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Lord McIntosh of Haringey: My Lords, I am glad that the noble Lord, Lord Barnett, got out from Equitable Life in time—I hope that it was not on the basis of inside information. I am still with Equitable Life for the AVCs on my ministerial salary. I suppose that I should have declared that interest right from the very beginning. Of course, there are very good reasons why government should not be lavish in compensation for those who are badly treated by private companies. That is why we have a Financial Services Compensation Fund.

Lord Naseby: My Lords, I declare an interest as the chairman of a life company and as the recipient of a very small annuity through the Parliamentary Pension Fund. Lord Penrose says that the society was the author of its own misfortune. In his Statement the Minister highlighted a number of situations that happened with that society, particularly that the appointed actuary did not follow best practice—I

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thought it was law, but it was only best practice—and made a recommendation on bonuses. It was for the board to decide whether that recommendation was acceptable.

Equitable Life trumpeted that its business plan was different from what everybody else was doing in the market. It trumpeted that it had no salesmen, its ratios were far lower than others and that it did not need the same sort of savings ratio as everybody else needed. Is not the real lesson that if a society, a company or any other organisation trumpets such a business plan, it is the signal to a regulator of any sort that it is worth having a close look at it?

In his Statement, the Minister said that we are to have three new reviews into the mutual movement. That is not welcome. Has there been any consultation with the FSA, particularly about the actuarial and accounting dimensions? The mutual movement and the normal movement have just gone through an exercise with the FSA, which is just coming to fruition. If the Minister is now saying that we have to start again, it is terrible news for any organisation that serves the public in savings. Has there been any consultation with the FSA before today's Statement about setting up those two reviews? What is the point of a third review on corporate governance when those of us involved in corporate governance have only just got to grips with Turnbull and Higgs and have started to implement all those recommendations?

Finally, can we have an assurance that these specific reviews that are, as I understand it, for the mutual movement, and presumably just for the mutual life movement, will not result in discrimination against the mutual movement as opposed to the commercial movement.

Lord McIntosh of Haringey: My Lords, this report was very thoroughly "Maxwellised" before it was published. I rather think that anything I say should be "Maxwellised", particularly if I am speaking without a script in your Lordships' House. In view of the fact that Lord Penrose says that there are matters that may go before the courts, I have to be extraordinarily careful in expressing any opinions that might affect that. The noble Lord, Lord Naseby, will forgive me if I do not go into his first point.

I do not think he is being fair about the three reviews. One of them—the Paul Myners review—will be about the governance of mutual life offices. I hope that the noble Lord will agree that there have been serious criticisms about the governance of one mutual life office. I hope that he and his company will not resist co-operation with Paul Myners in that review.

The other two reviews are rather different. One is to be about the actuarial profession. That is the review to be led by Sir Derek Morris, which is not particularly about mutual life offices. The third is the Accounting Standards Board's review into accounting for with-profits businesses by life assurers. All of those follow rationally from the conclusions of Lord Penrose.

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Constitutional Reform Bill [HL]

5.44 p.m.

Second Reading debate resumed.

Lord Mackay of Clashfern: My Lords, it seems to be a strange coincidence that we should have been discussing the report of Lord Penrose as he was a pupil of mine in years long gone by.

On the radio the other day, the noble Lord, Lord Goodhart, spoke of "the nuclear option" in discussing the provisions of the Asylum and Immigration (Treatment of Claimants, etc.) Bill, and particularly what is now Clause 11 of that Bill. By that, I understood him to refer to the possibility that if the courts saw that an Act of Parliament precluded them from intervening in an injustice, they might be in a difficult position in deciding their course of action in the light of that problem.

Under the arrangements that the present Bill proposes to replace there are two safeguards against the occurrence of the nuclear option—I am assuming from that description that most of us would agree that the nuclear option is to be avoided if possible. The first safeguard is the existence in the Cabinet of a person who took a judicial oath and who the Prime Minister of the day thought competent to preside over the highest court of appeal in this country. Therefore, one would believe that the chances of an unconstitutional measure getting through the Cabinet would be reduced by the existence of the Lord Chancellor.

The second is the existence of the Lords of Appeal in Ordinary in this House. Whatever they have done to indicate situations in which they would neither speak nor vote, I do not believe that that was intended to apply to a situation in which the Law Lords thought that the House was being asked to pass regulations or laws that were unconstitutional. I believe that the Writs of Summons, which they all accepted, put them under the obligation, if such an occurrence came to their notice, to do what they could by exercising the powers that Parliament and the state had given them to avoid that. I see nothing to replace that in the proposals that the Lord Chancellor has put before us in the Bill.

