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I want to reassure the House on that front. The thrust of the noble Baroness’s remarks was about identifying accurately what went wrong. Not only will lessons be learnt from that on how we can improve procedures, but action has already been taken to ensure that existing procedures—which, if followed, would certainly not have given rise to this lapse—will be followed meticulously.

On the future of government information, the whole House will recognise that the Government will need to reassure the nation of confidence in data protection, not least because there is no way in which we can serve the community without guaranteeing that confidence to the nation.

The noble Lord, Lord Newby, asked about failures in the recent past—which the Chancellor of the Exchequer identified in his Statement. Those were nothing to do with CDs in the post—a stolen laptop was one of the previous lapses, for instance. The subject of today’s Statement was a specific case. The noble Lord said it was due to low morale among the staff. That is an easy thing to assert and difficult to refute. I say that members of the government service—we all meet many of them in our daily lives—carry out their duties with proper attention to their responsibilities, but here was a catastrophic lapse where someone did not.

The noble Lord ought not to suggest that the National Audit Office was remiss in the way it requested the information. The National Audit Office asked for the information and it was the responsibility of HMRC to ensure that it was transmitted in a secure fashion—an obligation that was not followed through.

I reiterate that the Chancellor of the Exchequer did not make the Statement to the House until he had assured himself of a severe tightening up of procedures within his department. He also set out to make sure that the public was safeguarded by the full co-operation of all those who would be in possession of customer accounts, in order to effect the best possible protection to people with such accounts.

On ID cards, noble Lords will recognise that part of the problem arose because of the limited nature and degree of security involved. ID cards are meant to improve aspects of that.

I reiterate, the lapse was unacceptable, but day by day, right across government, such procedures are conducted with care, scrupulously and according to proper procedures. Such a lapse is unacceptable and requires the most immediate and proper action. The Chancellor of the Exchequer has already taken such action, and promised further action to tighten up procedures for the future.

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Baroness Farrington of Ribbleton: My Lords, I remind the House that the limited time of 20 minutes for Back-Bench interventions is for brief comments or questions only.

4.49 pm

Lord Skelmersdale: My Lords, one good thing to come out of this disgraceful incident is that child benefit will continue to be paid. Were I a novelist in your Lordships’ House, I would think long and hard before putting such a story into one of my novels. Be that as it may, why it is necessary for the NAO to have such data, in such enormous detail, and why cannot anonymised data be used, such as other organs within government would use?

Lord Davies of Oldham: My Lords, that is a very important question which we expect the review to look at very closely. It may be that what was sent to the National Audit Office in the disk was information above and beyond that which it needed for its purposes. The failure there would have less to do with the request from the National Audit Office than from the way in which the information had been prepared for it. We await the review on that. The Chancellor is concerned that that should form an important part of the review to be carried out which, of course, will be reported to Parliament.

Lord Christopher: My Lords, I have had 40 years of close connection with the Revenue department, 10 of which I was in it and subsequently with the Inland Revenue Staff Federation. The Chancellor certainly deserves credit for the thoroughness and care that he has taken in dealing with this matter once it came to his attention. As two speakers have already hinted, I believe it would be a mistake for inquiries to be limited simply to the issue of data, important though that is.

The Revenue is now being dealt with very differently from how that was done in the past. Culture, which was strong and valuable in the department, has been driven out. That is not something for which I would blame the present Government; if one is honest about it, it started in the days of the noble Baroness, Lady Thatcher. It is now treated like a factory and if one treats a department like a factory results of this nature will occur. To my knowledge, only one member of the board of the Revenue has revenue experience and that was in a specialist department. I think there may be someone from Customs, but I am not sure. The heads of many of the departments have no previous experience in this area. I strongly urge my noble friend to give some assurance that an examination of what is happening there will go beyond that and look at the management style and at the way in which staff are now being treated.

