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8 Dec 2010 : Column GC37

Grand Committee

Wednesday, 8 December 2010.

Arrangement of Business

Announcement

3.45 pm

The Deputy Chairman of Committees (Baroness Harris of Richmond): My Lords, before the Minister moves that the first statutory instrument be considered, perhaps I may remind noble Lords that in the case of each statutory instrument the Motion before the Committee will be that the Committee do consider the statutory instruments in question. I should perhaps make it clear that the Motions to approve the statutory instruments will be moved in the Chamber in the usual way. If there is a Division in the House the Committee will adjourn for 10 minutes.

Mutilations (Permitted Procedures) (England) (Amendment) Regulations 2010

Considered in Grand Committee

3.45 pm

Moved By Lord Henley

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley): My Lords, I beg to move that the Grand Committee do report to the House that it has considered the draft regulations, which we hope will be agreed by the House later. The coalition Government are, as always, committed to improved standards of animal welfare. It certainly forms part of my own department, Defra's, structural reform plan.

These regulations remove the ban on beak-trimming of laying hens which is due to come in on 1 January 2011, to allow for routine beak-trimming of day-old chicks intended for laying to be carried out using the infra-red technique only, with other methods restricted to emergency use only. I recognise that this issue has generated a lot of interest in another place. A Written Statement was provided to both Houses last month setting out the background behind these amending regulations, explaining the Government's determination to work closely with the industry with the objective of making a ban on beak-trimming possible in 2016. That is a commitment that I made and that my honourable friend Mr Jim Paice made in a Written Statement some two months ago.

The current position is that the UK makes use of a derogation in the EU Council Directive 99/74/EC on the welfare of laying hens, which allows for beak-trimming of laying hens that are less than 10 days old if carried out by qualified staff. The procedure is only permitted to prevent feather-pecking and cannibalism, which is a

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common but unpredictable behaviour in commercial flocks of laying hens and a significant welfare issue. The Mutilations (Permitted Procedures) (England) Regulations 2007 implement this derogation but only allow routine beak-trimming to be carried out until 31 December 2010, after which beak-trimming of laying hens would be banned.

The ban was put in place when the laying hens directive was implemented in the UK in 2002, allowing eight years to develop a strategy to manage birds without the need to beak-trim. The Beak Trimming Action Group-comprising representatives from industry, welfare groups, Defra, scientific and veterinary professions-was established to develop this strategy. However, progress in the control of injurious pecking in England has not been sufficient to implement a ban on beak-trimming without causing a significant risk to animal welfare. In the mean time, a new infra-red technique was developed and is now used to beak-trim birds commercially, as an alternative to hot-blading. Currently, the infra-red technique is used on 95 per cent of all beak-trimmed laying hens.

The Farm Animal Welfare Council reviewed the evidence in 2007 and 2009 and recommended that the ban on beak-trimming should be deferred until it can be demonstrated reliably under commercial conditions that laying hens can be managed without beak-trimming, without a greater risk to their welfare than that caused by beak-trimming itself. The FAWC recommended that infra-red beak treatment should be the only method used routinely, as the evidence indicated that it does not induce chronic pain.

The Government's long-term goal is to ban routine beak-trimming, but FAWC's advice represents a sensible and pragmatic approach in the circumstances. A ban on beak-trimming for laying hens at this time would result in significant welfare problems through outbreaks of feather-pecking and cannibalism. It is therefore right that the legislation needs to be amended to remove the impending ban, which would otherwise come into force on 1 January 2011.

The Government see the proposed removal of the ban very much as an interim solution. The previous Government's consultation on proposals to amend the legislation did not propose any dates to review the policy or for a future ban. This Government have taken heed of the strength of feeling on this issue and decided to adopt the Farm Animal Welfare Council's recommendation of setting a review date of 2015. We will assess the output of this work, with the objective of banning routine beak-trimming in 2016. The Beak Trimming Action Group will be reconvened; its first meeting has been arranged for January. We are committed to working with the group to find solutions to this very complex issue. The group will establish an action plan to include the key milestones which were laid out in the Written Statement, leading up to a full review of beak-trimming in 2015.

The review will consider results of ongoing research projects that are investigating practical and realistic ways to rear laying hens without the need for beak- trimming. Bristol University, for example, funded by the Tubney Charitable Trust, is carrying out a three-year intervention study. It is developing a trialling and

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advisory package to help producers reduce the risk of injurious pecking through changes to housing and husbandry. All the key stakeholder groups are on the steering group for this project, with representatives from industry, welfare organisations, researchers, economists and Defra. The Beak Trimming Action Group will begin to consider the outputs from this study next summer.

We recognise that any future strategy will have to identify the lessons that can be learnt from those countries that already have a ban in place or just do not beak-trim, such as Austria, Sweden and Switzerland, so we have asked the industry to undertake some study tours to such countries. Feather-pecking is greatest in systems of management which do not house birds in cages. Therefore, the risk to the welfare of laying hens from injurious pecking is likely to increase after the ban on conventional cages comes into force on 1 January 2012. A review in 2015 will allow producers time to increase their experience of managing flocks in alternative systems.

The review in 2015 will assess the achievements on eliminating beak-trimming to date and advise whether a ban on routine beak-trimming of laying hens will achieve the maximum welfare outcome, which is what we desire, with a view to reinstating the ban in 2016. These regulations will improve existing welfare standards for laying hens in the short term while we work hard to find a lasting solution, which will bring an end to the need for routine beak-trimming. They also complete the implementation of Council Directive 2007/43/EC by implementing the mutilations provisions for meat chickens and I commend them to the Committee.

Baroness Quin: My Lords, I thank the Minister for explaining the instrument. We fully support the aim of ending beak-trimming and the general desire across government to do so. As the Minister explained, without this instrument the ban would legally have come into force although, given the difficulties, I imagine that even had there not been a change of Government we would have been in a similar situation, particularly given the responses to the consultation that the previous Government held earlier this year. There is the difficult equation of balancing a possible deterioration in animal welfare standards by not continuing with the derogation and the concern that changing the system at this point could have meant that we would have had extra imports coming in from countries with lower welfare standards. I can therefore see some of the difficulties that were involved in calculating how to take this issue forward for the future and, for that reason, I understand the action that the Government are proposing in these regulations.

As the Minister said, however, there is considerable public and parliamentary interest in this issue. That is not surprising because there is a strong degree of commitment to animal welfare among the public and in Parliament and to seeing increased animal welfare standards for the future. Certainly, that concern was reflected in an Early Day Motion in the other House, which was proposed by a Conservative but endorsed by Members from many parties, particularly my own. Their desire is that beak-trimming should be brought

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to an end as soon as practicable. Indeed, that underlines the idea of creating some kind of deadline for this to happen, which the Government have done in deciding on the review period and the ban date as the Minister outlined to us.

Obviously, 2016 is some time off. I am not trying to make a party-political point because I know that the process has already been a long one. None the less, if there are any other ways of trying to shorten the timetable I would certainly encourage the Government look at them. One aspect of the work that needs to be undertaken between now and then is the study tour of EU and other European countries that do not have beak- trimming. I would have thought that that work could start soon and I understand that it will be proceeded with expeditiously. I understand what the Minister said about the three-year research project. That obviously takes us to some time in the future. However, having said that, I certainly hope that at the very least the timetable that has been set out can be adhered to.

I do not know whether the Government considered putting the deadlines in the regulations, but I hope that it will be made very clear that this is the deadline to which the Government are working. It would not be good for a signal to be sent out that nothing much will be happening immediately so therefore people do not need to worry about it. That has been a problem in the past and we do not want it to be a problem in the future.

On another issue, I strongly support what the Minister said in terms of favouring the infra-red method as opposed to the hot-blade method. As he said, 95 per cent of production is subject to the infra-red method. However, the regulations say that in the case of a sudden outbreak, it would be possible to use the hot-blade procedure. I understand from the debate that took place in the other House that such emergencies have not occurred recently. None the less, I note that the British Veterinary Association, in its response to the Government, is concerned that the regulations could be interpreted as allowing the arbitrary use of hot-blade beak-trimming after 10 days to control moderate or even minor outbreaks of injurious pecking. The association felt that in order to counteract that, the term "emergency" should be more clearly defined. Has consideration been given to that as a way forward? Or is it that, as was described in the other House, the concerns of the British Veterinary Association are not causing too much worry to the Government at present because this procedure is not really being used at the moment?

The regulations state that holdings with fewer than 350 birds are exempt from the regulations. I would like to ask the Minister a little more about that. Why should not the infra-red technique be prescribed for those holdings as well? I do not know whether there is routing beak-trimming in holdings with fewer than 350 birdsI note that in the debate in the other place the Minister said that such holdings would in any case be covered under the Animal Welfare Act, which was passed by the previous Government with all-party support. If the provisions in that Act were sufficient, why would these regulations be necessary? I am not quite sure why the older Act is sufficient in the case of

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holdings with fewer than 350 birds but not for holdings with more than 350 birds. The very helpful Explanatory Memorandum says that there are 1,323 holdings housing more than 350 laying hens. Does the Minister have any statistics for how many holdings have fewer than 350 birds? I could not see that information in the Explanatory Memorandum. If it is there, I apologise for having missed it.

