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Lord Davies of Oldham: My Lords, on behalf of my noble friend Lady Scotland of Asthal, I beg to move that the debate be adjourned until Monday next.

Moved, That the debate be adjourned until Monday next.—(Lord Davies of Oldham.)

On Question, Motion agreed to, and debate adjourned accordingly until Monday next.

Written Statements

Thursday 25 November 2004

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Queen's Counsel

The Secretary of State for Constitutional Affairs and Lord Chancellor (Lord Falconer of Thoroton): In May 2004 I told the House that I had asked the legal professions in England and Wales and in Northern Ireland to devise an improved scheme for appointing Queen's Counsel. I am pleased to be able to say that the Bar Council and the Law Society in England and Wales have reached agreement on a set of competences against which applicants for the QC rank should be assessed, and on an outline of the process for doing so. I have placed copies of both the competency framework and the outline process in the Library.

Considerable work still needs to be done to refine some of the details and to develop the mechanics of the assessment process. None the less, this is a very encouraging development. I congratulate the professional bodies on what they have achieved so far, and look forward to the introduction of a new and better system.

The Bar Council and Law Society in Northern Ireland are continuing to work on a similar scheme tailored to the requirements of their jurisdiction. They hope to make an announcement soon.

NHS Estate

The Parliamentary Under-Secretary of State, Department of Health (Lord Warner): A £17 billion improvement programme is being undertaken to improve the NHS estate. As a result of this investment the amount of the estate dating from before 1948 has halved since 1995. However, because of flaws in the current methodology, backlog maintenance figures do not reflect these improvements. A validation exercise has been undertaken on the 2002–03 backlog maintenance figures, prompted by concerns expressed by the NHS that these figures were both unrealistically high and not being consistently calculated and collected across the NHS.

We have decided to revise the way we measure backlog maintenance to give a more accurate picture of the condition of the NHS estate, to give the NHS a clearer idea of its priorities in improving its buildings and to allow managers to continue making the improvements that will build even better environments for both patients and staff. It will help the Healthcare Commission more accurately to measure NHS performance on the new national standards.

To ensure the estate continues to be maintained and improved, a much more constructive and consistent revised backlog measure—risk adjusted backlog maintenance—has been developed with the NHS. This places greater emphasis on identifying and measuring
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risk to business continuity and safety to patients, visitors and staff and has a greater focus on the quality of the estate and the remaining life of the building.

Backlog maintenance figures and the estimated risk adjusted figures for 2003–04 have been placed in the Library.

Health Inequalities: Spearhead Group

Lord Warner: My honourable friend the Parliamentary Under-Secretary of State for Public Health has today made the following Written Ministerial Statement.

The public health White Paper, Choosing Health: Making Healthy Choices Easier, set out the importance of ensuring that as the country strives to improve its health a priority must be given to tackling health inequalities so that all groups in society benefit from improvements in public health.

The Government have set public service agreement targets to address geographical inequalities in life expectancy, cancer, heart disease, stroke and related diseases. The targets aim to see faster progress compared to the average in the "fifth of areas with the worst health and deprivation indicators". Achievement of the targets will be assessed on the outcomes for this group in 2010. The local authorities and primary care trusts which are in these areas, the so-called Spearhead Group, has been published.

The Spearhead Group is made up of 70 local authorities and 88 primary care trusts, based upon the local authority areas that are in the bottom fifth nationally for three or more of the following five factors:

The list of local authorities and primary care trusts in the Spearhead Group is available in the Library.

For more information on health inequalities and on the Spearhead Group, visit

Human Fertilisation and Embryology Authority: Annual Report

Lord Warner: My honourable friend the Parliamentary Under-Secretary of State for Public Health has today made the following Written Ministerial Statement.

The 2003-04 annual report of the Human Fertilisation and Embryology Authority was laid before the House today. Copies of the report have been placed in the Library.
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Low Pay Commission: Government Evidence

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My honourable friend the Parliamentary Under-Secretary of State for Trade and Industry (Gerry Sutcliffe) has made the following Statement.

I am pleased to announce that the Government submitted their evidence to the Low Pay Commission today. The commission will take this and all the other evidence received into account when preparing its next report, which will be submitted to the Government by the end of February 2005. Copies of the Government's evidence have been placed in the Libraries of both Houses and on the Department of Trade and Industry website (

Operating and Financial Review

Lord Sainsbury of Turville: My right honourable friend the Minister of State for Industry and the Regions and Deputy Minister for Women and Equality (Jacqui Smith) has made the following Statement.

My department published a consultation on 5 May 2004 seeking views on draft regulations to implement a new statutory operating and financial review (OFR) and certain provisions of the accounts modernisation directive, requiring an enhanced review of a company's business in the directors' report.

