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Lord Higgins: My Lords, is it not the case that the overall effect of the Government's proposals in this area will produce a huge amount of revenue? All this provision will do is to give back a small amount in specific circumstances of great complexity. Further, surely the Minister can tell the House whether or not amendments that we make in this place to the Bill will simply pass through "on the nod" in another place, or whether they will receive proper consideration.

Lord McIntosh of Haringey: No, my Lords; I cannot give the noble Lord an answer to his second point. That is a matter for another place. It would be quite improper for me to intervene. As to the noble Lord's first point, I should point out that this Bill will cost the National Insurance Fund 160 million. In those circumstances, it is inappropriate to talk about stealth taxes here today, regardless of what the noble Lord may wish to do at other times.

On a related point, the noble Lord asked me why this provision should not be included in a Finance Bill. The reason is the one that I have just given; namely, that this is a Bill that affects the National Insurance Fund rather than the Consolidated Fund. That is why the provision cannot go into a Finance Bill, which is a money Bill.

The noble Lord asked me whether there should be refunds when conditions change. I am not sure whether the noble Lord made the distinction, but there are two kinds of refund about which we could be talking. First, there are refunds for employees. The answer in that respect is yes; there certainly would be tax relief as for Class 1 contributions, which would be made through the self-assessment process. As for the second kind of refund--that for employers--the answer is no. Employers must make up their minds. That is why the longer period of 92 days has been agreed. They must make their best estimate of what is to their advantage. They have asked for this change to be made, and it is being made in response to requests from a significant number of employers.

We cannot have this provision in the form of a "movable feast", whereby employers are able to opt in and out as appears to suit them at the time, according to the state of their share price and what they believe that status might be in the future. So the answer there is no: employers must make a decision about what they think will happen to share prices and they must decide whether or not to take advantage of the opportunity. Indeed, it is no more than an opportunity, and one in which no one is obliged to take part. There is, of course, an element of risk involved for all employers. But it will not be the same element of risk for different employers. That is why we could not legislate in such a way as to remove the risk for all employers. In some cases it will be in different amounts.

The noble Lord, Lord Higgins, raised a point that was mentioned in another place about the burden on employees as regards share options. The previous

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legislation introduced in the Child Support, Pensions and Social Security Act 2000 allowed the employee to take on the employer's liability. That occurs only with the employee's consent, and does produce a higher marginal rate of income tax to 47.32 per cent after relief from income tax on the amount of the employer's national insurance contributions paid. But that option is not compulsory for employees. That is why no change is proposed to that provision.

The noble Lord, Lord Higgins, suggested that there may need to be further amendments on the roll-over provisions. However, he did not specify what they were likely to be. I shall await those amendments with interest and give them the due attention that they deserve.

I am grateful to the noble Lord, Lord Goodhart, for the tone of what he said; but part of my response to the noble Lord, Lord Higgins, applies to the comments made by the noble Lord, Lord Goodhart. Clearly, one has to choose a date of some kind for crystallisation. The date that we chose was the day before the Pre-Budget Report was announced, and before these provisions were first made public. We could choose any other date that we wished: some dates would be advantageous to certain companies and disadvantageous to other companies, while other dates would be advantageous to a different set of companies and disadvantageous to others. There is nothing very much that we can do about the situation; that is the nature of share prices. It is called capitalism--or, indeed, is one of the effects of capitalism.

If we were to do what the noble Lord, Lord Goodhart, suggested and change the date to that of Royal Assent, it would, first, be a date in the future and, therefore, would give rise to the possibility of avoidance; and, secondly, on the best estimate that we can make of the countervailing changes involved, it would cost the National Insurance Fund 100 million more. We are not prepared to follow that route.

I am grateful to the noble Baroness, Lady Noakes, for the detailed points that she made. I have to agree with her that it is indeed unapproved share schemes that are affected by the provision. I am interested in the noble Baroness's views on the wider issues, but I do not believe that they arise within the terms of the Bill. The noble Baroness asked me a number of specific questions about the regulations under Clause 1(5). The regulations will be published in draft next week. The likely contents of the required notification are already available on the Inland Revenue website. Under those circumstances, I believe that the noble Baroness's criticisms of the 92-day period and her fears that the publication of the draft regulations might be significantly later than that period can be assuaged. I believe that that also answers her question about publicity.

