Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Fookes) (Con)
My Lords, before we begin, I remind your Lordships of the usual arrangement—if there is a Division in the Chamber, we adjourn immediately for 10 minutes.
Misuse of Drugs Act 1971 (Amendment) Order 2016
(8 years ago)
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Baroness Williams of Trafford
That the Grand Committee do consider the Misuse of Drugs Act 1971 (Amendment) Order 2016.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, this order was laid before Parliament on 20 July. I am very grateful to the Advisory Council on the Misuse of Drugs for its world-class advice. It is the council’s recommendations that have prompted the order before your Lordships today.
The order relates to a group of synthetic cannabinoids, captured by a generic definition, and to dienedione, an anabolic steroid. The order would amend the generic definition of synthetic cannabinoids in Schedule 2, Part 2 of the 1971 Act, to include the new group as class B drugs. This will make it an offence to possess, produce, import, export, supply or offer to supply these drugs without Home Office licence. The order will insert dienedione into Schedule 2 Part 3 of the Act, as a class C drug. Similar to other anabolic steroids, dienedione will be exempted from the Act’s possession offence.
The psychoactive effects and harms of the third generation synthetic cannabinoids proposed to be controlled by the order are reported to be similar to cannabis and other synthetic cannabinoids already controlled under the 1971 Act. A number of substances with legitimate medicinal applications have been specifically exempted from the definition, along with some substances already controlled as class A drugs. There are no known legitimate or recognised uses of the remaining compounds beyond potential research.
The ACMD advises that the potential physical and social harms of dienedione would be commensurate with those of other anabolic steroids. It notes that the substance can alter the growth of skeletal muscle and bone as well as the differentiation, growth and maintenance of the reproductive system and sexual characteristics in men.
The ACMD considers that these substances are being, or are likely to be, misused, and that misuse is having, or is capable of having, harmful effects sufficient to constitute a social problem. For this reason, my honourable friend the Minister for Vulnerability, Safeguarding and Countering Extremism, accepted the advisory council’s advice that these substances should be subject to this order.
In due course it is intended to make two further related negative statutory instruments to come into force at the same time as the order. This will add dienedione and the third generation synthetic cannabinoids to the appropriate schedules to the Misuse of Drugs Regulations 2001. The Misuse of Drugs (Designation) Order 2001 will also be amended to designate these synthetic cannabinoids, as they have no recognised legitimate uses outside of research.
The order, if made, will provide enforcement agencies with the requisite powers to restrict the supply and use of these harmful substances in this country. We know that the law change cannot, on its own, deter all those inclined to use or experiment with these drugs. However, we expect the order to have a notable impact on their availability. This will also provide a clear message to the public that the Government consider these substances too dangerous to health to allow them to circulate in the UK.
Lord Jones (Lab)
My Lords, I thank the Minister for her cogent and precise explanation of this draft statutory instrument. I am not able to discern from looking at the papers before us whether the Misuse of Drugs Act 1971 (Amendment) Order 2016 as a statutory instrument has any reference to Wales. Perhaps the Minister’s officials may be able to advise her. My guess is that it does not, but perhaps the information can come forward for the convenience of the Committee via officials. If it is not applicable, are we able to understand today how it may indirectly be applied to the Principality? Some information would be helpful. Even though more and more Members of your Lordships’ House have a link to and a residence in Wales, it is harder and harder to obtain information about the Principality given the establishment of the Welsh Assembly.
Lastly, and with no great seriousness, looking at the Explanatory Note and at the last list of substances that have legitimate medical uses, can I invite the Minister—who has great ability—for the convenience of the Committee to pronounce the last three substances?
Lord Kennedy of Southwark (Lab)
My Lords, I thank the noble Baroness for her explanation of the order before us today and say at the outset that we fully support them and what the Government are trying to do. I see in my briefing note that synthetic cannabinoids are also known as Spice, which I will use as it is easier. There were 29 deaths from these drugs in 2011 and that figure rose to 67 in 2014. Spice can cause aggression and delusions and worsen mental conditions and clearly is a very dangerous substance. We must do what we can to get it off the streets.
Figures from the Centre for Social Justice show that officers from 32 police forces attended 3,807 incidents in 2014, up from 1,400 the previous year. The Prison Ombudsman reported that between June 2013 and January 2016 there were 58 fatalities where the prisoner was thought to be, or suspected of being, involved with the substances before their death.
I do not know whether the Minister has any evidence or any information regarding admissions to A&E departments. I am sure there will be a number of these and ones where these drugs were taken with other substances. As I said, I fully support the order but I have a number of other points and questions for the Minister. If she cannot answer them now I would be very happy for her to write to me.
These drugs are still covered by the Psychoactive Substances Act so why are we moving across to the Misuse of Drugs Act? There is also a possession offence with this Act. How is that going to be policed? It would also be helpful if the Minister could say something about how schools, colleges and universities deal with young people’s exposure to these drugs and more generally about the quality of drug and alcohol education provision. I understand that the drugs strategy is going to be published in the next few weeks. Can she say a bit more about that, particularly about education and prevention? Does she see an intelligence gap in our ability to police the levels of Spice in the UK, being imported into Britain and being stockpiled? I am conscious that she may not be able to answer these questions here, and I am content with the order.
Baroness Williams of Trafford
My Lords, I thank all noble Lords who have contributed to the debate, and I shall go through the various questions they have asked. The noble Lord, Lord Jones, mentioned the fact that no reference is made to Wales, but these orders apply to England and Wales. He asked about the last three substances mentioned in the order—telmisartan, viminol and zafirlukast. The noble Lord wants to intervene.
Baroness Williams of Trafford
I thank the noble Lord. The noble Lord, Lord Kennedy, has rightly outlined the very real harms associated with Spice, in particular in prisons. A documentary I saw about the drug highlighted the terrible effect it is having on the streets of Manchester. In terms of the number of admissions to A&E departments, I do not have that figure today, but if we have it, I will provide it for him. However, I cannot think that even indirectly it does not contribute to emergency hospital admissions because of the general effect it has on the person who is using it. Moreover it is very cheap, which is why it acts as a pull on those who have less access to money than others.