A great deal is said—and there is the question of how effective it is—about judicial independence, but there is not much use having a lot of independent judges waiting to do the work if they are deprived of the jurisdiction by Act of Parliament. There would be massive unemployment of highly independent judges. As far as I can see, there is nothing in the Bill to protect against that possibility. It is not an entirely theoretical possibility because the noble Lord, Lord Goodhart—who I am glad to see has returned to be with us—was talking about a particular issue when he mentioned the nuclear option.

I am conscious of the fact that I spoke in the previous debate and I am endeavouring to give effect to what the Chief Whip said and I shall not go over what I said before. But there is one aspect of what was said in the previous debate that does trouble me—that

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is when the noble and learned Lord, Lord Falconer of Thoroton, vividly described the tension that exists in the office of Lord Chancellor. I am conscious of the fact that any Minister has a desire to do his best for the interests that he serves. Sometimes, perhaps more often than not, the Treasury is apt to come along and limit the success of his aspirations. That is a tension that the Lord Chancellor, like every other Minister, faces. But this seemed to be something different: a tension between the requirements of the Lord Chancellor's office and those of the ministerial office. If that means that as a Minister he wants to do something that as Lord Chancellor he should not do, it raises serious questions about what is involved. If the Lord Chancellor's responsibilities prevent him doing, or not doing, something that the Minister either will do, or will not do, it seems to me that what the Minister is proposing needs to be examined in some detail.

I pass to the Supreme Court and those proposals. I entirely accept the views expressed by the noble and learned Lord, Lord Nicholls of Birkenhead—a very experienced judge in the High Court and the Court of Appeal, as a head of division, and as the longest serving of the present Lords of Appeal in Ordinary. In my view he expressed eloquently and moderately the difficulties in the way of a Supreme Court.

If a Supreme Court is to be set up, I would suggest that those who have been British advocates general or British judges in the European Court at Luxembourg, the British judge at the European Court of Human Rights or the British judge at the International Court of Justice should be considered for eligibility to serve on the Supreme Court.

I feel that the Lord Chancellor's deliberate refraining from giving me an undertaking that the Supreme Court's facilities would be in position before the Act was brought into force indicates something about the importance that they attach to a Supreme Court. What could be a more inauspicious beginning for a new court than to continue in this building under the present arrangement, presumably with a sign up pointing to the Supreme Court? It would be interesting to see where the sign would lead you. That strikes me as an extraordinary way to start; and yet the Government have made it clear that they are not prepared—voluntarily, anyway—to give an undertaking that the facilities would be in place first.

We have some explanation about what will be done on finances in the passage in the Explanatory Notes to which the noble and learned Lord, Lord Lloyd, referred. I have not understood fully what these passages are saying, but I think that they say, among other things, that the level of fees to be charged in this new Supreme Court will be of the order of 10 times the fees presently charged in the House of Lords and that the balance of the money required will be raised from the other civil courts in the country—England and Wales, Scotland and Northern Ireland—right down to the lowest. So, for example, someone pursuing a small claim will have to pay a proportion of the additional costs incurred as a result of setting up the Supreme Court.

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There are, of course, other difficulties. The spread shown for the figures on total cost is not reflected when one tries to bring these costs down to the individual cases.

Those matters all suggest to me that the proposals have come forward with a degree of haste which is inappropriate for a major constitutional issue. To call it a government flagship is a good idea; I am sure that it is very important. However, I think that fundamental constitutional change requires a degree of deliberation. One of the reasons I say that is that the Select Committee of the House of Commons dealing with constitutional affairs—presided over by a very experienced Liberal Democrat, and with a substantial Labour Party majority in it, at least two of whom have great experience in the law—came to the conclusion that these changes should be considered first in a draft Bill.

5.53 p.m.

Lord Brennan: My Lords, as a law student it was told to me that constitutional principles provide the necessary integrity to our democracy. If that makes me a constitutional purist, I plead guilty. I find it difficult in the extreme that those such as the noble and learned Lords, Lord Lloyd and Lord Nicholls, should describe themselves as unreconstructed pragmatists. It is an intellectual concept of constitutional law which I cannot grasp. The importance of constitutional principle is at the heart of the Bill. A Supreme Court separate from the legislature, an independent commission for judicial appointments, the statutory underpinning of the independence of the judiciary are matters of the greatest moment. They are matters that should properly occupy debate in this Chamber and the other place and not in a Select Committee. The legislative process has started. It should follow its normal progress.