Lord Davies of Oldham: My Lords, the House will recognise the almost unrivalled experience of the relevant department that my noble friend brings to the issue. I assure him that all procedures are being examined. This is a matter of successful and proper management. I assure my noble friend that he is right

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in that unless one gets management structures right and the staff are co-operative, difficulties may flow. It is the responsibility of management to ensure that staff co-operate and enjoy their work as well as they are able and that they fulfil their duties properly. He will appreciate that no stone will be left unturned in examining how the issue arose. The points that he wants examined will indeed be examined. We will require that degree of thoroughness because there can be no question of a lapse of this seriousness ever happening again.

Baroness O'Cathain: My Lords, I have two questions for the Minister. The Statement from the Chancellor of the Exchequer says that the HMRC,

Where does the buck stop? The chairman has now gone and the board of commissioners, according to what the noble Lord, Lord Christopher, says, does not have the experience. It could be in free fall even more now. What responsibility does the Chancellor of the Exchequer take personally?

Secondly, did anyone anticipate that there would be a real problem of morale following the merging of two major organisations and that staff who might be threatened with the cuts could do this out of sheer misery? There are ways that commercial organisations have had to cope by appointing someone tasked specially to bring large organisations together. Did HMRC have someone like that?

Lord Davies of Oldham: My Lords, the question of where the buck stops is quite clear. HMRC is operationally independent; that is why the chair has resigned—he takes responsibility for a clear management failure. But the buck also stops with the Chancellor of the Exchequer, who is responsible for the department in which HMRC is located. Seized by his responsibilities, the Chancellor, of course, immediately took action to minimise the impact upon the public of this catastrophic failure. That is why he acted in the way that he has as soon as he was informed of the calamity and is why he brought to Parliament today his full Statement on what has gone wrong, the action he has already taken to minimise the damage and the action that he intends to take to guarantee that such an event does not occur again. That is the clear line of responsibility.

As to the merging of departments, although this was a more significant bringing together of two former organisations, the House will recognise that the public service sees considerable reorganisations quite frequently, in terms of both efficiency and costs. The noble Baroness will recognise that her own side, too, is very keen to point out from time to time the way in which costs can be reduced by more effective administration. It is the responsibility of every Government to seek to improve the quality of their administration. It is clear that we have particular lessons to learn from this event and the Chancellor has made it clear how he proposes that the nation and particularly the Government should learn those lessons.

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Lord Northbrook: My Lords, the Chancellor was informed of this serious incident on 10 November. Does the noble Lord agree that it is a serious matter that the House has not been informed for more than 10 days afterwards? Secondly, I would like to add to the question of the noble Lord, Lord Newby, about all this information being passed around on CDs. While I am not at all a computer expert, that seems to be a strange way of proceeding. How many other unencrypted CDs are floating around the country? Thirdly, HMRC has been stretched in many ways—it has been entrusted with the distribution of tax credits and the former Chancellor has demanded 25,000 redundancies or job cuts by way of efficiency savings. Is it any wonder that HMRC is in such chaos?

Lord Davies of Oldham: My Lords, I sought to reply earlier on the question of the length of time. The noble Lord will recognise that two issues confronted the Chancellor as soon as he knew that this loss had occurred—first, that the intensity of the search for the missing discs should be stepped up. That is why he intensified the search and then brought in the Metropolitan Police in the hope that the discs would be recovered, which regrettably has not occurred, as yet. Secondly, he was obliged to make sure that the public were protected with regard to their accounts with financial institutions and the banks. The Chancellor needed the fullest possible co-operation from all sectors of the industry where this information related to individual accounts. He has had that full co-operation. That is why we can say with confidence, at this stage, that we know of no reported instance at all of untoward development as a consequence of this information.

We also have every bank working on their customers’ behalf, operating the closest watch on personal accounts. If anything untoward occurs, the customer is made aware. That is not achieved overnight, but it was essential that it should be in place before the Statement to the House. The Chancellor has to balance the obligation to report to Parliament about an issue as serious as this as soon as he is able against effective and necessary action to safeguard the needs of the public.

