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House of Commons

Friday 26 October 1990

The House met at half-past Nine o'clock

PRAYERS

[Mr. Speaker-- in the Chair ]

PETITIONS

Dog Registration

9.35 am

Mr. Andrew Bowden (Brighton, Kemptown) : I am pleased to present a petition organised by Dog World and Pro Dogs, signed by nearly 50, 000 people and warning that a compulsory dog registration scheme will not work. The petition also outlines the positive steps that should be taken to protect dogs and deal with irresponsible dog owners. The petition reads as follows :

The Humble Petition of the undersigned sheweth that proposals for the compulsory dog registration will not solve the problems of dogs in society and will penalise responsible owners while the irresponsible who produce most of the problems will not participate. A far better answer is implementation of all existing legislation and a programme of education to combat straying, fouling and excessive and irresponsible breeding. Wherefore your Petitioner prays that your honourable House call upon the Government to reject the House of Lords amendment to the Environmental Protection Bill.

To lie upon the Table.


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Motorway Service Area (Bishop's Stortford)

9.36 am

Mr. Bowen Wells (Hertford and Stortford) : I have the honour to present three petitions from my assiduous constituents. The first is from the East Hertfordshire district council and with it, on the same subject, there is a similar petition from Bishop's Stortford town council. The two town councils are concerned about the problems that the Department of Transport has visited upon them by proposing the construction of a motorway service area at the Birchhanger interchange of the A120 and the M11.

The Petitioners believe that it will intrude badly into the protective green belt between Bishop's Stortford and the M11 and prevent the two councils from controlling further development in that area, which is under heavy developmental pressure. Therefore the East Hertfordshire district council

(a) urge the Secretary of State for Transport to reconsider the decision taken by the said Secretary of State in relation to the proposed erection of a Motorway Service Area at Birchhanger near Bishop's Stortford, and

(b) in the meantime require the Secretary of State to order the cessation of all activities in relation to the proposed erection of the said Motorway Service Area in order that the adverse impact upon the amenities of local residents and the danger to road users in this part of Hertfordshire be alleviated.

And your Petitioners as in duty bound will ever pray.

To lie upon the Table.

Similarly, the Bishop's Stortford town council petition reads as follows :

your petitioners pray that your honourable house (a) urge the Secretary of State for Transport to reconsider the decision taken by the said Secretary of State in relation to the proposed erection of a Motorway Service Area at Birchanger near Bishop's Stortford, and (b) in the meantime require the Secretary of State to order the cessation of all activities in relation to the proposed erection of the said Motorway Service Area in order that the adverse impact upon this part of Hertfordshire be alleviated.

And your Petitioners as in duty bound will ever pray, etc. To lie upon the Table.

Antarctica

Mr. Wells : My third petition is from 845 petitioners in the Bishop's Stortford and Hertford area. The petition states : the undersigned are alarmed that our Government is supporting a Treaty which will allow mining in Antarctica.

Antarctica is the last great wilderness left on earth and should be kept this way ; one place on Earth free from commercial development. Wherefore your Petitioners pray that your honourable House support International efforts to declare Antarctica a World Park.

To lie upon the Table.


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Orders of the Day

Courts and Legal Services Bill [Lords]

Lords amendments to Commons amendments considered.

New Clause

Tying-in arrangements : connection with residential property loans

The Lords have agreeed to the amendment made by the Commons : "Insert the following Clause :--

.--(1) In this section "residential property loan" means any loan which--

(a) is secured on land in the United Kingdom and

(b) is made to an individual in respect of the acquisition of land which is for his residential use or the residential use of a dependant of his.

(2) No person ("the lender") shall enter into an agreement with another ("the borrower") for the provision to the borrower by the lender of a residential property loan together with one or more controlled services, unless the conditions mentioned in subsection (3) are complied with before the agreement is entered into. (3) The conditions are that the lender--

(a) informs the borrower by notice that the residential property loan, and each controlled service to which the proposed agreement relates are separate services ;

(b) informs the borrower by notice whether the terms and conditions of the proposed residential property loan will, if the loan is made in accordance with the proposed agreement, be capable of subsequently being varied by the lender ;

(c) provides the borrower with a statement of--

(i) the price which will be payable by the borrower for each of the controlled services if they are all provided in accordance with the terms of the proposed agreement ; and

(ii) the extent to which (if at all) the terms and conditions of the proposed residential property loan would differ if it were to be provided by the lender without the controlled services to which the proposed agreement relates being provided by the lender ; and (

(d) informs the borrower by notice that, if the borrower declines to take from the lender any of the controlled services to which the proposed agreement relates, the lender will not on that account refuse to provide the proposed loan.

