My Lords, before public business begins, I take this opportunity to inform the House that I am to perform the formal opening ceremonies of two new magistrates' courthouses at Beverley and Bridlington on Wednesday, 24th July, when the House will sit. Accordingly, I trust that the House will grant me leave of absence.

asked Her Majesty's Government:

What action they have taken to ensure that programmes of modification and improvement now under way at British airports allow for the possibility that the United Kingdom may in the future opt in to the full provisions of the Schengen Convention.

My Lords, British airports plan their facilities on the basis that the United Kingdom will retain its existing system of frontier controls.

My Lords, does the Minister remember that the report published more than two years ago on Britain's Schengen opt-out suggested that it would be reasonable in all future modifications to British airports to take the precautionary approach that at some point the Government might change their mind? Does he recall that there was strong evidence from the British Airports Authority that the costs of doing so at speed if the Government were to change their mind would be considerable and perhaps prohibitive?

Does he accept that, now that the Government have opted back in to most provisions of the Schengen agreement, it is not unlikely that the Government will change their mind during the next few years, and that joined-up government would suggest that modifications now under way to Heathrow, and so on, should have started better to segregate passengers arriving from outside the European Union from those arriving from within the EU?

My Lords, the Government would certainly have no objection if the British Airports Authority or individual airports were to plan their future provision on the basis of the Schengen agreement. But I cannot agree with the noble Lord that we have changed or will change our view. We have not signed the implementing convention of 1990. The Schengen protocol allows us to implement all or part of the Schengen Convention, on the basis of which we have opted in for police and judicial co-operation on crime but out on immigration controls. The frontier protocol enables us to retain our frontiers. That is the current position.

My Lords, will the Minister accept my gratitude, and take note that, as joining Schengen would force Britain to abolish all its frontier controls, many people will appreciate what he has said today and give him their full support?

My Lords, that is the position that the Government took. I am grateful for the words of the noble Baroness.

asked Her Majesty's Government:

Whether they will make changes to the procedure for issuing British passports in order to eliminate fraud.

My Lords, the United Kingdom Passport Service takes passport fraud seriously and already has a range of checks in place to prevent and detect fraud. Those now include a check on the death records of under-18 year-olds in England and Wales. That new check represents a significant step forward in our efforts to crack down on the fraudulent use of birth certificates. The Passport Service has a major programme of work under way to counter identity fraud. That work is complementary to the recommendations arising from the Cabinet Office's identity fraud study, which was published on 3rd July and could lead to future changes in passport issuing procedures to take account of the increasing threat from fraud.

My Lords, I thank the Minister for his reply. Is the report correct that the method used to obtain a British passport in the book and film, The Day of the Jackal—searching parish and graveyard records—is still possible? If so, what action are the Government taking in view of the present threat of international terrorism?

My Lords, the Government take the so-called "Day of the Jackal" loophole seriously. Of course, any person is entitled in law to see publicly available indexes to the civil registration records and to buy a certified copy of any register entry. The events of September 11th have ensured that a sharpening of procedures and significant broad checks are in place.

The UKPS requires the provision of information declared to be true on its application form. Birth certificates are not proof of identity; additional evidence—driving licence, medical card, national insurance card or benefit book—is sought in certain cases. On occasion, passport applicants are called in for a personal interview.

We take identity theft very seriously and a detailed action plan is now in place to prevent it. I may add that the statistics for fraud are very low. It is estimated that 0.03 per cent of all issues are fraudulent—about 1,500 cases out of 5.5 million passports issued annually.

My Lords, when the maroon passport replaced the black one, we were given to understand that the new passport could be electronically scanned to avoid fraud. I pass through our airports on many occasions, but never once has my passport passed through any electronic gadget. When is such a system likely to be introduced to avoid fraud?

My Lords, the noble Lord is right to say that machine-readable detection methods are being developed. The pace and development of that technology must be sharpened, because we want to crack down on fraud as far as is humanly possible. Other important developments are likely to take place with biometrics, in which the iris, handprint or fingerprints can be read. All of those options are possible; they are all under active consideration and are being investigated by the UKPS as ways further to crack down on fraud.

My Lords, will my noble friend remind the House of the number of passports going missing in the post between the Passport Office and the applicant? If he does not have the figure to hand and decides to write to me with it, will he do so rather more expeditiously than have the Government in reply to a related Question on lost documents that I tabled on 14th January?

My Lords, my noble friend is entitled to a fulsome apology for that delay. I understand that his Question is due for reply during the next week.

My Lords, does the Minister agree that, in addition to an apology, the noble Lord, Lord Lipsey, deserves an Answer to his Question? If entitlement cards are introduced, is it envisaged that the Passport Agency would manage and operate the scheme?

My Lords, the entitlement card project is open for consultation, so those finer details have yet to be worked out. It is important that we respect the consultation period. The matter is delicate. Of course, there are great benefits to be gained by the development of the entitlement card. The Driver and Vehicle Licensing Agency and the UK Passport Service are working closely together on those projects.

My Lords, may I draw the Minister's attention to a large loophole in passport administration? I am sure that he knows, because I received this information in a Written Answer some time ago, that less than 5 per cent of the passports of people who die are sent back. Is he aware that the street value of a dead person's passport is about double that of a stolen passport—for the obvious reason that the chances are that the stolen passport has been reported and, at least in theory, cancelled? Last year, I asked the Government twice whether the Passport Service was now notified of someone's death, so that their passport could be cancelled. On 31st October, the Minister, in a Written Answer, said:

"The Passport Service is seeking to establish arrangements to receive routine notifications of death as part of its work on improving fraud countermeasures".—[Official Report, 31/10/01; col. WA 161.]

Two weeks later, I received the following Written Answer:

"We have not started to establish arrangements requiring the Government to be routinely notified of the death of United Kingdom passport holders, and we have no plans to do so".— [Official Report, 14/11/01; col.WA 81.]

Will the Minister kindly put into effect immediate plans to ensure that the Passport Service is notified by the Registrar General that people have died, so that their passports can be cancelled?

My Lords, that was a valuable question, and my brain cells are working overtime on it. I shall take the important suggestions made by the noble Lord. Lord Marlesford, to heart. I shall have words with the director of the United Kingdom Passport Service.

My Lords, have the Government taken steps to prevent multiple applications for passports? The Minister will recall that, after 11th September, some people in this country who were not unconnected with those events were found to have more than one passport.

My Lords, I am sure that the UKPS is taking steps to deal with such problems. The UKPS has a useful system that contains details of persons known to have made fraudulent applications in the past. With the benefit of the measures that have been put in place partly as a consequence of 11th September, the UKPS is pursuing such cases and is doing extremely well. Earlier, I gave figures on fraud detection, and much other encouraging progress is being made.

My Lords, I congratulate my noble friend the Minister on the improvement in the service for issuing passports, but I share the problems experienced by my noble friend Lord Lipsey as regards receiving passports through Royal Mail. Two passports for members of my family have recently been lost. Will the Government consider other means of distributing passports? Doing a deal with someone in the Royal Mail would be a wonderful way for someone to get duplicate or multiple passports.

My Lords, the Royal Mail remains the most reliable agency for ensuring that people receive their passport on time. The UKPS is doing very well. I am told that the average turnaround time for a passport is 4.24 days, which is a big improvement on the time that many customers experienced four or five years ago. Then, it took much longer— 17 or 18 days.

My Lords, can the Minister say when the requirement for a paper car licence, as well as the plastic driver's licence, will be dealt with? The Minister will be aware that, in many countries, the vehicle driver's licence is used as a form of corroborative evidence for people raising questions about the validity of passports. It is inconvenient that, in the UK, we still have the requirement for a useless plastic driver's licence as well as a paper one.

My Lords, I take the point. I said earlier that the driver's licence was one of the documents used to check applications. The current driver's licence is in paper and plastic form.

My Lords, would it be possible to go back to the first part of the question asked by the noble Lord, Lord Lipsey? He asked about the loss of passports. Does the Minister have any figures on that?

My Lords, I have no figures for lost passports, but I will investigate the matter. I shall write to my noble friend Lord Lipsey and make the information available to other noble Lords who are interested.

My Lords, can the Minister say whether passports are normally sent by registered post, which is traceable? If not, why not?

My Lords, they are not, I think, usually sent by registered post, but I will check t hat. My children recently received their new passports through the post in the normal way.

asked Her Majesty's Government:

Whether they plan further discussions on the future of Gibraltar with the Government of Spain during the parliamentary Recess.

My Lords, is it not likely that the agreement in principle by Her Majesty's Government to surrender some part of sovereignty will have persuaded the Spanish Government that their policy of bullying the Gibraltarians is producing results and will therefore make them more likely to continue with it? At the same time, is not that policy having the effect of making the Gibraltarians more resolute in resisting any surrender of sovereignty?

If Spain wants to influence the Gibraltarians in her favour, the right policy would be to woo the Gibraltarians, not to bully them. If the Government have already suggested that to the Spanish—I dare say that they have—should they not abandon their existing policies and make that point to the Spanish at every opportunity?

My Lords, as we have already discussed on a number of occasions, it is clear that Spain will have to make any deal attractive to the people of Gibraltar. As the British Government have made clear over and over again since 1969, anything that effects the sovereignty of the people of Gibraltar will be put to the people of Gibraltar in a referendum.

Of course, we reiterate to our friends in Spain that it is important that the issues that cause such irritation in Gibraltar—border delays, problems with telephone numbers and the other issues that your Lordships have discussed over many years—must be put right, if any deal is to go through.

My Lords, is not my noble friend the Minister well aware that successive governments have, on various occasions, endeavoured to get agreement on this difficult matter? All too often, they have backed away because of parliamentary and other pressure. Recess or no recess, will the Government please press on with the brave efforts that they have made to reach a settlement, bearing in mind the necessary safeguards for the people of Gibraltar and the undoubted fact that a settlement is in their interests?

My Lords, the Government will pursue the path to which we are now committed. I remind the House that it was a Conservative government who originally said that sovereignty could be included in such discussions.

My noble friend is right. It is in the interests of the people of Gibraltar that the Brussels process be pursued. The dispute is 300 years old, and its resolution must be in everybody's interest.

My Lords, does the Minister recall that the original Brussels agreement—in which I declare a semi-paternal interest—which launched the process, aimed at overcoming all the differences between Spain and the United Kingdom over Gibraltar, including issues of sovereignty? It was welcomed at the time by the Chief Minister of Gibraltar and by our Prime Minister as being, in her words,

"very much in the interests of both Gibraltar and Spain".

Does the Minister also recall that that agreement spelt out clearly the full commitment of Her Majesty's Government to honour the wishes of the people of Gibraltar? Has not the present regrettable deadlock arisen largely because of the serious imbalance in the Government's approach to the negotiations? They are much too willing to accommodate the requirements of the Spanish Government and much too willing to be heedless of the need for Spain—even more than Britain—to gain and maintain the confidence of the people of Gibraltar.

Finally, if the negotiations are to be resumed—as I would hope, but only after the dust has settled a little—is it not essential that that should be on the basis of proven Spanish willingness, as promised in the original 1984 agreement, to take the early action necessary to allow effective air communications and free movement of persons, vehicles and goods between Gibraltar and Spain?

My Lords, the noble and learned Lord, Lord Howe, has an excellent memory. He is absolutely right because I have in front of me the text of the Brussels communiqué. He also has the great integrity to use his memory, which is a point that might be reflected on by some of his honourable friends in another place.

The noble and learned Lord went on to talk about a serious imbalance. From the beginning of our discussions on this issue, I have very much regretted the absence of Mr Caruana from them. He was invited to join the discussions and that invitation remains open to him. I very much hope that, on reflection, he will decide that his proper place is at the negotiating table.

However, I should remind noble Lords that in the Statement made last week by my right honourable friend Mr Straw in another place, he pointed out that not only had the issue of shared sovereignty been discussed, but also that Gibraltar should have more internal self-government; that Gibraltar should retain its British traditions, customs and way of life; that Gibraltarians should retain the right to British nationality; that it should be free to retain its institutions and that it should be able to participate fully in the EU single market. I do not think that that reflects an imbalance in the position. That reflects a truly balanced position and one that has at its heart the interests of the people of Gibraltar.

My Lords—

My Lords—

My Lords, there is plenty of time for all noble Lords to speak.

My Lords, is the Minister aware that noble Lords on these Benches broadly support the efforts being made by the Government with Spain over the question of Gibraltar? We broadly support the effort to carry forward with Spain the original Brussels process. The noble and learned Lord, Lord Howe, has just mentioned that he was a distinguished member of the government who initiated that process. Does the Minister agree that, since we already share sovereignty with Spain and others in the European Union and in NATO, there is no issue of principle over Britain sharing sovereignty with Spain over Gibraltar? Indeed, it would be in the interests of the people of Gibraltar, as well as of those of Britain, Spain and the European Union in general, if such a sharing of sovereignty, together with a more general package, could be worked out. Will the Government use the parliamentary Recess to make major efforts to persuade the people of Gibraltar of the advantages of the Brussels process and, as has been mentioned already, to persuade the Spaniards to be a good deal more tactful in their approach to the people of Gibraltar?

My Lords, I am aware of the position of the Liberal Democrat Party on this matter. It is to be congratulated on the remarkable consistency of its support on this issue, which was also reflected by the noble and learned Lord, Lord Howe.

With regard to the point of principle, I shall say this. The point of principle with regard to shared sovereignty is that it must be a matter for a referendum of the people of Gibraltar. The other points mentioned by the noble Lord are not the crucial issues in this instance. What is crucial is that any change in the sovereignty of Gibraltar must be a matter for decision by the people of Gibraltar.

We have also said that any agreement reached must be permanent and that existing military arrangements would have to continue. Of course, as noble Lords would expect, we shall use the Summer Recess to continue to do all we can to further the possibility of reaching an agreement that would be in the interests of the people of Gibraltar.

My Lords, does my noble friend agree that there is a terrible smell of hypocrisy in the air in relation to Spain's claim for sovereignty over Gibraltar, given that Spain has sent warships, fighters, helicopters and special forces to remove six Moroccan soldiers from an uninhabited island which Morocco claims as its territory?

My Lords, I see that a number of noble Lords enjoyed that question. However, as a spokesman for the Government, let me say that we see this issue as one that should be resolved peacefully and quickly. We have good relations with both Spain and Morocco and we look to them to sort out their differences over the island of Parsley.

My Lords, first, does the noble Baroness agree that there is more than one way to resolve the issue of sovereignty? One of those ways would be for Spain to accept British sovereignty, as she did when the Treaty of Utrecht was signed. Secondly, can the noble Baroness explain in exactly which ways the Spanish wish to interfere in Gibraltar, for if they do not wish to do so, then surely they would not wish to exert even joint sovereignty?

My Lords, of course there is more than one way of solving the question of sovereignty. Theoretically it is possible that Spain might cede its claim, but as the noble Lord, Lord Tebbit, knows full well, that is not the real world. Spain has been clear and unequivocal on the point; it is not going to resile from its claim. We shall not resile from our position; namely, anything negotiated that affects sovereignty must be put before the people of Gibraltar. That is our red line, as indeed is the red line that I spoke of in an earlier response; that is, any solution must be a permanent one and the existing military arrangements would have to continue.

The noble Lord has asked why the Spanish would want to interfere. The word "interference" is very loaded, but I hope that Spain would want to cooperate in making the lives of the people of Gibraltar very much better than they are today—in dealing with the problems of border delays, in dealing with the questions over aviation and in dealing with the issue of telephone numbers. In those ways Spain could make a real difference.

My Lords, can the noble Baroness confirm that the Spanish Government made a comparison between Gibraltar with Hong Kong? Does she agree that that was somewhat far-fetched and have the Government made any response?

My Lords, I believe that the comparison is far-fetched. A number of analogies have been drawn. A moment ago my noble friend Lord Hoyle referred to the dispute over the island of Parsley and I refer to the Spanish enclaves in Morocco. The historical context of all those is very different, as is the legal position. I do not believe that it helps any of the parties involved in trying to resolve the issue to make such unhelpful comparisons.

My Lords, the noble Baroness referred to the difficulties being experienced by the people of Gibraltar, such as the issue over telephone numbers. Can she say why it has not been possible for Her Majesty's Government, as a member of the European Union representing Gibraltar—which I believe has a standing in the Union—to press for Spain to behave as it should towards another member? Why is it necessary to consider issues of sovereignty before we consider using our position within the European Union to persuade Spain to do what it should and to stop doing what she should not?

My Lords, the fact is that we have tried to use every avenue possible in order to resolve the issue. It has been suggested that we take some of these issues to the international courts. But in order to reach any kind of resolution through such multi-lateral fora, we would have to have a willing partner in Spain. The fact is—I refer back to what the noble Lord, Lord Tebbit, said—we have not had a willing partner in Spain.

What we do have is the helpful mechanism negotiated by the noble and learned Lord, Lord Howe, during his period in office as Foreign Secretary; namely, the Brussels process. That is the way in which Britain and Spain have decided to try to resolve this issue. So I agree with the noble Baroness: it is a pity that we cannot use to better advantage the European Union. We have tried to do so, but it is not possible. We are using the mechanisms open to us.

My Lords, given that there is in place a procedure for negotiation and given the real difficulties of striking poses on the issue, does the Minister accept that we on these Benches strongly support the answers that she has given and believe that there is no way forward except by pursuing an understanding negotiation between the two sides, even though that may take quite a while?

My Lords, I am grateful to the noble Baroness for her support. In answering I should say that I think it a pity that more of those who do understand the real position in relation to Gibraltar do not have the courage demonstrated by the noble Baroness to state that as unequivocally as she has done.

My Lords, the original Brussels negotiations initiated by my noble and learned friend Lord Howe were a sensible and ingenious mechanism. Why have things got into such a mess under the present Government? Everyone recognises that the handling has been a bit deficient. Will the present agreement in principle become null and void if and when the people of Gibraltar vole it down, or will it stay on ice?

Following on the intervention of the noble Lord, Lord Hoyle, I cannot resist asking the noble Baroness whether she sees any contradiction between the continuous, long-term insistence on the part of Spain on total sovereignty and in the meantime her use of the bullying tactics referred to by my noble friend Lord Blaker, and the rather zealous protection of the sovereign enclaves of Spain in Morocco.

My Lords, I do not accept the noble Lord's premise that the handling of this matter has been "a bit deficient". There were 13 years of Conservative government after the agreement in 1984. I point out to the noble Lord that we have got further in one year of negotiation than the party opposite did in the 13 years during which the process was available.

As I have explained previously, we have made it absolutely clear that no deal is better than a bad deal. I reiterate that to your Lordships. If we are not able to negotiate a deal which we believe will be in the interests of the people of Gibraltar, we shall haw no hesitation in saying so. We are engaged in an honest endeavour and enterprise to make their lives better. If we are not able to do so, it will not be for want of trying.

My Lords, with the leave of the House, perhaps I may ask the Leader of the House a question of which I have given notice; namely, whether or not the extremely important Statement on defence expenditure made earlier today at the other end of this corridor is to be repeated in this House; and if not, why not?

My Lords, I think the noble Lord knows the position. It is not intended that the Statement on defence should be repeated. The usual procedures were followed. The Statement was offered to the Conservative Opposition, and they did not wish to take it. It was offered in the usual way to the Liberal Democrats. They did not wish it to be taken. There is nothing different about this. Exactly the same set of circumstances obtained as recently as last Friday, when there was a Statement on Gibraltar which was offered, and the usual channels decided to decline, as they are perfectly entitled to do.

My Lords, that shows the wisdom of never asking a question unless you know the answer in advance—which, of course, I did. It is very sad that Her Majesty's Government have not sought to repeat the Statement in this House, as it is open to them to do. It lays out fair and square that this is the first time that there will be real increases in defence expenditure for five consecutive years.

I wonder whether my noble and learned friend can help us as to the motives of the Opposition. I do not normally rise to my feet on partisan matters in this House, but I think it quite extraordinary. Are they frightened to examine a Statement which contains such good news from the Government on defence expenditure; or do they lack the self-confidence—this applies to the Liberal Democrats as well—to find fault with it?

Unfortunately, I shall be at Farnborough next Wednesday and shall not be present for the debate on procedures. It is deplorable that the Cross-Benchers are not consulted on these matters. They include five former Chiefs of Defence Staff and many other senior experts in defence matters. The whole process of consultation in this House with respect to Statements is sadly lacking. I very much hope that my noble and learned friend can promise us a debate on this important Statement very soon after we return from the Summer Recess.

My Lords, it is not for me to intrude into private grief. I do not know what exercised the Conservatives or the Liberal Democrats, but this is the procedure that we have. We have honoured the procedure; so have the Opposition, and so have the Liberal Democrats.

My Lords, I am not sure whether the procedures of the House allow me to intervene. However, as the noble Lord, Lord Gilbert, was allowed to get away with a statement, perhaps I may make this point. Anyone who has listened to the Chancellor's recent announcements will know that it is a very wise thing to look at them carefully, then read the small print, then study the actual results. The suggestion that this represents a massive increase in defence expenditure is very much open to doubt.

The matter will not be resolved by a Statement and exchange of this kind. I hope that it will be possible—I ask the noble and learned Lord the Leader of the House, those in my party who are responsible for these matters, and the usual channels—when this House returns for the overspill, to have a serious and considered debate on the real issues of defence, and that we shall be much better informed than the Chancellor has made us so far as to the actual figures for defence spending.

My Lords, I strongly echo the words of the noble Lord, Lord King. That is precisely why we thought that on this occasion it was not sensible to take the Statement. We also recognised that the House had an obligation of scrutiny in regard to a Bill going through this House which is of a serious nature and contains a number of controversial matters. I refer to the Enterprise Bill. We therefore felt that it was more appropriate to give what limited time the House still had to that, while fully recognising the importance of defence and the opportunity to discuss it further at a later stage.

My Lords, every point that has been made will be faithfully transmitted through the usual channels.

My Lords, as my party has been mentioned by the noble Lord, Lord Gilbert, I thought to intervene briefly. However, my noble friend Lord King set out some of the reasons that lay behind our decision this morning. It is sometimes difficult to decide the priorities that this House should follow in its discussions. We were offered two Statements. We are taking one of them and not the other. That is not necessarily a judgment on which is the more important in the long term. Nevertheless, that is the decision that we took.

At present, this House is under great pressure of legislative business. It will be extremely difficult to finish the Enterprise Bill and the other Bills before the House in the time that the Government have currently allocated. That makes these decisions quite difficult to take. Like the noble Lord, Lord Gilbert, I hope that we can have a debate on defence when we have had time to consider this and other matters relating to defence in due course, but not before the Recess.

My Lords, the previous exchanges might indicate that I have bad news. I do not. With the leave of the House, I shall now repeat a Statement made in another place by the Deputy Prime Minister on sustainable communities, housing and planning. The Statement is as follows:

"I want to make a Statement on this Government's plans for a step change in our policies for building successful, thriving communities.

"The Chancellor has been generous. He has given a good settlement for local authorities, regional development agencies, regeneration, housing and planning. Today, I want to talk about two elements of our settlement—housing and planning—to provide decent, affordable homes for people wherever they live. And I want the House to join together to make a step change in our approach.

"Anyone looking at the record over past decades will recognise that all governments have failed to meet the housing needs of our people. There has been a continuing decline in the provision of all houses—social and private. We in this House should recognise that we have failed to meet the needs of this generation, let alone the needs of our children. The situation will get worse unless we take radical action now.

"In the last 30 years, we have seen unprecedented economic growth, rising incomes, smaller households, people living longer. We have seen an increasing demand for housing, but overall we are building 150,000 fewer homes today than we were 30 years ago. No wonder house prices are rocketing. No wonder many people cannot afford to live where they were born, in both urban and rural areas.

"There are different problems in different places in our country. We are failing to adjust to geographic changes in economic activity. We are failing to tackle abandonment and dereliction. We are failing to provide homes for teachers, nurses and other key workers. We are placing our public services under pressure because they cannot get enough skilled staff.

"So, today, I am announcing a step change in housing policy. And I propose to do that by promoting sustainable communities, making the best use of our land, increasing development on brownfield sites and protecting and enhancing our green belt and valuable countryside.

"The shortage of housing in London and the South East is causing record housing costs which are impacting directly on living standards. They make it more expensive for companies and public services to recruit and retain staff. They make it more difficult for young people to get a foot on the housing ladder. They affect our public services and force more families into bed-and-breakfast.

"Two years ago, in Regional Planning Guidance 9, I put in place a 'plan, monitor and manage' approach to planning for additional housing in the South East. I said then that local authorities should provide for new homes at the rate of 23,000 a year in London and 39,000 a year in the wider South East, outside of London.

"Today, we have to be open and honest, and recognise that these targets are not being met. We estimate that over the past two years the shortfall was approximately 10,000 homes. We cannot allow this to continue. I am therefore announcing today a number of measures that will meet the real pressures and challenges that we face.

"First, I will insist that all local authorities deliver the housing numbers set out in regional planning guidance. Tackling housing shortage is a national responsibility and we must all play our part—central and local government alike. I am therefore putting local authorities on notice that. where they fail to meet their targets, I will take action to intervene.

"Secondly, I will accelerate the existing proposals for significant growth in the four growth areas identified in regional planning guidance for the South East. Two years ago I asked for reports to be prepared on potential growth in the Thames Gateway, Ashford, the Milton Keynes area and the London-Stansted-Cambridge corridor. Those studies are complete or nearing completion and show how economic development will increase the number of homes we need. Over the coming months, taking account of these studies, I will work with regional and local partners in each of the four areas to establish where, at what scale and how quickly growth can be achieved.

"Overall we estimate that at least 200,000 new homes could be created in the growth areas. In the Thames Gateway in particular, I will be putting a renewed emphasis on delivery and, in discussion with the Thames Gateway Partnership, will establish new means of delivering rapid regeneration.

"Thirdly, we need to make better use of land, by improving design, increasing densities and using brownfield sites to the full. In 1998 I committed the Government to a target that 60 per cent of new homes should be on brownfield land. We have met that target eight years early but we need to keep up the pressure. To help with this, I will establish a register of surplus brownfield land held by government and public bodies. I am instructing English Partnerships to use its new role on brownfields to search out and deliver even more land for housing.

