asked Her Majesty's Government:

How their commitment given at European Union level in May "promoting a 10-year work programme on sustainable production and consumption with the aim of reversing the trends in the loss of natural resources and promoting the decoupling of economic growth from environmental degradation" will be drawn to the attention of consumers.

My Lords, the Government and the European Union are seeking agreement at the World Summit on Sustainable Development to a 10-year work programme on sustainable production and consumption. Clearly, informing consumers about the outcomes of the world summit will form part of the EU's communication strategy. Raising consumer awareness of the environmental pressures remains integral to our promotion of environmental policies, programmes and campaigns.

My Lords, I thank the Minister for his reply. However, the Government have made very little effort to inform consumers of what exactly their goals are and how consumers could translate that in terms of exercising a good choice on the high street. Does the Minister agree that not many Members of your Lordships' House have heard of last year's DEFRA campaign, "Pick the daisy", which was about choosing products with an EU eco-label? Does he agree that that is not fair to manufacturers, who are trying to up their game and produce products that use fewer natural resources, or to consumers, who are unable to implement any buying power in order to make a better environmental choice?

My Lords, it is unfair to say that the Government have not taken initiatives in this area. We have, in conjunction with industry, greatly improved the commitments involving the provision of environmental information to consumers. There are examples in the area of domestic appliances. Eco-labelling is only one aspect of that information. We have not developed a nationwide eco-labelling scheme partly because the European eco-label, with a daisy, is being developed at that level. It is important in an internationally traded sector to have a Europe-wide system. Wider promotion of information on energy consumption and material consumption is also part of the system, and not a simple label.

My Lords, the Question on the Order Paper relates to decoupling of economic growth and environmental degradation. The Government are to be congratulated on reducing the energy coefficient of growth, which is the relationship between GDP and the growth of energy consumption—growth is now slower. However, does the Minister agree that we have not so far succeeded in reducing the waste coefficient of growth? Do we know why that is and why the price mechanism is not reducing packaging and other coefficients of growth? If the tax and price mechanism is not somehow giving the right signals, do we face the dilemma that the alternative is regulation, which in other respects is not now a popular policy?

My Lords, my noble friend correct to say that we have reduced the energy coefficient. I believe that 30 or 40 years ago it was more than 1; in other words, we used more energy for every 1 per cent of growth in GDP. The figure is now substantially lower in the UK and worldwide. We have also reduced the total resource coefficient. Over the past 30 years, UK consumption of resources grew by about 12 per cent, whereas GDP and income grew by nearly 90 per cent. We had least success in the waste area. We must address information and consumer behaviour in that area and, ultimately, regulation and price. A combination of those instruments is needed.

My Lords, as someone who has in the past sold daisies to Japan, I will concentrate, as did the noble Lord, Lord Lea of Crondall, on the second half of the Question. Exactly how do the Government propose to decouple economic growth from environmental degradation other than waste?

My Lords, I have already indicated that we have had some success in terms of reduction and the relationship between total use of resources and growth in GDP. That reduction must continue. We have had substantial success in relation to energy. In conjunction with industry, we are looking at various market transformations, particularly in the area of domestic appliances, to allow consumers to make choices that minimise energy use and waste content. Our main approach is to raise awareness and work with market solutions, but it is clear that better labelling and a degree of regulation also play a part.

My Lords, does the Minister agree that, if the Government were to give active support to a vibrant bio-fuel industry, that would resolve an enormous amount of their commitments?

My Lords, as noble Lords know, we are committed to the development of renewable energies of many sorts. On the issue of bio-fuels, as the noble Lord, Lord Palmer, knows, the department is seriously considering the possibilities of various forms of renewable energy through crops, in respect of biomass and liquid bio-fuels.

My Lords, does the Minister agree that consumers learn about sustainability issues but that they tend to do so rather slowly? Introducing one sector after another is quite a wise policy. People have already learnt to look for recycled paper and glass products and, when people buy something that is made of wood, they look to see whether it has come from sustainable forests. Does the Minister agree that to attack the question sector by sector is a wise approach? What area of manufacturing do the Government plan to look at next?

My Lords, in one sense, that is a sensible approach, in that we must establish in people's consciousness the information for which they must look. We have had substantial success in relation to the energy consumption of domestic appliances. The scale of A to G has now been reduced because people buy only the top three, most energy efficient appliances. Both the Government and industry are focusing on providing better consumer information, based on energy consumption, in that area.

My Lords, does the Minister accept that the Government have been a little slow in considering some of these issues? As a result, we are experiencing tremendous problems with mountains of fridges. Soon, that will also be the case in respect of televisions. Many European directives are giving us enormous problems of which the general public are not aware.

My Lords, the European directives are geared to reducing waste and the damaging effects of waste, particularly in relation to fridges. We are tackling that problem. Long discussions have been held in various places about the effectiveness of the directive concerning fridges. There is a difficult, short-term problem relating to the dumping of fridges, but we are tackling that problem and overcoming it.

My Lords, I declare an interest as chair of the Forestry Commission. Will the Minister remind or announce to consumers in the House that the state forestry service in Britain is the first in the world to be accredited as sustainable? Can he give assurances to all our consumers in Britain that by-products from the state forestry service will, indeed, be from sustainable forests?

My Lords, I accept both the declaration of interest and the serious commitment of the Forestry Commission to sustainable timber. My department has given very clear advice to consumers on the choice of timber-based materials. Purchases of wood are an important contribution to that end.

asked Her Majesty's Government:

What steps they are taking to implement the commitment made in the White Paper Valuing People: A New Strategy for Learning Disability for the 21st Century (Cm 5086, paragraph 7.16) to promote supported living for people with a learning disability living with older parents aged 70 and over.

My Lords, the Government are committed to the implementation of the White Paper. They have issued Section 7 guidance and promoting supported living for people with a learning disability living with older carers is one of the priorities for both the revenue and capital elements of the £42 million learning disability development fund.

My Lords, I thank the Minister for that reply. Can he confirm that the Department of Health and the Office of the Deputy Prime Minister will issue joint guidance to local housing authorities and social services to ensure that they increase their efforts to provide such services and such housing for people with a learning disability who live at home with parents or a parent aged 70 or over? Will the Minister comment on how he feels that the joint guidance will be accepted? I should like to point out to your Lordships that, in view of the debate in another place yesterday, I use the word "joint" in its meaning of "togetherness".

My Lords, this Government are always together. The Department of Health and the Office of the Deputy Prime Minister hope to issue guidance very shortly. I believe that local authorities will find it helpful and supportive. The guidance will give a great deal of good advice on how they should develop their strategies. In doing so, we are particularly anxious that local authorities pick up the pressing need of older carers who have devoted their lives to their children with learning disabilities and worry about the future. We intend to monitor how local authorities take forward those plans and proposals.

My Lords, people with an appalling disability should be a priority group but they have been neglected. Is it not likely that the Government's guidance will also be neglected? Can my noble friend say whether Section 7 guidance is mandatory?

My Lords, so far as concerns Section 7 guidance, the courts have held that local authorities are required to follow the path charted by the Secretary of State's guidance. They have liberty to deviate from it where they judge, on admissible grounds, that there is a good reason to do so but they do not have the freedom to take a substantially different course. I believe that that makes the position absolutely clear. As my noble friend suggests, I acknowledge that the record of local authorities in this area has been very patchy. That is why local partnership boards will be required to produce housing strategies in the winter of 2002–03. Those will he informed by the local assessments of needs, which are being reviewed at present, and by the guidance that I have already mentioned.

My Lords, is the Minister aware that village communities are the cheapest and happiest places for people with learning difficulties to live in? Anything that the Government can do to stimulate the creation of further village communities will do most to solve this problem.

My Lords, I am aware of the noble Lord's deep concern about the value of village communities and his wish to ensure that such provision is available. He will know that the White Paper specified that village communities are one option which local partnership boards, comprising local authorities and other statutory agencies at local level, will take into account. I recognise that, for some people, village communities offer a genuine option. Equally, we expect the local partnership boards to consider other options as well, including supported living and other approaches that have been shown to work well.

My Lords, what guidance do the Government intend to give to people in their fifties, for example, whose children with learning disabilities live with them? Can the Minister say something about future planning? Thankfully, the life expectancy of those with learning disabilities is being raised all the time. However, that means that over time the problem to which I refer will increase.

My Lords, that point was made in the recent report by Mencap, which criticises local authorities for dealing only with the problem of older carers when perhaps one carer has died or a crisis point is reached. Clearly, the more we plan in advance the better. The local partnership boards are now undertaking an assessment of those kinds of needs in order to be able to plan for the future.

My Lords, can my noble friend tell the House whether the Government will now be urgently reviewing the availability of local authority funded housing support places for this priority group, since at the present rate of progress— 227 places a year—it will take 30 years to meet the needs of people with a learning disability now living with parents aged 70 and above?

My Lords, the precise point of the Section 7 guidance is to ensure that local authorities within the partnership boards develop a local housing strategy. It is our expectation that in the light of their assessment of local needs of people with learning disabilities and their carers, local authorities will develop a housing strategy this winter, which we shall carefully review.

We are keen to emphasise to local authorities that while they need to look at special provisions, much of the availability of social housing could well prove to be attractive to people with learning disabilities. It is important that all options are considered.

asked Her Majesty's Government:

What are their current policies towards Zimbabwe.

My Lords, there is a strong international consensus opposed to the actions of the Zimbabwe regime. We shall work to strengthen that consensus, while supporting credible regional efforts—in particular the joint initiative of South Africa and Nigeria— to restore democratic legitimacy to Zimbabwe.

My Lords, can the Minister confirm that at their June meeting, the European Union foreign ministers decided not to intensify the sanctions against Mr Mugabe and his cronies? Can she also confirm that at the recent G8 conference in Canada the documents issued by the conference contained no reference to Zimbabwe, nor did the Statement on the G8 conference given by the Prime Minister last week in another place?

Is the disappearance of Zimbabwe from the Government's radar screen the result of the fact that in the new treaty for the African union great importance is attached to human rights and good governance and not least to peer pressure to remedy any backsliding? Is the Government's policy now to leave any effort towards remedying the situation in Zimbabwe, which is causing ruin in most of Southern Africa, to African countries alone?

My Lords, Zimbabwe has not disappeared from the Government's radar screen. We have discussed Zimbabwe on many occasions in this House and sought to make clear the UK position. Clearly, I have not been successful in that. Perhaps my communication skills are at fault.

I shall repeat the Government's position. We deplore the violence and intimidation in Zimbabwe. We deeply regret the economic mismanagement 'which has led to a food crisis. That means that nearly 50 per cent of the population could need supplementary feeding by the end of the year. We have worked consistently to ensure international consensus on the issue. At the Commonwealth "troika" meeting, Zimbabwe was suspended from the Council of the Commonwealth. We have pressed the importance of human rights and good governance through the G8 process. The G8 Africa action plan contains several strong statements about the importance of good governance and the rule of law. I hope that noble Lords will read that.

My Lords, the Government's policy on Zimbabwe is broadly right. However, a solution to the problem will have to come from the African countries. Is my noble friend aware that our efforts should therefore be concentrated on trying to influence the African countries which can put pressure on Mr Mugabe to change his policies? I refer in particular to the South African Government. They persuaded Mr Smith to change his policies. Perhaps they will have the same effect on Mr Mugabe.

My noble friend spoke of starvation in Southern Africa. Which policies are the Government in a position to implement in relation to the starving people in Zimbabwe? How will we get the food to them?

My Lords, I agree with my noble friend. The leadership shown from within the African continent is essential in helping to resolve the issue. I have spoken on many occasions about the importance of peer pressure from the countries around Zimbabwe, particularly as they suffer from the economic mismanagement in Zimbabwe. In that context, the Southern African Development Community, including South Africa, is important.

As regards the food crisis in southern Africa, and in particular Zimbabwe, it is important that a different kind of economic management and a sustainable and transparent land reform process are put in place. Clearly, distribution of food will be a problem. However, we remain committed to working with our international partners, including the World Food Programme, on that issue.

My Lords, did the Minister note the action of the southern African churches on the UN international day in support of victims of torture, at which numerous testimonies were given of rape, violence and torture? Did she note also the suggestion made in South Africa that sooner or later there will have to be a truth commission to deal with those events? Will the Government support an international initiative to collect and validate witness statements so that in due course such a truth commission would be armed with the fullest possible facts?

My Lords, I am aware that not only the South African churches but other NGOs are concerned with the situation in Zimbabwe and, in particular, victims of torture. At present, our focus is not only on creating a political consensus but on dealing with the immediate humanitarian crisis. I am aware that discussions are ongoing, particularly in the NGO community, about the possibility of a truth commission. Those are not discussions in which we as a government are currently engaged. However, once we get through the current crisis, we shall seriously consider the matter.

My Lords, is the Minister aware—I am not sure that she was when we pressed her on sanctions earlier in the week—that the Foreign Secretary undertook to review the whole operation of travel sanctions at a meeting to be held on 22nd July, which is the week after next? Is she also aware that he stated there is a strong case for an extension of the measures? We agree with that. I urge the Minister to urge her colleagues, as vigorously as possible, to get on with an extension of the sanctions, which have not worked well. We must bear in mind that we are dealing with personnel led by Mr Mugabe, who are heading for the destitution of Zimbabwe, the undermining of the entire region's prosperity and the starvation of millions of people.

My Lords, I think that the noble Lord, Lord Howell, is referring to the GAC meeting on 22nd July. The sanctions are EU sanctions. There will be discussion at that GAC meeting. It is for that meeting to reach a decision on whether or not it wants to extend those sanctions.

I do not agree with the noble Lord that the sanctions have not worked well. I have been pressed in this House on the attendance of Robert Mugabe, for example, at the World Food Summit meeting in Rome. I hope that I have made it clear to the House that there is an exemption for attendance at international UN meetings. That applies across the board. It does not apply only to Robert Mugabe, but to other world leaders who face travel bans for other situations.

asked Her Majesty's Government:

Whether they have any plans to submit evidence to the Committee on Standards in Public Life on the answering of parliamentary Questions.

My Lords, the Government have already submitted evidence to the Committee on Standards in Public Life as part of their inquiry into defining the boundaries within the executive. They have no plans to submit any further written evidence.

My Lords, I thank the Minister for that reply. In the light of revelations this week that email conversations between civil servants working on Answers to parliamentary Questions from various honourable friends of mine in another place, included gems such as,

"Matthew Taylor is a tricky customer and he's not asking this just to help the government"—

a perceptive comment, if I may say so—and,

"I have got form on Willis",

can the Minister say whether the departmental guidelines in relation to parliamentary Questions are the same in the two Houses?

Will he give us a guarantee that, particularly in this House, identical answers will be given to the same Questions for Written Answer, regardless of which noble Lords ask them?

My Lords, my understanding, which I shall check, is that the Answers would be the same in both Houses and that they would be constructed under the same disciplines. Where there has been any attempt to frustrate, or to be disobliging to your Lordships or to any MP in another place, of course we shall insist that proprieties are observed. The Department for Education and Skills has reminded its staff of their responsibilities and of the need for impartiality.

My Lords, can my noble friend confirm that it is thanks to the Labour Government's Data Protection Act 1998 that individuals have a much greater right to know what personal data are held about them by government departments? That is a welcome development, the benefits of which should be offset against the opportunities for a bit of point scoring.

My Lords, I agree with my noble friend in principle. However, it inevitably makes for uncomfortable moments. One must remember that we are dealing with an organisation of almost half a million civil servants. So there will occasionally be mistakes and errors of judgment.

My Lords, are there any plans to submit evidence on not answering parliamentary Questions, or on giving evasive replies—although, of course, I do not have in mind any Member of this House on the Government Front Bench?

My Lords, departments will remind staff of their responsibilities. It is a matter that is taken seriously by the Government. As I said earlier, the Department for Education and Skills has already taken steps to remind its staff.

My Lords, are civil servants encouraged or discouraged to keep the type of personal information on Members of Parliament that we have been hearing about?

My Lords, from my experience at ministerial level they are neither discouraged nor encouraged. As I said earlier, there are proprieties which are long-standing that should be observed by the departments. As my noble friend has said, the public, Members of Parliament and others have far more access to data than was ever possible in the past.

My Lords, if it has been the practice of departments in preparing for ministerial Questions to pen portraits of Liberal Democrats, I wonder whether he could put the one on my noble friend Lord Russell in the Library of the House

My Lords, as an admirer of the noble Earl I would do that with great enthusiasm. The noble Lord touches on a point which came up recently. I was looking at a submission which had rather personalised—I thought—profiles attached, which talked about an eccentric from that great cradle of eccentricity, and named a certain school. I protested about that, but was told that it came off the Internet and was pulled off one of the commercial suppliers. So I do not think that we can blame the Civil Service for information that is readily available on most of your Lordships' shelves.

