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House of Lords

Wednesday, 2 February 2011.

3 pm

Prayers-read by the Lord Bishop of Guildford.

Introduction: Baroness Worthington

3.08 pm

Bryony Katherine Worthington, having been created Baroness Worthington, of Cambridge in the County of Cambridgeshire, was introduced and made the solemn affirmation, supported by Lord Eatwell and Lord Bassam of Brighton, and signed an undertaking to abide by the Code of Conduct.

Death of a Member: Lord Fyfe of Fairfield

Announcement

3.12 pm

The Lord Speaker (Baroness Hayman): My Lords, I regret that I have to inform the House of the death last night of Lord Fyfe of Fairfield. On behalf of the House, I extend our condolences to the noble Lord's family and friends.

Health: Multiple Sclerosis

Question

3.13 pm

Asked By Lord Walton of Detchant

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, patients with multiple sclerosis can receive treatment with a number of disease-modifying drugs where their clinicians consider they will benefit. More than 12,000 have benefitted from such drugs through the risk-sharing scheme established in 2002. In addition, another drug, Tysabri, has subsequently been licensed for use in the NHS and recommended by the National Institute for Health and Clinical Excellence.

Lord Walton of Detchant: My Lords, I thank the noble Earl for that Answer. As he made clear, following the introduction of interferons in the past 20 years, a number of effective drugs have been introduced and have been shown by research to have a beneficial effect upon the course of the disease, particularly in the relapsing and remitting form of the condition. However, is he aware that in the UK only 12 per cent of patients with multiple sclerosis are at present receiving these drugs? A recent report from the Department of Health shows that, in that respect, this country stands 13th out of 14 comparator countries. Surely we can do better.



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Earl Howe: My Lords, the noble Lord, with his extensive knowledge of neurology, is perhaps the best person in this House to inform us on this subject. He is of course right-and there is considerable comment on the fact-that, particularly as regards the new drug Tysabri that I mentioned, the uptake has been lower than was perhaps expected. Professor Sir Mike Richards' report on the extent and causes of international variations in drug usage outlines that low use of Tysabri in the UK could be the result of caution and/or scepticism among some neurologists about the benefits of the drug, particularly as regards its side-effects. However, the precise causes of the variations are a matter of speculation.

Lord Hylton: Does the noble Earl know-I expect that he does-that there is a treatment which extracts the stem cells from the patient's blood and reinjects them in crucial spots? This treatment is available in Baghdad, Beirut and Kurdistan. Will the Government make it available in this country, for the benefit of multiple sclerosis sufferers?

Earl Howe: My Lords, I have extensive briefing on some upcoming and promising treatments that may or may not emerge in the National Health Service, but I have to say that that is not one of them. I shall go away and ask the department to inform me.

Lord Winston: My Lords, in addition to the important point made by the noble Lord, Lord Walton, about drugs that should be available under the National Health Service, is the Minister aware that some years ago a Select Committee for Science and Technology inquiry gave clear evidence that, in small doses, cannabis is of great benefit to some patients who have spasms and other problems with multiple sclerosis? Do the Government have any plans to allow the use of that drug in those circumstances?

Earl Howe: My Lords, the noble Lord will know that a drug called Sativex was recently licensed, which is derived from an extract of cannabis, as he will be aware. Having said that, I believe that NICE has issued no guidance to the NHS on the use of Sativex, so it is for local primary care trusts to make funding decisions based on an assessment of the available evidence and on the basis of the patient's individual circumstances. As the noble Lord rightly said, Sativex treats the symptoms of severe spasticity caused by MS and is not a disease-modifying drug as such.

Baroness Gardner of Parkes: My Lords, I declare an interest as I have a daughter who has had multiple sclerosis for 30 years. For the past 13 years, she has been on beta interferon, which has been of great benefit to her. I understand from the press that there is a possibility of oral drugs rather than weekly injections in the future. Can the Minister tell us what stage that is at? I understand that the issue is still being considered by NICE as it is in the early stages. What progress is being made?

Earl Howe: My noble friend is absolutely right. There are two drugs, Cladribin and Fingolimod, which are oral treatments but they have not yet received licences. The trial results for Fingolimod are promising,

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but it is premature to say that the treatment will remove the need for the drugs in the risk-sharing scheme. Clearly, oral treatments are likely to have advantages over alternative treatments given by injection or infusion, but some concern has been expressed about possible side-effects and the likely cost to the NHS.

Lord Dubs: My Lords, does the Minister agree that many patients who are on those drugs also need the support of MS nurses, of which there are very few? Indeed, in some parts of the country there are none at all. What can be done about that?

Earl Howe: In recent years the number of specialist MS nurses has increased-I understand that the number has almost doubled-partly as a result of the risk-sharing scheme introduced in 2002. However, we hear anecdotal reports that the numbers are dwindling, which is a matter of concern. Under the new NHS architecture, which will be characterised by clinically-led commissioning responding to the health needs of the local area, we will see that the workforce planning that will emerge will lead to the training of more of these specialist nurses.

Baroness Finlay of Llandaff: During the current transition phase of the NHS as we move towards the new arrangements, what appeal mechanisms are there for patients who wish to be considered for disease-modifying drugs to be referred for neurological assessment where their general practitioner is not doing so or where they cannot find out who is the person to approve payment?

Earl Howe: My Lords, at the moment, the appeal process is to the primary care trust. Under the Government's proposals, the appeal will be, in the first instance, to the GP-led consortium and, thereafter, if appropriate, to the NHS commissioning board.

Baroness Jolly: My Lords, medication is clearly critical for patients with MS, but a whole range of aids are also available. How does my noble friend think that those aids might be more readily available under the new, reformed NHS?

Earl Howe: Again, my Lords, the requirement for aids will emerge from two driving processes: one will be the clinically led commissioning process and the other will be patient-led groups. Neurological Commissioning Support is already driving forward an extremely coherent and up-to-the-minute commissioning pattern of pathways for the emerging GP consortia. Patient power will have a big influence as well.

Japan: Whaling

Question

3.21 pm

Asked by Baroness Parminter



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The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley):My Lords, the Foreign Secretary and other Ministers, including those from my department, raised whaling with the Japanese Government on several occasions last year. Through the International Whaling Commission and the global convention for whaling, the United Kingdom regularly states our opposition to whaling by Japan and objects to its so-called scientific whaling in north Pacific and Antarctic waters. Japan's action undermines the moratorium on commercial whaling, the southern ocean whale sanctuary and international efforts to conserve and protect whales.

Baroness Parminter: I thank the Minister for that response. Japan has been seeking to put pressure on the International Whaling Commission to lift its ban on commercial whaling. Can the Minister assure the House that the Government will support the IWC secretariat as it seeks to improve governance in the light of allegations of vote buying and corruption, in the lead-up to its meeting in the Channel Islands this summer?

Lord Henley: My Lords, we have no direct evidence of vote buying or corruption, although I have to say that some of the voting at last year's IWC meeting in Agadir seemed somewhat odd and possibly resembles the Eurovision Song Contest. Having said that, we will continue to press our case at this year's IWC, and I hope that we will achieve similar success to what we achieved last year at Agadir.

Baroness Quin: My Lords, I welcome the fact that despite the change of government, UK policy on whaling seems to have emerged unscathed and unchanged. Given that the UK will be hosting the next IWC meeting, the importance of preparing for this meeting is even more pressing. From his contacts so far, how does the Minister assess the prospects for reform of the IWC at that meeting, and how does he assess the likelihood of getting together the alliance that we need to promote the policies that the UK Government favour?

Lord Henley: My Lords, first, I thank the noble Baroness for her comments. We will certainly continue with the policy on which Her Majesty's Governments-of all parties-have concluded for a number of years. We will continue to work with the IWC and hope to achieve success there. The important thing is that we also work within the EU to ensure that the EU speaks with a united voice on these matters. I offer praise to my honourable friend Mr Benyon, who last year at Agadir got the EU to speak as one bloc on the matter. It is very important that the EU continues to do that at St Helier this summer.

Lord Greaves: My noble friend mentioned the EU. Iceland is at the moment negotiating to join the EU. Last year, the Prime Minister suggested that if Iceland is to join the EU, it should cease whaling in its territorial waters. Has any progress been made with that proposal?



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Lord Henley: Our views and the views of other member states have been made fairly clear to Iceland. Put very simply, it has been advised that whaling is possibly incompatible with EU membership.

Lord Boswell of Aynho: My Lords, I welcome what my noble friend said. Is he aware of anything at all of scientific interest that has emerged from the Japanese practice of capturing whales for allegedly scientific purposes?

Lord Henley: My Lords, I am not aware, and that is why the words I used in my original Answer were "so-called scientific whaling".

Lord Dubs: My Lords, in advance of the meeting of the International Whaling Commission in July, are the Government exerting maximum pressure on all countries that are reasonably sympathetic to us-for example, Norway-that still practise whaling? Would it not be right to press very hard before the meeting in July rather than leaving it until July to exercise our influence?

Lord Henley: My Lords, the noble Lord makes a very good point, and we will continue to exert pressure on all the relevant states. He is right to draw attention to Norway, which is one of the countries that continues to practise whaling. We will continue to do so before the IWC and at the IWC itself.

The Countess of Mar: What is the current situation with the whale population? Are there still whales on the list of endangered species?

Lord Henley: My Lords, I understand that there are still whales on the endangered list, but the general agreement is that whaling should stop. That is what the IWC is seeking and what we, along with a number of other countries, are pressing for.

Currency Markets

Question

3.26 pm

Asked By Lord Dykes

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, Ministers regularly meet their opposite numbers from other member states to discuss pertinent economic and financial issues, including currency issues, at ECOFIN. The next council meeting is currently scheduled for 15 February.

Lord Dykes: I thank the Minister for that Answer and for the fact that, on at least four or five recent occasions, HMG have said with great emphasis that the United Kingdom benefits directly from a strong, stable and secure eurozone. Does he feel that if the City, which is probably the largest euro-trading market in the world now, is undermined by greedy gamblers still spreading false stories about the strength of the euro, that would be a tragedy for the City of London?



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Lord Sassoon: My Lords, we want to see a transparent, deep and liquid market in the euro, other currencies, commodities and all forms of securities. As my noble friend suggests, it is right that London has taken the lead not only in global currency trading but in so many other markets. This Government intend to ensure that that continues to be the case.

Lord Barnett: Could the Minister confirm the recent figures issued by the highly respected Bank for International Settlements that the sovereign debt owed to British banks by Ireland, Greece and Portugal is something like $233 billion and would be $370 billion if Spain was included? In those circumstances, would it not be sensible to involve ourselves in discussions on a serious eurozone scheme that would help to avoid any serious problems?

Lord Sassoon:My Lords, the European stability mechanism is the permanent mechanism that will replace the temporary arrangements and there is a commitment among European leaders to complete the design by March 2011. Even though we are not in the eurozone and will not be a member of the new stability mechanism, we have been invited to participate in the design. My right honourable friend the Chancellor confirmed to President Juncker, I think on 7 December, that the UK would take up that invitation to participate in the design.

Lord Trimble:My Lords, will Her Majesty's Government be prepared after 25 February to support the Irish efforts to renegotiate the interest rates on the finance made available to Ireland, as that would be preferable to a default, which would almost certainly be the alternative to such a renegotiation?

Lord Sassoon: My Lords, I think that we had better see how this plays out. It is encouraging that the European financial stability fund was able to make a successful bond issue at the end of last month. There was something like €45 billion of demand, which, in the technical phrase of the markets, was considered a blow-out-a hugely successful deal. That brings into question whether the terms can in any way be softened, but we had better wait to see how this evolves.

Lord Eatwell: My Lords, the noble Lord has said on numerous occasions to the House and again today that the stability of the eurozone is in Britain's best interests. He has also told us today that Britain will participate in the design of the new stability mechanism. Will he tell us whether Britain will participate fully in the operation of the new stability mechanism, once designed, or will we continue to hover irrelevantly on the sidelines when Britain's interests are at stake?

Lord Sassoon: My Lords, I have been completely clear, as has my right honourable friend the Chancellor of the Exchequer on numerous occasions, that while we wish to see a stable eurozone, which is indeed in Britain's best interests, we will not be a part of the new permanent European stability mechanism, which is a matter for the eurozone countries. However, that does

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not mean that we are not rightly concerned, as I have just explained, to make sure that the stability mechanism is established in an appropriate way. Just as we played a constructive role in relation to Ireland, we will continue to play a constructive role in relation to all these matters as we go forward.

