HOUSE OF LORDS - United Kingdom Parliament

Vol. 736
No. 281
PARLIAMENTARY DEBATES
(HANSARD)
Wednesday
14 March 2012
HOUSE OF LORDS
OFFICIAL REPORT
ORDER OF BUSINESS
Questions
Finance: Credit Rating Agencies
Education: Skills
Police: Vehicles
Armed Forces: Vehicles
Business of the House
Timing of Debates
Misuse of Drugs Act 1971 (Amendment) Order 2012
Statistics and Registration Service Act 2007 (Disclosure of Social Security and Revenue
Information) Regulations 2012
Immigration and Nationality (Fees) Regulations 2012
Schedule 5 to the Anti-terrorism, Crime and Security Act 2001 (Modification) Order 2012
Motions to Refer to Grand Committee
Legal Aid, Sentencing and Punishment of Offenders Bill
Report (4th Day)
EAC Report: Auditors
Considered in Grand Committee
Written Statements
Written Answers
For column numbers see back page
Grand Committee
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267 Leave of Absence [14 MARCH 2012] Finance: Credit Rating Agencies
268
3pm
House of Lords
Wednesday, 14 March 2012.
Prayers—read by the Lord Bishop of Newcastle.
Leave of Absence
3.06 pm
The Lord Speaker (Baroness D’Souza): My Lords,
the Association of European Senates is meeting this
week in Paris. Accordingly I seek leave of absence
from your Lordships’ House on Friday 16 March.
Finance: Credit Rating Agencies
Question
3.07 pm
Asked by Lord Giddens
To ask Her Majesty’s Government what is their
assessment of the influence exercised by the credit
rating agencies in the world economy.
The Commercial Secretary to the Treasury (Lord
Sassoon): My Lords, investors value the role of credit
rating agencies to provide market participants with a
neutral opinion of credit quality. However, to reduce
the procyclical effects of ratings changes, it is important
that market participants do not rely mechanistically
on credit rating agency opinions and that those ratings
are not hardwired into legislation. Therefore, the
Government strongly support G20 efforts to reduce
the overreliance on credit rating agency ratings, and
fostering competition through reducing barriers to
entry.
Lord Giddens: I thank the Minister for that Answer.
In the excellent report that was produced in this House,
a whole range of proposals were made for the reform
of the credit rating agencies, which I see as urgent and
important for the world economy. One of those proposals
was that the cartel of the big three agencies should be
opened up to greater competition. How in practice
does the Minister think this will be achieved? Has any
progress been made to that end? Does he by any
chance support the idea of compulsory rotation with
some of the smaller agencies, a proposal that has been
endorsed by a Treasury Select Committee inquiry that
is going on at the moment?
Lord Sassoon: The noble Lord, Lord Giddens, has
gone absolutely to the heart of the matter. Certainly
your Lordships’ Committee, the Government and most
commentators would like to see competition introduced,
but that is extremely difficult, as the noble Lord knows.
It is a highly concentrated industry and entry is difficult
because it takes time to build up a track record.
A number of steps need to be taken. As I have already
said, the hardwiring of credit ratings needs to be taken
out wherever possible from investor mandates and
from legislation and regulation in many countries.
We need to improve the transparency and comparability
of the ratings of the agencies and generally lower the
regulatory barriers to entry. I believe that Europe has
taken some steps, but it needs to take more. For
example, under the new registration processes, 16 credit
rating agencies are already registered in Europe and
another 15 more have applied to be registered, so there
are a lot more out there already than the three that get
all the focus. As to rotation, it is actually part of one of
the two rounds of European directives that have come
in since the financial crisis that analysts need to be
rotated within firms, which is probably the proportionate
response.
Lord Forsyth of Drumlean: My Lords, will my noble
friend indicate what view he thinks the credit agencies
will take of the Government’s proposal to issue 100-year
bonds. If these bonds are bought by the Bank of
England as part of a quantitative easing process, what
will be done to avoid the problem of the value of the
bonds falling as interest rates rise and being eliminated
by inflation over that period of time?
Lord Sassoon: My Lords, my noble friend conflates
a number of interesting questions. The key point is
that the UK is in a very strong position to look at
ultra-long or perpetual bonds. We have historically
very low rates of interest and significant investor
demand, particularly from the domestic funds, for
very long-dated gilts. In response to that situation, we
think that it is right to consult the market, as my right
honourable friend the Chancellor of the Exchequer
has indicated we will do, and to see what it has to say,
but we will not make any issue unless it represents
good value for the taxpayer.
Lord McFall of Alcluith: My Lords, given that the
credit rating agencies have demonstrated a consistent
lack of accuracy, have failed in their governance, are
flawed in that the person paying for the rating has to
ask for it, and competition is non-existent, will the
Minister encourage investors in the City to establish
their own credit rating agencies on a not-for-profit
basis? At a stroke, they would remove conflicts of
interest, introduce healthy competition and establish
accurate credit rating figures. Let us remember that all
the credit rating agencies gave Northern Rock a triple-A
rating immediately before its demise.
Lord Sassoon: My Lords, while we should not
underestimate the difficulties with the credit rating
agencies historically, equally we do not want to make
the situation sound more dramatic than it is. On
sovereign ratings, the IMF’s analysis in the autumn of
2010 indicated that the rating agencies had performed
relatively well and that, in all cases of sovereign default
since 1975, they had had those sovereigns on speculative
grade ratings at least one year ahead. I have already
given some answers as to how we should introduce
competition. If one of the vehicles that comes in is of
the sort which the noble Lord, Lord McFall, mentioned,
that would be up to the market and it should not be
prevented from using it.

269 Finance: Credit Rating Agencies [LORDS]
Education: Skills
270
Lord Harrison: My Lords, I know that the Minister
has read closely our report on the sovereign credit
rating agencies, which was published last November
and is available to Members of the House, but does he
share my concern that the three major credit rating
agencies are American? Does he also share our concern,
as expressed in the report, that to generate an agency
from within the European Union would not be well
received by the markets and that it is therefore essential
to ensure that there is open, free and fair competition
to establish markets for new players to come in and
compete with the existing three?
Lord Sassoon: I am certainly very happy to commend
again the report, Sovereign Credit Ratings: Shooting
the Messenger?, to which the noble Lord, Lord Harrison,
referred. It is an excellent report, which said among
other things:
“The criticism that credit rating agencies precipitated the euro
area crisis is largely unjustified”—
so it offered a very proportionate and measured response
to the criticism. I do not think that we should mind the
nationality of the rating agencies; it is the competition
that we want. In that connection, the Government
believe that it would be wrong to create a public
European credit rating agency because that would just
serve, among other things, to crowd out the competition.
Baroness Kramer: My Lords, until the mid-1970s,
investors paid the credit rating agencies, not the issuers.
The change was driven very much by the awareness of
credit rating agencies that they could gouge more
money from issuers. Does the Minister agree that
there is no evidence that the so-called private conversations
that now take place between the credit rating agencies
and the issuers because of their relationship have in
any way improved the quality of credit rating? Does
he further agree that returning to an investor-paid
system would take out the key conflict of interest?
Lord Sassoon: My Lords, I agree that the conflict of
interest question is important. I draw my noble friend’s
attention to the fact that in the two rounds of legislation
to date since the crisis, one of the things that has been
done is to ban credit rating agencies from providing a
paid advisory service. So some attention has already
been given to this issue by Europe.
Education: Skills
Question
3.15 pm
Asked by Lord Addington
To ask Her Majesty’s Government whether the
key skills and functional skills requirements in
the Apprenticeships, Skills, Children and Learning
Act 2009 are compatible with the Equality Act 2010
in relation to accessibility for dyslexic and other
disabled conditions.
The Parliamentary Under-Secretary of State,
Department for Business, Innovation and Skills (Baroness
Wilcox): My Lords, the apprenticeships provisions
within the Apprenticeships, Skills, Children and Learning
Act are compatible with the Equality Act. Employers
say that basic English and mathematics are essential
for apprentices. The specification of apprenticeship
standards for England sets out minimum requirements
for apprenticeships. Key skills are being withdrawn as
they are not fit for purpose and, from October, apprentices
can choose between the GCSEs or functional skills for
English and mathematics.
Lord Addington: I thank the Minister for that Answer
and draw attention to my declared interests. Does my
noble friend agree—I have shown this to her—that I
have some legal opinion which might contradict that?
Does she acknowledge that, at the moment, there are
people who are failing to pass the English qualification
because of dyslexia who could be helped through to
degree level if they chose that path? There is also
evidence which shows that people are having problems
because those who administer these tests do not know
what they could do. Under these circumstances, does
not our Government have a duty to make sure that
something which has been brought forward as a great
saviour of our skill force—the apprenticeship—is made
fit for purpose?
Baroness Wilcox: The noble Lord is an expert on
this subject and I think carefully about the answers
that I give him. Yes, he had already given me sight of
the Question he was going to ask. There is no evidence
to suggest that the Apprenticeships, Skills, Children
and Learning Act is not compliant with the Equality
Act. The Equality and Human Rights Commission is
a critical friend in order for us to be assured of
continued compliance, and it stays alongside us. On
tackling the colleges and providers, where a college or
provider is not using appropriate access arrangements
they may lose their right to deliver these qualifications
as an approved centre. We will be watching that situation
very carefully. Both English and mathematics, of course,
are on-going problems for people with dyslexia but,
where barriers to access remain, as a last resort individuals
can be exempted from up to two or three of the
assessed components within the functions skills—I
have checked this and found it to be right—speaking,
listening, communication, reading and writing. In the
last event, two or three of those components can be
removed to make it as accessible as possible.
Perhaps I might add that the employers are very
keen that everyone should have basic English and
mathematics, and we know how difficult this is for
many people with dyslexia. However, it is important, if
we can, to keep people with disabilities and dyslexia
inside the system and to help them to be as much a
part of our community as everyone else. So, wherever
it is possible to keep people inside the community, we
will. I am sorry that my answer was long but the issue
is important.
Lord Martin of Springburn: My Lords, does the
Minister agree that many of our excellent tradesmen
and tradeswomen would readily acknowledge that when
they were young they were not too good at passing
exams? We must be very careful when encouraging
young people to come into apprenticeships that we do
not make exams a barrier.

271 Education: Skills [14 MARCH 2012]
Police: Vehicles
272
Baroness Wilcox: That is absolutely right, and that
is why it is important for us to have functional skills,
which are much more accessible to people with disabilities.
I would be happy to talk to the noble Lord further on
that matter.
Lord Storey: My Lords, the Minister will be aware
that those students who go to university who have
special needs are supported, perhaps through a scribe
or assistive software, but that is not the case with
apprenticeships. How would the Minister advise on
this case? An apprentice electrician had an outstanding
report on his practical skills from his employer. However,
as he failed his key skills component, his employer was
unable to retain him and he is now, sadly, unemployed.
What advice would the Minister give to that young
person as to the support that we could give him and
other apprentices?
Baroness Wilcox: I am very sorry to hear this. We
have just commissioned Peter Little to carry out research
and recommend improvements to the accessibility of
these apprenticeships. In April we will publish his
report and a plan setting out exactly what we will do
to improve and to help the situation.
Lord Foulkes of Cumnock: My Lords, since this
Question refers to disabilities other than dyslexia, is
the Minister aware of the report published today
by the Scottish Association for Mental Health about
discrimination against people with mental illness in
employment? Will she get a copy of it and consider its
recommendations and applicability to England and
Wales?
Baroness Wilcox: Thank you very much indeed.
Yes, I will get a copy.
Police: Vehicles
Question
3.20 pm
Asked by Lord Hoyle
To ask Her Majesty’s Government what recent
discussions they have had with police authorities
about the cars they purchase.
The Minister of State, Home Office (Lord Henley):
My Lords, Ministers frequently meet police authorities.
In 2011 the Government made regulations that require
police vehicles to be provided through a specified
national framework agreement. Decisions about what
to buy from that framework are for chief constables
and their police authorities.
Lord Hoyle: My Lords, I thank the Minister for
that reply, but does he agree with me that as all the
police authorities in the north-west and many throughout
the country are changing from buying Vauxhall vehicles
to buying Hyundai, that is a kick in the teeth for
Vauxhall workers who are trying to keep the efficient
car plant in Ellesmere Port open? Could he give an
indication that any Korean police authorities are thinking
of buying British-built vehicles?
Lord Henley: My Lords, I do not speak for the
Korean Government and cannot speak for the police
authorities in Korea, so I do not know what police
cars they are buying. I am aware of the noble Lord’s
concern about matters in relation to his own police
area, and I understand that it is buying Hyundai. But I
can give an assurance that, if he looks at the figures, he
will find that Vauxhall is still the largest supplier of
lower and intermediate-performance police cars, which
are manufactured in his own area of Ellesmere Port.
The important point is that police authorities and
chief constables should be able to buy the cars that
they believe are suitable for their needs, and deal
within the framework in doing so.
Lord Low of Dalston: I do not much mind what
kind of cars the police use, but could the Minister use
his influence with the police to persuade them to
moderate their use of sirens, which are such a widespread
source of noise pollution in our cities? The siren is for
use in a real emergency, and not just when the officer is
in a hurry to get home for his tea.
Lord Henley: My Lords, I am aware of this complaint
from a number of noble Lords who have put it to me
on a number of occasions. I understand that there
might be one or two occasions when police cars are
using sirens in an inappropriate way. Again, that should
be a matter for the police authorities, but I hope that
they will bear in mind what the noble Lord has to say.
Lord Jones of Birmingham: I draw noble Lords’
attention to my declared interests. Would the Minister
agree with me that it is becoming increasingly difficult
for the businesses of this nation to believe that Her
Majesty’s Government want business to employ more
people and pay more tax when they buy their ships
from South Korea, their police vehicles from Korea,
their trains from Germany and their cars from Japan?
Further, would he agree that the EU procurement
rules talk about best value and not best price, and that
the Government increasingly show that they know the
price of everything and the value of nothing?
Lord Henley: My Lords, I would not want to go
down the line that the noble Lord is suggesting, which
smacks, dare I say it, of protectionism. I want the
police authorities and chief constables to buy the cars
that they feel are best for their needs. That is why I am
particularly grateful, as I said in answer to the noble
Lord, Lord Hoyle, that Vauxhall is the largest supplier
of one category of cars, which are being built in
Ellesmere Port, very close to where he comes from.
Baroness Trumpington: May I ask what the police
do with their cars when they have finished with
them? Do they send them to auction? A few years
ago my husband bought the ex-chief constable of
Cambridgeshire’s car and we drove happily at all kinds
of reckless speeds because everybody thought it was
the chief constable’s car.
Lord Henley: I am very grateful that I was not
driven in that car by my noble friend or her late
husband. Police cars do not last that long because they

273 Police: Vehicles [LORDS]
Armed Forces: Vehicles
274
[LORD HENLEY]
have a fairly heavy life. The police sell them at the end
of their lives and try to get the best possible value for
them.
Lord West of Spithead: My Lords, when I was a
Minister in the Home Office I was shocked at how
little co-ordination there was across police forces in
terms of procurement, and I tried to change that. Can
the Minister reassure us that, notwithstanding some
differentials between police forces, they are quite minimal
and there would be a huge gain to the public purse if
we could co-ordinate procurement?
Lord Henley: My Lords, the noble Lord refers to
his time in government. I was trying to make clear in
my original Answer that there have been considerable
changes since then. That is why we have brought in the
framework, which brings in co-ordination of a great
deal of procurement across all police forces that we
believe will save something of the order of £350 million
a year. This is money that we need to save.
Baroness Doocey: My Lords, do the Government
agree that there is no justification for the Metropolitan
Police keeping 32 luxury cars not for security purposes
but to chauffeur senior officers to and from their
homes?
Lord Henley: My Lords, obviously I cannot comment
on decisions made by the Metropolitan Police Authority
—that is a matter for the mayor’s office. If it is spending
money inadvisably, I hope that it would look carefully
at the circumstances in which it could possibly save
money in the future.
Baroness Worthington: Would the Minister comment
on the appropriateness of the list of activities in the
leaked tender document by the West Midlands and
Surrey police forces? Alongside the management of
the vehicle fleet, these included a whole host of activities
that ran to almost everything apart from the powers of
arrest.
Lord Henley: My Lords, I am not sure that that is
directly relevant to the Question. We are talking about
the purchase of vehicles. I want to make it clear that
that is a matter for the chief constables and we want
them to buy the appropriate cars for the job that has
to be done.
Lord Grenfell: My Lords, prompted by the very
pertinent question put by the noble Baroness, Lady
Trumpington, can I ask the Minister if, when these
police cars are no longer considered roadworthy, they
are put out to grass and placed at the disposal of the
Prime Minister and his friends?
Lord Henley: My Lords, as I made clear in my
earlier answer, they are sold for the best possible price.
Baroness O’Cathain: My Lords, can I ask my noble
friend to make sure that the opinions in response to
this Question do not make noble Lords go away with a
feeling that the British motor industry is in a bad
state? It is in the best state it has been in for about
15 years and we should talk up our industry rather
than the reverse.
Lord Henley: I am very grateful to my noble friend
for her comments. I remind her about the announcement
made about Nissan and the extra jobs that will be
available there as a result of decisions that Nissan has
made about further inward investment in this country.
Lord Brooke of Alverthorpe: On the day when it has
been announced that 2.7 million people in this country
are unemployed, and the likelihood is that that figure
will continue to rise for some time, is it not important
that we take such factors into account when we address
issues such as public procurement? Can one conceivably
believe that the French, German or Belgian Governments
would do some of the things that we do in this
country?
Lord Henley: Yet again, the noble Lord is heading
down the road of protectionism, which I do not believe
is the right answer. The answer that I gave to my noble
friend Lady O’Cathain about the success of Nissan
addresses that point exactly. Why have we attracted so
much inward investment? It is because we have the
right conditions to do so. The Nissan announcement
is one that even the noble Lord should welcome.
Viscount Simon: Is the noble Lord aware that ACPO
is reviewing the use of police vehicles with a view to
standardisation, which will result in reducing the cost
of those vehicles?
Lord Henley: My Lords, again, I answered that
point earlier when I dealt with the co-ordination that
we have brought to this matter through the national
framework. That is why we are looking to make savings
of the order of £350 million a year, compared to what
used to happen under the previous Government on
proper co-ordination of all police procurement.
Armed Forces: Vehicles
Question
3.30 pm
Asked by Lord Empey
To ask Her Majesty’s Government whether fighting
vehicles supplied to British troops in Afghanistan
provide adequate protection against Taliban attacks
using improvised explosive devices.
The Parliamentary Under-Secretary of State, Ministry
of Defence (Lord Astor of Hever): My Lords, the
current range of fighting vehicles supplied to British
troops in Afghanistan has been optimised for that
particular environment and offers the most suitable
form of survivability in that theatre of operations.
However, no vehicle can currently withstand a blast
of infinite magnitude and there will always be gaps in
a vehicle’s protection. The strengths and weaknesses
of the different types of platform that make up the

275 Armed Forces: Vehicles [14 MARCH 2012]
Business of the House
276
vehicle fleet give operational commanders the option
to mix and match capabilities and to tailor them for a
specific operation.
Lord Empey: My Lords, we were all shocked by the
tragic deaths last week of six of our service personnel
in Afghanistan. Can the Minister assure the House
that the flat-bottomed Warrior fighting vehicle is the most
suitable equipment to protect our Armed Forces from
improvised explosive devices? Can he further assure
the House that financial constraints on the provision
of equipment or modified equipment are not delaying
the deployment to Afghanistan of the best possible
protection for the brave men and women of our Armed
Forces?
Lord Astor of Hever: My Lords, my thoughts are
also with the families and friends of those six soldiers.
Every death and injury reminds us of the human cost
paid by our Armed Forces to keep our country safe.
The Warrior is optimised to protect our Armed Forces
from IEDs and is suitable for the task that it is
required to do. It has a good track record in both Iraq
and Afghanistan. The protected vehicle fleet in
Afghanistan comprises a mix of armoured capabilities,
some of which have flat-bottomed hulls with tracks
and others have V-shaped hulls with wheels. This
provides commanders with a range of operational
capabilities to match the threat. Despite financial
constraints, there is a successful programme that allows
the Treasury to fund urgent operational requirements
to procure equipment within a shortened timescale.
Since 2001, more than £5.5 billion has been spent on
UORs for Afghanistan.
Lord Morris of Aberavon: My Lords, it is many
years since I had ministerial responsibility, under the
noble Lord, Lord Healey, for the equipment of all
our Armed Forces. My advisers then sought to prioritise
needs for research and development. I believe that
the Taliban is skilful in simplifying the components
of IEDs, which may be part of the problem. Has
any priority been given to technological means of
counteracting IEDs? If so, when was priority given to
research and development in this field?
Lord Astor of Hever: My Lords, this is a very
important question. Survivability is measured by a
number of factors, not just the width of the armour. A
vehicle’s ability to manoeuvre around a battlefield, its
firepower and its situational awareness capabilities all
contribute to its survivability along with other factors
such as tactics and procedures. A platform’s relative
strength in one of the areas of survivability will result
in a corresponding trade-off against another. For example,
a highly mobile platform will have to be lightweight
and therefore cannot have heavy armour, such as the
Jackal and the Coyote, whereas a well armoured platform
will lack mobility, such as the Mastiff. The same is true
of lethality as the greater the firepower the more the
weight will increase, which means less armour and less
mobility. As tactics change, so does the optimal platform
of choice.
Lord Burnett: My Lords, as my noble friend knows,
when assessing an armoured vehicle, a balance has to
be struck between physical protection, mobility and
firepower. All contribute to survivability and operational
effectiveness. Is my noble friend satisfied that the
upgraded Warrior meets these standards more effectively
than other similar vehicles? Does it require a further
upgrade? What is the opinion of those in our Armed
Forces who have to use these vehicles?
Lord Astor of Hever: My Lords, the Warrior is very
popular with our troops. I was out in Afghanistan two
weeks ago and I spent quite a lot of time talking to
members of the Armed Forces who work with this bit
of equipment. They are very impressed by it. It is seen
by insurgents as a tank and they will normally melt
away on its arrival. It provides excellent mobility and
survivability and is able to operate over the most
difficult terrain. I need to be careful what I say for
security reasons but I can say that the recent incident
was a combination of several really unlucky combinations.
No vehicle in theatre, including one with a V-shaped
hull, would have survived a similar explosion. Warrior
has been extensively upgraded, particularly to deliver
enhanced protection against IEDs. I have copies of the
upgrade work on the Warrior, which has been security
cleared. I am very happy to distribute them to any
noble Lords who would like to see them.
Lord Davies of Stamford: My Lords, anybody who
knows anything about this subject will know that the
noble Lord is absolutely right. There is a level of
weight of explosive which will destroy any vehicle,
including a main battle tank. That is just one unfortunate
fact of life. In my time I think that I ordered eight new
armoured vehicles, seven of which were procured
specifically for Afghanistan under the UOR initiative.
I hope that all of them were successful in their way.
Does the noble Lord agree with me that the outstanding
success among them has been Mastiff 2 and that there
must be a very strong case, even though Mastiff 2 was
ordered under the UOR programme, for keeping that
permanently in inventory, where almost certainly its
qualities will be necessary in any other deployment we
make in a third world context?
Lord Astor of Hever: My Lords, this Government
take the protection of our Armed Forces against IEDs
very seriously. I know that the previous Government
did so as well and I pay tribute to them for what they
did in this area, particularly as regards equipment
such as the Mastiff. I take seriously what the noble
Lord says about Mastiff in the future. We are looking
at that very closely.
3.38 pm
Business of the House
Timing of Debates
Moved by Lord Strathclyde
That the debate on the Motion in the name of
Lord Howell of Guildford set down for Friday
16 March shall be limited to three and a half hours
and that the debate on the Motion in the name of
Lord Sassoon set down for Thursday 22 March
shall be limited to five hours.

277 Business of the House [LORDS] Legal Aid, Sentencing and Punishment
278
Lord Barnett: I take the opportunity of asking the
noble Lord the Leader of the House why we have not
yet had an opportunity to debate the serious matter of
access by Members of the House to the Peers’ car
park. When I last raised it, the noble Lord’s deputy
told me that it would be a matter of course. But in
practice we have been prevented by putting down
Written Answers. If an early opportunity is not given,
I will have to put down a Motion myself to allow the
House to decide.
The Chancellor of the Duchy of Lancaster (Lord
Strathclyde): Of course, the noble Lord is free to do
whatever he wishes to do within the rules as laid down
in the Companion to the Standing Orders. However, I
am prepared to have a discussion with the Chairman
of Committees.
Motion agreed.
Misuse of Drugs Act 1971 (Amendment)
Order 2012
Statistics and Registration Service Act
2007 (Disclosure of Social Security and
Revenue Information) Regulations 2012
Immigration and Nationality (Fees)
Regulations 2012
Schedule 5 to the Anti-terrorism, Crime
and Security Act 2001 (Modification)
Order 2012
Motions to Refer to Grand Committee
3.39 pm
Moved by Baroness Anelay of St Johns
That the draft orders and regulations be referred
to a Grand Committee.
Motions agreed.
Legal Aid, Sentencing and Punishment of
Offenders Bill
Report (4th Day)
Relevantdocuments:21stReportfromtheConstitution
Committee, 22nd Report from the Joint Committee
on Human Rights.
3.40 pm
Clause 26 : Choice of provider of services etc
Amendment 119
Moved by Baroness Grey-Thompson
119: Clause 26, page 21, line 11, leave out subsection (2) and
insert—
“( ) Notwithstanding subsection (1), the Lord Chancellor’s
duty under section 1(1) must include a duty to secure that a
person eligible to legal aid advice is able to access it in a range of
forms at the outset, including securing the provision of initial
face-to-face advice.”
Baroness Grey-Thompson: My Lords, the amendment
is also in the names of the noble Lords, Lord Bach,
Lord Newton of Braintree and Lord Pannick. It seeks
to remove the provisions for both a mandatory telephone
gateway and the delivery of legally aided services
exclusively by telephone. Instead, the amendment would
insert a duty to promote the plurality of provision and
the delivery channels in order to have regard to the
needs of clients when procuring services.
The Government have said that they will introduce
the mandatory gateway initially in four areas of law.
However, the Bill gives the Government wide powers
to make legal aid services available exclusively by
telephone or other electronic means in the future. I
move the amendment for several reasons. A telephone-only
service may work for a large number of people. However,
it may adversely impact the most vulnerable clients,
who may struggle to explain complex problems over
the phone. I should like to ask the Minister to share
with us how the coalition Government will identify
the groups of people for whom this service is not
suitable, and the criteria that will be used, given that
the Government acknowledged the difficulty in their
impact assessment, which stated:
“Disabled people may … find it harder to manage their case
paperwork through phone services. They may also find it harder
to communicate via the phone or manage any emotional distress
more remotely”.
Indeed, it may be hard for many people even to
access a telephone suitable for dialling in. Many people
in current times do not have a land line but only a
mobile. Accessing a telephone gateway via a mobile
could be expensive. Due to waiting times, credit may
even run out before a conclusion has been reached.
Also, fewer public phones are available, and they are
perhaps not the best way to try to resolve issues. I am
also concerned that people with language or speech
difficulties may be deterred from seeking advice. Without
early intervention, it is likely that their problems will
become more complex and costly to resolve at a later
date, and their problems will be pushed to another
area.
We must also think carefully about training operators.
It is my understanding that they will receive some
training, but there will be no formal legal training. As
a result, operators may not be able effectively to interpret
the nuances of complex cases put to them, let alone
cases put to them by clients who may be confused or
have some difficulty in communicating.

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The Government’s savings from their proposals will
be negligible, and they may in fact cost more. The
June 2011 impact assessment predicted savings of
between just £1 million and £2 million—a relatively
small amount. In fact, a study by the Legal Services
Research Centre found that telephone advice can take
longer to resolve problems than face-to-face advice.
Face-to-face advice is important in many cases for
fostering trust and building relationships in order to
get to the right resolution.
We could also lose the current streamlining. Much
good work has been done by local advice agencies,
which collaborate to streamline advice, whereby clients
need to go through the advice journey only once. The
mandatory telephone gateway will fracture this again,
because clients would need to phone in first and then
be referred to special advice elsewhere.
During the Bill’s Second Reading and Committee
stage in your Lordships’ House, Peers from all sides
expressed the view that a telephone-only legal aid
service would not be appropriate for all users. While I
accept that it may suit many, those with language
difficulties, learning difficulties or mental health problems
may be disadvantaged. Vulnerable clients, perhaps
those experiencing bereavement, loss of a job or debt,
or those with low self-esteem or poor literacy or
numeracy, are much more likely to be disadvantaged.
The Government risk excluding vulnerable people
from accessing meaningful and effective legal advice. I
beg to move.
Lord Phillips of Sudbury: My Lords, I started in a
Suffolk solicitor’s office in the late 1950s. As was
common then and now, a lot of preliminary advice,
particularly to people who could not pay anything,
was given by junior members of staff. Ever since, I
have been imprinted by early recollections of how
difficult it is for some people to give instructions at all.
Later, I became non-executive director of a company
that ran the first telephone helpline in the country, and
observed first-hand, as one might say, how that worked.
Of course, a great many people in the present age feel
perfectly comfortable with telephones. Provided that
there is no cost factor, to which the noble Baroness,
Lady Grey-Thompson, referred, that may prove an
adequate way to give instructions. However, we know
that there are many, even now, who are not comfortable
with telephonic communication and for whom, if the
matter they are seeking advice on is painful to them or
arouses great emotion, it is not a satisfactory way to
try to impart instructions.
If one thinks of poor people—perhaps I should not
have said poor people, because they can be highly
articulate, but inarticulate people and those who cannot
begin to analyse their problem and do not know quite
what it is—the telephone is unlikely to be an effective
means to impart information without which the adviser
cannot hope to help them to best effect. We are all
wholly aware of the Government’s need and wish to
save expenditure on legal aid, but I put it to my noble
friend that this is the falsest of false economies. Anyone
who has given such advice will readily say that the cost
in the adviser’s time is released when the client is in
front of them, when they can help the client, who is
often confused or emotional, to give them the precious
information without which they cannot hope to do a
satisfactory job. On cost grounds, the savings assumed
for the telephone helpline as an exclusive channel of
advice are misconceived. More importantly, I think we
all agree, so it does not need emphasising any further,
that justice cannot be done if there is no alternative to
deliver advice by face-to-face means.
I end by saying that where the person needing help
is poor, confused and deprived, the notion that one
should add to that catalogue of disadvantage the
inability to access the only advice that will work for
them—face-to-face advice—would be a terrible indictment
of our claim to be a democracy where we are equal
before the law.
Lord Wigley: My Lords, I shall speak briefly in
support of Amendment 119, moved so persuasively
by the noble Baroness, Lady Grey-Thompson. The
amendment removes the provision contained in Clause 26
for the Lord Chancellor to make legal advice services
available by telephone gateway or other electronic
means. It would instead place a duty on the Lord
Chancellor to ensure that individuals eligible for legal
aid advice are able to access that advice in the forms
most suited to their needs, including initial face-to-face
contact.
Clause 26 is perhaps one of the most controversial
elements of the Bill and has attracted widespread
criticism from disability groups and campaigners. The
clause contains provisions to establish a compulsory
telephone gateway and to make this gateway the only
method by which advice in certain categories of law is
available. These proposals will in effect disfranchise
individuals with learning difficulties or disabilities that
impair their ability to communicate efficiently from
being able to access advice. As Scope has pointed out,
many legal aid clients experience complex and multifaceted
problems that would be difficult to explain over a
telephone, while those with limited English or with
language or speech problems may be deterred from
seeking advice at all. Common sense suggests that
cases that are not dealt with at an early stage will be
more costly to resolve at a later stage.
The proposals represent a retrograde step that would
put up shocking barriers to equal access to justice. The
Government acknowledged this in their own impact
assessment, recognising that:
“Disabled people … may find it harder to manage their case
paperwork through phone services. They may also find it harder
to communicate or manage any emotional distress via the phone”.
What is more, as pointed out once again by Scope,
these proposals could end up costing the Government
more money, as opposed to making savings. The impact
assessment published in June 2011 predicted modest
savings of about £1 million to £2 million, while a study
compiled by the Legal Services Research Centre found
that advice provided over the telephone can unnecessarily
prolong cases, as was mentioned a moment ago, and
thereby make them more difficult to resolve.
In summary, Clause 26 adds further stress to already
distressing situations and risks excluding vulnerable
individuals from accessing legal advice altogether. The
proposals go against the principle of equality of arms
before the law and, frankly, display a cavalier attitude

281 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
282
[LORD WIGLEY]
towards the needs of those with disabilities or impairments.
Individuals with disabilities should be treated with the
utmost respect and dignity in all areas of society. It is
our duty to ensure that they are not disfranchised by a
scheme that aims to provide justice on the cheap.
The Lord Bishop of Chichester: My Lords, I, too,
support the amendment. Quite a number of people
find it quite hard to find their own voice and need the
support of a friend. As a priest I know how many of
the clergy spend a lot of time accompanying people
and enabling them to speak for themselves: not providing
a voice for the voiceless but enabling the voiceless to
find a voice. It seems that a lot of people are simply
not able to put their own case individually over the
telephone and need to have friends and supporters
with them. It seems essential that this alternative means,
the face-to-face interview, is available for those people
so that they can have friends and advocates with them.
Lord Roberts of Llandudno: My Lords, I join in
supporting the amendment. In recent debates we have
spoken about Jobcentre Plus and how, when young
people are looking for work, face-to-face interviews
are far more effective than sitting before a computer
or dealing over the telephone. This also holds true for
those who need advice. I understand that all those
under the age of 18 will be able to have face-to-face
interviews. This should be extended because people
are asking for advice at the most vulnerable time in
their lives, with turbulent economic situations, job
losses and so on. They need advice, and as the right
reverend Prelate stated, and as I know as a minister of
the Methodist church, the telephone has its uses, a
helpline has its uses, but you sometimes need to sit
face to face with a person—to have a personal relationship
within which they find far greater comfort and guidance
than they would otherwise. I am happy to give my
support to the amendment.
Lord Newton of Braintree: My Lords, perhaps I
may intervene briefly once again in these debates, in
complete support of the points that have been made,
not least by the noble Baroness, Lady Grey-Thompson
and my noble friend Lord Phillips of Sudbury but to a
degree by everyone who has spoken.
As it happens, I have other recent brief experience
of this in my capacity as a trustee, along with the
noble Lord, Lord Rooker, of the National Benevolent
Fund for the Aged, which is concerned with isolated
elderly people. We have recently been lobbying Ministers
about the apparent assumption that everyone can deal
with things on the telephone or through the internet.
That is essentially—dare I say it?—a middle-class
presumption that does not necessarily apply to the
areas that we are talking about now. To their credit,
the Ministers whom we have lobbied are, I think I am
right in saying, having a round-table discussion tomorrow
on how the problem might be dealt with, and I recommend
that the Ministry of Justice joins in.
Anyone who has been an MP will have been confronted
in their surgery by people who just need to talk to
someone, with a sense of the body language, to sort
out one to one what may be important in their case,
what is not relevant to an appeal and so on. I notice
the noble Lord nodding. You can spend an hour
listening to people who want to tell you their life story
and it is only face to face that you can disentangle the
points on which they might have a case. This is important
to a lot of people who cannot really fend for themselves.
I confess that even I, with a pretty high-quality, advanced
education, still prefer, if possible, to go and see someone
rather than talk to them on the phone because the
body language and the feel of the conversation are
important. Therefore, I do not think that we should
underestimate these things.
In a curious way, the Government have acknowledged
that in the briefing that I have here. It says that,
although it is a telephone gateway, there has to be a
careful assessment of whether the advice can be provided
face to face or over the telephone. Indeed, they have
already decided not to include in the single telephone
gateway debt, in so far as it remains in scope,
discrimination and special educational needs, as well
as, I think, community care. What is it that makes
these things so different from other forms of advice?
There will be many community care cases, and there
are also welfare benefit needs, as well as a need for
advice on a lot of other aspects of people’s lives. Why
is this to be exempted but not the other things? In a
way, therefore, I think that the case has been conceded.
The costs cannot be large and the need is great, and I
think that we are entitled to ask the Government to
reconsider this proposal.
Lord Pannick: My Lords, I added my name to the
amendment and I did so for a very simple reason: this
amendment is truly about access to justice. The concern
surrounding the Bill is that legal aid should not be
provided only by means that are simply inaccessible to
a number of people, as explained comprehensively
and persuasively by the noble Baroness, Lady Grey-
Thompson.
The Earl of Listowel: My Lords, coming late to this
debate, I regret that I may have missed some of its
complexities, but I ask the Minister for reassurance on
one point. I very warmly welcome the publication this
week of the Government’s social justice strategy and
the proposal for an early intervention foundation. The
Secretary of State, Iain Duncan Smith, has recognised
for a very long time how important it is to intervene
early with families if their children are to have good
and successful lives. Therefore, my concern over this
issue is whether it is going to provide a further barrier
to parents who need vital services. Will they find it
difficult to attain those services and get access to the
law, and will their children suffer as a result? I understand
that children under the age of 18 will have access to a
person if they need to speak to someone, but I am
worried about disabled parents, parents who are very
challenged and perhaps poor parents who, as a result
of this change, may not get the support that they need
and their children may suffer as a consequence.
4pm
Lord Quirk: My Lords, I very much support the
amendment. As the noble Lord, Lord Newton, reminded
us, communication is by no means dependent solely
on ears and eyes. It is multisensory and—as the noble

283 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
284
Lord, Lord Phillips, hinted earlier—the greater one’s
need, the more senses one needs for satisfactory
communication. I hope very much that the Government
will accept the amendment.
Lord Campbell of Alloway: My Lords, I will take
very little time. I am very concerned about the situation,
for all the reasons that were given—and that were put
better than I could have put them. I ask only that
consideration be given, and an assurance of further
consideration, so that this proposal will not simply be
cast away in some form of dismissal. That is all I ask
for: an assurance that consideration will be given.
Lord Bach: My Lords, I am proud to be associated
with the amendment in the names of the noble Baroness,
Lady Grey-Thompson, and the noble Lords, Lord
Newton and Lord Pannick. The amendment is of the
greatest importance, and many people outside the
House are following it with exceptional interest.
It is perhaps important to remind the House that
the mandatory gateway will apply only to those elements
of social welfare law that are still in scope—including,
of course, for the moment, welfare benefits because of
a decision that the House took last week on an amendment
moved by the noble Baroness, Lady Doocey. That is a
statement of the obvious, because those areas of social
welfare law that the Government intend to take out of
scope will be quite irrelevant for these purposes. There
is no possibility of legal aid in those cases. In effect, the
Government are saying that people with those legal
problems will have to fend for themselves if they have
no money. That is a pretty shocking state of affairs.
We have had a short but powerful debate in this
House today—and we had a very powerful one almost
three months ago at the end of the first day of Committee,
on 20 December 2011. Very powerful speeches were
made. I have in mind that of the noble Lord, Lord
Shipley, whose final words were:
“There are real dangers that some of those most in need of
help will fail to secure it through a mandatory telephone gateway”.—
[Official Report, 20/12/11; col. 1764.]
The noble Lord, Lord Phillips of Sudbury, made yet
another powerful speech today. The one he made on
that occasion was powerful, too. He said:
“If it is mandatory for those seeking assistance to go through
a telephone gateway, we will cast adrift a significant minority of
our fellow citizens who will never use a telephone gateway for the
sorts of problems with which they are confronted”.—[Official
Report, 20/12/11; col. 1766.]
The Minister says from a sedentary position that there
is no evidence of that. What an unbelievable response.
One only has to know from human nature—from
living in the real world rather than the world of
Whitehall—that that is how people are. It is about
time that the Government started taking people as
they are rather than as they want them to be. There
were powerful speeches also from the Liberal Democrat
Benches on that occasion.
I made the point that it was nearly three months
ago because we have had no hint of a concession in all
that time. We know from a letter that a telephone call
will not be free, as was suggested at the time. There
will be a cost to the client who has to make the call.
It will not be huge, but it will be there—and that is
another factor that will apply. It is simply common
sense that to have a mandatory gateway for all clients
seeking legal advice is absolutely inflexible and will
almost certainly lead to a number of people who
clearly should be helped receiving no help at all. It will
lead to injustice after injustice.
The Bolton CAB is a large CAB which covers all
these fields and has a legal aid contract. It runs an
advice surgery from time to time. Yesterday it tried an
experiment. Every client who came in had their tale
told in general terms by way of a tweet, in other words
on Twitter, so that one could read each one of these
cases during the course of the morning and afternoon
while this surgery lasted. One could see from reading
these how the world of a busy CAB or law centre or
advice centre actually worked in practice. There were
126 clients who sought legal advice on social welfare
issues and they covered practically everything that you
could think of. I have no doubt that some of those
clients were well able to make a telephone call and
start proceedings in that particular way, and I am an
undisguised fan of telephone advice when it is appropriate.
But are the Government really saying, as I suspect
they are, that all 126 of those clients would have been
able to do this? Are they saying it is not highly
advantageous to have face-to-face contact in some
cases? And are they really saying that someone who
turned up to a CAB should be turned away and told to
call a hotline, as will happen unless this amendment is
passed? Can you think of a more bureaucratic, fussy
and less efficient system and one that is less reflective
of the way people actually live their daily lives? I
would argue that it is an absurd proposition which is
un-British in the sense that it is one-size-fits-all and
too dirigiste and inflexible an approach.
Sometimes Governments just get things completely
wrong and Parliament has some sort of duty to say so.
It actually helps Governments in the long run if they
do not charge off in the wrong direction. Here is a
short story. I remember when I was a Minister sitting
where the Minister is, in the same department, putting
forward some foolish, to put it mildly, proposition
and then seeing, when the vote was called, many of my
own supporters walking past in order to vote in
the Opposition’s Lobby and losing the vote for the
Government by a large amount. It was the right thing
for them to do. Actually, there was so many of them
that none of them could be picked out and dealt with
later. There is an advantage in numbers sometimes.
And they need not even be afraid on this occasion of
the noble Lord, the Deputy Chief Whip of the House.
Frankly, I would argue that this is one of those instances.
If the Government are defeated on this issue and if the
Liberal Democrats could just bring themselves for
once to vote against the Government, the world would
not stop, the Government would not fall, but an
enormous mistake might be averted and Parliament
would have done the right thing.
The Minister of State, Ministry of Justice (Lord
McNally): My Lords, in case my colleagues on the
Liberal Democrat Benches missed it, that was a subtle
attempt by the noble Lord, Lord Bach, to woo them
into the Aye Lobby. All that I can say in this technological
age is, just think what the noble Lord, Lord Bassam,
will be tweeting about them if they do not do as he
suggests.