The noble Lord also asked about the crossover from the psychoactive substances legislation to the Misuse of Drugs Act. Given the reported risks and the known harms that the substances are already known to pose to public health, the ACMD had previously advised that they warrant control under the misuse of drugs legislation. The control utilises the stricter offences of production and distribution without a licence under any circumstances, which I am sure that the noble Lord will be pleased about, as well as the possession offence. That can impose a higher maximum sentence. These stricter penalties for offences will prove to be a stronger deterrent to the supply of these substances. I repeat what I said in my opening remarks: there is no known medicinal use for them.
The noble Lord asked about the drugs strategy. As he knows it is currently being developed and we will continue to build on the 2010 strategy to take a balanced approach and tackle drug misuse as a pre-driver of crime. We aim to publish the strategy shortly. I know that your Lordships do not like the word “shortly”, but we are planning to release it soon.
The noble Lord also talked about education and prevention, which for me is the key point in this: how do we deter our young people from taking these poor lifestyle choices in the first place? We have an online resilience-building resource called Rise Above which is aimed at 11 to 16 year-olds. It provides resources to help to develop the skills young people need to make positive choices for their health, including avoiding drug use. We also have FRANK, the Government’s drug information advice service that many noble Lords will have heard of. It continues to be updated to reflect new and emerging patterns of drug use and it evolves to remain in line with young people’s media habits. Moreover, Public Health England has developed its role in supporting local areas in terms of sharing evidence to support the commissioning and delivery of effective public health prevention activities. I think that I have answered all the questions put by noble Lords, and with that I beg to move.
Self-build and Custom Housebuilding (Time for Compliance and Fees) Regulations 2016
(8 years ago)
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Lord Bourne of Aberystwyth
That the Grand Committee do consider the Self-build and Custom Housebuilding (Time for Compliance and Fees) Regulations 2016.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, I beg to move that the draft Self-build and Custom Housebuilding (Time for Compliance and Fees) Regulations 2016, which were laid before the House on 14 July, be approved and come into force on 31 October. If approved, the regulations will, first, set out the time provided for local authorities to comply with the duty to grant sufficient planning permission to match demand on their self-build and custom housebuilding registers; and, secondly, provide for local authorities to charge fees for those to enter or remain on their self-build and custom housebuilding registers on a cost recovery basis.
This Government are committed to driving up housing supply, and promoting and supporting self-build and custom housebuilding are integral to delivering on that commitment. Doubling the number of self-build and custom build houses by 2020 will not only create much needed new homes but enable more people to live in homes designed by them to meet their specific needs. It will also provide welcome new business opportunities for smaller housebuilders, support and create new jobs, and drive innovation in alternative building techniques.
To take forward this commitment, we passed the Self-build and Custom Housebuilding Act, introduced in another place last year by the honourable Richard Bacon, and Sections 9 to 12 of the Housing and Planning Act earlier this year. The Self-build and Custom Housebuilding Act 2015, which the noble Lord, Lord Best, took through this House, came into force on 1 April this year. As a result, for the first time all local planning authorities have been required to keep a register of those who wish to build or commission their own home in their area and to have regard to that register when carrying out their housing, planning, land disposal and regeneration functions.
A fundamental barrier to more people building or commissioning their own homes is the lack of suitable available plots for self-build and custom housebuilding. These regulations, together with the Self-build and Custom Housebuilding Regulations 2016 that were laid in Parliament last week, are the final component of our legislative framework to support the doubling in size of the self-build and custom housebuilding sector. If approved, they will be critical to increasing the availability of land for self-build and custom housebuilding in England. They will require local authorities to grant enough planning permissions to match demand on their registers within three years of the year in which those entries are made in the register, ensuring that land for self-build and custom housebuilding is made available in a timely manner. This strikes the right balance between ensuring that authorities have sufficient time to identify suitable land and satisfying the need of those seeking land to build or commission their own home quickly.
The regulations also allow local authorities to charge a fee to those to be entered on their register and, where the number of entrants on the register count towards the number of plots for which an authority must grant planning permission, for them to charge an annual fee in subsequent years while the person remains on the register. It is important that authorities are able to charge fees only on a cost recovery basis. This will ensure that any fees charged are reasonable and reflect the costs incurred by the authorities.
Self-build and custom housebuilding have the potential to play a significant role in securing greater diversity in the housing market, as in other parts of Europe. We are fully committed to doubling the size of the self-build and custom housebuilding sector and we want it to become a mainstream form of housing, enabling more people to design their own homes to meet their specific needs. These regulations will increase opportunities for aspiring self-build and custom housebuilders to realise their ambitions of designing and building their own homes. I therefore commend the draft regulations to the Committee.
Lord Kennedy of Southwark (Lab)
My Lords, I will start my brief remarks by making my usual declarations that I am an elected councillor in the London Borough of Lewisham and a vice-president of the Local Government Association. I fully support the regulations before us today. They are a welcome boost to increasing the amount of self-build and custom-built homes in the UK. We have a number of self-build plots in Lewisham and I support them. I like the idea of new homes and innovation and it is very good if people are able to build properties themselves if they want to. Being able to double the number of plots and houses available would be very positive.
A week or two ago, we had a very interesting debate on housing. More generally, I hope we now all accept the need to increase the number of houses built for various tenures. It irritates me when people sometimes suggest that it is councils that hold back planning permission for property generally. In fact, we often agree permission for housing and then nothing happens. I hope that, in agreeing these regulations today, and looking for more plots, the Minister will also take a wider look at the whole question of planning and what we can do about plots of land with multiple permissions but on which nothing ever happens. Perhaps we can make some of those plots available for someone else to build more self-build houses. The real problem we need to look at is building more houses of different types. However, these regulations are very good and I am happy to support them.