4 pm

Paragraph 13.6.4.1 states that,

That seems a very marked reduction, calculated presumably on the basis of information that was gained during the consultation. Perhaps the Minister could explain that figure to me, because I found it quite puzzling.

An important issue is compliance with and respect for the regulations once they are brought in, as well as monitoring that they are being properly implemented. If the Minister has any further information about how the Government plan to take that compliance and monitoring work forward, I would be very grateful for it.

As I said earlier, I recognise the threat that would have come from imports if a ban had simply been imposed straightaway. We could have faced an increase in imports from countries where birds are beak-trimmed anyway and where there might be other animal welfare concerns. What plans do the Government have to monitor imports and, given the nature of this debate, to help educate and inform the public about the importance of bringing beak-trimming to an end? Consumers have shown themselves to be very sensitive over the years to animal welfare issues, as we have seen in increased purchases of free-range eggs and the interest taken in food labels which certify certain animal welfare standards. There needs to be a process for making information available to the public so that, as we move towards a ban, people are better informed and choose to buy products which conform to the highest standards.

As we move towards ending the derogation it is important to try to ensure that other EU countries do likewise, so that we are not disadvantaged competitively. We should build up alliances both at government level within the European Union and the European Parliament. I remember from my own days in the European Parliament belonging to the European group on animal welfare, so I know that there is pressure to respect animal welfare issues there. Building up those alliances will be important as we move towards the date when the ban comes into force.

The Opposition will not oppose the regulations for the reasons that I have outlined. We hope that the Government will make rapid progress along the lines that have been described to us today.

The Duke of Montrose: My Lords, I thank my noble friend for introducing the regulations. I am sure that the poultry industry is most grateful for the derogation being extended. The noble Baroness, Lady Quin, spoke about the public's enthusiasm for free-range

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and enriched colony cages in terms of production. That is where the problems of cannibalism and pecking occur most readily. Coming from Glasgow, I was most glad to hear that the University of Glasgow was able to make a positive contribution towards resolving some of the issues linked to beak-trimming and to developing infra-red treatment. Does the Minister know whether infra-red treatment is reckoned to cause any suffering, or is it objected to because it alters the physical properties of the beak?

I was grateful to my noble friend also for taking so much time to explain the rationale behind the 2015 review, because there was some doubt as to what its purpose and outcome would be.

Baroness Parminter: My Lords, I, too, accept the regulations as an interim measure ahead of a ban on beak-trimming. There is much common ground between both sides of the Committee, so I shall not repeat any of the very good points made by the noble Baroness, Lady Quin.

I was slightly disappointed that no firm date for a ban has been given. The Explanatory Memorandum says clearly,

How can we ensure that pressure is maintained on the industry to deliver to that timetable which we all want to see? I ask that question as a member of EU Sub-Committee D on agriculture, environment and fisheries, which is undertaking a review of innovation in agriculture. Many of the submissions that we have received tell of how the industry is struggling with the twin challenges of addressing climate change and the need for food security. Given that the industry is coping with finding funding for innovative research in those areas, how, without a firm cut-off date of 2016 for beak-trimming, can pressure be maintained on the industry to ensure that the necessary funding for research is delivered? I acknowledge what the Minister said about the research project in Bristol and the work of the Beak Trimming Action Group, but I should like to hear specifically how he will seek to keep pressure on the industry at a time when it is already struggling to find funding for innovative research in other areas of agriculture.

Lord Henley: I thank all noble Lords for their contributions. I shall try to deal with the various questions that have been put to me.

I am grateful to the noble Baroness, Lady Quin, for accepting the difficulties involved, but she went on to say that 2016 is a long time off. I hate ever to make party-political points and, as the noble Baroness knows, I never do-well, I try not to-but I should point out that the previous Government had eight years in which to deal with this matter and they found it difficult. We are seeking another six years to take us up to 2016, and I hope that we shall be able to do what we can. We will work as quickly as possible in these matters. The noble Baroness asked particularly how we would expedite the process and start study tours to other countries-which is a very good idea. I can assure her that, early in the new year, the industry will present its plan for getting these things looked at and seeing what happens overseas.



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Both the noble Baroness and my noble friend Lady Parminter said that they would like "2016" to appear in the regulations. I appreciate that it was in the previous regulations; that is why we are here today debating these regulations-it is possibly no bad thing on occasions to force Governments to come back. The commitments made by my honourable friend, which I repeated in a Written Statement, should be sufficient. However, my honourable friend made it clear that that we would do it only if it was possible. We do not want to compromise animal welfare provisions. Therefore, we will work as hard as we can and push forward as fast as we can but only, as I stress again to the noble Baroness, if these matters are possible.

The noble Baroness then asked for some idea of what we meant by "in emergencies" and when we would use something other than the infra-red treatment-that is, when we would use hot-blading. I must stress that hot-blading is intended only as a last resort and is carried out only in the interests of animal welfare. It is suitable only for the older birds and only after other provisions have been tried. Beak-trimming an adult flock is not a task that is undertaken lightly. All those poultry farmers who are involved understand the wish not to do so. I would not want to define what "emergency" means but those on the ground know what it means.

Moving on to statistics, the noble Baroness asked how many flocks had fewer than 350 laying birds. I am afraid I do not have a figure but there are a substantial number. There is, as the noble Baroness will know, no need for farmers with fewer than 50 birds to be registered. I have seven laying birds, which lay the odd egg but not that many. Those with more must be registered. I could find her an answer on the number of farmers who have between 50 and 350 birds. If that is possible, as long as it is not too expensive, I will do so.

My noble friend the Duke of Montrose asked about the evidence that infra-red technology was better than other methods. I accept that, like all methods, it is extremely likely to cause short-term pain but this has not yet been confirmed. However, on balance, the current evidence suggests that infra-red beak-trimming does not induce long-term pain. For those reasons, we are satisfied.

Lastly, the noble Baroness, Lady Quin, rightly asked about what we are doing to build alliances in Europe, in both the Council of Ministers and the European Parliament. I am glad that she stressed the importance of both. She spoke from her experience as a former Member of the European Parliament. It is important that we concentrate on both the Parliament and the Council of Ministers. We will certainly do what we can to build up the appropriate allowances and work with people. This will be generally true of everything that Defra does. Defra probably has more to do with the EU than any other department. I certainly notice that my honourable friends in Defra in another place are frequently in Brussels. The noble Baroness will know this from her own experience. We shall continue to work with others and we will certainly continue to keep other member states updated on the progress of what we are doing in our industry, just as we will

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continue to try to learn as much as possible from other member states. I referred in particular to Sweden and Austria; I forget which the third was.

I hope I have dealt with most of the questions that have been put to me.

Motion agreed.

Welfare of Farmed Animals (England) (Amendment) Regulations 2010

Considered in Grand Committee

4.14 pm

Moved By Lord Henley

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley): My Lords, these regulations implement Council directive 2007/43, which establishes for the first time rules governing the conditions under which meat chickens are kept and the monitoring of the birds in slaughterhouses for poor on-farm welfare. The directive is unique in that it looks not only at inputs but at welfare outcomes.

A small section of the directive dealing with mutilations will be implemented through the regulations which the Committee has just discussed.

These regulations apply to holdings with 500 or more birds. They do not apply to breeding stocks of meat chickens, hatcheries or chickens marketed as extensive indoor, free-range or organic. However, these birds are subject to the provisions of Schedule 1 to the welfare of farmed animals regulations 2007, which sets down general conditions for the way in which animals are kept. For the purposes of these regulations, we have defined the chickens in scope as "conventionally reared meat chicken".

Meat chicken welfare is an important issue. Around 850 million meat chickens are produced in the UK per year and 4 billion across the European Union. The United Kingdom is one of the largest meat chicken producers in the EU, and the total value of the UK industry is estimated at £1.6 billion. There has also been an increase in public awareness of meat chicken welfare over recent years, reflected in significant sales of chicken produced to higher welfare standards by major retailers.

The directive came into force on 30 June 2010. There has been a delay in implementing it in English law due to the change of government and the new processes that have been put in place to ensure the close scrutiny of all new legislation. However, I know that the industry and enforcement bodies have started to take account of the EU legislation in their activities, including training, and I much appreciate their commitment and good will in working with us on implementation. It has been an example of partnership working at its best.

Currently, there is no legal maximum stocking density for meat chickens in England. The directive permits member states to allow a maximum stocking density of up to 42 kilograms per square metre provided that

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certain criteria are met, including a challenging cumulative daily mortality figure over seven consecutive flocks. Therefore, a producer would have to meet these criteria and provide the evidence before being allowed to stock at 42 kilograms per square metre.

We have decided not to take advantage of this derogation on animal welfare grounds. The draft regulations set instead a maximum stocking density for conventionally reared meat chickens of 33 kilograms per square metre, with the opportunity to stock up to 39 kilograms per square metre provided that additional house documentation requirements and environmental parameters are met. This is in line with the commitment in the coalition agreement to improved standards of farm animal welfare.

