asked Her Majesty's Government:

My Lords, the measures implemented by us and our 13 other partners in the European Union are aimed at limiting our bilateral relationship with Austria as a signal of our concern at the inclusion of a far right party in Government. British and Austrian Ministers continue to work together on EU and other multilateral business. We have made clear to the Austrian Government that we will judge them on their actions and hew those match the commitments expressed in the Schuessel/Haider Declaration of 3rd February.

My Lords, I am grateful to the Minister for that explanation. I wonder whether she noticed the remarks on this subject by the Belgian Foreign Minister, who is rather talkative on the matter. He said that this boycott must continue until the Austrian Government break up. Is that rather extraordinary interference the aim of Her Majesty's Government or is it, as the Minister indicated today, intended more as a signal of concern while the Government wait and see? How long do the Government intend to wait and see before they feel that they can judge whether the Chancellor of Austria and his colleagues are telling the truth about the intentions of policies of their government?

My Lords, in relation to the comments made by the Belgian Minister, perhaps I may say straight away that of course he must be free to express his views. One knows that such views are not necessarily wholly representative of the Belgian position. However, as regards "how long" is, perhaps I may remind the noble Lord that the Austrian Government have been in office only since February. We are now in March. Less than two months has passed. That period of time is insufficient for us to be able to judge with any degree of accuracy whether the comments made by the Austrians can be relied upon. We shall continue to keep the matter under review in a productive and appropriate way.

My Lords, does my noble friend not agree that the European Union needs to be a union based on values? Does she further agree that those values are seriously undermined by the entry into government by a party which either espouses, or is led by an individual who espouses racist or fascist views and that, therefore, we must continue to defend the fundamental values of the European Union?

My Lords. I respectfully agree with that view. I believe I hear noble Lords opposite say "rubbish". That disappoints me greatly.

Hear hear!

My Lords, it is incredibly important that those values are shared and honoured and that we have confidence that our European partners share our aspirations in relation to security and equality.

My Lords, can the Minister tell the House exactly what the Austrian Government have to do to satisfy the British Government? Do they have to submit their government or their election to scrutiny?

Certainly not, my Lords. The Austrian Government must demonstrate—I emphasise the word "demonstrate"—that their commitment to the European values is true. They can only do that with the passage of time.

How long?

My Lords, I hear noble Lords opposite ask, "how long". My answer to that is: as long as it takes to satisfy us that they are bona fide.

My Lords, does interest in values, which is an important aspect in this matter, alter the attitude of the Government to the charter of fundamental human rights? If these democratic values were written into the treaty at the end of the IGC, would it not be easier to call to account governments in terms of how they stood up to such values?

My Lords, I hear what the noble Lord says. That is a view which has been canvassed before. I know that that matter is under constant debate. The values are clear at present. They are agreed upon by member states which are members of the European Union. We believe that there is sufficient clarity at present to deal with the situation as it appears to us.

My Lords, does the Minister agree that people who live in glass houses should not throw stones? Is she aware that her Government admitted into government in this United Kingdom the representatives of armed terrorists who give no sign whatever of resiling from their terrorism?

My Lords, I say without any degree of repentance that this Government have behaved honourably in that regard. The noble Lord knows how difficult the situation is in relation to Northern Ireland. I remind the House that agreements were entered into voluntarily by all sides in an attempt to arrive at peace. Perhaps I may respectfully say that that situation cannot be compared with the situation with which we are presented by Austria.

My Lords, does my noble friend agree with me that fascism is a creeping cancer? Had we been a bit firmer in the 1930s rather than allowing someone to come back carrying a piece of white paper, we may well have avoided the following six years.

My Lords, I agree with my noble friend that these are difficult times. We feel strongly that a proper message needs to be given to the Austrian Government voicing our concerns. Many noble Lords have said in the past that they have a choice. We are not trying to impinge on that choice. But neither can they impinge on ours. We have a choice as to with whom we associate and on what basis. We have chosen to indicate to the Austrians our disapproval of the position they have taken to date.

My Lords, in answer to earlier questions the Minister stated that the Austrian Government must demonstrate that their commitment to European values is true. Can the noble Baroness tell the House which values and what specific steps they have to take to satisfy the Government?

My Lords, I have answered this question again and again. The Austrian Government made a number of commitments. We will test them on each and every one of those commitments to ensure that they are addressing the issues in an appropriate way. That is my answer.

My Lords, is the noble Baroness aware that the Austrian people, who voted recently for a change out of frustration with the previous long-serving coalition, have an outstanding record of helping foreign refugees? I witnessed that help when I was a First Secretary in the British Embassy in Vienna during the Hungarian uprising in 1956. Should not the Austrian Government, as the noble Baroness said, be judged on their actions instead of being subjected to what are childish snubs?

My Lords, I regret that the noble Lord should choose to describe the actions of 14 European states as "childish snubs"; we do not concur with that view. This is a matter we take extremely seriously. We know that the Austrian Government expressed clear indications and commitment that they will ensure that they adhere to values. We will give them the opportunity and advantage of demonstrating that by their actions.

Next Question!

My Lords, we are in the ninth minute and should move on.

asked Her Majesty's Government:

My Lords, the capability of the current synchrotron at the Daresbury Laboratory will be maintained and continue to operate for up to seven years to provide an overlap period with the new synchrotron. The research councils are currently investing £5 million in new beamlines.

On 13th March 2000 I announced a review to examine options for strengthening the science base in the North West and have committed a minimum of £25 million from the science budget to fund the implementation of the review team's recommendations. An important part of the review will be to identify opportunities to build on the scientific capabilities of the Daresbury Laboratory. The Daresbury Laboratory is owned by the Council Central Laboratories of the research councils and they will be examining the future options for Daresbury as part of its normal strategic and operational planning process.

My Lords, I thank the Minister for that reply. However, I am sure that he appreciates that the Government's decision over this matter caused considerable concern in the North West, particularly among the industry and businesses which make use of the facility and the science people within the North West. Can he confirm whether the £25 million being made available to the North West will be new money, and not re-allocated money? Will he confirm also what the focus of the new Daresbury Laboratory is likely to be? We have at Daresbury some of the greatest experts on accelerator technology and micro-technology systems. It is important that we continue the work of relating research and industry, at which Daresbury scientists have been so effective.

My Lords, I understand the concerns of the scientists at Daresbury. The £25 million will be money that will be taken from the science budget and allocated specifically for this purpose. It is clearly new money in the sense that it will come from the Comprehensive Spending Review that is about to be agreed. We are aware that the people at Daresbury Laboratory have substantial skills, not only in the design of accelerators but also in terms of instrumentation, computing and in general engineering. The projects we are considering will seek to build on that basis.

My Lords, will my noble friend consider the anger and frustration that occurred not only throughout the North West, but also further afield that the Diamond Project, at the behest of Wellcome, has gone to Oxford'? Further, morale at this world famous laboratory is at rock bottom. Staff are already leaving. While the Minister is offering £25 million, that is poor compensation for losing a £500 million contract. Can my noble friend be more specific in saying what major scientific project will be located at Daresbury?

My Lords, we are aware of the impact of this decision on the people who work at Daresbury and are conscious that we need to build morale in order to ensure that this facility works well over the next seven years. It is not totally accurate to compare the £500 million with the projects that will be introduced. That cost would be spread over 25 years, as opposed to investment that will come in immediately. Clearly, the point of establishing the review team is to look at the sort of projects that we could introduce most advantageously. We have a list of projects that may be suitable, which range from a bio-medical research facility, Manchester University, to a technology centre, to bio-informatics and a database centre, and also a regional data centre for the Cern Large Hadron Collider. There is a set of important projects at which the review team is to look specifically.

My Lords, will the Minister indicate whether any work had already been carried out on this project at the Daresbury Laboratory and, if so, whether any of the value of that has been retained by the transfer?

My Lords, some work had already been done on the design of the machine in the process of reviewing the location and looking at the specification which has substantially changed since the original design was drawn up. We shall be able to use some of those ideas, but the machine design is now going through substantial change because we are talking about a much larger machine, a 24-cell machine rather than the 16-cell machine of the original design.

My Lords, will the Minister for Science say how much he was influenced in the move to Oxford by the contributions made by the Wellcome Foundation and how much the decision was based on pure science?

My Lords, the view of both the scientific advisers to the Government was that on balance there was a scientific case for the move to Didcot. This was not an overwhelming case, but on balance the view of the scientific adviser to the Government and the head of the research councils was that that was the right location. Given that this is a partnership of three parties, we took into account the views of our other partners, as one surely must do in these circumstances.

My Lords, will my noble friend—

My Lords—

My Lords, it is the turn of the Conservatives.

My Lords, cutting aside the convoluted wording of the first Answer, is not the real truth that this money has been announced before in the general science budget and therefore it is not new money?

My Lords, perhaps I have not made clear that this is money which will come from the new comprehensive spending review and therefore it has not been allocated.

My Lords, will my noble friend confirm that the synchrotron project at Daresbury has operated highly successfully for more than 20 years? Is he aware that the Government's decision to resite the project at Oxford has been regarded in the North West as virtually a government vote of no confidence in the scientific future of the region? Can the Minister explain why the Government allowed themselves to be dictated to and virtually blackmailed by the Wellcome Trust? Seven of the eight trustees of that trust are professors at Oxford, Cambridge and London Universities and can hardly be regarded as independent, unbiased advisers.

My Lords, it has never been suggested by anyone that the quality of science at Daresbury is anything other than world-class. Nevertheless the fact remains that there are good scientific reasons for siting the new synchrotron alongside the neutron source and the other facilities at Rutherford, such as the lasers and the nuclear magnetic resonance. As I said, that is the view of the scientific advisers. It was also the view of at least the physicists when we consulted those who will make use of the machine.

My Lords, is the noble Lord aware that a useful maxim to bear in mind is that experts should be on tap, never on top?

Yes, my Lords

asked Her Majesty's Government:

My Lords, the Greater London Authority's precepts were issued on 17th February. A band D council tax payer is being asked to pay 122.98 for the first year of the GLA. This includes payment for the police, the fire service and transport facilities. Of this, only £1.72 accounts for additional costs of the mayor, the assembly, their support staff and provision for future elections. That is equivalent to 3.3p a week and is in line with our commitment in the White Paper, A Mayor and Assembly for London, that a band D council tax payer would pay about 3p a week.

My Lords, I thank the Minister for that Answer. However, does not he agree that when the Government gave an estimate of the costs of the Greater London Authority they gave the clear impression that the funding of other services would remain on a basis comparable with previous years? Is it not true that the council tax payers of Greater London face an increase far in excess of the 3p and a reasonable allowance for inflation because of the reduced funding of the Metropolitan Police, and that does not even take account of uncosted costs in respect of the new headquarters building for future years?

My Lords, it is certainly true that the precept for a year is a precept for a year. However, the figures are comparable with the figures that we originally announced. Therefore I believe that we have fulfilled our commitments in that respect. As regards the ongoing services, the precept for the police has certainly increased substantially, but that relates to an unwinding of past grants and the past use of reserves in that area rather than to any great spending increase.

My Lords, does the Minister agree that the Greater London Authority budget has been set at above the council tax subsidy limitation level; that is, above capping? Does he believe that that is a good precedent, and is he happy to see it carry on in the future?

My Lords, the Greater London Authority must be subject to the same rules of local authority finance as anywhere else. Therefore, if it was to continue with a certain course in the future that would have consequences, as it would for any other local authority. However, this is the transitional phase. The level at which we have set the precept reflects the demands on the authority in the first year.

My Lords, is the Minister aware that in the past two years the Metropolitan Police force has been reduced by 796 officers? Will he confirm that the substantial increase in the Metropolitan Police precept which he has just mentioned is 17 per cent? Can he explain to Londoners how that represents best value?

My Lords, the noble Lord is correct to say that there is a 17 per cent increase. However, that replaces past grants and past use of reserves. It is therefore not as big an increase in the spending commitment; it is about a 2 per cent total increase in real spending on the police when one takes into account the other grants. The noble Lord is also correct to say that the numbers of police have fallen. We expect the number to remain roughly at the level of 25,600 over the next year.

My Lords, is my noble friend the Minister aware that many people will regard it as an anomaly verging on the bizarre that one government department has levied council tax benefit subsidy limitation on a precept decided by the Home Office in its capacity as the current Metropolitan Police Authority for London? In future years is he satisfied that the new Greater London Assembly will have sufficient powers over any actions by the mayor to vire money from one budget head to another?

My Lords, I do not accept the term "bizarre". These are transitional arrangements. There are bound to be differing considerations in regard to the future development of the precept for the GLA as compared with a year in which for three months the national Government will effectively take responsibility. The mayor will take full responsibility in the assembly from July. As regards the future arrangements, we had lengthy debates during the course of the then Greater London Authority Bill on the balance of powers between the mayor and the assembly. We believe that we have the balance right. I believe that in most respects my noble friend supported that position. I therefore think that the budget-making arrangements are appropriate. We hope that the mayor and the assembly can adopt sensible budgets which nevertheless meet the substantial needs of London's people.

My Lords, following the question of the noble Lord, Lord Harris of Haringey, is it not ironic that one government department should take an action which would inevitably be condemned by another government department if that action had been taken by a local authority?

My Lords, there are bound to be one or two anomalies as we move from one basis of finance to another, and that is partly reflected in this situation. As to the future, clearly "condemned" is not the appropriate word. If in future local authorities take certain decisions, certain consequences follow. That has always been part of local government and in this respect it is an automatic process, which is rather better than the form of control over local authority spending which was favoured by the previous administration.

asked Her Majesty's Government:

My Lords, the Government have made frequent representations to the Russian Government since the outbreak of hostilities in Chechnya, as has the EU. Most recently, the Prime Minister raised Chechnya with Mr Putin on 27th March in a telephone conversation following his victory in the Russian presidential election. Prior to that, representations were made during the Prime Minister's visit to St Petersburg on 11th March and the Foreign Secretary's visit to Moscow on 22nd and 23rd February.

My Lords, I thank the noble Baroness for that reply. Does she agree it is important that, given the recent Russian presidential election, if an ethical foreign policy is to be pursued by the British Government, that policy should be made abundantly plain to the new President?

My Lords, I respectfully agree with the noble Baroness. We have repeatedly set out our concerns in our contacts with the Russians while supporting humanitarian efforts to relieve the suffering. The Prime Minister and Foreign Secretary have also urged Russia to involve the international community, especially the UN, the International Committee of the Red Cross, OSCE and the Council of Europe. Russia has agreed the attachment of experts from the Council of Europe to the Russian Ombudsman for Human Rights. The terms have now been agreed and that should happen soon. That will give us an important opportunity to see what is happening on the ground.

My Lords, is the noble Baroness aware that this tragic war in Chechnya was partly in response to a state of anarchy in Chechnya in which many thousands of Russian civilians, and also three British telecommunications experts, suffered gross violations of human rights, including abduction, torture and murder, and also partly in response to a request from peaceable Muslims in Dagestan for protection against incursions from Islamist terrorists from Chechnya? Can the noble Baroness, therefore, confirm that the British Government will reassure the newly-elected Russian President that they will respond in a balanced way, not just in a very partial way as appears to have happened so far, and offer help to all who suffer as a result of the war in Chechnya?

My Lords, I commend the history which the noble Baroness recites. We are very much aware of the internal challenges that the Russian authorities face. But we have made it plain to the Russians that we believe they should respond in a proportionate way. While we have taken a balanced view, that does not prevent us from pressing the Russians very hard to address the issues that we see so painfully exposed on the ground in Chechnya.

My Lords, does the noble Baroness agree that there is abundant evidence from Amnesty International, Human Rights Watch and other reputable international human rights organisations of the scale of the atrocities committed against the people of Chechnya by the Russian occupying forces and that, notwithstanding all the representations made by Britain and the European Union, those acts have not been mitigated? Does the noble Baroness also agree with the recommendation of Amnesty International that there should be an international investigation of human rights violations in Chechnya; and, if so, can that be put to President Putin so that he can discuss it with Mrs Mary Robinson during her visit, which I believe begins tomorrow?

My Lords, we are aware of the reports of which the noble Lord speaks. We have raised those matters with the Russians and asked them to investigate the reports. We believe that a very useful contribution will be made by the efforts of the Council of Europe, whose representatives are now present on the ground and will have a continuing ability to obtain information. This is a matter which we are pursuing with the Russians, but before we make an informed judgment we need to know the facts as opposed to supposition and rumour.

My Lords, in any future discussions with the Russian Government, will Her Majesty's Government emphasise the importance of strengthening both the civil and criminal systems of justice? Would that not help to stem the flight of capital and encourage inward investment?

My Lords, I understand the sentiment behind the noble Lord's question. We have made clear to our Russian partners the most appropriate way to support the democratic process and have urged them to do all that they can to address these issues.

My Lords, is the Minister aware that last week Human Rights Watch reported grave abuses by Russian forces in their campaign against Chechnya, including torture, beatings and, on occasion, rape at a filtration camp inside Chechnya? Given that Mr Putin was the architect of Russia's current campaign in Chechnya, can the noble Baroness explain how the Prime Minister could travel to Russia—one of his main aims being,

"to renew and strengthen Britain's ties with R ussia"—

while last week his effort to avoid even speaking to the Austrian Chancellor, who to my knowledge is involved in no wars which indiscriminately harm civilians in his own country, was widely reported?

My Lords, of the 90 minutes that the Prime Minister spent with Mr Putin during his visit, 50 were devoted to Chechnya. That discussion had to take place in order to air our serious concerns in relation to Chechnya. We believe that at this delicate time it is of crucial importance that we engage fully with the new President of the Russian Federation to try to encourage Russia to behave in a manner which we can condone as opposed to criticise.

My Lords, can the noble Baroness confirm that, in line with the Government's ethical foreign policy, in those 50 minutes during his visit to President-elect Putin the Prime Minister stressed the importance of preserving the sovereignty of the other 20 republics in the Russian Federation, such as Dagestan, Sakha and Tatarstan, so that they would not be traumatised by the same treatment received by Chechnya—severe human rights violations and war crimes—should they, in turn, step out of line; and, if not, why not?

My Lords, I can reassure the noble Baroness and the House that as to Russia's relations, particularly those with Chechnya, the Prime Minister had an extensive conversation with the new President of the Russian Federation.

rose to call attention to the case for a power of delay on statutory instruments, as recommended by the Royal Commission on the Reform of the House of Lords; and to move for Papers.

The noble Lord said: My Lords, owing to the luck of the ballot, I am glad to have this opportunity to follow up the Unstarred Question on statutory instruments which was debated on 7th December 1999. I am very grateful to noble Lords in all parts of the House who are to take part in the debate. Noble Lords have a rich vein of knowledge of parliamentary procedure which will add greatly to the authority of this debate. I am also grateful to the noble and learned Lord, Lord Falconer of Thoroton, who is to answer the debate. I hope that I shall be equally grateful after he has replied.

Events have moved on since I tabled this Motion. On 22nd February of this year your Lordships decided by a substantial majority to reject an affirmative order. In so doing, the House exercised its undoubted right. As the noble and learned Lord, Lord Simon of Glaisdale, frequently reminds us, this power is rarely used. I suggest to noble Lords that that vote was one of enormous parliamentary significance and importance. It showed clearly that the interim House had confidence in its legitimacy. I am sure that that is the way in which the Leader of the House would put it.

I was originally attracted to the proposal of the Royal Commission that your Lordships' House might have power to delay statutory instruments for three months, but I believe that that recommendation was overtaken by the vote on 22nd February. I do not expect that this power will be used very often. I assume that it is likely to be used only when the House is strongly opposed to a major order. I do not believe either that the use of this power by the House in any way alters the balance between the two Houses. After all, the Government can re-introduce the same order or amend the order to take into account the views of the House. Ultimately, they will be able to get their statutory instrument, as they can now.

Statutory instruments have a long history. One can trace the germ to the Statute of Proclamations by which Parliament gave King Henry VIII power to legislate by proclamation. Of course, their number and their importance have increased enormously in recent years. They now affect so many aspects of our personal lives. The Royal Commission gave the figures: in 1900 there were 174 general statutory instruments and 821 local ones. By 1998 this had risen to 1,576 general instruments and 1,747 local ones. That is probably inevitable given the complexity and the range of modern legislation.

Your Lordships in all parts of the House would probably accept that we need flexibility. We also need to be able to give a quick response to changing events. Primary legislation is clearly too slow to deal with all the emergencies that may arise. As I think we agreed, the trouble is that the ability of Parliament to scrutinise has not kept pace with the number and importance of statutory instruments. That is not to belittle the valuable work done by the Joint Committee on Statutory Instruments and the Delegated Powers and Deregulation Committee. The terms of reference of these committees are limited. They are not able to consider the merits of the orders.

I had the privilege of serving on the Delegated Powers and Deregulation Committee until I was regulated off, having served my term. I am delighted to see that three of my former colleagues are to speak in this debate: my noble friend Lord Alexander of Weedon, the chairman of the committee, the noble Lord, Lord Goodhart, and the noble Lord, Lord Dahrendorf. It was my great pleasure to serve with them on that committee. I am sure that the House will listen with very great interest to the advice of those members of the committee regarding their possible further help by undertaking a greater role in the scrutiny of statutory instruments.

What can be done to improve the procedures? There have been various suggestions, some of which have come from another place. Clearly, any changes that your Lordships' House may decide to make will have relevance to the House of Commons. Most of these proposals were discussed eloquently in the Royal Commission's report. I should like to refer to them briefly. One suggestion was that there should be a new category of super affirmative instruments subject to scrutiny before being formally laid. A variant of that is that there should be pre-legislative scrutiny of the most important statutory instruments.

The Government deserve great credit for introducing quite a large number of Bills in draft to enable consideration by Parliament and outside interests before they are set in concrete. I think that this development needs improvement because Bills that have been through the pre-legislative scrutiny are still coming forward with large numbers of government amendments. None the less, the principle is sound. I suggest that if it is sound for primary legislation, it is equally sound for the most important of the statutory instruments; namely, secondary legislation.

Another proposal has been made that there should be a sifting committee to make recommendations on the handling of particularly important statutory instruments; for example, by referring them to the relevant Select Committee or an ad hoc committee. I suggest that this could help both Houses to identify and concentrate on the major statutory instruments. If this committee is set up, it might be better for it to be a joint committee of the two Houses so as to avoid duplication.

My next point is whether the House should be able to amend statutory instruments. The Royal Commission advised against that. I suggest, with due respect to it, that there is a case for amendment as well as the blunter instrument of rejection. This argument would be less strong in cases where statutory instruments have been subject to pre-legislative scrutiny.

All these proposals for procedural reform need to take into account devolution and the relationship between the devolved bodies and Westminster. There are many questions, including the handling of statutory instruments, that require attention. I am very pleased to see the noble Lord, Lord Prys-Davies, in his place today. I know that he has made a special study of these problems and the way in which they should be resolved.

I hope that it is now felt that the time is right to proceed with these amendments. The Royal Commission made certain recommendations on the composition of the House. I think it is generally recognised that it is very unlikely that these proposals would make any progress in this Parliament. It is going to be difficult enough to obtain agreement anyway on composition. But the atmosphere will not be right to have agreement in the run-up to the next general election. That is not the case as far as concerns procedural reforms where there is a wide measure of agreement. Reforms are already under way. Parliament has agreed to set up a Select Committee on Human Rights. A Select Committee on Constitutional Affairs seems to be broadly agreed, and it is probably only a matter of a short time before that is established.

My plea is that these varied suggestions for much needed improvement in the scrutiny of statutory instruments should be considered now. I hope that the House will agree that the Liaison Committee or the Procedure Committee should be invited to make recommendations for early action. I hope also that the noble and learned Lord, Lord Falconer, will be prepared to give this plea a fair wind. My Lords, I beg to move for Papers.

My Lords, I congratulate the noble Lord, Lord Dean of Harptree, both on winning the ballot and on introducing this very important debate. I congratulate him also on the excellent and dispassionate way in which he has done so. I find myself in the rare position of agreeing pretty well entirely with a speech made from the other side of your Lordships' House.

In a way, I am sorry that the noble Lord had 10 introduce this debate because I regard it as quite deplorable that the usual channels have not arranged a full-scale debate on the mode of operation of the interim House. They should have done that. The noble Lord, Lord Dean, reminded us about the particular vote on a statutory instrument a few weeks ago. I remember arguing at the time that, although we had the powers, we really should not have done what we did then without first debating our whole new approach to this issue. However, I was unable 10 persuade a sufficient number of noble Lords of the correctness of that view. While agreeing entirely with the noble Lord, I am not happy that we are making up new rules as we go along. Apart from today's debate, we must have a full-scale debate about the way the interim House should and will behave.

I regard the interim House—the House in which we are currently sitting and standing—as more legitimate. It will be even more legitimate still when the deficiency of numbers of Liberal Democrat and Labour Peers is made up, I hope in the very near future. I am convinced that the interim House can be an excellent revising Chamber—perhaps I may add another acerbic remark—especially when the problem of lack of resources and facilities is faced up to and solved. Therefore, while I am on the subject of debates, I think it is equally deplorable that the usual channels have not arranged a full-scale debate on the central question of resources and facilities.

On the report of the Royal Commission, Chapter 7 contains a great deal with which we could agree. Perhaps I may add, exactly as the noble Lord, Lord Dean, said, that much of that does not seem to require moving on to further stages of reform, much as we would like them. We can do it now and I think that we ought to do it now. In the evidence we gave to the Royal Commission, my noble friend Lord Barnett and I emphasised that side of the subject because we felt that concentrating on what we called "practicalities" might be at least as important as concentrating on the vexed question of membership and so on. That remains my view and I hope that it remains the view of my noble friend. I look forward to hearing from him on that matter.

Perhaps I may add one specific point on secondary legislation which we made to the Royal Commission. It is our view that if we scrutinised secondary legislation more seriously, it would improve our ability to deal with primary legislation. One of the reasons why we go in for a great deal of nit-picking and generally "on the face of the Bill" stuff on primary legislation is precisely that we do not trust what will happen when the secondary legislation, which often contains the real meat, comes forward. So we insist on it happening in primary legislation. We could become very much more efficient if we went down the path to which the Royal Commission somewhat guides us and certainly the noble Lord, Lord Dean, guides us and with which I totally agree.

In our evidence my noble friend Lord Barnett and I made a point—I have not consulted my noble friend on what I am about to say but the noble Lord, Lord Dean, also raised the point—on which I am now not sure that we are right. We said that we should be able to reject secondary legislation but we should also be able to amend it. Obviously, we need to retain the right to do so, but, on reflection and having thought about some of the examples, my judgment is that amending secondary legislation could be so complicated, given how important it is to the Bill, that I am beginning to think that it might be more important for us to say, "We vote against this piece of secondary legislation for the following reasons. We think that the Government ought to bring back the secondary legislation with amendments from their expert draftsmen that meet our requirements". In other words, I am not at all certain that I want to get into the business of redrafting secondary legislation, on which one often lacks the expertise. That is about the only way in which I backtrack from the original position which my noble friend and I took on that point.

