asked Her Majesty's Government:

What steps they are taking to guard against further flooding in Shrewsbury and the physical and emotional suffering which results.

My Lords, my department provides grant aid for flood and coastal defence capital works and associated studies that meet essential technical, economic and environmental criteria and achieve an appropriate priority score. The Department for Environment, Food and Rural Affairs has approved works for the Frankwell area of Shrewsbury and awaits applications from the Environment Agency for any further works in the town. For areas where permanent defences may not be viable, the Environment Agency is giving advice to individual householders on the installation of flood-proofing devices.

My Lords, I thank the Minister for his reply, but is he aware of the scale of the human trauma arising from what are now recurrent floodings in Shrewsbury and elsewhere? I refer to losses suffered by businesses, damage to people's homes, difficulties in getting insurance, family stress and health costs. Can the Government not increase funding for defence works in such areas by including those human factors in their cost-benefit calculations for building adequate flood defences?

My Lords, expenditure on flood defences has already risen by 90 per cent under this Government. Clearly, the forward programme, under which we are identifying the growing problem of flood vulnerability, will need to be taken into account in the current spending round. As for taking social, environmental and health factors into account in setting priorities for defences, that is already done. It is not done on a purely property value basis.

My Lords, is the Minister aware that at a meeting earlier this year, officials of the Environment Agency at Llanidloes—Llanidloes is the first town on the Severn; if Llanidloes floods one day, Shrewsbury floods 24 hours later—gave an undertaking to consider and report on the local and broader issues that caused the flooding? Damage was also caused at Llanidloes; I saw for myself some of the damage at Shrewsbury.

Does the Minister know of that undertaking, which was given some time ago? Has there been a report? Does he realise that that report could be of immense significance not solely for Shrewsbury but for towns upstream, such as my own of Llanidloes, and the towns downstream? There are regular patterns of flooding along the Severn. The whole question must be considered in terms of, first, the broad issue of the river tending to flood and, secondly, the local issues of floods in various parts being aggravated by local conditions.

Yes, my Lords, in addition to its studies in individual parts of Shrewsbury at present—studies that are in addition to the work already started in the Frankwell area—the Environment Agency is undertaking a study of the whole catchment area. It is important that areas both upstream and downstream from Shrewsbury are taken into account. That study is not yet complete, but my understanding coincides with that of the noble Lord: we need to consider the total picture.

My Lords, is the Minister aware that the problem goes much wider than Shrewsbury and the Severn area? Does he have any comment to make about statements from insurance companies that they will no longer insure properties subject to a danger of flooding? That could cause real problems for householders.

Yes, my Lords. Although it is true that many areas such as Shrewsbury have been subject to floods for centuries, the frequency and, in some cases, the intensity of those floods has increased in recent years. That has led to problems for insurance companies. My department is in close contact with the insurance industry. The Association of British Insurers has said that it will maintain insurance for another year. Thereafter, there are problems with insurance. We are maintaining close contact with the insurance industry on those matters.

My Lords, does the Minister agree that flooding is a deep problem and, indeed, goes wide? How can local authorities resist the pressure from builders to build on flood land? Living, as I do, in the Thames Valley—in Reading—1 know perfectly well that that pressure is almost constant. It does not go away whatever the planning authority wants to do. Even when government inspectors recommend against, the builders are still come back. We need to reduce that pressure on the flood plain.

My Lords, advice from the Environment Agency on new developments on the flood plain is provided on every occasion. Often, it recommends against developments. In addition, the general guidance to the planning authorities, which must balance the economic and environmental aspects, as well as the flooding aspects, is strongly to take into account vulnerability to flooding. But some of those areas have been built on for, as in the case of Shrewsbury, centuries, and it is a question not of new but of old development being subject to flooding. In the Frankwell area, the Environment Agency had to adopt some novel and innovative ways of dealing with defence of those valuable properties.

My Lords, does the Minister agree that the Government must first ensure that the institutional framework for dealing with floods works effectively, efficiently and consistently? Does he further agree that at present the framework suffers from what is frankly an extraordinary degree of bureaucratic complexity, with too many bodies involved: county councils, district councils, town and city councils, parish councils, landowners, internal drainage boards, and so on? What are the Government's plans to deal with that serious bureaucratic mess?

My Lords, several agencies are indeed involved, but in most areas there is an established system of co-operation, with the Environment Agency often acting as the lead. Nevertheless, the noble Lord is right to say that co-ordination and funding of those efforts need to be addressed. We are considering how best to co-ordinate the various authorities.

asked Her Majesty's Government:

What are their current policies regarding the conflict between Israel and the Palestinians.

My Lords, Her Majesty's Government condemn unequivocally the most recent suicide bombings, which have resulted in the deaths of 26 Israeli civilians. The loss of life and suffering of both Israelis and Palestinians must end.

The priority is to break the cycle of violence through a ceasefire, the withdrawal of Israeli troops and negotiations based on the vision of two states living side by side within secure and recognised borders. We call for implementation of recent United Nations Security Council resolutions and support an international conference and the renewal of a political process leading to a comprehensive settlement.

My Lords, I am grateful to the noble Baroness for that Answer. Does she agree that all noble Lords will wish to express their horror at the terrible tragedies suffered by both sides in recent days and weeks? Is it not becoming clear that the policies of the Israeli Government are not reducing, but rather increasing, the number of suicide bombers? Is not the new Israeli Government policy of occupying land likely to work to the disadvantage of Israel? Finally, is it not clear that it is probable that peace will not come to that area unless and until an American Administration prepared to be firm not only with the Palestinians but with the Israeli Government and the Israeli lobby in the United States?

My Lords, I support entirely what the noble Lord, Lord Blaker, said about our horror at the casualties on both sides. It is the position of Her Majesty's Government that Israel has, of course, the right to security. Unilateral acts, however, do not provide lasting security. The right way forward is to restart a political process, and Her Majesty's Government will remain engaged in all attempts to do so. I agree with the noble Lord that the United States has an important part to play in that and in persuading both sides to engage seriously in the process.

My Lords, does the Minister agree that, if the purpose of Mr Sharon's present policies is to improve and protect the security of Israel, they are failing? If his policies are designed to isolate and humiliate President Arafat and undermine the Palestinian Authority, leading to a reoccupation of the West Bank and Gaza, it is all the more urgent that Her Majesty's Government, in co-operation with our European partners and, especially, with the United States Administration, should take steps towards the comprehensive peace settlement to which the Minister referred. That must include the urgent withdrawal of Israeli settlers from the West Bank.

My Lords, the policies of both sides are failing. The use of suicide bombers does nothing to bring peace, nor, sadly, will the Israeli Government's attempts to increase security, without serious engagement in a political process. The United Kingdom Government have been intensively engaged to that end. My right honourable friend the Prime Minister has met President Mubarak, US Defense Secretary Rumsfeld, Prime Minister Sharon and Prime Minister Hariri and in recent days has spoken to Crown Prince Abdullah and President Bush. My right honourable friend the Foreign Secretary has, similarly, been heavily engaged.

We will continue to do everything that we can to take forward the process, despite the appalling events in the region.

My Lords, is my noble friend the Minister aware that the latest suicide bombing was carried out by the Al-Aqsa Martyrs Brigade, the political wing of Fatah, the organisation controlled by Yasser Arafat? Will my noble friend take into account, when assisting with the so-called peace process, the contradiction between Yasser Arafat's condemnation and the fact that a wing of his movement is carrying out the atrocities?

My Lords, one of the problems is the degree of control that can be exercised in the circumstances. We call on Yasser Arafat to make a 100 per cent effort to prevent terrorist attacks. We do that constantly in all our interchanges with the Palestinian Authority.

I should point out that President Arafat has condemned the bombings this week. He said that attacks on Israeli citizens did not relate in any way to the Palestinians' legitimate right to resist the Israeli occupation. He said that in Arabic, so I hope that there will be no equivocation among his supporters about his condemnation.

My Lords, it is right that Ariel Sharon's policies will not produce any kind of solution and are self-defeating. Does the Minister accept, however—I am sure that she does—that the calculated and targeted suicide bombing of civilian men, women, children and babies is an unqualified evil, with no "ifs" or "buts" attached? Does she welcome, as I do, the statement by 55 leading Palestinian thinkers to that effect? It was welcome, as were the comments of Chairman Arafat to the same effect. Will the Minister give us the Government's view of the new proposal to build a fence and trench through West Bank territory? Is that a plus or a minus?

My Lords, I hope that the noble Lord heard how I began my initial Answer. I said that Her Majesty's Government condemn unequivocally the suicide bombings. The noble Lord is, of course, right to emphasise the point, and Her Majesty's Government welcome all such statements, from whatever side. We hope that, when the statements are made by those on the Arab side, those who are carrying out the atrocities will listen carefully.

I understand that a 110-kilometre stretch of fence is being built along the northern green line, although it may extend further than that. I understand the wish to try to secure the Israeli population, but I fear that fences alone will not achieve that objective. Israel will be secured only by negotiations in which both sides have taken part realistically and sincerely.

My Lords, does my noble friend agree that some of' the prime sponsors of terrorism in the West Bank are in Syria and Iran? They use the Palestinians cynically as their means of destroying the state of Israel, their prime purpose, and have little interest in the well-being of the unfortunate Palestinians. Is there anything that our Government can do to bring pressure to bear on those states?

My Lords, without in any way indicating intelligence sources, I can assure your Lordships that, if Her Majesty's Government have reason to believe that such activities are encouraged by states overseas, we make representations to those governments. If we are looking around to find those who are really trying to help the Palestinian people, I would point to the donors of aid. The major contributor has been the European Commission. That aid helps the Palestinians and will be of more importance and benefit to them than encouragement for any form of terrorism.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In so doing, I declare an interest as a past member of the board of visitors of a young offenders institution.

The Question was as follows:

To ask Her Majesty's Government whether the new prisons which are being built will have facilities for disabled prisoners, staff, visitors and volunteers; and what plans they have to adapt existing prisons to provide these facilities.

My Lords, new houseblocks in both Prison Service-managed and contracted-out prisons are designed to be fully accessible to wheelchair users at ground floor level. Other appropriate facilities are also provided. The Prison Service has produced a draft design guide to reflect the requirements of the Disability Discrimination Act 1995. A needs assessment is being undertaken, which will benefit all those with a disability.

My Lords, I thank the Minister for that helpful reply. However, many facilities in our prisons are upstairs, and it is hugely difficult for severely disabled people to be integrated into prison life. Such people suffer extra discrimination.

Are prison officers covered by the Disability Discrimination Act 1995? How does human rights legislation relate to prisons?

My Lords, there are, of course, problems above ground floor level. As I said, a needs assessment is due to be completed within 12 months. That will form the basis of Prison Service strategy planning for all existing accommodation. As I suggested in my Answer, problems for disabled people must be taken into account in tenders for new prisons—contracted-out or in the Prison Service.

Prison officers are not included in the DDA. We take their position into account when preparing employment policies. It would take some time to give a complete summary of how the Human Rights Act 1998 applies to prisons. I shall write to the noble Baroness about that.

My Lords, does my noble and learned friend accept that, where possible, it is better to treat non-violent offenders in the community rather than sending them to prison? Should that not apply especially to disabled prisoners who, as the noble Baroness has already pointed out, are unlikely to receive decent treatment that will help them to avoid further expenses? If my noble and learned friend agrees with that comment, will he do what he can to encourage sentencers to take disability into account, in particular when a disabled person is found guilty of a non-violent offence?

My Lords, in a joint Statement made last week, my right honourable friends the Lord Chancellor and the Home Secretary made it clear that, with regard to non-serious crimes not involving violence or sexual assault, sentencers should consider whether prison will do any good in such cases. Evidence would suggest that short prison sentences imposed in cases where neither violence nor sexual assault is involved rarely do any good. Sentencers need to think about that much more.

My Lords, first, given the overcrowded conditions in our existing prisons, are there sufficient cells available which can be quickly adapted for prisoners afflicted by blindness or deafness? Secondly, are the relevant doorways wide enough for wheelchairs?

My Lords, the position is mixed throughout the prison estate. At any one time something under or up to 1 per cent of the prison population is disabled in one way or another, including physical disablement and sight impairment, to which the noble Lord referred. As I have said, at present sufficient space is available to deal with those prisoners, but it varies from place to place. I cannot give the noble Lord an assurance that in every case doors will be wide enough to accommodate wheelchairs, nor can I say whether in every establishment there will be sufficient facilities for the sight impaired.

My Lords, while welcoming the tone of his original Answer, does the Minister agree that it is extremely important for disabled family members, visitors and friends to know exactly what facilities are available during what will be a stressful time if they are visiting from outside? Do individual prison establishments produce in an accessible format a clear, one-page guide on what is available? If they do not, would the noble and learned Lord support that proposal?

My Lords, I agree that it is important for people to know exactly what facilities are available in each prison establishment and that family members in particular should be aware of the relevant facilities if a disabled relative is to visit a prison. I do not know the answer to the question put to me by the noble Baroness. I shall look into the matter and write to her.

My Lords, does the Minister agree that it is vitally important that the recommendations of the DDA are implemented with regard to support staff brought in from outside the Prison Service; that is, those working in prison education? I should also mention prison visitors, as referred to in the original Question. Will the Minister give an undertaking to ensure that, under the recommendations of the DDA, or at least its equivalent, such people will be provided with access to the entire prison system?

My Lords, I think that, in relation to the provision of services for people inside prisons, whether for prison staff or for prisoners themselves—in so far as those services are provided by outside agencies—then the equivalent standards of the DDA should apply.

My Lords, is my noble and learned friend aware that the best way to guarantee that disabled prisoners do not suffer discrimination would be to extend Part 3 of the Disability Discrimination Act 1995? However, some six months ago the Minister for Disabled People told me that she did not know when the provisions would be implemented, despite a clear commitment made by the Government. Will my noble and learned friend take this opportunity to tell the House by what date the extension of those provisions will be made?

My Lords, I cannot do so at the moment. Perhaps I may write to my noble friend.

My Lords, while I appreciate that the Government are committed to trying to improve conditions for prisoners, is the noble and learned Lord aware that at the moment many valuable prison health education programmes are being cut? I speak as a former worker in a young offenders' institution.

My Lords, in looking at the needs of prisoners, one must bear in mind the kinds of health education programmes that will be of help to them when they get out. That in turn helps the wider community because such education helps to reduce reoffending. I am not aware of the particular programmes to which the noble Baroness has referred, but I thoroughly endorse the sentiment that such education helps the community as a whole.

My Lords, will the Minister do what he can to encourage more disability awareness education for all those involved in prison work?

My Lords, the fact that a needs assessment is presently being undertaken and is due to report in 12 months' time marks an important step towards people becoming more aware of disability issues in the context of prisons.

asked Her Majesty's Government:

Whether their proposals for action on migration into the European Union for the Seville European Council include proposals to publish accurate figures on current migrant flows, countries of origin, transit and destination.

My Lords, the Government are proposing a range of measures to speed up progress on migration and asylum measures at EU level. Clearly we need to make sure that our action is based on appropriate evidence. EU member states already share information on migratory flows on a regular basis. If our discussions with our EU partners highlight the need for additional information gathering, then we shall consider how we can work together to take that forward.

My Lords, does the noble Lord accept that it is not so much information gathering, but the publication of such information that is necessary if we are to hold a slightly less passionate debate about immigration? At present, phrases such as "being swamped" and "floods of immigrants" are used frequently without the benefit of detailed evidence. I was happy to note that, two days ago, the Foreign Secretary gave some figures, although those figures concerned which countries people are coming from and in what numbers. Figures to show whether flows are rising or falling are not so easily available. Could not the Government suggest that it would help to promote a more dispassionate debate if such figures were to be published?

My Lords, to an extent, yes. Noble Lords will know well that the problem with many migration statistics, in particular information with regard to illegal immigration, is that the people concerned are not particularly keen to be enumerated. Furthermore, it is often the case that problems are encountered with data comparisons between different countries.

Nevertheless I agree with the thrust of the question put by the noble Lord. My right honourable friend the Home Secretary could not have made clearer his position on race and immigration; namely, that we must stand absolutely clear on our commitment to oppose racism and those who seek to equate pressures from migration with racism. We must also recognise the very positive contribution made by migration into the European Union and to the United Kingdom. The issue concerns bringing those migratory pressures under appropriate control.

My Lords, will population densities and unemployment figures also be provided for the European Union?

My Lords, I have no idea. I shall certainly raise those queries with the respective departments and write to the noble Lord.

My Lords, does my noble friend agree that it is very disturbing that recent research illustrates that many people in Britain, in particular the young, believe that there are 10 times as many immigrants in this country as is in fact the case? Should not a great deal of government time and resources be put into correcting this misapprehension so that, as the noble Lord, Lord Wallace of Saltaire, pointed out, we can have an intelligent rather than an emotional debate about this crucial issue?

My Lords, I agree that poll evidence suggests that many members of the public have considerably misplaced perceptions of the scale of asylum-seeking. It is a point that needs to he rebutted by all responsible politicians. Both my right honourable friends the Home Secretary and the Foreign Secretary could not have made it clearer that it is important to look truthfully at this issue. On the other hand, however, the reverse does not apply: it does not imply that nothing needs to be addressed.

Earlier this year we held a very good discussion on these issues. At the time the Government stated that it is crucial that the public should be convinced both by the Government and by responsible political parties that there are issues to be addressed, but that they are not out of control. Furthermore, we must sustain confidence in the fact that this country will welcome refugees, but that it does not have an open-door policy for economic migrants. That is impossible and the notion that it is happening in any way should not be allowed to catch fire.

My Lords, I join with the Minister in welcoming a rational debate on this very important issue. Returning to the Question with regard to Seville, does he agree that there would be a greater chance of achieving progress if European-wide agreement were reached to the effect that, when people move from one safe country to another safe country, they should return to the safe country from which they started their travels to have their applications processed?

My Lords, I am pleased to welcome to the Dispatch Box a fellow newcomer on this issue. The noble Baroness has expressed exactly what we believe and what we think a number of other countries feel would be right; namely, that there should be a responsibility in this area, as had been the original intention of Dublin 1. The first safe country should process the applications of asylum seekers. Under Dublin 2, one of the Prime Minister's goals for Seville, among a number of others, will be to try to ensure that we achieve a commitment to get a rapid agreement on Dublin 2, preferably by the end of this year.

My Lords, is the Minister satisfied that as the European Union enlarges there will be safe boundaries and that country states will be capable of carrying out their duties for the first registering of refugees?

My Lords, the Citizens' Freedoms and Rights, Justice and Home Affairs Committee of the European Union recognises that this is a significant challenge which requires vigorous preparation in terms of enlargement, which the Government strongly support. Enlargement will bring in a number of extra countries and considerably expand the land border. Some of those countries do not as yet have effective border controls for historical reasons. The challenge is to raise their performance on border control to the level of the best within Europe rather than allowing them to have the poorest border.

My Lords, before my noble friend Lord Bach repeats the Statement, perhaps I may say a word on a matter that may be of passing interest to the House—that is, the dates of the Summer Recess. The usual channels have been able to agree that, subject to the progress of business, we hope to rise at the close of business on Tuesday, 30th July and return on Monday, 7th September—I am sorry, October. That was a bad start. Monday, 7th October.

As noble Lords will know, "subject to the progress of business" is the phrase normally used. In this case it means precisely that. If business progress is slower than we expect at the moment, I shall have the grim task of coming before your Lordships and saying that it may be that we cannot rise when we are hoping to. On the other hand, if it is swifter, I shall have the joyous task of coming before your Lordships and saying that it may be that we can rise a little earlier. But those are the dates that we expect to adhere to.

I thank the noble Lords, Lord Cope and Lord Roper, for their help in the long and difficult task of trying to find agreed dates.

My Lords, I thank the noble Lord the Captain of the Gentlemen-at-Arms for making this announcement today—it is in the interests of the House to know what are the Government's proposals—and for his personal remarks. At an earlier stage in both our careers I would have taken his kind remarks as an attempt to damage my career, but things are different here.

We believe that the Government are setting themselves—and hence your Lordships' House—artificially early deadlines for the completion of business. Before anyone reads too much to their advantage into the noble Lord's remarks about the progress of business, it is my opinion that the Committee stages we are looking at are likely to take a longer rather than a shorter time than that currently allowed for. But the Government are entitled to have their business considered and we shall try to make it work.

