The Minister for Higher Education and Intellectual Property (Mr. David Lammy): I beg to move,

It is a pleasure to serve under your chairmanship, Mr. Benton. The draft regulations are intended to apply, under the Hallmarking Act 1973, to the precious metal, palladium. I thank both the Joint Committee on Statutory Instruments and the House of Lords Select Committee on the Merits of Statutory Instruments for carefully considering the draft order.

The 1973 Act makes it an offence, during the course of trade, to describe an unhallmarked article as being made wholly or partly of gold, silver or platinum, or to supply it with such a description attached. The order proposes to apply the Act to palladium in a similar manner. Palladium has not been prescribed by the Act previously because manufacturing difficulties led to high costs and low demand. Those manufacturing difficulties have now been overcome and the market for palladium articles is expected to grow considerably.

Given the value of the metal, which is less valuable than platinum and gold, but more valuable than silver, there is an increased danger of fraud. A consumer is not able to tell by eye the difference between articles made from palladium and those made from cheaper precious metals, such as silver or white gold, or base metals. To protect consumers from fraud and counterfeiting, and as requested by the precious metals and jewellery industry, I propose that the 1973 Act should be applied to palladium. There is another reason why palladium should be prescribed now. Under our obligations to the international hallmarking convention, of which we are a member, we shall shortly be required to recognise palladium articles hallmarked with the convention hallmark. That will be done under an amendment to existing legislation—the Hallmarking (International Convention) Order 2002—but we require the 1973 Act itself to apply to palladium to enable it to apply in a consistent manner to all precious metal articles affixed with the convention hallmark.

We conducted a full public consultation on the measure in the autumn of 2008 and it was supported by all stakeholders, including the precious metals and jewellery industry, the British Hallmarking Council and all four assay offices.

The order will come into force on the day after the day on which it is made. My noble colleague, the Minster for Science and Innovation, agreed that at the request of the precious metals industry to enable it to meet its Christmas rush, which peaks in September and October. He has consulted the sub-committee on productivity, skills and employment, which is part of the ministerial committee on economic development, and it agrees with his decision not to apply a common commencement date.

It will become an offence to apply to an unhallmarked item a description that it is wholly or partly made of palladium or to trade in such an item. That brings palladium into line with the same offence that covers gold, silver and platinum. The offence provision will apply to palladium with a fineness—or purity—not less than 500 parts per thousand. That value of minimum fineness is common to the international hallmarking convention and those EU member states that prescribe palladium. Small palladium articles weighing less than 1 g are exempt from hallmarking. Similar minimum weight provisions apply to the other prescribed precious metals. Hallmarking is not compulsory for any palladium article manufactured before 1 January 2010, but it will become an offence to trade in unhallmarked articles that are manufactured after that date. In the intervening period, manufacturers and traders may voluntarily have palladium articles hallmarked, if they so wish.

To avoid confusion and to protect the consumer, there are only three permitted fineness levels with which palladium may be hallmarked. Those levels conform to the international convention requirements. As with the well-known pictorial hallmarks— for example, a lion or a Britannia for silver—the trade has requested an optional pictorial trademark for palladium and has chosen the head of Pallas Athene, the Greek goddess of war, wisdom and crafts, after whom palladium was named.

Palladium is formally ranked as more precious than silver but less precious than gold or platinum, which is to enable manufacturers to conform to coating or plating rules. A precious metal article may only be coated with the same precious metal having a greater fineness or with a more precious precious metal.

As I mentioned, the measures are supported by the precious metals and jewellery industry, because they protect both buyers and sellers in a market that is expected to grow in the next few years. They are also required to protect articles hallmarked under the international hallmarking conventions. For those reasons, I commend the order to the Committee.

Adam Afriyie (Windsor) (Con): I am delighted to speak on the statutory instrument. This superb Act was produced in 1973, with the support of the Labour party at the time. It is a superb piece of legislation because it enables a market to function by giving consumers information and by ensuring the quality of the goods that are bought and sold. It addresses the information asymmetry between the consumer and the supplier. In addition, it is a free market piece of legislation that enables the statutory instrument to be introduced. Furthermore, from what I can see from the briefing notes, the measures will be cost-effective in operation and use existing enabling bodies to bring about the action on the ground.