I wish to emphasise two points which the noble Lord, Lord Dean, emphasised. I do so to show my support. I strongly favour the idea of pre-consideration of secondary legislation and I favour the idea of sifting. We do not want to look at all such secondary legislation. But if we had a committee to sift it and one could go to the committee and say, "We think that this is one that you ought to look at", it would improve our efficiency, which is very much in my mind in approaching these matters.

The only other point I wish to make relates to something which puzzles me about Chapter 7 of the report. Chapter 7 seems to accept the view—I think it is on the preliminary stage—that we can have a vote, the Commons simply takes no notice of us and after three months the secondary legislation is carried. Of one thing I am absolutely certain. If noble Lords devote some of their time and effort in any way whatever to secondary legislation, whether we vote to send it back for a rethink or vote to annul it, which means "rethink and redo it", the Commons should be obliged to respond with a reasoned argument, as they have to do on amendments and so on, before we have to back down.

My final remark, which may horrify one or two noble Lords, is that I believe that both with primary and secondary legislation the age of ping-pong ought to end. In other words, as part of the ultimate reforms, we should have the full right to say, "We don't like it".

But if the Commons have gone through correct procedures to argue against us, the nonsense which I have seen over a great many years—I fear that we shall see quite a lot of it this year—of legislation going backwards and forwards, the scene repeated, with the Commons begging to differ, has to come to an end. Your Lordships' House as a revising Chamber should have the right to do two things: to say to the Commons, "You have got it wrong and we are going to vote against it". But if they insist on bringing it back and will not give in to us, we should do what we all do in our personal lives; and when it eventually goes wrong, we can simply retain the right to say, "We told you so". I would rather have the "I told you so" position than the ping-pong position, which I really do not believe is a great credit to this House or to Parliament generally.

I conclude as I began. The noble Lord, Lord Dean, has done us a great favour. I very much hope that my noble and learned friend Lord Falconer will respond positively. But, ultimately, it is up to your Lordships' House to start to press about what it would like to do.

My Lords, I am very glad to speak in this debate in support of my noble friend Lord Dean of Harptree. My noble friend was for four years a most valued member of the Delegated Powers and Deregulation Committee and his speech makes an outstanding case for improved scrutiny for secondary legislation.

We would all agree that the quality of our lawmaking is crucial; and our laws are increasingly made through secondary legislation. The Procedure Committee of the House of Commons in 1996 and very recently has drawn attention to the inadequacy of scrutiny of such legislation in that House. Indeed, it is this House which in recent years has shown the most concern for secondary legislation. But there is still, as my noble friend Lord Dean said, much we must do if we are to equip ourselves effectively and properly to scrutinise across the board. I suspect that there would be agreement on all sides of the House that this is an area where there is a very clear role for this House to fill.

I also see it as a promising time to make positive proposals. There is already a recognition that pre-legislative scrutiny, of the kind undertaken by the Burns committee for the Financial Services and Markets Bill and for deregulation orders under the admirable procedures of the Deregulation and Contracting Out Act 1994, can improve our legislation. There is also an acceptance by government that both primary and secondary legislation must comply with the Human Rights Act and be certified to do so. A disciplined, consultative, regulation-making process will make for better, fairer and more efficient regulation.

On behalf of the Delegated Powers and Deregulation Committee, I had the privilege of giving oral evidence to both the Royal Commission on House of Lords Reform and to the House of Commons Procedure Committee on its recent inquiry into delegated legislation. I warmly welcome the recommendations about delegated legislation in both reports, although in the case of the Royal Commission I think its recommendations did not go far enough. My starting point is the Royal Commission's recommendation 35:

"There is a strong case for enhanced Parliamentary scrutiny of secondary legislation. The reformed second Chamber should make a strong contribution in this area".

What we in this House must, I believe, address, and address now, is how to respond to the recommendation s of the Royal Commission and the House of Commons Procedure Committee so as to create a more effective scrutiny system which builds on the strengths of the House of Lords. I should like to suggest five possible ways in which we could go about that. I do not seek to be prescriptive, because there are obvious variants.

First, the House should be given a formal power to delay secondary legislation. It is true that the House has asserted power recently to reject secondary legislation; however, I still believe that a delaying power would be a useful way in most cases to seek to work towards an amended order. If we adopt a delaying power, it should be for a period of six months, to accommodate the processes of trying to agree change and the proposed increased 60-day praying time for negative instruments. I regard a formal power of delay as valuable.

Secondly, there should be a sifting mechanism for statutory instruments. The Royal Commission supported the establishment of a new joint sifting committee. Alternatively, it suggested that the Lords might set up a sifting committee on its own, perhaps inviting the Delegated Powers and Deregulation Committee to take on the task. I hope it is not idleness when I say that I do not believe that the Delegated Powers and Deregulation Committee would be other than the second-best option. The less bureaucratic option would be to involve those Lords who are members of the Joint Committee on Statutory Instruments, who, with their legal advisers, have to plough through a myriad of statutory instruments in any event, and ask them to perform this additional role. Another House of Lords committee to carry out the sifting exercise seems a potentially profligate use of our limited resources, and admirable only for the process of felling more forests.

Thirdly, there should be a scrutiny mechanism for statutory instruments which had been sifted as requiring detailed scrutiny. The question of what to do with statutory instruments that are sifted as "high profile"—the "A" sift, in the terms of our own European Union Committee—seems to be one of the weakest points in the Royal Commission report. I suggest that an ad hoc committee should be appointed swiftly by the Committee of Selection to scrutinise each such instrument identified by the sifting committee. The committee could then hold hearings in public involving the Minister and other interested bodies, perhaps in the form of an all-day seminar rather than the more traditional form of a somewhat slow-moving Select Committee. It could examine carefully the regulatory impact assessments, which are now routinely prepared in most cases, and which in most cases similarly receive very little parliamentary scrutiny. I am conscious that this proposal will have resource implications. But like the noble Lord, Lord Peston, I believe that if the ideas are right we should start planning the necessary resource level now.

Fourthly, there should be a category of "super affirmatives", as it has become known in the jargon, recommended by the House of Commons Procedure Committee and supported by the Royal Commission. Some statutory instruments are so important, or so sensitive, that Parliament should consider them in draft, so that they can be amended in the light of consultation rather than waiting for them to be la id formally before Parliament and found wanting. It may well be that few statutory instruments should, or would, fall into this category. But on such occasions, I suggest that there is a good precedent in the deregulation Act procedures for such instruments to be laid in draft. We can all think of instruments which should fall into this category. It seems that it would be possible for the Delegated Powers and Deregulation Committee, in examining secondary legislation proposed in Bills, to identify at that stage which instruments, even if in rare cases, should be subject to the "super affirmative" procedure.

My fifth and final specific point is that the Statutory Instruments Act 1946 should be amended to extend the statutory "praying time" in respect of negative resolution instruments from 40 days to 60 days. Judging from the experience of the Delegated Powers and Deregulation Committee in scrutinising deregulation orders, where the initial scrutiny period is 60 days, I cannot see how in-depth scrutiny of some of the more controversial statutory instruments should be confined to 40 days. Indeed, in our own recent look at the controversial proposal to extend licensing hours on Sundays, we were grateful that the 60-day scrutiny period was extended as a welcome by-product of the short half-term Recess. But within that 60 days the committee had to meet six times to consider the proposal and to weigh the submissions of the 84 organisations and individuals who took the time to write to us about it. If we are serious about scrutiny, a 60-day proposal would seem more appropriate.

The volume of secondary legislation has increased, is increasing and is unlikely to diminish. That has been the thread running through this debate, and I look forward to hearing others of my colleagues on the Delegated Powers and Deregulation Committee make their contribution. The statistics that the Government recently provided in response to my Questions for Written Answer show that the increase is particularly true for negative instruments—those instruments which Parliament at present almost always nods through without comment. At the same time, the importance of much of the content of secondary legislation is increasing. It covers increasingly complex issues, perhaps especially in relation to information technology, where the goalposts are constantly changing and which is therefore a prime candidate for secondary legislation. It covers increasingly sensitive instruments, especially as we grapple with the immediate consequences of this Government's highly commendable and highly courageous step of incorporating the European Convention on Human Rights. Much, if not most, incompatibility with the European convention, and so with our own Human Rights Act, is likely to lie for consideration in the context of secondary legislation.

Whether we like it or not, we cannot stop the upward trend of secondary legislation. If we fail to take account of it in the House of Lords by pickling our scrutiny procedures in the aspic of the past, we shall be failing in our task as legislators. Seeing the interest in this debate on all sides of the House, I believe that we can, we must, and we want to rise this challenge. If we do so, we shall assist this House to become the second Chamber that the country merits.

My Lords, in meetings of the Delegated Powers and Deregulation Committee, most of us do not usually add much once our chairman, the distinguished noble Lord, Lord Alexander of Weedon, has spoken. I certainly rise to speak with some trepidation. I remember coming on to the committee over two years ago and realising that the noble Lord, Lord Dean of Harptree, was both a model and a mentor from whom one could learn how to conduct the no-nonsense business of that committee. The noble Lord also has a characteristic style, which is the style underlying this debate. It is an apparently technical debate, but I want to argue that it is one of considerable constitutional significance.

There are good reasons why the Wakeham commission has devoted a whole chapter to the issue of statutory instruments. The basic point is that legislation now takes place in a whole variety of ways, and what one might call non-orthodox forms of legislation are growing in importance. Statutory instruments alone have nearly doubled in the past 20 years and have risen to a particularly high plateau in the past eight years.

We now make laws in a number of ways: as primary legislation; as secondary legislation—that, in turn, appears in a variety of forms; by the creation of bodies which themselves have legislative powers—the extreme case, of course, is European legislation, but, as noble Lords who have listened to some of the debate will know very well, the Financial Services and Markets Bill creates such a body; and, of course, by guidance, guidelines, directives, or whatever they may be called. That raises enormous problems of scrutiny. Indeed, it raises questions as to the proper role of Parliament. I am very pleased that the noble Lord, Lord Norton of Louth, is to speak later in the debate because I know that that is one of his special concerns.

One must agree with the Wakeham commission that the sheer volume and level of detail of legislation is overwhelming, notably for the elected Chamber which has so many other functions. I do not wish to be a bore on the subject, but here again, in the case of secondary legislation, I believe that we have a good case for an appointed Chamber with Members who have the expertise and, incidentally, the time and who do not have to seek publicity. That is one of my arguments for a particular way forward in that regard.

The question raised by the noble Lord, Lord Dean, is: what do we do at the end of the scrutiny process? The Royal Commission does not want us to have the power to amend statutory instruments. It argues that a comprehensive system of amendments,

"would negate the advantages of secondary legislation'",

whereas a limited system,

"would be difficult to justify".

In that connection, it occurred to me to look at the instructive case of the Welsh Assembly which, as noble Lords know, in its legislative activity deals only with secondary legislation. It is well worth perusing the Official Record of the National Assembly for Wales. It is also quite enjoyable. Debates are pleasingly informal, as when the Presiding Officer interrupts a speaker and says, "Please do not make the same speech as you made earlier, Geraint!" With respect to the equivalent of statutory instruments in the Assembly, the Secretary responsible—say, the Secretary for Health and Social Services—introduces an order after it has been considered in draft by the Legislation Committee.

The Assembly is then invited to go through the following stages: first, to consider the report of the committee; secondly, to approve the principle of the order; thirdly, to consider, approve or reject amendments; and, finally, to approve the order. Frequently, that is an uncontroversial and rapid process. However, on 22nd March this year, for example, an order concerning NHS charges had a narrow majority on the question of principle: 25 Members voted for, 22 voted against and there were four abstentions. Abstentions are listed in all cases. An amendment was then debated with one speaker for and one against, as allowed by Standing Orders. It was rejected by a similar majority. In the end, 26 Assembly Members voted for the order and 24 against, with four abstentions. In other words, the Welsh Assembly has found a way of debating and, if the majority so wish, amending secondary legislation. It has done so without encountering the problems suggested by the Wakeham report. Can we learn from it?

No doubt it will be pointed out that there is a difference between a Secretary of State who promulgates instruments and an elected Parliament which makes laws. However, I believe that, as a minimum, Parliament must find a way of expressing its view on the conditions under which a statutory instrument would be acceptable. Admittedly, the absolute veto is a clumsy method to this end, especially if Parliament wishes to add something, as in the case of the freepost for the London mayoral elections, and has to reject an otherwise acceptable order to make its point.

The Wakeham commission suggests an alternative process which is, however, very elaborate; that is, consideration of drafts, sifting of instruments, possibly consultation, and eventually exercising the new power of delay, coupled with a request for an explanatory memorandum. Apparent loss of power in this regard would not worry me unduly. However, I cannot help feeling that the Welsh Assembly has found a more elegant method. At the very least, the exercise of the delaying power should be accompanied by a resolution which specifies the conditions under which a statutory instrument would be acceptable. Here I find myself in an identical position to that of the noble Lord, Lord Peston.

Other measures could be added (and might be worth discussing on another occasion) to make the scrutiny of statutory instruments more effective and also in some ways more predictable. In a sense, the Delegated Powers and Deregulation Committee is developing case law for what must be in primary legislation and what, at any rate, must be subject to affirmative procedure. When the noble and learned Lord, Lord Archer of Sandwell, was a member of the committee, he insisted that, as a rule, the creation of quasi-judicial institutions and sanctions should not be done by statutory instrument. A set of such principles might well be a useful guide for legislation.

Those are urgent questions. The Royal Commission may well be right that they can be dealt with by amending the Statutory Instruments Act 1946. However, the relevance goes much deeper: it has to do with the future of Parliament in our democracy, no less.

My Lords, it is a rare privilege to be able to speak in this debate and to follow the noble Lords who have already spoken, and in particular my noble friend Lord Dean of Harptree. I congratulate him on his wholly constructive speech. For once, I am able to agree with everything that the noble Lord, Lord Peston, has said. I agree wholly with him that the time is right for a full-scale debate; it should already have taken place. We must get on with it now.

I agree with the noble Lord that there must be a preconsideration of statutory instruments. Some time ago I served—I believe that I still serve—on the Statutory Instruments Committee. However, that committee is limited to vires. It is also sometimes limited to commenting that matters have been dealt with in an unusual situation. It says no more than that; it does not comment on merit or anything of that order. However, I believe that that is the way forward and would represent an important development. Again, I agree with the five principles, so neatly arranged and expounded by my noble friend Lord Alexander of Weedon.

The Royal Commission is to be congratulated on the intrinsic worth of the recommendations concerned with the workings of this House, such as our procedures, conventions and the setting up of committees, on which there was unanimity. It is totally plain from the manner in which such recommendations were expressed—and I am glad to be able to say this in the presence of my noble friend Lord Wakeham—that such matters should receive the appraisal of your Lordships with a view to implementation before the second stage of substantive reform, if such be the wish of the House.

One such matter—and it is only one—is the procedure by which this House may exercise its function to contain the misuse of executive power by resort to secondary legislation. I shall return to that later but the Government wish to defer consideration on that until the second stage of legislative reform. So there is a clear issue between what could be the sense of the House and what would be the will of the Government.

There can be no second-stage legislation until the question of composition—the stumbling block—on which the Royal Commission was not unanimous can be resolved by Parliament. However, the Royal Commission could not have contemplated that such a matter of our own domestic procedures should lack any consideration for such a long, uncertain period of time. There could be no such assurance. The Royal Commission could not have contemplated, of course, that every recommendation as to the workings of this House should receive immediate consideration with a view to implementation unless such were the wish of the House.

The object of the debate is to commend but one such recommendation to your Lordships for immediate consideration. Noble Lords will be grateful to my noble friend Lord Dean for having introduced this debate. The opportunity is indeed welcome. There is not now and never has been any commitment by government to seek the approval of Parliament for any recommendation in the report, albeit that the reappraisal of our procedures is not a matter for Parliament; it is not a matter for government; it is a matter for this House.

It was apparent from the debate on the report that the Government are no longer prepared to set up a Joint Committee of both Houses to consider proposals for substantive reform. One is left with the impression that the Government are not prepared to entertain any reappraisal of our procedures. The current attitude of government in that context, as concerns the power to delay secondary legislation and the Salisbury Convention, which cuts upon that problem, has been evinced on many occasions at Question Time. That is referred to at pages 21 to 23 of the Library Notes. Those are the Questions with which I was involved, asking that action should be taken.

The attitude evinced by the Government has always been: wait for substantive reform which must, inevitably, comprise the composition. Other excuses for inertia have been made; for example, that there should be no cherry-picking.

Whereas the Salisbury doctrine has not been defined or recorded in the Companion or Erskine May. the exercise of restraint to vote against secondary legislation has been recorded at page 187 of the Companion. But the entitlement to reject secondary legislation was affirmed in the benchmark debate of the noble and learned Lord, Lord Simon of Glaisdale, whose Motion was agreed to, and the entitlement was acknowledged by the Royal Commission at paragraph 7.39 of its report.

It is not the purpose of this speech to canvass the merits of any particular approach. That is a matter for the consideration of the constitutional committee which, it is hoped, will soon be set up in accordance with the key Recommendation 21 of the Royal Commission, or perhaps by the Procedure Committee or the Liaison Committee, if that constitutional committee is not established.

At all events, critical amendments and Motions are dealt with at page 187 of the Companion, which relates to Motions not challenging the delegated legislation, or a Motion to invite the Government to amend delegated legislation on which there is no Division, or a Motion regretting some element of delegated legislation which, if carried, has no practical effect but only serves to record a point of view. This will, on any showing, require very substantial amendment, and it requires that now; that is, if this House is to fulfil its function to exercise effective control over the executive.

An example of such abuse of power was to seek by order to treat the Greater London Authority as a local government authority when no such principle had been established in primary legislation.

The question of the exercise of self-restraint is considered in the Royal Commission report at paragraphs 7.31 to 7.38 and at Recommendations 41 and 43. Those advocate a suspensory veto which goes some way to meet the problem. At Question Time on 7th December, I suggested that a new convention should be introduced under which your Lordships' House, on a Division, could move to request another place to delay the instrument in some amended form which, if not relaid in a form acceptable to this House, could then be rejected. That goes some way to meet the proposal of my noble friend Lord Strathclyde that statutory instruments should be amendable.

Taking into account the criteria of the Salisbury doctrine, the noble and learned Lord, Lord Simon of Glaisdale, pointed out that, during the 1970s, both parties in opposition voted against statutory instruments. In that debate the noble and learned Lord pointed out also that the suggested rule of longstanding practice did not exist and the suggested convention not to reject statutory legislation entirely failed.

It is accepted that, under extant procedures of the House, we cannot amend or suggest amendments to secondary legislation. As a general practice, restraint should be exercised as regards rejection. But, where the Government resort to secondary legislation on a matter of principle, for the sake of administrative convenience as distinct from the implementation of the principle already enshrined in primary legislation, rejection is the only means available to restrain an abuse of power.

I very much like the proposal put forward by the noble Lord, Lord Peston, that, first, we should have the formal power to delay, indicating the form of amendment that we would want; secondly, that, if that were rejected, there should be a reasoned response; and, thirdly, that a new regime along those lines should be introduced so that we can avoid ping-pong.

So far, the Government's attitude has been contradictory. On the one hand, it is asserted that it is the function of the House to hold the executive to account. On the other hand, it is asserted that the right to reject secondary legislation either does not exist or ought not to be exercised. That is a somewhat neuronic approach. The hope is that the House will soon take the matter into its own hands.

My Lords, I am most glad to follow the noble Lord, Lord Campbell of Alloway, not least in joining him and other noble Lords in expressing gratitude to the noble Lord, Lord Dean of Harptree, who has once again put us all in his debt. That is so partly because he initiated the discussion and partly because his speech set the tone of what, with respect, seems to me to be an exceptionally constructive debate.

Furthermore, those of us who did not take part in the wider-ranging debate are enabled to pay our tribute to the Royal Commission. Even when one ventures to differ from a proposal, as I venture to do as regards the power to delay, one must recognise the masterly discussion in Chapter 7 on the whole issue of subordinate legislation.

Normally, secondary legislation does not throw up any problems when it is merely the "nuts and bolts", to adopt the phrase used by the late Bob Cryer, a greatly admired chairman of the Joint Select Committee. Adjusting the nuts and bolts, the final adjustment of the machine, does no more than to complete what should be clearly laid down in a blueprint in the primary legislation. Nevertheless, occasionally, secondary legislation goes beyond that. Sometimes that is due to the executive trying it on; sometimes, unexpectedly, a major matter is thrown up.

In the discussion in 1994, the noble Lord, Lord Rodgers of Quarry Bank, pointed out that the local government orders were such a matter on which your Lordships would be fully entitled to exercise their prerogative—indeed, responsibility—of voting, if thought right, against an order. Then there is the occasional secondary legislation which is reported by the Joint Select Committee as being unusual and unexpected. I hope that the noble Lord, Lord Mackay, will excuse me if I remind him of the unlamented Child Support Act, which was a skeleton Bill. It went so far wrong that the Government introduced an order under power to make transitory provision which altered the right retrospectively that had already accrued under the main Act. A government will always be tempted to do that when they get into a mess, even if they are an aggrandising government.

There will be cases in which your Lordships will want to exercise the responsibility that was clearly claimed in 1994. As the noble Lord, Lord Dean, pointed out, we had a recent example in relation to the mailshots in the London mayoral election. That was perceived by your Lordships as going far beyond the nuts and bolts. It was a question of democracy—the right of an electorate to be fully and accurately informed as to the issues on which it was called upon to choose. That was important as showing that the 1994 resolution, although it would rarely be needed if only because it made government departments much more careful, nevertheless could be used when a major issue transpired.

Before turning to the question of the three months' delay which the Royal Commission recommends as being the power that your Lordships should have in voting against subordinate legislation, perhaps I may first mention the question of amendment. Like most people who have been occupied with the problem—as I have, I confess, for decades, merely on the ground of old age—I am attracted by the logic of allowing parliamentary amendment of subordinate legislation. I agree with the Royal Commission in finally negativing that. First, it is certain that we would never get it from the executive. Secondly, there is a good reason for that; it would negative the advantages of subordinate legislation which are so clearly set out by the Royal Commission.

As regards the three months' delay, it is with trepidation that I find myself differing from the Royal Commission and from the noble Lords, Lord Alexander of Weedon and Lord Campbell of Alloway. In my view, it gives both too much and too little. It gives too much because the Government might sometimes be up against a timetable, as they were on the mailshot issue. Even if that were the case, a three-months' delay takes the matter out of the hands of the Government in the other place and asserts our supremacy. On the other hand, it also gives too little. Again, in the ordinary case where there is no timetable, an obstinate government—and after all, all governments are obstinate—will sit out three months' delay without any real difficulty.

We sometimes thoughtlessly use the phrase "asking the other place to think again". The recent vote on sex education in schools is another example of how unreal that phrase is. First, the other place does not collectively sit down and excogitate the issue from the beginning in the fight of the debate in your Lordships' House. Secondly, what happened immediately after the vote on sex education showed that the concept of the Government "thinking again" is quite unreal. What they do is to try to get away with as much as they can, as do any government.

Therefore, with great trepidation I should not agree with the proposal for a three-month delay. We have what we want in a sense through our present powers and they way that they are used. I venture to be greatly attracted by the suggestion of the noble Lord, Lord Peston, which has been taken up by other noble Lords; that in effect amendments can be proposed in debate. The noble Earl, Lord Russell, whose absence we feel today, has developed such a technique. We do not really need the three-month delay. We have all the power that we need under the present regime. I merely add that we are at a crisis of the constitution, because we are rewriting the constitution. In the end, there is the question of parliamentary government or executive government.

We are privileged that the noble and learned Lord, Lord Falconer, is to reply to the debate. He sits in the very control chamber of the powerhouse of a commanding and aggrandising central and centralising government. I hope that he will reassure us that those of us who celebrated the Glorious Revolution a decade ago can still glory in it. We gloried in it because it vindicated parliamentary government as against executive government. I trust that we may continue to do so.

My Lords, I certainly agree with the noble and learned Lord's final words. I add my congratulations to the noble Lord, Lord Dean of Harptree, on introducing this extremely important debate.

The question is: should this interim House have those powers of delay? As the Motion refers to the Royal Commission chaired by the noble Lord, Lord Wakeham, I suggested to him that he might care to stay to hear what I have to say because I hate to be even mildly controversial, but I propose to be so as regards his commission. The Motion refers to the commission, but, frankly, it did not need to because the commission is irrelevant to this debate.

As the commission was chaired by such a nice noble Lord as the noble Lord, Lord Wakeham—I know from my experience of another place and here that he is an extremely nice man—it never had a chance of producing anything other than a useless report. That was shown when he was given as vice-chairman Gerald Kaufman. It was quite impossible to produce a unanimous report of any kind with Gerald Kaufman on the commission, but the noble Lord managed it, with three variations included. Those three variations are about the worst part of the report so I shall not refer to them too much, but the report itself and those three recommendations or options would produce a hybrid House. That would certainly be even worse than this interim House.

I have no reason to want to see the Wakeham commission report introduced into this debate. This House itself is far from ideal. It is supposedly called an "interim House". If it were an ideal House I should not be in it. It would be a wholly elected House. I know that the noble Lord would not like it, but it has something to do with democracy. The idea of a democracy is that there should be two elected Chambers. I see the noble Lord, Lord Wakeham, shaking his head. He must have started off doing that in his impartial way when he began discussing the issue.

The plain fact is that in an elected second Chamber, of course, one would not have such nice people as ill of us. Some of the Members would not be very good.

The other place has 650 honourable and right honourable Members. Is anyone suggesting that they are all nice, decent, good Members of Parliament? Of course not. In an elected Chamber one does not always get nice people. One gets some difficult ones; and what is wrong with that? There is nothing wrong with having difficult Members in a Chamber. But we have now an interim Chamber for better or worse.

It has been suggested, including in this debate, that we must have lawyers and the independent Cross-Benchers. I shall not dwell on that point, because if anyone cares to consider the independence of Cross-Benchers, it will be found that they are anything but. Some of them should be sitting on the Benches opposite, as I have told them from time to time, except that they would probably find that there is not anything Right-wing enough for them there. There is no reason whatever why we should have all those professionals, Bishops and other religious leaders. If we want to take advice from such people, we can do so. They do not need to be Members of your Lordships' House at all. But I digress. I do so only because I wanted to upset the noble Lord, Lord Wakeham, a little. I see that I am not even doing that.

My Lords, I did not want to intervene to stop the noble Lord, but I should have thought that he has known me for long enough to know that he has to try a good deal harder before he upsets me!

My Lords, that is why I asked the noble Lord to stay. I knew that he would not be too upset.

If, as I see from the nodding and shaking of heads around the Chamber, noble Lords do not want an elected second Chamber, it is much better that we have a nominated one—nominated in whatever way noble Lords would like. That would be better than a hybrid House as recommended by the noble Lord, Lord Wakeham.