285 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
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[LORD MCNALLY]
Throughout this Bill it has been very difficult to
reply to a debate, trying to deal with very narrow,
specific terms, when the noble Lord, Lord Bach, constantly
makes his case in the broadest terms. We are not
forcing everybody through a telephone gateway; we
are doing a specific and very narrowly drawn test. I
ask noble Lords to make their decision on the facts.
We make jokes about this House and its
otherworldliness, but we are living in the most
communications-savvy generation in our history. I do
not just mean teenagers and young people; I mean
silver surfers and people right through. They buy on
eBay; they use telephones and new technology in a
very broad way. It is patronising to assume that people
cannot make use of it. Of course, we are aware that
there may be exceptions. That is why, when noble
Lords come to vote, it would be worth listening carefully
to what we actually propose to do and what safeguards
we are putting in place, rather than what I would call
the broad-brush approach adopted by the noble Lord,
Lord Bach.
There will be safeguards. Face-to-face advice will
remain an option in the exceptional circumstances
when there are callers for whom adaptations cannot
be made to ensure that there is an appropriate level of
service. Our starting point is that telephone advice is
effective and efficient. The Community Legal Advice
helpline figures for 2010-11 show that more than half
a million calls were made to the service. The 2010
survey of clients who subsequently received advice
from the specialist service showed that 90 per cent of
clients found the advice given helpful.
The benefits of electronic services generally and the
Community Legal Advice helpline service in particular
are twofold. The first benefit is access. These services
particularly help people with specific needs who find it
difficult to get to face-to-face services; for example,
those living in remote areas or who have a physical
disability. Callers can access the Community Legal
Advice helpline service at a time and place convenient
to them. The second benefit is quality. Contrary to the
assumption that face-to-face advice is always better,
specialist telephone advice providers are currently required
to meet higher quality standards than their face-to-face
counterparts. For both these reasons, the Government
believe that the Community Legal Advice helpline
should be the mandatory gateway for applying for
legal aid.
However, I can confirm today that the Government
have listened to concerns and will not proceed with the
proposal to include community care as one of the
initial areas of law for which clients will be required to
use the mandatory single gateway. We acknowledge
particular challenges in delivering a quality service to
community care clients. The Government have always
recognised that this is a complex area of law and said
in the impact assessment that around half of clients in
this area would require face-to-face meetings with legal
representatives even where only legal help is being
provided.
We have heard since from stakeholders that individuals’
circumstances can be so unique that face-to-face meetings
are frequently required to deal with problems in this
area even where only legal help is being provided. We
have accepted that the numbers of community care
clients requiring face-to-face advice is in fact likely to
be more than our original estimates, and we are therefore
not proceeding with the proposal to include community
care as one of the initial areas of law for which clients
will be required to use the mandatory single gateway.
Lord Newton of Braintree: My Lords, I acknowledge
that point. I would also like to acknowledge that I
inadvertently misquoted the briefing. I referred to
community care but I also said that debt, discrimination
and special educational needs were covered—I got
that wrong. However, I come back to my basic point.
What distinguishes the potential recipients of community
care from the recipients of welfare benefits and a lot of
other things? The same people will have needs elsewhere,
and they will need face-to-face help not only with their
community care needs.
4.15 pm
Lord McNally: That is what I call a second bite of
the cherry on Report. However, I was in fact about to
clarify, for the benefit of the House, that indeed the
noble Lord was wrong, and that the first gateway
areas of law will therefore be debt, discrimination, and
special educational needs.
As the House is aware, the Government have been
working with a range of groups, including equality
organisations, to discuss the many adaptations and
adjustments already in use through the existing community
legal advice helpline. As a result of this work, we are
comfortable that meaningful access to legal aid services
for the majority of callers in the areas of law that are
to be covered by the mandatory gateway is very much
achievable. The mandatory gateway will, therefore, be
relatively narrowly drawn, and we will proceed sensibly
and prudently. This is precisely about ensuring that
services remain accessible.
We believe that these are the right areas to begin with,
because the community legal advice helpline already
offers specialist telephone advice on debt, special
educational needs and some discrimination cases. We
trust that this provides sufficient knowledge on which
to base our volume estimates and have a good sense
about the realism of ensuring accessible services. Now
that we have made further movement on the issue—a
matter that I know the noble Baroness feels strongly
about—I hope that she may be able to meet us halfway,
particularly given the safeguards that we are also
putting in place, which will apply across the three
remaining areas.
The Government are not only committed to a review
of the whole implementation, including operation, of
the gateway in the three areas of law, but will ensure
that face-to-face advice continues to be available where
it is genuinely necessary. All callers will need to be
assessed on a case-by-case basis to determine whether
they should be offered advice only over the telephone.
Those making the assessment will be required to have
an awareness of the difficulties faced by callers, who
may have various conditions such as learning impairments,
hearing impairments, and mental health conditions.
Where they assess callers as not being suitable, even

287 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
288
with a reasonable adjustment, to receive telephone
legal aid advice, callers will be referred to face-to-face
providers. The key consideration will be whether the
individual client is able to give instructions over the
telephone and act on the advice given over the telephone.
As I have previously stated, specialist telephone
advice providers are currently required to meet higher
quality standards than their face-to-face counterparts.
I understand that the LSC is reviewing the quality
standards of all contracts in order to ensure that they
remain appropriate and fit for purpose once this Bill is
implemented. However, while the precise detail is still
being developed, I can assure the House that the
tender process, overall quality requirements and contract
management approach for the specialist telephone
advice providers will mean that they will continue to
meet a higher service standard than that expected of
equivalent face-to-face advice providers, and that this
will include a specific requirement for appropriate
training both in relation to understanding individual
needs and the assessment process itself. Noble Lords
should therefore rest assured that access will be protected
under these plans.
A number of specific points were made. My noble
friend Lord Roberts argued that the face-to-face guarantee
for under-18s should be extended to age 25. Again, I
must say to him that those aged 18 to 25 must be the
most telephone-friendly generation in our history, and
I do not think that we would extend it to 25.
The noble Baroness, Lady Grey-Thompson, made
the point that helpline operators are not legally qualified.
No, but they are fully trained to identify key words or
issues from the client’s description, and then—and this
is important—pass the client on to the appropriate
legally trained adviser. She also asked how we will
assess whether a person is in need of special attention.
As I have said, all callers will be assessed on a case-by-case
basis to determine whether they should be offered
advice over the telephone or assessed for direct face-to-face
advice. It is also possible for callers to have an authorised
third party to make the initial call for them. Therefore,
one should look past the broad brush swept by the
noble Lord, Lord Bach, and the suggestion that this is
a fundamental bar to access to legal aid.
I say to the noble Lord, Lord Pannick, that earlier
this year I went to the Law Society awards ceremony
for the best law officers of the year. I was extremely
impressed by how many of the prize winners gave
distance advice either by telephone or via the internet.
It is the age in which we live.
In this explanation, I hope that noble Lords will
understand that this is a narrow scope attempt at
using a telephone gateway. Built into it, in training the
people undertaking it, is the discretion to refer to other
specialists and the right of those specialists to offer
face-to-face advice if an inquiry warrants it. Noble
Lords can see that that is a far road from that painted
by some of the speeches today. We have also made a
significant move in response to the representations
made to us. Based on the facts and the arguments, I
hope that the noble Baroness will withdraw her
amendment and that, if not, noble Lords will support
me in the Division Lobby this afternoon.
The Earl of Listowel: Before the noble Lord sits
down, I thank him for clarifying the guidance to those
who will take these telephone calls. Will the Minister
consider giving these people guidance on the fact that
a disabled person may have parental responsibilities,
so that if they have children additional thought might
be given to a face-to-face meeting? If for some reason
this does not work, we harm not only the adult but
also the children.
Lord McNally: I would certainly consider that. As
so often with suggestions from the noble Earl, that is
well worth considering. However, to put it to him the
other way round, if the person phoning has children
the benefit of being able to get advice at a distance by
telephone at a time of their choice could also be an
advantage.
Lord Campbell of Alloway: I thank the noble Lord.
His speech opened the gateway, for which I am grateful,
to the face-to-face, one-by-one necessity which arises
in a lot of desperate cases. Therefore, on that basis, I
accept that the Government will do the right thing.
Lord McNally: I am very grateful that my eloquence
has won the noble Lord over. I would ask the House to
consider what he has rightly drawn attention to: namely,
that some people may be in need of an hour-long chat,
which is why the gateway is important for the volume
that we are dealing with and for making sure that
people get the right and the best advice as quickly as
possible.
Baroness Grey-Thompson: My Lords, I thank the
Minister for his response and I recognise that there
has been much positive movement. I also thank all
noble Lords who contributed to the debate and have
expressed their support. I will not précis each contribution,
but I feel that there is significant support on all sides
of the House. Perhaps I may quote the noble Lord,
Lord Wigley, who said that this section is controversial.
It is about respect and dignity.
In his response to the noble Lord, Lord Bach, the
Minister said that there is no evidence that people will
be reluctant to use the telephone gateway. I am afraid
that I disagree, and I do not believe it is patronising to
say that people will have difficulties with or will be put
off from communicating in certain ways. The noble
Lord, Lord Pannick, said that it is about access to
justice. People should be able to access justice in the
most appropriate way. I still do not feel that we are in
the right place yet because some cases are incredibly
complex. While I welcome the clarity on the training of
operators—it is very positive news that the operators
of the telephone lines will be better trained than
those who do face-to-face interviews—it still comes
down to the ability of the client to use the right
keywords. If they do not do that or are not able to
express things in the right way, I am very concerned
that we will be doing a great disservice to a huge
number of people.
Again, I thank the Minister, but I do not believe
that he has gone far enough, and I wish to test the
opinion of the House.

289 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
290
4.25 pm
Division on Amendment 119
Contents 234; Not-Contents 206.
Amendment 119 agreed.
Aberdare, L.
Adams of Craigielea, B.
Adebowale, L.
Ahmed, L.
Allenby of Megiddo, V.
Alton of Liverpool, L.
Anderson of Swansea, L.
Andrews, B.
Armstrong of Hill Top, B.
Bach, L.
Bakewell, B.
Barnett, L.
Bassam of Brighton, L.
Beecham, L.
Berkeley, L.
Best, L.
Bew, L.
Bhattacharyya, L.
Billingham, B.
Bilston, L.
Blackstone, B.
Blood, B.
Boothroyd, B.
Borrie, L.
Boyce, L.
Bradley, L.
Bragg, L.
Brennan, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Browne of Belmont, L.
Browne of Ladyton, L.
Campbell-Savours, L.
Carter of Coles, L.
Chichester, Bp.
Clancarty, E.
Clarke of Hampstead, L.
Clinton-Davis, L.
Cobbold, L.
Collins of Highbury, L.
Colville of Culross, V.
Condon, L.
Corston, B.
Coussins, B.
Cox, B.
Craig of Radley, L.
Craigavon, V.
Cunningham of Felling, L.
Davidson of Glen Clova, L.
Davies of Coity, L.
Davies of Oldham, L.
Davies of Stamford, L.
Dean of Thornton-le-Fylde,
B.
Deech, B.
Donaghy, B.
Donoughue, L.
Drake, B.
Dubs, L.
Elder, L.
Elystan-Morgan, L.
Emerton, B.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Division No. 1
CONTENTS
Evans of Watford, L.
Exeter, Bp.
Falconer of Thoroton, L.
Falkland, V.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Fellowes, L.
Finlay of Llandaff, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Golding, B.
Gould of Potternewton, B.
Graham of Edmonton, L.
Grantchester, L.
Greenway, L.
Grenfell, L.
Grey-Thompson, B. [Teller]
Griffiths of Burry Port, L.
Grocott, L.
Guthrie of Craigiebank, L.
Hall of Birkenhead, L.
Hameed, L.
Hannay of Chiswick, L.
Hanworth, V.
Harries of Pentregarth, L.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Hennessy of Nympsfield, L.
Hereford, Bp.
Hilton of Eggardon, B.
Hollick, L.
Hollis of Heigham, B.
Howarth of Newport, L.
Howe of Idlicote, B.
Howells of St Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Hylton, L.
Irvine of Lairg, L.
Janner of Braunstone, L.
Jones, L.
Jones of Whitchurch, B.
Judd, L.
Kennedy of Southwark, L.
Kilclooney, L.
King of West Bromwich, L.
Kingsmill, B.
Kinnock, L.
Kinnock of Holyhead, B.
Kirkhill, L.
Knight of Weymouth, L.
Krebs, L.
Laming, L.
Layard, L.
Lea of Crondall, L.
Lichfield, Bp.
Liddell of Coatdyke, B.
Liddle, L.
Lister of Burtersett, B.
Listowel, E.
Lloyd of Berwick, L.
Lytton, E.
McAvoy, L.
McConnell of Glenscorrodale,
L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate,
L.
McKenzie of Luton, L.
Mandelson, L.
Martin of Springburn, L.
Masham of Ilton, B.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Mitchell, L.
Monks, L.
Morgan, L.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Manchester, L.
Morris of Yardley, B.
Morrow, L.
Neill of Bladen, L.
Newcastle, Bp.
Newton of Braintree, L.
Nye, B.
O’Loan, B.
O’Neill of Bengarve, B.
O’Neill of Clackmannan, L.
Palmer, L.
Pannick, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Paul, L.
Pendry, L.
Pitkeathley, B.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prescott, L.
Prosser, B.
Puttnam, L.
Quirk, L.
Radice, L.
Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Allan of Hallam, L.
Anelay of St Johns, B. [Teller]
Armstrong of Ilminster, L.
Ashton of Hyde, L.
Astor, V.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Barker, B.
Bates, L.
Benjamin, B.
Berridge, B.
Black of Brentwood, L.
Bonham-Carter of Yarnbury,
B.
Bottomley of Nettlestone, B.
Bowness, L.
Bradshaw, L.
NOT CONTENTS
Ramsay of Cartvale, B.
Ramsbotham, L.
Rea, L.
Reid of Cardowan, L.
Rendell of Babergh, B.
Richard, L.
Rosser, L.
Rowe-Beddoe, L.
Rowlands, L.
Royall of Blaisdon, B.
St John of Bletso, L.
Saltoun of Abernethy, Ly.
Sandwich, E.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Sheldon, L.
Sherlock, B.
Simon, V.
Singh of Wimbledon, L.
Slim, V.
Smith of Basildon, B.
Snape, L.
Soley, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Touhig, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turnberg, L.
Turner of Camden, B.
Wall of New Barnet, B.
Walton of Detchant, L.
Warner, L.
Warnock, B.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Wigley, L.
Williams of Baglan, L.
Williams of Elvel, L.
Williamson of Horton, L.
Woolf, L.
Woolmer of Leeds, L.
Young of Norwood Green, L.
Bridgeman, V.
Brinton, B.
Brittan of Spennithorne, L.
Broers, L.
Brooke of Sutton Mandeville,
L.
Brougham and Vaux, L.
Browning, B.
Burnett, L.
Butler of Brockwell, L.
Byford, B.
Caithness, E.
Cathcart, E.
Chalker of Wallasey, B.
Chidgey, L.
Chorley, L.
Clement-Jones, L.
Colwyn, L.
Cope of Berkeley, L.
Cotter, L.
Courtown, E.

291 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
292
Crathorne, L.
Crickhowell, L.
Dannatt, L.
De Mauley, L.
Dear, L.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
Dykes, L.
Eccles, V.
Eccles of Moulton, B.
Eden of Winton, L.
Elton, L.
Empey, L.
Erroll, E.
Falkner of Margravine, B.
Faulks, L.
Feldman, L.
Fellowes of West Stafford, L.
Fink, L.
Fookes, B.
Forsyth of Drumlean, L.
Fowler, L.
Framlingham, L.
Fraser of Carmyllie, L.
Freeman, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
German, L.
Glasgow, E.
Glenarthur, L.
Glentoran, L.
Goodhart, L.
Goodlad, L.
Grade of Yarmouth, L.
Hamwee, B.
Hanham, B.
Harris of Peckham, L.
Henley, L.
Heyhoe Flint, B.
Higgins, L.
Hill of Oareford, L.
Hodgson of Astley Abbotts,
L.
Home, E.
Howard of Rising, L.
Howe, E.
Hunt of Wirral, L.
Hussain, L.
Hussein-Ece, B.
Inglewood, L.
James of Blackheath, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jolly, B.
Jones of Birmingham, L.
Jopling, L.
Kirkham, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Kramer, B.
Lawson of Blaby, L.
Lee of Trafford, L.
Lester of Herne Hill, L.
Levene of Portsoken, L.
Lingfield, L.
Linklater of Butterstone, B.
Liverpool, E.
Loomba, L.
Lothian, M.
Luce, L.
Luke, L.
Lyell, L.
McColl of Dulwich, L.
MacGregor of Pulham
Market, L.
Mackay of Clashfern, L.
Maclennan of Rogart, L.
McNally, L.
Maddock, B.
Magan of Castletown, L.
Mancroft, L.
Maples, L.
Mar and Kellie, E.
Marks of Henley-on-Thames,
L.
Marland, L.
Marlesford, L.
Mayhew of Twysden, L.
Miller of Chilthorne Domer,
B.
Montrose, D.
Morris of Bolton, B.
Naseby, L.
Neville-Jones, B.
Newby, L.
Noakes, B.
Northbrook, L.
Northover, B.
O’Cathain, B.
Oppenheim-Barnes, B.
Palmer of Childs Hill, L.
Palumbo, L.
Perry of Southwark, B.
Popat, L.
Randerson, B.
Razzall, L.
Rees-Mogg, L.
Rennard, L.
Renton of Mount Harry, L.
Ribeiro, L.
Risby, L.
Roberts of Conwy, L.
Ryder of Wensum, L.
Sassoon, L.
Scott of Needham Market, B.
Seccombe, B.
Selkirk of Douglas, L.
Selsdon, L.
Shackleton of Belgravia, B.
Sharkey, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shipley, L.
Shutt of Greetland, L.
Skelmersdale, L.
Smith of Clifton, L.
Spicer, L.
Stedman-Scott, B.
Steel of Aikwood, L.
Stewartby, L.
Stirrup, L.
Stoneham of Droxford, L.
Storey, L.
Stowell of Beeston, B.
Strasburger, L.
Strathclyde, L.
Sutherland of Houndwood, L.
Swinfen, L.
Taverne, L.
Taylor of Holbeach, L.
Teverson, L.
Thomas of Gresford, L.
Thomas of Walliswood, B.
Thomas of Winchester, B.
Tope, L.
Trefgarne, L.
Trenchard, V.
Trimble, L.
True, L.
Trumpington, B.
Tyler, L.
Verma, B. [Teller]
Vinson, L.
Wade of Chorlton, L.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
4.39 pm
Walmsley, B.
Waverley, V.
Wei, L.
Wilcox, B.
Willis of Knaresborough, L.
Willoughby de Broke, L.
Younger of Leckie, V.
Schedule 3:Legalaidforlegalpersons
Amendments 120 to 122
Moved by Lord McNally
120: Schedule 3, page 157, line 43, leave out “for”and insert “to”
121: Schedule 3, page 158, line 16, leave out “for”and insert “to”
122: Schedule 3, page 158, line 20, leave out “for”and insert “to”
Amendments 120 to 122 agreed.
Schedule 4:Transfer of employees and property etc of
Legal Services Commission
Amendment 123
Moved by Lord McNally
123: Schedule 4, page 164, line 4, leave out “1”and insert “37(1)”
Lord McNally: My Lords, with the implicit trust
that the House has in me—I am glad to see the noble
Lord, Lord Bach, nodding vigorously—I assure the
House that these are minor technical amendments.
They are really a belt-and-braces exercise to ensure
that there are no gaps between the Bill coming into
force in April 2013 and various contractual arrangements
that we must have. They are minor technical amendments
to cover an eventuality in which things did not quite
knit together in passing from one Bill to another. I
hope that the House will accept that assurance. I have
written explaining in detail, and the letter is in the
Library of the House. I beg to move.
Amendment 123 agreed.
Amendments 124 and 125
Moved by Lord McNally
124: Schedule 4, page 164, line 4, at end insert “(subject to
regulations under sub-paragraph (2))”
125: Schedule 4, page 164, line 7, at end insert—
“(2) The Lord Chancellor may by regulations amend or otherwise
modify the definition of “the transfer day” in sub-paragraph (1).”
Amendments 124 and 125 agreed.
Clause 38 : Consequential amendments
Amendment 126
Moved by Lord McNally
126: Clause 38, page 28, line 2, at end insert—

293 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
294
“(2) Where the Lord Chancellor considers it appropriate as
part of the arrangements for effecting the transition from the
operation of Part 1 of the Access to Justice Act 1999 to the
operation of this Part of this Act, the Lord Chancellor may by
regulations make provision requiring or enabling prescribed 1999
Act services to be made available to individuals or other persons
under this Part for a period specified or described in the regulations.
(3) In subsection (2) “1999 Act services” means services which,
immediately before the day on which the first regulations under
that subsection come into force, may be funded under Part 1 of
the Access to Justice Act 1999.
(4) Where the Lord Chancellor considers it appropriate for the
Legal Services Commission to cease to exist before this Part is
brought fully into force, the Lord Chancellor may by regulations
make provision for the purpose of requiring or enabling the Lord
Chancellor and the Director, or persons authorised by the Lord
Chancellor or the Director, to carry out LSC functions for a
period specified or described in the regulations.
(5) In subsection (4) “LSC functions”means functions conferred
or imposed on the Legal Services Commission by or under Part 1
of the Access to Justice Act 1999.
(6) Regulations under subsection (4) may not include provision
requiring or enabling the Lord Chancellor—
(a) to take decisions about whether services should be
funded in individual cases, or
(b) to give directions or guidance about the carrying out of
functions under Part 1 of the Access to Justice Act 1999
in relation to individual cases.
(7) Regulations under this section—
(a) may amend, repeal, revoke or otherwise modify Part 1 of
the Access to Justice Act 1999, this Part of this Act, any
other Act and any instrument made under an Act;
(b) may describe a period, in particular, by reference to the
coming into force of a provision of this Part of this Act
or the repeal of a provision of Part 1 of the Access to
Justice Act 1999.
(8) The requirement for regulations under this section to specify
or describe a period does not prevent the making of further
regulations under this section.
(9) The powers to make regulations under this section are
without prejudice to the generality of the powers to make regulations
under the other provisions of this Part and under section 138.
(10) In this section “Act” includes an Act or Measure of the
National Assembly for Wales.”
Amendment 126 agreed.
Clause 40 : Orders, regulations and directions
Amendment 127
Moved by Lord McNally
127: Clause 40, page 28, line 11, leave out “specified period”
and insert “period specified or described in the order, regulations
or direction”
Amendment 127 agreed.
Amendment 128
Moved by Lord McNally
128: Clause 40, page 28, line 28, leave out “subject to subsection (6)”
and insert “unless it is an instrument described in subsection (6)
or (9)”
Lord McNally: My Lords, the amendment deals
with matters on which I have written to colleagues; the
letter is in the Library of the House. It is in response to
the report of the Delegated Powers and Regulatory
Reform Committee, which recommended that the
procedures for regulations under Clause 10(1)(b) should
be subject to the affirmative resolution procedure.
These regulations will set out the merits criteria for
civil legal aid and set out rules around the prospects of
success and cost-to-benefit ratios. The Government
accepted this recommendation subject to allowing for
a provision as in the Access to Justice Act to allow
changes to be made without delay where appropriate.
I hope that noble Lords will see this series of amendments
as putting those recommendations into place. I beg to
move.
Amendment 128 agreed.
Amendment 129
Moved by Lord McNally
129: Clause 40, page 28, line 34, at end insert—
“( ) regulations under section 10(1)(b), other than
regulations in respect of which the Lord Chancellor has
made an urgency statement;
( ) regulations under section 12(9);”
Amendment 129 agreed.
Amendment 130 not moved.
Amendments 131 and 132
Moved by Lord McNally
131: Clause 40, page 28, line 41, at end insert—
“( ) regulations under section 38 that amend or repeal a
provision of an Act (as defined in that section), other
than regulations revoking such regulations or inserting
or repealing provision previously repealed or inserted by
such regulations;”
132: Clause 40, page 29, line 2, at end insert—
“(8) An urgency statement is a statement that the Lord Chancellor
considers that it is desirable for the regulations to come into force
without delay for the reasons given in the statement.
(9) Where a statutory instrument contains regulations under
section 10(1)(b) in respect of which the Lord Chancellor has
made an urgency statement—
(a) the regulations may not come into force before the
instrument and the statement are laid before Parliament,
and
(b) the regulations cease to have effect at the end of the
period of 120 days beginning with the day on which the
instrument is made unless the instrument is approved by
a resolution of each House of Parliament before the end
of that period.
(10) In reckoning the period of 120 days no account is to be
taken of any time—
(a) during which Parliament is dissolved or prorogued, or
(b) during which both Houses are adjourned for more than
4days.
(11) Where regulations cease to have effect under subsection
(9) that does not affect—
(a) anything previously done in reliance on the regulations, or
(b) the making of further regulations.”
Amendments 131 and 132 agreed.

295 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
296
Amendment 132A
Moved by Lord Beecham
132A: Before Clause 43, insert the following new Clause—
“Qualified one-way cost-shifting and uplift in general damages
(1) Before making an order to commence sections 43, 45 or 46
the Lord Chancellor must—
(a) establish a one-way cost-shifting for civil litigation in
accordance with this section; and
(b) increase the quantum of general damages for pain
suffering and loss of amenity by 10% above the levels
awarded immediately before this Part comes into force.
(2) A “one-way cost-shifting for civil litigation” means a
regime that applies to a claimant regardless of means, where that
person has entered into a funding arrangement by which he or she
receives legal services to pursue proceedings against a defendant
covered by insurance or self-insurance.
(3) Subject to subsection (4), the general rule that the court
will order an unsuccessful claimant to pay the costs of a successful
claimant shall not apply to a claimant within the regime.
(4) The court may apply the general rule where the court
finds—
(a) the claim was fraudulent;
(b) the claim was so unreasonable that it was or could have
been struck out on the grounds that it was frivolous,
vexatious or an abuse of process; or
(c) in respect of a claim for damages, the cost consequences
under Part 36 of the Civil Procedure Rules apply, save
that the proportion of a defendant’s costs payable by a
claimant within the regime, whether fixed or assessed,
shall be limited to 10% of the damages awarded to the
claimant.
(5) In the event that a claimant within the regime discontinues
his action, the general rule shall not apply, unless the court on
application finds the action to have been fraudulent, frivolous or
vexatious.
(6) In this section, a “funding arrangement”means an arrangement
where the claimant has—
(a) entered into a conditional fee agreement or a collective
conditional fee agreement which provides for a success
fee within the meaning of section 58(2) of the Courts
and Legal Services Act 1990; or
(b) taken out an insurance policy to which section 58C of
the Courts and Legal Services Act 1990 (recovery of
insurance premiums by way of costs) applies.”
Lord Beecham: My Lords, once again I declare an
interest as a non-paid consultant of a firm of solicitors
in which I was a senior partner. Having slipped and
fallen on my way to my office at Fielden House, I am
tempted to declare an interest as a potential claimant
against Westminster City Council. But even I would
not have the effrontery to pursue such a claim. There
may be no shortage of noble Lords who would proffer
their services, although I am doubtful about that, but I
may consult one of my clinical colleagues before the
dayisover.
Today we reach Part 2 of the Bill, a part that has
received little scrutiny in either House or in the media.
Yet it deals with matters of profound importance. The
conditional fee agreements system, which replaced
and supplemented some areas of legal aid, is as important
in ensuring access to justice for people of moderate
means and all people in certain areas of law not within
the scope of legal aid as legal aid has been to the
poorest. Without a robust and easily accessible civil
justice system, victims of terrible wrongs—industrial
disease, clinical negligence, privacy violation, such as
that suffered by Bob and Sally Dowler, and even
grotesque human rights abuses, as in the case of Trafigura
about which we will hear more later this afternoon—will
not get justice.
4.45 pm
Today’s debate therefore matters to potentially millions
of people in terms of securing access to justice and
redress for harm. Part 2 is not driven by the need to
reduce public expenditure, which is repeatedly cited as
the justification for the drastic reductions in legal aid
when we were discussing Part 1, and for which Part 1
now effectively provides. Part 2 instead seeks to implement
some but, crucially, not all of the recommended reforms
of the civil litigation system proposed by Lord Justice
Jackson after an exhaustive review of it.
We heard in debates on Part 1 that the Government
have studiously ignored the strong advice on retaining
the scope of and eligibility for legal aid, but it does not
stop there. They are also ignoring Lord Justice Jackson’s
recommendations for a modest increase of general
damages to help successful claimants meet the cost of
success fees and “after the event” insurance. Hitherto
these have been met by defendants under the conditional
fee system. Furthermore, they are not implementing
an important recommendation to protect claimants
with an arguable case from paying defendants’ costs
by introducing qualified one-way costs shifting, except
in personal injury cases. Qualified one-way costs shifting
would mean that an unsuccessful claimant would not
be liable to pay the costs of a successful defendant.
In this new system the losers would be successful
claimants who forfeit part of their damages to pay
success fees and the cost of “after the event” insurance,
and successful defendants and their insurers under the
QOCS system. The losers also include people who
would be deterred from bringing a claim by the cost of
“after the event” insurance to cover their own
disbursements. The winners will be unsuccessful claimants,
whose liability for costs would be met by the defendants,
and losing defendants. It might be thought a somewhat
perverse set of outcomes.
It is as well to remember the rationale for introducing
success fees in the first place. This was to encourage
lawyers to take on riskier cases, some of which would
be lost, at no cost to their clients; the lawyer is compensated
for the risk by the success fees in cases which they win.
The Lord Chancellor and some Members of your
Lorships’ House have suggested that the Government’s
proposals of limited success fees to be paid by successful
claimants will lead to a competition between lawyers
and drive down success fees. However, the corollary of
that is that lawyers will be less disposed to take cases
with a significant degree of risk so that the legally
squeezed middle will find themselves denied access to
justice in the same way that 650,000 people and their
dependants will be denied access. For them, legal aid
will no longer be available unless they have a high
prospect of success.
We are proposing that QOCS, recommended by
Lord Justice Jackson, should be embodied in the Bill
and not be delegated as a subject for the Civil Procedure
Rule Committee, a point made in Committee by the
noble and learned Baroness, Lady Butler-Sloss. We agree

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[LORD BEECHAM]
with the Civil Justice Council that the system should
be simple. It should apply to all forms of litigation,
not just personal injury, and it should be neither
means-tested nor subject to a minimum payment by
the claimant, as has apparently been suggested by the
Ministry of Justice. Perhaps when he replies the Minister
will comment on the Government’s intentions in those
respects.
Subsection (4) of my amendment identifies the
circumstances in which liability for costs would not
shift, including cases where a claimant fails to beat a
reasonable offer made by the defendant. The second
limb of the amendment deals with an uplift of damages
by 10 per cent, proposed by Lord Justice Jackson, to
help offset the cost to successful claimants of the new
requirement to pay the success fee out of damages
recovered—limited, it should be said, to 25 per cent of
the damages. The cost of ATE insurance would no
longer be recoverable from the defendant.
The Government appear to want to hand responsibility
for such a decision to the courts. That is not acceptable.
After all, it is some 13 years since the Law Commission
called for general damages in injury cases to be increased
by between a third and a half, and there has been very
little movement in that direction. Three eminent cost
judges who do not support the abolition of recoverable
success fees and ATE premiums point out that 10 per
cent would have been adequate to compensate for the
additional amount that would be lost by a successful
claimant. It is interesting that today’s Guardian reports
that the Master of the Rolls has written to the Ministry
of Justice, saying that the 10 per cent uplift cannot be
assured unless it is included in the Bill. What is the
Minister’s response to that? If he is confident that the
Master of the Rolls is wrong, will he not accept that
the provision needs to be in place before Clause 43 is
implemented, if enacted? For our part, although we
would have preferred a higher figure, we are prepared
to accept the Jackson recommendation.
I have mentioned “after the event” insurance. It is
not strictly the subject of the amendment but it is
frequently prayed in aid by Ministers as the answer to
the withdrawal of legal aid and for people above the
financial limits in any event. However, I have received
a letter from the Legal Expenses Insurance Group,
which represents 60 per cent to 80 per cent of the
“after the event” insurance market, which casts
considerable doubt on ministerial assertions in this
matter. Astonishingly, if it is correct, it would appear
that,
“the government has not consulted with or approached the
independent providers with a view to discussing alternative and
workable business models”.
The Legal Expenses Insurance Group believes that,
“unless some form of ATE premium recoverability is preserved,
access to justice will be significantly affected, both for personal
injury and non-personal injury risks. ATE insurers have made
proposals during the consultation process to assist the government
but the proposals have been ignored”.
It goes on to say that without amendment—this is the
crucial point—it would be completely unrealistic for
the “after the event” market to respond positively to
the intended reforms.
Even with the system of QOCS, “after the event”
insurance will still be needed to cover a claimant’s own
disbursements. According to another group of insurers,
premiums could range from £900 for an employer’s
liability claim to £1,900 for a disease claim and as
much as £11,000 for a contributory negligence claim.
The figures apparently reflect average success rates
and are based on these insurers’experience of unsuccessful
claims. I call on the Minister to tell us what discussions
have taken place over this critical issue, with whom
and with what result, and what he has to say about this
disturbing communication. This all demonstrates the
need for the Jackson recommendation on QOCS to be
implemented and, crucially, extended well beyond personal
injury claims.
Having effectively demolished the legal aid system,
Ministers are now, by their selective implementation
of Jackson, threatening further to limit access to justice
by undermining the conditional fee system. Their
preference appears to lie with “before the event”insurance,
which is beyond the reach of a significant proportion
of the population and is, in itself, inherently uncertain,
administered as it is by an industry second only to
banking in the depths of public esteem.
Our amendment would ensure that the Government
could implement the proposals to limit victims’ access
to justice contained in the Bill only if they implement
the counterbalancing proposals that Lord Justice Jackson
envisaged as promoting access to justice. Together,
they aim to bring down the cost of litigation for all.
Might it be that some reforms could be adopted
later than others? The answer to that question is no.
To target one feature of the landscape will not work.
That question and its answer are not mine; the question
was posed and answered by Lord Justice Jackson
himself in a recent edition of the New Law Journal.
Therefore, the question that the Government must
answer, should they choose to oppose this
amendment, is: if they intend to implement both
aspects of Lord Justice Jackson’s plans, why do they
oppose an amendment that would ensure that they are
implemented simultaneously? In that event, how will
the Government ensure that access to justice is
continuously facilitated? I beg to move.
Lord Thomas of Gresford: My Lords, conditional
fee agreements—no-win no-fee arrangements—were
first permitted by the legislation introduced by the
noble and learned Lord, Lord Mackay, in 1990. In the
beginning they were limited to personal injury cases,
insolvency cases and cases before the European Court
of Human Rights. They were a radical breach with the
principle that a lawyer ought not to have a financial
interest in the outcome of a case, and drew at the time
much opposition from Law Lords and the Law
Commission. Your Lordships are familiar with the way
this system now works. If the case is lost, the lawyer
receives no fees and therefore he needs to win or to
settle to earn a living. To recompense him for the risk
of losing, he is paid a success fee when he wins, a
percentage uplift of his standard fees, which in theory
recompenses him for those completely unrelated cases
he has taken on and lost. He recovers the standard
fees, which are payable by the losing defendants, but
the initial concept was that the winning claimant

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should pay the success fee—the uplift—out of his
damages. When the scheme was initially introduced,
the uplift was limited to 20 per cent of standard fees.
That was increased in 1995 to 100 per cent uplift to
cover the most unlikely case—that was how it was
introduced—where the risk of losing was 50:50.
Under the normal costs-shifting rules, the losing
claimant was open to pay the tax costs of the defendants.
He was not protected, as he would have been under a
legal aid certificate, from the costs that the defendants
had incurred in defending the case. Under legal aid an
order was very often made that a losing plaintiff—as
he then was—should pay the costs of the defendant.
However, it was almost never enforced, so effectively
he was not at risk of paying the defendant’s costs; but
if he was, he could not pay. In answer to a query from
Lord Hailsham, who was concerned that defendant
insurers were left out of pocket even when they won,
the noble and learned Lord, Lord Mackay, said:
“I understand that the Law Society is in the final stages of
organising a form of insurance policy to protect clients against a
costs order under a conditional fee agreement … If that is
implemented it will be a complete answer to the anxiety to which
my noble and learned friend has just referred”.—[Official Report,
18/7/94; col. 5.]
So “after the event” insurance was born to protect the
losing claimant against the defendant’s costs.
There are further matters to which I may refer later
such as caps on damages, but in 1999 the noble and
learned Lord, Lord Irvine of Lairg, as Lord Chancellor,
extended conditional fee agreements to all civil proceedings
except family law. However, the most radical change
he introduced was that the success fee and the “after
the event” insurance premium should then be paid by
the losing defendant. In a debate on 23 July 1998 he
resisted Lord Ackner’s amendment that success fees
should be capped. I said on that day:
“There has been no research as to whether solicitors overestimate
the risk in order to justify an excessive uplift of the fees. There
may be a doubling of fees now that 100 per cent. uplift is
permitted. But the solicitor who is charging the fees, who determines
that uplift, has to justify that uplift, assessing the risk himself. Is
he doing it properly?”.—[Official Report, 23/7/98; col. 1112.]
Even then, in 1998 when I was speaking, the evidence
suggested that the cherry picking of risk-free cases
was occurring. I was a teller for Lord Ackner on that
amendment, which was, unfortunately, lost. I hope that
your Lordships will forgive me for quoting my own
speech but it indicates that I was involved at an early
stage in the discussions that were taking place in 1999.
5pm
We now know what has happened. Whipped up by
dubious marketing forces and claims farmers, litigation
in smaller claims has increased. Success fees are charged
at 100 per cent in every case that goes to trial, not the
most unlikely cases—which was the original reason
for the introduction of such fees. That occurs even
under a system of fixed uplifts that have been agreed
with the insurance industry. The claimant does not
care. If he loses, he does not pay even his lawyer’s
standard fees, only his disbursements for expert reports
and court fees. If he wins, the defendants have been
paying the standard fees and the uplift, the success
fee—and this is the point relating to the amendment of
the noble Lord, Lord Beecham: after-the-event insurance
premiums have sky-rocketed because the claimant never
pays them and cost judges have failed to tax them
down. There needs to be reform of this system, which
has led to a completely unnecessary—I do not speak
as a lawyer when I use that word—escalation in legal
fees. They are out of proportion.
Ministers and Members of this House have been
buffeted from all sides over the past few weeks by the
lobbying of interested parties—claimant solicitors,
defendant solicitors, “after the event” insurers, the
Bar, the Law Society, concerned organisations of lawyers
and so on. What is the best way forward? I have tabled
some amendments that I shall deal with at a later
stage. However, perhaps I may say in response to the
amendment that it is essential, as the noble Lord,
Lord Beecham, said, that the introduction of one-way
costs-shifting in CFA cases should go hand in hand
with any alterations that there may be to conditional
fee agreements. I latched on to the word that was
used—I think it was by my noble friend Lord
McNally—in Committee: that it should be “synchronised”
with the CFAs.
The only issue I have with the noble Lord, Lord
Beecham, is whether that provision needs to be in the
Bill or whether we on these Benches can accept assurances
from our Government that these issues will be dealt
with by way of regulations. It is government policy
that has been announced from the Front Bench that
there will be one-way costs-shifting. It has been announced
that that will happen in synchronisation with any
alteration to the CFAs and that there will be a 10 per
cent uplift in general damages to cover the changes
that are being made to conditional fee agreements. All
I have to say to the noble Lord, Lord Beecham, is that
the amendment seems to be unnecessary in the light of
government assurances that we on these Benches are
bound to accept.
Lord Faulks: My Lords, I should like briefly to add
to what the noble Lord, Lord Thomas, has said. I
entirely endorse his comments. One of the problems
with ATE premiums is that they are, in effect,
unchallengeable because there is an assertion of what
a case costs a particular litigant and, when it comes to
an assessment, no alternative is put forward. Thereby,
a defendant will always have to pay that.
My second and final point is that the noble and
learned Lord, Lord Wallace, said in earlier debates
that the Government were proposing to increase
bereavement damages by 10 per cent, along with damages
for pain, suffering and loss of amenity—which, of
course, are general damages assessed by judges. I
understand that this proposal was made because those
damages are statutory and there would need to be a
formal amendment or some other device. I would be
happy to accept the assurance, which I understand to
be coming, that QOCS is on the way and that there
will be the appropriate method of bringing it in.
Baroness Kingsmill: My Lords, I should like to
speak to the amendments in my name. I am encouraged
to do so because, as a former personal injury lawyer,
I have a deep commitment and engagement with
accessibility of claimants to fair and appropriate redress
when they are suffering personal injury.