"I can also announce that we will be proceeding with a further three millennium communities, in East Ketley in Shropshire, Milton Keynes and Hastings. These add to the four we have already agreed in East Manchester, Allerton Bywater, Greenwich and King's Lynn, bringing the total number of communities to seven and the homes which will be delivered to more than 6,000.

"But to produce more sustainable development we must use land more efficiently in order to reduce overall land-take. To do this I am announcing that I intend to intervene in planning applications for housing that involve a density of less than 30 dwellings per hectare. I am also setting a new target to protect valuable countryside. Since 1997, I have increased the green belt by 30,000 hectares. Today I can announce for the first time a public service agreement target which commits us to protecting the valuable countryside around our towns, our cities and in the green belt.

"We will not tolerate urban sprawl, and we will not concrete over the South East—as some have speculated in the press—or any other region. But housing pressures in London and the South East are acute and require ambitious solutions. My strategy of providing for sustainable, high quality, well-planned communities in the growth areas will benefit everyone. It will mean that we reduce the pressure elsewhere in the South East and will protect valuable countryside for the benefit and enjoyment of all.

"There needs to be not just more homes, but more homes that people can afford. We have said schools and hospitals first. That means special attention to helping nurses, teachers and other public service workers get affordable homes. Since 1997 the Government have almost doubled funding for affordable housing to £1.2 billion per year and this is now supporting the creation of 20,000 new affordable homes every year.

"Subject to further detailed consideration about how best to use the new money available, we will now be able to increase that funding to provide additional homes for key workers and new social housing for the homeless and families in bed and breakfast accommodation. In addition to this new funding, we will be looking for ways to extend our existing programmes for affordable housing through greater partnership with employers and public and private landlords.

"The problems in the North and the Midlands are different but just as pressing. Some of our towns and cities are experiencing a renaissance in their economic and cultural fortunes. But many also have communities where properties are almost worthless, leaving people trapped in negative equity and facing the problems associated with social exclusion. We are building the wrong kind of houses in the wrong places and failing to tackle fully urban decay.

"Earlier this year we announced the creation of nine Pathfinder projects to tackle the most acute problems of low demand and abandonment in the North and the Midlands. I can announce that we will be taking those projects forward to help tackle the blight afflicting properties in the Pathfinder areas. In addition I can announce that, following EU approval, we will be going ahead with our new housing gap-funding scheme which will allow support for housing programmes where the market price is less than the cost of development.

"We will also reinforce our efforts to improve the overall condition of our housing and ensure that everyone has the opportunity of a decent home. In 1997 we released £5 billion of capital receipts to target the backlog of repairs to council homes. Over the past five years we have trebled council funding for housing to £2.4 billion a year, and in 2000 we set ourselves the challenging target of making all social housing decent by 2010. These actions have allowed us to make good progress on housing conditions.

"Overall, 1.7 million improvements have been made to council homes, and we are well on track to meet our interim target of bringing a third of the worst social housing—550,000 homes—up to a decent standard by 2004. We will work towards that target by devoting even more resources to refurbishment; by allowing all local authority arm's length housing companies receiving either a 'good' or 'excellent' rating to apply for this additional funding; and by reviewing all policies that contribute to our 2010 decent homes target to ensure that they are as effective as possible and provide value for money.

"It is not just social housing that needs attention. People in the private sector suffer some of our worst housing conditions. All too often housing benefit is funding the provision of unfit housing to the detriment of the tenant and the benefit of the landlord. This is unacceptable. As soon as parliamentary time allows, we will legislate to tackle the minority of unscrupulous landlords and boost our drive against poor conditions.

"Over the last five years we have provided funding to local authorities to help improve 30,000 private homes per year. I can announce today that we are setting a new objective to help improve more non-decent private sector homes occupied by vulnerable households. We are investing large sums of money in improving all housing, so we must have an inspection regime that drives up standards across the board and ensures reform.

"I am announcing today that I will establish a single housing inspectorate, building on the excellent work of the Audit Commission and the Housing Corporation. I am also announcing that we will establish strong regional bodies, going with the grain of our proposals for regional governance. These will bring housing investment together in a single regional pot. And they will link that investment with planning, infrastructure and economic growth strategies. I will announce further details later in the year when I have discussed them with key stakeholders. And I will put the new arrangements in place as soon as possible.

"In order to achieve a step change we need to increase resources for the planning system and bring about much-needed reform. We are therefore providing an extra £350 million for the planning system over the next three years. This must be targeted where it will improve performance the most. And I give notice that if poor performance does not improve, I will intervene. The extra money will be linked to reform and I am publishing today three documents: our response to the recent planning Green Paper consultation and supporting papers on compulsory purchase and on regional and local plans. Copies are in the Library.

"These put in place extensive reform, and I would like to summarise some of the key points. First, we will give counties a new statutory role in underpinning the new regional planning system, but we will abolish county structure plans themselves. Secondly, we will introduce business planning zones to deliver growth, jobs and productivity without sacrificing quality of development. Thirdly, I will speed up the planning of major infrastructure projects by setting out the Government's objectives in clear policy statements and changing inquiry processes to make them more efficient.

"I have accepted the Select Committee's arguments that parliamentary procedures for major infrastructure projects are not the best way forward. Finally, I will not change the right for objectors to make their case to the inspector at inquiries into plans. But I will take action to speed up the inquiry process.

"The proposals I have announced today focus on creating sustainable communities which meet the needs of all, regardless of where they live or the size of their pocket. But they are just the start. I will return to the House by the end of the year with a comprehensive long-term programme of action. This will meet the different needs of both the North and the South. Whether it is the key workers in need of affordable accommodation or families trapped by negative equity, we must work together to find solutions to their problems.

"Our long-term programme will link policies on housing, planning, transport, education, health and regeneration. It will demand a new standard in how we build houses and communities, seeking improvements in density, design, environmental standards and construction techniques and it will protect and help to revitalise the countryside for those who live in it and those who seek their leisure there.

"This is a strategy for the long term. We know the problems, we have the commitment, we have the resources. We must recognise in the country and on all sides of the House that we have simply not done enough over the years. We need more homes where people want to live, near where they work, in the North and in the South, at a price people can afford and in a way that protects the countryside. This is a challenge to all of us. I believe that the strategy I have put to the House today will begin to rise to that challenge".

My Lords, that completes the Statement from the Deputy Prime Minister.

My Lords, I thank the Minister for bringing the Statement to the House. It lays out the Deputy Prime Minister's thoughts and provides an analysis of the current housing position. Perhaps understandably, it is breathtakingly short on detail. But it contains some pointers to the future.

The proposals will push ever more responsibility into the hands of unelected regional bodies. Going with the grain of the Deputy Prime Minister's proposals for regional government, as he said, housing investment will be brought together into a single regional pot, with planning, infrastructure and economic growth strategies included. Is it proposed that there should be yet another regional body to deal with that, or is it anticipated that the undemocratic regional assemblies will be tasked with this extra responsibility, of which they have no experience?

The Government have made it abundantly clear that regional government will be introduced only where regions vote for it. Is this another example of the Government jumping the gun and introducing regional government by stealth? We should be told. If the electorate do not want regional government, they may simply be whistling in the wind with their votes in a referendum because local government's responsibilities for housing, planning and many other areas will have gone there anyway. That is a fine example of things being pulled up rather than being pulled down.

Where is it anticipated that local government will fit into the picture? How is it intended that local authorities should be able to influence how much housing will be placed in their areas and where? I fit is intended to give planning responsibilities to these new regional bodies, how much say will local planning authorities continue to have? In passing, what is meant by saying that county councils will be given a statutory underpinning role in the new regional planning system? County councils currently make and organise the structural plans. Presumably, under this new wording they will have no responsibility for the structural plans. Somewhere along the line, despite what has been said and all the consultation that has taken place rejecting the removal of county councils from structural plans, that is precisely what will happen.

Of course this is an interim statement. We are promised flesh on the bones later in the year. The flesh of local government should be beginning to creep at the outline thoughts presented here. Even where responsibilities are to be left, the Deputy Prime Minister is threatening intervention if local authorities do not perform to key government objectives and meet the targets on housing numbers set out in the regional planning guidance and some as yet unstated arbitrary standards—including, apparently, where permission is given for too few dwellings per hectare. Perhaps this is a policy of build them thick and build them high. Plans are clearly well advanced for four growth areas in the South East regional plan. How much of the land anticipated in those areas will be from the green belt?

The Deputy Prime Minister says that he will not concrete over the South East or anywhere else. Tell that to Stevenage, where acres of green belt land are being consumed.

An extra £1.2 billion is promised for affordable housing—some for key workers and some for property improvement. Money is always welcome, but whether it achieves its objectives depends on how it is spent.

The Deputy Prime Minister is anxious to help key workers into housing. London is desperately short of people to support its services. As chairman of a hospital in London I know that. However, whether all those key workers would want to live together in a suburb of Essex, for example, is debatable. New developments will have to be of mixed occupancy. If not, the Government cannot meet their targets for increasing the priority categories for the homeless and getting others out of bed-and-breakfast accommodation, never mind those others in need of decent housing, such as asylum seekers.

There will have to be additional infrastructure, too, to support the densities envisaged in the Statement. I am told that Kent already has a land bank of 11 years worth of housing, but it cannot develop it because some of the land is contaminated and there is no money to clean it. More importantly, there is also no money for the development of new schools, hospitals, roads and transport, not to mention the non-existent access to the additional water supplies that major schemes would require. Is any of that £1.2 billion to be devoted to that supporting infrastructure?

It is welcome news that the Government have decided to give more money to planning. I hope that the money will be used to increase staff numbers in local authorities to help with the movement of planning applications. I also welcome the decision not to give Parliament a role on major infrastructure applications. That proposal was excoriated by just about everyone. We recently had statutory instrument proposals for major infrastructure and changes to the inquiry system. What other proposals are coming forward to deal with major inquiries?

It is notable that the Statement proposes to continue with the little-admired business planning zones. As the Select Committee pointed out,

"it is based on the misconceived idea that the planning system is stopping desirable development rather than helping to enable it. There is no evidence of that".

This is yet another area that will he taken beyond local authority control.

Too few houses have been built in recent years, but that is no reason why, in redressing that problem, changes should be made to the whole system of local government, with increasing centralisation. I hope I am wrong in my surmise that this will be the intended or unintended result of the proposals.

Like the proverbial curate's egg, there will be some good in the proposals and some bad. Without the details of what lies behind the Statement, only time will tell. We look forward to the debates that will ensue.

My Lords, I thank the noble Lord the Minister for repeating the Statement made in another place and declare an interest as a member of Suffolk County Council—of which I have been an elected member for 12 years. We welcome also that the Statement puts housing higher on the agenda. Implicit in the Statement is a recognition that the policies of successive governments have failed thousands of citizens in respect of their most basic need.

We caution against one-size-fits-all policies, which fail to recognise enormous regional disparities. Neither must the pressures of economic growth in the South East be allowed completely to overshadow the different needs of the North.

We welcome the emphasis on the development of brownfield land. The fact that local authorities have delivered the Government's demanding targets eight years ahead of schedule demonstrates that when local authorities are given the tools, they can deliver a great deal. However, it costs a lot more to develop a brownfield site than to build on new land. Do the Government have any plans to introduce a levy on greenfield development, with that money used to redeem brownfield sites for housing? Is the noble Lord the Minister aware that some building societies are reluctant to lend money to purchase properties on land that was once contaminated? Does he know that a great volume of land is kept empty for long periods? Sometimes that is because landowners are waiting for values to rise and sometimes—which is more sinister—because such land is being held back for its ransom value, where it could form part of a much larger development.

Has any progress been made with the plans in the rural White Paper to end the 50 per cent rebate on second homes, with the money raised to be ring-fenced and used for housing? That measure would have a significant impact on the plans announced today. Are there any proposals to change the VAT system, to make it more cost-effective to undertake conversions and repairs? Something like one-fifth of the housing stock is either unfit or in poor condition. Such a change would do more for the housing stock than yet another level of inspection and audit of the kind that the Statement holds out.

The recent Green Paper failed to ask the real purpose of planning. We believe that planning is about the development of sustainable communities, sustainable economies and a sustainable environment. When the House debated that Green Paper, it was not until my noble friend Lady Hamwee summed up that the word "sustainability" was used. The emphasis so far has been on the planning process and we have rather lost sight of the outputs. The Green Paper diagnosed the problems, then drew entirely the wrong conclusions. Planning processes are too lengthy—largely because planning operates in a vacuum, with little in the way of a national framework in terms of spatial strategy, energy policy and transport. A raft of over-prescriptive government rules for the planning process has grown over the years and they are entirely in the hands of the Government to remove. There is a lack of skilled planners, so we welcome the promise of an extra £350 million—although we have yet to hear exactly how that money is to be spent.

Will it be possible to rationalise the new system in a hierarchical way? In terms of timing, there is no sensible relationship between county structure plans, regional plans and local plans. We welcome that the Government have listened to those who said that the parliamentary process is no way to deal with major infrastructure projects, but regret that the Government have not seen fit to retain county structure plans, despite the fact that 90 per cent of those consulted felt that they should be kept. We are many years from a democratically elected regional tier. For major planning decisions to be taken in the way proposed is a retrograde step.

The separation of land use from waste, minerals and transport planning will cause severe problems in future. The Statement recognises that a sub-regional planning tier is needed. We already have one—the county council. We regret that the opportunity has been lost to introduce a limited third-party right of appeal. If one adopts the view taken by the Green Paper, as we do, that community support for planning processes is paramount, the right to appeal against a decision hated locally should be introduced.

We regret the tone of the Statement. Its use of phrases such as,

"putting local authorities on notice",

and the emphasis it places on intervention will not help to develop a good relationship between local authorities and central Government. We are concerned at the proposal that the Secretary of State, advised by civil servants in London, will have the ability to override locally elected representatives.

My Lords, I am grateful to both noble Baronesses for their broad welcome for the Statement, even though they had legitimate questions. I say to the noble Baroness, Lady Hanham, that it is not insignificant that the only parts of the country that she mentioned were Essex and Kent—exactly the same as in another place. There is more to the country than Essex and Kent. Millions of people live outside Essex and Kent. Why the Front-Benchers in both Houses seem to concentrate just on Essex and Kent is beyond me.

My Lords—

I was referring to Tory Front-Benchers, my Lords. I listened to all the questioning on the Statement in another place and was surprised. The honourable Member for Brentwood and Ongar, Mr Pickles, was completely isolated and not supported by any of his Back-Bench colleagues.

We are not planning any new regional bodies of the kind for which the noble Baroness asked. The Housing Corporation, regional development agencies and the Government are not planning a new quango. The noble Baroness did not ask for one but that was implied by her question. Neither are we jumping the gun. At present, all relevant decisions will still come to Ministers. There is no question of decisions that should legitimately be made by Ministers accountable to Parliament being passed to an unelected group of people—however esteemed and qualified they may be. For the interim, decisions will be made by Ministers.

County councils will retain their rights in respect of minerals and waste but we are abolishing the structure plans. We are not abolishing county councils. Tory governments abolished county councils. Labour governments are not in that business. We do not want to impose another layer of planning—which would happen if we left county structure plans in place and be an undue burden on all concerned.

I do not want to bandy figures, but the Statement makes it clear that, since 1997, the Government have redesignated or physically added 30,000 hectares to the green belt. From 1979 to 1997, the figure was virtually stable. I do not have to apologise for anything. There is much more green belt under Labour than there was under the Tories. In no shape or form can any charges about attacking the green belt be levelled against the Deputy Prime Minister. We are pledged, as a public service agreement objective, to add to the green belt irrespective of our plans for more housing because we know that can be done. Green belts are not necessarily synonymous with green fields—which some people refuse to accept.

Density is not a question of piling them high and selling them cheap. Such properties do not last long. We have learnt the mistakes of the past. I invite your Lordships to study the publication Better Places to Live: By Design—a companion to PPG3. Unfortunately, it was published in September last year, when everyone's mind was on other matters.

In the document, example after example is given, supported by the Commission on Architecture and the Built Environment, of good quality dwellings, designed with good environmental standards and built at high density all over the country. There are examples in Norwich, Manchester, Southwark, Islington, again in Manchester and in Kendal of density building of 50 to 100 dwellings per hectare, whereas the average in the South East has been approximately 20.

There are other examples of density building of 30 to 50 dwellings per hectare in Bishop's Stortford, Lewisham, Dorchester, Liverpool and Newcastle. All have details of good quality desig:n. People are not piled on top of each other. The building is not done cheaply and corners are not cut. Therefore, there is absolutely no excuse for people to argue that higher density means poorer standards and poorer quality. We shall ensure that that is the case, in particular, in the growth areas. We shall focus a big push on the four growth areas to ensure that local authorities, planners and builders take account of the ideas and views of organisations such as the Commission on Architecture and the Built Environment.

With regard to the inquiry system, as my right honourable friend said, we have published three papers alongside today's Statement. One gives the Government's response to the consultation on the Green Paper. It does not give the Government's response to the Select Committee report. That will be done as part of the normal process. The 44 recommendations deserve a proper detailed response, and that will be done within the normal period of two months following publication. However, we have set out our response to the planning Green Paper.

In the inquiry system we want to maintain the right of all objectors to be heard. That is absolutely crucial. It is possible that, under different procedures, the inspector will be able to hear objectors either in an informal way or through mediation before the grand inquiry begins. Either way, objectors will have the right to be heard.

We also want to allow the inspectors to take issues concurrently as well as consecutively, as is the case at present in relation to major infrastructure inquiries. I give the example of Terminal 5. That was an exception but it is an example that people have in mind. During the course of that inquiry, the Deputy Prime Minister—then Secretary of State for Transport and the Environment—could not say what he wanted to say about transport in that area because that would have opened up completely new avenues in the inquiry. He was constrained. We want inspectors to be able to examine different aspects of big inquiries concurrently rather than one after the other.

If in an infrastructure project inspectors operate within the framework of a government statement on policy, they will not spend half their time with those appearing before the inquiry trying to work out what the policy is and then deciding whether the project fits the policy. Therefore, we believe that we can cut the time spent on major infrastructure inquiries by some 50 to 60 per cent.

Together, my right honourable friend the Deputy Prime Minister and I currently have 59 years' experience and membership of the other place. It did not take us too long to see that asking Parliament to take an almost statutory or constitutional role in an executive matter would be fraught with considerable difficulties for all concerned, including the Members of both Houses.

As we have said, we do not agree with the Select Committee on the matter of planning zones. We believe that such zones are achievable. It would not be a question of a free-for-all or a case of "anything goes". That is not our intention. It will not be a question of drawing on a map and saying simply that anything goes. Buildings must be of quality and good design. I hope that I have covered most of the issues raised by the noble Baroness. We shall return to the matter later in the autumn with a Statement containing further detail.

My Lords, before the Minister sits down, perhaps I may ask him to clarify what he said. On page 8 of the Statement, the Deputy Prime Minister says:

"I am also announcing that we will establish strong regional bodies".

The Minister suggested that it was proposed to add them on to something that was already there, but that is not what the Deputy Prime Minister said.

My Lords, it is not intended to create a brand new body. We are talking of the coming together of existing bodies which currently do not talk around the table in a structured fashion. We want them to do that, whether those involved are a government office, the director of the regional housing corporation or the RDA. We want to put the situation on a firmer footing. In that sense, it will not be a new body.

My Lords, I declare an interest as Leader of Essex County Council. I find it extraordinary that the Minister should say that we keep on mentioning Essex and Kent. We are talking about four sites for 200,000 houses, and three of those are in Essex and Kent. In fact, two are in Essex. Therefore, that is 100,000 houses for Essex. If Essex and Kent do not have a particular interest in the matter, I do not believe that anyone has.

Two of those sites—one is at Stansted and one at the Thames Gateway—could possibly take 50,000 houses. Again, the Minister said that we were not going to concrete over the South East. If 100,000 houses were built in Essex, that would constitute concreting over a considerable proportion of that county.

The Minister also said in the Statement that we were not delivering the number of houses in the South East. I say immediately that in Essex 18 months ago the Government published targets for regional guidance on planning. They set a target in Essex of 5,000 houses a year. We have been exceeding that target every year since then, and we are likely to exceed it even more. I shall not comment on other parts of the South East, but certainly Essex has exceeded its targets over those years and is meeting the Government's requirements. Therefore, I believe that the Minister should reconsider that comment.

I want to raise a point of particular concern to me about the whole Statement. While I certainly recognise, as do others, the need for more housing, I concur with the comment of my noble friend Lady Hanham concerning the need for infrastructure as well. We could do more in Essex now, but those who have lived in Essex will know that one has to go somewhere to work. Therefore, all the development in our county or other counties in the South East must also be accompanied by employment.

The Thames Gateway, which we also support as a regeneration area, needs employment as well as houses. I did not hear a suggestion in the Statement about the need to ensure that employment is created together with houses. If we do not do that, we shall create only more congestion and more problems, with no trains and no transport networks in the South East to cope with them. Therefore, I want the Minister to give us more information about how the infrastructure will compete with and complement the new houses.

I also concur with the noble Baroness, Lady Scott, who said that 90 per cent of the people commenting on the planning Green Paper wanted to support the counties retaining the structure plans. I believe that we are doing a great disservice to planning systems in this country. Counties have been a bulwark in preparing the structure plans. We could do with processes to speed them up—we all agree with that. I hope that the Minister will reconsider his statement about not leaving the counties with the structure plans; I believe that they could be helpful.

Therefore, can the Minister respond to the points that I have raised and provide an answer as to how the infrastructure will fit alongside the 200,000 houses in the South East? Will money be available for roads, rail and other networks in order to enable people to commute around?

My Lords, the noble Lord is brilliantly qualified to speak on behalf of Essex. I was simply making the observation that, on the Front Bench, one tries to take a national view of matters. It seems a little narrow for Members of both Houses to stick to only two counties out of the whole country when the Statement covered the North and the South.

I shall be brief in responding to the points raised by the noble Lord. The plans, projects and vision that exist in relation to the Thames Gateway, for example, will not work if only housing is to be considered. They will not work without new Thames crossings, and they will not work without infrastructure being put in place before work begins on the housing. I absolutely accept what the noble Lord said, and that is axiomatic throughout the rest of the Statement. On two occasions I referred to jobs and economic progress rather than simply housing.

I was not having a go at Essex; I was simply making an observation. Essex and Kent make valuable contributions to growth in this country, particularly through the Thames Gateway and the vision throughout the linear city. People will not have to travel tens of miles from their homes to work. We need jobs and sustainable communities, not only amorphous housing estates; otherwise, we shall make the mistakes of the past.

My Lords, taking a national view, it seems to me that this is a recipe for more regulators, more regulations and more inspectors. Will anyone be left to create wealth for the Government to tax in order to pay this new army of busybodies?

My Lords, absolutely. Regulators can save a great deal of money. The point raised by the noble Earl gives me an opportunity to answer a question put by the noble Baroness, Lady Scott, that I neglected to answer earlier. At present, the inspection of housing operates from two arms: the Audit Commission carries out one aspect and the Housing Corporation another. On inspection, we want a single body not three bodies. With the stakeholders concerned we are discussing the best way forward to create a single housing inspection. We do not want more busybodies or quangos. We want a single body where two exist at present.

My Lords, it is a refreshingly frank Statement from the Government about the state of housing in this country. First, why has it taken so long to reach this decision? For two decades on average the household formation has gone ahead of the number of homes built by 31,000. Secondly, can the Minister be more definite about when the Government intend to regulate the private rented sector? They have been promising this for five years. Can we please have a guarantee that we shall not be told in another five years that we shall deal with the issue when we have parliamentary time. Thirdly, will the Government consider selectively suspending the right to buy in some areas? The Government are putting a lot of money into building new social housing. Yet last year 53,000 local authority homes were sold and only 18,000 were built to replace them.

My Lords, on the latter point I say to the noble Baroness what the Deputy Prime Minister said in another place. The issue is not just new homes. Sometimes in order to rebuild and reinvigorate communities, particularly in the north where we have the problem of market collapse, the right-to-buy issue pops up just as we are about to demolish, costing the country millions of pounds. In some areas there has been flagrant abuse. These issues are under consideration at present. I can say no more than that.

I regret to say that I have to hide behind the old caveat about the private rented sector and selective licensing. We have a proposal for that. We have a manifesto commitment. The issue is being worked on. I cannot say when it will come before Parliament. I do not know what will be in the Queen's Speech later in the year. We are working on the plans. We are making statements. We are pursuing matters within the department with our advisers so that we are ready and available when the opportunity arises. We are getting on with the preparatory work. As regards waiting for 20 years—you wait a long time and then along comes a Labour government.

My Lords, in the Statement the Minister mentioned affordable housing. What will the Government do about the inflationary practices of mortgage lenders? In the 1960s and early 1970s they would lend a maximum of one and a half times an individual's annual income and twice the combined annual income of a husband and wife. They would lend only a percentage of the value of the property. I understand that today they will lend up to four times the annual income; and that they will lend up to 115 per cent, if not more, of the value of the property, which must force up prices. What are the Government doing to curb this inflationary practice?

My Lords, we do not control the market in that sense. It is a matter for individual companies. On the other hand, shortages create price increases. We seek to tackle that issue by increasing supply in the right place and, where we have market collapse, reversing the process by putting value back into properties which have negative equity because of wholesale abandonment of hundreds of thousands of dwellings. In some ways, we have the wrong houses in the wrong place and the wrong people in the wrong place. We have jobs in the wrong place. To that extent, we have a mis-matched economy. We seek to tackle that issue.

There is no doubt that mortgage lenders have considered the low interest rates—they are the lowest we have ever had—with low inflation in the long term. Under the pressures of the market and of customers, they are bound to seek to lend for longer periods. I cannot say that that is the key to the inflationary aspect. It may not be so at the affordable end but it is the effect on the market. Underlying the issue is an acute shortage of supply. The probable root cause of the problem is that there are fewer houses than the number of household formations, as the noble Baroness mentioned.

My Lords, I thank the Minister for the Statement. I listened to it with the ears of one who chairs an urban regeneration company in the Midlands. The whole idea of an urban regeneration company is to roll up a series of partnerships—those are the ethics of the board—with communities, county councils, borough councils and partnerships with RDAs.