Lord Jones (Lab)
My Lords, I thank the noble Lord, Lord Bourne, for the clear and resonant tones in which he spoke to the instrument. These were, no doubt, honed in the Wales Assembly—where he had a distinguished role and no little success—and a Welsh university.
My first brief question, with which, perhaps, his officials can help, is: how much self-building has occurred in previous years in England? Is there a record of self-builds for England in a recent year? Secondly, what sort of fees are paid individually on a self-build in England in a reasonably modest location? Is it possible for him to respond to those two questions? My third question, which I suspect he will not be able to advance on, is regarding any details concerning Wales.
Lord Bourne of Aberystwyth
My Lords, I thank noble Lords for participating in this debate and for the support that they have given to these regulations. I thank the noble Lord, Lord Kennedy, for his support and that of the Official Opposition in the House of Lords. I recognise that his borough of Lewisham is doing some innovative work in this area, as are other London boroughs and other areas in England. I will respond to the issues raised by the noble Lord, Lord Kennedy, and the noble Lord, Lord Jones. I thank the latter very much for his kind remarks about my honing of skills in the National Assembly for Wales, of which I have very fond memories. I met with the First Minister in the House of Lords yesterday. We were in danger of being in our anecdotage discussing the National Assembly last night, but that is another issue.
Self-builds in England are currently running at about 10,000 a year. They have been somewhat higher than that—it varies from year to year. As I have indicated, our aim is to double that figure by 2020. In the whole of the United Kingdom, they are running at about 12,000 a year. On continental Europe, the figures are much higher. About 7% to 10% of our housing completions are self-build. At the other end of the scale, about 80% of housing completions in Austria are self-build. In Sweden, it is around 63%; in Germany and France, about 60%; in the Netherlands it is also high. We are very different from continental Europe. There is a desire on the part of people in this country to design and build their own home, partly no doubt engendered by television programmes such as “Grand Designs” with Kevin McCloud. One of the side effects of this is it will improve the design of the houses that we have. If people are designing their own homes, they will be keen for that design to contribute to the general ambience and be of a high standard. I do not have an average cost for self-build—that will vary enormously from area to area and from house to house—but it is competitive with normal build, which is obviously in response to the desire people have to build their own home.
On a more general point made by the noble Lord, Lord Kennedy, he will know that we are bringing forward a housing White Paper this autumn that will address some of the issues we need to address to build more houses in this country. He will know that the Prime Minister is making this a high priority for the Government, which has already been indicated by the commitment of resources and the recent announcement by my right honourable friend the Secretary of State, Sajid Javid, of £3 billion for housebuilding, £1 billion of which could be directed in this area. Therefore we have committed resources to this and we regard it as important.
Once again, I thank noble Lords for their support and I commend these draft regulations to the Committee.
Human Trafficking and Exploitation (Scotland) Act 2015 (Consequential Provisions and Modifications) Order 2016
(8 years ago)
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Lord Dunlop
That the Grand Committee do consider the Human Trafficking and Exploitation (Scotland) Act 2015 (Consequential Provisions and Modifications) Order 2016
The Parliamentary Under-Secretary of State, Northern Ireland Office and Scotland Office (Lord Dunlop) (Con)
My Lords, it is appropriate that we should be considering this order today, as today is Anti-Slavery Day. The order before your Lordships is made under Section 104 of the Scotland Act 1998, which allows for “necessary or expedient” changes to UK legislation in consequence of an Act of the Scottish Parliament. The Act in this case is the Human Trafficking and Exploitation (Scotland) Act 2015. To summarise, the objective of the Act is to consolidate and strengthen the existing criminal law in Scotland against human trafficking and exploitation and to enhance the status of and support for the victims of these crimes. After passing through the Scottish Parliament, the Act received Royal Assent on 4 November 2015.
The 2015 Act is in six parts. Part 1 introduces two new offences: a new single offence of human trafficking for all types of exploitation and a new offence of,
“slavery, servitude and forced or compulsory labour”.
These replace existing offences in Scots law. The maximum penalty for human trafficking has increased from 14 years to life imprisonment. Part 2 includes provision on the support and assistance to which adult and child victims of human trafficking are entitled. The remaining parts deal with, among other things, the confiscation of property and proceeds of crime, in Part 3, and the introduction in Part 4 of two new preventive and risk orders in Scotland. In Part 5 the Act also places a duty on Scottish Ministers to prepare a trafficking and exploitation strategy.
As I said, if passed, this draft order would amend UK legislation as a consequence of the Act. The order updates existing UK legislation to give the 2015 Act full effect: to reflect the new Scottish offences, to ensure that the relevant powers of UK immigration officers are updated in line with the new offences so that they are able to detain vehicles, ships or aircraft where a person has been arrested for the offence of human trafficking, and to reflect new powers conferred on the police under the 2015 Act.
The order will, for example, update references to existing Scottish offences in relevant legislation applying in other parts of the UK. These changes, primarily to the Modern Slavery Act 2015 but also to the Immigration Act 1971 and the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004, will refer to the new single offence of “human trafficking” and the new offence of slavery, servitude and forced or compulsory labour in Scottish legislation and the repeal of existing offences.
The order will enable English and Welsh courts to enforce the two new Scottish trafficking and exploitation prevention and risk orders, which will ensure joined-up and robust enforcement. It will also implement the policy intention of some aspects of the Modern Slavery Act 2015 that relate to Scotland by ensuring the scope of the UK’s Independent Anti-Slavery Commissioner’s work and the duty of large companies to report on transparency in supply chains are both updated so that, in Scotland, these flow from the new Scottish offences.
The UK and Scottish Government Ministers and officials have worked closely together to ensure that this order makes in an effective manner the necessary amendments to UK legislation in consequence of the Act of the Scottish Parliament. I believe that this order demonstrates the UK Government’s continued commitment to working with the Scottish Government to make the devolution settlement work.
I hope noble Lords will agree that this order is an appropriate use of the powers in the Scotland Act and that the practical result is something to be welcomed. I commend the order to the Committee.