There is evidence that meat chicken welfare can be compromised at densities higher than 40 kilograms per square metre. A Defra-funded study at Oxford University showed that, while mortality and leg defects were not compromised at higher stocking densities, other measures were affected, such as jostling, a reduction in growth rate and fewer birds showing the best gait scores, which is an assessment of chicken walking ability. The Farm Animal Welfare Council has also advised against the adoption of a maximum stocking density of 42 kilograms per square metre. In addition, more than 90 per cent of domestic chicken production is currently subject to assurance scheme requirements, which operate at stocking densities at or lower than 38 kilograms per square metre.

Adopting this approach allows us to show leadership on animal welfare. The industry should aim to provide consumers with this information and promote the fact that English chicken meat meets the higher welfare standards set by this Government. Consumers can then make an informed choice. We are not alone in setting a maximum stocking density of 39 kilograms per square metre. I understand that Wales and Scotland have also already taken this approach.

However, we are not going to set this stocking density and walk away. The maximum stocking density will be reviewed as part of the post-implementation review of the regulations. In addition, the EU Commission will publish a report in 2012 looking at the directive's application and influence on chicken welfare.

We intend to commission a socioeconomic research project to assess the impact of implementing the regulations on the relevant monetary and non-monetary costs and benefits identified in the impact assessment. As part of that, the analysis will look at the impact of the regulations on the industry, enforcement body activity, the effectiveness of slaughterhouse welfare triggers, welfare outcomes and the experience of other member states, some of which will be operating a maximum stocking density of 42 kilograms per square metre.

As I mentioned earlier, the regulations are unique in that they will also look at the welfare outcomes for the birds. All birds will be subject to post-mortem inspections in the slaughterhouse for possible indications of poor on-farm welfare.

For flocks stocked at over 33 kilograms per square metre, mortality information will also be assessed as an indicator of poor welfare. "Poor welfare" will be

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defined through the setting of welfare triggers for mortality and post-mortem inspections in the slaughterhouse. Any concerns will be communicated to the producer and to Animal Health in order for them to take appropriate action. That might include the drawing up of an action plan in conjunction with Animal Health to outline how a welfare problem will be addressed.

This system of welfare triggers will allow for a more consistent approach across slaughterhouses to the identification of potential on-farm welfare problems. The welfare triggers have been based in part on a pilot study that saw some of the largest meat chicken companies working with us and Animal Health. This is another good example of people working together to improve welfare.

As highlighted, these draft regulations are certainly an important step in improving the welfare of meat chickens and I commend them to the Committee.

Baroness Quin: My Lords, the Opposition are generally supportive of these regulations and the directive behind them. Indeed, the directive was agreed in European Union negotiations under the previous Government, and the regulations implement the directive here. The Minister is correct in saying that this is a useful and important step forward. This is the first time that rules governing conditions under which meat chickens are kept have been agreed at EU level and there is monitoring of birds for poor on-farm welfare. That incorporates some of the animal welfare concerns, which are very recent concerns in EU legislation, so I welcome that.

The Minister was also right to stress that this is an important industry for us. Very often in the EU context we tend to think that other countries are more agriculturally focused than we are, but in terms of this industry, as the Minister pointed out, the UK is one of the largest chicken producers in the European Union. The industry's total value has been estimated at £1.6 billion.

Obviously, the regulations also relate to public concern in terms of the increased demand for food that is produced to higher welfare standards. There has been an increase in the number of consumers wanting assured produce in terms of animal welfare as well as other things. Speaking as a consumer rather than a parliamentarian, I find that the labels can sometimes be confusing with all the different assurance schemes that exist. I know that this has been tried for a number of years, but it would be good if we could move towards more simplification and greater certainty for consumers in this respect. None the less, the trend that we have seen overall is a welcome one.

In general, the Government have tried to strike a balance between animal welfare concerns and the dangers of getting into a situation where we become over-reliant on imports that do not meet the same high standards. It has been a difficult balance to strike. I agree with the Government that the limit of 39 kilos per square metre should be supported, as should not going up to 42.

The Minister rightly said that Wales and Scotland are working along similar lines. I understand, however, that in Northern Ireland a limit of 42 kilos per square

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metre has been sought. While I fully respect the devolution settlement and the ability of different jurisdictions to decide on their policies, it none the less would be a desirable goal for the UK to operate similar conditions for trading reasons, just as it is a good idea for similar high standards to operate throughout the EU as a whole, even though that is a much more ambitious goal. I do not know whether the Minister has had any discussions with his Northern Ireland counterparts about this, or whether there are special reasons for this of which I am not aware.

The Minister also said that we are not going to walk away from trying to improve standards as time goes on. I think that those were his words. While we have not gone much beyond the minimum standards of the EU in these regulations, what does the Minister see as the possibilities for reducing stocking densities further-from, say, 39 to 33 kilograms per square metre? Does he see us moving in that direction over the next few years?

The regulations are slightly late in being introduced to Parliament but that is not surprising, given that an election took place earlier this year. Does the Minister have any information about whether the regulations and the directive have now come into force in other member states, or whether there are some member states that have not yet adopted the legislation in the way that they are supposed to?

Information from the British Veterinary Association raised some concerns that it originally had about the proposed regulations. It wanted more detail on environmental enrichment to reduce the risk of leg problems in poultry, on litter management to maintain optimum conditions and on the importance of floor temperature. Does the Minister know whether the various concerns raised by the British Veterinary Association have been met?

I recognise that there are costs attached to these regulations. What I did not quite understand from the Explanatory Memorandum is how much of the costs involved are on-farm costs and how much are off-farm, relating to slaughterhouses, inspection processes and so on, to see whether animal welfare issues have arisen. If the Minister does not have that information immediately to hand, I would be happy for him to write to me. It could be, however, that it is in the information and I just have not managed to spot it.

Compliance with these regulations will be very important. The impact assessment accompanying the directive states that there was a 19.1 per cent failure rate for compliance with existing meat chicken welfare standards. Do the bodies concerned, which I understand are the Food Standards Agency and Animal Health, have the resources to try to ensure full compliance with these regulations? I know that the Minister in another place said firmly that he was determined to stamp out abuses in animal welfare practice, but it would be good if the Minister could give us any further information on this.

Finally, repeating something that I said earlier, which the Minister was kind enough to agree with, building alliances for higher welfare standards will be

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very important at European Union level. I wish the Government well in that task.

4.30 pm

Baroness Parminter: My Lords, the stocking densities of chickens cause huge animal welfare problems, so I can be a little more congratulatory to the Government on taking this step in setting a lower density for the housing of chickens in England and for some of our counterparts across Europe and elsewhere. It is hugely to be welcomed and I hope that many animal welfare organisations will take the opportunity to ensure that a wider public see this as an early indication of how this Government intend to treat animal welfare as the coalition moves forward.

I have one question, which follows on from what the Baroness, Lady Quin, said, because one of the issues is around not just stocking density but the enrichment of the cages. I think the Minister mentioned the potential review in 2012. Will the enrichment of cages be part of that review? It clearly has benefits not just for the chickens but for the industry in minimising lameness and the resulting costs of treating it.

I am not sure whether I am allowed a quick comment, so please stop me if I am not. As these regulations show the Government's commitment to dealing with the welfare issues around the stocking density for chickens, I hope the Minister will take the opportunity to look urgently at the housing issues for dairy cows in view of a planning application in Lincolnshire, where an early indication of the Government's approach to stocking densities is needed to ensure that some of the application's appalling welfare implications do not come into being.

The Duke of Montrose: My Lords, I declare my interest as a farmer, although it has absolutely nothing to do with poultry. My noble friend said that this was the first time that these regulations had been brought into the poultry industry, and I notice that one of the provisions says that every keeper will have to have a certificate. This is a novelty in the agricultural industry as a whole, and some farming elements are very sensitive to it and to the question of whether having a certificate will become a requirement for agricultural production generally.

I am grateful to my noble friend for introducing the measure; it certainly is welcome. I wonder whether the quantity of record-keeping required is likely to increase greatly from what the industry currently does. I am sure that people keep records in the interests of their own production and so on, and the current requirement is fairly detailed, but Regulation 13 talks about recording,

removed. I wonder whether the inspection will require reconciliation at the end of the day, which is always a headache in farming. I do not suppose that chickens evaporate in quite the same way as hill sheep tend to, but it is sometimes a rather difficult job to reconcile numbers. The regulations also want a record kept of the daily mortality rate. I presume that that is for every day that the chickens are kept.



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Lord Henley: My Lords, I start by thanking the noble Baroness, Lady Quin, for her general support for the regulations and for her comments on the meat chicken industry, which, as she suggests, is very important. I would like to deal with one or two points.

First, the noble Baroness talked about problems for the consumer in terms of confusion about labelling. I agree that there is still much confusion here, but I hope that, gradually, bit by bit, through the industry and in other ways, we can address it so that there is greater transparency and so that consumers can ultimately make appropriate and rational choices. However, it should mainly be a matter for the industry to get these things right, and I am pleased with what has recently been happening in this area.

Secondly, the noble Baroness talked about what was happening in Northern Ireland, where they have a higher limit and have gone for 42 kilograms per square metre. One has to say that this is devolution and that is where we are. That decision was taken following a consultation in Northern Ireland about these matters and we have to accept that. I have certainly had no discussions with devolved Ministers there, although I do not know whether my honourable friend Mr Paice has. However, I agree with the noble Baroness to some extent, in that these things are important not just in relation to Northern Ireland but across the whole EU. We should all be talking to each other, particularly if it is felt that there is an unfair advantage with one country having a higher stocking rate. In terms of animal welfare, we never want to be in a position where we are, as it were, exporting bad treatment of animals to other countries by sometimes overdoing our rules when other countries do not do the same.