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[BARONESS KINGSMILL]
There has been a lot of discussion about the so-called
compensation culture in our legal system, but I refute that:
there is no such thing as a compensation culture. In fact, if
you exclude motor claims, the total number of claims
has fallen from 116,380 in 2001 to little over 100,000 in
2010-11. It is 15 per cent lower than that it was in
2001. The Motor Insurers’ Bureau states that total
claims provision and expenditure fell by 10 per cent
compared to 2009. It is important that we all understand
that the so-called compensation culture is a myth, a
perception which is very far from reality.
That is why I have tabled some of the amendments.
They are technical. It is possible that there have been
oversights by the Government. I know that a 10 per
cent increase in general damages has been discussed
as a possibility. The Government have said that
they will implement the 10 per cent increase by
unenforceable means, such as requiring the judiciary
to increase damages all round, but that is not enough.
It is appropriate and important that that should be in
the Bill. I should like to hear the Minister’s comments
on that. When we are talking about something as
important as access to justice, people should not be
burdened with additional uncertainty about what the
costs will be.
I speak also to Amendment 141ZC, which would
protect claimants against excessive costs in the event
that they lose their claim. It is fully in the spirit of
Lord Justice Jackson’s recommendations. As other
speakers have said, the amendment implements Lord
Jackson’s proposals for qualified one-way costs-shifting
by including them in the Bill. That seems a very
sensible proposal. It means that claimants would not
be scared off by the risk of astronomic costs in the
event that they lose. That will encourage access to
justice. There is nothing quite as scary for claimants as
the feeling, when there is uncertainty about their case,
that they will be stuck with a very large bill at the end
of it. I would like that to be stated clearly in the Bill
and I join noble colleagues in asking the Minister to
consider the amendments.
Lord Mackay of Clashfern: What is the justification
for the costs-shifting system in the case where a person
has been able to get a funding arrangement? If a
person decides to take his case without a funding
arrangement, why should he not have the benefit of
the costs-shifting system just as well as the other? Why
should the fact that someone has managed to agree
with his solicitor be an important point as between
the claimant and the defendant? I have said before,
and I repeat briefly, that I have heard many expositions
from the late Lord Simon of Glaisdale about the
unfairness of the legal aid provision in that it deprived
successful defendants of their right to recover their
costs. This is an even more difficult situation. This is
nothing to do with the state and the state’s grant of
legal aid but is a question as between the client and
solicitor. The client may well decide, “I don’t want to
pay this success fee in any event. I am prepared to take
my case and if I lose, why should I have to pay the
costs of the other side when my colleague, who decides
to pay a big success fee to the solicitor, is going to be
protected?”.
The Advocate-General for Scotland (Lord Wallace
of Tankerness): My Lords, we have, as the noble Lord,
Lord Beecham, indicated, moved on to Part 2, but I
open by saying that on my walk from Dover House to
the House this afternoon, I, too, fell. I went over on
my ankle on what I think was a crack in the pavement,
so I have every sympathy with him and I trust that he
will need neither medical nor legal assistance as a
result. Indeed, I hope I will not either.
Part 2 implements the Government’s reforms to
civil litigation funding and costs following, as has been
discussed already in this debate, Lord Justice Jackson’s
recommendations. These reforms have a number of
important components. Abolishing the recoverability
of success fees and “after the event”, or ATE, insurance
is key to the Government’s aim of returning a sense of
proportion and fairness to the current regime. My noble
friend Lord Thomas of Gresford talked about premiums
going sky-high. I will return to these issues in more
detail in the course of responding to specific amendments.
As part of these reforms, the Government will
introduce QOCS—qualified one-way costs shifting—for
personal injury cases. This is an area of law where
most claimants are individuals, acting under CFAs,
and most defendants are insurers or other well-resourced
organisations which can well afford to defend themselves.
My noble and learned friend Lord Mackay of Clashfern
asked a very specific question, to which I hope that by
the time I conclude my remarks I can give him an
answer, about those who are funding themselves and
not acting under a CFA. The Government agree with
Lord Justice Jackson that QOCS in these cases is the
right way forward and strikes a fair balance between
claimants and defendants. In particular, it means that
in many cases claimants will no longer have to take
out expensive ATE insurance.
On ATE insurance, the noble Lord, Lord Beecham,
asked what engagement there had been with the insurance
industry on these matters. I am advised that insurance
both “after the event” and “before the event” can
certainly help. It is self evident that it could help with
legal costs. The “after the event” insurance market has
developed alongside the current CFA regime and, of
course, there is substantial financial interest in seeing
that regime continue. It is not surprising, therefore,
that the ATE industry’s public stance is to lobby hard
against the proposals that we are bringing forward.
Ministry of Justice Ministers and officials have met a
significant number of different insurers as the proposals
have been developed since Lord Justice Jackson’s
recommendations were published early in 2010. Although
we acknowledge that some ATE insurance providers
have said publicly that they will pull out of the ATE
market if the changes go ahead, others have indicated
that they will look positively at developing products
which meet new market needs as the details of these
proposals are finalised. We are also introducing a
10 per cent increase in damages for non-pecuniary
loss, such as pain, suffering and loss of amenity, which
is being taken forward by the senior judiciary.
5.15 pm
I accept that the 10 per cent uplift in general damages
could be achieved through primary legislation. It is
something that we considered and discussed with the

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senior judiciary. However, the Government have concluded
that it would be appropriate for the senior judiciary to
take this forward. We believe that this reflects the
historic position that such damages are for the senior
judiciary to determine, as set out, for example, in the
Court of Appeal case of Heil v Rankin, a case, picking up
the other point made by the noble Lord, Lord Beecham,
regarding the Law Commission report on damages.
Heil v Rankin was a Court of Appeal bench that was
established very much to take forward the proposals
of that Law Commission consultation paper in 1996,
Damages for Personal Injury: Non-Pecuniary Loss. The
House may wish to note that in his report Lord Justice
Jackson listed recommendations which would require
primary legislation to implement. Increasing damages
was not one of them. Indeed, in his response to the
Government’s consultation, Lord Justice Jackson agreed
with the Government’s approach that this was for the
senior judiciary to take forward. Lord Justice Jackson
said at paragraph 4.2 of his response to the Government’s
consultation:
“Method of achieving the adjustment. The Consultation Paper
states at para 97: ‘adjustments to the level of general damages
have hitherto been regarded as a judicial issue for the courts
rather than the Government’. I agree and have not included this
item in the list of reforms requiring legislation. It will be recalled
that in so far as the Law Commission’s recommendations for
increasing personal injury damages were accepted, those increases
were implemented by means of a guideline judgment handed
down by a five member Court of Appeal, presided over by the
Master of the Rolls: see Heil v Rankin ... The same procedure
could be adopted for implementing any future increase in the level
of general damages”.
We also want to ensure that the increase in the
level of damages does not, unlike the proposal in
Amendment 136E, apply simply to personal injury
but, where appropriate, to general damages for torts,
of which pain, suffering and loss of amenity are
examples. It is not practical to identify all of these in
legislation and any formulation that is designed to be a
catch-all provision runs the risk of excluding some.
My noble friend Lord Faulks referred to the increase
in bereavement damages under the Fatal Accidents
Act. As he said, those damages are statutory and fall
to be increased under the statutory process, whereas
the general damages for non-pecuniary loss are different.
However, I repeat what I said in an earlier debate—we
are minded to increase these as well.
QOCS and the 10 per cent uplift in damages do not
need to be implemented through primary legislation
and so have not been included in the Bill. We believe
that the same legal effect will be achieved through
other means. I know that this is a matter of considerable
importance not only to my noble friend Lord Thomas,
who has raised it with me on a number of occasions,
but to the House in general. We certainly intend to
introduce QOCS at the same time as the relevant
provisions in Part 2 are implemented in April 2013.
The noble Baroness, Lady Kingsmill, and the
noble Lord, Lord Beecham, have tabled amendments
that would seek to put QOCS in the Bill, rather
than including it in the Civil Procedure Rules.
Amendment 132A would also extend QOCS to areas
of litigation other than personal injury. In Committee,
I spoke about the reasons for including QOCS in the
rules rather than in primary legislation. The Government
do not believe that Amendments 132A, 136E, 141ZC
and 151ZA are either necessary or proportionate. The
rules are a much better mechanism than primary
legislation for implementing a new costs regime. They
provide flexibility and can be altered in the light of
developments, as required. There is a risk in being too
prescriptive in primary legislation, as it would prevent
the development of QOCS in the rules.
On the extension of QOCS to different types of
cases, the Government believe that Amendment 132A
is too broad and that it leaves itself open to possibly
unintended interpretation. It is not difficult to imagine
the potential consequences if the amendment were
accepted. Perhaps I may give two examples, because I
think that the circumstances in which it is proposed
that QOCS might apply would be in cases of breach of
contract. We could have a situation in which a premiership
footballer pursued a claim for contractual damages at
no financial risk, or a builder could sue an insured
homeowner over a building contract at no financial
risk to what might be one of the country’s biggest
building companies. We would be powerless to amend
the rules to allow for some degree of financial risk for
these claimants in such circumstances. We believe that
Amendment 132A could become a speculative claimant’s
charter, and it goes against the principles of the reforms
in Part 2, which are intended to reduce the scope for
speculative litigation.
The amendment would also restrict the future
development of QOCS. Currently, any extension of
QOCS to other areas of litigation beyond personal
injury cases may be achieved through changes to the
rules. Being too restrictive in primary legislation could
restrict the scope for the expansion of QOCS in the
rules. For example, while it may not be appropriate to
have an initial financial means test for QOCS in personal
injury cases, this is unlikely to be the case in, for
example, defamation or privacy cases. To list in statute
different types of cases where QOCS should apply
would mean that any future expansion might also
need to be effected through primary legislation, which
could be a lengthy and complex process.
The noble Lord, Lord Beecham, asked about the
financial test for QOCS. We agree that, for personal
injury cases, there should not be an initial financial
means test. We are in discussion about whether there
should be a financial contribution, although we recognise
the arguments that there should not be. The Civil
Justice Council, chaired by the Master of the Rolls, is
helping the department on the way forward. We are in
full consultation with stakeholders and very much
appreciate the considerable support of the Master of
the Rolls and the Civil Justice Council.
My noble and learned friend Lord Mackay of
Clashfern made a point about the applicability of QOCS
in circumstances where a claimant raises his or her
own funding. I recognise that it is fair to point out that
there will be cases where someone cannot or is unwilling
to obtain a conditional fee agreement. We have said
that QOCS will apply in all personal injury cases,
however funded. Although typically they are run under
CFAs, different considerations may apply in other
cases that we would need to consider carefully if the
types of cases covered by QOCS were to be extended.

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[LORD WALLACE OF TANKERNESS]
As I indicated, we do not believe that it is appropriate
to put these provisions in the Bill. There is a precedent
for the 10 per cent uplift being taken forward by the
senior judiciary, and we would look to that happening
in this case. I also give an assurance that QOCS will be
brought in at the same time as Part 2 of the Bill, so the
flexibility that will go along with having it in the rules
will certainly outweigh the advantages of having it in
primary legislation. We also believe that the extent of
the noble Lord’s amendment is far too wide. For these
reasons, I invite him to withdraw it.
Lord Ramsbotham: My Lords, before the noble and
learned Lord sits down, perhaps I may ask whether he
has considered the position of two groups of families
who may be considering making civil claims against
the Government following inquests. I refer to the
families of members of the Armed Forces and of
those who die in either police custody or prison.
Lord Wallace of Tankerness: My Lords, this may
not be quite what the noble Lord was thinking about,
but in some cases, as my noble friend Lord Faulks
indicated, if there is a question of a claim following a
bereavement, we have indicated that we intend that
there should be an uplift in these cases.
On the question of why we are not introducing
QOCS for judicial review claims—this may be the
circumstance to which the noble Lord was referring—the
responses to the consultation indicated that conditional
fee agreements were less commonly used outside the
area of personal injury and were not frequently used
in judicial review proceedings.
Lord Thomas of Gresford: I hope my noble and
learned friend will forgive me for mentioning that I
have tabled an amendment dealing with precisely that
point. It is for debate at a later time and proposes that
QOCS should apply in cases where, for example, there
is a death in custody—and to other matters referred to
by the noble Lord, Lord Ramsbotham.
Lord Wallace of Tankerness: I am grateful to my
noble friend. Debate on his amendment might allow a
better exploration of the important point raised by the
noble Lord, Lord Ramsbotham.
Lord Beecham: My Lords, that exchange was quite
useful because it illustrated the argument against what
the noble and learned Lord seeks to persuade us to
agree to; namely, the proposition that these are matters
for the Rules Committee. The noble Lord, Lord Thomas,
has tabled a sensible amendment that covers the situation
raised by the noble Lord, Lord Ramsbotham. However,
under the Bill these will not be matters for Parliament.
The scope of access to justice will not be in the Bill
and will not be the subject of legislation. The matter
will be in the hands of the Rules Committee. That is a
delegation of responsibility too far in a very significant
area of public policy. Therefore, I cannot accept the
arguments of the noble and learned Lord.
The noble Lord, Lord Thomas, has tabled amendments
that we will debate later. I say in advance that I have
sympathy with some of them, including the one to
which he referred. Perhaps he will forgive the obvious
pun: we understand that there are not many doubting
Thomases on the government Benches. He will also
understand that we do not necessarily share that
perspective and that a degree of scepticism is more
naturally to be found on this side.
In respect of one or two other matters, the Heil v
Rankin decision is based on a particular level of
damages. It is not a binding provision, applicable
across the piece, as is suggested in terms of the 10 per
cent uplift. It seems to us, and not only to us, that it is
imperative, given that we are now dealing with the
matter of principle of access to justice via this particular
method, that the legislation should encompass the
range of issues that arise. It can do so in the form of a
starting position and provide for additional regulations
to be approved by Parliament later. That would have
been an option. I would like to think it might still be
an option but I am not getting much encouragement
from the noble and learned Lord. I cannot accept that
the Government’s position is satisfactory. I am grateful
up to a point for an indication that one object of these
amendments will take place—that is to say that change
will be synchronised. I wish that the noble and learned
Lord and I had not synchronised our stumbles today.
But in terms of legislation, that is a welcome assurance.
Nevertheless, there are significant points of principle
here and in the circumstances I wish to test the opinion
of the House.
5.25 pm
Division on Amendment 132A
Contents 189; Not-Contents 237.
Amendment 132A disagreed.
Adams of Craigielea, B.
Adebowale, L.
Adonis, L.
Ahmed, L.
Alton of Liverpool, L.
Anderson of Swansea, L.
Andrews, B.
Armstrong of Hill Top, B.
Bach, L.
Bakewell, B.
Barnett, L.
Bassam of Brighton, L.
[Teller]
Beecham, L.
Berkeley, L.
Bilston, L.
Blackstone, B.
Blood, B.
Borrie, L.
Bradley, L.
Bragg, L.
Brennan, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Browne of Ladyton, L.
Campbell-Savours, L.
Carter of Coles, L.
Division No. 2
CONTENTS
Clancarty, E.
Clarke of Hampstead, L.
Clinton-Davis, L.
Collins of Highbury, L.
Corston, B.
Coussins, B.
Cox, B.
Davidson of Glen Clova, L.
Davies of Coity, L.
Davies of Oldham, L.
Davies of Stamford, L.
Dean of Thornton-le-Fylde,
B.
Donaghy, B.
Donoughue, L.
Drake, B.
Dubs, L.
Elder, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Evans of Watford, L.
Falconer of Thoroton, L.
Falkland, V.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Ford, B.
Foster of Bishop Auckland, L.

307 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
308
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Gilbert, L.
Golding, B.
Gould of Potternewton, B.
Grantchester, L.
Grenfell, L.
Grey-Thompson, B.
Griffiths of Burry Port, L.
Grocott, L.
Hall of Birkenhead, L.
Hanworth, V.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howarth of Newport, L.
Howells of St Davids, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Irvine of Lairg, L.
Janner of Braunstone, L.
Jones, L.
Jones of Whitchurch, B.
Judd, L.
Kennedy of Southwark, L.
King of Bow, B.
King of West Bromwich, L.
Kingsmill, B.
Kinnock, L.
Kinnock of Holyhead, B.
Kirkhill, L.
Knight of Weymouth, L.
Layard, L.
Lea of Crondall, L.
Liddell of Coatdyke, B.
Liddle, L.
Lister of Burtersett, B.
Low of Dalston, L.
McAvoy, L.
McConnell of Glenscorrodale,
L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate,
L.
McKenzie of Luton, L.
Mandelson, L.
Martin of Springburn, L.
Masham of Ilton, B.
Massey of Darwen, B.
Maxton, L.
Mitchell, L.
Monks, L.
Morgan, L.
Morgan of Huyton, B.
Morris of Aberavon, L.
Aberdare, L.
Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Allan of Hallam, L.
Anelay of St Johns, B. [Teller]
NOT CONTENTS
Morris of Handsworth, L.
Morris of Manchester, L.
Myners, L.
Newcastle, Bp.
Noon, L.
Nye, B.
O’Loan, B.
O’Neill of Clackmannan, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Pitkeathley, B.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prescott, L.
Prosser, B.
Puttnam, L.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Rendell of Babergh, B.
Richard, L.
Robertson of Port Ellen, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Saltoun of Abernethy, Ly.
Sandwich, E.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Sherlock, B.
Simon, V.
Singh of Wimbledon, L.
Smith of Basildon, B.
Smith of Finsbury, L.
Smith of Gilmorehill, B.
Snape, L.
Soley, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Tomlinson, L.
Touhig, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turnberg, L.
Turner of Camden, B.
Wall of New Barnet, B.
Walton of Detchant, L.
Warner, L.
Warnock, B.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Wigley, L.
Williams of Elvel, L.
Woolmer of Leeds, L.
Worthington, B.
Young of Norwood Green, L.
Young of Old Scone, B.
Armstrong of Ilminster, L.
Arran, E.
Ashton of Hyde, L.
Astor, V.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Barker, B.
Bates, L.
Benjamin, B.
Berridge, B.
Best, L.
Black of Brentwood, L.
Bonham-Carter of Yarnbury,
B.
Boothroyd, B.
Bottomley of Nettlestone, B.
Bowness, L.
Bradshaw, L.
Bridgeman, V.
Brinton, B.
Brittan of Spennithorne, L.
Brooke of Sutton Mandeville,
L.
Brougham and Vaux, L.
Browne of Belmont, L.
Browning, B.
Burnett, L.
Buscombe, B.
Butler-Sloss, B.
Byford, B.
Caithness, E.
Cathcart, E.
Chalker of Wallasey, B.
Chidgey, L.
Clement-Jones, L.
Cobbold, L.
Colville of Culross, V.
Colwyn, L.
Cope of Berkeley, L.
Cormack, L.
Cotter, L.
Courtown, E.
Craig of Radley, L.
Craigavon, V.
Crathorne, L.
Crickhowell, L.
Dannatt, L.
De Mauley, L.
Dear, L.
Deben, L.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
Eccles, V.
Eccles of Moulton, B.
Eden of Winton, L.
Elton, L.
Emerton, B.
Empey, L.
Erroll, E.
Falkner of Margravine, B.
Faulks, L.
Feldman, L.
Feldman of Elstree, L.
Fellowes, L.
Fellowes of West Stafford, L.
Fink, L.
Finlay of Llandaff, B.
Fookes, B.
Forsyth of Drumlean, L.
Fowler, L.
Framlingham, L.
Freeman, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
German, L.
Glasgow, E.
Glenarthur, L.
Glentoran, L.
Goodhart, L.
Goodlad, L.
Grade of Yarmouth, L.
Greenway, L.
Hamwee, B.
Hanham, B.
Hannay of Chiswick, L.
Harries of Pentregarth, L.
Harris of Peckham, L.
Henley, L.
Heyhoe Flint, B.
Higgins, L.
Hill of Oareford, L.
Hodgson of Astley Abbotts,
L.
Home, E.
Howarth of Breckland, B.
Howe, E.
Howe of Aberavon, L.
Howe of Idlicote, B.
Howell of Guildford, L.
Hunt of Wirral, L.
Hussain, L.
Hussein-Ece, B.
Inglewood, L.
James of Blackheath, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jolly, B.
Jones of Birmingham, L.
Jopling, L.
Kirkham, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Kramer, B.
Laird, L.
Laming, L.
Lawson of Blaby, L.
Lee of Trafford, L.
Lester of Herne Hill, L.
Lindsay, E.
Lingfield, L.
Linklater of Butterstone, B.
Listowel, E.
Lloyd of Berwick, L.
Loomba, L.
Luce, L.
Luke, L.
Lyell, L.
Lytton, E.
McColl of Dulwich, L.
MacGregor of Pulham
Market, L.
Mackay of Clashfern, L.
Maclennan of Rogart, L.
McNally, L.
Maddock, B.
Magan of Castletown, L.
Maginnis of Drumglass, L.
Mancroft, L.
Maples, L.
Mar and Kellie, E.
Marks of Henley-on-Thames,
L.
Marland, L.
Marlesford, L.
Mayhew of Twysden, L.
Meacher, B.
Methuen, L.
Miller of Chilthorne Domer,
B.
Montrose, D.
Morris of Bolton, B.
Morrow, L.
Neill of Bladen, L.
Neville-Jones, B.
Newby, L.
Newton of Braintree, L.
Noakes, B.

309 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
310
Northbrook, L.
Northover, B.
Norton of Louth, L.
O’Cathain, B.
O’Neill of Bengarve, B.
Oppenheim-Barnes, B.
Palmer, L.
Palmer of Childs Hill, L.
Palumbo, L.
Pannick, L.
Patten, L.
Phillips of Sudbury, L.
Popat, L.
Ramsbotham, L.
Randerson, B.
Razzall, L.
Rennard, L.
Renton of Mount Harry, L.
Ribeiro, L.
Risby, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Rowe-Beddoe, L.
Ryder of Wensum, L.
St John of Bletso, L.
Sassoon, L.
Scott of Needham Market, B.
Seccombe, B.
Selkirk of Douglas, L.
Selsdon, L.
Shackleton of Belgravia, B.
Sharkey, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shipley, L.
Shutt of Greetland, L. [Teller]
5.37 pm
Skelmersdale, L.
Spicer, L.
Stedman-Scott, B.
Steel of Aikwood, L.
Stewartby, L.
Stirrup, L.
Stoneham of Droxford, L.
Storey, L.
Stowell of Beeston, B.
Strasburger, L.
Sutherland of Houndwood, L.
Swinfen, L.
Taverne, L.
Taylor of Holbeach, L.
Teverson, L.
Thomas of Gresford, L.
Thomas of Winchester, B.
Tope, L.
Trefgarne, L.
Trenchard, V.
True, L.
Trumpington, B.
Tyler, L.
Verma, B.
Vinson, L.
Wade of Chorlton, L.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Walmsley, B.
Wasserman, L.
Waverley, V.
Wei, L.
Wilcox, B.
Williamson of Horton, L.
Woolf, L.
Younger of Leckie, V.
Amendment 132AA
Moved by Lord Alton of Liverpool
132AA: Before Clause 43, insert the following new Clause—
“Exception in respiratory (industrial disease or illness) cases
The changes made by sections 43, 45 and 46 of this Act do
not apply in relation to proceedings which include a
claim for damages for respiratory disease or illness (whether
or not resulting in death) arising from industrial exposure
to harmful substance.”
Lord Alton of Liverpool: My Lords, in speaking
to Amendment 132AA, I shall speak also to
Amendments 136, 141 and 142, which relate to Clauses 43,
45 and 46. In speaking to them I return to the issue of
mesothelioma and its victims, the question that I
raised on 22 November at Second Reading, at some
length in Committee on 30 January, and during Oral
Questions on 29 February. At the outset, may I thank
the Minister for his courtesy in meeting the noble
Lord, Lord Avebury, and myself yesterday, and for
listening so carefully to the arguments that we advanced
to him?
Anyone who has ever contested a parliamentary
by-election knows that it is the most special way of
entering Parliament. It is something that I share with
the noble Lord, Lord Avebury, and it is 50 years to the
day since the noble Lord, Lord Avebury, entered the
political lexicon as Orpington Man. Over the many
years that have passed since then I have always found
myself wanting to be on the same side of the argument
as the noble Lord, Lord Avebury, and nothing gives
me greater pleasure than the fact that he is one of the
signatories to this amendment.
Some 18 Members of your Lordships’ House are
signatories to a letter supporting this amendment.
They include the noble Lords, Lord Bach, Lord Beecham,
Lord Brennan, Lord Elystan-Morgan, Lord McColl,
Lord McFall, Lord Monks, Lord Newton, and Lord
Wigley, the right reverend Prelate the Bishop of Blackburn,
my noble and learned friend Lady Butler-Sloss, and
my noble friends Lady Finlay, Lord Martin, Lord
Patel and Lord Walton of Detchant. I give those
names to your Lordships’ House to demonstrate the
breadth of support for this amendment from all sides
and they include distinguished lawyers, distinguished
medics and representatives of working people’s interests.
Noble Lords may also have seen a letter which
appeared in the Times on 3 March signed by several
Members of this House. In conclusion, it states that,
“asbestos victims should not, and financially cannot, subsidise
other claimants’ access to justice, nor can they afford to defend
test cases run by rich insurers”.
In a nutshell, that is the principle we are debating
today. We must decide whether it can be right that
asbestos victims should be required to surrender as
much as 25 per cent of their damages for pain and
suffering to pay for legal costs. Let me repeat, the
clauses we are now debating required terminally ill
asbestos victims who succeed in a claim for compensation
against negligent, guilty employers to pay up to 25 per
cent of their damages for pain and suffering in legal
costs associated with the conditional fee agreement
system, the CFA.
Let us also be clear about what we are not debating.
This is the Legal Aid, Sentencing and Punishment of
Offenders Bill. Into which of those categories contained
in the Title do people suffering from mesothelioma
fall? As the Bill aims to restrict legal aid and to curtail
what has been described as a compensation culture, it
is worth nailing two myths at the outset. First, these
mesothelioma cases have not been legally aided and
are not legally aided now. They have not been legally
aided for some 12 years. Secondly, they are not part of
the compensation culture. I know that the Minister
concurs with those propositions.
Mesothelioma cases receive no legal aid. They are
not fraudulent cases and do not involve fakery. On
that much we can be agreed. As one victim put it
to me, “I can understand the need for legislation to
prevent the trivial and no-win fee claims but how can
the claim of a mesothelioma sufferer be ‘lumped in’
with ‘ambulance chasers’? Mesothelioma has only one
outcome and that is loss of life. It is not trivial, and
patients need help not hindrance”.
Currently, solicitors are paid a success fee by the
losing defendant to fund very difficult but meritorious
cases. This replaces the funding which was available
under legal aid. One claimant will have to pay for
another claimant’s chance to gain access to justice if
we agree the provisions in the Bill. Important test
cases which determine the right of mesothelioma sufferers
to claim would never have been run under the new
prescription. Those who tabled this amendment argue

311 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
312
that asbestos victims should not, and financially cannot,
subsidise other claimants’ access to justice, nor can
they afford to defend test cases run by rich insurers.
What else do we agree about? We are all agreed that
this is a terrible disease. The Minister movingly described
to us in Committee how a member of his own family
had their life cruelly ended by this fatal disease. We are
all agreed that once diagnosed the victim’s life is
drastically curtailed. Many doctors say that the average
lifespan from diagnosis to death is likely to be around
nine months to one year. Some 30,000 people have
died to date and as many as 60,000, according to
official figures, could die in the future.
What have been the lines of disagreement? The
Government have argued that conditional fee agreements,
as currently constructed, mean that win or lose a
claimant risks nothing but that has encouraged frivolous
and fraudulent claims to flourish. Yet those who tabled
this amendment argue—as I have said, the Government
have said that they agree—that the claims of dying
asbestos victims can never be frivolous or fraudulent.
So who is responsible for exploiting CFAs? The
Government and the insurance industry are quite
clear: road traffic accident claims, which make up over
70 per cent of all personal injury claims, particularly
whiplash claims, are to blame. In total, whiplash claims
add up to a staggering £2 billion annually. We argue
that RTA problems will not be solved by punishing
asbestos victims. As one victim explained to me:
“My life has been turned upside down, and I really didn’t want
to think about anything except spending my last days with my
family. I worked all my life and paid all my N.I. and taxes, so this
seems unfair”.
That is expressing it with commendable understatement.
5.45 pm
Those who tabled this amendment argue that the
victims suffer enough. It is iniquitous that they should
lose their modest compensation to reduce solicitors’
costs. Those costs can be reduced directly and access
to justice preserved, but not by scapegoating asbestos
victims. Many sufferers are so defeated by their illness
that they never make a claim as things stand now.
The Government additionally argue that claimants
must take some of the risk and have an investment in a
claim—“skin in the game”. This in my view is an ugly,
awful phrase and it is telling. If you consider that
mesothelioma sufferers have given their health and
their lives because unknowingly they took unwarranted
and fatal risks, it is obscene that they of all people
should have some “skin in the game”. A contributor
to a family asbestos forum said:
“The whole point of making a claim is to make a guilty party
pay attention and take responsibility. As the ‘victim’, why should
we ‘pay’ again? Is our life not enough?”.
This is not like a win on the lottery or a windfall, it is
about restoring victims to something like the position
they were in before diagnosis, and making proper
provision for them and for their families. Making
mesothelioma sufferers pay legal costs will not result
in greater competition, thus driving costs down, or
give mesothelioma sufferers “skin in the game”. Instead,
it will inhibit claims, thus adversely affecting access to
justice.
Another perverse outcome will be that challenges
to insurers’ appeals to limit liability for mesothelioma
claims will be unaffordable, as will taking a case to
trial, a point raised by me and by the right reverend
Prelate the Bishop of Liverpool during our recent
exchange at Question Time with the Minister. The
perverse effect of making claimants responsible for
success fees will be to make one claimant pay for
another’s chance of taking a claim—an extraordinary
prospect for mesothelioma sufferers.
Let me also say a word about “after the event”
insurance. It has been said that qualified one-way
costs-shifting will resolve the issue of claimants paying
ATE insurance. Leaving aside the punitive qualifications,
that is true, but the Government failed to add that
mesothelioma sufferers will face heavy disbursements
in the form of court costs, medical reports and so on,
which are not covered by QOCS. If ATE insurance is
available for disbursements, the premiums are expected
to be about two-thirds of the present premiums. These
fall to the claimant. If the punitive qualifications
regarding the behaviour of the parties and their financial
status are unchallenged, claimants will not risk their
savings and perhaps their houses to make a claim.
Let me end by returning to the Government’s best
argument, that changing the law will turn claimants
into a rod for the back of recalcitrant lawyers. Let us
think about that. What dying man or woman is going
to do this? Would you or I? It is simply fallacious to
argue that making claimants pay costs will mean that
they will shop around for the best deal. Dying asbestos
victims have already invested enough, and given their
pitiable condition, it is risible to suggest that they will
shop around. Terminally ill and dying people will simply
not have the energy, and they have other things on their
mind than looking for a lawyer to give them a better rate.
Whatever else now divides the House on how the
increased costs of litigation should be resolved, surely
we can see the force of the practical and the moral case
to exempt people who are dying of mesothelioma
from the strictures and provisions of the Bill. Once
again, I am indebted to your Lordships for the widespread
support for these amendments and to the Minister for
the courtesy he extended yesterday in listening to the
arguments. I hope that the amendments will commend
themselves to a majority in your Lordships’ House
and I beg to move.
Lord Avebury: My Lords, I congratulate the noble
Lord, Lord Alton, on the effectiveness and the tenacity
with which he has pursued the issue of mesothelioma
victims, and I am also grateful to him for his kind
reference to my 50th anniversary, which falls today. I
also join him in the thanks he has expressed to my
friend Lord McNally for the sympathetic and careful
hearing he gave us yesterday to discuss these issues.
The horrors associated with these diseases go back
four decades and more, when it first became known
that the ingestion of tiny amounts of asbestos could
lead to painful and invariably fatal diseases. Even then,
it was in the teeth of opposition from the manufacturers
of asbestos products that health and safety measures
were finally enacted to remove the use of this deadly
product from the workplace and pave the way for the
existing health and safety at work legislation.

313 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
314
[LORD AVEBURY]
When we discussed these amendments in Committee,
the first reaction of my noble friend the Minister was
to classify them as yet another in the series of amendments
calling for an exception to some aspects of the Bill’s
architecture. As my noble friend Lord Thomas of
Gresford pointed out, Lord Justice Jackson was not
looking for an architecture that involved everything
but for what was right in particular categories of case,
which must be the right way to proceed.
As we know, this is not an area of the Bill where
there is public money to be saved, other than in cases
where public authorities are defendants. What we are
arguing about is whether some of the costs of this very
special group of victims of mesothelioma disease in
CFA cases should be borne by the claimant rather
than the defendant or the insurers. Nor is this one of
the areas of the Bill on which there has been lobbying
by lawyers or insurance companies, as the noble Lord,
Lord Alton, said.
Furthermore, it is not an area in which, as my noble
friend the Minister put it, we are trying to create a
structure that squeezes out an inflationary element of
the process. Between 2007 and 2011, there was a
6.6 per cent reduction in employer liability cases, of
which most respiratory claims are a subset, and it is
expected that mesothelioma claims will peak in 2015,
or perhaps a little later, because of the elimination
years ago of asbestos from the working environment.
During that same period, 2007 to 2011, road traffic
accidents increased by 43 per cent to nearly 800,000
cases. That is where there may well be the abuse
referred to by my noble friend. Unscrupulous claimants
may be able to fake road traffic injuries, but not
mesothelioma or asbestosis. It is impossible for the
victims of these horrible diseases to launch a frivolous
or fraudulent claim, and it is unconscionable that
people on their deathbeds should be mulcted of thousands
of pounds out of the damages that they are awarded
by the courts.
As matters stand, the claimant pays nothing if he
loses. He takes out “after the event” insurance which
will pay the defendant’s costs as well as the ATE
premium if the case is lost, and the claimant’s solicitor
bears his own costs if he loses under the no-win,
no-fee arrangement. If the claimant wins the case, the
defendant pays the claimant’s solicitor’s base costs
plus disbursements, including medical reports, court
fees et cetera, plus the success fee and the ATE insurance
premium; that is, all the costs. So, with ATE insurance,
the claimant pays no costs, win or lose.
Under QOCS, which is not in the Bill, as we have
heard, but is due to be implemented by order—we are
glad to hear that it will be coterminous with the
introduction of this part of the Bill—the defendant
again pays the claimant’s solicitor’s base costs whether
the claimant wins or loses. ATE insurance will not
have to be taken out to cover the contingent liability.
Whether a market will develop in this area remains to
be seen, as the noble Lord, Lord Alton, said, but
assuming that it does, we are advised that the premium
could amount to at least two-thirds of the current
ATE premium in a similar case.
My noble and learned friend Lord Wallace wrote to
me and the noble Lord, Lord Wigley, on 7 February,
partly explaining how QOCS would operate. Yes, it
removes the need to fund an ATE premium to cover
the risk of having to pay the defendant’s solicitor’s
costs if the case is lost, but that is not the full story, as
the noble Lord, Lord Alton, has reminded us. Given
the high costs of disbursements in mesothelioma cases
it would be right to extend the recovery of the ATE
premium to mesothelioma claims as it is already in
clinical negligence claims.
My noble and learned friend omitted to say also in
the letter that the claimant is now going to forfeit not
only the ATE premium, which is no longer recoverable,
but the far higher amount of the success fee, for which
the defendant is no longer liable. The claimant is
effectively to be fined 25 per cent of the general
damages he has been awarded, losing perhaps £15,000
or more from the amount that has been awarded by
the court. It is certain that when this and the ATE
liability is explained to mortally ill claimants, many of
them will decide that it is not worth the hassle of
pursuing the case.
My noble friend Lord Thomas suggests that the
claimant should pay only half the success fee, but our
case is that victims of mesothelioma should receive the
whole of the amount they are awarded by the courts,
as hitherto. My noble and learned friend Lord Wallace
says that solicitors will compete on maximising the
damages that claimants can keep, an expectation which
is unlikely to materialise in some of the very complex
cases to which we are referring. However, if our
amendments are accepted, the right way to reduce the
legal costs would be to regulate them further, such as
by providing that a success fee is payable only in cases
that come to court.
My noble friend says that he cannot believe that
lawyers will be unwilling to take cases after the Bill
becomes law, and of course they will, but, in the
opinion of those advising us, they will take far fewer
of these cases. We are also told, not as a matter of
opinion but as a fact, that fewer claimants will decide
to pursue their cases under this regime. As matters
stand now, the victims of these painful diseases are
often reluctant to bear the mental stress of dealing
with solicitors and court proceedings. Almost unanimously
they have said to Tony Whitston, the expert who
advises us, that the prospect of losing thousands of
pounds out of the award that they may receive would
mean that many of them will not go ahead with their
claims.
We are not talking only about another concession
in the range of issues discussed in Committee, as the
Minister put it, but one that engaged the support of
every one of your Lordships, of all three parties and
the Cross-Benches, who spoke in that debate. The
Minister, who has personal experience through his
family of the dreadful fate of the victims of mesothelioma,
as we have heard, recognises that we are dealing with
cases that are sui generis. They have at least as great a
claim to be dealt with in a different way from the
run-of-the-mill CFA claims as clinical negligence cases,
and conceding this amendment would involve no costs
to public funds.