(4) Where a person advertises, or in any other manner promotes-- (

(a) the provision of any controlled services which, in the course of his business, he offers to provide in conjunction with the making by him of residential property loans ; or

(b) the making by him, in the course of his business, of any arrangements for the provision of any controlled services in conjunction with the making by him or any other person of residential property loans,

he shall comply with such requirements as to the information to be given, or which may not be given, in any such advertisement or promotion as the Secretary of State may by regulations impose.'." with the following amendment : in subsection 1, after ("section") insert

( "and sections (Tying-in Arrangements : supplemental provisions) and (Tying-in : offences)")


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9.39 am

The Solicitor-General (Sir Nicholas Lyell) : I beg to move, That this House doth agree with the Lords in the said amendment. I understand that it is convenient to discuss at the same time Lords amendments Nos. 2 to 19 to the amendment.

It may be helpful for me to remind the House why the tying-in provisions are included in the Bill. They are intended to remedy what the Government and consumer bodies have perceived to be a serious problem in the property market and especially in the domestic property market. The problem arises from the fact that house purchase can be stressful and house purchasers, at a time when they are vulnerable, are sometimes subjected to pressure to take a loan in combination with other services that are not necessarily quite what they want or need. The tying-in provisions are designed to remedy that by obliging lenders to make clear to borrowers what they are getting as part of any package, in what form and at what cost. The Lords amendments do not affect the policy of the clauses, which has now received the approval of both Houses, but they are necessary to give proper effect to the policy. In that sense, the amendments are essentially technical.

The main amendment, which has consequential results throughout the other clauses, is No. 2, which changes the tying-in prohibition from one based on the lender entering into an agreement with the borrower to one based on the provision of the loan together with other controlled services to the borrower. The reason for the change is simple. It became clear on further consideration of the amendments made by this House that the ambit of the prohibition was not as clear and effective as intended. "Agreement" was likely to be interpreted by the courts to mean "contract" and such an interpretation could have led to perhaps quite complex legal argument as to whether a contract existed in a particular case. The Government did not consider that this was desirable, especially in those cases which were likely to be heard by lay magistrates.

A further difficulty was that the prohibition in the form in which it left this House was based on an agreement to offer a loan together with other controlled services. Apart from the difficulty of proving the existence of such an agreement, all a lender would need to do to avoid the prohibition was to ensure that he never entered into such a single agreement.

Amendment No. 2 contains another important provision--the power given to the Secretary of State to provide for the stage, or "relevant step", to quote the amendment, at which the lender must serve the relevant notices and statements. The purpose here is to ensure that the borrower is given the information required by the clause at an appropriate stage in the transaction when it is early enough and clear enough to be useful to him. This flexible approach is preferable to imposing an absolute timetable, which could cause unnecessary delay or loss in some circumstances.

The other Lords amendments are either consequential on the deletion of the concept of "agreement" or merely technical drafting amendments intended to tidy up the clauses. The Government believe that the amendments improve the efficacy of the tying-in provisions. That can only be of benefit to the consumer when buying his home. I commend them to the House.


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9.45 am

Mr. John Fraser (Norwood) : Tying-in may not be readily understood by those who observe our proceedings. Some people regard it as a form of bondage--as it may be regarded. It is not easy to unravel it. We did not find it easy when we first saw the drafting of the tying-in clauses, although they are welcome and are supported. The clauses amount to two propositions. First, the lender, who will usually be a bank, an insurance company or a building society, will not be able to say to a borrower-- whether, as the Solicitor-General pointed out, it is a contract or not-- that he will lend the borrower money only if he also takes the lender's insurance policy or surveying, agency or conveyancing services. Those matters cannot be tied together, and that is right.

House purchase is one of the most important and expensive transactions of most consumers' lives. It would be utterly wrong if the need to obtain a mortgage led to having to buy an unwise insurance policy. I have seen some outrageous tying together--not by the general mortgage lenders, but by people on the fringes--of virtually worthless insurance policies, as a condition of making the loan. It is important that people buying a home should have complete freedom to obtain independent advice about conveyancing and about the insurance companies to which they go.

Such tying together happens even with the building societies. When I was Minister with responsibility for consumer affairs, I initiated discussions with the building societies which led to house buyers having a choice of the insurance company that insured the house. At one time, building societies tried to tie house buyers to a particular insurance company. In the biggest transaction of most consumers' lives, these are important matters. They are also important because they will ensure free and fair competition between those providing services in the house-buying market.

Secondly, the tying-in arrangements do not apply only to lenders. Someone who is carrying out conveyancing--which could also be a building society or a bank--will not be able to say, "I will only do your conveyancing provided you use the other services which I provide."