As to the noble Lord's Freudian slip, I expressed the view that many of your Lordships would prefer to come back a little earlier—for example, on 2nd October—rather than sitting in the week beginning 29th July. I hope that I was reflecting your Lordships' view in that respect. If it is really necessary for us to sit so much longer than another place—to maintain, among other things, our reputation as the hardest-working legislature in the world—that might be a better way to do it. After all, as we know, sitting in September rather than in July reflects the view of the noble and learned Lord the Leader of the House.

My Lords, I am glad that the Government Chief Whip has been able to make this announcement. It is for the convenience of the whole House to have information on these matters as early as possible. I thank him and his office for the hard work that they have put in over the past two days to ensure that we have a timetable. However, it is a challenging timetable which, as the noble Lord, Lord Cope, said, will present us with some difficulties. I believe that it is possible to meet the timetable. I hope that we can achieve the optimistic view and even shave a day or two off it. Let us hope that that is the case.

My Lords, it seems that in this House the Recesses get shorter and the sitting times get longer whereas in another place it appears to be the reverse and that the Recesses are longer and the sitting times are shorter. Can the noble Lord say what will be the Recess dates for the House of Commons? Is it not right that we should examine further the relationship between progress in each House so that this House does not have to sit a lot longer in order to accommodate the House of Commons sitting fewer days?

My Lords, further to the question of the noble Lord, Lord Stoddart, can the Government Chief Whip explain what are the Government's views now on family friendly policies? There is much interest in this subject in another place but, speaking as a mother with three young children, I take exception to the fact that family friendly policies seem to stop at the entrance to this Chamber. Here we are continuing, as always, to sit during the school holidays.

My Lords, the point raised by the noble Baroness, Lady Buscombe, is very much in the mind of the Leader's Group and the Procedure Committee. It may be that the outcome of discussions will result in what she seeks. I am entirely sympathetic to the point that she makes, but the choice here is whether the extra days come at the beginning or at the end. It would be nice to have fewer, a point made by the noble Lord, Lord Stoddart. It was rightly pointed outthat several noble Lords—including some who have spoken—who used to be at the other end of the Corridor have popped down here thinking, "Well, maybe it has a more gentle, leisured style". Clearly, that is not the case. We have longer, more frequent days of sitting now than the other place.

As to the noble Lord's question about how long the Recess will be at the other end of the Corridor, I believe that they rise three days earlier than us and return a week later than us. So I suppose that he will say that his case is made. The mismatch between the sitting days at the two ends is a serious issue that will have to be addressed.

I greatly appreciate the efforts made by the noble Lord, Lord Cope, to reach accommodation on this issue. He referred to my Freudian slip. If he had seen noble Lords' reaction, as I did, when I made that Freudian slip, he would have noticed that it was more in the nature of blood draining from faces than any sense of exultation. I am also grateful to the noble Lord, Lord Roper, for his help. I hope that we are able to keep to these dates.

My Lords, will the noble Lord give an undertaking about the need for extra time being accommodated at the end of the Recess rather than at the beginning. As the noble Baroness, Lady Buscombe, said, those of us with school-age children have no time to go on holiday except in the month of August. If the extra time needed is added at the beginning it is extraordinarily inconvenient for those with families, whereas we would not mind if it was after September when the children have already gone back to school.

My Lords, we are hoping to finish on 30th July, which is not an inordinately late day historically. I agree with the noble Lord that it would be highly desirable if we could look to more family friendly days of working. Those of us without children of school age may have grandchildren of school age and it is always desirable to achieve those objectives. But that may take a little negotiation.

My Lords, with the leave of the House, I shall now repeat a Statement made in another place earlier today by my right honourable friend the Secretary of State for Defence. The Statement is as follows:

"I should like to make a Statement about the contribution that British forces have made to operations in Afghanistan and the future disposition of our forces in that country.

"Two groups of British forces have been deployed in Afghanistan with separate but closely complementary aims—security assistance to the Afghan Interim Administration and offensive operations against Al'Qaeda and the Taliban. The United Kingdom has contributed to the International Security Assistance Force (ISAF) which we have led since its inception; and, through Task Force Jacana, we have contributed to Operation Enduring Freedom, aimed at Al'Qacda.

"I shall address ISAF first. The House will recall that, from the outset, we planned to reduce our contribution to ISAF once we had transferred its leadership to one of our partners. This has taken longer then we originally anticipated. But we had to get this right—ISAF's success has been crucial to the stability of Kabul and, more widely, to Afghanistan, a strategic aim that is profoundly important to the United Kingdom.

"I told the House on 16th May that we were working towards achieving the handover of the command of the ISAF by the end of June. I am pleased to be able to tell the House that commend of the ISAF was formally transferred from General McColl to General Zorlu of the Turkish Army a few hours ago, in a ceremony attended by my honourable friend the Under-Secretary of Slate for Defence and the Chief of the General Staff.

"I should like to take this opportunity to record our thanks for the considerable work that Turkey has done to make the handover a success. The United States has also made a significant contribution to this process—not least by providing strategic airlift to move Turkish troops to Kabul. For our part, we have agreed to leave computer and communications equipment and a fire engine in Afghanistan for use by the new ISAF headquarters. Some British troops will remain with the ISAF as well—I will say more about this later.

"No one who has been involved—and the British and Turkish staffs have been working closely together now for some time—can doubt the great importance that Turkey attaches to a successful tenure in command. We have every confidence in General Zorlu and his troops as they build on and take forward the excellent work that ISAF has already achieved.

"ISAF under Major General McColl has been a great success. It is no exaggeration to say that the force, while limited geographically to the area of Kabul, has had an impact right across Afghanistan. The Emergency Loya Jirgah and its local and regional groups would have been impossible without the reassurance, stability and sense of normality that ISAF helped the Afghan Interim Authority bring to Kabul. And without a secure place where representatives of all Afghanistan's people could meet to discuss how they want to govern their country, the gains of the past nine months could have been lost. Those members of our Armed Forces who have been involved with the ISAF should rightly feel proud of what they have achieved. They have the thanks of this House and of the British people.

"The Emergency Loya Jirgah, which concluded this morning, offered the Afghan people their first opportunity in decades to play a decisive role in choosing their government. It demonstrates the great progress that has been made since the collapse of the Taliban. Less then a year ago, the lives of the Afghan people were blighted by that cruel regime. It is a remarkable tribute to the decisive coalition action against the Taliban, to the Afghan people, and to the Interim Administration under Hamid Karzai, that within only six months, this large and peaceful assembly, representing all the Afghan people, has taken place in Kabul.

"The Loya Jirgah has given the Afghan people the chance to build a future based on mutual respect, human rights and democracy. It is a significant step towards the goal of representative, democratic elections, which are due to be held in 2004.

"As for the Emergency Loya Jirgah itself, I warmly welcome its decision to elect Hamid Karzai as Afghanistan's head of state. My right honourable friend the Prime Minister has written on behalf of the Government to congratulate him personally. Hamid Karzai risked his life to play a crucial role in the early stages of rebuilding Afghanistan. He deserves our full support.

"Through a combination of tact, diplomacy, understanding and firm authority, the ISAF has made a real difference on the ground. In the six months it has been in Kabul it has mounted 2,185 joint patrols with the Afghan police, increasing security on the streets of Kabul; destroyed or disposed of nearly 3 million munitions, including guided weapons, fuses, rockets, submunitions, bombs, shells, small arms ammunition, mortar bombs, grenades and both anti-tank and antipersonnel landmines—indeed, nearly 80 per cent of all the munitions destroyed were anti-personnel landmines, on its own a massive contribution towards the safety of the Afghan people; operated an ambulance service across Kabul throughout the night-time curfew; begun the process of reforming Afghanistan's security sector through the training of the 1st Battalion of the Afghan National Guard; completed some 200 aid projects in co-operation with the local civil authorities and other agencies—repairing roads, utilities, health, education, and administrative services.

"All this has made a real improvement to the lives of the people of Kabul. There is still more to do, but Kabul is again a bustling city. The vast majority of the people recognise, value and support ISAF's work. The warm welcome its patrols receive in the streets is proof enough of that, as I have seen for myself.

"This is not, of course, simply a British achievement. The ISAF is a truly multinational force. Nineteen other countries answered the call to provide forces. The United States has given invaluable assistance and support. Without the efforts of all these nations, the ISAF would not have been the success it has been.

"But we should certainly take pride in the particular British contribution to the force. General McColl and the British contingent have made a lasting and favourable impression on the Afghan people. Thanks to the efforts of British servicemen and women, we now have many friends in Afghanistan, from children on the streets of Kabul to the most senior members of the Afghan administration.

"The House will be pleased to know that the 1st Battalion, The Royal Anglian Regiment, will come home once it has completed transferring its responsibilities to the Turkish battlegroup that is replacing it. Together with many of the British forces committed to ISAF, they will have returned to the United Kingdom by the middle of next month.

"But that is not the end of our involvement with ISAF. It remains vital to the maintenance of security in Kabul and a stable future for Afghanistan. The United Kingdom will remain a major contributing nation. In total, our contribution will reduce from about 1,300 to some 400 troops. These will primarily be engineers and logistics support troops—high-value specialists who can bring important expertise that will be of specific use to ISAF.

"There is now a degree of optimism in Afghanistan that was unthinkable just a few months ago and ISAF has played a major role in creating a more secure environment. But, while Kabul is a safer place and Afghanistan as a whole is more secure, there is still a terrorist threat. The mountainous and inaccessible regions remain an ideal hiding-place for the Al'Qaeda and Taliban forces that are working to destroy that new-found sense of security. That was why we deployed Task Force Jacana—a 1,700-strong battlegroup formed around 45 Commando Royal Marines—at the request of the United States.

"There is no doubt that Al'Qaeda has been dealt a shattering blow by the coalition military action. But elements of that network remain. Recent arrests in Morocco and the United States have demonstrated that Al'Qaeda retains both the ambition and the capacity to threaten, and take, many lives. It is striving every day to find ways to use that capacity— including in Afghanistan.

"The future of Afghanistan now looks brighter than it has for some time. A significant milestone has been passed successfully with the conclusion of the Loya Jirgah, but Al'Qaeda have not gone away. We know they have been determined to undermine and derail the rebuilding process. The presence of Royal Marines and others on the ground in eastern Afghanistan has helped prevent them from achieving this. Our forces have denied ground to Al'Qaeda remnants and destroyed terrorist infrastructure. They have been crucial in providing a secure environment for the Emergency Loya Jirgah.

"The four operations conducted by Task Force Jacana—Ptarmigan, Snipe, Condor and, most recently, Buzzard—have involved destroying 28 bunkers and caves; flying over 1,000 helicopter sorties in the Chinooks of 27 Squadron, in an environment so demanding that it required us to operate at the edge of the aircraft's capabilities; finding and destroying 45,000 rounds of munitions, from machine-gun rounds to 155mm artillery shells. British troops also recovered two mortar systems and 440 107mm rocket systems. Every round destroyed helps to contain the terrorist threat and safeguard Afghanistan's future.

"The force also conducted significant humanitarian assistance work in its area of operations, so winning the hearts and minds of Afghan people in areas previously dominated by the Taliban and Al'Qaeda. For example, more than nine tonnes of wheat and 1,100 blankets have been distributed to those who need them.

"I want to make it absolutely clear to the House that Task Force Jacana has been led in an exemplary fashion from the start. Brigadier Roger Lane has done an outstanding job in leading his troops in four demanding operations through rugged, high-altitude terrain, which has been as tough as any that British units have had to tackle in recent memory.

"We should bear in mind that these operations carried, and still carry, real risks and we should be grateful that we have achieved such success without loss of life. Those who carp about the lack of action do so from a position of ignorance about the nature of warfare. That is one thing. It is quite another to wish that our troops had come under fire, which appears to have been the hope of some armchair commentators in recent weeks.

"It would have been quite wrong had I come before this House just over three months ago and not warned of the risks that our forces could face. British troops were and are keen to engage the enemy. They want to demonstrate the courage and professionalism that are the hallmarks of Britain's Armed Forces. However, the enemy is no fool. He has learned from the harsh defeat that he suffered during Operation Anaconda and has avoided further direct contact with our forces.

"I have previously told the House that the Jacana deployment would last in the order of three months. On the completion of Operation Buzzard, Task Force Jacana will be withdrawn from Afghanistan. The phased drawdown of the force will begin on 4th July and, subject as always to operational demands, should be complete by late next month. The drawdown will enable us to rest and reconstitute our forces for future contingencies. After consultation with the United States and our other coalition partners about the challenges and likely tasks ahead, I have concluded that there is no need to replace 45 Commando immediately. However, we will retain stores in Afghanistan to enable an even more rapid deployment than the initial one should that be required.

"Taken together, the handover of the ISAF command, the return home of the 1st Battalion, the Royal Anglian Regiment, and the drawdown of Task Force Jacana means that the number of British forces in the operational theatre in Afghanistan and elsewhere in the region supporting these operations should reduce from more than 4,000 today to some 2,000 by late summer. However, we will still maintain a Tomahawk-armed submarine presence, ships, aircraft and elements of other forces in Afghanistan and the region. These include forces on the ground—elements of 40 Commando will remain at Bagram, where they have played a vital role in helping to secure and protect the airfield. We shall also have logistics support personnel at Bagram as part of our capacity rapidly to deploy additional forces if the operational situation demands it.

"This reduction in numbers does not mean a reduction in our commitment either to Afghanistan or to the campaign against international terrorism. In fact, it is proof of our willingness to keep up military action for as long as it takes. This is not a conventional campaign. It will vary in tempo and location. The United Kingdom has forces with capabilities that few can match. That is why we must use them where they can do the most good.

"Crucial to the long-term future of Afghanistan as a stable and secure state will be the reform of its entire security sector—the army, the police and the structures that guide and control them. This is crucial if Afghanistan is to enjoy the stability that will permit economic and social recovery from decades of conflict. It is essential to ensure that Afghanistan does not slip back to being a failed state that provides a safe haven to terrorists. Together with the Foreign and Commonwealth Office and the Department for International Development, the Ministry of Defence is making a significant contribution to the international effort to achieve security sector reform.

"The United Kingdom is therefore co-ordinating international counter-narcotics efforts in Afghanistan. The new Afghan authorities have taken a tough line on drugs, issuing a decree banning the cultivation, processing and trafficking in heroin. We should applaud their resolve in tackling this problem, against the background of the poppy crop's economic significance to the people of parts of Afghanistan. Financial assistance has been offered to farmers who voluntarily eradicate their crops. This has had some success. We estimate that around a third of this year's crop has been destroyed. Afghan farmers who currently depend on opium production must have an alternative and legal livelihood. The international community needs to provide carefully targeted assistance to this. This is obviously a long-term problem and not one that can be solved in a single season.

"Our forces have been engaged in invaluable work in Afghanistan. They have carried out their duties with outstanding professionalism. There is more to do in the rebuilding of that country. We are determined to play our full part in this. That means ensuring that we maintain a sustainable commitment of forces and preserve a balance between contributing to military operations, training and maintaining skills and, importantly, giving our forces the opportunity to rest and spend time with their families. The changes in our contributions to operations in Afghanistan do that. I am sure that the House will give them its support".

My Lords, that concludes the Statement.

My Lords, I thank the Minister for that detailed Statement. We on these Benches congratulate Her Majesty's Armed Forces on carrying out yet again another two exemplary operations, this time in Afghanistan. I am sure the whole House thanks all our service men and women who took part in these operations. They should be justly proud of what they have done. The families of those who have been deployed should also not be forgotten, as they have had to put up with yet another period of separation.

The Statement was divided into two parts—ISAF and Task Force Jacana. I shall raise a few points under those two headings. The commander of ISAF, Major General McColl, is also to be congratulated on achieving such success with ISAF. I am not going to repeat all its achievements, as they have been listed in the Statement. He has undertaken a most difficult operation with great success. To bring together a multi-national force of 5,000 troops who have never trained together or even seen each other before is a significant achievement. To command such a fighting force in and around a war-torn city containing many gangsters and feuding warlords and to return that city to some normality, with peace and order on the streets and schools and hospitals reopened—and to do so without reliable intelligence—is a remarkable feat.

We on these Benches very much welcome the withdrawal of many of our troops from ISAF and at the same time wish every success to General Zorlu and the Turkish Army now in command of ISAF. I have noticed that there is no mention of the command arrangements for the British troops who will not be withdrawn. Will the Minister clarify under whose direct command our troops will be? Which logistic troops and supporting troops will be in the force of 400 left behind? Will he go into more detail about the tasks that they will be employed to do? We very much welcome the return of the 1st Battalion, the Royal Anglian Regiment.

On Operation Jacana, 45 Commando is to be congratulated on its successes. However, as the Statement warned, the return of Al'Qaeda is easy and may happen at any time. We also welcome the return of 45 Royal Marine Commando, less the elements of 40 Commando remaining to secure the Bagram airbase—a vital airfield for the support and sustainability of the remaining force and for any reinforcement, should it be required. Will the Minister clarify whether reinforcement would be required from the United Kingdom, and if so, under what conditions? Which elements of the Army, Navy and Air Force will remain in theatre?

I entirely support the comments about those who carp about the lack of action. Those, including the press, who make such statements should be very ashamed. They clearly have no idea about military operations. They should remain silent and not criticise an extremely dangerous and difficult operation. Great bravery and determination have been proved in some of the most difficult terrain in which troops have operated.

As I mentioned only yesterday, the Army is overcommitted. Over-commitment degrades training because the gap between tours of duty and operations becomes insufficient. That is what is happening now. Will the noble Lord give an undertaking that no more exercises will be cancelled, there will be no more shortages of spare parts, and there will be no more shortages of ammunition, fuel and equipment, so that our Armed Forces can train properly? Over-commitment also degrades retention, and the Army in particular is severely under-strength. Will the noble Lord say whether there is any intention to cut the Army establishment?

It is essential that we sustain Armed Forces that can be properly trained to carry out operations, develop and hone their skills, and yet have time to spend with their families, as has been said. The withdrawal of troops from Afghanistan is very welcome and is a start to being able to achieve this. However, this withdrawal on its own will not reduce the operational figure to the 19 per cent which will achieve it overall.

My Lords, we on these Benches also welcome the Statement. We echo the sentiments expressed by the Minister that it is a matter for celebration that, considering the very hostile nature of the operation, there were no fatalities. The fact is that 45 Commando has done an excellent job in Afghanistan. The fact that it has not had to undertake extensive firefights inevitably leads one to believe that Al'Qaeda and Taliban forces have seen the Marines' professionalism and strength. I believe that, as in Sierra Leone, it was those factors that discouraged extensive fighting. Those factors have also enabled the peaceful situation which has made it possible to conduct a successful Loya Jirgah. Extensive military operations probably would have made that much more difficult to achieve.

We have long expected that Turkey would take over the lead role in ISAF under the command of General Zorlu. However, if one of our other allies is not prepared to take over that role from Turkey, will British forces return to it? Although that would be unfortunate, it might be necessary to maintain the integrity of the ISAF mission.

The Minister mentioned the importance of rebuilding Afghanistan. There is some concern that, whereas there was full backing for the military commitment, similar support is not forthcoming for the rebuilding programme. The money that has been pledged does not seem to have materialised. Surely Afghanistan's security will be threatened if that country is not rebuilt, with direct consequences for Britain. Although action has been taken to counter heroin production in Afghanistan, production would be easier in an unsecured Afghanistan. Part of that crop would almost inevitably appear on British streets.

The real benefit of withdrawal from Afghanistan is partial easing of the perennial overstretch problem. I very much hope that the troops and the many support staff helping them will be allowed to rest and recuperate, rather than being immediately put on standby for future and as yet unannounced commitments. I have two questions on overstretch. First, has a date been agreed for the next reduction in troop numbers in the Balkans? Secondly, do the Government have any idea of the projected commitment of British forces to Macedonia?

My Lords, I thank both noble Lords very much for their comments, especially for their support for the Statement and for their kind and impressive words about our Armed Forces. I am sure that their words, as well as the Statement, will be welcomed by those members of the Armed Forces.