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Lord Howarth of Newport: My Lords, as another
co-signatory to the letter to which the noble Lord,
Lord Alton, referred, I endorse the argument so ably
put forward today by the noble Lord and the noble
Lord, Lord Avebury. I do not need to add anything to
what they have said. The speech of the noble Lord,
Lord Alton, today follows the magisterial speech that he
gave in Committee. These arguments are irrefutable.
To trammel the access to justice of mesothelioma
sufferers would be a terrible thing to do. I am sure the
Minister, as a kind and good man, will agree with that.
Lord Thomas of Gresford: My Lords, I add my
tribute to the noble Lord, Lord Avebury, for his 50-years’
celebration of Orpington. It was life-changing for
me because I joined the Liberal Party a fortnight
afterwards. Therefore, in a fortnight’s time it will be
my 50th anniversary as a member of the party and,
shortly after that, my 50th anniversary of failing to
win a seat. That is how it goes.
The amendment seeks to retain the status quo in
relation to one industrial disease—mesothelioma. Your
Lordships will appreciate from what I said in Committee
that these cases are terrible. I feel that completely. I
told your Lordships about a lady who lives very close
to me in Gresford. She came to this House and spoke,
and no doubt a number of your Lordships will remember
her vividly. Her husband died as a result of being
exposed to asbestos in Brymbo steel works, which is
perhaps three miles from where I live. But if you give
mesothelioma a special, unique status, what about the
people in my village who were in Gresford colliery—
that has a certain resonance, as your Lordships may
recall the disaster in 1934—or in Llay Main colliery,
about two miles away, which was the deepest pit in the
United Kingdom? I refer to those who suffer from
pneumoconiosis, another industrial disease. How can I
say, “I’m supporting that lady but I’m not supporting your
claims to have the same treatment for pneumoconiosis”?
6pm
However, you could widen that to all sorts of industrial
diseases and add in the person who has suffered
catastrophic injuries in a factory or road accident, or
multiple injuries that have severely disabled them.
Should mesothelioma be given an exceptional status?
To an extent, it already has that status because under
the Compensation Act 2006, there are very special
provisions. Providing that you can prove that a person
has been exposed to asbestos negligently in the past,
you do not have to prove that the mesothelioma that
arises 30 or 40 years later has derived from that
particular act. The responsible person under the 2006
Act is liable to all the damages, and the person suffering
from mesothelioma can recover accordingly.
Of course, there are special provisions about tracing
the insurers of employers some 30 or 40 years back.
The Government have a scheme to identify insurers. I
hope that they take it a step further, so that when they
cannot identify insurers of employers who have long
since departed they introduce something similar to the
Motor Insurers’ Bureau. Your Lordships will recall that
if you are injured in a car accident and either the driver
cannot be traced or was driving uninsured, it is possible
to bring an action against the Motor Insurers’ Bureau
and recover damages as if they were the insurers of the
person injured. In those cases of mesothelioma where
the original employers’ insurers cannot be traced, a
scheme like that should be introduced.
Furthermore, is the status quo for which this
amendment argues the best model? I do not believe
that it is. The model that the Government have adopted
follows the Jackson proposals in part; it does not
follow them entirely as it has left out some crucial
caveats such as the retention of legal aid in all clinical
negligence cases. The model adopted in this Bill is too
crude and needs refinement. I have searched for a
solution that would cover not just mesothelioma but
pneumoconiosis and other industrial diseases, such as
skin diseases in certain other employments, as well as
the catastrophic and multiple injury cases. The model
that I propose is not the status quo. As I said earlier, I
have listened to so many people from all sorts and all
sides, who have bombarded all of us with their briefs
and submissions. The model that I argue for is this.
First, there is no rationale for paying claimants’
lawyers success fees in cases where liability is admitted,
either by way of settlement before proceedings are
commenced or by formal admission in the defence
that is filed initially to the claim. In those circumstances,
where liability is admitted at an early stage, the lawyers
conducting the case for the claimant are not at risk at
all. They know that they are going to win and that
their fees will be paid. My Amendment 132C deals
with that situation.
Secondly, if liability is an issue and is denied in the
defence, at that point lawyers are at some risk and
claimants’ lawyers may lose the case, but there comes
a point in proceedings that is very important. Under
part 26 of the rules of procedure, which deals with
case management, a district judge allocates a case to
a track; it is a formal stage in the proceedings. There is
a small claims track for personal injuries of less than
£5,000 and other cases less than £1,000, and some
housing cases. Then there is a fast track, which is for
claims up to £25,000—soon to be put up to a limit of
£50,000, with no more than a day’s hearing—and a
multi-track. The multi-track cases, which include judicial
review and all serious personal injury cases, involve
mesothelioma, industrial diseases and multiple and
catastrophic injuries, fatal accidents and environmental
and civil liberties cases.
Thirdly, for small claims and fast-track cases, the
Government’s proposal is that the claimant should
pay the success fee subject to a cap set at 25 per cent of
the damages to date of trial, and he should be responsible.
Of those cases—the small, whiplash cases that have
bedevilled us, the RTA cases—70 per cent will come
under that track. With damages at the top end of the
scale of £50,000 in fast-track cases, the success fee
could not exceed £12,500. That is all right; it means
that the claimant’s damages are less, but he would not
have been able to bring the case if he had not had a
conditional fee agreement. The argument that the
noble and learned Lord, Lord Mackay, put way back
in 1990 was whether litigation should be completely
risk free.

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[LORD THOMAS OF GRESFORD]
In multi-track cases, where there is so much more at
stake, I consider that the success fee should be split
50:50 between the successful claimant and the losing
defendant. It should be stressed that the success fee is
a percentage uplift of the standard fees; the cap beyond
which the uplift cannot go is a percentage of the
damages that are awarded. The Government’s model
is that the success fee uplift should be capped at 25 per
cent of the general damages and losses to the date of
trial. In a large case, that award of damages to the date
of trial can be a small fraction of the total damages,
future care and loss being by far the greater proportion.
Yet we have to recognise reality. There is a need to
ensure that such potentially difficult and risky cases
remain commercially viable and attractive to experienced
litigation solicitors. Some solicitors on the high street
will take a case on a one-off basis. Is that the best way?
Do we not want to have some speciality and experience?
Commercially viable litigation will keep the solicitors
who currently do those cases taking those cases on.
My argument is, further, that the cap should be
placed on the whole award of damages, and not damages
to the date of trial where it is multi-tracked—with a
serious award of damages—as the noble and learned
Lord, Lord Mackay, originally proposed in his scheme.
From the claimant’s point of view, his share of the
success fee cannot extend beyond 12.5 per cent of
the damages, and that would be assisted by the proposed
10 per cent increase in the level of damages that we
discussed in the course of the last amendment. To try
to illustrate this, in a catastrophic case where the
damages award might be £10 million, taking into
account future loss, the claimant’s solicitors and barristers
will get their standard fees but they will also get a
success fee. Such a fee, which is a percentage uplift of
the standard fees, is never going to reach £2.5 million.
It is going to be a lesser sum.
In a lesser case where the damages are £600,000, to
illustrate a different proposition, a success fee might
reach £150,000 but it could not go any higher. Under
my proposed model, that would lead to the claimant
losing £75,000 of their £600,000 award and the defendants
paying £75,000 themselves. What are the consequences
of this? It is complicated and we have heard so much
about it. It would mean that the claimant has an
interest in the amount of the success fee and that lawyers
would compete for his business. It is not too much in
cloud-cuckoo-land to suppose that a solicitor would
advertise, “My success fee will be nil”, or, “My success
fee will be 5 per cent”, in order to attract business.
As for the “after the event” insurance premiums, we
have already agreed that one-way costs-shifting will be
introduced where there are conditional fee agreements
to remove the burden of heavy defendants’ costs.
One-way costs-shifting has operated in practice in
legal aid cases since the inception of legal aid. I have
tabled amendments which follow the amendments that
we discussed last time. If one-way costs-shifting is
introduced, the exorbitant “after the event” premiums
to cover the risk of paying heavy defendants’ costs are
removed at a stroke. You do not have to insure against
the defendant’s costs because one-way costs-shifting
means that the defendant will pay his own, even if
he wins, as has happened in legal aid cases. It may
be necessary to obtain “after the event” cover for
disbursements which might cost in a typical case £3,000
to £5,000.
Lord Bach: I must be under a misapprehension. I
thought that this group was about the amendments
that the noble Lord, Lord Alton, had so succinctly
moved and about my own amendments to which I also
hope to speak, perhaps even more succinctly in due
course. I am listening carefully to the noble Lord, as
I always do, but it seems that his amendments are part
of the group that begins with his Amendment 132B. I
am surprised that the noble Lord has not waited to
speak to his group as it appears on the Marshalled
List. Perhaps he can explain to the House why he is
doing this.
Lord Thomas of Gresford: Iamveryhappytodo
that. I will speak to it further in due course. Frankly,
I am anxious not to make the 31-minute speech that I
made when we last discussed this particular issue and
to relieve your Lordships of that burden. I am splitting
what I intend to say, which I think is necessary to
cover the whole field, so that it becomes a little more
understandable. I take the noble Lord’s rebuke in good
part, but let me repeat that asking for the status quo in
mesothelioma cases only is not the way to go forward.
Lord Alton of Liverpool: My Lords, I would draw
the noble Lord’s attention to the actual words in the
amendment and indeed in the amendment of the noble
Lord, Lord Bach, which is in this group. We have
corresponded about this and he has been good enough
to share with me prior to the debate some of the
points that he has made eloquently this afternoon. I
am grateful for that. However, this amendment goes
slightly wider than he is suggesting in his remarks
today and would cover, for instance, pneumoconiosis
as well.
6.15 pm
Lord Walton of Detchant: My Lords, I support the
amendments tabled by my noble friend Lord Alton. I
do so as a doctor. I was brought up in a mining village
in Durham County where as a youth I saw some of the
ravages of industrial injury and the effects of
pneumoconiosis on those who worked in the mines.
Later, when I moved to industrial Tyneside, I had
considerable acquaintance with industrial injuries of
all kinds and industrial diseases caused by a variety of
different agents. At an earlier stage of this Bill, I
commented that I was asked not infrequently to make
reports on people who had suffered neurological damage
as a result of these agents. The noble Lord, Lord
Beecham, responded by saying that when instructing
me to give such reports he had been grateful for their
nature and extent and also for the modest fees. Had I
known that he took that view the fees might have not
been quite so modest.
There is no doubt, as the noble Lord, Lord Thomas,
has said, that industrial injuries of all kinds are
prevalent in our society. Is there anything special
about mesothelioma? There is indeed. It is a disease caused

319 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
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by exposure to asbestos. The cause is known. The
clinical course is known. In this condition, the result
of particles lodging in the lungs means that the pleura
or membrane which covers the lungs becomes progressively
thickened, causing compression of the lungs and
respiratory failure. Unlike many other diseases, such
as pneumoconiosis, this disease is inevitably fatal. It is
a very special condition. It deserves special legal attention
and for that reason I strongly support these amendments
which I believe should be accepted by your Lordships’
House.
Baroness Butler-Sloss: My Lords, I apologise for
not being present at the beginning of this debate. My
name is on the letter and I want to underline my
support for it. As a judge, I was involved with a
number of these extremely sad cases, particularly at
the Court of Appeal. The letter has been very helpful
in setting out what is needed. I apologise to the noble
Lords, Lord Alton and Lord Avebury, for not having
heard most of what they said, but I have a shrewd idea
that it was said extremely well.
Lord Wigley: My Lords, I support Amendment 132AA
and wish to speak to the group which is associated
with it, standing in the names of the noble Lords,
Lord Alton and Lord Bach. I do so enthusiastically as
I indicated in Committee. Whereas the noble Lord,
Lord Thomas, may well have arguments in certain
cases in relation to the legal processes that he outlined,
I come to this from the point of view that compensation
should be available in full to people, reflecting their
suffering and the condition they have had, and that
any legal fees should be other than the sum allocated
as a response to that suffering. If this group of
amendments is not accepted, the House will no doubt
hear the noble Lord’s proposals in a later group of
amendments. The scope not only of Amendment 132AA
but also Amendment 132AB, which goes wider and covers
a number of other equally distressing and deserving
conditions, means that they can be supported when it
comes to a vote if it does indeed come to a vote.
These amendments would have the effect of exempting
cases involving claims for damages for respiratory
illnesses following exposure to harmful substances
from the range of changes proposed in Clauses 43,
45 and 46 of the Bill. The case for doing so was
covered extensively in Committee but, unfortunately,
the Minister has not so far moved towards accepting
the changes that we hoped he might accept at that
stage. A couple of weeks ago, at a St David’s Day
dinner, I found myself sitting opposite a widow from
my home area of Caernarfon. She had lost her husband
to asbestosis six years ago. She described what he and
they, as a family, had suffered. She received a modest
sum of compensation. However, she told me that she
had been following our debates in Committee and
doubted that she would have got that compensation
under the changes that are coming through. My goodness,
if that is the effect that they will have on people who
have suffered in that way, we have to make sure that
the Bill is watertight and looks after people who have
suffered as a result of the work that they have undertaken.
If Clause 43 is agreed unchecked, success fees under
a conditional fee arrangement will no longer be recoverable
from the losing party in all proceedings. Instead, in cases
where claims are made against an organisation as a
result of illness due to negligence, the fee will be
recovered from damages awarded to the injured person,
sometimes substantially eroding those damages. Likewise,
if Clause 45 is agreed as it now stands, “after the
event”insurance premiums will no longer be recoverable
from the losing defendant and will also be taken out of
the damages awarded to the injured party. Similar
changes are proposed in Clause 46, which prevents
organisations recovering their insurance premiums from
a losing party. Unsuccessful cases involving more than
one claimant can be highly expensive if there are
multiple defendants whose costs need to be covered in
the event of the case being lost. Without recoverable
insurance premiums, these cases simply will not, in
practice, be able to proceed.
Many organisations, including the Association of
Personal Injury Lawyers, have been at pains to make it
clear that damages are awarded for the pain and
suffering caused by prolonged and debilitating illnesses.
As I said earlier, damages were never intended to pay
towards legal costs. Making an insured person or their
family suffer an erosion of the financial compensation
to which they are entitled on top of the physical
distress they have endured is neither just nor dignified.
It is wrong that the Government are intent on ploughing
ahead with these changes without making exceptions
where they are due.
In Committee, the Minister spoke of the Government’s
overarching aim as being,
“to create an architecture which squeezes inflationary costs out of
the civil justice system”.—[Official Report, 30/1/12; col. 1433.]
Those are grand words indeed but they cover a multitude
of sins. As the noble Lord, Lord Alton, remarked, the
only people who will be squeezed as a result of these
changes are those who are already suffering from fatal
diseases and their families. That does not sound like
justice to me.
In Committee, the Minister also assured me that a
number of possible routes of redress would be made
available for individuals who had contracted diseases
such as mesothelioma and asbestosis through schemes
operated by the Department for Work and Pensions.
We have heard reference to this but, as yet, I have seen
no further detail on how these schemes may work. In
the mean time, we should proceed on the basis that
they are not there yet. However, I would welcome any
clarification that the Minister might give and will
listen carefully to what he has to say.
I support not only the group of amendments spoken
to by the noble Lord, Lord Alton, but support very
strongly Amendment 132AB in the name of the noble
Lord, Lord Bach. It is relevant to a group of industrial
diseases such as pneumoconiosis, silicosis and associated
lung diseases, which are certainly of considerable
importance to me and the community from which I
come.
If these clauses are agreed unchecked, individuals
who have suffered harm and distress will be dealt a
further blow and access to justice will be severely
undermined. It is perhaps futile to press the Government
to agree to changes that they have already so utterly
dismissed out of hand. However, I urge noble colleagues

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322
[LORD WIGLEY]
to support these amendments and to argue the case
that individuals already suffering due to negligence
should not face further hardship.
Lord Newton of Braintree: My Lords, may I briefly
split up the Cross-Benchers, albeit in support of everything
that they and most others have said? I have a couple of
prefatory remarks. I cannot quite share the enthusiasm
of the Liberal Democrat and former Liberal Democrat
Benches for the anniversary of my noble friend Lord
Avebury, although not because I do not have the
highest regard for him. However, I was in the Conservative
research department at the time and it was a major
culture shock, which did not tempt me to join the
Liberal Party. It could yet happen of course, but not
today.
The Minister may be glad to hear my other prefatory
remark. This will probably be my last foray on the Bill
because, in general, I regard Part 2 as being above my
pay grade. I have been reinforced in that view by the
speech of the noble Lord, Lord Thomas of Gresford,
which left me feeling—I hope he will not find this too
rude—as though I had been enveloped in fog.
I spoke on this matter at an earlier stage and I do
not intend to repeat myself. I simply endorse some
points that have been made. In an earlier incarnation,
when I was Minister for Disabled People, I was also
the Minister for the Industrial Injuries Advisory
Committee, so I know a bit about industrial diseases,
including respiratory diseases such as this one. While
they all have their problems and the scheme has its
offerings, this disease is pretty unique for reasons that
the noble Lord, Lord Alton, has outlined so clearly
with his medical knowledge. This was reinforced by
what the noble and learned Baroness, Lady Butler-Sloss,
said about her experience of seeing and being involved
in such cases. We cannot dismiss that.
I said earlier that we need to recognise that this
disease is not only terrible but moves very fast. Someone
gave the figure of nine months. To repeat something
that I said earlier, we also need to acknowledge that
this is one of those cancers—it is effectively a cancer—that
is still growing. It is not diminishing. There is a long
time fuse on exposure to asbestos. We have known
about it for a long time and action has been taken;
when asbestos is found, there is great expenditure on
getting rid of it. However, there are still more cases to
come than there have been because of that long fuse.
One way or another, it is a pretty special case. I just do
not like the idea that it can be dealt with only under
CFAs, with the consequences that were so eloquently
outlined by the noble Lord, Lord Alton.
This is not part of the mischief of exploiting whiplash
injuries. It is very much sui generis and needs to be
treated as such. The notion that someone who has just
been told that they have nine months or less to live will
engage in a lot of frivolous legal activity is far fetched
in the extreme.
The noble Lord, Lord Thomas of Gresford, referred
to all sorts of other ways of getting compensation,
including schemes that the Government have and the
possibility of a rival to the Motor Insurers’ Bureau.
We are talking about people with nine months to live.
It will probably take nine months for them to find out
where to start under some of those arrangements, let
alone to get some compensation. In any event, what
we are offered here are not the alternatives that the
noble Lord, Lord Thomas, outlined. They are not here
and would have to be worked up. What we have is what
is in the Bill. We need to look at that with care and,
once more, we need to ask the House of Commons to
think again.
6.30 pm
Lord Faulks: My Lords, I agree with every speaker
that this is a dreadful disease for which the sufferers
deserve compensation. Just as importantly, they deserve
compensation speedily. I am glad to say, as a practising
barrister with some experience of cases of this sort,
that the mechanisms and systems by which compensation
can be achieved have greatly improved so that this can
be done.
I agree that all these claims are thoroughly deserving.
There can be no dispute about diagnosis. They are not
the sort of cases that are covered by the much described
“compensation culture”. The real question, though, is
simply this: will these cases still proceed if the Bill
becomes law? There is no doubt that they will become
less profitable for lawyers, but will they become so
much less profitable that these very deserving cases will
be denied justice? That is the real question, I suggest.
The reason why lawyers do not take cases on CFAs—
this is perhaps particularly so in clinical negligence
cases—is because there are real difficulties and they
might lose the case. In a series of cases on mesothelioma
and other cases deriving from exposure to asbestos,
the courts have done a great deal to help in terms of
the law on causation. Not just through the 2006 Act
but in a series of cases in the Court of Appeal and in
the House of Lords, they have circumvented the difficulties
in proving liability, particularly the so-called “single
fibre” theory, where it was difficult to establish which
of a number of employers was responsible. That difficulty
is largely overcome. As I say, the noble Lord, Lord Walton,
has confirmed that diagnosis is rarely controversial, so
we do not have the situation of doctors disagreeing.
So what is the real difficulty about these cases? There
is a great deal of experience out there, both on the
claimants’ and the defendants’ side, in taking these
cases forward. One of the problems is not being able
to identify the appropriate defendant or the policy. We
have heard from the noble Lord, Lord Thomas, that
steps have been taken through the ABI and other
bodies to keep proper records of these matters.
However, where I have real difficulties, in agreement
with all noble Lords who have spoken, is on the
question of damages. A recent decision of the High
Court has dealt with the quantum of damages in these
cases. They are very modest. That is not because
judges are not profoundly sympathetic to the claims,
but simply because they are claims for pain and suffering
and loss of amenity and do not involve long-term care
claims or loss of earnings claims. Thus they are modest.
However, I find it unattractive in the extreme that
there should be 25 per cent taken off these damages,
albeit that will be increased by 10 per cent. I very much
hope that the Minister’s words are justified and that
solicitors will not see fit—how could they?—to take a

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percentage of damages in these circumstances. I share
with the noble Lord, Lord Alton, a revulsion of the
expression “skin in the game” in the context of these
desperately sad cases.
I suggest that Part 2 of the Bill is a very real and
positive attempt by the Government to cope with what
I have encountered as a disfiguring feature of the
litigation world when inflated costs are involved and
when cases become too much about lawyers’ fees and
interests and insurers’ interests rather than the underlying
dispute. This is a desperately sad series of cases. I
share all noble Lords’ concern that damages should be
recovered as quickly as possible. However, I venture
caution lest, in the wake of these cases, we lose the
structure and the architecture that Lord Justice Jackson
put forward.
Baroness Finlay of Llandaff: I support the comments
made by my noble friend Lord Walton of Detchant.
As a doctor, I look after these patients and have found
repeatedly that they do not even want to seek
compensation but are persuaded to do so. They do not
seek it for themselves as they know that their lives are
over, but because they want to leave something behind
for their bereaved families who will have to live on
after their death, facing a loss in pension.
As has been said, a common feature of mesothelioma
and the other respiratory diseases mentioned in other
amendments in this group is that diagnosis is clear.
Histological diagnosis under the microscope shows
the fibres and fragments of substance to which these
people have been exposed, such as asbestos fibres and
small amounts of substances such as beryllium and
silica. Another feature of these respiratory diseases is
that they form a discrete group. Protection of the
respiratory tract has been around for a long time but
workers have not always been adequately protected.
Sadly, there was a time lag in that regard. Indeed, as
regards these diseases, blue asbestos was thought to be
the culprit. It took some time before all forms of
asbestos were identified as being fundamental pathogens.
We must put the interests of the people suffering from
these diseases before any other interests. For those
reasons, I strongly support these amendments.
Lord Mackay of Clashfern: My Lords, obviously,
the people who fall into this category should have our
sincere sympathy. I certainly feel strongly that they
deserve that. However, I want to mention one or two
matters. First, when this system of contingency fees—or
whatever name you want to call it—was introduced,
there was no special rule for such cases. I do not know
to what extent the noble Lord, Lord Alton, or the
noble Lord, Lord Avebury, have looked into the situation
as it was when the system as I introduced it was
working.
Secondly, it will not have escaped your Lordships
that the next amendment of the noble Lord, Lord
Alton, concerns industrial disease cases generally. The
amendment we are discussing deals with respiratory
cases; the next amendment deals with industrial disease
cases. I particularly draw to your Lordships’ attention
the question of justice as between different claimants.
I entirely accept what has been said by those highly
medically qualified noble Lords who have spoken
about the disease we are discussing. However, other
troubles that are the subject of personal injury actions
involve lifelong deprivation of practically all one’s
faculties. That kind of long-lasting trouble comprises
another type of personal injury action. If your Lordships
wish to support this amendment, they have to think
how they would justify treating the cases we are discussing
differently from other terrible cases which those of us
who have experience of personal injury actions know
exist.
Long ago I was professionally involved in cases that
concerned the National Coal Board. Pneumoconiosis
cases were brought but other cases were brought involving
people who had been injured while working underground.
People who suffered those injuries were in terrible
distress and eventually died. However, before they
died they were in a very distressing situation. Therefore,
one has to be careful about how one distinguishes
between the different cases. Justice requires that similar
cases should be similarly dealt with.
If I understood him correctly, the noble Lord, Lord
Alton, said that the cases in the group he was asking
for should not be required to subsidise other cases. My
understanding of this system is that you do not subsidise
other cases: the success fee is dependent on the chances
of success in your case. It is a factor which is dependent
on a probability of success that works into the success
fee. It is not dependent on other cases; it is dependent
on the precise potential for winning that exists in the
case that you have in hand. Therefore, I do not accept
that this system in any way subsidises other cases
across the board except in the sense that the probability
of success in a particular case is what determines the
success fee.
If the noble Lord, Lord Alton, wishes to press this
amendment, I assume that he will not have the benefit
of the 10 per cent uplift for his amendments in this
group, which is on the way as a result of the undertakings
given by the Government. There is also the question of
the one-way shift. That would probably apply if it
were done generally in respect of these cases, but the
other may not.
This is a very difficult area. The sympathy of the
whole House is with these people, and that is very
much the case with me and my noble friend in particular,
given his experience of this issue. However, justice
requires us to do justice as between different claimants.
Other claimants also have very difficult conditions.
How do we say to X, “Your claim and the conditions
to which you have been exposed are so bad, as distinct
from the others, that we can justify treating you
differently”?
I should perhaps have said that I of course associate
myself with the congratulations to the noble Lord,
Lord Avebury. I did not suffer from the difficulties
that my noble friend Lord Newton of Braintree had.
Lord Alton of Liverpool: Perhaps I may put two
points to the noble and learned Lord before he sits
down. The system as it operated under his stewardship
did not take funds away from the claimant when they
were successful in litigation. That is surely the difference
from the matter before your Lordships’ House. When
the noble and learned Lord oversaw the system, it was
fair and just, and did not raid any of the funds that the

325 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
326
[LORD ALTON OF LIVERPOOL]
claimant was able to receive in compensation. We are
merely seeking to maintain the status quo in the way
that it operated during his time.
As to exceptional circumstances, surely, if someone
is terminally ill, they are exceptional or sui generis, as
described by the noble Lord, Lord Newton, and my
noble friend Lady Finlay in their interventions. If
people in this group are terminally ill, that is surely
what makes their cases exceptional.
Lord Mackay of Clashfern: My Lords, it is possible
to describe other types of illness and the basis for
claims in very much the same language as that used by
the noble Lord, Lord Walton of Detchant, and the
noble Baroness. So far as the first point is concerned,
in the system as I introduced it the success fee would
be payable by the claimant out of his or her damages.
Lord Bach: My Lords, we have had a powerful and
emotive debate and I want to be very brief because the
House wants to hear from the Minister, who is obviously
sympathetic, as was demonstrated by what has been
said about his visits made and meetings with noble
Lords on this issue. I am proud to support the amendment
in the name of the noble Lord, Lord Alton of Liverpool,
also supported by the noble Lord, Lord Avebury. I am
delighted that the noble Lord, Lord Alton, supports
my amendments in this group that deal with other
industrial diseases—Amendments 132AB, 132D and
141ZB. In response to the noble Lord, Lord Thomas
of Gresford, I say that if he thinks that other diseases
are also important to deal with, he should look carefully
at the amendments I may move in due course.
I shall cut down appreciably on what I wanted to
say. We know that asbestosis is not the only problem,
but speeches have been made in this debate by experts
who suggest that it is a problem out on its own that
should be considered separately, as it will be this
evening. It is because asbestosis is not the only problem
that I tabled my amendment that deals with other
serious industrial diseases. I do not need to go through
the types of diseases that I am talking about, but they
are the by-products of hard work. All these are inflicted
on hard-working people who have spent their lives
contributing to our society and economy, often in
industries that no longer exist, and in heavy industry,
manufacturing and public services. As has been said
by many noble Lords, many of these diseases do not
manifest themselves for years and are the legacy of
coal mining, our proud tradition of manufacturing,
steel making and other professions.
6.45 pm
I have here a letter received from the wife of a man
who suffered from mesothelioma, to which the noble
and learned Lord, Lord Davidson, referred in his
Second Reading speech many months ago. The man
was between 16 and 24 years old when he was exposed
to asbestos as an apprentice lift engineer, erecting lifts
on building sites. He stayed in that industry throughout
his working life. He loved his job and most of his
customers became his friends. His wife said:
“This disease has affected our lives in every possible way and
stress levels have been extremely high for both of us”.
She went on to say many things that will move the House,
and added that the stress and worry that go with what
she described were unbelievable. Yet, she claimed, the
Government were trying to make victims face additional
stress and worry by making them decide whether they
can afford to take out a civil action. She added:
“Compensation would be eroded by having to pay legal costs
plus insurance to cover defendants’ legal costs, plus the worry of
having to pay some fees upfront. This is an insult and will
discourage people from making a claim to which they are entitled.
This Bill should be designed to stop the ‘ambulance chaser’
brigade who contact prospective clients and advertise constantly,
not workplace victims whose lives were put at risk by exposure to
asbestos”.
Of course we are right to control the cost of litigation,
but road traffic accidents and slip-and-trip accidents are
quite separate and distinct. It is incongruous to somehow
link them with what we have been talking about in this
debate. It is unnecessary and rather cruel. It is with pleasure
that I invite the Minister to accept the amendments in
the name of the noble Lord, Lord Alton, and myself.
Lord McNally: My Lords, I should first say to
the noble Lord, Lord Newton, that if he is thinking of
joining the Liberal Democrats he would fit in very well.
This is not a debate about those who care about
mesothelioma sufferers and those who do not. We all
care, and many of us have been trying to address the
problems associated with that dreadful disease. Indeed,
the Department for Work and Pensions is working
closely with all stakeholders to see what can be done
to compensate people with mesothelioma and similar
conditions who are unable to claim civil damages
because their employer no longer exists and their
insurer cannot be found.
It is true, as has been mentioned, that Governments
of all parties have taken action to aid sufferers of
industrial injuries and illnesses, and the legacies of our
industrial past. However, it is also fair to put on record
that legal aid was removed from this area of litigation
by the previous Administration in 2000.
Before turning to the detail of these amendments, I
wanted to say a few words about the importance of
the changes we are introducing in Part 2. As we heard
in the earlier debate, the changes we are proposing to
no-win no-fee agreements were recommended by
Lord Justice Jackson after his year-long review, and
supported by the senior judiciary. The Lord Chief
Justice said that the report addressed civil costs as a
comprehensive, coherent whole. Our proposals were
welcomed by the previous Lord Chancellor, Mr Straw,
and by the opposition Front Bench in the other place
when the current Lord Chancellor announced them
on 29 March last year. The shadow Justice Minister
said at Committee stage:
“the intention of part 2 is perfectly sound, and it is one with
which we have a great deal of sympathy”.—[Official Report,
13/9/11; Commons, Legal Aid, Sentencing and Punishment of
Offenders Bill Committee, col. 501.]
So there is broad agreement on the principles of our
reform.
Part 2 addresses the way that the present system
is—as I think that the noble Lord, Lord Faulks,
described it—distorted. The agreement is perhaps not
surprising given the high costs that have arisen under

327 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
328
the current regime and the unfairness that has resulted
between claimants and defendants.
I remind the House of that, because I am concerned
that in making the position fairer between claimants
and defendants, as we seek to do, we should not make
the position less fair between different classes of claimants,
as some of the amendments would, as the noble and
learned Lord, Lord Mackay, just reminded us. The
current regime of recoverable success fees and insurance
premiums allows for risk-free litigation from claimants
and substantial additional costs for defendants.
Allowing exceptions, so that the regime continues
in relation to certain cases only, would introduce unfairness
for those claimants in an otherwise similar position
where the exception does not apply. Allowing an exception
for defamation claims, for victims of industrial diseases
or for claims of corporate harm by multinational
companies, for example, would introduce an advantage
to claimants in those specific categories which would
be unfair to those in otherwise similar positions whose
claims fell into a slightly different category. Clauses 43
and 45 are a fundamental element of the Government’s
reform in ensuring proportionality and fairness across
the board. That is why we resist any substantive
amendments to them.
I will take Amendments 132AA, 132AB, 132D,
136, 141, 141ZB and 142 together, as they are intended
to retain recoverable elements in claims dealing
with respiratory diseases or industrial diseases caused
by an employer’s breach of duty to an employee.
Amendments 132AA, 136, 141 and 142 would retain
recoverability of success fees after the event, or ATE
insurance payments and membership organisations’
self-insurance costs for respiratory disease cases.
Amendments 132AB, 132D and 141ZB would do the
same for employers’ liability claims relating to industrial
diseases.
Although I will address all industrial disease claims
in my response, I am aware of the keen interest of the
noble Lords, Lord Alton and Lord Avebury, in
mesothelioma in particular. They have been tireless
and dedicated campaigners on behalf of sufferers of
that fatal and tragic disease, and I commend them on
that. Although we can agree on the tragic nature of
the disease and its impact, I cannot agree that those
cases should be exempted from our reforms. Noble
Lords have argued that industrial diseases, including
mesothelioma and other less serious conditions, are
not part of the compensation culture. The Government
accept that—I did so in Committee. There is no suggestion
that those claims are brought improperly. Our reforms
are intended to address high cost throughout civil
litigation. This is not just about driving out fraudulent
or exaggerated claims but about ensuring that legal
costs are proportionate to the sums at issue. For that,
wholesale reform is needed. To be effective, it must
apply across the board.
Specifically on mesothelioma, I said in reply to an
Oral Question from the noble Lord, Lord Alton, on
29 February that I am not aware of anything associated
with those cases which makes them particularly expensive
to bring. I have not heard anything since which persuades
me that there is anything particular about the nature
of those cases—the cases, not the disease—which makes
them any harder to bring in legal terms than any other
case. Indeed, it is quite the reverse. As my noble friend
Lord Thomas of Gresford and the noble Lord, Lord
Faulks, pointed out, significant steps have been taken
in recent years to lower the barriers to bringing
compensation claims for those diseases. Senior Master
Whitaker, who oversees these cases in the High Court,
has helped to introduce a fast-track procedure for
mesothelioma cases. That has been incorporated into
a practice direction ensuring that those claims are
dealt with as quickly as possible—again a point brought
up by my noble and learned friend Lord Mackay.
Various legal changes over the past few years, including
primary legislation such as the Compensation Act
2006, and judgments of the Supreme Court, have
removed some of the hurdles for sufferers of respiratory
diseases to bringing claims. The Department for Work
and Pensions has undertaken various initiatives to
make it easier for claimants to trace their employers’
insurers. I understand that it can be difficult and
expensive for those with what the noble Lord, Lord
Wigley, I think, referred to as long-tail diseases, such
as mesothelioma, to track down the liable insurer. In
April 2011, the insurance industry set up the Employers’
Liability Trading Office, or ELTO. Supported by the
Government, the ELTO provides an online resource
through which claimants and their representatives can
search for the relevant policy, reducing time and costs
for those involved in such searches.
The Department for Work and Pensions continues
to work with stakeholders to see what can be done to
compensate people with mesothelioma and similar
conditions who are unable to claim civil damages
because their employer no longer exists and their
employer’s liability insurer cannot be found. A response
to the government consultation, Accessing Compensation
Supporting People Who Need to Trace Employers’ Liability
Insurance, which reflects further on possible solutions,
will be published in due course. I recently met the
insurance industry to discuss ongoing work. I can tell
the House that, as a result of this issue being raised in
discussion on the Bill, I will be taking the matter up
with my noble friend Lord Freud at the Department
for Work and Pensions to discuss what progress is
being made and how it can be advanced. As noble
Lords will be aware, my noble friend told the Grand
Committee yesterday that we will be increasing the
mesothelioma lump-sum payments by 3.1 per cent
from 1 April this year. I welcome my noble friend’s
statement and his commitment to working with interested
parties to offer further help to sufferers who have
difficulty in tracing their insurer.
Noble Lords have spoken of the prohibitive costs
of bringing industrial disease claims against well resourced
defendants. There is concern that claims will not be
brought if claimants risk being liable for high defendant
costs should they lose. In response, I remind noble
Lords that in personal injury claims, including industrial
disease, qualified one-way costs-shifting will apply—that
is, a losing claimant will usually not be at risk of
paying a defendant’s costs. We discussed QOCS earlier
in the debate.
We turn, then, to the claimant’s own disbursements,
which noble Lords have argued will be unaffordable

329 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
330
[LORD MCNALLY]
should “after the event” insurance premiums no longer
be recoverable. On respiratory disease claims, my
understanding is that only one medical report is required
by rules of court in order to issue a claim. This report
will cover the diagnosis, basic causation, prognosis
and what the life expectancy might have been without
mesothelioma. In exceptional circumstances, a forensic
engineering report may also be necessary to show
causation. However, the majority of mesothelioma
sufferers will not need reams of expert evidence to
bring their claim and consequently are unlikely to face
high up-front costs for expert reports.
Claims for industrial diseases are not unique in
requiring expert evidence to show the nature and
extent of the illness. The same is true of many personal
injury cases, where there may be disputes, if not of the
causation or liability, of the extent of the damage
caused. It is not true to say that such reports will be
unobtainable without a recoverable ATE premium,
particularly as a claim may be brought on the basis of
one report. A claimant may pay for reports through
their own means; solicitors may decide to bear up-front
costs themselves; or a claimant may take out ATE
insurance and pay the premium themselves. In any of
those instances, either the claimant or the solicitor will
have a direct interest in the costs that are being incurred—
which is one of the main principles underlying our
reforms.
It should also be noted that general damages for
non-pecuniary loss, such as pain, suffering and loss of
amenity, will be increased by 10 per cent—a point
emphasised by the noble and learned Lord, Lord
Mackay, but not mentioned in other speeches when
there was talk about a raid on damages. That will help
claimants to pay any success fee that may be due once
their claim has ended. I also point out that the proposed
cap on success fees of 25 per cent of damages awarded
is not compulsory. It is a negotiated amount and
excludes those for future care and loss. We expect
solicitors to compete for business by offering lower
fees. We also expect those who specialise in this area to
offer fair and realistic terms for their clients that take
into account not only the risk of the case, but also the
needs of the individual claimants and their families at
what, of course, will be a particularly traumatic time
in their lives.
7pm
I have previously explained the concerns of the
Government around the current regime and the significant
disadvantages it has for defendants, with no incentive
for claimants to control costs. I must underline that
those reforms in Part 2 are not about saving money for
the public purse. Making savings is a benefit, of course,
but that is not what Lord Justice Jackson was considering
when he wrote his comprehensive report. The Government
are determined to see more proportionate costs in civil
litigation, with greater fairness in the risk borne by
parties. Without our reforms, high and disproportionate
costs in civil litigation will continue. Access to justice
would not become more meaningful for all parties. If
these amendments were accepted, claimants in these
particular cases would have an advantage over others
who may be suffering from equally debilitating conditions.
This cannot be justified, but I am grateful to all noble
Lords. I am grateful to my noble friend Lord Thomas
for what was obviously deep thinking about alternatives
and I will study his remarks and the issues he raised
carefully. As I say, I will be taking these matters
further with my noble friend Lord Freud and other
ministerial colleagues with all due urgency, and, as I
have indicated, I hope that we can make some progress.
As I say, I do not believe that this is a debate
between those who want to help here and those who
do not. It is about keeping the Jackson reforms in
Part 2 in their place without producing a whole range
of anomalies, and at the same time the Government
taking forward with a sense of real urgency ways of
giving practical help to those who suffer from this
dreadful disease. I hope that the noble Lord, Lord
Alton, in the light of that reply, will withdraw his
amendment.
Lord Alton of Liverpool: My Lords, I am grateful to
the Minister for the way in which he has addressed this
issue this evening and, indeed, I reiterate my thanks to
him for meeting the noble Lord, Lord Avebury, and
me yesterday to discuss what more could be done to
help this unique group of people—a point I shall
return to in a moment. I am conscious that your
Lordships want to come to a decision on this matter,
so I promise that I will be brief.
There was no debate about this issue when it was
before the House of Commons; there was no Division
in the House of Commons. Your Lordships will be
doing your job in scrutinising legislation by supporting
these amendments this evening, because Members of
the House of Commons will now, I think, welcome the
opportunity to return to this question. I am told by
my noble friend Lady Finlay of Llandaff, whom I
spoke to earlier about this, that very small numbers of
people other than mesothelioma victims would actually
be caught by this amendment. However, if it should be
that this is slightly extended from this exceptional
group of people who are terminally ill and dying to
one or two other groups, let us make this more generic
and extend it to people who are terminally ill. That is
the difference; that is why I disagree with the noble
Lord, Lord McNally, when he says that this would be
giving this category of people an advantage over others.
This is a group of people who are entitled to an
advantage. If you are diagnosed as terminally ill—if
you are told that you only have nine months to a year
to live—then you are not in the same category as
others, and we have to do all we can to help.
The Minister said that his noble friend—in fact, it
was the noble Lord, Lord De Mauley, yesterday, speaking
on behalf of the noble Lord, Lord Freud, who was
unwell—gave an assurance that there would be an
increase in lump sum payments. That is extremely
welcome but it has no bearing whatsoever, of course,
on the litigation that we are taking about this evening,
which people might embark upon to seek compensation.
It is also welcome that there should be an uplift and I
hope that no one is suggesting that that should not
also be available to people who are terminally ill and
dying as a result of mesothelioma.