That leads me to what was almost the noble Baroness's final statement, in which she asked whether we would continue to discuss these matters with colleagues in the EU Parliament and Council. We will certainly do that because it is important to get things right.

The noble Baroness, Lady Quin, also asked whether we wanted to go further in reviewing the stocking density in the future. Certainly, as part of our consideration of policy, a post-implementation review of the new legislation is required to be carried out. In addition, the Commission will publish a report in 2012 looking at the directive's application and influence on chicken welfare and, as I said, we intend to commission further research into that. Therefore, we will look at this matter, although I obviously cannot give any assurances at the moment.

As regards implementation of the legislation in the rest of the EU, the noble Baroness understood why there had been a delay. This year we had an election, which often causes delays in these matters. My understanding is that it is now in force in the majority of other member states. However, we are aware that Italy and the Netherlands have only just started the process of implementation, so we will not necessarily be the last to do so.

The noble Baroness also asked about the costs on-farm and elsewhere-in slaughterhouses. I am afraid that I do not have the figures, so I shall write to the

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noble Baroness in due course if I can find something of use to say to her, otherwise I shall not do so. I am sure she will accept that.

Again, I thank my noble friend Lady Parminter for offering congratulations to the Government on doing something. She asked about the enrichment of cages. These regulations relate to meat chickens and do not cover the enrichment of cages. I understand that meat chickens are not kept in cages in this country, so that matter is not relevant.

My noble friend then moved on to problems which go slightly wide of the regulations. She asked about cattle and some of the new super-dairies. I shall not comment on that, other than to say that this is very much a planning issue and not one for us. However, whatever the conditions in which cattle, chicken or other animals are kept and stored, we will ensure that animal welfare issues are always taken into account.

I hope that I have dealt with the questions put to me and I commend the regulations to the Committee.

Motion agreed.

Road Safety (Financial Penalty Deposit) (Appropriate Amount) (Amendment) Order 2010

Considered in Grand Committee

4.39 pm

Moved By Earl Attlee

Earl Attlee: My Lords, I am pleased to introduce the Road Safety (Financial Penalty Deposit) (Appropriate Amount) (Amendment) Order. The purpose of this order is to prescribe the amount of financial penalty deposit that can be requested from an alleged offender-by the police or by an examiner from the Department for Transport's Vehicle and Operator Services Agency, VOSA-in respect of some particular fixed penalty offences.

This draft order before the Committee is one of three related draft statutory instruments which are needed to keep the provisions affecting the issue of fixed penalties and financial penalty deposits for road traffic offences up to date. The other two draft instruments are subject to the negative resolution, so we have only the one to consider here today. However, since the three instruments are interrelated I will be saying a few words about the draft negative instruments because doing so will help to explain what the order before the Committee is about.

Before doing so, the Committee may wish to be reminded that the purpose of financial penalty deposits is to provide a convenient mechanism for fixed penalties to be effective. The point is that when a fixed penalty is issued to an alleged offender who does not have a

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"satisfactory UK address", there is no enforcement mechanism in existence that could subsequently ensure that a fixed penalty is paid. Consequently, by taking a deposit payment from such a person on the spot, it is possible to guarantee payment, since the deposit will automatically be used to pay off the fixed penalty after 28 days, unless the alleged offender asks before that time for the case to proceed instead to court.

Deposits are commonly taken from drivers from abroad, who may fail to respond to a fixed penalty on leaving the UK, though the law applies to any individual who fails to provide a satisfactory UK address to the enforcement authorities. As the Committee will see, this is an essential procedure because it enables the enforcement authorities to deal in a practical way with offenders based outside of the UK, who are otherwise extremely difficult to pursue.

All fixed penalty levels, and the deposit amount corresponding to the relevant fixed penalty, are kept under review, and there are three main reasons why this needs to be done: first, in order to ensure that penalty levels and deposit amounts are set appropriately, to help deter offending; secondly, to ensure that penalty levels and deposit amounts are broadly consistent for similar offences-in other words to help ensure that the fixed penalty scheme itself is self-consistent; and, thirdly, to ensure that fixed penalties and the corresponding deposit amounts remain broadly in line with average court fines for the relevant offence.

Returning to this particular order, its purpose is to harmonise the financial penalty deposit amounts for similar registration plate offences, and for three offences relating to seat-belt wearing, so that all of these deposit amounts correspond with the relevant fixed penalty levels for these offences. Its purpose is also to reduce the deposit payable in respect of the offence of having insufficient motorcycle tyre tread depth, which is a necessary change for a reason I will explain in a moment.

As I mentioned, the two related statutory instruments are subject to the negative resolution procedure, although they are necessarily being taken forward as part of a package, together with the draft order before the Committee. One of the draft negative instruments is the Road Safety (Financial Penalty Deposit) (Amendment) Order 2010. This will make the offence of failing to fix a prescribed registration mark to a vehicle a fixed penalty offence in respect of which a financial penalty deposit can be requested.

The other draft negative instrument is the Fixed Penalty (Amendment) Order 2010. This will increase the fixed penalty level from £30 to £60 for driving or keeping a vehicle without a registration mark on display; and increase from £30 to £60 the fixed penalty level for driving or keeping a vehicle with an obscured registration mark. That order will also reduce from £120 to £60 the fixed penalty level for insufficient tyre tread depth on a motorcycle tyre.

Of course, failing to have a clearly visible registration mark can have significant implications for law enforcement and tracing criminals. The need to

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have a correct and visible registration mark on display is especially important from the point of view of the police and their increasing use of modern technology to help trace criminals and other persons in whom they may have an interest. Indeed, many people in whom the police have an interest are nowadays detected and apprehended as a result of the use of so-called automatic number plate recognition-ANPR-cameras. Consequently, increasing the fixed penalty and financial penalty deposit amounts in respect of registration mark offences will help to encourage compliance with the rules, and therefore be helpful for law enforcement more generally.

The fixed penalty scheme also prescribes a £60 fixed penalty for failing to have a registration plate of the correct size, shape and colour, and the Fixed Penalty (Amendment) Order 2010 will increase from £30 to £60 the two other registration mark offences I have already mentioned. The intention is therefore to make equivalent provision in the order we are considering here for the financial penalty deposits, which will secure payment from offenders without a satisfactory address in the UK who might otherwise not pay. If we were not to make these changes we would be left in the situation where no deposit amount would be prescribed for having an incorrect registration mark, and none could be taken in respect of a £60 fixed penalty. It would also mean that in the case of an obscured registration mark, or having none at all, a deposit of only £30 could be taken against a fixed penalty of twice that sum.

The changes in this order will also increase the financial penalty deposit level for certain seat-belt offences from £30 to £60. The reason for making this change is so that the amount of deposit that can be taken from offenders for these offences is the same as the existing fixed penalty level. Currently there is a £30 differential between the fixed penalty for these offences and the deposit amount that may be taken in respect of them.

Finally, the changes in this order will reduce from £120 to £60 the financial penalty deposit amount for insufficient tyre tread depth on a motorcycle tyre. This change is necessary in order to mirror a similar change in the fixed penalty level for this offence which will be made under the Fixed Penalty (Amendment) Order 2010.

The reason for the reduction in the fixed penalty level for this offence, and consequently for the reduction in the deposit amount for this offence, is that the penalty level was inadvertently increased to £120 in April 2009, and the action being taken now is simply to restore the penalty to its former level. The reason why the fixed penalty and deposit levels for this offence were unintentionally increased in 2009 was due to the fact that such a large number of legislative changes were needed when the financial penalty deposits scheme was introduced and a small error occurred.

To summarise, the overall purpose of prescribing financial penalty deposit appropriate amounts is to enable the fixed penalty scheme to operate effectively for offenders based outside the UK in the same way as it does for those with a satisfactory UK address. Small

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maintenance changes need to be made to this scheme from time to time, as I have explained. I therefore commend the order to the Committee.

4.45 pm

Lord Bradshaw: I have no objection to this whatever.

Lord Davies of Oldham: My Lords, neither have I, but I am going to speak at slightly greater length than the noble Lord, Lord Bradshaw, if only to congratulate the Minister on the lucid way in which he presented the order. He deserves a larger audience when the Government are for once doing good things. I commend him on what he is doing and I am sorry that he has a limited response here today. He has wholehearted support on my part and, so far as I can detect from the brief remarks of the noble Lord, Lord Bradshaw, he has 100 per cent from him too.

I appreciate the particular and gentle way in which the Minister indicated that there had been an error with regard to motorcycles in 2009. I am glad that that has been corrected, not least because those in the motorbike community sometimes feel that they are hard pressed even to the point of being victimised because they travel on two wheels. We all know from the incidence of accidents that it is a more hazardous form of travel. Therefore, at times motor cyclists are prone to considerable criticism for the accident rate, particularly since, as we know, a very small number are guilty of offending against speed limits in ways that cannot possibly be condoned. I am therefore glad that, on this occasion, we are indicating that fair is fair and making sure that the minor error that occurred in 2009 is put right.