Lord Newby: My Lords, following on from the previous question, will the Minister confirm that the Government will press the ECB to issue more euro-denominated bonds? That is a cheap and efficient way of generating funds which can be taken up by Ireland, Greece and the other eurozone member states that are now in financial difficulties.

Lord Sassoon: My Lords, I am grateful to my noble friend for again underlining some of the successes in recent financing in the eurozone, which is an encouraging sign. I would not go so far as presuming to give the ECB further advice, but certainly recent market operations have been encouraging.

Lord Stoddart of Swindon: Does the noble Lord agree that the fact that we are not in the euro has meant that our currency has been able to take the strain and that exports have increased? This country is likely to survive much better out of the euro currency, especially in regard to interest rates, which have been kept particularly low, to the benefit of industry and house buyers.

Lord Sassoon: I am grateful to the noble Lord and I thoroughly endorse his sentiments. This country has benefited greatly in recent years through the crisis by not being in the euro and by being able to develop our own policy responses. This coalition Government have no plans to enter the euro and are not making any preparations to do so at any future date.

Lord Pearson of Rannoch: Will the noble Lord go further and agree that, if the euro had never been invented, the currency markets and the world economy would not be in the trouble that they are?

Lord Sassoon: No, I would not want to go that far.

Lord Liddle: My Lords, does the Minister have a comment on reports in today's Financial Times that the French and the Germans are negotiating for the eurozone a competitiveness pact, which would have considerable implications for the single market? What steps will the Government take to ensure that Britain is fully involved in these discussions and that this will not be another case where we will be hovering on the sidelines?

Lord Sassoon: My Lords, I cannot comment on any specific proposals that might come forward from France and Germany, but the Government are right at the forefront of discussions to extend the single market to make sure that competitiveness issues internally and externally for the EU competing globally are kept firmly at the forefront of the European agenda.



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Baroness Williams of Crosby: Have the United Kingdom Government had any discussions with the German Government about coming into the European bond market, which, as my noble friend will know well, would have a very favourable effect on yields?

Lord Sassoon: I shall not comment on individual discussions about market matters, but I again note some of the positive developments in Europe collectively as well as the auctions since the beginning of the year by Portugal, Spain and Greece. However, we must recognise that the currency situation remains very fragile.

Lord Grocott: As the Minister is clearly pleased that Britain is not a member of the euro, would he like to remind the House which Government made that decision and would he like to join me in congratulating them on making the right decision?

Lord Sassoon: I am indeed content that we are not in the euro.

Forestry Commission

Question

3.35 pm

Asked By Lord Clark of Windermere

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley): My Lords, the consultation on the future of the public forest estate, published last Thursday, proposes new ownership and management models which will maintain the benefits which the estate currently provides. There are additional benefits, too. For example, transferring heritage forests to charities will allow stakeholders to have a far more significant role in their care and protection, and providing opportunities for community and civil society groups to buy or lease forests will bring high levels of local knowledge and enthusiasm to their management.

Lord Clark of Windermere: My Lords, I thank the Minister for his Answer. I want to ask him a very specific question. There is currently de facto access on foot to virtually all the public forest estate. There is de facto access by bicycle to virtually 100 per cent of the forest estate. There is also a great deal of access for horses. Will the Minister give the guarantee to the House this afternoon that if there were to be a transfer of land from the Forestry Commission, there would be no decrease whatever in any of those levels of access-on foot, by bicycle or for horses?

Noble Lords: Hear, hear!

Lord Henley: The noble Lord is a very distinguished former chair of the Forestry Commission. He will know that what he said is not strictly speaking accurate and that something of the order of 20 per cent of the

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forestry estate has no access because it is on leasehold land and access was never granted to it. He will also know that under his watch and that of the Labour Government, some 25,000 acres were sold without any safeguard whatever. I can give examples of woods that are now locked as a result of that, one of which is quite close to where the noble Lord was speaking only last week at a rally in Cumbria. As he will know from our consultation, we are very anxious to maintain access. Where we lease land, as we propose in the consultation, we will be able to provide secure conditions for it and will do what is appropriate at the time.

Lord Boyce: My Lords, I am sure that the Minister agrees that preserving our heritage conveys a very special social benefit. In that context, I would be grateful if he would say what plans the Government have to treat ancient woodlands as a special category? Furthermore, will the Government make available the appropriate resources if they are to hand over to charities and communities responsibility for their preservation?

Lord Henley: My Lords, I am very grateful to the noble and gallant Lord for mentioning our ancient woodlands and heritage forests. What we are setting out in relation to, for example, the New Forest and the Forest of Dean, is the idea that they should be taken over by charities. We are thinking of something possibly along the lines of what we have proposed for the British Waterways Board, where we have provided the money for it, in effect, to be mutualised. We are looking also at the charities option. All these options are laid out in the consultation document. I would advise the noble and gallant Lord to study it and produce his responses in due course, but I can offer a guarantee that our ancient woodlands will be protected appropriately-that is what we want. We are looking to realise assets on commercial forestry in places such as Kielder.

Lord Scott of Foscote: My Lords-

Lord Greaves: My Lords, the comprehensive spending review put forward proposals to sell 15 per cent of the forestry estate within the next four years. As that is possible under existing legislation, what is the rush to legislate for forestry in the Public Bodies Bill? Why does it have to take place now rather than at greater leisure in the next Defra Bill that comes along?

Lord Henley: My Lords, I am not sure that there is a Defra Bill in the pipeline, but I cannot comment on that. We are seeking powers to take the appropriate steps with regard to the Forestry Commission and the forestry estate in the Public Bodies Bill. We are looking not at an immediate sell-off of the entire estate, but at a process that will take place over a number of years. My noble friend need not worry about that.

The Lord Bishop of Guildford: My Lords, is the noble Lord aware of the rights-or, rather, the lack of them-of those who live in or by our forestry estates and of the reasons why Parliament in 1981, with the support of all sides of your Lordships' House and the

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other place, exempted the Forest of Dean from, I use shorthand, "sale", and thus the reasons why the right reverend Prelate the Bishop of Gloucester, my brother, will present an amendment to the Public Bodies Bill? I speak as a householder in the Forest of Dean.

Lord Henley: My Lords, I remember the Bill in 1981. Although I cannot remember specific parts of it, I am aware of the concerns relating to the Forest of Dean. I know that the Leader of the Opposition also has concerns about this. We will look at the amendments from the right reverend Prelate's colleague when we get to that stage-if we ever do-in the Public Bodies Bill, and we will then respond in the appropriate manner.

Baroness Quin: My Lords, how does the Minister justify the classification of forests in the consultation document and how was it decided? While I hope we all agree on the importance of the Forest of Dean and the New Forest, describing a forest such as Kielder simply as "commercial" flies in the face of the fact that it contains 31 areas of special scientific interest, is home to most of England's remaining red squirrels and has become increasingly important in recent years for tourism and recreation. How does the Minister justify this?

Lord Henley: As the noble Baroness will be aware, it is commercial woodland on an area that used to be open moorland. She and I know that part of the country very well. It is now covered in what people refer to as serried ranks of conifers and should be treated as commercial woodland. The important point is that the manner by which we propose to realise assets from it will mean that we can protect various areas. The sales conducted by the previous Government of some 25,000 acres were made without any protection whatever.

Lord Scott of Foscote: My Lords-

Lord Naseby: My Lords-

The Chancellor of the Duchy of Lancaster (Lord Strathclyde): My Lords, we ought to hear from the noble and learned Lord, Lord Scott.

Lord Scott of Foscote: My Lords, is there any reason why, before any sale, the Forestry Commission should not create a public right of way over many of the paths in each and every piece of freehold woodland, which would be enforceable against purchasers and would persist as do all other public rights of way?

Lord Henley: My Lords, that would be possible on freehold land. We believe that by leasing land rather than selling it as freehold, one can impose greater conditions and ones that are easier to enforce. As a much greater lawyer than me, the noble and learned Lord will know that covenants imposed when land is sold are easily avoided when it moves on to a subsequent owner.



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Middle East

Private Notice Question

3.44 pm

Tabled By Baroness Symons of Vernham Dean

Baroness Symons of Vernham Dean: My Lords, I beg leave to ask a Question of which I have given private notice. In doing so, I declare an interest as chairman of the Arab-British Chamber of Commerce.

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, I thank the noble Baroness for her Question. Jordan is a close ally and we value the support that it offers on regional issues such as the Middle East peace process. We are watching closely the situation in Jordan following the disbanding of the Cabinet. It is important that Jordan continues its programme of political and economic reform, and we will work with the Jordanian Government to support that goal.

Baroness Symons of Vernham Dean: I thank the Minister for that response. Jordan is indeed a close ally and I imagine that there are many in your Lordships' House who have longstanding friendships with Jordan. The noble Lord mentioned Jordan's role in the Middle East peace process. Jordan and Egypt, taken together, have been very steadfast in their support of that peace process. Given the level of public unrest in both countries, perhaps I may ask him whether there has been any direct contact between Ministers in Her Majesty's Government and the new Prime Minister of Jordan.

In addition, Jordan has some really appalling economic problems, some shared with the rest of the Middle East, such as high unemployment and the high prices of commodities, and others very particular, such as no water and very little energy. These demonstrations are spreading around the Middle East. We hear today that demonstrations are planned in Syria, Algeria and even possibly in the Gulf states. There are even some reports-I do not know how reliable-about demonstrations in Jeddah. Will the noble Lord very kindly consider arranging for a briefing in your Lordships' House, so that those who are interested in these matters may have a somewhat deeper opportunity of discussing them with him, with the benefit of the wisdom of the Foreign and Commonwealth Office?

Lord Howell of Guildford: I thank the noble Baroness for those queries. The new Prime Minister has only just been appointed and the Government are yet to be formed. However, I can tell your Lordships that my right honourable friend the Prime Minster spoke with King Abdullah on Sunday, three days ago; my honourable friend the Under-Secretary of State Alistair Burt visited Jordan on 20 January, about 10 days ago; and our ambassador there is of course in regular contact with a great many people involved in the situation. We are keeping close contact in what is obviously a very fluid

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and evolving situation. The noble Baroness is quite right that the threat of contagion is certainly seen there. There seems to be some evidence that, thanks to modern global communications-mobile telephones and so on-news and views are travelling very rapidly through the entire region. We will have to see how things turn out in Jordan and whether there is a similar pattern to what we have seen in Tunisia and Egypt in recent days. It is early days, and each country of course has its completely different and separate qualities and patterns of events, which may affect the outcome in different ways. I would be delighted to provide a briefing and would like to make arrangements with her and other interested parties as soon as possible.

Baroness Falkner of Margravine: First, I endorse the request of the noble Baroness, Lady Symons, for a briefing. That would be very helpful given how many noble Lords in this House would wish to be posted about events and to avail themselves of the knowledge in the Foreign and Commonwealth Office. On the broader question of Jordan, and as a candid friend to Jordan, I would point out that this is the second time that a Government have been dismissed in Jordan in about 15 months. Perhaps in the Middle East we need to have a mind-shift whereby we recognise that absolute rule by monarchs is possibly no longer the direction of travel that the people of the Middle East might wish to see. On the wider stability of the region, I suggest to my noble friend that each country has very individual and differing circumstances, and it would be very helpful to discuss each country rather than one set of countries as a whole.

Lord Howell of Guildford: My noble friend is right and confirms what I have just said, that the countries are different. I will certainly provide the briefing she requests. She is right, too, to suggest that a kind of wind of change-although one must be careful about historical analogies-seems to be sweeping through the area, and that raises new questions about forms of government. Whether those forms are along the lines of previous patterns or whether we see new forms of government, the general wish of a nation like ours must be to see orderly transition, maximum stability and the development of democratically minded and balanced societies that can bring peace and prosperity to the entire region.

Lord Anderson of Swansea: My Lords, on the face of it, the Government who are likely to emerge from the current turbulence in Jordan are likely to be much closer to the Arab street, and therefore are likely to take a much more negative view about the Middle East peace process. Is that the United Kingdom Government's assessment?

Lord Howell of Guildford: That is a possibility. Clearly, the developments in Egypt will affect the outlook in the Israel/Palestine dispute and, depending on how other patterns evolve, that may well be so. The noble Lord, with his expertise, is right: from the point of view of Israel, things are changing, and there will need to be a reassessment. But exactly how it is going to work out it is too early to say.

Lord Eden of Winton: My Lords-



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Lord Hylton: My Lords-

Noble Lords: Cross Bench!

Lord Hylton: My Lords, do the Government share the widespread sympathy for Jordan in having to cope with large numbers of refugees from Iraq, which is an unintended consequence of the allied invasion of that country?

