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Lord Davies of Oldham: My Lords, Ministers followed officials advice about the impact on the finances of pension schemes of the abolition of payable tax credits. The officials advice was that the existence of the payable tax credit distorted investment decisions by encouraging companies to pay out dividends. Abolishing payable tax credits encouraged companies to base their investment decisions more on long-term commercial requirements and less on the need to pay high dividends.
Lord Jenkin of Roding: My Lords, is the Minister aware that the system of advance corporation tax, which is the origin of this problem and was introduced in 1972 after over a years very full public consultation, was intended to, and indeed did, remove the double taxation of distributed profits? Is he aware that that is largely in force today? Is he also aware that almost the only exception to that covers dividends paid to pension funds, where ACT was effectively removed by the Chancellor in 1997 without any consultation? Why must pension fund investors be the only shareholders to suffer double taxation on the distributed profits of the companies in which they invest?
Lord Davies of Oldham: My Lords, a strategic decision was taken in 1997 to link this issue to the reduction of corporation tax in order to guarantee incentives for greater investment in our business and industry, which in the longer run would benefit pension funds. That is largely what happened. The economic growth of the country since then has ensured that resources going into pension funds have increased substantially, but the whole House will recognise that the demands upon pension funds are accelerating at a great rate, particularly because of longevity.
Lord Morris of Handsworth: My Lords, does the Minister agree that employees contributions to pension funds are generally seen as deferred earnings? Will he therefore comment on the negative impact on pension funds caused by a number of employers taking pension holidays and refusing to contribute to their funds? Will he further say whether the withdrawal of the tax credit had the support of the CBI?
Lord Davies of Oldham: My Lords, we are engaging rather more with history than with the countrys immediate position regarding pensions, but my noble friend is right that companies taking pension holidays, which were subsequently found not to be justified, was a contributory factor in the limited resources of pension funds. On the noble Lords general point, there have been difficulties for pension funds, as we all recognise; nevertheless, I think that pension holidays are a thing of the past.
Baroness Noakes: My Lords, will the Minister confirm that it was a legal requirement that employers took pension holidays when certain conditions were fulfilled and not a question of employers choosing to take them, which implies that they voluntarily weakened their pension schemes?
Lord Davies of Oldham: My Lords, we are back to the 1980s again. I can only emphasise that the most important decision with regard to the 1980s was the reduction in corporation tax, which greatly aided British industry.
Lord Newby: My Lords, perhaps we may return to the present. Will the Minister confirm that the Chancellor continues to hit pension funds and that reducing rate relief on empty property in this years Budget will wipe £3 billion from the assets of pension and life insurance funds?
Lord Davies of Oldham: My Lords, the noble Lord cannot have it both ways, because I know that his party is as vocal as any about our current accommodation problem and housing crisis. The Chancellor therefore bears in mind incentives for bringing as much property as possible into use and not keeping it empty. More generally, substantial progress on this matter has been made in recent years. I do not see the advantages in our revisiting 1997. There will always be arguments about a decision taken, but what do we gain from revisiting them?
Lord Campbell-Savours: My Lords, will my noble friend confirm that not a single opposition politician in either House was able to predict the dotcom collapse when it came at the end of the 1990s, which was in many ways responsible for what happened?
Lord Davies of Oldham: My Lords, immediately after the Chancellors decision in 1997, investment in this country, contrary to some of the more pessimistic perspectives, rose significantly, by 16 per cent in three years. What was not foreseen was the exposed position of the dotcom companies. My noble friend is right that the losses sustained by pension funds from that collapse were much greater than anything that had occurred previously.
(2) Accredited community restorative justice schemes shall be inspected regularly by the Criminal Justice Inspectorate, which shall report on such inspections to the Secretary of State who shall publish a report.
(4) If the Criminal Justice Inspectorate considers that a scheme is unsatisfactory or is operating in an unsatisfactory manner, it may recommend to the Secretary of State that it be removed from the register.
We have discussed these issues at some length and remain of the view that a lot more unites than divides us on this issue. With respect to the noble Lord, Lord Trimble, who in due course will propose an amendment, our view is that the clause already addresses his concerns. What we want to achieve is essentially the same as he intends, and I hope that that offers some comfort. We have some concern that his amendments, which are obviously well intended, will have some unfortunate side effects that he would not wish to see.