My Lords, from the answers that my noble friend has given is he on the point of delivering a reply to a Question I tabled to him on 19th of last month—an Answer to which was due yesterday—which concerned the safety of the wave screen at Brixham harbour?

My Lords, I shall return to the department with some urgency and report back.

My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Minister for Work and Pensions. The Statement is as follows:

"I would like to make a Statement on the Pickering report that was published this morning.

"The report is the culmination of nine months of hard work by Alan Pickering and his team. I would like to thank him and also everyone who took the time and effort to submit their views—some of whom are here today.

"In his report Alan Pickering acknowledges the encouragement he received not only from my right honourable friends for Edinburgh Central and Makerfield, but also from the right honourable and honourable members opposite for Hitchin and Harpenden, Havant and Northavon.

"I believe pensions simplification has to be at the heart of any strategy to encourage greater pension provision. We need to deal with the complexities built up over the years by successive governments.

"Alan's report makes 52 recommendations. Among the key ones are: a new pensions Act to consolidate all existing private pensions legislation; a new, more proactive, regulator; a better, more targeted approach for communicating with pension scheme members; more flexibility to modify schemes; allowing employers to make membership of their occupational pension scheme a condition of employment; and the ending of compulsory indexation for defined benefit pensions and compulsory survivors' benefits.

"The report, together with Ron Sandler's proposals—announced by my honourable friend the Financial Secretary on Tuesday—represents the first stage of a comprehensive review of occupational and personal pension provision in the country.

"The Government will take a radical look at the issues, together with the results of the Inland Revenue review of tax simplification, when that is completed. In the autumn we will come forward with our proposals in a Green Paper.

"This will initiate a wide-ranging consultation. It will look at private pensions policy in the round, including the opportunities open to people around retirement, and will set out the Government's proposals to enable people to build up more pension savings.

"Alan Pickering's report covers some complex issues and includes some tough choices—the inevitable dilemmas faced by all simplifiers.

"The report presents challenges to us all—to employees and their unions, to employers and commercial pension providers, to government and opposition.

"I believe we need to be guided by the following principles and objectives, grounded in a long-term approach; fairness, security in retirement, informed choice for consumers, simple and proportionate regulation, ensuring incentives are effective and well understood, promoting employment among older workers and flexibility to give individuals more choice over the pace at which they retire from the labour market. I hope that we can secure all-party agreement to these.

"The Government believe that pension provision should be based on partnership, which can secure lasting buy-in from all key players.

"We must strike the right balances between sometimes competing goals. We want the simplicity that enables people to make informed choices, without stifling product innovation and competition. We want a proportionate regulatory framework that provides sufficient security for savers while making it worthwhile for employers and commercial providers to make available good pension products. We need to ensure that we remove unnecessary barriers to employer provision and employer contributions. We need to make it easier for people to save and easier to sell savings products, as Ron Sandler's report proposed on Tuesday. We need to achieve all of that and more against the remorseless arithmetic that tells us that because we are living longer and want to maintain a good standard of living in retirement, we need to save more, work longer, or achieve a combination of both.

"We wanted Alan Pickering to present a strong challenge to the degree of regulation of private pensions. He has done that; he has made some valuable proposals for simplifying pensions legislation and reducing administrative burdens on both schemes and employers—cutting costs and simplifying choices for individuals. His recommendations also present some tough choices.

"Let us consider, for example, his recommendation that employers should have the choice to make joining a company pension a condition of employment. Some 16 per cent of people who could benefit from a company pension scheme presently choose not to do so. Compelling people to join would restrict those people's choice. But we must balance against that the beneficial effects for schemes and the overall effect of extending pension coverage.

"Alan has also made a number of specific recommendations for easements of legislation, especially to repeal Section 67 of the Pensions Act 1995. Again, that throws up a tough choice. That recommendation would mean that if employers faced funding constraints with their scheme, they could have an option to reduce future funding costs rather than to close the scheme. That would remove an absolute guarantee against the consequences of change but might well secure a better outcome for members and the future of the scheme, when set against the alternative of its closure. Alan also recommends an end to compulsory indexation of pensions and the removal of compulsory survivors' benefits as a condition of contracting out.

"On first reading, those proposals are not attractive. They go against the drive for the past 30 years to price-protect pensions and enhance survivors' benefits. But, in the light of Alan Pickering's report, we will need to consider all the consequences.

"As well as the big themes and recommendations to which I have referred, a number of more modest issues are addressed to my department and to others: for example, improving how contracting out is administered, streamlining procedures and reducing general administrative burdens; considering ways to provide better advice through the workplace; and improving information given to pension scheme members. Those recommendations have considerable merit and, subject to the response that we receive to the report, I intend to implement them.

"In conclusion, Alan Pickering's report offers clear options for simplification and makes a valuable contribution to the debate that we must have about the next stage of pension reform. We must face up to the tough choices that he sets out. In seeking to simplify in future, we must also face up to what is in many ways the harder challenge of simplifying the past, in the sense that we need to simplify the different regulations that have built up over the years. Otherwise, we will end up adding yet another layer to the existing layer cake of regulation and complexity.

"Alan Pickering's proposals are radical, ambitious and pragmatic. I urge the House, the public, employers, trade unions and pension providers——all those whose partnership is essential for effective pension reform—to give them full and constructive consideration. The Government will certainly do so. The acid tests for the Green Paper must be what will increase the level of savings for retirement and make a secure occupational pension accessible to as many people as possible."

My Lords, that concludes the Statement.

My Lords, first, I thank the noble Baroness for repeating the Statement made in another place and declare an interest as the chairman of an occupational pension scheme. We certainly welcome the report and congratulate Mr Pickering—as I prefer to refer to him, rather than in the informal manner used by the Minister. Of course, Mr Pickering and his team benefited from widespread consultation, including that with my honourable friend Mr Willetts in another place.

Having said that, the terms of reference of the report were restrictive. For that reason, it does not convey the present sense of crisis in pension provision. Neither does it analyse the causes of that crisis, other than in a passing reference to the problems of FRS 17, which have, I hope, been at least deferred, and the minimum funding requirement.

About five years go, the Government rightly paid tribute to the tremendous contribution made by company schemes, calling them the jewel in the crown, and so on. But, since then, they have suffered one blow after another—most notoriously, of course, the Chancellor of the Exchequer's attack on them in his first Budget. How much worse off does the Minister think that pension schemes now are as a result of that? Does that not now amount to more than £35 billion?

Nor does the report refer to other specific examples, such as the deterrent effect that the minimum income guarantee related to earnings may have on people who may otherwise contribute to pensions. That is especially true of defined contribution schemes. The noble Baronesses shakes her head. What size of pension fund would he necessary to lift people above the level of benefit provided by the minimum income guarantee?

As the report makes clear, it must be considered against the Sandler report, which we discussed last Tuesday. Sandler was enthusiastic about stakeholder products, which we must consider against the background of the stakeholder pension. That has been disappointing in terms of reaching its target audience of about 5 million people. As a result of how it has operated, only a small proportion of those whom the Government hoped to help—some estimates are as low as 2 per cent—may have benefited.

In that context, I am concerned by the expression used by the Financial Secretary to the Treasury when she referred to such products as "a safe haven". Would the noble Baroness refer to the stakeholder pension as a safe haven? In my view, such a statement is akin to mis-selling. If someone invested, say, £1,000 in a stakeholder pension, is that likely to be worth more or less now?

I warmly welcome some parts of the report. In a paragraph to which the Statement did not refer, but which is none the less important, it considers whether trustees should have more flexibility in giving advice to their beneficiaries. That is a real problem. Pickering envisages that most in the context of whether they could recommend a particular pension. But trustees are also inhibited by the current legislation from expressing a view on, for example, what someone who has had an additional voluntary contribution policy with Equitable Life for the past couple of years or so should do about that. Trustees may well know more about that than the independent financial advisers to whom they otherwise necessarily must refer their beneficiaries.

That brings us to the question of compulsory membership. It is estimated that about 16 per cent of employees do not join company schemes. That is a question of communication, but it is extraordinary that not everyone who is entitled to join even the best scheme does so. That is a cause for concern, although whether compulsion is the right answer is debatable.

The report also rightly draws especial attention to the problems of regulation. Basically, it distinguishes between the administrative burden placed on company schemes—which is great and has steadily increased in recent years—and what Pickering refers to as prescription on design, that is to say, on what should be the terms of the pension scheme. He draws particular attention to the effect on defined benefit schemes and questions whether they should be required to be indexed and to include survivor benefits. Those are difficult areas and will require careful consideration.

There is a slight counsel of despair in Pickering's observation that such provisions may have to be abandoned because of the difficulties that companies are facing in the present climate. The report refers also to the reduction in the different types of pension, where a balance must be struck. There are advantages in simplification but if the number of schemes is reduced too much, consumer choice will be limited.

In recent months we have seen something almost approaching panic, with companies closing defined benefit schemes and moving towards defined contribution schemes—the effect of the factors that I have mentioned and of a decline in the stock market. If that trend continues unabated, there may be little left of the company pension scheme that has been admired for such a long time.

I urge the Government to react quickly to the report. The Statement promises a Green Paper in the autumn, but one was published shortly after the Government came to office. It aimed at reversing the proportion of private to public schemes to 60 per cent and 40 per cent. Since then, the proportion has moved steadily in the wrong direction. It is important that the Government's response should not be unduly delayed.

The consultation with Mr. Pickering has been extremely helpful, but if the present situation is not to deteriorate further, it will be necessary to set a tight timetable for assessing the proposals made in the report—which I say again is extremely helpful.

My Lords, I thank the noble Baroness the Minister for repeating the Statement and welcome this extremely interesting and thought-provoking report.

It is easy to view the report in a particular way against the current crisis, when many of its proposals are for the longer term. It is incumbent upon the House to look at the design and intention behind some of Mr. Pickering's proposals.

There is much in the report for careful and thorough consideration, such as the proposals for survivor benefits. The report describes the changing nature of relationships and employment. From earlier debates on pension policy, it is clear that a crisis exists in relation to pensions for women. For the foreseeable future, women will earn much less than their male counterparts—so their pension purchasing power will inevitably be lower. What efforts will be made in the consultations to focus on women's pension problems?

The report's second most important proposal concerns indexation. Mr. Pickering observes that a pension is a pension is a pension. However, in many cases a pension scheme promise is not worth the paper that it is written on. The settlement as between private and state pension provision is falling apart. It is difficult to see how some of the indexation proposals can be taken on board to achieve the report's stated objective of increasing confidence in occupational pensions and savings.

Some aspects that are not part of the report, such as an analysis of the healthcare costs of retirement, must be part of the Green Paper. I hope that that paper will not make the mistake of confusing mortality with morbidity. The prospect of a large number of older people living much longer at considerably higher healthcare costs must be taken into consideration when devising a long-term pensions policy.

My one strong criticism of the report is that it greatly overestimates the power of employees individually or collectively to challenge pensions provision decisions made by their employers. In recent months, we have seen what it takes for even informed bodies of workers to mount a legal challenge. The report's proposals rest on extremely well-equipped and powerful employees. I am not sure that that situation will exist in future.

The report offers the potential for a wholly new contract for occupational pensions. Equally, because the proposals are tentative, there is the potential for a complete disaster or dog's dinner. What will the consultation document contain about the timing of implementation—on which many of the proposals and transitional arrangements rest?

My Lords, I too find it difficult to talk about Alan. I thank the noble Lord, Lord Higgins, and the noble Baroness, Lady Barker, for their constructive approach. If we are to find ways through difficult situations with staying power, there must be consent. Informed criticism is a different aspect. I much welcome the consensual tone evident so far and hope that it will be perpetuated.

The noble Lord asked about the cost of ACT to pension schemes. About £5 billion a year came back to the Exchequer as a result of no longer having the tax defamation that was ACT—of which about £3·5 billion fell directly on pension schemes. British companies, unlike American companies, were paying as a result of a tax distortion too much in dividends while not making enough of the investment on which long-term jobs and the pensions of future generations depend. We are delighted to see that, since that change in the tax structure, investment in companies has increased, which means that it is having the effect that we hoped for.

Secondly, the noble Lord asked about pension credit. He asked what size of fund would be needed to raise somebody above MIG. In fact, it will not work like that. Pension credit has addressed that issue, and the noble Lord's question is a pre-pension credit question. For example, for someone who has a full state retirement pension and an occupational pension of £100 a week, that occupational pension would not raise them above M1G. We can work out what the pension pot would have to be for that £100. Under pension credit, that pensioner would keep £60 of the £100, and the figure would go up to something like £113 a week, as opposed to the current figure of £100 a week. Therefore, the question will not be relevant once the pension credit system is in place next year.

The third point that the noble Lord raised was about stakeholders. I simply disagree with him about the success or otherwise of stakeholders. So far, something like 815,000 people have joined a stakeholder scheme. The vast majority of those people are the people of working age whom we hoped to help. Because those products are low-cost, transparent trackers of the index, they are safer, cheaper and more readily available than the products on the market hitherto.

The noble Lord also raised a query about the Government's response to the move from defined benefit to defined contribution schemes. As I said, they are safer, they are low-cost, and they are transparent trackers. The safest product of all is one that does not relate to any volatility on the market and is simply guaranteed by the taxpayer—the retirement pension and similar savings vehicles. Among funded occupational schemes, the stakeholder product, given its low cost, its transparency and the fact that it tracks the index, is likely to be safer and more reliable than others currently available to people of modest income.

The noble Lord's last major point was about the DB-to-DC schemes. He will know that, with the move from DB to DC schemes, there is a transfer of risk. The noble Baroness, Lady Barker, said that a pension promise was not a pension promise when it was not delivered. For many years, employers have enjoyed a pension contributions holiday and have not had to meet the pension promise behind the defined benefit scheme. Even last year, half of all companies had either suspended or reduced pension contributions. The moment that employers are required to pay the full sum implied in the pension promise, some of them, encouraged by financial directors, vote with their feet and move into defined contribution schemes and use that as an opportunity to reduce their pension commitment from an average of 12 to 15 per cent to 5 to 7 per cent.

The key thing is whether not only employees but employers pay at the levels that we need to establish decent retirement incomes in old age. We will consider whether. Pickering has the right solution. But there is no dispute about the fact that what matters is that, over time, if the same level of contribution is kept up and if we make the same assumptions about the stock market, a DC scheme and a DB scheme should not produce strikingly different outcomes. The trouble is that employers are using the opportunity to cut contributions, which means that outcomes will be very different.

The noble Baroness, Lady Barker, pressed me on two major points, the first of which was timing. We will have a consultation document, and it will probably—it is a matter for others, not for me lead to legislation. Were that to be the case and should there be consensus, we would be talking about the year after for consultation with the industry, and we would have to give two years' notice and so on. The noble Baroness is right about that. Changing pensions structures takes time because people invest in them for 40 years or so. It is right that we should get a consensus for change and, as far as possible, consider all the aspects properly, rather than going for a hasty solution.

The noble Baroness also asked about survivors' benefits and whether we were considering the situation properly. I am happy to repeat the undertaking that the Secretary of State gave earlier today. The consultative document will consider all implications for the gender balance properly and thoroughly. Obviously, Pickering considers the three balances: that between employers and employees; that between pension providers and consumers; and that between employees with a pension and those without. However, the Government must take two other balances into consideration. One is the gender balance and the other is the intergenerational contract between current pensioners, who may be open to Section 67 changes, and those who are deferred pensioners or current employees. That is part of the wider context, wider than the issues that Pickering addressed.

The noble Baroness will know that, according to the Association of British Insurers statistics, something like 80 per cent of those buying a money purchase pot go for flat-rate single life products because they prefer to have the money up front. That is a consideration because, if one is not careful, one simply pushes the problem of poverty further into old age. That is particularly the case for women. That is why we must consider whether we can encourage women not only to come into the labour market, as we do, but to build up a proper, independent pension provision, including pension sharing on divorce for those whose relationship ends, something of whichLady Seear, was a prominent advocate. There is also the question of the roles of the state second pension and the stakeholder scheme.

The Government have produced ways to help women to compensate for the fact that they have lower earnings and earn for a shorter time, although they live longer. That produces a complex of pension issues that are sharper than those experienced by men.