The problem of the powers, if one had an elected or even a new second Chamber, is important. Everyone agrees that the other place must be paramount. I agree with that view. Recently, I referred to something that the Leader of the Opposition, the noble Lord, Lord Strathclyde, was quoted as having said—I am not sure whether it was true: he was going to be bolshy and ignore the Salisbury Convention. When I said that to him, he both nodded and shook his head, so I was not clear what he was saying. No doubt his Deputy Leader will tell us.

The Salisbury Convention is just that—a convention. If we have a new Chamber or this Chamber is strengthened in some way, we should entrench the Salisbury Convention in legislation and stop talking about conventions. That could be done to limit the powers of this Chamber, so allowing the other place to be paramount. At the moment, we have this so-called interim House. I agree with those who have said that we should be able to make the government of the day think again in relation to secondary legislation.

I entirely agree with everything that has been said on that subject, and we do not need to wait to do it. It can be done now. My noble friend Lord Peston, in his customary wise way, said that it should be done only once: we should not be playing ping-pong with the other place and with the Government. In that way we diminish the responsibility, the powers and the respect in which the House is held, and so I hope that if we do take these powers it would be to use them just once.

As I have said, one does not need to worry too much about the Wakeham commission report, because its recommendations will not be implemented. The noble Lord knows that: he is smiling now, but he knows very well they will not. Can you imagine that if this Government were re-elected and at the start of a new Parliament the then Prime Minister—the present one, I assume—would have as a high priority instituting a new major piece of constitutional legislation? One has to be joking. It will not happen. This interim House is going to last for rather a long period of time, in my view.

The Wakeham commission report, from which this Motion has taken some recommendations, got it right in this respect. That is not too surprising. Out of 132 recommendations it would be astonishing if it had not got one or two right—and it did—but we are told that we should not cherrypick from the report. Why should we not? In any case we are not even talking of the Wakeham commission recommendations: these are the ones that my noble friend Lord Peston and I set out to them in our evidence. So this really could be said to be our evidence. The plain fact is that there is absolutely no reason whatsoever why one should not cherrypick at least one or two of the good points in the report.

Let me revert to the Motion. My noble friend Lord Peston agreed with what we submitted in evidence at the time: that we should seek to allow secondary legislation both to be voted on in your Lordships' House and to be amended. He had doubts about the amending part. He has not discussed this with me—to my regret, and I will talk to him about that later. The reason that he gave is quite a good one, actually: despite all our brilliant legal minds and great parliamentary minds, we are not well equipped to draft amending legislation. We should therefore simply throw it out and let the government of the day do the necessary work. I agree with him on that. There is no harm in doing it that way, but it is important that the interim House should have those powers because, as I say, we are going to last a long time and so there is no need to wait.

The noble Lord, Lord Dean of Harptree, asked the Minister to give it a fair wind. I hope he does so but, frankly, it does not matter. It is not a matter for the Government. We should remind ourselves that we in your Lordships' House are in command of our own rules. It would be nice if he gave it a fair wind but, frankly, if he, the usual channels and the authorities of the House decide that we should not have it, that has nothing to do with it. We are in charge—we, the Members of your Lordships' House—and if they do not like it, that is just too bad. So I say to my noble and learned friend Lord Falconer, of whom I am very fond, as he knows—just as I am of the noble Lord, Lord Wakeham—that I hope he will give it a fair wind. It is a very sensible suggestion that these powers should be taken by your Lordships' House. At the same time I hope that your Lordships will remember that it is not for them to decide. We can decide, and should.

My Lords, I, too, welcome this debate and join with others on congratulating my noble friend Lo rd Dean of Harptree on initiating it. Indeed I commend my noble friend on his persistence in returning to this extremely important matter. I think I now know how one of my students feels at the end of a seminar, saying that, "Everything I wanted to say has already been sail". Where I differ from the student is that I intend to carry on!

Before get to the meat of what I should like to say, I just want to respond to the noble Lord, Lord Barnett, who provokes me with his opening comments about democracy. I disagree with him. He is taking one particular definition of democracy. He is defining it solely in terms of process: that is, election. If you define democracy as the translation of the wishes of the electors into legislative output, then you come up with a very different form of parliament. I think that is a preferable definition and it also entails looking at Parliament in a holistic manner, and not simply concentrating on this Chamber.

I now turn to the heart of the debate itself. This is, as the noble Lord, Lord Dahrendorf, has said, a very important debate because in looking at delegated legislation we are addressing a problem of Parliament, not a problem of the House of Lords. It is quite possible to move forward on this issue without impinging on the wider debate about the shape of the upper House.

The upper House, whatever form it takes, should join with the other place in subjecting delegated legislation to effective scrutiny. That there is a need for the effective serutiny of delegated legislation cannot be doubted. The phenomenal growth in the volume of statutory instruments has already been mentioned and has been recorded by a range of authoritative bodies. It was noted by the Hansard Society Commission on the Legislative Process in 1992, by the Procedure Committee of the House of Commons in 1996 and now by the Royal Commission. All three bodies agree that the means of parliamentary scrutiny are inadequate for the task. Each makes recommendations for strengthening scrutiny.

The report of the Commons Procedure Committee on Delegated Legislation in 1996 was a powerful document in favour of reform. I should perhaps declare an interest in that I was one of the five witnesses to give oral evidence to the committee. The committee offered 18 recommendations, the most significant of which are mentioned in the report of the Wakeham commission and have been touched upon already by several speakers.

It recommended a new category of "super affirmative" instruments. It favoured the creation of a new sifting committee to decide which negative instruments merited debate. The sifting committee was to look at statutory instruments in the context of political importance, thus distinguishing it from the work of the Joint Committee on Statutory Instruments, which of course is concerned with the technical merits. It also recommended a point that was touched upon by my noble friend Lord Alexander of Weedon that the "praying time" in respect of negative resolution instruments should be extended from 40 to 60 days, and that debates in the Standing Committee on Statutory Instruments take place on substantive Motions.

The committee's report makes an excellent case for these recommendations. The Royal Commission in effect makes similar recommendations for your Lordships' House. Indeed, as the commission records on page 72,

"our proposals are very much in line with the spirit of the Procedure Committee's report".

It goes on to say that the two could be considered in parallel. This, I think, is a crucial point. As I have mentioned, it is not a case of looking at the problem purely from the perspective of your Lordships' House. It has to be considered in a holistic manner; that is, from the perspective of Parliament. Indeed this is intrinsic to the recommendations of the Royal Commission. It favours a joint sifting committee. As it argues, a Joint Committee ensures consistency of approach and avoids duplication of staff effort. I endorse that recommendation. As an alternative to a Joint Committee, as my noble friend Lord Alexander of Weedon has mentioned, it recommends the House establishing its own procedure, perhaps employing the Delegated Powers and Deregulation Committee for the purpose. Like my noble friend, and for the reasons given by the Royal Commission, I favour a Joint Committee.

The Royal Commission offers a well argued case for reform and is highly persuasive. I believe that the case for action is overwhelming. However, like several other noble Lords, I would qualify my endorsement of that in two respects. The first is in respect of its conclusion that there is no case for making it possible to amend statutory instruments once they have been formally laid before Parliament. Like the noble Lord, Lord Peston, I recognise the difficulties of permitting amendment by Parliament. In large measure, as the noble and learned Lord, Lord Simon of Glaisdale, mentioned, it undermines the case for having delegated legislation and this point was well recognised by the Commons Procedure Committee in its report.

However, there is a case for Parliament being able to persuade government to withdraw and reintroduce a statutory instrument that is clearly flawed. The Procedure Committee effectively squared the circle by recommending that it be possible for conditional amendments to be moved in a Standing Committee on Statutory Instruments. It would then be open to the Government to withdraw and re-lay the instrument, with some regard to the terms of the amendments agreed in Committee; alternatively, it could of course seek the formal approval of the House to the unamended instrument. It would also be possible, under its recommendations, to move conditional amendments on the Floor of the House. If passed, it would then be open to the Government to withdraw and re-lay the instrument. Technically, the House does not amend the instrument, but in effect it is inducing the Government to amend it. That, I think, is the way to proceed, and I recommend that your Lordships' House should adopt a similar approach.

I differ also from the Royal Commission in its recommendation that the powers of this House be limited in respect of delegated legislation. The limited powers it recommends would, I think, be too much of an encouragement for the Government simply to employ their majority in the House of Commons to override any vote in your Lordships' House to reject a draft instrument or to annul an instrument. I believe that the existing powers are adequate. Delegated legislation is not analogous to primary legislation, simply by definition. Not only can the Government relay an instrument; they can, if your Lordships' House continues to reject it, embody it in primary legislation and thus, ultimately, ensure its passage under the provisions of the Parliament Act. That fact is recognised by the Royal Commission, but it makes the point in suggesting that the existing absolute veto power is more apparent than real. However, in that respect, I disagree with the Royal Commission. Introducing legislation to give effect to a rejected instrument is time consuming, eats into the Government's legislative programme and, of course, if the House rejects the legislation, entails a delay of one year. That prospect gives the House much more leverage than the capacity to delay an instrument for three months.

Furthermore, I believe that this House is perfectly entitled to use its power to annul an instrument. The reasons for that are twofold; one is present and one is prospective. First, delegated legislation is designed to provide a means to an end. The ends are stipulated, or should be stipulated, in the primary legislation. We are not therefore dealing with matters that are likely to be embodied in a manifesto or the Government's programme for the Session.

Secondly—this is the prospective reason—the proposed method of scrutiny that I have outlined gives greater legitimacy to the use of the power. If a sifting committee has recommended that an instrument be annulled or has passed a conditional amendment that the Government have not heeded, then the House will expect a full justification from the Government. If that is not forthcoming, I think that the House would have perfectly valid grounds for rejecting the instrument. Of course, if the system is working well, the House should not need to use the power, but I think that the power needs to be there.

These are important qualifications. However, the essential point for the purpose of today's debate is that the Royal Commission has endorsed the view of previous bodies that action is needed to strengthen Parliament in its scrutiny of delegated legislation. The key word here is Parliament. We are not discussing something that is part and parcel of the debate about reform of the upper House. We are discussing a problem that faces Parliament. Both Houses should act, and should do so as a matter of urgency.

My Lords, I am most grateful to the noble Lord, Lord Dean of Harptree, for introducing this debate on an important subject which the events of 22nd February have made even more important than they were before. When, as a novice, I joined the Delegated Powers and Deregulation Committee, I learnt much from the experience and wisdom of the noble Lord.

However, I agree with the noble Lord, Lord Peston, that, useful though this debate has been, it is no substitute for a full debate on the role of the interim House. That, I believe, is a debate that we should have and I am sorry that the Leader of the House is not in her place today to listen to our debate. I hope that she will take the opportunity of reading the report in Hansard very carefully.

The power of your Lordships' House to reject secondary legislation emerged like a tiger from its lair on 18th June 1968 when this House narrowly rejected the Southern Rhodesia (United Nations Sanctions) Order. That vote was seen to create a constitutional crisis. It brought to an end the cross-party discussions on the reform of your Lordships' House that were proceeding at the time. The government announced their intention to introduce legislation to reduce the powers of your Lordships' House—an intention which somehow they never got around to implementing. The order, in a slightly varied form, was relaid and approved by your Lordships' House a month later, on 18th July. The tiger returned to its lair, where it snarled from time to time.

The procedural device of a non-fatal amendment was invented. The extremely useful Library Notes on this subject tell us that a non-fatal amendment was passed eight times between 1977 and 1998. During that period there were also some direct challenges to orders, but none of them was successful.

On 20th October 1994, the noble and learned Lord, Lord Simon of Glaisdale—whom I am very glad to see has once again participated in the debate today—persuaded your Lordships' House that there was no convention which prevented it from exercising a power to reject secondary legislation. That, of course, has always been the view of these Benches.

On 22nd February his year, the tiger emerged from its lair for a second time and savaged the London election rules because they did not provide for a freepost. This time there was no constitutional crisis. The Government negotiated on the subject and returned with an amendment to the Representation of the People Bill to allow a freepost for the mayoral election. On this occasion, your Lordships' House was acting not to protect, as in 1968, a white minority government in S Duthem Rhodesia, but to protect the democratic rights of the electors of London. That forms the background to today's debate.

I believe that fie right to reject secondary legislation is a very powerful weapon in the hands of your Lordships' House. It is so powerful that it must be exercised with very great care and restraint. I shall not try to suggest any specific rules for this; it would take far too long in our debate this afternoon and others could do it much better than I. However, the power should not be used, in particular, to block the implementation of an Act if the principles being implemented were fully debated in Parliament during the passage of that Act.

For example, under the Access to Justice Act 1999, there were many aspects of the funding code for the Community Legal Service to which we on these Benches strongly objected. But those issues had been fully debated during the passage of the Bill and it would not have been right to challenge the order for approval of the funding code. When the order came forward, I appeared in this House merely to criticise it, but not to make any attempt to revoke it.

However, if the circumstances justify the exercise of a power to reject secondary legislation, then I believe that it is the right and duty of your Lordships' House to exercise that power. The attempt to lay down rules for the mayoral election without a freepost was plainly such a case.

The trouble with the proposals in Chapter 7 of the report of the Royal Commission is that it entirely destroys this vital power of your Lordships' House. Under Recommendations 41 and 42 of the report, any order rejected by your Lordships' House can nevertheless take effect if confirmed in the other place within three months. I emphasise the word "within", rather than at the end of three months. The effect of this would have been that when your Lordships' House threw out the London election rules, those rules would have been voted on again within a matter of a few days in another place. They would have taken effect without any amendment and there would have been no freepost.

I have to say that when I first read Chapter 7, I assumed that these proposals were intended to work the other way around. I thought that they meant that the other place could force an order through after a delay of three months, and I believe that, judging from his speech, that is what the noble and learned Lord, Lord Simon of Glaisdale, also thought. I then re-read the chapter and discovered that I had misunderstood what was said in the report; namely, that three months was the end of the time within which the other place could confirm the original order, not the start of that time. Let me refer to Recommendation 41, which states:

"Where the second chamber votes against a draft instrument, the draft should nevertheless be deemed to be approved if the House of Commons subsequently gives (or, as the case may be, reaffirms) its approval within three months".

My Lords, I am not sure that the noble Lord is referring to the right recommendation when he comments on Recommendation 41 rather than Recommendation 42. There is a distinction between draft secondary legislation and what I take to be full secondary legislation.

No, my Lords. Recommendation 41 refers to the affirmative resolution procedure; Recommendation 42 refers to the negative procedure. Recommendation 42 is less clear. It states:

"the annulment should not take effect for three months and could be overridden by a resolution of the House of Commons".

But I take it that that annulment is intended to operate only within that three month period. I am sorry to have to say this in the presence of the noble Lord, Lord Wakeham, but I find that particular proposal both extraordinary and indefensible.

There is a case for reducing power over statutory instruments from absolute veto to power to delay for a period of, say, one year, in line with our powers over primary legislation. However, there are arguments the other way for saying that, if the Government want to override the veto of your Lordships' House, they should do so by primary legislation. I can see no arguments for the proposal as it stands in Chapter 7.

There are a number of good things in that chapter. I agree with Recommendation 35, that there should be, as many noble Lords have said, more parliamentary scrutiny of secondary legislation and that your Lordships' House should make a strong contribution to that scrutiny. I agree with Recommendation 36, that particularly significant statutory instruments should be published in draft for consultation before being laid before Parliament. To a considerable extent that is already happening, especially where statutory instruments are intended to implement new primary legislation and are published for consultation while that legislation is passing through Parliament. I agree with Recommendations 37 and 38, for a sifting mechanism to look at the significance of statutory instruments and to draw attention to those which merit debate.

I regret the report's conclusion that there is no case for making it possible to amend statutory instruments once they are laid before Parliament. I agree with the noble Lord, Lord Peston, that there should be no general power to allow amendment of statutory instruments—that would defeat the purpose of getting them through Parliament relatively quickly and efficiently—but there is much to be said for the proposal of the noble Lord, Lord Norton of Louth, to permit conditional amendments to statutory instruments in order that your Lordships' House could reject the statutory instrument but explain the terms on which it would consent to it if re-laid.

Going beyond that, in the relatively short time that I have been a Member of your Lordships' House, I have become increasingly convinced that there is a need for a kind of legislation which is intermediate between the affirmative resolution procedure and primary legislation. That would perhaps be similar to the super-affirmative statutory instrument discussed by the noble Lord, Lord Alexander of Weedon, in his constructive and thoughtful speech.

The affirmative resolution procedure we now have excludes amendments and usually means no more than 20 minutes of debate in the dinner hour or at the end of the day's business. Primary legislation, by contrast, involves the whole panoply of Second Reading, Committee stage, Report stage and Third Reading—and the allocation of the Committee stage to the Moses Room in some cases does little to shorten the procedure. The Jellicoe procedure appears to have been totally abandoned. An intermediate procedure would be appropriate both for particularly important statutory instruments and for minor and uncontroversial Bills, such as many of the Law Commission Bills.

As I have made clear, I disagree strongly with Recommendations 41 and 42. The report was published before your Lordships' House rejected the London election rules. The report assumes in paragraph 7.11 that there was a convention that your Lordships' House did not reject statutory instruments. Maybe now the authors of the report would say something different. Be that as it may, we on these Benches will fight as strongly as we can to preserve the unfettered right of your Lordships' House to reject secondary legislation.

My Lords, we have had a very useful and interesting debate on the immensely important issue of secondary legislation. As all noble Lords who have spoken have said, we are deeply grateful to my noble friend Lord Dean of Harptree for introducing it.

I have reminded the House on a number of occasions that, although it is a long time ago, I was one of the founder members of the Delegated Powers Scrutiny Committee, as it was initially called. After a very short membership, I was whisked off to the Government. I then became a gamekeeper after being a poacher—or perhaps it was the other way round; I am not sure. I certainly noticed the reminder of the noble and learned Lord, Lord Simon of Glaisdale, about the Child Support Agency and the secondary legislation that surrounded it. Clearly my spell on the Delegated Powers Scrutiny Committee did not do me as much good as it should have.

The truth is that all governments tend to produce skeleton Bills, or parts of Bills, which allow Ministers—or, more truthfully, civil servants—to draw up the rules later. Indeed, it should be not only the opposition parties and government Back-Benchers but Ministers themselves who should want to reduce what is, in reality, legislation by officials. Parliament in theory sets out the principles, but it is in government departments that the rule books are written—rule books which can close shops, slaughterhouses and schools; which can pile costs and bureaucracy on business; and which can put jobs at risk in areas such as, if I may take a random example, the pig industry.

There is cross-party agreement that this development needs to be checked. Over time, there have of course been steps taken to deal with affirmative, negative and general instruments. Parliament has tried to build up its defences against the abuse of secondary power. We have had the Commons Standing Committee on Delegated Legislation, the Joint Committee on Statutory Instruments, and now we have in your Lordships' House the Delegated Powers and Deregulation Committee. These institutions are useful. In particular, your Lordships' Delegated Powers and Deregulation Committee does an outstanding job in drawing attention to attempts by government to push secondary powers too far and to evade scrutiny on the face of legislation.

All governments have so far heeded notes of the Delegated Powers and Deregulation Committee. There was a recent unwise attempt by the noble Lord. Lord Bassam of Brighton, to tough it out on proceedings at general elections, but wisdom overtook the Government and the noble Lord brought forward amendments to agree with the Delegated Powers and Deregulation Committee. That is quite right. At the risk of incurring, perhaps not the wrath of but a row from the noble Lord, Lord Barnett, I venture to suggest that advice from this committee is on the way to becoming a convention of the way we deal with legislation. We in this House and in the other place should expect obedience from all governments to the recommendations of the committee.

Despite these checks, problems abound. If I can remind the House, the Pollution Control Act was, in its original form, the worst example of a skeleton Bill ever to come to the House. Now we have a growing swathe of late amendments to big Bills, some of which contain enabling powers. The Delegated Powers and Deregulation Committee commented on this in its 10th report. In regard to the government amendments at the Committee stage of the Financial Services Bill, it stated:

"the increasing speed with which the Committee is being asked to work … may on occasion mean that the Committee's report on amendments is published after the House has considered the amendments".

Clearly that is not a satisfactory position, especially if the amendments contain Henry VIII type secondary powers.

We are increasingly under pressure of time and weight of legislation. There is a weakness in the other place in the scrutiny of legislation. Your Lordships need only read dare I say it—the Committee stages of Bills before they come here. They may sometimes occasion a laugh but they do not occasion much wisdom. There is also the sheer weight of legislation. The 1997–98 Session was the longest in history. In this Session we have a huge programme of Bills—the fullest programme that many can remember. And we have a huge number of late amendments: 1,000 to the GLA Bill; 500 to the Local Government Bill; and some 600, I understand, to the Financial Services and Markets Bill. Those are all problems which beset this Government as they beset to an extent the last government. We have to try to find a way to deal with them, and in particular secondary legislation.

Running through the debate has been reference to the report of the Royal Commission chaired by my noble friend Lord Wakeham, whom I am pleased to see in his place. Most noble Lords made reference to Chapter 7 of the report on secondary legislation. I agree with many of the recommendations in that chapter. I agree with noble Lords, in particular the noble Lord, Lord Barnett, who said that we could move ahead now with some of the recommendations. The sifting committee proposal in Recommendations 37 and 38 has met with approval around the House and could be introduced. I have some reservations. I shall come to my principal reservation on Chapter 7 later.

We all agree that secondary legislation is not open to sufficient scrutiny. We need to discuss it perhaps more often. Do we, or do we not, need to be able to amend it? We need to be able if we wish, and on rare occasions, to reject it.

Better accountability not only involves your Lordships and Members of the other place having a close look at secondary legislation but also must involve us lining with outside bodies and organisations which will be affected by the detail of it. My noble friend Lord Alexander of Weedon spoke about that issue.

I was surprised that your Lordships dwelt largely on secondary legislation brought in after—sometimes a long time after—the primary legislation on which it was based. At this stage, perhaps I may throw into the pot consideration of what we do about the powers in the primary legislation as it goes through your Lordships' House. I have a few suggestions. Where important regulations are to be brought in under a Bill, draft regulations should be available to the House before the Committee stage. In a properly planned world that should be possible. Ministers should give as much attention to the small print as to the soundbites of law making. It is the small print that makes or breaks businesses and jobs.

If draft regulations are not available, either House should be increasingly reluctant to proceed to Committee stage or should declare its right to reject outright late presented regulations. Where draft regulations are presented after Committee or secondary powers added into a Bill after Committee, that part of the Bill should normally be recommitted so that we can have a Committee-type discussion and not a Report-type, or, even worse, a Third Reading-type, of discussion.

In some circumstances it might be sensible to lay the draft regulations as amending schedules to the Bill. Your Lordships may remember that for a variety of reasons I suggested this to the Government in the Referendums (Scotland and Wales) Bill in the summer of 1997. Indeed, the Government took that on board. Therefore while the Bill was still going through as primary legislation, we were able to discuss the detail of the secondary legislation which dictated how the referendums would work and were of great importance and interest.

Your Lordships' House must retain the power to reject regulations. I shall come to that in a moment. As my noble friend Lord Campbell of Alloway pointed out, we could continue to use non-fatal Motions to point to where regulations need amendment, but your Lordships will recall that the Government ignored that procedure on the massive vote on beef-on-the-bone regulations. I do not say this as a condemnation of this Government, but non-fatal resolutions do not stake much terror into the heart of government of any party.

Both Houses, possibly in the context of the Joint Committee we should like to see put forward under stage two, should look at ways to enable amendment of secondary legislation. However, I agree with the noble Lord, Lord Peston, that it might be difficult to define a way forward for amending secondary legislation. It would need a lot of time and staff, and perhaps work off the Floor of the House, with evidence from parties to be affected, and complex mechanisms for reaching agreement between the two Houses. I listened with care to the noble Lord, Lord Dahrendorf, who suggested that we should perhaps look at the Welsh Assembly for an example of how to do that; and I shall certainly do that.

As regards the recommendations in the report of the Royal Commission that if we reject secondary legislation the House of Commons can in two or three days' time simply agree with it again and that is it, I believe that that would be totally unsatisfactory. I agree entirely with the noble Lord, Lord Goodhart, that if that power had been in place when your Lordships decided to reject the London elections measure, two days later the House of Commons would simply have rubber-stamped the government position and the noble Lord, Lord Goodhart, and myself would never have had meetings with the Government Chief Whip and his two colleagues and negotiated what I think was a sensible agreement and a way out. We were fortunate then because the Representation of the People Bill was there as a vehicle. I accept that. But I was not blind to the fact that there was a vehicle available. Nor, indeed, was the noble Lord, Lord Goodhart.

We have to be extremely careful about going down the road my noble friend Lord Wakeham suggests in these two recommendations. I think that government of any party would not be too unhappy about that recommendation. That is why I believe that we should retain our right to reject secondary legislation, perhaps doing so in a way which makes clear why we are rejecting it and what we should like to see changed; and the Government can then negotiate and come back with an amended regulation which your Lordships would then pass. As the noble Lord, Lord Goodhart, said after the London orders debate, I think that your Lordships should use that power—as my party would—very sparingly indeed.

A number of noble Lords have referred to the remarks of the noble and learned Lord, Lord Simon of Glaisdale, in a number of debates. However, I want to close with the noble and learned Lord's words on Third Reading of the Representation of the People Bill on 6th March 2000. At col. 817 of the Official Report the noble and learned Lord said;

"I trust that henceforth there will be no question but that your Lordships have power to examine, scrutinise and challenge secondary legislation".

That is certainly the view of these Benches.

My Lords, I join with every speaker in the debate and thank the noble Lord, Lord Dean of Harptree, for raising the matter and making such an excellent speech. As one noble Lord said, it set the tone. I thank all noble Lords who have participated in the debate. It has been a useful and illuminating debate in getting Members of this House to express views on the issue of how secondary legislation should be dealt with.

A range of suggestions was made. The noble Lord, Lord Dean of Harptree, said, "Let's get on with the Royal Commission's proposals and propose a way to amend secondary legislation". My noble friend Lord Peston said, "We cannot amend, but let us get on with some proposals in relation to amendment". The noble Lord, Lord Alexander, gave effectively five suggestions some of which are in the commission's report and some are not. The noble Lord, Lord Dahrendorf, directed us to Wales and said, "See what the National Assembly for Wales has done". The noble Lord, Lord Campbell of Alloway, said, "Ignoring the fact that the House of Commons would have to be involved in some way, let us just get on with it ourselves. Let us think of a way of procuring delay". The noble and learned Lord, Lord Simon of Glaisdale, said, "Don't do anything. Let us just rely upon our powers to reject provisions of secondary legislation".