Lord Howell of Guildford: Yes, the Government share that sentiment. Jordan has had to face some grave trials and pressures from external forces, of which that is certainly one. Many of us who would regard ourselves as a friend of Jordan and Jordan as a friend of this country look on those situations and how Jordan has had to deal with them with sympathy and support.

Lord Eden of Winton: My Lords, can my noble friend confirm that in the case of Jordan the monarchy is enshrined in the constitution? How far does he think the intervention of western Governments would be helpful in the evolution of any new forms of government that might emerge in those countries? Should we not leave a large amount of that to the people in those countries?

Lord Howell of Guildford: My noble friend is right that the general principle must be that these nations have their separate qualities and situations and must be left to determine their own forms of government. That is absolutely right. It is much too early to speculate on how this will turn out, and certainly much too early to suggest any question of intervention. As far as I am concerned, that simply does not arise.

Baroness Williams of Crosby: My Lords, can my noble friend say whether there is any possibility of reviewing the current proposals for cuts in the World Service to this particular region of the world at a time when the attitudes of the Arab street, and particularly its educated members, will be absolutely crucial in whether we move towards a democracy in those countries or not?

Lord Howell of Guildford: As we debated very vigorously last week in this House and in another place, the changes to the budget and proposals for the World Service are not only the outcome of a necessary austerity, they are tailored to the new forms of communication-online, mobiles, television and so on-which pervade in the area. I do not know whether my noble friend will agree, but there is general evidence that the new impact of television in the area, from Al-Jazeera and the BBC's own Arabic television programmes, is probably the dominant force for today and tomorrow in communicating with the area. So I do not think that I can hold out any hope for her that the particular arrangements announced for the BBC World Service are likely to be changed in that respect.

Lord Hurd of Westwell: Would my noble friend accept that throughout the Middle East thousands of British men and women are doing work in hospitals and schools that is extremely valuable for the area? Would it not be a great mistake-and I am not suggesting

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that he is falling into it-if anything that appeared in the press or from official sources gave those people, who are doing valuable work, the impression that their work had come to an end and that they had better get out?

Lord Howell of Guildford: My noble friend, with his experience, is of course totally right. It would be a grave mistake. For the record, with regard to Jordan, there are about 1,000 British residents there and 200 tourists at the moment. There has been a minor updating of the travel advice to avoid political demonstrations-that is common sense-but there are no travel restrictions. My noble friend's general message is absolutely correct.

Legislative Reform (Civil Partnership) Order 2011

European Union (Definition of Treaties) (Stabilisation and Association Agreement) (Republic of Serbia) Order 2011

Misuse of Drugs Act 1971 (Amendment) Order 2011

Immigration and Nationality (Fees) Order 2011

Civil Procedure (Amendment No. 4) Rules 2010

Rules of the Court of Judicature (Northern Ireland) (Amendment No. 3) 2010

Control of Donations and Regulation of Loans etc. (Extension of the Prescribed Period) (Northern Ireland) Order 2011

Motions to Refer to Grand Committee

3.54 pm

Moved By Lord Strathclyde

Motions agreed.

National Insurance Contributions Bill

Main Bill Page
Copy of the Bill
Explanatory Notes

Second Reading

3.55 pm

Moved By Lord Sassoon

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, I am pleased to open this debate on the Bill before us today, which has two purposes.



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The first part of the Bill introduces a 1 per cent increase in the class 1 employee and employer rates, and the class 4 self-employed rates of national insurance contributions from April of this year. As some Members of the House will no doubt remember, this was announced by the previous Government in their 2009 Pre-Budget Report. If the increases were to be introduced as the previous Government had intended, they would have led to an increase in the cost of labour. I reassure the House that this Government intend to reverse the impact of the previous Government's tax on jobs by increasing the employer national insurance threshold, the primary threshold for employees and the income tax personal allowance.

At the Emergency Budget in June 2010, my right honourable friend the Chancellor confirmed that the personal allowance would be increased by £1,000 from next April and that the employer national insurance contributions threshold would rise by £21 a week over indexation. At the same time, my right honourable friend confirmed that it is our intention to raise the employee national insurance contributions threshold by £24 a week above indexation and to raise national insurance contribution rates by 1 per cent.

The first part of the Bill before the House sets out how the increase in rates of 1 per cent will apply. First, it increases the employer rate from 12.8 per cent to 13.8 per cent. This 1 per cent increase will also apply to class 1A and 1B contributions that are paid by employers on benefits in kind and pay-as-you-earn settlement agreements. Secondly, it will increase the employee main rate from 11 per cent to 12 per cent. The same 1 per cent rise will also apply to class 4 contributions paid by the self-employed, which will rise from 8 per cent to 9 per cent. Thirdly, the additional rates of employee class 1 and self-employed class 4, payable on earnings or profits above the upper earnings limit and the upper profits limit, will rise from 1 per cent to 2 per cent.

Compared with the plans that this Government inherited, over £3 billion a year is being returned to employers once our changes are fully implemented. Indeed, our actions will mean that some 880,000 low earners in the UK will be taken out of income tax altogether; that around 950,000 low earners will no longer pay national insurance contributions, while their benefit rights will be protected; that employees earning under £35,000 a year will pay less income tax and national insurance; and, that employers will pay less national insurance on all workers earning less than £20,000 a year.

The second part of the Bill encourages employment and enterprise in areas of the United Kingdom that are most reliant on public sector employment. Our aim is to help these regions move to a more sustainable economic model-one based on private sector growth, enterprise and investment. That is why we are introducing a holiday from employer national insurance contributions, with the aim of providing support for qualifying new businesses in targeted areas of the United Kingdom. This action will reduce the costs of taking on new staff and provide support in the vital early stages of business development. In order to ensure affordability, the holiday will be limited to the first 10 employees taken on in the

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first year of business. For each of these workers, the holiday will last for 12 months, unless the closing date for the scheme, 5 September 2013, is reached before the 12 months have elapsed. The maximum amount that an employer can profit from any single employee will be limited to £5,000. At the time of last year's Budget, it was estimated that start-up companies would save around £940 million worth of national insurance over the next three years. This is money that they can use to hire additional staff, expand their businesses or invest in our nation's economic recovery.

This is both an important and a necessary Bill. It will go some way towards enabling the reduction of the taxation of labour in targeted areas, to help support employment and secure the recovery. In short, the Bill is good for growth and good for jobs. I beg to move.

4 pm

Lord McKenzie of Luton: My Lords, I thank the Minister for his explanation of the Bill, which, he will have gathered from proceedings in another place, we will not seek to oppose. Notwithstanding that, there are a number of issues that we intend to press.

First, there is the economic context of the Bill. We have heard about the Government's proposals relating to the deficit. Objective observers would acknowledge that when the coalition Government took office, the country had spent almost three complete quarters out of recession and borrowing was falling. Our approach to the deficit was, and would be, to ensure that there was sufficient private sector momentum before the public sector cuts began, cutting back more carefully with genuine protection for the poor and vulnerable. For us, jobs and growth need to come first, which is why we oppose the VAT increase and opted for increases in national insurance contributions-but not until April 2011. That is why we now support the increase in national insurance rates included in the Bill. We proposed it when in Government, as we have heard, as part of the tough choices that had to be made to tackle the deficit, but we were clear that those with earnings under £20,000 would be protected by a rise in the primary threshold. Given the vehemence of the attack on our proposals during the general election, it is somewhat surprising that we see the Government retaining these proposed increases and retaining them without fully increasing the secondary threshold for employers, which it was purported would negate the effect of the increases for employers. Can the Minister confirm that the amounts to be raised from employers from the increases proposed in the Bill will be greater by some £1.4 billion than the savings employers will obtain from increases in the secondary threshold? I suggest that praying in aid the cost of the increase in the income tax personal allowance does not help, because that is focused on individuals' circumstances and because it is dwarfed by the cuts to benefits and tax credits that the IFS said will lead to dramatic increases in poverty-some £18 billion, focused on the poorest.

So much for the allegations that increasing national insurance rates will kill off the recovery. It is the arrival of the VAT hike, the onset of deep cuts in public expenditure, the certainty of job losses in the public and private sectors and the plummeting of consumer confidence that are endangering growth. As

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the CIPD stated, the VAT rise could be considered more of a tax on jobs than the rise in employers' national insurance, but this Government have now given us both. We should be greatly concerned that Britain's recovery has now ground to a halt.

The increases in national insurance rates in the Bill are consistent with what we proposed-a 1 per cent increase on employer and employee contributions, applicable to class 1 and class 4 contributions. The Bill also provides for a 1 per cent increase in the additional rate paid by employees and the self-employed above the upper earnings limit. The proceeds of this additional rate, introduced in 2003, have hitherto been used entirely to contribute to NHS funding. I shall say more on that later.

Before moving on, though, one might just record that it is unusual to have debates on issues of national insurance without at some stage a discussion about the contribution principle, the merging of national insurance with income tax and the size, scope and nature of the surplus in the National Insurance Fund. I will resist it for this afternoon, except to inquire how the Government see the relationship of national insurance to income tax thresholds going forward.

Back in 2007 it was proposed that simplification of the tax and national insurance system could be achieved by alignment of the income tax personal allowance threshold with the employee and employer national insurance thresholds, and the higher-rate tax threshold with the national insurance upper earnings limit. For a variety of reasons this has fallen by the wayside, but where does this aspiration stand now? Anywhere?

A critical relationship is that between the lower earnings limit and the personal allowance threshold. If there is the prospect of the personal allowance heading for £10,000 and the LEL being dragged upwards, this has significant consequences for the contributory principle and other issues for those on low pay and with part-time jobs, the majority of whom will be women. Perhaps the Minister will let us have his views.

As we have heard, the second part of the Bill covers the introduction of the employers' national insurance holiday for certain new businesses up to a limit of £5,000 per employee for up to 10 new employees. While we see merit in this proposal, it hardly amounts to a plan for growth. We have some concerns, particularly around the targeting of this initiative. A key cause for complaint in the other place, which we echo, is the crude exclusion of businesses that are principally carried on in Greater London, the south-east region or the eastern region. Excluding these areas from its application creates unfairness and unnecessary bureaucracy. It will be complicated enough to ensure that the holiday is focused on genuine start-ups and new employees, without the further complication of having to ensure that the principal place at which the business is carried on is not in any of the excluded regions.

It seems somewhat inconsistent to define excluded areas by reference to regions when the Government are themselves in the process of scrapping regional development agencies and calling forth local enterprise partnerships, some of which will cut across regional boundaries. Take the case of Luton in particular. It will be part of the South East Midlands LEP, which includes parts of three regional areas, two of which

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are excluded from benefiting from the start-up incentive while one is not. Where is the sense in that? If the enterprise partnerships are supposed better to reflect economic communities, how will one handle having part of its area potentially benefiting from the holiday and part not?

The Minister will no doubt have read the contributions of honourable Members in another place, identifying areas in their constituencies that have higher levels of deprivation and unemployment or higher levels of reliance on public sector jobs, but which are excluded under these definitions in comparison to some which are included. My honourable friend David Hanson in another place identified more than a dozen constituencies that are in the top 60 constituencies for public sector employment but are not covered by the scheme. Examples were provided of areas that included pockets of deprivation that could benefit from the scheme, but their disadvantage is subsumed into wider regional boundaries. Of the top 12 most deprived local authorities, seven are excluded.

Noble Lords will doubtless also have received representations from Thames Gateway, a hugely important regeneration project which is also to be denied the advantage of this scheme. This makes clear that within the Gateway partnership area there are areas of extreme deprivation and high reliance on public sector involvement. The basis for excluding certain regions rests on identifying regions that are particularly reliant on public sector employment, although we have heard no evidence that this automatically equates to a weak private sector. Using this as a criterion also seems to overlook the growing blurring of the boundaries between the public and private sectors. The fact that a local authority may have outsourced certain activities to the private sector may not make that provider any less vulnerable to cuts. Outsourcing aside, much of what the public sector is responsible for is provided by the private sector, especially on capital projects, and where Building Schools for the Future plans have been savaged, for example, might identify areas of public sector dependence which have become vulnerable.