I accept and respect the sincerity of those who take a different view. However, I submit that it is a view which is unrepresentative and unnecessary to apply. It is almost undemocratic, if I understood correctly my noble friend Lord Carter, that a Select Committee could recommend after consideration that this Bill should not proceed. That would not be a bar to this House proceeding with it, but it would be a considerable constitutional obstacle for a small group of our members to put up to the face of the House.

Why do I say that it is unrepresentative and unnecessary to accept the amendment that the Bill should go to a Select Committee? First, the creation of a Judicial Appointments Commission has been generally endorsed as a necessary and worthwhile recommendation. The only significant issue about it is whether the recommendations of the commission should themselves be effective by way of appointment or whether it should be the subject of government recommendation or some hybrid of the two. The value of a judicial ombudsman to safeguard the processes is obvious. The noble and learned Lord, Lord Woolf, has just said that this is a scheme of appointment that is urgently necessary. What reason is there for delay in debating that question on the Floor of this Chamber? There is no democratic reason for delay.

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Secondly, a Supreme Court has been debated for a number of years under the rubric of two basic contentions, the first of which is that judges are not legislators. It is so trite it seems difficult to see why we should have to say it. The second is that the Supreme Court of the House of Lords in its judicial capacity as we presently know it should be separate from—different from—the legislature and the executive.

I said that the amendment to put this matter to a Select Committee was unrepresentative and I meant it. All the lawyers, through their Bar Councils or Law Societies in England and Wales, Scotland and Northern Ireland, have accepted the principle of a Supreme Court subject to the mechanics of its constitution being properly debated and subject, of course, to adequate resources being given to it. All the NGOs that are concerned with justice and constitutional issues support it.

Of the 12 current members of the judicial panel of the Judicial Committee, five have said they are in favour of a Supreme Court, five are against, one has abstained, and one is as yet undecided. In the debates of February and now, it may well be that the impression is given to the House that the judiciary at that level is against this reform. That would be totally misleading. The judges of the Judicial Committee, such as the noble and learned Lords, Lord Bingham, Lord Steyn and others who are in favour of it, choose by virtue of their belief in democratic principle not to attend and debate the question in this Chamber, not because they are diffident about their convictions that a Supreme Court is the right course for our constitution.

The critical question about the Supreme Court is surely one of principle: are you in favour of it or not? What reason does that give for delay? None. It is a matter for this House to decide, if necessary by vote in this Chamber.

I turn to the independence of the judiciary. The demise of the office of the Lord Chancellor is envisaged in this Bill. The noble and learned Lord, Lord Woolf, the Lord Chief Justice, has just expressed that which he has expressed before, the concern that by the course of events since last year it will be simply impractical to go back to the world of the Lord Chancellor's powers that many in this Chamber would want to see. It is simply impractical.

Furthermore, is it constitutionally appropriate that a Minister such as the Lord Chancellor, responsible for several billions of pounds of expenditure of public money should be in this Chamber and not accountable to the elected Chamber? That point was made forcefully by my noble and learned friend Lord Morris in the previous debate and it is a telling point. We cannot democratically suggest that in our constitution there must always be a Lord Chancellor whose job it is to protect the independence of the judiciary. As I said last time, it is simply not the realpolitik of modern political life.

What confidence can we have that if we keep the tradition of the Lord Chancellor's role those who hold that position in future will occupy it with the same

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independence and distinction as those in the past? Is it not better that the independence of the judiciary should be underpinned by statute?

In January of this year the Lord Chief Justice and the Lord Chancellor agreed a concordat by which this Bill would meet the concerns of the judiciary about how their independence was to be guaranteed. Clause 1 of the Bill seeks to do it. It may need to be revised and improved. But it makes it clear what the parliamentary intent is.

Nothing has been said in this debate so far of the much enhanced power of the Lord Chief Justice under the new scheme in the management and control of the judiciary, the courts system and their financing. Judicial discipline, previously at the behest of the Lord Chancellor alone, now must be exercised by the new Secretary only with the concurrence of the Lord Chief Justice. Is this a retreat from good standards or an advance towards better ones? Is legislative protection less important than an undefined, assumed confidence in particular individuals? Surely not.