The noble Lord, Lord Barnett, wrests credit away from the noble Lord, Lord Wakeham, for the proposal for three months' delay. He says that this is his idea and that of the noble Lord, Lord Peston. He says, "Let's get on with it" but equally says that we should cherry pick. The noble Lord, Lord Norton of Louth, rightly says that we should act in co-operation with the other place. The noble Lord, Lord Goodhart, rejects some of the proposals of the noble Lord, Lord Wakeham, but accepts others. Similarly, the noble Lord, Lord Mackay of Ardbrecknish, supports the idea of amendment. I simply go through that to indicate that there is plainly no consensus at present as to how one should deal with the issue—

My Lords, I am grateful to my noble and learned friend for giving way. He must have heard a different debate from the one to which I have been listening. I was astonished by the high degree of consensus among noble Lords. I hesitate to ignore my noble and learned friend for the moment, but if we were asked to sit down together I believe that we would come up with a solution to the whole set of problems. I have no doubt that there was considerable consensus.

My Lords, I believe there was a consensus that something should be done but not as to what that should be. The noble and learned Lord, Lord Simon of Glaisdale, for example, said, "Don't do anything; just rely on your power to reject". Other noble Lords said, "We have to get rid of our power to reject and delay". Other noble Lords said that we should delay in different ways. Yet other noble Lords, of whom the noble Lord, Lord Dahrendorf, is the best example, said, "Take a whole new model"; namely, the National Assembly of Wales. To say that there is a consensus on the way forward seems to me, with respect, optimistic. What was being said was simply that there should be a way forward.

My Lords, I am grateful to the noble and learned Lord for giving way. Perhaps I may offer a suggestion. Can the Minister identify any noble Lord who argued against changing the process and introducing a sifting committee?

My Lords, the noble and learned Lord, Lord Simon of Glaisdale, said that we should simply rely upon our power to reject. The approach of the Government to the Royal Commission chaired by the noble Lord, Lord Wakeham, is that we would wish to hear detailed comments on its proposals. This debate has been a useful way of dealing with and receiving such comments, though I accept that it will not be the only way.

In my remarks, perhaps I may not address the particular proposals made by the House—this is a useful listening debate from our point of view—but address the way forward in the mean time. That raises the question of the current position in the present interim House. The Government believe that there is, and should be, a convention that this House does not reject secondary legislation. I should like to draw to your Lordships' attention two definitions of a constitutional convention which I believe are relevant. The first is found in Marshall and Moodie, Some Problems of the Constitution, which states:

"Conventions are rules of constitutional behaviour which are considered to be binding by and upon those who operate the constitution, but which are not enforced by the law courts".

In Dicey's Introduction to the Study of the Law of the Constitution, he stated:

"The general rule that the House of Lords must in matters of legislation ultimately give way to the House of Commons is one of the best-established maxims of modern constitutional ethics".

My Lords, I am grateful to the noble and learned Lord for giving way in a time-limited debate. A great many years have passed—in fact, a century— since Dicey wrote that. How can the Minister possibly stand up now and say that there is no convention when that was expressly asserted in 1994 and expressly acted on within this very year?

My Lords, I shall come to that, if I may. I shall deal with the 1994 position and the February 2000 position. As has been agreed in the course of the debate, the House has rejected secondary legislation only twice since the war: on Rhodesian sanctions and on arrangements for the London mayoral elections earlier last month.

My Lords, I am sorry to interrupt the noble and learned Lord again. It is true that only twice have the votes been carried to a negative Division. But during the sixties and seventies, think the noble and learned Lord will agree that both parties repeatedly voted against secondary legislation without necessarily carrying it in the Division Lobby.

My Lords, I agree that from time to time people voted against secondary legislation. But, apart from the two occasions to which I have referred, those were the only occasions when secondary legislation was defeated by a fatal motion. The fact that between 1945 and the year 2000 Members of this House voted in a way inconsistent with the Salisbury/Addington convention does not mean that there was not a Salisbury/Addington convention which prevailed, and still prevails, in this House.

As your Lordships know, when secondary legislation is actually defeated by this House, the other place cannot cverrule your Lordships because the concurrence of both Houses is required. Perhaps I may deal with the 1994 debate initiated by the noble and learned Lord, Lord Simon of Glaisdale. There was no vote taken. As the then Leader of the House—

My Lords, again I am sorry to interrupt the noble and learned Lord. There was no vote taken because the resolution was carried nem. con.

My Lords, that is absolutely right. What was the basis on which it was carried? Perhaps we may refer to the words of the then Leader of the House, the noble Viscount, Lord Cranborne. When the issue was debated, he said that this sat very ill with your Lordships' role as a revising chamber— that is, to defeat secondary legislation—whose power should be one of asking the other place to think again, not to defy it.

As he put it,

"It is clear that the exercise of this crude power could result in stalemate between the two Houses with little scope for resolution"—[Official Report, 20/10/94; col. 361.]

It is clear that when the noble Viscount, Lord Cranborne, indicated that the Conservative Party would not vote against the resolution proposed, everybody accented that the power was there to vote against secondary legislation—

My Lords, I do not think that even the noble and learned Lord can assert that the reason the vote was not carried by the Conservative Party was because the resolution was understood to mean precisely the opposite of what it said.

My Lords, perhaps I may remind noble Lords that this is a timed debate. I should like the Minister to have time to reply.

My Lords, I am being too provocative; I apologise. The reason I assert that that was why the Conservative Party, or indeed anybody, did not vote against the resolution is because that is the true meaning of what the noble Lord said. Nobody disputes that the power exists to vote against secondary legislation, just as nobody disputes that the power exists to vote against legislation in breach of the Salisbury Convention. The question is not: is the power there to vote against it? The question is: is there a convention that says constitutionally we should not do it?

I do not deny that, procedurally, as was resolved in the 1994 debate, noble Lords have the power to defeat secondary legislation; but I say that that is no different from their power to defeat legislation in breach of the Salisbury Convention.

Much secondary legislation is now very important as a means of delivering government policies. Sometimes, of course, it is simply detail or transitional but on other occasions it is crucial to the smooth process of government that secondary legislation should be used.

I think it unlikely that matters would ever come to the point that rejection would occur on small matters of detail. The fact that the power has been used or even invoked so rarely points to that. Therefore, almost by definition, the question of defeat of a statutory instrument will arise only when it deals with an important matter of policy. The question, therefore, is: should the House of Lords be able to prevent the elected government from doing things they wish to do, and which the elected Commons agrees they should do as a matter of important policy, where that policy requires secondary legislation for its implementation?

The question therefore is: should the House of Lords be able to prevent, for example, the fixing of a minimum wage at the level that the Commons want? Or should it be able to prevent the mayoral elections from going ahead altogether? When I say "prevent", I mean prevent altogether. That is the power that it is said exists in this House in relation to secondary legislation; in effect, a power to override the elected other place in relation to matters of high policy. If one looks at the history of this issue, the matter never arises in relation to detail. That is usually dealt with by agreement. The answer to the question must be and is, "No". The unelected Chamber should not be able to prevent the elected Government and Chamber from doing, as a matter of principle, what the other place decided to do.

This unelected Chamber is not the equal of the elected Chamber. Noble Lords opposite are rather given to claiming that, now that the House is more legitimate than it previously was, it has somehow acquired that right. That is nonsense. This House is indeed more legitimate than it was because all of its Members have in one way or another earned their place. But in democratic terms it is still not as legitimate as the other place. Therefore, it is not right that it should exercise a power which actually sets aside and makes of no effect the wishes of the other place on important issues of policy, which decision cannot be reversed by the other place. This Chamber is a scrutinising Chamber. That is accepted. It is not one where important matters of principle are to be resolved as a matter of finality.

The prime power of this Chamber is to make the Government think again. This it already has the means to do, even on secondary legislation, by various devices drawing attention to concerns about individual instruments which fall short of outright rejection. For example, noble Lords may agree a Motion setting out the amendments they would ideally like to see made to an order. Noble Lords with more experience than I will know all of the non-fatal means by which this House developed mechanisms to draw to the attention of the executive or the other place what they would like to see in secondary legislation.

It is sometimes suggested that if the Government attach so much importance to something with which they cannot contemplate not proceeding, they ought to deal with it by way of primary legislation, thus leaving open the possibility of using the Parliament Acts to overrule your Lordships' House. That is a mistaken view on both constitutional and practical grounds. Everyone accepts that there are matters which are entirely properly dealt with by secondary legislation. Secondary legislation does not emerge from the ether at the whim of the Government. In every case where it is used, it is under powers which have been conferred in primary legislation.

My Lords, every?

My Lords, yes: every.

My Lords, I am following the argument of the noble and learned Lord, but does he agree that his argument would be on firmer ground if, during the passage of the primary legislation, the secondary legislation were available, thus enabling both Houses to see what the Government intended?

My Lords, how can it be available in every case? What happens when the minimum wage is changed? That is the sort of situation we are talking about.

My Lords, we could be talking about the first time, when we could at least see it before we pass the primary legislation.

My Lords, sometimes it is available. The noble Lord gave examples. Sometimes, as I indicated—and frequently—it is a power given to a government on an ongoing basis which it is intended should be changed and, therefore, cannot always be available at first instance.

Parliament has agreed that secondary legislation is appropriate in those cases where it has given Parliament the power to pass secondary legislation. We in this House now have a highly-respected committee which advises on the question of whether the powers proposed are indeed appropriate. Governments of both parties take the recommendations of that committee, in my view rightly, extremely seriously.

On the practicalities, one of the main reasons for preferring secondary legislation is, as I have said, where the provisions are transitional; where they apply only in specified circumstances, which are themselves time-limited; where they are urgent: where they are needed to enable us to fulfil international obligations; or where they need to be flexible to respond to changing situations. Doing any of those things by primary legislation so that the Parliament Acts are available, risks unacceptable delay, especially if the Parliament Act had to be invoked. It clogs up the parliamentary process. Logically, if primary legislation is required on the first occasion that the issue arises, why would this House agree that in future secondary legislation would be adequate?

The Chairman of the Delegated Powers and Deregulation Committee, the noble Lord, Lord Alexander of Weedon—I am glad to see him in his place—who took part in this debate, fully accepts that the proper use of secondary legislation is essential to the proper workings of Parliament and government. Once we accept that that is the proposition, we end up in this strange situation which it appears that certain noble Lords are arguing for; that is, that this House has the power to veto certain acts of the elected government.

I venture to suggest that even the way in which the power has been used since the war does not indicate a desire to reject, but only to delay. In the case of the Rhodesian sanctions order, the noble Lord, Lord Carrington, said that,

"if the Government decided, in spite of the advice which we had given them, to re-lay the Order, we should be giving the Commons another opportunity to debate it in the light of what has been said in this House … I have always thought that this was the proper function of a Second Chamber".—[Official Report, 18/6/68; col. 576.]

The noble Lord, Lord Carrington, was not asserting, even in relation to the Rhodesian sanctions order, a right to veto, which is the right being asserted by the noble and learned Lord, Lord Simon of Glaisdale. Indeed, when the Government did relay the order, as the noble Lord, Lord Goodhart, mentioned, your Lordships' House duly approved it. At the time, given the wider consequences of that first action, the words of the noble Lord, Lord Wade, in the second debate that,

"to flout the House of Commons, to overrule the elected Chamber, would undoubtedly be … one of the greatest mistakes this House has made for a long time".—[Official Report, 17/6/68; col. 357.]

seemed prophetic. Did the Rhodesian sanctions order, in those circumstances, indicate that the House had a power to veto? In my view, clearly not. In my view, equally, it was not taken by this House as indicating that it had such a power—see the fact that this House then developed non-fatal ways of dealing with the issue; see the fact that until last month it never sought to assert that power; see also the conclusions of the Wakeham Royal Commission which give what the noble and learned Lord, Lord Simon of Glaisdale, described as a "masterful analysis" of the existing position.

Paragraph 7 11 of the report stated:

"Although in 1994 the House of Lords (on a motion from Lord Simon of Glaisdale) asserted its 'unfettered freedom to vote on any subordinate legislation', in practice there has (so far) been no serious challenge since 1968 to the convention that the House of Lords does not reject Statutory Instruments".

My Lords, will the noble and learned Lord read the first three lines of paragraph 7.39, which deals with this issue.

My Lords, I shall come to that. Paragraph 7.31 says:

"The powers of the present House of Lords in respect of Statutory Instruments are more absolute than those it has in respect of primary legislation. On the other hand, as we noted … there has since 1968 been no serious challenge to the convention that the House of Lords does not reject Statutory Instruments. Its influence over secondary legislation is therefore paradoxically less than its influence over primary legislation".

Paragraph 7.39 says:

"We did consider the option of retaining the second chamber's present absolute veto over Statutory Instruments, particularly in relation to delegated powers".

It continues further down,

"The absolute nature of the House of Lords powers in relation to secondary legislation is more apparent than real".

So an objective consideration of the matter by the Wakeham Commission (if I may call it that), concluded that in reality there was no such veto. That is exactly consistent with the constitutional position of this House.

My Lords, if the Minister is pressing, as he is passionately, that this power should not veto secondary legislation, is he not then making a devastatingly supportive case that there must be a delaying power or this House cannot properly fulfil its duty at all?

My Lords, at the moment I am discussing the present position. If we take 1968 as the starting point, this House has operated for the past 32 years on the basis that it has no power to reject secondary legislation. It has been perfectly satisfied with its non-fatal powers. What happens next requires consideration of the kind of ideas that we have discussed this afternoon. I am concerned to identify the present position.

What about the events of 22nd February 2000? In my respectful submission the noble Lord, Lord Goodhart, indicated the extraordinarily flawed nature of his argument in support of what happened on that occasion when he indicated that there was no convention of tae kind we have discussed. He said that if the matter had been debated or considered in the course of the primary legislation it would be wrong to challenge the secondary legislation. He referred to the Access to Justice Act. As the noble Lord, Lord Goodhart, knows, the Greater London Authority Act established the mayor and the need for an election in that regard. Unlike in the cases of the then Scotland and Wales Bills—if I may call them that in shorthand—there was no suggestion or amendment proposed by anyone that there should be a freepost arrangement. No one thought it right to raise that matter at the appropriate time.

My Lords—

My Lords, when I have finished this sequence of remarks the noble Lord can demonstrate where I am wrong. The matter I was discussing was never debated at the appropriate tame. As with the Rhodesian sanctions, it is perfectly possible that this House acted in breach of the existing constitutional convention.

My Lords, I suggest to the noble and learned Lord that the problem with the then Greater London Authority Bill was that the failure to include anything in the nature of a free mailshot was simply overlooked. I think that I speak for my noble friends when I say that they assumed that there were powers to create a mailshot. The legislation is extremely complex; there are cross-references to the Representation of the People Act 1983. I believe that a search has produced one reference to a mailshot in the Committee stage in the other place which certainly did not suggest that there would not be one. At the time no one realised that this problem would occur.

My Lords, as I say, the measure was included in the Scotland and Wales Acts. In a sense the noble Lord is saying that the Opposition, having failed to raise the matter at the right time, then decided to raise it at the wrong time; that is, when the secondary legislation went through. That may well be an indication of an exceptional circumstance. However, that mistake by the Opposition does not seem to me to justify the breaking of what—if one looks objectively at the history of this matter, as the Wakeham Commission did—was plainly a constitutional convention.

The Government believe that the fact that the process of reform of your Lordships' House has begun does not change the relationship between the two Houses. This House is still untouched by the electorate at large, while the other derives its whole existence from it. The other House must therefore prevail on issues such as this. It is wrong for this House, however strongly it feels, to reject an order which the elected Chamber is content to approve.

I turn briefly to the proposal in the Royal Commission report for a power of delay. As I said earlier, I can see that this is an issue whose case is well worth arguing. Indeed, to some extent I see the force of what the noble Lord, Lord Alexander, said. However, we cannot decide it now. That is obvious from the wide range of views that have been expressed.

When the noble Lord, Lord Wakeham, spoke in our debate on the Royal Commission report on 7th March he counselled against what he described as "cherry picking". The Royal Commission set out a blueprint for what it thought the functions of the second Chamber should be in the future. It then proposed a method of composition which it thought would best fit the second Chamber to fulfil those functions. The two—composition and functions—went together. Proposed functions which were suitable for the fully reformed House were not necessarily to be treated as suitable for the present transitional House. That is not to say that they are definitely unsuitable. One of the advantages of debates such as today's is that it enables us to explore precisely that kind of question.

However, where the Royal Commission thought that particular recommendations could with advantage be adopted in advance of full reform, it said so. The recommendations in relation to secondary legislation were not in that list for one very good reason; namely, that at least some of the changes to the treatment of secondary legislation which the Royal Commission recommended would require legislation, including many of those which are the subject of this debate.

I should remind the House that the proposal to allow this House to delay secondary legislation is part of a package of measures recommended by the Royal Commission. As many noble Lords have said, they include the establishment of a "sifting committee" to consider the best treatment of individual statutory instruments, particularly, but not exclusively, when the vires for the instrument have got out of step with the contemporary importance of the measures covered by it. They also include a requirement that no statutory instrument should be debated until the Joint Committee on Statutory Instruments has reported, and an extension from 40 to 60 days in the period of time during which a statutory instrument can be prayed against has been made. As many noble Lords have pointed out, both these recommendations were originally made by the Procedure Committee in another place. They have recently been endorsed by a fresh report from that same committee.

That brings me to one of the key reasons—which was specifically identified by the noble Lord, Lord Norton of Louth—for not considering in isolation the proposals in the Royal Commission's report in the chapter relating to secondary legislation. They affect both Houses of Parliament equally. The Royal Commission report stated that its proposals were aimed at,

"enabling the two Houses to work together in scrutinising Statutory Instruments more effectively".

I believe that that is an important factor which we should continue to bear in mind. It is particularly relevant in this case because the power of delay proposed by the Royal Commission is, of course, a power to send a statutory instrument back to the Commons. They will have to develop procedures to deal with such an arrangement. It is not just a request for a Minister to think again; it is a request for the other place to think again. Therefore, before we in this House decide that this is a desirable development, we ought to be certain that it is also acceptable to the other place. It would be a pity if a proposal aimed at increasing the ability of the two Houses to work together became instead a bone of contention between them.

As I said at the outset, I am grateful to all noble Lords who have participated in the debate as it has given us an opportunity to air many of the important issues raised by the Royal Commission and other associated matters.

My Lords, I, too, am exceedingly grateful to noble Lords on all sides of the House who have participated in what has been a most useful and constructive debate. I am also grateful to the noble and learned Lord for listening to the whole of the debate. I am relieved that, although he did not say "yes", he did not quite say "no" either. Therefore I believe that we can proceed on the basis of the clear message that has emerged from the debate; namely, "get on with it now". The time is ripe to sharpen up parliamentary procedures for the scrutiny of delegated legislation. On that note, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

rose to call attention to the case for extending Section 33 of the Value Added Tax Act 1994 to include national museums and galleries which are the responsibility of central Government; and to move for Papers.

The noble Lord said: My Lords, it gives me great pleasure to introduce this afternoon's debate on the case for extending Section 33 of the VAT Act 1994 to include national museums and galleries. This is an exciting and hugely helpful proposal for simplifying a long-standing museum predicament. It is also of vital importance if we are to stop the financially damaging division between national museums that charge admission, and those that do not.

In the arts debate a fortnight ago, initiated by the noble Baroness, Lady McIntosh, I drew attention to the National Art Collections Fund's ingenious and imaginative proposal to permit the national museums to reclaim VAT on non-business activities without having to charge for entry, thereby putting non-charging museums on the same footing as charging museums and most local authority museums.

A number of speakers drew attention to the Government's pledge of free admission to national museums. The noble Lord, Lord McIntosh, referred to the subject as "well-worn". I should like to assure him that free admission, important though it is, is not the focus of this debate. Instead I shall concentrate on the damage caused by the present VAT system to all our national museums and their ability to deliver their core objectives. It is essential that the VAT anomaly is sorted out. I urge the Minister to do everything he can to resolve it. It will not go away and, until it is properly addressed, schemes for increased access to museums, however, imaginative, will always be limited.

Put at its simplest, charging museums can recover VAT, free museums cannot. By allowing the two systems to co-exist, the Government are favouring charging museums and penalising non-charging ones. That not only goes against their avowed desire to achieve universal free admission; it actually offers financial inducements for museums to introduce entry charges. I hope that that is not the Government's intention, and, if it is not, can they please get to grips with the current anomaly?

The VAT nightmare unites charging and non-charging museums alike. What possible advantage is there in forcing museums to commit enormous amounts of time and energy devising methods of VAT recovery rather than focusing on their core activities? National museums have to devote considerable resources to consultancy fees, employing experts to devise schemes specifically to recover VAT because the sums involved make such a difference to them. Sound financial management, yes, but expensive tax consultants? Surely we would much rather they concentrated on their public service priorities such as access, education and outreach.

There is, however, one potential solution to which the Government should give serious consideration. Last summer, at the suggestion of the DCMS, the National Art Collections Fund teamed up the Charity Tax Reform Group to look at possible answers to the VAT problem. They came up with a satisfyingly simple scheme which in its final form, and after proper consultation with the national museums, tax specialists and the European Commission was submitted to the DCMS in January this year. What it proposed was a at, by adding them to Section 33 of the VAT Act 1994, all the national museums could recover the VAT they incurred, regardless of whether or not they charge admission.

The concession already applies to a number of government-funded bodies such as the BBC and local authorities—and thus to some museums funded by local authorities. At a stroke, this proposal would remove the anomaly between charging and non-charging museums and it would also end the circular process whereby government grants are used to pay VAT back to that same government, but with considerable additional administrative costs.

There are several reasons why the national museums and galleries should be added to Section 33. For one thing, they are funded by central government—in other words, out of taxpayers' money—and all hold and maintain national assets on our behalf. For another, their funding is closely tied to the delivery of public service objectives, including significant public access to their collections. The national museums are exactly what their name suggests: a huge resource for the entire nation. The majority may be located in the South East, for which there are historical reasons—and here they are visited by and accessible to millions of Britons from around the country. In addition, they are repositories for world-class scholarship, education, inspiration and excellence of all kinds. It is crucial for all of us that this excellence is maintained, along with the buildings that house them.

Why are we penalising our national institutions when many of our local museums are covered by Section 33? Should not the nationals be able to serve the public unhampered by VAT considerations? Customs are now apparently arguing that it is the policy that Section 33 status can be conferred only on bodies that have the right to precept on local taxation. This may be a policy developed by Customs, but -it is not the one based on the law. There are already a number of bodies within Section 33 that do not have the right to precept on local taxation. Is Customs saying that these bodies should not be included in Section 33? If not, the policy is clearly inconsistent and discriminatory. It seems ridiculous that a policy that has been developed by Customs has the effect of preventing the Government from fulfilling one of their key policy aims. It is clearly within the Government's power to re-examine the logic of their own guidelines. That this is within their rights so far as the European Commission is concerned has been confirmed at the highest level by Pierre Guieu, who was a senior official and drafted the Sixth VAT Directive. He states that,

"it is entirely a matter for the UK Government to develop a mechanism to prevent these organisations from having to pay VAT's.

That leads me to my next point. If we do not adopt a solution such as this, there is a real danger that the Government's policy of free entry for children and pensioners will unravel. While welcoming today's statement on free admission for pensioners. I understand that Customs and Excise will review whether museums can be regarded as "businesses" if more than half of their visitors get in free. That may well happen—visitor numbers have increased by an average of 18 per cent in the last year, since children have been allowed in free. I share the Government's desire to see increased visitor numbers at national museums. But what a nonsense it would be if we have a situation whereby "too many" free visitors results in museums having, as it were, to "compensate" Customs and Excise.

I should be grateful if the Minister could assure us that that is not going to happen—although, even if he can, sadly, that will offer reassurance only in the short-term. As we all know, it is well within the remit of Customs and Excise to review this, and any such informal arrangement, as and when it chooses in the future.

Previous attempts to address the VAT problem have been thwarted by claims that the Government are powerless to act because of contrary European legislation. The Government will be cheered to learn that that is not so. Indeed, no less a person than the head of the European Commission's taxation unit has stated that Section 33 of UK VAT law does not conflict with the European common VAT system.

A comparison with other EU countries reveals that the Commission tolerates a variety of regimes. There is not a universal application of VAT, in so far as public sector bodies including museums and galleries are concerned, but an ad hoc situation where different member states apply their own systems while conforming to the provisions of the Sixth VAT Directive.

By restricting the amendment to national museums and galleries only, the cost (in terms of lost revenue to the Treasury) can be identified and contained. Such a scheme would be simple to achieve, as the Treasury has the power to add to the list of bodies in Section 33 by means of an Order in Council and primary legislation would therefore not be required. The exact cost of amending Section 33 is difficult to estimate, given that a museum's capital works vary from year to year. However, to give noble Lords some idea, if we take the British Museum, the National Gallery, the Tate and the National Portrait Gallery, they estimate that the total annual amount of VAT they would be able to reclaim would average £3.1 million. That is money that could go to enhance their public services, rather than to Customs and Excise.

It would, of course, be necessary to ring-fence entry to Section 33 with robust qualifying criteria. The NACF, in consultation with the DCMS, has suggested 10 conditions that would have to be met, including: that the institution should be a national museum or gallery; should be subject to central government financial memoranda; that the majority of its trustees should be appointed by central government; and that there should be significant public access. In such a way, repercussive claims could be countered.

The Government set aside £30 million to help museums and galleries achieve free access for all to the collections by April 2001. How much of that is left? Will the Minister tell the House whether enough remains to meet the relatively small cost of this proposal?

What is becoming increasingly clear is that solving the VAT problem is not a matter for the DCMS alone. It can be resolved only if Customs and Excise and the Treasury are prepared to get together, examine the fine detail and come up with a logical, fair and joined-up approach. Different arms of government are failing to work together, to the detriment of museums and their public. I beg the Minister to use his considerable powers of persuasion and good sense to get his two departments together and devise a satisfactory solution. My Lords, I beg to move for Papers.

My Lords, we are grateful to the noble Lord, Lord Freyberg, for initiating this debate. I congratulate him on his very thorough speech and the strong case that he makes for helping the free museums in this way. After all, these are some of the greatest museums in the country. Free museums must pay non-recoverable VAT on their associated expenditure and running costs, and that taxation can be quite substantial. This is an anomalous position vis-à-vis the so-called business category museums which make entry charges. There is also a grey area relating to those museums and galleries which offer free entry to children, students and pensioners but charge other visitors.

HM Customs and Excise has accepted that the admission of some visitors free of charge does not constitute a separate non-business activity to make those museums liable for VAT. However, the position is uncertain. I understand that Customs has indicated that it may challenge the tribunal's ruling in the case of the Imperial War Museum if some visitors, such as children and old age pensioners, are allowed in free. It seems that any compromise solution, such as the introduction of certain free periods for everyone, may also be challenged.

This Gilbertian situation goes right across the Government's policy of free admission for all to our artistic heritage by April 2001, for the reason that the more museums move towards free admission the more likely it is that they will be challenged by Customs. The result of this ridiculous state of affairs is that many museums are discouraged from dropping admission charges altogether. I hope that the Government recall that it was our noble friend Lord Jenkins of Putney who, when Labour Minister for the Arts, abolished admission charges; indeed, it was almost the first act of the new Labour government in 1974. That has been modified since by the Conservatives to allow the trustees of each museum to decide whether or not to charge. But our two greatest institutions, the British Museum and the National Gallery, do not charge; and the former has never charged, except for special exhibitions, since its foundation. I wonder how much longer these two great institutions will be able to hold out. The same goes for many other important museums and galleries, such as the National Portrait Gallery, the Wallace, the Tate and the National Galleries of Scotland.