We particularly commend that part of the order dealing with seat belts. There is no doubt that in the range of legislation that has helped to reduce fatalities and injuries over the years, seat-belt legislation takes pride of place. It has been of enormous significance. That is why successive Governments have extended its range and salience. We are entirely in favour of this order, which increases the deposit as far as seat belts are concerned.

I am interested in the noble Earl's point about registration numbers. Perhaps he will correct what may be my somewhat dated perspective; can he make it absolutely clear whether number plate law obtains to the same specifications across the European Community? He emphasised the aspect to do with foreign vehicles and he is absolutely right that number plate recognition is an important part of law enforcement. I believe, for instance, that at present several countries do not expect motor bikes to have front number plates. I recall-this is where I am slightly hesitant because I may be a little dated-when Italian front number plates, particularly on fast Alfa Romeos, were of a microscopic quality, so even those with the keenest eyesight had difficulty in recognising them. I am not sure that the new technology is up to that. Can the Minister therefore offer that element of reassurance on number plates? Is there a degree of standardisation, and does that which obtains as far as the British motorist is concerned apply also to foreign motorists when they bring cars into this country and may be guilty of traffic offences?



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I know we have tightened up on this matter but there is always the tendency for people to select a number plate that has an affectionate dimension to it. Therefore, the characters are produced in ways that mean they may not always be entirely recognisable. I saw one the other day that I was certain was the driver's favourite nickname for his girlfriend. You had to get pretty close to the car-I do not know about the girlfriend-before you could easily recognise the number plate. I am just seeking reassurance on that score.

The noble Earl should recognise that we very much approve of the order and realise that it is under the affirmative procedure. That is why we are debating it today. If not, we would have been content for the order to go through.

Earl Attlee: My Lords, I thank both noble Lords for their response to the order. As I explained at the outset, this is one of three related statutory instruments. The other two have been laid before the House under the negative resolution procedure.

I was surprised that the noble Lord, Lord Bradshaw, did not have a good go at me about foreign lorries; I had a lovely speech ready to roll but I did not need to use it.

I thank the noble Lord, Lord Davies of Oldham, for his contribution. He raised a number of points. This order builds on the work of the Road Safety Act, which the noble Lord himself piloted through your Lordships' House. I remember our debates on that. The noble Lord talked about seat belts. I cannot sit in a moving car fitted with seat belts without fitting them. I would feel so uncomfortable. It is a mystery to me why anyone would want to travel in a motor vehicle without wearing a seat belt, but they do. We do as much as we possibly can to stop people from doing that. I went out with the Metropolitan Police, and one of the things that they were paying attention to was motorists driving without wearing a seat belt.

The noble Lord talked about number plates. He is right that there is a wide range of styles of number plates. VOSA is particularly concerned about foreign goods vehicles. I believe that VOSA can read foreign number plates with its automatic number plate reading equipment. That is important because VOSA targets its efforts against certain operators and certain vehicles when it knows that they are rogue operators. The fixed penalties might seem to be quite small in relation to the operation of a goods vehicle. However, every fixed penalty offence will be recorded on the VOSA database. If the vehicle is detected again, it will be stopped to try to ensure that it is operating in compliance with the law.

The financial penalty deposit scheme helps to provide our enforcement authorities with an effective enforcement mechanism for dealing with alleged road traffic offenders who would otherwise be extremely difficult to pursue. The scheme needs minor housekeeping changes from time to time to keep it in line with the fixed penalty scheme so that UK resident offenders and offenders who have no satisfactory address in the UK can be dealt with in an equivalent way. Such minor changes are being proposed under this order and I believe that

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most motorists would understand and support these amendments irrespective of whether they are UK residents or non-UK residents. I therefore commend the order to the Committee.

Motion agreed.

Post Office Network Subsidy Scheme (Amendment) Order 2010

Considered in Grand Committee

4.58 pm

Moved By Baroness Wilcox

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, I remember, as other noble Lords certainly will, a time when what we now call Royal Mail was known as the Post Office, and then, briefly, Consignia. So perhaps I may start by being absolutely clear about what we mean by the Post Office and what we are here to discuss. The Post Office is an unrivalled network of around 11,500 shops where you can post your parcel or collect your pension. Royal Mail is responsible for collecting and delivering our letters. It provides the universal postal service that connects any post box to every address in the country.

The Government are committed to a strong and sustainable Post Office network. That is why on 27 October we announced funding of £1.34 billion for the Post Office network over the spending review period, subject to state aid approval from the European Commission. On 9 November, we published the policy statement, Securing the Post Office Network in the Digital Age, setting out our plans and commitments for the network. On 13 October, we published the Postal Services Bill, which is currently being debated in Committee in the other place. I shall expand on our plans for the Post Office network shortly, but perhaps I may first address the substance of the instrument currently before the Committee-which is all we are really seeking to discuss today.

The previous Administration introduced the Post Office Network Subsidy Scheme Order 2007 under provisions in Section 103 of the Postal Services Act 2000. The Act allows the Secretary of State to make an order permitting payments for the purpose of assisting in the provision of public post offices or assisting in the provision of services to be provided from public post offices.

Under the terms of the subsidy scheme order, the Government can provide funding to keep post offices open or to enable the establishment of post offices in areas of the country where, without funding, it is unlikely that they would be provided. The current scheme allows the Secretary of State to make payments of up to £160 million in any 12-month period beginning

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on 1 April. As we want to provide more funding than at present, we are seeking to amend the current order to increase the limit to £500 million.

For the next four years, the largest tranche of funding that we have committed in any one year is £415 million. Increasing the cap on the level of payments made under the subsidy scheme order to £500 million allows for some flexibility and contingency; for example, in case of changes to the tax treatment of the funding. We know that this is a large increase but I am sure that noble Lords will agree that the Post Office is a valuable national asset. It is much more than a commercial entity and serves a distinct social purpose. That is why the Postal Services Bill ensures that the Post Office will not be for sale.

The previous Government provided funding for the closure of 5,000 post offices; our approach is different. We will address the real economic challenges that the network faces. Our funding will enable the Post Office to do more than simply maintain the status quo. As well as receiving funding for loss-making branches, the Post Office will be able to invest in the network and introduce new technologies so that branches can be brought up to date. As the previous Government did not fully compensate Post Office Ltd in association with its maintenance of the Post Office network, our funding will give it the opportunity to invest its own resources in developing new revenue streams.

There will be no programme of post office closures on our watch. This funding will ensure that there continues to be a network of around 11,500 post office branches in the UK that continues to meet the post office access criteria. They ensure that 99 per cent of the UK population is within three miles of the nearest post office outlet, while 90 per cent is within one mile. They also contain specific protections for people in rural and deprived urban areas.

Furthermore, the proposed modernisation of the network which we set out in the policy statement will allow for longer opening hours and a faster service. This will make the Post Office more convenient for customers. It will also make it a stronger retail partner for Royal Mail.

However, the number of letters that we send is projected to continue declining over the coming years. Although the growth of online shopping and parcels offers opportunities for the Post Office, it will also need to develop revenues from other sources. These can be divided into two main areas: government services and financial services. We want the Post Office to become a genuine front office for government at both national and local levels. We are exploring the scope for greater local authority involvement in the planning, delivery and level of post office service provision. In terms of financial services, the Royal Bank of Scotland and the Post Office reached agreement last month to allow their customers, including those of NatWest, to access their accounts at post offices. This means that almost 80 per cent of current account customers will be able to withdraw cash free of charge at a Post Office branch.

However, we-and especially me, as I am getting rather over-excited by all this-must remember that today we are here to discuss the Post Office Network Subsidy Scheme (Amendment) Order 2010. New funding

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will help to ensure that the Post Office network has a secure and sustainable future. I hope that noble Lords will agree that the Post Office network should continue to play an important role throughout this country and will therefore approve the order.

Lord Cotter: I support the Minister on this measure. It is extremely encouraging that the coalition's approach is a determination to keep our sub-post offices open. I do not wish to have a go at the Opposition but that is extremely welcome in contrast with the previous Government, under whom there were a lot of closures.

When it comes to regulations and Bills, I am always very keen to see whether there is an impact assessment. On this occasion, there is apparently no impact, but I simply raise it as a point that I always tend to raise because, if there is an impact, we must be sure that the matter is addressed when a regulation is brought forward. However, in this case, it does not apply.

I congratulate the Minister on taking the wind out of my sails. I was going to ask for details of what the subsidy would be used towards and so on, but she came forward with some very tangible points which, as I said, took the wind out of my sails. I was going to ask what measures there might be, particularly with, as the Minister said, the decline in the number of letters and in the sale of stamps and so on. Therefore, it is very good to talk about new revenue schemes, longer opening hours and the network being a very strong part of Royal Mail. The Minister also talked about central and local government services being directed, wherever possible, to the Post Office, and of course we have learnt that the banks are going to be engaged in the new arrangements.

Therefore, I shall not waste Members' time and shall say no more, other than that I very much applaud what has been discussed and I thank the Minister very much for explaining it so clearly. Tangible measures and initiatives will be brought forward to implement what is proposed.

Lord Jones: My Lords, I thank the noble Baroness for her introduction, which was helpful. I support the order and think that those who originated the network subsidy scheme deserve high praise. It is heartening to hear of a continued determination to keep what is left of the Post Office network. Support for the network of 11,500 branches is good news and I think that it will be acclaimed across the nation.