The noble Lord, Lord Higgins, teased us about the previous Green Paper on pension reform, published, I think, in December 1998. He asked what we had done. In the foreword, the Prime Minister said that we needed an assurance of a decent income through the new minimum income guarantee and that that income should rise in line with earnings. We have done that; it will become the pension credit. The Prime Minister also called for dramatically better pension provision for those on low incomes and those unable to work because they are carers or are disabled. We have delivered that; it is called the state second pension. The third thing that he called for was a better deal for middle and higher income earners through low-cost and flexible personal stakeholder pensions. We have delivered that; it is called the stakeholder system.

The previous Green Paper led to three pieces of legislation. I hope that the consultative document, which may lead to legislation, will not lead to quite so much.

My Lords, I thank my noble friend for making the Statement. I welcome the Pickering report. It is interesting, and it floats many ideas that need serious consideration. I declare my interest. For many years, I was a member of the Occupational Pensions Board, the precursor to the Occupational Pensions Regulatory Authority. I am a current member of the council of OPAS, the Pensions Advisory Service.

The report, I am glad to say, refers to member-nominated trustees. Trustees play an important role in representing members' interests in schemes. It is important that trustees should have proper training and support to carry out those functions. I was also interested by—and I support—the report's recommendation that it should be possible for firms to make it a condition of employment that people belong to the occupational scheme. On previous occasions on which we discussed pensions, I put down amendments to that effect but never managed to get them carried. It is an important matter. A situation in which employees are bound by contract to contribute to a scheme gives us further reason for having a good regulatory mechanism to ensure that the schemes in which they invest their earnings and in which the employer also invests should be safe.

One of the problems is that recent scandals have caused the public to lose faith, to some extent, in pension provision. That is a great pity. Occupational pensions are one of the great successes of the past century. Because of occupational pension provision, many pensioners now retire on higher incomes than they would have had had pension provision not existed.

I disagree with Alan Pickering on the issue of indexation. In my experience, schemes index, if at all, to a maximum of five per cent per annum anyway. It is a fairly moderate system of indexation, which does not take account of the possibility of a higher rate of inflation. If people are to have faith in their pension provision, they need to have faith in the fact that it will keep pace with rising costs in the future.

Another interesting recommendation made by Pickering is that there should be multi-employer schemes. It is worth considering the case for small employers to group together, perhaps on a geographical basis, to provide schemes for employees in their areas. It is important that we have an opportunity for full discussion of those issues.

The noble Baroness, Lady Barker, raised two very important issues; namely, provision for women and interaction with the state scheme. I welcome the Minister's assurance that there will be a Green Paper and an opportunity for full consultation and further discussion.

My Lords, my noble friend dissented on two propositions—that affecting survivors' benefits and that eradicating RPI from occupational pensions. I remind my noble friend that, under Pickering, those would be optional proposals that could be part of an employer's scheme. It is Pickering's belief that what encourages employers to leave DB schemes and transfer to DC schemes is the fact that the better the scheme, the more regulated and onerous it may appear. Therefore, if one strips it down to a bare bones scheme and makes it cheaper, there will be a greater willingness by employers to both support and access it. The problem is that that concept is counterfactual; one does not know whether or not it is true. That is precisely why we need the consultation for which my noble friend has called.

My Lords, in view of the fact that the amount of pension paid depends on the size of the pension fund, will the Minister say whether the recent tax changes relating to dividends to pension funds have assisted or damaged the funds?

My Lords, I thought I had answered that question fairly fully when I responded to the noble Lord, Lord Higgins. The noble Lord may disagree with my answer, but I certainly addressed the issue. I said that the reason for abolishing ACT was that, as it stood, it deformed the pattern of investment in companies through tax privileges, compared with the United States; and your Lordships can see evidence of that.

My second point—pressure of time did not permit me to make it initially—is that the Myners report, as the noble Lord will know, said that what mattered was not the tax protection of ACT, but the asset allocation decision by good fund managers, which he reckoned was 10 times more important.

My Lords, as Director of the Personal Investment Authority, I spent more years than I care to remember mired in the muck trying to sort out the pension mis-selling scandal. I therefore welcome the fact that, particularly for occupational pensions, some simplification is at last being advocated in this report.

Will the Minister agree that so long as pension providers are allowed to sell on the back of a lie, the lie being that in real terms investments can grow at six or eight per cent per annum, whereas four or even two per cent would be nearer the realistic mark, we shall have intermittent crises and problems in the field of pensions and will tempt people to under-provide for their pensions?

My Lords, my noble friend is absolutely right that we should all take more seriously, as I am sure we will, the health warning that investments can go down as well as up. All the evidence that I have looked at from 1955—the same is true of all European OECD countries—is that over time, provided dividends and such like have been reinvested, equities have performed much better than either cash or government bonds. However, there is some volatility, but if one starts a pension fund at a sufficiently young age, as one should, that volatility should even itself out over 40 years.

My noble friend is right. No one can expect to revert to the years of six or eight per cent real return. We need to have much more realistic expectations, not only about what the Stock Market will return but, given longevity, about how much we need to save for the time we hope to spend in retirement. It is no longer the case that two people can expect to spend 30 to 40 years in retirement on the basis of one person working for 35 years.

My Lords, I welcome this report on pensions, as I would any report that tends to provide some answers to the increasing problems in the field of pensions.

One of the issues of great importance concerns people who have an opportunity to join occupational pensions but do not do so. It is estimated that 16 per cent do not, which means that 84 per cent, the vast majority, do. However, recognising that 84 per cent represents millions of people, 16 per cent represents hundreds of thousands of people. If one considers the beneficiaries of an occupational pension, such as husbands, wives and children, one runs into a large number of people.

When I was a trade union officer, I received all kinds of answers from people who were informed that the joining of a pension scheme was a condition of their employment. Unlike the noble Lord, Lord Higgins, they gave answers, such as, "I shall not live that long" or "I want my money now, I do not want it in the future" —very short-term approaches, which they could not exercise because it was a condition of their employment. I do not envisage any difficulty in reintroducing that kind of provision. I hope the Government will embrace the recommendation that an employer should be able to insist on an occupational pension scheme as a condition of employment. In that way, the fund will grow.

The Minister referred to pension holidays. Pension holidays have taken place. However, as I recall—I was involved in pensions in my own trade union—in those days many employers were driven to introduce pension holidays after securing major improvements to their funds because otherwise there was a threat of taxation, which the previous administration introduced.

My noble friend has expressed views on the choice of employers to insist that an employee should join their company schemes. I recognise and respect that view, which is shared by many of our colleagues. That is exactly the kind of issue on which we shall need to seek consensus when we publish the consultation document.

My Lords, it is difficult to consider pensions in the round without referring to the very extensive pensions in the public service—the Civil Service, the Armed Forces, the health service, teachers, local government, the police and other groups, which make up a very significant proportion of our country's employed people.

Public service pension schemes have tended mainly to be index-linked and to have had survivor benefits. I imagine that at least some of those who are looking forward to receiving public service pensions may be worried by press reports of this report, indicating that there are now questions marks over whether index-linking and survivor benefits will be continued. In those circumstances, will the Minister give some indication of the Government's view of the size of that matter? Such pension schemes, of which there is a wide variety in the public service, are often not funded. It is therefore necessary to take them fully into account, as I hope the proposed Green Paper will.

My Lords, I should like to respond by making one or two brief points. First, this is an independent report to the Government; it is not the Government's report. A whole range of proposals have been put forward—some 52 in all. We agree with some of them because they are self-evidently virtuous while others are more provocative and we shall want to seek consent for them. The noble Lord, Lord Hayhoe, will understand therefore that we are not in a position to endorse every proposal.

Secondly, as the noble Lord, Lord Higgins, pointed out, we have to look at this in the context of the sound recommendations of Myners and the forthcoming autumn review. We need to contextualise this matter.

I turn now to the points raised with regard to public service pensions. I should like to say first that no existing pensioner could be affected by anything in Pickering. The report proposes an option for employers to make available to their employees. Thus it would be for the trustees, employers and employees of public sector firms to decide whether that is the way they wish to go and to trade, if you like, value asset in terms of the benefits of the scheme with cost of access and entry. Thus different schemes may reach different decisions. For example, I understand that the terms and conditions of the Civil Service scheme may be very different from those pertaining in my former university scheme. That is a decision made by the participants.

However, given the suggestions made in the Pickering report, it is not expected that the Government would require firms to strip advantages such as index linking and survivors' benefits out of their schemes against their current will. That has not been suggested in the report and nothing said today by my right honourable friend would suggest that either.

My Lords, perhaps I may invite the Minister briefly to decontextualise for a moment and to respond to one question. Rightly she has deplored the dangerous trend whereby companies have been cutting the employers' contribution at the same time as they are moving away from defined benefit contribution schemes. What, if anything, will the Government do about this?

My Lords, I cannot answer the question because it falls into the same extremely difficult category as that of making pensions compulsory. If one followed the noble Lord's thinking, one would need, first, to make all pensions compulsory on employers and, secondly, to force all employees to join such compulsory schemes. Thirdly, the schemes would require a minimum contribution from employees and, fourthly, they would require a substantial minimum contribution from employers. Finally, agreement would have to be reached on difficult issues such as index-linking, survivors' benefits and so forth.

If the noble Lord is seeking to press me on what we are going to do about all five issues, then I cannot tell him. Those are not government decisions. What must be done is to build a consensus with regard to what people are willing to trade for what. Are they willing to pay for higher benefits? Are they willing to work longer for higher benefits? Are they willing to seek a second income in the household to buy those benefits? Finally, what securities and compulsions would they wish to see underpinning such schemes? As a result, now is not the right time for me to ad lib in regard to some of the most difficult questions on which no government have been able effectively to reach a consensus over the past quarter of a century.

My Lords, I thank my noble friend on the Front Bench for repeating the Statement. The question of pensions is turning into a nightmare. I should declare an interest as chairman of Caparo Group Ltd, which recently has generated a certain amount of news in the press.

I welcome the Pickering report, although I have not yet had a chance to look at it in detail. It is time to clarify matters so that everyone understands the outcomes of their pension schemes rather than having different results. Indeed, it is now becoming more difficult to run a company's pension scheme than it is to run the business itself. I ask the Government to look at what they can do to simplify the system as soon as possible.

My Lords, clarity and simplicity were precisely the terms of reference governing the Pickering report. My right honourable friend has already made it clear that the Government are extremely supportive of all moves towards greater simplicity.

My Lords, is the noble Baroness aware that the Government's arguments in favour of taxation of dividends on pension funds are now running a little thin? They must have been thought up by a wizard in the Treasury who knew very little about how management works. Is there any hard evidence to suggest that investment, in particular in manufacturing industry, has increased as a result of the Government's actions?

My Lords, I cannot talk specifically about the manufacturing sector because the noble Lord will know as well as I do that different sectors grow or do not grow at different rates, thus influencing issues surrounding the European currency and so forth. Thus I am not able to give him any detailed information with regard to the manufacturing industry.

However, I can tell him that I have received assurances that, as a result of the changes that we have introduced, investment in industry has increased. Perhaps I may repeat what I said earlier. Obviously pensioners would like extra money through tax privileges. However, from our point of view it is equally important that the bedrock of pensions, reflected by the health of the companies that fund them, is protected. That is best secured by ensuring that companies continue to reinvest.

I should like to make a further point. The tone of noble Lords opposite would suggest that there is no government support for private sector pensions. At present I believe that we are spending something in the order of £45 billion on the range of state sector pensions; we are supplying £11 billion in NICs contracted-out rebates that help to fund occupational pensions. In addition, a sum in the order of £14 billion of taxpayers' money goes into tax reliefs, rebates and the like, sustaining and supporting the occupational pension industry.

I do not think that the noble Lord, Lord Prior, should regard the occupational pension industry as under-supported by the current fiscal regime, particularly given that in this country we now have one of the lowest corporation tax levels on record.

My Lords, before going on to make one or two remarks, perhaps I may ask my noble friend on the Front Bench to reconsider the response she made just now in relation to public service pensions. If I recall correctly, she said that there was nothing in the Pickering report that could affect current members of company pension schemes. I hope that my noble friend Lord Paul is not listening to this, but it seems that this report may give a number of employers many ideas. We may well see some acceleration of changes in those pension schemes currently in payment.

I turn now to the brief points that I wish to put to my noble friend. First, the Statement refers to striking a balance between "innovation, competition and simplicity". As every Chancellor of the Exchequer proves with every Budget, innovation and competition add to greater complexity. We must ensure that, so far as we are able, we move forward with simple and worthwhile schemes.

Perhaps I may presume to offer a little advice. I should imagine that all noble Lords who have spoken in our debate are concerned about the problems with regard to survivors' benefits and indexing. Were I to give any advice at all, it would be to say quickly that the Government should not be minded to accept those recommendations. The Government will receive a far more positive response in that regard, certainly from the trades unions and the TUC, if they know that those recommendations have been put out of the way.

Lastly, it is my opinion that pension provision will be one of the big issues of the next general election. There is a pensions crisis. Unusually, it is not related solely to the vast bulk of working people. I should declare an interest here, but those looking forward to an "equitable life" are finding that it will be less so. There is a real problem here. Certainly we are going to see long-term problems with regard to the concept of the stakeholder pension. To that end, would my noble friend on the Front Bench consider approaching the Trades Union Congress? Good examples can be cited from the past, in particular in Israel with Histradut; that is, to have a scheme that is effectively endorsed and run by the trade union movement as a whole, with a view to providing the kind of pension systems which are badly needed.

My Lords, I look forward to reading my noble friend's contribution to the consultative document. No doubt the trade union movement will be active in promoting its views through that medium.

My noble friend knows well that I shall not give any undertakings with regard to the Government's response to one or two of the proposals. However, I listened with care to his points with regard to pension schemes and pensioners. I said earlier that the Pickering report made it clear that it was not referring to existing pensioners. However, that is not to say that Pickering does not believe that Section 67 of the Pensions Act 1995 may need to be amended to allow for alterations to schemes for the benefit of schemes as a whole. That is one of the proposals being put to us. We will consider it and see whether the problem is the size that Pickering believes it to be.

My noble friend Lord Christopher said there was a pensions crisis. There is a problem of longevity. Every decade people live two years longer. There is the medium-term problem of the stock market. I suspect that if it were trading at 6,000 to 6,500 there would not be some of today's concerns. There is a more immediate problem of lack of confidence in the pension industry built up through years of mis-selling, together with what happened at Equitable Life and the like. We are hoping that that combination of simplification and regulation will allow us, with Myners, in co-operation with the industry to develop a range of products that people will see as safe and secure vehicles for protection against poverty in their old age. The state is a partner; employers are a partner; and the industry is a partner.

I hope that many of your Lordships who have spoken in this interesting debate will contribute to the consultative process. I do not doubt that we shall return to the issues.

moved Amendment No. 1:

Page 12, line 13, at end insert—

"(4A) Subsection (4) does not affect any power of the court to deal with the defendant in respect of a failure to comply with an order under this section."

The noble and learned Lord said: My Lords, in moving the amendment, I shall speak also to Amendments Nos. 3 and 5. The amendments return us to an issue discussed briefly in Committee and on Report. I indicated on Report that we would table them.

As your Lordships will be aware, if the defendant fails to comply with the court's order to provide information, the court has the power under Clause 19(4) to draw adverse inferences from the failure. The effect of the amendments is straightforward. They make it clear that the power to draw inferences does not affect any other powers the court has to deal with the defendant in that situation; notably, the power to punish the defendant by way of contempt for failing to comply with its order.

The power to draw adverse inferences will provide sufficient inducement to the defendant to respond in many situations, but it will not be fully effective where the defendant is ordered to provide general information and says nothing. The amendments will help to ensure that the defendant always responds to the court's order. By making it clear that the order to provide information attracts contempt for noncompliance, we will enhance its effectiveness. I beg to move.

On Question, amendment agreed to.

moved Amendment No. 2:

Page 49, line 35, at end insert—

"() For the purposes of this Part, a body corporate may have a criminal lifestyle."

The noble Lord said: My Lords, in moving the amendment, I shall speak also to Amendments Nos. 4 and 6. The amendments raise a short issue that should have been raised at an earlier stage. I regret that the question did not occur to me until Report stage, when I realised that there was a problem with the definition of what constitutes a criminal lifestyle.

The question is: can a company have a criminal lifestyle? I raised this matter briefly in debate, but the Attorney-General gave an off-the-cuff response and did not have time to give a considered response. I have therefore tabled the amendments to ensure we receive a proper expression of the Government's views.

The idea of a corporation having a lifestyle is odd. "Lifestyle" is defined in the Oxford English Dictionary as,

"a way or style of living".