There is also the issue about how companies will know when Royal Assent takes effect. The Inland Revenue has written to all companies with unapproved share option schemes that have so notified the Revenue, as they should do. In the

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mailshot and the press release, the Inland Revenue has offered to advise all companies that have expressed an interest when Royal Assent is received. Indeed, over 400 companies have already expressed that interest.

The noble Baroness asked me about the position of unlisted companies and whether all of them would be treated as not liable because the share options are not readily convertible assets. Where the shares or share options of an unlisted company are not readily convertible assets, the company will be deemed to have made a notice and the special contribution will be nil.

I entirely agree with the noble Baroness about the difficulty of valuing the shares of unlisted companies, having been involved in running an unlisted company for many years. However, the shares in unlisted companies can be readily convertible assets and the company will then need to decide, like all other companies, whether or not to opt to pay a special contribution. A company does not have to have an agreed share option before it makes the payment; it is only required to pay an amount on a reasonable basis within the 92-day period.

The noble Baroness asked me whether there would be a simple version. Certainly I assure her that the Inland Revenue will publish a clear and simple guide with examples. Although I dread going back to the issue of IR35, my understanding of today's High Court judgment is that the legality of IR35 was upheld but that the Inland Revenue was taken severely to task for the quality of its guidance. Therefore, we have something to improve on there. I commend the Bill to the House.

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

Local Elections

3.51 p.m.

The Lord Privy Seal (Baroness Jay of Paddington): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Home Secretary. The Statement is as follows:

    "With permission, I should like to make a Statement about the decision to defer the local government elections which were due to take place next month.

    "On 3rd May elections for 34 English county councils and 11 English unitary authorities were scheduled and just under a fortnight later, on 16th May, elections for 26 district councils in Northern Ireland were also due.

    "The House will, however, be aware of the considerable scale of the representations which we have received to defer these elections because of foot and mouth disease.

    "As my right honourable friend the Prime Minister has now made clear, we have listened very carefully to those representations.

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    "We judge that in terms of practical arrangements, polling in May would be possible, and would produce fair results. Following changes to the law brought into force on 16th February, postal votes in England and Wales are now available on demand to any voter. With, literally, a handful of exceptions, schools in which many polling stations are sited have remained open and operational in all foot and mouth disease areas. Forms of canvassing have changed. Telephone canvassing is now a key way in which voters are contacted by candidates and the political parties.

    "We have taken careful note of the impact on tourism, and the message which any lengthy or indeterminate deferral might send out. But on the other side of the equation, there has been the need for national and, in some areas, local politicians to be focused on the fight against foot and mouth disease, as the necessary machinery to deal with any eventuality is put in place; and there have been the feelings and sensitivities of people in the communities most severely affected by this dreadful disease to be considered.

    "Taking account of these considerations we have therefore decided that these local elections should be deferred for a short while--in the case of England and Wales, for a five week period from 3rd May to Thursday 7th June, and in the case of Northern Ireland, for a three week period, from 16th May, also to 7th June.

    "Some district and borough council by-elections are due on 3rd May, and others could be held on each Thursday thereafter before 7th June. In these circumstances the Government believe it best if all by-elections in this period are also postponed until 7th June. In the timescale it is not practical to defer by-elections due before 3rd May.

    "A Bill to ask this House, and the other place, to give effect to these deferrals will be introduced as soon as possible. As preparations for local elections on 3rd May and 16th May will have to continue until legislation for their deferral receives Royal Assent, it is plainly in everyone's interest that the legislation should be passed as quickly as possible.

    "There are a number of detailed consequential matters which will have to be dealt with in the legislation. I shall therefore make arrangements for the opposition parties to have an outline of the draft legislation later today.