The noble Lord, Lord Freyberg, proposes a solution which I support, and I hope that it will receive serious consideration by the Government. I looked at the 1994 VAT Act and noted that the Long Title was not restrictive. Section 33(3)(k), to which the noble Lord referred, allows other bodies to be added by order made by the Treasury. The revenue lost to Customs would not be great: I understand that it would amount to only about £3 million. That figure represents the VAT which the free museums and galleries would be able to recover if Section 33 were extended. This is not a large sum, but it is very important in terms of the institutions' own budgets.

Problems over VAT are beginning to affect decisions to the detriment of our cultural life. I hope that the Government will take action to remove these anomalies. For example, paintings created since 1973 are liable to VAT. That bears very heavily on museums such as the Tate and the Scottish modern art galleries which have large collections of contemporary art. A contemporary painting costing, say, £200,000 would be liable to VAT of £35,000. That is most onerous in relation to any gallery's purchasing power. I hope that my noble friend will do something about it.

As the noble Lord, Lord Freyberg, said, the European Commission has said that this refund scheme does not conflict with the EU's common VAT system. The noble Lord gave credence to that by quoting the responsible Head of Unit in the directorate-general of the European Commission concerned with taxation. If there are problems with Brussels I hope that the Government will seek to remove the anomalies and show the same resolution as they showed in their negotiations with Brussels over the ill-judged proposals relating to droit de suite, as a result of which they gained some important concessions and had the backing of all parties in your Lordships' House. If it is just a national problem based on fears of a precedent, which is the usual basis for so much resistance to change, I hope that the Government will take steps to put it right by legislation.

My Lords, not for the first time the noble Lord. Lord Freyberg, has rendered a service by raising an important issue in this House. But I have learnt the hard way that there is one unalterable rule of politics: when government policy is most illogical Ministers will defend it with particular stubbornness. I fear that the Minister will declare that the present rules are holy writ and cannot be altered. I hope that I am wrong.

The first illogicality with which we are confronted is that, although t is government policy that museum access should be free, the rules which prevent the reclaiming of VAT provide a compelling incentive for national museums to charge. The second illogicality is that local authority museums and galleries can reclaim VAT but national museums and galleries cannot. I illustrate the effect of the incentive with an example. In the case of the National Museums and Galleries of Wales, half the gross income from admissions of about £1 million a year goes in the cost of collection; but recovery of that is worth about double the gross income from admissions.

When recently I asked the noble Lord what his response was likely to be to the case that we intended to present, he told me—I believe with regret—that the advice he had received was absolutely firm: Section 33 of the 1994 Act could not be extended by order to include the national museums and galleries, apparently on the grounds that all those bodies covered by the present exemption levied charges and not taxes. That is a rather different point from the one made by the noble Lord, Lord Freyberg, who said that the issue was whether it was a precept by a local authority.

I understand that the argument within departmental circles is that an exemption that is designed for local authorities which levy rates cannot be extended to bodies which are funded primarily by means of government taxation. I suspect that the Minister will produce other arguments as well, some of which we know by heart. Those arguments are always wheeled out on these occasions and include our old friends "the awkward precedent", "the floodgates once opened cannot be closed" and "the excessive and unbearable cost". All of those arguments can be answered.

I dwell on the first argument: the distinction that is said to exist between a levy and a tax. Can it be seriously argued that a local authority rate paid by me to help provide public services is fundamentally different from a tax paid by me to the Inland Revenue to provide public services? Why should such a narrow difference of nomenclature and technique in raising public funds produce absurd differences of treatment between organisations which provide the same service?

Let us look a little further at local authority funding. A very high proportion of it comes from the rate support grant, not the rates; in other words, taxes. If the original object of the exemption was to prevent a circular transfer of funds in which grants arising from taxation repaid VAT lost by local authorities, surely it is just as desirable to avoid a similar circulation of funds in relation to national museums.

As for the "precedent" and "floodgates" arguments, let us consider what has been done already. The exemption business began with local authority museums and the BBC. It was extended to include ITN so that it could compete with the BBC; and it has been further extended to an extraordinary range of other organisations. Limited steps have been taken, each for a good reason, and limited steps can be taken again.

If the Minister tells us that the distinction between a levy and a tax is important because of the rules of the European common VAT system, then I draw his attention to the response made by Stephen Bill, Head of Unit, Directorate-General Taxation, European Commission, to the Charities Tax Reform Group about the present Section 33 arrangements. He said:

"This refund scheme does not conflict with the European Common VAT system and could be considered as a sort of subsidy granted to the bodies mentioned".

I return to Wales and the example represented by NMGW. There can be no doubt that the introduction of charges has significantly reduced visitor numbers to the National Museum and Gallery in Cathays Park, Cardiff, which has recently been described in the Which? guide to tourist attractions as "an outstanding flagship museum", as well as to the other museums and galleries elsewhere in Wales.

The director tells me that there is no question that free admission for all is what will make NMGW truly accessible. We anticipate that visitor numbers will increase by at least 50 per cent with full free access in the short term and by over 100 per cent in the long term. However, the present substantial income from VAT recovery cannot be put aside by the museum authorities. Budgets are much too tight already, and the museum's plans for the future are dependent on adequate revenue funding. Its capital programme for developments is where the big "gain" from VAT recovery lies. Even if we ignore the £25 million art and £2.2 million Welsh Slate Museum projects already finished, the museum is planning to spend £6.6 million on the Big Pit Museum, £1.3 million on the Museum of the Welsh Woollen Industry and perhaps £20 million on the Industrial and Maritime Museum in Swansea. The ability to claim back VAT represents an essential feature of the funding programme for these projects.

The Big Pit Museum has also been praised by Which? as,

"a vivid record of authentic industrial heritage".

The future of this marvellous museum is now in the balance. The Heritage Lottery Fund has offered a grant of over £5 million to secure its future, but that is dependent on revenue funding of £400,000 a year being forthcoming from the Welsh Assembly and the maintenance of other income. The heritage lottery grant can be used to lever a matching sum from Europe under the Objective 1 programme. The same is true of the much larger Swansea project.

Therefore, what we are talking about this evening in this House is not just something that is important for those of us who believe that our museums and galleries throughout the United Kingdom make a contribution of immense significance to the cultural and social life of the nation, but in Wales they are important too because there current projects form an important part of the programme of economic and social regeneration that the Welsh Assembly has inherited from its predecessors in the Welsh Office. Those pressing for reform have a powerful case. The Government really must respond positively.

My Lords, if this debate necessarily has a rather narrow focus, it is none the worse for that. The proposal of my noble friend Lord Freyberg for a small and simple amendment to a tax regulation would have a major effect on progression to what we all believe is the Government's declared aim; namely, universal free access to our national museums and galleries.

The value of VAT recovery, if museums charge for admission, is a very important factor when museums have to decide whether to charge. As the noble Lord, Lord Crickhowell, has pointed out, that is particularly true if they are embarking on a big building project. There is a great deal involved. My noble friend has explained the matter clearly and succinctly at least twice in your Lordships' House, once today and once in the Arts debate a few weeks ago. There is no need to repeat his explanations, which are admirable. We are grateful to him. I want to support him as emphatically as I can.

There could only ever have been two objections standing in the way. First, it might have been supposed to be inconsistent with EU directives. But as he and the noble Lord, Lord Crickhowell, pointed out, this limited amendment is unlikely to run any such risk. The EU is sympathetic, in principle, to low taxation on cultural expenditure.

A second and perhaps more powerful objection might have been the possibility of repercussions; that is to say, that if museums and galleries were brought within the scope of Section 33 a good many other public institutions might clamour for admission through the same door. If that is the case, can we be told who and what they are? Is it genuinely the case that it cannot be done for museums because others would expect the same treatment? If the "floodgate" argument is used, we must be told who will be able to come in on the flood. What other public bodies are there not now qualifying as businesses for VAT that would have to be allowed to do so if non-charging museums were allowed to charge?

The fact is that in allowing local authorities and certain other public institutions, such as the BBC and ITN, to qualify, the 1994 Act did in all logic open the door to museums and galleries. But it is hard to see what other public funded bodies remain to queue for admission on similar grounds. Surely, it is quite absurd if for want of a small, simple and easily introduced amendment to tax regulation, which need have no repercussive effect, present arrangements are allowed to go on undermining the Government's own declared ambition to achieve universal free access to our national museums and galleries.

My noble friend Lord Freyberg asked an interesting question arising out of the free admission of pensioners and children by those museums which otherwise make charges. If the proportion of pensioners and/or children visiting a particular gallery goes up to half the total, Customs and Excise may take the view that the business status of that museum is no longer valid and VAT no longer recoverable. Might the board of such a gallery have to limit the number of pensioners and children it admits because they could not afford to lose the museum's VAT business status? One only has to ask that question to realise what a crazy situation we are discussing. For generations the administration of our country has been generally admired throughout the world. But it is very hard to admire an administration that tolerates an anomaly of this kind without putting it right.

Finally, we need a positive response in this matter sooner rather than later. Museums, like other institutions, have to make plans. They cannot run efficiently without knowing where they are going to stand. A major element of their revenue is at stake. I hope that we shall be encouraged by the Minister's reply. I believe he and his department are in sympathy with my noble friend's proposal.

Three years ago in this House the noble Lord, Lord McIntosh, was unable to go beyond encouraging museums to see whether a higher proportion of their turnover might be able to qualify as business turnover. The fact is that what matters is whether VAT is recoverable on a museum's main expenditure. Without that recognition we cannot make measurable progress towards what I take to be the Government's aim—that of universal free access.

Surely there can be no simpler way of moving in that direction than my noble friend's proposal. My noble friend Lord Freyberg has won the argument, but I beg the Minister, approaching the Treasury, to try to win the day.

My Lords, I congratulate the noble Lord, Lord Freyberg, on initiating this debate. Universal free admission to national galleries and museums is a cause that I have always supported. My childhood was enriched by family outings to the South Kensington museums. I know that countless children of my generation, many of whose parents were far less able to pay admission charges than my own, benefited greatly from that experience as well.

I see that my noble friend Lord McIntosh of Haringey will reply to the debate for the Government. It would perhaps have been appropriate had your Lordships allowed him to speak twice: once as the Minister from the Department for Culture, Media and Sport, which wholeheartedly supports the principle of free admission, and once as the spokesman for the Treasury, which appears to be encouraging Customs and Excise to frustrate it. The noble Lord, Lord Freyberg, referred to "joined up government"—we hear a lot of that these days—but on this issue it appears that Customs and Excise seems determined to unpick the stitches so laboriously sewn into the tapestry by the DCMS.

I am not a tax lawyer and I do not claim to be an expert on the intricacies of VAT procedures. But I can recognise a good policy when I see one. The aspiration to achieve free admission at the 10 national museums which currently charge and to maintain free admission at those which do not is a policy like that. Chris Smith, the Secretary a' State, deserves a good deal of credit for improving the admission charging regime as much as he has. I strongly support the DCMS's decision taken in December 1998 to set aside £30 million so that in theory free admission for all could have been achieved by April 2001. That was to have been the last step in a three-stage approach which began a year ago with the arrangements to admit children and is being followed next week by the second step of allowing pensioners in for free.

However, to get full value from free admission for children, one has to allow accompanying adults in as well, because so many parents feel that their children need an adult escort when coming up to town to visit a museum or gallery. This is a policy which passes with flying colours new Labour's "For the many, not the few" test. A number of speeches made by members of the Government set out the arguments very clearly. In a press release dated 8th December 1997, Chris Smith said:

"Access is a cornerstone of all this Government's cultural policies, including those to museums and galleries. We want to see access to our cultural treasures made available to the many, not just the few".

Earlier that year, in March 1997, when Labour was still in opposition, Dr Jack Cunningham and Mark Fisher, the shadow Ministers, published a document entitled Create the Future: a strategy for cultural policy and the creative economy. In a section headed "Making our national institutions more accessible", they said:

"We are concerned about the introduction of admission charges in national museums. These great collections have been paid for, and maintained by the British people.

We will review the evidence on charging. Some evidence suggests that high charges can lead to a big decline in attendance".

That is certainly true.

If one looks at the visitor statistics for the museums which have introduced charges, the picture is very clear. In 1986–87, the last year before charges were introduced, the Natural History Museum had 2.5 million visitors. In the first full year after charges, the number had fallen to 1.6 million. By 1996–97, the figure was still only 1.8 million. The fall at the Science Museum was even worse: from 3.16 million in 1986–87 to 1.12 million in 1989–90 and back up to only 1.5 million in 1996–97. Those figures have kindly been provided to me by the National Art Collections Fund and they differ slightly, but not in a material respect, from those which appear in the article in the Guardian today.

I have no doubt that if the National Gallery and the British Museum were forced to drop their present free admission policy and start charging, they would lose a huge number of their existing 5 million or so visitors. They would also be breaking faith with their benefactors who donated their treasures on the understanding that the people would be free to see them without charge. They might not lose too many of the devoted all-day visitors, but there would certainly be an end to what one might call the "lunchtime drop-ins", the office workers with an hour to spare who like to immerse themselves briefly in our art and antiquity treasures. They certainly would not spend £10, or even a fiver, for a short visit to the National Gallery or the British Museum. I should hate to see them deprived of that opportunity.

I occasionally hear the argument that while it may be okay to let British people in for free, the absence of charges means that we are subsidising foreign tourists. That is a pathetic argument. None of us expects to pay more than the locals for services in cities abroad when we travel as tourists, and in any case we should remember how much foreign tourists contribute to the economic welfare of London and other cities as tourist attractions. If more come here because our finest museums and art galleries are free, we should welcome that and say "thank you" to them.

Other speakers are better qualified than I to advise on whether Section 33 of the VAT Act 1994 can be amended in the way that the National Art Collections Fund and the noble Lord, Lord Freyberg, have proposed. I look forward to hearing what my noble friend Lord McIntosh has to say about that. If it is indeed the case that national museums can be brought within the scope of Section 33 and join local authorities and public institutions like the BBC in being able to recover VAT, that would seem to be a sensible and obvious route to adopt. But if it cannot be done in that way, I do hope that the DCMS and the Treasury can get together to find a solution.

For if it is right that £30 million should be set aside to help the museums achieve free admission by 2001, as the DCMS already has done, how can it be wrong to find just a little more to solve the problem completely?

My Lords, like other noble Lords who have spoken, I should like to thank the noble Lord, Lord Freyberg, not only for introducing this theme but for his very clear exposition of the position and for introducing the admirable solution which has been put forward by the National Art Collections Fund. We are very much in the noble Lord's debt for doing so.

As a trustee of the British Museum, I am proud that the British Museum does not charge admission and that it has never done so. I believe that all trustees of the British Museum are proud of that circumstance. Long before I became a trustee of the British Museum, I found it a pleasure and a privilege, as a British citizen, to be able to enter that museum, the National Gallery, the National Portrait Gallery or the Tate Gallery without charge to see the great national treasures which generations of citizens have given to this country and others which have been purchased with taxpayers' money. It would be a sorry day if charges had to be levied in this area, which is of course a possibility.

We applauded the Labour manifesto which made clear that it was Labour policy to introduce free admission to national museums. We applaud—I am sure that I do not speak only for the British Museum—the strenuous efforts which the Secretary of State for Culture, Media and Sport has made in this direction. I very much look forward to the endorsement of the noble Lord, Lord McIntosh of Haringey, as the representative in this House of the Secretary of State for Culture, Media and Sport, of that admirable position.

The noble Lord, Lord Strabolgi, has correctly referred to the Gilbertian position in which the noble Lord who is to reply for the Government finds himself. The noble Lord, Lord Faulkner of Worcester, has correctly referred to that ambiguous position. For in this House he is not only the Minister for Culture, Media and Sport in the land of Titipu; he is also the Minister for Treasury affairs in the land of Titipu. So he stands Janus-like, looking in both directions. I very much fear that he may also have the role of Lord High Executioner in this matter.

Does the noble Lord not appreciate—it is a rhetorical question: he is very well informed; of course he appreciates—that if the Victoria and Albert Museum, the Science Museum or the Imperial War Museum were to abolish admission charges, they would at once, through this Gilbertian catch-22 situation, be obliged to pay VAT on their expenses? They would not only forgo the income from admission charges, which they might be willing or able to do, but they would also be subjected to that additional burden.

I should like to illustrate the difficulty by referring to the British Museum. It finds itself in considerable financial difficulties, although it is very grateful for the help it has received from the Government on a one-off basis for this year in this matter. In a normal year the British Museum suffers recoverable VAT of around £750,000 on running expenses and up to £1 million on capital expenditure. That expenditure is difficult to maintain and would be alleviated by the proposals made by the noble Lord, Lord Freyberg.

Moreover, the situation has been exacerbated by the Great Court project where total VAT costs of about £15 million are at risk. I was much enlightened by the Answer given yesterday by the noble Lord, Lord McIntosh, to the Question tabled by the noble Lord, Lord Freyberg. We read that, in terms of the National Lottery element of the British Museum's Great Court project, the estimate of future VAT recovery from project costs is £8.7 million.

I am happy to hear that and I have a two-part question to put to the noble Lord. First, can he confirm that if the lottery grant of £45.7 million is appropriately expended the British Museum will be able to recover the £8.7 million? Secondly, as the lottery grant was approximately 50 per cent of the total cost of the Great Court project, can he give an explicit assurance that the British Museum will be able to recover the other half, thereby giving a total recovery of £17 million? I can assure the noble Lord that that would be most welcome.

Perhaps I may also point out to the noble Lord that the British Museum has another important and inspiring project; the study centre project. It was to be financed by a PFI arrangement of some complexity. I have to tell the House—I would tell the noble Lord, but I believe that he knows it already—that that project is currently stalled, partly due to the VAT component which pushes it beyond the limits of viability. I should be delighted if he could assure the House and the British Museum that it need not pay VAT on that project either.

Finally, the amount of time and effort which the British Museum, like other museums, must spend on hiring consultants and all manner of specialists to analyse how best we may arrange our affairs is absurd. On that issue alone we have spent almost 18 months of management time and tens of thousands of pounds on expert advice in order to try to reduce our VAT liabilities. The situation is ridiculous as we have already been told that we must pay back to the Government a large proportion of the grant in aid that we received from the Government. It is truly Gilbertian and I hope that tonight the noble Lord, Lord McIntosh, will find himself also the Minister for joined-up government in the land of Titipu.

My Lords, I welcome the opportunity to participate in the debate and I congratulate the noble Lord, Lord Freyberg, on initiating this important discussion. There are a number of reasons why the issue is important.

The Labour Party has a longstanding commitment—one which dates back to its inception—to make culture and the arts accessible to the people. In more recent times, since the general election in 1997, that commitment has expressed itself in several ways. The first was the action announced in 1998 by my honourable friend the Secretary of State to abolish museum and gallery charges over a three-year period. But, as a Labour Government, we have had at the core of our programme a commitment to deal with social exclusion. Indeed, several of the reports produced by the policy action teams have referred to cultural poverty, the lack of access to the arts and its impact on the quality of life for people on low incomes. Finally, reference should be made in the debate to the priority which we as a party and government have placed on education and raising standards.

All of that might lead one to believe that the question to be answered is how the Government make it possible to abolish museum and art gallery charges rather than whether it is possible. Everyone must welcome the abolition of charges for children and the fact that within the next few days pensioners will cease to pay. None the less, it still costs £28 for two adults to take their children to the Natural History Museum and the Science Museum in one day, as I did myself not so long ago. These charges can and do act as a barrier. It would be a great shame if, for the lack of imaginative solutions, political will, a row between departments of state or whatever, some museums and art galleries find it impossible to abolish charges.

I have a particular affection for the Museum of Scotland—I hope that my Scottish colleagues will forgive me for mentioning it—and its wonderful new wing which was completed and opened by the Queen in the past year. It is a beautifully designed building, offering imaginative and exciting exhibitions. My family enjoy gang there on every occasion we visit Edinburgh.

The director of the Museum of Scotland and many of his fellow directors want to abolish admission charges. During the weekend, he was quoted in the national press as saying that if the Government agreed to the proposal he would reconsider free admission to his museum. As a result of the significant cost of the recent building works at the Museum of Scotland, if it were to abolish entry fees it would be liable to VAT on its building works which would run into millions of pounds.

I am aware teat the Museum of Scotland is the responsibility of the devolved Scottish Parliament, but VAT is the responsibility of UK-wide statute. It seems very unlikely that the Scottish Parliament will be willing or able to make available funds to meet such a large shortfall.

I am really puzzled and ask my noble friend the Minister to use his best endeavours to solve the problem. I know that, being the cultured man that he is, he must be sympathetic to the situation. I beg him to try to make sense of why bodies providing a public service funded out of taxation must use that money to pay tax. Surely, it is for that reason that bodies such as the BBC are already listed in the schedule and are therefore exempt.

The particular relevance to museums is that the current policy of VAT rules create a big financial incentive to charge for admission. A charging museum such as the Museum of Scotland is able to reclaim the VAT which it pays and so has no incentive to change. The VAT reclaimed is often greater than the income generated by ticket sales. That does not make sense to me. What appears to be happening here is that the Government's VAT regime provides a strong financial reward for doing something which restricts access and use to museums and is against government policy.

One answer might be to increase grants to the museums and art galleries to enable them to overcome the immediate VAT problem, but that will merely increase the amount given out in grants to take back in VAT. It would also put a questionmark over all new capital projects, new exhibitions and developments of any kind. I know that my honourable friend the Minister for Museums has put together a powerful case for change. The noble Lord, Lord Freyberg, has also done so. I hope and trust that my noble friend the Minister, who carries briefs for both departments, will be able to use his good offices and good sense to help us make progress on the issue.

My Lords, I, too, thank the noble Lord, Lord Freyberg, for introducing the debate. In doing so, he is doing a splendid job in carrying on the battle from Lord Clancarty, who we greatly miss on these occasions.

I was shocked to read in this week's edition of The House magazine that I am one of the few Conservative Peers remaining who is a member of a government quango. That may be because the board of trustees of a museum is not my idea of a quango. It may he because the job is entirely unremunerated. It may al so be because I fondly believed that I was appointed for my strong Liverpool connections and my interest and involvement in arts and heritage issues in the European Parliament, the Council of Europe and in your Lordships' House.

Be that as it may, for noble Lords who may not have read The House magazine, I declare my interest as a trustee since 1993 of the National Museums and Galleries on Merseyside. It is the only English national museum outside London which consists of eight separate parts, including the famous Walker Art Gallery, a fine maritime museum and a new conservation centre, which is unrivalled elsewhere, not only in this country but more widely in Europe.

The general arguments in favour of extending Section 33 of the VAT Act 1994 to include national museums and galleries have already been well made.

I support the arguments, especially those advanced by the noble Lord, Lord Strabolgi, who has long been the champion of this particular VAT issue, and also those of the noble Lord, Lord Gibson, who has such expertise in this field. But I believe that all noble Lords have put forward the most convincing arguments in support of the Motion of the noble Lord, Lord Freyberg.

It may serve to illustrate the issue further if I explain our experience in Merseyside. Two years ago, the trustees of the National Museums and Galleries on Merseyside were forced, most reluctantly, to introduce charges because of diminishing government funding and ever-increasing costs. We pitched the charges at a very low level: at £3 for what we call "an eight pass", which entitles individuals to visit each of the eight separate parts of our National Museums and Galleries, and also on a season ticket basis. We also introduced family tickets at £5, again covering the eight parts of the museums and galleries and on a season ticket basis.

Last year, we partially reversed that system of charging because we now offer free admission to children and old-age pensioners. That has been funded by the Department for Culture, Media and Sport and we hope that it will keep up that funding. However, if the numbers of old-age pensioners and children exceed 50 per cent of our total visitors, as has already been mentioned, we risk an inquiry by Customs and Excise and risk losing our VAT advantage.

Therefore, the income from the admissions policy has not been so very large. However, the significant factor for our cash flow has been that we can recoup some £½ million of VAT as a consequence of the charging. But we could be affected even more in the future. We have a "2001 project", as do many other institutions, but ours is intended to revitalise the Liverpool Museum and the Museum of Liverpool Life, as well as carrying out work in the Walker Art Gallery. That will enable us to display better many of our treasures which at present are not available to the public. However, it has involved fund-raising to the tune of some £34 million. Happily, we received a substantial grant from the National Lottery of some £24 million. However, the VAT amount that we would lose if we changed our charging policy would be some £6 million. That is a significant amount and reinforces the points made so well by my noble friend Lord Renfrew.

It must be said that, after introducing those charges, we believe that the number of visitors dropped by approximately 10 per cent, in spite of the low level of admission charges. I say "we believe" because direct comparisons are not really possible. The method of counting visitors prior to charging was perhaps not as accurate as it now is. However, for a Government who are keen on access and on bringing as many people as possible to the arts, any diminution in the number of visitors must be regrettable.

For all the reasons advanced in the debate, I very much support the terms of the Motion of the noble Lord, Lord Freyberg, in particular because the Treasury has the power, because it would not require primary legislation and because the cost can be identified and contained. I look forward to a sympathetic reply from the noble Lord, Lord McIntosh of Haringey.

My Lords, like others, I feel a great sense of gratitude to my noble friend Lord Freyberg for his enthusiastic perseverance in this subject. Section 33 of the VAT Act does not sound like the most dramatic subject. It sounds rather dry and dusty. However, as noble Lords have pointed out, it is hugely important to those who are trying to run museums and galleries and trying to carry out the Government's avowed policy of free entry.

I must declare a non-financial interest as a trustee of the National Museums of Scotland. I believed that I might have had to crave indulgence from your Lordships to speak about matters north of the Border since the Motion refers to museums and galleries which are the responsibility of central government. However, I am reliably informed that in this context central government covers Scotland as well and includes institutions funded by the Scottish Executive through the block grant. Although we have one United Kingdom, we are capable of having more than one central government in this context.

In Scotland we have two institutions which are covered by the subject of the debate: one is the National Museums of Scotland; the other is the National Galleries of Scotland. One—the National Museums—charges, although not for children, and with special provision for pensioners; the other—the National Galleries—does not charge. The National Museums of Scotland, which is the area with which I am most familiar—and I very much appreciate the remarks made by the noble Baroness, Lady Thornton, about the splendid new Museum of Scotland (that is absolutely true; it is terrific!)—have been affected in very much the same way as have other museums, for example, in Wales, as noble Lords have pointed out. The number of our visitors went down by approximately 30 to 40 per cent when we started charging, although there has been some upward movement since the Museum of Scotland was opened because it is so attractive.

However, the key point that I wish to make with regard to finances is that on ticket sales the National Museums of Scotland receive some £550,000 a year, not counting expenses. But with regard to reclaimed VAT, the museums receive approximately £800,000 a year, which is considerably more. Behind those figures is the even more significant point that on building projects the VAT charges can be enormous.