A corporation is a person in law, but it cannot be said in any real sense to live. Only a living person can have a lifestyle. In deciding for the purposes of Clause 76 whether a defendant has a criminal lifestyle, "defendant" must mean a living defendant. A company cannot have a lifestyle. If that is so, there is a big hole in the Bill.

Many offences under Schedule 2—quite apart from many that are not included but could be made the basis of a criminal lifestyle—can be committed by a body corporate. In such cases, the body corporate is usually the person who makes a profit and against whom a confiscation order needs to be made if it is to be effective.

It is clear that the Government intend the Bill to cover corporations that commit crimes and not just individuals. But it is far from clear that the Bill has that effect. On Report, the Attorney-General relied on the principle that the word "person" in a statute includes a body corporate under the Interpretation Act 1978. But that is subject to a context showing a contrary intention. The reference to "lifestyle" could be read by a court as showing such a contrary intention, particularly in view of the principle that a statute that imposes penalties must be read strictly in favour of the person against whom the penalties are claimed.

The definition of criminal lifestyle does not use the word "person". It refers to the defendant who has a criminal lifestyle, not the person who has a crirninal lifestyle. Therefore, in interpreting Clause 76 a court would have to proceed without relying on the definition of "person" in the Interpretation Act.

I am aware that this is a technical and legalistic argument. But unless the Government accept the amendments, a prosecution will face this argument sooner or later and could lose it. We have always made it clear that we wish to strengthen the Bill where it needs strengthening. We believe that in this case it needs clarification to strengthen it. I beg to move.

My Lords, we have considered carefully the issues put persuasively by the noble Lord, Lord Goodhart, but we believe there is nothing in the point. As the noble Lord knows, for the purposes of the Bill, "criminal lifestyle" is defined not in the Oxford English Dictionary but in the Bill itself, in particular in Clauses 76 and 226, which states:

"A defendant has a criminal lifestyle if (and only if) the following condition is satisfied",

which is that it is an offence of a particular type, or a number of offences committed over a period of time. There is no difficulty in understanding that, and there would be no difficulty in a court interpreting the definition in that way.

The noble Lord rightly refers to Clause 6, which states that the court must decide whether the defendant has a criminal lifestyle. However, Clause 89(3) defines a defendant as,

"a person against whom proceedings for an offence have been started".

Schedule 1 to the Interpretation Act 1978 states that,

"'Person' includes a body of persons corporate or unincorporate".

It follows, there being nothing in the context that suggests to the contrary, that references to the defendant in Clause 6 and elsewhere in the Bill already include bodies corporate.

I believe that the noble Lord and the Government are seeking the same end. We believe that the amendments would serve no useful purpose. Indeed, they would be damaging, because they would cast doubt on every instance in other legislation where a person is referred to. If we state explicitly that a person includes a corporation in the Bill, we will invite other statutes that use the term to be construed as referring only to a natural person.

I am afraid that for those reasons, while we share the aim, we are unable to support the amendments. I hope that having heard my explanation, the noble Lord will feel able to withdraw Amendment No. 2.

My Lords, I do not believe for one moment that the amendment would cast any doubt on the general interpretation of the word "person". What is unusual here—and the reason the amendments were tabled—is the specific use of the word "lifestyle". That is where the difficulty arises.

However, I welcome the fact that the Government have made it clear that in their view there is no ambiguity. That statement may be relied on if, in a future case, it is argued before a court that there is an ambiguity. To that extent my purpose in bringing forward the amendments has been satisfied. In those circumstances, no useful purpose would be served by my taking the matter further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 3:

Page 66, line 8, at end insert—

"(3A) Subsection (3) does not affect any power of the court to deal with the accused in respect of a failure to comply with an order under this section."

On Question, amendment agreed to.

moved Amendment No. 5:

Page 106, line 26, at end insert—

"(4A) Subsection (4) does not affect any power of the court to deal with the defendant in respect of a failure to comply with an order under this section."

On Question, amendment agreed to.

moved Amendment No. 7:

Page 150, line 32, at beginning insert "Subject to section 246A,"

The noble and learned Lord said: My Lords, the substantive amendment is Amendment No. 8, the next amendment on the Marshalled List.

The purpose of the amendment is to improve the Bill in two respects. First, it seeks to remove the risk of a serious injustice. It enables a man who has been accused of crime to defend himself in the normal way before a judge and jury. Secondly, it seeks to make Part 5 of the Bill less vulnerable to attack under the Human Rights Act. It is a waste of everyone's time to enact legislation which one can see will fall at the very first hurdle. It is surely wrong to wash one's hands of all responsibility for that result, as the Liberal Democrats, if I may respectfully say so, seemed inclined to do at Report stage by saying that it was better to leave the Government to stew in their own juice. That is not my phrase but that of the noble Lord, Lord Goodhart. Surely we can do better than that and seek to remove now the most obvious objections which will be raised under the Human Rights Act.

In returning to the first point, I shall not of course repeat the argument that I put forward on Report. That would be tedious and unnecessary. In a few moments I shall deal with the arguments put forward by the noble and learned Lord the Attorney-General by way of reply, but, first, it may be helpful to stand back a little from the Bill and take an overall view of what Part 5 seeks to achieve.

The Bill itself deals with the proceeds of crime—and I emphasise that word at the outset. It is true that Part 5 refers to "unlawful conduct"—a somewhat woolly expression—but, fortunately, unlawful conduct is defined in Clause 244 as conduct which would be unlawful under our criminal law. So we can safely forget about unlawful conduct and talk simply about crime.

Under Clause 246, proceedings can be brought against anyone who holds what is called "recoverable property". Recoverable property means property obtained by a person through crime, whether his own crime or someone else's crime. That is the combined effect of Clauses 245 and 308. So unless a crime has been committed, and unless that crime has been proved, the judge simply has no power to make a recovery order. So far, all is clear and must be common ground.

Next, it may be helpful to follow the likely course of these so-called civil proceedings. I shall assume that they are being brought against the kind of person that the Government seem to have most in mind—that is, the major criminals who are at the centre of a criminal network but who are said to be untouchable by the criminal law. We are told that there are 400 such people known to the police. That number was often referred to in earlier stages of the Bill, both in this House and in the other place.

Let us assume that these proceedings are being brought against such a person and a claim form is duly served. What happens next? The first thing the defendant will do is to ask this simple question: "Through whose crime do you say these proceeds were obtained—my crime or someone else's crime—and what is the nature of the crime which you allege?" Unless the defendant gets an answer to those questions the civil proceedings will simply be struck out. The defendant is entitled to a fair trial in civil proceedings, just as he is entitled to a fair trial in criminal proceedings. No High Court judge of whom I have knowledge would allow civil proceedings to continue unless the crimes alleged are particularised. Again, that must be common ground.

Let us suppose that the allegation is that the proceeds were obtained through the defendant's own unlawful conduct—for example, by his dealing in drugs. Let us suppose next that the defendant denies the allegation, as he surely would. He might say, "You have got the wrong man". I have no idea what his defence may be, but, surely, if he denies that serious offence, he must as a matter of elementary justice be entitled to have that question decided on a criminal standard of proof by a judge and jury.

The noble and learned Lord the Attorney-General said that that would be a most unfortunate state of affairs. It would mean that a lot of criminals would escape. "We know who they are", he said. "It is plain from our intelligence". I am paraphrasing from the speech that the noble and learned Lord made on 25th June, col. 1270 of Hansard: "It is plain from their lifestyle, their luxury homes, their yachts and fast motor cars, which do not appear to have been acquired by any lawful activity on their part". He continued at col. 1271, "It is true that there is not enough evidence to convict them of specific crimes, but it is as plain as a pikestaff that their money has been acquired as the proceeds of crime".

I find that a most remarkable statement to have fallen from the lips of the noble and learned Lord. Those 400 people may indeed be the subject of grave suspicion on the part of the police, but happily we do not live in a police state. We shall not know those people to be criminals until they have been charged and convicted of a crime. Anyone familiar with the criminal courts will be able to tell noble Lords from their own experience about cases that seem as plain as a pikestaff to the police but that fell apart when they came to court. Then there are those unhappy cases that should have fallen apart but did not and instead have resulted in grave miscarriages of justice.

That is why we rightly insist on the higher standard of proof where the liberty of the subject is concerned—proof beyond reasonable doubt. Once we allow the civil burden of proof to intrude we shall conduct a grave disservice to the cause of justice.

The noble and learned Lord then says that none of that really matters because the proceedings are not aimed at an individual but aimed at his property. That is col. 1271. He is not being accused of anything; the proceedings will not result in a conviction; and in any event he cannot be sent to gaol. But I protest. He is being accused of something. He is being accused of drug dealing. Unless it is found "as a fact"—not my phrase but that of the noble and learned Lord—by the judge that he is guilty of drug dealing, the judge has no power to make a recovery order. The noble and learned Lord says that there is a distinction between being found guilty by the judge and being convicted. I venture to suggest that that is a distinction that would not be readily apparent to the defendant. It is certainly a distinction that is lost on me and appears to be lost to the editors of the Oxford English Dictionary.

Lastly, it is said that this amendment, if accepted, would be unfair. The noble and learned Lord said that the "little man" would be subjected to the full force of Part 5, but that the big wheel, suspected of far worse crimes—crimes that cannot be proved—would go scot-free. If the crimes cannot be proved, is there anything so surprising about the defendant going scot-free?

I shall summarise the first point—the second point is much shorter. A person who is accused of very serious crimes as part of the so-called civil proceedings is surely entitled to have the matter of his guilt decided by a judge and jury on the criminal standard. If he is acquitted, that should surely be the end of it. That is the purpose of the first five paragraphs of my amendment.

The second point is quite brief and is a Human Rights Act point. No doubt, when the legislation is in force it will he attacked under the Human Rights Act on numerous grounds. One ground stands out a mile. In a case where the alleged offender is before the court and is found guilty by the judge of a crime committed, let us say, 12 years ago, Part 5 allows the state to recover the proceeds of that crime from that day to this in a way that was not possible when the crime was committed. That is retrospective legislation of the most obnoxious kind and it is directly prohibited by Article 7 of the Human Rights Act. Nor shall a heavier penalty be imposed than the one that was applicable at the time that the criminal offence was committed.

It is said by the noble and learned Lord that a recovery order is not a penalty imposed for an offence, but that it is compensation claimed by the state for loss suffered by the state as a consequence of that offence. That is the plainest nonsense. The state has suffered no loss as a consequence of the offence and is not entitled to compensation. It is the victim, if anyone, who has suffered a loss and not the state.

That horse will not run. As it happens the horse ran in the case of Welch v. United Kingdom. It ran and it fell. That was the very point that was decided against the United Kingdom in Welch. It is true, as the noble and learned Lord will point out, that that was after a conviction. I hope that by now I have persuaded your Lordships that there is no distinction to be drawn between a conviction and a finding of guilt. That is certainly not a distinction that would find any favour at Strasbourg.

The purpose of the last paragraph of the amendment is simply to confine the retrospective effect of Part 5 to those cases where it has at least a chance of being upheld; that is to say, where the offender has not been before the court because he is overseas or because he is dead or in some other way unavailable. By confining the retrospective effect of Part 5, I suggest that this House will make a significant improvement to the Bill. In that spirit, I put forward this amendment as a compromise. It falls far short of what I would have wanted, but I put it forward as a form of compromise which I hope may still be accepted, although I have no strong expectation. I beg to move.

My Lords, I earnestly hope that the Government and your Lordships will support the amendment moved by the noble and learned Lord, Lord Lloyd of Berwick. We have to remember that he has moved it in the light of his great experience as a Law Lord. I shall be brief. There is not much need to repeat the arguments that the noble and learned Lord has used, but I want to emphasise one point. The trouble is that Clause 246 ignores the difference in the burden of proof in several criminal cases.

I remind your Lordships that in civil actions the burden of proof is based on the balance of probabilities, but in criminal cases there is a stronger burden of proof—a burden of proof beyond reasonable doubt. Although Clause 246 deals with civil cases and criminal cases, that difference is ignored. Amendment No. 7 would put the matter right.

My Lords, on Report my noble friend Lord Goodhart indicated that the Government should stew in their own juice, as the noble and learned Lord, Lord Lloyd, pointed out. But he also gave strong support to these amendments. From these Benches, I do not propose to repeat the arguments so eloquently made by the noble and learned Lord, but the Government's response on Report was a familiar one: we all know what is going on. We know that such people are guilty; we have intelligence to that effect. It is the same kind of sentiment as was expressed recently by the Chief Constable in North Wales. He remarked that it was tragic that 63 per cent of people who appeared on trial before the Crown Court in North Wales were acquitted. We were not sure whether he was blaming the juries, the defence lawyers or his own force for failing to bring forward adequate evidence.

That is the point. Adequate and proper evidence needs to be brought forward before these draconian remedies are brought into effect. Ordinary standards of the criminal law ought not to be set aside. Suspicion of crime is not enough. We on these Benches will again strongly support the amendment.

The noble and learned Lord has made an extremely eloquent case. First, perhaps I may ask him a technical question. The "unlawful conduct" can, we see, be conduct committed outside the United Kingdom. How is an English criminal court to try an offence which was committed outside its jurisdiction—in a foreign jurisdiction—which it has no jurisdiction to try as a criminal offence? That is my technical question.

Perhaps I may now become bolder and suggest a possible fallacy in the noble and learned Lord's argument. He said that unlawful conduct is defined as the commission of a crime. He then used the word "crime" instead of "unlawful conduct". But surely there is a difference between being certain that a person has accumulated his wealth by criminal activity and being able to prove a specific crime by which he acquired it. You may not be able to prove that he smuggled in X quantity of drugs on a certain day and sold them on the street the next day. But you may be able to prove—and perhaps you ought to have to prove beyond reasonable doubt—that he could not possibly have accumulated the enormous wealth that he has without ever going to work, without ever going to a casino, and without ever going to the horse races—and how on earth did he get his wealth, especially if he absolutely declines to prove it and if you can prove that in the past two years he has flown 14 times to and from Colombia and cannot explain what those journeys were for?

Surely there will be many cases in which it could be proved, even beyond reasonable doubt, that a person's wealth had been accumulated by unlawful conduct, but you could not prove any specific time with the full particulars necessary to enable you to obtain a conviction.

My Lords, perhaps I may—

My Lords, as the noble and learned Lord has the right of reply and as we are at Third Reading, it may be better if he answers the question at that time.

My Lords, the intellectual quality and persuasiveness of the speech by the noble and learned Lord, Lord Lloyd, ought by now to have convinced the Government to accept his amendment.

The Government's objective under Part 5 of the Bill is in principle a laudable one. It is to deprive drug traffickers and other criminals of their ill-gotten gains. The trouble is that, in doing so, they have succeeded in expropriating the right of the British citizen to trial by jury.

Our initial instinct on these Benches was to adopt the approach taken by the noble Lord, Lord Goodhart; that is to say that we disapproved of the approach taken by Part 5 but thought that it ought to be left to the courts to settle the matter. Our view changed, in the course of the Bill proceedings, for three reasons. First, the noble and learned Lord, Lord Lloyd of Berwick, as he rightly said, convinced us that this was a negative approach. We want, if possible, to make Part 5 work. That is precisely what the noble and learned Lord has done.

The second thing he did was to persuade us that, if someone is entitled to a right to trial by jury in circumstances where the evidence is strong enough to convict that person, he or she ought to be entitled to that same right in circumstances where the evidence is not strong enough to convict them. The right to trial by jury is a fundamental building block of our constitutional freedom. It is wholly undermined by Part 5 of the Bill. There is no real distinction between a confiscation order under Part 2 and a recovery order under Part 5; yet Part 2 provides the guarantee of trial by jury and Part 5 does not.

There is a final reason why I am convinced that your Lordships should accept the amendment. It is one that I gleaned, in the course of the past few days, from the Committee stage of the Nationality, Immigration and Asylum Bill. In Clause 4 of that Bill, the Government seek to deprive individuals, born in the United Kingdom, of their citizenship if their conduct seriously prejudices the vital interests of the United Kingdom. The Home Secretary determines the existence of that situation on his own subjective judgment.

I regard that as a step further down the undesirable road sign-posted by Part 5 of this Bill. I applaud the objectives of the Government under Part 5, just as I applaud the objectives of the Government under the Nationality, Immigration and Asylum Bill. But the Government are seeking to achieve the results that they want by wholly undermining the criminal law of this country built up over many centuries. Surely the right way to get the result under Part 5, as indeed under Clause 4, is to define the offences more clearly and more precisely in criminal law so that the proper criminal procedures in the criminal courts can be used.