Twelve new urban regeneration companies have been announced in the past 18 months, Corby being one. One of our aspirations is to build 22,000 new homes. Most of those will be on Brownfield sites, a relic of the old steelworks. I am listening carefully. I wonder how the Government will target assistance to urban regeneration companies which clearly have a reverse role when most people talk about housing. We say, "Bring us your people". We want to expand. We want to have a much larger critical mass within the Midlands.

What help will be available for urban regeneration companies such as Corby Urban Regeneration Company? Will the future bring more help in planning and housing? Our responsibilities are not only new build but also to improve the existing housing stock.

My Lords, I cannot go into figures today although the noble Baroness has not been slow in lobbying me along with the elected Members for the area in putting the case for Corby. I accept that there is substantial case for new housing and better infrastructure and transport arrangements. One of the growth areas is Milton Keynes and the south Midlands which includes the area to which the noble Baroness refers. We shall come forward with firmer proposals once we have talked to all the stakeholders in that area.

My Lords, the Minister said that in declining areas in the north of England there is a market collapse: with the wrong houses, the wrong jobs and the wrong people in the wrong places. Those of us who live in such areas do not think that we are the wrong people. I live in a valley where the towns are slowly dying. The population is and has been declining for some time. I refer to towns such as Nelson, Burnley and Accrington.

Part of the purpose of planning is not simply to accept that economic activity and growth exist but to influence them. Have the Government abandoned the old ideas of regional development—that in areas of declining regional activity one of the purposes of government is to resuscitate and encourage economic activity?

In the Statement it is proposed that housing expenditure in future should be in one regional pot. Can the Minister tell us whether the new Pathfinder projects—one is in our valley in north-east Lancashire—will be part of that regional pot or will they be kept separate?

My Lords, I declare an interest as chair of the Housing Corporation. I welcome the Statement. Some of the points raised after the Minister sat down surprise me. An almost pessimistic view was expressed in response to what was very good news. It was a most wide-ranging Statement. It may have been brief but a long statement is not always good news. There was a lot of good news in today's brief Statement.

The Statement recognises, as I do as chairman of the corporation, many points. Part of our remit is to advise the Government about the issues concerning the northern counties, in relation to which market failure is addressed in the Statement. Market failure has not occurred in each of the counties, but there is market failure in some of the towns, as the noble Lord, Lord Greaves, said.

We welcome the Statement, but we know that the pressure pot is in London and the South East. The Thames Gateway, for example, covers three regional areas—not just one county or one region. The Housing Corporation welcomes the requirement for parties to come together to talk about investment and it welcomes being involved in that. It is one of two inspectorates, so it also welcomes the idea of entering into sensible talks with the Government about merging two jobs into one, which will streamline the position. We welcome the Statement and look forward to the detail. It is good news and we should not walk away from it.

My noble friend Lord Clarke of Hampstead wanted to be present for the Statement but had to attend a Select Committee. He asked me whether I would say on his behalf, as a chairman who looked after the inner city problems in Burnley, that in his view the people of Burnley would regard this Statement about the northern counties as optimistic.

My Lords, I am grateful to my noble friend. She chairs what is by any stretch of the imagination and by any Whitehall measure a first-class organisation. It has been wholly positive, supportive and incredibly helpful to the new department in the past few weeks as we have been preparing for the effects of the Comprehensive Spending Review and preparing this Statement. I look forward to the discussions about how we shall combine the two inspectorates with their good operations and differences in their ways.

The noble Baroness made a valuable point about the Thames Gateway. It is a huge operation. Fourteen zones have already been identified and there will not be a single delivery mechanism in the area. She is right to say that there are three regional development agencies and several counties, including the London boroughs. Of course, the Greater London Council and the Mayor also have a crucial role to play.

The point about the North is well made. This Statement is not just about the hot-spots of London and the South East. We are responsible for the whole of England. The pressures and problems are different in each area. It is not that the North is full of collapsed economies and communities and it is not the case that the South does not have any empty housing. There is a mixture of problems which we have to address.

My Lords, I congratulate the Government on having reached their 60 per cent target for brownfield sites for new homes as early as they have. If the achievement for new housing had been greater, as the Government may wish it to have been, would that still have been the case? Will postmen be regarded as key workers? Can the Minister contemplate a simplified version of the government response to the consultation on planning because the language at the moment is fairly opaque?

My Lords, we can always improve the quality of our communications. I accept what the noble Lord, Lord Brooke, has said. If a simplified version of what is quite a short document is possible I shall see whether I can provide him with it.

In terms of key workers, if public services are not delivered one wonders why. One recognises a key worker when the service is not delivered. We talk about nurses and teachers and since the Government came to power the pressure has been on education and health, but if the post is not delivered postmen become key workers. That is the same issue. He makes a fair point which I do not seek to deny.

The figure is different in different regions, but overall we have reached the target of 60 per cent brownfield development of new housing eight years ahead of time with a low house building total. I do not know what the result would have been if there had been a higher house build level. Because we know the amount of brownfield land around, although there is no register of it. English Partnerships are working on that so that we can parcel it up and check it out. I do not know whether we would have met the target or not. However, we are hell-bent on keeping to the target and stepping up the housing output. Therefore, the pressure is on to find more brownfield land.

My Lords, I beg to move the Motion standing on the Order Paper. It relates to the order in which the House will take the Animal Health Bill in Committee. I have a few words of explanation.

This Motion is moved in order to proceed to the Committee stage of the Animal Health Bill, which was delayed by an amendment to the Motion carried by your Lordships on 26th March. The conditions of that amendment have now all been fulfilled. That amendment stipulated that debate could not proceed further until three steps had been taken by the Government. Those related to the consideration and publication of the findings of two of the independent inquiries into last year's foot and mouth outbreak and to the publication of our response to consultation on the implementation of powers contained in the Bill.

Your Lordships will wish to note that I have arranged for a copy of the government response to consultation to be placed in the Library of the House and, following the publication of the reports of the two inquiries, that completes the remaining steps specified in the amendment.

We are of course mindful of the needs on the part of the interested parties to have sufficient time to absorb the findings and lessons of the inquiries, not only of those that have been published, as referred to in the amendment—the Royal Society and the National Audit Office—but also Dr Anderson's report, which is expected to be published this coming Monday.

For that reason we propose effectively to reverse the order in which the Bill is debated in Committee, starting with the provisions that deal with scrapie, which are Clause 5 and Schedule 2. They are not part of the subject matter of the reports or the consultation process. Under that arrangement we would not proceed to the areas that deal with foot and mouth disease and related matters until after the Summer Recess, by which time Members of the House will have had a chance to absorb the recommendations of the reports. I hope your Lordships will agree that that will be an acceptable order in which to debate the Bill during the course of the Committee stage. I beg to move.

Moved, That it be an instruction to the Committee of the Whole House to whom the Animal Health Bill has been committed that they consider the Bill in the following order:

• Clause 5,
• Schedule 2,
• Clause 14,
• Clauses 1 to 3,
• Schedule 1,
• Clause 4,
• Clauses 6 to 13,
• Clauses 15 to 18.—(Lord Whitty.)

My Lords, I declare my interest in farming, although I deny the interest in "specialist goat disease making" as published in the Register of Lords' Interests. Perhaps that was a Freudian slip on the part of the registrar. I am in fact a goats' cheese maker.

When this Bill was last before the House on 26th March, my noble friend Lord Moran moved the amendment mentioned by the noble Lord, Lord Whitty. In the absence of my noble friend, he has asked me to convey to the House the following message. I would be grateful for noble Lords' indulgence. The message reads:

"I am very surprised that the Government has decided to resume the Committee stage of the Animal Health Bill. The amendment I introduced on March 26 was passed by 130 votes to 124. By this vote the House declined to consider the Bill any further until the various reports on the Foot and Mouth Disease had been received, considered and published by Her Majesty's Government. The National Audit Office's Report was published on June 21 but the Government has not yet responded to it".

I gather that the Minister has now said that the response is in the Printed Paper Office.

"The Royal Society's report was published on July 16. Neither the Government nor the House will have time to consider it and respond adequately before July 25. We are still awaiting the conclusions of the Lessons Learned enquiry, not due till next week, a couple of days before the scheduled Committee stage.

I am astonished that the Government has not considered it necessary to communicate with me prior to putting the Bill back on the Order Paper. The House authorities told me that they expected the Government to speak or write to me. They have not done so.

I have heard suggestions that the Government may have it in mind to propose that only Part II of the Bill, on scrapie, may be dealt with on the two days on the grounds that it is 'non-controversial'. If they think so, they are wrong. The proposals on scrapie are highly controversial. As I pointed out in January at Second Reading, the President of the Royal College of Veterinary Surgeons said that in this part of the Bill 'many unsupported scientific judgements are made'.

In any case, it is hard to see how the Government intends to proceed with a Bill that legalizes further mass slaughter when the Royal Society's report recommends that only 'diseased animals, and all those that are known, or very likely, to have been infected by them' be slaughtered. It does not recommend contiguous culling. On the contrary, its view is that 'emergency vaccination should be seen as a major tool of first resort, along with culling of infected premises and known dangerous contacts, for controlling FMD outbreaks'. It seems likely from early reports that the Lessons Learned enquiry will come to a similar conclusion. The Government will be faced with the alternative of ignoring the conclusions of the most eminent scientific body in the country or of abandoning or entirely rewriting the existing animal health Bill. Why, then, press ahead with a Committee stage now?

The Government has so far ignored all the criticisms made of the Bill in both Houses and by many organisations in the country. Their attitude is not unlike that of Edward Lear's Jumblies who sang:

'We don't care a button, we don't care a fig

In our sieve we will sail to sea'.

Clearly, it would be much more sensible for the government to hold over further consideration of these problems until after the summer recess, when they and we will have been able to study and reflect on all three of the relevant enquiry reports (all commissioned by the Government itself) and decide on the best way forward".

That is the end of the remarks of my noble friend Lord Moran. In my opinion, my noble friend makes an eminently sensible proposal. The Minister's Motion asks us to deal first with the scrapie measures. What is the point of us dealing with what amounts to about a third of the Bill before the Summer Recess when it seems likely that the remaining two-thirds will have to be substantially rewritten in the light of various reports?

I would go further than my noble friend. I suggest to the Minister that he dumps this Bill and drafts a completely new one during the Summer Recess—one that takes into account the many recommendations contained in the reports commissioned by Her Majesty's Government following the recent epidemic of foot and mouth disease, and also takes into account the many valid objections to Schedule 2 to the Bill.

I am confident that both the Minister and all noble Lords must see the sense in our having placed before us a Bill that has been carefully drafted and which, with a little luck, will need little amendment, rather than struggle on trying to put some sense into this current defective Bill. The Minister already has more powers than he needs to deal with transmissible spongiform encephalopathies in our livestock. There is therefore no urgency for Schedule 2 to be enacted. I fully recognise the need for strong measures to control animal diseases. However, I want to see good, sound law that is both reasonable and enforceable.

Finally, I am very disturbed by the Minister's apparent discourtesy to my noble friend Lord Moran and to the House. Why did he not consider it necessary to communicate to my noble friend before this Motion was put on the Order Paper? In the light of their importance, why has he not allowed us more time to consider the contents of the relevant reports? As noble Lords will have gathered, I wish to oppose this Motion.

My Lords, we are examining the successful amendment of the noble Lord, Lord Moran, in relation to the Animal Health Bill. Factually, the Government have considered the responses, at least theoretically, to the consultation on the implementation of powers in the Bill. Their response has arrived in the past 24 hours so I now understand why the noble Lord, Lord Moran, did not get that information. It has been placed in the Library of the House so technically it is in the public domain. Even though I do not like some of its conclusions or the way in which this has been handled at such short notice, the Minister has made a statement and provided assurances. I should be grateful if he would repeat in his summing up that we are going to consider only Part 2 of the Bill which addresses the issue of scrapie.

There are, as has been said, a number of important scientific issues in relation to the control of scrapie. I believe that it is possible to proceed with Part 2 of the Bill next week. However, I give warning that my party will examine Part 2 of the Bill together with amendments that we have put down. If we believe that scientifically the Bill is not sound, then we shall not hesitate to try and defeat it on Report. However, that is no reason why Part 2 of the Bill should not proceed.

Part 1 of the Bill, concerning foot and mouth and infectious diseases, will not be taken until October. Therefore there is time to consider the results of the Royal Society, the NAO report and other reports such as the Anderson Report into foot and mouth. Therefore, on balance, we cannot see a reason to delay the Animal Health Bill further, as long as only Part 2 is taken next week.

My Lords, while I accept the Minister's assurance that Schedule 2, which is the operative part of the Bill to be discussed next week and the week after, has nothing to do with the reports referred to in the Motion of the noble Lord, Lord Moran, passed some months ago, it occurs to me that there are parts of Schedule 2 which have a conformity with other parts of the Bill and other parts of the animal health legislation that will remain on the statute book. That being so, if the Government themselves seek to amend, for example, the enforcement provisions of this clearly controversial schedule, may we have an assurance that there will be reciprocal amendments to other parts of the Bill and animal health legislation more widely? If not, I have no doubt that all this time which has been found will be wasted and there will be quite serious cause for Schedule 2 to be recommitted after we come back from the Summer Recess.

My Lords, I should like to comment on the letter referred to by the noble Countess, Lady Mar. Before doing so, I should like to remind the House of our family's farming interest.

Like other noble Lords, I am slightly disturbed by the way the Government wish to push ahead with this Bill. The scrapie section is not a deeply infectious or deeply worrying part. It is actually the least worrying part of the Bill. The need for urgency is, therefore, slightly beyond me. I have a briefing sent to me by the RSPCA this morning, appertaining to the whole Bill but particularly the scrapie section. The RSPCA,

"are concerned that there is no time indication in the Bill. Any disease eradication programme for scrapie should be phased in over a number of years, for example 10 plus years".

I know that the industry has already raised this issue with the Minister. The briefing continues:

"The RSPCA would like to see the testing programme phased in over a period of time. Testing of all breeding ram, and the year's lambs one year ahead and then focus on other groups or herds over the next years".

There is a concern even within that organisation. It is not a breeding organisation, but an animal welfare one. But it fears that,

"too rapid a cull could devastate the gene pool leading to other health problems".

We believe that pushing ahead with this section is unwise. Other noble Lords have already referred to the fact that we have had the outcomes from the National Audit Office and the Royal Society.

It is to the latter that I should like to draw the Minister's attention. The Government maintain that there is nothing in those two reports that affect the scrapie section. Perhaps I may turn the Minister's attention to page 141, Annex A: Terms of Reference:

"This inquiry was commissioned by the Royal Society, jointly by the Chief Scientific Adviser and the Permanent Secretary of DEFRA on behalf of the Prime Minister and the Secretary of State. The commission stressed that the inquiry should be clearly independent. This meant that the terms of reference were agreed mutually between the Society, the Office of Scientific Technology and DEFRA".

The report goes on to say that the terms of reference agreed were:

"To review the scientific questions relating to the transmission, prevention and control of epidemic outbreaks of infectious disease in livestock in the UK".

At the bottom it says that transmissible diseases have the potential for very serious and rapid spread, irrespective of national boundaries. They can have serious social and economic or public health consequences and are a matter of major importance in the international trade of animals or animal products. From my reading of that—the Minister will correct me if I am wrong—the report particularly refers to the scrapie provisions in the Bill. So I return to the position we are in at the moment and ask: is it wise that we should press ahead with the Bill at this time?

One or two other points particularly concern me. The first is that this Bill has already technically been through the other House and arrived before your Lordships today. If the Government find that they have to introduce many new amendments, our democratically-elected colleagues in the other place will not have a chance to debate the substance of a Bill which will be democratically altered to an unknown degree.

My Lords, does not the noble Baroness mean "undemocratically" altered?

My Lords, the noble Countess, as ever, is quite correct. I must choose my words more carefully. But what I am saying is that if we make huge changes to the Bill, because of the way that Parliament works—as noble Lords know well we discuss only the amendments tabled in this House—the other place will not have a chance to discuss those changes. As we know and accept, the guillotine Motion is used in the other House and we could see huge swathes of this Bill going through undebated. I am concerned therefore about the procedure for Bills going through this House. I hope that the Minister will take that into consideration because it is enormously important.

As the Minister is aware, I wrote to him twice—once on 29th May and again on 2nd July—warning that we would not consider the scrapie provisions without taking into consideration the powers of enforcement and other aspects of the TSE regulations which we debated at great length. It was only this morning that I finally received a reply to my letter. It was a very full reply and I do not know whether other Members of this House have had a chance to see it—I do not intend to read four pages of it now. It underlines my concern about the speed at which we are progressing.

The department's letter acknowledges that major concerns were raised when we took the TSE regulations through. It says it now intends to consult again with the industry on some of the provisions. How sensibly can we pursue the enactment of provisions relating to scrapie in a Bill containing powers for the control of animal disease while the Government are still consulting? I hardly think it wise to push ahead at this time.

I return to two earlier points. The first is that we are told that we will have two days in Committee—the first on Tuesday of next week and the other on the Monday of the following week—to deal with the scrapie provisions, which the Government consider to be uncontroversial. But as the noble Countess, Lady Mar, indicated when reading the letter from the noble Lord, Lord Moran, many of us believe that there are controversial aspects to consider. We are given two days for those provisions, which cover only one-third of the Bill. We have been given only two further days to consider the other two-thirds.

How does the Minister think we can handle the whole of the Bill in four days if he recognises, quite rightly, that we need two days to consider the scrapie provisions? Would it not be wiser to withdraw the Bill at the moment and wait until we have heard the various recommendations, particularly from the Anderson inquiry which reports this Monday, before we push ahead? The noble Lord may accuse me of trying to delay and putting the Bill off. But I would be more protective of our parliamentary time. I fear at the end of the day we shall take longer going back over work than we would if the Bill was withdrawn today.

My Lords, I see two arguments for proceeding with the Bill in the way suggested by the Government. The first is an agricultural one and the second constitutional.

I should say at the outset that, as the noble Countess, Lady Mar, quoted the noble Lord, Lord Moran, the noble Lord, Lord Plumb, who unfortunately could not stay because his wife is unwell, made it clear that he supports the Government in their proposal to take the Bill forward in this way. The President of the National Sheep Association says that its members are anxious to get to grips with the scrapie situation. The NFU also supports the Bill. It has some concerns about compensation but that will be dealt with in the autumn when we come to the later part of the Bill.

So there are strong agricultural arguments for progressing the scrapie provisions. Of course the NAO report, to which reference has been made, relates entirely to foot and mouth disease and not to scrapie; it concerns the FMD outbreak.

Earlier this year 77 amendments were tabled on Schedule 2. I have not read the whole of the Royal Society report, but I find it hard to believe that there will be an enormous amount of extra amendments to the schedule required as a result of that report, which is a major scientific investigation which will need a long time and a great deal of consultation before any legislation finally appears—perhaps an all-embracing Animal Health Act much later. I believe I am correct in saying—I shall be corrected if I am wrong—that the Royal Society report excludes TSEs. It contains four paragraphs on the sheep industry generally and scrapie is mentioned in passing in one paragraph.

That is the agricultural argument for getting on with this part of the Bill dealing with scrapie. Even if a large number of amendments are tabled on Schedule 2, in my experience two days will be sufficient to deal with that part of the Bill.

The constitutional argument is that there is a powerful convention in this House which we tamper with at our peril. The elected Government are entitled to have their business considered. What we did in March had not been done since the 19th century. I regarded it as highly irresponsible. If there had been an outbreak of foot and mouth disease—thank God there has not been—or if one were to occur in the recess and the Government found that they did not have all the powers they needed to deal with it, those who supported the noble Lord, Lord Moran, would bear a heavy responsibility.

I cannot find any example, certainly in my 15 years in the House, where an order of consideration has been voted against. So yet another precedent would be created. The Government met the requirements of the Moran Motion, which only specified the NAO report and the Royal Society report. It was an oversight on the part of the noble Lord, Lord Moran, to omit Anderson, but all that was required was publication and response to those reports. In fact, in the terms of the Motion the Government would have been entitled to proceed with the Bill in the order in which it is printed. But they are waiting for the Anderson report. So the House will have the chance to consider the NAO report and the Anderson report—the two main reports dealing with FM D in this Bill—and the Royal Society report, which deals with vaccination and so forth. That will affect the Bill but not in terms of major amendment.

The House will have the whole summer to consider the three reports. That is a sensible way of dealing with the Bill. We explored this procedure much earlier—I am not revealing any secrets of the usual channels—after the vote on the Moran Motion. It was then thought that this might be a way forward. But the Government waited to meet the terms of the Moran Motion. They have done so. Two reports have been published, though only one has any effect on scrapie, and that only in passing. So there are agricultural and constitutional grounds for proceeding. To oppose the order of consideration of this Bill and the way that the Government wish to proceed would, in my view, be extremely dangerous.

My Lords, I gather from my noble friend on the Front Bench that this order has not been agreed by the usual channels. She said so much against it that it seemed to me that the usual channels could not have been involved in deciding the way in which things should be done.

My Lords, in fairness, I must put the noble Lord right. I was indeed approached by the usual channels to consider taking the Bill in the order suggested. We have not got as far as that at the moment. I have the minute of the noble Lord, Lord Moran, in front of me and I refer it to the noble Lord, Lord Carter. It states that,

"Her Majesty's Government have received, considered".

I do not believe that they have considered. When I saw that I read it through very carefully. As regards the correction as to clarity, yes, I was asked that we take these matters in the sequence that we have. The report of the Royal Society had not appeared and I was not expecting it to have any reference at all to scrapie and TSE, but it has. That is why we are having this short debate.

My Lords, that answers one of my questions. But it appears that this is another occasion when the usual channels appear to have forgotten that Back-Benchers exist. We are not asked whether we should have Statements taken in this House. There was a little debate about that earlier today. I find it particularly extraordinary when what is a truly Back-Bench amendment succeeds without whipping or support, as far as I am aware, from any of the Opposition Benches in this House and the originator of the amendment is not told, consulted or informed in any way of the Government's plans for responding to it as the reports appear.

We are looking at how this House should operate in the future and, as Back-Benchers, we need to have care for our rights and abilities to make a difference in this House. We need to make sure that the usual channels, which are useful on many occasions, pay attention to us. Perhaps the mechanisms are not there for doing so at the moment because we seem to be forgotten more often than should be the case. To that extent I unreservedly support the noble Countess. Lady Mar. I do not have any particular comment to make on the substance of the Motion. I shall listen to what the Minister has to say.

My Lords, despite the wide-ranging nature of this discussion, all we have before us today is the order in which we should consider the Bill. The order is to facilitate discussion in the sequence I have described and to which the noble Baroness Lady Byford, referred.

I apologise if there was any discourtesy to the noble Lord, Lord Moran. However, we used the normal procedure in order to discuss both the tinting and the order. It may well be that the wider points raised by the noble Lord, Lord Lucas, can be taken up in a separate context. We certainly intended no departure from the normal procedure.

As regards justification for suggesting the order in this way, the words which the noble Countess, Lady Mar, read from the noble Lord, Lord Moran, related to dealing with scrapie because it was non-controversial. That was not the motivation although it was less controversial than other parts of the Bill. The reason was that the issues were not covered by the reports or the reports on the consultation.

Although the noble Baroness, Lady Byford, indicated that the terms of reference of the Royal Society report could have included TSE, it did not in fact include any substantive discussion of it principally because the focus was on List A diseases, as defined, which do not include TSEs. The only references to those in the report relate to information and not how to deal with them. Therefore, there is no implication for Part 2 of the Bill in the report of the Royal Society and none whatsoever as regards the National Audit Office report, which is being dealt with in the normal way in another place through the Public Accounts Committee. Some noble Lords will be aware that the Permanent Secretary of my department had a fairly lengthy and interesting session with the Select Committee on the report a few weeks ago.

As regards other issues, the noble Countess rather let the cat out of the bag by saying that the main motivation of the noble Lord, Lord Moran, was to dump the Bill. That may or may not be the case.

My Lords, I do not believe that that was the view of the noble Lord, Lord Moran, but mine.

My Lords, that is even clearer and I therefore apologise once again to the noble Lord, Lord Moran, in his absence. If the noble Countess wishes to make it clear, it is also necessary to make it clear to the House that that was not the purpose or content of the Motion passed by this House in March. That was to delay the Bill until we had received and considered the reports and the response to the consultation relating to parts of the Bill.

The Government have already considered them and the House has the opportunity to do so in the summer before we reach the relevant points. The scrapie provisions are not affected or any of the stipulations in the resolution passed in March which, as my noble friend Lord Carter said, was an extraordinary Motion in the first place. It would be even more extraordinary if we rejected a scheduling Motion today.

Others have queried why we should proceed so rapidly on the scrapie part of the Bill. It is a part of the Bill which is widely supported by the industry, which needs reassurance on some aspects of it. We are discussing the logistical aspects. The eradication of scrapie from the national herd will take several years, but virtually everybody in the sheep industry wishes to begin the process as rapidly as possible and therefore to get onto the statute book as rapidly as possible the legal powers to do that. That is why it is equally urgent that we proceed with the scrapie part of the Bill as the Government consider the provisions are needed as regards the foot and mouth disease. No doubt others will take a different view.

I shall be making a Statement in the House on the report of the Royal Society and on the Anderson report, due on Monday, after we have received it. Some of these matters can then be discussed more widely. But before the House today is a Motion which enables us to adopt a sensible timetable, but it is only about the order in which we take the Bill. I therefore hope that the House will accept the Motion and not take the unprecedented step of voting against it. Some of the substantive points which have been raised can be dealt with in the normal way in Committee in this House. I commend the Motion to the House.

On Question, Motion agreed to.

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

Moved, That the House do now again resolve itself into Committee.—(Lord Sainsbury of Turville.) On Question, Motion agreed to.

House in Committee accordingly.

moved Amendment No. 84:

Before Clause 16, insert the following new clause —

"APPEALABLE DECISIONS

In section 46(2) of the 1998 Act. there is inserted after paragraph (h)—

"(i) to issue a notice under section 26 requiring the production of specified documents or information;

(j) to investigate premises without a warrant under section 27;

(k) to investigate premises with a warrant under section 28: (1) not to investigate a complaint under Chapter I or II;

(m) not to grant interim measures under section 35.""