331 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
332
The Jackson proposals have been referred to a great
deal during the debates in your Lordships’ House, but
we all know that they are a curate’s egg—they are
there in part. They have been chosen where it suits
those who are proposing these new arrangements and,
where it does not, they are set to one side: this is a very
good example of where that has happened.
Let me reiterate: this is not about public money.
Legal aid, as the Minister himself has said, has not
been available for the past 12 years, so this is not about
public money. Nor is it about the compensation culture;
we are all agreed about that. It is about an exceptional
group of people, but it is also more than that. The
noble and learned Lord, Lord Mackay of Clashfern,
said that it is about justice. I simply ask your Lordships
how it can ever be just to raid the compensation that
someone has been awarded because they have proven
their case in court—to take up to 25 per cent of what
they have been awarded to help them through the last
days of their life. How can it ever be a matter of justice
to do that? It is for that reason that I would like to seek
the opinion of your Lordships’ House.
7.05 pm
Division on Amendment 132AA
Contents 189; Not-Contents 158.
Amendment 132AA agreed.
Division No. 3
Aberdare, L.
Adams of Craigielea, B.
Adebowale, L.
Ahmed, L.
Alton of Liverpool, L. [Teller]
Anderson of Swansea, L.
Andrews, B.
Armstrong of Hill Top, B.
Avebury, L.
Bach, L.
Bakewell, B.
Bassam of Brighton, L.
Beecham, L.
Berkeley, L.
Best, L.
Bilston, L.
Blackstone, B.
Blood, B.
Boothroyd, B.
Borrie, L.
Bradley, L.
Brennan, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Browne of Belmont, L.
Browne of Ladyton, L.
Butler-Sloss, B.
Cameron of Dillington, L.
Campbell-Savours, L.
Carter of Coles, L.
Clancarty, E.
Clarke of Hampstead, L.
Clinton-Davis, L.
Collins of Highbury, L.
Colville of Culross, V.
Corston, B.
Coussins, B.
Cox, B.
Davidson of Glen Clova, L.
CONTENTS
Davies of Coity, L.
Davies of Oldham, L.
Donaghy, B.
Donoughue, L.
Doocey, B.
Dubs, L.
Elder, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Watford, L.
Exeter, Bp.
Falconer of Thoroton, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Fellowes, L.
Finlay of Llandaff, B.
Ford, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Freyberg, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Gilbert, L.
Golding, B.
Gould of Potternewton, B.
Grantchester, L.
Greenway, L.
Grenfell, L.
Grey-Thompson, B.
Grocott, L.
Hall of Birkenhead, L.
Hanworth, V.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howarth of Breckland, B.
Howarth of Newport, L.
Howe of Idlicote, B.
Howells of St Davids, B.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Irvine of Lairg, L.
Janner of Braunstone, L.
Jones, L.
Jones of Whitchurch, B.
Judd, L.
Kennedy of Southwark, L.
Kilclooney, L.
King of Bow, B.
King of West Bromwich, L.
Kingsmill, B.
Kinnock, L.
Kinnock of Holyhead, B.
Kirkhill, L.
Knight of Weymouth, L.
Layard, L.
Lea of Crondall, L.
Liddle, L.
Lister of Burtersett, B.
Lytton, E.
McAvoy, L.
McConnell of Glenscorrodale,
L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate,
L.
McKenzie of Luton, L.
Maginnis of Drumglass, L.
Martin of Springburn, L.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Mitchell, L.
Monks, L.
Morgan, L.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Myners, L.
Newcastle, Bp.
Newton of Braintree, L.
Nye, B.
O’Neill of Clackmannan, L.
Palmer, L.
Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Allan of Hallam, L.
Anelay of St Johns, B. [Teller]
Arran, E.
Ashton of Hyde, L.
Astor, V.
Astor of Hever, L.
Attlee, E.
Barker, B.
Bates, L.
Benjamin, B.
Berridge, B.
Bew, L.
Blencathra, L.
Bowness, L.
Bradshaw, L.
Bridgeman, V.
NOT CONTENTS
Pannick, L.
Patel of Blackburn, L.
Pendry, L.
Plant of Highfield, L.
Prescott, L.
Prosser, B.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Richard, L.
Rogan, L.
Rooker, L.
Rosser, L.
Rowe-Beddoe, L.
Rowlands, L.
Royall of Blaisdon, B.
Saltoun of Abernethy, Ly.
Sandwich, E.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Sherlock, B.
Simon, V.
Smith of Basildon, B.
Smith of Finsbury, L.
Soley, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Tomlinson, L.
Touhig, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turner of Camden, B.
Wall of New Barnet, B.
Walton of Detchant, L.
Warner, L.
Warnock, B.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Wigley, L.
Williamson of Horton, L.
Wills, L.
Wood of Anfield, L.
Worthington, B.
Young of Old Scone, B.
Brinton, B.
Brooke of Sutton Mandeville,
L.
Brougham and Vaux, L.
Browning, B.
Burnett, L.
Buscombe, B.
Byford, B.
Caithness, E.
Cathcart, E.
Chalker of Wallasey, B.
Chidgey, L.
Clement-Jones, L.
Colwyn, L.
Cope of Berkeley, L.
Courtown, E.
Craigavon, V.
Crathorne, L.
Dannatt, L.

333 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
334
De Mauley, L.
Deben, L.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Eccles, V.
Eccles of Moulton, B.
Eden of Winton, L.
Elton, L.
Faulks, L.
Feldman of Elstree, L.
Fink, L.
Fookes, B.
Forsyth of Drumlean, L.
Fowler, L.
Framlingham, L.
Fraser of Carmyllie, L.
Freeman, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
German, L.
Glasgow, E.
Glenarthur, L.
Glentoran, L.
Goodlad, L.
Goschen, V.
Grade of Yarmouth, L.
Hanham, B.
Harris of Peckham, L.
Henley, L.
Heyhoe Flint, B.
Higgins, L.
Hill of Oareford, L.
Hodgson of Astley Abbotts,
L.
Howard of Rising, L.
Howe, E.
Hunt of Wirral, L.
Hussein-Ece, B.
Inglewood, L.
James of Blackheath, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jolly, B.
Jopling, L.
Kirkham, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Kramer, B.
Lee of Trafford, L.
Lester of Herne Hill, L.
Lindsay, E.
Lingfield, L.
Linklater of Butterstone, B.
Lloyd of Berwick, L.
Loomba, L.
Luke, L.
Lyell, L.
McColl of Dulwich, L.
MacGregor of Pulham
Market, L.
7.16 pm
Amendment 132AB
Moved by Lord Bach
Mackay of Clashfern, L.
McNally, L.
Maddock, B.
Mancroft, L.
Maples, L.
Mar and Kellie, E.
Marks of Henley-on-Thames,
L.
Mayhew of Twysden, L.
Montrose, D.
Morris of Bolton, B.
Neville-Jones, B.
Newlove, B.
Northover, B.
Norton of Louth, L.
Oppenheim-Barnes, B.
Palmer of Childs Hill, L.
Palumbo, L.
Phillips of Sudbury, L.
Popat, L.
Randerson, B.
Redesdale, L.
Risby, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Sassoon, L.
Scott of Needham Market, B.
Seccombe, B.
Selkirk of Douglas, L.
Selsdon, L.
Shackleton of Belgravia, B.
Sharkey, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shipley, L.
Shutt of Greetland, L. [Teller]
Skelmersdale, L.
Spicer, L.
Stedman-Scott, B.
Stewartby, L.
Stoneham of Droxford, L.
Storey, L.
Stowell of Beeston, B.
Strasburger, L.
Strathclyde, L.
Taverne, L.
Taylor of Holbeach, L.
Teverson, L.
Thomas of Gresford, L.
Tope, L.
True, L.
Tyler, L.
Verma, B.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Walmsley, B.
Wasserman, L.
Wilcox, B.
132AB: Before Clause 43, insert the following new Clause—
“Exception for industrial disease cases
The changes made by sections 43, 45 and 46 of this Act
do not apply in relation to proceedings which include a
claim for damages for a disease, condition or illness
(whether or not resulting in death) resulting from any
breach of duty owed by an employer to an employee.”
Lord Bach: My Lords, I beg to move.
7.16 pm
Division on Amendment 132AB
Contents 168; Not-Contents 163.
Amendment 132AB agreed.
Aberdare, L.
Adams of Craigielea, B.
Adebowale, L.
Ahmed, L.
Alton of Liverpool, L.
Anderson of Swansea, L.
Andrews, B.
Armstrong of Hill Top, B.
Bach, L.
Bakewell, B.
Bassam of Brighton, L.
[Teller]
Beecham, L.
Berkeley, L.
Best, L.
Bilston, L.
Blackstone, B.
Blood, B.
Boothroyd, B.
Borrie, L.
Bradley, L.
Brennan, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Browne of Belmont, L.
Browne of Ladyton, L.
Campbell-Savours, L.
Carter of Coles, L.
Clancarty, E.
Clarke of Hampstead, L.
Clinton-Davis, L.
Collins of Highbury, L.
Corston, B.
Coussins, B.
Davies of Coity, L.
Davies of Oldham, L.
Donaghy, B.
Dubs, L.
Elder, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Watford, L.
Exeter, Bp.
Falconer of Thoroton, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Fellowes, L.
Finlay of Llandaff, B.
Ford, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Freyberg, L.
Gale, B.
Gibson of Market Rasen, B.
Gilbert, L.
Golding, B.
Gould of Potternewton, B.
Grantchester, L.
Greenway, L.
Grenfell, L.
Grey-Thompson, B.
Division No. 4
CONTENTS
Grocott, L.
Hall of Birkenhead, L.
Hanworth, V.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howarth of Breckland, B.
Howarth of Newport, L.
Howe of Idlicote, B.
Howells of St Davids, B.
Hoyle, L.
Hughes of Woodside, L.
Janner of Braunstone, L.
Jones, L.
Jones of Whitchurch, B.
Judd, L.
Kennedy of Southwark, L.
Kilclooney, L.
King of Bow, B.
King of West Bromwich, L.
Kingsmill, B.
Kinnock, L.
Kinnock of Holyhead, B.
Kirkhill, L.
Knight of Weymouth, L.
Lea of Crondall, L.
Liddle, L.
Lister of Burtersett, B.
McAvoy, L.
McConnell of Glenscorrodale,
L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate,
L.
McKenzie of Luton, L.
Martin of Springburn, L.
Massey of Darwen, B.
Maxton, L.
Mitchell, L.
Monks, L.
Morgan, L.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Newcastle, Bp.
Nye, B.
O’Neill of Clackmannan, L.
Pannick, L.
Patel, L.
Patel of Blackburn, L.
Pendry, L.
Prescott, L.

335 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
336
Prosser, B.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Richard, L.
Rogan, L.
Rooker, L.
Rosser, L.
Rowe-Beddoe, L.
Rowlands, L.
Royall of Blaisdon, B.
Saltoun of Abernethy, Ly.
Sawyer, L.
Scotland of Asthal, B.
Sewel, L.
Sherlock, B.
Simon, V.
Smith of Basildon, B.
Smith of Finsbury, L.
Soley, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Addington, L.
Ahmad of Wimbledon, L.
Alderdice, L.
Allan of Hallam, L.
Anelay of St Johns, B. [Teller]
Arran, E.
Ashton of Hyde, L.
Astor, V.
Astor of Hever, L.
Attlee, E.
Barker, B.
Bates, L.
Benjamin, B.
Berridge, B.
Bew, L.
Blencathra, L.
Bowness, L.
Bridgeman, V.
Brinton, B.
Brooke of Sutton Mandeville,
L.
Brougham and Vaux, L.
Browning, B.
Burnett, L.
Buscombe, B.
Butler-Sloss, B.
Byford, B.
Caithness, E.
Cathcart, E.
Chalker of Wallasey, B.
Clement-Jones, L.
Colwyn, L.
Cope of Berkeley, L.
Cormack, L.
Courtown, E.
Craigavon, V.
Crathorne, L.
Dannatt, L.
De Mauley, L.
Deben, L.
Dholakia, L.
Dixon-Smith, L.
Dobbs, L.
Doocey, B.
Eccles, V.
Eccles of Moulton, B.
Eden of Winton, L.
Elton, L.
Faulks, L.
Feldman of Elstree, L.
Fink, L.
NOT CONTENTS
Taylor of Blackburn, L.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Tomlinson, L.
Touhig, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turner of Camden, B.
Wall of New Barnet, B.
Warner, L.
Warnock, B.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Wigley, L.
Williamson of Horton, L.
Wills, L.
Wood of Anfield, L.
Worthington, B.
Young of Old Scone, B.
Fookes, B.
Forsyth of Drumlean, L.
Fowler, L.
Framlingham, L.
Fraser of Carmyllie, L.
Freeman, L.
Garden of Frognal, B.
Gardiner of Kimble, L.
Gardner of Parkes, B.
Geddes, L.
German, L.
Glasgow, E.
Glenarthur, L.
Goodlad, L.
Goschen, V.
Grade of Yarmouth, L.
Hamwee, B.
Hanham, B.
Harris of Peckham, L.
Henley, L.
Heyhoe Flint, B.
Higgins, L.
Hill of Oareford, L.
Hodgson of Astley Abbotts,
L.
Howard of Rising, L.
Howe, E.
Hunt of Wirral, L.
Hussein-Ece, B.
Inglewood, L.
James of Blackheath, L.
Jenkin of Kennington, B.
Jenkin of Roding, L.
Jolly, B.
Jopling, L.
Kirkham, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Kramer, B.
Lee of Trafford, L.
Lester of Herne Hill, L.
Lindsay, E.
Lingfield, L.
Linklater of Butterstone, B.
Lloyd of Berwick, L.
Loomba, L.
Luke, L.
Lyell, L.
McColl of Dulwich, L.
MacGregor of Pulham
Market, L.
Mackay of Clashfern, L.
McNally, L.
Maddock, B.
Maginnis of Drumglass, L.
Mancroft, L.
Maples, L.
Mar and Kellie, E.
Marks of Henley-on-Thames,
L.
Mayhew of Twysden, L.
Montrose, D.
Morris of Bolton, B.
Neville-Jones, B.
Newlove, B.
Northover, B.
Norton of Louth, L.
Oppenheim-Barnes, B.
Palmer, L.
Palmer of Childs Hill, L.
Palumbo, L.
Phillips of Sudbury, L.
Popat, L.
Randerson, B.
Redesdale, L.
Rennard, L.
Ribeiro, L.
Risby, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Scott of Needham Market, B.
Seccombe, B.
Selkirk of Douglas, L.
Selsdon, L.
7.27 pm
Sitting suspended.
8pm
Shackleton of Belgravia, B.
Sharkey, L.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shipley, L.
Shutt of Greetland, L. [Teller]
Skelmersdale, L.
Spicer, L.
Stedman-Scott, B.
Stewartby, L.
Stoneham of Droxford, L.
Storey, L.
Stowell of Beeston, B.
Strasburger, L.
Strathclyde, L.
Taverne, L.
Taylor of Holbeach, L.
Teverson, L.
Thomas of Gresford, L.
Tope, L.
True, L.
Tyler, L.
Verma, B.
Wakeham, L.
Wallace of Saltaire, L.
Wallace of Tankerness, L.
Walmsley, B.
Walton of Detchant, L.
Wasserman, L.
Wilcox, B.
Amendment 132AC
Moved by Baroness Coussins
132ACBefore Clause 43, insert the following new Clause—
“Exception for international human rights cases
The changes made by sections 43, 45 and 46 of this Act do
not apply in relation to proceedings which include a
claim for damages for international human rights cases.”
Baroness Coussins: My Lords, In moving Amendment
132AC, which was added as a manuscript amendment
this morning, I shall speak also to Amendments 134,
135 and 138, which I believe are consequential to that
first one and appear in the Marshalled List under my
name and have the support of Members on all sides of
the House. My amendments would ensure that in this
country we retained effective access to justice in our
courts for overseas victims of human rights abuses or
environmental harm caused as a result of the operations
of UK companies. These amendments would not involve
any expenditure whatever from the public purse. I
remind the House of my interest as a non-executive
adviser on corporate social responsibility to various
companies and I acknowledge the work of CAFOD,
Amnesty, Oxfam and other organisations in the corporate
responsibility coalition which strongly support these
amendments.
I am grateful to the noble Lord, Lord McNally, and
the noble and learned Lord, Lord Wallace of Tankerness,
for meeting with me and others to discuss these
amendments and for the subsequent letter the noble

337 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
338
[BARONESS COUSSINS]
Lord, Lord McNally, sent. I am only sorry that I do
not seem to have persuaded him of the need for these
amendments but I will have one more go here today
and make four brief points in response to the reasoning
set out in his letter of 29 February 2012 to me and the
noble Lord, Lord Stevenson.
First, the Government are clear that the effect of
Part 2 of this Bill should be, and I quote from the
impact assessment,
“a transfer of resources primarily from claimants and claimant
lawyers to defendants. For many of the cases in scope, the
defendant is a public body, funded by the taxpayer”.
There is the critical difference. In the type of cases that
I am referring to, the defendant is not a public body. It
is not the NHS, for example. The defendants here are
multinational companies, often with huge resources
and large teams of their own very expensive lawyers.
The claimants, by contrast, in past cases have included
rural farmers from remote areas of Peru or Colombia,
South African asbestos miners, or citizens of the Côte
d’Ivoire, one of the poorest countries in the world. So
my amendments are about an exceptionally different
type of claimant from those this Bill is really about,
and I think that that must be acknowledged.
Secondly, the Minister has said that damages-based
agreements, or DBAs, are the answer, but in my view
he has not backed this up with evidence as to how
DBAs would work specifically for these types of cases.
Without my amendments, lawyers’ success fees would
not come from the losing company; they would be
taken out of the victim’s damages. Shifting the burden
of payment for fees and insurance costs from the
defendant to the victim risks substantially reducing or
even wiping out the damages that victims receive. In
such situations it is hard to imagine it being financially
viable to bring the case in the first place.
Thirdly, the Government acknowledge that a potential
impact of the Bill’s proposals is that fewer cases may
be brought, especially where there is a lower probability
of success or where cases involve highly disproportionate
costs compared to the amount being disputed. That is
exactly the case with these international corporate
human rights abuse cases. This does not mean that
such cases are not worth pursuing. It is still vital that
vulnerable victims should get justice and at least some
compensation. Companies need to know that they can
be brought to account if they act irresponsibly. The
proposed amendments to Clauses 43 and 45 would
retain the current funding system for international
human rights cases. I want to make it clear that
creating this exception would not gut the overall aim
of the Bill. It would not fundamentally undermine the
Bill’s purpose at all. The offending company would
have to pay out only if the case met all the existing
prescribed criteria to do with public interest.
Finally, other countries will be looking to the UK
to follow our lead in working out how to implement
the United Nations’ guiding principles on business
and human rights. What kind of example are we
setting to other countries if we change our laws now to
make it even harder for poor victims of corporate
abuses to seek redress. I urge the Government to agree
to carve out an exception for these rare cases, which
the Bill was surely not intended to be about in the first
place. I beg to move.
Lord Judd: My Lords, I strongly support and endorse
this amendment. We have been reminded that a number
of very significant organisations in this country which
are working in the front line in the countries concerned
feel passionately that this amendment is necessary. I
declare an interest as a former director of Oxfam. All
my experience during those years at Oxfam and since
in my work with similar organisations has underlined
the importance of this amendment. Not infrequently I
found myself in a situation in which we were being
asked to respond to need. In effect, by responding to
need we were masking injustice because we were dealing
with the consequences of what had happened instead
of getting to the roots of what had happened. This
seemed in a sense dishonest in that if we were serious
about the issues that confronted us, we had to get to
the underlying cause that had brought about the
lamentable situation.
From that standpoint I reached a very firm conviction
during my time at Oxfam and since that very
frequently people in the Third World are not primarily
asking for handouts or support, they are asking for
justice. If they have not got justice, how on earth can
they get themselves together to start self-generating
progress and the rest because they are burdened by
the consequences of what has happened to them as a
result of abuse of one kind or another? That is
fundamentally wrong. Of course, if people are desperate
to start taking their situation forward themselves, we
should ensure that that is possible and that they are
not artificially and unnecessarily hindered.
I really do not know how a Government who set so
much store by their commitment to the overseas aid
programme—which is a great credit to them—in saying
that it must be ring-fenced in the current economic
situation do not see that the logic of that position
demands that an amendment of this kind should be
accepted. Failing to accept this amendment would be
working against the very commitment of the Government.
From that standpoint, I applaud the amendment and
hope that the Government will feel able to take it
seriously, even at this late stage.
Baroness Miller of Chilthorne Domer: My Lords, I
have put my name to Amendment 134 in the belief
that the Government are quite right, in general, on the
principles in this part of the Bill but they are wrong
not to have made an exception in this case. These are
very modest amendments to allow exceptions to be
made.
The noble Lord, Lord Judd, mentioned one reason
why exceptions need to be made: DfID. This Government
are working hard to follow the amount of aid that this
country has committed—and I pay tribute to the
Opposition. But it is not only DfID. The FCO realises
that soft power is very important, and the Department
for Business also realises that companies need to be
socially responsible. Corporate responsibility has become
a very important standard for this country.

339 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
340
This is recognised across almost all of government,
and I urge my noble friend and the Ministry of Justice
to join the other departments in making sure that
companies listed here that have the potential to cause
enormous damage—the extractive industries, in particular,
whose work is accelerating at an enormous rate, and
also agribusiness as commodity prices go up; there are
a number of businesses whose turnover and impact in
the world is growing day by day at a rate that was quite
unimaginable even a decade ago—that needs to be
balanced by better access to justice, not worse. It is for
that reason that I support these amendments.
The Lord Bishop of Newcastle: My Lords, I too
support this amendment, which I think is really important.
It is about the impact this Bill will have on access to
judicial remedies for victims in host countries who are
harmed by the activities of multinationals. Under the
existing regime, it is already difficult for these kinds of
cases to be brought in the UK. This Bill will change
that system to make it virtually impossible for such
cases to be brought in the future.
The cases in question are typically brought by poor
victims who have had their livelihoods destroyed, their
homes despoiled or their health gravely damaged by
the UK or a UK-based company. As it stands, the Bill
makes it economically unviable for both claimants and
law firms to bring such cases due to the high financial
risks. Provisions on success fees and insurance premiums
mean that even if they were successful, claimants
would have to pay such fees and costs out of their own
damages.
This fundamental change is inappropriate, surely,
because damages awarded would be typically too low
to cover the costs involved. Damages in these particular
cases are assessed according to developing country
standards, whereas legal costs are incurred in the UK.
As a result, as others have said, the Bill will create a
practical barrier to justice and it is very unlikely that
such cases will continue to be brought.
There would be no additional cost to the taxpayer if
this amendment were accepted, but the benefits would
be hugely significant in enabling poor communities to
claim damages where they have been harmed and, just
as importantly, in showing companies that they cannot
act with impunity. I hope that the Government will
reconsider this aspect of the Bill and move towards
accepting this amendment.
Baroness Howe of Idlicote: My Lords, my name is
not on this amendment but, having listened to the
arguments, there seems to be absolutely no good reason
why the Minister should not agree to it. It is not going
to cost the taxpayer anything extra and it means that
companies that have been the cause of this sort of
damage should pay the proper price and the proper
compensation. I certainly back the amendment moved
by my noble friend Lady Coussins.
8.15 pm
Lord Brennan: My Lords, the arrival of globalisation
as a world economic and human phenomenon, we
hope, brings more benefits than disadvantages. However,
reality tells us that globalisation produces serious adverse
consequences from time to time, particularly in the
developing world. It cannot be right that developed
countries such as ours do not have a system of justice
that provides remedies for those affected in such countries
because of the liability of companies based in this
jurisdiction. That reality in terms of what justice should
provide should enable people from those countries
access to our courts to seek appropriate remedies.
Amendment 134 in this group gives a power to the
Lord Chancellor to provide regulations that would
permit, in certain circumstances, our courts to deal
with such cases. The numbers of cases that are likely
to arise are few. Their cost and complexity is very
large. To make provision for them would produce no
consequence that would damage the Government’s
policy in this Bill to save money and introduce cost
control. None of that would be affected.
In my professional experience at the Bar I have
done several of these cases. I have two examples to
illustrate what I consider to be the validity of my
submission to your Lordships. The South African
resource of asbestos was a major benefit to companies
in this country for decades. The standards of working
practices and protection of ordinary workers were
extremely low. I will not reveal anything that is not in
the public domain by saying that I represented the
plaintiff African miners—7,000 of them—many of
whom were women, who were being used to break
asbestos rock against granite to free the asbestos fibres
for collection and use while bearing on their backs
newborn babies. It is difficult to imagine that anyone
would not think that that called for some remedy, if
proved.
The case was dealt with in this country in the 1990s
and it took three years of hearings in the lower court,
the Court of Appeal and the House of Lords Judicial
Committee before the plaintiffs finally got an order
that the case should be heard in this country. Not
surprisingly, it was eventually settled, a settlement that
included compensation to all those people who had
had to produce their medical records, their X-rays,
from the very difficult administrative circumstances of
the young South Africa of the 1990s and of the
Government of South Africa, who were given money
by the defendant company to contribute toward the
clean-up of asbestos residues at the mines where they
had been produced. All of that produced a trust
settlement. All of that cost a huge amount in expense,
with top class lawyers. Can it seriously be suggested
that, under any of the reforms proposed in this Bill,
such services by lawyers would be given these days? It
is an absurd proposition.
I will move on to describe the second case, and then
I will briefly come to a conclusion. I was involved in
the Ivory Coast case in its early stages and I went to
Abijan. We had tens of thousands of claimants, all of
whom had to fill in questionnaires and produce medical
evidence—often in French, in Francophone Côte d’Ivoire
—and then come to England to pursue their case. By
the time of this case, a few years ago, the law had
changed, and I invite the Minister and his staff to bear
this in mind. The law of the European Union now
states that plaintiffs like that must sue the company
which is alleged to be at fault in the jurisdiction from

341 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
342
[LORD BRENNAN]
which that company operates. They are required to
come to our country to pursue their claim. It is not a
matter of form shopping—it is a requirement. That
case cost a fortune, and it was settled, and it took years.
Companies such as this are often either insured,
with enormous excesses that give them a lot of influence
on the conduct of the litigation, or they are self-insured,
because they are so big and powerful. For two or three
years the programme is one of the plaintiffs producing
all their medical and expert evidence and then going to
court, hearing after hearing, long before trial, and
spending a fortune. However, there was legal aid for
the South African case and a conditional fee agreement
for the case I have just mentioned. It worked and justice
was done. That is all that I am asking the Government
to consider should be done for this class of case in the
future. These people have to come here. They do not
have elite lawyers, funding or local remedies. They come
to our country for justice. They come to where the
company was based and where it should face justice.
This is a state of affairs which I commend to the
attention of the Government and the House. How
could it be said that any such case was properly
catered for by allowing the previous system that was
used in the Côte d’Ivoire case to continue? How could
that adversely affect all the domestic factors that figure
for local people? How could it benefit this country?
Will we leave the Chamber having voted in favour of
this, with our heads held high because we represent a
country in which justice still prevails and access for the
poorest, from wherever, is still available, or do we hang
our heads in shame over something that cannot possibly
be justified?
There is a risk that if this kind of exception is not
made grave injustice will follow and the reputation of
our country and our courts for just civil proceedings
will be seriously damaged. It is time to think.
Lord Stevenson of Balmacara: My Lords, I thank
those noble Lords who have spoken in this debate, in
particular the noble Baroness, Lady Coussins, who,
with her usual fluency and clarity, made the case
extremely well. My noble friend Lord Judd, with his
lifelong commitment to human rights, also drew attention
to the many organisations who have written to us and
who have supported the case that has been made
tonight. My noble friend Lord Brennan, who has just
spoken, has direct experience of many of the cases
which we are talking about today and left us with a
very powerful message about the impact that could be
effected if the Bill goes forward unchanged. I thank
the noble Baroness, Lady Miller, for her support of
our amendment, particularly for drawing attention to
the wider soft-power aspects which are so important
in this area, and the right reverend Prelate for bringing
into play the inevitable impact on poor communities
of the Rome II regulations. Those will of course limit
the level of expenses that they can possibly receive,
and therefore create a completely unbalanced playing
field in this area.
To apply the test that was proposed by the noble
Lord, Lord Faulks, in the previous group, it is clear that
the widely held view around your Lordships’ House is
that once this Bill becomes law, it will not be possible
to mount cases brought by vulnerable victims of corporate
abuses perpetrated overseas by UK companies within
the English courts. As we have been reminded, they have
to be raised here. There can be little doubt that the
Government really are on the wrong side of the argument
tonight, and I join with the noble Baroness, Lady
Howe, in not being at all clear why this is the case.
In his letter to me and the noble Baroness, Lady
Coussins, of last month, which has already been referred
to, the Minister argued that corporate human rights
cases could still be viable under the measures contained
in the Bill, and he helpfully highlighted the opportunity
to use damages-based agreements—DBAs. This line
of argument derives from the much quoted Jackson
report which, it is worth pointing out, did not specifically
deal with the cases that we are highlighting today. I
will not go into the detailed arguments, as they have
been well covered, but neither of Lord Jackson’s
suggestions—under which the effect of lower damages
recovery would be ameliorated, in his view—will work
for typical corporate human rights abuse actions brought
by claimants from developing countries.
We recognise, and indeed support in some ways,
that one objective of this Bill is to reduce the costs of
cases across the legal system as a whole, and one
cannot be against that. Clearly there is a much better
reason for this where these costs fall to be met in whole
or part by the public purse but, as the Minister has
already accepted, we are not dealing with this area in
this part of the Bill. However, in the cases we have
highlighted, not only is there no cost to the public
purse, but there is already a system in place to decide
whether the legal costs awarded are appropriate. Indeed,
it was used in recent cases to significantly reduce the
costs claimed by the winning side, although they did in
fact settle.
It may be irritating to the department to have to
create a carve-out in a Bill for such a small group of
cases, but surely it is vitally important that vulnerable
victims should get justice—and at least some compensation
—for the trauma and harm that they have experienced,
or for the loss of livelihood or even of life that has
been caused by UK companies. It is equally important
that companies need to know that they can be brought
to account if they act irresponsibly. That is why we
believe it is warranted to carve out an exception, so
that the broader measures in this Bill do not close off
justice in the UK for this small but very significant
group of cases.
Our amendments would retain the current funding
system in effect for human rights cases. Creating this
exception would not be fatal to the overall aims of
the Bill. The existing regime of success fees and “after
the event” insurance premiums being paid by the losing
company instead of coming out of the damages of the
claimant are, in our view, the most sensible way of
ensuring that these cases continue to be mounted.
Moreover, it is unlikely to be more than a few cases a
year, as stringent rules have to be met before such
cases can be mounted.
In the debate last week, the noble and learned
Lord, Lord Wallace of Tankerness, recognised that, in
clinical negligence cases, removing the recoverability
of ATE insurance premiums could create a real problem

343 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
344
for claimants. The Government have therefore created
a carve-out because expert reports are such an essential
requirement for building clinical negligence cases
successfully. However, the expenses of obtaining such
reports would not necessarily be covered under the
new regime. In the human rights cases that we are
looking at, expert opinions and reports—for example,
the analysis of alleged toxic waste or polluted water;
or medical examinations in relation to asbestos ingested
by miners in South Africa—are a vital part of showing
that there is a valid case to answer. There is a very
strong read-across from clinical negligence cases to the
sort of human rights cases we are dealing with here.
I hope we can find an accommodation here. In
plain terms, all the evidence suggests that the approach
being taken in this Bill will kill off the chances of
mounting this very small group of special cases in
future. How poignant it is that at the same time as we
are debating this amendment, the Foreign Office is
leading valuable cross-governmental work on how we
implement the UN guiding principles on business and
human rights adopted in June 2011, which the Ministers
told us in our meeting with them that the Government
support. We were one of the countries most closely
involved in UN Special Representative John Ruggie’s
work. Indeed, the previous and the present Governments
have been vocal in their support of the guiding principles
and the present Prime Minister has committed publicly
to implement them.
What sort of example are we setting and what
message are we sending to UK companies if we now
change our laws to make it hard for poor victims of
corporate abuses perpetrated by UK companies to
seek redress? They may be a small number of cases but
they have had a direct impact on the lives of millions
of people in the developing world. Each successful
case has shone a harsh light on key areas of corporate
misconduct in the developing world—from the dumping
of pollutants in the water supplies of communities to
appalling health and safety standards in mines and to
direct corporate involvement in abduction and torture.
Ultimately, it is surely important that businesses know
that they cannot act with impunity. We do not want
the majority of responsible UK businesses to be at a
disadvantage because laggard companies get away with
substandard, harmful business practices.
8.30 pm
Lord McNally: My Lords, the noble Baroness, Lady
Coussins, said that making this exception would not
“gut” the Bill. But I hope that noble Lords who sit
through these debates or perhaps read Hansard will
see the pattern. Clauses 43 and 45 are a fundamental
element of the package of reforms recommended by
Lord Justice Jackson to deal with the problems of
disproportionate costs in civil litigation under CFAs. I
have called that the central architecture of the Bill.
The clauses seek to reform and remove the inflationary
defects introduced into the system by the previous
Administration, which is the central point.
The Jackson reforms look at a specific part of our
civil justice system. Throughout the passage of the
Bill, we have had claims for exceptions to the central
architecture. Certainly, in debates an adopter stands
up and goes into the great clinical detail of an illness
that we might be talking about, as if that is what the
debate is about, and whether one should vote for or
against it. Or the noble Lord, Lord Brennan, tells us of
the suffering and the hardship of working in mines in
South Africa as though that was the subject of the
debate. Then everyone thinks, “Oh, we can’t be against
poor women in South Africa in such conditions or
people suffering from such terrible diseases”. In fact,
that will remove the central reforms of the Bill.
In most of the examples that we have had so far,
when one looks at what we are actually doing, they do
not stand up to examination. It is of course always
possible to make the case for an exception in a particular
class of case, as noble Lords have done. But we believe
that our changes must apply across the board. However,
let me make it clear at the outset that we support
claims arising from allegations of corporate harm in
developing countries being brought and we support
the protection damages for personal injury. No-win
no-fee conditional fee agreements will continue on the
same basis on which the noble and learned Lord, Lord
Mackay of Clashfern, introduced them. Indeed, if the
noble Lord, Lord Brennan, was referring to a case in
the 1990s, it was probably brought under this regime,
which is the basis on which it still operates in Scotland.
We are also extending the availability of damages-based
agreements, which are sometimes called contingency
fees, to enable their use in civil litigation. Some of the
objections to DBAs from the representatives of big
business make me feel that they are a much more
potent weapon than people give them credit for.
As I have said, we recognise how important these
cases can be. We recognise also that, following the
Rome II regulations, the damages in these cases can be
relatively low. But the costs have been extremely high,
as demonstrated in the now notorious Trafigura case,
in which the Court of Appeal criticised the claimant
lawyers for seeking costs of £100 million in a case
which resulted in £30 million in damages. I should add
that the defendant’s costs were only approximately
£14 million, which was about one-seventh of the costs
claimed by the claimants.
The reforms in Part 2 are about making costs more
proportionate, while allowing meritorious claims to be
pursued. As has been recognised by the noble Baroness,
Lady Coussins, I and my officials have met on several
occasions with representatives of NGOs which support
these cases but we are not persuaded that they cannot
be brought when our changes are implemented. We
have asked for examples of further details of costs. If
noble Lords want to engage between now and Third
Reading, I will be happy to do so.
However, I continue to come to this Dispatch Box
to answer attacks on this legislation that do not stand
up to examination of the reality. It often means that
the Opposition cleverly erase their own record in these
areas and immediately adopt whichever hard case is
being brought forward as the exception that will not
damage the whole architecture of the Bill. We believe
that Jackson was right in his reforms. We do not
believe that those kinds of cases—I think the number
referred to is about 10 such cases in the past 15 years
—will be prevented from being brought.