Various questions have been asked, some of which I can answer now. The noble Lord, Lord Vivian, wanted to know what ISAF and our troops remaining in Afghanistan will do. As the Statement says, the troops who will remain as ISAF members are primarily engineers and logistics support troops. They are high-value specialists and, after discussions, it was decided that they could most usefully serve now as ISAF members. ISAF will continue to fulfil the UN mandate. The detailed tasks will of course depend on the nature of the continuing situation, which we hope and expect will improve.

British leadership of ISAF in its first few months, and the fact that a substantial number—400—British troops are remaining, are undeniable factors in ISA F's success. Our troops' performance in such situations easily bears comparison with that of any other country in the world, as the past few months have shown.

As the Statement says, approximately 2,000 troops will remain in and around Afghanistan, comprised of members of all the Armed Forces. I shall not go into detail as to what they may or may not do. However, a considerable British presence will remain in and around Afghanistan.

The noble Lord, Lord Redesdale, asked what will happen when Turkey's leadership ends. It is too early to say. As he will know, however, discussions on that issue are under way. That is really all that I can say about that.

Unsurprisingly, both noble Lords used the word "overstretch". As noble Lords will know, that is not a word that I employ. I am not sure that it describes the position. We do not believe that our Armed Forces are overstretched. What we do say is that they are clearly very busy. Today's Statement on Afghanistan demonstrates our commitment to withdraw service personnel from operations at the earliest possible opportunity—the crucial phrase—in order to ease the demands placed on them.

As for figures, the review of the Army's future manpower requirement has been concluded and the figure of 106,978 was recently published as the revised manning target. As of May 2002, whole Army strength stood at 101,320. Recent performance has been encouraging, with whole Army strength increasing by about 1,300 in the past 12 months. It is predicted that the whole Army strength will increase to between 103,000 and 104,000 by the year 2005. Of course, that is not to say that there are no difficulties; it would be foolish to pretend that that is the case. However, recruitment has certainly gone up during the course of the past 12 months. There are other problems. Noble Lords will be quick to say that retention is one of them. Of course, that is correct.

As I say, we continue to withdraw personnel from operations at the earliest possible opportunity but I remind the House that the percentage of the Army committed to operations has reduced from 44 per cent in June 1999, during the height of the Kosovo campaign, to around 27 per cent. That includes those preparing for, deployed on and recovering from operations in April 2002. Those actually on operations at the present time, before we start to withdraw the troops we are discussing, amount to a figure of about 20 per cent.

The average interval between unit tours has also improved. The Army's latest average figure—I emphasise the word "average"—is around 24 months, which is consistent with the SDR target. However, we recognise that some individuals do not fall the right side of that particular average.

I hope that I have answered most of the questions asked by the two noble Lords. As regards the Balkans, no date has yet been set by the United Nations for any reduction in troops there.

My Lords, does my noble friend accept that for those of us who have had the privilege of serving in the Armed Forces, and have had ministerial responsibility in this area, there is no doubt whatsoever that one of our finest assets in the United Kingdom is the quality and professionalism of the services, not least the Royal Marines? Does my noble friend agree therefore that it is proper for the whole House to record its immense appreciation for what the services have done in these difficult circumstances in Afghanistan and for the patience and long suffering of their families who must have been very anxious for much of the time?

Does not my noble friend agree that one of the highest priorities must be to encourage the new administration in Afghanistan to take responsibility for security and that, therefore, reform of the security sector—the building up of the Afghan military services and, indeed, the building up of the civil police—is a crucial priority?

However, as the noble Lord, Lord Redesdale, said, security in Afghanistan will never be won on that score alone. The economic and social redevelopment and reconstruction of Afghanistan is absolutely crucial, not least if the game being played by the warlords is to be undermined. In that context, can my noble friend reassure the House that there is some acceleration and strengthening of commitment, not only on our part but also on that of our allies, to ensure the success of the economic and social reconstruction programme in that country?

My Lords, I thank the noble Lord for his comments and for his remarks on the British Armed Forces, in particular the Marines. I agree with the other points that he raised. Although the Statement is concerned primarily with defence, defence activities should not be considered on their own. The noble Lord is absolutely right to stress the need for economic and social development. That is just as important, if not more so, in the long term as our defence activities at the present time.

Right from the beginning the British Government have been committed to ensure that various departments of state are involved in Afghanistan. The noble Lord will remember that the Statement referred to the Foreign and Commonwealth Office, DfID and the Ministry of Defence as being linked together. We work together on this matter. Our Armed Forces in ISAF and the Marines have carried out humanitarian work that probably would not have been done if they had not been there. I promise to pass on the noble Lord's comment about the need to accelerate that side of our activity in the months to come. I think that he will find that that will happen.

My Lords, I add my personal and warmest tribute to the achievement of the British forces which comes as no surprise to any Member of this House. The British forces bring to this kind of task not only significant military capability and courage but also that quality of humour and good nature on the streets which can win hearts and minds in an absolutely vital and crucial way.

I have two or three questions for the Minister. First, did I hear him say that Turkey would lead 1SAF for any particular length of time? Is there a fixed period? Is a further leadership envisaged? Secondly, Afghanistan is hardly a country. If it is to be a country, some unifying security force is critical. There is a reference to the training of 1 Battalion. What are the plans for training any further battalions? Who will be responsible for that? Is it an ISAF responsibility? Does it now become a Turkish responsibility to start training further battalions? Thirdly, the Minister referred to problems of retention and recruitment. I believe that he referred to a target strength of 106,000. Subject to the difficulties of retention and recruitment being effectively tackled, can I take it that the funding is in place to enable that figure of 106,000 troops, if it can be achieved, to be paid for?

My Lords, I thank the noble Lord for his comments. He has held high office in the defence field. His comments therefore are of particular value. He did not mishear: I did not mention a time-scale for Turkey's period of leadership as I am not in a position to do so. However, I believe that one can anticipate that it will be of roughly the same length as our leadership. I am afraid that I cannot help the noble Lord further on that matter.

As regards numbers, we would not have mentioned the figure of 106,000-plus if resources were not available to meet that. The noble Lord asked another question, which I—

My Lords, I asked about training.

My Lords, I am grateful to the noble Lord for reminding me of that. As I understand the position, the Americans have played an important role in training the new Afghan security force. I do not know whether that involves just the armed forces or whether it includes the police or other elements that make up that crucial security capacity. I do not know who will now be responsible for training the new Afghan army but I shall write to the noble Lord on that matter.

My Lords, I too welcome the Statement. I join noble Lords in congratulating our Armed Forces. I pay tribute to them and to their families in regard to the sacrifices they have made.

I have one major and one minor question for the Minister. The first question relates to the destruction of the opium crop. I can see that the opium crop may need to be destroyed, but are farmers compensated for that? If you destroy crops and do not compensate people, you make them hostile. Will the international development agencies seek a way to capture the opium crop and make it non-marketable and, while encouraging farmers not to replant opium, at the same time ensure that they do not lose money as a consequence of our drugs policy? If we do not have an effective drugs policy, it is not their fault.

Secondly, as regards the creation of an Afghan nation, as mentioned by the noble Lord, Lord King, that is a matter for the Loya Jirgah and politics. Surely there are enough trained people in Afghanistan who can fire a gun and various other arms; the question is to win them over to the government's side. What may be required is a political means of incorporating the warring people into a national army.

My Lords, I am grateful for my noble friend's comments about our Armed Forces. I shall do my best to answer his questions. Financial assistance has already been offered to farmers who voluntarily eradicate their opium crop. No doubt that form of assistance will be improved over time. The noble Lord is right to say that if farmers have for years lived off the proceeds of growing opium but suddenly find that they are no longer able to do so, they will be tempted to continue unless they are properly compensated.

The noble Lord's second comment, about the new Afghan army—and, indeed, any new Afghan security force—was absolutely right. That involves as much a political question as a question of training. Great care has been taken to ensure that all the elements that make up Afghanistan are included in the 1st Battalion of the new Afghan National Guard, to which I referred. That can be difficult but it has been taken on board. Nothing would be worse than if the security forces in Afghanistan were committed for various reasons to one part of that nation rather than another.

My Lords, I join in the congratulations expressed by noble Lords throughout the House on the excellence of, and superb services provided by, all our Armed Forces. I say how very proud we all are of them. Could the Minister give us some information about when all of 45 Royal Marine Commando will be able to return to Arbroath? Could he also give us—I know that this is more difficult—any idea of what future commitment there could be for our Armed Forces? I am aware that that means donning his fortune-telling hat.

My Lords, I thank the noble Baroness for that question. I know of her great interest and involvement in the part of Scotland in which Arbroath is found. As I understand it, all of 45 Royal Marine, which is currently in Afghanistan taking part in Operation Jacana, will return home in the time period that I mentioned; some will do so sooner rather than later. If I am wrong, I shall let the noble Baroness know at once.

My Lords, I join in the general congratulations that have been extended to our Armed Forces. I pay tribute in particular to those engaged in the destruction of munitions, who may help to save civilian lives in Afghanistan. We should recognise that those doing that work face hardship and danger carrying out that important task.

I have two questions for the Minister. First, did we complete the training of the 1st Battalion of the Afghan National Guard? If not, could he say more about to whom we handed over the immediate task, irrespective of his promise to write to noble Lords about the long-term future of the training programme for Afghan security forces as a whole?

Secondly, pursuant to the question asked by the noble Baroness, Lady Strange, can the Minister give an undertaking that British troops who are now being withdrawn from Afghanistan will not be redeployed in active service—that might have been foreshadowed by the reference in the Statement to future contingencies—without a full Statement in your Lordships' House and the other place?

My Lords, I can give that last guarantee to the noble Lord. If we are to send more soldiers or other members of our Armed Forces to Afghanistan in considerable numbers, so as to counter some of the effects of what I have announced today, both Houses of Parliament should be informed. Both Houses of Parliament were informed about Operation Jacana when the 45 Royal Marine first went to Afghanistan.

I thank the noble Lord for his comments on those who destroy munitions. Those outside this House do not always recognise the crucial role that the Armed Forces play as a force for good, as peacekeepers, in making civilisation more possible by getting rid of some of the dreadful landmines. Both of the forces to which I have referred today have been involved in that effort. It is of huge value in saving lives and making sure that people are not injured.

My Lords, first, what financial arrangements have been made for the reimbursement of Turkey for undertaking its role? What contribution is Britain making to that reimbursement, both as a proportion and as a sum of money? Secondly, what has been the total cost to us so far of our military involvement in Afghanistan? Which countries have contributed to that cost, and how much did they contribute?

My Lords, I am afraid that I cannot help the noble Lord with his second question, but I shall make sure that he is written to and given the latest figures that are available. So far as Turkey is concerned, the British Government have not paid any financial assistance to the Turks. As I said when I repeated the Statement, we have left some equipment for them, including the computers to which I referred. The United States, which has given its firm support to us—it will also do so to Turkey—has played a full part in the discussions concerning the handover and it gave Turkey 28 million dollars in financial assistance.

My Lords, while the Minister may not like to use the word "overstretch", is he aware that almost everyone else uses it and that almost everyone else believes that the Army is currently seriously overstretched?

The Minister kindly gave noble Lords various figures about Army strength and recruitment. Has he heard reports—I heard one only this morning— stating that the Government's current intention is to cut the size of the Army to below 100,000 in future defence reviews? Bearing in mind the level of overstretch, the continuing terrorist threat, the demands of the new European ESDP and the need to catch up with training—my noble friend on the Front Bench referred to that—it would be absolute lunacy at the moment to reduce the size of the Army to below 100,000. Will he tell us that those reports are totally unfounded?

Yes, my Lords, I can indeed. I am happy to tell the noble Lord and the House that those reports are totally unfounded. The figure that I gave— 106,978—is the considered figure after reviewing the Army's future manpower requirement. I know that articles in the press have made the suggestion that the noble Lord kindly put to me. Those articles—not for the first time in the defence field—are wrong.

My Lords, we are rightly paying tribute to our Armed Forces for their remarkable role in achieving security, especially in Kabul. Does the Minister also recognise the contribution of British non-governmental organisations, which deploy considerable forces, not least in the field of security? I refer, for example, to the mine-clearance agencies.

The Minister mentioned engineers. Is it true that the ISAF forces are now moving outside Kabul into civil engineering? Have they a role in, for example, the reconstruction of roads from the Iranian border, with which the Government of Iran are involved?

My Lords, I am more than happy to acknowledge the very important role that NGOs have played right from the start in Afghanistan. They went there when it was extremely dangerous to do so. I am grateful to the noble Earl for having raised that.

On ISAF, the United Nations resolution that set it up and which continues it relates to Kabul and the area immediately surrounding it. So far, that is precisely the area on which those working in ISAF have concentrated. Moving to a wider area in Afghanistan would be a big step, which has not yet been taken.

My Lords, is the Minister aware that the importance that the Afghan Government attach to the elimination of the opium poppy is confirmed by the fact that the Minister of Defence, when an assassination attempt was made on him a few months ago, was engaged in precisely that role with other army officers? Did I correctly understand the Minister to say that some of the British troops who remain will continue to train the Afghan army, which at present consists of only two battalions? If so, that is an immensely important role, not least to this country because historically, as the Minister no doubt knows, 90 per cent of the heroin in this country has come from Afghanistan. Over the past year, the growth of the poppy in Afghanistan has increased dramatically following a ban imposed by the Taliban.

My Lords, I thank the noble Lord for his comments. There is no doubt that the administration in Afghanistan has taken a brave stance on opium and heroin. It is one with which we shall assist them as best we can for exactly the reason given by the noble Lord. Many people in this country are victims of that terrible trade, and it has gone on for many years.

My Lords, are our forces being brought back from Afghanistan and possibly from Kosovo with a view to their future deployment in assisting the United States in a possible engagement with Iraq?

My Lords, they are not being brought back for that reason. No decision has been taken to launch military action and such action is not imminent. As we have made clear on a number of occasions, we are proceeding patiently and prudently in consultation with our allies and we are giving Iraq every chance to comply with United Nations resolutions. Therefore, the answer to the noble Lady is: no.

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Filkin.)

On Question, Motion agreed to.

House in Committee accordingly.

moved Amendment No. 1:

After Clause 1, insert the following new clause—

"Possession of anything for mobile telephone reprogramming purposes

(1) A person commits an offence if he has in his custody or under his control anything which he may use for the purpose of changing or interfering with the operation of a unique device identifier.

(2) A unique device identifier is an electronic equipment identifier which is unique to a mobile wireless communication device.

(3) It shall be a defence against a crime committed under section 2(1)(a) if the person is able to demonstrate that he is required to have in his custody or under his control that thing for legitimate purposes.

(4) A person guilty of an offence under this section is liable—

(a) on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding the statutory maximum or to both, or

(b) on conviction on indictment, to imprisonment for a term not exceeding 5 years, or to a fine or to both."

The noble Lord said: My Lords, I begin by saying that I am grateful to the Minister for sending me a letter in which he set out in detail how he expected the Bill to work. But it remains a concern of myself and my colleagues that the Bill, as currently drafted, is not sufficiently clear and not sufficiently strong. Perhaps I should reiterate the purpose of the Bill, which is to make it a criminal offence to tamper with the unique identification number of a mobile telephone. The intention is to prevent the second-hand market, as one might say, in stolen mobile telephones.

The Bill is wholly laudable in intention and, indeed, we support it entirely in principle. But our concern is that it is not sufficiently precise to catch people and, indeed, we believe that more could have been done to prevent the crime. The offence that we seek to stop is not the crime of tampering with mobile telephones and the marginal loss of revenue to mobile telephone companies; we are seeking to stop muggings on the street in which people are robbed of mobile telephones. Therefore, it is street crime and street violence and part of that general campaign which is far more significant. We believe that, in other circumstances, the Bill could have been rather more fortunately drafted with a definition of the offence. My amendment seeks to bring that about.

I am bound to tell the Committee that I tried to table another amendment which I believe would have been even more effective. When I questioned how one measures a person's intent to commit a crime, the Minister's letter to me explained that if someone is found with the equipment to alter a unique identification number and if he is found with 50 stolen mobile telephones, one might reasonably infer that he had the intent to commit the crime. That is so. But people in that category would quickly learn to keep their stock of stolen mobile telephones separate from the equipment which they would need to use. Therefore, I asked myself: why not make it an offence for an ordinary individual to own or have in his possession four or more mobile telephones? I tried very hard to come up with a reasonable number. I could not think why anyone would want three mobile telephones. Therefore, it seemed to me that four was probably a safe number to choose.

When I tried to table an amendment to that effect, I regret that the Clerks, to whom we have to turn for guidance, considered the matter and said that such an amendment was not permissible because the terms under which the Bill is drafted are so tight and so specific that such wording would not be acceptable. I must defer to their expertise. However, that leads me to the conclusion that perhaps the driving motive for the drafting was to get the Bill passed quickly rather than necessarily to consider keenly ways of preventing such offences taking place and to do something to improve the environment on our streets.

However, we should be clear that in order to amend an identification number for a mobile telephone one simply needs a computer and a particular type of computer program. One cannot very well start to restrict the sale of computers if, as the Bill says, one believes that someone might commit an offence with them. As to the program, I have here a print-out of some 75 pages to which I was referred when I researched this matter. It tells me very precisely how, to use a vernacular phrase, to "clock" a mobile telephone. That information is freely available. I dare say that the suppliers of that information might have been slightly amused to see it being downloaded in so august a place as this House.

But the fact is that, if my amendment is approved—if the Minister is gracious enough to accept it—it will knock me down because I shall quickly have to take that mass of paper to the shredder or I shall become a criminal through having the means of doing the job.

Will the noble Lord give way? When I was faced with that dilemma this morning, I used my own personal computer so that I did not have to use the parliamentary intranet computer, with which we are provided, for fear that I might find myself equally in difficulty.

I suppose that there is a remote possibility that, in downloading the material on to my computer, I have managed to download it on to everyone else's computer on the intranet. That would have most amusing consequences.

On a more serious note, in my submission, the amendment that we propose makes the position of the crime more clear in the Bill. The amendment states that possession of anything for mobile telephone reprogramming purposes will be an offence. It then goes on to provide a defence because there are legitimate uses for such programs, or so I am told—I defer to other people's expertise. Therefore, subsection (3) of the amendment states:

"It shall be a defence against a crime committed under [this] section … if the person is able to demonstrate that he is required to have in his custody or under his control that thing for legitimate purposes".

It may be argued that in tabling such an amendment we are making a presumption of guilt.. In British law a presumption of guilt is already accepted if one happens to have on one's computer a load of paedophiliac photographs. I do not believe that we can argue that that creates an unreasonable precedent. It is not unreasonable to work in this way and provide a defence.

That is the substance of the amendment. We believe that it provides a clearer position than that in the Bill where a person commits an offence if he has under his custody or control anything that may be used in that way and he intends to use it. I believe that there are difficulties in relation to judging intent, although circumstantial evidence can create a reasonable supposition of intent. The same applies to the second clause of the Bill on the supply of equipment. It deals with whether a supplier,

"knows or believes that the person to whom the thing is supplied intends to use it unlawfully".

This is an interesting Bill which has been designed to be passed quickly and almost without thought. I believe that we can improve it and I hope that my amendment, which is designed to improve it, may be acceptable to the Minister. Amendment No. 2 is consequential upon Amendment No. 1 and if we get nowhere with the first amendment, Amendment No. 2 will sink without trace. I beg to move.

If this amendment is agreed to I shall be unable to call Amendment No. 2 on the ground of inconsistency.

I ask my noble friend's forgiveness as I have some friends waiting for me outside the Chamber. I did not expect the Statement to take place over the past hour.

I want to follow the noble Lord, Lord Dixon-Smith, and point to some specific equipment that may be one of the things—"things" being the key word in his amendment. There is an early reference to "anything" and then "thing". That "thing" could be a cable that links the PC to the phone; that could be the interface between the two. Perhaps in reply my noble friend could make specific reference to that because in a conversation that I had a couple of hours ago with someone in this area of business—it seemed an interesting Bill on which to carry out some work—reference was made to problems that may arise with the possession of a cable as an interface.

We also support the broad principle of this Bill, as we said at Second Reading. The noble Lord, Lord Dixon-Smith, is absolutely right to talk about the extent to which crimes in relation to mobile phones have caused a serious blip in car crime figures, particularly when violence is used.