It is at that point that I believe that we move out of the Gilbertian situation into something more akin to Alice in Wonderland. The problem is not simply that at the end of, let us say, February, one says, "We have enough children who are coming in free. OK, no more children until the next financial year". It is that one simply does not know what the rules will be. If, for example, the National Museums of Scotland now follow government intention in Scotland and stop charging, at some point will Customs and Excise say, "Well, you never really were a genuinely commercial organisation. By the way, some of the VAT that you reclaimed on the building of this new museum will now go back to Customs and Excise"? It is that issue—the Alice in Wonderland element—which makes it so difficult and which makes it necessary for so much time and administrative effort to be put into this particular point, rather than what the museums and galleries really want to do.

I mentioned the National Galleries of Scotland and I am sure that the noble Lord, Lord Gordon of Strathblane, who is a trustee, will want to speak about that. It seems to me that, looking at it from a sister institution, it is a classic example of the problem. It is a non-charging institution. Therefore, it cannot claim back money from VAT. However, more significantly, it, too, has a wonderful project—the Playfair project—to re-do the old Royal Scottish Academy and to link that with the National Gallery and to do many things which are greatly to the benefit of people in Scotland. However, I gather that it could suffer a VAT charge of up to £3 million, and it will have to so structure the project that there will be the maximum number of commercial things going on so that they can then reclaim the maximum of VAT. That seems to be a classic example of the circular problem that we have got into. That project will be partly funded by the Scottish Executive as well as by the National Heritage Lottery Fund.

So in effect, the Scottish Executive will be providing money and another part of the overall government system will be taking back the money. It is a classic case of the Government giveth and the Government taketh away, but there will be precious few people who say, "Blessed be the name of the Government", unless and until—and I hope the Minister can tell us this—they are able to sort out that contradiction. I am sure that, in that case, all of us who are interested in this matter will give a very considerable cheer.

My Lords, before I say anything on this subject, so eloquently introduced by the noble Lord, Lord Freyberg, I must declare my sundry and manifold interests in the museums of the United Kingdom. I was a member of the Museums and Galleries Commission, may it rest in peace, for more than 15 years and chairman for five. I am currently deputy chairman of the Trustees of the National Portrait Gallery I have been a vice-president of the Museums Association and I have been on the Council of the National Museums of Wales and so on. All those appointments have one thing in common: they never paid me a penny.

So it is with a pure heart and humble voice that I can speak about the acute problems caused by what appears to me essentially a simple interdepartmental squabble. For it is surely absurd that the Government's own policy on free access, fostered and nurtured by the Department for Culture, Media and Sport, should be blocked and blighted by Customs and Excise.

Let us take the case of the National Portrait Gallery, a small but highly prestigious and eminently successful national gallery. For over 100 years it has been exemplary as a non-charging public institution, freely and democratically open to everyone. Except that I hat is not quite true. I must confess that there was one brief and disastrous episode in 1973–74 when, against all our instincts, we bowed in the house of Rimmon and obeyed the requirement of the government then in power under Sir Edward Heath. We paid dearly for our pusillanimity as we put on the required admission charge, raked in the pennies of the poor and watched our visitor numbers plummet. Fortunately, it was not long after that that the Heath government failed to maintain the confidence of the country and we were able to drop our admission charges and return, duly penitent, to the paths of righteousness.

But for the NPG it was a salutary experience and we shall not do it again. We survived the Thatcher years without charging for admission and in 1997 we hoped for better days. And our hopes were not dashed when the present Government espoused the policy of free access for all. But its faithfulness to that policy has cost the NPG dear. Its current grant-in-aid is £5.115 million. We calculate that unreclaimable VAT costs us approximately £300,000 per annum.

That money goes straight back to the Treasury, whence it came, in that "circular transfer" roundabout. That sum is the equivalent of mounting two major exhibitions a year of the style, status and popularity of the current exhibition of the photographic work of the noble Earl, Lord Snowdon, which has attracted some 30,000 visitors in its first four weeks, or our recent Cartier-Bresson exhibition which brought in thousands who would never otherwise have dreamt of entering our doors.

Alternatively, £300,000 would meet the cost of late-night opening two days a week. That is a development which successive Ministers have urged upon us, from the noble Earl, Lord Gowrie, who never tired of commending to us the example of Buffalo, USA—which seemed, like Arkwright's shop, to be "open all hours"—to the present incumbent, Chris Smith, who would equally like to see us "alight at night". We would love to accede to their requests, if only we did not have that running sore of £300,000 per annum to deal with.

If we considered only the most urgent needs of our own institution, £300,000 would cover the annual cost of our conservation and collection management programmes. Again, we worry continually about maintaining our academic and scholarly standards and £300,000 would fund four years of cataloguing our photographs and reference collections. For £300,000 we could undertake the re-display, urgently needed, at our outstations at Bodelwyddan and Beningbrough. But none of that can be done so long as the VAT bill lands on the director's desk.

This matter goes far deeper than a mere spat between government departments. The principle of free access to our great national collections in England, Northern Ireland, Scotland and Wales must be reaffirmed and reasserted and properly funded.

As evidence of the importance of free access to the cultural health of our nation, I offer the example of Professor Margaret Gowing, a trustee of the NPG and other museums, who died in November 1998. She was a London girl. The poverty into which her family sank when her father died of tuberculosis left a lasting impression on her. She later became Oxford's first Professor of the History of Science and was one of the few scholars who were fellows of both the Royal Society and the British Academy. One obituary of her states that,

"she took full advantage of the experiences that London offered a poor child, and it is her memory of the benefits of free entry to national museums that fired her anger at the introduction of charges at the Imperial War Museum (from whose Board of Trustees she consequently resigned)".

Thank God she did not have to resign from the Trustees of the NPG. The NPG is one clear example of the necessity of this change.

Amendment of Section 33 seems a sensible way forward. If my noble friend, in his reply, shows that the matter cannot be resolved in that way, I hope that he will suggest any other way he may know or at least promise to leave no bureaucrat unbothered and no civil servant unharassed until we rid the great national museums of that impediment, that albatross around the neck, that ball and chain around the foot and, in this matter at least grant them,

"a happy issue out of all their afflictions".

My Lords, I join others in thanking the noble Lord, Lord Freyberg, for initiating this debate. There is a strong case for what he proposes. Not least is that so in the light of the background to the Question. The Government gave a commitment to encourage free admissions to national museums and galleries. If in so doing the Government had provided two other related assurances, then, of course, there might have been no need for this debate today: the first necessary assurance is compensation to museums and galleries for loss of income from charging; and the second is compensation to them for their loss of business status and recoverable VAT.

Such assurances from the Government may be intended. As yet, they have not been properly given. Nor is it even clear that the Government still uphold their earlier commitment to free admissions in the first place. No doubt there have been statements of intent to promote free admissions to children and pensioners. However, to go no further falls far short of their earlier commitment to free admissions for all.

Therefore, the first question is whether the Government are still committed to free admissions for all and, if not, why that commitment may have become watered down.

Secondly, if it may have been altered and the original government commitment to free admissions for all has thus been replaced by a compromise government policy of free admissions for some only, what plans do the Government have for the administration of compensation? Under a scheme of partially free admissions, how will museums and galleries be compensated for loss of income from charging and for loss of VAT recoverability?

That leads in to the case of the noble Lord, Lord Freyberg. His proposed solution offers two key benefits. The first is consistency between the cultural aim of free admissions and the fiscal rule of no VAT recoverability without business status. Extension of Section 33 of the Value Added Tax Act 1994 to national museums and galleries provides the accommodation. Yet one allegation against the proposal is that its accommodation would invite a challenge from Europe. However, that is not so. We have already heard today of the EC statement which construes the accommodation as a relevant subsidy.

The fear has also been expressed that the extension of Section 33 to museums and galleries would then have to apply to many other institutions and charities as well. That is surely a groundless fear. Owing to their status, national museums and galleries may easily be classified and restricted as sole beneficiaries. Then a specious differentiation is attempted between institutions such as local authorities, the BBC and ITN to which Section 33 currently extends and national museums and galleries to which it does not as yet extend. The claim is that the differentiation is valid since local authorities and the BBC may raise taxes, levies and so on, while national museums and galleries do not. Nevertheless, as has been said, national museums serve the whole nation. They and their collections are for the long term. Their financing is for the public good. Thus, attempted disqualification against them and differentiation between them and other public institutions to which Section 33 now extends reflect rather narrow and specious reasoning.

That connects to the second main benefit which the proposal of the noble Lord, Lord Freyberg, offers. This assists the Gilbertian predicament to which my noble friend Lord Renfrew referred and it illustrates the unhappy and circuitous tale of Dear Lisa's bucket. The Government may now say that the hole in the bucket of the free admissions commitment is that of the difficulty of administering compensation for loss of VAT recoverability. The Government may now say that it is thus better to compromise or drop free admissions rather than confront a particular administrative obstacle or technicality.

Fortunately, the noble Lord, Lord Freyberg, and others are good workmen. They can enable the Government to keep their word on free admissions. And their remedy can prevent the degeneration of a solid bucket of commitment into a misleading flash in the pan of unreliability.

My Lords, I join others in congratulating the noble Lord, Lord Freyberg, on introducing the debate, but rather more on introducing such an elegant solution to a problem with which clearly previous governments, as well as this one, have wrestled. At this moment, short of some deus ex machine by my noble friend Lord McIntosh, it is game, set and match for the proposal.

Since I interpret—as did the noble Lord, Lord Wilson—the phrase "central Government" to include the devolved Scottish Parliament, I must properly declare an interest as a trustee of the National Galleries of Scotland. Unfortunately, I share the fate of my noble friend Lord Morris, in that it is an unpaid occupation and therefore I derive no commercial benefit from the case which I am advancing. But I readily admit that the National Galleries of Scotland would benefit to the tune of about £225,000 per year on running colts if the proposal were adopted. Significantly more importantly, however, as the noble Lord, Lord Wilson, pointed out, is that they currently have an ambitious programme to develop the Royal Scottish Academy building, known as "the Playfair project", the costs of which are in excess of £20 million. The savings on VAT on that project would be extremely substantial.

Like my noble friend Lord Faulkner, I refer to the many roles played by my noble friend Lord McIntosh in this House. Indeed, glancing down the Order Paper, in all four debases which may occur on the matters confronting us during the remainder of the day, my noble friend Lord McIntosh has a starring role. Such versatility can be only envied. However, I do not envy him the dilemma of being the Government's spokesman in this House for both the Department of Culture, Media and Sport and the Treasury. I do not wish to induce any schizophrenia in my noble friend, but joined-up government can go only so far. He must decide at some point which side of the fence he is on. I suspect that we shall receive a more sympathetic reply from my noble friend Lord McIntosh as spokesman for the Department of Culture, Media and Sport.

What we are all arguing for here is consistency. At present, the museums and galleries which charge for admission and are therefore out of sympathy with government policy have the benefit of reclaiming almost all their VAT. The museums and galleries which, in sympathy with government policy, do not charge for admission lose out. One might believe that the main benefit of charging is the cash that one draws out of the till from admission charges, but it has been estimated that at least half the benefit is the ability to recover VAT. We are therefore currently disincentivising museums and galleries to endorse and embrace government policy.

At present there is a clear inducement to galleries to charge and a penalty on those which do not. The Government must make up their minds which is more important: £3.1 million of lost VAT revenue to a Treasury which, through its sound management of the economy, is doing rather well in terms of receipts, or the fulfilment of the Government's policy on free access to museums and galleries. Unlike my noble friend Lord McIntosh, I do not hold any briefs, but in the overall scheme of things I should think that fulfilling the obligation and the promise to try to achieve free access must take precedence over a mere £3.1 million in VAT.

Let us consider also the number of institutions—it is almost embarrassing—to which Section 33 already extends: police authorities; the BBC; ITN; river purification boards; internal drainage boards; port health authorities; not quite Uncle Torn Cobbleigh and all. Adding in museums and galleries would be entirely consistent with what the Government wish to do. The noble Lord, Lord Freyberg, has produced a Motion which would remove one of the main obstacles to national museums getting rid of admission charges and would therefore eliminate the present conflict between the Government's taxation policy and their cultural policy. It would ensure that the loss of revenue to the Treasury is measurable, because the proposal is clearly ringfenced and contained. The estimated loss would be £3.1 million. It would have a direct and significant impact on the museums' delivery of public service.

At the moment, a great deal of management time and money is spent on trying to avoid paying VAT by doing all kinds of things which museums do not particularly want to do, but by which they can save the payment of VAT. That produces also a distortion of management decisions. The proposal would clearly protect the Government from any repercussive effects of a further extension of Section 33. As has already been mentioned, it would be acceptable to the European Commission. Above all, it is extremely easy to achieve. My understanding is that it can be achieved by Order in Council subject to a negative resolution and it would be easy to administer. For all those reasons, I hope that my noble friend Lord McIntosh, when he comes to reply, will feel that he is speaking for DCMS rather than for the Treasury.

My Lords, speaking at the end of a single-issue debate such as this, I can say without fear of contradiction that virtually everything on the subject has already been said. As a result, I can be extremely brief. The Government's laudable, although perhaps utopian, commitment to free entry to museums seems to be under some real threat. Therefore, they should welcome the suggestion of the noble Lord, Lord Freyberg. We all greatly thank the noble Lord for the opportunity to discuss the matter.

It is interesting that as the last speaker on the list I follow a group of noble Lords who have been in entire agreement in different ways and with slightly different reasons. There has been no dissent about the suggestion being a good one. The case for extending Section 33 has been well made. There is no need to repeat the arguments. By accepting the case, the Government would clearly help the national museums and galleries for which they are responsible.

Furthermore, there is a real threat that if VAT charges to those museums and galleries which do not charge cannot be reclaimed, some of those museums may be compelled to charge in the future. That runs totally and absolutely counter to the Government's commitment to free entry.

I particularly look forward to what the Minister has to say about the problem of children and pensioners. That seems on the face of it a real problem; if over half come in free to a museum, will Customs and Excise say, "Well, you're no longer a business and so you can't reclaim VAT"? It certainly would have a devastating effect.

As a number of your Lordships have pointed out, I am sure that the Minister will want to do all that he can to ensure free entry to museums and galleries. He will do that wearing his DCMS hat, but I daresay the Treasury may have found some way of preventing him being overly helpful to the cause of free entry, even though the Treasury of course has the power to add to the list of bodies identified under Section 33 without primary legislation and even though a number of bodies are allowed to recover VAT that is incurred, despite not being businesses.

In this category will fall most particularly the numerous local authorities which have museums and galleries in their care and which open free. They can reclaim VAT. I hope that the Minister has some good news for us this evening but, if he has not got some good news, I urge him to please "keep on the case". That was a point made much more eloquently by the noble Lord, Lord Morris of Castle Morris. I hope that the Minister can find a way of allowing museums and galleries to reclaim VAT. If they cannot do that the consequences could greatly affect free entry, a cause which is so dear to the Government's heart.

My Lords, the plea put so eloquently before us by the noble Lord, Lord Freyberg, is narrow and precise: yet many contributions made by your Lordships have, quite understandably, gone way beyond the narrow confines of his Motion. I shall not, however, attempt to go down the paths already trodden by so many earlier speakers.

Let me say at the outset that I have looked very quickly through my own party's new arts policy, which has been rushed to me on the Bench, and see that our fundamental aim is very close to that of the Labour Party, although it uses slightly different words. We would make it a primary function of government to support the arts and to help to make them accessible to all. That echoes what I think the noble Baroness, Lady Thornton, said earlier. I do not think that the noble Lord, Lord McIntosh, will disagree with that.

We have had from various noble Lords a foretaste of what the noble Lord's reply to the debate may be and the difficulties in which he may find himself among the various functions which he performs so expertly. He is extremely versatile—so versatile that on one previous occasion he gave us a snatch of Gilbert and Sullivan at the end of an arts debate. One imagines that the noble Lord might be tempted to appear rather in the fashion of a music hall comedian, perhaps in a suit of which half is that of a tax collector and the other half that of a Minister for the arts and having an argument with himself.

My Lords, the noble Viscount should recall another song from "Iolanthe": "united we sing as one individual".

My Lords, there you are! There is a very good example and a foretaste of the very good-humoured answer we are likely to get from the noble Lord, Lord McIntosh. I think he is probably going to answer us as a Minister for the arts, representing the DCMS. We shall have the advantage, with all his experience, of receiving his advice on how the matters before us can be resolved, if indeed they can be.

Many of your Lordships have described the situation before us in terms of Alice's Adventures in Wonderland or even as Gilbertian. The noble Lord, Lord Strabolgi, referred to that, but actually the situation is becoming almost Kafkaesque. We have a government who tell us that free admission and access for all is a prime aim, and we on these Benches agree with that. Yet here we have a situation which has moved on from the one we discussed some weeks ago—or was it days ago?—when the moneys available for free access were described as insufficient. Those museums and galleries which charge have the benefit of recouping their VAT, because they are adjudged to be a business. Those that do not charge—and many of them have grants from various sources as well as from lottery funds—and have great plans will find that their VAT bills are enormous. They will be crippling.

That is the extraordinary position in which we find ourselves. I find even more extraordinary the Kafkaesque prospect that if this situation continues there will be arguments with Customs and Excise, and the uncertainty that brings, about partial free admissions, as has been mentioned by other speakers. Following the Imperial War Museum case, where it was accepted that it was possible that some visitors who came in free of charge did not materially affect the position, we have been given fair notice that Customs and Excise will now look very carefully at what museums and galleries do by way of mitigating their position. That may prove very difficult. The noble Lord, Lord Renfrew, asked from his experience whether it was desirable for museums and galleries to be spending all this time worrying about VAT, rather than getting on with what they should be doing: namely, providing excellent quality services for all, particularly for young and underprivileged people, throughout the country.

It seems an extraordinary situation because anyone who cares for the arts—a Rip van Winkle if you like, and here I have introduced yet another level of a Winkle-esque situation—who arrives here and discovers this state of affairs will wonder what kind of a country they have arrived in. If they arrived in France or Germany they would find a very different situation, because in those countries they spend almost double what we spend in terms of taxation moneys on the arts.

This whole situation is set against a background which is familiar, even in local government areas where museums and galleries come within the mechanism of Section 33 of the Value Added Tax Act. Within the English local government finance system the arts are not classified separately and are not taken into account separately in applications for revenue support grant. Is it surprising, therefore, that arts provision across the board, let alone from museums and galleries, is extremely patchy?

It is against that background that you get departmental squabbling, as the noble Lord, Lord Morris, described it. I do not think there is any squabbling: I wish there were, and I hope that the noble Lord will tell us that there is squabbling.

The other evening, together with parliamentary friends, I went to a presentation in another place which was organised by the All Party Group for the Arts in London, at which the mayoral candidates were quizzed on their plans for the arts. I myself asked a question on this very point, and the only satisfactory answer I had—satisfactory to me because it was robust—was from Mr Dobson. Mr Dobson made a colourful comparison: he said that in the Wild West—and this is why I shall put a cross somewhere on the paper for Mr Dobson in the forthcoming election—people settled matters with bullets, but we are parliamentarians He went on to say that it was outrageous, and that the Government would settle this by using legislation. I like that approach. Perhaps the Minister will be able to tell us whether that will be possible. I hope that it will be possible, because this situation cannot continue.

In preparation for this debate, I have tried to explain the issue to several friends, including some who know the arts. Their reaction has been to open their mouths in amazement and say, "That is ludicrous!".

Perhaps I may make one more specific point. What consideration has been given to the wishes of those who, over the years, have made bequests to museums and galleries, or those who will do so in the future? Almost without exception, such bequests are tied to the prospect of free admission for all. This situation runs absolutely counter to the wishes of those who make bequests. The Mahon bequest illustrates the problem.

If there is another way of dealing with this matter, I hope that the Minister will tell us. After attending a briefing, I understand that the European Union is not bothered about it and is willing to leave the matter entirely in the hands of the UK Government. For that reason, I hope flat the Minister—without singing another aria in this Gilbertian situation—will be able to cheer us. Unless a sensible approach is adopted, the day-to-day situation looks dire for those who have to deal with it on that basis.

My Lords, I, too, thank the noble Lord, Lord Freyberg, for giving us the opportunity to discuss the vexed issue of VAT rules and how they inhibit the ability of trustees to abolish entrance fees for museums and galleries. I was interested to hear about the situation from the points of view of my experienced noble friends Lady Hooper and Lord Renfrew, as trustees respectively of the Merseyside Museum and the British Museum. They told the House about the many problems involved in administering the system.

From what we have heard in today's contributions, it is certainly apparent that the Government have not so far thought through the full impact of their policy on free access. I doubt if I shall be as generous as the noble Viscount, Lord Falkland, and absolve the Minister from answering on behalf of the Treasury. I remind noble Lords that in this House, unlike in another place, Ministers answer for the Government. However, I am sure that the particular Minister on the Front Bench tonight will be able to do that perfectly well.

This problem was raised some 15 months ago by my noble friend Lord Montagu of Beaulieu. In December 1998, in a Starred Question, he asked the Government whether the VAT implications in this matter had been worked out. The answer from the Minister was something along the lines of, "We are still talking about it", or more accurately, "We are in negotiations on this point". Yet we are no further forward. I also note that when the Government talked then on the subject of free access, they did mean free entry.

However, I noticed that in the speech of my noble friend Lord Dundee he sought a commitment from the Government that their policy remained that of free entry for all. I shall listen closely to the response of the Minister on that point. That is because over the past year or so that I have held this brief I have noticed that the Government talk about free entry, free access, wider access and keeping free those museums currently charging nothing. The policy seems to ebb and flow. I have heard the Government say that they have not really ever pledged—either before the election or in the manifesto—to provide free entry for all to museums. For that reason, I shall be interested to hear what happens tonight.

Whatever the semantics of the matter—and others have referred to semantics tonight—the fact is that throughout these discussions the Government have made the public believe—this is important—that they would introduce free entry to all national museums and galleries. I shall refer again, as I did two weeks ago when this subject was debated, to a Department for Culture, Media and Sport press release from 24th July 1998 in which the Government referred to, "universal free entry in 2001". However, only in February of this year, during Question Time in this House, another variation was made on the theme in response to a Question tabled by the noble Viscount, Lord Falkland. The Minister described what he called the "wider sense of access" which,

"includes the ways in which museums and galleries can improve the presentation of their collections and improve the hours in which they are made available; it includes the publicity for them: and it includes the way in which they are extended to the wider world outside museums and galleries".

He then went on to say,

"It is that wider sense of access about which the Government are most concerned".—[Official Report, 21/2/00; cols. 7–8.]

If the Government are "most concerned" about the wider issues of access such as publicity and so forth, surely the corollary of that is that they are less concerned about free entry. We then have cause to question how great is their commitment now to the more obvious form of access so far as concerns the public: that is, simply free entry.

As we have already heard, the VAT anomaly bedevils trustees' attempts to give free entry for all. Both tonight and two weeks ago the noble Lord, Lord Freyberg, has explained very clearly that the National Art Collections Fund recommends what appears to be a straightforward and comprehensive solution to that problem: Section 33 of the Value Added Tax Act 1994 should be amended. I look forward to hearing whether the Government accept this as a solution and, if not, why not. Earlier in the debate my noble friend Lord Crickhowell posed certain forensically detailed and powerful questions about the operation of Section 33, in particular as regards the difference between a levy and a tax. I look forward to hearing the Minister's replies to those questions.

Over the weekend reports in the press stated that the Government intend to reject the recommendation of the National Art Collections Fund and to adopt a compromise procedure; namely, the introduction of free periods of entry to museums for everyone, or perhaps free entry commencing next year only for those adults of working age claiming state benefits. What advice have the Government received about whether this kind of development would provoke a challenge from Customs? Several noble Lords have highlighted all the difficulties that could arise.

Last week the NACF kindly provided a briefing session for interested Peers. As it pointed out, if the balance between paying and non-paying visitors tips too far towards the non-payers, it throws into question the level of "business activity". In short, the more that charging museums move in stages to a complete free admissions policy, the more likely they are to encounter a non-business challenge from Customs. The NACF says that this will result in greater financial uncertainty and lead to disputes and possibly litigation, all of which would have a significant impact on museum and gallery management costs and resources.

Today the three Ministers from the Department for Culture, Media and Sport—and I say that advisedly because I think that it is a disappointment that someone of the Minister's ability is only a spokesman for DCMS—are all over the place, both geographically and figuratively. They are visiting St Ives, York and Liverpool to mark the start of free entry for pensioners which comes in at the end of this week. But, as several noble Lords have mentioned today, is the Minister aware that Customs and Excise has already advised that the introduction of free entry to pensioners is in itself likely to tip the scales against museums and make them fall into the category of non-businesses? My noble friend Lord Crathorne drew careful attention to this problem. Such a move would force museums to lose their rights to VAT reclaims. If that happens, will the Government compensate them for that loss, because they would have caused it?

I was intrigued by the reference made by the noble Viscount, Lord Falkland, to last Monday's meeting of the All-Party London Arts and Culture Group. I, too, listened with interest to what was said at that meeting. I do not often quote Labour candidates, but I should like to do so as well. I took a careful note. The official Labour candidate said that he is "fanatically in favour" of free entry to London museums. He said:

"The idea that some preposterous quirk in the VAT law should stop it is barmy".

He does not mince his words. But, unlike the noble Viscount, I shall not be putting my cross against his name. I cannot quite go that far. Having heard the debate, I wonder whether on this occasion the Minister will be able to announce a change in the law and make Mr Dobson's day.

My Lords, today's debate has been a splendid cry of support for more funding for museums and galleries, and for wider and free access. We should all be grateful to the noble Lord, Lord Freyberg, for that.

I am grateful to the noble Baroness, Lady Anelay, for finally reminding the House that I speak for the Government and not specifically for the Treasury or for the Department of Culture, Media and Sport. If I were to stand at the Dispatch Box and speak on a sectoral basis for a particular department and run the risk of someone else standing up and saying something different on behalf of another department—whether it should happen to me or to anyone else is not important, despite the relatively friendly teasing I have endured this evening—I would say that this Government are all over the place. That is not the case.

The published subject of the debate is VAT and national museums and galleries. However, I think it is fair to say that the thrust of the debate has, quite properly, been about levels of public funding for museums and galleries. If that is the case—I believe it to be not only true but desirable—then we should talk about net levels of funding: the funding that goes to museums and galleries.

Noble Lords should not assume that we in government are fools and that we do not think about the implications of taking money back in VAT from any public service, be it museums and galleries or anything else. If it were not the case that, at all times since the general election, those in the Treasury, Customs and Excise and the Department of Culture, Media and Sport had been fully aware of the VAT implications of free access, we would be properly worthy of criticism. But of course we have always been aware of the implications; we have always been conscious that the net funding, the net burden on the public purse, is the proper consideration.