So what is the reason for delay on this front—that we want to keep the role of the Lord Chancellor? Is that enough to frustrate a Bill of this constitutional importance? I suggest it is not. Thomas Paine, in the introduction to his book on Common Sense, said that a long habit of not thinking a thing wrong gives it a superficial impression of being right and raises at debate a formidable outcry in defence of custom and that such outcry has to be resisted and rejected.

This Bill introduces a new, written chapter into our mostly unwritten constitution. It demands the fullest parliamentary attention, impartiality, wherever possible, and an apolitical approach. Above all, there should be concern for our national values of constitutional principle. If the House accepts the amendment it faces two consequences. First, will confidence in our ability to accept and undertake major and sometimes controversial legislation as the first Chamber remain as it is now? I wonder. Secondly, do we not run the risk of being seen unreasonably to be obstructing reasonable reform?

The Government are bent on major constitutional change. That involves two government obligations in conducting this Bill here and in another place. The first is that they should be receptive to constructive amendment. This is a constitution of the people, not of a Labour government. Secondly, they must be very astute to avoid unnecessary delay. If this is the way our constitution should be, we should brook no significant delay.

6.6 p.m.

The Lord Bishop of Worcester: My Lords, I am grateful to the noble Lord, Lord Brennan, for a speech that spoke to the heart of the matter. If I come to somewhat different conclusions it is not out of any disrespect for the importance of the issues on which he dwelt.

There are numerous things in this Bill about which we should be pleased: the reform of the judicial appointments and disciplinary system is excellent, and

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the laying on the Government of a duty to support the independence of the judiciary. I wonder what utterances that might have spared us if it had already been in place. It is an excellent thing that it should be.

However, I wish to voice my own sense of caution on the subject of the Supreme Court. It is a concern with the way in which the word independence has come to be used in a context in which I would personally have preferred the word integrity. What is important to us is that judges should not be interfered with by the exercise of undue pressure of any kind and that their rights and authority should be respected.

Where I differ from the direction of the Bill is that I am absolutely clear that integrity is no longer safeguarded by what is being called independence and certainly not by what is being called separation. I wonder if I might be allowed to trespass on your Lordships' attention for a moment by talking about a situation outside this House, namely, that of the Anglican world-wide communion where the tradition of independence of its several provinces has placed the whole notion of a communion under enormous strain. The reason is that in a world that is globalised and reducing in size, independence is an illusion. The pressure is intense and the means to exercise it are many and various.

I do not believe myself that it is a guarantee of the integrity of the judiciary that it should be sent up the road or perhaps it is down the river, to a building that is separate from this House. I do not believe that that guarantees any kind of independence. For the well-being of our society we require interaction with integrity. The presence of the Law Lords in this House, whether they speak or whether they are silent, is itself a statement about the integrity of our society at the highest level in the land. I believe that that is of the profoundest importance.

Each day the Bishop appointed to lead prayers from these Benches prays that, as a result of our deliberations, there may be the knitting together of all persons and estates within this realm. That is at the heart of our constitutional arrangements and speaks about a unitary concept of society, not one in which the separation of powers is the road we follow. There is much that I admire about life in the United States, but all the evidence is that if the organs of power are separated they will find other methods of exercising control and pressure and of violating the integrity which should be our primary concern. They will pack courts politically or they will use the power of money to influence the legislature.

It is an illusion to suppose that the way in which we safeguard integrity is by keeping people apart in their different roles. The reality is that there is no structure of society in which integrity can be safeguarded by separating different components and stopping them from talking to each other. The fact that the Law Lords have exercised a certain self-denying ordinance about how they discharge their role in this Chamber is to me not evidence that the present system can no longer work but precisely the opposite—it is evidence that there is an understanding on the part of those who inherit certain

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offices. "Inherit" is a proper word because they, like I dare say those of us who sit on these Benches, are very conscious of stepping into a tradition which has the possibility of changing you as a person and enabling you to put your own personal, political or even legal agendas to one side in the exercise of your office. That seems to me to be an indispensable model. I venture to suggest that it will continue to be indispensable long after—if this Bill goes through—we have sent the Law Lords on their way.

I urge the House to consider that there is in the constitution of this country—that is to make no judgment on the constitutions of other countries—a heart that searches for interaction with integrity rather than separation and independence. It is not for me to criticise the judges who have found that the phrase, "the independence of the judiciary", suits their purposes. However, from my particular vantage point—or, one might say, disadvantage point—it is not the best phrase to choose. I do not believe that the days of independence can be with us much longer in the creation of a just and peaceable world. I believe that the world of interaction with integrity in the search for justice, a world that relies and builds up the capacity of individuals and institutions while listening with great intensity and attention to the words of other institutions and other bodies, that enhances their ability nevertheless to stand in their own place and make their own decisions and come to their own conclusions, is the world we need if we are to live in peace and justice with each other.