Any scheme of this nature which is time limited, confined to start-ups, restricted geographically and applicable to only some employees will inevitably need robust rules. On the face of it, the Bill includes clearly defined boundaries as well as a general anti-avoidance provision. We will want to test these in Committee. However, the more complex the scheme, the greater the cost of implementation and the less the likelihood of businesses availing themselves of the benefit. Removing the excluded regions would be one way of simplifying the contributions holiday. The Government estimate that there will be take-up by some 400,000 employers for 800,000 employees, with a potential benefit of £940 million, as we heard from the Minister. It is anticipated that an extra 240 full-time employees would be required to operate the scheme. Of course, the clock is already ticking as the scheme is retrospective to June 2010 and has just two and a half years to run. Will the Minister please update us on the take-up of the scheme to date and what monitoring and reporting arrangements are planned? Early reconsideration of the scope would be in point should the aspiration for take-up not be realised.



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Our concern is about the targeting of this initiative. In its defence the Minister will no doubt argue that there is only so much money for the scheme and to extend it would be costly. That does not necessarily follow. It could be spread in a different way. The Minister might also consider how much of the expenditure is dead weight when it is available for areas where unemployment is low and business survival rates are strong.

We have a further concern about the Bill which is prompted by Clause 3. This reduces the amount of the additional primary and self-employed contributions which go to the NHS. These contribution rates are increased by 1 per cent and apply from a lower starting point with the UEL reduced to £817 per week. Hitherto, the whole of the amount raised has been hypothecated to the NHS, but the Bill reduces this to just 50 per cent. This is a proposition which the Government may regret. The coalition agreement pledged to,

Noble Lords will be aware that on any objective analysis when taking account of the diversion of £1 billion of funding for social care, the NHS is facing a real terms cut over the spending review period, and this at a time when it is faced with government imposed increases in VAT and the impact of inflation on the costs of treatment as well as the costs of the planned reorganisation. Is not the reality that this is in danger of becoming another dishonoured coalition pledge? By this reduction in the rate of hypothecation the Government have not made it easier for themselves.

As I have said, we will not oppose this Bill. We support the national insurance increases. However, the national insurance holiday is poorly targeted and should be improved and changes to the rules on NHS hypothecation are a missed opportunity. We will take these matters further in Committee.

4.13 pm

Lord Newby: I thank the Minister for the clear way in which he introduced the Bill, which we support. This is not the occasion for a major economic policy debate but I wish to respond to the comment of the noble Lord, Lord McKenzie, that the Labour Party's policy-to the extent that we can discern it-is to delay and reduce the adjustment made to the public finances as compared with the policy of the coalition. However, if Japan is having its debt downgraded by the rating agencies for failing to take significant action, think how much our debt would have been downgraded by now if we had followed the prescriptions of the shadow Chancellor of the Exchequer.

As regards the rate increase proposed in the Bill, over the past 15 years we have seen considerable increases in national insurance, largely because national insurance is the ultimate stealth tax. Virtually nobody understands it and virtually nobody understands its relationship with the funding of the NHS. I doubt whether many people realise that, whereas income tax raises £150 billion, in 2009 national insurance raised £96 billion-two-thirds of the amount of income tax. Most people are largely unaware of how the system works and how much they pay.



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To a certain extent, it is a pity that the raising of taxation from individuals is focused on national insurance because it is the opposite of having a transparent tax system. I would have been far more sympathetic to the previous Government if, from time to time over the past 13 years, the basic rate of income tax had been raised. However, once Tony Blair said in the run-up to the 1997 general election that he would not do that in that Parliament, it became impossible for the previous Government to do so. Politically, it has now become virtually impossible to contemplate doing so, even though that would be fairer than national insurance as a way of raising very large sums of money from the entire population.

We welcome particularly the fact that the Government are increasing the personal allowance in respect of both national insurance and income tax. I would be interested to know whether the Labour Party also supports this major measure for incentivising those at the bottom end of the income stream to pursue and take up gainful employment.

The holiday for new businesses has been greatly debated in another place. There are a number of contentious elements to it. I support the measure in principle because it will put back into the regions some £940 million. As noble Lords will be aware, I have been extremely concerned at the way in which funding for the regions has been decimated at a time when they are likely to be suffering disproportionately large job losses for the very reason that this measure is being introduced-namely, that they have a disproportionately large number of public sector workers.

The advantage of this means of putting funding into the regions over the traditional forms of regional policy is that it is entirely market-led. No money is spent unless individuals decide that they are prepared to establish a business in the regions. Therefore, the criticisms of the RDAs-I supported them but lost the battle-that a lot of money was wasted cannot, by definition, apply to this measure.

One of the big issues which the noble Lord, Lord McKenzie, raised was whether the coverage is right. Is it right to exclude the southern regions from the scope of the Bill? It probably is, for two reasons. First, there is a limited amount of money available, so it is better to put it where there is greater need. There is undoubtedly greater need the further away from London you get. Secondly, the reason we have very high levels of unemployment in particular parts of London is very different from the reason that we have very high levels of unemployment in parts of the north and has virtually nothing to do with lack of demand. London is a hugely buoyant economy, which draws in very large numbers of staff from around the world. If you live in London and have even a modicum of skill, getting a job is much easier-indeed, it is of a different order of magnitude-than if you live in Barnsley, Sunderland or Liverpool. The problems with the London labour market are largely to do with skills, and with the attitudes in some communities about what type of job people are prepared to take and where they are prepared to take it up, rather than with a deficit of aggregate demand in the region as a whole. I have no difficulty with the exclusion of London from this measure.



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The criticism that has been made of the holiday, with which I have some sympathy, is that the funding might have been as well if not better targeted if it applied to micro-companies-companies with five or fewer staff-that are thinking of taking on an additional person. That is partly because the likelihood of those companies sustaining themselves over a period is greater than that of start-ups, given that a large number of those inevitably do not make it. Also, a large number of small companies, involving two or three people, are now thinking of taking on additional staff.

I declare an interest as a chairman of one such company. At the moment, we are thinking seriously about employing somebody full-time based in Birmingham, and the major constraint is simply whether we can afford it. A holiday of the kind proposed in the Bill for start-ups would help us quite a lot. The lobbying by the Federation of Small Businesses on this is pretty telling. Surveys of the federation's members show that 57 per cent would like to employ an additional staff member in future. If that were limited simply to one person per company, it would create 800,000 jobs.

I know that money is tight and that you cannot give a blanket holiday to everybody. However, I fear that the holiday will not necessarily be taken up by as many as the large number that the Government hope for. My request to the Government is that the operation of the scheme be reviewed after a year to see whether it has been taken up by the numbers of new companies that they hope. If not, I hope that they will see whether the scheme can be extended to existing, very small companies, and in those cases possibly limit it to their taking on a very small number of additional staff. That said, this is a welcome way of incentivising job creation outside the more prosperous areas and I wish it well.

4.22 pm

Lord Bilimoria: My Lords, not only is 2011 the centenary of the Parliament Act, it is also the centenary of national insurance being introduced by the great Liberal leader Lloyd George. Is it not ironic that we now have a coalition Government taking us back 100 years? With all the problems we face in this country today-the war in Afghanistan, a gargantuan deficit, and a fall in GDP in the last quarter to name just three-we have a Deputy Prime Minister wanting to push through House of Lords reform and a Government wanting to celebrate the introduction of national insurance 100 years ago by putting it up.

In his acceptance speech as the Republican presidential candidate in 1988, we all remember George Bush Senior's infamous words:

"Read my lips: no new taxes".

We all know how that turned out. In the lead-up to the 1997 general election, Labour pledged to raise neither the base rate of tax nor the top rate in the lifetime of the Parliament, a pledge repeated by the then Chancellor Gordon Brown before the 2001 and 2005 elections. That pledge, however, omitted the glaring point that almost £8 billion was raised through national insurance hikes in 2003. And that is the point about national insurance-rising rates are generally not met by the public with the same alarm as increases in

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income tax, for which the noble Lord, Lord Newby, wishes. I quote from a note on national insurance contributions from the Commons Library:

"Many commentators have argued that NICs are poorly understood by the general public, despite the very large amount of money that they raise:

John Whiting is a tax partner at PricewaterhouseCoopers ... He has a question that he tries out on people ... when they talk to him about the tax system. 'I ask them what the second biggest tax is, after income tax,' he says. 'People flounder. They suggest value-added tax and you shake your head. They suggest corporation tax. Wrong again. Then they start the wilder guesses and suggest petrol duties. They rarely come up with the correct answer, which is national insurance contributions.'

NICs are, in the words of Peter Bickley, technical manager of the Tax Faculty of the Institute of Chartered Accountants in England and Wales"-

of which I am proud to be a fellow-

It is estimated that in 2009-10, income tax, as the noble Lord, Lord Newby, said, brought in £134 billion to the Exchequer-nearly one-quarter of all government takings. National insurance contributions brought in almost £100 billion-almost as much as VAT and corporation tax combined.

People have the impression that national insurance is a contributory system, going only into social security, benefits, pensions and even the NHS. However, Andrew Dilnot, former director of the Institute for Fiscal Studies, said in 1995 that,

In a study of perceptions of the national insurance system published by the then Department of Social Security, it was found that respondents saw no real distinction between paying national insurance and tax. Whether it be income tax or national insurance, the money is in effect going into the same pot, and the game is up. As Abraham Lincoln famously said, you can fool some of the people all the time, and all of the people some of the time, but you cannot fool all of the people all of the time.

This Government's and the previous Government's plans to increase primary and secondary national insurance contributions by one per cent to 12 per cent and 13.8 per cent respectively is made even more astonishing in the context of the rest of our cut-throat tax system. We have a top rate of tax of 50 per cent, which dwarfs America's reasonable top rate of 35 per cent. Research conducted by KPMG and released in October 2010 revealed that only three countries in Europe are above the UK in terms of personal income tax rates-the Netherlands, Sweden and Denmark-and that we lag behind our two big competitors, Germany and France.

How are we to compete in the international market if we do not have internationally competitive tax rates? How do we expect to attract foreign investment to our country, and attract top talent to the City, if it makes more financial sense for talented people to go elsewhere with their businesses? The Chancellor

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must know this. That is why he reduced corporation tax from 28 to 24 per cent-a move of which I am wholeheartedly in favour. He said:

"Corporation tax rates are compared around the world, and low rates act as adverts for the countries that introduce them. Our current rate of 28p is looking less and less competitive".-[Official Report, Commons, 22/6/10; col. 174.]

This is the right attitude applied by the Chancellor to a much smaller area of tax. Corporation tax makes up 10 per cent of the Exchequer's tax receipts: much less than national insurance contributions.

On top of this, we have the madcap immigration cap, turning away international talent. With this national insurance hike, we are merely adding to the ever-growing list of problems that the country faces. Savage and unnecessary cuts-for example, the privatisation of forests-are raising relatively small amounts of money while hurting and upsetting so many people so much. We have a defence review during a period of wartime and turmoil and uncertainty in the Middle East; an SDSR that was rushed through in three months and has made us the subject of international mockery, with aircraft carriers without aircraft, nuclear submarines without AWAC cover and army numbers continually being cut; and the brutish and ham-handed threefold increase in tuition fees that will hurt the higher education sector-both universities and students. VAT has been put up to 20 per cent. There is uncertainty in Europe, with the PIGS countries nowhere near out of the woods and the future of the euro nowhere near certain. There is also global uncertainty and the ominous fact that the economy shrank by 5 per cent in the last quarter-weather or no weather, and whether you like it or not. We have an onslaught of more and more EU regulations and red tape; our housing market has been in the doldrums for years; we have had a prolonged period of dangerously high levels of inflation, with the Monetary Policy Committee of the Bank of England and the Governor of the Bank of England writing letter after letter, month after month, to the Chancellor, after breaching the 2 per cent target. On top of this, the Governor of the Bank of England tells us that real wages have fallen over the past six years-something that has not occurred since the 1920s. All this shows us how badly the British consumer is being squeezed. In an economy where 60 per cent of GDP is accounted for by consumer spending, the confidence of the consumer is paramount, as the noble Lord, Lord McKenzie, said.

Another concern lies in the Government's tax plans in the lower-income and middle-income thresholds. The Minister spoke of this. However, the IFS tells us that 750,000 people are to be moved into the 40 per cent rate of income tax this year, and a further 850,000 people in 2014-15. This is due to the fact that while the Government are raising the threshold at which people are liable to pay tax, rightly by £1,000 to £7,475, they are reducing the threshold for higher-rate tax from £43,000 to £42,000.

We can all agree that the massive deficit that weighs over us needs to be reduced. No one argues with the Government about this. We, like the United States, have rightly used massive quantitative easing and reduced interest rates for a prolonged period. All this needed to

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be done and needs to be done. This is where the similarities with the United States end. Whereas we are increasing taxes, including national insurance contributions, the United States has been cutting taxes.