I am grateful to the noble Lord, Lord Dixon-Smith. I well remember him making the same point at Second Reading. Unfortunately, I do not have a copy of the Minister's letter. It would have given me an explanation, but that does not matter. The noble Lord, Lord Dixon-Smith, was good enough to let me have a copy of his amendment. I am interested in the Minister's observation about the amendment.

At first sight, I do not see anything wrong with what is proposed. Clause 1 sets out circumstances under which a person does not commit an offence, such as being the "manufacturer of the device" or because the action of re-programming has been authorised by the manufacturer of the device. The amendment broadens that provision in that it provides an individual with a defence,

"that he is required to have in his custody or under his control"—

a mobile device—

"for legitimate purposes".

In terms of the defence provided there is a difference of emphasis. It would be helpful if the Minister could explain whether the amendment would be more productive than the Home Office provision.

I thank both Front Benches for their expressions of broad support for the intent of the Bill, if we have not yet reached unanimity on the exact mechanisms. I shall resist the invitation to respond to the amendment that the noble Lord, Lord Dixon-Smith, did not move and try to focus on the one that he did. He raised some interesting, almost Second Reading type questions, about the context of the amendment. I shall speak briefly as we are in Committee.

In essence, the Bill is the product of some effective work between the police and the mobile phone industry. There has been clear and strong pressure from them both that it is necessary and desirable to move forward as rapidly as possible and to introduce this legislation. The noble Lord, Lord Dixon-Smith, also raised questions about the wider context. The Government have been extremely active in the past year or so in terms of considering mobile phone theft and its relationship to street crime in general and to the street crimes initiative.

A range of actions are under way in terms of crime prevention and detection: closer and more vigorous targeting by the police; working with the police on identifying hot spots; high visibility policing and robbery teams; video ID parades; fast-track street crime cases; street crime courts proposals; enhancement of victim support schemes; the Crown Prosecution Service premium service; electronic tagging of juveniles and so on. There is a wider context. He is quite right to say, and we do not pretend this to be the case, that one Bill, with only three clauses, will provide the total solution to the problem. We believe that it is a necessary part of that picture and we are emboldened by the strong desire from the industry and the police to move forward.

The noble Lord, Lord Dixon-Smith, invited me to make a judgment about whether he was guilty of creating an offence. We have not yet passed the Bill, but had we done so, I would say that he was not guilty. Although he may have downloaded the software, I have known him long enough to believe that there was no intent to go with it. Is my judgment wrong?

I thought I had made it plain that the offence would have been mine if the Minister accepted my amendment.

I rest my case. The central point is that the Bill states that one has to have the means to change it and the prosecution has to prove the intent at the same time. In that context, my noble friend Lord Campbell-Savours ingeniously suggested that he, in possession of a table on which his PC sat, may potentially be in danger. One cannot use a table for the purpose of,

"changing or interfering with the operation of a unique device identifier".

I said "cable" not "table"!

Despite my hearing, I believe that the point still stands. A cable by itself is not capable of reprogramming a mobile phone in that way. Only software has that capacity. Therefore, I believe that he is safe with his cable, or even his table!

Let me say that, while we are appreciative of the challenge from the noble Lord, Lord Dixon-Smith—it is right and necessary to ensure that we get it right—we do not believe his amendment to be necessary. It reflects his clearly expressed concerns at Second Reading that the offences proposed in Clause 2 of the Bill may criminalise legitimate retailers and people who own computers and software programmes which are capable of changing mobile telephone numbers.

My noble friend says that a cable could not be so used. In fact the Bill says,

"A person commits an offence if…he offers to supply anything which may be used for the purpose of changing or interfering with the operation of a unique device identifier and…he knows or believes that the person to whom the thing is offered intends if it is supplied to him to use it unlawfully for that purpose or to allow it to be used unlawfully for that purpose".

He could use a cable as an interface. It would form part of the equipment that is required. All I am asking is whether, if the dealer sells a cable and it can be shown that he may have known it was going to be used for this purpose, he is committing an offence.

That is a slightly remote set of circumstances. I cannot see how a dealer could be aware that a cable by itself was to be used for the purposes that we are focusing on in terms of mobile phone theft.

Perhaps I can come hack to my noble friend; I am sorry to press this matter. I was told today that that is precisely what dealers do. They offer for sale this equipment for those purposes. Perhaps we can come back to this on Report having gathered a little more information. I am not trying to be difficult, but I feel we should consider that it is not only the software that we are talking about.

I can give the assurance that my noble friend seeks: if we are not able to satisfy him before then, we shall return to this on Report. We will clearly check whether, on a common sense interpretation of the law as drafted, there is any risk of the type he implied. The broad thrust, as I expressed earlier, is that a dealer is only liable if he seeks to sell such equipment or undertakes such activities with an intent to commit the offence that we are seeking to prevent.

The amendments of the noble Lord, Lord Dixon-Smith, would replace the offence in Clause 2(1) of the Bill. Clause 2(1) provides that a person who possesses anything which can be used to change an IMEI number, and intends to use it or allow it to be used for that purpose, commits an offence. The offence covers all the equipment or software that may be used for reprogramming, which is perhaps the point of my noble friend, even if it was not designed with that in mind. The amendments would remove from the offence the need to show intent. It would be a defence if the person concerned could demonstrate that he was required to have possession of the equipment or software for legitimate purposes.

The Government's position, as I explained in my letter to the noble Lord, Lord Dixon-Smith, is that we do not believe the concern to be justified. We accept that the equipment required to re-programme the identification number may also be used for legitimate purposes. However, the requirement in Clause 2 to show intent will mean that the Bill will not criminalise people who legitimately possess equipment which can be used to change an IMEI number. The offence is only committed if there is proof both of possession or of supply of the equipment and of intent to use it to change the number. It is that lock of the two that is central to the offence.

The provision has been drafted in close consultation with the police, the Crown Prosecution Service and the mobile phone industry to ensure that it does not cover the legitimate use or supply of equipment. The noble Lord previously explained that he sees a difficulty with proving intent. But the concept of intent and belief are already used extensively in criminal law without major difficulty. For example, the Theft Acts create the offence of theft where a person dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it. The courts have held that intention can be deduced from the circumstances of a case.

In many cases a defendant will deny that he intended permanently to deprive the owner of the property. But the courts will look to what the defendant did with the property to ascertain his intention. So under Clause 2 of the Bill, in the absence of a confession, the courts would look to see what the defendant knew and to what use he had put the equipment in order to ascertain his intention. In the context of the Bill proof of intent may emerge from evidence gathered by the police in targeted, intelligence-led operations; for example, where a stockpile of handsets with the same IME1 number was found in the custody of an individual who also possessed the relevant equipment. In that circumstance one could envisage that the Crown Prosecution Service would feel that there 'was a reasonably strong case to answer.

The police and the CPS are confident that they will be able to mount successful investigations and prosecutions under the Bill. They are currently working on joint charging standards to ensure that the legislation has the maximum effect. Therefore we do not consider the amendments to be necessary to safeguard owners or suppliers of equipment or software which is used legitimately. I can add weight to that by instancing the sort of work already being undertaken by the Merseyside Police Force, which is in the process of identifying the retailers who currently supply such equipment and giving them advance warning of the Act, ensuring that they are aware of what they need to do to avoid any risk of criminality on their part.

In the light of my remarks, I hope that the noble Lord, Lord Dixon-Smith, will accept that, while this is by no means the total solution to mobile phone theft, it is a necessary part of it. We believe it makes progress. It will support the initiatives that the mobile phone industry has put in place to reduce mobile phone theft, and it is important that the Government respond in this way. But it needs to stand alongside many other measures which are currently under way.

I do not intend to be facetious when I say that the Minister, in explaining why he rejects my amendment, actually supported the amendment that I could not move. He said that one of the circumstantial facts that the police would take into account in judging an offence under the Bill is the possession of a cache of mobile phones with the same IMEI number. If that was an automatic offence people might not do it, and it would in fact be quite a disincentive.

The Minister gave a considerable explanation as to why the Bill will work and why my amendment may not be necessary. But he did not pass an opinion as to whether or not my amendment would strengthen the Bill. I am grateful to the noble Lord, Lord Dholakia, for his remarks, and more importantly to the noble Lord, Lord Campbell-Savours, for his brief intervention, which indicates how technically difficult the problem is with which we are dealing. In the circumstances it is probably prudent for me to say that we will study the Minister's response. Perhaps we can meet before the next stage of the Bill to see if we can resolve our differences off the Floor of the House, which would be a happy outcome. If not, we may need to return to this matter in due course. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Tax Credits Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Bill read a third time.

Clause 10 [Maximum rate]:

moved Amendment No. 1:

Page 7, line 15, leave out subsection (4).

The noble Lord said: My Lords, Amendment No. 1 is a simple probing amendment. It seeks to leave out subsection (4). Clause 10 is concerned with the maximum rate of tax credit which may be paid and in particular the situation with regard to child tax credit.

The earlier part of the clause sets out its purpose and describes the way in which a determination of the amount of tax credit should be established. It mentions various elements of that tax credit, namely an element which reflects the entitlement of a person to child tax credit and an element which reflects the situation with regard to each child or qualifying young person for whom the individual or the couple are responsible. There is a third element which specifies how those shall variously be described.

However, subsection (4) simply states:

"The prescribed matter of determination may involve the inclusion of such other elements as may be prescribed".

The purpose of the amendment is to ask the Minister what the Government have in mind as to what additional elements might be prescribed. I beg to move.

My Lords, I have a lot of sympathy with this amendment. The clause in the Bill is open-ended to the point of vacuity. It reads:

"The prescribed manner of determination may involve the inclusion of such other elements as may be prescribed".

One might freely translate that as, "I am a medicine: prescribe me".

It empowers the Secretary of State to do almost anything. I know that departments want flexibility. But departments and Parliaments are always competing interests. There are always two sides to the net. When one gets to the point where there is only one side to the net, and the law allows the Secretary of State to do whatever he likes, then we sign away our usefulness.

I am sure that the Minister has perfectly sensible things that she wants to do under this power. In which case she might define it a little more tightly in order to allow herself to do what she actually wants to do, which I am sure is not nearly as nefarious as all the various things that could possibly be done under the clause if one had a mind to do them.

My Lords, when the noble Lord, Lord Higgins, stood up, I was not sure whether he was more concerned with the infelicity of the drafting, in other words, he was going to do a critique of its syntax—which is to some extent the point of the noble Earl, Lord Russell, with which I have sympathy—or whether he had a more substantial concern with the breadth of the clause. I am very happy to try and put on record why we believe we need the clause in its drafted form.

The aim of the provision is, as the noble Earl, Lord Russell, suspected, to create a flexible framework so that the child tax credit can adapt to the changing needs of families. That must always be within the framework provided by the Bill. But the provision would allow us a different way of targeting additional support to families with children. Therefore, the child tax credit would react sufficiently and ensure that we could provide the most appropriate support to families with children.

I wish I could predict how that power might need to be used. If I could, I would specify that and it could be done by regulations, and so on. But we need this power for the flexibility. Perhaps I may give a couple of reasons why. We know, for example—and this is an issue which I have raised before—that in the next few years a third or more of all poor children will be living in large families. We might very well want to strengthen the tax credit system to have, for example, a premium for large families to help them better move into the world of work.

Perhaps I may look backwards. Experience suggests that we need such flexibility, and governments have drawn on such flexibility in the past. For example— and I asked the officials to check this for me—with family credit, the then government had a similar flexibility which was used to introduce extra money for the 30-hour premium, which gave additional support to families who worked longer hours.

Later, within the Bill that dealt with working tax credit that your Lordships were involved in, such flexibility was used to give more support to disabled children in the light of evidence that the degree of poverty in those families was even more severe than we had originally anticipated.

Clause 10 is a benign clause. It allows the inclusion—not exclusion—of additional elements. It cannot touch the basic structure—the CTC and working tax credit—hut it allows the inclusion of additional elements. I cannot conceive how that could be other than beneficial to families that we are trying to help. Any additional element must be in addition to the child and family element —it cannot scrap it—which under Clause 10(2) we must provide for and which will remain key elements of support in the child tax credit. It must remain within the general framework of the Bill provided by Clause 9. Additional elements must also sit within that.

The noble Earl, Lord Russell, pressed me on whether we could draw the regulations more tightly. Actually, no. We either have the power to introduce new and not yet identified elements, or we do not. If we have that power—and I have taken legal advice on the matter—we need the vires that we have taken, which are the same kind of vires, powers and flexibility that have been drawn down by previous governments.

My Lords, if the law stated that the Secretary of State is entitled to prescribe support for children according to other criteria identifying children who may be in a particular need, would that not meet the case and be a good deal more precise?

No, my Lords. One of the elements of the Bill is the working tax credit, which obviously goes to adults. At the moment there is an over-25s rule. The noble Earl, Lord Russell, has pressed me on many occasions that it might apply to people below that age. I could conceive of circumstances in which we might wish to develop policy in that way. We could not do that if we follow the path of the noble Earl, Lord Russell.

With the experience that we have had with tax credits, and before that with family credit, we need such powers. Such powers have been exercised benevolently because they add to what we are already doing. And they are subject, through regulations, to the full scrutiny of this House. I hope that the noble Lord, Lord Higgins, will feel able to withdraw his amendment and that the noble Earl will accept that this is a benevolent power to meet unspecified circumstances, but which in the past have certainly been to the benefit of the families that we most want to help.

My Lords, the noble Baroness is in her most persuasive mode and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 2:

After Clause 14, insert the following new clause —

"REVIEW AND ALTERATION OF RATES OF TAX CREDITS

Section 150 of the Social Security Administration Act 1992 (c. 5) (annual up-rating of benefits) shall apply with like effect to tax credits, and paragraph 28(2) and (3) of Schedule 3 to this Act shall amend section 150 accordingly."

The noble Earl said: My Lords, in moving Amendment No. 2, I shall speak also to Amendment No. 27, which is grouped with it. It is one of the disadvantages of proceeding orally that one cannot indicate the presence or absence of capital letters. If I were to say that Rooker. Wise was wise, I would not wish to emulate the limerick about Liddell and Scott's Greek dictionary:

"Oh, Mr Liddell, will you answer a riddle, was it not mainly Scott?"

I would never have so treated the noble Lord, Lord Rooker. Having met and having done business with him, I would never have dreamed of doing so. "Wise" in my sentence was in lower case. It was meant to say that it was a good idea.

We have experience of things which have been included within the regular uprating formula for social security and of things which have happened. Where something is included within the regular formula for uprating, it is no bar to the Secretary of State uprating if he or she chooses by a greater amount than that formula. But it is a bar to doing so by a lesser amount.

I remind the Minister of the capital limits, which fall outside the Rooker-Wise formula and were not uprated from 1988 until recently. The Minister and I have had a lot of exchanges on that subject, which she has brought to a triumphant conclusion—on which I congratulate her. Would not it be nice to have a formula on the statute book whereby we would not have to do all this work to achieve uprating? When something falls outside the formula, there is a risk of a political battle, of which only a tiny part will be visible in this House—much more will happen at the Treasury—when uprating is wanted in difficult circumstances.

The Minister may want to be more generous than the Rooker-Wise formula in some respects, which I honour and welcome. The amendment would do nothing to prevent her. Can the Minister indicate that the formula will be updated, and regularly, and that she is prepared to accept a legal obligation to that effect? Going to the Treasury without a legal framework for protection is a case of going naked into the conference chamber, if ever I heard one. I beg to move.

My Lords, this matter was debated in Committee on 23rd May and subsequent amendments cover some of the same points. I shall defer my remarks until we reach them, depending on the Minister's response now.

My Lords, the noble Earl seeks to apply the provisions of the 1992 Act but that is not the right approach because the new tax credits do not form part of the social security system. The Bill is designed to establish a dedicated, administrative framework for those credits—rather than borrow from social security legislation.

When a similar amendment was tabled in another place, the Government made it clear that they did not intend to apply the provisions of social security law to deal with uprating but undertook to consider whether it would he appropriate to introduce arrangements for uprating the new tax credits similar to those that currently apply for WFTC and DPTC. In Committee, we brought forward a package of changes intended to respond to some of the noble Earl's points.

Clause 41 requires the Treasury to review each year against prices the amounts for the various elements of child tax credit and working tax credit. That applies also to income thresholds, including the £2,500 responsiveness band, and the like. The Treasury is required by Clause 41 to prepare and lay before Parliament a report of its review, which must include a statement of the amount that would have been if the credit had fully retained its value against prices.

The existing arrangements for uprating WFTC and DPTC ensure that an order changing the rates of those tax credits will be subject to the affirmative procedure. We amended Clause 66 accordingly.

The concerns expressed by the noble Earl and by the noble Lord, Lord Higgins, in his later amendment are proper in seeking to protect the value of tax credits and to avoid a fight each and every year, but there is no way that the Government can make a commitment beyond the life of the current Parliament.

The childcare element of child tax credit would not be included in any automatic uprating. At present, we reimburse 70 per cent of a sum of £200-plus for children. I could conceive that without altering the upper figure, we might prefer to go from 70 per cent to 75 per cent, choose to look at regional premiums or consider the option of helping to fund informal childcare.

Leaving the childcare element aside, I am happy to confirm that the children's element in CTC—the basic building block of support for children—will be raised in line with earnings during the life of this Parliament. That is one of the most generous commitments to child well-being that I can recall.

I have discussed the issues with my right honourable friend the Paymaster General. In another place, she has already expressed sympathy with the proposal that the working tax credit should be regularly uprated in line with prices. I am happy today to give the undertaking to the House that WTC—the adult element—will also be uprated in line with prices during the life of this Parliament. That is a new commitment—an undertaking that goes beyond the sympathy that my right honourable friend has so far felt able to extend. I am sure that your Lordships welcome it. I am delighted that there is consent on this issue in all parts of your Lordships' House. With those assurances and that undertaking, I hope that the noble Earl will feel that he has not done badly today.

My Lords, I thank the Minister warmly. Her reply does not give me everything for which I asked but it is significantly more than half a loaf. I understand her arguments about childcare. I am familiar with a number of debates and am aware that they could go in a number of different directions. If the Minister wants flexibility, she has a right to it.

The commitment to uprate the child element in line with prices is remarkably generous and a great achievement, on which the Government are to be congratulated. I warmly welcome also the further undertaking—I particularly welcome the word "undertaking"—to uprate the ordinary working element in line with prices. Even granted all the Minister's comments about this not being pure social security law, if the result of the move to the Treasury were to be that a lot of things that are significantly good in social security law were to disappear, one might think twice. But if such provisions are preserved for the life of this Parliament, any questions can be dealt with at the next general election and the electorate can form their own opinion.

This House has achieved that which the Bryce commission envisaged, in allowing a delay sufficient for the opinion of the people to be expressed. I can ask no more. I thank the Minister warmly and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 [Initial decisions]:

moved Amendment No. 3:

Page 10, line 30, at end insert ", provided that the date specified is not less than thirty working days from the date of receipt of the notice"

The noble Lord said: My Lords, with this it may be convenient to discuss Amendments Nos. 4, 5, 6 and 7, which together seek to alter the Bill in such a way that the period within which action can be taken in response to a decision by the board—effectively to appeal against it—is lengthened. It seems eminently reasonable that small businesses preoccupied with everyday affairs should have an appropriate length of time in which to respond to the Inland Revenue. I beg to move.

My Lords, there is very little between us on this point. Clause 23 provides for regulations to be made to set out the time limits for providing information. In considering the time limits, the main factor will obviously be the need to let the Inland Revenue have the information that it requires as quickly as possible in order to come to a decision on a claim, or a change of circumstances, or to continue with an inquiry into an award. It will thus be in the interest of claimants for information to be given in good time.

Nevertheless, the Inland Revenue would also always consider the practicalities of supplying information, especially when requesting information from third parties such as employers or childcare providers. There is no wish to impose unreasonable time limits on claimants or third parties with this provision. Therefore, regulations made under Clause 23 will specify a time limit of not less than 30 days. It is important to get that on the record. I wonder whether I should repeat that sentence, because it goes to the heart of the noble Lord's amendment. Regulations made under Clause 23 will specify a time limit of not less than 30 days. I should stress that these formal powers to request information by means of a notice in writing shall be used only if an informal request for information, usually made by telephone, has not been successful. Therefore, notices of this kind will not be commonplace but will be used only when absolutely necessary. This also means that the third party who is subject to the request will always have significantly more than 30 days to respond from the date of the initial informal request for information.