The noble Lord said: This amendment concerns Section 46 of the Competition Act 1998. It seeks to insert some new paragraphs after paragraph (h). None of the measures stipulated in the amendment is capable of being appealed to the Competition Commission Appeal Tribunal which, as the Committee is aware, is to be re-named the Competition Appeal Tribunal under the Bill. Nevertheless, each of the additions has significant effects for the party concerned and can be challenged only by judicial review. The amendment is consistent with the Government's declared wish to have competition matters dealt with by bodies versed in competition law and practice. The decisions on the additions listed above should go to the CAT and not to the courts.

On the very day that the Bill was introduced in March 2002, an important decision was taken by the Competition Commission Appeal Tribunal in a case called Bettercare. The case concerned whether a complainant had a right to appeal against a rejection of a complaint by the OFT—a matter not listed in Section 46. The OFT argued that it had not taken a decision but had merely decided not to exercise its discretion to open proceedings on the grounds that the Competition Act did not apply to the party complained about. The party complained about was a local authority. The CAT nevertheless held that this was an appealable decision.

The situation now seems to be, therefore, that if the OFT rejects a complaint on substantive grounds its decision is appealable; but if it decides not to investigate on grounds of, say, lack of resources or lack of the importance of the subject matter, that would be challengeable in the High Court only by way of judicial review. That will plainly lead to confusion. It might not, in particular, be easy to determine what was the basis for rejection: indeed, the OFT might be encouraged to base all rejection letters on judicial review-type grounds which would not be conducive to good decision making or to transparency. Moreover, a complainant who brought his appeal in the "wrong" forum might find himself out of time because of the difference in limitation periods for the two procedures.

There is absolutely no reason whatever not to provide that all competition-related decisions, including rejection of complaints, should be reviewable by the CAT and not by the ordinary courts. I beg to move.

The amendment would add to the list of decisions by the Office of Fair Trading that could be appealed to the competition appeal tribunal under the Competition Act 1998. I think that the reference in the amendment should be to Section 46(3) and not to Section 46(2). But that is of no matter.

Section 46(3) of that Act lists a number of decisions taken by the Office of Fair Trading that can be the subject of a full appeal to the tribunal. Further decisions of the OFT may be added by regulations under Section 46(3), and, in the case of third party appeals, Section 47(1). With one exception, we do not propose to add any new category of appealable decisions.

The exception is the category covered by paragraph (m), which the amendment proposes to add. I agree with the noble Lord, Lord Kingsland, that decisions not to grant interim measures should be appealable under Section 46, or, as I think is more likely, by third parties under Section 47. We stated our intention to implement this change in the July White Paper. As the Minister said in another place, we will be bringing forward the relevant secondary legislation as soon as is practicable. But it is unnecessary to make the amendment on the face of the Bill.

Having said that, I am not minded to take action on the other proposals in the amendment. The list of appealable decisions in Section 46(3) consists of substantive decisions by the OFT requiring an analysis of the merits of the case, and with only one exception taken at the conclusion of a procedure or investigation. The sole exception is the current right to appeal against interim measures taken under Section 35, which we are prepared to extend by order to include decisions not to grant interim measures.

We do not think it appropriate or necessary to provide for a full right of appeal on any intermediate, investigatory step in the OFT's proceedings. Parties are not without an avenue—as the noble Lord, Lord Kingsland, has reminded us—of judicial redress in any of the circumstances stipulated in the amendment. The option of applying for judicial review in the High Court will always be available. In that case the court will have full powers to impose remedies such as injunctions.

The noble Lord, Lord Kingsland, referred to the Bettercare case. Section 42(3) is clear that decisions as to whether the Chapter I or Chapter II prohibitions have been infringed can be appealed to the competition appeal tribunal. That includes decisions that a prohibition has not been breached. The Bettercare case establishes that the Director-General of Fair Trading may have made a decision that the prohibition has not been infringed, even where the position has not been taken at the end of a full administrative procedure and is not formally entitled a decision. It is sufficient if the DGFT had in substance made the determination of the issue—for instance, in the course of correspondence with the complainant— rejecting a complaint.

This is a substantive decision. It can be appealed to the tribunal. I hope that deals with the concern expressed by the noble Lord, Lord Kingsland. It was always the intention behind Section 46(3). My noble friend Lord Simon of Highbury during the debate on the 1998 Competition Bill said that it was our intention that substantive decisions by the director should be appealable to the Competition Commission. With those two, I hope, convincing points, I hope that the amendment will not be pursued.

I am grateful to the noble Lord for his full reply. He will not be surprised to hear that I am disappointed by it. I shall certainly return to the matter on Report. He is quite right about the subsection designation. The amendment should have referred to Section 46(3). I apologise to the Committee for that.

The Bettercare case is a good example of the illustration I gave about the OFT being tempted to cast its decision in terms of reasons which fall within the judicial review, rather than the appeal category. I think in this case of paragraph (1) of my amendment.

Judicial review in competition cases is hardly a remedy at all. As the noble Lord is well aware—if for no other reason than because of his experience with the Financial Services Bill—it is not normal in judicial review cases for judges to permit either cross-examination or discovery of documents. In those circumstances, it would be extremely difficult for a complainant before a judge in the Administrative Court to get anywhere with judicial review proceedings in relation to that matter. For those reasons, I shall be returning to the matter on Report. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 agreed to.

moved Amendment No. 85:

After Clause 16, insert the following new clause—

"TRIBUNAL: REGULATIONS

(1) The Lord Chancellor and the Secretary of State may together make regulations—

(a) empowering the courts to transfer to the Tribunal for determination by it any issue arising in any civil proceedings the determination of which depends on whether provisions of Chapter I or II of the 1998 Act or of Article 81 or 82 of the Treaty have been infringed where, in the opinion of the court making the transfer, the transfer would be conducive to the efficient conduct of the proceedings;

(b) making any rules that the Lord Chancellor and the Secretary of State may deem to be appropriate as ancillary to the power to make such transfers or to be reasonably required in connection therewith and in particular, but without prejudice to the generality of the foregoing, to the effect that—

(i) on making such a transfer, the court making the transfer may state facts that the Tribunal shall then treat as established for the purposes of determining the issues transferred to it;

(ii) after having made its determination, the Tribunal shall remit the matter to the court that made the transfer to it, declaring the determination of that issue by the Tribunal, which, subject to any clarification or amplification by the Tribunal of its determination that may be requested by the court that made the transfer, shall then be treated as a determination of that issue by that court;

(iii) enabling courts that have made, or have in contemplation the making of, such transfers and the Tribunal to co-operate together in any way that they deem to be appropriate to enable issues arising in the proceedings before them to be determined as efficiently as possible.

(2) The Lord Chancellor may appoint as President and as chairman of the Tribunal judges of any of the courts provided that, before appointing a judge of the Court of Session or sheriff courts under this subsection, the Lord Chancellor shall first consult the Lord President of the Court of Session.

(3) In this section references to "the courts" are to the High Court of Justice and the county courts in England and Wales and Northern Ireland and the Court of Session and the sheriff courts in Scotland.

(4) The power to make regulations under this section is exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.

The noble Lord said: Amendment No. 85 seeks to test the Government's intent on one or two quite complicated issues that relate to the functions of the competition appeal tribunal and the function of the courts. I am grateful for the representations that have been made to me in this respect by a number of practitioners in the competition law area.

The concern which the amendment seeks to remedy is that the Bill, if passed in its current form, would be in danger of getting the competition appeal tribunal to perform functions that it is not eminently qualified to deal with and getting the High Court to perform functions that it is not properly qualified to deal with. That is the substance of the amendment. It is designed to give the Government power to bring in regulations, on which there will need to be extensive consultations, to attempt to ensure that the right functions can be placed with the right bodies.

The background is that, for the first time, the Bill contemplates that where there are breaches of regulations and laws regarding competition legislation the power is given for private actions to be brought. We on these Benches certainly welcome that.

But the question is whether what was Clause 16 and is now Clause 17 appropriately assigns the power to make decisions on damages to the tribunal. In our judicial structure, the body that is eminently qualified to deal with questions of damages is the High Court. One of the underlying principles of the amendment is that the High Court, rather than the tribunal, should deal with damages.

Conversely, under the Bill, in many cases the competition appeal tribunal will not be assigned to deal with what it will be eminently qualified to deal: significant issues involving the interplay between the law and the economics of a case. High Court judges are not usually qualified to make such determinations. The amendment is intended to ensure that regulations can be introduced by the Government and that the competition appeal tribunal will deal with the matters with which it is eminently qualified to deal—complicated factual economic issues, for example, determining whether the exemptions in Article 81(3) apply.

Such issues have been increasingly determined in Europe, but because of the way in which European law is beginning to develop they will soon return to be matters to be determined by domestic tribunals or courts. Such issues should be determined by the tribunal. Conversely, the High Court is the appropriate place to determine issues of damages. That is the purpose of the amendment. I beg to move.

I support the amendment. It is primarily due to the work of the distinguished competition lawyer Sir Jeremy Lever that the matter is before us today.

As the noble Lord, Lord Razzall, explained, for a variety of reasons, mainly connected with the content of the Bill and the likely move of the European Commission to delegate much of its competition decision-making to national authorities, the volume of competition cases in national courts will grow substantially. Essentially, the amendment implies that the Government have got matters the wrong way round in the Bill. The Government seek to concentrate responsibility in the new competition appeal tribunal for determining damages following decisions by the responsible competition authorities.

The philosophy behind the amendment is that measuring damages in competition cases is not an especially complicated matter for Queen's Bench judges. Given the huge volume of work that the competition appeal tribunal is about to undertake, why not relieve it of the task—or at least of the exclusive task—of doing something that can just as well be done by other courts?

On the other hand, the Bill as drafted will, in private actions, require ordinary High Court judges to deal with the most sophisticated and complex competition matters—those under Article 82(3), for example—which the CAT is uniquely qualified to consider and undertake.

The amendment is intended to provide a transfer mechanism in the opposite direction to that of the Bill. It is intended to provide the power to take cases that arise in the ordinary courts and transfer them to the competition appeal tribunal. In a sense, we are trying to change the flow. The Bill will send damages matters to the competition appeal tribunal; it should send competition matters to it.

The amendment has no political content. It is an attempt to assess where the burdens will lie on the judicial system when the Bill is enacted. It is in everyone's interest to get that right. The Government have taken a certain view in the Bill. I hope that they will give the amendment serious consideration, if they have not already done so, so that we can develop the idea during our proceedings.

For the record, I think that the noble Lord meant Article 81(3), not Article 82.

Yes. I have got off to a bad start with my statutory designations; I apologise.

I do not think that we are worried about damn dots!

I listened carefully to what the noble Lords, Lord Razzall and Lord Kingsland, said. I certainly recognise that they feel strongly about this issue. I should like to consider their remarks between now and Report, but I must address myself to the amendment before us and point out the difficulties with it.

The amendment would achieve two things. It would enable the Lord Chancellor and the Secretary of State to make regulations enabling courts to transfer certain competition issues to be determined by the competition appeal tribunal. It would also, although this has not been spoken to, allow the Lord Chancellor to appoint judges directly to the positions of president and chairman of the tribunal.

Under the amendment, we should have the strange position whereby a tribunal made a decision on an issue arising in a case before a High Court judge that was then binding on that judge. It is true that, as a result of Clause 19, findings of infringements of competition law will be binding on the courts, but that will be only when the full appeal route has been exhausted and only in relation to claims for damages. So that is narrowly circumscribed.

Introducing such rules could lead to inconsistency in the way in which cases are dealt with. That could depend on the working practices of a particular judge. Some judges might refer some parts of a case to the CAT; but a different judge might decide to keep the whole case. That would be unsatisfactory for the parties involved because they would not have a clear idea of the path that their case would take.

The point was not spoken to, but the amendment would also involve a substantial enlargement of the powers of the CAT as currently proposed. It appears to allow the CAT to take initial decisions on competition law breaches that are currently taken by the Office of Fair Trading. As the noble Lord, Lord Razzall, is nodding, perhaps that is what he meant to achieve. The CAT has the power to make decisions relating to breaches of competition law, but only those that have been the subject of an OFT decision and are subsequently appealed to the CAT. That is why it is called an appeal tribunal.

Shall I speak to the issue of the direct appointment of judges by my noble and learned friend the Lord Chancellor?

Please do.

The proposal that my noble and learned friend the Lord Chancellor should be able to appoint judges directly cuts across the policy of the Lord Chancellor's Department that all appointments to the tribunal should be by way of open competition. Open competition does not rule out the possibility that some judges will be appointed chairmen, but they will have to apply for the posts when they are advertised. We would be delighted if some judges were to apply; they have valuable expertise to offer the tribunal, not least in the two new areas of damages and judicial review. However, we see no need to make express provision to allow for the direct appointment of judges. The policy favoured by my noble and learned friend of running a competition, which will have a set of chairmen in place by the time that the provisions of the Bill commence, is the right one.

Does my noble friend the Minister agree that, in any case, judges are already eligible, under Schedule 2, for the appointments to which the amendment applies? All judges have the 7-year or 10-year qualification referred to in the schedule.

I hoped that I had said that. That is the Government's position.

The amendment would have covered that issue as well. However, I understood that the view of the Lord Chancellor's Department was that the noble and learned Lord had the power to appoint judges in the way suggested by the Minister. That is why it was thought unnecessary to cover the matter in the amendment.

My noble and learned friend does, of course, have that power, but he has made it clear that he intends to open up the system for the appointment of judges to competition. I would have hoped that that would be generally welcomed.

The noble and learned Lord the Lord Chancellor may well wish to open the system up to competition, but he can still assign the winners of that competition in any way he likes.

I shall deal with the principal objections that the Minister raised, although I am sure that the noble Lord, Lord Razzall, will deal with them too. The Minister said that it would be inappropriate for a second court to accept a determination of issues that had been raised in the first court. Essentially, he asked why the second court should accept the findings of the first court, if the case were transferred to it.

I am sorry to keep bobbing up and down. The issue is not whether the second court should accept the decisions of the first court; it is whether those decisions are binding.

There is nothing exceptional about the situation. Even before the enactment of this Bill, that will often be the position. Findings of fact will have been made in public law proceedings under Chapter 1 or Chapter 2 of the Competition Act 1998 or under Articles 81 or 82 of the EC treaty. Subject to certain conditions, such findings of fact will be treated as determinative in subsequent actions. That has always been the case.

The Minister's second objection was that the amendment would, in some way, expropriate the Office of Fair Trading or the competition authorities of the European Community of their powers. That is not so. We are discussing the transfer of matters that are the subject of private actions in the High Court—that have been brought either under Articles 81 or 82 of the EC treaty or under the corresponding provisions of Chapter 1 and Chapter 2 of the Competition Act 1998. The intervention of the competition authorities is not an issue.

I welcome the fact that the Minister said that he would consider the matter. Some important points have been raised. As the noble Lord, Lord Kingsland, said, it is not a party political matter. There is no politics in it: we are just trying to get the Bill right.

One point to which the Minister did not refer is that the amendment looks ahead to what we believe will be the structure of competition law in a year or two. Perhaps I did not emphasise that enough in my opening remarks. The noble Lord, Lord Kingsland, and I made the point that most practitioners anticipate that the powers devolved by the European Commission will come back to the structure in the UK. In other words, many decisions currently taken in Brussels will be taken in the UK.

It is likely that those decisions will, initially, be made by the OFT and that appeals will go from the OFT to the competition appeal tribunal. We are unlikely to have further legislation in place when that happens, but the amendment would create a structure so that the right bodies—the courts or the competition appeal tribunal—will be ready to hear the appeals. The courts will determine the damages and the competition appeals tribunal will determine cases relating to the complex inter-relationship between law, fact and economics, of which the classic example is appeals about the exemptions in Article 81(3). If the Government accept that that is what will happen, we must then ask what the composition of the CAT should be.

In the history of English law—I say, "English law", although we should bear in mind that it is an issue for the whole of the UK—when a raft of particular cases comes to the judiciary, people with expertise in that area are appointed to the High Court Bench. There is, in effect, a commercial court: judges are appointed to the High Court to deal with complicated commercial cases. I presume that, when the noble and learned Lord the Lord Chancellor introduces his new policy of advertisement for the judiciary, knockabout criminal lawyers from the Old Bailey will not apply for a job in the commercial court. Presumably, the noble and learned Lord will advertise for commercial court judges.

We would not want to create a situation in which, because of the number of cases that come to the High Court, we would appoint to the High Court Bench only people with experience of competition law. We would want to build up a corpus of judges with competition law experience in the same way as the commercial court has developed. Those people should apply for appointment to the competition appeal tribunal because that is where they could best apply their judicial skills and their economic experience.

I shall say another word about the relationship between the court and the competition appeal tribunal. Under the Bill, the High Court can—as it already does—award damages in competition cases. That is not in question. The point is that the competition appeal tribunal offers an alternative route—only—for cases in which infringement of competition law has already been established. That will be the expertise of those on the tribunal.

I do not want to labour the point, and I know that the Minister will consider the matter. We are supposing that, not many years hence, a raft of decisions will be taken in the UK that, currently, are taken in Brussels. Major decisions are to be devolved to the UK. We want to see powers taken in the Bill under which the correct elements of those decisions should be taken by the competition appeal tribunal, the members of which will be qualified to deal with the complicated relationship between economics, facts and the law that practitioners in the field must have. The Bill is designed to confer on the Government powers to bring forward regulations to ensure that that can take place.

Although it is a complicated issue, in a nutshell it is what the noble Lord, Lord Kingsland, and I seek with the amendment. I am grateful to the Minister for his assurance that he will take the amendment away and think about it. On that basis, I am happy to withdraw the amendment.

Amendment, by leave, withdrawn.

Before moving on to Amendment No. 86, I should advise the Committee that if Amendment No. 87 is agreed to, I shall not be able to call Amendments Nos. 88 to 93 inclusive under the rules of pre-emption.

moved Amendment No. 86:

Page 7, leave out lines 25 and 26 and insert—"

(1) This section applies to—

(a) any claim for damages, or

(b) any other claim for a sum of money,

which a person who has suffered loss or damage as a result of the infringement of a relevant prohibition may make in civil proceedings brought in any part of the United Kingdom.

(1A) In this section "relevant prohibition" means any of the following—"

The noble Lord said: In moving Amendment No. 86 I wish to speak also to Amendments Nos. 87, 94 and 95. Late on Tuesday evening we dealt with a number of paving amendments which in themselves were not of great significance; the significance arises in this group of amendments. Later, Amendments Nos. 103 and 108 are consequential amendments that complete the pattern.

The amendments relating to Clause 17 replace most of the current clause with a redrafted version. There is nothing substantially new in the redraft, but it provides greater legal clarity and should reduce uncertainty.

Clause 17 amends the Competition Act 1998 to allow the competition appeal tribunal to hear claims for damages in cases where a breach of competition law has been established. This covers breaches both of the prohibitions in the Competition Act itself and breaches of the prohibitions in the Articles 81 and 82 of the European Communities Treaty.

The competition appeal tribunal will have jurisdiction to hear damages claims where a breach of competition law has been found by the OFT in respect of a Chapter I or Chapter II prohibition set out in the 1998 Act, or by the European Commission or the OFT in respect of Article 81 or 82. Once the appeals process for the relevant decision has been exhausted, parties harmed by the anti-competitive action will be able to seek damages before the competition appeal tribunal.

Parties will still be able to claim damages through the courts in the usual way. However, the CAT route will offer significant advantages by virtue of more streamlined procedures and the availability of expertise in competition law and the effects of anticompetitive activity. The noble Lords, Lord Razzall and Lord Kingsland, referred to those when discussing the previous amendment.

Amendment No. 86 expresses with greater clarity the point made by existing subsection (3); namely, that the scope of a damages claim made before the tribunal is to be the same as that made before a court. It also makes it clear that the damages which may be awarded include all monetary awards which can be awarded by a court in respect of the relevant infringement. This could conceivably include claims for the restitution of profits unlawfully made by the infringing company as well as in respect of loss caused to the injured party, although the scope for these will depend on the evolving jurisprudence of the courts.

Under Amendment No. 87, subsections (5), (6), (7) and (9) are merely reworded versions of current subsections (2), (5), (4) and (6) respectively. Subsection (4) simply teases out the wording that is currently at the beginning of subsections (4) and (5). Subsection (8) clarifies that the competition appeal tribunal will be bound by decisions relating to the various prohibitions in competition law.

Amendment No. 94 clarifies that claims can be made under this section even if the cause of action arose before the commencement of these provisions. Of course such claims can already be made in the courts.

Amendment No. 95 is merely a redrafted version of Clause 18 that provides greater legal clarity. Clause 18 amends the Competition Act 1998 to introduce the right for consumer organisations to bring claims for damages on behalf of groups of named and identified consumers. These group claims for damages can be made only before the competition appeal tribunal, not in front of the courts. As in the case of individual damages claims brought in by the CAT, a claim can be brought only where a breach of competition law has already been established. Once the full appeals process relating to the relevant decision on the breach of competition law has been exhausted, organisations will be able to bring forward the claim. However, the consumers concerned must have given their consent before any claim can be commenced.

Before bringing a group claim, organisations will have to apply to be specifically designated by the Secretary of State. If they are to be included in the list of specified bodies, applicants will have to meet published criteria. The designation of bodies will be by a statutory instrument made by the Secretary of State and subject to the negative resolution procedure.

Subsections (1) to (4) of the new version of Section 47B take the place of current subsections (1), (2), (3) and (5). The redraft clarifies the relationship between individual claims and consumer group proceedings. Subsection (5) applies certain provisions of Section 47A, inserted by Clause 17, to ensure that an infringement of competition law has to be established before a group claim can be brought, and the right to bring a group claim does not affect the right to bring a claim before the court.

Subsection (5A) is the only true new paragraph introduced by the amendment. It enables the competition appeal tribunal to order the defendant to pay any monetary remedies to the body bringing the claim forward for onward distribution to the relevant individuals, as long as all consent. But this subsection makes it clear that the damages will still be awarded to the individuals rather than to the representative body, which will be acting on their behalf in receiving the amounts due. In other words, the amendment merely provides an alternative distribution mechanism; that is, from the defendant to the consumer body arid then on to the individuals. It will be necessary for both the consumer body and all the individuals concerned to give their consent before the tribunal can make the necessary order. That decision will have to be taken at the beginning of the process.

The other essential ingredient of the mechanism introduced by subsection (5A) is the ability for consumer bodies to enforce awards where an order has been made that the money should go to the body for onwards distribution. The ability to do that was introduced by government Amendments Nos. 68 and 69.

I hope that the Committee will agree that these redrafts are clearer than the current versions. I beg to move.

On Question, amendment agreed to.

moved Amendment No. 87:

Page 7, line 34, leave out from beginning to end of line 37 on page 8 and insert—

"(2) For the purpose of identifying claims which may be made in civil proceedings, any limitation rules that would apply in such proceedings are to be disregarded.

(3) A claim to which this section applies may (subject to the provisions of this Act and Tribunal rules) be made in proceedings brought before the Tribunal.

(4) But no claim may be made in such proceedings—

(a) until a decision mentioned in subsection (5) has established that the relevant prohibition in question has been infringed; and

(b) otherwise than with the permission of the Tribunal, during any period specified in subsection (6) or (7) which relates to that decision.

(5) The decisions which may be relied on for the purposes of proceedings under this section are—

(a) a decision of the OFT that the Chapter I prohibition or the Chapter II prohibition has been infringed;

(b) a decision of the OFT that the prohibition in Article 81(1) or Article 82 of the Treaty has been infringed;

(c) a decision of the Tribunal on an appeal from a decision of the OFT that the Chapter I prohibition, the Chapter II prohibition or the prohibition in Article 81(1) or Article 82 of the Treaty has been infringed;

(d) a decision of the European Commission that the prohibition in Article 81(1) or Article 82 of the Treaty has been infringed; or

(e) a decision of the European Commission that the prohibition in Article 65(1) of the Treaty establishing the European Coal and Steel Community has been infringed, or a finding made by the European Commission under Article 66(7) of that Treaty.

(6) The periods during which proceedings in respect of a claim made in reliance on a decision mentioned in subsection (5)(a), (b) or (c) may not be brought without permission are—

(a) in the case of a decision of the OFT, the period during which an appeal may be made to the Tribunal under section 46, section 47 or the EC Competition Law (Articles 84 and 85) Enforcement Regulations 2001 (S.I. 2001/2916);

(b) in the case of a decision of the OFT which is the subject of an appeal mentioned in paragraph (a), the period following the decision of the Tribunal on the appeal during which a further appeal may be made under section 49 or under those Regulations;

(c) in the case of a decision of the Tribunal mentioned in subsection (5)(c), the period during which a further appeal may be made under section 49 or under those Regulations;

(d) in the case of any decision which is the subject of a further appeal, the period during which an appeal may be made to the House of Lords from a decision on the further appeal;

and, where any appeal mentioned in paragraph (a), (b), (c) or (d) is made, the period specified in that paragraph includes the period before the appeal is determined.

(7) The periods during which proceedings in respect of a claim made in reliance on a decision or finding of the European Commission may not be brought without permission are—

(a) the period during which proceedings against the decision or finding may be instituted in the European Court; and

(b) if any such proceedings are instituted, the period before those proceedings are determined.

(8) In determining a claim to which this section applies the Tribunal is bound by any decision mentioned in subsection (5) which establishes that the prohibition in question has been infringed.

(9) The right to make a claim to which this section applies in proceedings before the Tribunal does not affect the right to bring any other proceedings in respect of the claim.""

On Question, amendment agreed to.

moved Amendment No. 94:

Page 8, line 37, at end insert—

"(2) Section 47A applies to claims arising before the commencement of this section as it applies to claims arising after that time."

On Question, amendment agreed to.

Clause 17, as amended, agreed to.

Clause 18 [Claims on behalf of consumers]:

moved Amendment No. 95:

Page 8, line 42, leave out from beginning to end of line 9 on page 9 and insert—

"(1) A specified body may (subject to the provisions of this Act and Tribunal rules) bring proceedings before the Tribunal which comprise consumer claims made or continued on behalf of at least two individuals.