From my work in another place over many years, it quickly became obvious that any community worthy of the name needed a post office and a school, and this order may well hold the line in terms of our communities. These are big amounts of money and they must be welcomed.

One always speaks from experience, so I instance the sub-post office of Llanfynydd in Flintshire. It is tiny, it is valued and it is the village centre. Nothing is too much trouble for the family who run it. Situated on a Welsh hillside at 800 feet, adjacent to a church and a school, it is the centre of a far-flung, Welsh-speaking community. I do not think that any praise is too high for this particular sub-post office, and I make that statement in the knowledge that there are many hundreds

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of such sub-post offices across the nation. Long may they remain open, giving our communities the service that they need.

I hope that this order will guarantee the survival of post offices such as the one in Llanfynydd in Flintshire. I think that Wales will benefit from what is being proposed and I welcome the order very much.

Lord Young of Norwood Green: My Lords, I could not help smiling when the Minister defined the Royal Mail and the Post Office because I remember when it was called the GPO, which dates me slightly. I was also an employee and, as I recall, the postmaster-general at the time was Anthony Wedgwood Benn. How time passes when you are enjoying yourself.

We welcome the increased subsidy. However, as the Merits Committee helpfully issued a health warning and said that the Order should be considered in conjunction with the Postal Services Bill, it is only appropriate that we register our concern about the impact of the Postal Services Bill. Of course we welcome the increased subsidy, but we would like to see enshrined in legislation the principle that the Post Office network should be used as the access points for Royal Mail.

We believe that the Secretary of State should have the power to specify exactly how many access points there should be. The reason for that is that it has been suggested that a privatised Royal Mail company might think that its needs could be served by a network of some 4,000 outlets. Currently, we have 11,900 post offices. I certainly endorse the comments of my noble friend Lord Jones about the vital importance of these post offices to the local community. Of that number, some 7,000 or so could be adequate to meet the access criteria that were introduced by the last Labour Government and have been accepted by this Government and spelt out again in their recent document on the future of the Post Office network in the digital age.

The criteria spell out that the access criteria introduced by Labour meant that, as the Minister said, 99 per cent are to be within three miles of their nearest outlet and 90 per cent should be within one mile. The access criteria continue with a more detailed definition in relation to urban and rural areas. The purpose of the criteria is to ensure reasonable access to post offices in both urban and rural areas. Without them, there would be no control of the overall shape of the Post Office network. We believe that a viable sustainable Post Office network is a critical part of the social infrastructure for many communities, which I was pleased to hear the Minister seemed to endorse. That is why we introduced the access criteria: to ensure that communities would continue to be fairly served by a national Post Office network. As I said, these access criteria could be met with something like 7,000 post offices, but we put in an additional investment so that we could keep the number at 11,900.

If the Government are serious about wanting to keep that number of post offices open and keep the network as we know it now, there should be a mechanism that the Government can use. The Secretary of State should have the power to specify the number of post offices to be used as access points for the services of

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the provider of the universal postal service. I am talking about that in the context of a privatised Royal Mail.

The Minister might argue that it is up to the privatised business what it decides to do, how many access points it uses and where those access point are located. That is precisely our concern. The nature of the relationship between Royal Mail and the Post Office in a privatised environment would be different. Will there be the current inter-business agreement that safeguards that relationship? We are talking about a national network and a universal service that we all agree we want to be easily accessible to everyone in the UK. Given that all parties on both sides of the House now agree on the access criteria of post offices, we cannot see any good argument for the Secretary of State not having the power to specify not only that the provider of the universal service should use post offices as access points but how many post offices that should be. If the Government are serious about protecting the Post Office network, the straightforward solution would be to enshrine in the Postal Services Bill that the Secretary of State should have that power.

We are talking about using large amounts of taxpayers' money to subsidise the Post Office network. Therefore we want to make sure that that money is used to preserve that as part of the universal postal service. It seems that other countries have no problem about not letting the Government have a say in this. Elsewhere, where there has been privatisation of the mail service-we make it clear that we are opposed to complete privatisation-there has also been legislation to protect the post office network and specify its use as access points for the universal postal service.

5.15 pm

As I said, we do not want to see the privatisation of the Royal Mail service but if the Government persist and it is going to happen, we cannot see what is wrong with including in that legislation a mechanism by which to protect the Post Office network. That is clearly what the overwhelming majority of the public want to see. Most people cannot imagine that it would ever be any different. The Government specify all sorts of regulations that private providers have to comply with: look at the various schemes that the energy companies are expected to participate in. To conclude, we welcome the increase in subsidy and in the range of services that the Minister has outlined. Nevertheless, I hope that the Minister will deal with our concerns in her reply.

Baroness Wilcox: My Lords, I am grateful to those of your Lordships who have participated. The Post Office network is an important national asset and it is important that we ensure it has a secure and sustainable future. My noble friend Lord Cotter paid me the compliment of saying that I had taken the wind out of his sails. As I am a sailing woman, I hope very much that I can reverse that. I hope that I raised the wind in his sails rather than taking it out of them.

My noble friend went on to talk about an impact assessment and I have a little note here on why we do not have one. It says that, as stated in the Explanatory Memorandum to the Post Office Network Subsidy

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Scheme (Amendment) Order, we do not believe that this order requires an impact assessment. The Government's core policy is to ensure a Post Office network of at least 11,500 branches, which continues to meet the access criteria that were implemented in 2007 after national public consultation. This is a continuation of existing government policy and therefore does not constitute change for which the impact should be assessed. Moreover, the Government's guidance on impact assessments states that spending proposals do not generally require them, as they are developed through a business case process. Well, there we are. However, I was delighted to have his support and I hope to continue to have it when the Bill comes to this House, fairly soon.

I also thank the noble Lord, Lord Jones, for his support. I was listening to his experience in another place and heard of the Flintshire village in the Welsh hillside, whose name I could not pronounce.

Lord Jones: Llanfynydd.

Baroness Wilcox: Of course. I am not even going to try it.

Lord Jones: Which, being translated, means the little church on the hillside.

Baroness Wilcox: Well, how lovely indeed. Of the post offices, the rural ones are obviously those which we are all most concerned to do everything that we can to try and keep open.

In the last two outings that we have had facing each other, I have managed each time to call the noble Lord, Lord Young, "the Minister". I shall try this time not to do it and to remember that I am the Minister. I also forgot the noble Lord's background in the industry, when he reminded us of the GPO. I am not going to be tempted by him-I have been warned about this-to wander into the Bill, which will of course be with us some time at the beginning of next year. I look forward very much indeed to debating with him when the Bill comes, because of all his experience when he was a Minister. I am sure that he will have some pretty splendid arguments to put up.

I think that I have covered most of the points made. People have been very good. Your Lordships have seemed to be in support so all I need say at this stage, Deputy Chairman, is that I commend the order to the Committee.

Motion agreed.

National Minimum Wage (Amendment) (No. 2) Regulations 2010

Considered in Grand Committee

5.20 pm

Moved By Baroness Wilcox

The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox): My Lords, I am pleased today to present these regulations to the Committee. The regulations

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before us provide that, where an employer makes money payments for travelling expenses that are eligible for tax relief, these payments do not count towards the national minimum wage. They address the problems we have identified with what are commonly called travel and subsistence schemes, operated by some employment businesses that involve low-paid workers. I will briefly outline how these schemes work and why we are tightening their rules.

Traditionally, employment businesses have engaged workers under agency contracts. In this situation, the worker is not an employee of the employment business. As a result, each assignment with a client is, for tax legislation purposes, considered to be the worker's permanent place of employment. Increasingly, however, some employment businesses are engaging workers under an employment contract, rather than under an agency contract. These contracts are also sometimes referred to as "overarching contracts of employment" because they link, or claim to link, a series of different assignments into one overarching employment with the employment business. One of the consequences of this approach is that, for the purposes of tax legislation, each assignment with a client is considered to be the worker's temporary place of employment.

This distinction between a temporary and permanent place of employment is an important one. Since 1998, workers travelling from home to a temporary workplace have been eligible for tax relief on their travel expenses, which includes associated subsistence costs. Travel from home to a permanent workplace, on the other hand, does not qualify for tax relief. Therefore, by engaging workers under employment contracts, employment businesses are able to use travel and subsistence schemes to reduce the amount of tax and national insurance contributions that the worker pays and the amount of national insurance contributions that the employer pays.

Travel and subsistence schemes operate through an arrangement known as salary sacrifice. Under it, an employee contractually agrees to give up part of their taxable income in exchange for something else that is either non-taxable or taxable at a lower rate. In this case, the employee receives travel-and usually subsistence-expenses. These expenses are free of tax and national insurance contributions because they relate to travel to a temporary workplace. Payments of expenses for travel from home to these temporary workplaces and associated subsistence count as pay under national minimum wage rules. Therefore, as long as the taxable pay and the expenses paid by the employer are equal to or greater than the minimum wage, the employer is compliant for minimum wage purposes. The worker benefits from these arrangements as they receive a slightly higher take-home pay than they would otherwise have done. The employer also benefits, as the amount of salary on which they have to pay the employer's national insurance contributions is decreased. In many cases, the expenses that the employer pays to the worker are less than the salary that the worker has surrendered.