345 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
346
[LORD MCNALLY]
We have listened carefully and we have sought to
engage with relevant NGOs on this issue. As I said I
would in Committee, I have now discussed this matter
further with the Secretary of State but for the reasons
that I have given we remain unconvinced that these
cases cannot be brought under the new regime, as was
suggested by the right reverend Prelate the Bishop of
Newcastle.
Lord Brennan: The noble Lord is most gracious to
give way. The points I was making were illustrated
with cases. My principle point was that these cases are
so expensive to run that you need a capital base which
is not available to lawyers in this country. I should like
the Minister to consider—if not now, later—in explaining
to the House how it is that his advisers are telling him
that lawyers in this country can raise £2 million,
£3 million, £4 million or £5 million to run a case for
three or four years. How will that be done?
Lord McNally: I will certainly take note of that. I
realise the experience of the noble Lord, Lord Brennan,
in these areas. When we asked the NGOs for hard
facts and figures on costs, they were not forthcoming
but perhaps there is time between now and Third
Reading to re-engage. I also think that part of the
problem is that whatever we have in civil law, conditional
fee agreements or anything else, some of the problems
raised by the noble Lord, Lord Brennan, in illustration
will not be solved in British law courts or by changes
in the British legal system. We are trying to reform
what everyone who comes to the Dispatch Box
acknowledges is a defect in our civil legal system and
for which Lord Justice Jackson has produced a reform
package that we are trying to put into law. Everyone
agrees that we are right to do so, but for this, that and
the other exception. Again, I am willing to discuss this
further, but I do not think the case has been made—
Lord Judd: My Lords—
Lord Martin of Springburn: My Lords—
Lord McNally: I am sorry, but I am not going to
take questions. We are hard-pressed for time. I have
offered to re-engage, but as I said before, the evidence
we asked for has not been forthcoming and I do not
believe the argument that without this amendment, it
is going to be catastrophic for these particular cases;
that is, for those which people want to take through
our law courts. I ask the noble Lord to withdraw his
amendment—
A noble Lord: The noble Baroness.
Lord McNally: I am sorry, the noble Baroness,
Lady Coussins. I am happy to re-engage between now
and Third Reading, but at this point we are not
convinced.
Lord Judd: So the earth is flat.
Lord McNally: No.
Baroness Coussins: My Lords, I thank all noble
Lords who have contributed to this debate and I
appreciate everyone’s support. I particularly appreciated
the powerful contribution made by the noble Lord,
Lord Brennan, who helped us to envisage what these
amendments would mean to real people in the real
world rather than just considering the administrative
and legalistic matters that are set down on paper. I
also thank the Minister for his thoughtful, if disappointing,
response. It is all very well to support something in
principle, but if in practice you cannot get at it, that
support becomes meaningless. However, I appreciate
the Minister’s offer to engage between now and Third
Reading, and I can assure him that I will pursue that
offer in order to look very carefully at what could be
brought back at Third Reading. That is because if this
Bill remains unamended, I fear that what we will end
up with are poor, vulnerable people in developing
countries who not only will be the victims of corporate
human rights abuses, but the victims of the unintended
consequences of this Bill. For now, however, I am
content to withdraw the amendment.
Amendment 132AC withdrawn.
Amendment 132B
Moved by Lord Thomas of Gresford
132B: Clause 43, page 30, line 10, after “are” insert “, subject
to subsection 4C,”
Lord Thomas of Gresford: My Lords, this group of
amendments sets out the refinements to the architecture
of the Bill that I have previously suggested. Noble
Lords heard from me at some length before and I do
not propose to repeat everything I said. I would just
remind your Lordships that the model I am suggesting
is that lawyers’ success fees should not be paid if the
case settles or liability is admitted before proceedings
are commenced. The reason for that is that there is no
risk to the lawyers that they will not be paid. Noble
Lords will recall that I quoted from my own speech
back in 1998 when I indicated then that the question
of risk was important, but had never been properly
assessed. That is the first limb of my argument, and it
is set out in Amendment 132C.
I went on to draw attention to the significance
of the point of allocation within proceedings where a
case is sent to the fast track of small claims or becomes
one of the multi-track cases. In the multi-track cases,
I suggested that the success fee should be paid, but
split 50:50 between the successful claimant and the
losing defendant. While in this area, I suggested
that the claimant would have an interest in the amount
of the success fee and that there would be the possibility
of competition. Those points are set out in
Amendments 132E, 133B and 133E.
That is the point I reached when the noble Lord,
Lord Bach, suggested that I had gone on for too long,
and no doubt I had. It is interesting because we are
supposed to have these discussions about legislation
on Report. The last time I spoke on this issue, the
noble Lord, Lord Newton, said that he was in a fog
and someone leant across to ask, “What on earth is he
talking about?”. That suggests that legislation on these

347 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
348
detailed points should not be on the face of the Bill
but should be dealt with in secondary legislation following
negotiations between interested parties. This system
builds in a form of solidity that it is very difficult to
remove.
8.45 pm
I want to make one or two points before I deal with
the other matters. The first is ATE insurance premiums.
The point has been made and accepted that one-way
costs-shifting should be applied where there are conditional
fee agreements. However, they should not only be
applied in personal injury cases; rather, there should
be a power along the lines proposed in my amendment
to extend the areas of law to which one-way costs-shifting
should be involved to when the Lord Chancellor thinks
it is appropriate. Consequently I think there is far
more flexibility, in the light of the experience available,
in my Amendment 142B on one-way costs-shifting
than was suggested by the noble Lord, Lord Beecham.
It states:
“Rules of Court may provide that in proceedings of a description
specified by order made by the Lord Chancellor”,
so that the introduction of other areas of law could
come in by stages. I think that that is the way to go
forward.
I shall give two specific examples of areas of law
proceedings which I suggest should be subject to the
one-way costs-shifting regime. The first and most
important is environmental cases. These cases bring
additional complexities. The United Kingdom is a
full signatory to the Aarhus convention, which includes
the requirement that the costs of environmental
proceedings should not be prohibitively expensive.
The Aarhus principles are themselves embedded in a
range of European legislation which has been incorporated
into a range of United Kingdom law. Indeed, I could
quote cases in which those principles have been discussed.
I addressed in Committee the point that the changes
which are to be implemented will mean that this
jurisdiction is not compliant with the underlying
requirements of the convention. Protective costs orders
are not an answer. Your Lordships who were here in
Committee may recall that my noble friend Lord
Lester raised protective costs orders. Now that I have
had the opportunity to consider them, as opposed to
having a swipe from behind, I can give some answers
to his arguments. First, a protective costs order is not
available to claimants who want an injunction in
nuisance or private proceedings. The whole arrangement
is too uncertain and discretionary to be a reassurance
for claimants who are contemplating environmental
proceedings. The procedure is stressful, time-consuming
and expensive. All sorts of satellite litigation are involved.
The prohibition on a private interest in proceedings is
of uncertain application and scope. If you have the
private interest, if the nuisance is affecting you, you
cannot apply for a protective costs order, which is an
enormous limitation on its usefulness. The cap on the
defendant’s costs of £30,000 may be sufficient in some
cases, but there are certainly cases where a cap of
£30,000 in a protective costs order will not be. It will
ruin claimants, who will be put off taking proceedings.
The application for a protective costs order has to be
renewed at different stages of proceedings.
One-way costs-shifting is needed to ensure compliance
with Aarhus and the international obligations which
we have accepted, and they require specific provision;
that is Amendment 142BA. Amendment 142BB deals
in matters that were raised by the noble Lord, Lord
Ramsbotham; that is, actions against the police, false
imprisonment and deaths in custody. Such actions are
pursued by civil liabilities firms and should be within
the area of one-way costs-shifting, because the defendant
is the state—in this situation, a powerful state, whether
it is a police force or a prison; those are the sort of
cases that I am referring to.
The amendments make it clear that one-way costsshifting
should apply where there is a claim which
entails either the protection of the environment or
civil liberties. The Bill should import a specific definition
which ensures that the rule is engaged only where the
convention applies.
The model, which I have outlined in my past two
speeches and which is fully supported by the personal
injuries Bar, although it is not the solution that it
originally argued for, strikes the right balance. It builds
the house with a structure which is fair and will last.
The claimant whose case settles before issuing proceedings
receives his damages in total, free of any success fee
deduction. The claimant who settles after issuing
proceedings will receive most of his damages and
there will be a commercial interest in driving down
success fees. Claimants with smaller claims, such as
whiplash, will pay a limited success fee out of their
damages, but there is an incentive for insurers to admit
liability early and settle. If the case is allocated to the
multi-track, that opens up liability to the insurers for
50 per cent of the success fee. There is an incentive for
lawyers to engage in difficult cases where liability is
denied on the multi-track, because they can earn a
significant success fee if they win. A claimant with
a difficult case on the multi-track will pay only half
the success fee out of his damages and not, as the
Government now propose, 100 per cent of the success
fee. One-way costs-shifting will break the excessive
“after the event” market, and premiums for “after the
event” cover merely for disbursements will be much
lower. Even then, my amendment would divide up
those ATE premiums between the claimant and the
defendant, whereas the Government propose that, if
there is a premium, it should be payable by the claimant
only. This is a refinement of the Government’s scheme.
I know that the Minister is anxious to maintain the
architecture of the Bill; my proposal does not destroy
it but amends it in a way that is fair.
The reforms introduced by the noble and learned
Lord, Lord Irvine, in 1999 were brought in in good
faith but they were open to exploitation and abuse. I
am not with those from the Opposition and Cross
Benches who argue for simply taking their particular
area of law out of the new arrangements. The current
status quo has to be changed. It is no good saying that
in this area, that area or another area we should
maintain the status quo. It has to be reformed. We on
these Benches pride ourselves as being the party of
reform. It is in that spirit that I ask my noble and
learned friend to continue the dialogue that we have
had on these amendments and to come to some
conclusions before Third Reading. I beg to move.

349 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
350
Lord Beecham: My Lords, I thought the party of
the noble Lord, Lord Thomas, was a party of conscience
and reform. Conscience appears to have taken a back
seat. I have a good deal of sympathy with most of the
amendments to which he has spoken and I shall briefly
comment on them.
Although we would prefer that the success fee were
not deducted at all from a successful claimant, the noble
Lord’s proposal is clearly better than the Government’s
proposal. So, to the extent that the Government might
be disposed to listen to him on this, we would support
that in lieu of what we regard as an even better position.
The other amendments to which the noble Lord
spoke largely depend on matters being determined by
rules of the court, which would appear to have a
discretion to make the necessary changes, for example,
under Amendments 142B, 142BA and 142BB, with
the Lord Chancellor, in the case of Amendment 142B,
identifying the proceedings but not necessarily requiring
the change to be made.
I entirely share the noble Lord’s view about
environmental claims, and a subsequent amendment
in my name covers much the same territory. In Committee,
I quoted at some length the legal opinions to which
the noble Lord referred at that time and dealt with the
point about the Aarhus amendment and the points
made by his noble friend Lord Lester, which, I agree,
misstate the position in respect of protective costs
orders. The noble Lord, Lord Thomas, is absolutely
right to say, as I said on that occasion, that they do not
offer a sufficient defence, as it were, to those in that
position.
I similarly agree in relation to the civil liberties
claims and, again, we have tabled an amendment in
somewhat similar terms, with the exception that under
the opposition amendments the Lord Chancellor would
effectively take the decision which would change the
nature of the position in relation to those claims. As
that would have to be, as the noble Lord implied at
one point, through secondary legislation or affirmative
resolution, it is a more accountable way of dealing
with matters than simply leaving it to the courts to
determine.
In these circumstances I apprehend that the
Government will not be disposed to accept these
amendments. Perhaps the Minister will be willing to
undertake further discussions with his noble friend, if
not with anybody else. If not, as the matter clearly will
not be put to the vote tonight, I can only record our
unfortunate disagreement with the position in which
we will end up because it will not be satisfactory. I do
not accept that it is undesirable and wrong to look at
particular instances which might fall outside the general
rule. The Government have acknowledged to some
degree that this should be the case in relation to
recoverability under clinical negligence. If they can do
that in respect of clinical negligence, then they can
equally extend a similar principle elsewhere. Having
said that, we await the noble and learned Lord’s response.
Lord Wallace of Tankerness: My Lords, I thank my
noble friend for his amendments. It will come as no
surprise to the House if I yet again echo what has been
said on numerous occasions on Report: the architecture,
as my noble friend Lord McNally referred to it, of this
part of the Bill seeks to ensure that there is fundamental
proportionality and fairness across the board in these
claims, and that is why we have adopted the proposals
of Lord Justice Jackson.
The cumulative effects of Amendments 132B, 132C,
132E, 133B, 133E, 139D, 140A, 141ZA, 141ZB and
142B would be, as my noble friend said, a refinement
on what has been proposed. When the noble Lord,
Lord Beecham, talks about my party and my noble
friend’s party as being a party of conscience, it is
because we feel that some of the fees that have been
charged have been unconscionable under the existing
scheme. That is why we wish to address the issue.
My noble friend wishes to introduce staged success
fees. I am very grateful to him for his complex set of
amendments; he has set out what the fees would be at
different stages, on the multi-track approach. His proposals
would introduce staged success fees in ATE insurance
premiums, the cost of which would be split between
the losing defendant and the successful claimant. Some
recoverability of success fees in ATE insurance premiums
would therefore remain.
I assure my noble friend and the House that we
have given the amendments careful consideration, even
at this late stage. They are proposed as a compromise
and are supported by some but not all personal injury
claimant representatives. It is fair to recall that these
proposals are not entirely new. In his report, Lord
Justice Jackson made primary recommendations that have
essentially been adopted by the Government in Part 2.
He also made an alternative set of recommendations
which, while not identical, bear some considerable
similarity to the proposals put forward by my noble
friend.
9pm
The Government consulted on both sets of proposals
in their consultation. However, the respondents to the
consultation expressed relatively little support for
that alternative. Having given full consideration of all
the responses, the Government announced almost a
year ago its way forward in line with the primary
recommendations of Lord Justice Jackson’s report.
The proposals, which the Government essentially
endorsed, amount to a package of measures, which
are carefully balanced to be fair to claimants and
defendants. They are based on the abolition of recoverable
success fees and insurance premiums, but have some
supporting features which are intended to balance the
abolition of recoverability. These include a 10 per cent
increase in the level of general damages and the
introduction of qualified one-way costs-shifting, or
QOCS, in personal injury cases. In addition, measures
to improve the arrangements for offers to settle under
Part 36 of the Civil Procedure Rules are also seen as
part of the package. Although the detail of all these
proposals has not yet been finalised, the essential
architecture is in place and is there to be seen.
Our concern would be that revisiting these essential
features, which would be the consequence of accepting
my noble friend’s proposals, would require us to reconsider
the whole package, and in particular whether the
balancing features, such as the Part 36 sanctions,

351 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
352
or the specific exemption of clinical negligence cases,
would remain as originally proposed. We do not believe
that the alternative proposals would address the high
costs under the current regime. As my noble friend
indicated during the passage of the Bill, he generally
supports the Government’s decision to transfer the
burden of the success fee to the successful claimant.
However, these amendments would allow elements of
success fees to continue to be recoverable.
In the same way, the “after the event” insurers
argue for their insurance premiums to be paid by the
other side. In some of the more serious cases, these
amendments would see successful personal injury
claimants paying an increased amount from their damages
in legal fees. Again, part of the architecture that we
have talked about it is a cap to protect damages, which
would mean that damages for future care and loss,
which can run into millions of pounds in catastrophic
injury cases, would not be taken into account and
would be free from any claim in terms of the success
fee. Our concern would be that these amendments
would see some of those carefully calculated, necessary
but often substantial damages going not to the claimant
but as additional fees to lawyers. While I accept my
noble friend’s point that his amendments seek to limit
recovery of success fees and ATE insurance premium
at the point of allocation, we do not believe that this is
right or fair. In particular, although we have no doubt
that the amendments were moved with the best of
intentions, they could lead to a continuation of the
current problems by other means. They could see
unnecessarily high costs for defendants, and a greater
deduction from claimants’ damages than we propose.
The Government have tried to weigh up all the
arguments, and balance the respective interests, and
we believe that the proposals that we have introduced
achieve that balance. They were consulted on and have
been set out in the Bill, and we are not persuaded at
this stage that this fundamental change—it is not a
narrow refinement—is justified.
With regard to some of the specifics on QOCS to
which my noble friend referred, we intend to introduce
them at the same time as the relevant provisions in
Part 2 of the Bill, as they are implemented in April 2013.
My noble friend also seeks to place QOCS in the
Bill—we had a debate about that earlier this evening—and
he sets out limited exceptions for fraud, vexatious
claims and abuse of process. I indicated earlier why we
believe that this matter should be done by way of the
Civil Procedure Rule Committee and should not be in
the Bill. I do not intend to rehearse these arguments
again, but it may be that through these rules we can
get a kind of flexibility which would allow at a later
stage some of the other points to be raised, perhaps
more than would be possible if the rules were set out
in statute and would therefore require primary legislation.
Webelievethattherulesallowforsufficientaccountability.
The Lord Chancellor would remain accountable for
the policy of QOCS, and that would be set out publicly
by the Lord Chancellor so that he could be answerable
to it. The rules themselves would be made by the Civil
Procedure Rule Committee, which includes the Master
of the Rolls, and are agreed by the Lord Chancellor.
They come into effect by way of statutory instrument.
There is an established procedure which would involve
consultation as appropriate. It would be relatively
straightforward to devise a QOCS scheme regime for
personal injury cases. Although there are many such
claims every year, as a class they contain typical features
which simply do not exist in other types of claims.
Other types of claims have been mentioned. My
noble friend mentioned, particularly, environmental
claims. Amendments 139 and 140 in a later group will
no doubt explore this further, but as he may have
anticipated the Government still believe that the protective
costs order ought to provide better cost protection in
environmental judicial review cases. We hope that it
will be clear from the outset what costs the claimant
would have to pay if the claim was unsuccessful while
ensuring that some contribution is made towards the
costs of public bodies that have successfully defended
a claim. The Government believe that this is the right
approach, but we are considering how best to deliver
this in the light of recent developments. The Government
are currently consulting on proposals to codify the
current case law on protective costs orders in relation
to judicial review claims which fall under the Convention
on Access to Information, Public Participation in
Decision-making and Access to Justice in Environmental
Matters; it is much easier to say “the Aarhus convention”.
That consultation closed on 18 January this year and
the Government will announce their way forward in
the near future.
The reason for which we wish to make a distinction
is that, while personal injuries have typical features
which allow us to go down the road of QOCS at this
stage, different considerations apply in other types of
cases. “Before the event”legal insurance may be available
for professional negligence cases. Legal aid is available
in judicial review cases. We will keep this under review,
and having the matter dealt with by the Civil Procedure
Rule Committee but with the Lord Chancellor setting
the policy subject to consultation, and no doubt subject
to accountability to Parliament, will allow a greater
flexibility for these matters to be looked at in the
future if there was a case made to extend the QOCS
system.
We are not persuaded that the refinements proposed
by my noble friend would lead to a fair or workable
solution. We believe that we have struck the right
balances, abolishing the recoverability of success fees,
and ATE insurance premiums will mean that claimants
have an interest in the cost being curbed on their behalf,
which will help to restore proportion and fairness in
the current regime. We are also clear that special
damages for future care and loss, which provide for
necessary care and equipment, should be protected
and not apportioned among those representing the
claimant. I cannot accept that to change the overall
package in this way at this time would lower the costs
of civil litigation across the board. Against that
background I urge my noble friend to withdraw his
amendment.
Lord Thomas of Gresford: My Lords, I am not so
much disappointed as hurt by my noble and learned
friend’s reply. I am hurt that he thinks that my amendments
would increase the cost. The whole purpose of tabling
these amendments was to come forward with a system

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354
[LORD THOMAS OF GRESFORD]
that squeezes the excess costs of litigation out of the
system. This is one area where he is wrong to make
that suggestion.
The other matter that concerns me is that the
Minister should suggest that I am in some way completely
wrecking the architecture of the Bill. I am not; I am
trying to make it better for one reason. The one factor
that was missing from his response was whether litigation
solicitors and barristers will take on difficult and risky
cases under the regime that is now proposed. It is not
about the Jackson proposals in toto, although various
things are left out. This is the issue. Only time will tell.
Will solicitors take these cases on when the success fee
has been squeezed down in the way that is proposed?
I was suggesting that for one level—for settlements
and so on—there should not be a success fee because
there is no risk. That brings down the cost of litigation
as a whole. However, where there are risky cases
lawyers need a proper reward. That factor was not
mentioned in my noble and learned friend’s response. I
hope to talk to him more about this matter before we
finally dispose of the Bill but, for the moment, I beg
leave to withdraw the amendment.
Amendment 132B withdrawn.
Amendments 132C to 132E not moved.
Amendment 133
Moved by Lord Martin of Springburn
133: Clause 43, page 30, line 24, leave out subsection (4)
Lord Martin of Springburn: My Lords, I am pleased
to move this amendment. I understand that the night
is getting on and we have all been here for many hours.
I say in the nicest possible way that, as the hour gets
later, the noble Lord, Lord McNally, seems to get a bit
more edgy or, as we say in Scotland—I do not know if
the term is used south of the border—a wee bit
crabbit. The noble Lord would not give way.
The Jackson report has been mentioned many times
tonight, and it sounds as though it is a commendable
report. However, I put it to the noble Lord, Lord
McNally, that we are not here just to take a report and
rubber-stamp it. That would be easy. It has to be
debated and thought through. It would be very easy
for our democratic institutions if we just got a report
and passed it through, saying, “It’s a good report”. It
has to be tried and tested. In that spirit, I am moving
this amendment.
I declare an interest. I successfully took the Times
to task on a no-win no-fee basis. Even on that basis, it
was very daunting to be up against a large media
organisation. I have been in politics for a long time and
I feel as though we have all been hardened to what the
media do and say. It must be even tougher for men and
women who never expected to be in a situation in
which their reputation was tarnished. It is a great loss
that we are losing no-win no-fee for libel damages. My
thoughts go to Mr Christopher Jefferies, the landlord
in Bristol who was accused of all sorts of things because
he was in the wrong place at the wrong time. It was
very sad for the poor victim of that murder, but
Mr Jefferies was also a victim.
The media said all sorts of things about that poor
man. He must have thought to himself that he must
take them on, and he did so on a no-win no-fee basis.
Mr Jefferies probably took them on knowing—or his
lawyers would have known—that whereas he had one
solicitor, every national newspaper has a whole team
of solicitors. There is not a time in the day when a
media editor does not have access to a solicitor. I do
not need to reiterate the things that the media said
about that poor man as your Lordships know what
was said. I was appalled that when the editor—I
believe it was the editor of the Mirror newspaper—spoke
at the Leveson inquiry, his apology was so cold and
unmoving that you would not have known from it that
he had destroyed that poor man’s very reputation.
9.15 pm
We all know that the media act as a pack. They
have a pack mentality and when one of them went
after the man, the others followed suit. I listened to
that editor say, “I spoke to the night-shift lawyer and
to the day-shift lawyer, and they both said that the
story was all right to run. I therefore ran the story and
I am very sorry about the difficulty that Mr Jefferies
has had”. I think you would have made more of an
apology to a next-door neighbour if you had forgotten
to take the strimmer back after borrowing it to use in
the garden. That is how cold these people are. Anybody
else from any other sector, knowing what had been
said about that poor man, would have said, “My God,
we have done a terrible thing. Let us make sure that we
never, ever do it again”. The fact that there was a
night-shift lawyer and a day-shift lawyer indicates that
the media has an absolute team of lawyers behind
them, whereas the complainant gets a lawyer on a
no-win no-fee basis.
Mr Jefferies is not the only victim of this: a lady in
the Essex area sought damages, but not from the
media. She was a local councillor and did her civic
duty, which was recognised by the council which elected
her as mayor. A very rich person who had more money
than sense, as they say, decided that he would falsely
allege that the lady was a shoplifter and was unfit to
hold public office. He went to the extent of hitching a
great banner to his private plane, and flew around
Essex saying all sorts of things about this lady. That
was not the only time that he had done that. He did
the same thing to Christine Butler, a former MP. After
the relevant lady had won her case, he said that she
was falsely claiming incapacity benefits. The lady was
seriously ill but she had to go to court again. At least,
with a no-win no-fee situation there is no concern
about your mortgage or about any savings that you
may have, and your lawyer will tell you whether your
chances are good or bad.
We know about the things that some newspapers do
because we have heard about phone hacking and the
type of newspapers that were involved in that. However,
I was disappointed in the Guardian asIhavealways
found that newspaper to be very decent and reasonable.
In my experience, its staff have not doorstepped people.
If they want to make an inquiry or get a quote from
you, they have done it through the usual channels or
approached you directly in a reasonable way. However,
somehow or other they got it wrong in the case of a

355 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
356
career Army officer in the Intelligence Corps when
they said that he was involved in torture. He took the
newspaper to court—or, rather, he did not at first take
it to court but sought damages. The newspaper offered
him a derisory amount. He was then successful in
obtaining a no-win no-fee case, which he won. It was
disappointing that the Guardian should have pushed
the matter to that extent. The judge awarded £58,000
in damages and described that man as a distinguished
soldier. A former commanding officer gave evidence
to the effect that the man embodied the best traditions
of the British Army.
It is getting late in the evening. I have referred to
cases, particularly that of the lady councillor who was
on disability benefit. The no-win no-fee arrangement
would have taken a great worry away from her, as it
certainly did in the case of the soldier. I have declared
an interest; the salary that I was earning as a Speaker
was on public record, but there is still a worry if you
are going to court and you have to engage barristers
and lawyers, and take witness statements. You say to
yourself, “Am I at risk? Will my mortgage and finances
be at risk?”. I urge the Minister to think again. I know
what he said about the Jackson report, but in this
House and the other place you do not take a High
Court judge’s report—no disrespect to High Court
judges—fling it on the table and say, “There you are; it
is a good report. We’ll all agree to it and go home”.
That is not what democracy is about. It has to be tried
and tested; and if it needs changing, then we change it.
I beg to move.
Lord Beecham: My Lords, in fairness to the
Government, they did not do what the noble Lord,
Lord Martin, suggested. They did not put the whole
report on the table and say, “We will have it”, but
chose which bits suited them and left out the part of
the report that dealt with legal aid, which we have
debated at some length, among other matters. However,
that is a little beside the point.
I support the noble Lord’s amendment, if only
because subsection (4), which it seeks to delete, effectively
locks and bolts the door to any subsequent change to
the provisions on success fees without primary legislation.
That is a formidable obstacle. The subsection is
unnecessary and the Government could have dealt
with the matter in a way that would have allowed them
or a subsequent Government to review the situation
without primary legislation. The way that the Bill is
drafted does not allow that, and for that reason, if no
other, I support the noble Lord’s amendment.
Lord McNally: Did the noble Lord, Lord Martin,
say “crabby”? My goodness; I have always been thought
of as a little ray of sunshine. Of course we have not
accepted the Jackson report lock, stock and barrel. We
have honed and polished it, and brought it to the
House. We have of course accepted the proper role of
this House, which is to revise and advise. I listened
with a good deal of sympathy to the experience of the
noble Lord, Lord Martin, although I have to say that I
am not a lawyer, and I would have taken up the case of
Christopher Jefferies, never mind anyone else. I think
it was the Daily Mirror that accused him of being a
Liberal Democrat, which would have been—I had
better not say it.
Lord Martin of Springburn: My Lords—
Lord McNally: The noble Lord has come to my aid,
because I think these cases are still going on, and I had
better say no more. Whenever I hear the Opposition
on the wickedness of the press, I have to remind them
that from those Benches more than a decade ago I
proposed a minor amendment on press accountability,
and was told from this Dispatch Box by the Labour
Minister of the day that I was proposing the “slippery
slope” to a state-controlled press. We know today what
slippery slope we were actually on.
I say to the noble Lord, Lord Martin, as I have
explained in dealing with other amendments, that
abolishing recoverability of success fees and insurance
premiums from the losing side will rebalance the CFA
regime to make it fairer for defendants by reducing the
substantial additional costs which they have to pay
under the current regime. Amendment 133 would
retain the recovery of success fees from the losing side
in all cases. I am not sure whether Amendment 133ZA
was spoken to, so I shall not refer to it, but the noble
Lord, Lord Martin, made it sound as though we were
abolishing CFAs. I emphasise that CFAs will still be
available to fund the same cases as they were under the
original arrangements introduced by my noble and
learned friend Lord Mackay of Clashfern.
However, I understand the concerns of the noble
Lord, Lord Martin, about the press. I am not sure that
they are best dealt with in this Bill. As the noble Lord
will know, I hope when parliamentary time can be
found to introduce a defamation Bill. It is in that Bill
that we will look at the question of the balance of
arms between the individual and large media interests.
I hope that we can do that reasonably soon. In the
light of that and what I have explained, I hope that he
will withdraw his amendment.
Lord Martin of Springburn: My Lords, I am very
pleased that the noble Lord has said that he hopes to
bring in a defamation Bill. That at least is something,
because my worry is that there is a great imbalance. I
will not detain the House any longer. I beg leave to
withdraw the amendment.
Amendment 133 withdrawn.
Amendment 133ZA not moved.
Amendment 133A
Moved by Lord Thomas of Gresford
133A: Clause 43, page 30, line 24, at end insert—
“( ) In section 58A of that Act, after subsection (6), insert—
“(7) A costs order may include provision requiring the payment
of any fees payable under a conditional fee agreement which
provides for a success fee in the following proceedings—
(a) proceedings in England and Wales by a company which
is being wound up in England and Wales or Scotland;
(b) proceedings by a company which has entered administration
under Part II of the Insolvency Act 1986;
(c) proceedings in England and Wales by a person acting in
the capacity of—
(i) liquidator of a company which is being wound up in
England and Wales or Scotland; or
(ii) trustee of a bankrupt’s estate;

357 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
358
(d) proceedings by a person acting in the capacity of an
administrator appointed pursuant to the provisions of
Part II of the Insolvency Act 1986.
(8) In subsections (7)(a) and (7)(c) “company”means a company
within the meaning of section 1 of the Companies Act 2006 or a
company which may be wound up under Part V of the Insolvency
Act 1986.”.”
Lord Thomas of Gresford: My Lords, I return to a
subject which we addressed in Committee: proceedings
brought by a liquidator of a company, the trustee of a
bankrupt’s estate or an administrator appointed pursuant
to the provisions of Part II of the Insolvency Act 1986
to recover the assets of a business or company which
has gone into liquidation or has become financially
insolvent.
The point is that insolvency practitioners who engage
in that important work have to bring proceedings to
recover the assets of the company, or money representing
the assets of a company, from a company director or
partner in the firm. They can be very expensive
proceedings, because a lot of investigation has to be
undertaken. Often, the director or partner who is in
default has disappeared—or hopped it overseas—so it
is not easy to bring those proceedings. The liquidators,
and so on, cannot bring the proceedings themselves.
They employ solicitors to do that and to carry out
those investigations. From time to time, they are forced
to go to court to try to get a court order against an
individual. In so doing, a conditional fee agreement is
entered into, and a success fee is part of that conditional
fee agreement.
As all of us will know, one of the major creditors is
Her Majesty’s Revenue and Customs. Consequently, it
seems a little silly to employ insolvency practitioners
to recover all this money and then to have a reduction,
contrary to the interests of the Revenue and Customs,
from whatever has been recovered in order to pay the
success fee. It seems to me that the success fee, when
these proceedings are successful, should be paid by the
person who is in default—the person who has hopped
it. That is the current situation.
I mentioned earlier today that back in 1990 when
the noble and learned Lord, Lord Mackay, introduced
conditional fee agreements for the first time, there
were three categories: personal injuries, insolvency
proceedings and applications to the European Court
of Human Rights. So from the very beginning, from
the inception of this type of agreement, insolvency
practitioners have had this protection for the proceedings
that they have to bring. From the point of view of
making sure that the defaulter pays and in the interests
of the Revenue and Customs and perfectly decent
creditors which may be a large firm or a small firm, it
seems only sensible that the amendment should succeed.
I beg to move.
9.30 pm
Lord Bach: I am happy to put my name to this
amendment with the noble Lord, Lord Thomas of
Gresford. I cannot think of anything he said that is
not right on this. It seems an open-and-shut case—as
it did in Committee, I have to say, when the noble and
learned Lord, Lord Mackay of Clashfern, made the
first speech in the debate on this subject. I have nothing
to add to what the noble Lord, Lord Thomas of
Gresford, said: he made the case. If the Government
are to reject this, I very much hope that it will come
back for final decision at Third Reading.
Lord McNally: My Lords, the Government accept
that insolvency proceedings are untypical of our reforms
to CFAs in an important respect. Across many areas
of law—for example, in clinical negligence cases against
the NHS—the Government are on the sharp end of
our dysfunctional CFA regime as it is the defendants
bringing cases against claimants, sometimes speculatively.
However, as the noble Lord, Lord Thomas, has said,
insolvency stands apart because it is one of the few
areas where CFAs sometimes work to the advantage
of government departments; for example where an
insolvency practitioner recovers moneys for the taxpayer
and other creditors. So if these amendments were to
be accepted, they would effectively constitute a carve-out
for the key place where CFAs can be useful to the
Government—this at a time when we are asking everyone
else to adjust to a new, more sensible regime.
We debated insolvency proceedings in Committee
and I said then that we were considering this issue
within government. I can report that we have thought
about it carefully, but we do not agree that an amendment
along these lines is the right way forward. I do not
believe it is acceptable to say that CFA reform is good
for everyone else, but is not good for the Government.
Lord Bach: I am sorry to interrupt, but it is not so
much that this is good for the Government—it is good
for the taxpayer. Surely that should be one of the main
considerations. If it is good for the Government, that is
fine; but if it is the taxpayer who will benefit, because
creditors get their money, as it were—the HMRC gets
its money by taking advantage of the amendment—I
cannot see why the Government are resisting this.
Lord McNally: As the noble Lord will know, the
interests of the taxpayer and the Government are
synonymous, because one is working for the other.
Lord Bach: Which one is working for whom?
Lord McNally: It is far too late in the evening for
such repartee. As I say, we have reached agreement
across government, in respect of insolvency proceedings,
that new ways will be implemented to deal with these
cases without recoverable success fees and insurance
premiums. We are working on a programme of
implementation and we will set out the details in due
course.
As with other areas now subject to a new CFA
regime, the effect will be that claims occur at more
proportionate cost, as claimants will have a stake in
the legal costs being incurred on their behalf. We
believe that the exemption proposed by the amendments
in respect of insolvency proceedings is unnecessary
and would breach the basic rationale of our reform
policy. I therefore urge my noble friend to withdraw
his amendment.

359 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
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Lord Thomas of Gresford: Can my noble friend tell
us when these proposals will be finalised and whether
it will be during the currency of this Bill?
Lord McNally: I am trying to work out the vaguest
reply that I can give to that. Discussions are going on
and, as I said, we will make an announcement as soon
as possible.
Lord Thomas of Gresford: I am very much enlightened
by my noble friend’s formulation. The noble Lord,
Lord Bach, made a very good point. It is the taxpayer’s
money that we are talking about here, and not just the
taxpayer but the worthy creditor, the small businessman
or even the large businessman who has given credit to
a firm that has gone into liquidation, sometimes through
fraud and sometimes through incompetence. However,
the taxpayer and the businessman are going to suffer
because of this provision, unless my noble friend is
saying that these proceedings are never going to be
brought because there is some other way of doing it.
The vagueness has left us all a little in the air. However,
for the moment and subject to further discussions
between now and Third Reading, I beg leave to withdraw
the amendment.
Amendment 133A withdrawn.
Amendments 133B and 133C not moved.
Amendment 133CA
Moved by Lord Beecham
133CA: Clause 43, page 30, line 25, after “proceedings” insert
“, other than proceedings of a type listed in section 58(6A),”
Lord Beecham: My Lords, this amendment effectively
deals with the position in which public authorities are
the defendants to claims. In cases where the state is in
fact the defendant—in other words, the converse of
the previous situation that we discussed—the amendment
would allow for success fees to be paid when a CFA is
in place. To give a brief indication of the kinds of
cases that might be involved, they would cover claims
for assault, battery, false imprisonment, malicious
prosecution, trespass to goods or land, and misfeasance
in a public office, or claims in a judicial review or
under the Data Protection Act and the Equality Act,
negligence where there is a wider public interest in the
claim being brought—a sort of localised Trafigura
situation, one might imagine—or damages in respect
of an act or omission by a public authority that
involved a breach of convention rights.
Those are all potentially serious matters in which
the state is, in one capacity or another, in the position
of defendant. In those circumstances, it seems appropriate
that the success fee position should not be that advocated
for the rest of the legislation—although we have our
differences about that too—but that the state should
pay the success fee and not expect it to come out of
whatever damages might be awarded to a successful
complainant concerning acts that the state should
never have committed. I beg to move.
Lord McNally: My Lords, I hope that my reply to
the previous debate has shown our gritty determination
to keep to the central architecture of the Bill. As I have
explained, abolishing the recoverability of success fees
and insurance premiums from the losing side is a key
government reform which will reduce the substantial
additional costs paid by defendants under the current
regime. The reforms are intended to apply across all
areas of civil litigation, and the Government do not
believe that any exemptions are necessary, fair or
desirable. If the amendments were accepted, claimants
in these types of cases would have no incentive to
control their lawyers’ costs. That cannot be right.
Proposals to control legal costs should apply across
the board. I urge the noble Lord to withdraw his
amendment.
Lord Beecham: I decline the request to agree with
the Minister. There is little incentive for the Government
as a defendant to settle cases when they do not have the
additional incentive of a success fee being awarded against
them when they lose. However, in the circumstances I
beg leave to withdraw the amendment.
Amendment 133CA withdrawn.
Amendments 133D to 135 not moved.
Amendment 135A
Moved by Lord McNally
135A: Clause 43, page 30, line 30, leave out from “not” to end
of line 32 and insert “prevent a costs order including provision in
relation to a success fee payable by a person (“P”) under a
conditional fee agreement entered into before the day on which
that subsection comes into force (“the commencement day”) if—
(a) the agreement was entered into specifically for the
purposes of the provision to P of advocacy or litigation
services in connection with the matter that is the subject
of the proceedings in which the costs order is made, or
(b) advocacy or litigation services were provided to P under
the agreement in connection with that matter before the
commencement day.”
Lord McNally: My Lords, the government amendments
in this group are minor and technical and will ensure
that changes to the recoverability of success fees and
the insurance element will apply consistently to all
conditional fee agreements, including collective CFAs.
I wrote to all Peers last week about the amendment. A
copy of the letter was placed in the Library of the
House. I beg to move.
Lord Bach: My Lords, I am not getting to my feet
just to be difficult. When the Minister moves government
amendments and describes them as technical, usually
I sit absolutely still in my place. However, on this
occasion I have a couple of questions. If he does not
know the answers tonight, he is welcome to write to
me and to other noble Lords. Will he confirm that the
effect of Amendment 135A will be that a success fee as
part of a CFA under which work for the claimant
commenced before the Bill’s commencement day will
still be recoverable from the defendant on exactly the
same basis as it is now?

361 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
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[LORD BACH]
The second question is similar but concerns collective
CFAs. Will the Minister confirm that the effect of the
amendment will be that a success fee as part of a
collective CFA under which work for an individual
claimant commenced before the Bill’s commencement
day will still be recoverable from the defendant on the
same basis as it is now? I will not object to the
amendment being agreed, but I would be grateful if in
due course I could have answers to those questions.
Lord McNally: My Lords, I am sorely tempted to
show that after months of total immersion in the Bill I
can leap to the Dispatch Box and give the noble Lord
a detailed response. However, as he knows, I did only
one paper on English legal institutions in part 1 of my
degree. Therefore, I will not pretend that I can give
him a definitive answer. However, I firmly promise
that a letter will go to him and into the Library of the
House in response to those questions.
Amendment 135A agreed.
Amendment 136 not moved.
9.45 pm
Amendment 136A
Moved by Lord Beecham
136A: Clause 43, page 30, line 32, at end insert—
“( ) The amendments made by subsections (2) and (4) do not
apply in relation to proceedings that include a claim for judicial
review of a decision, or of a failure to decide, by a public body.”
Lord Beecham: My Lords, Amendment 136A is in
another group of amendments that seek to modify the
Government’s stance and I anticipate something short
of a welcome from the Minister when he replies.
Nevertheless, I want to raise these matters. The effect
of Amendment 136A would be to permit the recoverability
of ATE insurance in judicial review cases funded by a
CFA. This is particularly relevant since at the moment
there is no proposal to introduce QOCS for these
cases. In addition, in any event claimants would have
to fund their own disbursements via an ATE policy as
well. Particularly in the absence of QOCS, recoverability
remains an important issue in those cases.
Amendment 136B would effectively disapply the
Bill’s provisions for breach of an employer’s duty
leading to physical or psychological injuries—in effect,
personal injury claims. I do not propose to repeat
what was said in Committee or at Second Reading
about the desirability of including personal injury
cases within this proposal. The noble Lord will disagree
but it strikes me as axiomatic.
Amendment 136C maintains the same approach in
respect of professional negligence cases which can
take a variety of forms, as we have said before, affecting
members of the legal and other professions. The noble
Lord will repeat the mantra that we should not be
seeking to add to cases where the general principle is
disapplied, but this is potentially important. In particular,
the loss of money by professional negligence will be
compounded by having to pay, potentially, a significant
success fee out of damages, which does not seem at all
reasonable.
Amendment 136D would give a complete exemption
for clinical negligence cases as opposed to the partial
exemption which is currently proposed. Amendment 139C
would require the Lord Chancellor to make regulations
to provide for cost orders to require payment where
the applicant has taken out an insurance policy against
the risk of liability to pay their own costs within a
pre-action protocol period or 42 days in the absence of
such a period. This is a potential stumbling block. In
an earlier debate I referred to the potential scale of the
cost of premiums to cover the cost of disbursements—
leaving aside road traffic cases where it will be fairly
nominal—ranging from £900 through to a very high
claim of around £11,000 in respect of clinical negligence.
I am not anticipating a favourable response at this
hour. It is a matter which will have be returned to if
not at Third Reading then in future as we see an
accumulation of cases in which claimants are put at a
disadvantage or alternatively in which many people
are deterred from taking proceedings in the first place
by the potential cost of organising their own “after the
event” insurance to cover disbursements—estimated
by the Access to Justice Action Group to be something
like 25 per cent of cases, following an extensive trawl
through some 69,000 cases. That would represent a
significant reduction in the number of claimants actually
able to bring their cases before a tribunal. I beg to
move.
Lord Pannick: My Lords, I am sure the Minister
will tell us again that the general regime for success
fees and “after the event” insurance must apply to all
cases and one cannot have exemption for this type of
case. But have the Government given any thought to
whether it might be desirable to include in Part 2 a
provision similar to Clause 8(2) of Part 1, giving some
form of discretion to the Lord Chancellor to exclude
from the scope of Part 2, in the light of experience of
how Part 2 operates, any categories of case in respect
of which it becomes apparent after this Bill comes into
effect that the system is not working very well and is
causing practical problems about access to justice? It
might then be more sensible to go back, in relation to
particular categories of case, to the old system under
which the unsuccessful defendant would have to pay
the success fee. Will the Minister give some thought to
whether a general power for the Lord Chancellor to
that effect might not be a good idea? Things might
look rather different in a year or two from how they
look now.
Lord McNally: My Lords, we have reached the
stage of the evening when the noble Lord, Lord Pannick,
not only asks the questions but gives the answers as
well—cutting out the middleman, which is me.
I take note of his suggestion. As I do with all our
deliberations, I will report back to the Lord Chancellor
on this. I would have thought that his experience of
the willingness of your Lordships to make exceptions,
one after another after another, will make him think
that giving such flexibility in the Bill will only encourage
a constant stream of exceptions coming to his door.
We have thought very hard about this. We think
that the architecture is right. We think that by going
back to the system as it broadly was under the noble

363 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
364
and learned Lord, Lord Mackay, repairs the damage
that was done by the previous Administration—with
the best of good will. I will report, and I will even tell
the Lord Chancellor that it was an idea of the noble
Lord, Lord Pannick, which I am sure will produce the
appropriate response from the Lord Chancellor.
Lord Bach: I think we can almost see the response now.
Lord McNally: Amendment 139C, in the name of
the noble Lord, Lord Beecham, seeks to amend Clause 45
to require the Lord Chancellor to make regulations to
allow the recovery of ATE insurance premiums taken
out to cover the risk of paying one’s own disbursements
within the relevant pre-action protocol period. As I
have already made clear, the Government’s position
on ATE insurance is that it should no longer be
recoverable from the losing party. Amendment 139C
goes against the Government’s reform and we will
strongly resist it.
In the same vein, I cannot accept Amendments 136A
to 136D, which would retain recoverability of success
fees for judicial review, employers’ liability claims,
professional negligence and clinical negligence. I have
touched on some of these issues before and I do not
intend to detain noble Lords further by going into the
details of each particular area or trying to assess
which litigants should be classed as more deserving
than others. As I have said, it would be invidious and
unfair to set out exceptions for some claimants and
not for others, and we do not intend to do so.
I urge the noble Lord not to press the amendments.
Lord Beecham: With my customary reluctance, I
beg leave to withdraw the amendment.
Amendment 136A withdrawn.
Amendments 136B to 136D not moved.
Amendment 136E not moved.
Clause 45 : Recovery of insurance premiums by way of
costs
Amendment 137
Moved by Lord Lloyd of Berwick
137: Clause 45, page 31, line 38, leave out from “policy” to end
of line 33 on page 32
Lord Lloyd of Berwick: My Lords, this amendment
is concerned with one aspect of clinical negligence
cases: the cost of expert reports. It would not have
been necessary if the House had accepted my noble
friend Lady Grey-Thompson’s amendment last week,
but unfortunately it failed by a narrow margin.
Everybody, I think, agrees that the cost of expert
reports at least should be recovered in one way or
another. The trouble is that the Government set about
it in the wrong way. In Committee on 16 January, I put
forward some figures to show why. I did not expect
that the noble and learned Lord, Lord Wallace of
Tankerness, would deal with the figures there and
then. However, I have to say that I did expect that I
would get something rather better than what I got
some weeks later, which said simply that the Government
did not recognise or accept my assumptions. Nothing
then happened for a further period of time, until 1
March, when the Government put forward their own
alternative calculations.
On the following day, 2 March, the Government
were given a detailed answer which showed that their
calculations were simply wrong. On 7 March, the third
day of Report stage, I again explained why, but on that
occasion the noble and learned Lord, Lord Wallace of
Tankerness, did not deal with the figures, any more
than he had done on 16 January. Instead, he said that
he would place the Government’s calculation in the
Library of the House. However, he had not done so by
the time I had left the House last night, nor when I
arrived this morning. I did not in fact see the Government’s
calculations until early this afternoon.
However, that delay, which I would humbly suggest
was unforgivable, at least meant that the Government
have now put forward—at my request, I may say—and
placed in the Library, not only the Government’s own
calculation but the response to it, which was prepared
by Mr Andrew Parker, a partner in the firm of Beachcroft,
to whom I am especially indebted. That response
shows that by accepting this amendment the Government
would make a saving to the taxpayer of something
between £10 million and £19 million.
I suspect that the House will be glad to hear that I
will not go into the figures again, since the Government
have simply left it too late for further consideration of
the figures. The House has accepted the amendment
that I tabled last week, on the basis of the figures
which I then put forward, there having been no other
figures with which to compare them. However, that is
not an end of the matter, because the savings that I
have indicated will depend on the Government accepting
this amendment, the second part of the coupled
amendments now before the House, as well as the one
that they accepted last week. If the Government are
serious about saving money, as they have said so often
in Committee and so far on Report, then that is what
they ought to do.
The repeal of Section 29 of the Access to Justice
Act, which would get rid of recoverable insurance
premiums, is one of the two or three main planks on
which Part 2 of the Bill rests. What, therefore, is the
point of repealing Section 29 and then, in the same
breath, making an exception in the case of expert
reports, when expert reports are now covered by legal
aid as a result of last week’s amendment? It simply
does not make sense. The only explanation given so
far is that the Government want to help those who are
above the legal aid limit. But how does that square
with the Government’s attitude to those many deserving
cases, of which we have heard from all sides, who are
being denied legal aid even though they are within the
legal aid limit? It is in the highest degree ironic that
one of the grounds given by the Government for
spending the extra £10 million is the need to secure
access to justice for those who are above the limit.
How much better that money would have been spent
elsewhere in the course of this Bill.