The noble and learned Lord the AttorneyGeneral—who is looking at me with a bewildered expression—himself referred to 400 criminals in the country who could not be prosecuted by the prosecuting authorities. Surely in those circumstances it is up to the Government to define the offences more precisely, so that these criminals can be dealt with through the criminal courts.

For all those reasons, I support the amendment moved by the noble and learned Lord, Lord Lloyd of Berwick, and trust that the Government will accept it.

My Lords, the noble and learned Lord, Lord Lloyd of Berwick, has throughout made plain his opposition to the new civil recovery scheme in Part 5 of the Bill. He is entirely consistent in continuing to oppose it. That is not something that can be said of the approach of the Front Bench opposite and—.I think, although I am not entirely clear—from the Liberal Democrat Benches.

I remind the House, and indeed the noble Lord, Lord Kingsland, of what was said at Second Reading, when the noble Baroness, Lady Buscombe, made it very clear that this:

"will signal a will and a wish to assist the Government in producing a workable and effective piece of legislation".

She said specifically in relation to Part 5:

"…we do not want to obstruct the key objectives of the Bill, that is a real concern. We want to see those who have committed criminal offences deprived of their ill-gotten pins. [Official Report, 25/3/02; cols. 19–23.]

I shall not mince my words. The amendment proposed by the noble and learned Lord, which we debated fully on Report although we did not divide, will not improve the Bill. It will not be workable in the way that he proposes. I give way to the noble Lord.

My Lords, I am most grateful to the Minister, not only for giving way but also for promoting me in the Peerage. I believe he referred to me as "the noble Earl".

The noble and learned Lord may not have been listening to my opening remarks. I hope that he will accept that I said at the outset that our instinct was to leave the matter to the courts. It was as a result of the debate in your Lordships' House and the skilful ingenuity of the noble and learned Lord, Lord Lloyd of Berwick, that our position moved. However, our view remains as the Government said their position remained: that people should be deprived of their ill-gotten gains as a result of their criminal activities—so we may prosecute them for their criminal activities.

My Lords, if I attributed such peerage to the noble Lord, I am not sure whether to apologise to him or to those who have that dignity. But I do not apologise to him for saying what I have said and will continue to say on the amendment. It the amendment were passed, it would not improve the Bill. It would prevent Part 5 from being effective. With your Lordships' leave, I shall explain why.

Perhaps I may deal, first, with one point. Throughout there has been reference to the European Convention on Human Rights and whether or not the process involved would be held to be a civil or criminal process. That is a technical question. I shall not weary your Lordships with the arguments about it now. The simple approach taken by the Government is this. We are not seeking compensation for the state. The noble and learned Lord, Lord Lloyd of Berwick, suggested that I had said that we were seeking compensation for the state. I do not recall ever saying that. What I have said repeatedly is that this is about saying to people who are holding property which they have no right to hold because it is the proceeds of drug trafficking, bank robbery or other serious crime, "You have no right to this property and therefore this property is to be taken away".

By his amendment, the noble and learned Lord, Lord Lloyd of Berwick, accepts that in relation to all people except those who are said themselves to have committed the unlawful conduct.

My Lords, I thank the noble and learned Lord for giving way. Yes, but surely in the case of the bank robbery the property belongs to the bank not to the state.

My Lords, as is clear from the Bill, if the bank can demonstrate that that it is its property it will be able to recover it.

One of the difficulties—with respect, the noble and learned Lord did not deal with this point, although the noble Viscount, Lord Bledisloe, made it well and clearly—is the fact that there are people in relation to whom it is not possible to say, "You committed this particular crime". But it may be possible to say that what they plainly possess in terms of property is the proceeds of crime. Precisely which crime—a bank robbery on this day, a drug trafficking offence on that day, proof of which is required by the criminal law cannot be demonstrated.

The noble and learned Lord rightly puts the High Court judge before us as an object of admiration and fairness. If a High Court judge is persuaded—otherwise no order is made—that property held by someone is the proceeds of unlawful conduct, the question is whether or not that property should be taken from that person who has no right to keep it.

What is the burden of proof in such circumstances? I have dealt with this matter at every stage—Second Reading, in Committee and on Report. No one has ever gainsaid what I said. It is this. Although the civil standard applies—that of the balance of probabilities—the decisions of the courts make very clear indeed that where the issue is serious misconduct, although that is still determined on the balance of probabilities, because of the inherent unlikelihood that serious criminal conduct has been committed the courts require more cogent proof.

My Lords, is the noble and learned Lord the Attorney-General contending seriously that under the Bill as it now stands it would be possible for a court, without any evidence that any particular unlawful conduct has occurred, to come to the conclusion that the assets of the respondent must have been acquired by some unspecified unlawful conduct? That is not how I read the Bill.

My Lords, a High Court judge will have the duty to consider whether or not a particular property which is identified is the product of some unlawful conduct. What evidence the court will be persuaded by will be a matter for the court. I do not disagree with the example given by the noble Viscount, Lord Bledisloe, of someone who plainly has very substantial means, has never done a day's work in his life and cannot explain—that is a part of it—where any of it came from when questions are put. It is the easiest thing for someone to say, "You say that these are the proceeds of crime. I can tell you that I acquired this in this or that way". But he puts forward no credible explanation for that; and there is other evidence which suggests that he has been mixing in criminal circles: he has been taking aeroplane flights to Colombia, or whatever it may be. The judge will have to decide.

My Lords, I am sorry to intervene again. Under Clause 244, the matter the court has to decide on the balance of probabilities is whether it is proved that any matters alleged to constitute unlawful conduct have occurred. That makes clear that a matter which constitutes unlawful conduct must have occurred.

My Lords, there will be certain cases where no doubt specific unlawful conduct is identified. The point I make is that there will be cases where, for example, it will be apparent that the property someone is holding may be the proceeds of a bank robbery or of drug trafficking. One cannot tell which it is but one can be satisfied—not the police; it is not a police state; not me; not the director—but the court is satisfied that those are the proceeds of unlawful conduct. In those circumstances, the court will be able to make the order.

I remind noble Lords of what I said about the standard of proof. It is important for two reasons. Because it is so important, I hope that noble Lords will bear with me while I read again these words that,

"When assessing the probabilities the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation, the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability. Fraud is usually less likely than negligence. Deliberate physical injury is usually less likely than accidental physical injury …built into the preponderance of probability standard is a generous degree of flexibility in respect of the seriousness of the allegation".

The court would have to be satisfied—

My Lords, I am grateful to the noble and learned Lord for giving way. Would he bear in mind that Clause 244(1) refers to,

"conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part"?

As criminal law is brought into operation there, surely the principle of the burden of proof, which, as was said by the noble and learned Lord, has for centuries been beyond reasonable doubt, should apply.

My Lords, as I explained on Report—it has not been contradicted by the noble and learned Lord—time and again in the civil courts an allegation of a criminal act is made in the context of a civil proceeding. In those circumstances, what the court does is precisely what I have just read from the words of the noble and learned Lord, Lord Nicholls of Birkenhead. It decides that question on the civil standard, but applying the preponderance of that probability taking account of the need for more cogent evidence.

I have previously given examples. That happens in any libel actions and it happenedin re. H itself. The allegation underlying a care proceeding was that the father was guilty of raping the daughter. The whole question in the case was whether that allegation had to be determined on the criminal standard or in relation to something less. Obviously, the finding even in civil process would be very damaging to the father. Your Lordships' House in its judicial capacity held that on the balance of probabilities, but that more cogent evidence was required.

As it happens, the noble and learned Lord, Lloyd of Berwick, was on the panel. I have with me what he said. On that occasion, interestingly, he had no difficulty with the proposition that a civil court might find somebody guilty of a criminal offence in the sense that it found that he had committed that criminal offence. In fact, the noble and learned Lord was in a minority in suggesting that one should not have that heightened standard. His view was that the standard of proof should merely be a simple balance of probabilities. One understands why the noble and learned Lord said that. There is a critical difference between a criminal process and a civil process. In a criminal process, someone is convicted and goes to gaol or is at risk of going to gaol. That is not the case when someone is found in a civil process to have committed some disreputable act. At Report stage I gave the example of a case, which the noble and learned Lord tried when he was a puisne judge and I was a junior member of the Bar, involving forgery, deceit and lying. There was no suggestion at any stage that, despite the importance of those allegations, they could be dealt with only before a criminal court.

My Lords, will the Minister confirm that it is not the case under the Bill that mere possession of property, which is thought to have been obtained dishonestly in some way or other, is sufficient for the provisions to come into effect? Clause 244 states:

"Conduct occurring in any part of the United Kingdom is unlawful conduct if it is unlawful under the criminal law of that part".

It continues:

"The court or sheriff must decide on a balance of probabilities whether it is proved …that any matters alleged to constitute unlawful conduct have occurred".

It is not for the person to explain where his property came from; it is for those seeking to recover that property to demonstrate on a balance of probabilities that unlawful conduct—that is, unlawful conduct under the criminal law—has actually occurred. The response of the noble and learned Lord has given an entirely different impression.

My Lords, I have been absolutely consistent throughout. Clause 308 is where one needs to start in this regard. It states:

"Property obtained through unlawful conduct is recoverable property".

That is what the court is considering: whether the property is obtained through unlawful conduct. I stand by what I said. The court might be satisfied to that heightened standard that the property was the proceeds of unlawful conduct, but it could not be said whether it involved the proceeds of the bank robbery on 14th June 1963 or on 16th June 1980. It might: even be satisfied that the person had committed both. But which are the proceeds of crime? What has the person done with the proceeds in the mean time? On the question whether one can trace that back to the Midland Bank as opposed to Barclays Bank: no, the court would not have to do that.

On the European Convention, I respect the fact that the noble and learned Lord takes a different view from that of the Government. I have throughout said that we recognise that we are to some extent in uncharted territory. The Government's view— the better view—is that this matter will be held to be civil, not criminal. That is under the Strasbourg jurisprudence. I draw support from the fact that there are decisions from your Lordships' House, the Privy Council and Strasbourg supporting that result. The Government have said throughout that we accept that this is likely to be challenged. The sort of people who we are talking about, if we are right about them, will have pots of money, which they will not want to give up without a fight and they will challenge the decision. The Government should—this line was previously and rightly taken by the Opposition—be able to propose the legislation, have it tested in the courts and establish whether we are right, as we believe we are, not on a wing and a chance but because we have looked at the matter very carefully and concluded that we are right and will be held to be right. If there is something wrong with that, let us have the judgment of the court so that we can amend it in a way that makes sense and which reflects what the problem is; it should not be dealt with in some other way.

In order to emphasise what is so extraordinary about the amendment of the noble and learned Lord, I want to contrast two different people. The first is someone who is not said to be the person who has committed the unlawful conduct but who is holding the property, such as a wife or an associate. The amendment would accept that that person can be proceeded with under Part 5, with all the rigours of that part. One could go back 12 years and the case will be decided on the balance of probabilities, the standard of proof that I have identified. Part 5 will operate. If the person is said to be the culprit or is likely to be the culprit—not the person who is less culpable—under the amendment of the noble and learned Lord, that person cannot be proceeded against at all.

I shall explain why I say, "not at all". As I have made clear throughout the Bill's passage—it is very clear that this will be the position—there will be a hierarchy of proceedings. If it is possible to pursue criminal proceedings, they will be pursued. A decision will be made by the prosecutors about whether to proceed without regard to the fact that there is a civil process as well. Only if the prosecutors form the view that it is not possible to proceed will the civil process come in. After that, there are the taxation provisions.

What would happen under the amendment of the noble and learned Lord? The amendment says that if the person who is proceeded against is someone who is said to be guilty of unlawful conduct, that person is entitled to insist on going to the Crown Court. But for what would they go to the Crown Court? For a trial? But the prosecutor has already decided that it is inappropriate to proceed by way of trial. That cannot happen. But what if the prosecutor proceeds? What if the reason why it is not possible to proceed against the person is because he has sufficiently distanced himself from the actual criminal acts? The court may be absolutely convinced that he is holding the proceeds of a bank robbery but it may not know whether he is a bank robber, a conspirator or simply a fence—someone who is holding the property. He cannot be convicted on any of those grounds because one cannot convict him when one does not know which of those applies. He is entitled to keep all of that money although a court is satisfied that he was guilty.

What about the situation raised by the noble Viscount, Lord Bledisloe? What if the clearest possible evidence is that the person was guilty of committing a fraud outside the United Kingdom which we cannot prosecute? That is a very common problem these days because, as noble Lords well know, crime is global. If there is drug trafficking or human trafficking in a foreign country, we cannot bring the relevant person to the Kingston Crown Court or the Old Bailey. That person is entitled to say, "You cannot try me in the Crown Court, therefore I can keep all of this property". Those are considerable loopholes.

The extraordinarily absurd result is that one can proceed against the wife, someone who is not really culpable, but not against someone who is culpable. That is a manifest nonsense. Why is that said to be justified? On the basis that there is a right to trial by jury? There is a right to trial by jury for criminal offences, but this is not a criminal conviction. One does not go to gaol, the matter does not go on one's rehabilitation of offenders record and one has an appeal to the Court of Appeal. It is a civil process like any other civil process.

With respect to the noble Lord, Lord Kingsland, I say that it is impossible to describe this amendment as improving the Bill. If it is agreed to, it will mean that it will not be possible to proceed against a person who is holding the proceeds of crime even though a court can be satisfied of that by convincing evidence, unless one can convict that person of a specific crime.

The noble and learned Lord, Lord Lloyd of Berwick, considers that to be right because he does not believe that Part 5 should stand part of the Bill. As I said, I respect that. The Government happen to take a different view about it. But for the Opposition to say that the amendment would make the Bill more workable when they are driving a huge hole through it is simply false; it simply is not possible to maintain that point of view.

I turn to the final point—the Article 7 point—of the noble and learned Lord's amendment concerning retrospectivity. We debated this matter on Report at considerable length. Again, I invite noble Lords opposite to consider the consequence of this part of the amendment. It would mean that it would not be possible to proceed against a person who was currently holding the proceeds of a crime committed in the past. Therefore, if the amendment were agreed to, the provision would operate only in relation to crimes committed in the future. We are talking about a grossly denatured remedy because the provision would apply only far off in the future and the effect of the act would be gravely reduced.

The Government take the view that the provision is not contrary to Article 7 of the European convention. I explained on Report—I do not want to weary your Lordships now—why that is so. The noble and learned Lord referred to the case of Welch. As I said on that occasion, there are five distinguishing features. While one could argue about one or two of them, one could not do so in relation to the others. The most important of them is that in Welch there was a penalty because the individual had already been convicted of five counts of conspiracy to supply class A drugs. Welch was sentenced to 22 years in prison and, on top of that, the court said, "What's more, there will be a confiscation order". The Court in Strasbourg said, "That's a penalty". That is not the process that is taking place here.

Again, I recognise that there is a difference between us concerning what the Court in Strasbourg will say—if we get that far. But, having considered the matter extremely carefully, the Government's view, contrary to, and respecting fully, that of a former Law Lord, is that the Government will prevail in the courts. It is right that the Government should be allowed to proceed. I believe that many Members of your Lordships' House are of the view that it is important, as the noble Baroness, Lady Buscombe, said, that we should he able to deprive criminals of the proceeds of their crime; otherwise, as the noble Lord, Lord Kingsland, said at Second Reading, leaving criminals with the working capital of crime would have a corrosive effect on society. If noble Lords agree that depriving criminals of the proceeds of their crime is the objective that we seek to achieve, they will reject the amendment.

My Lords, I thank noble Lords on the Conservative and Liberal Democrat Front Benches for their support. As to the noble Viscount's first question concerning offences committed abroad, it seems to me that that illustrates very well the type of difficulties which will occur over and over again when Part 5 of the Bill is put into practice. As the noble and learned Lord the Attorney-General pointed out, that is one reason that I have been opposed to Part 5 from the start.

As to the second question, the noble Viscount meets me half way in urging the criminal standard of proof. I am very glad of that. But I still do not savour the concept of a person being accused of criminal activity in general, even a particular kind of criminal activity in general. In that respect, I must beg leave to differ from the noble Viscount.

As to the noble and learned Lord's response, I have now listened to him on three occasions. I am grateful for the trouble that he has taken each time. I have not been persuaded; indeed, if anything, and if it is not offensive to say so, I feel even less persuaded now than I was at the start. In those circumstances, I feel obliged to test the opinion of the House.

moved Amendment No. 8:

After Clause 246, insert the following new clause—

moved Amendment No. 9:

Page 171, line 31, after "is" insert "withdrawn or"

The noble and learned Lord said: My Lords, on Report the Government brought forward an amendment to make clear that the three-month period during which an application for compensation must be made does not begin until any appeal proceedings are finally concluded. The noble Baroness, Lady Buscombe, argued that this did not take account of the case where an application for leave to appeal was withdrawn or where an appeal was abandoned. I said then that I would consider the matter. We have considered it and we have brought forward Amendment No. 9 to put the issue beyond any doubt that might arise in the case of a withdrawn application. We do not think that any further provision is necessary where an appeal is abandoned as the abandonment of the proceedings would mean that they would be finally concluded within the meaning of Clause 286(3).

