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Lord Whitty: As to what the fraud might consist of?

Lord Stoddart of Swindon: Quite.

Lord Whitty: For example, it might be trying to acquire for the local authority the achievement of a level of reduction of landfill that they had not actually achieved, which they could then trade—in other words, creating a fraudulent credit in a market for which they would then get some return. The person who did that would probably be the officer concerned rather than the leader or the chief executive, but it would be that kind of offence.

Lord Dixon-Smith: I am grateful to the Minister for his explanation. The debate has revealed the difficulties that are put into an administrative system once a trading element is inserted into what is otherwise a relatively straightforward operation, particularly when the trading is in something that is almost notional. As the Minister has implied, if you create a false market by issuing false returns you can prove almost anything. I agree that might well create an offence that is worthy of the sort of penalty described. You could avoid it even more easily by not permitting trading and you would not have the bother. That might solve it. It would certainly solve the problem of the prison population as well.

We will have to study the reply, which was designed to be helpful. I am grateful for that, but I do not know that we are entirely satisfied. We may need to return to the issue again. In the meantime I beg leave to withdraw the amendment.

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Amendment, by leave, withdrawn.

[Amendments No. 23 to 26 not moved.]

Clause 6 agreed to.

Clause 7 [Trading and other transfer of landfill allowances]:

6.45 p.m.

Lord Dixon-Smith moved Amendment No. 27:

    Page 5, line 34, after "allocated" insert "for the year in which the trade will be completed"

The noble Lord said: We think that unused allowances should be able to be carried forward and used by the waste disposal authority to which they were allocated. Transfers of allowances should concern only current year entitlements.

This is a probing amendment which will enable the Minister to explain a little more how it is envisaged that the trading of allowances will be carried on and, in particular, how it will be carried forward from prior years and borrowed from future years. It will give us a better understanding of how the trading will work.

We return to the matter of the substance of the Bill being in regulations and the difficulty caused by not having those regulations. Without some information from the Government, it is extremely difficult for ordinary, suspicious Members of the Committee—if I can describe myself as ordinary and suspicious at the same time—to envisage exactly how the system will work. Only the Minister can provide that. It would be interesting to know whether any pilot work has been carried out in relation to this issue and, if so, what happened. It would also be interesting to know whether a risk assessment has been done on the possibility of this blowing up in our faces.

If we devise a trading system that does not work, then we shall not help anyone. We have no way of judging whether or not what is being suggested will work. That is the purpose behind Amendments Nos. 27 and 29. Amendment No. 33 concerns a much narrower point. It probes whether the Bill as drafted would be a general ruling or whether it would be limited to specific trades or specific waste disposal authorities. It was tabled simply in order to elicit more information from the Minister. I beg to move.

Lord Livsey of Talgarth: I support the amendment because it tightens up the description relating to the year in which trade is completed. It is a good probing amendment, which will help us to clarify the situation.

Amendment No. 29 seeks to leave out paragraphs (c) and (d). Instead, it inserts wording which relates to the transfer of unused landfill allowances and the transfer of allowances allocated—or those which are yet to be allocated—for any subsequent year. That would appear to limit flexibility but, in fact, it could also put the onus on poorly performing councils to sort themselves out. I should be very interested to hear the Minister's opinion on that.

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Amendment No. 33 seeks to leave out the words,

    "or for specified scheme years",

and limits the provision to a specific scheme year. It encourages good practice but, at the same time, reduces some elements of flexibility. In general, we support the amendments but would like the Minister to comment on some of the aspects that I have mentioned.

Lord Whitty: The amendments attempt to restrict the scope of the new regulations so that they specify that trading can take place only in a specified year. That seems to cut across some of the arguments raised by Members of the Committee at an earlier stage when we tried to find ways of smoothing out the cost and the planning of schemes designed to meet these objectives. If you could only trade but could not bank, borrow or trade across the years, clearly it would be more difficult to smooth out those changes.