Lord Hope of Craighead (CB)
My Lords, I am very grateful to the Minister for his careful introduction to this draft order. I should point out at the very outset that it goes without saying that I am entirely in sympathy with the aims of the Act itself and the draft order for the reasons which the noble Lord has given. The reason I have risen to my feet is to draw attention to two problems with the wording of Article 2, which deals with the detention of a “vehicle, ship or aircraft” in circumstances where a person has been arrested and there are “reasonable grounds” for thinking that it might be forfeited. The article itself is very well laid out and extremely clear in its terms, and it is only because of the clarity of the terms and the way it is laid out that two matters have come to my attention which I respectfully suggest may require further thought.
The broad structure is to identify first the power to detain in paragraph (1) of Article 2. The second is paragraph (2) of Article 2, which says that the,
“vehicle, ship or aircraft may be detained”,
until certain things have happened. It is important for the protection of the individual who owns the article in question, be it a vehicle, ship or aircraft, that the date at which the detention comes to an end—if, indeed, it is to be released from detention—is clearly identified. One has in mind, of course, Article 1 of Protocol 1 to the European Convention on Human Rights, which gives a right to the peaceful enjoyment of one’s possessions, of which one may be deprived only in the public interest and subject to conditions prescribed by law. This is fulfilling the requirement that the conditions should be prescribed by law and it is important that they should be properly set out.
If one works through Article 2(2), one sees that the detention may come to an end when a decision is taken as to whether or not to begin solemn proceedings or, if solemn proceedings are begun against a person arrested for the offence, until certain things happen. I have no complaint about sub-paragraph (a); it is sub-paragraph (b) that begins to open up some possible points of difficulty. Where solemn proceedings are begun, they may result in the acquittal of the individual, which is set out there. That indeed would be a point at which the article would be released from the detention. Heading (ii) refers to conviction and identifies correctly that the question of whether the article is released from detention will depend on whether the High Court or the sheriff, as the case may be,
“decides whether or not to order forfeiture”.
When that decision is taken, if it is not to order forfeiture, it is clear that the detention comes to an end. The problem arises when one looks at heading (iii), which uses the phrase “proceedings are otherwise concluded”. Very properly, the drafter has gone on to seek to identify the stage at which proceedings are otherwise concluded. It begins by saying:
“For the purposes of paragraph (2) … solemn proceedings begin”—
in well-understood circumstances where there is a first appearance or the indictment is served. I have no problem with that part of the article. The problems arise when looking at paragraph (3)(b), which says that,
“proceedings are taken to be otherwise concluded if … the proceedings are deserted simpliciter”.
That is a very clear point of time. When the Crown deserts proceedings simpliciter they are brought absolutely to an end, there are no further proceedings and it is perfectly proper that the article should no longer be detained. It identifies the point of time very accurately.
Under heading (ii), however, we are dealing with a different kind of desertion of proceedings, “pro loco et tempore”, which is a phrase used in the Scottish courts for the situation where the prosecutor decides that the case cannot proceed for the time being because, for example, the witness is seriously ill or absent and the Crown simply cannot lead the evidence needed to enable the proceedings to go on. The judge or the sheriff, as the case may be, has to decide whether it is proper that proceedings should be stayed temporarily for that purpose. He may refuse to do that, in which case it may be that the Crown is driven to deserting the proceedings simpliciter, but we are dealing with a situation where a decision is to accede to the Crown’s request that the proceedings be deserted “pro loco et tempore”, and,
“no further trial diet is appointed”.
The problem with that concluding phrase is that it leaves in the air the date at which one knows for certain that there will be no further trial diet. Under the Scottish system, the prosecution is entirely in the hands of the Lord Advocate. With great respect, I suggest that it might be better to clarify in some way the point of time at which one can be certain that no further trial diet will be appointed. That is frequently done by the Crown Office writing to the accused saying that it has decided to take no further proceedings. If a letter of that kind is written, it binds the Crown not to proceed any further and the date of the letter is be the date on which one knows for certain that the vehicle, ship or whatever it is should no longer be detained. The better way in which to phrase it might be for a certificate by the Lord Advocate himself or herself to be obtained which would identify his or her decision that there should be no further proceedings. That would achieve absolute clarity and ensure that the decision was ultimately taken by the law officer. Given the importance of what we are dealing with, which is really a very serious crime indeed, it would be best to obtain his or her decision that there should be no further proceedings.
The same point arises in paragraph (4), where we are dealing with three things that are added together. First,
“the indictment falls or is for any other reason not brought to trial”.
Secondly,
“the diet is not continued, adjourned or postponed”,
and, thirdly,
“no further proceedings are in contemplation”.
I do not have any problem with the first two, but with the last one, how does one know that,
“no further proceedings are in contemplation”?
Again, the suggestion is that the best way of ensuring certainty about that would be to obtain a certificate from a law officer—preferably the Lord Advocate—which would identify the decision at that level that there should be no further proceedings.
There are some situations in which a statute intervenes to say that if proceedings are not taken within a given period of time the indictment necessarily falls. In summary proceedings there is a cut-off date of, I think, six months—it may be 12 months—but when one is dealing with proceedings on indictment, as we are here, there is generally no absolute cut-off date in Scots law. I am subject to correction but I do not think that the statutes which we are dealing with as background to this order actually lay down a period of time within which the indictment must be brought. One is dealing with this problem in an area where there is no statutory backing to give a certain date at which the detention of the vehicle or whatever it is should be brought to an end, and therefore something has to be written into the order to make this clear.
I emphasise that I am not in any way raising these points to cause problems for the Minister. However, I suggest that in the interests of everybody it is better to be quite sure that one has identified correctly a cut-off date at each of the various stages with which this order is dealing. Article 2 has identified some of them perfectly correctly in accordance with Scots procedure, but in the two paragraphs that I have identified, in Article 2(3)(b)(ii) and Article 2(4)(c), I suggest that there is a lack of clarity and that it would be better for the Minister to take time and advice to see whether that clarity can be provided.