(2) In this section "consumer claim" means a claim to which section 47A applies which an individual has in respect of an infringement affecting (directly or indirectly) goods or services to which subsection (6) applies.

(3) A consumer claim may be included in proceedings under this section if it is—

(a) a claim made in the proceedings on behalf of the individual concerned by the specified body; or

(b) a claim made by the individual concerned under section 47A which is continued in the proceedings on his behalf by the specified body;

and such a claim may only be made or continued in the proceedings with the consent of the individual concerned.

(4) The consumer claims included in proceedings under this section must all relate to the same infringement.

(5) The provisions of section 47A(4) to (9) apply to a consumer claim included in proceedings under this section as they apply to a claim made in proceedings under that section.

(5A) Any damages or other sum (not being costs or expenses) awarded in respect of a consumer claim included in proceedings under this section must be awarded to the individual concerned; but the Tribunal may, with the consent of the specified body and the individual, order that the sum awarded must be paid to the specified body (acting on behalf of the individual)."

On Question, amendment agreed to.

For the information of the Committee, Amendments Nos. 96 to 101 are preempted by virtue of the fact that Amendment No. 95 has been agreed to.

I apologise to the Committee. Because I was taken completely unawares by the fact that three or four lines had been pre-empted, as has been said, I shall simply not oppose the Question that Clause 18 shall stand part of the Bill.

Clause 18, as amended, agreed to.

Clause 19 [Findings of infringements]:

moved Amendment No. 103:

Page 9, line 35, leave out "for damages" and insert "in which damages or any other sum of money is claimed"

The noble Lord said: This amendment is consequential on the redraft of Clause 17. It merely makes allowances for any proceeding where the claim is for a monetary remedy other than damages. So a claim might be brought for the restitution of profits unlawfully made by the infringing company, as well as in respect of loss caused to the injured party. I beg to move.

On Question, amendment agreed to.

moved Amendment No. 104:

Page 10, line 4, after "OFT" insert "or the European Commission".

The noble Lord said: In moving this amendment, I shall speak also to the other amendments in the group.

As presently drafted, the new Section 58A would not operate to make a decision of the European Commission that there had been an infringement of Article 81(1) or Article 82 binding upon a national court in proceedings before it for damages. This is anomalous given that findings by the OFT in respect of precisely the same infringement would he binding upon a national court in these circumstances.

There would appear to be no justification whatsoever for the distinction drawn between decisions of the OFT and decisions of the European Commission in this respect. Both the European Court of Justice and the English High Court have recognised that decisions of the European Commission should generally be followed by national courts. Indeed, as a matter of English law, a national court is now bound to uphold a finding of the European Commission that there has been a breach of Article 81(1) or Article 82.

It is submitted that the fact that the common law achieves a similar result to that which would be achieved by the proposed amendment does not make the proposed amendment redundant. The common law must be applied to the facts of each individual case by the courts. Defendants will, of course, attempt to take advantage of a variety of technical legal arguments to escape the conclusion that any particular decision of the European Commission is binding.

Requiring claimants to rely upon a developing body of case law rather than a clear legislative pronouncement introduces an additional element of uncertainty into any private action for damages. The proposed amendment would put the matter beyond all doubt and would encourage and facilitate private actions in national courts following a finding of infringement by the European Commission. I beg to move.

I hope that I can readily put the noble Lord's mind at rest.

Amendment No. 104 is unnecessary, as Article 81 and Article 82 decisions taken by the European Commission are already binding on UK courts by virtue of European law. I rely on the judgment of the European Court of Justice in the Masterfoods case, which is referred to in paragraph 82 of the Explanatory Notes (ECJ Case C-344/98 Masterfoods v HB Ice Cream, at paragraphs 45 to 60 of the judgment).

Indeed, Amendment No. 105 provides an illustration of the confusion that can arise if an attempt is made to codify in a statutory provision in our law the position under European law. A decision of the European Commission has binding effects on the national courts, notwithstanding that it may be the subject of proceedings before the European Court of Justice or the court of first instance. However, it would no doubt normally be sensible for the national court to stay its proceedings pending the outcome of the European proceedings, or alternatively to make a preliminary reference itself to the European Court. The amendment proposed would be an inaccurate summary of the position under European law, since it might suggest that the Commission's decision was without legal effect before the European proceedings had been determined.

Amendments Nos. 106 and 107 are consequential on Amendments Nos. 104 and 105.

I am most grateful to the Minister. I shall go away and look at the case. If it does indeed illustrate the point that he makes, I shall happily allow the matter to rest there. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 105 to 107 not moved.]

Clause 19, as amended, agreed to.

Clause 20 agreed to.

Schedule 5 [Proceedings under Part 1 of the 1998 Act]:

moved Amendment No. 108:

Page 205, leave out line 20 and insert "or other sum in respect of a claim made in proceedings under section 47A, or included in proceedings under section 47B (other than a decision On costs or expenses) or the amount of any such damages or other sum; and"

The noble Lord said: Amendment No. 108 is a consequential amendment that is required as a result of the redrafting of Clauses 17 and 18. The amendment ensures that any sums awarded in claims under Section 47A, or in claims included in group consumer claims under Section 47B, may be the subject of an appeal to the Court of Appeal or to the Court of Session in Scotland. I beg to move.

On Question, amendment agreed to.

Schedule 5, as amended, agreed to.

Clause 21 [Duty to make references in relation to completed mergers]:

moved Amendment No. 109:

Page 10, line 35, leave out "shall" and insert "may at its discretion"

The noble Lord said: The purpose of this amendment is to give the OFT a discretion rather than leave it under an obligation to make a reference to the Competition Commission in relation to both completed and anticipated mergers.

The Bill introduces a significant change of emphasis. Under the Fair Trading Act, the Secretary of State had discretion whether or not to refer mergers, acting on the advice of the Director-General of Fair Trading, whose advice, since October 2000, has always been accepted. The formulation proposed in Clauses 21 and 32 requires a reference to be made in the case of completed mergers and proposed mergers except in certain limited circumstances. The Minister in another place stated that there were no other circumstances in which a reference need not be made.

In practice, the clause will lead to a situation of almost obligatory pre-clearance for all mergers. Although many parties do that now, it is at their discretion. On Report, the Minister stated that those who raised such concerns seemed to be ignoring the fact that the OFT would apply a competition test. The Minister said that only cases that could lead to a substantial lessening of competition would be referred.

However, until we have a track record of the OFT applying the "substantial lessening of competition" test, it is very likely that in practical terms the parties will regard the absence of any discretion as a reason for seeking clearances in more cases than under the present regime. Moreover, in the case of joint ventures, the substitution of a £45 million turnover test for the £70 million assets test will mean that potentially many more joint ventures will now come within merger control.

There was no consultation on this change of policy. It was not mentioned in the White Paper. No reason has been given for the Minister's assertion that the new emphasis would not result in a greater number of references. I beg to move.

I wonder whether the noble Lord, Lord Kingsland, is right in saying that there is no justification for the Minister's assertion in the other place that the new formula would not result in the reference to the Competition Commission of a greater number of mergers. He is of course aware that Clause 21(2) makes it clear that the OFT may not make a reference if it believes that,

"the market concerned is not … of sufficient importance",

or if there are relevant customer benefits that,

"outweigh the substantial lessening of competition".

that would arise from the merger. That cuts down the number of mergers where the duty of the OFT to make references to the Competition Commission arises.

I shall not debate the points that we shall no doubt discuss under the next amendment of the noble Lord, Lord Kingsland, but the key provision is based on the substantial lessening of competition. In legal terms, the noble Lord is correct in saying that there is no track record, because it is a new statutory test. In the past there was no statutory test other than the broad one on public interest; and several criteria, of which competition was one.

But to say that there is no track record is a wrong inference. The record shows the test's existence not only since the Competition Act 1998, or the year 2000 to which the noble Lord referred, but for at least the past couple of decades since the famous Tebbit test was announced whereby mergers would—save in exceptional circumstances—be referred to the Competition Commission only where there was a significant likelihood of a reduction in competition. It may not have been a statutory test, but it has been the test applied by both the Office of Fair Trading and Ministers, who are still involved until the Bill becomes law. The concern of the noble Lord, Lord Kingsland, does not seem justified.

Amendments Nos. 109 and 117 seek to give the OFT a discretion, rather than a duty, to refer completed and anticipated mergers that meet the reference criteria. Perhaps it would be helpful to set out the Government's thinking on the reference test to be applied by the OFT. The OFT's duty in relation to referring mergers has been crafted to reflect the two key principles underlying our reform of the merger regime, that is, taking Ministers out of decision-making and focusing the regime on a clear, competition-based test. We think that those two principles should be closely linked. When handing over decision-making powers to an independent expert body such as the OFT, we think it is sensible to define closely the test that that body will apply. In this case, we wanted to ensure that the OFT would refer only on competition grounds; that is, where a merger may result in a substantial lessening of competition.

The amendments seek to leave the OFT with a discretion to refer such cases. They mean that the OFT would have the power not to refer a case that would result in a substantial lessening of competition. The amendments leave the decision as to what would be a reasonable exercise of the power to the courts to determine.

However, the Government's intention is to set out clearly what cases should be referred by the OFT. Broadly, we think that a merger that could create competition problems should be considered further by the Competition Commission. However, we believe that there are three circumstances that would justify no reference even where there may be a substantial lessening of competition. They include those pointed out by my noble friend Lord Borrie—first, where the market or markets concerned are not important enough to justify a reference; secondly, where customer benefits flowing from the merger would outweigh any substantial lessening of competition; and, thirdly, in the case of an anticipated merger, where the merger is not, or not yet, likely to go ahead.

For those circumstances we have given the OFT discretion over whether to refer the merger. We do not think that there are any other circumstances that would justify the clearance of a merger that may result in a substantial lessening of competition. We think it is important for Parliament to set out the parameters of the powers to be exercised by independent bodies. In this case, we are proposing a sensible test that focuses on the OFT's area of expertise, grants flexibility where it will be sensible for the OFT to exercise discretion, but does not—as the amendments would—leave the scope of the new regime to be determined by a body independent of Parliament and government. In view of those arguments, I invite the noble Lord to withdraw his amendment.

I am most grateful to the Minister for his reply. Is it reasonable to assume that in practice there will be no change; that although there is a different test, and the relationship between the Minister and the OFT is changed, nevertheless the historic track record—to use the expression in a slightly different context from that in my opening speech—is a good guide to conduct in future? Is that what the Minister is in effect saying?

The OFT does not consider that the change to a competition-based test will result in a different number of merger references given the situation in recent years.

So the new test is not really a change in policy.

No. Given that it has been accepted that the competition test is by and large the one that Ministers have said they will base their judgments on, that is likely to mean a continuity of policy.

I am most grateful to the Minister. I shall reflect on these exchanges over the summer adjournment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 110:

Page 10, line 38, leave out from "resulted" to end of line 40 and insert "in the creation or strengthening of a dominant position, as a result of which competition is likely to be significantly reduced within any market or markets in the United Kingdom for goods or services"

The noble Lord said: As we have just heard, the Government propose to introduce a new competition-based test to determine whether the OFT should refer a merger to the Competition Commission. It replaces the public interest test in the Fair Trading. Act 1973. We accept that a competition test has been applied for some time; nevertheless it makes sense to enshrine the change in the statute. The test the Government propose is the substantial lessening of competition, which is the test applied in the United States, Canada and Australia.

However, we urge the Government to reconsider their position and instead to adopt the dominance test, which is the test applied in the European Community. It is the standard for assessing mergers under the EC Merger Regulation. The new test would impose a different standard for assessing the potential effect of mergers from that at EU level. The recent judgment of the court of first instance in the Airtours case has shown that there is a significant difference between the dominance test and the SLC test, given the requirements now established for proving collective dominance.

Businesses operating in the United Kingdom should not be faced with a different merger test in this country simply because the transaction in question does not fall within the ECMR. In addition, as there is no established case law in Europe applying a statutory SLC test, the outcome of merger references will be less clear and predictable for UK businesses.

Most member states, to say nothing of the applicant states, have aligned their merger control provisions to the current dominance test. It would be more helpful for United Kingdom companies doing business across Europe to operate under a common standard.

The new test is one of the big surprises for me. When we debated the Competition Bill in 1998, the Government's clear underlying philosophy was to align our domestic law and its competition tests with European Community law and its competition tests. More times than I care to remember, Ministers said, "We want to simplify things for the British businessman. He is currently faced with a myriad tests. We want him to look at what he is doing in the context of one test". Yet four years later, when the Competition Act is only just beginning to bite in many respects, the Government have completely changed their approach on mergers.

Certainty in the law is important. If the Minister believes, as he said on the previous amendment, that the new test will not make much difference to the policy of the OFT and the authorities, that is a fortiori a reason for not introducing it. I beg to move.

Superficially there is a great deal in what the noble Lord, Lord Kingsland, says about European countries and the European Union itself having a dominance test, while we are proposing a different test of substantial lessening of competition. However, the noble Lord gave the impression that the test is new. As I said on the previous amendment, while it is new in legal terms because it has not been established in statute, it has in practice been operated for a couple of decades by successive Ministers under different colours of government, as well as by the Office of Fair Trading.

Secondly, in its Green Paper the European Union explained its thinking that a substantial lessening of competition test might be better from an economic point of view than the dominance test embodied in the 1989 regulation that governs mergers with a Community dimension. There have been consultation papers and government papers raising the possibility of that. Responses are available to government. The test that is now embodied in the Bill has not come out of thin air.

More than anything else I am concerned that we adopt the best test in economic terms. It is not clear to me whether a dominance test would deal with the possibility of a merger strengthening a non-collusive oligopolistic market. When a merger involving two companies in the same market comes before the Competition Commission, we want it to consider not just whether the merger may result in one dominant or monopoly company, but whether it will leave a number of companies in the market, but all refraining from any real competition. Markets that are characterised by the presence of only a small number of firms with significant market shares may operate just as uncompetitively—and therefore badly from the customer's point of view—as a market dominated by a single undertaking. It has not been clear how far European law, in relation to the European merger regulation, can prevent collective dominance in oligopolistic markets. If a merger merely strengthens an existing oligopoly, it is doubtful whether European law applies to prevent it.

The dominance test is more legalistic than the test proposed in the Bill. The test proposed in the Bill has more economic significance and a closer relationship to the way in which the Office of Fair Trading, the Department of Trade and Industry and the Competition Commission have been dealing with and considering the adverse effects or otherwise of a merger over the past 10 or 20 years. The test that has been tried out through consultation papers on relevant associations and companies in this country is more likely to achieve what we want, which is that mergers should not be allowed if they create a significant adverse consequence on competition, unless there are significant customer benefits that outweigh that.

The noble Lord, Lord Kingsland, takes slightly too simple an approach to harmonising our mergers competition test with that in Brussels. The amendments would replace the mergers substantial lessening of competition test with a European-style dominance test.

I stress again that the Government's choice of test for the new regime has been the subject of careful and extensive consultation. The question was first raised in the Government's consultation document on the reform of the merger regime, published in August 1999. There was further consultation in October 2000 and again following the publication of the White Paper on competition last year. In addition, my officials have met with lawyers, economists and other experts about the new regime and about the most appropriate competition test to employ. A large majority of those who responded favoured a substantial lessening of competition test. They believe that it represents a better economic test than the dominance test currently used in the European Community merger regulation.

The response from the City of London Law Society, which is expert in the competition field, sums up the issues effectively. It said:

"The Group does not favour the adoption of a dominance test due to its inflexibility in dealing with a range of situations including oligopolistic dominance and highly leveraged acquisitions. It does not see any benefits from having the same substantive test at a national level as in the ECMR. Additionally, it should be noted that other established merger control regimes within the EC have not found it necessary to adopt the ECMR test".

The substantial lessening of competition test is, in effect, currently applied by the UK authorities in their competition analysis.

The noble Lord, Lord Kingsland, wants continuity. The substantial lessening of competition test provides a high degree of continuity between the new and old regimes in terms of substantive analysis. The so-called substantial lessening of competition test has the key advantage of allowing the authorities to concentrate on the overall effect of a merger on competition, rather than on structures. It will allow the authorities to act whenever there is an increase of sole, joint or collective market power resulting from a merger.

The key concern with a dominance test is uncertainty as to when the authorities can take action in circumstances in which a merger will not lead to one firm having a substantial market share but where the merger nevertheless increases the likelihood of the firms remaining in the market acting in an anticompetitive way. To use economic terms, there is considerable uncertainty about whether a dominance test is effective for dealing with the creation of non-collusive, oligopolistic markets. European law has developed a concept of "collective dominance" that partly bridges the gap but the concept's application in the context of mergers is not ideal.

The substantial lessening of competition test is preferable in alluding to the impact of a merger on the whole market rather than concentrating on the position of a particular market participant. Because of concerns that a dominance test did not satisfactorily cover collective dominance cases, Australia in 1993 and New Zealand last year switched from a dominance to a substantial lessening of competition test. Among our European Union colleagues, the Irish Government recently enacted a new competition law that adopts a substantial lessening of competition test in preference to dominance. Spain has a similar test of whether a transaction may prevent the maintenance of effective competition in the market.

The Green Paper on reforms to EU merger regulations raises a substantial lessening of competition test as a possible option to replace dominance. Decisions about that have not been taken. In a recent speech, Commissioner Monti said that he personally had an open mind about the choice of test:

"We are not wedded to the current wording and have no prejudice in favour of one formulation or another. What matters is the effectiveness of the legal instrument".

Some people claim that a dominance test is a more certain test of business by providing a more predictable outcome. I do not agree. The concept of a substantial lessening of competition test is an economic one that is used and well understood in a number of other major jurisdictions—including the United States, Japan, Canada, Australia and New Zealand. It is best understood by reference to the question of whether a merger would increase or facilitate the exercise of power in a market—leading to reduced output, higher prices, less innovation and lower quality or choice. Any additional certainty will be provided by information and advice, which the authorities will be required to produce under Clause 103—explaining how they will consider references and how the relevant provisions will operate.

The US regime has operated successfully on the basis of a substantial lessening of competition test, backed by joint guidelines issued by the Department of Justice and the Federal Trade Commission. I have every confidence that the UK system can operate with the same degree of certainty and predictability. The arguments for harmonising our merger tests with that used in Brussels are not compelling. The one-stop-shop system for merger regulation within Europe means that cases—other than those concerned with security and other exceptions—fall either within the ECMR or UK regime but not both. Clear thresholds govern which jurisdiction will apply.

The Bill provides the freedom and opportunity to adopt the better test—that which will best preserve competitive intensity in our domestic market. We should take that opportunity rather than pursue harmonisation for its own sake. The substantial lessening of competition test is used in a number of other major international jurisdictions that are major trading partners of the UK. It is the strong preference of the Office of Fair Trading and the chairman of the Competition Commission. The majority of respondents to our consultation exercise agreed with that choice of test. I urge the noble Lord to withdraw the amendment.

I am most grateful for the noble Lord's extremely full reply. He referred to consultation papers in 1999 but that was long before the Airtours decision—at a time when we believed that the European Commission's pursuit of the idea of collective dominance would not be halted, temporarily or otherwise, by the European Court. At the time, we had no reason to believe that the test which the Government are now seeking to adopt would be more effective than the collective dominance test as applied by the European Commission. It is only now that we have Airtours that a real distinction between the two tests has opened up.

Airtours may or may not survive an appeal to the European Court of Justice—because as I understand it, that decision is by the court of first instance. If the case is appealed and the CFI decision is reversed, the collective dominance doctrine will be re-established in the EU. In my submission, that doctrine is at least as effective as that which the Government are seeking to adopt.

My second point is directed at the Minister but encompasses the distinguished intervention by the noble Lord, Lord Borrie. Part 3 ought to be read with Part 4. The noble Lord's concern about the Airtours CFI decision is that oligopolies will be incapable of proper control by the EU authorities. But that will not be true in the case of the UK because the Bill allows the Competition Commission to examine a range of market imperfections, including oligopolistic practices. The UK legislation will fill the gap that the noble Lord fears will open up in the European context.

One treats with enormous respect any intervention by the noble Lord, Lord Borrie, because he is far and away the most experienced member of the Committee in competition matters. However, I hope that the noble Lord accepts that the UK authorities will not be stuck with the mergers section of the Bill for dealing with oligopolistic situations but will have other arrows in their quiver.

The noble Lord has been unduly kind to me, so I hesitate to intervene. However, there is a world of difference between preventing a merger that is undesirable because it may have a seriously adverse effect on competition and undertaking an investigation after the event—when it is difficult to go back to square one.

I entirely accept that distinction but it encapsulates an appropriate approach. If dominance is not identified before the merger, a priori the merger should be allowed to proceed. If the merged company's subsequent conduct in the market is unattractively oligopolistic, the competition authorities can draw on other parts of the Bill to redress the anti-competitive feature. The Bill has the answer without introducing the new test.

I can reasonably assume from the Minister's remarks about the undesirability of consistency for consistency's sake that the Government's philosophy in respect of this Bill is very different from their philosophy in respect of the Competition Act 1998—when the idea of a consistent regime providing more certainty for business was central to the Government's approach to competition matters. I have now concluded that that is no longer the case.

I shall reflect very carefully on what the Minister said. I hope that he will accept that this is a very important matter and that he will forgive me if I return to it on Report. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Before moving on to the next group of amendments, it may be for the convenience of the Committee if I advise it that Amendment No. 118 in the name of the noble Baroness, Lady Turner of Camden, has been decoupled from that group and will be moved separately.

moved Amendment No. 111:

Page 10, line 40, at end insert "for which the annual output exceeds £500 million"

The noble Lord said: I rise to move the amendment in the absence of my noble friend Lord Hodgson of Astley Abbots. The amendment would insert words at the end of Clause 21(1)(b) so that the paragraph would read:

"the creation of [the relevant merger situation] has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services for which the annual output exceeds £500 million".

It is linked to further amendments in the names of my noble friend Lord Kingsland, myself and my noble friend Lady Miller of Hendon. Those amendments recognise that the Government propose to remove the assets test in the Fair Trading Act 1973 and replace it with a turnover test; namely, as one can see from Clause 22(1)(b), that,

"the value of the turnover in the United Kingdom of the enterprise being [acquired] exceeds £45 million".

The purpose of this group of amendments is to allow the Committee to consider whether or not the system will become clogged up through the Office of Fair Trading having to review transactions which are comparatively unimportant in competition terms; hence the wish on the part of my noble friend Lord Hodgson to insert an annual output test and the wish in Amendment No. 113 to increase the turnover test from £45 million to £70 million.

Perhaps I may make it clear immediately to the Minister and to Members of the Committee that I believe it is right to remove the assets test from the scope of the UK's merger regime because assets are not the best measure of the market strength, or otherwise, of a company. As the Government acknowledged, I believe, in 1999, when the reforms were first floated, asset structures are changing. Consequently, it is now recognised that the assets test is outdated and no longer relevant to the modern world of mergers and acquisitions. However, if the Government are to replace the assets limb of the test with a turnover test, my contention is that a figure of £70 million would be a more appropriate level than £45 million.

I am not sure how the Government arrived at the figure of £45 million. The Minister may well be able to take us through the thought processes which resulted in that surprisingly exact figure. I hope that the Government will accept that, in order to avoid the imposition of excessive burdens on both business and the Office of Fair Trading, it is important that the system does not become clogged up in the way that I described. Therefore, while it is right that a de minimis threshold is vital to the process of the competition regime, I believe that most outside observers will consider the figure of £45 million to be too small.

Other countries where regimes similar to the one under discussion are in place have far higher figures than the equivalent of £45 million. I believe that it is the view of the Confederation of British Industry that the figure should, indeed, be raised to £70 million.

Amendment No. 114 also appears in this group. That amendment seeks to replace the share of supply test with a market share test. The amendment would at page 12, line 11 of the Bill leave out subsections (3) to (7) and insert:

"The condition mentioned in this subsection is that the merger would create or strengthen a share of 25 per cent or more in any relevant market in the United Kingdom or a substantial part of the United Kingdom".

As my noble friend has just been considering, the test for deciding whether to make a reference is now to be based on whether there is, or is likely to be, a substantial lessening of competition. We have agreed to consider carefully the points raised by the Minister in that respect.

However, if we were to accept that there should be a substantial lessening of competition, any such test would necessarily involve at least a preliminary assessment of markets and market share. The subsection, as drafted, would require the Office of Fair Trading to apply two tests: to look at markets for the substantive decision on a reference and the concept of the supply of goods or services of a similar description for establishing a jurisdiction.

We believe that the subsection drafted by the Government will be unnecessarily confusing as it combines a market definition, which is an economic test, with the subjectivity of the authorities under the old FTA regime in looking at aspects of the supply of goods or services. While the subjective approach may be acceptable in a regime where there is a wide discretion not to refer, surely it is unacceptable unless the changes which increase the discretion of the OFT in relation to Clauses 21 and 22 are incorporated.

In summary, I suppose that the core of the difficulty here is that the Government have bolted a new test on to the regime and the two do not marry well. If the share of supply test remains, there is a risk of the description being narrowly drawn. In the absence of a discretion on the part of the OFT, that would result in a larger number of references.

I turn to Amendment No. 115, which seeks to insert at the end of line 9 on page 13 of the Bill:

"Notwithstanding the above, a relevant merger situation shall not be deemed to have arisen for the purposes of this Part if the transaction in question has no effects (either actual or potential) in the United Kingdom or any part of it".

Perhaps I may explain to the Minister that this is very much a probing amendment. Even if a share of supply test were not brought to bear, the turnover test would remain at the fairly high level of £45 million. Therefore, to prevent an excessive regulatory burden on UK business, surely it is right to ensure that the OFT does not have the opportunity or, indeed, does not have placed upon it the obligation, to spend the time and valuable resources involved in reviewing mergers that have no impact in the United Kingdom.

The asset test of £70 million and the turnover test of £45 million apply to world-wide turnover. Therefore, in some cases there may be no impact whatever in the UK. Thus, the purpose of Amendment No. 115 is to ensure that the companies involved would not find themselves falling foul of an immediate and automatic OFT inquiry. Therefore surely such transactions need not be notified in the same way.