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[LORD LLOYD OF BERWICK]
The truth is that the Government simply made the
wrong decision. They listened to representations, as a
result of which they decided to fund expert reports by
way of ATE insurance rather than by way of legal aid.
They chose the most expensive course but they now
have the chance to mend their ways. It is not too late
for them to put the matter right by accepting this
amendment. I beg to move.
10 pm
Lord Beecham: My Lords, I strongly support the
noble and learned Lord’s amendment, which makes
every conceivable sense from the financial to the legal
and logical. I have to say that I do not at all blame the
noble Lord, Lord McNally, or the noble and learned
Lord, Lord Wallace, but it is a matter of some concern
that those responsible were not courteous enough to
ensure that the noble and learned Lord, Lord Lloyd,
who, after all, is one of the most distinguished Members
of your Lordships’ House, should have been supplied
with a copy of the document lodged in the Library.
Indeed, had I not chanced across it myself today and
given him a copy, he might not even at this stage have
known of its existence. That is not good enough and I
hope that Ministers will have a word with the appropriate
members of their staff.
More significantly, the noble and learned Lord
makes an unanswerable case for this amendment and
I hope that the Minister will be able to say that the
Government will respond sensibly. It would assist
justice and assist the finances. It seems to me that it
would be absurd for the Minister not to accept this
amendment.
Lord McNally: My Lords, if there has been any
discourtesy to the noble and learned Lord, Lord Lloyd,
I absolutely apologise and take responsibility for it. I
should like to put that on the record. The noble and
learned Lord has described our proposal in the past as
expensive and inefficient, and has made much of the
difference between his and the Government’s figures.
As he knows, we have now put our calculations in the
Library of the House and I can assure your Lordships
that we have given careful consideration to the calculations
that the noble and learned Lord has provided. In
addition, I have met with the noble and learned Lord,
as have my officials, and we have swapped calculations.
We have explained that we believe that he is omitting
some vital costs from his calculations.
The method we have used is open and transparent.
Taking costs to legal aid and to public sector defendants,
we believe that the costs to the public purse of the
proposals from the noble and learned Lord, Lord Lloyd,
to fund expert reports by legal aid is about £17.5 million
a year, whereas the cost to the public purse of our
proposal for recoverable insurance premiums is between
£18.5 million and £19.5 million. The result is likely to
be an additional cost of about £1 million to £2 million.
I understand that the noble and learned Lord does
not accept our calculations, but we do not accept his.
This is a matter on which we have to take a judgment.
These additional costs, as he has said, will enable more
people to gain access to justice than under his proposals,
which are limited to those who are financially eligible
for legal aid. For this reason, and for reasons that are
set out in more detail in the paper in the Library, we
believe that the powers in Clause 45 are the best way to
support victims of clinical negligence in a relatively
inexpensive and fair way. I realise that this is a clash of
figures and a clash of judgments, but I am making my
judgment and we are willing to defend it in this House.
At this hour, I would urge the noble and learned Lord
to withdraw his amendment.
Lord Lloyd of Berwick: My Lords, I am afraid that
I do not find the answer satisfactory. I will withdraw
the amendment, of course, but in the hope that the
Government will think again and perhaps, between
now and Third Reading, take further and better advice.
On that basis, I beg leave to withdraw the amendment.
Amendment 137 withdrawn.
Amendment 138 not moved.
Amendment 139
Moved by Lord Beecham
139: Clause 45, page 31, line 39, at end insert “, (2A) or (2B)”
Lord Beecham: My Lords, we return briefly to the
question of environmental cases which we also
discussed under the amendments tabled by the noble
Lord, Lord Thomas. The distinction between these
amendments and the previous amendments are that,
in this case, the amendments provide the Lord Chancellor
with the opportunity to provide by regulation for the
changes that are sought; namely, that in respect of
Amendments 139 and 140, disbursements related to
ATE insurance would be recoverable and, under
Amendment 142BC, that qualified one-way costs-shifting
would apply, as it should, to these cases. That was
recommended by Lord Justice Jackson and I cannot
see why the Government would differ from his view.
Therefore, for environmental claims and judicial reviews
connected with them, QOCS would apply, as indeed
they should. This is an important area of policy and
potential litigation. As the noble Lord, Lord Thomas,
pointed out fully, it needs to be addressed. As I have
said, we prefer this iteration of the remedy, but in one
way or another the Government should be seen to
move in the direction of facilitating these claims under
the conditional fee arrangement scheme. I beg to
move.
Lord McNally: My Lords, Amendments 139 and
140 seek to allow the continued recoverability of ATE
insurance premiums in environmental claims to cover
the costs of expert reports. Environmental claims will
generally involve a number of claimants who could
contribute towards the costs of any reports. Alternatively,
the reports could be funded under a “before the event”
insurance policy should claimants have one, or under
an “after the event” insurance policy should claimants
wish to purchase one. Further, the claimant’s solicitors
might agree to fund disbursements in exchange, perhaps,
for an increased success fee. A variety of means of

367 Legal Aid, Sentencing and Punishment [14 MARCH 2012] Legal Aid, Sentencing and Punishment
368
funding disbursements are available in environmental
cases without the need for an exception for recoverable
insurance premiums.
So far as the other side’s costs are concerned, the
Government’s view, as I explained in Committee, is
that a protective costs order ought to provide sufficient
costs protection in respect of the other side’s costs in
environmental judicial review cases, as we set out in
our recent consultation. Under a PCO, it will be clear
from the outset what costs the claimant will have to
pay if the claim is unsuccessful. The order will also
ensure that some contribution is made towards the
costs of public bodies that have successfully defended
the claim. As I said earlier, environmental claims will
generally involve a number of claimants and it is right
that they should contribute together to costs, at least
to some extent. The Government remain convinced
that this is the right approach in these cases. We will
shortly set out the details of the way forward in the
light of our consultation. I hope, therefore, that the
noble Lord will withdraw his amendment.
Lord Beecham: I beg leave to withdraw the amendment.
Amendment 139 withdrawn.
Amendments 139A to 141ZC not moved.
Clause 46 : Recovery where body undertakes to meet
costs liabilities
Amendment 141A
Moved by Lord McNally
141A: Clause 46, page 32, line 44, leave out “party to proceedings”
and insert “person”
Lord McNally: Amendments 141A to 141C relate
to the self-insurance element where a body undertakes
to meet a member’s cost liabilities. They are intended
to have a similar effect to government Amendment 135A.
I beg to move.
Amendment 141A agreed.
Amendment 141AA not moved.
Amendments 141B and 141C
Moved by Lord McNally
141B: Clause 46, page 32, line 45, leave out from beginning to
“before”
141C: Clause 46, page 32, line 46, at end insert “if the
undertaking was given specifically in respect of the costs of other
parties to proceedings relating to the matter which is the subject
of the proceedings in which the costs order is made”
Amendments 141B and 141C agreed.
Amendments 142 and 142A not moved.
Amendments 142B to 142BC not moved.
Amendment 142C
Moved by Lord Thomas of Gresford
142C: After Clause 53, insert the following new Clause—
“Third party litigation funding
(1) A third party litigation funding agreement which satisfies
all of the conditions applicable to it by virtue of this section shall
not be unenforceable by reason only of it being a third party
litigation funding agreement; but any other third party litigation
funding agreement shall be unenforceable.
(2) A third party litigation funding agreement is an agreement
under which a third party (“the funder”) agrees to fund (in whole
or in part) the provision of advocacy or litigation services to
another person (“the litigant”) by a person other than the funder
in exchange for remuneration.
(3) For the purposes of subsection (2), “remuneration”includes—
(a) a payment or any other transfer of value representing or
calculated by reference to the value of a judgment or
settlement; and
(b) an assignment of the proceeds (in whole or in part) of
any judgment or settlement.
(4) The following conditions are applicable to a third party
litigation funding agreement—
(a) it must be in writing;
(b) it must not relate to—
(i) proceedings which by virtue of section 58A(1) and
(2) of the Courts and Legal Services Act 1990
cannot be the subject of an enforceable conditional
fee agreement;
(ii) a multi-party action, representative action or any
proceedings which are the subject of a group
litigation order; or
(iii) any other proceedings of a description prescribed
by the Lord Chancellor;
(c) it must comply with such requirements as shall be
prescribed by the Lord Chancellor.
(5) Regulations under subsection (4)(c) may—
(a) require any person which enters into a third party
funding agreement with a litigant to first obtain a license
from a licensing body to be designated by the Lord
Chancellor; and
(b) set out conditions to be satisfied in order to obtain such
a license.
(6) In this section “advocacy services” and “litigation services”
are as defined in section 119 of the Courts and Legal Services
Act 1990.”
Lord Thomas of Gresford: My Lords, the amendment
raises the issue of third party litigation funding. I
made a lengthy contribution in Committee which I do
not propose to repeat. The basis of the amendment is
to bring under government control third party litigation
funding. Your Lordships may recall that a voluntary
code has been entered into by those who are concerned
in third party litigation funding and I suggested in
Committee, and I repeat, that it is far better that the
Lord Chancellor should take a look at this and bring
in something along the lines of what I have suggested
in my amendment. I beg to move.
Lord Bach: We agree with the amendments in the
name of the noble Lord, Lord Thomas of Gresford.
Lord McNally: My Lords, I have said before that
we are grateful to my noble friend for raising this issue.
It is a possible problem and a number of noble and
learned Lords and lawyers outside have given warning

369 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
370
[LORD MCNALLY]
signals. At the moment we are looking at how voluntary
regulation is working in the area. However, my right
honourable friend the Lord Chancellor is very aware
of the situation and is keeping it under review. We do
not think that statutory regulation through this Bill is
either the right place or the right time but we welcome
the fact that my noble friend has put this issue on the
political radar. Both lawyers and legislators will have
to follow the matter closely to see whether we will need
to return to it at some future date. In the mean time, I
ask my noble friend to withdraw the amendment.
Lord Thomas of Gresford: On this occasion I am
grateful to my noble friend for his reply. My purpose
was to highlight the insidious advance of third party
litigation funding. It is essentially an American concept
that has advanced into this country. So far it has
reached commercial litigation, with which I have no
quarrel. It has also got into family law and I shall be
extremely concerned if it were to get into personal
injury cases. The fact that the Lord Chancellor now
has it on his agenda and will monitor the way in which
the voluntary code operates is of great comfort to me
and it is on that basis that I beg leave to withdraw the
amendment.
Amendment 142C withdrawn.
Amendment 142D
Moved by Lord Thomas of Gresford
142D: After Clause 53, insert the following new Clause—
“Third party offers to settle
It shall be an offence for a third party insurance company to
solicit a claimant who has a cause of action for personal
injuries against its policy holder, to make an offer to
settle that cause of action unless—
(a) it has obtained adequate medical evidence of the
personal injury and has disclosed it to the claimant; and
(b) the claimant is advised when the offer is made of his
right to obtain legal advice; and
(c) the offer is in full and final settlement of the cause of
action.”
Lord Thomas of Gresford: This amendment concerns
the third party insurance company, which approaches
a prospective claimant and offers to settle without
there being adequate medical evidence, without the
claimant being informed that he has a right to legal
advice and without the offer being in full and final
settlement of the cause of action. In Committee, I
hesitated to suggest that it should be a criminal offence,
and suggested that the best way of dealing with the
matter should be that such settlements would be void,
which would enable a claimant who subsequently
discovered that he was in a far worse condition than he
had thought to reopen the matter and to claim damages
for the injuries that he received. That is a practice that
has crept in. It means that people accept settlements
without proper advice or evidence of what is wrong
with them and without a proper calculation of their losses.
It seems to me that a lot of people are vulnerable to
that type of approach. That is one side of the problem.
The other side is that it encourages people with no
basis for a claim at all to make one and accept a sum
of money that means that, over a large range of cases,
the insurance company benefits. That is just as bad as
that people should be incited to put forward fraudulent
claims.
My noble friend’s answer in Committee was that
the FSA rules are sufficient to cover the matters of
which I complain. That immediately makes me ask
who enforces the FSA rules. What control is there over
the employee of a third-party insurance company who,
quite clandestinely, makes offers of this sort to settle
cases that are perfectly valid and which he knows to be
valid? So at this stage I put forward the suggestion that
it should be a criminal offence for people to engage in
this type of behaviour. That may be going a step further.
Perhaps my original concept that the alleged settlement
obtained should be void was the right way to go. But
certainly there is an abuse going on and I expect the
Government to do more than to refer to FSA rules
when there is no one to enforce them. I beg to move.
Lord Bach: The Minister would be well advised to
give serious consideration to the amendment proposed
by the noble Lord, Lord Thomas of Gresford. This is
not one that he moved in Committee—he has moved it
for the first time today. The House knows that he has
become an expert in this field of litigation over the
months that he has spoken to me about it. He may well
be right that it is no good the Government taking a
position that looks like it may take some time to
develop. It is something that needs to be done and
thought about pretty promptly. Therefore, as far as we
can, we support the amendment.
Lord McNally: My Lords, I think it was the noble
Lord, Lord Martin, who talked about the proper role
of the House of Lords. Although the hour is late, my
noble friend Lord Thomas has demonstrated one of
the benefits of this House in bringing to the Government’s
attention an area where there already is or could be a
malpractice that will have to be dealt with. As he
explained, this is a practice where an insurer approaches
a claimant directly, usually immediately after a road
traffic accident, with a view to settling the claim,
where an insurer’s own policyholder is at fault in a car
accident. As I understand it, claimant representatives
refer to this practice as third party capture, whereas
defendant representatives call it third party assistance.
As I indicated in Committee, I shall continue to refer
to this practice as third party contact.
Amendment 142D would make it an offence for an
insurer to make such an unsolicited approach to a
potential claimant in a personal injury case. The
amendment also specifies those requirements which
must be met before an insurer may make an offer to
settle such a claim. This includes a requirement to obtain
adequate medical evidence of injury and to advise the
claimant of their right to obtain full legal advice
before accepting the offer and making it clear to the
claimant that the offer to settle is full and final.
It is unclear what my noble friend means when he
says that this practice should be an offence. If he refers
to this as being a criminal offence, I do not believe that
a criminal sanction is appropriate or proportionate.
You would have to prove beyond reasonable doubt
that something amounted to an unsolicited approach.
As I explained in Committee, the Financial Services

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372
Authority regulates the insurance industry and requires
insurers to treat their customers fairly at all times and
that this covers third party claimants.
Third party contact does not in itself cause detriment
to the consumer and may be to their advantage, as a
claim can often be resolved quickly. In addition, this
practice can allow insurers to reduce the legal costs
associated with handling a claim and this in turn
reduces costs for all policyholders. However, I am
aware of the concerns around the potential risk of
conflict of interest and the need for the claimant to
have independent legal advice before any settlement is
agreed. This matter was looked at by the FSA in its
review of third party contact during 2009-10 and it
did not find conclusive evidence that unrepresented
third parties could have achieved higher compensation
had they obtained independent legal representation.
Following the FSA’s review, the Association of British
Insurers published a code of practice in June 2010.
The code contains specific guidance for insurers on
contacting claimants. This limits unsolicited contact.
For example, and I quote:
“Insurers will not make unsolicited visits to an unrepresented
claimant at their current address, including hospitals”.
The code also requires that claimants are informed of
their right to seek independent legal advice and other
options available for them to resolve their claim.
Most of the issues which this amendment seeks to
address in respect of the handling of third party
contact claims are already covered by existing regulation.
The FSA rules require that insurers fully inform third
party claimants of their legal rights, including to
independent legal advice and alternatives to settling
directly with the insurer. The Government do not
believe it is right or appropriate to introduce further
sanctions or regulation in this area, especially when a
scheme already exists to monitor insurers’ activities.
That said, I can reassure my noble friend that if a
serious concern arises in the future in this area—and
we will keep it under review—we will not hesitate to
take this up with the Treasury and with the FSA.
I am therefore grateful to my noble friend for
raising this issue with us, but for the reasons that I
have mentioned I hope that he will agree to withdraw
the amendment.
Lord Thomas of Gresford: My Lords, I am grateful
to my noble friend. I am glad that some publicity has
been give to this practice which I believe to be fairly
widespread and causing a great deal of concern. As
long as the Government keep their eye on this area, I
shall be satisfied. I beg leave to withdraw the amendment.
Amendment 142D withdrawn.
10.30 pm
Clause 54 : Rules against referral fees
Amendment 142E
Moved by Lord Beecham
142E: Clause 54, page 39, line 24, at end insert—
“()Aregulated person is not in breach of this section if the
body to which the payment is made for the prescribed legal
business is a not-for-profit organisation and the payment is in the
nature of a service that was provided before 27 July 1999.”
Lord Beecham: My Lords, this amendment deals
with referral fees. The Bill provides rules against referral
fees and defines the nature of regulated persons, who
are effectively prohibited from receiving a payment for
referring prescribed legal business to another person.
Under Clause 54(4), the legal services in question
relate to,
“a claim or potential claim for damages for personal injury or
death”,
or where,
“the business is of a description specified in regulations made by
the Lord Chancellor”.
I do not know quite what is envisaged by the latter
provision, but it is clear that the aim is to inhibit the
referral of personal injury claims in return for payment.
The regulated person, who for these purposes would
presumably be acting on behalf of an injured person,
would also be in breach of the subsection if he arranged
for another person to provide services to the injured
party and was paid or had been paid for making the
arrangement.
A number of issues arise from this. The first is that
the payment need not necessarily be financial; it could
also involve, for example, the provision of another
service. It might fall within the scope of the clause—I
am not sure whether this was intended—if an organisation
referred a client to a solicitor and, as part of their
service, the solicitor prepared a will for that client or
gave legal advice on another matter that was not
related to the personal injury or other category that
the Lord Chancellor might specify.
The purpose of Amendment 142E is to make it
clear that a person would not be in breach of this
subsection if the body to which the payment is made—that
is, the person referring the client—is a not-for-profit
organisation. There are of course organisations, such
as charities and the like, which refer their members or
others to solicitors and perhaps other professionals,
and receive payment in return. In particular, I understand
that a number of medical charities do this. I suppose
that at one time organisations such as the Automobile
Association, or other motoring organisations that are
no longer membership organisations in the traditional
sense, might have done likewise. Since they are not-forprofit
organisations, it does not seem appropriate that
this bar should be in place.
The situation is not analogous to that which the
noble Lord, Lord Thomas, dealt with in terms of
third-party funding, about which he is absolutely right
to be exercised. Therefore, it should not be caught
within the prohibition that is envisaged here. It could
certainly do considerable harm to organisations and,
for that matter, limit the benefit to clients of being
referred. As I said, they might be referred on the basis
of free advice or advice at a reduced cost, which would
presumably appeal to the Government—quite rightly
since they are talking about reductions in cost.
Therefore, I hope that the noble Lord will look
again at this situation, perhaps with a view to coming
back to it at Third Reading if he cannot accede to this
measure tonight. There are other amendments before
us in this group and there is to be a further amendment
which will be taken next Tuesday, so we are not quite

373 Legal Aid, Sentencing and Punishment [LORDS] Legal Aid, Sentencing and Punishment
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[LORD BEECHAM]
in the position of closing the door yet—not before
Third Reading in any event. In these circumstances, I
beg to move Amendment 142E.
Lord Hunt of Wirral: My Lords, in speaking to
Amendments 146A and 148A, I wish to say how
strongly I support in principle the Government’s proposal
to ban referral fees. I declare my interest as a partner
in DAC Beachcroft, the international commercial law
firm. My amendments are intended simply to clear up
some possible loopholes. Having just heard the comments
of the noble Lord, Lord Beecham, I caution how
important it is to have a blanket ban because any ban
that is implemented has to work. However watertight
the ban is—my amendments are intended to help the
Government achieve that objective—it is critical that
we also remove the incentive for referral and profit
share by removing the excessive legal costs from the
system. There are many vested interests here and a lot
of money is at stake—too much money in my view.
At present, solicitors acting for claimants can still
afford to pay out more than half of their fees to a
third party whose only role is to buy and sell on the
details of an injured person. That cannot be right.
Amendment 146A would make a minor change to
Clause 54(4) by inserting,
“which consist of or include damages”.
I raised in Committee the spectre of the current wording
permitting the payment of a referral fee for some
non-injury element of an injury claim, completely
bypassing the Government’s intentions. I look forward
to hearing my noble friend the Minister’s comments
on that.
Amendment 148A would insert,
“whether received by the person referring prescribed legal business
or not”,
into Clause 54(8). I highlighted in Committee this gap
in the drafting which could be exploited simply by the
way in which payment is routed. Again, I await my
noble friend the Minister’s answer.
Finally, I would also be very interested to hear whether
my noble friend can give this House a commitment
about just how much of the excess cost can now be
taken out of the system altogether, which is, frankly, a
more effective remedy than tightening up the drafting.
Lord Martin of Springburn: My Lords, I wish to
speak to Amendment 146 in my name. In doing so, I
declare an interest as I have been a member of the
Unite union for a long time. I am not having a go at
the media on this matter but, often when trade unions
are mentioned in the media, reference is made to trade
union leaders. Not much is known about the activities
of the lay officials and junior officers of a trade union.
Tonight we have spoken about asbestos victims. A
trade union would probably be the first port of call for
a person who felt that they were suffering from the
effects of asbestos inhalation. Apart from the serious
matter of asbestos inhalation, your Lordships may be
aware that even a National Health Service kitchen can
be a very dangerous place for workers. They can fall,
be scalded or be cut by the knives that they are using.
After any injury such as that or any other injury
relating to a person’s work, the first port of call is to
the local trade union office, and an investigation is
made before the matter is referred to a lawyer. Any of
us who has run an office knows that photocopiers,
heating, lighting and cleaning all cost money. It means
that there should at least be some compensation for
the trade union that is prepared to try to help that
member before the member goes to a solicitor.
Baroness Deech: My Lords, I declare an interest as
chair of the Bar Standards Board, which regulates
barristers and prohibits the payment of referral fees,
which we regard as immoral—I think that I am not
putting it too strongly—and which we disapprove of
because they are anti-competitive.
While I have every respect for my noble friend Lord
Martin and for the work that the unions do to help
their members, the amendment has brought to mind
one of the most reprehensible incidents of modern
times relating to lawyers and referral fees. I will not
give the House too much detail because it is late at
night, and the story is probably well known to noble
Lords here, especially noble and learned Lords. When
very many miners were sick and 23,000 cases were
referred on by the union to a solicitors’ firm, it ended
up with reprimand and with the law firm taking far
more money than did the sick miners. The solicitors
were paying the union, and in the case that I am
thinking of the amount came to about £10 million,
because 23,500 cases were referred to one firm.
If a firm of lawyers knows that a number of cases
of that order are to be referred to them without the
firm making any effort, without it going out into the
market and proving how good it is, it is not surprising
that things went wrong.
Lord Martin of Springburn: Iknowitislateinthe
evening and I thank the noble Baroness, but I am sure
she would agree that not every union or every solicitor
would conduct their affairs like that. Tomorrow, there
will be unions that refer their members to a solicitor,
and they will do so in good faith and in the best
interests of their members.
Baroness Deech: I am sure that the noble Lord is
right, but what I am objecting to is the exchange of
money. If you go to the website of the union, you may
click through to the page where legal services are
offered, click where the page directs you to a law firm,
the law firm is named, and then you can continue to
click until it says, “For every case referred to this firm,
the firm will pay the union a sum of several hundred
pounds”. If the unions wish to help their members, it
would be very easy simply to refer them to a whole
number of local firms without money changing hands.
There is nothing to stop the good work done by the
unions, which I praise. It is the exchange of money
that I object to. In the case that I am thinking of, it was
actually public funds that went to the solicitors’ firm.
It illustrates what is wrong with referral fees: the issue
is treated as commercial and the law firm can sit back,
knowing that cases will flood its way, whether it deserves
them or not.

375 Legal Aid, Sentencing and Punishment [14 MARCH 2012] London Local Authorities Bill [HL]
376
There have been other reprehensible incidents such
as this, with which I will not delay noble Lords, save to
mention one other effect. Given that very large sums
of money are paid to the union, whichever union it is,
by the law firm, and we know that many unions are
inclined to support one political party, we end up with
money being paid—very indirectly, I grant you—to
the political party because the money is coming from the
funds that the union has accumulated, and part of
those funds come from referral fees.
If the solicitors can afford to pay £200 a time, or
whatever it may be, to the union in return for every
case, that must logically indicate that the case could
have been handled for less money than was charged. I
am by no means saying that that is always bad, but
there is definitely a risk in referral fees. In particular,
there is a severe risk to the interests of justice where a
firm knows that thousands of cases can come its way
without it making the effort in the market to get them
and handle them well. Therefore, with all due respect,
I hope that the amendment will not be pursued, as I
do not think that it helps the Bill.
10.45 pm
Lord McNally: My Lords, I think that there is
broad agreement across the House about the need to
ban referral fees in personal injury cases, as we propose
in Clauses 54 to 58. However, there is some disagreement
about how it should be done, as this debate has shown.
It may be helpful if, in reply, I deal separately with
those amendments with which we have some sympathy
and those with which we do not. The Government
agree with the intention behind Amendments 146A
and 148A in the name of my noble friend Lord Hunt
of Wirral. I give the House a commitment that we will
bring back amendments at Third Reading to address
the issues raised by those amendments. However, the
Government cannot agree with Amendments 142E
and 146. We believe that it is not in the public interest
for payments in receipt of referral fees to be allowed in
any personal injury cases, regardless of whether the
recipient is a solicitor, a charity, a trade union or some
other party. If the provision applies to solicitors who
pay referral fees, it must also apply to the not-for-profit
organisations which deal with them.
The Government intend to ban the payment and
receipt of referral fees in all personal injury cases, and
we are not persuaded that there should be special
treatment for not-for-profit organisations, or for solicitors
dealing with trade unions, to exempt them from the
ban. However, trade unions will of course still be able
to refer cases, without payment, to those best able to
pursue them. Nothing in the clauses prevents lawyers
providing services free of charge to registered charities.
A number of points were made in the debate. The
noble Baroness, Lady Deech, made a powerful case in
favour of what we are trying to do on referral fees. She
referred to a case, which we all remember, which
shows how the best of intentions can be misused when
trying to deal with a problem. I say to the noble Lord,
Lord Martin, that I certainly advocate the value of
trade union membership, but that there is a danger of
trade unions, charities and others having a sweetheart
relationship with a firm of solicitors based on referral
fees.
My noble friend Lord Hunt of Wirral asked me
how much of the excess litigation costs can be taken
out of the system. My right honourable friend the
Prime Minister has announced that we will be extending
the road traffic accident scheme to cover claims up to
£25,000, and to cover employer and public liability
cases. As part of that process, the Government intend
to make an objective assessment of the existing costs
involved in RTA schemes, and we expect fixed recoverable
costs of £1,200 to be reduced significantly as a result.
The new fees will come in when the Jackson reforms in
Part 2 of the Bill and the ban on referral fees are
implemented in April 2013. Although I cannot give a
precise figure, the aim, as in other parts of the Bill, is
to squeeze out of the system excessive costs, which are
undoubtedly there.
I hope that, in the light of those responses, the
noble Lord will withdraw the amendment.
Lord Beecham: My Lords, I will be withdrawing my
amendment. I must disabuse the noble Baroness, Lady
Deech, with whom I shared a law course at Oxford, on
the question of the political aspect of union funding.
Union funds for political purposes, of course, derive
from their political funds and not from general income.
The noble Lord, who has a long memory of these
things, is acknowledging that, for which I am grateful.
It is not just a question, however, of fees, as I have
indicated. Other services offered to members, whether
they be of trade unions or other organisations, would
be caught, apparently, by the Bill as it currently stands.
I cannot believe that that is really part of the Government’s
intention. Not all unions have an arrangement of this
kind, where a referral fee is paid, but unions do have
extensive and expensive legal departments which have
to be supported. It does not seem unreasonable that
those organisations—and, indeed, other organisations;
charitable organisations—should have a scheme. I agree
that the noble Baroness has identified a particularly
abusive situation which, of course, has been rightly
dealt with, but that is very much the exception. Having
said that, we will, up to a point, be returning to this
matter on the next day of Report in a slightly different
context. I beg leave, therefore, to withdraw the amendment.
Amendment 142E withdrawn.
Amendments 143 and 144 not moved.
Consideration on Report adjourned.
London Local Authorities Bill [HL]
Returned from the Commons
The Bill was returned from the Commons agreed to with
amendments.
House adjourned at 10.50 pm.

GC 47 Arrangement of Business [14 MARCH 2012]
Auditors: EAC Report
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3.45 pm
Grand Committee
Wednesday, 14 March 2012.
Arrangement of Business
The Deputy Chairman of Committees (Lord Colwyn):
My Lords, welcome to the Grand Committee. If there
is a Division in the House the Committee will, as is
customary, adjourn for 10 minutes.
Auditors: EAC Report
Considered in Grand Committee
3.45 pm
Moved By Lord MacGregor of Pulham Market
That the Grand Committee takes note of
the Report of the Economic Affairs Committee
on Auditors: Market concentration and their role
(2nd Report, HL Paper 119).
Lord MacGregor of Pulham Market: My Lords,
pressures on the parliamentary timetable and the queue
of Lords Select Committee reports awaiting debate
have meant that it is almost a year since our report was
published. There have been some important developments
since then, progress on which it will be interesting to
discuss today, but many of the issues are still alive and
highly topical. As chairman of the committee I am
therefore pleased to introduce the report.
When we first decided to look into the oligopoly of
the audit profession, some, I think, thought it a somewhat
dry and limited if not esoteric topic mainly of interest
to the accounting profession. It became rapidly clear
to us that this was not so. It was a fascinating inquiry,
sometimes taking us in unexpected directions. The
serious issues surrounding the current oligopoly I will
touch on in a moment. However, as our inquiry
progressed, two other important themes emerged on
which we have made recommendations: namely the
inadequacies of the roles played by auditors and of
the dialogue between auditors and regulators leading
up to and during the financial and banking crisis—and
this became an important issue for us as a result of our
probings at the hearing we had with senior partners of
the big four auditors themselves—and, secondly, concerns
about the effect on audit of the adoption of international
financial reporting standards. I shall touch on all
three. This widened our inquiry considerably. Our
report contains 204 conclusions and recommendations.
I hope to cover the main themes but inevitably I shall
have to leave a number of issues to others.
Before I do so, I should like to thank most warmly
our committee clerk, Bill Sinton, and his staff, Stephen
Seawright and Karen Sumner, the committee assistant,
for all their invaluable help and hard work. In particular,
I thank our special adviser for this report, Professor
Andrew Chambers, professor of corporate governance
at London South Bank University, whose expertise
and advice was invaluable.
First, I turn to the market concentration of auditors.
The need for a reliable audit was recognised by this
House as early as 1849, when a Select Committee
looking into financial scandals in the railway boom
was credited with helping to establish the accountancy
profession. Certainly by 1872 the Great Western Railway
had an audit committee and an external auditor, who
was called Mr Deloitte.
Rigorous and trustworthy audit has long been
recognised as vital to the proper running of capital
markets. Without a clear and reliable system of assurance
that accounts show a true and fair picture of a company’s
financial state, there is no basis for investment decisions.
It has long been a statutory requirement for large
firms to be audited every year. The annual audit has
become an essential underpinning of financial markets,
especially since they have gone global. While offering
a statutory service, audit has become a large and
prosperous profession. Auditors have built on large
firms’ legal obligations to buy their services by selling
a range of other financial consultancy services to their
semi-captive audit clients.
In recent decades, as financial markets became
global, the main audit firms have become very much
larger and more dominant as they spread beyond
national borders and as they consolidated and
concentrated among themselves. By the 1980s we had
the big eight international audit firms, mostly international
federations of national partnerships. By 2002 mergers
and the disappearance of Arthur Andersen had brought
the big eight down to the big four: Deloitte, PwC,
KPMG and Ernst & Young. No regulatory barriers
prevented this concentration in this country or elsewhere.
The big four greatly outweighed second-tier audit
firms in both size and global reach; and there is always
the risk that withdrawal or disappearance of one of
the big four could leave us with an even more dominant
big three—a point to which I shall return.
So the problem is easy to identify: the big four
firms’ oligopoly, especially in the United Kingdom. In
the UK, the big four audit 99 of the largest firms listed
in the FTSE 100 index. In certain markets, such as
banking, there is not even a big four but effectively a
big three, since Ernst & Young does not audit banks in
the UK. It is questionable whether large banks in the
UK have any real choice of auditor, and that may well
apply to some other financial institutions as well.
An auditor to a FTSE 100 client remains in place
for 48 years on average. Barclays has had the same
auditor, PwC or its predecessors, since 1896. The
picture is similar in the next ranking FTSE 250 large
companies, almost all of which are audited by the big
four. A FTSE 250 auditor remains in place for 36 years
on average. This does not look like a competitive
market.
Witnesses from the big four assured us that the
large-firm audit market in the UK is fiercely competitive,
but we were not convinced. The market is clearly an
oligopoly, with all the attendant concerns about
competition, choice, quality and conflict of interest.
I must say that I was much struck during our hearings
by the fact that almost all of our witnesses without
exception agreed that there was a risk that the big four
might become a big three, and then there would be a

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[LORD MACGREGOR OF PULHAM MARKET]
major problem. That included the representatives of
the big four. However, finding solutions was not so
easy.
The Financial Reporting Council—and I am delighted
to see its current chairman, the noble Baroness, Lady
Hogg, here today—produced a set of recommendations
from its market participants group in 2007. However,
in our view—and I think there is general agreement on
this—this had little or no effect in lessening the dominance
of the big four. The then Minister at the Department
of Business, Innovation and Skills, Mr Edward Davey,
outlined a number of measures that echoed the approach
of the FRC, an approach that we described as having
palpably failed. We would expect exactly the same
results for the measures which he advocated to our
committee as the FRC’s measures have had. As we
have said in our report:
“It may be sensible to introduce these measures on their own
merits. But they do not add up to a policy of creating greater
competition and choice, of altering the current oligopolistic
situation, or of addressing the risks of the Big Four coming down
to a Big Three”.
We outlined in Appendix 3 of our report 34 individual
measures which had been put to our committee in one
form or another for dealing with this situation. In our
analysis we read carefully through all of them and
rejected a considerable number, including the proposal
for joint audit committees which the European
Commission has now advocated. At a seminar which I
addressed in the City attended by senior accountants
and regulators, one leading key participant described
our report as a,
“road map for future action”.
I turn now to a few of the key recommendations.
Although our committee contains members with much
experience and expertise, our part-time committee
simply did not have the time or the resources, including
substantial dedicated staff, to address all the highly
complex issues stemming from market concentration.
By far our most important recommendation was therefore
that the OFT should conduct an investigation into the
audit market in the UK, with a view to a possible
referral to the Competition Commission to analyse all
the issues in depth. Frankly, this has been fudged for
some years. We felt that such an investigation was
overdue, and I have been delighted to see that the
OFT, at our prompting, swiftly took up the matter and
the Competition Commission is now carrying out that
review.
We recognised the international dimension to the
issues, but felt that the UK could give a lead internationally
by undertaking such a review. Concurrently we have
the European Commission’s inquiry, and our committee
was able to have a hearing last month with Jonathan
Faull, the Director-General of the Internal Market
and Services Department of the European Commission.
Like us, the Commission is concerned about competition
and choice. It points out that in most member states
the big four audit more than 85 per cent of large listed
companies. The Commission’s proposals are now before
the European Parliament. Some of them are in similar
directions to our own recommendations, but the
Commission’s remit does not cover pure competition
issues, which are the preserve of national authorities
such as the Competition Commission.
We had a range of other recommendations, which I
have no doubt the Competition Commission will look
at more fully, and I touch on them only briefly. We
recommended that FTSE 350 companies should carry
out a mandatory tender of their audit contract every
five years, and that audit committees should be required
to include detailed reasons for their choice of auditors
in their report to shareholders. We recommended greater
involvement of institutional investors in audit matters,
although I have to say that I do not overestimate the
likely impact of this. We took up the suggestion of the
noble Baroness, Lady Hogg, to us that the abolition of
the Audit Commission would provide an opportunity
to increase competition and choice in the audit market
if it formed the basis of a substantial new competitor
to the big four. There have been developments on this,
which the noble Baroness will no doubt comment on.
We put particular stress on the need for separate
risk committees in banks and major financial institutions,
and also other large companies where appropriate. We
believe that every bank should have a properly constituted
and effective risk committee at board level. It should
be one of the duties of the external auditors to ensure
that this is done. This is relevant to the accountancy
marketplace in the sense that such committees will
increasingly require specialist skills and external advice.
We saw scope for this advice being provided by a firm
that is not the company’s auditor, which could open
up opportunities for the second-tier accountancy firms.
Next, we were struck during our inquiry by the
fragmented and unwieldy regulatory structure that
governs accountancy and audit in the United Kingdom,
with overlapping organisations and functions. This
seemed to us inefficient and unnecessary. It also seems
to offer too much scope for regulatory capture, especially
since present or former big four partners hold so many
positions on the various bodies and committees. Other
professions have only one regulator—for example, the
General Medical Council. We noted that the Financial
Reporting Council has been seeking wider powers that
would help promote some rationalisation of the regulatory
maze. I look forward to hearing what the noble Baroness,
Lady Hogg, has to say about progress on these matters,
which our committee strongly supported. If it does
not achieve real impetus towards rationalisation, we
recommended that the Government should stand ready
to impose a remedy. Perhaps the Minister will comment
on that.
Finally, because of the concerns about the big four
moving to a big three, we recommended that the
Government and regulators should promote the
introduction of living wills for big four auditors. There
are many other recommendations that I have not had
time to deal with and which others may wish to
mention. As I said earlier, I hope that all of them will
be considered by the Competition Commission in its
inquiry.
I now turn to the other two areas. First, as our
proceedings continued, it became clear that there were
shortcomings of auditing during the financial crisis.
Banks were audited and certified as going concerns

