31Z: Schedule 1, page 60, line 17, at end insert—

“After section 27 insert—

“27A Powers to wind up companies etc: Scotland

(1) The Scottish Ministers may present a petition to the court for the winding up of a company or relevant body, or the dissolution of a partnership, if—

(a) the company, relevant body or partnership has been convicted of an offence under section 25 in relation to a serious crime prevention order; and

(b) the Scottish Ministers consider that it would be in the public interest for the company or (as the case may be) relevant body to be wound up or the partnership to be dissolved.

(2) The Insolvency Act 1986 applies in relation to—

(a) a petition under this section for the winding up of a company; and

(b) the company’s winding up;

as it applies in relation to a petition under section 124A of the Act of 1986 for the winding up of a company and the company’s winding up (winding up on grounds of public interest) but subject to the modifications in subsections (3) and (4).

(3) Section 124(4)(b) of the Act of 1986 (application for winding up) applies in relation to a petition under this section as if it permits the petition to be presented by the Scottish Ministers.

(4) The court may make an order under section 125 of the Act of 1986 (powers of court on hearing of petition) to wind up the company only if—

(a) the company has been convicted of an offence under section 25 in relation to a serious crime prevention order; and

(b) the court considers that it is just and equitable for the company to be wound up.

(5) Where a petition is made to the court under this section for the dissolution of a partnership, the court may make an order to dissolve the partnership only if—

(a) the partnership has been convicted of an offence under section 25 in relation to a serious crime prevention order; and

(b) the court considers that it is just and equitable for the partnership to be dissolved.

(6) Where the court makes an order to dissolve a partnership under this section, the Partnership Act 1890 applies in respect of the dissolution as if it were a dissolution under section 35 of that Act.

(7) The appropriate Minister may by order provide for the Act of 1986 to apply, with such modifications as that person considers appropriate, in relation to a petition under this section for the winding up of a relevant body and the relevant body’s winding up.

(8) An order made by virtue of subsection (7) must ensure that the court may make an order to wind up the relevant body only if—

(a) the relevant body has been convicted of an offence under section 25 in relation to a serious crime prevention order; and

(b) the court considers that it is just and equitable for the relevant body to be wound up.

8 July 2014 : Column 155

(9) No petition may be presented, or order to wind up or dissolve made, by virtue of this section if—

(a) an appeal against conviction for the offence concerned has been made and not finally determined; or

(b) the period during which such an appeal may be made has not expired.

(10) No petition may be presented, or order to wind up or dissolve made, by virtue of this section if—

(a) the company or relevant body is already being wound up by the court, or

(b) the partnership is already being dissolved by the court.

(11) In deciding for the purposes of subsection (9) whether an appeal is finally determined or whether the period during which an appeal may be made has expired, any power to appeal out of time is to be ignored.

(12) In this section—

“appropriate Minister” means—

(a) in relation to a relevant body falling within paragraphs (a) to (c) of the definition of “relevant body” below, the Treasury; and

(b) in relation to any other relevant body, the Scottish Ministers;

“company” means—

(a) a company registered under the Companies Act 2006 in Scotland, or

(b) an unregistered company within the meaning of Part 5 of the Insolvency Act 1986 (see section 220 of that Act),

but does not include a relevant body;

“the court”, in relation to a company, means a court in Scotland having jurisdiction to wind up the company;

“partnership” does not include a relevant body; and

“relevant body” means—

(a) a building society (within the meaning of the Building Societies Act 1986);

(b) an incorporated friendly society (within the meaning of the Friendly Societies Act 1992);

(c) a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014;

(d) a limited liability partnership; or

(e) such other description of person as may be specified by order made by the Scottish Ministers;

and the references to sections 124 to 125 of the Insolvency Act 1986 include references to those sections as applied by section 221(1) of that Act (unregistered companies).”

(1) Section 29 (powers to wind up: supplementary) is amended as follows.

(2) After subsection (1) insert—

“(1ZA) The Scottish Ministers may by order make such modifications as they consider appropriate to the application of the Insolvency Act 1986 by virtue of section 27A(2).”

(3) In subsection (2)—

(a) after “subsection (1)” insert “, (1ZA)”;

(b) after “section 27(3) and (4)” insert “, 27A(3) and (4)”.

(4) After subsection (3) insert—

“(3ZA) The Scottish Ministers may by order make such consequential or supplementary provision, applying with or without modifications any provision made by or under an enactment including an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament, as they consider appropriate in connection with section 27A(2) to (4).”

(5) In subsection (4)—

(a) after “section 27(5) or (6)” insert “, 27A(7)”;

(b) after “subsection (1)” insert “, (1ZA)”;

(c) after “enactment” insert “including, in the case of an

8 July 2014 : Column 156

order made by virtue of section 27A(7) or subsection (1ZA) above, an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament.””

Amendments 31W to 31Z agreed.

Amendments 31AA to 31AC

Moved by Lord Taylor of Holbeach

31AA: Schedule 1, page 60, leave out lines 32 to 34 and insert—

“(1) Proceedings before the High Court of Justiciary (the “High Court”) or the sheriff arising by virtue of section 22A, 22B, 22C or 22E are civil proceedings.

(2) One consequence of this is that the standard of proof to be applied by the High Court or (as the case may be) the sheriff in such proceedings is the civil standard of proof.

(3) Two other consequences of this are that the High Court or (as the case may be) the sheriff—

(a) is not restricted to considering evidence that would have been admissible in the criminal proceedings in which the person concerned was convicted; and

(b) may adjourn any proceedings in relation to a serious crime prevention order even after sentencing the person concerned.

(4) Despite subsection (1), an Act of Adjournal under section 305 of the Criminal Procedure (Scotland) Act 1995 (Acts of Adjournal) may be made in relation to proceedings before the High Court or the sheriff arising by virtue of section 22A, 22B, 22C or 22E.

(5) A serious crime prevention order may be made as mentioned in section 22A(6)(b) in spite of anything in sections 246 and 247 of the Criminal Procedure (Scotland) Act 1995 (which relate to orders discharging a person absolutely and their effect).

(6) A variation of a serious crime prevention order may be made as mentioned in section 22B(4)(b), or (as the case may be) a variation of or a new serious crime prevention order may be made as mentioned in section 22C(4)(b), in spite of anything in sections 246 and 247 of the Criminal Procedure (Scotland) Act 1995.”

31AB: Schedule 1, page 61, line 25, at end insert—

“( ) in subsection (6)—

(i) for “statutory instrument” substitute “the Secretary of State or the Treasury”;

(ii) after “27(6) or (12),” insert “, 27A(7)”;”

31AC: Schedule 1, page 61, line 29, at end insert “, 27A(7) or (12), 29(1ZA) or (3ZA)”

Amendments 31AA to 31AC agreed.

Schedule 1, as amended, agreed.

Clauses 43 and 44 agreed.

Clause 45: Extension of order where person charged

Amendment 31AD

Moved by Lord Taylor of Holbeach

31AD: Clause 45, page 35, line 36, after “22A” insert “or 22C”

Amendment 31AD agreed.

Clause 45, as amended, agreed.

Clause 46 agreed.

8 July 2014 : Column 157

Amendment 32

Moved by Baroness Meacher

32: Before Clause 47, insert the following new Clause—

“Dissuasion Panels to prevent gang-related violence and drug-dealing activity

(1) A police officer may refer a person aged 14 or over to a Dissuasion Panel under this section if the following two conditions are met.

(2) The first condition is that the officer is satisfied on the balance of probabilities that the person has engaged in or has encouraged or assisted—

(a) gang-related violence; or

(b) gang-related drug-dealing activity.

(3) The second condition is that the officer thinks it is necessary to make the referral for any of the following purposes—

(a) to prevent the person from engaging in, or encouraging or assisting, gang-related violence or gang-related drug-dealing activity;

(b) to protect the person from gang-related violence or gang-related drug-dealing activity;

(c) to determine whether the person is drug dependent and may benefit from drug treatment.

(4) A Dissuasion Panel must be comprised of at least three people from the following backgrounds, with preference given to professionals with prior knowledge of the individual—

(a) medical, including mental health;

(b) social work;

(c) legal;

(d) any other profession that the court believes will be useful and as it directs.

(5) The Dissuasion Panel will—

(a) assess the individual’s personal circumstances,

(b) consider whether these have impacted on the activities at subsection (2), and

(c) determine whether interventions are needed to—

(i) prevent the person from engaging in, or encouraging or assisting, gang-related violence or gang-related drug-dealing activity;

(ii) protect the person from gang-related violence or gang-related drug-dealing activity;

(iii) address drug dependency.

(6) Following assessment of a person by a Dissuasion Panel under this section, the Panel may—

(a) make no further intervention; or

(b) require the respondent to do something which they reasonably believe will—

(i) prevent the person from engaging in, or encouraging or assisting, gang-related violence or gang-related drug-dealing activity;

(ii) protect the person from gang-related violence or gang-related drug-dealing activity;

(iii) address drug dependency.

(7) Requirements may include, but are not limited to—

(a) treatment for those who are drug dependent;

(b) counselling;

(c) education;

(d) training;

(e) reporting to the Panel for review.

(8) If the person does not agree to the proposed requirements they will be referred to court for alternative action under section 34 of the Policing and Crime Act 2009, as introduced by section 47 of the Serious Crime Act 2014.

(9) At any review by the Dissuasion Panel, the Panel may—

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(a) permit the contract to continue with its current terms;

(b) vary the contract by—

(i) adding a requirement;

(ii) removing an existing requirement;

(iii) amending an existing requirement;

(c) cancel the contract and refer the person to court for alternative action under section 34 of the Policing and Crime Act 2009, as introduced by section 47 of the Serious Crime Act 2014.

(10) If the person breaches the contract, he or she will initially be referred back to the Dissuasion Panel who may—

(a) permit the contract to continue with its current terms;

(b) vary the contract by—

(i) adding a requirement;

(ii) remove an existing requirement;

(iii) amending an existing requirement;

(c) cancel the contract and refer the individual to court for alternative action under section 34 of the Policing and Crime Act 2009 as introduced by section 47 of the Serious Crime Act 2014.

(11) For the purposes of this section, something is “gang-related” if it occurs in the course of, or is otherwise related to, the activities of a group that—

(a) consists of at least three people, and

(b) has one or more characteristics that enable its members to be identified by others as a group.

(12) In this section “violence” includes a threat of violence.

(13) In this Part “drug-dealing activity” means the unlawful production, supply, importation or exportation of a controlled drug.

(14) “Production”, “supply” and “controlled drug” have the meanings given by section 37(1) of the Misuse of Drugs Act 1971.”

Baroness Meacher (CB): My Lords, I rise to move Amendment 32 and to speak also to Amendments 33 to 39, all of which are probing amendments. I emphasise that we are presenting quite a detailed proposition. The new clause was drafted by a lawyer from Release at my request. Neither she nor I claim that every word will be approved by government lawyers. We ask for your Lordships’ indulgence on that. I am grateful to the Minister for the meeting we had yesterday to discuss these amendments. It was extremely helpful.

I shall deal quickly with Amendments 33 to 39. They are substantially consequential on the new clause and I do not want to take the time of the House to discuss them in any detail. The exception is Amendment 34, which replaces the lower standard of proof with “beyond reasonable doubt” as the basis for injunctions. Any order of a court which could involve penalties should, in our view, be based on the criminal standard of proof. We are simply asserting that and I shall not debate it. Amendments 38 and 39 also relate specifically to injunctions and ensure that the requirements or prohibitions spelled out in an injunction relate specifically, in Amendment 38, to,

“engaging in, or encouraging or assisting, gang-related violence or gang-related drug-dealing activity”

and in Amendment 39, to

“protect the respondent from gang-related violence or gang-related drug-dealing activity”.

I shall be interested in what the Minister has to say about those amendments, but I shall focus my remarks more generally on Clause 47 and specifically on the new clause.

8 July 2014 : Column 159

We understand the objective of Clause 47 and are not arguing against the granting of injunctions in a number of situations envisaged by the Government. Our concern is that the injunctions referred to in Clause 47 and in the Policing and Crime Act 2009 require the young person to go to court where the injunction may be issued. We discussed this issue yesterday with the noble Lord. The involvement of the court in our view is an extremely costly and in many cases unnecessary process. It is also a process which criminalises the young person and makes it harder for them to return to normal life and earn a living.

We understand that an injunction may place a range of prohibitions and requirements on the young person, including the requirement to participate in rehabilitative activities. We realise that they are not just blunt instruments. We welcome the requirement in the statutory guidance on the implementation of gang injunctions of 2011 that the body proposing to apply for the injunction must consult the youth offending team and may also consult schools, probation and other bodies. Local authorities also have an obligation under the National Health Service and Community Care Act 1990. If a young person may be suffering from drug, alcohol or mental health problems, local authorities must have regard to that.

5.30 pm

The evidence on what works with gangs highlights the key success factors—community mobilisation, social intervention, provision of social opportunities, organisational change and development of local agencies and groups. The court process is not a success factor. Clause 47 does nothing to enhance the rehabilitative or preventive elements already available—or available at least in theory. I emphasise the words “at least in theory” because, of course, a lot of these things are being stripped of their funding as we speak. I would go further. If the individual is a problem drug user, an injunction will not work. An addict cannot make rational choices without a great deal of support in a structured setting and, generally, over a period of time.

In Amendment 32, we propose that a young person could be referred to a dissuasion panel by a police officer—not a court—who has reason to believe that the individual is dealing in an illicit substance. For the purposes of this legislation, the individual is likely to be acting in association with a gang, whatever that may mean. The dissuasion panel’s role is to identify whether the individual is drug dependent. If so, the panel will draw up a contract with the individual, which will certainly include attendance at a treatment programme and a range of other actions designed to deal with the problems identified and help the individual to turn his back on drugs and drug dealing. These actions could include the provision of counselling, attendance at an educational or training establishment and even mandatory community service—and also reporting to the panel for review at a specified time.