The noble Baroness also argued that we should be referring to permission to appeal rather than leave to appeal. While we agree that "permission" is the more modern expression in relation to England and Wales, it is not correct usage in relation to the rest of the United Kingdom. As Part 5 applies throughout the United Kingdom we need to retain references to "leave" so that it can work in Scotland and Northern Ireland and, as there can be no possible doubt about what "leave" means, it is unnecessary to depart from the simple solution of using a single word.

Amendment No. 10 corrects a minor drafting error. It replaces the word "sum" with the word "currency" in Clause 303. I beg to move.

My Lords, I wish to thank the noble and learned Lord the Attorney-General for responding to our concerns expressed in Committee and on Report regarding Clause 286. I entirely accept his point with regard to use of the word "permission" versus "leave". It is rather refreshing to hear that for once the Government are refraining from the need to modernise. Thank you very much for that report.

On Question, amendment agreed to.

moved Amendment No. 10:

Page 183, line 31, leave out "sum" and insert "currency"

On Question, amendment agreed to.

moved Amendment No. 12:

Page 199, line 24, at end insert "or an employee of his"

The noble Lord said: My Lords, Clause 313(3) of the Bill gives the Government a right to claw back from a plaintiff damages paid to him or her out of recoverable property which has been obtained when the damages have been paid under a judgment of the court.

We believe that that is grossly unfair because it is punishing the innocent plaintiff, not the person against whom the recovery order is made. It also creates plain anomalies. If the claim, for example, is a claim for damages for negligence, the plaintiff can keep the money awarded to him or her under the judgment if the damage is caused by a negligent act which is also a criminal offence, for example, careless driving. But the plaintiff cannot keep the money if the damage is caused by a non-criminal form of negligence. If damages are paid by an insurance company, the plaintiff can keep the money because it is not paid for out of recoverable property. At least, that is the view of the Government. I am not certain that that is the case if the insurance premium was paid out of recoverable property. If, on the other hand, the damages are paid personally by an uninsured defendant, there may be a right to claw them back.

There will be plain inconsistencies between situations which have nothing to do with the plaintiff. When a similar amendment to this was moved by us on Report, the Government raised what seemed to me a fair point; that is, that a payment made out of recoverable property to, for example, a former spouse in the course of matrimonial proceedings, should remain recoverable. We have therefore tabled a revised amendment which prevents a claw back only in the case of claims for payment of a debt or for damages, and would not prevent the claw-back in the case of an order for payment of a settlement of matrimonial property.

That seems to me to be an amendment which is plainly just and fair. It will prevent what could be a serious injustice to a successful plaintiff. I also find it extraordinary, and, indeed, unprecedented, to be able to recover damages which have been not only ordered but paid under an order of the court in cases other than ones where there has been fraud or some other serious default on the part of the plaintiff. To that extent, it establishes thoroughly bad precedent. Therefore, I hope, though I fear I do not expect, that the Government will see the justice of the case and will accept the amendment. I beg to move.

My Lords, I shall explain the context in which the amendment arises. Clause 309 enables the proceeds of unlawful conduct to be traced. That principle is not assailed. Giving away dispositions, for example, or other dispositions, does not prevent the property from continuing to be recoverable and therefore recovered. But there must be exceptions.

Perhaps the most important exception is in Clause 31 2(1). Where someone acquires the property in good faith for value and without notice, lie can keep it. That concept is well known to lawyers. It is often called "equity's darling". There are three elements to that. If a person has acquired in good faith, for value and without notice, the property is tainted in that way.

However, another exception which the Government thought important is contained at present in Clause 312(3). That is in circumstances where the very nature of the proceedings is on the basis of the respondent's unlawful conduct. In those circumstances, it is likely that the claimant 'will realise that the property is recoverable because he is saying either, "The property has been taken from me by fraud", or if not that very property. "That is the sort of person who takes property dishonestly from other people". That is why the exception, as presently drafted, is necessary. Therefore, if I am defrauded. I sue for fraud and I receive back my money. The fact that I knew that the property which is coming to me was the proceeds of crime does not and should not prevent the recovery order from operating.

It would be wrong in those circumstances that the director should recover; the victim would take priority. However, the noble Lord, Lord Goodhart, wants to extend that to the proceeds of any judgment for debt or damages, subject only to the proviso that it is made in good faith, and therefore would not apply the two other elements in Clause 312 without notice that it is recoverable property or that it is for value. That would put the judgment creditor in a favourable position. Indeed, subject to other parts of the Bill, the person who had obtained a judgment for a debt would be in a better position than the person who had simply had the debt paid on this analysis without the need to go to court.

I emphasise that that does not undermine the judgment. The judgment will remain. If someone has a judgment, there is nothing wrong with him saying, "The respondent has chosen to meet that judgment by using my money or other property to which he is not entitled". The true owner—in this case the state, because that is the philosophy behind Part 5—is entitled to say, "That is property which should he mine. This judgment has to be settled with some other property". There is nothing absurd or wrong about the principle.

My fundamental proposition is that Clause 312(1) adequately meets the cases which should be met. I understand that the noble Lord accepts that if a judgment is met there is a disposal, so that part is satisfied. He presumably sees no difficulty in the concept of good faith because that is the concept he wants to apply. Presumably, he has no difficulty with the concept that it was without notice that it is recoverable property. He continues to question whether or not a person who has obtained a judgment may be giving value. That is where he and I differ.

I invite the noble Lord first to consider a case in which a person has supplied goods, has a claim for a debt and that debt is paid before court proceedings. There can be no doubt that value has been given because value was given at the time that the money was lent, the goods were sold or whatever gives rise to the debt. There is no less value given when the money is paid following a judgment. Equally, if there is a claim for damages, the person who has that claim as a result of an injury sustained possesses something which is a chose in action in legal terms. It is a right of action which is given up at the time that the judgment is satisfied. One cannot obviously keep both the right of action and the proceeds of the judgment.

Therefore, I do not have difficulty in seeing that in the right case the concept of Clause 312 can apply to proceeds after a judgment. It will be for the court to be satisfied that value has been given. That would always be the case. Researches have identified the Chancery Division case of Taylor v. Blakelock. That was a breach of trust. When the property was then passed from another trust to the person who had the claim in relation to the trust, it was held to be a disposition for value. One is not surprised by that because the real distinction is between a volunteer and someone who has given value. Someone who has a claim for damages, which is satisfied by the court, is not an innocent volunteer. That would be for the court to decide, but I suggest that there is not the problem that the noble Lord suggests.

The amendment is not necessary in order to meet the category of case with which he is concerned. However, there is a further problem, which goes beyond the considerations set out under Clause 312; that is, equitable considerations. That does not include the requirement of absence of notice or the requirement of value in some other sense. If the noble Lord accepts my argument, we have dealt with that point. It does not deal with the "without notice" issue. If someone has a judgment—even if a bona fide judgment—and knows that it is being satisfied from the proceeds of a robbery, why should he be able to keep the property? He will say, "No, you must pay me out of money which is clean".

I refer to a second problem. In Part 5 we have been attempting to have a civil process, which follows the same kind of rules as a civil process. A concept such as bona fide purchaser for value without notice and in good faith is entirely what one would expect in a civil process. The courts would be used to dealing with that. To introduce a novel concept which simply depends upon good faith would be to introduce an unusual approach. That could give rise to serious difficulties as to how this is supposed to apply.

I hope that the noble Lord feels that that explanation—although we have covered some of this ground before—is of some reassurance. I invite him to withdraw the amendment.

My Lords, I am inclined to accept the argument of the noble and learned Lord the Attorney-General so far as it applies to actions in debt. To that extent, I agree that the wording of my amendment, which refers to debt, is probably superfluous. However, there remain serious problems as regards actions for damages.

Let us assume that there is an action for damages for personal injury. A plaintiff who is injured by the negligence of the respondent is not interested in the question of whether or not any claim for damages is likely to be satisfied out of recoverable property.

It is not like a contract where one knows that one is dealing with a particular person. One may or may not know that that person is involved in crime. If one does, it is reasonable that the property acquired from him should be treated as being recoverable. I turn back to the case of someone injured by the negligence of the respondent. Let us assume that at the time of the injury the injured person does not know anything about the respondent whatsoever, except that his conduct has injured him. The noble and learned Lord tried to argue that one could get around that issue by saying that when the plaintiff is injured he acquires a chose in action—a right in action. When he gets the payment of damages he disposes of his right of action for value and in good faith. I regard that as an extremely narrow and technical argument.

On Report the noble and learned Lord raised against me the argument that the cause of action is extinguished by the judgment. On this occasion I would raise that against him because by the time one gets one's damages judgment has already been given, obviously. So one no longer has a cause of action—when one gets the damages one has nothing of which one can dispose. I do not wish to rely on that exceedingly technical argument.

If the noble and learned Lord is right—when one gets judgment in an action for damages, and when that judgment is satisfied one provides value to the person who paid the damages—the whole of subsection (3) would be unnecessary. If the claimant's claim is based on the defendant's unlawful conduct, there must be a right of action for the unlawful conduct which is being given up, in exactly the same way as would be the case if it is simply an action for damages for negligence.

My Lords, I thank the noble Lord for giving way to me. In that circumstance the claimant will have noticed that it is recoverable property. That is why Clause 312(1) would not work in that situation. That is why the existing clause is necessary.

My Lords, the point about the notice is a bad one. I return to the case of someone injured by negligence. At the time of the injury, he has no idea that the respondent is involved in crime. By the time the judgment is satisfied he has found out quite a good deal more about the respondent. If that is the case, on the noble and learned Lord's interpretation of Clause 312(1), the conditions cannot be satisfied because by the time the judgment is satisfied the plaintiff has notice that the property might be recoverable. Surely, it should make no difference whatever if an entirely innocent plaintiff, with a good cause of action in damages against a respondent is defeated simply because at some stage before the judgment is satisfied he comes across the otherwise irrelevant information that the respondent, is a no-good type against whom a recovery order might be made. It is unjustified to say that that is a deciding factor in whether or not the plaintiff is entitled to keep the damages which he has been paid. This is a wholly unjustifiable objection.

I am unhappy with the Government's response. Nevertheless, I have the feeling that we are arguing in terms of some fairly narrow technicalities. I should be reluctant in the circumstances—although I remain convinced that my point is good—to press the matter to a Division. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 12:

Page 199, line 24, at end insert "or an employee of his"

The noble Lord said: My Lords, in moving Amendment No. 12,I shall speak also to Amendments Nos. 13, 14, 15 and 16. The amendments are based on the belief that the most effective way to ensure that the regulated sector observes high standards in relation to money-laundering is to make its employers liable to prosecution for misconduct or negligence of their employees, whether or not the directors of an employer company have been guilty of it.

If employers face a hefty fine for a breach of money-laundering by their staff, that ensures that their staff are not only properly trained but are selected as people who have the capacity to do the job, are properly monitored and are not grossly overworked.

Amendment No. 12 substantially strengthens the Bill. In addition, it eliminates the need to make employees personally liable for a negligent failure to spot a suspicious transaction. It is unfair to make a junior employee liable for failure to spot a suspicious transaction if he did not realise that it was suspicious.

There is a specific defence provided in the Bill for employees who have not had proper training, but it is not a defence if they fail to notice that a transaction is suspicious because they are exhausted by overwork or because they are simply not up to the job. That potential unfairness to employees who may find themselves with a criminal conviction for negligent conduct was a matter of great concern to members of all parties in Committee in another place. An offence of careless driving is a criminal offence of negligence, but does not normally attract the kind of stigma that would be attracted by a conviction for money laundering, which may be a crime of serious dishonesty.

The amendments would strengthen the Bill by giving employers a real incentive to ensure the maintenance of high standards in watching for money laundering and would remove a potential injustice to their staff. I beg to move.

My Lords, I rise to support the amendments. As the noble and learned Lord, Lord Falconer, will recall, in Committee we tabled amendments of a slightly different nature to the clause. Our approach was to reduce the penalty for the negligence offence to one below the custodial threshold. That did not find favour with the noble and learned Lord. The noble Lord, Lord Goodhart, took the message and has come up with a different approach.

The Government's approach is both ethically wrong and operationally futile. It is ethically wrong for the reasons explained by the noble Lord. A criminal penalty of that nature should not be the consequence of negligent conduct in which an officer in an institution does not do what he ought to do, according to the required standard. Equally, the existence of the penalty will make no difference to the conduct of those who are, to use the modern expression that I do not much like myself, but which seems the most evocative, at the workstation.

I hope that the Minister will reflect on the matter. I do not say that our solution is necessarily the best; nor that that of the noble Lord, Lord Goodhart, is the best; but the Government should think again about the issue. So something needs to be done. The Government have got the balance wrong and they should take the opportunity, while the Bill is still alive, to come up with a better solution.

My Lords, we share a considerable number of goals with noble Lords on both Front Benches on the matter, but I earnestly ask both of them to consider what they are proposing under the amendment.

For example, let us suppose that a one-man solicitors firm has trained all of its staff and has systems in place, as required under the money laundering directive that is to be introduced. That one-man firm will be caught by the directive and by the clause. He has trained; he has the system; he is careful. As the result of the negligence of one of his employees, there is a breach of the provision. Under the amendment, the employee will get off but the solicitor, who is completely blameless in that respect and has done everything required of him, will end up being liable for a criminal offence that carries a maximum penalty of five years in prison.

Having put the ethical case, I cannot believe that noble Lords intended that, but that is the amendment's consequence once the second money laundering directive is introduced and solicitors are caught by it.

My Lords, I am most grateful to the noble and learned Lord for giving way, and I shall be telegraphic. I agree with much of what he said, but the Government are equally at fault in their position. That is why I asked them to come up with a different approach. The Government have criticised both of our approaches, but they have not done anything to improve their draft.

My Lords, that draft involves blameworthy conduct in the sense of negligence before a crime is committed, whereas the draft proposed by the noble Lord, Lord Goodhart, which the noble Lord supports, involves conviction for an offence without any blameworthy conduct.

We all agree that our goal is high standards for reporting coupled with appropriate penalties for wrong-doing. We cannot possibly support what would in effect be strict liability for professionals who were completely blameless. From what the noble Lord, Lord Kingsland, said, I detect that he does not support that conclusion either. We think that we have the best solution.

The Money Laundering Regulations 1993 require all businesses within the regulated sector to have systems in place to provide for the training of employees, the identification of customers and the keeping of records for five years. The penalty on conviction for failing to comply with the regulations is a period of imprisonment of up to two years or an unlimited fine. Most companies are diligent in that respect and comply fully with the regulations' requirements, but a company director can already be brought to book for failing to take the regulations seriously. That is important because of the high standards that we seek.

In effect, the amendments would mean that even if an employer has done everything in his power to ensure that his employees have been correctly trained to be alert to money laundering, where an employee fails to make a disclosure because he did not know or suspect that money laundering was going on, the employer would have to take full responsibility for the negligent behaviour of his employees. It does not end there. In the circumstances that I have described, by virtue of Clause 338, the employer could find himself subject to a period of imprisonment of up to five years.

For the reasons that I have given, that cannot be right. The employer will have done nothing wrong at all; on the contrary, he will have done all that he can to protect his company from money laundering activity and yet, through wilfulness or sheer laziness on the part of his employee, he may still face a longish term of imprisonment.

Separately from the ethical point, how would the amendment work in practice? Where the employee knew or suspected money laundering, the prosecutor would seem to have a choice whether to prosecute the employer or the employee. It is not right to have the option of prosecuting the employer in cases where the employee deliberately fails to report money laundering. In cases in which there was no knowledge or suspicion, the employee would have a defence to the offence, so the prosecutor could pursue only the employer.

However, in practice it may not be clear at the outset whether there was actual knowledge or suspicion or simply reasonable grounds for it. In order to secure a conviction, the prosecution would need to put both the employee and the employer in the dock and see whether the employee successfully made the defence. That could lead to the employer being prosecuted in the most inappropriate cases.

The simple fact is that, under the amendments, the prosecutor would be reluctant to bring a prosecution against a company except in the most blatant cases of a company's disregard of proper procedures. In most such cases, the company would be liable to prosecution under the money laundering regulations in any event. We should be no further forward in trying to bring about a higher degree of diligence within the regulated sector.