I remember that in the 1980s, after Ronald Reagan's tax reductions, total tax revenues actually climbed by 100 per cent. After last December's extension and expansion of tax cuts in the United States-a package of £542 billion-the IMF revised its growth predictions for the US economy this year from 2.3 per cent to 3 per cent, and for the global economy from 4.2 per cent to 4.4 per cent. In the face of all this, we in Britain raise our taxes and national insurance rates and stand by as our growth rate falters. We need to do everything we can to help the economy grow. If we made tax cuts in the UK proportionate to those in the United States, the impact would be huge, by enabling businesses, especially SMEs, to surge forward. The noble Lord, Lord Newby, spoke of SMEs. Consumers would start spending and, most importantly, consumers and businesses would have confidence, as the noble Lord, Lord McKenzie, said. The momentum would build, the economy would grow, tax takes would go up and the deficit would go down. This is the magic bullet, not the tax and NIC increases that are stifling business, stifling the consumer and stifling confidence all round.

There are elements of this Bill that I welcome; for example, the increase in the threshold. I also welcome the NIC holiday for new business start-ups to encourage the creation of private sector jobs in regions reliant on public sector employment. This is a fantastic idea. To see the Government support small and medium-sized enterprise in this way is hugely encouraging. Such businesses are the engine of our economy and deserve support. They are vital if we are to get out of these dark times. However, why not take this good idea and run with it? Why exclude Greater London and the south-east? Let us make this a national, as opposed to a regional, holiday. This gesture in the grand scheme is welcome. I hope that what the Minister said is right and that it will save about £1 billion for SMEs in times to come. If we are serious about growth, we need to decrease taxes. What happened to Chancellor George Osborne's opinion of a national insurance increase which he said in opposition was an unwelcome tax on jobs?

In conclusion, it is appropriate now, more than ever, to quote Churchill's opinion of taxation. He said that,

I urge the Government to re-examine their approach to deficit reduction. The economy should be encouraged to grow, not be stifled by taxation. There are huge areas of public expenditure and inefficiency which can be addressed before we put our businesses and consumers at risk. Public expenditure as a percentage of GDP needs to return to the 40 per cent level. Inefficiencies in the health and welfare sectors need to be addressed. We have an overgenerous welfare system which is being abused and taken advantage of. Cuts must be made there. Instead we are cutting where it hurts the most, forcing our economy back into its shell and hurting our competitiveness.



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The Government have had their chance to do the right thing. Instead, at the risk of sounding gruesome, I believe that what the Government are doing to the economy and to the British consumer could be equated to medieval torture-the ruination of this country's economy through death by a thousand cuts and strangulation by taxation.

4.35 pm

Lord Myners: My Lords, it is always a pleasure to speak after the noble Lord, Lord Bilimoria. I have a tendency at times to stray away from the core subject in hand, but that can be judged only in relative terms, so I hope that your Lordships will judge me to be focused. The noble Lord, Lord Newby, correctly said that this is not an excuse for a general discussion about the economy, although I am sure that the House would welcome such an opportunity in due course. My noble friend Lord McKenzie of Luton has expressed the view that the Government's position on NIC is one that the Labour Party will not oppose in substance although we will challenge it in detail, especially when the Bill is in Committee.

The key challenge for the economy is growth and addressing the deficit. There is no doubt that the deficit needs to be addressed but that must be set in context. In 2007-08 the deficit was 2 per cent of GDP; it was only the global banking crisis that forced it up with its impact on tax receipts and increased public expenditure through the fiscal adjustment process. We are clear that the deficit needs to be addressed, and the difference between the Government and the Opposition is a matter of quantum and pace in terms of deficit reduction.

The noble Lord, Lord Newby, challenged us to ask what would happen if the deficit had not been addressed, and pointed to the credit rating agencies and their attitude to Japan. I think that those agencies are somewhat in disrepute and I would not be terribly taken by their views. Simply, the deficit was well funded and continues to be well funded. We have a 14-year average debt maturity for gilts and were funding at the time of the general election the lowest long-term rate of interest for more than 40 years. The Minister used to tell the House about how interest rates had come down, which was a sign of the world's financial markets endorsing the Government's policies. He has been rather more silent of late as interest rates have gone up. The UK gilt-edge market has been the worst performing major fixed-income market in the world in the past eight months. We do not hear very much from the Minister on that. It is happening because markets are becoming increasingly worried about inflation and the prospect of the economy being pushed back into recession.

The noble Lord, Lord Bilimoria, said that the last quarter of 2010 saw negative GDP of 5 per cent. It was not 5 per cent but 0.5 per cent but the fact remains that we were alone among the world's major economies in experiencing a negative figure. We have to watch how the UK economy develops compared with other economies that seem to be coming out of the global recession. The Government will not be forgiven if their own policies force us back into recession.



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My questions on the Bill are matters of detail. The holiday refers to an anticipated participation by 400,000 employers defined as being outside the "excluded regions" in Clause 4(5) and falling within the definitions in Clauses 5 and 6. Can the Minister be a little more helpful by explaining how the estimate of 400,000 has been arrived at? Can he clarify whether the cost is on the basis that the 800,000 jobs would not have been created at all or are they significantly jobs that would have been created regardless of whether the measure was adopted? My feeling is that the £940 million may be the cost but it is an overestimation of the benefit of the policy that the Government are promoting as a counterbalance against the general impact of employment on the NIC charge.

The noble Lord, Lord Bilimoria, is right about it being a tax on jobs, but it is worth keeping in mind that the OBR estimates that the impact on jobs of the VAT increase is three times as great as the estimated impact of the increase in NIC. Although it looks to be specifically related to employment, other taxes have an even more adverse impact on employment activities.

Have the figures of £940 million, 400,000 employers and 800,000 employees been audited by the OBR? Can the Minister, either now or in writing after Second Reading, tell us whether there is any evidence that this is already having an impact on employment creation? The Bill is retrospective in its impact back to June 2010, so we should have eight months' experience already. We should see an increase in employment creation in the non-excluded regions compared with the excluded regions. I would be interested to know whether we are talking about really new jobs being created-as opposed to those which, in the natural cycle of things, would have been created-and whether there is evidence that the policy is having the desired impact.

The excluded regions worry me. I am very pleased to see that Cornwall is eligible. Cornwall has very high unemployment and, as your Lordships know, I will always speak up in this House for my home county. However, I find it odd that Torbay and Harrogate should qualify for this aid, but Southampton, Bethnal Green and Corby do not. That is the problem with something as crude as the regional definitions that we employ here.

What would the cost have been had the excluded regions not been excluded? If the Government can calculate the figure on a regional basis-I am very sceptical about how much reliance we can place on these data-for job creation in a changing environment for a certain type of employer, a certain size of enterprise, newly created and in certain regions but not all regions of the economy, they should also be able to tell us what the additional cost would have been had the excluded regions also been eligible. Then we could look at the trade-offs. Would it have been justified not to have excluded regions? Would it have been better to have a lower tax advantage or a lower threshold for the number of employees? There are a number of ways in which one could have effectively divided up the benefit proposed under the legislation.



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My noble friend Lord McKenzie of Luton spoke very insightfully on the issues of regional exemptions. That said, whatever we can do for the regions is valuable, because the abolition of the RDAs is having a tragic impact on the regions. The LEPs are clearly not going to substitute for the RDAs. I welcome that support for regional economic activity.

Why are charities not included? There are 5,000 new charities established in this country every year-there may be even more with the big society. I would like the Minister to think carefully about whether newly established charities could also be eligible for the exemption. That would seem entirely consistent with the Government's position on a number of issues and would be most welcomed by those in the charitable sector, who find themselves under huge pressure as a result of changes in other taxation and general cutbacks on public expenditure.

Finally, Clause 10 deals with anti-avoidance. I welcome that. There has been much confusion between avoidance and evasion. Dr Cable and Mr Danny Alexander have often talked in terms of them being one and the same. Clearly, they are not. Anti-avoidance regulations are appropriate, and I support the Government's intention to introduce general anti-avoidance requirements on the part of banks.

Setting things in proportion, whatever avoidance might be going on here by someone creating a business in one of the regions employing not more than 10 people, that is hardly undermining the integrity of public finance. Where avoidance is most pronounced, as the Minister will know, is in the financial sector. I ask him to confirm that the Government are as committed to pursuing avoidance strategies on the part of banks and financial institutions as they are on the part of small employers in the regions.

Let me put a very specific question to the Minister. In the past, banks and financial institutions have been very creative at avoiding NIC. One of the things they have done is to pay bonuses in gold bullion and other forms. Can the Minister confirm that the Government will be vigilant in ensuring that such strategies are not able to operate in future and that no business of which he has ever been part, employed by or worked for has ever involved itself in paying bonuses in gold bullion or non-transferable instruments?

4.45 pm

The Archbishop of York: My Lords, I, too, should like to pose to the Minister the questions that the noble Lord, Lord Myners, asked about whether charities will be covered by the NIC holiday for new businesses. Why not include them? Their inclusion might help their businesses and activities. Joe Public might also be getting a bit worried-possibly even bothered-by this because, during the general election, one group was saying that an increase in national insurance contributions would be a tax on jobs while another was saying that a VAT rise would be a tax on jobs. Now, people will be getting both. Can we be assured that jobs are not being doubly taxed, first by the VAT rise and now through national insurance contributions? It would be helpful if the Minister could assure us that this double taxation will not increase unemployment.



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4.46 pm

Lord Martin of Springburn: My Lords, I have been very interested in what every noble Lord has had to say, including the Minister and the shadow Minister, and I am delighted that incentives are being provided to bring work to men and women. But perhaps I can ask the Minister to give employers the incentives to employ as many apprentices as possible. I feel very strongly that when young people are taken on as apprentices, they are given a great sense of dignity and worth by getting training that will last them for the rest of the lives. Self-employed businesspeople have been mentioned. A self-employed plasterer, bricklayer or electrician can easily take on an apprentice. I hope the Minister will give every thought to increasing the number of apprentices.

4.47 pm

Lord Newton of Braintree: I had not intended to intervene-this is a bit of an overcrowded gap, and I apologise for not having given notice-but I was quite struck by the references to charities. I should declare an interest as I was until recently the chair of Help the Hospices and have a whole variety of other charitable connections of one kind or another that are listed in the register.

I understand what has led the noble Lord, Lord Myners, to make this point, but I would also say that in the charitable world in general, including in the Charities Commission, there is some doubt about whether we really want to go on encouraging the creation of more and more small charities which often end up competing with each other; and whether, in that case, we should want to give an advantage to new charities against existing small charities in the way that is suggested. It sounds good, but it needs some fairly hard thinking.

4.49 pm

Lord Davies of Oldham: My Lords, this has been a most interesting debate. As the House will recognise, the Opposition's case has largely been presented in the excellent speech of my noble friend Lord McKenzie of Luton. However, it is my interesting task to sum up some of the major questions that the Government need to respond to in this debate. I appreciate that the Minister still has the Committee stage to go through and that many of these questions will receive more deliberation during that stage. However, several questions were raised today which-in fairness to the excellence of this debate-he ought to answer.

I will answer one question for him, if he likes. The noble Lord, Lord Bilimoria, wondered why national insurance contributions were the great hidden tax. Where was the noble Lord in the general election? He might recall that the general election was substantially fought on issues such as national insurance contributions-in fact the Labour Party was berated by the Conservative Party because we intended to increase NICs. Subsequently, the Conservative Party, as the coalition Government, came to agree with this position, which is why we have clearly indicated that we have no intention of objecting in principle to the Bill.



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We also note that what the Conservative Party did not mention in the general election, but which the coalition Government have brought into operation, is a VAT increase. My noble friend Lord Myners has reinforced the point that this will have three times the impact on jobs-it will cost 250,000 jobs-that the NIC position will create.

The real issue of contention here is the concept of how this holiday will be implemented. First, the very fact that it will not be general will increase the administrative costs and complexity. It means that there will be more of a paperchase and that more people will need to be employed in Her Majesty's Revenue and Customs. So there are costs involved. Secondly, what are these broad categories of exclusions? Speaking from the coalition position, the noble Lord, Lord Newby, said that the London labour market is somewhat different, and that help for the regions which might be appropriate elsewhere might therefore not be appropriate for London. But he did not mention the eastern region, did he? It is losing its RDA, too, and it is subject to this exemption. Why did he not address himself to that matter? He said that the London situation is different, and it is.

One of the problems with the London situation is that far too many Members of Parliament arrive in London either at our great railway stations and are conveyed through the West End to Westminster; or they come down the great roads from Tatton, through north London and Hampstead and into Westminster; or they come from Oxfordshire on the great roads through the west of London-Kensington and Chelsea perhaps-into Westminster. They are therefore utterly oblivious of the fact that London includes eight of the most deprived areas in the country. Several of them are east London boroughs. Tower Hamlets and Hackney-to take but two-are second and third in terms of levels of deprivation.