The important points are that the dissuasion panels would not be a soft option, but they would avoid criminalising the problem drug user and they would involve the young person in drawing up a contract to solve his problems rather than passively receiving a penalty handed down by a court. This is really pretty

8 July 2014 : Column 160

crucial with these people. If you simply hand down orders, it will not work with these sorts of individuals. The new clause provides for the contract to be changed at review, if appropriate, or for the contract to be cancelled and the individual to be referred to court for alternative action. We accept that a referral to court will be unavoidable in some circumstances.

The rationale for these amendments is that young people who become involved in gang-related activities, often involving drugs, generally have serious personal and family problems. Sending them to court can simply make matters worse. Our amendments draw on the experience of the dissuasion commissions which have been in operation for 13 years in Portugal. These commissions have taken the place of the court for very many young people. There the dissuasion commission includes three people, generally from the legal, medical and social work fields. The functions of the commission in Portugal are very much reflected in our amendments. The model in Portugal has seen a very significant increase in the number of drug addicts in treatment and a sharp reduction in the proportion of the prison population having drug problems. Fewer young people become addicted to drugs in Portugal than in neighbouring countries that pursue more traditional policies. It seems that we really do have a lot to learn from that experience and the experience of other countries. It is worth noting that the drug policy has been supported over the years by all the political parties in Portugal, which was not the case when the policy was introduced. We have to pay attention to that. Why is it that politicians in parties that opposed the policy should come round and then support it, unless the policy works? It clearly does.

We already have in the UK a range of services for young people at risk of being involved in gang-related violence and drug-dealing activity. The problem is that these services are underfunded, chaotically organised and subject to constant reorganisation, thus undermining their efficiency. Already funds are devoted to drug courts when they would be better spent on the services needed by young people.

In conclusion, can the Minister give an assurance to the House that his department will assess the costs and benefits of dissuasion panels in dealing with drug-related offences, and, in particular, with people who are dependent on drugs? This work would follow naturally from the Government’s probably excellent review of international drug policy, which included a look at the Portuguese system. I beg to move.

Lord Elton: The noble Baroness has put forward a very attractive proposal, at which I hope my noble friend will look carefully. I do not doubt that it will need a lot more work on it before it can be in statute. I hope that the length of the interval between Committee and Report will make that possible.

I have a question for the noble Baroness, having only cursorily looked at the amendment. It seems to me that it depends very much on the quality of the sentence or referral that the panel makes. There should be a requirement that any child or young person who is put into its orbit should not be able to fall out of the system so that they simply have to report at intervals. I would like to see the word “monitor” in there somewhere.

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A responsible adult or organisation should be required in the statute; otherwise, we will get people fading away, as they have done in the past under probation.

Lord Howarth of Newport: My Lords, I was extremely happy to add my name to the amendments in this group, tabled by my noble friend Lady Meacher, and I pay tribute to the work that she does as chair of the All-Party Parliamentary Group on Drug Policy Reform. She is deeply knowledgeable in this field, and I know that the House will always listen with great care to the proposals that she makes. She is right, of course, to make the point that injunctions on their own will achieve nothing, and that people with a drug dependency or who find themselves in the ambit of drug-related gangs are people who need help. She is right to suggest that the help that they need should very likely be help in terms of their health. It is better with these young people to treat their predicament not as a criminal but as a health issue. That is the model that has been established in Portugal since 2001, as my noble friend said, initially amid some considerable controversy—because Portugal faced an appalling crisis of drug trafficking and addiction and a whole generation of young people in very great danger. It was to many people countercultural primarily as a health-related issue rather than as a criminal issue. But the evidence shows that, over the years, the approach has paid off and results have been very good indeed.

I commend to the noble Lord, Lord Elton, and others the report on the Portuguese experience published by the charity, Transform, and available on its website. It looks very carefully at the evidence of what has happened in Portugal. I add to the highlights that my noble friend Lady Meacher mentioned the facts that drug use has,

“declined among those aged 15-24, the population most at risk of initiating drug use … Rates of past-year and past-month drug use among the general population—which are seen as the best indicators of evolving drug use trends—have decreased”,

and that,

“Rates of continuation of drug use (i.e. the proportion of the population that have ever used an illicit drug and continue to do so) have decreased”.

On all these important indicators, the policy has been vindicated. However, it is also important to say that this Portuguese strategy is one of investing very considerably in support services for the young people who are brought before disuassion commissions. The young people come to an agreement with the disuassion commission about a course of action that they will take. Not only will they seek to co-operate willingly with what is recommended in terms of their health, but there are many other courses that the disuassion commission may recommend for them, including job training and all kinds of activities and processes to help them to integrate successfully with society. This strategy came at a time when Portugal was broadening the range and depth of its welfare state and of its support services for vulnerable and fragile young people. Of course, Portugal has been under very serious fiscal pressure in recent years. It may well be that the quality and extent of these services are not what the authors of the strategy would ideally have wished; none the less, the results have been very good.

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It will be necessary, if we are to adopt a constructive, positive, humane strategy of the kind that has been pioneered and demonstrated in Portugal, for the Government of the day in this country to be willing to invest in the resources needed to make a full success of that. We all know how very difficult that is going to be for a Government now or in the foreseeable future to do. That is a kind of caveat; but it would not at all invalidate the adoption of a strategy such as the one my noble friend has commended to the Committee. I very much hope that the Committee will favour what she has suggested.

Baroness Hamwee: My Lords, like my noble friend and other noble Lords, I do not want to comment on the fine detail of the amendment but simply to support the noble Baroness. Her points about avoiding criminalisation and what I might summarise as an active, supportive, constructive response, are immensely important. Under the noble Baroness’s chairmanship, some of us met a number of MPs from Portugal. We were very struck by the agreement across the parties about the benefits of this measure and the lack of contention around it. We actually ran out of questions to ask them on that issue. Clearly, in that country they have succeeded in taking some of the heat out of the drugs issues, which has been a very considerable achievement. I hope that we might learn from that example.

Baroness Smith of Basildon: My Lords, I am grateful to the noble Baroness, Lady Meacher, for giving me a copy of her amendment and a briefing note on it when she tabled it. I was not aware of the Portuguese experience as my noble friend, Lord Howarth described it. It is interesting and bears further consideration. I am not an expert on whether the detail of the amendment is correct. It looks complicated, which might be because it was drafted by a lawyer, but I suspect that it is not so complicated in practice.

These dissuasion panels would sit alongside the injunctions, such as is proposed in the Bill, and a police officer would refer a young person if they were involved in gang-related violence or a drug-related activity. The panel would be tasked with assessing the young person. It would determine whether there was a need to require the young person to undertake some form of action, whether that be treatment or counselling, to prevent them engaging in further activities, to protect them or to address their drug dependency. That seems to be a more holistic approach to tackling the drug culture and drug abuse.

5.45 pm

That chimes with some of the things we have been looking at, in that there is a plea here for joined-up government. We disagree with those who argue that criminalisation of drugs prevents addicts from seeking treatment. In the UK we have been, and currently are, a world leader in providing drug treatment. If we look at the figures from the European Monitoring Centre for Drugs and Drug Addiction, we see that we are streets ahead of some of our European neighbours—I exclude Portugal from that. In 2010 at least 60% of opioid users in the UK were accessing treatment. The figure was just 12% in the Netherlands and 25% in

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Sweden. Drug-related deaths among the under-30s more than halved in a decade. In any other area of policy that would be seen as a success to date—although more work is needed—and as a record to work on to get further progress.

My fear is that even with the problems we have had, the progress that has been made to date could be lost. If we go back to 2001, we started to change how we dealt with drug addiction. The first stage was to increase provision for those who needed treatment. In 2001 there was a nine-week wait to access treatment. By 2011 that was down to five days. However, creating places for drug treatment is not enough because the key problem was that people were not completing their treatment and were dropping out half way through; so the problem became trying to keep people in treatment. In 2005-06 37,000 people dropped out. That figure was down to 17,000 by 2011-12, which was still too many but progress in the right direction. That allowed the focus to switch to those who were completing treatment. In 2011-12, the figures had nearly reversed; the figure of 17,000 dropping out was far below the number of those who completed treatment.

My noble friend Lord Howarth made a point about investment. The sea change in providing treatment was because of investment, and clear leadership. From 2001 until last year drug treatment was delivered by the National Treatment Agency, which was joint between the Home Office and the Department of Health. Both departments had to work together: they controlled NHS budgets on drug treatment and oversaw delivery. Home Office involvement is key.

That is one of the interesting things about the amendment. Drug treatment is seen by some to be poor value for money in terms of eventual health outcomes. However, if we look at the wider social outcomes for the individual concerned and the community, including crime, drug treatment is a highly cost-effective investment. It is estimated that drug treatment in the UK prevents about 4.9 million crimes a year and saves the economy about £960 million. That kind of involvement from the Home Office, leading through to treatment, is being lost, because responsibility for drug treatment has been devolved to local authorities, assisted by health and well-being boards, with no requirement for input from the criminal justice system. The very point the noble Baroness, Lady Meacher, is making is that when somebody comes into contact with the criminal justice system on a drugs-related offence, that is the opportunity to ensure treatment and intervention from a panel such as she outlines in her amendment. At present about 80% of the funding that local authorities receive comes from what was the pooled budget for drug and alcohol treatment. The Government are giving money to local authorities with one hand and taking it away with the other, because budgets are being slashed. The money that was ring-fenced for drug treatment is now being taken away and absorbed in other costs, putting enormous pressure on the services.

I come back to the point made by my noble friend Lord Howarth. The Government no longer know how much money is being spent on drug treatment: the figure is not available. The amendments tabled by my noble friend Lord Howarth and the noble Baroness,

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Lady Meacher, recognise the wider social implications and the involvement of the criminal justice system. At the first point at which someone comes into contact with the criminal justice system, they look to bring in other agencies and work with a more holistic approach. When we talk about drug victims it is not just those whose lives are controlled or ruined by the personal use of drugs, but those who have suffered as a result of drug crime, whether acquisitive crime or anti-social behaviour. Therefore, the proposal of the noble Baroness, Lady Meacher, is worthy of detailed consideration and I hope that the Minister will take the opportunity to look at it. It would not detract from the injunctions in the Bill, and it is right that they should be available. However, if we could have a process working alongside injunctions to enable us to deal not just with the criminal process but to develop treatment to deter drug abuse and those who fall victim to it, whether they be the individuals taking drugs or the victims of drug-related crime, that seems to me a result worth paying for.

Lord Taylor of Holbeach: My Lords, I am grateful to the noble Baroness, Lady Meacher, for explaining her thinking behind these amendments, and to noble Lords for taking part in this interesting debate. I am also grateful to the noble Baroness, Lady Meacher, for coming to see me yesterday, when we had a good discussion, so that I could understand what she wanted to achieve through her amendments on tackling drug dependency. I know that she takes a strong interest in this issue. We have often discussed drugs policy in this Chamber while wearing other hats. I recognise that her intention is to place a stronger focus on addressing drug dependency and on meeting the needs of vulnerable individuals who may become involved in gang-related violence and drug dealing. Therefore, I welcome this opportunity to discuss these issues.

However, as my noble friend Lord Elton indicated, gang injunctions are a much wider issue than that of just drug abuse. Drug abuse can be an element of gang activity but gang injunctions go much further than drug abuse alone. I hope that I can help noble Lords by talking about what the Government are doing to tackle drug-related offending and reoffending. The Government strongly support local investment in integrated offender management approaches, including identifying drug-using offenders and directing them to treatment. This is going on now. The Government are also: piloting drug recovery wings, focused on abstinence and connecting offenders with community drug recovery services on release; increasing the number of drug-free environments and piloting payment by results for drug and alcohol recovery services; testing a new “through the gate” model for substance misuse services to complement the introduction of transforming rehabilitation proposals; and developing and testing liaison and diversion services in police custody suites and at courts. I mention these initiatives because I do not want it to be assumed that no effort is being made at a local level to try to make drug users’ lives better. A great deal of effort is being expended in this area.

The expansion of activities covered by gang injunctions is not a substitute for seeking the prosecution of someone for a serious crime such as drug dealing. However, there are instances where a gang injunction

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may help prevent respondents engaging in gang-related drug activity or protect people being further drawn into such activity, which is particularly important for children, girls and young women.

Amendment 32 introduces the concept of dissuasion panels with the purpose of assessing the personal circumstances that could have led a person to engage in gang-related violence or gang-related drug-dealing activity. The panels would be composed of persons from a medical, legal or social work background. The amendment also confers powers on these new panels to impose requirements on an individual to prevent them engaging in the gang-related violence or gang-related drug-dealing activity, to protect the individual from such violence or activity, and to address drug dependency.

Although referrals to a dissuasion panel appear to be discretionary, the tenor of the proposed new clause seems to be to prevent an application for a gang injunction being considered by a court until the case has been referred to the dissuasion panel—I think I heard the noble Baroness aright in that regard—and the person concerned declines to abide by any requirements imposed by the panel. The result of the proposed new clause would be the introduction of a two-stage process. While I have considerable sympathy for the outcome the noble Baroness is seeking to achieve, I believe that interjecting a dissuasion panel into the process applying to a gang injunction is unnecessary.

Baroness Meacher: I should make it clear that the amendment proposes that only if a police officer identifies drugs as a problem for the individual concerned will they be referred to the dissuasion panel. If they have engaged in violence and there is no indication of drugs being involved, then, of course, they will go straight through to the court.