So we would end up with unfairness and would not produce the high standards that we seek. In those circumstances, I firmly ask the noble Lord to reconsider and to withdraw the amendment.

My Lords, I found the noble and learned Lord's response far from convincing. He raised the argument of the one-person solicitors firm and said that the threat of a five-year term imprisonment for the breach of the money laundering rules by an employee of the solicitor would be inappropriate. Of course that is so but there would be no chance in those circumstances of any term of imprisonment being imposed. A five-year term would be almost equally inappropriate for a new young employee who, despite being properly trained, failed to notice something that an experienced employee would have noticed and became liable for negligence.

Equally, where the employees of a large firm or an incorporated business commit a series of breaches, plainly there is something wrong with the way that the employer runs the business and a fine—possibly substantial—would be entirely appropriate. Strict liability is a way of ensuring high standards in the commercial sector, so there are several fields in which employers are subject to strict criminal liability for breaches of law by their employees.

I would have been minded to press the amendment to a Division except that it would impose a considerable potential liability on any organisation that falls within the regulated sector now or may do in future. It would be inappropriate to press the amendment to a vote without more thorough consultation with the business sector potentially affected than we have been able to undertake. In those circumstance, while I remain convinced that the amendment is a much better way of proceeding, it is not appropriate to press it now. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 17:

Page 226, line 1, at end insert—

"(11) Rules of court may make provision as to the practice and procedure to be followed in connection with proceedings relating to the issue of letters of request by a judge under this section."

The noble and learned Lord said: My Lords, before I refer to Amendment No. 17, I want to add something that I should have said in response to Amendment No. 12. The Government believe that strong anti-money laundering measures, including the new negligence test, are fully justified against the background of several money laundering cases in the City that were not reported to law enforcement. For the City's financial reputation and standing, here and overseas, it is of utmost importance that the United Kingdom should be seen to demand the highest standards of diligence. I was recently able to reassure representatives of the Law Society concerning the operation of the provisions in Part 7. One of their concerns was that a problem might arise if NCIS is unable to consent to a transaction quickly and a client brings an action for negligence—for example, where there is urgency in completing a conveyancing transaction.

Although it would ultimately be for the court to decide, in our view it is highly unlikely that a company that is in dialogue with NCIS would be found negligent in those circumstances. Where a report is sent to NCIS and the matter is urgent, I am looking into establishing a follow-up hotline within NCIS to operate during daylight hours, so that the discloser is not left in the difficult position of neither being able to effect a transaction nor inform the client that a report has been made to NCIS. The Bill's time limits will be helpful but there will inevitably be cases where consent to a transaction needs to be given before seven calendar days, as provided in the Bill.

My Lords, I am most grateful to the noble and learned Lord for making that point. The original Law Society proposal for a two-day time limit presented obvious difficulties and might have led to NCIS refusing permission without the opportunity to consider the matter properly because the two-day limit was approaching. The formula devised by the noble and learned Lord and the Law Society is the right way to proceed.

My Lords, I am obliged.

I alerted your Lordships to the need for Amendment No. 17 on Report. Its effect is to provide a power to make rules of court for proceedings under Clause 380, which makes provision for the Director of ARA to apply to a judge for a letter requesting evidence from overseas relating to confiscation investigations. The person under investigation will also be able to request such evidence for use in their defence. The amendment is required because applications under this clause will be made to a judge, not to a court, and therefore specific rule-making provision within the Bill to make rules of court will be required.

Amendment No. 18 is a purely drafting amendment. Part 5 of the Bill refers to "interim receiving orders" for England and Wales and to "interim administration orders" for Scotland—reflecting the different terminology in the two jurisdictions. The same terminology is used in Part 8. Amendment 18 simply adds a reference to "interim administration orders" to the interpretation provision for Part 8. I beg to move.

On Question, amendment agreed to.

moved Amendment No. 18:

Page 246, line 10, leave out "and "interim receiving order"" and insert ", "interim receiving order" and "interim administration order""

On Question, amendment agreed to.

moved Amendment No. 19:

Page 247, line 42, after "339" insert ", 340"

The noble and learned Lord said: My Lords, the two sets of minor amendments that follow are technical. They are largely a matter of integration, in that they extend to the whole of the United Kingdom provisions that the Bill already applies to one or more of the three jurisdictions. The amendments to Clauses 429 and 433 are mainly designed to simplify for Northern Ireland the interrelationship between tainted gifts under the confiscation legislation and under-value transactions under the insolvency legislation. The amendments simply replicate for Northern Ireland amendments that your Lordships approved for England and Wales and Scotland on Report, when I mentioned that we would bringing them forward.

The second set of amendments affects Clause 423 and, to a lesser extent, Clauses 429, 431 and 433 and is concerned with preferences—a term used in insolvency legislation. I beg to move.

On Question, amendment agreed to.

moved Amendments Nos. 20 to 22:

Page 248, line 1, after "339" insert ", 340"

Page 248, line 10, after "339" insert 340"

Page 248, line 10, after "27" insert ", 44"

On Question, amendments agreed to.

moved Amendments Nos. 23 to 29:

Page 251, line 31, after "312" insert ", 313"

Page 251, leave out lines 33 to 36.

Page 251, line 38, at end insert ", or

(ca) there is in force in respect of such property an order under section 51, 53, 130(3), 201 or 203."

Page 251, line 39, after "312" insert ", 313"

Page 251, line 39, leave out from "after" to "must" in line 40 and insert "an order mentioned in subsection (2)(c) or (ea) is discharged"

Page 251, line 43, leave out subsection (4).

Page 252, line 3, leave out subsections (6) and (7).

On Question, amendments agreed to.

moved Amendments Nos. 30 to 36:

Page 254, line 4, after "238" insert ", 239"

Page 254, line 5, after "242" insert "or 243"

Page 254, line 6, after "alienations" insert 'land unfair preferences"

Page 254, line 12, after "238" insert ",239"

Page 254, line 13, after "242" insert "or 243"

Page 254, line 21, after "substitution" insert "—

(a) for references to section 239 of the 1986 Act of references to section 615 of the Companies Act 1985;

(b)"

Page 254, line 22, at end insert ";

(c) for references to section 243 of the 1986 Act of references to section 615B of the Companies Act 1985."

On Question, amendments agreed to.

moved Amendments Nos. 37 to 43:

Page 255, line 38, after "202" insert ", 203"

Page 255, leave out lines 40 to 43.

Page 255, line 45, at end insert ", or

(ca) there is in force in respect of such property an order under section 51, 53, 130(3), 201 or 203."

Page 256, line 1, after "202" insert ", 203"

Page 256, line 1, leave out from "after" to "must" in line 2 and insert "an order mentioned in subsection (3)(c) or (ca) is discharged"

Page 256, line 5, leave out subsection (5).

Page 256, line 11, leave out subsection (7).

On Question, amendments agreed to.

moved Amendment No. 44:

Page 271, line 15, at end insert—

"() an order under paragraph 5 of Schedule 9 to amend Part 1 of that Schedule;"

The noble Lord said: My Lords, at the very last gasp we plead for the third time for the Government to adopt the simple proposal to subject the extension of criminal offences to new groups of people to full parliamentary scrutiny by the mechanism of the affirmatory procedure—which was the recommendation of the Delegated Powers and Regulatory Reform Committee.

Clause 463 imposes a considerable burden on businesses that are designated in Part 1 of Schedule 9 as the regulated sector. Criminal responsibility is placed upon any person involved in that sector who has information that may be apposite to money laundering. The Government's response on Report was twofold. First, they said that it was necessary to implement the second European money laundering directive—which would extend the scope of the schedule to accountants, auditors, tax advisers, lawyers, estate agents, casinos and dealers in high-value goods. One only has to consider that last group to wonder what sort of businesses are included in dealers and high-value goods. How are they to be defined? The extensions should be fully debated and accepted affirmatively.

Secondly, the Government said that minor technical changes to the money-laundering regulations have already been made from time to time and that technical changes do not require the expenditure of a considerable amount of parliamentary time. If that is so, we are not concerned with minor technical changes but with the extension to new groups of people of a whole raft of new criminal offences. That matter should be fully considered by the House and another place. I beg to move.

My Lords, I support the amendment.

My Lords, we are still not minded to accept the noble Lord's amendment or the recommendations of the Select Committee on Delegated Powers and Regulatory Reform in this respect.

As the noble Lord said, we intend to implement the Second European Money Laundering Directive by a revision of the Money Laundering Regulations 1993, which will include an extension of the regulations to cover the areas of business specified in the directive. Changes to the regulations will be subject to a full three-month period of consultation. On Report, I said that the regulations—and hence the criminal law—would be amended simply in order to fulfil our international obligations, as set out in the directive, which has, of course, been considered and cleared by scrutiny Committees in both Houses.

At that stage, the noble Lord stated that he was not satisfied with that argument, because the directive did not lay down a requirement as to the length of sentence for failing to report suspected money laundering. I must point out that the European directives and other international documents represent a minimum standard. In order to maintain the strong reputation of our financial sector, the UK must be seen as a leader in the field, with strong, effective anti-money laundering provisions in place.

As set out in paragraphs 84 and 85 of the Home Office's memorandum, the Treasury can, at present, change the definition of business in the regulated sector set out in the Money Laundering Regulations 1993 by order subject to the negative resolution procedure under the European Communities Act 1972. That covers issues such as the requirement to establish systems for suspicious transaction reports, keeping records, undertaking training and appointing designated money laundering reporting officers.

The noble Lord, Lord Thomas of Gresford, made the point that the European Communities Act could not be used to create offences for which the penalties were more than two years and that we should, therefore, not argue that the Schedule 9 power should have the same procedure as the Money Laundering Regulations, which are made under the European Communities Act and contain only penalties of two years. I still disagree with that line of argument. It is clear that we are not trying to say that the provisions in the Bill are the same as the Money Laundering Regulations. Neither are we creating offences by way of secondary legislation. We would be making changes to what constitutes the regulated sector for the purpose of the Act and changes to the list of supervisory authorities. It has already been accepted that the regulated sector will be extended to additional types of business, such as accountants and tax advisers, and that they will, consequently, be subject to the failure to disclose offence and the penalties that that offence attracts.

The important point is that we must ensure that the two definitions of the regulated sector are kept the same for practical purposes. It would not be sensible to have one definition of the regulated sector for the purpose of the Money Laundering Regulations but another definition for the requirement in the Proceeds of Crime Bill to make suspicious transaction reports when there were reasonable grounds to suspect involvement in money laundering.

My Lords, that must be the weakest argument ever. After all, the House is used to making identical sets of regulations for, say, England and Wales, on the one hand, and Scotland, on the other. The regulations may be identical, but they will be in different instruments. It is perfectly possible to do exactly the same here.

My Lords, it would be perfectly possible to do it, but it is equally possible that it would not be done. It is for the House to judge the strength of the argument. If we make one order subject to affirmative resolution, there would be the potential for the definitions to get out of step, while we wait for the affirmative order to be approved. The amendments would also create the rather odd and undesirable position in which amendments to Part 1 of Schedule 9—the definition of the regulated sector— would be subject to the affirmative resolution procedure, while amendments to Part 2 of the schedule—the list of supervisory authorities—would be subject to the negative procedure.

I hope that what I have said will reassure the noble Lord and that the amendment will be withdrawn.

My Lords, I must take up that final point. I emphasised that the thrust of the amendment was that we should deal with the extension of criminal offences to new groups of people. The Minister says that that does not create new criminal offences, but there are dealers in high value goods who today do not commit an offence by failing to report matters that come to their attention but who tomorrow, when the regulations are passed, will commit: a criminal offence if they fail to disclose information. That is creating new criminal offences.

We are wholly unsatisfied with the explanation given. However, for the moment—indeed, for the end of the Bill in this House—we will not press the amendment to a Division. I beg leave to withdraw the amendment.

Amendment, by leave, withdraw.

moved Amendment No.1:

Page 28, line 6, at end insert—

"() the Police Ombudsman for Northern Ireland"

The noble Lord said: My Lords, before I speak to the amendment, I shall take a moment of the House's time to thank the Minister and all his team for their care and patience in handling our amendments from day one. We have had many meetings outside the Chamber as well as long and interesting debates in it. I feel—perhaps slightly conceitedly—that the Bill has been given a serious and thorough examination. That examination has been treated courteously, carefully and diligently by the Government.

I return to the amendment. The arguments for the proposed change have been made two or three times. The amendment refers to the remit of the chief inspector of criminal justice and to the areas that he should inspect. There is, as I shall hear shortly from the Minister, common ground between us. We agree that the list is not complete. It is also common ground that there are powers for the Secretary of State to add to the list. However, I must make the point a last time. There are organisations in Northern Ireland that are, clearly, part and parcel of the judicial system. Unlike certain noble Lords, I shall not pick on one. Noble Lords will know that people feel more strongly about some of those organisations than they do about others. I sincerely hope that the logic will bear fruit in due course and that we will see a comprehensive list of organisations that will be inspected by the chief inspector of criminal justice. I beg to move.

My Lords, I support the amendment, but, before I proceed with the debate, I join the noble Lord, Lord Glentoran, in expressing gratitude to the Minister and to his colleague, the noble Baroness, Lady Scotland of Asthal, who, I understand, has to be in Brussels today. Both have been exceedingly courteous.

I hope that, in the passage of the Bill through Committee and Report, we have managed to exchange ideas and concerns to the extent that the Bill will benefit society in Northern Ireland. I listened carefully as the noble and learned Lord the Lord Privy Seal assured us again and again that the Bill would not be implemented or the relevant matters devolved until the situation was right and that nothing would be done that would jeopardise that tender plant, the devolved arrangement in Northern Ireland.

Like the noble Lord, Lord Glentoran, I am concerned that there are 19 organisations invited to come under the scrutiny of the Chief Inspector of Criminal Justice, which, despite having been asked as long ago as February to consult and consider that particular matter, have been unable four months later to respond positively. I cannot believe that all 19 organisations under consideration have been as reluctant. I therefore cannot understand why responses have not been put forward. It appears to me that the Police Ombudsman, whose task is to ensure transparency and openness in terms of policing in Northern Ireland, would not wish to be seen as reluctant to be open and transparent in the way in which her duties and those of her office are carried out.

Will the Minister therefore indicate the reason for four months of wavering and indifference on the part of those organisations, or some of them? Will he at least give your Lordships an assurance that, subsequent to today's proceedings, there will be no opportunity for any of those 19 organisations to opt out of their responsibilities to participate in the scrutiny procedure to which this clause of the Bill relates? It would be a matter of particular concern should any of the organisations be able to say, "We are not prepared to participate in the scrutiny for which this Bill makes provision".

The noble and learned Lord knows that I still have considerable concerns with regard to the remainder of the Bill. However, he has endeavoured to reassure me on many matters. I appreciate the correspondence that I have received from him. I hope that he is able further to reassure me today.

My Lords, I am conscious that we are revisiting unfinished business in more ways than one. In that context, I must apologise to your Lordships' House that in my final speech on this matter at Report stage a week ago I appear by some Fawkesian slip to have said "5th November" when I meant to say "5th February", which will have made my speech extremely difficult to follow.

To make sense of what I had made a nonsense, the true chronology was that Mr Browne in Committee in the Commons on 5th February had said that he might complete the consultation that underlies this amendment by Report stage in the Commons. The latter occurred on 4th March, and the noble and learned Lord the Minister revealed on Report here on 1st July that Mr Browne had written to the consultees on 28th February, four days earlier. As we now know, that consultation has still not been completed, four months later. I acknowledge that the bodies already on the face of the Bill had two years of consultation. By comparison, therefore, four months is a bagatelle. Equally, however, Mr Browne's original estimate of four days was perhaps a little optimistic.

As the Bill has moved towards the slipway leading to enactment, another drama has been played in parallel. At this elegiac moment in the Bill's progress, I hope I shall be allowed the indulgence of saying that, however sorry I may be that the Government's consultation in this instance has taken four months and may take up to two years altogether, I am delighted that they have taken longer than the period of less than two weeks taken by Queen's University, Belfast to consult on its decision to end the teaching of Greek, Latin and classical studies. If any of your Lordships wonder at the relevance of that, some of us who had small parts to play in the 30 years of the Troubles have been aware of their classical resonance. The great Seamus Heaney, who won a Nobel Prize for Literature, even before John Hume and David Trimble won theirs for Peace, adapted a Sophoclean episode from the 20 Homeric years of the Trojan Wars into a contemporary play.