I listen to this debate with a view to helping me make up my mind about the amendment of the noble and learned Lord, Lord Lloyd. The issue that will have to be debated hard in this place, in another place and in our society at large is what price we are prepared to pay, in terms of the discomfort of individuals regarding the roles they have to hold together, in allowing a society to evolve in which interaction with integrity—the harder route than the route of independence and separation—is allowed to be developed and nourished among us.

6.13 p.m.

Lord McCluskey: My Lords, I was not able to speak on 12 February but I shall none the less try to be brief. I make it plain that I extend a complete welcome to Part 3 of the Bill and that I have no objection in principle to the notion of a Supreme Court which is properly thought out, properly established and properly resourced. However, it appears to me that this Bill contains much that is unnecessary. It is not clear what good some of its provisions will do and I fear there are reasons for supposing that the Bill will wreak real harm.

I have been a Member of your Lordships' House for nearly 30 years—on the Front Bench for the government, on the Front Bench for the opposition, on the Back Bench for the opposition and on the Cross Benches for some time. Therefore, I can claim some experience of the work of the House and of the part played in that work by those Members who are also judges. In my time many noble and learned Lords,

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including a number of serving Lords of Appeal, have contributed enormously and valuably to the work of the House, especially in relation to constitutional affairs.

As some noble Lords will remember, in the 1970s I was heavily involved when, from the government Front Bench, I assisted the then Lord Chancellor, Lord Elwyn-Jones, to take the Scotland Bill and the Wales Bill through this House. I remind your Lordships of the names of a few of those who contributed to that debate—Lord Wilberforce, Lord Wheatley—the Lord Justice Clerk of Scotland—the noble and learned Lord, Lord Scarman, Viscount Dilhorne, Lord Diplock, Lord Hailsham, the noble and learned Lord, Lord Ackner, who is present today, and Lord Morris of Borth-y-Gest: there are many others who today continue in that excellent tradition. In my opinion the revising and advising function of this House would be significantly impoverished if we were to deprive ourselves of the possibility of contributions from judges of the calibre of those I have mentioned. Not only that but serving judges act as the chairmen of, or members of, committees of the House that do extremely valuable work which makes the House of Lords worth while. It would be a shame to take them away from that precipitately.

It is now suddenly suggested that to have serving judges participate in the work of the upper House is an offence against the doctrine of the separation of powers. A good deal of nonsense is spoken about the separation of powers. We have never had a separation of powers of the kind that Montesquieu persuaded the American founders of the constitution to adopt in Philadelphia at the end of the 18th century. For example, our executive is embedded in the legislature in a way that must make Montesquieu turn in his grave. I have reminded your Lordships that for a very long time, certainly for 135 years or so, serving judges have always played an important part in the deliberations of this House. They seldom vote. If voting is seen as anomalous, I am sure that they would be ready to adopt a convention that they would never vote except on matters of conscience, just as the non-judicial Members of this House observe a convention that they do not vote in the proceedings of the Appellate Committee. There is nothing to stop us adopting a convention that enables us to separate our judicial function from our function as Members of this House.

I take some pride in the fact that, following the sterling example of the noble and learned Lord, Lord Scarman, when dealing with the Police and Criminal Evidence Bill in 1984, when he successfully moved two amendments against the then government in order to improve that Bill, I proposed and successfully argued in this Chamber an important amendment to the Scotland Bill in November 1998. I see that the noble Lord, Lord Carter, is present. He will remember how, much to his irritation, we defeated the government. What we did then was to remove from the Scotland Bill a provision that judges could be removed by a vote in a single Chamber of Parliament on the initiative of the Secretary of State or the First Minister. That was seen as totally obnoxious. I am happy to say that your Lordships' House—I had the

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great support of the noble Lord, Lord Lester of Herne Hill—defeated that particular provision. I was able to do that with the assistance of the noble and learned Lord, Lord Hope of Craighead, who is present, and my noble and learned friends Lord Clyde and Lord Jauncey of Tullichettle, who is sitting beside me.

That enables me when I meet foreign judges and foreign lawyers, as I do, in the United States, Canada, throughout the Commonwealth, and in the former Soviet Union, to explain that we have independent judges, at least in Scotland, because they cannot be sacked except by a special procedure which has effectively to go through the Privy Council.

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