The Government consider that there are several problems with the use of travel and subsistence schemes for workers on the national minimum wage. The first is about preserving the integrity of the minimum wage

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as a wage floor. As I am sure noble Lords are aware, the coalition Government are committed to the minimum wage because we recognise the protection it gives to low-income workers and the incentive to work that it provides. For the minimum wage regime to be effective, employers must be able to demonstrate easily that they have met their legal obligations.

Workers need to know what they are entitled to, which is particularly important given the vulnerability of those with whom we are concerned today. Allowing some salary sacrifices to count towards the minimum wage where others, such as childcare vouchers, do not unduly complicates the regime. There is evidence that the employer gains far more from these schemes than the worker, and that the majority of workers do not understand how the schemes work. The Government consider this to be a form of exploitation of low-paid workers.

A number of adverse consequences flow from the participation of low-paid workers in such schemes. The amount that a worker pays in national insurance contributions potentially affects their entitlement to certain benefits. For low-paid workers in travel and subsistence schemes, the most significant impact is on the basic and additional state pension. If they participate in the schemes, the pay that is liable for national insurance contributions is reduced, thereby increasing the number of weeks that they must work and pay national insurance contributions to secure the qualifying earnings for the state pension. It thus increases the risk of the worker not meeting the eligibility criteria for contributory benefits.

In addition, businesses not using travel and subsistence schemes can find themselves at a competitive disadvantage to those which do. Businesses using such schemes can undercut them on price or general profit margins, which would not be possible without the tax and national insurance contribution benefits available.

Some businesses have told us that they do not wish to implement travel and subsistence schemes for employees because they consider them to be exploitative and morally wrong. For some, this is an ethical matter. They believe that such schemes might be against low-paid workers' long-term interests, that workers do not properly understand how the schemes work and that some schemes do not, in reality, give workers the employment rights associated with an employment contract. For others, the implementation costs mean they are cost-effective only where a large number of workers is involved. As a result, smaller businesses are less able to use such schemes.

There are further issues of fairness. Artificially reducing the pay liable for tax and national insurance contributions means that a low-paid worker in a travel scheme becomes entitled to an higher level of certain benefits, such as tax credits, than a low-paid worker who is paid the same amount but not through a travel scheme. We do not believe that this is right. Nor do we consider it right that the burden of financing benefits should be passed from the employer and the worker to the general taxpayer.

For the reasons that I have set out, the Government consider that payments of travel and associated subsistence expenses relating to travel from home to a temporary

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workplace should not count as pay for minimum wage purposes. The draft regulations before us today will preserve the integrity of the minimum wage. They will reduce the risk of reducing low-paid workers' entitlement to certain social security benefits. They will ensure a level playing field for those businesses unwilling or unable to use such schemes. They will remove the unfairness in the present situation. I beg to move.

Lord Cotter: I thank the Minister. I declare an interest as having been a member of the committee on the national minimum wage in the other place. I was very pleased to play a part in seeing that legislation through. We sat on one occasion for what I think was the longest-ever sitting in Parliament-close to 24 hours-going overnight to consider the Bill. While many others spoke all the time, I spoke only occasionally. I promise not to speak for 24 hours today, which I am sure is a great relief to everybody. That includes me, because I would run out of steam.

Suffice to say, I thank the Minister once again for the explanation and for drawing out the intention of this measure to preserve the minimum wage, preserve its integrity and ensure that the workforce is not exploited in any way. The regulations are being put before Parliament for approval and I see no reason not to approve their implementation today. In terms of impact, I was glad that small businesses were also mentioned in the regulations. On that basis, I thank the Minister and hope that this goes forward successfully.

5.30 pm

Lord Myners: My Lords, I declare an interest as a former chairman of the Low Pay Commission. I am grateful to the Minister for her clear explanation of the regulations. I welcome the simplification that is being suggested and I am delighted to be reminded again of the coalition Government's commitment to the national minimum wage.

I have four questions relating to the regulations. Would I be correct in understanding that an employee currently receiving precisely the adult national minimum wage who was also receiving assistance for transport to work would, as a result of this regulation, effectively have a lower benefit as a consequence of employment?

Secondly, I was somewhat surprised to see the explanation in paragraph 7.3 of the Explanatory Memorandum that,

will be affected. The figure of 90,000 seems to be quite large. What percentage is that of the total number of employees estimated to be earning the national minimum wage? I suspect that the use of the word "only" may be misleading.

I would also like to know a little more about the impact of the judicial review explained at paragraph 8.2 and what impact that might have on the timing of the implementation of these revised regulations. Finally, perhaps the Minister can explain paragraph 10.1 of the Explanatory Memorandum, which makes no sense to me at all.



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While officials in the Box prepare the answers, I will do the Minister the courtesy of talking on another subject so that they can prepare their notes. I know how much anxiety can be prompted when you look around and they are filing their nails and not writing a note for you.

I have four general points on the national minimum wage. I was delighted to hear the Minister reiterate her commitment to the minimum wage in a Question to the House last week in connection with internship. Am I correct in understanding that her clear statement that there would be no change in the way in which the minimum wage operates reflects the fact that we continue to believe that the RPI is the appropriate index for inflation that should be used when assessing whether the minimum wage represents an increase or decrease in real income?

Secondly, can the Low Pay Commission be asked to look at the accommodation allowance, which has not kept pace with the cost of accommodation and is falling behind in terms of value?

Thirdly, the Low Pay Commission should also give its attention to piece work. For example, hotel service operatives-or chambermaids as we used to call them-are sometimes assumed to be able to complete four bedrooms an hour for the purposes of earning the minimum wage. There is a lot of evidence that the rate of productivity assumed is altogether too high. Therefore, the minimum wage is being breached in both spirit and purpose.

Finally, can the Minister confirm that, as part of the coalition Government's commitment to the minimum wage, there will be no diminution in the resource available for compliance and enforcement? The word "fairness" was used earlier. The national minimum wage has to be fair both to employees and to employers who comply. When employers in the vicinity do not comply, that means a disadvantage for businesses which meet their legal obligations. I came across many examples of firms which did not comply. Resource was already very stretched in terms of monitoring compliance and enforcement. If the Government were in any way to reduce the resource made available for these functions, that would undermine the national minimum wage, which I believe the Institute for Government recently listed as one of the top 10 achievements of recent Governments. I think it is fair to say that the national minimum wage has had universal support from all political parties, and commitment to compliance, monitoring and enforcement is critical.

I think that I have now allowed sufficient time for those in the Box to perform their duties. I support the proposed regulations.

Lord Jones: Perhaps I will give them a little more time. I thank the Minister for her exposition at the onset. I am very glad to follow my noble friend Lord Myners, who on these matters has a very distinguished track record. The Committee may well learn from his expertise.

I welcome the details given, which were detailed enough. I support the regulations and would not be able to contribute without praising the minimum wage legislation overall. It was a very great social advance in

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Britain. It has been hugely beneficial to my own country of Wales and perhaps also particularly to sparsely populated areas across Britain-those, for example, which are dependent on tourism, the hospitality industry and aspects of agriculture and forestry for employment. It is a huge advance for many ordinary people in our nation.

Like the noble Lord, Lord Cotter, in another place I observed the clamour, controversy and opposition when the Blair Administration brought forward the minimum wage legislation. It was almost unbelievable. The opposition was strong and, looking back, there was much sound and fury. I am glad that I was able to support that legislation and use my vote in the other place. I, for one, am very proud that the minimum wage is on the statute book and I am grateful for the information that the Minister has given us today.

Lord Young of Norwood Green: My Lords, I, too, welcome the statutory instrument before us, which proposes to make a change so that payments by an employer for travel expenses to a temporary workplace which are eligible for tax relief will not count as pay for national minimum wage purposes. I certainly endorse the comments made by my noble friend Lord Jones, and I shall come later to the tour de force and analysis from my noble friend Lord Myners.

It is right to remind ourselves that the national minimum wage was introduced by the Labour Government in 1999 in spite of all manner of scaremongering. I remember talk from some sections of the right-wing press of 2 million jobs being at risk, and of course the legislation was opposed by the Conservative Party at the time, so we welcome the conversion, although I would not call it a pauline conversion. When it was introduced, the minimum wage raised pay for more than 2 million people. Thereafter, the Labour Government ensured that there were regular above-inflation increases so that, in the first 10 years of its existence, the national minimum wage rose by 59 per cent. Those increases raised the living standards of the lowest paid and helped to close the gap between men's and women's pay. We should not forget those fundamental changes that took place.

I certainly endorse the point that my noble friend Lord Myners made about the importance of compliance and enforcement. It took us a while before HMRC and the employment agency services group got around to ensuring that they prosecuted those people who failed to pay the minimum wage. I would welcome some reassurance on that. I very much hope that the coalition parties will continue our policy-to endorse again a point made by my noble friend Lord Myners-of increasing the national minimum wage at or above the level of inflation. I also hope that there is no intention on the coalition's part to allow the national minimum wage to wither on the vine. I express those fears because we have already seen the coalition Government decide to use the consumer prices index instead of the retail prices index to calculate rises in pensions and benefits, which will gradually erode pensioners' income.