The legislation is deeply Conservative and I am delighted that we are extending it to palladium today. The application of a hallmark is in some ways the oldest form of consumer protection. “Hallmark” refers to the marking in the guild hall in London many hundreds of years ago. I am delighted that we maintain a presence in that measurement system. Hallmarking is part of a nationwide lead that we have in the setting of standards overall, whether the National Physical Laboratory or national weights and measures. We have a strong presence in that field. We used to have a British empire based on gunboat diplomacy; I believe that we can have an empire of sorts again, based on standardised measurements conducted here in the United Kingdom.

I very much welcome the extension of the measure. The marks are universally recognised and each of the assay offices in the UK will be able to apply the mark, whether in Sheffield, Edinburgh, Birmingham or London. The system that underpins the market, and has enabled it to function, is impressive. The system provides jobs in the United Kingdom and pleasure to those who wear jewellery. However, I would not be doing my job if I did not have one or two questions—in fact, I have three.

First, what will be the impact on existing stocks of palladium if the markings only come into operation from 1 January 2010? What will happen to the existing stocks—how will they be treated? If someone in March supplies palladium that is unhallmarked, from previous stock, how does that work?

Secondly, £110,000 of economic benefit is identified for charities, businesses and the economy at large. Where does that number come from and how is it substantiated? It is not that I question the amount, but I would like some clarification.

Thirdly, as shadow Minister for Science and Innovation I am concerned about the evidence base for any decisions that we make in this place or for any statutory instruments that we pass. Where is the evidence that there is an increasing market for palladium? I do not question it, I am simply asking the Minister. On what evidence does he base his assertions that the measure will be a good one because the market is growing? I am aware that the price of palladium is around $250 or $300 at the moment, relative to around $1,000 for gold, but where is the evidence for the growing market?

If the Minister calmly and succinctly deals with those few points, Conservative Members will be comfortable to let the matter rest and allow this deeply Conservative and market-oriented piece of legislation through.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): Mr. Benton, it is always a pleasure to appear under your chairmanship. I thank the Minister for his erudite and lengthy exposition of the precious metals market as it applies to jewellery. The order before us must be one of the most straightforward and unremarkable statutory instruments with which I have had the pleasure to deal. It is also possibly unique—I do not think I have ever come across a consultation in which 100 per cent. of the consultees were entirely in favour of the proposed measure. On that basis, it would seem somewhat churlish even to think of opposing it. I assure the Minister that we will not do that at all.

I shall pass on two observations, rather than any questions. First, I was amused and gratified to see that the mark will be the head of Pallas Athene. That shows a degree of creativity. I was going to ask whether it was chosen by an official in the Minister’s Department, but he answered that in advance by telling me that the industry came up with the mark.

Following on from the point made by the hon. Member for Windsor, I am quite interested in how the net present value calculations were put together. If one had nothing else to do on a rainy afternoon, going through the assumptions of a net present value calculation for a net benefit would certainly help one to pass the time. However, given that the measure is so wholeheartedly wished for by the entire industry, I will confine my remarks to that, and hope that the measure passes with good speed.

Mr. Lammy: I am grateful for the manner in which the hon. Gentlemen for Windsor and for Caithness, Sutherland and Easter Ross put their remarks, and for the swift manner in which we are passing this important piece of legislation. The hon. Member for Windsor was quite right to suggest that the legislation is about security and protection. However, I take slight issue with the fact that he suggested that the measure is Conservative. I think that the measure is progressive, and behoves a Government who believe in a welfare state and the security of all their citizens.

The hon. Gentleman asked about provisions up to 1 January 2010. It is important to stress that up until that point, palladium is outside the scope of the 1973 Act. Therefore, the provisions will not apply to anything made of palladium. People may choose to mark palladium articles however they like, provided it is not misleading advertising or a misrepresentation. There is nothing to stop people adding a palladium hallmark if they wish to do so. Such goods may be traded normally before 1 January 2010, until the specific offence provisions of the 1973 Act apply and come under the Consumer Protection from Unfair Trading Regulations 2008.

In a sense, the hon. Gentleman’s second and third points are connected. We are able to hallmark palladium now because manufacturing processes and science have moved on. The problem with palladium’s propensity to absorb hydrogen from the air when molten during casting has recently been overcome with improvements in gas cover technology. That means that we can be fairly confident—we take our advice from the industry—that, because palladium is lighter in weight than silver, it will become popular and its demand will increase; indeed, there has been a steady increase in trading figures. We are probably right to assume that, given the economic conditions, as well as the price of gold—he referred to that—and the price of platinum, there will be considerable growth in the market. The order is a preventive measure, coming in before we see that rapid acceleration.

The evidence base for the figures provided is the best estimates that we could garner from the industry. I hope that the hon. Gentleman will take the figures at face value.