    "The House will be aware that the cost of administering local elections falls on the local authorities concerned. In respect of the elections that were due to take place in May, local authorities have already incurred expenditure and will be obliged to go on doing so until the new Bill receives Royal Assent. We shall, accordingly, be taking powers in the Bill to compensate local authorities for expenditure legitimately and unavoidably incurred.

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    "Although nominations for the elections due on 3rd May do not close until tomorrow, some candidates may have incurred costs because of the deferral. These should be relatively small, but to cover this the maximum limit on candidates' expenses will be increased in the Bill by 50 per cent.

    "The Bill will also provide that candidates validly nominated for elections due on 3rd May will not have to resubmit their nomination papers.

    "Delaying elections is not a step to be taken lightly. Nevertheless, I hope the House will agree with me that a relatively short postponement of the kind I have set out is an appropriate response to the circumstances".

My Lords, that concludes the Statement made by my right honourable friend the Home Secretary. Before I sit down, it may be for the convenience of the House if I make a few comments about the handling of the Bill in this House. I understand that the Bill will be introduced in the Commons tomorrow and will arrive in this House on Wednesday evening. It has been agreed through the usual channels that we shall have Second Reading on Thursday and the remaining stages of the Bill will be taken next Monday, 9th April. The business which has already been published for those two days will be postponed until after the Easter Recess.

3.56 p.m.

Lord Strathclyde: My Lords, I thank the noble Baroness the Leader of the House for repeating the Statement today. As she rightly says, the decision to delay elections should not be lightly taken. We all agree with that.

However, the country will also be grateful that at long last the Prime Minister has come to acknowledge the gravity of the foot and mouth crisis. I assure the House that my party will co-operate in legislation that is required to postpone local elections and which will be a great relief to farmers in the affected areas and to those others right across the country who are living in fear of this disease.

The House will, of course, need time to scrutinise the legislation and some of the technical issues, including compensation, raised in the Statement. I am also grateful for the business statement that the noble Baroness has just made. I signal my agreement to it.

I welcome the fact that local authorities which have begun spending on elections will be compensated. But will the noble Baroness accept that legislation should be framed around taking the necessary powers to set a new date when it is clear it would be responsible to do so, rather than fixing one set date?

Can she say why it would be highly dangerous, as the Prime Minister said today, to delay local elections beyond 7th June but not beyond 3rd May? Would it not be more sensitive to country people to leave the election date open until it is clearer when the crisis might be resolved? Has she considered letting local elections go ahead earlier in some areas than in others in order not to burden people in the worst affected areas?

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Does not all this demonstrate how out of touch the Prime Minister has been that it took appeals from the two most reverend Primates and the Leaders of the Conservative and Liberal Democrat Parties before he was prepared to postpone his general election plans? Only last Thursday, the Leader of another place, Mrs Beckett and a stream of Cabinet colleagues said that to postpone local elections would send a,

    "very strong and very negative signal to the world".

Does not the Prime Minister's decision send such a signal? I assume that the noble Baroness thinks that it does not. If not, why not? What has changed since last Thursday? Has the Prime Minister suddenly woken up to the fact that the countryside is bleeding? Or was it simply that he had a visit from Mr Philip Gould and Miss Anji Hunter with their focus group reports?

While we acknowledge that the noble Baroness, Lady Hayman, has been working hard, is it not now clear that the Government have acted all along far too unimaginatively and far too late? Does not the noble Baroness agree that crucial time was lost in the first two weeks when, to keep open the option of an early general election, spin doctors were told to play down the crisis and the Minister boasted that it was under control?

Was not the failure to deploy the Army until nine days after we called for it a catastrophic delay? Was not that mistake compounded by the token nature of the early Army deployment? Why, despite the findings of the report by the Duke of Northumberland on the 1967 outbreak, did the Government persist in resisting burial and insist only on burning carcasses? Why was there such dithering about the concept of a firebreak of slaughter around acute outbreaks and why was action taken so slowly? What has it taken so long to reach a point of decision about vaccination? Indeed, when will the Government take a final decision on vaccination? Why did it take two weeks after we called for it for the Government to announce compensation for farmers and a week to announce rate relief for local businesses?