Therefore, although the noble Lord's amendments are not quite the same in that they specify a time limit of "thirty working days" for supplying information to the Inland Revenue, I hope that the noble Lord will appreciate that, in practice, the time limit of 30 days to be set in regulations will take effect only when informal requests for information have been unsuccessful. Therefore, in practice, we may well be going beyond the 30 working days required by the noble Lord. I do not find this unreasonable. It is consistent with existing provisions in tax and social security legislation. With those assurances and cross-references, I hope that the noble Lord, Lord Higgins, will feel able to withdraw his amendment.

My Lords, the Minister has given us some helpful information. No doubt such matters could be further considered. However, on balance, I am inclined to accept the noble Baroness's argument. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 8:

Page 18, line 22, leave out subsection (8).

The noble Lord said: My Lords, this is rather an important amendment, which suggests that subsection (8) of Clause 25 should be deleted. The subsection is perhaps open to a variety of possible interpretations. Our main cause for concern is the implication that those receiving tax credits will need to do so through a bank account. The subsection starts with the word "IF", by way of a proviso, and states:

"If the regulations [for making payments] make provision for payments of a tax credit, or any element of a tax credit, to be made by the Board by way of a credit to a bank account or other account notified to the Board, the regulations may provide that entitlement to the tax credit or element is dependent on an account having been notified to the Board in accordance with the regulations".

On the face of it, that sounds fairly straightforward. However, if the regulations do make provision for payment of tax credits to be made through a bank account, the implication would seem to be that the person concerned will not receive his tax credit unless he has informed the board of the nature of the bank account into which he wishes the payment to be made. Therefore, the problem immediately arises as to what the situation would be if the individual does not have a bank account. Indeed, he might well prefer to have that payment made through some other means by way of the existing arrangements, or whatever.

The sanction would seem to be pretty severe. If the board makes a regulation stating that the tax credit should be paid into a bank account and the person does not tell the board what the bank account is, it would seem that he will not receive the tax credit. Clearly that is not the intention of the Bill; indeed, the Bill's intention is that the board shall pay tax credits, not that it shall pay them providing that the recipient has a bank account and notifies the board as to the nature of the bank account.

On top of all that, we have a further ambiguity in the last few words of the subsection, because it says that,

"the regulations may provide that entitlement to the tax credit or element is dependent on an account having been notified to the Board in accordance with the regulations".

But we have no idea—indeed, none at all—of what regulations may say regarding how the bank account is to be notified. Of course, this has wider implications. We debated earlier the position of post offices as a means of making payments. As far as concerns this subsection, it seems that it would be possible for the board to say "We will only pay a tax credit through a bank account". It does not say that the board will do so, but, in effect, it says that the board may do so if it wishes; in other words, the regulations may insist, subject to the penalty that I mentioned, that an arrangement is made for the payment to be made into a bank account. I trust that I have the noble Baroness's attention—

My Lords, I was just drawing my noble friend's attention to the precise wording of the subsection and trying to explain to him why I thought that the noble Lord might have misunderstood the purport of the clause.

I do not believe that I have, my Lords. Indeed, I find it slightly sinister. We need to he clearer on the meaning of the subsection.

Can the noble Baroness assure us not only that it is not the intention of the Government to insist that all payments are made through a bank account, but also that they will positively not do so? The implication of the subsection seems to suggest that, if the board so decides, payments will only be made through a bank account, and that, without a bank account, recipients will have a problem. That leads us to the issue of post offices and the whole question of the position of the so-called "Universal Bank". We are unclear as to what extent that has made progress, and to what extent it might be available to all those who might wish to receive a tax credit.

At present, we know that there are many people, especially those who are likely to be in receipt of a tax credit, who do not have a bank account. We must consider how difficult it might be for them to open such an account. I raised previously the question of a credit rating agency. I pointed out that, without any credit record, it may be extremely difficult for someone to open a bank account. The noble Baroness, Lady Scotland, replied to a question that I raised only recently. I understand that not as much progress has been made in this respect as the noble Baroness suggested on that occasion. It is certainly the case that many people will experience problems in opening a bank account. If that is so, and if these regulations are used in the way that subsection (8) seems to imply, people—I was about to say "may not be able to get"— will not get the tax credit to which this Bill would otherwise make them entitled.

I view this subsection with very considerable suspicion. I believe that the way in which it is suggested that the tax credit will not be paid at all unless the requirements outlined in its wording are met—namely, that the individual must inform the board of the nature of his bank account into which the payment is to be made—is quite worrying. This is not a point that we picked up earlier. It is only upon reflection that we have come to the conclusion that the subsection, as drafted, is open to a number of interpretations, some of which should be regarded with considerable suspicion. I put it as high as that. I hope, therefore, that the Minister will be able to reassure us. The easiest way to do so would be to accept the amendment. I beg to move.

My Lords, I congratulate the noble Lord, Lord Higgins, on spotting this one. The subtext of the amendment should be not, "Don't mention the war" but "Don't mention the Post Office". So I shall not, but it is certainly true that for many people at the lower end of our income distribution, a bank is not really a suitable means of dealing with their money.

I have told before, but it bears repetition, the citizens advice bureau story of the woman on income support whose bank wrongly calculated her to be in overdraft and sent her a letter charging her £10, which meant that she could not buy any food. It was convinced that it had made a mistake and wrote her a letter to say that it admitted its mistake. It restored her account to credit but charged her £10 for the writing of the letter, which put her back into overdraft. So once again she could not buy any food.

That is the sort of thing that makes poor people tend to avoid banks. If people are in that situation and the only way that they can receive working tax credit is through a bank, they may, as the noble Lord, Lord Higgins, said, not receive it at all. That will mean that the working tax credit will not achieve its object.

So I hope that the Minister can give us the categorical assurance that it will be possible to receive the tax credit other than through a bank. She needs to say a little more than that it will be available through the universal bank, because the universal bank, although we all wish it well, at present remains optative. There must be some present means by which people can receive the credit, or that she can guarantee will exist when the Bill comes into force. If she cannot, we are in a serious situation.

My Lords, I am delighted that your Lordships agree that at this stage we are not discussing post offices or the location of post offices; we are discussing whether claimants can be required to receive payment through an account if that account is available to them.

The amendment would by removing Clause 25(8) prevent the Revenue ever making it a requirement that clients should receive their tax credits by automated credit transfer, even when they already had a bank account and when other benefits, such as child benefit, were being paid into it. About 85 per cent of tax credit and benefit clients have a bank account, yet under the amendment they could demand that although they have a bank account they should be paid by, say, Giro in perpetuity. That is what removing the subsection would do.

To answer the point impressed on me by the noble Earl, Lord Russell. I have already made clear our commitment that clients who prefer not to use an ordinary bank account will be able to access their credits and benefits in cash at a post office. We expect that that transfer to the Post Office will be made by ACT—if not directly through a bank, such as Lloyds, or whatever, down the road—either into the basic bank account with outlets at the Post Office, about which the noble Lord, Lord Higgins, pressed me on our progress, or even via the more basic card account at a post office. That may meet the noble Lord's concern.

The noble Earl, Lord Russell, asked me to give an assurance that payments can be received other than through a bank. Yes, my Lords, they can be received through the card account at a post office, which is so simple, and into which benefits or credits are paid and from which cash is withdrawn. That is all that it does. There are no cheques, credit, problems with overdrafts or anything like that. Indeed, that may be the first step towards people becoming comfortable with an account and moving to other forms of banking mechanisms that allow them to pay by standing order, direct debit and so on. But I can give the noble Earl the assurance that he sought.

Claim forms will invite people to give details of their bank account when they claim. If they cannot or do not do so, the Inland Revenue will contact them to ask them for details and provide guidance for those who need help in opening an account, including setting up the basic account at a post office.

So as I said, the transfer of cash will take place by ACT, but the cash can be withdrawn at a post office if necessary—not through people's own bank, not through the basic bank, but through the card account. I have gone further and said that where, for example, parents with care want the protection of a separate account—I know that that has concerned the noble Earl, Lord Russell, in the past—they can have it and the child tax credit can be paid into a different account from that into which wages may be paid. So there is that security as well.

We have gone further still—again, I hope that the noble Earl will find this worth while—and said that, exceptionally, where even the Post Office card account is inappropriate—for example, in the case of travellers or of an ex-offender with no fixed address—some form of credit payment document may be required. We have taken careful steps in the Bill and in draft Regulation 12(3) to ensure that, where necessary, the Revenue can make payments by alternative methods.

We have given the final assurance, even beyond that, that we will not require payment by ACT until suitable facilities are available, including the post office card account—not just the basic bank or universal banking system. There will be no gaps in provision. I entirely accept that the transition must be seamless.

My Lords, I am most grateful to the noble Baroness, who is gradually helping to clarify the matter. Earlier, she appeared to be implying that an individual who was already receiving social security payments through a hank account would not be allowed to draw the tax credit by one of the other means. Perhaps I may also thank her for something. Just before Third Reading, she kindly sent round an example of the proposed tax credit claim form. We are grateful for that; it was interesting to read it. But it states:

"You need a bank or building society account into which we can pay credits. If you do not have an account, or want to use the Post Office or open a new account for tax credits, see Notes, page 31".

Unfortunately, the noble Baroness kindly sent us the form but not the notes, so we do not know what is proposed for individuals who receive the form and say that they want to use the Post Office or open a new account for tax credits.

My Lords, I apologise for that. If the notes are ready, I shall send the noble Lord a copy.

There is no problem if someone already has a bank account and wants to be paid by another ACT method. What I was saying is that what the noble Lord could not reasonably expect us to permit is people, while having a bank account and being used to it, to continue to he paid by Giro, or even order book, say, in perpetuity. On the noble Lord's first point, if they want to use other methods of payment such as the basic bank or a card account at a post office—that is a simple money in, money out account with no other facility—there is no problem. I hope that the noble Lord will accept that.

Given all of those undertakings, I should have hoped that I had met your Lordships' concerns. The amendment provides that even where a client already has a bank account or already has some credits, benefits or wages paid by ACT, he could none the less continue to require his or her child tax credit to be paid by some other method—by order book or, more likely, Giro.

Why did the previous administration seek to introduce a smart card for benefits payments—although we know that, given the overrun on cost and time, we had to pull back from that? For two reasons: they were worried about the cost of transactions; but above all, they were worried about fraud and safety. About £150 million a year is already lost in fraud because of Giro and order book payment methods. The larger the value of the benefit or credit, the greater the safety risk. What is a Giro? Essentially, it is an uncrossed cheque. Which has been the worst area of wide-scale fraud in social security? Housing benefit. Why? In part, because it has been paid by Giro, and tenants have stolen Giros from other tenants and landlords have in turn stolen them from their tenants.

The Government have been addressing those issues, as your Lordships will know. I have—rightly—been pressed to address the issue of fraud in housing benefit, part of which is attributable to the use of giros and the fact that they can be cashed by other people We are making progress, but we must do more. Fraud occurs because handling giros is like handling uncrossed cheques.

I cannot believe that the noble Lord would wish to see benefits or tax credits, which could be of substantial value, being paid by giro, as in the case of housing benefit. At the very point at which we are trying to eradicate fraud in housing benefit, we should not import it into the tax credit system in the method of payment. That would be madness.

The child tax credit, in particular, is a high value credit. If it includes the cost of paying childminders or nurseries, it could be worth £300 a week, £600 a fortnight, £1,200 a month. Would any of your Lordships want that sort of money handled by giro or uncrossed cheque? Of course not. Yet, the amendment would mean that vulnerable people who live in rough areas or who are less financially sophisticated could be exposed to difficulties, just because of a sentimental attachment to ration books and giros. That is not safe. Nor will childminders and nurseries be keen to be paid in cash in that way.

The amendment is concerned with the way in which clients are paid. The payment will still be available in cash at the post office, if that is what the client wants. Furthermore, under ACT, the client will not have to draw out all of the £300 and wander home with all that cash, as would happen with a giro or a ration book. With a bank facility or a Post Office card facility, the client can draw out the £50 or £80 that she needs at that time. That will allow the client to budget and will mean that she does not put herself at risk. With ACT, clients can draw out what they need, when they need it. They can also use whichever post office they wish, which is not the case at the moment.

The money will be available in cash at post offices. It will be a more economical form of transaction for the taxpayer—a penny per transaction with ACT, compared to £1.40 per giro transaction—and will be more convenient for the clients, who can withdraw what they need, rather than the full lump sum, where and when they need it. It is a speedier form of payment. For childcare, in particular, people may need to adjust the arrangements several times a year. With ACT, necessary adjustments can be made to the payment almost immediately; with order books or giros, it would take some time, and there could be problems. It may also have the longer-term financial benefit of bringing people into the banking system. Above all, the system is safe and secure. It will reduce fraud of the sort that has bedevilled the housing benefit giro system and should reduce the theft that so many pensioners with order books fear.

The amendment is profoundly misguided. No one in the Chamber would advise a friend to receive or transmit sums of £300, £600 or £1,000 by the equivalent of order books, giros, ration books or uncrossed cheques. We are ensuring that people will have their cash at their post office. I hope that I have given the noble Earl, Lord Russell, the assurance that he wanted. We will not move to any system until we are confident that it is available to all who need to use it. I hope that, with that explanation, the noble Lord, Lord Higgins, will withdraw the amendment.

My Lords, I listened carefully to what the Minister said, and I shall read it with even greater care in Hansard.

Much of what the Minister said was right, but she was rather over the top about what the amendment would do. It is not clear that it would have the effect that she suggested. If I were wrong about that, the clause would not read as it does. It says that the board can make regulations, and then it says:

"If the regulations make provision for payments of a tax credit...by way of a credit to a bank account".

If my amendment were as dramatic as the Minister sought to portray it, it would not say that. It would say:

"Regulations shall make provision for payments".

It does not. The clause is oddly worded, with an "if' at the beginning. I do not accept that the amendment would be as dramatic as the Minister says.

There is still considerable doubt about this aspect of the Bill. I was almost tempted to suggest that we should take the opinion of the House, but, on balance, I have decided not to. The important thing is that, when the regulations are produced, we should scrutinise them with great care. That shows how important it is that your Lordships' House should retain the right to throw regulations out, even if we still do not have the right to amend statutory instruments and orders. The events of the past few days show how important that right is, if only for use as a deterrent, in certain circumstances.

I look forward to receiving the notes about the form to which I referred. Subject to that, and as we will have a chance to examine the regulations, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 9:

Page 18, line 26, at end insert—

"() Payments under this Act shall be made from the Consolidated Fund."

The noble Lord said: My Lords, we tabled this amendment at earlier stages, but, for various reasons, we have not moved it.

The Chancellor's Budget included measures that raised a huge amount of extra money from national insurance contributions by companies and individuals. I have always regarded national insurance contributions as a tax, even when I was at the Treasury. In effect, the Budget raised a huge amount in extra taxation. In simple terms, one could say about the overall shape of the Budget that the amount raised from business in national insurance contributions roughly equaled—or provided—the amount of extra money to be spent on the National Health Service. The money raised from individuals in increased national insurance contributions and other taxation effectively funded the payments to be made under this Bill.

If the money was raised in national insurance contributions in order to provide some vestige of plausibility for the Government's previous promise not to increase taxation, how did the Government succeed in getting their hands on the money that they wished to spend in a particular way? The money would normally go into the National Insurance Fund, in certain proportions, and to the National Health Service, in other proportions. I was not mistaken in thinking that the Government had a problem, and we soon found that we had a National Insurance Contributions Bill that changed the allocation between the National Health Service, on the one hand, and pensions and so on, on the other.

I am still puzzled, however. The National Insurance Contributions Bill distributes the extra money into the National Health Service in the way that was intended and changes the balance between health payments and social security payments in the national insurance pot. I am still not clear how the Chancellor can obtain the money needed to meet the extra expenditure envisaged in the Tax Credits Bill. What is the total cost of the Bill now? Originally, I thought it was £2.7 billion, but I think that I am right in saying that it is £1.7 billion. Can the Minister clarify the cost of the Bill?

If we turn to the Red Book, which has grown over the years—it is probably 20 times thicker than the original Red Book with which I was originally involved—we may look in vain for any means of ascertaining where the extra money to fund the Tax Credits Bill is to be obtained by the Chancellor. We cannot tell whether the money will be drawn from funds that have gone to the Consolidated Fund or from those that have gone to the National Insurance Fund.

It is clear that, under the Budget, there has been a massive increase in government taxation and expenditure. I would assume, therefore, that since the Tax Credits Bill will impose a massive increase in expenditure for reasons we all understand, it must be related in some way to the corresponding increase in taxation. I hope that the noble Baroness will explain where the extra money now to be redistributed—this one is a real old Labour proposal; I am glad to see the noble Baroness, the noble Lord, Lord McIntosh, and, indeed, noble Lords on the Back Benches behind the Ministers smiling at my remark—is to come from; that is, how those concerned are to receive it and from what source. I beg to move.

My Lords, this amendment seeks to explore the Government's thinking behind the funding and accounting arrangements for the two new tax credits. We touched on a similar issue covering the various devices and forms both in Grand Committee and in our debates on Report. Each of us takes our delight in different ways, but I have to say that my delight in rehearsing once again our theological debates on accountancy is now diminishing somewhat. However, perhaps that is because we have reached Third Reading.

The Government's position on funding arrangements for the new credits is clear and consistent. I should stress that the arrangements provided for in this Bill follow the model laid down by the Tax Credits Act 1999, which was also carefully scrutinised and agreed by noble Lords, including the noble Lord, Lord Higgins, and the noble Earl, Lord Russell. On behalf of my right honourable friend the Paymaster General, I brought that Bill to your Lordships' House.

The key point to make is that tax credits form part of the tax system. We have discussed at some length the percentage of tax credits that will offset tax liabilities and the amount of tax credit payments which will exceed such tax liabilities. We have also discussed the ways in which the new tax credits replicate the tax system in the sense that awards will run for up to one year, in line with the tax year; entitlement will be based on income for one tax year; the measure of income for these new credits will be much more closely aligned with that used for assessing income tax; and that the new, more integrated system for support will be available to people whether or not they are in work, but will be in place and able to support them as they move into work.

Given that, I think that it would be wrong to focus only on the numbers, although I shall be happy to repeat for the noble Lord the information that I believe I have already given him; namely, that the additional cost of these proposals, on top of the cost of the existing tax credits, is to be around £2.7 billion. I have no reason to think that the figure has changed. I am not quite sure from where the noble Lord took the figure he quoted in his remarks. If he has a source I should be happy to look at it.

My Lords, I took the figure from page 217 of the Red Book. To my surprise, it seemed to indicate that the cost would be around £1.7 billion rather than £ 2.7 billion.

My Lords, this is the one occasion on which I have not brought the Red Book into the Chamber However, the assurances I have been given, along with the figures that I have quoted during previous stages, confirm the figure of £2.7 billion. We put that figure on the table in Grand Committee.

Because the tax credits will form an integrated part of the tax system they are to be administered by the Inland Revenue, and because the credits will provide a way for the tax system to recognise a family or household's circumstances and responsibilities within the tax year, it is entirely proper for the new tax credits to be funded from tax receipts, just as WFTC, DPTC and the children's tax credit are funded in this way now. We are building on what we already have in place. This is an issue which, as I recall, went through with all-party support.

I have already made clear that the funding arrangements provided for in the Bill follow those set out in the 1999 Act. They do not introduce any new principles. Existing tax credits are already administered in this way.

The noble Lord pressed me about the relationship with the National Insurance Fund. The funding arrangements for tax credits have nothing to do with the National Insurance Fund. These new tax credits, like WFTC and DTPC, will be funded by deductions from tax receipts before they are paid to the Exchequer. In effect, they will reduce the amount going into the Consolidated Fund.

My Lords, we know from our earlier discussions on this matter that the amount comprising a genuine tax credit is only around 10 per cent of the total. Some 90 per cent of it will be straight expenditure. What I do not understand is where the money to pay for that additional expenditure has been raised.

My Lords, the money is to come from general tax revenues. As I have said, payments are to be deducted from tax receipts before they are paid to the Consolidated Fund, as set out in Clause 2. That is why Clause 2 makes it clear that the amounts are to be deducted by the Board from the gross revenues. I have to say that we have discussed this at length.