The government amendment was drafted by parliamentary counsel to provide that the chief inspector may inspect a restorative justice scheme, to confer on him the power to do so. The Government intend that the chief inspector will inspect schemes as regularly as he thinks appropriate. The noble Lords amendment creates instead a statutory duty on the chief inspector regularly to inspect all schemes. Under such an arrangement, the chief inspector could be in breach of that statutory duty if he did not inspect all schemes with the same regularity, whether or not he believed it appropriate to do so. This could leave the chief inspector vulnerable to legal challenge when he is merely carrying out the task conferred on him by the Government with the diligence that he has shown in his work so far. For example, there might be occasions when the chief inspector will wish to inspect some schemes more frequently than others, either in response to complaints or simply to satisfy himself that proper standards are being met. The noble Lords amendment would constrain him in his ability to do this.
I regret to say, too, that the amendment appears to suggest that regular inspection is required of schemes that are the subject of an application to register. Schemes in that transitional position are subject to a preregistration inspection and are inspected again by consent only if they have initially failed to meet the required standards for registration. The application process should take about two to three months, so we do not see the need for more than one inspection during the application process unless the chief inspector wishes to check that conditional recommendations have been implemented.
As for handling inspection reports, the government amendment provides that each inspection will be reported by the chief inspector but affords the flexibility for several inspections to be addressed in one report when the chief inspector thinks it appropriate to do so. Each of those reports representing all the inspections undertaken would then be published and laid before Parliament by the Secretary of State. Amendments Nos. 3C and 3D remove from the chief inspector the flexibility to report collectively on a number of schemes operating under the same organisational banner. We have seen that operating already very effectively in his collective pre-accreditation inspection report on four community-based restorative justice schemes, affiliated to the Northern Ireland alternatives. That was laid before your Lordships' House on 2 May. But that is a minor point.
The chief inspector will still report on all inspections, but the amendment would limit the exercise of his discretion to inspect and report in the manner that he thinks most appropriate. It is as simple as that. We believe that it is important that the chief inspector retains the flexibility to target those schemes that he assesses might require more frequent announced or unannounced inspections than others. I am certain that is what noble Lords want to happen. Taken collectively, the amendments to the Motion could expose the chief inspector to the risk of unnecessary and potentially mischievous challenge where he might seek to use his own judgment in setting inspection schedules.
On that basis I hope that the noble Lord will not press his amendments. We are at one on this. The policy remains the same as it did before we even started down the route of agreeing to this amendment, which we did at Third Reading. We have simply tried to put the policy as operated into legislative form, meeting the request made by the noble Lord, Lord Trimble, which had the agreement of the House. Parliamentary counsel has chosen this way of doing it. It meets all our policy objectives and gives discretion to the chief inspector, who performs the professional function. I repeat the following for the avoidance of any doubt: a power is provided that the chief inspector may inspect a scheme. That has been done in order to confer on him the very power to inspect a scheme. That is the term which parliamentary counsel thought most appropriate in order to give the chief inspector that power.
I was very pleased when the Minister in this House accepted the new clause that I tabled a few weeks ago. I particularly appreciated the comments that he made in doing so when he referred to the new clause having four main elements, two of which comprised shalls and two of which comprised mays. He noted that there was a balance between what the inspector would be required to do and those matters on which he would have discretion. He said that parliamentary draftsmen would look at these matters and, if they felt that the drafting could be improved, would do so. I had, and have, no difficulty with parliamentary draftsmen looking at these matters and tidying them up. I shall not fuss about the form of matters; it is the substance which is important to me. However, I regret to say that I believe there has been a change of substance here.
The Government amendment is therefore consistent with the approach taken in existing legislation relating to the chief inspector's other inspection functions.[Official Report, Commons, 10/5/07; col. 330.]
Would that it were. The amendment has changed one of the shalls that I had in the original new clause to a may. I refer to the shall that imposed upon the inspector of criminal justice a duty to inspect schemes. Under this amendment that has now become a discretion, which I do not believe is a step in the right direction.