Lord Taylor of Holbeach: I am grateful to the noble Baroness for that explanation but I do not think that it totally weakens the argument I am trying to make for adopting a holistic approach to gang activity, which is contained in the gang injunctions. An individual’s personal circumstances leading to his or her involvement in gangs are already part and parcel of the matters taken into account as part of the gang injunction process. The Policing and Crime Act 2009 includes a consultation requirement. This requires the applicant to consult any local authority, chief police officer and other body or individual that the applicant thinks it is appropriate to consult. The Government’s statutory guidance on gang injunctions—we are considering gang injunctions in the Bill—published in 2010, stresses this point and suggests that the consultation process may include voluntary or support services working with the respondent and/or their family as well as the respondent’s school or housing provider, among others.

I agree that it is essential to take into account mental health or substance misuse issues, as these can be very relevant to someone’s involvement in gangs, together with any other personal circumstances, and this is already the case as part of the application process for a gang injunction. I also agree that it is important to stress this point further. However, I believe that the best place would be in guidance rather than introducing an additional statutory layer to the

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process. The guidance on gang injunctions is currently being revised and will be reissued in the autumn, as I explained to the noble Baroness yesterday. The revised version will make clear that the consultation process should include medical practitioners where appropriate and any other relevant professional who may assist in determining the individual circumstances of the case, and in particular whether substance misuse or mental health issues are factors that need to be taken into account.

New subsection (7) of the proposed new clause stresses further the point that requirements to prevent or protect a person from gang-related violence or drug dealing may include treatment for drug dependency, counselling, education or training. Gang injunctions are intended to help respondents leave the gang and may already include positive requirements such as the ones highlighted in Amendment 32 that work towards this end. The statutory guidance encourages applicants to be creative about helping respondents to leave the gang and specifically suggests that anger management sessions, coaching, counselling or other behavioural sessions may be appropriate. The revised guidance will stress further the positive requirement element of the gang injunction as a way of helping break away from gang-related violence, which is one of the elements we are seeking to address, and/or drug dealing.

6 pm

Amendment 34 would change the standard of proof which applies to the determination of whether a person has engaged in, or has encouraged or assisted, gang-related violence or drug dealing from the “balance of probabilities” to “beyond reasonable doubt”; that is, from the civil to the criminal standard.

Gang injunctions are civil tools and that is why I consider them so important. As such, the standard of proof is quite properly the “balance of probabilities”. As is the case in other civil proceedings, the court will be guided by a wide range of evidence before determining whether a gang injunction should be imposed. This may include direct evidence from witnesses, hearsay evidence from community members or police officers, statements from professional witnesses or other expert evidence. Courts will impose a gang injunction only after careful consideration of all the evidence and only after they are convinced that the injunction is necessary for the purposes set out in the legislation. It would be iniquitous to apply the criminal burden of proof to what are civil proceedings.

Amendments 38 and 39 seek to reinforce that gang injunctions have both a preventive and protective purpose. I believe that the amendments are not needed given that Clause 47 as it stands already provides that a gang injunction is granted for such a purpose. I would also point the noble Baroness to Section 34(4) of the Policing and Crime Act 2009, which makes it clear that an injunction may prohibit or require the respondent to,

“do anything described in the injunction”.

We had these sorts of things when we discussed injunctions against nuisance and annoyance in the most recent Bill. This provision affords the court significant flexibility to set out appropriate conditions and requirements to prevent the respondent from engaging in gang-related violence and drug dealing.

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I have set out why I think in the gang injunction we have the foundations for a proper relationship between those who are participating in gangs and an opportunity for them to move away from such a lifestyle. I say to the noble Baroness that as a result of her visit yesterday and how she described the Portuguese experience, we will look at the scheme in Portugal. I am ready to have a further discussion with her before Report. We are looking at the guidelines and will address some of the issues that have been made in this debate. The debate has shown that we want to achieve the same outcome here in terms of preventing gang-related violence and gang-related drug-dealing activity by addressing the underlying causes of an individual’s involvement in a gang. Where there are drug dependency issues they need to be addressed if the gang injunction is to achieve its purpose. Without addressing drug issues in somebody who has a drug problem, we will not have a successful outcome from a gang injunction in that case.

I firmly believe that the existing framework already allows for such an approach and the revised statutory guidance to be issued in the autumn will reinforce this critical message to front-line professionals. I fear that the introduction of the dissuasion panels will unnecessarily complicate a process that is focused on the gang injunction and all that can be done with that. For these reasons, I hope that the noble Baroness will withdraw her amendment today. We will have the opportunity of talking further and I hope to share with her some of our thinking on the guidance that we are in the process of producing.

Lord Elton: Before my noble friend concludes, could I ask him two questions? First, we had some impressive figures indicating the change in the percentage of treatments that were completed following the introduction of the system in Portugal. How do those rates compare with existing rates in the United Kingdom?

Secondly, he mentioned anger management as one means of diminishing gang violence and therefore, presumably, gang membership. I hope that he will not overlook the exceedingly powerful inducement of fear maintaining the membership of gangs—not merely internal intimidation but the feeling that nowhere is safe unless you are inside the gang, which is a very common phenomenon among young people certainly in London and I do not doubt in other major cities as well. I went to a conference some time ago in London where children were reported as having said that they felt safer in the gang than they did not only in school but at home. That is a much bigger issue than we are tackling now, but it cannot be ignored. If we are going to get the architecture right, it has to be taken into account.

Lord Taylor of Holbeach: I am not in the position to provide the figures that my noble friend asked for, but certainly when we study the Portuguese system and documentation I will make sure that I write to the noble Lord—and indeed to all noble Lords who have spoken in this debate. It will be useful to share that information.

My noble friend is absolutely right. There are all sorts of reasons why people belong to gangs. Fear is one of them. I have made two visits now to Brixton to

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see how territory, people and circumstance combine to encourage the existence of gangs. We need to be proactive in the way in which we deal with this problem. It causes abject misery through drug dependency; it causes crime through theft; it causes violence; and it causes unnecessary loss of life, as much of the violence can result in fatalities. All of that needs to be addressed in any policy that deals with gangs.

That is why we need a process. In my view, gang injunction lies at the heart of that process. I would be reluctant to dilute that but it can be informed by processes that can be imported from elsewhere. I hope that I have given some idea of my thinking about the issue and I hope that the noble Baroness, as I have said already, will withdraw her amendment.

Baroness Meacher: I thank the Minister for his very considered reply, and also give a special thank you to the noble Lord, Lord Elton, for his thoughtful intervention. I assure him that one of the key points in the Portuguese system is indeed the monitoring of the observance of the contract by the individual.

Lord Elton: I am sorry, but the word I used was “mentoring”.

Baroness Meacher:Indeed: mentoring. The idea in this system is that the referral to, for example, treatment ensures that the person is then mentored in the environment to which they are referred, whether it is residential or day-based or a number of different things. The idea is a comprehensive package for the individual, monitored—not mentored—by the dissuasion commission panel to make sure that the person really does receive all the elements that they have signed up to in their contract. As I said, it is not a soft option but it is an effective one. That is what we are seeking to at least discuss here. I am truly grateful to the noble Lord, Lord Elton, to my noble friend Lord Howarth for a very considered and important contribution, and to the noble Baronesses, Lady Smith and Lady Hamwee. This has been a helpful debate.

I need to mention in response to the noble Baroness, Lady Smith, that Britain still has one of the highest levels of drug addiction and problems in Europe. We are in the top three countries. The tougher the policies, the worse a country tends to do. That is just a basic rule across many countries and is well understood in the field.

I am very grateful indeed to the Minister for agreeing that the department will look at—and, I hope, undertake a cost-benefit analysis of—dissuasion panels as an option for dealing with people with drug dependence problems. That is the point: it is cost effective and it is worth it. It produces results and it is cheaper. Rather than seeing it as a sort of two-tier system, one should think of it as dissuasion panels taking an awful lot of work away from the courts and dealing with that work more effectively: that is perhaps a better mental set in relation to this problem. With my many thanks to all those who have been involved, we will undoubtedly come back to this and, I hope, have further discussions with the Minister. On that basis, I beg leave to withdraw the amendment.

Amendment 32 withdrawn.

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Clause 47 : Injunctions to prevent gang-related violence and drug-dealing activity

Amendments 33 to 39 not moved.

Debate on whether Clause 47 should stand part of the Bill.

Lord Howarth of Newport: My Lords, before the Committee approves Clause 47, I suggest that we think very carefully about its construction and its drafting. Broadening out our consideration from the specific issues of drugs on which we were focused while examining the last group of amendments, we should look at some wider issues of principle, particularly those of civil liberties. I do not want to detain the Committee unduly, but this House prides itself on its willingness to apply line-by-line scrutiny to legislation, and where this clause is concerned some close examination will be appropriate.

The clause would substitute for the existing Section 34 of the Policing and Crime Act 2009 a new Section 34. In proposed new Section 34(1), it is made clear that we are considering the question of powers to grant injunctions against people “aged 14 or over”, and therefore against children. We should bear that in mind as we consider what follows in Clause 47 and the new Section 34. Subsection (2) says that the first condition which the court must satisfy is that it thinks,

“on the balance of probabilities that the respondent has engaged in or has encouraged or assisted … gang-related violence, or … gang-related drug-dealing activity”.

We talked a moment ago about the question of the civil level of proof as against the criminal level—the balance of probabilities as against “beyond reasonable doubt”—and I understand the case that the Minister was making. But under Clause 47, if the court is satisfied on the balance of probabilities that these things have happened and that the person,

“has engaged in or has encouraged … drug-dealing activity”,

then we are told later on, in subsection (7), that “drug- dealing activity” means what it does under the terms,

“of the Misuse of Drugs Act 1971”.

So the young person is being drawn into the purview of the criminal justice system, at the age of 14 or over, but without the safeguards that the criminal law provides: the statutory defences and the higher standard of proof required.

I am not clear what representation a young person in these circumstances will be entitled to, or whether legal aid will be available to support a young person to make their case against an injunction. It also ought to be borne in mind that in criminal proceedings and in one of the amendments that the noble Baroness, Lady Meacher, proposed—I always want to call her my noble friend—the individual must agree to a drug rehabilitation order. I do not see any requirement in Clause 47 that the young person should agree to a course of action which would be prescribed in an injunction. There are issues here that we ought to reflect on.

6.15 pm

The intention of these powers of injunction is, according to subsection (3),

“to prevent the respondent from engaging in … gang-related violence or gang-related drug-dealing”,

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and so forth or,

“to protect the respondent from”,

the same. I am not clear how the application of an injunction in such circumstances would prevent a young person pursuing the course of action that the Government want to prevent occurring. It would be helpful to know from the Minister how the Government’s review of existing gang injunctions has gone and what it has so far found. Am I right in thinking that, between 2011 and 2014, there were only 88 gang injunctions in all and that only two of those were issued against people under the age of 18? One is bound to ask the question: why were there so few?

It may be that the explanations include considerable uncertainty among local people concerned with this process about whether injunctions would be beneficial. It may be to do with the complexity and time-consuming nature of the process of seeking and securing an injunction. It may be to do with the difficulty of mustering the evidence needed to obtain an injunction in regard to people who are on the periphery of a gang. It may be to do with the tension that there must be between professionals dealing with young people who might be the subject of an injunction. How are they to support them and build their trust when they are, at the same time, policing the injunction and may have to dispatch the young person back to court and to a criminal penalty? One would imagine that there are these difficulties.

Who are the professionals who are going to support the young people thus injuncted? I would imagine that the youth offending teams already have a very heavy load with the cases that are coming through to them from the criminal courts. What requirement are the Government laying on local agencies to work together? Will they be increasing the resources available to make a success of these injunctions in positive terms? Maybe what is needed is better funding, co-ordination and organisation—and, perhaps, better respect for the professionals working in this field—rather than new powers or some new structure. I do not know whether the Minister would be able to tell us what the latest figures are on the breaching of ASBOs. The figures I have seen tell me that, as of December 2007, 61% of ASBOs had been breached. How many gang injunctions have been breached and how confident can the Home Office be that these new gang injunctions are going to work, in that people will comply with them and they will prove to be worth while?

As for the ambition to,

“protect the respondent from gang-related violence or gang-related drug-dealing activity”,

I would like to share with the Committee a case study that the Howard League has offered to us. It says:

“Sam was 20 when he contacted one of the solicitors at the Howard League for Penal Reform. He had never been convicted of a gang related offence. He had been shot. The police imposed an interim gang-injunction on Sam without warning and without representation, claiming it was a ‘protective measure’. The sheer scope of the restrictions on his life were astonishing: he could not enter his home town—meaning he was effectively made homeless as he lived with his Mum there; he could not see, contact or even ring his partner, so he couldn’t see his son unless the child was in the care of someone else; and he was banned from contacting the majority of his friends. During this time Sam had the constant

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threat that even though he had done nothing wrong, if he breached any of these requirements he could be sent to prison. As the police can impose interim gang injunctions without the authority of the court, it was a year before it was finally decided that the interim injunction on Sam was not appropriate or lawful. This was a year of a young man’s life”.

So I need to be persuaded by the Minister that the objective of protecting young people can be satisfactorily secured through the issuance of such injunctions.

Under new subsection (4), a power could be taken under injunction to,

“prohibit the respondent from doing anything described in the injunction … require the respondent to do anything required in the injunction”.

These are completely open-ended powers. There is huge scope for arbitrary requirements to be laid upon the people who are the subject of injunctions. I am not seeking to suggest that the court would wish to act arbitrarily or inappropriately, but I ask the Minister what expertise is going to be found in the courts for dealing with people on the fringes of criminality. They have much experience in dealing with that, but they need expertise to deal with people who are on the fringes of drug dependency, or who are perhaps already into drug dependency.

What confidence does the Minister have that the courts and their advisers will be equipped right across the country to ensure that the terms of these injunctions are actually appropriate? What sort of requirements does he envisage will be stipulated in these injunctions? Does the Home Office have a view on best practice? What is the record so far? Is it going to evaluate what has already happened, and will it evaluate the consequences of the new model of gang injunctions? The Minister told us that draft statutory guidance would be issued in the autumn. That is encouraging. Will that draft statutory guidance be issued and be available to us before we come to Report? It would help us in our consideration of the Bill.