Lord McAvoy (Lab)
My Lords, I will take as long as I can so that the Minister can give some attention to what the noble and learned Lord, Lord Hope of Craighead, has said. It sounds fascinatingly complicated to me, but I am sure the Minister’s mind will be applied to it. I thank the Minister for his clear exposition—notwithstanding what the noble and learned Lord said—outlining the procedures, new offences and updating of powers, particularly the co-operation between England and Wales and the fact that the order covers Northern Ireland as well. This is quite sensible co-operation.
As outlined in the Explanatory Notes, the basis of this order, and the basis of the Act passed by the Scottish Parliament, was that the Equal Opportunities Committee of the Scottish Parliament published a report of an inquiry into migration and trafficking in December 2010. That committee heard evidence of problems and issues faced by the diverse migrant communities in Scotland, as well as of the extent of trafficking of persons in Scotland and protection available to victims of trafficking. It also states that the Act makes human trafficking unwelcome—“a more hostile place” is the phrase used. The Scottish Parliament is owed a vote of thanks for turning its attention to this matter, because Scotland has a regular, steady influx of diverse immigrants into the country. I myself am the grandson of immigrants from County Antrim and County Fermanagh in Northern Ireland. This is particularly so in the west of Scotland, but the central belt as a whole has a track record of receiving migrants and assimilating them into the community. The new wave of immigrants, especially from the European Union, the Far East and Asia, may not have precipitated this, but it brings new issues and problems and new standards for assimilating communities in Scotland. The Scottish Parliament has done a terrific job, and I hope it is successful. I thank the Minister again for outlining the issues involved in this order and look forward with interest to his reply to the noble and learned Lord.
Lord Dunlop
I thank noble Lords for this short debate. I am particularly grateful, as ever, to the noble Lord, Lord McAvoy, for his offer to occupy the crease—that would be a way to put it—so that I have sufficient time to answer the detailed points made by the noble and learned Lord, Lord Hope. I also thank the noble and learned Lord for giving notice of the questions he intended to ask. He raised a number of detailed points. I recognise that his expertise in Scots law is of an altogether different class to my own. I understand that the wording he refers to is consistent with the wording in the 2016 Act of the Scottish Parliament. I therefore fear that I do not have a clear answer for him on the detailed points he has raised this afternoon. Obviously, however, I undertake to take advice and to consider carefully the points he has raised, and, having done that, I will come back to him in writing to address those points.
I echo what the noble Lord, Lord McAvoy, said. This order is testimony to the joint commitment shown by this Parliament and the Scottish Parliament to take action and to tackle the scourge of trafficking and slavery, and I therefore commend it to the Committee.
Bankruptcy (Scotland) Act 2016 (Consequential Provisions and Modifications) Order 2016
(8 years ago)
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Lord Dunlop
That the Grand Committee do consider the Bankruptcy (Scotland) Act 2016 (Consequential Provisions and Modifications) Order 2016
The Parliamentary Under-Secretary of State, Northern Ireland Office and Scotland Office (Lord Dunlop)
My Lords, to summarise, the Bankruptcy (Scotland) Act 2016 consolidates bankruptcy legislation in Scotland. The Act received Royal Assent on 28 April 2016, having been passed by the Scottish Parliament. The purpose of the 2016 Act is to consolidate Scottish laws on insolvency and make bankruptcy policy more accessible, both for the money advice community and those experiencing financial difficulties. As with the order we have just discussed, if passed, this order would amend UK legislation as a consequence of the Act. The order is made under Section 104 of the Scotland Act 1998, which allows for “necessary or expedient” changes to UK legislation in consequence of an Act of the Scottish Parliament.
The Bankruptcy (Scotland) Act 1985 has been heavily amended over the years and new primary legislation has been introduced, most recently in the form of the Bankruptcy and Debt Advice (Scotland) Act 2014. Bankruptcy legislation in Scotland has been widely considered to be confusing and difficult to follow, and the need to consolidate the law has been identified. Drafting of the Bankruptcy Consolidation Bill was led by the Scottish Law Commission, which, alongside officials from the Accountant in Bankruptcy, Scotland’s insolvency service, undertook a consultation in 2011 on consolidating bankruptcy legislation before the Lord Advocate brought forward proposals for a Bill. This Scottish primary consolidation legislation therefore brings together and restates all of the Scottish bankruptcy legislation, including the elements from the 2014 Act—a move supported by the money advice and insolvency industry, as reflected in evidence to the Scottish Parliament when it passed the 2016 Act earlier this year.
Some of the provisions that the legislation consolidated must be restated in both Scots law and UK law. For example, Articles 4 and 6 of the order restate provisions on the effect of discharge from debts and on limitation of actions outside Scotland as a result of Scottish bankruptcies. Article 3 restates the current arrangements for examination, in certain Scottish bankruptcy proceedings, of persons residing in parts of the UK other than Scotland. Schedule 1 updates cross-references in statutes across the UK—for instance, to replace references to “the 1985 Act” with references to “the 2016 Act”. Lastly, Article 5 restates minor procedural provisions about powers of the Secretary of State.
The UK and Scottish Governments, Ministers and officials have worked closely together to ensure that this order makes the necessary amendments to UK legislation in consequence of the 2016 Act of the Scottish Parliament. I hope that noble Lords agree that this order is also an appropriate use of the powers in the Scotland Act and a further example of the UK Government’s commitment to work with the Scottish Government to make the devolution settlement work. I commend the order to the Committee. I beg to move.
Lord McAvoy (Lab)
My Lords, again I thank the Minister for the exposition of quite a complicated order. Although no formal consultation by the Government has taken place on the order, the Scottish Law Commission consulted fully both on the draft Bill and an accompanying order under Section 104 of the 1998 Act. These are available online. The Scottish Parliament stated in guidance notes on a draft of the order provided for information with the Bill that became the 2016 Act—the consolidation Bill:
“This instrument has no impact of a regulatory nature on the private sector or civil society organisations”.