The Lords amendments and the main clauses to which they relate must be put into force and I ask the Solicitor-General for an undertaking that they will be. They must also work. We cannot go through the charade of debating detailed clauses in Committee, on Report and in the House of Lords and of putting them on the statute book only to discover that they are never implemented by a commencement order. That is the danger, and it happened with the Building Societies Act 1986. That Act contained similar provisions which restricted building societies from engaging in conditional arrangements. The Building Societies Association then came to the Government and said, "Why don't we operate these things by means of a voluntary code?" Although the laws are on the statute book, they are not put into force. I have been told that one could drive not only a coach and horses through the loopholes in the voluntary code, but a traffic jam on the M25 on a Friday morning.

When the tying-in provisions are debated in the other place, the Council of Mortgage Lenders asked for a voluntary code which would mean that although the provisions would be on the statute book, they would not


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be put into force. It is pointless for us to have debates and to put into operation detailed controls--which everyone agrees to be necessary--if they do not then become the law of the land. I ask the Solicitor-General to give an undertaking that, when we have passed the amendments and the Bill becomes law, the provisions will be put into force.

I also ask the Solicitor-General to ensure that the provisions work. One of the most important reasons is the safeguarding of consumers. We have always been in favour of competition in the provision of services in conveyancing and mortgage lending. The provisions are also important for fair competition.

An essential part of the legal profession is becoming increasingly fragile and vulnerable--that is, the part of the profession that undertakes legal aid work. Many firms now do not undertake legal aid work. I am afraid that the legal profession is showing a growing tendency to grow into two professions--firms that undertake legal aid work and those that do not.

The firms that undertake legal aid work are fragile and vulnerable--the more so recently because of the slump in the property market, which has meant a reduction in residential conveyancing. The loss of conveyancing work affects the cash flow of those doing legal aid work, who often have to wait a long time for their bills to be paid by the state. If conveyancing work is not available to support the overheads that a firm has to meet in connection with that section of its business, those overheads will have to be met from the legal aid work, thus making it even less remunerative.

There is a great danger that some of the services provided by legal aid firms will disappear altogether. There is already evidence that more and more people are contemplating giving up legal aid work. Often, those who do legal aid work--especially criminal legal aid work--are the younger and less experienced members of the profession. After they have spent two, three, or four years in the profession, they find that the rewards of undertaking legal aid work are not sufficiently high, and they move into industry or into the Crown prosecution service, which offers more attractive rates of pay. The result is that, increasingly, those in the legal aid service are less experienced and less well paid than those elsewhere in the profession. It is in danger of becoming a second-class sector. I know that I must not debate that subject at any great length this morning, Madam Deputy Speaker. I merely wanted to underline the relationship between the other services that lawyers provide and their legal aid services. If the provisions do not work and if, unfairly, there is loss leading of the services--if work is unjustifiably taken away from the most vulnerable and fragile part of the profession--there is a real danger that the legal aid system could collapse.

The Lord Chancellor has made it clear that, notwithstanding the fact that the remuneration for legal aid work has been below the rate of inflation, he is intending to restrict it still further, simply because the total cost of the service--which is a demand-led service--has increased. That is the subject for a future debate, but, as I have told the Solicitor-General before, I believe that one reason why there is a problem elsewhere in the profession, and elsewhere in his Department in the payment of bills, is that crime has increased.


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If crime increases, the number of people defending criminals increases and costs rise. It is not the cost per hour that has increased ; it is simply that demand has increased. There has also been an increase in expenditure as a result of the Police and Criminal Evidence Act 1984. Five years ago, 6,000 bills were put in for attendance at police stations. Now, 402,000 bills are put in every year, simply to make the legislation work.

I ask the Solicitor-General to give an undertaking that the provisions will be put into force and also that the Lord Chancellor's Department and his colleagues will do their best to ensure that they will be adhered to, not merely to the letter, but in the spirit in which they were intended in the other place.

Mr. Ivan Lawrence (Burton) : As my last word on our proceedings on a momentous Bill--in which I must, of course, declare an interest--let me welcome the amendment. It will protect people who take out mortgages from being put upon and will extend still further the Government's commitment to the property-owning democracy and to making it simpler and safer for people to become owner-occupiers. We can all look forward to the time when, as a result of the Government's economic policies, interest rates will fall and that policy will be advanced still further.