At new subsection (5), the definition of “gang-related” has been very significantly loosened from the 2009 legislation and has become a catch-all. The subsection elides “gang” and “group”. It includes any group above the number of three. The Minister did helpfully touch on this in his response to the previous debate, but it does lead me to want to know much more about the Home Office’s thinking on gangs. Gangs are a very important phenomenon. There has been much sociological and criminological study of them.

In my experience, when I was a Member of Parliament for Newport, young people would gather in groups on the streets. They were particularly likely to do so where they were living in communities where their homes were small, where their family background was poor and where the opportunity for constructive activity was all too little. Local people would be worried about that. But we have to accept—and I think this was suggested earlier—that a gang can be a social context in which young people find themselves. They seek to become established members of the group, they seek status, and they seek—as the noble Lord, Lord Elton, suggested—safety. There is no harm in that. Of course, if a group morphs into a gang and the gang is a significantly criminal organisation then that is very dangerous and we need to think very hard about how

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to rescue young people from their involvement in gangs of that kind. But it would be helpful before we legislate for these very open-ended and wide-ranging powers if the Minister would unfold to us what the Home Office’s thinking is about gangs and the most positive and effective approach to them.

We are told in new subsection (6), that,

“‘violence’ includes a threat of violence”.

In that case, if it is a serious threat of violence, it has to be taken very seriously, but what if it is just rough language or a bit of pushing and shoving? It seems that as the clause is at present drafted, people could be injuncted for very minor misbehaviour. We are told in the impact statement and in the Explanatory Notes that the reason why the Government are enlarging the scope of gang injunctions is because “front line professionals” have found the existing definition of a gang “unduly restrictive”. Again, I would like to know who these front-line professionals are, what they have said and whether the Home Office has interrogated them and applied some scepticism to the requests to have what is effectively open licence to pull in any kid who is a little bit truculent.

There are civil liberties issues here. We have seen the precedent of stop and search. We have seen the desperately unfortunate consequences in which young black people have been six times more likely to be stopped and searched and far more likely to be arrested and brought to court. The Home Secretary has quite rightly challenged the police on that history and those practices, but I fear that by legislating these open-ended powers of injunction, we could be about to repeat that same disastrous error. I wonder if there are going to be targets for how many injunctions are to be issued.

The scale of the problem that the Government are seeking to redress is absolutely huge. I read recently in the Sunday Times that the Home Office estimates that there are 300 drug traffickers, 3,000 middle-market wholesalers, but 70,000 street dealers. If there have only been the handful of gang injunctions issued that I mentioned earlier, then how are these gang injunctions to make any significant impact on a problem of this scale? It seems a means of getting at the petty criminals, the small people, and the low-hanging fruit. It seems a means of looking at the symptoms; it does not seem to address the roots.

I do not think the noble Lord should ask the House to legislate to this effect until he can show us that his new provisions for gang injunctions are part of a decent, coherent and convincing policy.

Lord Taylor of Holbeach: I am very happy to assure the noble Lord that our policy is indeed decent and coherent. I did not find his arguments so coherent, because I felt in some ways that he was trying to say that he felt the new provisions within the Bill were going too far, and were affecting civil liberties, and at the same time suggesting that they were not effective at all about dealing with young people who found themselves in gangs. In our last debate I showed there is coherence here. Gang violence is a serious problem. It does need addressing. It needs a legal framework against which you can address it. A great advantage of the injunction is that it provides an opportunity for that to happen.

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Gang and youth violence is damaging too many young people in our country and can have a devastating effect not only on those who get caught up in it but also on their families and communities. Gang injunctions are a valuable civil tool that allows the police or a local authority to apply to the county court or the High Court for an injunction against an individual who has been involved in gang-related violence. Gang injunctions are available to help the police and local authorities prevent acts of gang violence, but importantly, the injunctions are also there to protect younger gang members’ behaviour from escalating, including by requiring them to participate in activities which help them leave gangs behind.

6.30 pm

Gang involvement is a distinct issue; police and community safety partners require a tailored civil order that they can use as part of their response to tackle local gang issues effectively. Gang injunctions for adults have been available since January 2011.

Baroness Meacher: I regret that the Minister referred to the speech of the noble Lord, Lord Howarth, as incoherent—or words to that effect. It seemed to me that the noble Lord’s arguments were incredibly powerful with regard to the lack of appropriate skills and training of the people in the courts, and the Howard League case he referred to. Obviously, as I said in my own speech, matters are made a great deal worse by cutting somebody off from their support systems and so on. I have to say that many of the comments made by the noble Lord, Lord Howarth, support strongly the case for having a professional tribunal or dissuasion panel to look at these cases, rather than leaving it to the courts, which do not appear to have the skills needed in these very difficult situations. I absolutely agree with the Minister that these are difficult problems; they have to be dealt with, but they have to be dealt with professionally, and I think that is the point the noble Lord, Lord Howarth, was trying to make.

Baroness Smith of Basildon: I had intended to speak in this debate. The noble Lord was uncharacteristically quick off his feet to respond to my noble friend. This clause requires some clarification and I am sorry that he seems quite upset about the probing questions that have been asked. I will listen to what he has to say. If the issues I intended to ask him about are not addressed, I will come back to him at the end of his comments, but there are some points of clarification that would be helpful in this debate.

Lord Taylor of Holbeach: I am sorry, I just felt that the closing remarks of the noble Lord, Lord Howarth, when he said that government policy lacked coherence in this area, were belied by the contribution that I had made in the previous debate on the amendment moved by the noble Baroness, Lady Meacher.

Lord Howarth of Newport: I did not say that the policy lacked coherence; I said that I thought it was wrong to ask the House to legislate before the Government had demonstrated that these new legislative provisions were part of a coherent and decent policy.

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Lord Taylor of Holbeach: In which case, I am in the process of doing just that. Perhaps we can draw a line under our little spat. Indeed, I was going on to talk about the ways in which the people who are responsible for seeking gang injunctions do bring professional expertise to these matters.

As I was saying when the noble Baroness, Lady Meacher, intervened, gang injunctions for adults have been available since January 2011, and gang injunctions for 14 to 17 year-olds have been available since January 2012. I hope it reassures the noble Lord, Lord Howarth, that when applying for injunctions against minors, the applicant must consider their duties towards young people in general, including the general duty to safeguard and promote the welfare of children, together with any child protection issues that arise in a particular case. In doing so, the applicant would be expected to seek the views of any social services or children’s services department that is engaged with the child.

The findings of a review of the operation of gang injunctions, published in January 2014, indicated that the definition of a gang used in the Policing and Crime Act 2009 has some limitations for addressing local gang issues. I am sure that noble Lords would expect the Government, having found those limitations, to come forward with amendments to address them.

Section 34(5) of the 2009 Act specifies the circumstances in which gang injunctions may be made. The court must be satisfied that,

“the respondent has engaged in, or has encouraged or assisted, gang-related violence”—

that is the fundamental requirement. “Gang-related violence” is defined as,

“violence or a threat of violence which occurs in the course of, or is otherwise related to, the activities of a group that … consists of at least 3 people … uses a name, emblem or colour or has any other characteristic that enables its members to be identified by others as a group, and … is associated with a particular area”.

We are not talking about stop and search here; we are talking about collective activity. Following consultation with practitioners, we have concluded that this definition is too restrictive and, more importantly, does not reflect the true nature of how gangs operate in England and Wales.

Gangs do not always have a name, emblem or colour or other characteristic which enables their members to be identified as a group. Instead, individuals may operate as a group and engage in criminality with some degree of organisation without these features. Although gangs are traditionally associated with particular territories, they are now increasingly involved in criminality beyond their own areas and can be less associated with a particular area. Gang structures are now seen to change over time—they are morphing—such that it is possible for gangs to disappear from certain locations and reappear in other locations relatively quickly. Gangs may move to other locations as a result of black market forces or being pushed out by rival gangs.

In order to reflect the changes in the way gangs operate, Clause 47 amends the 2009 Act to revise the definition of gang-related violence. Under the new definition, violence will be gang-related,

“if it occurs in the course of, or is otherwise related to, the activities of a group that … consists of at least three people”—

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that remains—

“and has one or more characteristics that enable its members to be identified by others as a group”.

It has been suggested that this definition is too wide and that any group of three or more people identified by others as such could be affected by this legislation. I assure the Committee that this is not the case. Being part of a gang as defined by this clause is the first stage of the process but courts will also need to be satisfied that the defendant has been involved in violence and that any such violence is related to the gang. Of course, only courts can impose a gang injunction, after they are satisfied that it is necessary to do so.

In addition, evidence from police and local authorities shows that urban street gangs often engage in street drug-dealing on behalf of organised criminals, and some gangs aspire to and may become organised crime groups in their own right. That is why we are expanding the activity in relation to which gang injunctions can be imposed to involvement in the drugs market. This will allow gang injunctions to be used to prevent individuals from engaging in drug-dealing and to protect people from being further drawn into illegal drug-dealing, which is particularly important for vulnerable people, in particular teenage children, of whom we spoke earlier.

The noble Lord, Lord Howarth, has raised some wider points about the Government’s overall drugs strategy. The noble Lord’s view is that the strategy is not sufficiently focused on tackling the root causes of demand for illegal drugs which drive this market. I agree with the noble Lord that reducing the demand for drugs is essential to successfully tackling this issue. Indeed, it is one of the three strands of the Government’s strategy, which balances action to reduce demand alongside support for individuals to recover from drug dependency and ensuring that law enforcement effectively protects society by restricting the supply of drugs.

We are confident that this approach is working. Drug usage has fallen to its lowest level since records began in 1996. Figures on the level of overall drug use among young people in 2012 show that 17% of pupils aged 11 to 15 reported ever taking a drug, compared with 29% in 2001. There is a marked fall in the use of drugs among young people.

Lord Howarth of Newport: The Home Office is fond of quoting certain statistics that are, I am sure, correct, and demonstrate declining use of certain drugs. Can the noble Lord, however, tell us whether the use of class A drugs has fallen? What is his view on the consumption of new psychoactive substances, which are also drugs, even if not proscribed under the Misuse of Drugs Act 1971? Surely the overall picture is far less comforting than he seeks to persuade us it is.

Lord Taylor of Holbeach: I accept that. I am not at all complacent about the role of drugs in society and I think the noble Lord knows that. However, I am saying that we have, through our strategy, at least reduced consumption over the past few years. It is an important element—we know that 45% of acquisitive crime, for example, is estimated to be carried out by opiate or crack users. It remains a matter of concern.

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Nobody is complacent about this—I did not want to create that impression. However, I also wanted to reassure the noble Lord and the noble Baroness that we are driving this policy hard because we recognise the damage that drugs do in society. We continue to do all we can to prevent people using drugs in the first place, and to intervene early with those who start to develop problems, for example by developing an online alcohol and drug education and prevention information service. This work to reduce demand for illegal drugs is crucial, but I am equally clear that we need to provide the police and local authorities with the tools they require to intervene to prevent the harm caused to communities by gangs who are involved in drug dealing and to divert young people on the periphery of this world away from gangs before their involvement becomes serious.

The whole point of this clause is to improve our response to gang-related violence and involvement in illegal drug dealing by redefining and extending the scope of these injunctions to ensure they better reflect the reality of gang culture in England and Wales. Of the 109 gang injunctions issued, 45% have been breached. Interim injunctions were granted on the authority of the court. It needs to act proportionately when it considers these matters. We never expected large numbers of gang injunctions to be used. They are aimed at preventing gang-related violence, and they are a useful tool for local partners to use in the right circumstances for the right individuals. The changes in this Bill will enable more effective targeting of those not directly involved in violence but who could influence violent activity. I say to the noble Lord that legal aid is available for gang injunctions, including costs incurred for a lawyer to represent a person in court. Legal aid also covers breach and variation hearings.

I have tried to cover most of the points raised by the noble Lord in his intervention. I apologise to the noble Baroness—I did not mean to cut her off from this debate, and if she wants to say a few words on this issue I am happy to do my best to reply to them too.

6.45 pm

Baroness Smith of Basildon: I am grateful to the noble Lord, as I think the noble Baroness, Lady Meacher, was intending to speak on this. We were looking at each other, and the noble Lord beat us both to the Dispatch Box.

I will be brief, as the Minister has sought to answer some of the questions, although others remain. We accept that the current definition of gangs has not been able to include or address some of the existing problems. The number of injunctions indicates that. Our worry is—this was raised at Second Reading—that in broadening the definition it becomes easier to get the lower-hanging fruit. There are two levels here. There are those gangs which are violent, intimidating—there are serious levels of violence in some cases. There are others who are altogether different: younger people who may appear intimidating to some people close to them and will have signs to indicate that they are gangs, but are of a very different order from those who threaten and terrorise communities. So there are two kinds of gangs under discussion. We want to see the most serious kind—the intimidating and violent—

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come into the ambit of this measure, but not by widening the definition so that those who are easier to catch and easier to identify, or are on the fringes of gangs, are inadvertently caught up.

I do not know whether the noble Lord, or any other noble Lords, saw the TV programme on Sunday evening called “Common”. I hesitate to address legal issues in the presence of the noble and learned Lord, Lord Hope of Craighead, but this fictional drama examined the law of common purpose or joint enterprise. If I understood right—I am sure I will be corrected if I am wrong—that law dictates that all participants of a criminal enterprise have a responsibility for all the results of that enterprise. This was a case about a young man who was before the courts on a murder charge, even though he was the driver of the car and had no idea what was happening. Nevertheless, he was part of that criminal enterprise.