It said that no significant imposition or reduction of costs was foreseen, that there was no impact on the public sector, and the legislation would not have any significant impact on activities undertaken by small businesses. The effect of the order is purely consequential; it,
“does not create new policy or frameworks and therefore no monitoring or review of the effects of this Order are required”.
It is quite simple. It is a necessary matter, and has the support of the Opposition.
Lord Dunlop
I am very grateful to the noble Lord for his support. As he has laid out, this order is fundamentally of a technical nature, consolidating legislation rather than making any changes to policy or the devolution settlement. I therefore commend the order to the Committee.
Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016
Lord Young of Cookham
That the Grand Committee do consider the Financial Services and Markets Act 2000 (Ring-fenced Bodies, Core Activities, Excluded Activities and Prohibitions) (Amendment) Order 2016
Lord Young of Cookham (Con)
My Lords, from 1 January 2019 the ring-fencing regime will require structural separation of core retail banking on the one hand from investment banking on the other for UK banks with retail deposits of more than £25 billion. Ring-fencing was the central recommendation of the Independent Commission on Banking chaired by Sir John Vickers, which the Government accepted and legislated for in the Financial Services (Banking Reform) Act 2013. It will support financial stability by insulating retail ring-fenced banks’ core services whose continuous provision is essential to the economy—that is, retail and small business deposits and payments services—from shocks originating elsewhere in the global financial system. It means that banks which provide those essential services become simpler and more resolvable so that core services can keep running even if a ring-fenced bank or its group fails. In doing so, ring-fencing reduces the perceived subsidy that comes from the presumption that the Government will bail out failing banks. Details of the regime are set out in secondary legislation passed in 2014 and it is some of those details that this order amends.
There are 18 different amendments in the order which achieve three purposes. First, to address issues in the secondary legislation that could inhibit the successful implementation of the regime; secondly, to ensure that ring-fenced banks are able to continue recognisable retail banking activities; and thirdly, to close holes that we have discovered in the ring-fence. Together with the PRA, we will constantly patrol the ring-fence for any flaws in the regime and will step in to close them when they are identified.
To assist the Committee, as I note each of the amendments, I will identify the part of the order where each can be found. Unfortunately, as the order is laid out in line with the elements of the existing secondary legislation it is amending rather than thematic, and as some amendments require changes to more than one part of the legislation, my description may involve some skipping around. I am of course happy to provide a more detailed explanation of any aspect of this order.
The first category of amendments tackles issues in the regulations that could work against the successful implementation of the regime. Article 2 of the order, after necessary changes to some definitions, withdraws the requirement for banks’ larger customers to complete a burdensome qualifying declaration and removes the requirement for banks to issue information to customers who are unaffected by the regime. Article 3(3) on page 4 also falls into this category by allowing in certain circumstances the securitisation of assets acquired in a resolution scenario and providing for the treatment of assets held by the banking group before ring-fencing comes into effect. Sticking with the theme of addressing issues that could threaten implementation, the elements of Article 3(6) found at the top of page 7 make it much easier for the PRA to assess compliance with the rules relating to the selling of simple derivatives, while Article 3(7) ensures consistency with the pensions regulations. Finally in this category, Article 3(10), right at the end of the order, addresses what happens when an organisation unexpectedly becomes a relevant financial institution while a ring-fenced bank is exposed to it.
The second set of amendments addresses issues with the regulations that might prevent ring-fenced banks carrying out activities we would certainly expect a retail bank to conduct. Amendments found in Article 3(4) on page 5 ensure that ring-fenced banks can continue being members of payment systems and central counterparties, and that they can hedge risks within the ring-fence. Articles 3(7) and 3(8) on page 7 ensure that ring-fenced banks can manage their liquidity risk. Similarly, amendments found in Articles 3(9) and 3(10) on page 8 ensure that ring-fenced banks can continue lending working capital to small businesses, acting as trustees, providing consultative services, and providing loans to infrastructure projects. The final set of amendments closes holes we have discovered in the ring-fence. Article 3(2) on page 4 expands the list of globally systemic insurers to which ring-fenced banks may not be exposed. Article 3(6) on page 6 tightens the risk calculation that constrains ring-fenced banks’ issuance of simple derivatives.
There are some things these amendments do not do. They do not alter the location of the ring-fence: core activities must be ring-fenced and investment banking activity must be outside the fence. They do not alter the height of the ring-fence: the same degree of operational and financial independence must be observed between the ring-fenced bank and the rest of its group, and they do not alter the timetable for ring-fencing banks. Banks in scope must be ring-fenced 27 months from now and, together with the PRA and the FCA, we are monitoring their progress closely. I beg to move.
Lord Tunnicliffe (Lab)
My Lords, I thank the Minister for introducing the final statutory instrument of the day. The order makes a number of changes to the ring-fence regime which is due to come into force on 1 January 2019. As a result of the structural changes that the banks have begun to implement in advance of the regime, the Treasury has suggested that a number of technical issues have become apparent which if not rectified could undermine its effectiveness.
I want to say at the outset that the Opposition have no intention of opposing any of the measures proposed in this statutory instrument and any moves to fix errors prior to the commencement of the regime are welcome. However, there are a number of questions that I want to put to the Minister in order to clarify the intent and purpose of some of the changes outlined in the order. Before turning to the specifics, I want to address a broader issue which I hope sincerely the Minister will take back to those of his colleagues in the Treasury who prepare explanatory material for future statutory instruments. At the most basic level, the order relates to the forthcoming introduction of the ring-fencing regime, but the underlying objective of the instrument and of the Financial Services (Banking Reform) Act 2013 which it amends is to ensure the reduction of risk from the banking sector.