This Statement explains how the Government intend to proceed in the light of responses to the consultation document. I am grateful to all those who responded to the consultation. A summary of the responses will be placed on the DTI website next month and in the Libraries of both Houses.

Our OFR proposals have been subject to extensive public consultation over the past four years. In making this statement today I am clear that the OFR will improve the quality, usefulness and relevance of information provided by quoted companies—helping investors, shareholders and other interested parties get a better understanding of a company's operations and its future business prospects.

The OFR represents a real opportunity for business to promote long-term value creation. Improved shareholder engagement will help strengthen corporate performance and boost confidence in UK companies. The OFR is a vital part of the DTI's drive for effective corporate governance, which will benefit investors, business and the economy at large by improving the quality of investment decisions and the allocation of capital.

I have considered consultees' comments carefully with a view to ensuring companies are able to provide full and frank disclosures in a cost-effective and efficient way. This will enhance the usefulness of the OFR for both shareholders and other stakeholders. As a result, I am amending some of the earlier proposals to ensure that the regulations achieve the Government's overarching policy objectives.
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On coverage for the OFR, I have considered the arguments for both extending the OFR (to large private companies) and for narrowing it (to larger quoted companies only). I have concluded that the draft regulations should stand as drafted. There will be no extension of scope for the OFR and it will apply to quoted companies only.

I have also considered the standard of care required of directors preparing the OFR, as well as the role of auditors. On the first point, I have decided to drop the requirement that auditors give an opinion on whether the directors have used "due and careful enquiry" in preparing the OFR. This should address concerns that we might be requiring a different legal standard for this type of corporate report.

On the second point, I am simplifying the role of the auditors. I am retaining the requirement that auditors should consider whether the OFR is consistent with the company's accounts, and whether it contains any inconsistencies based on any matters that have come to their attention while conducting the company audit.

This reflects concerns that having auditors review the process would prove difficult and costly, and have the unintended consequence of discouraging full and frank reporting by reducing the OFR into an anodyne, "box-ticking" exercise.

I believe directors can be open and candid with information on the basis that a distinction can be made between those statements made based on good faith judgments, and those made based on objectively verifiable data. Guidance notes will make clear to companies that they may wish to advise members of the need to treat with caution good faith judgments, in particular those relating to future events or prospects. As well, the regulations will make clear that directors will not be required to disclose specific information about impending developments or specific matters in the course of negotiation.

Following the consultation, we believe the objectives and content of the OFR are right. No changes of substance will be made therefore and there will be no extension of content.

Having met the review objective and general requirements of the schedule, directors will then need to consider and include information relating to their environmental, employment, and social and community policies to the extent necessary for shareholders to understand how these are impacting the business and wider community.

With regard to enforcement, I believe the OFR warrants the implementation of a sturdy regime but must be allowed a chance to bed-in. I have therefore decided to delay the FRRP's role in administrative enforcement until one year after the duty to prepare OFRs has kicked in. This means the FRRP will start looking at OFRs prepared for financial years starting on or after 1 April 2006.

I have also addressed potential cost burdens arising from our proposal to make mandatory hard-copy circulation of the OFR. Where shareholders have agreed to receive summary financial statements, there will be no requirement for the full OFR to be sent, and
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shareholders will be notified of the availability of the OFR on the company website.

In addition, potential duplication of reporting requirements occasioned by the introduction of the EU modernisation directive will be avoided. All companies in a group other than small companies will be required to produce individual directors' reports or, if they are quoted, individual OFRs with the ultimate parent company also producing a group report (but not an individual report). Where the parent is a quoted company, the OFR will be prepared for the group. Small and medium-sized companies will be allowed to take full advantage of reporting exemptions under EU accounting directives, including those that that are part of a group.

Finally, on timing, I intend to lay the regulations within the next two months. Given concerns expressed in consultation about the need for adequate preparation time, the date the regulations come into effect will be delayed until financial years beginning on or after 1 April 2005 (and not 1 January 2005), thus giving business three extra months to absorb the new reporting standard and prepare for implementation.

We know the business environment is changing dramatically and at an accelerating pace. Companies are becoming increasingly complex and information needs are changing. This was reflected during the consultation and in the responses from stakeholders: companies, institutional investors, professional bodies, auditors, trades unions and representative organisations.

It is evident that vibrant capital markets rely on interventions and institutions that promote the governance of companies. Corporate governance structures ensure shareholders receive reliable information about the value of companies, while motivating directors and managers to maximise long-term value creation. I believe that the OFR is a crucial element in the corporate governance agenda, and will contribute to raising the productivity of British companies, helping generate prosperity for all.

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