However, having said that, let me set out our views—they have not changed—about wider and free access, about the nature of VAT itself and the problems we face in trying to define who should or should not pay VAT. I should like to look at some potential solutions and then specifically at Section 33 of the VAT Act 1994, its history, the principles of preception on which Section 33 is based, the European dimension and the issue of precedent, which other people call by the more emotive name of "floodgate". I should then like to reach some kind of conclusion.

First, let me say about free access what I think your Lordships know. Funds have been available to permit free access for children since April 1999—and will be available for free access for the over 60s from 1st April (this coming Saturday)—to the currently charging national museums funded by DCMS. We are continuing to assess the most effective ways of enhancing access in 2001, and we shall make an announcement on that in due course. On that, I do not intend to make any advance or retreat from previous policy. I am simply repeating what has been the position for a very long time.

Free access for children has been very successful for those museums which previously charged. To the end of January, visits by children were up by 18 per cent. As the noble Baroness, Lady Anelay, said, free access for the over 60s is being launched today by the Secretary of State at the National Railway Museum in York and by other Ministers in St Ives and in Liverpool. We have also provided the funds to allow the currently DCMS nationals to stay free.

I welcome what the noble Viscount, Lord Falkland, said about Sir Denis Mahon and his recent bequest of his wonderful collection of Italian baroque paintings. Some time ago, I was sent to Bologna to—it is impolite to say— "schmooze" Sir Denis Mahon; to assure him that he was safe in leaving his paintings to our national museums and galleries. He was and is determined that they should go only to museums and galleries which have free access, and I and other Ministers have been able to assure him that that will continue to be the case. He has accepted, correctly, those assurances, and he has made the bequest to which the noble Viscount referred.

In addition to that, the Secretary of State has announced that Tate Modern at Bankside will have free access for all when it opens. It is probably the most wonderful, largest, new art gallery in this country for the whole of the last century. An additional grant of £5 million is being paid to the Tate Gallery this coming year, and £6 million next year for that purpose. So our commitment has not changed; it is as firm as it ever was.

VAT of course is a potential obstacle to extending free access. We understand the concerns that it may limit our future freedom of action and may even threaten the free access already available. We have always been aware of the VAT implications of the free access policy—especially at a time when many national museums and galleries are carrying out major capital developments mainly funded by the National Lottery—and we have continually been in contact with Customs and Excise to try to address any VAT problems.

But this is not an anomaly of VAT—this is VAT. This is what VAT is about. The burden of VAT is intended to fall totally on the final consumer, either private individuals or organisations which are not in business. The admission of people to premises for a payment is a business activity, but free admission is not. Museums which charge for admission are generally in business—some have non-business activities such as free academic research—and they can recover all or nearly all of the VAT they incur. Museums which do not charge for admission, or which have substantial numbers of free admissions, usually have some business activities—such as shops, cafes or special exhibitions—which entitle them to recover some VAT. However, they cannot recover VAT relating to their non-business activities. The additional grants to museums which abandon charges are unlikely fully to off-set the VAT cost. The NACF perceives this as an inducement to museums to charge, while those which offer free admission suffer a heavy financial penalty.

Of course I recognise the concern that the situation is worse because all museums are currently incurring a lot of VAT because of National Lottery capital projects. But it has always been the case that VAT can be included in the grant request to the National Lottery. If the VAT has not been included in the grant request for a project which is liable to VAT without it being recoverable, then the grant request has not been properly made. It is of course true that free admission can mean that some VAT cannot be recovered. This is a complex issue. It depends very much on the museum's individual circumstances and it is subject to negotiation between the museum and the local VAT inspector.

Before leaving the question of lottery grants, I should say to the noble Lord, Lord Renfrew, that the figures that he saw in my Answer to the noble Lord, Lord Freyberg, are the figures provided for the British Museum. They have not been inspected or verified by Customs and Excise. That is the basis on which they have been given. One noble Lord said that this is a lottery. It is not. The local VAT inspector deals with his local museums and galleries, not because he is a kind of free-standing baron able to negotiate as he thinks fit, but because the needs and circumstances of museums and galleries are different one from the other. Customs and Excise is concerned with equity rather than equality, and it will be directing the approach taken by local officers to ensure that the same basic principles are followed.

Let us look at what potential solutions there might be. We could treat non-charging museums as being in business so that they can recover all or most of the VAT they incur. However, in both UK and European Community law business involves making supplies for a consideration; and any change to that would mean amending the sixth directive. To amend the sixth directive I have to say, frankly, is all but impossible at least in the foreseeable future. Only the Commission can propose legislation, so anyone suggesting a change to accommodate museums would need to convince it, first, that there was a problem and, secondly, that there is a solution which is consistent with the basic scheme of the tax. This is not a cascade tax; it is a tax on the ultimate consumer; and, frankly, we are unlikely to overcome the first hurdle.

Another solution is that of the National Museums and Galleries on Merseyside to which the noble Baroness, Lady Hooper, referred: admission at a reduced cost. Customs and Excise has confirmed that, provided museums make more than a token charge for admission, reduction of the charge should not significantly affect their VAT recovery.

Finally, there is the proposal, the subject of the debate, to include national museums and galleries within Section 33. That is considered to be a quick and easy method for national museums and galleries to recover tax which they cannot otherwise claim. Of course, we are grateful to the National Art Collections Fund for the paper it produced with the help of the Charities Tax Reform Group, and for the approaches it has made to the European Commission.

Let us look at the history of Section 33. It is part of the original 1972 VAT legislation. It allows certain bodies to reclaim tax incurred on their purchases used in carrying out their non-business activity. But apart from exceptions like the BBC which was introduced at the very beginning, this status has been restricted to local authority-type bodies with legal powers directly to precept on local taxation—not local authority museums, I have to say to the noble Lord, Lord Crickhowell, but local authorities—for all their services. If I said to him that they levied charges and not taxes, I was almost certainly wrong because that is not the implication. This is important because the total amount of VAT refunded in 1999 under Section 33 to local authorities was about £3.4 billion.

What about precepting as a determining factor for inclusion? The criteria for adding new bodies is that they carry out new local authority-type functions and have the power in law directly to precept on local authority funds. Since 1972 it is true that 33 bodies have been added by Treasury order. National museums and galleries cannot precept on local authorities and are unrelated to local authority funding requirements. These long-established rules have been strictly applied to many applications for admission from non-departmental public bodies, a category which includes our national museums and galleries and they have all been rejected. The Charity Tax Review Group has been in negotiation with Customs and Excise and has been firmly told that it cannot be extended to it.

My Lords, I thank the Minister for giving way. As regards ITN, the precepting is on Channel 3 providers; it is not on the local authorities. And in the case of the Environment Agency the precepting is not on local authorities. Surely these are the levying of charges and not precepting on local authorities. There are already exceptions, are there not?

My Lords, I said that there have been exceptions. They were all hard fought. For the ITC it was introduced at the same time as the BBC.

National museums and galleries simply do not meet the precept levying criteria and if they were admitted it would be difficult to apply a defensible yardstick to prevent entry to other non-departmental bodies. The VAT incurred by non-departmental bodies is about £400 million which is partly offset by central grants and business activity on which input tax can be reclaimed. The tax loss could be in the region of £50 million to £70 million in this area.

In the European context, yes, of course we are aware of the views which have been expressed by the European Commission. We do not dispute that part of the Commission may hold that Section 33 as framed at present is outside the terms of the sixth directive and European Community law does not cover it. But if it were to be considered as part of the law, which might be the case if there were an extension, then the Commission would take infraction proceedings against the United Kingdom. We have known this for a long time, but there is uncertainty to the extent that membership could be extended to the semi-commercial sector that could still prompt the Commission to take infraction action.

As regards setting the precedent—the floodgates argument—I have spoken of the cost regarding charities and the £400 million tax which could be at risk. The noble Lord, Lord Strabolgi, and many others said that the cost for the charging of museums and galleries would be £3 million. If we extended that to the non-charging museums and galleries we should be talking about £30 million. In any case, other non-departmental public bodies could well be pressing for similar treatment.

We are not stupid. This is public money. If the money is going out to museums and galleries and is being recovered in the form of VAT, you do not seriously think that the Treasury, Customs and Excise, and the Department for Culture, Media and Sport have not taken that into account not only in the way in which our VAT laws are framed but also in the way in which the size of grant for the DCMS is framed. A number of noble Lords have spoken as though this were somehow a quick fix. The noble Lord, Lord Gibson, said that there was no repercussive effect. Of course there is a repercussive effect. If we set targets for public expenditure in this country—and noble Lords opposite who have been Members of government know that I am right about this—in the knowledge that some of our expenditure is gross and sums are recovered in VAT, then we are looking at the net effect on public expenditure; and that is what we publish in our Budget figures. It is the basis on which the allocations in our spending reviews are based. Every noble Lord who has been a Minister must know that to be true

I do not say firmly and finally that there is no prospect of change in Section 33. We shall continue to look for the possibilities of change. I am not saying that there is no possibility that other ways may not be found of improving the funding of museums and galleries. After all, that is the subject of the spending round 2000 which is going on. But I have to say that anyone who thinks that there is a cost-free fix in changing the VAT law is deluding himself.

Noble Lords have done an excellent job for museums and galleries by their determined advocacy of free access and of the worth and means of museums and galleries. That cannot be taken away from them.

My Lords, I am immensely grateful to everyone who has spoken today. It has been an informative and lively debate. I am particularly grateful to the Minister for his comments and for explaining the Government's position. I am sorry that he is unable to move in our direction. I understand the purpose of Section 33. I see no logical and, with great respect, no legal basis on which to limit it I note that in 1984 when a Labour MP asked the Chancellor of the Exchequer in a Question for Written Answer whether the national museums and galleries should be put on the same footing as local authority museums under this very power, he was told by the Treasury Minister, Barney Hayhoe—now the noble Lord, Lord Hayhoe—not that it could not be done but, on the contrary, that no VAT refund was needed because national museums grants were designed to cover VAT. That is patently no longer the cage. The refund is now badly needed, not least in order for the Government to deliver their admirable policy of universal free access. Mr Hayhoe's answer clearly indicates that the Treasury at that time had no intention of declaring this power off limits. Indeed, it is extraordinary that many local authority museums have the benefit of this power, which is denied to their national colleagues.

Are the Government saying that they cannot add national museums to Section 33 or that they do not want to? As there do not seem to be any overwhelming objections, I urge the Government to find the political will to add national museums and galleries to Section 33. I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.

rose to move. That an humble Address be presented to Her Majesty praying that the regulations laid before the House on 8th March be annulled (S.I. 2000/630).

The noble Baroness said: My Lords, I beg to move the Motion standing in my name on the Order Paper.

The statutory instruments to which my Prayer relates will have a significant effect both upon those who pay taxes and those who buy TV licences. The order makes three changes in one fell swoop. The TV licence fee has increased from £101 per year to £104 for colour and for black and white by £1, giving the BBC an extra £200 million every year. Free licences for people over the age of 75 will be introduced from 1st November this year; one per household. The third part of the order amends the licence fee concessions available to those in sheltered accommodation.

I make clear from the outset that I do not propose to put this Motion to a vote. One might ask why I tabled it. Looking around the Chamber, which seems dripping with BBC governors and an ex-directorgeneral—not quite an ex-director-general; I beg his pardon, there are a few days yet to go—the noble Lord, Lord Birt, in the Chamber, I begin to wonder why on earth I tabled it. My colleagues in another place last night did not have to face quite such a battery against them on that occasion. However, I hope it will not end up as a battery against what I have to say.

I have three reasons for tabling the Motion. First, quite simply, it was the only way in which this House could have any opportunity to ask the Government questions about changes that are made here by negative instrument and to give the Minister the opportunity to put on record the explanation of the Government for the changes and the thinking behind them.

Secondly, I should like the Minister to give the House an assurance—this might sound a strange thing to say, not least from me—that the BBC will not be required to bear the administrative costs associated with the Government's pre-election give-aways. Thirdly, I want to draw attention to a narrow point which I believe has been missed in another place. The order could, in practice, remove from people over 60 who are currently in sheltered accommodation the right to concessions in certain narrowly defined circumstances. I do not believe that that is what the Government intend and I want to explore that.

I have approached the debate from my viewpoint as a friend of the taxpayer, a friend of the licence fee payer and, I would still say, a friend of the BBC. I shall carry on with that, regardless. It is true that I am a candid friend, but I sent a draft copy of my speech to the BBC last week. I am not too sure how many people had a heart attack, but they are still talking to me—just. I met the head of TV Licensing on Monday. I am grateful to him for his detailed and patient answering of my questions. Noble Lords will be aware that TV Licensing is, in a sense, a brand name of the BBC, but it is a wholly-owned subsidiary.

We on these Benches recognise the achievements of the BBC and its importance in setting the benchmark of quality in national and international broadcasting. The BBC has made, and I hope it will continue to make, a major contribution to the cultural life of the nation. However, as noble Lords are all aware, the broadcasting world is changing rapidly. Already more than 3 million households have access to multichannel digital television. That explosion of choice raises fundamental questions about the current and future role of the BBC and, necessarily, about its funding.

Perhaps there are good reasons for letting the BBC now break the existing agreement that was intended, when made, to give it scope to develop the digital services. I would simply maintain that when the Secretary of State made his Statement in another place, it was he who failed to make that case effectively. Those who feel tonight that this will be a bash at the BBC's speech will find that it is not quite that. Perhaps others might want to do that in future debates we have on broadcasting. I hope that we have the opportunity to explore the role of public service broadcasters in general during the course of this coming year in our Wednesday debates.

I have questions about the operation of Parts 2 and 3 of the order, if I may call them that. I refer to the parts which affect the free licences for the over-75s and the extension of concessions, or so it would appear, to those in sheltered accommodation. I turn first to the free licences which will be available to the over-75s. I was intrigued to note that when the Secretary of State made his Statement in another place he said that the concession would be made provided that primary legislation can be passed to enable it to be made. We now find that that change is to be effected by secondary legislation. What advice did the Government receive between 21st February this year when the Statement was made and 8th March when this instrument was laid to change their minds about the need for primary legislation to effect the change?

Can the Minister confirm that some primary legislation may still be needed in order to give the BBC full access to all our national insurance information—the numbers held for us by the DSS at Newcastle—so that those who claim a free licence can have that claim verified?

The heart of my questions are: what are the financial implications of the change for both the Treasury and the BBC? How has the Treasury calculated the £300 million which the Secretary of State announced would be paid every year to the BBC as compensation for the loss in income for the sale of those licences to the over-75s? Is £300 million really an accurate figure or is it, indeed, as I have been led to believe by advice, closer to £340 million in the first year and about the same thereafter?

Is the estimate of the compensation to be paid linked to the number of those who are currently over 75 who are estimated to hold a licence? Are such figures available? How many people have a licence over 75? Or is that compensation amount linked to the number of households that the Government expect to make a claim to have a 75 year-old living with them after 1st November this year? Let us suppose that my mother came to live with me in my household. As she is 86, I would be able to transfer my licence fee into her name and obtain a free licence for my household.

I note that the compensation is strictly for the amount of free licences issued. There is the question of the cost of administration. Such costs are excluded from the estimate of £300 million, if that, given by the Secretary of State. Can the Minister confirm that the estimated cost of the work to be carried out by TV Licensing is about £22 million in the first year and about £8 million to £10 million thereafter? They will be required this year to write to every single household in the land to inform those who are over 75 about the scheme and explain how it operates. They must verify the claims and police the system thereafter to ensure there is no fraud. That is their job. Can the Minister assure the House that the Treasury will pick up the bill for all that work, both this year and in ensuing years?

The taxpayer!

My Lords, I am delighted to hear the Minister remind me, from a sedentary position, that when we talk about the Treasury paying we are talking about each and every one of us paying. Indeed, pensioners between the ages of 65 and 75 will pay more for their TV licence, not receive a free licence and, if they are a taxpayer, still pay even more for the administration costs.

My question is simple: will the taxpayers, through the Treasury, bear that cost or will the BBC be expected to make further savings or dip into the money it has been given to provide for its digital expansion? Will it have to do that to pay for the administration costs? I hope that that would not be the case.

There are some complexities in the way the free TV licence will operate. For example, can the Minister confirm that those who are over 75 must still apply for and hold a licence, even though it is free? What happens if somebody over 75 fails to apply for a licence or, having applied for it, fails to complete it and send it in? If detected, can the Minister confirm what I believe to be the case; that is, that over-75 year-olds will still be subject to prosecution? I have this ghastly vision of the first ever case of the TV licensing people having no choice but to prosecute somebody aged 90 because that person does not have a TV licence, even though the licence is free. I see that as a potential bureaucratic nightmare.

Finally, I turn to the third change made by the order; the ARC system—the licensing system which covers those in sheltered accommodation. Last night, when this order was taken in another place, the Minister stated at col. 301 of the Official Report, that this provision,

"will have the additional benefit of safeguarding the entitlement to the concession of residents in sheltered housing schemes with male residents aged between 60 and 64".

I fully acknowledge what the Government are trying to achieve. But I have been advised by TV Licensing that the way in which the order is worded introduces a new and unwelcome anomaly that in practice could remove the right to hold concessionary licences from those people over 60 who live in sheltered accommodation. It works like this.

As the situation currently exists, if I am living in sheltered accommodation and am just over 60 and there is a gentleman living in that sheltered accommodation between the ages of 60 and 65, because he is not of pensionable age h e should in theory knock me out from having access to concessionary licences. TV Licensing has been exercising a discretion to ignore the presence of that man and therefore allow the concessionary licences to apply. At times it has been taken to court by bodies which say that if it exercises discretion in that case, it should exercise it in others. I am sure TV Licensing would welcome the fact that this change means it is not in the invidious position of having to decide whether or not to exercise discretion.

I can therefore see the logic behind what the Government are trying to achieve. It looks as though the BBC would be OK and people in sheltered accommodation would be in an acceptable position. But I am advised by TV Licensing that, if a man aged between the magic ages of 60 and 65, lives in sheltered accommodation and works over 15 hours a week—that means he car: no longer be calculated as retired—this order will abolish the right of everybody else in that sheltered accommodation to hold concessionary licences. Noble Lords will be aware that there are several good practice employers like B&Q who actively recruit older workers. It is therefore possible that the scenario I described could occur.

I contacted Age Concern to discuss this matter and found that it was not aware of this potential anomaly. Matters came to a head so late because I only saw TV Licensing on Monday and it has not been possible to follow it through. But I undertake to try to do so. None of us want this to occur. I am seeking from the Government an answer as to whether or not they are aware of this development and this advice from TV Licensing. Whatever is the position, will they undertake to look at the situation urgently after the order goes through, as go through it will, so that, if there is a potential anomaly, we are able to put it right on a future occasion?

I come back in a rather elliptical way to where I began a long while ago—this is a complex order—to say that, of course, this is a statutory instrument and as such it cannot be amended. So even if there is fault in it, it must go through. I commend the Prayer to the House.

Moved, That an humble Address be presented to Her Majesty praying that the regulations laid before the House on 8th March be annulled (S.I. 2000/630).—(Baroness Anelay of St Johns.)

My Lords, having taken advice from the table I should declare an interest in that a company with which I am associated under Category 2 of the Register of Members' Interests has worked for the BBC. I am also President of the British Radio and Electronic Equipment Manufacturers' Association (BREMA). Both those interests are registered in the appropriate fashion.

Listening to the noble Baroness, Lady Anelay, I sometimes wonder whether the Government do not put their proposals on concessions to pensioners on the old "bike shed" process of getting material through council budgets. The council always used to put in the cost of repainting the bike shed, knowing that that would dominate the ensuing debate and the rest of the council budget would go through on the nod. I dipped into last night's debate in the Commons and a lot of attention was paid to these concessions to pensioners. I see the noble Baroness, Lady Greengross, glaring at me. That in no way implies that it is not a welcome concession to pensioners and one that is not appreciated. However, it is away from the main and welcome thrust of this order; that is, the increase in licence fee. Indeed, if the noble Baroness had pressed her Prayer this evening we would resolutely have voted against it.

It is also a pleasure to see the noble Lord, Lord Birt, in his place. I am not sure he has the same brooding presence that Lord Reith must once have had in this Chamber. But he brings considerable experience to our deliberations.

The noble Baroness does not need to apologise for bringing this Prayer before the House. As she said, it gives us an opportunity to air a number of points in relation to the Government's decision on the licence fee. The way that she put forward her views was a welcome change to what was once the strident anti-BBC rhetoric which used to come from the Conservative Benches. The BBC needs friends and, as she put it, it needs candid friends.

The licence fee has always been politically sensitive. I was first brought into this game when the noble Lord, Lord Callaghan, asked me, as his political adviser in Number 10, to keep an eye on what the Home Office was up to in relation to the licence fee in the late 1970s. The idea that the licence fee is a great imposition has been slightly changed with the coming of subscription television. We now see what a bargain the licence fee is compared with that asked by cable or satellite subscription services.

I am glad also that the noble Baroness did not trot out the canard that the licence fee is a poll tax. I believe that by each person paying a licence fee we spread the cost of our public service broadcasting in a way that makes quality public service broadcasting available to all. That is something that should be welcomed by all.

For that reason I welcome the new settlement. It provides new resources and gives the BBC a vote of confidence which enables it to plan ahead at least until the review of the charter. The way that the Government and the BBC have come to this agreement is welcome. It re-establishes BBC1 as the BBC's flagship channel. It writes in a commitment to education, to exploring the world of interactivity and to enhancing services to the devolved nations and regions of the UK. At the same time it places pretty heavy burdens on the BBC to find further cost and efficiency savings.

The Secretary of State has declared his intention to implement independent reviews of BBC news services, starting with News 24. I have no objection to such a review as long as it is in the context that if the BBC is to remain at the forefront of news coverage it should be as part of a 24-hour news service. There has been much sniping at News 24, but Sky still has minute audiences for its news service. I believe that Mr Murdoch well realises that an effective 24-hour news service is not only a benefit in itself but a useful political calling card. CNN spent many years establishing itself as a 24-hour service. ITN is now moving in that direction. I am quite willing—as I am sure is the BBC—to see News 24 examined. I am quite sure that News 24 is capable of improvement. However, we should not allow News 24 to be sabotaged by critics who have vested commercial interests in their criticism.

We have come to the end of a 12-year battle over the future of the BBC. I hope that the remarks of the noble Baroness signalled that. Almost throughout the 1990s questions were raised as to whether we wanted the BBC; whether it should be split up; or whether it should be privatised. I believe that the national consensus is that we want to retain the BBC. If we are of a mind to retain the BBC, we must give it the resources to do the job that we want it to do. I very much welcomed the statement of the Secretary of State that,

"the BBC should provide a strong and distinctive schedule of benchmark quality programmes on all its services and should drive the take-up of new digital and on-line services. A strong BBC is crucial in ensuring that everyone can have access to information, news, education and current affairs, using efficient modern methods".

I believe that that is a statement of intent, a mission statement, which we can all support.

The BBC has made a unique contribution to the cultural life of this country in the 20th century. I believe that in the new century it is essential to the health of our democracy. Its cultural role is essential as our values are constantly challenged by the dominance of American media. As was pointed out in the agreement with the BBC, its political role has increased in importance with regional diversity. We need the BBC to bring us together as a nation. I am convinced that, like democracy, the licence fee is a bad system of funding until you compare it with all the alternatives. As one of the alternatives which was rejected, I thought that the Davies committee's solution of a digital levy was a bad solution. I know that the noble Lord, Lord Birt, agrees with me because at one time he was for the digital levy and, at another time, against it. That was a good each-way bet which meant that he was on the winning side in the end!

The problem with the digital levy is that it is a catch-22 situation. We need a successful switch to digital to drive forward the digital revolution, yet the digital levy would have made people less keen to switch. We must therefore promote free-to-air digital. I know that the Secretary of State has promised a campaign on free-to-air digital. One wonders when we shall see that. However, there is a danger. We see at the moment what I would call predatory subsidy—the offering of so-called "free" set-top boxes which lures viewers into what is termed "walled gardens". Once they enter the subscription market, they are trapped. We want interoperability and a free-to-air offer, not just because that gives choice to the viewer but also—here I declare my BREMA interest—because it gives a good base for a manufacturing industry in which Britain is at the moment in the lead.

I hope that the Government will campaign hard on the free-to-air offer. They have shown commendable courage in ignoring the vandals who wish to dismember the BBC and they have supported higher standards. On that basis the BBC should be able to go forward with confidence.

A demonstration of that confidence is the BBC talent initiative. The BBC should be looking for new performing, creative and technical talent. Quite frankly, I do not think that it should worry about so-called "star performers" being poached. They rarely twinkle quite so brightly once they are away from the BBC. The BBC has constantly shown its capacity to find new talent and to bring on new stars.

There are two mantras worth preserving: first, the one that the noble Lord, Lord Hurd, used in his White Paper over a decade ago; namely, that we must have quality, diversity and choice for British broadcasting. The best way to achieve that is through a well funded BBC that can operate in all centres of technology and not be restricted by either lack of funding or by attempts by commercial interests to undermine its initiatives. The BBC still has that old Reithian objective to entertain, educate and inform. I believe that that is as important as ever to the health of the nation.

My Lords, the noble Baroness, Lady Anelay, was right to point out that there is a veritable phalanx of "BBC types" in the Chamber tonight. I particularly welcome the noble Lord, Lord Birt. I declare an interest as a vice chairman of the BBC and also as the daughter of a blind mother over 75 years-old.

There are three questions on which we might legitimately dwell tonight. The first is the question that is perhaps central to the licence fee increase; namely, is an increase in the licence fee justified? I am always slightly bemused when that question arises because if you go anywhere outside these islands and ask people whether the BBC is a good thing, you hear paeans of praise heaped upon it. People are in no doubt whatsoever as to the value of the BBC. People abroad often think that we are rather mad to question that. It is now the second most recognised global brand after Coca-Cola. The BBC is promoting Britain right across the globe.

Back here in the UK the BBC fulfils a clear and distinctive public service role. Any doubt expressed about that needs to be closely examined. The smokescreen of saying that there is uncertainty over the BBC's public service role in the digital age is indeed a smokescreen. I believe that the BBC will continue to be a benchmark for quality and for influencing the whole of the broadcast ecology. It will continue to provide universality of access irrespective of ability to pay when more and more broadcasting is on a pay-perview or subscription basis.

At the end of the day, it cannot be denied that the BBC offers a bargain. Viewers receive two analogue television channels, four digital television channels, five national radio stations, a range of local radio stations and the biggest on-line content site in Europe, with over 150 m Ilion page impressions every month. That represents e bargain now; and it will represent an even bigger bargain in the future. Alongside an increase in the licence fee, there is an agreement with government to produce over £1 billion in internal savings and to redirect the maximum amount of resources to programme-making, and there is a clear package of new developments spanning creativity, citizenship, learning and services for the devolved nations as part of the UK. People receive all that for less than the price of a packet of crisps a day—so it is a veritable bargain. I believe that the increase in the licence fee can be justified to the man in the street.

