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Lord Stoddart of Swindon: My Lords, did I hear the noble Lord say that the 1968 Act covers manufacturers as well as dealers?
Lord Lester of Herne Hill: My Lords, that is right. The definition of registered firearms dealer includes manufacturer. I now turn to the basis of compensation. I do not apologise to your Lordships for taking this carefully because it is important to see how carefully modulated this amendment is and what it does and does not do.
Compensation under this amendment is deliberately put at a modest level sufficient to cushion the effects of the ban on firearms dealers while, hopefully, they find other means of gainful economic activity. The Australian scheme referred to in Committee two weeks ago is far more onerous to the taxpayer and far more generous to the firearms dealer. Compensation is assessed in Australia by valuing the business prior to the coming into force of the legislation based on the audited accounts of the past three financial years and by valuing the business after the coming into force of the legislation by estimating what future profits there would have been had the legislation not been introduced. This is a complex, technical and costly exercise because it seeks to assess what would have been the future profitability of the business taking into account a whole variety of variables. The final figure of compensation under the Australian method can be as much as between six and nine times the annual earnings of the business.
By contrast, our amendment chooses a much simpler and much less costly method than does the Australian scheme and is designed to provide some recompense for the hardship suffered as a result of the speedy and totally
unexpected demise of a licensed means of livelihood. The amendment provides that firearms dealers are to be paid at the rate of one year's after tax profits based on an average of the past three years of audited financial accounts. The lump sum should not be in itself subject to tax. This amendment is also narrowly restrictive in another sense. It does not date the loss from before the Dunblane tragedy in March 1996, nor even from the time at which the Government responded to the Cullen Report on 16th October 1996. It dates the loss for which compensation is payable from the time of the passing of the Act.I am of course aware that the business has declined significantly since March 1996, but I have taken into account the fact that current stock will be valued at market price, not at cost price, so there is already an element of loss of profit in the compensation payable under the Bill as it stands. The scheme sets compensation at one year's after tax profits. This should provide a breathing space for those who may in time be able to diversify and rebuild their business. It will provide some fairly meagre relief for those unfortunate enough to have to close down.
If I may say so, we as legislators need to take account of the exceptional circumstances surrounding the passing of this law. Had it not been for the Dunblane tragedy, the Bill would not have been so quickly conceived. Indeed it might well not have come about at all if Dunblane had not dramatically focused public concern about violent crimes involving the misuse of firearms. Registered firearms dealers lawfully carrying on their business with certificates issued by the police should surely not be treated unfairly as scapegoats for Thomas Hamilton's madness.
Our amendment will doubtless be criticised for its parsimony. The scheme is deliberately devised, as I have tried to explain, to be the minimum necessary to achieve a fair balance and avoid an excessive burden either on firearms dealers or on the general body of taxpayers. I gather there may be some 650 registered firearms dealers whose business will be severely prejudiced by this legislation. They estimate that 2,180 jobs will be lost and as many as 350 businesses will be totally wiped out. Most of these are small or medium-sized businesses. Staff have already been laid off and in some cases business is at a standstill. One manufacturer wrote that having built up a business over 30 years he had £300,000 worth of equipment that is now valueless and had to pay rent to store the guns that he will have in due course to surrender. There is little prospect of his developing an export market.
These are not trivial matters that we can simply shrug our shoulders as utilitarians and say, "It is a price worth paying for the greater public good". For a small group of people the law will involve terrible hardship. It is not accurate to claim that there are no precedents for paying compensation to businesses adversely impacted by government legislation. There is a national compensation code which applies where local authorities and government acquire land, property or businesses. It is currently being applied to businesses forced to relocate or to extinguish as a result of the Channel Tunnel rail link legislation. Since 1993 the
Government have had in place a European Community decommissioning scheme for registered fishing vessels and estimate that by the end of this year they will have paid a total of £50 million in grants to fishermen whose vessels have been decommissioned. The Government are offering the rendering industry £118 million for the loss of its market.The Government have accepted that the Bill does not merely regulate the use of arms. That is why the Bill provides compensation to the owners of prohibited handguns, ammunition and ancillary equipment. But the Government have argued that there is a difference of principle between the loss of the right to use handguns and the loss of the right to make or sell them. Neither the case law of the European Court of Human Rights, nor of senior Commonwealth constitutional courts, including the Judicial Committee of the Privy Council, supports such an arbitrary distinction.
Much of the point of the government argument derives from the distinction they seek to draw between regulation of an industry in the interest of public safety and compulsory acquisition or nationalisation of an industry. The imposition of higher standards of health and safety may indeed impose new costs on industry which it may find financially burdensome. No one would sensibly argue for the state to be required to give compensation on each such occasion. But when a dealer is prohibited from selling the product which forms the core of his business and, what is more, his licensed business, he loses his customers and his business, and the legislation can no longer be called mere regulation.
In the words again of Justice Oliver Wendell Holmes,
- "When protection is qualified the natural tendency of human nature is to extend it more. While property may be regulated to a certain extent if regulation goes too far it will be recognised as taking. This is a question of degree and therefore cannot be disposed of by general propositions".
Parliament has a wide margin of appreciation in meeting the obligations imposed on the UK by the guarantee of the right to the peaceful enjoyment of one's possessions under Article 1 of the first protocol. If the amendment is passed, I believe that it will pass muster under the convention as providing fair though not full compensation. If the amendment is rejected, I believe that there is a serious risk that the European Court of Human Rights will in due course decide that the legislation is unfair in its effect and lacking in a sense of proportion in this important respect. I beg to move.
Lord Monson: My Lords, my original instinct was to support Amendment No. 31 in the name of the noble
Earl, Lord Peel, which provides for the possibility of proper compensation. However, I am not convinced that subsection (2) of the noble Earl's amendment is correctly drafted, although admittedly that could always be rectified at Third Reading.More importantly, as I ventured to remind noble Lords earlier today, politics is the art of the possible. I suspect that the other place would for a variety of reasons reject the idea of full compensation, immoral though that rejection would be, in my opinion. A quarter of a loaf is surely better than no bread. I think that Amendment No. 27, cleverly drafted with great expertise by the noble Lord, Lord Lester of Herne Hill, as one would expect, provides an admittedly disappointing quarter of a loaf. The noble Lord used the word "parsimonious".
In parenthesis, perhaps I may express surprise that the European Convention on Human Rights, on which the noble Lord, Lord Lester, bases his amendment, apparently holds that one year's post-tax profits equals fair compensation. But if that is the case, so be it.
If the amendment is resisted by the Government and by the Labour Party, it is likely, as the noble Lord said, that the European Court of Human Rights will eventually force the government of the day--of whichever political party that may be composed--to produce a similar or possibly better answer. The difference is that it will be too late for many people who stand to go bankrupt and even lose their homes through no fault of their own. I hope that at the very least the House will support this extremely modest amendment, and, ideally, the amendment of the noble Earl, Lord Peel.
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