Ministers are right to say that industries other than farming, notably tourism, have been desperately affected by the crisis. What action do the Government intend to take to provide further support for the tourism industry? Will the noble Baroness allow a day, perhaps after the Easter Recess, for a debate in the House on the future of this vital national industry?

I hope that the noble Baroness will address one particular point. What will be the criteria for deciding to hold local elections in June when it was wrong to hold them in May? What will have to be different from today? Can she set out for the House the objective test that will make it safe to hold elections then when it is unsafe to hold them now? The Prime Minister said this morning that one of his key criteria was the feelings and sensitivities of local communities. For example, if people in Devon are still as worried in June, if the farmers in Cumbria are as threatened with ruin as they are today, will those factors no longer be relevant to the Prime Minister's thinking? If not, does that not

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suggest that the Prime Minister's decision is more about looking good to focus groups than looking good to the countryside?

When and on what criteria will the Prime Minister decide that he no longer has to give his full attention to the crisis? When will he think it right for key Ministers to turn their backs on the crisis and start electioneering? When and why will there no longer be the need, as the Statement says, for national and local politicians to be focused on fighting the disease? And when will it be right for local communities to lose their elected voices? I hope that the noble Baroness can tell the House, therefore, the criteria against which the Cabinet has agreed to take that decision and what makes June right and May wrong.

Finally, does the noble Baroness accept that the postponement of the election makes a mockery of the way in which her noble friend the Captain of the Gentlemen-at-Arms has been driving the House? The Government have been cutting corners in a drive to push too many Bills through before a May election. Now that Parliament is not, after all, to be cut short this Thursday, this House must be allowed to take the time it needs to review government Bills. On broader issues, will the noble Baroness promise time to debate the White Paper on rural affairs?

The Government's response to this crisis has veered from the complacent to the incompetent. No amount of spin can replace the wasted weeks or make good hopes and livelihoods broken or years of toil destroyed. But there is time now perhaps to make up with single-minded attention for the main failures in the Government's handling of the crisis so far. So long as the Prime Minister genuinely puts the country first, stops dithering and takes some of the overdue actions which we on this side of the House have long been calling for, he will have the support of the whole of this House. But no one will forgive a continuation of the incompetence, complacency and self-serving spin-doctoring that we have seen over the past few weeks and for which our countryside is now paying such a terrible price.

4.4 p.m.

Lord Rodgers of Quarry Bank: My Lords, from these Benches, I, too, thank the noble Baroness the Leader of the House for repeating the Statement here. It is particularly appropriate to do so because there are now probably more noble Lords in this House than Members of the House of Commons with active or past service in local government. On Monday next, it will be appropriate to scrutinise the Bill carefully in Committee, Report and final stages to ensure that the expertise in this House is brought to bear on the detailed provisions.

I do not want to take part in another debate on the foot and mouth crisis and its tragic consequences or on rural affairs. These are very appropriate matters for the House to consider. However, at present we have before us a proposal for a Bill; and it is that Bill and the consequences for local government to which we should turn our minds.

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In the Statement there is a plain admission that delaying elections is not a step to be taken lightly. That is what we should now focus on. Local elections have not been cancelled or postponed for over 50 years. I hope very much that postponement on this occasion will not be a precedent and that we shall wait at least another 50 years before it occurs again. The instrument of postponing democratic elections is well known in non-democratic countries. There is no fear that it is being done on that account now in this country. Nevertheless, fixed dates for elections, not to be changed by the government of the day whatever the circumstances, is a good principle. For that reason, I hope that the noble Baroness will make clear that it is not in this Government's mind that there shall be any repetition.

Inevitably, therefore, postponement should make us uncomfortable. But I should be even more uncomfortable if, as I understand the noble Lord, Lord Strathclyde, suggests, there were to be an open-ended commitment to local elections at an unspecified date in the future. That really would give the government of the day an opportunity which I think they should be denied. If governments have to make such a postponement, it is right that they should explain the position to the House and fix an alternative date which can be the subject of debate and not leave an open-ended commitment to hold elections when it may suit them best.