If, as the noble Lord, Lord Dixon-Smith, suggests there is a danger of the whole scheme not getting off the ground and it was seen by the majority of authorities as a problem if it was done outside a given year, it is possible that one would want to limit that. I doubt that. It is certainly not the Government's view that at this stage they should limit trading to within a particular year for the reasons that I have outlined. That would not give us scope to plan and to smooth our allocation of resources.

The intention of the clauses is to enable us to consult on the precise nature of the regulations. If the word came back from the local authorities that for reasons of safeness, so to speak, we should trade only within one year, clearly we would have to take that into account. That is not the general impression I have at the moment, and it is therefore not sensible for us to limit ourselves in primary legislation to that provision.

I am afraid I did not completely follow the arguments of the noble Lord, Lord Livsey, on Amendment No. 29 which, as he says, would appear to introduce yet more flexibility in the same direction, although he did say that it may help failing authorities. I am not sure how that would arise. It would restrict trading and therefore restrict the ability of all authorities to give themselves some elbow room in order to meet the targets over the period, but not necessarily in a given year. That is what the trading scheme is designed to provide.

Lord Livsey of Talgarth: Can the Minister say in the situation that he has just described whether there is insufficient discipline in the legislation to meet the targets that are set? I know that that is particularly difficult because governments of all colours are reluctant to tie themselves down until the regulations are published and when they have had consultations, for example, with local authorities. I understand that, but there appears to be a blank cheque which might result in targets not being met.

Lord Whitty: No, the discipline will apply in the target years. There is a great deal of discipline built

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into this process, but in order to meet those targets we believe, in part, that a market solution is appropriate. It is a limited market, but one which would enable what would otherwise be step changes in performance to be smoothed out. That seems highly desirable in those circumstances. If local authorities can arrange matters between each other in order to achieve that, that is a sensible outcome. To restrict them at that stage, would seem unnecessarily inflexible.

Lord Dixon-Smith: I am grateful to the Minister for his explanation. He is trying to be as helpful as he can be in the circumstances, and I am grateful to him for that. Since we are flying blind, that explanation must be helpful to us, but we shall have to study it seriously. As with all these explanations, there is a danger that one gives rise to further questions to which we shall need to return. At the present time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Dixon-Smith moved Amendment No. 28:

    Page 5, line 34, leave out "or any other"

The noble Lord said: These are probing amendments. We appear to be envisaging a system where each allocating authority will have as one part of its strategy a reduction of waste from outside its area going to landfill in its area. But a waste disposal authority within the area will be able to trade allowances from another allocating authority—if we have understood the Bill correctly. That seems to be entirely permissible if we read the Bill with care. I cannot help wondering whether that is really what is intended.

Another potential problem is that we may have one area—let say England—operating one system and the Scots, because they have put part of the Bill through a different system, devising a second system and the Welsh devising a third. There is a risk that we could erode the integrity of the whole. The amendments are important from that point of view and I look forward to hearing the Minister's explanation.

Amendment No. 31 makes

    "provision for limiting the length of journeys to landfill sites made by local waste authorities".

This returns us to a problem that I discussed when debating an earlier amendment: waste being dumped where it is convenient for it to be dumped rather than where it ought to be. One waste manager explained that he assumed that scarce resources would result in higher trading prices—this is on the trading of quota. Hence, if Birmingham were to run out of landfill within 30 miles of the city, that landfill could become a scarce resource and Birmingham could then trade up. At the same time, the landfill operator would charge more.

The problem could reach the point where it was cheaper for Birmingham to sell its close quota, buy something more cheaply that was further away and take the rubbish another 20 miles, perhaps. The overall cost equation for that may work out favourably. We would not want that to happen, but given the realities of creating a market, it could.

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Finally, Amendment No. 32 allows the allocating authority to suspend the transfer of allowances. Again, we do not know the circumstances under which the Secretary of State, who would be the allocating authority, might decide to do that. We know only that the power exists. Once again, this concerns timing. When will he do this? Why? How much notice will he give of the change? Will he be able to suspend all trading of all allowances, or is he likely to suspend trading only in futures allowances? Might he suspend trading in past allowances that are surplus because authorities have met their targets? All the amendments have been tabled to elicit further information. I beg to move.

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