It is instructive to look at the powers and functions of the chief inspector under the existing legislation. This is referred to in the Governments amendment. Section 46 of the Justice (Northern Ireland) Act 2002, headed, Functions of Chief Inspector, begins:
It does not say may or shall, but must. The organisations listed include the Police Service of Northern Ireland, Forensic Science Northern Ireland, the State Pathologists Department, the Public Prosecution Service for Northern Ireland, the Probation Board for Northern Ireland, the Northern Ireland Prison Service and the Justice Board. All these things must be inspected, but when we come to community restorative justice schemes, the Government prefer may.
Against the background of those mandatory requirements in the 2002 Act, I found great difficulty in sympathising with the argument put by the Minister. If it is a matter of form, I am not concerned with it; it is a question of the substance. The substance with regard to the other functions of the criminal justice legislation under the 2002 Act is to put a duty on the inspector to inspect, and to put a duty on him to report with regard to each inspection. If that is the function and the duty of the inspector with regard to all those other matters that he has to look at, why should those responsibilities be less with regard to community restorative justice schemes? The other functions that the inspector is inspectingthe police, the prosecution service, the juvenile board, the probation board and all the rest of it are carried out by professional persons whose knowledge and skill is known from their strong record. A duty is put on the inspector with regard to the inspection of those professional persons carrying out duties that they have carried out before in a responsible way.
Here, we have community restorative justice schemes which, by and large, are going to be run by former paramilitariesthe guidelines adopted by the Northern Ireland Office are designed to enable former paramilitaries to run themyet with regard to them there will be a lesser requirement in terms of inspection and publication. That naturally gives me concern. I want to see community restorative justice schemes operating properly, and the only measure that we have to ensure that is the inspectorate. The inspectorate therefore should be operating with regard to community restorative justice schemes to the same standard and under the same duties as apply to the functions of the inspectorate generally.
Lord Glentoran: My Lords, noble Lords will be well aware that my party and my honourable friend Laurence Robertson did not vote against the Governments proposed amendment in another place. Perhaps that is because we are a very much more sophisticated refining Chamber than another place. It is quite technical to compare the two amendments. They are detailed comparisons, and my noble friend Lord Trimble, coming from the background that he does, is best able to do exactly that, and he has demonstrated to your Lordships the key differences and the key matters about which we are concerned.
The community justice system is very important. It is a high-risk project in Northern Ireland. It is the last of the major concerns that my party has had as we have progressed to devolution. I was very pleased when the Minister was able to accept the amendment proposed by my noble friend Lord Trimble. I was disappointed, despite my lack of experience as a lawyer, when I first read the Governments amendment and realised that theyfor one reason or another, and I do not really understand whyhad weakened the Bill. The amendment proposed by my noble friend Lord Trimble was clear, concise and demanding. The Governments amendment is not that; it is weak and it leaves more open to chance in a high-risk operation of community justice systems in Northern Ireland, some of which will undoubtedly be run by ex-paramilitaries. I support my noble friends amendment.
Lord Smith of Clifton: My Lords, I, too, was initially taken in by the Ministers comments that the inspector needed to have flexibility. Then I heard the incisive argument of the noble Lord, Lord Trimble, who explained why the power might be too flexible. Given the embryonic nature of these schemes, we are in uncharted waters and much could go wrong with their implementationalthough we all hope that they succeed. I understand why we should be more flexible and give greater discretion to inspectors of other agencies, but tight scrutiny by the inspector is needed in the initial period. I was persuaded by the arguments of the noble Lord, Lord Trimble. If he were to press his amendment, we would support him.
Lord Rooker: My Lords, if I had wanted to take offence, I could have. The noble Lord, Lord Smith of Clifton, should know that I am not trying to take anyone in. The Governments proposal in the amendment of the other place is wholly consistent with what has been said here. I repeat that the chief inspector, under Amendments Nos. 3B, 3C and 3D, would statutorily be required to inspect all schemes on the same basis. However, we are not dealing with criminal justice agencies set up by Parliament. The inspector will not inspect any scheme unless it invites him to do so by applying for accreditation. We are dealing with voluntary bodies set up under the protocol. That is wholly different from the position of the other agencies in the criminal justice system mentioned by the noble Lord. None of these restorative justice bodies will be inspected unless they apply voluntarily to be accredited. There is no comparison with the other agencies in that regard; if they apply for accreditation, they will be inspected. Therefore, there is no difference from what was said previously.
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