There has been a good deal of discussion--no one can complain about that--about whether the postponement of the elections, or holding them on 3rd May, would or would not be in the national interests or in the interest of any individual or political party. We must acknowledge that all those factors come into the minds of every Prime Minister faced with these very difficult decisions. It would be naive to argue that Prime Ministers make decisions in the national interest except in so far as most of them identify the national interest with their own interest and that of their own parties. We should recognise that and not be hypocritical in present circumstances.

In the Statement, the arguments are put fairly for postponement of or carrying on with the 3rd May date. Indeed, if I were to weigh carefully in milligrams the arguments set out in the Statement I think that they marginally come down in favour of going ahead on 3rd May. But I think that that is a measures only of the dilemma in which the Prime Minister has been put. I agree that in the circumstances postponement makes the best sense.

I hope that the Bill will make progress. We shall help to see it through all its stages, provided--I make this absolutely clear--we are satisfied that the detail is right. In that respect, I make two suggestions. The first is that even in advance of Second Reading the noble Baroness and the Minister concerned seek to draw on the expertise of Members of this House who are willing to help get the Bill right before we enter Committee stage. Secondly, I hope that every step will be taken to ensure that the Home Office is on top of the detail and that clear, unequivocal statements are made by it and

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the appropriate departments to those in local government who will be affected by the outcome. I refer not only to elected members of local authorities but all those officials in local government who will have difficult decisions to make. The detail is important. The Home Office is not invulnerable in such matters. I hope that it will do better this time.

4.9 p.m.

Baroness Jay of Paddington: My Lords, I am grateful to both noble Lords for their recognition that this is a serious position and that a serious decision has been taken on the basis of the reasons that the Statement made very clear. The decision has been taken with great solemnity and a recognition of the seriousness of postponing democratic processes in this way.

I am grateful to the noble Lord, Lord Rodgers, for his support for those parts of the Bill that he mentioned. He referred to the expertise available in this House that could lend authority to our discussions even before the Bill comes here for Second Reading. I am sure that the Government will seek to facilitate that arrangement. During the morning I have asked for a list of those Members of this House who are directly affected by or involved in local elections. The noble Lord, Lord Rodgers, is right that several among our number are directly affected and that others who may not be directly involved in these circumstances have been elected and will be important in lending their authority to any discussions on the Bill, which we must get right quickly to facilitate the process.

I also agree with the noble Lord, Lord Rodgers, that this is not a time for another debate on foot and mouth. My noble friend Lady Hayman has reported regularly to this House with great authority and enormous attention to detail. I understand from my noble friend the Chief Whip that she has spoken six times on the subject in the past four weeks and, due to the efforts of the noble Viscount, Lord Cranborne, will do so again on Wednesday. I therefore do not intend to respond to the general points about the foot and mouth situation, except in so far as it impacts on the serious decision that has been taken today.

As I said, the criteria on which the decision was taken were set out in the Statement. A short delay enables certainty. That certainty affects the planning for local authorities and candidates involved in local elections and is also necessary across the broader spectrum for those in the farming community and in the wider sphere of economic activity who may be directly or indirectly affected by foot and mouth disease. It is agreed that 7th June strikes the right balance between a delay that enables the Government to accelerate and to put in place further strategies and mechanisms to halt and combat the disease--I am sure that the noble Lord, Lord Strathclyde, is aware that the Prime Minister has spent the greater part of his time on this problem in the past few weeks--and the uncertainties that would be caused by an open-ended delay. Again, I strongly agree with the noble Lord, Lord Rodgers, that it would be extraordinary for

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anyone to argue more than superficially in this House that it should be within the power of the executive to determine the date of elections by order.

We welcome the renewed attention to legislation that the noble Lord, Lord Strathclyde, promised from his Benches. The Government are delighted that already in this Session we have sent to the Commons eight major Bills without any defeats. We expect to continue to do the same in the additional weeks that are opened up to us.

It is not surprising that the Conservative Opposition should seek an open-ended delay and not to establish any date for elections. It is clear that they do not want an election at all.

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