How does the use of such a scheme affect the workers? I pay tribute to the helpful analysis of the Merits of Statutory Instruments Committee, which gave us a useful assessment of the effect on workers

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and their take-home pay. Just as important is what it will mean for them in future entitlements. If the money that one takes home equates to the minimum wage and is made up partly of wages and partly of an amount for travel, the actual wage is rather less than the minimum wage. In cases that Her Majesty's Revenue and Customs has seen, workers who are paid the national minimum wage and who use a travel and subsistence scheme can find that as much as 40 per cent of their wages are paid as travel and subsistence expenses.

In making up our mind about whether we should support the proposed instrument, one of the things that certainly influenced us was that the Low Pay Commission, the Equality and Human Rights Commission and the Gangmasters Licensing Authority all endorsed it, as the Minister said. Over the past five years the HMRC compliance teams have interviewed an estimated 400 to 500 workers, the majority of whom were paid at or near the minimum wage. Virtually none of them understood in any meaningful way the contractual terms of their engagement. The possibility of exploitation is a real worry.

The access to earnings-related contributory benefits, which is based on a worker attaining the qualifying earnings factor, can therefore be affected. The effect of participating in travel and subsistence schemes is to reduce the amount of a worker's pay on which national insurance contributions are paid, depending on how many weeks they are unable to work for, and puts at risk their ability to achieve the qualifying earnings factor. That is most likely to affect eligibility for both basic and additional state pension.

I understand from the impact assessment that the schemes we are discussing are likely to involve some 90,000 out of a possible 1 million people. I would like some confirmation of that. It endorses another point that my noble friend Lord Myners made. The change proposed in the legislation could have a negative impact on some workers who are currently in such travel and subsistence schemes because only part of the amount that a worker takes home is pay, and gross pay is assessed for tax purposes. Some workers, because they receive less pay, may be entitled to more working tax credit. Under the regulations, some people could find that they are entitled to less working tax credit because more of their take-home money will be pay. However, such individuals have until now had an advantage over other workers with similar levels of income who are not in such schemes. This legislation will end the unfairness that travel and subsistence schemes create. We endorse the point that the Minister made: workers who participate in them artificially benefit from enhanced eligibility for tax credits, compared to other workers who do not or cannot participate.

What steps will the Government take to ensure that any workers whose eligibility for working tax credit will be affected are properly informed about the change? That is important. We know that tax credits have been a huge boost to those on low incomes and have been recognised as helping to reduce the gap between rich and poor. I am sure that I am not the only Peer who has had to deal with people whose circumstances have changed and where workers are then faced with a

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clawback, where they must pay back an overpayment of tax credit. I stress that we want to know what the Government will do to ensure that anyone affected by the measure is kept fully informed and does not end up, months down the line, in a situation of being asked to pay back money that they simply do not have.

That said, we support the motivation behind this statutory instrument because we believe that it will prevent exploitation and ensure that the contributory benefit position of temporary workers paid at or near the national minimum wage is not prejudiced by the reduction of earnings liable to pass on national insurance contributions. We also support it because the intention is to ensure that employment businesses and umbrella companies do not gain an unfair competitive advantage through the use of travel and subsistence schemes for temporary workers. I, too, look forward to the answers to the issues raised by my noble friend Lord Myners.

5.45 pm

Baroness Wilcox: My Lords, I am grateful to all noble Lords who have participated in the debate. I believe that the regulations raise important issues of principle about the minimum wage and the rights of workers and employers, so it is essential that we give them very careful consideration. I was therefore happy to hear the comments today and to hear some supporting views, which is always nice. I really had not taken it on board that my noble friend Lord Cotter had been a member of the national minimum wage committee in another place. Hearing that he sat for 24 hours, our Chief Whip would, no doubt, remind us that other people in other places sit longer than we do. However, it was a wonderful piece of work and it has been supported over the years.

The noble Lord, Lord Myners, asked several questions and I think that I can answer a goodly few. On the first, we recognise that workers participating in travel and subsistence schemes may see a small reduction in their take-home pay as a result of the changes in the regulations. However, our experience is that the direct cash benefit to the worker is minimal in comparison to the direct cash benefit to the employment business. We consider it wrong in principle that profits should be made by employers from low-paid workers through the application of salary sacrifice schemes. There is evidence that significant numbers of low-paid workers do not understand the way in which these schemes work. Indeed, the noble Lord, Lord Young, pointed that out in his remarks.

The regulations will remove the risk that, by participating in travel schemes, low-paid workers will not be able to meet the requirements for entitlements to earnings-related benefits, in particular the basic and additional state pension. Again, I pick up on something that the noble Lord, Lord Young, said: let us make sure that everybody knows and understands what is happening to them because they are already complaining that they do not at the minute. We must be very sure that what we do makes that clearer.

On the second question from the noble Lord, Lord Myners, about a percentage of temporary workers as opposed to workers on the national minimum wage,

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we estimate that approximately 1 million workers are earning that national minimum wage so 90,000 is, for interest, roughly 10 per cent of that total. His third question was on why we have not waited until the result of the judicial review to put forward the regulations. We consider that the judicial review application has no merit and we are strongly defending ourselves against it. There are good reasons for the Government to make these regulations and we are confident that the court will agree with us. We therefore see no reason to delay the regulations until the result of the judicial review is known.

On the noble Lord's fourth question, it says here that there is an error in paragraph 10.1 of the memorandum, for which we apologise. We thank the noble Lord, Lord Myners, very much for bringing it to our attention. Yes, jolly good. On enforcement compliance, this Government are firmly committed to the national minimum wage and to effective risk-based enforcement. Enforcement is essential in ensuring a level playing field for legitimate businesses and in protecting workers who are at risk of abuse by those who refuse to play by the rules. BIS has published a strategy for national minimum wage compliance. It focuses on how the compliance and enforcement landscape should look over the next three to five years and recognises that our approach must continue to be based on intelligence and data. In the context of reduced budgets we will need to prioritise, but we are clear that underpayment is not an option. The strategy will help us to make informed choices to ensure that we have the right tools for the job and that resources are focused where they are most effective.

The noble Lord, Lord Jones, also talked about his time in the other place. He spoke with Welsh passion about the national minimum wage. It was very nice to hear him and good to have his support for the work going forward. I hope that we do not disappoint him.

The noble Lord, Lord Young, talked of the beneficial effects of the previous Government's work in this area and of closing the gap between men and women's pay. To that, I would say, "Yes, but we are not there yet". We will keep trying to improve on the previous Government's work. The noble Lord also paid tribute to the excellent work of the Merits Committee. I agree with that, as I am sure would all other noble Lords.

I was asked whether we would make sure that people were properly informed of the changes. Yes, we certainly will. I was asked also whether workers will face a claw-back of overpaid tax credits at the end of the year as a result of their pay being adjusted. No, they will not. For tax credits to be adjusted downwards for 2010-11, there would need to be a substantially greater increase in taxable pay for 2010-11 than will arise from the proposed amendment to the regulations.

There were one or two other questions which the noble Lord, Lord Myners, very kindly put to me as I was waiting for the answers to the first ones. I am not sure that I am able to answer them all at the moment; if that is the case, I shall write to him.

Lord Myners: I congratulate the Minister on doing a superb job in answering the questions. Many members of the coalition Government would do well

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to study the skill, openness and sincerity with which she attempts to answer questions and, indeed, succeeds in doing so.

I have only one question to ask at this point; it is fortunate that we have a Minister from the Department of Business with us to answer it. Which is the right rate of inflation? The Government are using CPI for changing benefits and pensions, but they are using RPI for increasing the payments that students make in connection with university education. Both decisions come from the same department of state. Can the Minister put my mind at ease and tell me which is the relevant index to be used for the purpose of determining fair value for people on low incomes or of paying for their education?

Baroness Wilcox: I think that the noble Lord, Lord Myners, will understand the answer that I can give him. The Government will consider the recommendations of the Low Pay Commission when deciding on the appropriate rates for the national minimum wage.

Lord Myners: That is a very good answer to a question that I did not ask but I am happy to leave it at that.

Baroness Wilcox: That is most gracious.

Lord Young of Norwood Green: That was exactly the point that I was coming to. When the Minister said that she would "consider", did that mean that she is

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not committed to accepting the recommendations of the Low Pay Commission? Are the Government prepared to accept its recommendations, as previous Governments have done?

Baroness Wilcox: I am told that this Government never commit-at least, not at this moment-so I think that I just have to say that we are considering the Low Pay Commission's recommendations.

Lord Myners: This Government may never commit. They pledge, but we know what the pledges are worth. However, it is right to point out that the Low Pay Commission's recommendations on hourly rates have never been rejected by government. I sincerely hope that this Government will respect the commission's independence, integrity, foresight and professionalism and not lightly even contemplate rejecting its recommendations.

Baroness Wilcox: I am sorry, my Lords. I was being flippant and was somewhat thrown by the question, which is a little wide of the regulations that I am introducing today. Yes, of course, we shall be listening very carefully to the Low Pay Commission. We shall remember its independence and integrity, which we will honour. If there are no further questions that anyone wishes to put at the moment, I commend the regulations to the Committee.

Motion agreed.

Committee adjourned at 5.56 pm.


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