To summarise, a relevant merger situation will be deemed to have arisen if either the new turnover test or the share of supply test is satisfied. However, in order to prevent business from having excessive regulatory burdens and to remove the need for the OFT to expend time and resources by reviewing mergers with no impact on the UK such transactions should be excluded from the jurisdiction of the OFT. I beg to move.

I speak to Amendments Nos. 111, 113, 114, 115 and 119. Perhaps I may take together Amendments Nos. 111 and 119 as they seek to introduce what I would characterise as a "de minimis" provision. They would have the effect of preventing the OFT and the Competition Commission from taking any action against mergers in markets below a certain size.

Clause 21(2) of the Bill gives the OFT a discretion not to refer a merger where the market or markets concerned are not of sufficient importance to justify making a reference to the Competition Commission. The issue raised by the amendments is whether to introduce a formal and more absolute de minimis provision or to rely on the OFT and the commission to exercise their judgment sensibly having regard to the guidance that both will he required to publish under Clause 103 of the Bill.

De minimis thresholds are tricky because all markets are different and at different stages of economic development. Some may be declining, about to be superseded by new technology. The current size of such a market might not be a reliable indicator of its economic importance. Conversely, a small market in an emerging technology may have considerably greater longer term significance such that a reference would certainly be justified. We think, therefore, that it would be better to leave the authorities discretion to make their own judgments in this area, which is what the term "sufficient importance" is intended to allow for.

I turn now to the amendments concerned with the jurisdictional tests for the new merger regime. The jurisdictional tests are ones that determine whether a merger is subject to merger control regulations.

I deal first with Amendment No. 113. The amendment seeks to raise the UK turnover threshold of the target company from £45 million to £70 million. I understand that the concern is that the £45 million figure would overload the OFT with benign cases and would prejudice the system against, for example, new technology companies with small asset value but high turnover.

The £45 million figure was derived from data research we undertook in my department. Briefly, the figure is based on an analysis of the assets and turnover levels of 110,000 UK companies. Our intention was to find a figure that we believed would account for roughly the same number of companies as is currently the case under the assets test.

What we have is an informed estimate. One needs to be clear about that. I do not accept that there is anything to be gained from replacing one informed estimate with another less informed one. Further, I do not believe that a direct comparison can he made between the value of assets and the value of turnover, especially considering that £70 million assets is a world-wide figure and £45 million turnover is limited to the UK.

However, we acknowledge that some unease exists about the level of £45 million. We think that our evidence supports it but we are willing to look at it again to reconfirm what would he an appropriate figure for the turnover test. In particular, we would he grateful for any suggestions from interested bodies on how the figure should he derived. In the light of this commitment, I hope that the noble Lord will be prepared to withdraw the amendment.

Amendment No. 114 seeks to replace the current jurisdictional definition of' share of supply with a definition based on "market share". A similar amendment was put forward in another place. I echo again the reasons why we think that the share of supply test is the right test for our merger regime. It has the characteristics of being a simple, transparent and easy to apply test that is appropriate for a jurisdictional threshold. Calculating the more economically substantive market share test would be an extra burden on both business and the OFT. That is why we have not been pressed to make this change in any of the consultations we have run.

Amendment No. 115 seeks to make clear that a relevant merger situation does not include mergers that have no impact on the UK or part of it. Again, a similar amendment was put forward in another place. In those debates we sought to reassure honourable Members that the Government share the view that the activities of our competition authorities should be focused on mergers that have a direct impact on the UK markets.

The amendment was rejected because we consider that it is not necessary. That is because the new design of the jurisdictional tests ensures that they are concentrated on the UK markets. The share of supply test must be applied to the UK market or, as the case may be, a substantial part of it. The new turnover test will measure the turnover of the target company in the UK. It replaces an assets test which took account of world-wide assets.

We share, therefore, the sentiments behind the amendment but I hope that noble Lords are satisfied that the legislation as currently drafted does deliver the UK-focused regime that is intended. With those explanations, I hope that the amendment will not be pressed.

I shall want time to consider the Minister's response. I was interested to hear his remarks on Amendment No. 113. It is necessary to make a judgment as to the correct level. I have been unable to peruse the data research to which he referred. I am not sure whether it is publicly available. If the Minister were to consider sharing it with noble Lords, we could then judge whether £45 million is a better guesstimate than £70 million. I have not had access to detailed research. I do not know whether the Minister wishes to intervene. He seems of happy countenance at the suggestion that he might make the data research available.

I can see no reason why we would not make that available. However, I have described the nature of the information. The data suggests that we consider what test on turnover will equate to the assets test. The real question is whether that is the right way to proceed. We have a simple correlation. That is why we are happy to reconsider the point. But the matter for consideration is the principle rather than the data.

I agree with the Minister that it is consideration of the principle. However, a figure is required in the Bill. Therefore, I am grateful to the Minister for agreeing to make the data research available. I also much appreciate his willingness to consider the matter further. My noble friends and I will ensure that outside organisations are made aware of the Minister's kind offer and that we respond accordingly.

I note what he said on Amendment No. 114. I should like time to reflect on it. He indicated that he was sympathetic to Amendment No. 115. I should like to consider several of the points he made. I shall consult with my noble friend on the Minister's comments on Amendment Nos. 111 and 119. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

moved Amendment No. 112:

Page 11, line 7, at end insert—

"() the enterprise being the subject of the proposed merger and being unable to meet its financial obligations cannot otherwise reorganise or dispose of its assets with lesser anti-competitive risk."

The noble Lord said: Clause 21(2) sets out two instances where the OFT may not decide to make a reference to the Competition Commission, the first being where the market concerned is not of sufficient importance to justify a reference and the second being where customer benefits outweigh any adverse impact on competition. Both of those are welcome, although the Government or OFT should be required either to introduce thresholds or to produce written guidance before the Bill comes into force as to what will be deemed to be not of sufficient importance.

However, in our view, a further instance should be added: namely, the so-called "failing-firm" defence, which is applied in the United States and by the European Commission. In the United States the party wishing to rely on the defence must show, first, that the failing firm cannot meet its financial obligations; secondly, that the failing firm cannot reorganise in bankruptcy; thirdly, that the failing firm cannot find another buyer whose purchase of the firm would pose lesser anti-competitive risks; and, fourthly, that, in the absence of the merger, the failing firm's assets will exit the market.

As far as the European Community law is concerned, the failing-company defence has been applied since 1993. In a case called Kali-Salz/MDK/ Treuhand, of that year, although a dominant position was found to be created in the German market for potash, the case was cleared because it was considered that a prohibition would have led to the same outcome in the market as would have been the case if there had been a clearance.

In the Commission's decision the following three criteria were set out. First, the company will go bankrupt within the immediate future; secondly, the market shares of the company will in any case go to the merging party; and thirdly, there is no less anticompetitive way of selling the company. In other words, the main difference between the United States and the EU approach is that the latter imposes the additional requirement that the market shares of the failing firm will in any case go to the acquiring party.

We would be happy with either the EU test or the US test. I say that in the spirit of the Minister's new multinational approach to definitions in the Bill. I beg to move.

These amendments would make specific provision for the competition authorities to have regard to the matter of whether a merger involves a so-called "failing firm". Where the situation described in the amendments arises, that will naturally form part of the competition authorities' assessment against the substantial lessening of competition test. Therefore, we believe that the amendments are unnecessary. In fact, by particularising the "failing fines" case, the effect of the amendments could he to narrow the normal application of the substantial lessening of competition test.

Where the authority believes that a firm is to exit the market anyway because of insolvency or other financial difficulties, that will influence the assessment of whether the merger may be expected to result in a substantial lessening of competition. If competition would be diminished to the same degree regardless of whether the merger took place, it would not he possible to find that that merger would result in a substantial lessening of competition.

That is never an easy judgment to make. A number of factors come into play; for example, whether the failing firm's market share is likely to fall to the acquiring firm anyway, or be spread among the remaining players in the market. None the less, it is part of the competition assessment itself. We confirmed that in paragraph 126 of the Explanatory Notes which said,

"whether in the absence of the merger one of the firms would fail and, it' so, whether its failure would cause the assets of that firm to exit the market",

that was one of the matters that may be potentially relevant to the assessment of whether a merger will result in a substantial lessening of competition.

Its application will be addressed in more detail in the guidance to be published by the OFT and the Competition Commission. It is worth pointing out that other major merger jurisdictions do not mention the failing firms concept on the face of their respective legislations. In the United States, for example, the issue is addressed in the FTC and the Department of Justice guidance and the same is true of Australia. The European Commission merger regulations also do not deal expressly with the failing firm issue but case law shows that it is a matter that can be taken into account in the assessment of whether a merger results in the creation of a dominant position. We are far from being alone in dealing with these issues in guidance. This is a matter that can be satisfactorily and more flexibly dealt with in guidance and I urge the noble Lords and the noble Baroness to withdraw their amendments.

I believe that I am most grateful to the Minister for his response. I believe he is saying that although he is not prepared to put the test on the face of the Bill, in practice he would expect the competition authorities to apply it. On that basis I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 21 agreed to.

Clause 22 [Relevant merger situations]:

[Amendments Nos. 113 to 115 not moved.]

Clause 22 agreed to.

Clause 23 agreed to.

Clause 24 [Extension of time-limits]:

[Amendment No. 116 not moved.]

Clause 24 agreed to.

Clauses 25 to 31 agreed to.

Clause 32 [Duty to make references in relation to anticipated mergers]:

[Amendment No. 117 not moved.]

moved Amendment No. 118:

Page 19, line 37, at end insert—

"()Before making such a reference, the OFT shall consider submissions from appropriate organisations, including those representing consumer interest and the workforces in the relevant undertakings."

The noble Baroness said: Amendment No. 118 stands in my name and that of my noble friends. Unfortunately, the noble Lords, Lord Lea of Crondall and Lord Wedderburn, are unable to be present. At the outset I state my interest. I am a member and a former official of the trade union MSF (now Amicus), a union that on previous occasions has raised the whole issue of employee interests in merger and takeover situations.

I find it surprising that there is no reference at all in this part of the Bill to employees. I can understand that in a Bill about creating a fairer environment for competition, there should be some reference to consumers— although there is not much—but I am surprised that there is nothing about employees whose work and skills often lead to success and who are sometimes referred to as an enterprise's biggest asset.

There have been times during the past 20 or 30 years when the whole commercial and industrial scene appears to have been afflicted with "merger mania". One such episode took place shortly after I became a Member of your Lordships' House. In 1987, when I was still a working union official, I introduced a Private Member's Bill designed to protect staff in takeover and merger situations. At that time I was able to quote from British Business to the effect that, in 1986, industrial and commercial companies' expenditure on acquisitions and mergers within the UK reached a record £13.5 billion, almost double the 1985 total. The livelihoods of about 500,000 employees were bound up with those deals.

I said then that,

"the background to all this is a big rise in profits but stagnant investment in manufacturing industry. The City is finding it easy to provide finance for takeovers, but is still failing to provide investment capital in manufacturing industry".

At that time, I quoted from Sir Gordon Borrie, as the noble Lord, Lord Borrie, then was—he was Director-General of Fair Trading—to the effect that although he strongly held that competition should be the main consideration in merger policy, he did not take the view that everything could be left to market forces. He said,

"I do not have complete faith in the 'invisible hand' of Adam Smith as the regulator of our economic and social affairs".

In introducing my Bill, I said that I did not believe competition alone was an adequate yardstick. My Bill therefore provided for consideration of other factors. There should be a requirement to consider the interests of employees, to ensure that production and output in the UK are maintained for the benefit of the economy and to ensure some control of strategic industries where those are in the interests of national security. Of course, my Bill did not make any progress at that time, but when I look at the debate again, I am struck by how relevant are some of the statements made riot only by me, but also by some of the supporting speakers to the present situation. On 4th July 2002, an article appeared in the Guardian under the heading:

"Merger Mania Created Millionaires But Made Millions Poorer. How Take-over Frenzy Has Hit Shares Since 1998".

A number of major mergers are listed. In almost every case, the share price had shown a catastrophic drop. GlaxoWellcome Smithkline, Vodafone, Airtouch, CDU, Norwich Union, AOL Time Warner, Deutsche Telekom, One2One and others.

This has not only badly hit individual shareholders, but also people who are members of pension schemes. And, in most cases, there have been job losses. Often, the employees know nothing about what is in store for them until they read it in newspapers or hear it on the radio in the morning, while getting ready for work. There was one notable case in which members of my union were involved. They did not know that merger talks had been proceeding. It had been a closely-guarded secret until they heard the announcement on early morning radio, accompanied by a statement that there would be 5,000 redundancies. At the time I introduced my Bill, the late Lord Denning supported me. He said:

"The employees, the servants, are the people who have built up the company and given it its goodwill. Certainly they should be consulted before any take-over of a company is effected".

I turn to a heading of The Times dated 9th March 1987 which states in bold black headlines:

"The employees are a company's biggest asset and they must always come first. In these days of mergers and take-overs, the employees do not come first or last—they do not come into the matter at all".

Our amendment does not go anywhere near as far as Lord Denning indicated. We simply ask that the OFT should receive submissions on behalf of employees. We have also included consumer interests, since these are not referred to in this part of the Bill either. Indeed, NACAB makes that point in its extensive briefing. Incidentally, it is sometimes forgotten that trade unionists are consumers too.

What we are suggesting is not uncommon. In the Netherlands, for example, a merger code gives unions more extensive rights than we seek. There, the unions' rights are consultative only, but they can give their views on the likely impact on employee interests before a merger agreement is finally signed. Works councils can appeal to the courts if companies act unreasonably.

I hope my noble friend the Minister will agree that it is right that a Bill concerned with enterprise—and ensuring that there is fair competition—should have some regard to the employees whose lives may be very adversely affected in a merger or take-over situation. Often they are likely to lose not only employment, but pension rights. These are very serious matters affecting sometimes thousands of people. Those who actually make the decisions, as the newspaper article points out, often become millionaires, but life is likely to become much more difficult for the employees who may have worked hard for the enterprises concerned. Our very modest amendment seeks to give such people a right to be heard. I beg to move.

I rise to support Amendment 118. 1 must declare an interest as member and past president of MSF, the section of Amicus.

In some cases it is far too narrow to regard the position as merely one of competition. My noble friend was right to say that there is no mention in this part of the Bill of consumers. Often competition is just looked at in the short term, rather than the long term, ignoring what effect it might have on consumer choice.

I am surprised that, in a Bill on enterprise, there is no mention in this part of employees or their rights. Let us look at unemployment. The company concerned may be a major or even dominant employer in a region, so any job losses have an effect not only on directly employed workers but also on sub-contractors, who are mostly from the same locality. This has an effect on the business community, particularly small businesses dependent on this employer and on the spending power of those who are their employees. So it has a major effect on many people and their families.

The other aspect to mergers is that while shareholders may benefit from a merger in the short term, very often mergers are shown to be a failure. Many mergers collapse after 12 months. But the damage has been done to those people who lost their jobs and the damage left on the area.

I hope that the Minister will consider this point. Having looked at the Bill, it seems that only competition is mentioned. There is a reference later on in Clause 57 to national security—whatever that may mean. I would prefer the Minister to look very carefully at our amendment with a view to accepting it. The amendment has some teeth that will benefit consumers and particularly employees affected by a merger. When a merger takes place, it is not known that a plant is to be closed, but very often that occurs within a short period. I hope the Minister will look at this amendment from a social point of view and will accept what I believe to be a very reasonable amendment.

The amendment seeks to ensure that the OFT will consider the views of consumer groups, employee representatives and other organisations before referring an anticipated merger to the Competition Commission.

The Government's intention has been to create a regime that will operate transparently and one which will allow interested parties to feed their views into the process. Where the OFT is considering whether to make a reference, Clause 102(1) requires the OFT to take action to bring information about the investigation to the attention of those it considers might be affected by the merger. In practice, the OFT intends to continue its current practice of publishing an invitation to comment notice. That will give all interested groups—including employee representatives and consumer groups—an opportunity to submit views. Administrative law requirements will then ensure that the OFT takes account of representations that it receives.

However, we need to say that the OFT will, of course, assess all mergers against the tests set out in the legislation. This is primarily about whether the merger may be expected to result in a substantial lessening of competition. The views of employee representatives will be helpful where they relate to the specific criteria set out in the legislation. However, specific employment issues will not factor in the OFT's decision in whether to refer the merger. That is because we believe that safeguarding competition is vital to delivering increased productivity which will in turn improve employment prospects overall. In addition, it is worth pointing out that the OFT will be required by Clause 104 to give full reasons for its decision—both to refer and to clear mergers.

Finally, Clause 117 gives any person aggrieved by a decision of the OFT scope to appeal to the competition appeal tribunal, for example, if the appropriate procedures have not been followed. We believe that these arrangements, taken together, are sufficient to ensure that the OFT will obtain and consider the views of third parties where relevant.

The noble Baroness and the noble Lord who put forward the amendment are looking for something more. If it were what the amendment says, that is already covered by current practice of the OFT. My noble friends were looking for other criteria against which mergers could be measured. It is absolutely fundamental to this Bill that we are talking strictly about competition—a test. We are not seeking for politicians or others to impose their judgment as to whether or not the merger makes sense economically.

I hope, with that explanation, my noble friend will withdraw her amendment, though I realise that what I have said only partially meets the point being raised.

I thank my noble friend the Minister for that explanation. I am glad that it is expected that there will be opportunity for employees' organisations to make submissions. I note that.

But my noble friend is correct: we looked for rather more than he gave. We were looking to widen the criteria because, as my noble friend Lord Hoyle made clear, we did not feel that competitiveness was sufficient on its own. We felt that other considerations should be taken into account.

However, it is not our intention to take this matter further this evening. We shall think carefully about it during the recess and consider whether or not we should say anything further on Report. We believe it to be an important question which matters to a great many people. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 agreed to.

Clause 33 agreed to.

Clause 34 [Questions to be decided in relation to completed mergers]:

[Amendment No. 119 not moved.]

Clause 34 agreed to.

Clause 35 agreed to.

Clause 36 [Cancellation and variation of references under section 21 or 32]:

moved Amendment No. 120:

Page 22, line 41, at end insert—

"(2A) Where, by virtue of subsection 12), the Commission treats a reference made under section 21 or 32 as if it had been made under section 32 or (as the case may be) 21, sections 74 to 78 shall, in particular, apply as if the reference had been made under section 32 or (as the case may be) 21 instead of under section 21 or 32.

(2B) Subsection (2C) applies in relation to any undertaking accepted under section 77, or any order made under section 78, which is in force immediately before the Commission, by virtue of subsection (2), treats a reference made under section 21 or 32 as if it had been made under section 32 or (as the case may be) 21.

(2C) The undertaking or order shall, so far as applicable, continue in force as if—

(a) in the case of an undertaking or order which relates to a reference made under section 21, accepted or made in relation to a reference made under section 32; and

(b) in the case of an undertaking or order which relates to a reference made under section 32, accepted or made in relation to a reference made under section 21;

and the undertaking or order concerned may be varied, superseded, released or revoked accordingly."

The noble Lord said: This group comprises a number of minor and technical amendments which all relate to the enforcement provisions of the merger regime. I do not believe that they raise any issues of substance. Members of the Committee will have received a letter setting out briefly the purpose and nature of the amendments. However, if it is helpful to the Committee I shall provide further details of the amendments we are tabling.

Amendments Nos. 120, 126, 132, 142 to 144 and 150 clarify what happens where a merger referred to as an anticipated merger becomes a completed merger during the course of an investigation or vice versa. That will happen only rarely. Amendments to Clauses 36, 48, 63, 104 and 125 provide that undertakings or orders that were accepted on one basis continue to have effect where the nature of the merger reference changes. The automatic restrictions on certain dealings in Clauses 74 and 75 will also apply as if the merger reference had been made on the relevant basis at the outset.

Amendments Nos. 127 to 129 and 139 make clear that the normal enforcement provisions contained in Clauses 74 to 78 apply to public interest cases where the public interest claim is withdrawn and the case is passed back to the Competition Commission to be investigated purely on competition grounds.

Amendments Nos. 135 and 136 are minor technical corrections to Clause 75 which take out references to Clauses 68 and 69, orders and undertakings. These are concerned only with completed mergers and are therefore not relevant in the context of anticipated mergers.

Amendments Nos. 137 to 140 make clear that if a replacement order is made under Clause 80, it is only specified undertakings which fall away. An order under Clause 80 will be brought when undertakings are not being fulfilled. It would not be desirable to penalise all parties where only one is in breach of its undertaking.

Amendments Nos. 165 and 166 are technical amendments to improve internal drafting consistency by aligning references to airport operators with language used elsewhere in Schedule 9. I beg to move.

On Question, amendment agreed to.

Clause 36, as amended, agreed to.

Clause 37 agreed to.

Clause 38 [Time-limits for investigations and reports]:

[Amendments Nos. 121 and 122 not moved.]

Clause 38 agreed to.

Clause 39 agreed to.

Clause 40 [Duty to remedy effects of completed or anticipated mergers]:

[Amendment No. 123 not moved.]

Clause 40 agreed to.

moved Amendment No. 124:

Page 26, line 39, at end insert—

"() "Public interest consideration" in subsection (2) shall include possible social consequences, including the effect on employment."

The noble Baroness said: Amendment No. 124 stands in my name and that of my noble friends. It is clear that the Government want to hand over responsibility in merger and takeover situations to the OFT and the commission, and the sole criterion, as we heard this evening, appears to be competitiveness.

There is a clause about public interest but it seems clear that government intervention is only envisaged in the most extreme circumstances. I believe that to be wrong. It is surely clear that many mergers and takeovers have considerable social consequences, and only governments can deal with those. Indeed, they may have to if the consequences involve high unemployment in a particular region.

The TUC is concerned about that. It says in briefing:

"The danger for the Government is that removing Ministers from competition decisions will not prevent politically damaging situations arising, but will curb their ability to act when they do".

If a company is a major employer, local communities and other local firms may be hit; regional development may be interrupted or brought to an end altogether. In other words, a large merger or takeover could affect adversely many thousands of people and not only those in the immediate environment.

We have recently been witnesses, as I said on the earlier amendment, to another round of mergers and takeovers—referred to as "merger mania". A recent newspaper article said that many of the deals were done when share prices were roaring. So the predators overpaid for their targets and are now having to write down huge amounts of money in their accounts to reflect the subsequent slump in value. That is the reason, perhaps, why Vodafone is nursing the biggest loss in Britain's corporate history.

Norwich Union and the CGU merged to become Aviva. But that lovely new name has not prevented a halving of the share price in 18 months. So it is not only employees in the relevant companies that suffer—often through job loss or demotion—shareholders suffer too, and of course pension funds. We have heard a great deal about a pensions crisis in recent weeks. The catastrophic drop in the stock market is cited as one of the reasons for the disappearance of defined benefit schemes. There may of course be other reasons as well, but a drop in share values clearly has made a major impact. So mergers and takeovers are not just about competitiveness.

Those are some of the reasons why the Trades Union Congress is saying that it does not agree that decisions as to whether mergers and takeovers should proceed should be made only on the basis of competition. The TUC believes that mergers and takeovers should be regulated in the public interest and that the impact on employment should be taken into account.

Our amendment is very simple; indeed it is modest. We are seeking to introduce it in the part of the Bill dealing with the public interest. We define that as possible social consequences, including the effect on employment. In those circumstances we believe the Government should be able to intervene. I urge my noble friend the Minister to accept the amendment. I beg to move.

I support Amendment No. 124 in the name of my noble friend Lady Turner and myself. Again, I echo what my noble friend said. The Government are trying, in their words, to escape from political decisions; but what they cannot escape from are the consequences of those decisions. To remain on one side, or to pretend to do so, and simply rely on competition when social consequences are taking place is a decision they will regret in the longer term.

Perhaps I may give the media as one example. News International, owned by Rupert Murdoch, has newspapers read by 70 per cent of adults in this country. That is almost a monopolistic position yet the draft Communication Bill does not rule out a further take-over by that group. Of that 70 per cent, The Times is the best-selling "heavy". The Sun sells 4 million copies daily. Quite apart from The Sunday Times there is the News of the World which is the largest-selling Sunday paper.

I am not in favour or against or get too excited about the euro, but there is something to be said as regards Rupert Murdoch. He has already determined that before any referendum takes place his media interests will be opposed to the euro. That is a very dangerous position. Any further decision must have social consequences. I cannot see any Government, particularly one whom I support, backing away from taking that into account.

There is also the question of employment. Not very long ago it appeared that Rover was in a difficult situation which would have had grave consequences for the whole of the West Midlands. Given that situation, the Minister put together a rescue package because of the consequences which would have affected not only the company but all the suppliers in the area. There would also have been a devastating effect on the whole of the region.

What would happen if there were another bid for Rover? Could any Government, Minister or Secretary of State escape from the social and employment consequences? Given some of the circumstances, it is totally unrealistic to rely on competition. I hope that the Minister will look a little further. He realised that he did not satisfy us on the previous occasion. We are speaking here about public interest which can have tremendous social and employment consequences for the whole of the region and, as regards the media, for the whole nation. I ask him to accept this modest amendment, particularly having regard to the social consequences of a merger.

The amendment seeks to indicate a further public interest consideration, that the Secretary of State could intervene on decisions about mergers. I say to my noble friend Lord Hoyle that when we consider newspapers a different set of considerations are taken into account. The plurality of the press is covered by the Fair Trading Act and will be updated by the Communication Bill. A different set of considerations apply in that case. I shall be talking about other companies.

As the Bill stands, the competition authorities will take decisions on mergers on the basis of a focused competition test. The Secretary of State has power to intervene in a case that raises a public interest issue, which she believes should be specified in legislation. At present we foresee a need for ministerial intervention on national security grounds only. That is the only consideration specified in the Bill.

The Government have considered the case for specifying further matters, but we do not anticipate that Ministers will need to intervene on any other issues. That is why the Bill does not mention social effects or the effects on employment.

Switching away from the current public interest test to a competition test for assessing mergers has involved hard thinking and tough choices. It is a focused policy. We believe that in the vast majority of cases the economy is best served if mergers are assessed solely on the basis of their effect on competition and that these decisions are best taken by the expert competition authorities operating independently of Ministers.