We have a slightly similar issue before us: could those who may not be part of violent activity, perhaps on the fringe but not involved, be somehow caught up? I am not defending those who are part of a criminal gang, or part of an activity where they should be held responsible: it is the idea of the wider definition catching the lower-hanging fruit, those who are easier to place an injunction on in the courts. Given that the first condition has to be satisfied on the balance of probabilities—the respondent has engaged in, or has encouraged or assisted gang-related violence or drug dealing—it would be helpful if the Minister could say exactly how he defines “engaged in, encouraged or assisted”. I suppose “engaged in” is quite easy. However, will whether someone is “encouraging” or “assisting” be defined in guidance?

I also echo the point made by my noble friend Lord Howarth when he asked for guidance from the Minister on what measures could be expected from the courts—when will that guidance be available? Will it be made available to your Lordships’ House before Report? It would be quite helpful in those discussions. Furthermore, concerns were raised by several noble Lords at Second Reading that the standard of proof here is a civil rather than a criminal one. I do not think the Minister addressed that in his comments in response to my noble friend. It would be helpful if he were able to address that.

I am sorry not to be as quick on my feet as the noble Lord—he is obviously fitter and healthier than I am. I will do better in future.

Lord Elton: My Lords, before my noble friend applies the secateurs again to this budding debate, perhaps I may give notice that I also have points to raise, after he has dealt with this one.

Lord Taylor of Holbeach: I think it would be easier if I dealt with them all. If other noble Lords want to bring something to the party I would be happy to deal with them all in a final wind-up speech. I do apologise for jumping the gun. The two noble Baronesses were obviously far too polite to each other, but if the noble and learned Lord, Lord Hope, and my noble friend Lord Elton would like to speak, I will do my best to respond.

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Lord Hope of Craighead (CB): My Lords, I have been drawn to my feet by the comments of the noble Baroness, Lady Smith of Basildon. I have had experience of prosecuting cases involving gang violence—in a way, this is a point in favour of the injunction system. One of the great difficulties for the prosecutor is proving involvement in these activities beyond reasonable doubt. In Scotland, we used to have an offence called mobbing and rioting—that was one of my first forays into prosecution—where a whole number of people were brought into court and accused of being involved in a mob. The noble Baroness is quite right: if they were so involved, they were liable for everything that the mob did. I found that I lost quite a number of the accused because I could not prove that they were sufficiently connected to be brought into the system. If one was applying the civil standard, it would be reasonably clear that one would be able to say that they were involved in the kind of activity that the injunction is directed at. I therefore see a value in the injunction system.

I may have misunderstood the Minister, but did he say that 45% of such injunctions are breached? That troubles me for a reason that might be worth mentioning. In the cases that I came across, there was great intimidation of individuals to force them into the gang activity. If one has a typical city area where the gang competes with a gang from another place 300 or 400 yards along the road, all youths of a particular age are expected to participate in the activities of the gang. I am a bit troubled by the idea of a person being singled out for an injunction and then turning to their colleagues—or compatriots, it might be—who are saying, “Come along and join us. Get hold of a weapon and attack the other people”. If he says, “Well, I’m sorry, I can’t do that, because I’ve got an injunction against me”, I think that he would be jeered at and drawn along simply out of shame and intimidation. It is that aspect of the system that worries me. I would be interested if the Minister had any information as to why such a high proportion of those injunctions are being breached, because it might suggest that there is something in the system that is in need of improvement.

Broadly speaking, I understand the policy behind this. As a former prosecutor, I think that it has a value in being able to get people into some kind of legal system to deter them from further activity which the criminal law perhaps cannot do.

Lord Elton: My Lords, mine is a much smaller question and reveals my ignorance of POCA. I understand that the applications will be made by the police. How long is it expected that it will take to grant the applications and are the arrangements for the interim in any way influenced by the proposed new section? I imagine that there is a section in the parent Act which applies the standards in the new section to the interim injunction. If not, how do they relate?

Lord Taylor of Holbeach: I am pleased that we have had this little episode at the end of our discussion. I am grateful for the contribution of the noble and learned Lord, Lord Hope. He is right: I did say that 45% of injunctions had been breached. Making civil

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injunctions work is always a challenge for authorities. We have discussed that sort of issue when considering previous Bills.

I say to my noble friend Lord Elton that it is not POCA, but PACA—it is the Police and Crime Act 2009 that is being amended by this part of the Bill.

I say to the noble Baroness that this is not about criminalising gang members but finding a civil way of dealing with the trouble in which they find themselves. They are members of a gang; we want to get them out of a gang. The gang is no good for them; it is no good for their fellow gang members. This is an important way of being able to deal with this matter.

I expect the guidelines, about which I spoke to the noble Baroness, Lady Meacher, privately yesterday and today in public—I am sorry that I did not address this issue earlier—to be available before we return on Report. I say again to the noble Baroness that the test of “encouraging or assisting” gang-related violence is in the existing legislation; it is not a new illustration. I am not aware that the courts are having any difficulty in interpreting that test.

I hope that I can with confidence propose that Clause 47 stand part of the Bill, having done my best to demonstrate all the things that noble Lord, Lord Howarth of Newport, demanded of me when he addressed the issue at the beginning of this debate.

Clause 47 agreed.

Amendment 40

Moved by Lord Marlesford

40: After Clause 47, insert the following new Clause—

“UK Passport Office powers

Foreign passport declaration

(1) Subject to subsection (2), where a person holds, tries to renew or to obtain a British passport, the UK Passport Office may require that person to provide information about any foreign passport or passports they currently hold or have held in the past and may further require that person to notify the UK Passport Office of any subsequently acquired foreign passport.

(2) Such information must be considered by the UK Passport Office to be of use for combatting terrorism or other serious or organised crime.

(3) Any information so obtained by the UK Passport Office may be retained by that Office and used for the purpose of combatting terrorism or serious or organised crime.”

Lord Marlesford (Con): My Lords, I make no apology for raising again the issue of foreign passports. I say straightaway that I am not proposing, and have never proposed, any restrictions of any sort on people holding foreign passports.

I last raised this matter on 7 April as an amendment to the Immigration Bill. It was of course opposed by the Home Office for the usual NIH reasons. Of all departments, the Home Office more than others rejects ideas that do not originate from its own creative and fertile mind. However, the problem is that the Home Office, especially in recent years, has not always been good at joined-up thinking, so it can be an obstacle to joined-up government. That is why I fear that my noble friend the Minister is probably under riding

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instructions to say that my proposal for there to a requirement that details of foreign passports held by British passport-holders should be with the Passport Office is unnecessary and irrelevant in the war against terrorism, serious crime or organised crime. There is a second reason. The Passport Office is at present in considerable difficulties and may regard itself as incapable of handling the changes that are needed, however urgent they are. I shall give a little detail of this later.

I bring forward the amendment in the context of the menace of the deep cloud of Islamist terrorism. Tragically, the fundamentally good and admirable purposes of Islam—one of the three great monotheistic religions, which has given the world so much in science, culture and ethics and has historically been a haven for religious tolerance—and the true religious dimension of it as laid out in the Koran, which at its finest level is expressed by the mystical doctrine of Sufi, have been undermined by the medieval intolerance of the Wahabi sect and hijacked by political Islam, with its armed terrorist groups, such as al-Qaeda and now ISIS, which are engaged in the savage and cruel civil war between the Sunnis and the Shias.

7 pm

Although to some extent this has diverted the jihadists away from western shores, it has also drawn in a small number of Muslims, particularly the young and alienated, who live in non-Muslim countries. Indeed, in its ability to divert the world from peace, stability and prosperity, political Islam now looks as if it could cause as much grief in this century as did fascism and communism in the 20th century. I believe that theocracy is the antithesis of democracy. To counter the terrorist wings of political Islam becomes ever more urgent as the international security situation deteriorates as a result of the birth of an enhanced international Islamist-based terrorist movement. ISIS has now declared an Islamic state, or caliphate, with the declared aim of global expansion so that,

“the black flag of Islam”,

as one jihadist said, flies over the Palace of Westminster and Buckingham Palace, and Sharia becomes the law of our land as well as their land. It is, of course, absurd posturing, which could be mocked or ignored if it did not have the proved capacity to recruit alienated Muslims to its cause using the formidable weapon of suicide attack, which is reinforced by the false but seductive assurance of the rewards to the martyr. As a weapon, I remind your Lordships that it was never used by the IRA, and yet the terrorism of those 30 years caused us in Britain quite enough pain, grief and cost.

More than five years ago, I was warned by some in the security agencies that they were greatly handicapped by the fact that British passport holders could travel in and out of Britain on their British passports, and if they had additional passports of other countries, it was practically impossible to trace where they had been or what they had done before they returned to Britain on their British passports. Ever since then I have been trying to fill that gap in our defences. Of course, the solution was and is blindingly obvious. British passport holders should be required to give the Passport Office details of any other passport that they

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hold or acquire. This would then be entered on the electronic record of their British passport so that when a British passport is scanned on arrival at and departure from Britain, the Border Force officer would at once be alerted to that fact. I regard the new Border Force as a huge improvement on the previous arrangements. In some circumstances, it would provide a vital clue in helping to fulfil the first of all obligations of any Government: the defence of the realm.

However, progress with the full implementation of the e-Borders scheme, which started so long ago and has cost hundreds of millions of pounds, has been dismal. It will turn out to be a competitor for the title of the most disastrous, large-scale computer scheme that has been produced by a Government in this country probably for half a century. The intention was that all entries and departures of passengers from our borders should be identified, recorded, reconciled and retained for as long as necessary. Although arrivals are now mainly scrutinised electronically, departures are not. Only a week ago, in a Written Answer, my noble friend the Minister told me:

“Border Force officers perform in-person exit controls on passengers departing the UK on an intelligence-led basis in accordance with the Border Force Operating Mandate”.—[Official Report, 2/7/14; col. WA 268.]

That, of course, means that the operating mandate has changed. The e-Borders system was designed to ensure that the electronic scanning of departures would ensure that the agreement for temporary admission to this country could be monitored. Overstaying has been one of the major problems with the control of our immigration system. Dealing with this problem now seems to have been abandoned.

During the many years that I have been following the development of the e-Borders system, Her Majesty’s Government were at least open about its progress. In another Written Answer last week to a Question about the retention of records from electronic scanning, I was told that to reveal this,

“would not be in the interests of border and national security”.—[

Official Report,

2/7/14; col.

WA 268


That suggests that the passport system, on which effective border control depends, is in even worse shape than it was.

I have been looking at the current passport application form and the notes that go with it. I think it is the worst designed government form that I have seen for a long time. First, the strange orange ink used makes it extremely difficult to read, and thus complete. I gather that this colour was invented by a highly paid PR consultant, rather in the way that some years ago British Airways paid large sums to have the British flag removed from the tails of their aircraft and replaced with weird third-world designs. Secondly, the passport form seems to give no clear and mandatory obligation to give details of non-British passports held. The Passport Office claims the contrary. All I can say is, look at the form and decide.

A few months ago, I spoke to one of Britain’s most senior police officers, responsible for combating terrorism, who expressed great surprise that what I was asking for was not already in force. However, she has now departed, and I gather that the police now follow the correct Home Office line on this issue.

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I will give one final example of why what I propose is urgent. Is my noble friend aware that the so-called caliphate state has started to produce its own passport and, as of last week, 111,000 have been issued? Indeed, I have a copy in my hand. Is he aware that the caliphate has announced that its armies will attack whoever harms the holder of this passport? Is my noble friend really going to tell the House that the Home Office has no interest in establishing which British passport holders also hold a caliphate passport? My amendment makes it clear that the whole purpose of collecting the information on other passports is to help in combating terrorism and serious and organised crime. I am convinced that it would do so, which is why I urge the Government at least to have another look at the whole issue.

I was so glad to hear that my right honourable friend the Home Secretary, for whom I have great admiration, has instructed her Permanent Secretary, Mr Mark Sedwill, to have a fresh look at the Passport Office. I hope I am not being presumptuous if I ask my noble friend the Minister to invite Mr Sedwill at least to glance at what I have just said. I beg to move.

Earl Attlee (Con): My Lords, I am grateful to my noble friend Lord Marlesford for introducing this amendment. It is not the first time that he has raised the issue of foreign passports held by UK passport holders. My noble friend knows very well that success is not normally achieved at the first outing of an amendment, and I admire his persistence. He certainly does not need to apologise for raising this issue again, even if his speech was as wide-ranging as it was interesting.

I query the need for subsections (2) and (3) of the proposed new clause. I do not know why they are there at all. If Parliament agreed them, we would be telling enforcement officials, rather unhelpfully, “We give you this source of information and you are to be grateful and make use of it”. I suspect that my noble friend is far too skilled and experienced to carelessly insert a redundant provision into his amendment. Perhaps it has rather more to do with my noble friend ingeniously making his amendment relevant to the Bill.

The problem is that if we tidy up his amendment by deleting subsections (2) and (3), the amendment will no longer be relevant to the Bill. However, I have another anxiety. I can understand why my noble friend has not provided for any penalties, other than the implied possibility of the withdrawal of the UK passport under prerogative powers. My fear is that an innocent holder of multiple passports may find themselves in difficulties, while at the same time the serious criminal or terrorist has merely made an admin error. I hope that when my noble friend comes to reply to the debate, he will allay my concerns.

Lord Taylor of Holbeach: As noble Lords know, we debated this issue fairly recently when my noble friend moved a similar amendment on Report of last Session’s Immigration Bill on 7 April. Since then, following my recent meeting with my noble friend, I met him again today. We have looked afresh at the issue and I have to advise my noble friend that I have reached the same conclusion as I did before.

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As I indicated when we debated this issue in the Immigration Bill, Her Majesty’s Passport Office contributes directly to the Home Secretary’s key aims of securing borders, tackling terrorism and reducing crime. It achieves this through its public protection strategy and by sharing data and intelligence with other parts of the Home Office and other agencies. I thank the senior officials from Her Majesty’s Passport Office for providing me with briefings in this area. They have been extremely busy recently, as noble Lords will know.