I appreciate that there may well be an unbridgeable gap between noble Lords on the Benches opposite and myself as regards whether these are tax credits or benefits and therefore whether the accountancy devices or the modes of funding are appropriate, in the views of the noble Lords, for this endeavour. At its core, we are seeking to make work pay. People are to be paid working tax credit through the wage packet. As a result, I hope that people will be brought from being out of work into being in work. Furthermore, for the first time tax credits will provide an integrated child tax credit which can be received by someone out of work, but which can then be ported into work.

The accountancy devices regarding which elements should be appropriately recorded under taxable revenues and which should be recorded as payments being made to individuals are entirely in accordance with the ONS and OECD proposals, a matter that we have already discussed at great length. I could discuss on a philosophical level whether tax credits form a part of the tax system or whether only 10 per cent of the credits should be counted as tax forgone. However, I think quite simply that there is no meeting of minds on this.

Ultimately, however, for the purposes of what we are seeking to achieve here, and given that we are following well-established procedures originally set up for WFTC and DPTC, does it matter? We are seeking to ensure that more money goes to families with children in ways that will encourage people into the labour market. The procedures of accountancy are entirely compatible with international standards; they are transparent and available for public scrutiny. There can be no ambiguity about what we are doing. Perhaps I may say to the noble Lord that I really do not understand why he does not let the matter rest.

My Lords, before the noble Baroness sits down, I do not seek to raise any of the complicated points we discussed earlier in our deliberations with regard to the OECD and so forth. All I seek is this. As the noble Baroness has said, this Bill will involve an extra expenditure of £2.7 billion. The question is: what is the corresponding increase in taxation that is going to finance that expenditure? It is a simple point.

However, the recent increase in taxation has been in the form of higher national insurance contributions and therefore does not go into the general tax pot, except to the extent that the National Insurance Contributions Bill that I mentioned earlier will transfer it from one pot to the other. My question is this: from where will the increased taxation come to pay for the £2.7 billion which this Bill is going to transfer?

My Lords, this is no different from anything else that we have discussed during our debates on other Bills. The Government make a judgment on taxation, including tax credits, at each Budget consistent with strict fiscal rules. The noble Lord has respected those rules. He has agreed that we have observed them absolutely and properly. The Budget included measures to raise additional resources. It also provided additional moneys for government priorities, including tax credits. There is no hypothecation of revenue raised in one place to be spent on tax credits. I believe that an element of hypothecation may be what the noble Lord is pushing for, but I do not think that I can help him.

I repeat: I do not think that at any stage we are going to have a meeting of minds on this matter.

My Lords, the relevant response is the one I once put on a test paper of a student at Yale—that is, "Four out of 10. See me afterwards". We shall have to discuss this matter outside. I am still very unhappy about the arrangements. It would be helpful to discuss this issue outside. Perhaps that is the best way of handling the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 26 [Payments of working tax credit by employers]:

moved Amendment No. 10:

Page 18, line 28, leave out from "payments" to "to" in line 29.

The noble Lord said: My Lords, in moving Amendment No. 10, I shall speak also to Amendment No. 11. These are technical amendments and concern the rather broad way in which the regulations are to be drawn. Subsection (1) states that,

"Regulations may require employers, when making Schedule E payments and in any such other circumstances as may be prescribed",

and so on. The wording seems excessively wide. Is the Minister absolutely sure that the regulations need to cover

"any such other circumstances as may be prescribed"?

Is not that too wide? This is somewhat similar to the earlier amendment. It is perhaps a rather tedious point to raise at this moment but I believe it is worth bringing to the attention of the House.

Amendment No. 11 concerns the wording,

"or prescribed elements of working tax credit,

which is rather more specific. The clause gives the Government discretion to act,

"in any other … circumstances as may be prescribed"

in regard to either the whole of the working tax credit or "prescribed elements". Either way, the wording is too wide and gives the Government too much scope to amend the legislation. I beg to move.

My Lords, the noble Lord, Lord Higgins, described the amendment as a technical amendment and I shall reply to it in that vein. The effect of Amendment No. 10 would be that employers could be required to pay working tax credit to their employees only when they are making Schedule E payments and in no other circumstances. It is the "no other circumstances" that he believes is too wide.

An employer who by mistake failed to make a tax credit payment at the same time that he made a Schedule E payment would not be able to correct the error until he was due to make another Schedule E payment—in other words, he would not be able to make an intermediate payment to correct an error. That is the only effect that the amendment would have. It would slow down and coarsen the payment system. It would not have any effect in reducing burdens on employers.

The effect of Amendment No. 11 would be to ensure that employers pay all elements of working tax credit due to an employee and would remove the power for the board to prescribe that certain elements should be paid direct to the claimant by the board and not by the employer. That strikes me as being directly in conflict with the passionate arguments that we have heard during the course of the Bill that this is a burden on employers.

The effect of the amendment would be that regulations could not prescribe, for example, that the childcare element is to he paid direct to the person in a family who is mainly responsible for caring for the children. So, in addition to increasing the burden on employers, Amendment No. 11 would stop the payment of childcare benefit direct to the carer. I cannot believe that that is right either.

My Lords, that is far and away the most convincing argument I have heard today. It is probably the most convincing argument I have heard for some time. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 11 to 13 not moved.]

moved. Amendment No. 14:

Page 18, line 32, after "to insert "inform the Board of the gross pay of each of their employees and to"

The noble Lord said: My Lords, in moving Amendment No. 14, I shall speak also to Amendment No. 15. The amendments seek to establish an easier system for employers to work. Indeed, it may be the case that the Government have in mind something of the same kind. Amendment No. 14 seeks to insert the words,

"inform the Board of the gross pay of each of their employees",

and so on. Amendment No. 15 seeks to insert the words,

"and such notices to indicate to the employers the appropriate payment to be made to each employee".

It is my understanding that the Government, in deciding how much of a tax credit ought to be paid to an employee, have all the information necessary other than specific information about the gross pay of each employee. If they were provided with that information, it would be possible for them, taking into account all the various factors which will alter the tax credit, simply to indicate to the employers the appropriate payment to be made to each employee.

So the employer would tell the Revenue, "I have 10 employees. Their names are such and such. Their gross incomes are so much", and the Revenue will then say, "In that case, you should pay a specific amount to each of them by way of tax credit". My understanding is that all the information the Revenue will need to work that out should be available to it. That may or may not he the case, but I thought it would be helpful to establish to what extent the Government feel that system would enable the burden on employers to he reduced by the Inland Revenue carrying out the calculations rather than the employer having to do it for the Revenue and on its behalf. I beg to move.

My Lords, both amendments are unnecessary. In particular, Amendment No. 14 would place a considerable extra burden on employers for no conceivable purpose. If it has not become clear in the course of the proceedings of the Bill, let me explain how this will work. People will claim either or both of the tax credits by completing a form and giving details of their family circumstances, the number of children, and their income, including earnings. They will complete the form on the basis of their income in the previous tax year—information that they will have from their payslips, their P60 or their self-assessment return. So normally there will be no need for employers to be directly involved in the claims of their employees.

Amendment No. 14 would introduce a new burden on employers. They would have to send the Revenue the gross pay of all their employees—it is not clear whether the amendment would apply to all their employees or only those who are or may become entitled to working tax credit—for no purpose. It is the employees' responsibility to give information about their income. I cannot see the point of employers doing that.

Amendment No. 15 would require notices to be sent to employers telling them to start paying tax credits to an employee and to,

"indicate to the employers the appropriate payment to be made to each employee".

That is exactly what the Bill does. That is exactly what the start notice is. There is no work for the employer under any circumstances in calculating the tax credit. These amendments would not make things easier; they would make things worse.

My Lords, the Minister has explained the matter clearly. Perhaps one had not fully understood the exact way in which the mechanisms operate. This may also arise on the next amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 15 not moved.]

moved Amendment No. 16:

Page 19, line 12, after "calculated," insert—

"() for the payment by the Board of an allowance covering the estimated cost to the employer of administering tax credits based on the average number of employees paid during the year,"

The noble Lord said: My Lords, before I move the amendment, I draw your Lordships' attention to the declaration of interest that I made at earlier stages of the Bill.

The amendment returns to the fundamental question of what assistance the Government are prepared to give to businesses to compensate them for their work as suppliers of government social services. The Government propose to impose on employers, regardless of their size or profitability, the whole burden of administering this new tax credit scheme. Smaller employers in particular, as we have said on many occasions, do not have and cannot afford the substantial departments necessary to administer this scheme. This modest amendment seeks to require the Government to assess and estimate the amount of the costs to employers of carrying out the new task that the Government require of them and to offer them some compensation for those new tasks. We believe that such a responsibility will have the salutary effect of focusing the Government's attention on the costs to business when the Bill is implemented.

Perhaps I may briefly set out the background to the amendment. I draw the attention of the House to three letters that I have received in the past week concerning the amendments. The first was a helpful and elegantly constructed letter from the Minister containing a description of all that the Government had done for businesses over the years. She concludes:

"I hope you will agree that this is an impressive record and that it will explain why I cannot accept your suggestion that this Government is insensitive to the needs of small business".

The letter paints such a touching picture of a benevolent government with grateful businessmen gathered at their feet that I was on the point of withdrawing the amendment altogether. But then I received a second letter, this time from the London Chamber of Commerce and Industry, which painted a very different picture. It spoke of the many complications in payroll systems and lamented the fact that,

"more time will have to be spent by employers completing paperwork, administering records and notifications.".

The letter refers to a survey conducted by the London Chamber in April this year, exploring the general impact on businesses of the last Budget and specifically the impact on their payroll administration. Members were asked:

"Did the Budget … simplify the tax system for your business?"

Five per cent of respondents agreed that it did; 69 per cent disagreed.

At that point I was a slightly confused and, frankly, did not know what to do about the amendment—until I received a third letter—in fact, a copy of a letter from the Minister to my noble friend Lord Northbrook. This set out the details of the regulatory impact assessment for November 2001 in relation to the Bill.

Now here is a strange thing. There is no standard format for regulatory impact assessments; so it is hard to see all the required answers to one's questions. There is another odd thing about the regulatory impact assessment. Who, it might be asked, actually does the assessment of the impact of the Government's regulations? I was curious. Was it perhaps the Institute of Fiscal Studies, the National Audit Office, the Comptroller General, or some independent body of expert economists? No—I am afraid that the Government carry out their own assessment. This is rather like the students of the noble Earl, Lord Russell, having the opportunity to design their own exam papers and then to mark them themselves. That seems to be the system.

The letter explained that under that system—

My Lords, they would probably mark them rather more harshly than I would.

My Lords, that is possible.

The letter arrives at a specific figure. It says that when the whole process is complete, employers will save £11 million. It is very specific—that is the amount of the saving to which it refers. This was doubly interesting, and I was curious to see how the Government could have arrived at such a firm figure.

In order to demonstrate how the impact assessment is carried out, perhaps I may subject your Lordships to an IQ test of a sort. I promise that it is only a slight paraphrase of the Minister's letter. It goes like this: if it takes one man between 45 minutes and an hour to complete an earnings inquiry form, and on average 35 per cent of these forms are directed to small firms, at a cost of £20 an hour, and 65 per cent to large firms, at a cost of £10 an hour, removing the need for these inquiries would save employers between X million and Y million a year, what are X and Y?

Or try this: assuming that around 1 million WFTC/DPTC recipients who are paid by their employers renew their tax credit award each year, and assuming that the move from a six-month award to a 12-month award will eliminate around half of all renewals; and assuming that removing the need to stop payments in advance of a renewal will halve the time taken by an employer to stop and then re-start an award, what will be the cost saving for the remaining 500,000 renewals?

Or take this one: if around 35 per cent of tax credit recipients paid by their employer work for small or medium-sized businesses, and to stop or start a tax credit manually involves around 30 minutes' work by a proprietor or adviser, at a cost of £20 an hour; and if in large employers, with more sophisticated systems, a stop or start is likely to take 30 minutes for a payroll operator at £10 an hour; then by how much will reducing the need for stops and starts decrease employer costs? After seeing the third letter, I thought better of dropping that amendment. I thought that it would be better to let it stand.

In Committee, the Minister confessed that she was baffled by the persistence of our inquiries about costs to small business.

My Lords, I did not say that I was baffled about the cost to small employers. I was baffled about the concerns about accountancy, "IR" in capitals, "ir" in lower case letters, and so on. It was entirely proper and I was glad to have the opportunity to reply to the letter from the noble Lord, Lord Northbrook, explaining not only what government policy had done for small and medium-sized enterprises more generally, but in particular how we came to a figure of £11 million. I did not want to be accused of plucking some figure from the air. It was built up by quite detailed analysis: we give the assumptions on which it is based, arrive at the calculations and, therefore, give the noble Lord the opportunity to scrutinise this in the way that he is doing.

My Lords, the noble Baroness may remember the slightly chilling phrase that she used to deal with the difficulties that we pointed out in relation to the administration of tax credits by firms. She said:

-all they have to do is to pay out what the tax credit office tells them to pay".—[Official Report, 16/5/02; col. CWH 36.]

The curiosity is that employers themselves do not see it as quite so simple.

I should like to suggest a kinder approach. Perhaps I may remain in the idiom of the IQ test as I have started in that vein. Let us say that we accept all the assumptions that I have described as accurate, and that we accept that the Government carry out their own assessment of their own regulations. Let us say further that we accept a figure of £11 million to be the saving. The fact that it is a saving means that, before there is saving, the costs to employers are X. So the present cost to employers of tax credits is X- minus £l1 million. I have no idea what X is. I have never seen the figure published. I shall willingly sit down if the noble Baroness can say what X is. In the absence of knowledge—

My Lords, it is about £100 million. There are ways of calculating it.

So, my Lords, let us say that the scheme is costing the employers £90 million—which explains why what on the surface appears to be the merit of the saving is not seen by the employers as quite the benefaction that it might otherwise be. It is only a reduction in a high cost, rather than an actual reduction in their total costs.

Having worked out that the net cost to business of the Government's involvement of companies in administering social services is £90 million, the simple proposal in the amendment is that the Government, having calculated the figure, should give it back to employers to compensate them for that sum. I beg to move.

My Lords, we on these Benches are prepared to support this amendment. Governments for many centuries have been addicted to farming out their administrative work to private individuals and private bodies. Perhaps I may take one example, about which the noble Baroness may feel as I do. In 1517, the Evil May Day riots took place in London—the nearest that 16th century London came to race riots. Cardinal Wolsey drafted a proclamation commanding all husbands to keep their wives within their houses—as agents of the King, as if they were special constables. This obviously is a way by which the state can save money. When states are in the process of programmes of economy, they tend to find this sort of thing very tempting. One sees it, for example, in the part that has been given to British Airways in the process of immigration control. It can be very expensive to the private individual or private body concerned. It is a way in which the state can shovel off its costs while getting all the benefit of having everything done its own way.

There is a case for saying that if other bodies are to do the Government's administrative work, they should be paid as if they 'were in government service. That principle has once been conceded in this House—on the Education (Student Loans) Act 1990. The universities have been very appreciative of that—and that includes me. In a lot of cases, they would have been left with a choice between two people running a loans office or one lecturer who might have to be dismissed to raise the money to pay for it, plus a number of books not bought for the library. Those are not the choices that one likes to have delegated to one.

I have read the letter to the noble Lord, Lord Northbrook, and I appreciate that the Government have in many ways tried to soften the blow. They have tried to ease the burden on employers where they can. However, the basic principle remains that if you get people to do your dirty work for you, you pay them for it. That is a good principle and it is on that ground that we support the amendment.

My Lords, I do not think that the House would appreciate it if I spent a great deal of time going over the intelligence test arguments. My only comment about the letter to the noble Lord, Lord Northbrook, is that when the noble Lord, Lord Saatchi, read out the assumptions and went on to ask what the conclusion would be, he failed to read out the essential assumptions on, for example, the number of earnings inquiries that there might be. He gave the House only half the evidence. If he had read the whole of the assumptions in the letter, mathematically he would have come to the conclusions that we have come to. I shall not make any more point of that.

However, I shall make more point of the substantive issues in the letter to the noble Lord, Lord Northbrook, because we ought to appreciate the changes that have been made to the system that has been in operation for the past two years. They are described as minimal, but they are not. I do not expect the London Chamber of Commerce to understand that because the question has not been put before its members, who are describing the situation that is being reformed by the Bill.

There are four points. First, claimants will not routinely have to ask their employers to verify their earnings. Tax credit awards will be based initially on annual income for the previous year. People will have the information necessary to make a claim on their pay slip, their P60 or their self-assessment tax return. Employers have had to be involved in that and will no longer have to be involved in it.

Secondly, if an employee who is receiving working tax credit leaves, the employer will simply stop paying the tax credit. He does not have to complete a certificate of payments, as now. Under the present system, entitlement to WFTC and DPTC fixed awards continues for six months even if the recipient stops working. If the employee remains entitled to working tax credit because he has another job, he—not the employer—will be responsible for telling the Revenue about the change of employer.

Thirdly, because the new tax credits will be awarded on an annual basis, there will no longer be six-monthly stops and starts, which are a troublesome feature of the current system.

Fourthly, the application procedure for employers who need funding will be greatly simplified. Employers will apply at the beginning of each tax year and the revenue system will adjust the funding amounts paid to an employer if there is a change in-year to the amount of tax credit that the employer has to pay.

On the technical side of the arguments, I am confident that the Bill makes things significantly easier for employers and no additional burden is imposed. However, it is much more important that we understand the principle behind this. The principle is not—as the noble Earl, Lord Russell, said—getting other people to do the dirty work. As I have said, we have been committed to minimising extra work for employers. The fundamental argument is more basic. The arguments against paying compensation are the same now as they were when we debated the issue in relation to the Tax Credits Act 1999. The system has never provided for a direct subsidy or compensation to employers who fulfil their obligations in relation to tax. Employers are not reimbursed for operating the PAYE system. That is the point that I want to make to the noble Earl, Lord Russell, in particular, as he unwisely expressed his support for the amendment without hearing the arguments. That has been the case since PAYE came into effect 40 or more years ago. I have never heard any objection to that from the Liberal Party, the Alliance, the Liberal Democrats or whatever they have called themselves at the time.

There has been a cash-flow benefit to employers with the PAYE system all the time. Any employer, as I was, who had a PAYE system collected the money from employees long before they paid it out to the Revenue. That is the significant point that has to be made.

In this case, there is no demand on the cash flow of employers. Their cash-flow benefit is marginally reduced, but there is no additional burden. Under the system proposed in the Bill, employers are not expected to fund the tax credit payments, even temporarily, out of their own resources.

Apart from the objection in principle to paying compensation to employers—in other words, to introducing a new principle of compensation on something that has been accepted by employers over a period—the amendment raises tricky practical questions. Paying tax credit with pay is closely linked to other employer procedures in connection with payroll and the PAYE system generally. Separating out the costs associated with tax credits from employers' other operating costs would be extremely difficult and time-consuming and would almost certainly add to employers' administration costs. It would be virtually impossible for the Revenue to check on the validity of the costs claimed by employers, given that employers' compliance costs will vary according to the payroll system used and the general efficiency of individual employers. The amendment could well mean more bureaucracy and red tape for employers rather than less.

I have said that any costs to employers of paying tax credit will be kept to a minimum and I have explained exactly how. Those costs must be seen in the context of the many measures that the Government have introduced to help businesses. I shall not repeat them because they were all included in the first letter to the noble Lord, Lord Saatchi, on the basis of which he almost decided not to move the amendment. The fundamental principle remains that the Bill refines and simplifies rather than complicating any possible burden to employers. We have been entirely open about the costs to employers of the existing system and the extent of the savings that are made by the Bill.

Much more fundamentally, it is in all our interests that tax credits should be seen as making work pay and that they should be paid through employers. We shall come to that argument on the next amendment. It is also important that we should maintain the principle that has stood in our tax system for the past 40 years or more, that it is legitimate when adopting the most effective and economical system of collecting tax—which is through pay-as-you-earn—not to pay specific compensation to employers.