The Minister referred to 18 amendments—there are in fact more when you take into account the multiple changes being made on some points. They are being introduced because at present there are shortfalls in the ring-fencing regime standards. They are minor alterations, but as I understand it the regime would have a severe impact on the operation of the sector if left unamended, so these changes are quite important. I presume that the decisions have been made as a result of detailed examination and consultation, and I would ask the Minister why such information has not been provided with the order. The noble Lord is an experienced parliamentarian and will know that by convention we will not oppose these measures. It is therefore vital that we have a full assurance that the changes do not increase risk and are necessary not only for the banking sector but for the public good. As Her Majesty’s Opposition, we cannot provide the necessary scrutiny if Explanatory Memorandums are as scarce in detail as the one in question today.
The Minister’s speech has illustrated beautifully why I never read such orders. They are, frankly, impossible to read, especially when they amend other orders; it is bad enough when they just amend a Bill. We in the Opposition are totally dependent on the clarity of Explanatory Memorandums in order to apply scrutiny, but I must say that the memorandum for this order hits something of a new low. During the development of this legislation, which I have lived with all the way through—largely because I did not duck at times—we have had very good support from the Treasury. It produced excellent briefing notes to go with the original Act and the various amendments to it, and its helpfulness continues to this day—I think that it was Tom Etheridge whom I spoke to yesterday morning. Although Treasury officials have helped me go through the memorandum, it is unfortunate that it should be so difficult to understand. In terms of confusion my favourite is paragraph 7.22. I shall not read it out because I am sure that the Minister has it in front with him or has read it with the same energy as I have. I could not understand it because it does two quite different things in the same paragraph, and indeed in the same sentence.
I failed my 11-plus and attended a secondary technical school, but I remember my English teacher telling me not to put more than one idea in a sentence, and ideally not more than one idea in a paragraph. Perhaps if I had gone to a grammar school I would have a more nuanced approach whereby you mix them all up like a soup. To illustrate the limitations of paragraph 7.22, if you delete in the second line,
“and strengthen the UK’s resolution toolkit”,
and then in the fourth line delete,
“acquired in a resolution scenario”,
and reread it, the paragraph makes sense. It states:
“RFBs are currently prohibited from securitising assets that they haven’t created themselves”.
That is simply not true because there are no RFBs. What it really means is that the order as presently drafted makes that prohibition. As I have amended the paragraph, it goes on to say:
“To aid transition to the ring-fencing regime … this Order amends the EAPO to allow an RFB to securitise assets … transferred in a ring-fencing transfer scheme”.
A ring-fenced transfer scheme is a scheme which is proposed by a bank for how it will divide itself up and is approved by a court. That is an absolutely essential part of the process of creating the ring-fence so it is reasonable that that exception should be made. The paragraph goes on to say in lovely language,
“or acquired by itself or a member of the wider banking group at least two years before becoming an RFB. In all cases this is limited to assets that an RFB is permitted to hold”.
What that actually means is that any assets acquired after 1 January 2017 cannot come under this prohibition in order to create a two-year buffer before 1 January 2019 when the ring-fence comes into effect. Once again, that is a perfectly reasonable thing to do. As I have amended this paragraph, it is all about how to get into the ring-fence situation in order to modify the prohibition for that transition to take place. That is an important idea. I think that I understand it, but if I do not I am sure that the Minister will tell me so. If I have understood it correctly, it is a perfectly reasonable concept.
A second meaning arises if I delete in the second line of the paragraph,
“aid transition to the ring-fencing regime and”,
and then in the third line, I delete from “transferred” to the end of that sentence. It would then read:
“To … strengthen the UK’s resolution toolkit, this Order amends the EAPO to allow an RFB to securitise assets acquired in a resolution scenario”.
This once again is a very powerful and crucial idea. I have been unfortunate enough to have studied the resolution regime as part of my duties in picking up this brief. It is an exciting process when a bank goes bust. My understanding is that there would probably be 60 hours in which to work over a weekend. It is crucial that the resolution authority is able, if it believes it to be the right course of action, to break up the bank and transfer the good bits to another ring-fenced body, and for that ring-fenced body to be able to take those assets as if they were its own. I think that is what this paragraph means given what I believe are two different senses.
If I have made a mistake, perhaps the Minister will write a letter. I am sympathetic to that. But the point I am making is that this paragraph and many other paragraphs in the document could have been written at greater length for bears of little brain like myself so that we could tread through this order. It is very big and I think it contains 20-odd changes that are crucial to the regime. One important duty of the Opposition is for at least one person in it to understand the order in totality and to have tested it to see whether it makes sense and is consistent.
As I have said, this is a wider issue than just the order in front of us. I hope that the Minister will convey the concerns I have raised so that all sides of the House can engage in more informed and fruitful discussions. Once again, I thank the Treasury, which was happy to take the time to take me through the order.
On two specific points, the first concerns the removal of the “qualifying declaration” which large corporate customers are required to submit before the bank can move their account to the non-ring-fenced body, and its replacement with a requirement on the bank to reach a determination as to whether a customer is eligible to be moved to the non-ring-fenced body. From my reading of the instrument—I encourage the Minister to correct me if I am wrong—this is the only alteration that constitutes an actual policy shift as opposed to a technical amendment. I would be grateful if the Minister could go into more detail about why this decision was made and the implications that this will have on both the companies and the banking sector. I am happy for the Minister to write to me on this, but I tried quite hard to understand the paragraph in the draft Explanatory Memorandum that covered this point. While I think I understood it in part, I do not understand it fully.
The second point, which relates to the removal of the qualifying declaration, concerns the impact assessment or the lack thereof. Paragraph 10.2 of the Explanatory Memorandum states that,
“these amendments respond to technical issues”,
and that therefore there will be,
“no new impact on business, charities or voluntary bodies”.
Yet only two paragraphs later the memorandum reveals that:
“The Treasury is preparing a validation impact assessment in relation to the removal of the qualifying declaration process”.
Surely it would have been wise to produce an assessment before the policy was introduced, or at least before the order was laid. The Government have until January 2019 to get this right, so why is it being rushed through and the correct assessment procedure not being followed? Can the Minister say when the validation impact assessment will be published? Such a document might also provide more understanding of the motivation of that part of the order.