My noble friend raised a number of points concerning his amendment. I start by responding directly to the issues he raised. There is an existing requirement for holders of any uncancelled passport to provide that document when applying for a British passport. I will expand on that point later. HMPO issues around 5.5 million passports each year. Data are not held centrally on the number of applicants who hold a second passport under another nationality. Of the passports issued each year, around 1 million applications are from first-time applicants and the remaining 4.5 million are for passport renewals and replacements. About 95% of applications are made in the UK, with the remaining 5% from British citizens resident overseas.

There is no requirement for a British passport holder to notify HMPO of a change of address. This is because the address of the passport holder is not relevant to the ability to travel and cross borders. The HMPO database is for those issued with or refused a British passport. It is not intended to be a record of the individual’s changing personal circumstances unless that impacts on their identity, nationality or entitlement to continue to hold a passport. HMPO has an established process in place whereby the police, courts and prisons notify it of court or police conditions attached to an individual, including persons wanted, arrest warrants, bail conditions and travel restrictions.

I do not have an estimate of the costs involved in setting up a database as suggested in the amendment, but imagine it would be in the hundreds of thousands rather than millions. The issue is one of value for money. To what use would we put the information? If there were a benefit in setting up such a database, we would do so and the costs would be outweighed by security and public protection considerations. However, as I indicated, Her Majesty’s Passport Office already requires a person applying for a first-time passport or renewing or replacing any existing passport to indicate whether they have had any sort of passport—British or otherwise—or been included in any passport before.

Where a passport applicant indicates that they have, they are then required to send to the Passport Office all uncancelled passports. This requirement to submit a passport held in a second nationality is primarily for identification purposes. It can also assist in the determination of British nationality. However, the primary function is to ensure that any British passport issued is compatible with the identity and personal details contained in the existing overseas passport.

Border Force and law enforcement agencies can access data held by Her Majesty’s Passport Office provided it is relevant to their examination of a passenger at a port or is necessary in connection with any

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investigation or inquiries being undertaken. Accordingly, the information gathered by HM Passport Office is available to assist Border Force and others in helping to prevent and detect crime.

Holding dual national status is perfectly lawful in the UK. It is not a barrier to the issuing of a British passport. We believe that it would therefore be disproportionate to require a person to notify the UK Government of any subsequently acquired overseas passport unless that was relevant to an outstanding application for a British passport. Should such a person fail to disclose at the point of application for a British passport that they hold a passport under another nationality, it would be a criminal offence on the basis that they would have made a false statement on the application form. Apart from considerations of criminal proceedings, it would be open to consider the exercise of the royal prerogative to withdraw or refuse the issue of a British passport. That would be considered on the individual circumstances of the case and the seriousness of the consequences of the attempted deception.

7.15 pm

I hope my noble friend will agree that there are steps already in place to deal with the concerns he raised. It would be a significant and intrusive additional step to require every British citizen who holds dual nationality to keep the Passport Office informed of their citizenship of another country. The Passport Office looked at the evidence and assessed the risk associated with dual nationals to be low. It therefore believes that the compiling and maintaining of a database of dual nationals containing details of large numbers of citizens who pose no risk at all to be disproportionate and overly burdensome. Moreover, we believe that existing powers are sufficient to enable action to be taken when dual nationals are considered to be a risk.

I very much recognise my noble friend’s concern about preventing those people who seek to cause harm to this country or our allies from being able to travel in and out of countries on different passports. The Committee will be aware that the royal prerogative was updated by the Home Secretary on 25 April 2013. In her Statement to the House of Commons, the Home Secretary made clear the importance of being able to refuse or withdraw passport facilities from British nationals who may seek to harm the UK or its allies by travelling on a British passport to, for example, engage in terrorist-related or other serious or organised criminal activity.

Information held by Her Majesty’s Passport Office on second passports under another nationality is already available to Border Force staff, the police and other agencies if considered relevant to an inquiry or investigation. The proposal to hold a database of all dual passport holders has been considered in consultation with law enforcement agencies. It is not considered that such a database would provide any significant additional benefit.

I thank my noble friend for raising this important issue. I know he does so in the genuine belief that he is assisting our fight against crime and terrorism. I know he would wish me to say otherwise, but if I felt genuinely that his amendment added to the security of the country or to the fight against crime I would

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encourage him here. As my noble friend Lord Attlee pointed out, I would look at the amendment to see how it could be made to better describe his ambition. However, I do not think that my noble friend Lord Marlesford is correct in his statement.

On the issuing of passports by the caliphate, it is up to the British Government to decide whether they accept them. I doubt that the British Government would.

On the application form, I draw my noble friend’s attention to the sheer number of applications to and passports issued by HMPO—5.5 million each year. The colour and design of the form allow it to be scanned and processed at high speed with a high degree of accuracy. It is deliberately laid out as it is and the last survey, between March last year and March this year, showed that 80% said the form was easy to complete and 81% said that they were clear about which sections they needed to complete. I am not saying that anything is ever perfect, but it does not fall into the category of being the worst form that I have ever encountered, as my noble friend suggested.

I realise that he may not be fully satisfied with my response, although I hope I have been able to reassure him that these data are already collected at the point at which a passport application is made and that the information is available to other agencies where it is relevant to their function. On that basis, I hope my noble friend will withdraw his amendment.

Lord Marlesford: My Lords, I thank my noble friend Lord Attlee for his comments. He was absolutely right: we had to adapt the amendment to the Bill. The Minister’s answer was exactly as I expected and also quite revealing. The emphasis on the Passport Office’s burden reflects my point that I suspect that its internal problems mean that it feels that it could not cope with it, and that if anything makes the proposal go away, so much the better. What he says is the Passport Office’s view is not the one that has been expressed to me by a number of people in the security world, which is that this is necessary.

I was not, of course, suggesting that the caliphate passport would ever be shown to a British Border Force inspector. The whole point about the caliphate passport is that it will be used in the sort of countries where we would want to know a British passport holder had been doing things. The one thing he has not mentioned is that there is a greatly increasing and very serious threat of Islamist terrorism from the al-Qaeda and ISIS terrorist wings of political Islam. Pray God there is not, but if there were some terrible atrocity and it was found later that we had no idea what was likely but that we might have done if we had realised a person was moving around with other passports, there would be some regret at the Government’s line.

Frankly, the Government are wrong about this. The passport is a powerful weapon for defending our borders but full use is not made of it. I very much hope that the Permanent Secretary who has been tasked with looking at the Passport Office will consider these issues. As I said earlier, I pay tribute to the Border Force, which has greatly improved since Admiral Montgomery took it over from the Civil Service. As

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I said last time, I suspect we will gradually tiptoe towards a sounder way of making the best use of the passport system to protect us and our citizens. I beg leave to withdraw the amendment.

Amendment 40 withdrawn.

Amendment 40A

Moved by Baroness Hamwee

40A: After Clause 47, insert the following new Clause—


In section 47 of the Policing and Crime Act 2009 (guidance), for subsection (3) substitute—

“(3) Before issuing or revising any guidance under this section, the Secretary of State must consult the Lord Chief Justice of England and Wales, and representatives of chief police officers, local authorities, health authorities and persons concerned with the care of young people, the Youth Justice Board and such other persons as the Secretary of State thinks appropriate.””

Baroness Hamwee: My Lords, Section 47 of the Policing and Crime Act 2009—PACA, as my noble friend referred to it a few minutes ago—provides that the Secretary of State must issue guidance relating to gang-related violence injunctions. Under Section 47, the Secretary of State must, before issuing or revising guidance, consult the Lord Chief Justice of England and Wales and such other persons as the Secretary of State thinks appropriate. Given the multidisciplinary nature of gang-related violence, it is interesting that the only specific consultee is the Lord Chief Justice—the courts, essentially. My amendment would add consultation of representatives of chief police officers, local authorities, health authorities and persons concerned with the care of young people, the Youth Justice Board and, again, such other persons as the Secretary of State thinks appropriate.

I do not need to persuade the Committee of the interest, in a technical sense, of all those whom I have listed, in the issue of gang-related violence and the formation and operation of gangs. I appreciate that, under PACA, the Secretary of State is able to consult all these people but it would be appropriate to list a wider number of officeholders and interests than is simply caught up in “such other persons”. I beg to move.

Lord Taylor of Holbeach: My Lords, I am grateful to my noble friend Lady Hamwee for outlining her thinking behind this amendment. I entirely agree that the contents of any statutory guidance should be developed and agreed on by all the relevant parties in advance. I assure her that this is already the case. The statutory guidance on gang injunctions is being revised, as we have already discussed, and will be reissued in the autumn. We are already consulting the Youth Justice Board, the Ministry of Justice, HM Courts and Tribunals Service, the Judicial College, the Crown Prosecution Service and the College of Policing. We also plan to consult police forces and local authorities, through the Local Government Association, as well as the Department of Health and the Department for Education. This will ensure that the welfare of young people is integral to the process. I have emphasised, in my contributions, the importance of this guidance in making gang injunctions effective.

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In legal terms, the current requirement to consult the Lord Chief Justice and,

“any other such person as the Secretary of State thinks appropriate”,

allows enough flexibility so that relevant parties are involved in the process as judged most appropriate. It is a commonly used form of words to describe this sort of consultation. Although I understand exactly why my noble friend has tabled this amendment, it is not possible to set out in legislation a comprehensive list of all those who should be consulted and I am not persuaded that anything further would be achieved by laying out a list of consultees. For this reason, and in the knowledge that the new guidance involves considerable consultation—though not I hope so much that it would mean it is not available by Report—I hope my noble friend will feel able to withdraw her amendment.

Baroness Hamwee: My Lords, we know the phrase well. When my noble friend started to list those who are currently being consulted, I thought that this was sticking, again, with the court system. However, he widened that, and I was very pleased to hear confirmation that the importance of the welfare of young people, not just a criminal justice response, is being encapsulated in the consultation going on at the moment. I do not intend to pursue this, but I am glad to have that information and to have the recognition articulated in that way. I beg leave to withdraw the amendment.

Amendment 40A withdrawn.

Clauses 48 to 50 agreed.

Schedule 2 agreed.

Clauses 51 to 55 agreed.

7.30 pm

Clause 56: Continued retention or return of seized substances

Amendment 40B

Moved by Baroness Hamwee

40B: Clause 56, page 42, line 15, at end insert “and (if different) the person from whom it was seized”

Baroness Hamwee: Amendment 40B will end this part of the work on the Bill with, again, something of a whimper, but nevertheless I shall pursue it very briefly in order to get the Minister’s comment.

Clause 56 deals with the retention or return of substances seized under these new provisions. Subsection (7) provides that where the substance is being retained for a second period, reasonable efforts are made,

“to give … notice to the person who the officer thinks may be entitled to the substance”.

The amendment would simply add that notice should also be given to the person from whom it was seized if that person is different. I may be missing something somewhere else in this clause, but I beg to move.

Lord Howarth of Newport:My Lords, I am aware that the Committee is hungry. I am hungry myself, so I shall be extremely brief. This amendment, helpfully tabled by the noble Baroness, Lady Hamwee, provides

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us with the only opportunity to debate the provisions in the Bill that deal with cutting agents used to bulk out illegal drugs. I simply want to draw to the attention of the Committee the law of unintended consequences. Cracking down on relatively harmless cutting agents such as benzocaine runs the risk that you drive criminals to use much more damaging cutting agents. A case was reported in Scotland recently in which six people died. They had used heroin that had been bulked out with a cutting agent contaminated with anthrax. Criminals are entirely unscrupulous. I hope that, when under the terms of this clause, the police, customs and courts are considering whether to return or retain cutting agents that have been seized, they will think very carefully about the consequences of impounding relatively safe cutting agents, thereby providing an incentive for criminals to use much more dangerous cutting agents.

I will also, although this is a painful thing to do, draw to the attention of the Committee the utterly tragic case of Martha Fernback, a 15 year-old girl who died nearly a year ago after consuming ecstasy—MDMA—which was 91% pure compared to the average street-level purity of 58%. Had that MDMA been cut and the purity been what it would normally be when it came into her hands, she would still be alive today. Her mother, Anne-Marie Cockburn, has campaigned with tremendous courage and great wisdom asking that the Home Secretary and the shadow Home Secretary think deeply about whether it would be right to move from the system of prohibition that trapped that girl towards a system of legalisation and strict regulation as well as vastly better education in this field. I will not enlarge on that theme because the Minister and the House know my views well, but as the House determines whether to approve these clauses we ought to bear in mind that legislation with the best of intentions, which the Government have, can lead to horribly counterproductive effects.

Baroness Williams of Trafford: My Lords, if a court approves the further retention of a suspected drug-cutting agent beyond the initial 30-day detention period, it is only right that the responsible police or customs officer makes reasonable efforts to inform the person who may be entitled to the substances if the person was not present or represented at the court hearing. A person entitled to the substances is defined in Clause 53 as the person the substances were seized from or the owner of the substances. It is important that all those persons who are entitled to receive notice do so. This provides additional protection for the legitimate trade, ensuring people have sufficient time to consider and act upon the notice, if appropriate.

I commend my noble friend Lady Hamwee for ensuring that we continue to minimise the impact on the legitimate trade by setting out in clear terms who should be informed of the court’s decision. I shall therefore give further consideration to extending the provision to ensure that notice is given to the person from whom the suspected drug-cutting agents were seized, if different from the owner. I will reflect on this point and let her know the outcome in advance of Report.

On the two points made by the noble Lord, Lord Howarth, about switching to more dangerous cutting agents, the proposals include a general seizure power

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which covers any substance suspected of being intended for use as a drug-cutting agent. Therefore, we do not anticipate that they will lead to drug traffickers using cutting agents that are more dangerous than those currently being used. I have heard of dangerous cutting agents being used currently. Any new substances that traffickers begin to use would be equally subject to seizure under these powers.