The second issue that is worth touching on briefly is the vexed question of concessions. Who should receive concessions is a decision for government. We have seen one major benefit this year for which we must be thankful; namely, the free licence for those over 75. That reduces to 130,000 those who are subject to the other, much vexed, concessionary licence schemes, in relation to which there are always anomalies and problems of boundaries.

A third issue concerned me which has not been touched on in the debate. It is the question of whether there is a risk to the independence of the BBC if 13 per cent of its licence fee income comes direct from a government department. I hope that the concessionary schemes have been designed specifically to ensure that the BBC's independence will not be eroded. The strong principle will remain that each household must still have a licence; the only difference will lie in how the cost is met—by the DSS or the individual. DSS payments will no: come from a capped budget subject to spending review control. The only question is whether the household will pay directly for the licence or whether the payment will be made automatically by the DSS. I hope that that goes some way to reassuring the noble Baroness, Lady Anelay, who expressed concerns about whether the BBC will be faced with a shortfall if the sum currently predicted were not to be met. It will indeed be met. Over the past few months I have felt more reassured that the new system of concessions will not erode the independence of the BBC. The BBC guards its independence ruggedly, and intends to remain independent while making sure that it receives and collects a proper payment for the services that it provides, to a high standard, to each household.

My Lords, I, too, begin by declaring an interest. I am the "other half' of that "battery" of governors referred to by my noble friend Lady Anelay. I am not sure that, between us, the noble Baroness, Lady Young of Old Scone, and I could man a battery very satisfactorily. However, I share my noble friend's disappointment that we form so high a proportion of those who are present for this debate. My noble friend has performed a great service in providing an occasion for the discussion of this important set of issues. I should like to assure her that the guns in my battery are certainly not trained towards her. A candid friend—and I stress the word "candid"—is exactly what the BBC needs.

I commend the Government on providing the BBC with security of funding in the licence fee settlement for a sufficient period of time to enable it to evolve something that presents extreme difficulty; namely, a strategy for public service broadcasting of the quality that Britain has come to expect from the BBC in a world that is changing extremely fast technologically. I should like to take this opportunity to congratulate the noble Lord, Lord Birt, on all he did to help the BBC think its way through to that new world at the same time as focusing on the programming that it was presenting in the old one.

I also commend my noble friend for raising a number of issues relating to concessionary licence fees. It is important that the Government are given this opportunity to respond to the questions that she has raised. If the Minister will forgive me saying so—and if my friends in the Treasury will forgive me—it would be a not unfamiliar Treasury trick to allow some of the cost to trickle back on to the BBC. That would, of course, be to the disbenefit of all licence fee payers. I am sure the Minister will provide satisfactory answers to the questions raised by my noble friend. I conclude by again congratulating her on raising them.

My Lords, I intervene briefly simply to spare the embarrassment of the Board of Governors of the BBC, who feel that they may be monopolising the debate! I was a member of the committee that examined BBC funding. The committee was unanimous in its feeling that the BBC should be given more funding. Any body which depends on an RPI-based settlement needs that settlement re-examined between five and 10 years in the period of funding because it inevitably gets out of kilter with what is happening in the real world.

I disagreed with my colleagues on the committee who advocated a digital licence fee. I suggested that the current agreement, which was meant to be RPI-minus for the next two years, should be broken and restored to an RPI-plus basis. My principal reason was to guarantee the BBC extra funding. The Government have gone marginally further than I would have done and the settlement is more generous than I suggested. I do not quarrel with that—I would rather err on the side of generosity to the BBC than the other way.

My main argument against a digital licence fee—and I am glad the Government have rejected the idea—was that the prospect had united every other broadcaster against the BBC in a way that I have not seen in 40 years in broadcasting. That would have posed grave dangers for the survival of the licence fee in 2006. I hope that it will survive. It is a distinctive form of funding and one which should be retained.

A further point raised by the noble Baroness, Lady Young, was whether there was a danger to the BBC's independence from the direct government funding of licences for pensioners over the age of 75. The situation would have been even worse had the Government done nothing and left the BBC as a kind of surrogate Department of Social Security and the licence fee as an form of extra taxation that did not count as taxation. It is much better that the Department of Social Security should fund benefits where it believes that they should be funded. It should not be part of the BBC's job to do that.

Thirdly, it is important to distinguish public service broadcasting from public funding—a point that has not been touched on so far. The triumph of broadcasting in this country under successive governments is that public service broadcasting has extended across the ITV network. One need only look to the fact that the current chairman of the BBC, the most recently retired director-general, the noble Lord, Lord Birt, and his successor, Mr Greg Dyke, have all emanated from London Weekend Television. That suggests that, unless they underwent a road to Damascus conversion during the taxi ride from one building to another, public service principles imbue traditional commercial broadcasting in this country as well. It is vitally important that we preserve that. Frankly, the 1990 Act did immense damage to ITV, some of which is now becoming apparent in a reduction in the quality of quite a lot of the programmes.

However, it is important that there should not be an automatic assumption that, if there is to be public service broadcasting, it can be provided only by the BBC. If the Secretary of State decides, for example, that he wants a new service to be a public service, it may well be that it should then be open to the ITNs of this world to go for that as well as the BBC. That will produce a healthier broadcasting ecology. If we confine public service broadcasting to the BBC and let the rest run not, we shall eventually end up with the equivalent of the public service channels in the United States, which attract a tiny minority audience. We need public service broadcasting across the spectrum so far as is possible.

My Lords, I have never played this game before and do not know the rules about how the Government Front Bench should respond to a Prayer to annul an order. Apart from expressing regret that the noble Lord, Lord Birt, did not seize the opportunity to make an impromptu maiden speech—he would have been within his rights to do so—I shall précis the long speech that I have before me in praise of the BBC and then answer the questions posed by the noble Baroness, Lady Anelay. I agree with virtually everything that has been said by other noble Lords who have taken part in the debate. I make one exception. I believe that the comments of the noble Lord, Lord McNally, about interoperability and other matters fall outside the scope of the order.

In so far as all noble Lords have spoken about the role of the BBC, the importance of security of funding and the licence fee, and have said how much they welcome the decision that has been taken, I do not believe that there is much point in repeating in detail the speech which was made last night in another place. The first paragraph of my speech states that the Government are committed to the continued role of the BBC as the United Kingdom's principal—not the only—public service broadcaster. I emphasise those words for the benefit of my noble friend Lord Gordon. My noble friend is quite right that public service broadcasting principles should apply to all broadcasting, not just to the BBC. The paragraph goes on to say that the BBC's central role is the provision of free access to its public service channels with a high standard of information, news, education and current affairs programmes.

The next paragraph of my speech states that of all the options for funding the corporation the current television licence fee has distinct advantages: in other words, it is probably very bad but it is better than all the alternatives, as the noble Lord, Lord McNally said. I agree with the noble Baroness, Lady Hogg: we thought that it was important to provide sustainable funding up to the end of the Royal Charter at the end of 2006 in the expectation that, if that policy was successful, it would lead to continued stability of funding thereafter. We appointed Gavyn Davies to chair an independent review panel which came to the conclusion that the licence fee, with modifications, was the correct way forward. We have taken account of the report of the panel and also commissioned a review of the BBC's financial projections by independent consultants to assist our decisions on finance and an analysis by the Department for Culture, Media and Sport.

We have not adopted all the proposals of the review panel. For the reasons that have been well expressed, we have rejected the view that a digital licence supplement is an appropriate alternative or addition, but we have agreed with the panel that additional funding should come in the first instance from self-help. Therefore, we have challenged the BBC to help itself by efficiency savings, partnerships, joint ventures, reductions in bureaucracy and other means. We have set a target of £490 million by 2006/07 over and above the £600 million which the BBC has itself estimated. We recognise that that is a more demanding target than that set by the Davies panel. On that basis, we have decided to provide the required additional licence fee funding via annual increases of 1.5 per cent over RPI from April this year through to 2006.

We have also accepted the general thrust of the review panel's recommendations about transparency, fair trading and accountability. We shall institute procedures for the introduction of new services which will include an opportunity for public consultation before the Secretary of State reaches decisions on proposed new services. There will also be a programme of reviews of all the current BBC digital services—"News 24", "Choice", "Knowledge" and "Parliament"—to ensure that they achieve their stated purpose. We de not expect the licence fee to fund services such as dedicated film and sport channels where there is no distinct and separate public service remit.

We shall commission independent scrutinies of the BBC's fair trading policies and financial reporting and publish the results. As to concessions, we have already gone beyond the Davies recommendations with the announcement of free licences for those over 75. The noble Baroness, Lady Anelay, asked me why the Government had changed their view about the means by which that should be achieved. Free television licences can be introduced under the provisions of the Wireless Telegraphy Act 1949, as amended. However, an amendment to the BBC's agreement with the Secretary of State will be required to enable the Department of Social Security to make payments to the BBC to cover the cost of free television licences. That will be done by affirmative resolution.

The Government will also bring forward primary legislation to enable the Department of Social Security to provide information to the BBC. That will assist in the efficient administration of the scheme and, in most cases, enable the application procedures to be greatly simplified. Without going into the history of how these decisions have been arrived at, I can say only that they have been taken on the advice of the highest possible authorities. The cost to the taxpayer of free licences will be approximately £368 million. The administration cost will be £24.3 million, and the ongoing costs are expected to be £10 million in the first year and £8 million per annum thereafter. All of those costs will be borne by public funds, not the BBC.

The noble Baroness, Lady Anelay, asked about those over 75 who applied for licences. That question has already been dealt with by my noble friend Lady Young. The answer is that all households will need a licence. I am glad that my noble friend Lady Young is reassured that that will help to preserve the independence of the BBC's funding. The noble Baroness, Lady Anelay, asked me about the removal of the right to a free television licence where a man in sheltered accommodation aged between 60 and 64 worked more than 15 hours a week. I do not know the answer to that question. The noble Baroness has apparently been given that question by the BBC's licensing unit. It would have been helpful if it had given the department its opinion before the order was framed but it did not do so. That matter must be investigated. I shall provide an answer to the noble Baroness and copy it to all those who have taken part in the debate.

I do not believe that it is for me to defend the order any more than I have. The basis on which the Prayer to annul is made is very limited. I am grateful to all noble Lords who have taken part in this short debate.

My Lords, I am grateful to the Minister for his response. As he points out, the basis of the Prayer is narrow. I assure the noble Lord, Lord McNally, that I do not see the roles of the BBC coming to an end; they are just beginning. When the BBC has a strong and growing online system, is becoming an Internet service provider and goes into realms that neither it nor any of the users of these services could have expected of any broadcaster, we shall continue to ask questions as to what the role of a public service broadcaster, or any broadcaster, should be. I believe that those matters fall within the remit of a debate, not a Prayer to annul. Therefore, I have sought to restrict my remarks very closely. I am grateful to the Minister for addressing himself to the questions that I posed. I beg leave to withdraw the Motion.

Motion, by leave, withdrawn.

rose to move, That the draft order laid before the House on 1st March be approved [12th Report from the Joint Committee].

The noble Lord said: My Lords, in preparing for Scottish devolution, it was recognised that there would be some UK or GB-wide public bodies with a remit which includes responsibility for devolved matters in Scotland. Section 88 of the Scotland Act provides the mechanism to designate such public bodies as "cross-border public authorities". The Scotland Act 1998 (Cross-Border Public Authorities) (Specification) Order 1999 designated 65 public bodies as cross-border public authorities, including the British Library Board, Theatres Trust and the trustees of the National Heritage Memorial Fund.

Designation as a cross-border public authority has the effect that ministerial functions in relation to the body do not transfer automatically to Scottish Ministers, as they would for bodies operating wholly in a devolved area. Instead, the Scottish Ministers have a right to be consulted on all appointments to the body and on the exercise of any functions in relation to the body which might affect devolved matters.

But these default arrangements are not suitable for every cross-border public authority, so Section 89 of the Scotland Act allows arrangements to be tailor-made for a particular body. This is the purpose of the present order in relation to the appointment and, in certain cases, removal of members of the British Library Board, trustees of the Theatres Trust, and trustees of the National Heritage Memorial Fund. For these bodies, UK and Scottish Ministers have agreed that it is not necessary to consult on the appointment or removal of every trustee or member. The order ensures that Scottish interests are properly represented. In effect, it re-establishes the pre-devolution position on appointment issues, which was a mixture of statutory and voluntary arrangements.

All the bodies affected by this order have been consulted. They all support the provisions. Indeed, Section 89(3) of the Scotland Act provides that no recommendation shall be made to make an order unless the cross-border authorities have been consulted. The order is also in line with the concordat between the Department for Culture, Media and Sport and the Scottish Executive covering consultation arrangements on all appointments of interest to the Scottish Executive.

The order cannot be recommended to Her Majesty unless it has been approved by a resolution of each House of Parliament, and by a resolution of the Scottish Parliament. The order was agreed in another place on 20th March and approved yesterday by a committee of the Scottish Parliament. Formal approval of the order by the Scottish Parliament will be, presumably, on 6th April. This is the second such order. The first was approved last year and covered 30 cross-border public authorities.

Let me deal briefly with each of the three public bodies concerned. The British Library is the national library of the United Kingdom and the foremost centre for reference, study and bibliographical and other information services for both science and the humanities. The remit of the Theatres Trust UK is,

"to promote the better protection of theatres for the benefit of the nation".

Local authorities are required to consult the trust on planning applications affecting land on which there is a theatre. The trust also provides advice on theatre buildings to grant-making bodies, including lottery bodies. I am confident that in the case of both public bodies Scottish interests will be fully represented in their work across the United Kingdom.

For the British Library and Theatres Trust, appointments are made by the Secretary of State for Culture, Media and Sport and Scottish Ministers will be consulted on one member of the British Library's Board and one member of the Theatres Trust, who, in the view of the Secretary of State for Culture, Media and Sport,

"appears to him to have special knowledge of Scotland".

The National Heritage Memorial Fund is a fund of last resort that has the powers to provide financial assistance towards the acquisition, maintenance and preservation of buildings, lands, works of art and other objects or structures of importance to the national heritage. The NHMF also administers the Heritage Lottery Fund that distributes money generated by the National Lottery. Both the NHMF and the HLF have a remit that is UK-wide.

Appointments to the NHMF are made by the Prime Minister on advice from the Secretary of State for Culture, Media and Sport. The Prime Minister will consult Scottish Ministers on the appointment of the chairman and however many persons with Scottish connections—"by residence or otherwise"—are normally trustees at any one time. In Section 1 of the National Heritage Act 1980, consultation on the appointment of the chairman is required to take place with what are now the devolved administrations.

In addition, the Prime Minister is required to consult Scottish Ministers on the termination on grounds of misconduct of appointment of the chairman and any trustees with Scottish connections. Again, I am confident that Scottish interests will be fully represented in the work of the NHMF and the HLF across the United Kingdom.

The order makes sensible provision to ensure that these cross-border public authorities can continue to operate with an appropriate input and control for the UK Government and the Scottish Executive. The pre-devolution arrangements worked well, and UK and Scottish Ministers are happy to have these reestablished as set out in the order.

I can confirm that the order complies with the provisions of the European Convention on Human Rights. I commend the order to the House.

Moved, That the draft order laid before the House on 1st March be approved [12th Report from the Joint Committee].—(Lord McIntosh of Haringey.)

My Lords, I am grateful to the Minister for giving an explanation to the House, one that is far easier to understand than that given in another place. I trawled through the Official Report of proceedings there; I read twice, thrice and still felt that I had made no headway at all, but eventually got there. Certainly, I feel that the explanation given to this House was a lot more helpful.

In effect, we are asked to accept that this order provides a pragmatic answer to the question of how much consultation with Scottish Ministers is enough to maintain that fair balance between a representation of Scottish views about appointments and the delay that would be caused by seeking views on each and every appointment to bodies that represent the whole of Britain. We, on these Benches, would not oppose the making of the order and would accept that its purpose is to achieve that fair balance. The Minister has referred to the fact that consultation has taken place. I have spoken to two of the bodies concerned, and they reflect that and feel that they were able to put their views satisfactorily.

When the order was taken in another place, my honourable friend Mr Grieve sought assurances from the Minister with regard to the consultation upon the removal of members from the British Library Board and the Theatres Trust. I would be grateful if the Minister would repeat the assurances given in another place by his honourable friend Mr Howarth that in practice the Government would consult on the removal of appointees from both bodies.

I have two questions that were not fully covered during the debate in another place. The first relates to the issue of what is special knowledge of Scotland. The appointment of one member to each of the two bodies—the British Library Board and the Theatres Trust—will be made by the Secretary of State for Culture, Media and Sport after consultation with Scottish Minister s. The appointee will be a person who appears to haw "special knowledge of Scotland". Does that mean that the individual could be English—or any other nationality—living in England, but who has, say, a very detailed, academic knowledge of Scotland? What does the Government have in mind as to the meaning of "special knowledge of Scotland"?

My second question is with regard to the matter of a concordat that was mentioned in the debate in another place. In those discussions the Minister said that the order is in line with the separate discussions that the DCMS had with the Scottish Executive on an agreed concordat covering consultation arrangements on all appointments of interest to the Scottish Executive. Were those discussions only with the relevant Minister, Rhone Brankin, or were they widened to include other members of the executive?

With reference to the concordat, perhaps the nub of the issue is: has that been published? Is it in the public domain in any way?

Will any further orders be necessary for other culture, media and sport bodies under the Scotland Act 1998? The Library could not assist me on this point: will any comparable orders be required under the Government of Wales Act? We do not oppose the making of the order.

My Lords, I am grateful to the noble Baroness for her response to the order. I shall answer her questions as quickly and as fully as I can. But I do not think I can answer all of her questions in the time available.

Yes, the noble Baroness is right. The procedures for the removal of trustees of the British Library and the Theatres Trust are not set out in the order. They are for the National Heritage Memorial Fund, because that is appropriate in terms of its constitution. The procedures are informal and have been agreed. They appear to be satisfactory to all concerned.

The noble Baroness asked about "special knowledge". There is no such thing as English or Scottish nationality. We are all citizens of the United Kingdom of Great Britain and Northern Ireland; at least, that is what my passport says. One could have someone on, for example, the Theatres Trust who is a director of a theatre in Edinburgh. His or her appointment may be up for renewal, by which time he or she has gone to direct a theatre in Leeds. It would be quite stupid to take it away because by that time he or she was living south of the Border. We wanted a little flexibility. That is why we put it in terms of "special knowledge" rather than in terms of residence or of nationality.

The noble Baroness asked about the concordat. I do not think it is particularly appropriate for me to say which Minister> of the Scottish Executive were involved in the discussions. The Scottish Executive has its own ways, which are none of our business, for deciding who takes responsibility for decisions. If I say to the noble Baroness that the executive observed its proper procedures and is satisfied with the results, that is as far as I need go. I do not know whether it was published, or whether more are needed, or whether it applies to Wales, but I shall write to the noble Baroness on those points.

On Question, Motion agreed to.

rose to move, That the draft regulations laid before the House on 1st March be approved [12th Report from the Joint committee].

The noble Lord said: My Lords, the noble Baroness, Lady Anelay, can now leave. The purpose of the regulations is to transfer the function of UK competent authority for listing from the London Stock Exchange to the Financial Services Authority. The intention is that the transfer should take place on 1st May.

The future framework of official listing is dealt with in Part VI of the Financial Services and Markets Bill which your Lordships considered on Tuesday 21st March. The competent authority for listing is named in that Bill as the Financial Services Authority.

As I made clear when moving amendments to the Bill last Tuesday, the competent authority for listing performs a number of functions. Principally, it is responsible for admitting securities to the official list and making and enforcing the listing rules which govern both the admission of securities to the official list and the ongoing responsibilities of issuers of such securities. The requirement to have a competent authority and a number of the requirements which issuers of officially listed securities have to meet are laid down in the various European Community directives dealing with official listing.

The Stock Exchange has been the UK's competent authority since the concept was first introduced into UK law in 1984. The decision to make the transfer in no way reflects dissatisfaction with the past performance of the Exchange. But in the light of the Exchange's decision to demutualise, it is no longer appropriate for it to continue to exercise the competent authority function. Indeed, the Exchange itself suggested that that would be inappropriate. A demutualised Stock Exchange will be a for-profit organisation. I could go further and say that, almost certainly, it will be profitable. We consider that it would create the possibility, or at least the perception, of conflicts of interest for the statutory functions of the competent authority to be exercised by a commercial for-profit company, particularly against the background of increasing competition between stock exchanges, including new entrants to the UK market such as Nasdaq Europe and Jiway.

We have decided to effect the transfer initially by means of regulations made under the European Communities Act, rather than wait for the enactment and implementation of the Financial Services and Markets Bill. Indeed. I gave notice of that in debate on Tuesday of last week. There are two main reasons for this. First, it is clearly in the interests of all concerned that the transfer of responsibilities should be as smooth and seamless as possible. The transfer involves not just legislative powers but staff, IT systems, financial issues and so on. Using regulations enables us to specify in advance a particular date which assists the planning process.

Secondly, against the backdrop of the London Stock Exchange's demutualisation process, it is desirable to make the transfer as soon as possible. It would be unsatisfactory, for the Exchange as well as others, to leave it with the competent authority function for a significant period after it has been formally demutualised. Hence we consider it best to make the transfer using the powers under the European Communities Act, and 1st May is the earliest feasible date.

The effect of the regulations will be that the FSA will inherit the current functions, rights and obligations of the Exchange in its capacity as competent authority. The regulations also make transitional provisions to carry forward existing listings and listing rules and anything done or in train at the time of the transfer. Provision is included for the transfer of staff in the Exchange's listing department to the FSA.

There is one regulation to which I draw specific attention. Although the transfer is intended to take place on 1st May, Regulation 8 provides that the FSA should be able to make listing rules as soon as the regulations, once they have been agreed by both Houses, are made. The purpose of including this provision is to enable the FSA to bring the new listing rules and revocations of old listing rules into force immediately on 1st May when the transfer of functions takes effect. Certain limited changes to the listing rules are necessary to reflect the separation of admission to the official list and admission to trading on the London Stock Exchange after the FSA becomes the competent authority. In the absence of Regulation 8, there might be doubt about the FSA's powers to prepare new rules in advance and an undesirable hiatus between the transfer of functions and the new listing rules taking effect.

The Exchange, the FSA and the Treasury are all working to ensure that the transfer occurs as smoothly as possible with no loss of effectiveness for the competent authority. The draft regulations are a necessary part of the process. I commend them to the House. I beg to move.

Moved, That the draft regulations laid before the House on 1st March be approved [12th Report from the Joint Committee].—(Lord McIntosh of Haringey.)

My Lords, I am grateful to the Minister for his explanation of the regulations. Indeed, as the noble Lord has reminded us, we covered a fair amount of the ground in some detail during our third day in Committee on the Financial Services and Markets Bill. Accordingly, I do not propose to trespass on the fine print of our ongoing scrutiny of that measure. It is enough to say that we look forward to topping and tailing Part VI when the Government table the additional amendments that the Minister advised us would be forthcoming at Report.

We on these Benches take the point, made again by the Minister tonight, that the London Stock Exchange itself does not feel it appropriate that it should continue to be the competent authority for listing because of its recent decision to demutualise. It is my interpretation that the regulations and, to an extent, their relative urgency arise in very great measure from that. While conceding that it is not immediately of relevance today, we do have reservations about the FSA being charged with two competing roles: first, to regulate financial services and markets, and, secondly, to perform the market role of maintaining the competent listing authority. Indeed, this whole issue—the question of who regulates the regulator—has been a persistent theme of our scrutiny of the Bill. No doubt that will continue.

However, for the purposes of today's proceedings, we recognise that it is important that the function of the competent authority should continue—I use the same phrase as the Minister—in as smooth and seamless a way as possible. We can therefore accept the transference of these responsibilities to the FSA.

My Lords, I am grateful to the noble Earl for his welcome for the regulations. He was admirably brief but he said more than the Opposition Front Bench said when I was moving the amendment in Committee. The only other intervention was from the Liberal Democrat Front Bench. I certainly take his point. We shall have to have a number of additional amendments. That will provide an opportunity for any noble Lords who are interested to take part in debate on any technical issues which may arise at Report stage.

On Question, Motion agreed to.

rose to move, That the draft order laid before the House on 3rd March be approved [12th Report from the Joint Committee].

The noble Lord said: My Lords, I am pleased to introduce this order which follows our first annual review of the rates and thresholds of working families' tax credit and disabled person's tax credit, which we introduced in October last year.

When we came into government, we found 4.5 million adults living in households where no one worked; one in three children living in poverty; and nearly one in five children growing up in families without work.

Too often in the past, people, including the disabled, faced alarming reemployment and poverty traps. If they tried to work, they found that they were better off staying on benefits. If they tried to find decent childcare, they found that very little was available and that what there was they could not afford. If they overcame those obstacles and started work, they often found that it just did not pay them to try to better their situation by taking on more hours or more responsibility. They were caught in a poverty trap because they saw so little of the extra money that they earned.

Working families' tax credit and disabled person's tax credit are at the heart of this Government's strategy to make work pay and to tackle poverty. They are targeting extra support to those who need it. Already, only five months after the launch of the new tax credits, more than 3 million people have called the tax credit response and helplines; more than 1 million people have submitted applications; and more than 700,000 tax credit awards have been made. Already, more than 1 million families are receiving working families' tax credit or disabled person's tax credit, or are in transition from family credit and disability working allowance.

The order increases the rates and thresholds of working families' tax credit and disabled person's tax credit from 11th April 2000 1.6 per cent in line with the increase in the Rossi index (the index which is broadly in line with the Retail Prices Index, less certain housing costs).

In addition, in order to fulfil a commitment made in the Budget of 1999, it increases the child credit for under-11s by an extra £1.10 over and above the indexation, to align it with the child credit for 11 to 16 year-olds. These increases will boost the incomes of around 1.4 million low income working families and disabled people who work.

Perhaps I may explain in a little more detail. The order increases the amount of credits for an adult, child or young person, including the extra 30-hour tax credit, which a family gets when one earner works at least 30 hours a week. These credits determine the maximum working families' tax credit or the maximum disabled person's tax credit available. The order also increases the income threshold for working families' tax credit and the thresholds for disabled person's tax credit. The thresholds, or applicable amounts, are the levels over and above which income begins to taper away the maximum award of the tax credits.

Following the transfer of functions under the Tax Credits Act 1999, we have also taken the opportunity to combine the relevant annual changes to the lax credits for England, Scotland, Wales and Northern Ireland in a single instrument. This Government are promoting opportunity for all. They are not writing people off, but helping them to get on. Working families' tax credit and disabled person's tax credit are about making work pay, thus encouraging people to work rather than to rely on out-of-work benefits. And they are about helping families, including disabled people, out of poverty.

The order ensures that the differentials between in-work tax credits and out-of-work benefits are maintained and it provides extra help, over and above indexation, for young children. I commend the order to the House.

Moved, That the draft order laid before the House on 3rd March be approved [12th Report from the Joint Committee].—(Lord McIntosh of Haringey.)