Lord Barnett: My Lords, this is clearly an appalling lapse by officials in the department concerned. I am prepared, obviously, to leave this matter to further investigation and, I hope, some effective action. However, can my noble friend ensure that staff cuts are not blamed for what happened? As the noble Lord, Lord James, will know from his examination and the Gershon report, in huge government departments it was right that efforts were made to cut staff numbers to create a more effective department. Can my noble friend ensure that there is no question of rushing to blame the whole lapse of management on the staff cuts?

Lord Davies of Oldham: My Lords, I am grateful to my noble friend for putting that issue in context. There have been cuts in a number of departments as a result of work on efficiency, and there has been a

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massive reorganisation as a result of work by the Government; we have not had a lapse of this seriousness or to this extent in any other department. My noble friend is right about that.

The obvious point is that procedures were not followed effectively in this case. There is no evidence that it concerned someone suffering from an enormous overload of work or insufficient supervision. The problem was that procedures were not followed. That lapse cannot be countenanced. Neither I nor anyone else in the House can put the lapse down to insufficient numbers of staff without more evidence than I have at my disposal at the moment.

Lord Brooke of Alverthorpe: My Lords, I, too, was involved in the HMRC Bill, during whose passage confidentiality issues were dealt with. First, regardless of whether Customs and the Inland Revenue had merged, if procedures had not been followed this breach could have happened under the old Inland Revenue. Secondly, can the Minister confirm that while there is a target of 25,000 cuts, in fact only 12,500 cuts have been delivered? If so, and if there is a problem with staffing, will he undertake to ensure that proper staffing is in place before the Government proceed with the further 12,500 cuts to meet the target? Thirdly, did loss of the disk on 18 October arise because of the internal postal service of the merged Revenue and Customs or is there an outsourced service that acts on behalf of the new department? Fourthly, has it been established if any other items went astray on the same day?

Lord Davies of Oldham: My Lords, on the latter point, the TNT courier service was used for this delivery. It will be recognised that other deliverers—in particular, Royal Mail—were in some difficulty at the time because there was a suspension of some services. However, as I have sought to make clear all afternoon, the failure was in the procedure relating to the disk and its security and the fact that it was entrusted to a courier service, which can be of a high standard but is, nevertheless, an external service, and we all know that, by definition, there are limited guarantees in that. That was the process. Where the fault lay is still to be identified, but clearly responsibility rests with the person who pursued this action and the question is whether, in carrying out that action, they followed proper departmental procedures.

I tried, however inadequately, to answer my noble friend on a question a moment ago about cuts. I do not think that cuts have anything to do with this. Of course, economies are being effected across the government service, but that can happen while guaranteeing the service. It is management’s role to ensure that, otherwise the cuts would not be justified. I assure my noble friend that due process will be followed in the department on any development.

Lord Northbrook: My Lords, can the noble Lord answer the question that I posed earlier about whether disks are the most sensible way for this information to be sent around and should a review of this should be carried out?

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Lord Davies of Oldham: My Lords, that issue will certainly be considered by the review, but I think that encrypted disks with proper security can be used effectively. We all recognise the enormous convenience of using disks, but these two disks were safeguarded only by passwords, which provide very limited security, and that is certainly unacceptable.

Lord Skelmersdale: My Lords—

Lord Stoddart of Swindon: My Lords, we have been assured that there are strict procedures to prevent data leaking into unauthorised hands but it is clear that the methods are not successful and that they are not doing the job. I know that the Minister said that there will be a review but, during that review, will the Government examine whether they can handle all the information that they are now demanding about people, whatever they are doing—for example, medical records, the children’s database, the 53 pieces of information that will be required by people who travel and the ID card database? Will it be possible for government to manage all that, plus very much more information? Is it all necessary and will that be inquired into when the safeguarding of systems is reviewed?

Lord Davies of Oldham: My Lords, the review will look at this department’s procedures and at any lessons that can be learnt across government. However, there is a massive movement of information across government departments and between government agencies and external organisations, and safeguarding the privacy of data takes place every day.

When we get a lapse of this nature, we recognise that it is essential that all procedures are followed meticulously and that those procedures are fail-safe. The noble Lord will recognise that over a vast area of the government service there is no question but that data are handled entirely properly. As for the future, technology makes it possible for Governments and for all organisations to acquire information on a scale which could not have been contemplated 20 years ago. What is incumbent upon Governments and other organisations is that information should be used only for the purposes for which it is intended and safeguarded properly. It is the responsibility of the Government to ensure that that occurs with regard to all their information.