We therefore need to take seriously the representation from Thames Gateway. Of course its area covers more than these London boroughs, but these London boroughs are part of that developmental scheme. They are suffering with rates of unemployment that match anywhere in the United Kingdom. So what is the justification for excluding these authorities and London from the provision?

The noble Lord will also recognise that my noble friend Lord McKenzie asked two quite specific questions which are general enough and relevant enough to this debate. They will certainly be pursued in due course. They are important to the structure of the debate, and the Minister ought to reply to them. My noble friend wanted to know, first, whether the increases proposed in the Bill will be greater by some £1.4 billion than the savings that employers will obtain from increases in the secondary threshold. It will not do to argue that the measures should be seen in the context of the broader taxation structure. The issue is what the Bill will do concerning demands on resources.

The second question concerned the part of the national insurance contribution that is hypothecated for the NHS. Will we get some insight here? The fact that the Bill reduces that by some 50 per cent has serious implications both for the Government's promise that the National Health Service will be fully funded

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and in terms of the enormous demand on resources that that represents. Reducing the hypothecated amount is a loss of resource available to the health service. It is not a gain. So I think that the Minister ought to reply to that point as well.

This has been a most interesting debate, and I think that noble Lords have been restrained. Although he indicated that he sympathised with those who want a general debate on the economy, even my noble friend Lord Myners ensured that his contribution remained entirely relevant to the measure, at the same time as posing to the Minister some very real anxieties about the course that government policy is following. However, this is not a general economic debate. This is a debate about a particular Bill that the Government are putting before the House. We in this House never object to Second Readings, and we find the basic principle behind the Bill unexceptionable, but that does not mean that we do not have a number of questions and issues that we want to discuss in Committee.

4.57 pm

Lord Sassoon: My Lords, this has been an interesting and high-quality debate, as is usual for this House, even if it has gone off into general economic issues on a number of occasions. Nevertheless, I am grateful to all noble Lords who have contributed.

Perhaps I may first address one or two of the questions and concerns that have been raised in connection with the national insurance contribution rate rises. I shall to try to restrain myself and not be drawn into some of the broader economic debate. My noble friend Lord Newby neatly knocked some of those concerns on the head, and your Lordships do not need another long lecture from me to explain just why the deficit reduction is necessary and what the greater construct is.

The noble Lords, Lord McKenzie of Luton and Lord Myners, referred to VAT in different ways. The critical point here is that consumption taxes are generally regarded by economists as being the least damaging to growth. If we had raised in other ways the £13 billion that it was regrettably necessary to raise out of the increase in VAT-for example, through larger increases in national insurance contributions-it would have been significantly more damaging to growth and jobs.

The noble Lord, Lord McKenzie of Luton, asked about the £1.4 billion effect on employers. This is a complicated matter, because there is a net overall benefit of £3 billion accruing from the total package, but it is the case that the way in which we have ameliorated the previous Government's plans means that some of the benefit is switched from national insurance contributions to income tax. So, yes, there will be a net rise in national insurance contribution payments, compensated by a larger fall in income tax payments. While one can dice and slice this any number of ways, the critical point is that, in total, employers will be £3 billion better off next year, and that figure will rise in future years.

The noble Lord, Lord McKenzie of Luton, asked about the relationship of thresholds going forward. We have no plans to break the alignment of income tax higher rate threshold and the upper earnings and

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profits limits. Beyond this, we will review options for simplification in the light of any advice we get on priorities which are identified by the Office of Tax Simplification as and when it looks at this area.

The last main point on Part 1 of the Bill related to the important question of the funding of the National Health Service. This was also referred to by the noble Lord, Lord Davies of Oldham. I hope it is completely clear to noble Lords that nothing in the Bill affects in any way the commitment to increase NHS spending in real terms in each year of this Parliament. We can afford to do this without additional funding from national insurance contributions. I hope that gives reassurance and answers some of the specific questions raised by noble Lords on Part 1 of the Bill.

There were a number of detailed questions on Part 2 of the Bill. The first general group of questions related broadly to the scope of the holiday, both geographically and in relation to charities in particular. On the question of charities, which was referred to by the noble Lord, Lord Myners, and the most reverend Primate, it is not the case that charities are excluded from the scheme, but they must qualify in a number of respects. First, a new charity must be located in one of the relevant regions and it has to carry on a trade. In those circumstances, the holiday will apply subject to the charity meeting the other qualifying conditions.

It would be wrong to say that all charities are excluded, but I accept that non-trading charities are. If they had been included, it would have complicated the scheme and created complexity around administration, eligibility, anti-avoidance rules and so on. Any benefit ensuing is likely to be limited as we estimate that relatively few non-trading charities employing staff are likely to be set up over the holiday period.

The consistent theme is that the scheme is targeted at new businesses creating employment. If a new charity carries on a business, it will qualify.

Lord Barnett: My Lords, the noble Lord gave a definition of "trade" as "trading". However, Clause 5(6)(a) refers to,

Is that not somewhat different?

Lord Sassoon: My Lords, I think it is a wider definition, so if a charity in those areas was carrying on activities that went beyond trading, my understanding is that the charity would qualify. The noble Lord, Lord Barnett, makes a point that perhaps the latitude for charities is wider than I am painting it. However, the critical point here-perhaps I am using "trading" too loosely-is that we are talking about creating new employment. If a new charity is carrying on a business that creates employment, it will qualify.

Lord Myners: The Minister said that the Government estimate very few non-trading charities will be established during the holiday period. Can the Minister let us know how many charities the Government expect to be established during this period? They have clearly done the work; otherwise, he would not have given the answer that he did.



2 Feb 2011 : Column 1430

Lord Sassoon: My Lords, I will look to see how many non-trading charities have been created in past periods. However, the noble Lord is long on these questions about what might have been the case had we done the estimate on another basis. I will come on to the critical questions of what estimates have been produced in a minute, if he will permit me. I know he likes to come in on my responses to debates with more and more questions, and I shall try to answer some of the ones he asked me earlier.

The noble Lord, Lord Myners, and other noble Lords asked questions about the geographic extent of the holiday-of course we are delighted that Cornwall is included. However, London and other areas have been excluded. My noble friend Lord Newby admirably answered the question asked by the noble Lord, Lord Davies of Oldham, about London, so I would just refer him to what he already heard the noble Lord, Lord Newby, say.

The critical thing is that we are targeting the scheme, as a temporary measure, on providing assistance to those areas that are most reliant on public sector employment as we transition to a more sustainable model of economic growth. I appreciate that if we had a much more complex scheme, which we think would be disproportionate, we could pick out smaller areas. However, given the proportionality of the scheme and its administration, cost and complexity, the targeting we have done achieves the scheme's main objectives and consciously excludes those areas that are not so dependent on public sector employment. It amuses me somewhat to note that in plenty of other contexts the Government are criticised for not targeting areas sufficiently and here we are targeting them on those areas where the transition is going to be most difficult.

The cost of extending the holiday to other regions, on the same basis that we have estimated the other costings, would be: £250 million for Greater London, £250 million for the south-east and £160 million for the east of England. These are not inconsiderable sums.

The Archbishop of York: Will the Minister assure us that he has done some research that tells him that Tower Hamlets and Hackney-boroughs that I knew when I was Bishop of Stepney-are not solely dependent on public services? Why are they not included?

Lord Sassoon: As I have tried to explain, the issue here is that we have to take broad areas of the country to make this workable. Otherwise, the scheme would be effectively unmanageable in the way that we want it. Some remarks have already been made about the cost of administering the scheme, and while of course there are boroughs in London that are very significantly deprived-and the noble Lord, Lord Myners, has raised questions about other parts of the country-we have had to work the design of the scheme around regional units. Therefore, as I have tried to explain and as my noble friend Lord Newby eloquently explained, the relatively benign employment conditions in London mean that we have had to take regions including London as a whole.

On the estimates of cost, I can reassure the noble Lord, Lord Myners. I do not talk about the Office for Budget Responsibility as an auditing body, although

2 Feb 2011 : Column 1431

he might like me to do so. That is not what it does. The OBR has independently reviewed all the key figures and looked at the £940 million, the 800,000 employees and the 400,000 employers. I assure the noble Lord that, whatever term he likes to use, the OBR has put that through its machine-

Lord Myners: I have to intervene at this point. As the Minister knows full well, it was the Chancellor of the Exchequer who used the term auditing to describe the work of the OBR in connection with public expenditure.

Lord Sassoon: My Lords, we are talking about the estimates here of the effect of the national insurance holiday. They have been put through the OBR's estimable machinery in the normal way that the OBR does. As to the basis for the figure of 800,000 jobs, the detail of how that estimate was made and the data sources used were set out in the policy costings document published alongside the June Budget. I believe that the basis on which it was done was entirely transparent.

There was also a question whether the £940 million might be an overestimate of the benefit. It is a number that represents money that these new employers would otherwise have paid, so it genuinely reduces their labour costs and benefits them by that amount.

Lastly, I address the question about monitoring the holiday. My noble friend Lord Newby and the noble Lord, Lord McKenzie, asked about this, and the noble Lord, Lord Myners, may have touched on it. There will be monitoring and updates will be published after the end of the tax year on the operation of the scheme, including information at regional level. The Government envisage that the report will cover, from a regional and national perspective, the number of businesses applying and applications rejected, as well as the number of employees for whom a benefit is received and the amount claimed. This report will require information supplied by employers following the end of the tax year, and the first report will be published when the necessary information has been received, processed and checked to ensure that there is appropriate quality assurance. The Government aim to have these collated data and provisional findings published as soon as they become available, so it will be a comprehensive report on how the scheme is going.

Lord Davies of Oldham: Of course, the House will be reassured by the points that the Minister has just made, but does he have any comment to make on the question asked about the up-to-date position? The scheme has been running for a while now and there must, therefore, be some analysis of progress.

Lord Sassoon: My Lords, I really think that it is too early yet to have reliable data of the sort that I have indicated, which will come in at the end of the year, to make any judgments about the success of the scheme. As I have explained, we will publish comprehensive regional and national data on the scheme. It would cause there to be a disproportionate burden on the employers and the scheme if we asked them to report with greater frequency. The Government will study the data when they come in to make sure that we understand fully the impact of the scheme.



2 Feb 2011 : Column 1432

Lord Myners: Surely, the Minister will have data because applications have to be made and therefore will already have been made for an eight-month period. The Minister should be able to give us those data. I hope that, in writing to us after Second Reading, he will provide Members who have spoken in this debate with that information.

Lord Sassoon: My Lords, the scheme can be sensibly judged only when we get the full package of data on a national and regional basis that is broken down by the number of employees in the way that I have described. That will be published very transparently when there is a first basis of data on which to judge properly the impact of the scheme.

I want to address one last, important point from the noble Lord, Lord Martin of Springburn, about apprenticeships. Those have not been addressed otherwise in this debate but are of course relevant to the broader approach of the Government. His point is slightly detached from the main purpose of the Bill, but it gives me an opportunity to remind noble Lords that, in 2011-12, the Government will be providing £799 million for apprenticeships for 16 to 19 year-olds, which is an increase from the £780 million in 2010-11, and will fund 230,000 apprenticeship places for that age group. I trust that the noble Lord will recognise that this Government absolutely take on board the importance of apprenticeships. I could give the data if he wants, but I will not prolong the discussion now about the considerable amount of money that is also going into adult apprenticeships.

Lord Martin of Springburn: I welcome any help and initiative that is given to employing apprentices. On the remark about adult apprenticeships, it should not be forgotten that those who may have missed an opportunity when they left school should have an opportunity, as adults, to take up apprenticeships.

Lord Sassoon: Indeed, I think that in 2011-12 the sum for adult apprenticeships will be over £600 million. That accounts for something of the order of 430,000 apprenticeships, so the point is well made.

I am conscious of the time. I hope that I have been able to reassure noble Lords on the majority of the questions that they have raised on both parts of the Bill. I am grateful to the noble Lords, Lord McKenzie of Luton and Lord Davies of Oldham, for making it completely clear that the Opposition do not oppose this Bill. I am also grateful for having had the opportunity to explain the Government's position on the issues in the Bill. The Bill enables the reduction of taxation on labour nationally, with extra support in targeted areas, and I ask the House to give the Bill a Second Reading.