My Lords, I am most grateful to the Minister for that reply. I had the pleasure this morning of watching the first 20 minutes of the Prime Minister's first press conference. All the questions that I was able to see concerned the issue of spin and trust. We have had some stunning revelations in the course of our consideration of this Bill. I believe that that is a great tribute to your Lordships' House. We have had, for example, the first full explanation of the treatment of tax credits in the Red Book, and confirmation that the previously inappropriate treatment of tax credits, which I think Ministers have acknowledged, will he changed to bring it into line with normal accounting standards in OECD countries.

There were further revelations. We learned first that 90 per cent of the total amount of tax credits are not in fact tax credits but paid effectively as benefits. In other words, they are not reductions of one's tax liability. I do not think that anyone knew that until this House considered the Bill. The second amazing revelation was that the total cost of tax credits is now £15 billion annually. That massive figure was unknown to the body of economists and others who closely follow these matters. The third figure, which we have heard today for the first time, is that the scheme's real cost is £89 million annually. That figure at last finally clarifies why employers have complained and these Benches have taken up their cause, particularly the cause of small businesses.

The last thing that Government Front-Benchers want is advice from our Front Benches. However, I do not understand why the Government do not wish to sing the Bill's merits from the rooftops. Thanks to your Lordships' House, the Government now have another opportunity to produce an annual report in which all the figures 1 mentioned can be brought together, allowing everyone to see in true light the benefits of this Bill, in which the noble Baroness, Lady Hollis, believes passionately. I am truly puzzled by why the Government would want these figures to emerge as the result of pressure from our Benches rather than as something in which they take a certain pride. Nevertheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 17 not moved.]

Clause 40 [Exercise of right of appeal]:

moved Amendment No. 18:

Page 26, line 5. at end insert—

"() The Secretary of State shall have discretion to allow an appeal out of time where the delay was caused by illness or other circumstances not within the control of the claimant."

The noble Earl said: My Lords, I must confess to remaining quite remarkably unstunned. I bring hack Amendment No. 18 for a very limited purpose. The Minister told us in Committee when I moved it that a large part of the Bill was covered by the Taxes Management Act 1970, which conceded the principle that I wanted. However, she believed that there was a small area to which the 1970 Act did not apply. So I have brought back the amendment in order to discover in which parts of the Bill the principle of this amendment is not applied by the 1970 Act. I had tabled the amendment on Report but did not move it because it arose during the hours of darkness when it would not have been appropriate. I beg to move.

My Lords, I think that I can give the noble Earl the explanation he seeks. If I cannot, I hope that he will allow me to follow this up in writing.

Section 49 of the Taxes Management Act 1970 allows someone to ask the Inland Revenue to accept a late appeal if there was a reasonable excuse for not making the appeal in the time limit. Under the section, the matter is decided by the commissioners if the Inland Revenue does not agree with the appellant. Section 49 is in Part V of the Taxes Management Act, and so applies in relation to tax credit appeals by virtue of Clause.39(6).

The noble Earl was concerned in Grand Committee about whether special provision for late appeals was needed during the transitional arrangements for claimants' appeals. I think that those were the grounds on which he quite properly explored the issue in Grand Committee. Your Lordships will be aware that a new clause has been inserted into the Bill to allow tax credit appeals by claimants to be heard by the (Social Security) Appeals Service for a transitional period rather than by the tax commissioners. While those transitional arrangements are in place, Part V of the Taxes Management Act will not apply to them.

I have written to the noble Earl about the point he raised. I am also happy to confirm again that there is scope for late appeals to be brought to the Appeals Service, where it is in the interests of justice for late appeals to be heard. Applications for such late appeals are to be determined by a legally qualified panel member and not simply at the discretion of the Secretary of State. These arrangements, which are set out in Regulation 32 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999, will apply during the transitional period for claimants' appeals.

The noble Earl pressed me particularly on which parts of the Bill are not covered by the Taxes Management Act. They are Part 2—"Child benefit and guardian's allowance"—and the transitional arrangements which I have just described for claimants' tax credit appeals. However, both are covered by equivalent arrangements in social security law which allow late appeals.

My Lords, I think that, with that, the Minister has told me everything that I had hoped to hear. I thank her warmly and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 41 [Annual review]:

moved Amendment No. 19:

Page 26, line 40, at end insert "and take steps to ensure that each amount fully retains its value"

The noble Lord said: My Lords, to some extent, and perhaps to a considerable extent, Amendment No. 19 covers much the same ground as Amendment No. 2 with which it was not grouped. As we said, the ground covered by Amendment No. 2 had previously been discussed, on 23rd May, at col. CWH 143, in Grand Committee. This amendment effectively raises the issue of uprating the various tax credits.

Amendment No. 19 and those with which it is grouped, particularly Amendment No. 21, seeks to ensure that, after laying the report already provided for in the clause to which the noble Baroness, Lady Hollis, has referred, the Treasury must take action to ensure that three things happen: that the basic working tax credit is increased with price inflation, the child tax credit in line with earnings, and that the child care element of the working tax credit is increased by an amount not less than the increase in price inflation. What we are seeking to do here—we may or may not have been wholly successfully—is effectively to include in the Bill the assurances that the noble Baroness, Lady Hollis, has given us previously and today on Amendment No. 2, which we discussed earlier.

In our debate in Grand Committee, the noble Baroness made a statement which I found somewhat curious. She said that these tax credits,

"are not part of the social security system".—[Official Report, 23/05/02; col. CWH 143.]

I was struck by that remark. It seemed to me that they clearly are part of the social security structure, and it never occurred to me for one moment that they were not. As I have already pointed out, they are all concerned with a pretty massive redistribution of income to various cases which the Government feel ought to be helped. The question then is whether they should be uprated in the same way as other social security benefits. Reference was also made to the "Rooker-Wise amendment". More accurately, I think, it should be the "Rooker-Wise-Lawson amendment" as it was carried by a coalition of individuals who supported the proposals for uprating.

The noble Baroness also surprised me by saying, "We cannot accept this because the Government cannot bind their successors"—which is of course absolutely true. However, that does not mean that one cannot include in legislation provisions which are designed to continue indefinitely and can be designed to be reversed either by the same government or certainly by successive governments. So I do not really understand why she took the view that one could not include uprating provisions in the Bill.

I said that I hoped that our amendments had effectively embodied what the noble Baroness outlined in Grand Committee, at col. CWH 144, on 23rd May. Not surprisingly she began by saying:

"It is slightly more complicated than that. We are dealing with three elements in tax credits. First the expectation is the basic working tax credit will be reviewed annually in line with prices".

She said that it would be reviewed, not uprated. She continued:

"The Chancellor of the Exchequer has already made a commitment that the uprating of children's tax credit, to my delight, will be in line with earnings, which is better than prices".

So far, so good as regards what we seek to put on the face of the Bill in paragraphs (a) and (b) of our amendment. For the reasons I mentioned, I do not believe that the earlier objections to our doing that were valid.

As regards paragraph (c) of our amendment, the noble Baroness continued:

"However, the situation is slightly more complicated because we do not want automatically to link"—

splendid grammar, as always, with no split infinitives—

"the third element, which is the childcare element, to price inflation, because childcare costs do not necessarily follow those same trends".—[Official Report, 23/05/02; col. CWH 144.]

I was not clear whether the noble Baroness argued that childcare costs do not go up as much as price inflation or whether she believed that they went up more and therefore she wanted to retain a degree of flexibility. We, being charitable as always, put the second interpretation on her remarks; namely, that she thought that occasionally childcare costs might go up faster than inflation. It seems unlikely that they would go up significantly less than inflation. Generally speaking, service sector costs tend to go up more rapidly than other costs. That has always been the case as regards the wages of hairdressers—a well known example used in first-year economics exam papers. Paragraph (c) of our amendment proposes that,

"the childcare element of working tax credit is increased by an amount not less than the increase in retail price inflation".

As I say, we do not accept the argument that the measure is binding on future governments. All kinds of measures are designed as if they were perpetual. I hope that the noble Baroness will accept that we merely seek to embody in the Bill what she has already said the Government undertake to do. I beg to move.

My Lords, I am rather disappointed that the noble Lord felt that he needed to move the amendment after the discussion and debate we have had and the undertakings I gave in response to Amendment No. 2 in the name of the noble Earl, Lord Russell. I did not give assurances; I gave undertakings. I chose my words carefully as the noble Earl, Lord Russell, was anxious that it should not be a matter of expressing warm words but rather of giving an undertaking for which the Government could be held to account. I hoped that I had met your Lordships' concern. I was able to give that undertaking for the first time. Although my right honourable friend in another place had expressed sympathy for the proposal, she made clear today—I was able to repeat her assurances to the House—that we shall undertake to raise working tax credit in line with RPI this Parliament.

The noble Lord knows that the Chancellor of the Exchequer and my right honourable friend have already made it clear that the children's element will be raised in line with earnings. We have given a commitment to that extent. I sought to explain at some length—I thought that your Lordships had accepted my arguments—that it is not appropriate within such undertakings to deal with childcare in the way that the noble Lord proposes, partly because we do not know what will happen as regards supply and demand but, more generally, because we are in the middle of a childcare review.

There are all kinds of ways of meeting the very real need for childcare places. At present only one childcare place is available in all its forms for something like every eight children in the country. We are looking at ways to promote childcare. Earlier I tried to explain to your Lordships that perhaps a better or alternative way of doing that would be, instead of returning 70 per cent of the cost, to consider a different figure, perhaps a higher one or one that changes as people have more children. Given that, as far as I can see, childcare costs are almost certainly far more expensive in London than, say, in the West Country, it may be better to consider the matter on more of a regional basis. Alternatively, the right way to meet this need may be to look at support for informal childcare which might involve a different kind of financial structure than that which is envisaged.

For all those reasons it is not appropriate in my view—I thought that your Lordships had accepted that, certainly, judging from the warm response of the noble Earl, Lord Russell, he had—to include the measure that is proposed. We have never included that formula of words in social security or tax credit Bills. What we have done today—I thought that your Lordships welcomed that—is to give not just assurances but undertakings that the two key elements—the adult element and the children's element—will rise, in the case of the adult element, in line with prices and, in the case of the children's element, in line with earnings, this Parliament. Obviously, I cannot give undertakings beyond that. The noble Lord is pushing me far too hard, particularly as regards the childcare element, for all the reasons that I tried to explain earlier. Given that the Government genuinely have gone a long way to try to make crystal clear our commitments and obligations today in the undertakings that my right honourable friend has been able to give, I hope that the noble Lord will not press the matter further.

My Lords, the jargon is becoming more complicated. I have not previously distinguished as clearly as perhaps the noble Baroness considers that I should have done between assurances and undertakings. She seems to imply that an undertaking is somehow more certain than an assurance, in which case that casts considerable doubt on assurances given by the Government.

However, it is clear that the noble Baroness believes that she is giving an absolutely firm and watertight commitment on behalf of the Government. I note that she indicates assent to that. I accept her comments as regards the first two elements of my amendment. However, I am still slightly surprised at her explanation with regard to the third element; namely, the childcare element. I again quote the noble Baroness's words at col. 144 of Hansard of 23rd May:

"we do not want automatically to link the third element, which is the childcare element, to price inflation, because childcare costs do not necessarily follow those same trends".

I interpreted that to mean that they might go up faster than inflation. Indeed, I believe that that is likely to be the case given the usual underlying elements in the service sector.

However, the argument the noble Baroness now puts forward is not quite the same as the one she put forward in Grand Committee which was purely related to price inflation. She is now saying that the childcare structure is in any case being changed—

My Lords, I am trying to explain that we are discussing a different beast. We are talking about the purchase of a service. In response to the noble Lord in Committee and today I have tried to explain why it is a different beast. At the end of the day it is vital for this Government, if we are to seek to overcome child poverty, to encourage lone parents in particular into the labour market. They will do so only if they have childcare that they can afford, that they trust and that is convenient. I serve on a working party which is examining this issue. We need to keep that issue under review but the right way to tackle it is certainly not through automatic linking as the noble Lord suggests.

My Lords, the noble Baroness elaborates on the view that she expressed in Grand Committee. That is helpful. We accept the argument that she put forward; namely, that automatic linking would not be appropriate if one is not absolutely clear what one is automatically linking the price increase to, and that the structure of childcare benefit may change. That is not an unreasonable argument. As I said, the first two elements of my amendment have already been covered by an "undertaking". Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 20 and 21 not moved.]

Clause 42 [Persons subject to immigration control]:

moved Amendment No. 22:

Leave out Clause 42.

The noble Earl said: My Lords, there are two reasons for leaving out the clause: one involves drafting and one involves substance. The argument about drafting is that the clause is a classically open-ended clause. It states:

"Regulations may make provision in relation to persons subject to immigration control or in relation to prescribed descriptions of such persons"—

one is not sure what is lurking under that provision—

"(a) for excluding entitlement to, or to a prescribed element of, child tax credit or working tax credit (or both), or

(b) for this Part to apply subject to other prescribed modifications".

In other words, the clause says that if one is dealing with persons who are subject to immigration control, one can do with them exactly what one likes. They are like the medieval villain; they do not know in the evening what they will be doing in the morning. That is a statement in law rather than in fact; I suspect that medieval villains probably knew rather well what they would be doing in the morning.

There may be clear policy intentions behind the clause, but it will fall into the hands of other governments and other Secretaries of State; it will turn up in other atmospheres and situations. For Parliament to abdicate completely any control over how tax credits apply to persons who are subject to immigration control is a very big handing-over of power. If Parliament is perpetually in the business of abdicating power, it cannot complain—it has only itself to blame—if it has not got much left afterwards. The drafting of the clause alone would be a sufficient reason for objecting to it.

More specifically, the treatment of persons who are subject to immigration control is one of those subjects in relation to which a great fear occasionally sweeps over a country. When that happens, there is a strong tendency to look for scapegoats. It is absolutely vital that that feeling should never be appeased when it arises. When one starts trying to appease it, one finds that one can never do enough. That is always the trouble with appeasement: the other people always want more of it. As the noble Lord, Lord Healey, once said—I believe that he was Secretary of State for Defence at the time—"Offering defence cuts to the left is like offering herrings to a sealion". Appeasement is absolutely the wrong response to such racial panics.

If a clause of this sort was in the possession of a Secretary of State in any government—not just this Government—it would lead him into temptation. We should not lead people into such temptation. The clause makes it much too easy for future Secretaries of State to give way to cries of, "Let's be nasty to asylum seekers". It seems that they have now succeeded reds as what one looks for under the bed. This is a thoroughly dangerous clause and I hope that the Minister will consider leaving it out. I beg to move.

My Lords, I originally tabled the amendment because it seemed appropriate that there should be much more clarity about the Government's proposals in Clause 42 than is apparent in the Bill. It seemed more appropriate that the noble Earl should move the amendment because he feels very passionately—we all do—about the issues that underlie the clause. It is also appropriate for the matter to be debated in your Lordships' House; the other place may not have an opportunity to do so. It is certainly right that the Government's intentions should be made clear. I hope that the Minister will spell out the position and seek to allay the concerns that those of us on this side of the House have about the way in which the clause could operate.

On the other hand, important entitlements are involved and we need to be clear about which groups of people the Government have in mind either to include or exclude, and in what circumstances. I hope that the noble Baroness will give us an assurance that if asylum seekers are granted asylum in this country, they will be treated in precisely the same way as everyone else and that there will be no question of them being put at a disadvantage in relation to those of us who already enjoy the benefits of being in the United Kingdom. I look forward to the Minister's reply; the situation needs clarifying as much as possible.

My Lords, I shall try to do so. I remind noble Lords that we are talking about those who are subject to immigration control. It is worth spelling that out. I absolutely agree with the noble Lord: we should not confuse this issue with questions about the decency of treatment for asylum seekers, particularly those who have been granted refugee status or exceptional leave to remain. I agree with the noble Earl, Lord Russell, that we should in no sense seek to appease emotions that none of us would recognise as being in any way honourable or decent.

A person who is subject to immigration control is basically a person who is in the United Kingdom without permission or who has permission to be here but whose permission to remain is subject to the condition that he must not have recourse to public funds. That includes people with work permits, such as someone coming from Australia to the United Kingdom for a year to work in someone's house. It also includes those asylum seekers to whom permission to work is granted because they have not had a decision on their asylum application within six months. It does not include EEA nationals, those who are granted asylum or—I made this point to the noble Lord, Lord Higgins—those who are given exceptional leave to remain. With regard to those categories, I hope that I can give the noble Lord the assurance that he sought. We are talking about people who are not EEA nationals, who have not been granted asylum status and who have not been granted exceptional leave to remain; as I said, we are talking about someone from Australia or the old Soviet Union who has come here for a year or two and who comes on the condition that he does not have recourse to public funds.

The rules on immigration control are a matter for the Home Office and are set out in existing legislation—in particular, in the Immigration and Asylum Act 1999, to which the clause refers. That is why people who are subject to immigration control are not able to claim WFTC or DPTC—existing tax credits. Those are the grounds on which they come in, subject to immigration control. The clause provides for regulations to be made about the access that people have to tax credits.

A power to make regulations has been taken because it would not, in itself, have been sufficient just to insert references to working tax credit and child tax credit in the Immigration and Asylum Act 1999.

In Committee, the noble Earl, Lord Russell, expressed concern—he repeated it today—about the width of the vires. As I mentioned then, we will need to make special provision to ensure that couples are dealt with appropriately where only one person is subject to immigration control. In other words, at the moment, the rules are that no one who is subject to immigration control is allowed recourse to public funds. Should we wish to widen that at any stage—I may give examples—we need the clause to enable us to do so. Without it, the existing blanket rule—"no recourse to public funds"—remains.

My Lords, I want to probe a little further about the reference to,

"prescribed descriptions of such persons".

Could the prescription be done in terms of race? The racial discrimination legislation does not, as I understand it, apply to immigration law. Does that bring the clause within the scope of immigration law or is racial discrimination under the clause illegal? The point is material.

My Lords, I am pretty confident of the answer but I shall get professional advice. I agree with the noble Earl that that is a major consideration.

When I have sought advice on the matter, the categories or descriptions of persons that are involved have never at any stage involved a particular race or ethnic minority group. They have been concerned with situations in which, for example, one person in a couple is subject to immigration controls and the other is not. That is the category in question. It ensures that people in like circumstances are treated in like ways. That is why the word "category" is necessary, rather than making a rule or discretion for Joe Bloggs.

We may also need to modify other rules, such as those concerned with the engagement of the claim and in qualifying remunerative work and a person's responsibility for a child. At present, different systems take different approaches towards, say, the immigration status of children. But, again, we need to bring that within the broader framework of the Bill. We are considering which of the models—for example, the income support and JSA model or the WFTC/ DPTC model—is more appropriate. We are certainly seeking advice and would welcome the noble Earl's views on the matter.

In terms of the prescribed descriptions of persons, the noble Earl was concerned that, in relation to immigration control, we might need to draw distinctions according to nationality in contravention of the European Convention on Human Rights. I assure him that such distinctions are not a matter for these regulations. However, as the noble Earl will know, a person who is subject to immigration control can fall into various categories, irrespective of his nationality. The categories cover those who seek asylum, those who are in the country without permission, those who are in the country temporarily, and those who either have or do not have permission to take up paid employment, and so on.

As things stand—this is the substantive point that I want to make—all such groups are excluded from entitlement to WFTC and DPTC benefits and from anything that might count as recourse to public funds. We want to follow that approach, but we believe that it makes sense to keep all aspects of the tax credit rules under review. Without such a clause, we would not be able to make the kind of category exemption to which one person is subject but the other is not, and to which we might want to return.

I hope that I have addressed the noble Earl's concern. As I said, with regard to his point that we shall be running contrary to the European Convention on Human Rights, I have given an undertaking and a written declaration that that is not the case. Therefore, I hope that that meets the noble Earl's concern. However, I shall be very happy to follow that up with further legal advice because I believe that he has raised an issue on which he is entitled to have more precise assurances than I have been able to give today. However, we are on the same side in relation to this matter, and I hope that the noble Earl will be able to withdraw the amendment.

My Lords, I am grateful to the Minister for those concluding words. I understand what she says about couples. Of course, that will be a fairly common situation since people who are in this country for a number of years may well tend to marry. I still believe that these mires are too widely drafted. However, I do not propose to take the matter any further tonight, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 [General functions of Board]:

moved Amendment No. 23:

Page 30, line 32, leave out subsection (2).