The amendment is one of a chain of sensible and constructive proposals that the Government have made during our proceedings on the Bill. It can only benefit consumers. It does little to diminish the agonising process by which we have sought to make legal services more expensive and less readily available--thus, I fear, threatening the long-term existence of the Bar. I say that with a heavy heart--as I have throughout our proceedings--because I am convinced that the Bar has been one of the great jewels in the British system. It is one of the institutions for which our legal system has been renowned and respected worldwide. As the Bill will make it far more attractive for people to become solicitors than to become barristers it is inevitable that, in the fulness of time, the Bar as we know it will disappear.

We have waded through the Bill with great assistance from the Opposition at every stage. The Government have listened to representations made by the Bar Council and substantial improvements have been made. Their Lordships have made a magnificent contribution to our proceedings. One of the results of the introduction of the Bill has been that the Bar has looked at itself more thoroughly and has brought forward a number of proposals. While the Bar continues to enjoy its status as an independent entity in our legal system, those proposals will ensure that it functions more efficiently and effectively and to sustain the glory of our legal system. The amendment is one of a chain of useful proposals that the Government have made. I welcome it, and I should particularly like to thank my right hon. and learned Friends, the Attorney-General and the Solicitor-General for the care that they have taken during the passage of a Bill that has shaken the firmaments of our system.

Mr. Teddy Taylor (Southend, East) : I have one brief question on subsection 3(d) of the proposed new clause. I must declare an interest as a director of a temperance insurance company called Ansvar, which only insures total


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abstainers. As the House can no doubt imagine, our business in some areas is rather limited, although we operate all over the world. Subsection 3(d) states that the lender is obliged to advise the borrower by notice that if the borrower declines to take from the lender any of the controlled services to which the proposed agreement relates, the lender will not on that account refuse to provide the proposed loan.

That appears to be a complete safeguard. If company A wants to lend an individual money to buy a house or anything else, it will not be able to say, "You will not get the loan if you do not accept our controlled services." I am sure that Ministers will be aware, however, that there is a second type of restriction. A lending company can say that it is prepared to accept combined services or related services only from companies of which it approves. That has arisen time and time again. An individual who goes along to a building society looking for assistance or aid and says, "I want to insure my house with company A" may be advised that company A is not considered acceptable. That is especially true of insurance.

I am aware that this is a narrow point and one to which the Minister may not have addressed himself, but I hope that he will now reflect on it and consider whether subsection 3(d) is comprehensive and will provide the full support that the Government seek to offer. There is no doubt that the provision represents a major advance. It will stop companies seeking to increase their incomes dramatically by offering controlled services and seeking to obtain substantial commissions or earnings from them.

On the other hand, a danger remains, and I could report particular cases-- taken from my experience both in my constituency and as a director of a rather unusual company--in which building societies have been prepared to accept insurance or mortgage control only from a list of companies of which they approve. This is rather a minor point, but bearing in mind the Government have taken very strong and correct steps to ensure that the borrower is protected and safeguarded, I hope that my right hon. and learned Friend the Solicitor-General will consider this minor point which can be quite significant for people who want to borrow money.

10 am

The Solicitor-General : I will reply to the contributions in this short debate in reverse order. My hon. Friend the Member for Southend, East (Mr. Taylor) referred to subsection (3)(d), the object of which is to ensure that if a number of services are offered there will be openness and the potential borrower knows exactly what cost he is being asked to pay in respect of each of the available services and he can then choose whether to take any of those extra services or none of them. If he chooses to take none, the amendment ensures that he nevertheless gets the loan which was originally offered at whatever price it was made clear that it would be offered. There may be differential pricing, but there must be openness and clarity so that the borrower knows from the outset what cost is involved. My hon. Friend asked whether that bites on some of the conditions that are sometimes made by mortgage lenders, sometimes with very good sound reasons, that other services such as insurance shall be provided by reputable companies providing sufficient cover. The amendment does not bite directly on that, nor is it intended to. However, I will reflect on what my hon. Friend has said


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and will invite my right hon. and noble Friend the Lord Chancellor to reflect on it when he considers regulation. Having listened carefully to my hon. Friend, I do not think that it is likely that we will be able to meet the anxieties that he has drawn to the attention of the House, but we will reflect upon them.

I thank my hon. and learned Friend the Member for Burton (Mr. Lawrence) for his kind welcome for the amendments and for this part of the Bill. The House is aware that he had anxieties about other aspects of the Bill. I would take a more forward looking approach on behalf of the Bar of which I, like he, am a member. While it was a jewel in the crown, I foresee it remaining a sparkling jewel in the crown and rising to the challenge presented by the Bill. I hope that I can encourage my hon. and learned Friend to take heart in that respect.