Lord Myners: There was one final point which I raised about anti-avoidance in the larger corporate sector, through mechanisms such as paying bonuses by gold bullion and by other non-distributable or non-marketable instruments. Does the Minister endorse my view that such strategies are morally unacceptable? Will the Government use all efforts to ensure that such avoidance by large financial institutions receives as much attention as is apparently being focused here on avoidance by small employers in the regions?



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Lord Sassoon: I was trying to keep my responses within the time limit and to matters relevant to this Bill but, if the noble Lord provokes me, I certainly did not receive any gold bars or anything like that from my employer. I shared that employer with the noble Baroness, Lady Vadera. Perhaps the noble Lord would also like to check with her to make sure that she did not receive any gold bars. Of course, the Government are very concerned to make sure that all taxpayers pay what is due. In respect of the banks-I did not want to be provoked into this-the previous Government greatly trumpeted a code of tax practice to get the banks to subscribe to it. They did not manage to get the banks signed up; we now have them signed up. If the noble Lord asks about it, we are very much on the case.

I ask the House to give the Bill a Second Reading.

Bill read a second time and committed to a Grand Committee.

Parliamentary Voting System and Constituencies Bill

Committee (17th Day)

5.20 pm

Schedule 4 : Application to the referendum of existing provisions

Debate on whether Schedule 4, as amended, should be agreed.

Lord Campbell-Savours: I wish to intervene in this debate following a contribution yesterday by my noble and learned friend Lord Falconer of Thoroton, when he drew our attention to that fact that large sections of the Representation of the People Act 1983 have been transferred into Schedule 4. That gave me cause to read Schedule 4.

As a preamble to my remarks, I suggest to the noble Lord, Lord Tyler, that we do not always move amendments to clauses and schedules on Bills until Report, because often it is important to get an explanation of those schedules and clauses prior to tabling amendments. That is precisely what I want to do on this occasion.

To begin with, I shall concentrate my remarks on Section 61 of the 1983 Act, on other voting offences, which is transferred on page 97. I am sorry to refer to a page number, but I am not a lawyer. Section 61, as modified in this proposed legislation, will say that:

"A person shall be guilty of an offence if",

that person votes,

That is under new paragraph (a). Under new paragraph (b), it is an offence if he votes,

and, under new paragraph (c), it is an offence if he votes for a person knowing that they are subject to a legal incapacity to vote. What is interesting about those provisions, which have been transferred from Section 61 of the original Act, is that, when I read through the whole schedule, I realised that parts of it

2 Feb 2011 : Column 1434

were perhaps not enforced in the original 1983 legislation. Have there actually been prosecutions under these sections in the 1983 Act? Could the Minister establish whether that is the position?

Also on page 97-as I say, I am not a lawyer, so I have to refer to the page-in the wording transferred directly from Section 61, there is another part that is not clear; when I was discussing this with colleagues there was a little ambiguity about what it means. It says:

"A person shall be guilty of an offence if ... he votes on his own behalf otherwise than by proxy more than once in the referendum".

Some people might interpret that as meaning that a person has two votes for themselves. I wondered whether the Minister had considered the possibility of that being the case.

Schedule 5 sets out the position more clearly: it is illegal to vote more than once in the same referendum,

The wording that is used in the 1983 Act has endured for the past 25 years, but I wonder whether anyone had sought to interpret it in the way that a minority might, which was not the intention of the 1983 Administration when they brought these sections into law.

Section 61 also says:

"A person shall be guilty of an offence if ... he votes on his own behalf in person in the referendum when he is entitled to vote by post".

I was unaware of this. My noble friend says that it cannot be right. If you look at Schedule 5, it is more clearly set out on page 166. The 11th instruction states:

"After receiving this postal vote, you cannot vote in person at a polling station in the referendum[s]* or election[s]*".

I wonder how many people know that. I wonder how many people receive a postal vote, do not use it and walk into the polling booth to vote, not realising that, according to the provisions of this Act as I interpret them, they are breaking the law. I did not know that.

Baroness Golding: I did.

Lord Campbell-Savours: My noble friend knew but I can tell that there are others in the Chamber who did not.

Lord Maxton: I am not absolutely sure about this but I seem to remember that this happened to me once. I could take the postal vote with me and hand it in at the polling station, rather than be barred from voting, as such.

Lord Campbell-Savours: That may well be the case. There may well be an explanation as to how it can be done. All I am saying is that there will be some people who will have a postal vote, not use it and go into a polling booth to cast their votes. It may well be that Members of this House did so formerly; of course, they cannot vote now.

Baroness Golding: It will be marked by the returning officer on the sheet that they have a postal vote. Therefore, they will not be entitled to have another vote handed to them when they go to the polling station. That has always been the case, as far as I can remember, and it is still the case now.



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Lord Campbell-Savours: That may well be the explanation. If so, that element of confusion in my mind is no longer of any relevance. However, I turn to page 102, where there is a particularly interesting section. Section 100 of the 1983 Act, "Illegal canvassing by police officers", is largely transferred to the Bill. That section reads:

"No member of a police force shall by word, message, writing or in any other manner, endeavour to persuade any person to give, or dissuade any person from giving, his vote, whether as an elector or as proxy",

but the Bill would delete "as proxy" and substitute "in the referendum". It does not say "No member of a police force acting as a police officer"; it simply says:

"No member of a police force".

If we were interpreting that literally, I would suggest that it meant that, as a police officer, you cannot,

that could be a friend or relative-

in the referendum. I would have thought that that was unenforceable, so why is it in law? Why does it remain in the 1983 Act in that form when there have probably been no prosecutions-unless I can be corrected-over the 27 years since the legislation was originally introduced?

The transferred Section 111, on page 102 of the Bill, is headed, "Prohibition of paid canvassers". It states:

"For 'an election' substitute 'the referendum'".

In other words, the Bill has been made to mimic the provision in the 1983 Act. Section 111 of the 1983 Act states that it would be an offence:

"If a person is, either before, during or after an election"-

"the referendum" is substituted for "an election"-

we are talking about the referendum in this case. However, some people who are campaigning will be paid-I presume this applies in the yes campaign, and perhaps even in the no campaign-to carry out precisely that function. In the 1983 Act this comes under the heading of "Prohibition of paid canvassers", but what is a canvasser in terms of interpretation of the law? Someone seems to have gone through the 1983 Act, lifted all the sections, deleted the words "election to Parliament" or whatever, inserted "referendum" and perhaps not thought through in great detail where that section is relevant to the campaign on the referendum that is to take place in May this year. That is all I have to say at this stage in the debate.

5.30 pm

Lord Maxton: My Lords, following the comments of my noble friend Lord Campbell-Savours, I wish to refer to postal voting. I know that my earlier intervention was not perhaps entirely helpful to him but the fact is that this matter raises another question. The referendum is a national referendum. Some voters will be registered at more than one address for work or other reasons. Many Members of this House are probably in that position. The register will entitle the person to vote in

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the local elections. If they have a postal vote for that local election, they will also presumably receive their paper for the referendum. However, they will also be entitled to vote on the referendum in Scotland or wherever their other home might be. However, if they receive the postal vote at one address, will that be marked on the national register to indicate that they are not entitled to vote on the referendum at their main residence? The Minister shakes his head as if to say that he does not know the answer. Now he is indicating that he does know the answer. That is fine. In that case I await his reply.

Lord Howarth of Newport: My Lords, my noble friend has raised two interesting points. The first concerns the prohibition against police officers canvassing. One can understand why, historically, this might be regarded as an appropriate provision. In some other countries-one might cite Egypt at present-democracy is highly imperfect and people may have real grounds for apprehension that the police might not be interested in improving democracy, so one can understand why there might be such a provision in electoral law. However, it seems to me that it must be a very long time indeed since that was a realistic apprehension in this country-at least I hope that that is the case. My noble friend makes a very good point that this must be a difficult provision-indeed, a discriminatory one-for members of police forces, who are entitled to vote as citizens and to talk about political issues with their friends and families. While conversation within the family might not be regarded as canvassing, there must be a rather imprecise definition of what this prohibition amounts to.

Baroness Golding: In my constituency we have a police officer who is now retired. He was advised not to join the Labour Party or to show any bias towards it while he was a policeman. That means canvassing.

Lord Howarth of Newport: One can understand that. It is a little difficult in legislation to draw the line between what people do in their public official capacity and what they may do in their personal capacity. It will be interesting to hear the Minister's thoughts on whether this legislation is well framed to meet the circumstances of today.

My noble friend also drew attention to the prohibition against paid canvassers. I must confess that even after decades of political activity, I was unaware of this prohibition. It seems to me that it is quite commonplace, in all political parties, for people who are paid employees-paid functionaries-of the political parties to engage very actively indeed in canvassing and in the organisation of canvassing. Again, it would be helpful to hear from the Minister whether he has any concern that this prohibition, which has been long established in election law-at least since 1983-is in fact regularly and routinely ignored and whether it is sensible simply to re-enact it for the purposes of the referendum by transferring it from the 1983 legislation.

Lord Campbell-Savours: Perhaps it would be helpful if the Minister could assure us that when the law in this whole area is being further revised, the 1983 Act

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and its provisions might well be subject to reconsideration. We are not tying him down, but there are sections of that law which now look a little dated and it might be worth considering them more widely.

Lord Howarth of Newport: My noble friend Lord Campbell-Savours has done the Committee a good service by drawing our attention to the possibility that what we have seen is a cut-and-paste job. We have seen the transference of slabs of the 1983 legislation into this 2011 legislation. It would be helpful to know just how much thought has gone into this and whether the Minister thinks there is any case for reviewing these schedules before the Bill comes back on Report to make sure that he and his officials are entirely happy that in all aspects they make good practical sense.

Lord Grocott: I hope that this does not sound flippant, but an anomalous situation could arise, given what my noble friend Lord Campbell-Savours says about off-duty policemen being in any way involved in any kind of electoral activity, when we are shortly to receive a Bill from the other end of the Corridor providing for elected police commissioners. It would be rather odd, would it not, if one level of the police force was expressly required to involve itself in elections and all the activities associated with them, but not the bobby on the beat?

Lord Howarth of Newport: My noble friend has a great talent for a kind of lateral thinking that is always fruitful in our debates. His point is a little wide of the amendment; I must reprove him to that extent. However, it would be rather curious if we were to be presented with legislation that proposed that in elections for police commissioners, police officers should not be entitled to play a part or exercise any persuasive powers.

The Advocate-General for Scotland (Lord Wallace of Tankerness): I thank noble Lords who have taken part in this debate and highlighted some interesting aspects. I suspect that parts of the 1983 legislation have not been visited for some time. To take the general point, I am not aware of any moves afoot to review electoral law in this way, but I am sure that those in the responsible department will take note of what is said with regard to the generality.

The noble Lord, Lord Howarth of Newport, referred to this disparagingly as a cut-and-paste job. The schedule seeks to ensure that as far as practically possible, the existing rules governing the registration for and the conduct of parliamentary elections should apply in the case of the referendum. As is very obvious, in order to take account of this, there have had to be changes in terminology. For example, it would not make sense to have references to candidates when there are no candidates in a referendum. To do that, people had to go right through.

I was asked whether this section of the 1983 Act would be considered for revision in future. We will want to look at that, but it is right that we base the referendum on the rules that we know. If I had come to the House with subtle changes, I would have had a

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difficult job trying to explain them, and no doubt some noble Lords would have thought that a great conspiracy was afoot. In future, we will be happy to review the provisions, but I cannot honestly say that it will be done quickly-certainly not in time for Report. However, I do not think that that was what was asked: I think that the request was to look at this more generally.

I will respond to specific points. I do not have the information about whether there have been any convictions under Section 61 of the Representation of the People Act. That is a matter for the courts and I am advised that the information is not collected centrally. The provision with regard to voting on one's own behalf or by proxy, to which the noble Lord, Lord Campbell-Savours, drew attention, is intended to cover the situation where one can vote on one's own behalf and also by proxy on someone else's behalf, but one cannot vote twice on one's own behalf.

That brings us to the question of postal votes. There is a danger of Members of the Committee getting into their anecdotage. The noble Lord, Lord Maxton, asked whether, if you have a postal vote in one place but are registered in another, as Members of Parliament have been, you could vote in another place even if the postal vote had been issued. I know the answer because in the 1989 European elections I had a postal vote in the Highlands and Islands constituency, for which I was a Member of Parliament, and I was living in London. Local elections were on the same day and it took me a long time to persuade the polling clerk not to issue me with a ballot paper for the European elections because I had already voted and it would have been an offence to vote again-whereas I did want to vote in the local elections. I do not know how I knew about it, but I did. Perhaps it is important, as the noble Lord, Lord Campbell-Savours, pointed out, that the information should be in the material that will go out to those who receive a postal vote that they may not vote more than once.