Merger regulation is best aimed at safeguarding the competitive intensity in the economy. Competition provides the spur for businesses to be more productive, innovative and efficient, better able to provide long-term, sustainable employment and better products and services for consumers.

Adding social and employment factors to the test for mergers would create barriers to market restructuring. We believe that it is wrong to create such barriers unless there are significant anti-competitive effects. Restructuring must be possible if companies and markets are to remain dynamic and competitive.

I recognise, of course, that mergers can have adverse social and employment impacts in the short term, but I do not believe that the answer is to indicate that Ministers should step in on such grounds. That way lies uncertainty and unpredictability with political lobbying creeping back into the whole process.

The task for the Government is to make sure that the economy as a whole is strong and to help people who are affected to adapt, retrain and get new jobs. We have a good record for creating the conditions for a dynamic economy which can adjust to change. We have the lowest unemployment rate since the 1970s, the lowest rate of inflation and the lowest interest rates since the 1960s. We have record numbers of people in work because private sector employment has increased by 1.25 million over the past five years. We remain the number one destination for foreign, direct investment into Europe.

I should like to make a further important point. It is to set the reforms to the merger regime in the context of the existing fair trading legislation and how it has operated. In practice, competition has been the principal factor in the UK merger policy for many years. In 1984, the then Secretary of State for Trade and Industry, the noble Lord, Lord Tebbit, announced that references would be made primarily on competition grounds. That has been a pursued by every subsequent Secretary of State. When one looks at the reports of the Competition Commission on mergers one finds that the employment effects and other non-competition effects of mergers, other than national security issues, are not matters that have determined decisions in recent years. Legislating for a focused competition test is not something which will make a large difference in practice to the way in which mergers are currently regulated.

Finally, I mention the mechanism of the Bill which provides for factors other than competition and national security being considered, should this prove necessary in the future. I shall explore that in more detail in a moment as regards Amendment No 131. It is worth noting in relation to this amendment that the power in Clause 57(3), together with the power of intervention set out in Clause 41, represent a careful balance. This amendment would tip that balance. As we have said before, we have no current plans to specify new public interest considerations. We have built in appropriate checks on the use of this power, which we believe are essential to preserve the predictability of the new regime. However, we also believe that the mechanism provides an important safety valve which will ensure that the very exceptional case can be dealt with appropriately. In the light of this explanation, I invite the noble Baroness to withdraw the amendment.

I thank the Minister for that explanation. He will not be surprised to learn that I find it disappointing because it has always been the case that competitiveness has been the sole criterion since the Tebbit test. That does not necessarily mean that it has always been right or that people have not suffered as a result of it being applied. In fact, we know of cases where that has happened. The policy that my noble friend has enunciated will not prevent the Government being lobbied when people believe that they are being disadvantaged. Quite obviously, people will make a fuss if they feel that they are being harmed as a result of decisions made within the criteria laid down in this Bill.

However, I do not intend to press the matter further now. I should like to think about it and then decide what further action I might wish to take at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move that the House do now resume. In moving the Motion, I suggest that we return to this business not before 8.30.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

rose to move, That the draft order laid before the House on 22nd May be approved [31st Report from the Joint Committee].

The noble Lord said: My Lords, this order has been made in exercise of the powers conferred on the Secretary of State by Section 12(1), (2) and (5) and Section 78(5) of the Regulation of Investigatory Powers Act 2000 (RIPA).

Part I of Chapter I of RIPA updates the previous law in the UK governing the interception of communications. It provides for and regulates powers to allow lawful interception of communications by law enforcement, security and intelligence agencies, consistent with the Human Rights Act 1998. It also creates a system of safeguards reflecting the requirements of Article 8 of the European Convention on Human Rights.

In the United Kingdom, interception is only conducted under warrants authorised personally by the Secretary of State and where it is deemed necessary in the interests of national security for the purpose of preventing or detecting serious crime, or for safeguarding the economic well-being of the UK.

In short, the order under the Act gives the Secretary of State the authority to require communications service providers, which could be a telephone company or a postal service, to put in place an infrastructure capable of intercepting communications when a warrant is issued with proper authority for them to do so. So the order is not about the actual interception, but the putting in place of an interception capability, as the title implies.

The schedule to the order lists those obligation which appear to the Secretary of State reasonable to impose on communications service providers for the purpose of securing the information required. The obligations under Part I provide for public postal services and public telecommunication services being required to respond.

There has been lengthy consultation on the order. Also RIPA established a Technical Advisory Board. As the House may well know, it is a non-departmental public body, with the right and the role to comment on draft orders or draft notices made under the Act and to give advice to the Secretary of State. If approved by the House, the order will take effect on 1st August 2002. The Secretary of State's power to impose the obligations in the order shall be exercised through a notice issued to specific communications service providers. So it is order, then notices and then—if the provision is in place—in future times, warrants to undertake interceptions.

The Government intend that a notice given to a CSP will, wherever possible, be the product of prior dialogue and agreement between the Government's representatives and the CSP in question. However, should a CSP consider that a notice given to it is unreasonable, it is able to make reference to the Technical Advisory Board, as I indicated.

Clearly, there are issues of financial burdens imposed on CSPs in setting up such an infrastructure or responding to specific warrants. Therefore, the Act imposed a requirement on the Secretary of State to make fair contribution to the costs incurred as a consequence of those obligations. For example, last year alone, CSPs received some £14 million from the Government. But there is under way a fuller consultation process with the industry about trying to develop the costing regime and the compensation framework to compensate for it.

Without more ado, I commend the order to the House. I beg to move.

Moved, That the draft order laid before the House on 22nd May be approved [31st Report front the Joint Committee].—(Lord Filkin.)

My Lords, I thank the Minister for his explanation of the order. Although some of the orders which follow on from the passage of the Regulation of Investigatory Powers Act are controversial, we accept that this is not one of them. As my honourable friend Dominic Grieve made clear in another place, we believe that the draft order's objective is eminently sensible.

RIPA contains a provision that places an obligation on service providers and the draft order defines it. It does not go to the issue of what should be intercepted, but it shows how the matter should be intercepted. We are satisfied that the draft order is acceptable to the public service providers themselves.

My honourable friend pointed out that it would be desirable for Parliament to be kept informed about the continuing discussions about what will be defined as a fair contribution to costs incurred by public telecommunications services as a consequence of the order. There should be a contribution to their costs. After all, their job is not to intercept people's communications. That work is only done at the Government's specific request.

In his response, the Minister in another place stated that it was reasonable to ensure that during the discussions the Government are transparent with Parliament. He undertook to find mechanisms for so doing. Will the Minister give that same assurance tonight and therefore assure this House that noble lords will also he kept fully informed on these matters? With that one mild reservation, we recognise that this order should be welcomed as it is a good step to resolving satisfactorily the problem of how to undertake interception when it is needed.

My Lords, it is funny how a tune, a smell or a taste can bring waves of nostalgia. When I picked up the Explanatory Note for this order and started to read it, suddenly I was wafted back two years to nights of pleasures that the noble Lord, Lord Bassam, and myself had on the RIP Bill, as it then was. Suddenly, the nature of some of those debates came back.

Although, as the noble Baroness says, this is not about the practical operation of RIPA, it touches on two issues I remember well that we discussed in some detail during the passage of the Bill. The first, as she has rightly said, was that we wanted assurances at the time—indeed, it was a concession won in this House—that the CSPs, the communications service providers, would not be unfairly burdened by cost in carrying out an operation which was in the national interests, in the fullest sense of that word. We welcomed the provision of £20 million over three years.

It is interesting, as the Minister said, that £14 million was spent last year. I wonder whether that was the impact of 11th September or whether operationally we have found that the cost is slightly more than was anticipated when the Bill was first passed. Some clarification would help.

The other item which was a direct result of pressure in this House was the setting up of the Technical Advisory Board. I remember there was some reluctance by the Government and their side of operations to have the board. It would be interesting to see how it is working in practice. It seems to have done a job in giving the order a clean bill of health. At the time there was doubt whether TAB would be robust or independently-minded enough to carry out its job as a kind of referee between the security services and the providers. There is a constant balance to be found between "want to know" and "need to know". At that time there was concern whether we would have unfair, onerous duties put on CSPs because of a voracious appetite by the security services for these facilities with the knock-on effect on costs and technology. So I hope that the TAB, which was established as a kind of referee, is working well. It would be interesting to know what is the assessment of that. Knowing the lobbying that I received during the passage of the Act, if it were not, I know that the Internet community would have been bombarding me with e-mails to tell me so. So I am taking silence as an indication that it is working well and that the balance of six government and six independent assessors is right. Has the Minister any comments about that?

That apart, like the noble Baroness, Lady Seccombe, we find the order entirely acceptable—the more so because it contains within it two of the concessions that the noble Lord, Lord Cope, and I won from the Government during those happy days spent two years ago with the noble Lord, Lord Bassam.

My Lords, I shall be pleased to pass those fond memories on to my noble friend, who will he delighted to receive them. I thank both Front Benches for their positive support and acknowledgement of the role played by this House in developing the Act. We are now experiencing some of the benefits of that. I agree that the issue of fair contributions to CSPs is important and am happy to repeat the undertaking given by my honourable friend in the other place.

With regard to costs, £14 million was indeed spent this year. I am scratching my head wondering why the sum spent appears to be so high in the current year. It certainly was not as the result of September 11th. Let me return to that in a moment. The £14 million was for on-going work with CPSs with existing capability. The £20 million is to establish a new capability, primarily for Internet interception. I hope that that makes it clear.

My Lords, I am sure that it will be clear when I read Hansard.

But the core promise was that further negotiation with the CSPs continued. I think that £20 million was an amount plucked out of the air because none of us knew how it would work or what would be the pattern of demand. What both I and the noble Baroness want is an assurance that the House will be kept informed of the progress of negotiations with the CSPs and that the on-going pattern of expenditure is considered to be fair both by industry and by the Government.

My Lords, I agree. That was what I was confirming in short in my previous remark. I was touching in my introductory remarks on the fact that a working group was under way with the industry to try to identify a more sophisticated way to assess costs. In essence, that is to distinguish between the costs of establishing the infrastructure and the costs associated with responding to warrants. Those are essentially two drivers of costs: having in place the platforms or systems; and the frequency with which they are used. That work is on-going and, no doubt, at some stage, its results will be appropriately shared with any Members who are interested.

My further advice on expenditure is that the £14 million paid last year is likely to be the typical level. The £20 million may be additional. There is at least the potential for increased compensation through what is seen to be a fuller and more transparent formula.

I was also asked about the TAB. Of course, it is early days to assess it, but we hope that the silence on the personal computer of the noble Lord, Lord McNally, is a sign of it progressing well. We also hope that the balance of membership, including six from the law enforcement and security services and six from the industry, is a good one that places the existing dialogue and tensions into a forum in which people must at least explore and clarify the issues and then produce advice for the Home Secretary—which is, essentially, its route forward. No doubt, how that is working will be the subject of further debate.

On Question, Motion agreed to.

rose to move, That the draft order laid before the House on 10th June be approved [33rd Report from the Joint Committee].

The noble Lord said: My Lords, in moving the draft order, I shall speak also to the Regulation of Investigatory Powers (Covert Surveillance: Code of Practice) Order 2002, because the two codes of practice have many common features.

Both orders have been laid under the Regulation of Investigatory Powers Act 2000. They have been made in exercise of the powers conferred on the Secretary of State by Section 71 of the Act. Section 71(1) requires the Secretary of State to issue codes of practice relating to the exercise and performance of powers and duties under that Act.

The codes support the Act by providing clear and, we hope, unambiguous guidance on authorising the carrying out of covert surveillance and the use of covert human intelligence sources. Section 71(3) requires all draft codes of practice issued under RIPA to be published and the Secretary of State to consider any representations.

The provisions in Part 2 of the Act provide, for the first time, for a framework for the use of covert surveillance and covert human intelligence sources that is compliant with the European Convention on Human Rights. The codes of practice provide a framework within which public authorities should operate, require that records are kept on the decision-making process and that issues of necessity and proportionality must be taken into account before an authorisation can be granted, to ensure consistency with obligations under the ECHR and the Human Rights Act 1998. The orders do not add to the public authorities already covered by RIPA and listed in Part 1 of Schedule 1.

Both codes also provide additional safeguards and a higher level of authorisation in cases where confidential information is likely to be acquired. The draft codes do not provide those public authorities with any additional powers. They set out further safeguards and place added restrictions over and above those already contained in RIPA for cases involving confidential information. I labour that point slightly, because there was previous misunderstanding of it.

The orders provide public authorities already covered by RIPA for those purposes and the public with clear and unambiguous statutory guidelines on the proper procedures and requirements for authorising the use of the provisions. In my view, the orders are compatible with the rights set out in the European Convention on Human Rights. I beg to move.

Moved, That the draft order laid before the House on 10th June be approved [33rd Report from the Joint Committee].—(Lord Filkin.)

My Lords, not merely are the orders compatible with Part 2 of the Regulation of Investigatory Powers Act 2000, they are an essential ingredient of it. I do not know anything about Part I. I wish that I had joined the noble Lords, Lord McNally and Lord Bassam of Brighton, in discussing the legislation, because I am now extremely familiar with Part II, to which the orders relate. There is sister legislation in Scotland about which I shall also make some observations.

I must declare my interest. Under the Regulation of Investigatory Powers Act 2000, there is a job for the Office of Surveillance Commissioners. The office was set up under the Police Act 1997, and they now have an extended power to examine the way in which public bodies use their powers and carry out the functions under Part II of the 2000 Act mentioned by the Minister. It is an important role. Not only is it the sole way in which article 8 of the European Convention can be given effect for the benefit of the citizens of this country but it is a great protection to public authorities. If they use their powers correctly, they will be protected against complaints and other actions by those who feel that they have been dealt with improperly by the public authority and had their privacy infringed.

The procedures must be correct. Part II of the Act is not the most brilliantly transparent legislation that I have seen. That is why I would like to have taken part in the discussions. In the Office of Surveillance Commissioners, there are several ranks. I am one of the most junior, but, as a surveillance commissioner, I go round inspecting public authorities not involved in law enforcement all over the United Kingdom. Since the Act came into force in October 2000, we have lacked the codes of practice that the Minister is now introducing. There were some drafts, but they were not very good. Now, we have an order that brings into force codes of practice that will help us all. They will be an essential tool of my trade. During an inspection of a local authority earlier this week, I used them to point out the way in which things ought to be done in accordance with the codes.

There has been consultation. We were consulted, and all the things that we wanted—except, I think, one—are in the codes. They will be immensely useful for the purposes of ensuring that the procedure is properly carried out. It would be less than grateful of me if I did not say to the Home Office that we are pleased to have the codes of practice. We shall use them to good effect from now on. I know that, if the courts intervene, codes of practice can be changed, and we might have amendments in due time. For the moment, the codes will do extremely well, and they will underpin greater understanding of some difficult legislation.

I welcome the codes. I, for one, will use them a great deal.

My Lords, I am grateful to the Minister for his explanation of the orders. When they were debated in another place, my honourable friends voted against them. As a consequence, the Minister, Mr Bob Ainsworth wrote a letter to my honourable friend Mr Nick Hawkins that sought to explain further the matters on which my honourable friend had expressed opposition. The explanation in the letter has made it possible for us to refrain from opposing the order today.

We fully appreciate that the draft codes have been made in exercise of the powers conferred on the Secretary of State by Section 71 of the Regulation of Investigatory Powers Act 2000, which requires the Secretary of State to issue codes of practice relating to the exercise and performance of powers and duties under RIPA. The assurance given by Mr Ainsworth in his letter that the orders did not add to the public authorities already covered by RIPA and listed in Schedule 1 is important, as is his assurance that the draft codes do not provide those public authorities with any additional powers. We accept that Chapter 3—in particular, paragraph 3·2—of both draft codes of practice sets out further safeguards and places restrictions over and above those contained in RIPA on the public authorities listed in annex A of the codes.

Throughout the scrutiny of the orders, it has not been our intention to deprive public authorities already covered by RIPA for these purposes and the public of clear statutory guidelines on proper procedures. We endorse the safeguards in the code. Our purpose throughout has been to ensure proper scrutiny of the orders, and that has now been achieved.

My Lords, with my noble friend Lord McNally, I was deeply enmeshed in the debate on the original Regulation of Investigatory Powers Act. The noble Viscount, Lord Colville of Culross, is now deeply involved in the implementation of the Act as a commissioner. It is mildly reassuring to hear him say that it is complex legislation. The interweaving of the statutes set out at the start of both codes, other statutes not highlighted in the codes, the statutory instruments made under those statutes and the codes themselves has created a legal Bermuda Triangle into which few will venture with any confidence of emerging with the right answer.

One of the issues raised in the debate on the legislation was whether the codes would be duly, comprehensively and properly observed, however well they looked on the page. When we debated the Bill, there was a general lack of confidence that the resources would be made available to allow it to work properly. Now, there is serious doubt—in the mind of those on these Benches, at any rate—that there will be sufficient resources of the right sort to implement the codes. The overall legislative framework is difficult for us legislators, even though some of us are practising lawyers, so we must have huge sympathy for the public authorities and officials who will have to find their way round that jigsaw puzzle while doing highly pressurised jobs. They have many demands on their time and are unable to prioritise what they do because of the emergencies with which they must contend.

One of the issues that the Minister must address is the allocation of resources to the commissioners—the surveillance commissioners, the interception of communications commissioners and others. How many people will there be in how many offices? The House also deserves to know what extra budgetary allowance has been made for—to take the example of one of the principal public authorities—the police? It will require a significant increase in paperwork for them to observe properly the terms of the legislation and the codes. We need only think of reviews or cancellations of surveillance orders, intrusive or not. We need only consider the stages set out in the codes to realise that they represent a significant addition to the already heavy bureaucratic obligations on the police and other public authorities.

I should be grateful to learn whether the Government have thought about this and specific allowance has been made for it. In that way we will be assured that the impressive verbal reassurance on the face of the codes will be implemented, not only now and then but in all cases.

Unless the Minister suspects that I am being a little pedantic about this, when sitting in this gilded Chamber it is terribly easy to forget that the powers in the RIPA 2000 and under these codes are the most heavily intrusive and potentially dangerous to the liberty of the subject that we have in our entire law. For that reason, the need to be reassured on issues of resources, both with regard to those charged with overseeing the proper implementation of the Act and the codes and for those who will have to use the powers day by day is great. They are not marginal matters; rather they go to the heart of the concerns expressed both in this House and in the other place throughout the passage of the legislation about the wisdom of it. That is because, on whichever Bench noble Lords sit in this House, and whether noble Lords have been in government, we know only too well the terrible tendency of modern governments to legislate voluminously and generously without having sufficient regard for the practical, on-the-ground impact.

Great relief and gratitude is felt on these Benches—I am sure that I speak for other Benches as well—that the Home Secretary has withdrawn the other statutory instruments that initially he was minded to bring forward under the Act. I thank David Blunkett for the direct and unvarnished way he presented his decision to the public. It was most refreshing to find a Minister acting in that way.

I turn now to record keeping. Those bold enough to try to follow the legislation have expressed deep concerns about intrusion into the privacy of the subject, in particular in terms of what information on citizens is to be stored under this tangled web of legislation. Perhaps I may make a general apology to the Minister for not having given him notice of the various points that I shall raise, but I was brought into the lists, so to speak, only today.

I should like to be reassured on paragraph 2·14, covering the central record of all authorisations. I wish to draw particular attention to the fact that there does not appear to be a central, national record of authorisations or any information on what is done with them. The code refers to a "centrally retrievable record", but that is to be held by "each public authority". Surely it would be easier for those tasked with overseeing the process, with resources that will never be sufficient to cover everything, if there was in place a retrievable national record.

Under what circumstances would a member of the public either identified or referred to in the records have the right to search against the same in order to discover if he or she had been the subject of an authorisation, whether or not the authorisation was still live? I do not expect an answer tonight, but I recall that during the course of our debates this issue was keenly debated. We should not forget that the entire defence mechanism of the tribunal set up under the auspices of the Act will be an empty vessel if those who may have complaints to bring do not know that they have a complaint to make.

One of the most disturbing aspects of state warehousing of information on individual citizens is that those citizens never get to know that they are on the state records, whether the records are correct and whether or not they should be included in terms of legislative permit. How are authorisations cancelled; what is the process? Who oversees the cancellation process? By what means can the person charged with the task go about their business? In all, I was left more rather than less worried after reading paragraphs 2·14 to 2·18 of the code.

Paragraph 2·16 deals with the destruction of "the product"—an unhappy phrase. Who decides, and on what criteria, whether and how destruction is to take place? Who decides whether a further period of retention is to be sought? Under paragraph 2·18, I should like to know how the information referred to is accessed. Is there to be further resort to the authorising senior officer if and when a further retention of information is required?

I hope not to delay the House for too long, but these are important matters. I turn now to the question of "confidential personal information" dealt with at paragraph 6·30 onwards. I am sure that all noble Lords will appreciate the importance of this part of the code. It allows the powers of the Act to be used in circumstances covering personal information. That could be information subject to legal privilege; it could be journalistic information or it could be the information that passes between a priest and someone resorting to him. Again, I am left feeling unhappy about where the code takes us.

Perhaps I may refer to paragraph 3·10:

"Communications involving Confidential Personal Information and Confidential Journalistic Material".

That suggests the extent to which these powers will be used in the most sensitive of circumstances. I say only that the kind of fears expressed in the House—and at times thought to be exaggerated by government spokesmen—are here made flesh, so to speak.

I turn briefly to communications subject to legal privilege. It appears that legal privilege would be breached if,

"there are grounds to believe that the professional legal adviser is intending to hold or use the information concerned for a criminal purpose".

That will give someone using the powers the right to breach a legal privilege, which in our law is the one unique and special relationship of privilege, if the person concerned thinks that there are grounds for believing that the professional legal adviser is engaged in a criminal purpose. Again, special arrangements have been made under paragraph 6.30 to ensure that the prior approval of a special commissioner must be sought.

The central point I wish to make here is that that very real protection in an extremely sensitive class of circumstance is not a statutory protection. I do not think that paragraph 6·30, covering the requirement for the prior approval of a surveillance commissioner, is reflected in the Act itself. That means that the protection is unsafe and should have been included in the Act. Our feeling on these Benches is that this and many other aspects of the code should have been in primary legislation. It is no good saying that on the whole the police, NCIS, the military and so on are decent, honest fellows. The whole point of legislation giving the state power over citizens is for us to act as watchdogs against the few bad apples that can, and always will, disregard the proprieties.

Given that these aspects of the code are not in the primary legislation, Section 72 of the Regulation of Investigatory Powers Act does not give any solace. It states expressly that failure to comply with any provision of the code of practice shall not of itself render the person breaching the code liable to any criminal or civil proceedings. I am not even sure that any such breach has to be brought to the attention of the surveillance commissioner. Again, I should be grateful if the Minister would at some stage come back to me on that point. It is surely a massive lacuna in an already weak protection—that is, a non-statutory code, a breach of which does not automatically give rise to any civil or criminal proceedings—not to have such a breach specifically brought to the attention of the surveillance commissioner.

I am told that debate on the orders should end at 8.30 p.m. Therefore, I shall need to romp through the remainder of the points that I want to make. I turn first to consultation. I am not at all sure that consultation on these codes was adequate. I have been in touch with a number of organisations which one might have thought would take a great interest in the contents. I should be grateful to know how the Government consulted. Did they go out to various organisations, or did they simply post the draft code on the Internet? How long did they give for consultation and how many people made representations to them?

I have touched on the issue of complaints. It is a huge hole.

I turn finally to the use of vulnerable individuals and juveniles under the cover human intelligence sources code of practice. They are two classes of person to whom we have a particular obligation. The code states that vulnerable individuals can be used as sources of information under the powers given in RIPA, but goes on to state that they shall be used as a source only,

"in the most exceptional circumstances".

No idea is given as to what that might mean. I wonder whether that reference is sufficient, In an area of the highest possible sensitivity, to protect vulnerable individuals from being used in that way.

Annex A lists the officers who may authorise the use of a vulnerable individual or a juvenile. We find that a chief officer of a local authority or the head of paid service has the power to authorise the use of vulnerable individuals for the purpose of acting as a source of covert intrusive or other information. Is that right? Is it right that the immediate senior officer of the DEFRA prosecution division should have that right? It is an enormously important one. I query whether all matters of the utilisation of vulnerable individuals should either have been included in the statute, or whether even now they should be included in an amending statute, or have to have the clearance of the surveillance commissioner, as for other sensitive issues under the Act.

Finally, under the heading "Juvenile sources", the code of practice states:

"On no occasion should the use or conduct of a source under 16 years of age be authorised to give information against his parents or any person who has parental responsibility for him".

Again, that is not a statutory provision. It is, therefore, subject only to the very weak provisions in Section 72. If anyone breached this provision and used someone under the age of 16 as an informant against a parent, what check could be made? Who would be told? Who would have the right of complaint? All this is shrouded in something worse than mystery. As matters stand, we have no assurance whatever that a breach of such an important aspect of the code would ever see the light of day, or ever get to the parents whose juvenile son or daughter had been so used in order that they could make a complaint.

Subject to those few points, we are disinclined to divide the House.

My Lords, I thank the noble Lords who have spoken. I begin by thanking in particular the noble Viscount, Lord Colville of Culross, for bringing to our consideration of the orders some remarkable direct experience and expertise. I mark his point—which is sound—that the codes can develop in the light of circumstances and experience, as I am sure they will in time as circumstances change. That is, in part, why it is important that they are not on the face of the Act: they are much more flexible and can change with circumstances.

I thank the noble Baroness. Lady Seccombe, for her acknowledgement that the letter from my honourable friend Bob Ainsworth was helpful in clarifying a misunderstanding and for her endorsement of the safeguards contained in the code.

I shall do my best to minimise the length of the letter that will need to be sent to the noble Lord. Lord Phillips of Sudbury, by dealing with a number of points, but undoubtedly I shall not have time to deal with them all to his satisfaction.

The noble Lord raised questions about resources. The chief surveillance commissioner clearly had some concerns about ensuring that he was adequately resourced to do his job. We think that those issues have been addressed and that the office of the surveillance commissioner is properly resourced to undertake those responsibilities. No doubt in the light of experience he will be monitoring the situation in the future, as will the Home Office.