On the risk that the powers to seize cutting agents would place drug users in danger because of purity issues, by restricting the ability of drug traffickers to cut drugs we anticipate that the new powers will reduce harm by limiting the availability of drugs on the street. Lower availability should increase prices and therefore reduce use. The powers will also attack the profits of drug traffickers, which they use to fund a range of other harmful criminal activities. Moreover, the most common cutting agents are far from harmless. There has been a move away from inactive cutting agents to more dangerous pharmaceutical agents, such as benzocaine, lidocaine and phenacetin. Toxic doses of benzocaine and lidocaine can decrease the oxygen-carrying capacity of the blood and can cause convulsions that mimic the acute toxicity of cocaine. Phenacetin, a painkiller, is no longer used in the UK due to its carcinogenic and kidney-damaging properties.

I hope my response has addressed the issues that my noble friend and the noble Lord have raised and that my noble friend will be content to withdraw her amendment.

Baroness Hamwee: My Lords, the Minister is extremely generous and I consider my wrist to have been slapped. I beg leave to withdraw the amendment.

Amendment 40B withdrawn.

Clause 56 agreed.

Clauses 57 to 61 agreed.

House resumed.

Arrangement of Business


7.39 pm

Baroness Anelay of St Johns (Con): My Lords, yet again with the Serious Crime Bill we have had not only good and strong arguments but we have considered them succinctly. As a result, we are in the position that we have reached the target for today’s consideration of the Bill at a point when it means that the Question for Short Debate in the name of my noble friend Lady Wheatcroft has become the last business of the day. This has the advantage for those who previously thought that they had seven minutes that they may now have 10 minutes for speeches. The number of minutes for the proposer, my noble friend Lady Wheatcroft, remains at 10, and for my noble friend the Minister at 12. However, for all other participants, it is now 10 minutes.

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Industrial Strategy: British Business Bank

Question for Short Debate

7.40 pm

Asked by Baroness Wheatcroft

To ask Her Majesty’s Government what is their strategy in relation to industrial policy, and in particular the British Business Bank.

Baroness Wheatcroft (Con): My Lords, I am delighted to be leading this debate on the industrial strategy and the role of the British Business Bank within it. The good news is that there is a strategy. The even better news is that it is working. We have in the past seen Governments meddle with industry with less happy results. In steel, in motors and even in travel agency, Governments have demonstrated that they are not great when it comes to running things.

However, this Government have a well thought-out strategy which is not about short-term froth but about long-term benefits for the country. Establishing the British Business Bank is an important facet of that strategy, helping smaller firms to overcome that perennial problem of how to get their hands on finance. Governments sometimes seem to struggle to breach the divides between various departments but, on the industrial front, we really do have joined-up government: the Treasury working with BIS and UKTI to get the right results, to help our businesses grow and, crucially, to export.

The overarching policy is to provide an environment which nurtures business generally, with low corporation tax and sensible, not overburdensome, regulation. Although there are some difficulties which cannot be addressed overnight, and will in fact take years to put right, such as infrastructure failings and the skills shortage—which all too often means a failing of numeracy and literacy—the UK is nevertheless now an attractive place to start, build and grow a business. It is Europe’s top destination for foreign direct investment, the money flows that create jobs.

There is one school of thought that argues that government should not attempt to intervene in industry beyond providing that hospitable environment. Certainly, picking winners is a dangerous occupation, not that some Governments do not still attempt it. Choosing individual companies to be nurtured into being national champions is a recipe for national disaster. This Government have avoided it and wisely chosen to look not at companies, but at those sectors where we already have an edge and where an extra push might produce the greatest benefits for the country.

There are 11 such sectors. Another Administration might have rounded the number up and gone for a neat dozen, or rounded it down to come up with a top 10. The fact that both those options have been resisted in favour of 11 chosen sectors surely indicates that a genuine plan, rather than passing headlines, is what this is all about. The sectors are aerospace, agricultural technologies, automotives—and here I declare an interest as a director of Fiat; we do not yet manufacture in the UK but I am doing my best—construction, information

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economy, international education, life sciences, nuclear, offshore wind, oil and gas, and professional and business services.

Is it not instantly cheering to reflect that in all those really important and high-growth sectors, the UK already has some world-class businesses and they are going to get better? There are things that an enlightened Government can do to help. Within each sector, top executives now get together, not to collaborate on price—which would see them land up in jail, which is not part of the Government’s industrial strategy—but to look at where there are barriers to growth and things that Ministers can do to make life easier for them.

The Government can, and do, help to fund research which will benefit these chosen sectors. For instance, there is now a £7 million centre for “extreme engineering” at the University of Newcastle. The Neptune Centre for Subsea and Offshore Engineering brings together industry and academia to develop technologies that can withstand the world’s harshest environments. Future success in the oil and gas industry will depend on being able to employ the best science and technology, and what emerges from this centre will keep British companies at the forefront of these developments. Siting this ground-breaking centre on the north bank of the Tyne will give a boost to the revival of this part of Tyneside.

It is absolutely vital that our industrial strategy is not just about rebalancing the economy in terms of its dependence on the service sector, but about rebalancing it geographically. The concentration of wealth and wealth creation in London and the south-east is simply not healthy. In terms of gross value added, the average Londoner generates more than £37,000, while in the north-east the figure is marginally over £16,000, and in Wales it is even less than that.

While I am sure that we here in the capital like to think that we are doing our bit for the economy—although there are of course some who doubt that we do much of it in here—I am confident that in the north-east and Wales people feel the same way. These figures are a reflection not of a lack of energy or enterprise but of the huge growth in the financial services sector which has benefited London and of a lack of investment in the regions. Perhaps the Minister could tell the House how industrial strategy is contributing to rebalancing that. We need to make sure that the profits of growth are shared across the country and not just in the wealthy south-east. The growth is coming but we need to be sure that it is shared.

Remarkable evidence of that growth has come just today, with the latest figures from the National Institute of Economic and Social Research. It estimates that in the previous quarter Britain enjoyed its fastest growth for four years, at 0.9%; that really is cause for celebration. Yet, despite that remarkable achievement, we could do better. Too many of our small businesses stay just that way. For some that is a lifestyle decision, but for many it is because they hit hurdles that they simply cannot get over.

That was why the Government established the British Business Bank. In some ways this is still a notional entity, as it has to go through the laborious process of

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getting EU approval before it can take on a life of its own. That should come, I hope, by the end of the year. However, for now, the British Business Bank is part of the Department for Business, Innovation and Skills, and here it is already at work.

I confess to something of a maternal interest in the British Business Bank as I was a member of the steering group which tried to plot a useful course for this innovation. It was conceived as a potential solution to growing complaints from smaller businesses about the banks’ reluctance to lend, or at least to lend on reasonable terms. It is all very well to make an offer of funding to a small firm, but if it is at an interest rate and on terms which are completely impossible that does not really constitute an offer at all. The latest available figures indicate that banks’ reluctance to lend remains. According to the Bank of England, in the first four months of this year total lending to small and medium-sized enterprises was almost £2 billion lower than in the same period last year, which was itself £1.5 billion lower than in the previous year.

Now, maybe demand has really shrunk, but it is hard to believe that it has evaporated on that scale. The British Business Bank is therefore attempting to bridge the gap, encouraging new lenders into the market and channelling funds into innovative operators such as the peer-to-peer lender Funding Circle. Here I must confess to a touch of nervousness when I read the bank’s promotional material and see: “We’ll use … securitisation techniques”. It goes on to say:

“By using leverage as a tool”,

we will be able to—noble Lords will get the gist of what concerns me. Securitisation and leverage are not of themselves ruinous, but anyone who has lived through the ravages of the financial crisis has learned to treat them with a degree of caution. Can the Minister reassure the House that the business bank will remain focused on helping smaller firms rather than becoming a government-owned investment bank? I have always struggled with the term “investment bank” anyhow, because investment seems to be the antithesis of what those organisations do. Will the business bank specifically help companies in those 11 sectors that have been set out as the strategic sectors for the country?

The business bank can do much useful work in just guiding smaller firms through the various schemes available for them—all 810 of them, according to the website. From the Armagh Business Centre through the Survive and Thrive programme to the Wood Energy Business Scheme, there surely must be something for everyone—but finding it may be difficult. A bit of streamlining might not go amiss. The business bank website is on its way to becoming a user-friendly information hub, but there is still a way to go. Often money is not the key to what smaller firms need.

I will end—and I promise that I will end here—by mentioning a scheme launched at the beginning of this year to bolster the 8,900 mid-sized businesses in this country. Currently those businesses make up just 0.5% of all businesses, but contribute around a fifth of employment and turnover. The CBI reckons that if they were to reach their full potential, they could add £20 billion to £50 billion to the economy. I cannot see why the sky should not be the limit. However, only

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17% of those businesses export. The Government have now sent a personal letter to each one of those companies, asking if they would like individual support from UKTI to get them exporting. There are specialists ready to work with them. Is that not an industrial strategy in action?

7.52 pm

Lord Haskel (Lab): My Lords, I am most grateful to the noble Baroness for moving this Motion, because it provides us with an opportunity to learn more about the business bank. It seems to have been below the horizon in recent months, but I notice it published a strategy document last month, in June.

The noble Baroness puts the business bank in the context of an industrial policy strategy. My response is: what strategy? Yes, she explained actions that the Government are taking, and Ministers refer to an industrial strategy that was announced in 2012. Last Thursday, the Minister spoke of a strategy in a debate on manufacturing and mentioned several initiatives, all of which are very welcome. However, the noble Baroness described initiatives reacting to market opportunities or to issues that have arisen in the economy: skills, training, technologies and sectors for support, exporting and, yes, financing. She also described existing businesses.

However, that does not add up to a strategy. Those are piecemeal responses to changes or problems that have arisen over the years. A strategy has to be intellectually coherent. It has to provide a framework for all of these activities. It has to be a means to an end—a means for achieving a vision. If we have one, perhaps the Minister can tell us what is the purpose of our strategy? Is it economic growth, or to benefit us all?

Ministers like to learn from Germany. Fifteen years ago, Germany was the sick man of Europe. Their strategy was laid out in Lisbon 2000 and the Haas report. It was economic, social and environmental, and yes—it has worked. It has provided a path for everybody in Germany to improve their quality of life and their ability to earn a living, and their economy is winning the race to the top. That is a strategy.

The noble Baroness is therefore right to put the question of the business bank in the context of a strategy. However, I put it to her that this is yet one more example of the Government reacting to events. Indeed, she told us as much when she said that the bank had resulted from what occurred during the banking crisis, because of lack of investment funds for small and medium-sized enterprises.

I welcome what the bank has done, acting as an intermediary in supplying credit, unlocking funds through guarantees and filling in other small funding gaps. I also welcome the way it has tidied up the work of the small loans guarantee and the capital for enterprise initiatives. The website gives us the numbers, but it does not make clear how much are loans on the bank’s own account and how much are for acting as intermediaries. Perhaps the Minister can tell us that. Although welcome, the amounts are quite small in relation to the size of the financial market and will have a modest impact on the market.

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A proper strategy would deal with the financial market itself, not just one of its failures. It should be a market which provides patient capital to allow small and medium-sized enterprises to develop their businesses. It should provide investment in capital intensive schemes such as power stations or cement works, which are mainly foreign owned because our financial market is adverse to this kind of investment. The same goes for infrastructure investment. The market should work for us all instead of finance largely being an end in itself.

We know that just giving the banks more money to lend to business obviously does not work—the money goes elsewhere. A proper strategy would encourage putting money into industry for the public benefit instead of inflating the value of our homes for private benefit. For instance, in many European countries, including Germany, you cannot borrow against the rising value of your house, so rising property values do not suffocate lending to business. A proper strategy would encompass more competition. In this morning’s Financial Times there was news of the potential for 30 new banks. That is good.

If the objective of the business bank is to raise the quality of life of us all and help our industry win the race to the top, all those issues have to be part of a strategy, throughout government. An industrial bank can help, especially as part of a coherent strategy, but it cannot do it alone.

7.58 pm

Lord Stoneham of Droxford (LD): My Lords, it is a pleasure to take part in the debate initiated by the noble Baroness, Lady Wheatcroft, and to have her tour d’horizon of the Government’s industrial strategy from her perspective of experience in the business world and business journalism.

As the noble Baroness said, there are very good and encouraging signs of recovery as the economy starts to rebalance and growth resumes. When Vince Cable first started to refer to the term “industrial strategy”, I must say that I had certain concerns about that terminology, because I always associated it with the Government’s failed ventures to intervene in industry in the 1970s. However, the work at BIS over the past four years matches the Treasury in providing the essential components of recovery and the hope for sustainable growth. The brand “industrial strategy” is clearly being restored and reinvigorated, and it looks like a winner. I want to explain to the noble Lord, Lord Haskel, that there are components of an industrial strategy here. They are very clear, have been set out very clearly by the Secretary of State for Business, and a lot of them build on the good foundations left by the previous Secretary of State for Business, the noble Lord, Lord Mandelson.

There are four key components of this strategy. The first is the partnership activity concentrated on the key strategic sectors. We have seen the recovery in the automobile sector: it is remarkable. We are now one of the leading producers of motor cars in Europe. Now we have to concentrate on making sure that the component supplies are provided in the UK and not simply imported. This weekend in Silverstone we saw the spotlight on the specialist engineering companies which are behind

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the development of Formula 1, and all the reforms that they have introduced, particularly on energy conservation. Many of these SMEs are based here in the UK.