Lord Maxton: In that case, is the Minister saying that it will be the responsibility of the person who is registered to make sure that they do not receive a postal vote for the referendum, rather than it being noted on some form of national register?

Lord Wallace of Tankerness: The thing to say is do not use it, or, if you have used it, do not take the second vote. The important thing is that nobody votes more than once.

Lord Campbell-Savours: My noble friend Lady Golding intervened to correct me. However, it still leaves a question in my mind. If the application for the postal vote has been made immediately prior to the election, how can we be sure that the officers in the polling booth have before them an electoral register that has been updated to include the mark that my noble friend Lady Golding referred to? I do not expect the Minister to reply on that point now, but he might wish to check and let us know the position on Report or in writing.

Lord Wallace of Tankerness: I will certainly check and advise the noble Lord, and other noble Lords who have contributed to the debate.



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Lord Rennard: Perhaps the Minister would agree with me that the reason why we have a cut-off for applying for a postal vote before an election is to create that gap, so that the list provided to polling station presiding officers on the day is up to date and shows who has been given a postal vote. Thus a ballot paper for a non-postal vote cannot be issued on polling day to someone who has already been issued with a postal vote.

Many issues have been raised by noble Lords in this short debate. With the exception of the contributions of the noble Baroness, Lady Golding, the prejudice of people who over many years have organised elections as election agents has been confirmed. Those who have stood as candidates in elections understand very little about the laws that govern the elections. Those of us who have got on with the business of organising elections understand that none of the issues raised in the debate has caused any problems in the 28 years since the 1983 legislation-or indeed in the decades before that-and that it would be most unwise in this debate suddenly to start revising our election laws so that we would have different election laws for the conduct of the referendum from those that we will have for the elections that will also take place on 5 May this year.

5.45 pm

Lord Bach: My Lords, the noble Lord, Lord Rennard, is being a bit hard on those who stand for elections. Their job is to stand for elections. Why should they know? Any agent would tell them, "Mind your own business".

Lord Wallace of Tankerness: As one who stood for election on I do not know how many occasions, I shall not tangle with one of the best agents that my party has ever known.

Baroness Golding: I realise that the noble and learned Lord does not wish to tackle one of the best agents, but there is an emergency postal vote if you are taken into hospital. I say as an agent that one of the best agents seems to have forgotten that.

Lord Wallace of Tankerness: If a person who has been taken into hospital requires an emergency postal vote, it is highly unlikely that they will turn up at the polling station because, by definition, they are in hospital.

The general point is made. There is a responsibility on the citizen not to vote twice in the same election. I should have thought that that was a well known rule. The other point which seems to be agreed across the Committee is that it is important in this referendum that we use the rules that have been in place for 28 years. The time may be coming for them to be reviewed, but that will not happen before the referendum. We are safer, in terms of running a smooth referendum campaign, using rules that are tried and tested.

Schedule 4 agreed.



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Schedule 5 : Combination of polls: England

Amendment 122DA

Moved by Lord Wallace of Tankerness

122DA: Schedule 5, page 138, line 2, at end insert-

"( ) Regulation 11 of the Local Authorities (Conduct of Referendums) (England) Regulations 2007 has effect as if the reference to regulation 10(1) or (7) included a reference to section 4."

Lord Wallace of Tankerness: My Lords, Clause 4 makes it clear that the local government referendums in England can be combined with the referendum on the voting system. The amendment is required to make clear which set of rules applies to govern the conduct of the poll, should such a local referendum be combined with the referendum on the voting system in voting areas where no other relevant local election is taking place. Although we have yet to receive confirmation of where, if any, local government referendums will be held on 5 May, this minor amendment is important to clarify which set of rules would, in that eventuality, apply to govern a combination of such a poll with the referendum on the voting system. I beg to move.

Amendment 122DA agreed.

Amendment 122E

Moved by Lord Wallace of Tankerness

122E: Schedule 5, page 151, line 40, at end insert-

"( ) Regulation 116(1) of the Representation of the People (England and Wales) Regulations 2001 (S.I. 2001/341) has effect in relation to a relevant election as if the reference to documents forwarded under rule 55(1)(e) of the elections rules were to documents forwarded under rule 50(1)(a) of the referendum rules as applied by this paragraph."

Lord Wallace of Tankerness: I shall speak also to the other amendments in this group, all of which are related. Indeed, they relate to each of the combination schedules and have been grouped to ensure that there are equivalent combination provisions across the whole of the United Kingdom.

The overall purpose is to ensure the smooth running of the provisions in Schedules 5 to 8, which relate to the provision of, access to and retention of documents at a combined poll. The amendments are technical and will make certain that the right documents are available to the right officers at the right time, and are retained by the right officers after the polls are over.

I do not intend to go into this matter in great detail, unless pressed, but noble Lords may be interested to note that the amendments provide that at the end of a combined poll there is the same obligation on the registration officer or counting officer to provide access to and supply copies of combined election documents that would have existed if the election had been taken alone. In England, Wales and Scotland, the counting officer will be provided with the necessary lists and other election documentation and information needed to carry out his or her functions in relation to the combined elections that are transferred to him or her. For example, we have specifically provided that as

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soon as practicable after 5 pm on the sixth day before the poll-that is, after the date for applying for a proxy vote has passed-the registration officer must provide the counting officer with the absent voting lists for any elections which are combined with the referendum in his or her voting area.

An equivalent provision is not needed for Northern Ireland because of the chief electoral officer's role as both a returning officer for the election and counting officer for the referendum. Other provisions specifically relate to documentation in Northern Ireland, including a court order for the production of a combined corresponding number list retained by the chief electoral officer for Northern Ireland, which can be obtained where necessary in relation to a local election offence or petition, in the same way that such an order could have been obtained if the document had been retained by an officer of the relevant council.

I should also advise the Committee that the Electoral Commission, the Association of Electoral Administrators, the Northern Ireland Office, the Scotland Office and the Wales Office have confirmed that they are content with these amendments. I beg to move.

Lord Bach: My Lords, I thank the Minister for introducing his amendments. I have a simple question. Why are they being added now when I think a number of amendments were added at the latter stage in the Commons proceedings on the Bill? Was this something that was omitted or has it just been thought up? I am talking about Amendments 122F, 122H and 122K, which all refer to the same thing. I can see its importance and we do not oppose it, but why does it appear now when everything else in Schedule 5 was there at the time of the proceedings in another place?

If the noble and learned Lord does not have the answer by the time I sit down, he can write to me. This seems quite important so I am interested to know why it was not added before.

Lord Howarth of Newport: Let me provide a little more time for officials to advise the noble and learned Lord. I should be grateful if he would advise the House on the means of communication whereby these minor, technical but none the less significant changes will be communicated to those whose duty it is to carry out the relevant functions. How much complexity is there in that and will training be needed? How will the system ensure that all those who need to know about these changes being made at a late stage actually know, given the short-ish interval between enactment and the date of the referendum?

Lord Wallace of Tankerness: My Lords, I understand that through scrutiny of the legislation it was noticed that these points needed to be added to the Bill. In answer to the noble Lord, Lord Howarth of Newport, the schedules are combination schedules. He referred to training. What was going to happen would happen anyway. For the sake of argument, if it was an election to the Welsh National Assembly, now that there is a combined election it would bite on both ballots. In that regard the chief counting officer is responsible for

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the referendum and there is communication there. My information is that these points have already been communicated to administrators who have commented on the provision. As I said when I moved the amendment, the Electoral Commission and the Association of Electoral Administrators have already confirmed that they are content with the amendments. In other words, it is very much into the system already and I am confident that they will be well communicated.

Amendment 122E agreed.

Amendment 122F

Moved by Lord Wallace of Tankerness

122F: Schedule 5, page 152, line 26, at end insert-

"Provision of registers etc to counting officerRegisters

Regulation 98 of the Representation of the People (England and Wales) Regulations 2001 as modified by Part 3 of Schedule 4 above applies for the purposes of a relevant election as it applies for the purposes of the referendum.

Absent voters lists

As soon as practicable after 5 pm on the 6th day before the date of the poll, the registration officer must provide the counting officer with the following lists, and any subsequent revised lists or revisions to the lists-

(a) the list of proxies for each relevant election;

(b) the postal voters list for each relevant election;

(c) the proxy postal voters list for each relevant election.

Personal identifier information

Where proceedings on the issue and receipt of postal ballot papers are taken together by virtue of regulation 65 of the Representation of the People (England and Wales) Regulations 2001, paragraph 7C of Schedule 4 to the Representation of the People Act 2000 has effect as if a reference to a returning officer were a reference to the counting officer."

Amendment 122F agreed.

Debate on whether Schedule 5, as amended, should be agreed.

Lord Campbell-Savours: I wonder whether the noble and learned Lord can answer a few questions on Schedule 5, which refers to combined polls and states:

"The cost of taking the combined polls (excluding any cost solely attributable to the referendum or to a particular relevant election), and any cost attributable to their combination, is to be apportioned equally among them".

I presume that means among the authorities concerned, but perhaps the noble and learned Lord can tell us exactly what it means in these circumstances. If it is a question of apportionment and different sources of money are to pick up bills, I presume that there is an apportionment procedure. Can he explain what that procedure is and could it lead to dispute? If local authorities are contributing to the pot, disputes may well be possible. The 1983 Act may well make provision for that, but I have not been able to find specific reference to apportionment in this context.

In Schedule 5, on page 141, there is reference to ballot boxes under paragraph 18, which states:

"If the counting officer thinks fit, the same ballot box may be used at the polls for the referendum and the relevant elections".



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In other words, we will have a combined ballot box in certain polling stations receiving both referendum votes and other votes. There may well be circumstances in the local authority where some might argue, for whatever reason, that they want that because of its implications for the arrangements in the counting stations.

One would have thought that it is better to have two boxes separated in advance as against placing the responsibility on the counters in the counting stations to divide the ballot papers themselves. Are the Government prepared to issue guidance on whether they would prefer that a particular approach was adopted, as against giving the counting officer responsibility in his or her discretion to decide whether he or she feels that there should be a single box or two boxes to collect the votes?

Finally, on the same page, the title of paragraph 21 states:

"Guidance to be exhibited inside and outside polling stations".

I raised that issue during our debates last night. The question remains unanswered. Paragraph 21 states:

"A notice in the form set out in Form 5 in Part 3 of this schedule, giving directions for the guidance of voters in voting, must be printed in conspicuous characters and exhibited inside and outside every polling station".

What I was on about last night, and I repeat my concerns today, is what happens if those who are rather keen on securing a particular result decide to drive a huge 40-footer artic truck with big signs saying, "Vote yes for AV", or otherwise, and park it right outside the polling station door? In general election campaigns, people plaster candidates' names on huge hoardings of that nature which are mobile, but I wondered whether on this occasion, because of the highly controversial nature of the question being asked in the referendum, there might be those who decided to conduct their campaign by using those mobile hoardings. Is there not a need to issue some guidance to polling clerks? Clearly, they would have to be subject to the law as to what they should do in such circumstances.

Lord McAvoy: My Lords, I return briefly to an area that I mentioned last night on which I did not get a response from the noble Lord, Lord Strathclyde. I accept that I raised what was probably a unique set of circumstances and I would not expect the Minister to have an answer at his fingertips. I could go through the detail again, but in the spirit of the understanding that we have, I will say only that it is about the definition of the area of control under the authority of the presiding officer. At page 137, the Bill states:

"A relevant officer is ... in the case of proceedings at a polling station, the presiding officer".

My point is similar but not identical to that made by my noble friend Lord Campbell-Savours about the definition of the area of control if activity is taking place, such as voters being approached as they head towards the polling station. At one of the polling stations with which I was involved, the presiding officer and the police had genuine uncertainty and doubt about getting involved in that. If there is activity like that, which is not desirable, although I am not sure about whether it is illegal, or if a complaint is made, does the presiding officer have any authority over it?



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6 pm

Page 141 refers to the point which my noble friend Lord Campbell-Savours made on the ballot boxes. Paragraph 18(1) states:

"If the counting officer thinks fit, the same ballot box may be used at the polls for the referendum and the relevant elections".

I shall not go into all the details of the 2007 election in Scotland as they have been spoken about enough. Utter chaos reigned at scores, if not hundreds, of polling stations because of uncertainty and confusion and, as we all know, it ended up with a record number of wasted votes. If my memory serves right, there were 1,200, but I will be corrected if there were more or less.


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