In the 17th century, another era of internecine conflict, Dryden translated the epigrammatic Latin of one of his contemporaries to read,

"For those whom God to ruin has designed,

He fits for fate, and first destroys their mind".

I regret the decision to end classical studies at Queen's University, Belfast, which was a most distinguished department. Of course, I do not lay that at the Government's door, but I hope that their consultation has a happier outcome than the one I have just described.

My Lords. I recognise that the noble and learned Lord made it clear at Report stage that a consultation period is still taking place. However, it is strange that the Police Ombudsman, who, above many others, must be seen to be connected with criminal justice, has still been unable to reply. It is equally extremely difficult to believe that, when she does answer, she could answer other than by saying that she would be prepared to submit herself to the inspector's remit. I make a last plea to the Government to consider putting the Police Ombudsman on the list, on the assumption that, no person thinking properly about her duty to criminal justice could very well do otherwise than say that she will submit herself.

My Lords, I am very grateful for the courteous remarks introduced by the noble Lord, Lord Glentoran, and echoed by other noble Lords. I shall respond, because it has never been a requirement for any of us to be relevant when speaking to any amendment on the face of this Bill.

We are reaching the end of a difficult journey. The noble Baroness, Lady O'Cathain, who I am pleased to see in her place, expressed serious, reasoned concerns about the Grand Committee procedure. I am happy to pay tribute to all who participated. It was a model of its kind; the House authorities were excellent in providing us with proper accommodation after the first two days; and I believe that in the scrutiny of this Bill we have done our duty properly to the people of Northern Ireland.

I have reminded myself of the areas in which improvements have been made: the judiciary; the lay members of the commission to declare in writing their commitment to non-violence, exclusively peaceful and democratic means; that the pool of candidates is to be reflective of the community; that appointment can be made only on merit; the roll-out in an orderly way of the new Public Prosecution Service; the designation of the DPP under Sections 75 and 76 of the Act; that we listened particularly carefully to the concerns expressed on community safety partnerships, about which we have tabled amendments; and, not least, that the noble Lord, Lord Glentoran, achieved his requirement that the Secretary of State should be obliged to publish reports. Without being unduly self-congratulatory, we have done good work.

Perhaps I may say also that I am pleased to see the noble and redoubtable Baroness, Lady Park of Monmouth, back with us after her recent indisposition. Furthermore, I welcome in particular the generous and good-hearted words of the noble Lord, Lord Maginnis. He does not agree with me on all occasions; indeed, he has not agreed on any occasion, but throughout we have had a civilised discourse and debate.

I turn now to Amendment No. 1. I can confirm for the noble Lord, Lord Maginnis, that there is no question of any organisation being able to opt out or to have a veto. We are continuing with our consultations. They are lengthy, but we have approached the matter on the basis that it is better to have a willing rather than an unwilling co-operator. That is the key to what we are doing. Some organisations have proved to be reluctant. Some claim to have sent letters to my honourable friend Mr Browne. I had better not mention one which claims that its letter has been lost. I shall leave noble Lords to draw their own ignoble conclusions as regards whose letter might have been lost in the post.

Noble Lords are entitled to something more definite than I have said in the past. What I am undertaking is this: the Secretary of State does intend to use this power and there is no prospect that the present limited list will remain. I have said privately to the noble Lord, Lord Glentoran, and f repeat for the benefit of all noble Lords the following. In the first week back after the Recess I shall undertake to write an update letter to all noble Lords and to place a copy in the Library of the House. That will set a terminal point at which decisions will have to have been made.

On that basis, I hope that the noble Lord will feel content that he has achieved his substantial purpose.

My Lords, I thank the noble and learned Lord for that explanation which very generously he gave me earlier today in his office. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

had given notice of his intention to move Amendment No. 2:

Page 28, line 6, at end insert—

"(k) any other organisations which the Secretary of State may by order specify from time to time.

() No order may he made under paragraph (k) unless a draft has been laid before and approved by a resolution of each House of Parliament."

The noble Lord said: My Lords, perhaps I may take this opportunity to reiterate what has been said by other noble Lords. The deliberations on this Bill have been lengthy—indeed, on occasion they have been too lengthy—but ultimately the legislation has come through well. On Second Reading I said that I felt that we were creating an overly elaborate judicial infrastructure, and I am still not persuaded on that point. However, I wish the Bill well. I think that some parts of it are excellent, in particular the provisions dealing with the treatment of young offenders. They are truly pioneering and I hope that they will be extended throughout the United Kingdom once they are up and running in Northern Ireland.

Overall, we welcome the Bill. Its enactment will properly devolve judicial arrangements to Northern Ireland. I wish to add my thanks to the noble and learned Lord the Lord Privy Seal. His discussions with all noble Lords have been of the highest order.

I do not intend to move the amendment.

My Lords, in these happy and felicitous circumstances, I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(Lord Williams of Mostyn.)

On Question, Bill passed and returned to the Commons with amendments.

My Lords, I beg to move that this Bill do now pass. In so doing, I should like to express my thanks to all noble Lords, in particular those on the Opposition Benches, for their constructive approach and the proper testing that they have given the Bill in its passage through the House.

Together with other measures being taken forward in co-operation with the industry, the Bill will help to remove the incentive for mobile phone theft and to tackle street crime.

I should also like to express my thanks to the Bill team. I commend the Bill to the House.

Moved, That the Bill do now pass.—(Lord Filkin.)

My Lords, we are glad to have assisted in the passage of the Bill.

On Question, Bill passed and sent to the Commons.

My Lords, I beg to move that this Bill be now read a second time. From the outset I wish to declare my interest as someone who works as an adviser to the Co-operative Group and as a member of the Co-operative Party.

I am honoured to move the Second Reading of the Employee Share Schemes Bill and I should like to take the opportunity to pay tribute to my honourable friend Mark Lazarowicz, who piloted the legislation through its stages in the other place with such skill that he succeeded in persuading the Government to join with him in extending the scope of tax advantages in the Bill.

The Bill was originally introduced to remedy an anomaly in the current legislation with regard to the operation of tax advantages available to employee share schemes. Ironically, the very businesses that provide for a high degree of employee ownership and involvement and are totally or partially employee controlled are often unable to distribute shares to the employees on a tax-effective basis because of their employee-based structure. That anomaly acts as a deterrent to the wider extension of employee ownership. This Bill seeks to address that problem.

Perhaps I may describe briefly the purposes of the Bill. It will encourage wider employee ownership in the UK and will do so by extending the tax benefits for employee share schemes for companies that wish to encourage widespread employee ownership.

It will facilitate the transfer of shares to an employee trust by companies that want to make a significant move towards employee ownership and transfer a large part of the company into a trust at the outset. At present, this action may be discouraged because to do so would not offer corporation tax benefits otherwise available when such shares are transferred on a year-by-year basis. Thus, provided that at least 10 per cent of the company's ordinary share capital is held on behalf of the employees by trustees, the Bill provides for corporation tax relief to be granted "up front" in respect of such shares.

In addition, the Bill seeks to make it easier for employee trusts which hold shares to elect employees as trustees of that shareholding, and so give employees a direct voice in the ownership of the businesses in which they work.

Clause 1 states that the Bill will amend Schedule 8 of the Finance Act 2000, covering the introduction and operation of share incentive plans. Clause 1(2) adds a provision to the SIP legislation, which gives a clear pointer to companies setting up an SIP that elected employees may become trustees. Clause 1(3) seeks to support the position of companies and, in particular, business owners who want to make a significant move towards employee ownership. It grants corporation tax relief up front where a significant block of shares—10 per cent or more—is transferred to an employee trust. Clause 1(4) ensures that the availability of the corporation tax deduction should be linked to the distribution of shares in order to maintain the link between productivity and employee benefits. This also ensures that a proportionate part of the deduction will be withdrawn in respect of any shares which may for whatever reason be awarded to a non-Schedule E taxpayer.

Clause 2 proposes changes to the Finance Act 2000 which are consequential on the other changes resulting from the Bill. Clause 3 provides that shares held in an SIP by trustees with the benefit of up-front corporation tax relief will not be subject to income tax on dividends and other distributions or capital gains tax for so long as the trustees hold them, during a period of up to 10 years. This extends the period for relief otherwise available under the SIP legislation, which is usually limited to two years. This measure is designed to ensure that the enacted provisions of the Bill operate in the same way as the provisions for existing legislation governing SIPs.

Clause 4 gives the Bill its title: Employee Share Schemes Act 2002. Clause 5 states that the Bill will become law on 6th April 2003. The Bill represents a milestone in rewarding long-term commitment by employees. There is no better incentive and motivation for employees than for their work to be recognised and for them to share in their firm's success. Research has shown that businesses with widespread employee share ownership outperform their rivals. The combination of employee share ownership and employee participation yields the best results for everyone.

I read with great pleasure the commitment that my honourable friend the Paymaster General gave to the issue in her remarks on Report in the other place. She said,

"The Government attach great importance to employee share ownership and participation. Increasing employee share ownership is at the heart of the Government's productivity agenda

The Share Incentive Plan introduced in the Finance Act 2000 has made it easier for not just some, but all employees to become stakeholders in a company. I wholeheartedly welcome the Government's commitment and support for the Bill. I commend the Bill to the House.

Moved, That the Bill be now read a second time.— (Baroness Thornton.)

My Lords, I rise to welcome the Bill. As a former Liberal Democrat candidate it has been mother's milk: a say and a share in the place where you work. I do not declare an interest, but I have an interest in the other sense. I was an initial director of Job Ownership Limited, which has been involved with the Bill. It is a further step towards wider share ownership.

The gist of the Bill is that major tax relief is available. That should encourage proprietors and employees. During the time I was involved with Job Ownership, 20 years or so ago, I became interested in the theology of employee-owned organisations. There is quite a span. The major element is whether the employee ownership is collective or individual. I am in favour of letting many flowers grow, but I wonder whether there will be an opportunity to review the arrangements and see that there is a level playing field in terms of the fiscal arrangements of the organisations trying to encourage greater employee ownership; particularly the tax incentives.

In the other place there was discussion about the John Lewis Partnership and some of the possible concerns of that firm in relation to the Bill. There are occasions when we nudge matters, and this is a nudging Bill. There is further help and assistance for employee ownership in the Bill and I rise to encourage that. I hope that the further nudge eventually goes through Perhaps there should he an opportunity in the not-too-distant future to consider further nudges.

My Lords, I am happy to support the Bill. The noble Baroness, Lady Thornton, has done us a service in picking it up from the honourable Member for Edinburgh North and Leith.

I am speaking in this House on the Bill because I have been involved in encouraging employee share schemes, both when I was Minister of State for Small Firms in the Government of my noble friend Lady Thatcher and also later when I was in the Treasury. I am a longstanding supporter of small businesses and of employee share schemes. I agree with the remark of the noble Lord, Lord Shutt of Greetland, about many flowers blooming. There are many different ways in which such schemes may be encouraged, which work well in different circumstances. It should not be a function of government to persuade organisations to use one form as opposed to another.

The noble Lord also referred to the important outstanding matter of the John Lewis Partnership and other firms arranged on the same lines. As we all know, John Lewis is an outstanding example of employee share ownership. It is far more longstanding than any of the schemes of either the present or previous Government—of which I was a member—on this matter. It would be astonishing and wrong if John Lewis was to be excluded from the benefits of the Bill because of the arrangement of its partnership.

So far we have had only expressions of sympathy from the Government on that point. With regard to John Lewis and similar companies it is an example of what passes for activity by the Government: every assistance short of actual help. I hope that the Minister will be able to reassure us either today or in later stages on that aspect.

The Bill is a finance Bill in all but name. It is about tax. It amends the Finance Act 2000 and does nothing else. It was handled in another place by my successor as Her Majesty's Paymaster General, Dawn Primarolo, who was also my parliamentary neighbour. It is excellent that we are being allowed to discuss the Bill completely, not only today but in its later stages, and to discuss amendments should noble Lords wish. I look forward to the later stages being conducted in a full and proper manner as befits a Bill, even if it is a finance Bill in all but name.

My Lords, I congratulate my noble friend Lady Thornton on bringing the Bill before the House. I am not sure that I share the exulted enthusiasm displayed by the noble Lord on the Opposition Benches, who delighted in the fact that this is a quasi-finance Bill and therefore felt that we should take extra delight in the proceedings. I have rather more respect for finance Bills in the other place not to develop a certain shudder about Bills on which discussion often went on long into the night under the old regime. Let us rest assured that, as the noble Lord, Lord Cope, described, the Bill amends the Finance Act; but it began as a Private Member's Bill in the other place and is being read in that vein here.

As my noble friend said in her opening remarks, employee share ownership is at the heart of the Government's drive for improved productivity and enterprise. In July 2000 we introduced the Share Incentive Plan and enterprise management incentives. The noble Lord, Lord Shutt, is right that the body of which he has fond associations, Job Ownership Limited, played its part in the Bill's development. So too did the Co-operative Party; I congratulate both organisations on their contribution.

As has been indicated in all parts of the House, the Bill enjoyed support on all sides of the Commons. The Government's proposals on share incentive plans and enterprise management incentives were developed in consultation with industry and both are proving very popular. For example, more than 600 companies have applied for Inland Revenue approval of their share incentive plans. This demonstrates our very real commitment to employee share ownership. But we are not complacent. The need for development will be monitored. Both the share incentive plan and enterprise management incentives will be fully evaluated in 2005–06, although there will be some preliminary findings available before then.

The Government have also made a commitment to look at the corporation tax treatment of share schemes to make it simpler, particularly for small companies—a matter to which the noble Lord, Lord Cope, referred and which I know is dear to his heart. This should provide further encouragement to introduce employee share schemes. The Government welcome the aims of the Bill to encourage employee participation and employee ownership. Research shows that companies with widespread employee ownership and participation out-perform their rivals.

The Government accept the idea of providing in the Bill a framework for employee representation on the share incentive plan trust for those companies that wish to use it. Inland Revenue officials are working with my honourable friend Mark Lazarowicz and his team on a trust deed that would provide for this with a view to making it available alongside a model trust deed already offered by the Revenue.

The Government fully support the transfer of shares into employee ownership. The new early corporation tax deduction will complete the measures that the Government have already taken to facilitate the transfer of shares from individuals such as family owners into the share incentive plan. Capital gains tax roll-over relief is already available for individuals on the gain made when they transfer shares to a trust that holds at least 10 per cent of the ordinary share capital of the company. Shares that were held in a qualifying employee share ownership trust on 21st March 2000 can be transferred to a share incentive plan without the immediate corporation tax deduction being lost.

An additional tax advantage is given in the Bill by allowing share incentive plan trustees to be exempt from income tax on dividends and from any capital gains tax that might arise on disposal of the shares throughout the 10-year period they have to award the shares to employees.

The Government share the widespread enthusiasm for the measure which has been shown today. The noble Lord, Lord Cope, asked about the John Lewis Partnership. The noble Lord is right, discussions are still on-going in respect of that company, which, because of its structure, raises particular issues in regard to this legislation. Not all the issues have as yet been resolved. But that is not through a want of co-operation by the Government and work is progressing constructively on that front.

I am aware of how much hard work has been put into the Bill by its proponents. They have worked with the Government to settle on a series of provisions that enjoy joint support and I am grateful for that. I affirm the Government's support for the Bill. Once again I congratulate my noble friend on the perceptive way in which she introduced the Bill and the clear way in which she outlined its issues. I am sure that she will ensure that the Bill has a satisfactory passage.

My Lords, I should mark the fact that I have been allowed out to play without my noble friend Lord Graham. He would have spoken in support of the Bill today but he is on his way to Manchester on Co-operative business. I should also mark the fact that I have had a great deal of support from Job Ownership and the Co-operative Party in preparing myself to deal with the technicalities of the Bill. Tax issues are not my speciality in this House, as noble Lords will know, and I am very grateful for their support.

I shall have to discuss with them the issue of John Lewis. I am sure that noble Lords will be aware that the Minister said on 21st June that the Government are taking the issue very seriously indeed and are trying to resolve it. I hope that they will succeed.

As to the point raised by the noble Lord, Lord Shutt, about the legal and tax regime in general for Job Ownership—and, indeed, for Co-operative and other social ownerships—I believe that very soon we shall see some developments from the Government in that area in terms of strategic issues concerning the whole regime. I hope that Job Ownership will take the Government's general statement of intent in this area as an opportunity to push for the kind of reforms we would like to see on a broader front. The Bill is not designed to do that, as noble Lords will know.

With grateful thanks to the noble Lords, Lord Shutt and Lord Cope, and to my noble friend Lord Davies, I hope that the House will give the Bill a Second Reading.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

House adjourned at sixteen minutes past seven o'clock.