I spent about 10 hours trying to understand the order and at points one has to stand back and say, “Why bother?”. We had a lovely illustration today of the other end of the spectrum, where my noble friend Lord McAvoy was able to say, “Fine—get on with it”. He put it in proper lordly terms, but frankly he did not say any more than that. That was a class of statutory instrument I would describe as trivial—I do not mean that in a rude sense but in a technical sense. In mathematics, when you have a line sometimes you put “trivial” at the end, which means that the reason for it is self-evident; the reason for that order was self-evident, and fair enough. There are some totally political orders which we do not vote against because of our convention, but we want to stand up, make big speeches and get on the record that we do not like what something is doing, which is important. Some orders are a mixture of technical and political, but some, which I hope this order is, are wholly technical. What, then, is the role of the Opposition? It seems to be to make sure that the drafting of the order and the thinking behind it have full depth—that it fits together and goes with the grain of the order. For that, we need fully to understand it.
There are two ways through this dilemma. One is for the Treasury to write better Explanatory Memorandums; we know it can because of some of the excellent stuff it produced in generating the legislation. The other is probably for us in particular to become aware of orders rather earlier; I have put action in hand for that. When we have conversations with the Minister and officials about something of this depth and length, we can use a more informal process to slog through the detail and make sure that we understand it.
As far as I am able to understand the order, I thoroughly approve of it. I have been through the changes, which all seem necessary and reasonable. I have a slight problem with the definition in relation to notification of a big company compared with a little company, but, that aside, we are content with the general policy, which we have supported through its many stages. This seems to be a sensible set of corrections. If the Government have another swathe of amendments to bring to us—many would be critical of that, but I know that they would be reacting to responses from industry and their own work—I would want on that occasion to try to understand more before we reached this stage, so that we could perhaps make this stage a mere formality.
Lord Young of Cookham
My Lords, I have taken many statutory instruments through another place, but this is the first SI that I have taken through your Lordships’ House. I am enormously impressed by the detailed consideration which the noble Lord has given to it; it will certainly put me on my guard for any future SIs that I may take through. I am grateful to him for the Opposition’s support for the order before us. The noble Lord has a background in this subject, having been closely involved with the primary legislation.
Let me try to deal with some of the issues that the noble Lord raised. On consultation, the amendments were the subject of a short, technical review—because they are mainly technical changes—with the affected banking groups and their representative body, the British Bankers’ Association. Such a review was proportionate for the amendments, given their technical nature. They have also been drafted in consultation with the PRA and the Financial Conduct Authority.
The noble Lord asked about the impact of the order on risk. Some amendments ensure that ring-fenced banks are able to deliver economic services, as it was always the intention that they should. Some of the activities help ring-fenced banks manage their risk; for example, ensuring they can hedge risks within the sub-group. Other activities permitted by the amendments and the ring-fencing legislation more broadly carry risk, but with this order we are not shifting the ring-fence to include any new types of business but only ensuring that ring-fenced banks are able to deliver the service that they are meant to.
I take the noble Lord’s point on the Explanatory Memorandum. He wants an Explanatory Memorandum for the Explanatory Memorandum, because he found it difficult to follow. I will take that point on board and see whether in future we can do better and make sure that an Explanatory Memorandum lives up to its name.
On securitisation, the bit of the Explanatory Memorandum that the noble Lord focused on, his understanding is correct. Ring-fenced banks are allowed to securitise the assets that they created—this was a recommendation of the Independent Commission on Banking. Ring-fenced banks normally may not securitise assets originating outside the ring-fence. The order makes two changes: first, to what assets ring-fenced banks may securitise after 2019; secondly, to provide for what happens to assets already on their books before ring-fencing comes into existence.
The first change provides an exception to the prohibition on securitising acquired assets for assets obtained following the resolution of a failed firm. Successful resolution is important to ensure that failing firms do not harm the economy or taxpayers. This amendment maximises the resolution options available to the regulators by increasing the chance of finding a suitable private sector purchaser for the failed bank’s assets.
The second change introduces provisions to deal with banks’ existing assets. The current regulations fail to provide for the treatment of both assets created by the banking group before the ring-fence is established and assets acquired by the banking group in the past. The order makes it clear that when ring-fenced banks are created, they may securitise the assets already held by the banking group and those transferred through the ring-fenced transfer scheme. However, to stop banking groups spending the next two years acquiring assets for the ring-fenced banks to securitise, ring-fenced banks will be able to securitise assets held by the banking group only if they were acquired more than two years before the ring-fenced bank was established; for most banks this means 1 January 2017, which will be shortly after this order comes into force.
On the changes to the qualifying declaration, this should simplify matters for businesses. Completing qualifying declarations is likely to require banks’ customers to devote senior staff time to completing the declaration and may require engagement of legal advice, accountants and auditors to sign off the evidence the business provides. This cost to non-bank businesses will be considerably higher than to banks completing due diligence. With the changes, non-bank businesses will not have to undertake the regime that was set out initially. We believe that around 34,000 medium and large businesses will benefit from this change.
On the impact this will have, these amendments are, as I said, mainly technical changes to the ring-fencing regulation. The amendment with the most significant impact is the one I just referred to: the removal of the qualifying declaration process. This will remove a burden on banks and their medium and large business clients during the transition. The Regulatory Policy Committee rules say that the deregulatory nature of this change means that we do not need to prepare a regulatory impact assessment. But we do need to prepare, on a longer timescale, a “validation” impact assessment so the RPC can confirm the deregulatory effect of removing the qualifying declaration process. We do not normally publish these validation impact assessments but in this case I will be happy to, once it has been validated.
Finally, the noble Lord suggested a process of interaction between Opposition Members or other noble Lords and the Treasury to get a better understanding of the regulations that are brought forward. I will take that helpful suggestion away and see how the Government can best respond to it.