Two weeks ago, I visited Airbus in Toulouse, another example of where partnership between Government and industry has been remarkably successful. In 1995, 20% of passenger aircraft were made in Europe by European manufacturers; the rest were made in America. Today, more than 50% of those planes are made in Europe, largely through Airbus and its suppliers, and we have 10,000 employees in Airbus and 100,000 working in the supply chain of this company. It is impossible to see how success would be possible in that sector without a partnership between the Government on research and development and a vision of what a European industrial strategy could achieve in this sector. Any idea that a partnership with the German and French aviation sectors could take place so successfully outside the EU is, in my view, ludicrous.

The second key component of the strategy is the promotion of key technologies, particularly based on the partnership with universities and the development of catapult centres. The role of universities has been recognised as essential to economic growth. They are building on the competitive advantages in research, which we must now exploit in a successful industrial strategy, whether it is in energy storage, robotics, regenerative medicine or the other sectors and technologies that they have identified as part of the strategy.

The third component—and where the coalition has had great success, although I will not go into the detail tonight—is addressing skill shortages and unemployment through the growth of the apprenticeship scheme and a refocus on the importance of technical education. The provision of skills in these technical areas is vital for our industrial strategy.

The fourth component of the strategy is to provide financial support, particularly for small and medium-sized enterprises. We know that SMEs are a major provider of jobs and have been over the past couple of years—remarkably so as we have recovered from recession. There is great potential now through more start-ups and more growth from these companies. It is remarkable that until 2012 this country was the only one of the G8 countries without a specialist institution seeking to intervene and provide finance and advice for SMEs. Germany has its KfW bank; the USA, despite moves in Congress, still has the Small Business Administration. These are bodies with vast resources and expertise which all help with financing and advice for small businesses. I hope that our British investment bank, once it is approved by the European Union’s competition authorities in the autumn, will be a further force for us in this competitive market.

We are grappling with market imperfections in respect of financing small businesses. At a time when bank choice is down to four, with many withdrawing from high-risk, high-cost, more risky finance for small businesses, we needed to do something to fill that gap. It is long overdue. It is a problem that has existed in this country since the 1930s and when markets do not work then the Government have to help make sure

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that they do. There has been a lack of provision for debt and equity financing for these companies and there has been demand weakness as well. There has been a lack of awareness of business potential and of the benefits of raising finance at cheaper rents. Without the funding, these companies will not fulfil their potential. The first step is to develop the local networks, through investment partners, to form a strategic plan, which we have now seen published by the business bank, and then to develop the key partnering to help private finance think longer term and take advantage of government backing to lever lower borrowing costs. We have seen substantial progress in the first year of the bank: £282 million lent to 30,000 businesses; and the formation of 80 financial partners, with the aim of increasing this investment to £10 billion by 2018.

For the country to make its mark and to gain competitive advantage we have to see some continuity in these policies over the next four to 10 years. It is important to recognise that we will not see the benefits of some of these policies until the next Government or the Government after next—these policies take time to emerge—but we have got to see ongoing work to simplify financing schemes and to finesse them in different markets. We have to develop the bank to match the best of our competitors in other countries, particularly in Germany.

There are two final elements to the industrial strategy. The Government are making moves to ensure that government procurement is aimed at helping small businesses, particularly with the success of the Olympics in 2012. In the regional economic partnerships we have the basis for encouraging growth in the regions, and I hope that these organisations will be used to help promote financial opportunity for small businesses.

Just as the Treasury’s determination and focus on the financial and economic policy of the country are showing signs of working, so the industrial strategy, led by BIS, is ensuring that the firm foundations for industrial recovery and export growth are built on a genuine partnership between the Government and key industrial sectors: knowledge, the strength of our universities; firm initiatives to improve skills; government procurement policies; and, at last, the establishment of a heavy-weight, specialist organisation, the British Business Bank, to assist and advise SMEs on financing, which is long overdue.

8.07 pm

Lord Leigh of Hurley (Con): My Lords, I thank my noble friend Lady Wheatcroft for instigating this debate. Her insightful remarks come as a result of her very distinguished career as a business journalist at the Times and the Wall Street Journal, where her articles were a must-read for any businessperson for many years. I am particularly pleased to be able to take part in this debate because the financing of SMEs is an area in which I have had an interest all my working life. I refer your Lordships to my various interests as declared in the register of interests. I shall focus my remarks on the British Business Bank.

It was very clear to many of us in 2010, when the coalition Government first came to power, that the country’s finances had been left in a ghastly state in

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many areas and directions. It was not just the out-of-control debt and deficit which were threatening the whole economy and country, but the shock of the global financial crisis meant that banks were making life extremely difficult for many perfectly good businesses that desperately needed finance, both for working capital, or short-term finance, and longer-term equity injection.

It is probably safe to say that the incoming Government were shocked by the inability of the traditional banks at that time to take on the role they had previously undertaken in providing finance to SMEs and were acting a bit like rabbits caught in the headlights. The numbers bear this out. Successful loan applications for SMEs had dropped from 88% in 2007 to 65% in 2010, as opposed to 76% in Germany. In addition, the changing capital requirements, commonly known as Basel III, applied a risk weighting system with increased premiums for lending to SMEs which simply exacerbated one of the main areas in the UK for retail clearing banks. Indeed, it seemed clear that the retail banks simply could not, or would not, lend money to SMEs and found themselves incapable of doing so on a cost-effective basis. As the noble Lord, Lord Haskel, mentioned in the debate on Thursday on manufacturing, the noble Lord, Lord Young, reminded us of his recent enterprise report and noted that more than 95% of firms in this country currently employ fewer than 10 people. Smaller businesses are crucial to economic growth, and the current ratio of 80% of UK smaller business having as their bankers one of the four big banks is not sustainable.

There are particular circumstances for SMEs, which mean that they need special help. Many do not have a finance director but rely on the owner’s ability to do a service function and many other functions, and they rarely have time to shop around for finance. Indeed, research shows that 71% of SMEs seek finance only from their existing provider and, on average, in terms of median, the time spent by all SMEs looking for alternative sources of finance is less than one hour. Like all of us, SME owners do not enjoy filling out forms. Accordingly, in 2010, the word was out that banks were no longer interested in lending to them and, as a result, the problem became self-fulfilling as SME owners did not bother to apply to banks for such finance.

It then transpired that around the world, as the noble Lord, Lord Haskel, said, there were better ways of doing business. The noble Lord, Lord Stoneham, mentioned that in Germany there was the successful KfW model, which dwarfs anything that has been done in this country. We were the only country in the G8 not to have a comparable institution—by which I mean an institution that lends and invests in banks themselves. This is the work of the British Business Bank, which is probably misnamed. Although it is certainly British and certainly business-focused, not domestic, it is not really a bank as commonly understood, but rather an investor in challenger start-up organisations, which themselves pump-prime finance in a mixture of debt and equity to their own clients. This is infinitely preferable to the well trodden route of government direct intervention and subsequent massive write-off and losses.

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I understand that the British Business Bank is tasked to achieve a return roughly equivalent to five-year gilts. It is not money that is written off; it is money on the books of BIS that seeks a return. I hope that we see full transparency on the results of BBB and, equally important, of each of its partners, some of whom, such as the start-up loans, will find profitability a stretch. I note that £300 million has been allocated to the investment programme to promote choice and competition in business finance, of which £203 million has been recommended. This is an excellent initiative, but it contains a large element of risk. Trying to achieve a return comparable to five-year gilts will prove a challenge.

There has in the past, before BBB, been a plethora of direct schemes available to entrepreneurs but, as I have said in this House, finding out about government grants and availability of funds has not been easy. Although the Government have reduced the schemes down to one government website, which is very helpful, the results are not produced in a way that is easy for an entrepreneur to select the appropriate scheme. The last time I looked, I found 791 schemes available to entrepreneurs seeking grants. I then tried a more selective search and I chose to look for a business in London with up to 250 employees in the service sector; by pressing the button, I was offered 42 grants, which is still too confusing.

The creation of the British Business Bank is a huge step forward and reflects the approach taken by this coalition Government to business, often by people in government who have had real experience of running a business with all the frustrations and pleasures that this entails. It is particularly pleasing to see that only 19% of British Business Bank’s business has been in London, so more than 80% is in the rest of the UK. It has ambitions to unlock further substantial sums as the new legislation allows. This is, of course, in addition to the £6 billion of growth deals announced by the Government yesterday, which is a separate matter.

I want to emphasise that the British Business Bank is not the only source of finance to businesses arranged by the Government. I particularly recommend to your Lordships the Business Growth Fund, an organisation that is finally coming to fruition and is investing equity finance into British business. I look forward to the British Business Bank reporting that its allocation of close to £3.9 billion has been deployed. I very much hope that all parties, while they may not have supported every aspect of the Chancellor’s successful recovery, will commit in their forthcoming manifestos to support the British Business Bank.

8.15 pm

Lord Wrigglesworth (LD): My Lords, I join in congratulating my noble friend Lady Wheatcroft in introducing this short debate, which provides us with a very useful opportunity to discuss industrial strategy and the role of the British Business Bank and banking more generally. The comments from my noble friend Lord Stoneham set out very clearly, when linked with what my noble friend Lady Wheatcroft said about industrial strategy, exactly what the Government are seeking to achieve. I am somewhat surprised by the

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comments of the noble Lord, Lord Haskel, because I think that BIS and the Secretary of State have set out a very clear industrial strategy.

We have a lot of history in this. If you go back to Tony Benn, you have the extreme of wanting to nationalise the 40 top companies in the country. You then go through the Industrial Reorganisation Corporation and the National Economic Development Council, picking winners. That is another strategy. I think that the Government have got it absolutely right, as the noble Baroness said. They are facilitating the success of the banking sector and the other sectors and activities pointed out by my noble friend Lord Stoneham.

I wanted to intervene in this debate because I have had experience in two banks. One of them was a state bank, established by Tony Benn when he was Secretary of State for Trade and Industry, called the National Girobank. I worked in the City for that bank for a number of years. The intention was to give everybody in the country a bank account, so that everybody could transfer money from one account to another by the new electronic means that was just becoming available. It all sounded absolutely wonderful; but of course it paid no attention to what was going on in the market. The bank ended up being privatised and sold off to the Alliance Building Society. It is still doing a useful little job there, but nothing like the major ambitions of Tony Benn in that time.

Because of my experience I want to bring some reservations to this debate about government policy at the moment—although I heartily endorse all that the Government are seeking to achieve. There is a great risk that expectations are raised too high about what can be achieved in creating competition in the banking sector. I was delighted to read—as the noble Lord also pointed out—in the Financial Times today that there is potential for another 30 banks. I hope that there are going to be 30 new banks; but I shall believe it when I see it. It also reported that five new banks had been given a certificate. I tried to start a bank in the north-east some years ago and know what it was like to try to get a licence to operate. There are five new banks—two of them Nigerian, two of them Indian and one British. The British one, Paragon, began life financing buy-to-let flats and houses in the boom before 2007-08.

We are therefore a long way from seeing the competition appearing that I think everybody would like to see. We hear a lot about challenger banks appearing on the scene. Nobody can disagree with it, but the greatest force in banking, from my experience, is inertia. People do not change their bank accounts. We need more competition in order to encourage them to do so; but to get carried away and think that in the term of one Government we can completely change the structure of the banking system in the country is pie in the sky. This is a very good start. It is very well worth doing and should be supported, but it is important that we do not get carried away and think that it can achieve everything in five minutes.

Similarly, on the regulatory side, there is a great danger that people think more can be achieved than actually can be achieved. In a previous incarnation I went to the United States to look at banking regulation

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there, which has always been rather more rigorous than it is here. I visited the comptroller of the currency; I remember meeting Paul Volcker; I met the chairmen of the Senate committee on banking and the House Committee on Financial Services, and a whole host of other people. The one message I got from it was that, no matter how much regulation we introduce, we will still get problems in the banking sector. I am slightly concerned that while we are spending our time discussing deregulation Bills and everybody is calling for deregulation in every other sector, if we are not very careful, in the stampede to regulate our banks we are going to kill the goose that has laid the golden egg in recent years.

That is not to say that things have not to be done; but there are over a million paragraphs of regulation in the FSA rulebook. When the Bank of England was given statutory responsibility over bank supervision in 1979, fewer than 80 people were engaged in the supervision of financial firms. Since then the number of UK financial supervisors has increased to around 1,200. In 1980 there was one UK regulator for every 11,000 people employed in the UK financial sector. By 2011, there was one regulator for every 300 people employed in finance. Those numbers do not even include compliance people in the private sector, the number of which has exploded since the crisis.

In 1974 returns could have around 150 entries. Today, UK banks are required to fill in more than 7,500 separate cells of data—a fiftyfold increase. Forthcoming legislation could see that rise to between 30,000 to 50,000 data cells spread across 60 different regulatory forms. We are in danger of killing the goose that laid the golden egg. While we are rightly concerned to control the banking sector, we need to realise that there is a limit to what should be done and what can be done.

The British Business Bank is getting off to a really good start. As my noble friend said, it is not really a bank; if anything, it is a wholesale bank. It is supporting or partnering other institutions. I think that that is the right way ahead; as a result, it is getting quickly to a very substantial number of small firms. The truth is that 80% of the lending to firms in this country is coming from the big institutions. Clearly, that is not a desirable situation so we want to see this institution succeeding.

I am slightly concerned, in reading the bank’s documents, that it says that:

“Unlike most banks, our impact is not measured in terms of profits generated but rather by the benefit of increased economic activity it creates”.

That is all very fine. I hope that the bank achieves the rates of return to which my noble friend referred because I do not want to see this institution crowding out other banks and other financial institutions seeking to operate on proper rates of return. Therefore the rates of return that it achieves are terribly important. I am pleased to see the objectives in there and the monitoring of them that the institution is proposing.

The British Business Bank deserves support. It is targeted in the right way through a whole host of institutions and it clearly has made a very good start in helping firms in the small and medium-sized enterprise sector which so clearly need the support that the bank is giving.

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