The noble Lord said: My Lords, it is possible that the noble Baroness will have a slight sense of déjá vu so far as concerns this amendment. Therefore, perhaps I may assure her that, if that is so, this is my swan song, if I may mix my metaphors.

At previous stages of the Bill, we have discussed at great length the curious way in which the draftsman insists on calling things which are pay-outs or benefits part of revenue, which of course is concerned with receipts. We have been over that point at great length on many occasions. But at this late stage in the Bill—at Clause 53—we suddenly find that for the purposes of the Inland Revenue Regulation Act 1890, which, again, we discussed at great length previously, the definition of "Inland Revenue" here includes both child benefit and the guardian's allowance.

My objection to this clause is very simple. The clause says that things which are pluses are minuses:, it says that black is white; and it is an abuse of the English language to say that something relates to the Inland Revenue if one is paying out a sum rather than otherwise. I hope that my noble and learned friend Lord Howe of Aberavon, in considering the whole subject of tax legislation, might seek to clarify this point. None the less, since the provision covers two separate and new items—child benefit and the guardian's allowance—I hope that, even at this late stage, I can move the noble Baroness to see the overwhelming logic of the amendment. I beg to move.

My Lords, I am sorry but I am absolutely flinty on this matter. We have discussed the 1866 Act in great detail on previous occasions. We have discussed the 1890 Act, under which the Inland Revenue has its powers. I recall vividly that the 1866 Act—

Oh!

My Lords, I have the words in front of me, as does the noble Lord. He got there ahead of me. When we looked at the 1866 Act, the words in front of us made it clear that after deductions of X, Y and Z, the gross revenues of the board may, and so on. Therefore, it was clear that when the board was set up originally by, I believe, William Gladstone, or at least given its powers in that form under that Act, gross revenues were what were left over after deductions had taken place. Therefore, the meanings that this Bill adopts are entirely consistent with those laid down by William Ewart Gladstone.

As I said, we discussed this matter at great length on a previous occasion. As I explained then, the amplification of the term "inland revenue" in the Inland Revenue Regulation Act is necessary to ensure that the statutory framework under which the board exercises its statutory responsibilities applies to the full range of its functions. That is why Clause 53(2) provides that the term "inland revenue", with lower case initials—I believe that I should belong to the compositors' union—is to be taken to include tax credits, child benefit and guardian's allowance. In other words, "inland revenue", with lower case as opposed to capitalised initials, means the comings-in and the goings-out of moneys.

Following the transfer effected by Part 2 of the Bill, child benefit and guardian's allowance will be administered by the Inland Revenue, with capital letters. Therefore, the term "inland revenue"—that is, moneys—which, in Section 39 of the 1890 Act is a reference to the scope of the Board of Inland Revenue's responsibilities, needs to be amplified so that it covers those benefits.

When we discussed the matter earlier, I explained that the term "inland revenue" had nothing to do with what counts as tax. The clause simply makes the point that no one is suggesting that child benefit and guardian's allowance will be anything other than social security benefits, even after responsibility for administering them has been transferred to the Inland Revenue. None the less, that power needs to be embodied by effect of the Bill. Therefore, I hope that the noble Lord is happy to agree that this is his swan song on the issue.

My Lords, happy? I am bitterly disappointed by that reply. The child benefit and the guardian's allowance are not deductions, even in the context of the earlier debate. But I believe that we are anxious to make progress. I shall see what other avenues are available to me, and perhaps the reforming group of my noble and learned friend Lord Howe of Aberavon will finally manage to put the matter right after a century and a half or so. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 59 [Use and disclosure of information]:

moved Amendment No. 24:

Leave out Clause 59.

The noble Lord said: My Lords, in moving Amendment No. 24, I shall speak also to Amendment No. 29. There are two issues relating to Schedule 5. My noble friend and I thought that the easiest way to raise both issues was to move that the whole schedule be removed from the Bill.

The first reason for that suggestion is that Schedule 5 is intended to provide statutory authority to disclose information, which would be in breach of the Data Protection Act 1998. We believe that it may also touch on the Human Rights Act 1998. The exchange of information, for example, under paragraph 9 relating to the passing of information about tax credit claimants in relation to health, may be in breach of Article 8(1) of the convention. That states that:

"Everyone has the right of respect for private and family life".

However, I imagine that the noble Baroness will say that that is justified under Article 8(2), which provides:

"There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others".

I suppose that the noble Baroness will argue that the Government are relying on the phrase,

"the economic well-being of the country".

However, I should like to ask her whether that is really so. The interference of a person's privacy must also, according to the Human Rights Act, be,

"necessary in a democratic society".

I am told by those who know more about such matters that the case law clearly establishes that the interference must also be proportionate—that is reasonable.

To us that does not appear to be clear cut in relation to the passing of information among government agencies and departments that are described in Schedule 5. Given the events this week in relation to privacy in which your Lordships' House was closely involved, perhaps the noble Baroness can give further justification on that point.

I turn to the second reason why there is a case for leaving this clause out of the Bill, which is that the House of Commons has never seen it. Only the unelected Chamber has had a chance to look at it. Therefore, that touches on a fundamental point which is the relationship between the two Houses of Parliament. During the passage of the House of Lords Bill the then Attorney-General, now the Leader of the House, said that the result of that Bill would be a modern House of Lords,

"better equipped to do its proper job of holding the Executive to account".

Noble Lords will also remember that he warned us that we should perform that task in a manner suited to the humble House that this is. To spell that out for us a new word in the Government's lexicon emerged: "primacy". It was mentioned 12 times in the White Paper on the reform of your Lordships' House, mainly in the phrase,

"the primacy of the House of Commons".

So it was that on 7th November in the Statement of the Leader of the House on the White Paper to explain why it was impossible to have more than a 20 per cent elected element in this House, he said,

"Reform of your Lordships' House must satisfy one key condition".

He went on to explain that key condition. He said:

"It must not alter the respective roles and authority of the two Chambers".

He continued:

"The House of Lords should remain subject to the pre-eminence of the House of Commons in discharging its functions".—[Official Report, 7/11/01; col. 206.]

I stress the word "pre-eminence".

Noble Lords may remember that the Leader of the House gave a crisp reply to my noble friend Lord Kingsland at the end of a debate on the Parliament Act. He asked my noble friend whether he was questioning the supremacy of the House of Commons. The Leader of the House will have thought carefully and with great precision about the choice of the word "supremacy". I looked it up and its meaning is one that is perfectly benign and that all noble Lords could accept as a description of the House of Commons in relation to this House. There are meanings in the Thesaurus such as,

"above, greater, top spot, first place, senior, top dog, top banana, outrank, No. 1".

I do not believe that any of us would disagree with those definitions of another place.

We are a humble House and we know our place. The House of Commons sends us legislation which we revise and send back for its consideration. It has the last word. But I do not know of any speech by the Leader of the House in which he said that your Lordships' House would receive legislation directly from Government departments; in other words, directly from the executive, bypassing the House of Commons altogether. I do not recall the Leader of the House saying anything about the primacy of the Department for Work and Pensions, or about the preeminence of the Treasury. He did not say that because that would be a new constitutional departure whose only merit would be its extreme originality.

If the Department for Work and Pensions is to deal directly with your Lordships' House, why do we bother with the House of Commons at all? We could scrap it and let your Lordships' House deal directly with government departments. Is that what we want? We must remember that there is a great deal of concern about the lack of scrutiny of finance Bills. The Institute of Chartered Accountants said of the Finance Act,

"Much of this legislation was barely debated in its progress through Parliament. Many of the provisions became law without either a thorough review or the time for second thoughts or worthwhile amendments".

The ICA summed up its view of the process:

"The tax system has spun out of democratic control".

Therefore, what should we say about a schedule such as this one which has not been seen at all by another place. In my opinion, we should refuse to consider this schedule; we should send it back so that the elected House can perform the function that we all agree is for it alone. It is not the case, as the Minister said in Committee, that in putting forward this suggestion we are challenging the supremacy of the House of Commons. In fact, we are doing the exact opposite. On 18th December the Leader of the House said,

"The House of Commons is to be supreme‖it must have its own way".—[Official Report, 18/12/01; col. 130.]

Of course, that is right, but that is the problem. I have no idea whether this schedule is what the House of Commons wants because it has not had a chance to tell us.

We accept, as the noble and learned Lord, Lord Simon of Glaisdale, says,

"that the vouchsafing of fiscal authority to the other place is a necessary conclusion".—[Official Report, 24/1/01; col. 266.]

However, we do not accept that, in the absence of any consideration by another place, we should vouchsafe fiscal authority to the Department for Work and Pensions. I beg to move.

My Lords, I have two points to make. First, the alleged primacy of the House of Commons has existed in our history for two periods, which between them amount to 26 years. The first was from 1649 to 1653 and the second from 1846 to 1868. Otherwise, what happened is that the executive learned to use patronage to control the House of Commons and still does. Secondly, if another place fails to do its duty, that is no excuse for us not to do ours.

My Lords, the noble Earl, Lord Russell, has addressed some of the points raised by the noble Lord, Lord Saatchi. The amendments seek to remove the powers in Schedule 5 which enable the Inland Revenue to use the information that it obtains when administering tax credits, child benefit, or guardians allowance for any purpose except the particular credit or benefit to which it applies. In other words, if the amendment were to be agreed by the House, we would not be able to use that information or give it to any other government department and passported benefits would be wiped out.

My Lords, it does not mean that.

My Lords, it does. We have already said that. On a previous occasion I made it clear that that is why we need data exchange because without it the Department of Health, which is responsible for determining free prescriptions, and the Department for Education and Skills, which is responsible for determining free school meals, cannot function. The Department for Work and Pensions does not determine those matters, nor does the Inland Revenue; it is the home department that determines them. So they need that information either in its original form or with corroboration from our department. If you want to be responsible for taking free school dinners away from the poor children of this country, so be it. I am sure that is not the intention of the noble Lord, but his amendment would have that effect. It would remove the power that we have to provide that information.

The noble Lord is right to want to ensure that unnecessary information that may transgress the Data Protection Act is not transferred. Our starting point is that all information about claimants is confidential.

The schedule applies to tax credits, child benefit and guardian's allowance. The existing criminal sanction against the unauthorised disclosure of information by revenue staff applies. To provide that efficient, effective, joined-up service to claimants so that they may receive passported benefits, and occasionally to help protect against fraud, we need that information to be disclosed to other bodies. None of those provisions is contrary to the Human Rights Act.

This issue, together with all other aspects of the Bill, was specifically considered by my right honourable friend and the Chancellor of the Exchequer in another place and they signed, as I have, the certificate of compatibility on the introduction of the Bill. Nothing has changed since then. If we are to have passported benefits, these powers are needed so that the information is available to the home departments which will continue properly to exercise those powers within the constraints of the Data Protection Act. No one may use those powers for purposes other than those proposed and they are compatible with the Human Rights Act.

The second point was picked up by the noble Earl, Lord Russell. He seemed to suggest that Schedule 5 has never been seen by the other place. He appeared to suggest that it is a late addition to the Bill and that the other House has never seen it. That simply is not true. Schedule 5 has been in the Bill from the outset. It is for the other place to decide what it scrutinises.

My Lords, I said that the other place had not seen it, by which I meant that it was in the Bill, but that the Government had denied another place the opportunity to discuss it or to scrutinise it.

My Lords, the noble Lord said that the Commons had not "seen" it. The plain English translation of that is that they had not seen it because it is new. On the contrary: they saw it; they chose not to debate it. That is a matter for the Commons. Whether or not your Lordships agree that that was wise, it is not for us to say that because the Commons chose not to discuss it, it is our job to take it all out.

My Lords, perhaps I can assist the noble Baroness. Each House is sovereign over its own procedure. We have no more right to criticise the Commons' use of its procedures than it has to criticise ours.

My Lords, more elegantly put than I could ever hope to. I hope that as a result of those two arguments—first, that removing the schedule by going with this amendment would deny the departments the information they need to passport poor children and families on to their relevant benefits; secondly, that it is not our business to comment on what the Commons chooses to scrutinise—the noble Lord will not wish to pursue the matter further.

My Lords, the House of Commons did not decide not to scrutinise this schedule; the Government decided that it would not scrutinise it. That is what happened. Therefore it remains the case that this House is being required to look at legislation—not for the first time—and far exceed the duties and responsibilities given to it by the Leader of the House in his description of this place. We suggest that it is a responsibility that we should decline. However, the noble Baroness, as she said, is "flinty" on this point and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 65 [Regulations, orders and schemes]:

[Amendment No. 25 not moved.]

moved Amendment No. 26:

After Clause 66, insert the following new clause—

"ADVISORY BODIES AND CONSULTATION

The Social Security Advisory Committee (constituted under section 9 of the Social Security Act 1980 (c. 30) (the social security advisory committee) and Part XIII of the Social Security Administration Act 1992 (c. 5) (advisory bodies and consultation)) and its functions shall apply to tax credits, and paragraph 28(4) and (5) of Schedule 3 to this Act shall amend Part XIII of the Social Security Administration Act 1992 accordingly."

The noble Earl said: My Lords, in moving Amendment No. 26, I shall speak also to Amendment No. 28 which is grouped with it. The effect of these two amendments is to bring the matter of tax credits within the scope of the Social Security Advisory Committee.

When one has the transfer of business between departments, one has a merging of cultures. The purpose of this and one or two other amendments that I have moved is to ensure that within that merging of cultures, the most desirable feature—that is, the culture of social security, which is in many respects a good one—should not be lost.

The Social Security Advisory Committee is of immense value to us in our proceedings here. Regulations are not the easiest of reading matter and to have, when they are before us, the committee's exposition of what the regulations say—what they do, what the bodies it has consulted have to say, what specific defects have been spotted within them and in what ways, if any, they need changing—and to have then the Secretary of State's reply to those matters all in the Printed Paper Office whenever we consider a social security regulation, is an immense advantage to us. So I hope that the transfer of responsibilities to the Treasury will not mean that that benefit will he lost.

I understand that there are already informal arrangements for the Social Security Advisory Committee to be consulted. But that is not the same as actually having its recommendations in the Printed Paper Office where we can read them. That ensures a proper debate on regulations when we get them. In fact, it is an absolutely vital asset to scrutiny.

As I understand it, the problem that the Government have about this is the problem of accountability. I do not see a problem about the accountability of the Social Security Advisory Committee to the Department for Work and Pensions for what is within its remit, and to the Treasury for matters within its remit. After all, there are other advisory bodies which may be accountable to more than one department for work which comes within their particular purview. Even if there is some difficulty seen about this, in the last resort, if Parliament is sovereign, it can do whatever it likes. If Parliament wants to do this, it can. I rather hope it will want to do this. I beg to move.

My Lords, I rise to support the noble Earl in this amendment, which is a very important one. We all accept that the Social Security Advisory Committee does excellent work, and the noble Earl stressed its importance.

Under this Bill the responsibility for this specific social security benefit—it clearly is a social security benefit; I do not accept the argument put forward earlier by the Minister that it is somehow outside the social security structure—and the body best qualified to comment on the way in which the tax credit scheme develops is the Social Security Advisory Committee. The argument is put forward that somehow it is within the remit of the Inland Revenue and not social security. I do not accept that argument. It clearly comes within the social security structure.

I hope therefore that if the noble Baroness seeks to reject this amendment, the matter will be pressed to a Division and the opinion of the House taken upon it. It is an important amendment. After all, £2.7 billion is being paid out in what are indisputably and in reality social security benefits. They are not part of the Inland Revenue—we have been over this argument before—they are social security benefits. Even the parts which are genuine tax credits and deducted from other tax liabilities comprise only 10 per cent of the total. It is entirely appropriate therefore that the Social Security Advisory Committee should keep an eye on the way in which the tax credits system develops without regard to the exact department which is responsible for its administration. I strongly support the view that the noble Earl put forward.

My Lords, I am sorry but I am unable to accept the amendment in the way it is presented on the Marshalled List.

The role of the committee is set out in Part 13 of the Social Security Administration Act. That role is to advise the Secretary of State in connection with the carrying out of his functions. This amendment seeks to widen the remit of the committee, giving it an advisory role in relation to the functions of the Treasury and the Inland Revenue under this Bill.

I understand the concern of your Lordships that the experience and knowledge of the Social Security Advisory Committee, to which we all pay tribute, in the area of social policy can inform the development of the tax credits and that proposals for draft regulations made under this Bill are subject to appropriate scrutiny and consultation. I agree with that sentiment.

When WFTC and DPTC were introduced—similarly when responsibility for national insurance contributions was transferred to the Inland Revenue — the Government were anxious to ensure that that scrutiny and consultation took place. Inland Revenue officials were asked to make sure that the committee was shown any relevant regulations in draft to ensure that we benefited from the expertise of its members. That practice has continued and I should like to take this opportunity to place on record our appreciation of the contribution those members have made.

I said in Grand Committee—I repeat it tonight—that the Inland Revenue and the Social Security Advisory Committee, although they do not have a formal arrangement because that would alter the whole basis of the committee, have an informal arrangement under which consultation takes place. That will continue once the new tax credits are in place. Indeed, officials at the Inland Revenue have already agreed with the Social Security Advisory Committee a basis for ongoing consultation, renewing and updating the arrangements put in place in 1999.

The committee is consulted regularly. It was consulted about the proposed introduction of these two new tax credits and officials met to discuss the Government's proposals. We shall be consulting its members to discuss the regulations. I hope that your Lordships will agree that that consultation exercise is going ahead satisfactorily.

Perhaps I may quote from two of the most recent reports of the advisory committee. In its 12th report, 1999–00, the committee said,

"While these are still early days, these informal procedures have in our opinion worked well and we are grateful to Inland Revenue officials for the care they have taken to keep the committee informed of all relevant developments".

In last year's report, 2000–01, it said,

"We also continue to comment informally on proposals from the Inland Revenue concerning matters such as WFTC. We arc grateful to Inland Revenue officials who continue to keep us closely in touch with relevant developments within then areas of responsibility".

Earl Russell: My Lords, perhaps the noble Baroness can assist us a little further. She says that comments or, at least, judgments from the committee on these matters exist. Is there any chance that in the future those may be made available to the House?

My Lords, where the Inland Revenue and the Treasury introduce significant changes which go out to consultation, then, as with the original papers here and other major developments, there will be a response from the Social Security Advisory Committee. That would be published and placed in the Library of the House. The Social Security Advisory Committee does not publish its smaller—if I can put it that way—responses to the Department for Work and Pensions. Its major issues are put into its annual report. In that sense I hope the noble Earl will agree that there is some, although perhaps not perfect, analogy, between the two systems.

While I sympathise with what the noble Earl seeks to do, I think that the informal arrangements work very well, as do the Social Security Advisory Committee and the Inland Revenue. Where there are major changes which go out to consultation, the views of the Social Security Advisory Committee are sought by the Inland Revenue, and are placed in the Library of the House. With those assurances, I hope that it is not appropriate to change its formal terms of reference. The informal arrangements that we have are proving, so far as I can see, highly satisfactory and highly effective. I hope that the noble Earl is able to withdraw his amendment.

My Lords, I am not clear what the noble Earl who moved the amendment proposes—

My Lords, this is the amendment of the noble Earl, Lord Russell.

My Lords, I thought that the noble Lord, Lord Higgins, wished to intervene before the Minister sat down.

I am grateful to the Minister for the one crumb of comfort that she has given me. I think that it is a rich crumb. The making available of the reports of the committee to this House is of great value.

I knew perfectly well that I was proposing to change the committee's remit. I do not see why that is such a particularly desperate and dangerous thing to do. I understand that there is a culture which says that it has not happened before, therefore it is desperately dangerous. But there is substance in the remark of Edmund Burke that,

"Whatever now is established, once was innovation".

So, I am not persuaded by those arguments.

I am grateful for the support of the noble Lord, Lord Higgins, but when he urges me to divide the House, I think of the story of the 18th century MP. He was a particularly boring MP, who spoke for well over three hours until the Chamber was completely empty. At the end of which he began to read the Riot Act until Edmund Burke, of all improbable people, got up and said:

"Ah, my friend, you are too late. See you not the crowd has dispersed?"

For that reason, I beg leave to withdraw the amendment.

My Lords—

Is it your Lordships pleasure that this amendment be withdrawn?

My Lords, we, on this Bench, decline. We believe that there is a case for putting the amendment formally on the face of the Bill. We therefore wish to test the opinion of the House.