Local Transport Bill [HL]

5.10 pm

Second Reading debate resumed.

Lord Roberts of Conwy: My Lords, we return to the Second Reading of the Local Transport Bill. While much of the Bill applies to England and Wales, there is one clause that applies to Wales only and is of particular interest. That is Clause 109 which transfers specific legislative powers to the National Assembly for Wales and has already been mentioned by the noble Lord, Lord Bassam, and by my noble friend Lord Attlee. This clause is one of three such clauses

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which will appear in Bills to come before your Lordships this Session. Similar clauses appear in the Education and Skills Bill and the Planning Reform Bill. These framework clauses, as they are called, will enable the National Assembly and its Government to pass Assembly measures which will have the same effect and force as measures passed by this Parliament. Such clauses are not new to us in Parliament but they are constitutionally important in that they augment and enhance the powers devolved to the National Assembly. I am sure your Lordships would wish to be aware of that. The main powers transferred in Clause 109 relate to schemes for charging for the use of trunk roads in Wales. Trunk roads are the roads for which Welsh Ministers are responsible and they include the major east-west arteries such as the M4 in the south and the A55 in north Wales.

We are informed by the very useful memorandum on these framework provisions supplied by the Welsh Assembly Government that there are no plans to amend the provisions relating to trunk road pricing schemes on an England and Wales basis and that this seems an appropriate opportunity to seek legislative competence for the Assembly,

I think we are all aware by now that there is no similar pricing proposal for England and its national roads. I recall a massive public protest against it on the No. 10 Downing Street website some time ago and I believe that the number of protests reached a record level of 1.8 million.

One's first reaction to the Welsh proposal is fearful to say the least, fearful that the Assembly Government might impose charges for the use of the major arteries I referred to earlier—the M4 and the A55—which supply the life-blood of Wales, as if the Severn Bridge tolls were not enough of a handicap for travellers to the Principality. As someone who had responsibility as a Minister for roads in Wales in the 1980s, I am aware of the vital role major roads played in attracting new industry and contributing to prosperity. It is a fact of life that road traffic increases when the economy prospers and that there is a direct relationship between the two, a point made by the noble Lord, Lord Bassam. Similarly, road traffic declines during a recession. We tend to forget that we are approaching hard times now by all accounts, and economic growth next year is already forecast to be lower than expected. Clearly, in these circumstances, we must do nothing which threatens our economic well-being in Wales or elsewhere in the UK.

The thrust and justification for road charging schemes to date has been that they help to reduce congestion, but it is not inconceivable that the financial proceeds of road charging can in themselves be a powerful stimulus, especially in times when local authorities are strapped for cash, which currently appears to be the case. Some authorities in Wales, for example, have had allocations from the Assembly Government barely covering inflation. They may well be tempted to charge for the use of their roads if there is the possibility of a reward. I share the misgivings of the noble Lord, Lord Cameron of Dillington, about road charging schemes.

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Clause 109 provides that the proceeds of trunk road charging schemes in Wales shall be applied to purposes relating to transport and that, prima facie, is good news. But, of course, any resulting increase in the resources available for transport purposes will probably mean a smaller allocation from the Assembly Government budget, and charging schemes may well develop into a stealthy means of raising extra revenue.

I have one more point to make about Clause 109. The Assembly Government memorandum spells out in detail what the Assembly measure, which will flow from the clause and the grant of legislative competence, may contain. The 13 details listed range from the designation of trunk roads that will be subject to charging, to the financial arrangements for the application of revenues for transport purposes. Indeed, such is the detail in the memorandum that one is tempted to say that, with a little refinement, they could have been incorporated in the Bill. There would then be no call for an Assembly measure, which is bound to involve much work and effort at the Assembly some time in future. But then, of course, the powers would not have been devolved and that, after all, is one of the main points of the exercise and Clause 109.

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