As to the police, no doubt—

My Lords, I asked how many individuals would be involved—how many staff the commissioners will have in order to do the work. Will the Minister give that information in his letter?

My Lords, I shall be delighted to provide that information when I write to the noble Lord.

With regard to the police, no doubt there are additional burdens, but they have received what is probably one of the more generous financial settlements for a while. Therefore, one hopes that they are not collapsing under the burden. I have riot heard of any representations to that effect.

I was asked what would happen if the code was ignored. We do not believe that it will be. Public authorities are legally obliged by Section 71 of RIPA to follow the code, and the commissioner clearly has the responsibility to ensure that they do. Who checks that cancellations are carried out? The inspectors regularly inspect public authorities to ensure that these matters are complied with.

As regards public action against the records, the Data Protection Act applies to records held by public authorities. Individuals can make a subject access request to any public authority. However, in some circumstances the information will not have to be given if it would prejudice national security or the prevention or detection of crime.

In relation to paragraph 6·30, the provisions in Chapter 6 are to be found in Part III of the Police Act 1997. These codes replace the intrusive surveillance code of practice issued under the Police Act 1997.

I do not agree with the argument that records should be stored centrally. It seems to me that the records should be stored where the body is that is undertaking an investigation and where the surveillance commissioners can interrogate both the people who put them there and the documents at the same time, rather than moving to some data warehouse somewhere else.

There is no special protection for privileged information on lawyers or journalists or for medical information. On the other hand, it is clear that such information should not be accessed except in exceptional and compelling circumstances, as set out in paragraph 3·6 of the code.

With regard to whether information on vulnerable individuals should be used, we envisage such use only in limited circumstances. The code sets out further safeguards on the use of such sources above the requirements of the Act. The draft codes of practice on covert surveillance were consulted on, as signalled on the Home Office website. The public consultation period lasted from September to November 2000. The charge was that breach of the code gives no rise to noticeable or criminal liability. Covert surveillance per se is not criminal; Part II of RIPA makes surveillance lawful for human rights purposes. In other words, RIPA authorisation protects the public authority from civil claims under the Human Rights Act, the point made by the noble Viscount, Lord Colville.

The noble Lord, Lord Phillips, referred to the use of juveniles under 16 under paragraph 3·14. Article 3 of Statutory Instrument Number 2793—the Regulation of Investigatory Powers (Juveniles) Order 2000—states that juveniles under 16 may not be used to give information against their parents. I am sure that I have not dealt with all the points, but I shall write with fuller details.

On Question, Motion agreed to.

My Lords, I beg to move.

Moved, That the draft order laid before the House on 10th June be approved [33rd Report from the Joint Committee].—(Lord Filkin.)

On Question, Motion agreed to.

rose to move, That the draft order laid before the House on 3rd July be approved [35th Report from the Joint Committee].

The noble Lord said: My Lords, the events of September 11th clarified for everyone the danger faced from terrorists and the importance of utilising all possible proportionate means to counter it. Information collected by the enforcement agencies on passengers and goods carried into and out of the United Kingdom is regarded by the police as crucially important in that respect. The powers complement and will, over time, incrementally build on the security measures already in place at ports, such as powers to stop, question, search and detain individuals as well as physical preventive security measures such as body scanners.

The powers will allow the police to build an intelligence map to target and track terrorists to disrupt and prevent their activities in the UK and elsewhere. In a meeting with representatives from the air and sea carrier industry on 11th July, my right honourable friend the Home Secretary stated his belief in this power as an essential counter-terrorism tool and his commitment to it and to making it work in an agreed and proportionate manner.

At the time he made clear that we are aware of the pressures faced by the industry and stressed the importance of further consultation. We will ensure that the powers are introduced in an incremental way reflecting local circumstances. We have agreed that it would be useful for Ministers to meet the carriers again to discuss progress on the process of consultation and implementation.

Paragraph 17 of Schedule 7 to the Terrorism Act 2000 as amended by Section 119 of the Anti-terrorism, Crime and Security Act 2001 gives the power to an examining officer to make a written request to an air or sea carrier for information. Information requested could relate to passengers, crew, their vehicles and goods on all journeys to, from and within the United Kingdom. The request may relate to a particular ship or aircraft, or to all ships or aircraft of the carrier. It may relate to a single journey or span a period of time.

The key to this is targeted requests, not blanket "all passengers on all flights" demands for information. It is in the interests of the police to target requests around current intelligence patterns for maximum effect. Therefore, use of the powers must be proportionate and local circumstances must always be taken into consideration by the police.

Initial consultation took place between March and June 2002 when officials met a wide range of industry bodies including representatives of the air and sea passenger and freight carriers, freight forwarders, and maritime container companies. Additionally, officials visited ports and individual companies to observe the industry in operation and to obtain advice on possible business impact.

The range of meetings and visits coupled with the regular meetings with key representatives of the border agencies—containing a range of expertise in ports policing, immigration and Customs and Excise matters—resulted in better understanding on both sides of the needs and capacity of each side and ultimately led to a substantial revision of the original list of information requirements.

A number of concerns were raised during the consultation process and these were brought to our direct attention at an important and useful meeting on 11th July. We recognise and acknowledge that they are matters of genuine concern to the industry. We made clear then and I wish to make clear now that the order is an enabler; how, and the extent to which, the power is applied will have some flexibility. Putting the flexibility in the order itself was explored but counsel advised against it. Nevertheless, the department is committed to making the consultation process have meaning and life and to work closely with industry.

The national security need was to have the enabler in place before the recess and to allow for consultation to continue over the summer and subsequently until we have a workable outcome. What is important is that the principle behind the power is recognised by both sides who have undertaken to continue the consultation process on implementation.

Therefore, although the power will come into force 30 days after the order is made, I assure the House that the legislation will not be implemented until the most thorough consultation has been carried out and agreement so far as possible on the best way forward has been reached with the carriers. In the interim we hope that both sides are able to think creatively about how best to approach the issue. Additionally, the police have made it clear that there will be no requirement on domestic carriers to undertake routine collection of the information requirements specified in the order.

In all cases, even when the power is in place, there will be a need to take local circumstances into account. The powers fall under the Terrorism Act 2000 and, as such, will be scrutinised by the independent reviewer of the Act, the noble Lord, Lord Carlile of Berriew. Officials are grateful for the continued active involvement and contribution of all sides. We wish to make the implementation proportionate.

To summarise, the Home Secretary has heard the concerns raised and intends that the consultation and the incremental phasing should be carried out in an intelligent and sensitive fashion. I commend the order to the House.

Moved, That the draft order laid before the House on 3rd July be approved [35th Report from the Joint Committee].—(Lord Filkin.)

My Lords, I thank the Minister for his explanation of the order. When we agreed to take it along with other orders tonight in the dinner break we were not aware of the concerns of the aviation industry. We shall not oppose the making of the order and we would not wish to oppose something that the Government, on advice, believe may help to combat terrorism, but we would like to place on the record that the aviation and tourism industries have concerns about the operability of the order. In addition, I understand that my noble friend Lord Skelmersdale has carried out some detailed research and has some searching questions to put to the Minister.

The problem seems to be that the Government have handled the consultative process on the order badly. I have read the proceedings of 15th July in Standing Committee of another place. I accept that the order is only an enabling measure and that the Government have now given a commitment to continue consultation with the industry at a meeting in September. Will the Minister confirm that the meeting will definitely go ahead?

Will the Minister give a commitment that in addition to continuing to consult the airlines, the Government will consult with tourism: for example, the British Incoming Tour Operators Association, the Tourism Alliance and the British Tourist Authority? The BTA of course needs to be in a position to fulfil its statutory role as adviser to the Government on tourism. Will the Minister assure the House that no requirements will be imposed under Schedule 7 that will impact on the international competitiveness of the UK transport sector? Will he assure the House that requirements will not be imposed under the schedule without compelling evidence that the most proportionate means of implementation has been selected, following on from consultation?

As I said at the beginning, we shall not oppose the order, as we share the Government's desire to combat terrorism.

My Lords, the fact that we are discussing the serious threat of terrorism does not mean that we have to take everything that is put in front of us as carte blanche. The only thing blanche that I can find about the order is the large amount of salt that will be required for its digestion.

Every now and then, we find some information or proposed legislation that, in the words of my noble friend Lord Peyton, makes our nerve ends twitch. That happened to me when I first saw the order, which the noble Lord, Lord Filkin, has so thoroughly explained to us. When I received not one but two letters of complaint about the order, my twitching got considerably worse.

My original concern was the normal one for a Member of your Lordships' House: will the information on the schedule, to be demanded from the ports and airlines, actually work? I noted that the Minister was under a misapprehension. The police requests that may or may not follow from the order are not the problem. The problem is the need for the airlines and the port authorities to gather that information. The police requests, if they are made, will come after that.

In the words of the noble Lord, Lord McNally, on the first order that the House discussed a few moments ago: is it a case of wanting to know rather than needing to know? Clearly, the provision cannot stop terrorism dead in its tracks. It could be useful only after a terrorist event. I am not knocking the need for the police and security forces to gain background information on the carrying out of a suspected crime. For obvious reasons, that is a vital part of their work.

However, many is the time that I and members of my family have travelled under an assumed name. Were I a terrorist, that could not help the police one jot. Nor would the false address, car number and other details that I would give to the airline. If I would deceive on that, how much more likely would it be for me to invent a fictitious cargo, for example?

I understand that the police tried to collect similar information in July 1999. Within a month the operation was discontinued. Yet here it is again in an even more comprehensive guise. Whether it was dropped for the obvious reason that I have just given or because the airlines made a stink I do not know, but what I do know is that the airlines and ferry companies are making a fuss now, of which the Home Office is well aware and on which the Minister, in his inimitable fashion, has just remarked.

Home Office officials sent a letter to all the potentially affected firms, which were to be adjured to collect even more than the information currently on the schedule to this order, on 1st March this year. As the Minister has said, that resulted in a meeting, which was held on 12th April. I understand that it was attended by all the industry bodies. It is a curious example of the Government's much flaunted concept of joined-up government that the Department for Transport was not involved or, as far as can ascertain, even informed that the proposals were about to be, or had been, issued.

Home Office officials were certainly unaware that the subject was under discussion internationally and that a meeting with United States officials was due soon. I understand that it is fixed for tomorrow, when the Department for Transport will complain to the United States authorities about their much milder plans than are to be found in the schedule to this order.

Were the Foreign Office or the Department of Trade and Industry informed? I have tabled a couple of Questions for Written Answer, which the Minister can now answer verbally. To be fair, there has been no time for written responses.

All that is bad enough, but the plot thickens. At the 12th April meeting, the airlines naturally supported the Government's intentions to prevent terrorism. However, there was and remains a mega problem. The data expected of them are not currently available. Much of the information can be neither scanned electronically nor verified by the airline. Under these proposals, operators—presumably check-in staff—will have to input it manually. It does not take much imagination to realise what that will do to check-in times, eventually leading to a loss of capability at a time when airlines are fighting to remain competitive gateways in the air industry. At worst, I am told, check-in times may have to be extended to up to four hours.

It also does not take much imagination to realise that airlines' costs will increase significantly. Has any cost/benefit analysis been done? I was intrigued to see, rather late in the day, a Home Office memorandum in the Printed Paper Office accompanying the order, but I do not call that a regulatory impact assessment and I certainly do not call it a cost/benefit analysis.

I shall not weary the House by going through the airlines' concerns one by one. I am sure that other noble Lords have points of concern. Suffice it to say that the Minister's officials were more than a little surprised at what they had been told and that the industry representatives left with the strong impression—I am being kind to the officials; my airline correspondents called it a promise—that a further meeting would be held before the order was laid. There was no such meeting. It was not until later that Ministers took a grip on the situation and the Home Secretary and the junior Minister responsible held such a meeting. I do not know whether it was then or originally that the police representatives said that the information would hardly ever be used. However, what we all know is that the Minister handling the order in another place said that it would not be used on the first day permitted. The noble Lord has repeated that this evening. The order does not say so, but the Minister did, at col. 4 of the Official Report of the Third Standing Committee on Delegated Legislation on 15th July. She went on:

"further discussions will be held to consider whether or not collection of all items of data listed in the schedule was feasible or whether the data will be as useful as the police and other border agencies think that they might".—[Official Report, Commons Third Standing Committee on Delegated Legislation, 15/7/02; col. 5.]

Again, the noble Lord said much the same just now.

Putting the cart before the horse is not the way to legislate on any matter, let alone one as serious as this. The Minister should withdraw the order and come back to us with a properly thought-out proposal that is workable, has a cost/benefit analysis attached and will be useful and used.

My Lords, one of the great values of this House is when a Member such as the noble Lord, Lord Skelmersdale, gets his teeth into a subject and will not let go. I pay tribute to the way in which he has championed the cause in the House. I shall not delay the House long with my comments.

When I was a lad and we used to play football and cricket in the street, if we broke a window we used to send the most innocent, mild-mannered and angelic of our number to get the ball back. I suspect that the noble Lord, Lord Filkin, fulfils that role among Home Office Ministers.

Not for the first time, the Home Office has overextended itself, rushed its fences, under-consulted and then found itself in a mess. It is interesting that these powers were first contained in a 1989 Act, but prudent government and experience showed that they were not to be used.

Airlines with experience of these matters such as Britannia and Virgin have expressed great concern at the consequences if the measures were rushed through and have expressed doubt as to whether the powers requested will have real effect in the war against terrorism. Virgin Atlantic provided an excellent brief containing 10 specific objections. The most striking was that the order is out of kilter with measures in the United States and elsewhere in Europe. It seems odd that international consultation has not taken place.

After Virgin, Britannia and the noble Lord, Lord Skelmersdale, started mobilising, all of a sudden the Home Office clanked into action, a meeting was held and various assurance were given. If anyone doubts that the department is in retreat, I can only quote The Guardian report on the Home Office briefing after the 11th July meeting, which quoted a Home Office spokesman:

"This is a victory for common sense".

We all recognise that comment as code for "We are fast in retreat and will try to sort this matter out". I welcome the Home Secretary's belated promises on 11th July of further consultations, of staging if the measure is introduced and acceptable trigger mechanisms.

There is a temptation for Ministers to say, "If only you knew what we knew" or, even worse, "So you are in favour of terrorism, are you?", whatever the nature of the measure. There is an onus on Ministers and on the rest of us to test the powers that the security services require. The security services have a voracious appetite for more information and power. Within a democratic and free society, Ministers must, as part of their responsibilities, serve as a check and balance on the security services when they go too far.

I am not sure even now that the powers being requested will be practicable in any meaningful war against terrorism. But because a fuss has been created and the absurdities of the original proposals have been revealed, there is time for the Home Office to consult properly and to examine the impracticalities that have been exposed.

We will not divide the House, but if the 11th July meeting had not taken place and the Home Secretary had failed to give assurances on that occasion, we would have done so and sought support. Not for the first time, the Home Office has not listened carefully enough but rushed its fences. The Minister has promised a period of further consultation. I can promise the Minister a further period of close monitoring of that consultation in making a judgment on whether the Government listened and got it right.

My Lords, utility was one of the challenges mentioned by the noble Lord, Lord Skelmersdale. One must to some extent listen to the police and security services when they make a request. The processes or measures in question are not a result of civil servants saying, "We think this would be a jolly good idea", but are the consequence of requests from the police or security services.

The facilities sought will provide the police with accurate information that they will be able to check against a database of known or suspected terrorists and to build profiles of suspects—thus leading to effective intelligence-led policing operations. To some extent, we are talking about the development of new surveillance systems that do not currently exist fully developed anywhere but which are being incrementally developed by a number of countries. All countries who are concerned about the security of their subjects are gradually experimenting and feeling their way.

The implementation timetable could be two or three years—in some cases, even longer—because of the need to develop a proportionate and targeted approach. The Government could say, "We will not take any powers but let the discussion process move on. When we think things are right, we will put those powers in place". Or the Government can do as we have done—give the powers, recognise that there will be a complicated process of progressive implementation and development with the industries involved, reinforced by the authority that the order gives. We are right to have chosen the latter course because it signals to everyone that progress must be made, albeit in a proportionate way.

To answer the noble Baroness, the 13th September meeting will be going ahead. We will consult with the tourism industry and any others that think they are affected. Competitiveness between industry sectors is clearly an issue of which we are aware—BA raised that point with the Home Secretary at the 11th July meeting. I totally agree with the noble Baroness about listening to what the police and security services have to say and deciding the most important information for them to have early—and the most proportionate means of providing it. There must be a partnership between the Government, security services and industry. No one knows exactly the right answers. There must be a continuing dialogue to test which information is crucial, whether it can be obtained in a different way and whether it can be put in a different timeframe to make industry compliance much less expensive and difficult.

The situation is not that the Government are saying "Do that" and waiting for industry to complain. Instead, there will be constant dialogue between various sectors about utility, proportionality and best means.

To answer the noble Lord, Lord Skelmersdale, carriers will need the capacity to collect information but not to gather all the information until there is a request—albeit that requests can be made in respect of future journeys. For example, carriers might be requested to collect information on flights to destination X over the next three months.

My Lords, could the noble Lord explain that more fully? As I understood it, the information has to be available to be collected. If it is available to be collected and is not collected, when the police ask for the information it will not be there. Therefore, surely everyone will be in contravention of the order.

My Lords, essentially, there will be a request to a carrier to provide information between certain points and certain flights over certain periods of time. If the carrier has not been asked about such information previously, he cannot be expected to have it in his possession.

If I have not engaged with the noble Lord, Lord Skelmersdale, perhaps we can enjoy one of our correspondences. I shall be pleased to do so if that will help. I shall consider what he said and see whether I can give a better answer in writing.

As I signaled, we hope that the information will assist in targeting and profiling terrorists. With regard to the impact on international commercial issues, the point is well made about the importance of trying to move progressively towards some harmonisation of such data systems across the world. However, again, one cannot do nothing while that process takes perhaps five or 10 years; we must move in parallel by starting our systems and pressing for some convergence internationally.

I am aware of the time and aware of the pressure from other business. I conclude by stressing what I said about the importance of taking forward the consultation with a variety of industries. The meeting on 11th July made clear that we were talking not only about airline industries but about airport, travel and other industries. One could not even talk about one industry as a homogeneous group. There were significant differences in impact between, for example, low-cost and higher-cost scheduled flights and between charters. Therefore, those issues must be understood and taken into account by government and by the police in terms of developing the systems. The industry itself must also recognise its responsibilities, as it did at the meeting, by working with government to ensure that we obtain relevant information to reduce our security threats.

My Lords, before the Minister finally concludes this business, does he accept from me that he has answered with a very straight bat but that, unless the bat is held in the right place, the ball still hits the wicket?

My Lords, I agree with the noble Lord, Lord Skelmersdale, that the fundamental issue is about the utility to reduce terrorism. Clearly government will not be passive on these issues. They will need to hold discussions with the police and security services progressively to ensure that the utility being obtained is proportionate to the burdens and pressures that result from the processes.

To an extent, one has to start on that venture rather than assume that it is impossible. That is why we believe it is right to make this order and to begin the process of progressive, thoughtful implementation.

My Lords, before the Minister sits down, does he agree that, in a proper and orderly fashion, we would not consider passing the order until we had seen the outcome of the meeting on 13th September? As I said, we shall not divide on the issue tonight, but I hope that the noble Lord, Lord Skelmersdale, will put on his pads again when we return on 7th October. If we are to approve the order tonight, the House is entitled to know the outcome of that 13th September meeting, either by a ministerial Statement or by the activities of the noble Lord.

My Lords, of course, in a proper and ordered world, we would not have experienced the events of 11th September and we would not have had the sense of pressure that faces all civilised governments in the world. That is the tension that we face at present. I commend the order to the House.

On Question, Motion agreed to.

moved Amendment No. 125:

Page 26, line 42 leave out from "57" to end of line 43.

The noble Lord said: I want to draw to the Minister's attention subsection (3) of Clause 41. which states:

"For the purposes of this Part a public interest consideration is a consideration which, at the time of the giving of the intervention notice concerned, is specified in section 57".

Clause 57 is entitled "Specified considerations". Subsection (1) of the clause states:

"The interests of national security are specified in this section".

Subsection (2) states:

"In subsection (1) 'national security' includes public security; and in this subsection 'public security' has the same meaning as in article 21(3) of the European Merger Regulations".

I shall not comment on subsections (3) and (4) because they will be the subject of a subsequent debate. However, Clause 41(3) goes on to say,

"is specified in section 57 or is not so specified but, in the opinion of the Secretary of State, ought to be so specified".

In a previous debate, when dealing with amendments put forward by his noble friend Lady Turner of Camden, the noble Lord, Lord Hoyle, and a number of other noble Lords, the Minister made it clear that he did not wish to see political lobbying creeping back in. I shall now help him, as will this side of the Chamber, to ensure that that does not happen. I do not know whether he authorised the concluding words of Clause 41(3), but they are an open door. They are not restricted at all by the phrase "national security". I refer again to the words,

"is specified in Clause 57 or is not so specified but, in the opinion of the Secretary of State, ought to be so specified".

The Minister will recall that Clause 57 is merely entitled "Specified considerations". There we have it: all the arguments that the Minister deployed in dealing with his noble friends—"There are tough choices to be made"; "There are problems"; "I agree, there are adverse social employment consequences to be faced"; "We must avoid uncertainty"; and "We must decide on solely competition issues"—those are all very strong words but they are weakened enormously by this open door.

At present, unless the Minister accepts my amendment, it will he open to the Government to add a new ground of public interest when they feel like it. Surely that is most unsatisfactory. When it was pressed in the other place, the Minister argued that the power should remain. However, Miss Melanie Johnson was unable to say what possible category she might have in mind to add to the definition in the Bill. I believe that Miss Johnson has a long way to go before she acquires the expertise and experience of the Minister. Therefore, I very much hope that he will be able to tell us what categories the parliamentary draftsmen had in mind.

It is possible that he will want time to reflect on the matter. In that case, we may have to return to the subject at a later stage. But, unless he is able to make very strong arguments to the contrary, I believe that the Government have an opportunity here to move the goalposts when the game is in process. Why do I say that? Under this subsection a new public interest ground could be added if the Secretary of State decided to change the rules after the parties concerned had embarked on their merger. It is perfectly possible for those who were intent on merging suddenly to find that the rules were changed after the event. Therefore, that would introduce the very uncertainty that the Minister had in mind when he so persuasively argued with his noble friends that he did not want to return to the bad old days of political involvement in such matters.

Since my noble friend Lord Tebbit introduced his guidelines, there has been a self-denying ordinance among successive Secretaries of State of both main parties that they would look narrowly at competition issues when they reached their decisions. There is an element of cross-party consensus—it is wholly to he applauded—that political involvement brings the system into disrepute.

I welcome the Minister's assistance on one point. Members of the public probably find it difficult to distinguish between a politician making a decision on non-political and political grounds. What is the difference between the public and the political interest for a Minister? An analysis of that might be interesting.

Why am I so concerned about this subsection? There will be further debate on the newspaper industry and the figure of Mr Richard Desmond. The Minister may recall that the director-general had advised the Secretary of State that on competition issues he could see no reason to refer the bid. But the bid was referred. Although we are not discussing newspapers, the Minister might reflect on that situation and assure us that it will never occur again. If he is able to give that assurance, surely it is possible for him to agree to the amendment. It would remove the temptation to reintroduce party politics, political issues and matters as important as employment and social issues which so exercised his noble friends. That temptation is surely a diversion which the Minister will not wish to have on the face of this legislation.

We shall come to further debate on subsections (3) and (4) of Clause 57. They already allow the Secretary of State to,

"modify this section for the purpose of adding to, removing or amending any consideration which is for the time being specified in this section".

It cannot be a matter of national security. It must be a matter which comes under the overall heading of "specified considerations". The provision states that the Secretary of State may have an opinion that there is a specified consideration and that he can add the consideration to his list of allowable reasons even though the merger process may be under way. So he could come in through political lobbying which I recall can be very intense, with Members of Parliament coming to see you who are concerned about the effect of a merger or a competition situation in their constituencies. The Minister will not need me to give a list of examples of what would happen in those circumstances.

I am giving the Minister the opportunity to turn his previous words into action and to accept the amendment. I beg to move.

It is necessary to see the amendment in the context of what: went previously. Although there was a self-denying ordinance, the Secretary of State always had the ability in circumstances which could not be envisaged at the time to take a public interest consideration into account.

We have here a residual power of the Secretary of State, in the light of circumstances which we cannot envisage at present. The only circumstance we can envisage clearly at present is national security. Noble Lords might wish for other examples. If we could envisage what those would be, we would put them in the legislation. However, I give a flavour and an example. Let us suppose that some new technology is essential to large parts of the British economy and the possibility exists that some company will be able to get control of it. It might be difficult to say that that relates to national security, but the economic security of the country might be involved.

The Minister's example is interesting. Surely it would be possible for such modification of the interests of national security to be contained under the existing provisions in Clause 57(3) and (4) which enable the Secretary of State to modify the section by adding any consideration which is as important as he described, such as new technology—and he should know as Minister for Science and Technology.

Is the noble Lord saying that the only issue could be national security? I suggest that other considerations might be important. One cannot say that a situation where we do not know the specific circumstance will definitely come under national security.

I agree that it is cautious to say that circumstances may arise where we need to be able to take this action. The provision also has to be passed by affirmative resolution in the Houses. The Secretary of State cannot suddenly say, "In this merger case I shall take into account these purely political considerations", without that being clearly agreed to by both Houses of Parliament.

The newspaper issue is quite different. We shall deal with newspapers in a moment. I believe that they are covered by the Fair Trading Act which will be updated by the Communications Bill. In relation to Richard Desmond's acquisition of the Express, the acquisition of the Express newspaper business by Northern & Shell group fell under the general merger provisions of the Fair Trading Act. Therefore, it was treated in exactly the same way as any other merger considered under that Act and the OFT saw no reason to refer it to the Competition Commission on competition grounds.

Later we shall come to the matter of newspapers which raises a different issue. On the central issue, I shall argue strongly that we need a residual power that will be allowed to the Secretary of State only by affirmative resolution of the two Houses. We need that because one cannot be certain whether there will be circumstances in which that may be necessary.