I want now to consider the highly relevant points raised by the hon. Member for Norwood (Mr. Fraser). He was extremely anxious that this tying-in clause should be implemented. It is the Government's clear intention that the clause should be put into effect in one way or another so that its benefit should be available fairly and squarely to the mortgage lender and to potential customers. I couch my words in that way because, as the hon. Gentleman said, the Council of Mortgage Lenders and others made a final plea that consideration should be given to the opportunity of a voluntary system. My right hon. Friend the Lord Chancellor commented on that topic in another place, stating :

"The regulation-making powers in the new clauses provide for some flexibility. There will be consultation"--

prior to implementation--

"as indeed is required by subsection (11) of Amendment No. 146, before any regulations are made. The Government intend to hold extensive consultations with interested parties"--

which of course include the Council of Mortgage Lenders "towards the end of the year with a view to making regulations in the spring. That is not a fixed timetable as much will depend on the outcome of the consultations. If"--

I emphasise "if"--

"the industry could convince the Government that it had a simpler way of avoiding tying-in by lenders which it could police adequately, the Government could be open to persuasion that bringing the relevant provisions into force would not be necessary after all. But--and I must be clear on this point--the case would have to be a convincing one and the disclosure requirements in the clauses under discussion are the minimum that the Government consider necessary to protect the borrower."--( Official Report, House of Lords, 24 October 1990 ; Vol. 522, c. 1452.)

Drawing the matter together, we now have a clause which both Houses have considered with great care which we believe is well capable of being made to work and well capable of being effective. The only circumstances in which we might delay or defer bringing the provisions into effect would be if we were really convinced that the matter could be dealt with in another way and a strong case would have to be made for that.

The hon. Member for Norwood put the amendment in the context of the Bill as a whole and the wider services offered by solicitors, and he referred to legal aid. He was right to draw attention to the fact that the amount of legal aid provided over recent years has risen in leaps and bounds. The figure for legal aid will be £730 million this year, compared to about £100 million when I came to the House 11 years ago. It has doubled in real terms every five years.


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Part of the reason for the increase is connected with crime, and part of it with the liberty of the subject. The hon. Member for Norwood drew attention to the fact that 402,000 bills for attendance at police stations were brought in last year, while only a few years ago it was 6,000. That is a benign statistic. It shows that those who are detained in police stations who need the advice of solicitors are getting it in large numbers. That is something which the Police and Criminal Evidence Act 1984 wished to happen and we are happy to see it happening. It means hard work for solicitors, and of course they will discuss, as they are perfectly entitled to, the proper levels of remuneration. Many solicitors manage to make legal aid work extremely well although I know that smaller solicitors are having a harder time. That is quite properly an area of discussion and the matter is only tangential to the amendments which are widely welcomed and should be approved by the House.

Question put and agreed to.

Subsequent Lords amendments to the Commons amendment agreed to.

STATUTORY INSTRUMENTS, &c.

Crown Agents

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committee on Statutory Instruments, &c.). That the draft Crown Agents (Additional Powers) Order 1990, which was laid before this House on 16th July, be approved.-- [Mr. Chapman.]

Question agreed to.

Boundaries Commissioner (Northern Ireland)

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committee on Statutory Instruments, &c.). That the draft Local Government Boundaries Commissioner (Northern Ireland) Order 1990, which was laid before this House on 18th July, be approved.-- [Mr. Chapman.]

Question agreed to.

Fire Escapes (Scotland)

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committee on Statutory Instruments, &c.). That the draft Housing (Grants for Fire Escapes in Houses in Multiple Occupation) (Prescribed Percentage) (Scotland) Order 1990, which was laid before this House on 26th July, be approved.-- [Mr. Chapman.]

Question agreed to.

Parliamentary Constituencies (Scotland)

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committee on Statutory Instruments, &c.). That the draft Parliamentary Constituencies (Scotland) (Miscellaneous Changes) Order 1990, which was laid before this House on 25th July, be approved.-- [Mr. Chapman.]

Question agreed to.

DEFENCE

Ordered,

That Mr. John Wilkinson be discharged from the Defence Committee, and Mr. John Lee be added to the Committee-- [Sir Marcus Fox, on behalf of the Committee of Selection.]


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ENVIRONMENT

Ordered,

That Mr. Peter L. Pike be discharged from the Environment Committee, and Mr. Terry Lewis be added to the Committee-- [Sir Marcus Fox, on behalf of the Committee of Selection.]

TREASURY AND CIVIL SERVICE

Ordered,

That Mr. Neil Hamilton be discharged from the Treasury and Civil Service Committee, and Mr. Charles Wardle be added to the Committee.-- [Sir Marcus Fox, on behalf of the Committee of Selection.]


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