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GC 52
just before they had to be rescued by taxpayers to
avoid collapse. We were not particularly impressed by
the defences produced by the auditing firms themselves,
and there have of course since been highly critical
reports on Northern Rock, RBS and HBOS. The
value of audit here was at best questionable, even
allowing for the issue—which we acknowledged—that
panic might have followed if auditors had publicly
questioned the accounts of banks. However, confidential
dialogue between auditors and bank regulators does
not run these risks, and it was on this that we focused.
We were shocked to discover that the dialogue on
these lines—which was required by statute under the
Banking Act 1987, and which I am sure my noble
friend Lord Lawson will wish to refer to—was virtually
non-existent in the run-up to the crisis. We described
the lack of meetings between bank auditors and regulators
during that period as a dereliction of duty.
Part of the problem was the separation of powers
and duties between the FSA and the Bank of England,
which this Government have now rectified. However,
we also recommended a statutory change to ensure
that confidential dialogue between bank auditors and
financial regulators takes place regularly. We welcome
the introduction by the FSA and the Bank of England
of a code of practice to encourage dialogue. I also
note that the Institute of Chartered Accountants in
England and Wales has just produced its good practice
for bank auditors, audit committees and executive
management in this regard. However, in its briefing
for this debate, the ICAEW says that it does not see a
need to prescribe this dialogue in law. That was not the
view of our committee at the time that we did our
report, and I for one still do not agree. If we are to
avoid the bad habits and mistakes that emerged during
the financial crisis, I continue to believe that the statutory
requirement for dialogue between auditors and regulators
is necessary. I will be interested to hear the Minister’s
response.
Finally—and now I get on to the matters that are
rather abstruse for many of us—on accounting standards,
we heard considerable evidence that the introduction
in 2005 of international financial reporting standards,
the IFRS, in place of the old British generally accepted
accounting principles, GAAP, had led to sharp reductions
in the quality and reliability of large-firm audit, especially
of banks.
Witnesses told us that under IFRS auditors cared
more about compliance with rules than with exercising
professional scepticism and careful judgment to reach
a true and fair view of clients’ accounts as required by
company law. In short, so it is said, the auditor’s
abiding principle is now box-ticking instead of prudence.
The argument runs that superficial conformity with
the rules can disguise underlying faults that it was the
auditor’s skill and duty to detect under the old system.
Banks in the crisis were a case in point. Unlike GAAP,
IFRS takes account only of losses already incurred,
not of expected losses. In these litigious times it is
perhaps understandable if auditors feel safer monitoring
compliance with a set of rules and exercising judgment.
However, the public interest is not served if, as critics
allege, IFRS audits are failing to give a true and fair
picture. I note that the new chief executive of the
Royal Bank of Scotland has recently referred to the Alice
in Wonderland nature of some aspects of the bank’s
results.
This is a complex area, and I do not pretend that we
will get to the bottom of it all—although there are
members of my committee who are better equipped to
do so than I am. The Government gave a lengthy but
somewhat holding reply in their official response to
our report on this, and we have since had correspondence
with Norman Lamb, the new Minister for Employment
Relations, Consumer and Postal Affairs in BIS, in
which he states:
“I consider that the changes in IFRS introduced since the
financial crisis and the further changes proposed to be implemented
should help to achieve accounting rules for banks which are
crisis-neutral, provided they are endorsed by the EU, and provided
they are properly applied the next time that valuations come
under pressure”.
That is pretty guarded. On the issue raised by Mr Andrew
Haldane of the Bank of England that new standards
are needed for bank audits, he referred to the preliminary
report of the Sharman committee—under one of our
colleagues, the noble Lord, Lord Sharman—and said:
“The Sharman panel are considering the responses to this
Report at present. We await their conclusions with interest”.
It would be helpful to hear from the Minister when we
can expect definitive government decisions on this
matter.
To conclude, it has been a fascinating and rewarding
inquiry that has led to action. I am most grateful to all
my colleagues for their substantial contributions to it.
4.03 pm
Lord Hollick: My Lords, I thank the noble Lord,
Lord MacGregor, for his excellent chairmanship of
our committee and for the very clear review of our
report that he has just given. I apologise to the Minister
and noble Lords for my early departure from today’s
debate to catch a flight to Berlin this evening.
I shall focus my remarks on the committee’s work
on how banks were audited before and during the
financial crisis and on the impact of IFRS rules on the
audit. Banks rely on the confidence of depositors,
bond holders and investors to survive. That confidence
is founded on the belief that the bank is a going
concern. In his report Going Concern and Liquidity
Risks, to which the noble Lord, Lord MacGregor,
referred, the noble Lord, Lord Sharman, and his
colleagues identify two elements to the going-concern
test: solvency, which is the ability to meet liabilities in
full; and liquidity, which is the ability to liquidate
assets at the velocity needed to meet liabilities as they
fall due.
If confidence is shaken, the flow of funds to the
banks dries up and the fragile business model, which
in essence is to borrow short and to lend long, is
imperilled and a funding crisis ensues. That is what
happened in 2007-08 and, to a considerable degree, the
problem persists to this day. Indeed, eurozone banks,
in particular, are wary of lending to one another and
therefore place their funds with the ECB, which recycles
the funds to other banks. That recycling was augmented
at the end of 2011 by the ECB’s three-year LTRO—
long-term refinancing operation—which is a programme

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[LORD HOLLICK]
to ease liquidity and introduce quantitative easing into
the eurozone. However, that programme does not
address solvency. Indeed, it could exacerbate solvency
if the banks use the LTRO funds to add to their
holdings of risky sovereign debt.
The annual audit, particularly the going-concern
test, is crucial to building and maintaining confidence
in banks. Without it, banks become uninvestable and
unable to fund their day-to-day activities. Our report
highlighted several areas of concern. We noted that, in
recent years, as the noble Lord, Lord MacGregor, has
said, the traditional principles-based approach of auditors
has been replaced by a more rules-based approach.
“Prudence”, “true and fair view” and “going concern”,
all viewed through a sceptical set of spectacles, have
given way to a close adherence to rules, which to some
observers looks, as the noble Lord, Lord MacGregor,
has said, like box-ticking supplanting mature judgment.
For the auditors, this approach makes life a little
easier. There is less likelihood of litigation, which of
course is a major issue in the United States, whose
voice is probably the loudest at the global debate on
audit rules, and there is less pressure to use judgment.
Yet informed, experienced judgment by a professional
sceptic is precisely what is needed. The recognition of
losses on loans and other assets held by the banks is
just such an issue, where judgment really matters.
Instead, IFRS rules are now paramount and IAS 39
requires that provisions against these assets can be
made only for incurred, and not expected, losses. This
led to a procyclical reporting of bank profits, which
Mr Timothy Bush of the Investment Management
Association said was in conflict with the Companies
Act 2006 requirement to prepare accounts prudently
without crediting any unrealised profits. Professor Fearnley
saw IAS 39 as far less prudent than its equivalent
under UK GAAP because it substituted neutrality for
prudence. As a result, the profits of banks were artificially
boosted during the period leading up to the banking
crisis—including, in some cases, unrealised profits,
leading to unjustifiably higher bonuses and dividend
payments, a practice colourfully named in the City as
“skimming”. That “skimming” led, when the true
state of affairs became apparent, to an even larger
hole in the balance sheets of our banks, which of
course had to be filled with taxpayers’ money.
IFRS rules require assets to be mark to market,
which is fine if there is a liquid market, but all too
often the assets held by banks—some devilishly complex
and frankly beyond the ken of most bank directors—are
either not traded or so infrequently traded that a
market valuation is meaningless. Quite perversely, such
practices could actually lead the banks to write up the
value of certain assets, thereby recording unrealised
profits which were deemed available for distribution
but which turned out to be wholly fictitious when the
asset matured or came to be realised.
Before the advent of IAS 39, banks and their auditors
were able to apply prudence to loan asset provision
and to provide against anticipated but not incurred
losses. IAS 39 forbids that. It even has the absurd
example in its practice note that a loan to a dead
person who died before the accounting date can be
provided against, but no such provision can be made if
the death occurred after the accounting date. In the
world of absurd things, this probably trumps Donald
Rumsfeld’s “known unknowns”.
A judgment about the liquidity of the bank is
critical to its going-concern status. In retrospect, it is
clear that many of our banks were dangerously reliant
on short-term money market funds. This risk of illiquidity
was not spelt out by the directors or auditors in their
report, yet it goes to the heart of the viability of the
bank’s business model and its going-concern status, so
essential to creditor and depositor confidence. The
senior partner of PwC told us:
“It’s not the job of the auditor … to look at the business
model of a business”.
This, as we conclude in our report, appears
disconcertingly complacent. The noble Lord, Lord
Sharman, in his report, says:
“The going concern assessment should focus on the risks the
entity takes and faces that are critical to its success or which could
cause its business model to fail”.
It is simply not good enough for the auditors to stand
aside. It is their job to look at and analyse the business
model, and to satisfy themselves that the bank is
indeed a going concern. They cannot hide behind the
director’s judgment. Indeed, they should recall that
when, in 1879, banks were allowed to become limited
liability companies, Parliament made it abundantly
clear that it intended the auditor to be the last honest
man standing, to protect the interests of depositors
and investors.
Reliable and transparent bank accounts are essential
to rebuilding confidence in our banks. Andy Haldane,
the executive director for financial stability at the
Bank of England, has called for a different accounting
regime, which allows for judgment and prudence to be
exercised. His colleague Andrew Bailey, the chief cashier,
wrote:
“Current financial statement disclosures … despite being compliant
with accounting standards are … not sufficiently granular or
transparent … to support users’ understanding”.
The credit rating agencies offer no help. Leaving aside
their calamitous record over the past few years, they
too have to rely largely on published accounts.
What is the Government’s response to this urgent
problem? They agree with the committee’s conclusion
that financial institutions should build appropriate
capital buffers to provide against downturn. They
welcome signs that accounting standards boards are
proposing to move to an expected-loss model that
provides for a more forward-looking approach to how
credit losses are accounted for. Then timidity creeps
in. They say:
“Financial reporting however, is designed to convey a true and
fair view at a point in time”.
That lets the auditors off the hook on the going-concern
test and puts the auditors’ interests ahead of the users’
interests. I would like the Minister to tell us when the
Government expect the new forward-looking approach
to accounting for credit losses to be introduced. In
their response they mention that it would be June
2011. It clearly has not been. As I understand it, there
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setters, so the earliest that one could expect this would
be the middle of this decade, by which time we will
probably have another financial crisis.
I ask the Government how they respond to the
Sharman report’s call for the going-concern test to be
more qualitative and longer-term in outlook rather
than, as they say in their response to our report,
“at a point in time”.
Also, what steps do they plan to take to put prudence
and judgment back at the heart of accounting, as
called for by the Bank of England, which echoes the
principles in the Companies Act 2006 setting the
requirements for audited accounts to give a true and
fair view above all other standards?
4.12 pm
Lord Shipley: My Lords, I, too, thank my noble
friend Lord MacGregor of Pulham Market for chairing
such a detailed and important inquiry, and for leading
the committee to a set of very powerful recommendations.
When I draw back the curtains at home in Newcastle,
I can see over the rooftops the new HQ building of
Northern Rock that was under construction in 2007
when the bank failed and had to be nationalised. It is
now owned by the city council, purchased under prudential
borrowing powers, and earning a rental stream for the
council. Here I should declare my interest as a member
of Newcastle City Council still, and also as an account
holder at Northern Rock in 2007 and now.
That view of that building each morning serves as a
salutary reminder to me of what can go wrong; how
trust in large, familiar institutions can be lost overnight;
and how vital and essential it is that effective checks
and balances are delivered through high-quality audit
and risk management processes. We should never forget
that a lot of people lost their shares in Northern Rock
in 2007, nor that many employees lost their jobs.
Shareholders had a right to expect better than they
got. They received annual reports and were entitled to
think that the report was an accurate reflection of the
health of the bank as a going concern. They still ask
what went wrong. Was it a culture of box-ticking and
telephone audit interviews rather than a detailed
examination by the auditors of the Northern Rock
business model? Did the auditors know or suspect?
Was everyone too complacent? Had corporate memory
of previous banking failures simply faded away?
We know now that, for many months before its
collapse, Northern Rock was following a risky business
model in its reliance on wholesale markets to sustain
its very high lending levels. Yet auditors appear not to
have been aware of, nor to have understood, the
dangers—or, if they were, to have acted upon them.
Today I still find myself astonished that, in 2006, not a
single meeting between the FSA and the external
auditors of Northern Rock or HBOS took place, and
that only one meeting between the auditors of RBS
and the FSA took place. In 2007, only one FSA/auditors
meeting took place with each bank auditor.
In their response to the committee’s findings, the
Government said that they had three clear policy
objectives: high-quality audits which are independent
of the body being audited; a competitive market in the
supply of audits; and an audit market that is resilient
and could withstand the withdrawal of one of the
major firms. We can agree on that. However, there is a
specific problem in the banking sector, because only
three of the big four are active in it. In addition, choice
of auditor can be limited by the need to avoid using a
firm engaged by another bank. There is also a risk
that, with only three audit firms active, the essential
challenge theoretically provided by the audit system
can end up being blunted. Familiarity, complacency
and a lack of an alternative can dominate thinking.
That is why the recommendations of the committee on
the issue of risk are so very important, because we
must separate risk from audit.
Risk and audit, however closely related, are actually
about different things. Combining the two can lead to
risk being seen as secondary to audit, and when an
audit report gives no indication that a company is in
trouble when it is, it suggests that the risk function has
not been properly carried out. So, separation is vital.
There was, I think, a misunderstanding in the
Government’s response to the committee’s report,
regarding which audit company could give specialist
advice to a risk committee. It is obviously important
that the main auditor should explain any concerns it
has directly to the committee. However, it would be
inappropriate for a risk committee to be given continuing
specialist advice on its work by the main auditor.
I think that that was the committee’s overall intention.
There is a related issue here in that there is a clear
conflict of interest if an audit company provides other
services to the company it audits. It surely must be
better for other firms to provide such advice, and it
would, of course, give companies not in the big four
an opportunity to undertake such work.
I welcome the Government’s response that audit
committees should meet formally with principal
shareholders regularly, and I agree with the committee’s
recommendation that published reports of audit
committees should explain significant reporting issues
raised during the course of an audit.
Shareholders bear responsibility too. It became all
too obvious in our inquiry that shareholders did not
question the choice of auditor as much as they should
and that they tended, to their own potential detriment,
to be insufficiently assertive in a company’s business.
We have at least learnt that, when concerns become
apparent, there has to be a clear framework for bank
auditors to talk directly and privately with the Bank of
England. Too many people took their eye off the ball,
forgot the examples of the past and made assumptions
about viability that were deeply damaging to the
reputations of many people. Supervisors, shareholders,
board members, audit committees, risk committees—all
need clarity about what is expected of them and a
constant restatement of their role so that audit is not
just left to somebody else.
Crucially, we have learnt that auditors have the
clearest responsibility to advise on a company’s state
of health. It is not enough to see annual audits as a
snapshot in time. Auditors have a wider set of
responsibilities, to shareholders, supervisors, customers
and the taxpayer, to ensure that they fulfil the
responsibilities placed upon them by others.

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[LORD SHIPLEY]
In conclusion, the committee’s report has been a
major help in identifying how communication and the
regulatory framework can be improved, and how we
should learn from the lessons of the banking crisis.
However, it requires continued vigilance, particularly
in the years ahead, as corporate memory starts to fade
yet again.
4.19 pm
Lord Lawson of Blaby: My Lords, like my fellow
members of the committee I should like to start by
paying tribute to the outstanding chairmanship of my
noble friend Lord MacGregor. I should also like to
associate myself with his thanks to our small but
hardworking corps of staff and advisers during this
inquiry.
One thing came out loud and clear in the evidence
we had: the change from GAAP to IFRS was a change
from prudence to box-ticking. That is disastrous and it
has to be changed—it has to be reversed. However,
like my colleagues, I shall devote my remarks
overwhelmingly to the issue of the banks. Not only are
the banks of overwhelming importance to the health
of our economy—we have seen what has happened as
a result of the banking meltdown of 2007-08—but a
move away from prudence in accounting is far more
serious in banking than in other areas of business and
industry. I shall make a number of points; it is a
complicated subject. I do not expect my noble friend
the Minister to reply to my points. I hope, however,
that she will take them back to her department, that
they will be properly considered there and that she will
write to me in answer to the various points that I shall
make.
Banks are particularly important, as I said, because
prudence is more important in the case of banking
than it is anywhere else—it is absolutely essential in
the case of banking. However, there is another reason
why banks are particularly important. In the normal
course of events there is a sanction which auditors can
impose in relation to a company’s accounts—they can
qualify the accounts if they have concerns. However,
no auditor will ever qualify a bank’s accounts when
the bank is likely to be in difficulty, when the qualification
is required, because it would lead to a run on the bank,
which would be absolutely disastrous and clearly not
in the public interest. Something needs to be done to
rectify this, and I shall come on to that.
At the heart of it all, however, there is a cultural
problem and a moral decline, both of which are very
difficult to address by legislation. Some noble Lords
here today may have read today’s New York Times,
which contains a devastating article headed “Why I
am leaving Goldman Sachs”, in which a senior Goldman
Sachs executive who has decided to leave itemises in
detail what he describes as the moral bankruptcy of
Goldman Sachs. We should not be complacent and
think that that moral decline was only in Goldman
Sachs, or indeed only in the United States. Last week
the FSA produced a report on HBOS—Halifax Bank
of Scotland—which did not receive the attention that
it merited. The report states that this bank was “guilty
of serious misconduct” and ascribes this to a culture,
“of optimism at the expense of prudence”.
“Culture of optimism” is quite a nice euphemism—we
all know what was going on. This included, incidentally,
and I will come on to it, grossly inadequate provisioning,
which is highly culpable in the case of a bank. What
were the auditors—in this case KPMG, but I do not
think that KPMG was any worse than any of the
others—doing? To all intents and purposes it was
doing nothing.
It is more than 50 years since I was the senior writer
of the Lex column in the Financial Times, andIhave
watched with concern the decline in moral standards
in the City of London and in finance. It might be part
of a decline in the whole community, which we are not
here to discuss now. However, the matter is particularly
serious in the case of banking.
The Deputy Chairman of Committees: My Lords, I
am sorry to cut the noble Lord off midflight but there
is a Division in the Chamber. I suggest that we adjourn
for 10 minutes, until 4.35 pm.
4.25 pm
Sitting suspended for a Division in the House.
4.35 pm
The Deputy Chairman of Committees: My Lords, I
think everyone has returned. If that is the case—nobody
is obviously missing—I invite the noble Lord to continue
his remarks.
Lord Lawson of Blaby: As I was saying when I was
so politely interrupted, we have a problem. Now I turn
to what we are going to do about it. Andy Haldane,
the executive director for financial stability at the
Bank of England, has been mentioned once or twice
already, and I have had the benefit not merely of
reading what he has to say but of a number of private
discussions with him over the months and, indeed,
years. That has been a great assistance to me in clearing
my own mind, but he is not necessarily responsible for
any of the points that I am going to make. He may
agree with some but not others.
I have seven practical proposals to make. First,
however, I shall give a bit of background. My noble
friend Lord MacGregor, our chairman, mentioned the
Banking Act 1987, which I introduced with the enormous
assistance of the Economic Secretary to the Treasury
at the time, my noble friend Lord Stewartby. I could
not have done it without him, and I am delighted that
he is taking part in this debate. We produced an Act
which was partly intended to deal with the problems
of the banking sector, both the supervision and the
auditing dimensions. Perhaps I may add in parenthesis
that I had authorised the Bank of England, as the
owner of Johnson Matthey Bankers—when Johnson
Matthey Bankers went belly up it had to be rescued by
the authorities, and I did that through the Bank of
England—to sue the auditors, Arthur Young. The
Bank sued Arthur Young and received a very substantial
out-of-court settlement. This time, when the situation
has been far worse, not a single firm of auditors has
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My first specific proposal is to recreate the Board of
Banking Supervision, which was an important innovation
in the Banking Act 1987. It was swept away by Mr Gordon
Brown when he very mistakenly tore up the improved
system of banking supervision and regulation that I
had put in place and replaced it with his dysfunctional
system involving the FSA. The present Government
are doing something a bit like recreating the Board of
Banking Supervision, but in not nearly as effective a
way. I would like to see it recreated in the way in which
my noble friend Lord Stewartby and I put it into the
1987 Act.
Secondly, before that Act it was illegal for there to
be a dialogue between the auditors and the supervisors
because the auditors would be breaking their
confidentiality towards their client. The Act not only
made that legal but stated that there must be that
dialogue. It was there for a few years but with the
Brown changes in the regulatory system it fell into
desuetude. The Bank of England and, I think, the
coalition Government are now proposing that there
should be a code of practice in order to reinstate the
idea of dialogue. As auditors are unable to qualify
accounts in particular, it is particularly important that
if they discover anything amiss with a bank’s account,
they can tip off the supervisory authority, which is
now the Bank of England.
Equally, if the Bank of England has some concerns,
it can say privately to the auditors, “We would like you
to look at this particular bank and see what it is up to
in this regard”. The dialogue is crucial, and I do not
believe—nor did our committee believe—that a code
of practice is enough. Our committee concluded that
this should be mandatory: there should be a legal
requirement for the dialogue to take place, which is
absolutely right. So, that is my second proposal.
The third proposal comes back to the problem of
the qualification of accounts. As I indicated, in practice
it is impossible—it does not happen, and it did not
happen before the banking meltdown of 2008—for an
auditing company to qualify a bank’s accounts. Under
the present system the accounts are either qualified or
they are not. Not qualifying them is almost like using
a nuclear weapon. It may well be worth considering
using a gradation, rather in the way that the rating
agencies grade financial instruments, starting with
AAA and going down to wherever they eventually go.
It would be possible for the auditors to grade the
accounts, and there could be a requirement for them
to do so. It is quite possible that the auditors would be
less corrupt and more reliable than the rating agencies
are. That is my third proposal.
The fourth proposal is that in order to recreate the
culture of prudence in core banking, there should be a
complete separation between retail banking and
investment banking. I am delighted that, thanks to the
Vickers commission, the Government are going half
way towards that by creating the ring-fence. However,
I do not believe that a ring-fence will be impermeable
or wholly effective. Bankers are very clever, or most of
them are, and they will find ways round it. We are also
talking about culture, and the prudent culture of retail
banking and the adventurous culture of investment
banking are two diametrically opposed cultures. With
the best will in the world it is difficult to see how we
can have two quite different and opposed cultures
within the same corporate entity. There should be a
complete separation, not just the ring-fence.
My fifth proposal concerns the issue raised particularly
by the noble Lord, Lord Hollick, about the problems
of mark-to-market accounting and valuations of assets.
Mark to market, as he indicated, can be pretty fictitious
when the market is so thin. Of course, there is often no
market at all, so they do mark to model, which is a
complete fiction. Is that a reliable form of valuation
for establishing the profits of the bank and also its
capital? At present, these paper profits add to the
bank’s capital. If we are concerned that banks should
have adequate capital, the idea that we are satisfied
with paper capital—which of course disappears just
when you really need it—is both absurd and deeply
worrying. The paper profits are also used to pay out
bonuses that are anything but paper; they are real.
That has to be stopped. Unrealised gains should neither
count as capital nor be payable as bonuses. There is an
analogy with dividends in the latter point. It is not
permitted to pay dividends out of purely paper gains,
but it is permitted to pay bonuses out of them.
My sixth proposal concerns the question of
provisioning. One of the many defects of IFRS is the
way that the old idea of general provisions—which
was certainly very important when I was a non-executive
director of Barclays Bank, some 20 years ago—is no
longer permitted; you can only have specific provisions.
A moment of reflection makes quite clear that this is
unacceptable, because specific provisions only come
about when it seems as if the loan, or whatever it is,
has been impaired. You need provisions when times
are good. You do not need them when you are already
in great difficulty because you have all these impaired
loans on your book. You need to be able to make a
general provision because you know as a prudent
banker that although there are things that you do not
know about specifically, you do know, because of the
nature of things and the way that the world works,
that something like it will happen. We have to get back
to the general provisions that IFRS prohibits.
My seventh and last proposal concerns taxation.
That may not be a matter for your Lordships’ House,
but we can talk about it. It is particularly timely now,
with a Budget coming up very shortly. The proposal
addresses the problem of the treatment of loan capital
compared with equity capital. If we are going to have
a strong and stable banking system, it is essential that
it has adequate equity capital. That is what makes it
secure. However, we have a tax system in which the
interest payable on loans is tax deductible but the
dividends paid on equity capital are not. So there is
always a perverse incentive for the banks to capitalise
themselves as much as possible on a tiny little sliver of
equity. The tax system tells them that that is what they
should be doing. It should not do so, and the tax
system in this regard has to be changed.
I commend these seven modest proposals to my
noble friend. As I say, I am not expecting her to reply
to them this afternoon.

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4.47 pm
Lord Currie of Marylebone: My Lords, in rising to
speak in this debate on the Economic Affairs Committee’s
report on concentration in the auditing market, I
should start by declaring an interest as one of two
non-executive directors at BDO. I will touch on that
role and the experience that it has given me in some of
my remarks. Because of that interest, although I am a
member of the Economic Affairs Committee, I had to
recuse myself from this inquiry. The loss was very
much mine—my colleagues have clearly enjoyed a
most interesting, wide-ranging and very rich inquiry
and have produced an excellent report. I congratulate
them, particularly our chairman, the noble Lord, Lord
MacGregor. The report has been deservedly influential,
with the very rapid adoption of its first key
recommendation, of an OFT investigation of the auditing
market, leading to a Competition Commission inquiry.
We await the results of that inquiry later this year.
The appointment of independent non-executives to
audit firms became mandatory in 2010 under the FRC
governance code for audit firms. Under the code, the
non-execs have a rather broad remit to look after the
public interest in the activities of audit firms. Some of
the points that have been made about the audit of
banks bears very strongly on that role. Different firms
have chosen different ways to incorporate their non-execs
into the decision-making of their partnership governance
arrangements. BDO saw advantage in non-execs rather
earlier than its rivals. In 2008, it appointed me and my
colleague Lesley MacDonagh, the former managing
partner of the law firm Lovells. In contrast to the
non-execs at other firms, we have been placed at
the heart of BDO’s decision-making, sitting as part of
the leadership team meetings. Lesley chairs those meetings,
while I chair the firm’s risk committee. As such, we are
involved in all the key strategic and operational decisions
that drive the business forward. One could question
whether such a central role in decision-making is not
in conflict with the public interest remit given to us
under the FRC code. I would strongly argue that that
is not the case: public reputation is key to the success
or otherwise of audit firms, as the unfortunate demise
of Arthur Andersen demonstrated, so I see no conflict
between the public interest and the successful development
of the business.
In December, the FRC called a meeting of the
independent non-execs across all the audit firms to
monitor how the new arrangements code was working.
It was welcome to hear that the non-execs of the big
four saw as possibly the key public interest ensuring
that four do not become three. As the report makes
clear, the collapse, like Arthur Andersen, of one of the
big four would turn an undesirably concentrated audit
market into one where major companies faced no
effective choice. It is therefore vital that none of the
big four gets into difficulties that threaten its reputation
and market standing. Were the worst to happen, regulatory
intervention to prevent further market consolidation
in those circumstances would be essential, however
difficult.
My role as a non-exec of one of the leading mid-tier
audit firms is rather different. The public interest
imperative on us is to turn the four into five by
enhancing the capacity and range of BDO, whether
through organic growth or by mergers. BDO itself has
grown to the size it has largely as a result of organic
growth but also as a result of mergers, some large and
many small. Small-scale mergers continue as small
audit partnerships decide to join a stronger brand,
and they are regular features of our leadership team
meetings. They will undoubtedly continue as the flat-lining
of the audit market induces further rationalisation.
My experience is that the directors of most FTSE
100 companies, and indeed many of those of FTSE
250 companies, underestimate the capacity and quality
of what the leading mid-tier firms, such as BDO and
Grant Thornton, can and do offer. It is a little-known
fact that BDO is a $5 billion dollar business worldwide,
operating in more than 120 countries but, as the
report states, too few of the top companies look
beyond the big four for audit services. The big four
often claim to be the guardians of audit quality and to
be the only ones who can undertake the audit of
sophisticated businesses. Yet the AIU assessments of
audit quality do not highlight any bright line between
the quality of the big four and that of the larger
mid-tier firms. What they show is that all audit firms
experience occasional lapses of quality, but that quality
is generally high and that there is little difference in
standard between the big four and the mid-tier.
The large mid-tier firms would probably acknowledge
that they do not have the capacity to audit all of the
biggest, very complex and highly internationally diversified
businesses—the global banks and the oil majors come
to mind. That may be true, but I would make two
points about it. First, as the report demonstrates very
clearly—others have already alluded to this, particularly
the noble Lord, Lord Lawson—the big four did not
cover themselves with glory in their audits of the
major banks. The FSA report of only last week pointed
out that HBOS was able to conceal problem loans
from its auditors, KPMG, in the run-up to its financial
collapse, and KPMG raised no red flag over HBOS’s
excessive risk taking. Secondly, if the major banks are
exceedingly complex to audit, it is almost certainly the
case that they are exceedingly complex to manage. Too
big to fail goes hand in hand with too big to audit. The
source of the problem is less the incapacity of auditors,
big four or others, effectively to audit these complex
businesses, but rather the incapacity of the human
mind to grasp the complex interrelationships between
these businesses. The answer is not bigger, more
concentrated auditors, but rather less complex businesses
that the human mind can understand and manage
rather than delegating that to mathematical computerbased
algorithms.
I would argue that the capacity and quality of the
leading mid-tier audit firms, such as BDO and Grant
Thornton, are not limiting their ability to acquire
FTSE 100 and FTSE 250 companies, but rather it is
market perceptions about them that constrain things.
These perceptions should shift over time, were it not
for the undoubted barriers to effective competition
that the OFT investigation has highlighted and the
Competition Commission is investigating, but there is
no doubt that the quickest way to resolve such barriers
is likely to be consolidation in the mid-tier part of the
market. As I have already noted, the flat-lining of the

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audit market is providing a strong impetus to
consolidation. I hope very much that the competition
and regulatory authorities would not allow one of the
big four to take over one of the mid-tier firms, since
that would mean still more entrenched concentration.
What could and should be allowed are mergers among
the mid-tier businesses. That would help to create a
still more viable alternative to the big four and should
also help to overcome the perception that the mid-tier
lacks capacity and capability.
However, we should not underestimate the difficulties
that need to be overcome for such mid-tier consolidation
to happen and to be effective. First, combining mid-tier
firms will not automatically lead to a change in market
perceptions. Secondly, most audit companies are
partnerships, and there is no effective take-over mechanism
for partnerships. Rather like universities, mergers happen
only with the consent of both sides and, as for universities,
this happy constellation does not often come around.
Matters are made still more complex and difficult
because we are talking about the merger not just of
partnerships, but also, at some levels, of complex
international networks of partnerships. Winning
agreement for any merger of this kind is far from
straightforward, even if the commercial logic is compelling.
That is not to say that consolidation of the kind that I
have been discussing will not happen, but it is to say
that it is not assured. Without it, we are left with the
current market position in which choice and competition
are insufficient for FTSE 100 and FTSE 250 companies.
Over time, continued investment and organic growth
by the mid-tier companies could change the market
structure, but that is a long-term outcome while market
sentiments require something more urgent.
That leads me to the one area of this admirable
report with which I take issue: its analysis of the case
for changing the ownership rules for audit companies.
Currently non-auditors are precluded from owning
more than 49 per cent of the voting rights in an audit
firm, as was the case for law firms until last autumn
when the provisions of the Legal Services Act 2007,
allowing alternative ownership structures—the so-called
Tesco clause—came into effect. The Economic Affairs
Committee did not see any immediate grounds for
changing the law in respect of ownership, despite the
strong advocacy of the FRC. It took this position in
the light of evidence from BDO and Grant Thornton
that they do not feel the need for greater access to
capital to expand. I think the committee’s position on
this is mistaken.
I would interpret the evidence from BDO and Grant
Thornton somewhat differently. Within their preferred
partnership model, they do not feel constrained by the
availability of capital, but the partnership model
undoubtedly places constraints on the strategic moves
that these businesses can contemplate, as I can attest
having sat through many strategic discussions. This is
not in any way a criticism of their way of doing
business, but it is to recognise that partnerships are
only one way of organising audit business, or indeed
any business. Given that, I think that there is considerable
merit in allowing greater variety in governance: this
would allow new entrants to come into the market
with a corporate genetic structure different from the
partnership model. That can only be good for greater
choice and competition in this market. Indeed, not to
do so could be seen as a form of professional restrictive
practice, and that has fallen out of favour in almost
every other area of business life. After all, we do not
expect airlines to be owned by pilots or technology
companies to be owned by nerds, although in the
latter case some of them are, with great success. So I
would argue strongly for the change in ownership
rules that the committee turned its back on, but which
are part of the European reform package proposed by
Monsieur Barnier, and I would also note that BDO
favours this change.
There is much else in this rich report that I have not
commented on, and there is insufficient time for me to
do so. They include: the very important weaknesses in
IFRS; marking to market and marking to model
which contributed to the financial boom and subsequent
crisis; the need for risk committees; the much-needed
simplification of the regulatory landscape, which the
noble Lord, Lord MacGregor, referred to; and the
necessary enhancement of the powers and authority
of the FRC that would come with that; the relationship
between auditors and regulators; and much besides,
but I have spoken long enough. I conclude by
congratulating the noble Lord, Lord MacGregor, and
my colleagues on the Economic Affairs Committee on
producing such an excellent report. It has already
achieved its key objective the form of the Competition
Commission inquiry. This debate is merely a staging
post. We must await what the competition gurus come
up with. Let no one underestimate what is at stake. We
cannot allow this critical market for corporate information
to lack the choice and competition that we take for
granted in all other walks of business life.
5.01 pm
Lord Stewartby: My Lords, retrospectively, I declare
some interest in this field, having been chairman of
the audit committees of banks and building societies
and having been involved in or with banks in some
form or other during most of my working life. I would
like to offer a few comments in light of that.
We have an admirable report here, but I kept asking
myself, “Well, what would we do about that?”, and
“Would this be an effective answer to the problem that
we are looking at?”. It is very difficult to match it up.
I am not in any sense criticising the committee for not
having found some punchy answers to some of these
difficult questions, but there are still a lot of unresolved
issues that are going to need continuous attention.
It was helpful of my noble friend Lord Lawson to
give us his seven recommendations and I thank him
for his kind words about me. It was an interesting task,
constructing the Banking Act in the 1980s. I was glad
that my noble friend drew attention to the BoBS—Board
of Banking Supervision—because we came to the
conclusion that the best judges of whether things were
all right or not would be those who had practical
experience, rather than our relying on the detached
co-operation that we would otherwise get. I am sure,
as sure as my noble friend, that doing away with the
BoBS represented a practical weakening of the system
because, thereafter, it lacked this accumulated experience
of practitioners in the area, and that had been extremely
valuable.

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This leads on to a question that I ask myself frequently:
“Is there any obvious way around the dominance of
the big four, and how on earth can competition operate
effectively when you have so few players and the things
they are competing in are not measurable by ordinary
standards?” If you are a big international company
looking to change your auditors, what will you be
looking for? The answer is reputation, high-calibre
staff and probably, among the many other considerations,
the right geographical coverage. It seems to me that
that is what has driven the consolidation of the big
auditors. After all, their major clients need a thorough
service from experts.
For that reason, I think that it is likely that there is a
limit to the number of well-qualified big audit firms
that there can possibly be. There is just no impetus to
create another one. I have seen people suggesting that
we should encourage the setting up of new firms, but I
do not think that is realistic. I am much more interested
in what the noble Lord, Lord Currie, said about
whether there is an opportunity for upping the game
for the medium players. It is not satisfactory that,
when an audit company is looking for business, it
cannot sell itself very easily on price or service because
they are so difficult to compare, and that is an argument
against moving too often. The most astonishing figure
in this document is that to which my noble friend drew
attention: on average, major companies change their
auditors every 48 years. That is generations. It has
come about because of a historical process that got
huge stimulus from globalisation. Service companies
had to adapt to dealing with much larger and more
complex businesses than they had been used to. Although
I very much welcome the discussion and thinking of
ways of dealing with this, we are not all that far away
from a situation where there are only three, or possibly
fewer, companies that can do something on that scale.
That leads me on to the question of how much the
competition among them does for the good of the
business. If competition was operating effectively, you
would expect it to have a significant impact on how
audit firms, among many others, go about their business.
Everything we have seen in the past few years makes
us ask another question: why did auditors not recognise
the risks? Of course, the setting up of risk committees
is a useful development. Two of the committees that I
was on had to make a change because of extraneous
factors and other changes have been out of their desire
to rotate activities, but on risks and losses they all
seemed set in the same mould. There was not a readily
identifiable characteristic of one type of audit work or
another. I keep remembering the remark made by the
Queen when she visited the Stock Exchange. She asked
how come no one saw this coming if it was all so big.
You could say that of the business community. If you
had six firms instead of three that could do international
banks, would you really get much alternative or would
they all have made the same mistakes?
The thing that I find most extraordinary is that,
across the board, there was a unification of attitude
and outlook. I do not know how you could define
that, but certainly the end product with the massive
extra provisioning and losses that have come through
in the past three years shows that something was
seriously wrong with the process that was meant to
identify risks and what they would do. You do not get
the impression that this is how it was looked at. You
could almost say that there was a suspension of critical
faculties across the whole area. You have the managers
and executives in the businesses, the internal audit
departments, the audit committees and external auditors,
so it is not all the fault of any one of those. Curiously
enough, however, they are all involved in relatively the
same process.
When I was dealing with investment managements
a few years back, the absurd phrase “slicing and
dicing” was often used. The idea was that you had a
whole lot of loans and you put a little bit of each one
in a package and walked around the corner to see the
rating agencies. As it happens, they seem to have fallen
over very badly on this. The point is that there were
several different layers, so if you deconstructed the
slicing and dicing you would find small parts of some
very unsatisfactory businesses. Yet nobody in these
operating roles managed to permeate this wall of
almost wilful ignorance about what was going on in
those sorts of businesses. It was not just the auditors
or the banks, but a collective failing. It is appalling
that we have not had any explanation as to how
auditors, or anybody else, failed to test out on a
sampling basis the decisions before them.
In particular, I welcome the recommendation about
the Office of Fair Trading investigation. That is absolutely
essential. I strongly support the elevation of prudence
to a more prominent role, which was the second of the
committee’s main recommendations, particularly because
I thought that the introduction of Basel II and IFRS
was bound to lead to trouble as it would exaggerate
rather than offset economic swings, and that is exactly
what happened. The trouble is—and I must apologise
if it seems like I am being overly critical here—the
accounting profession is not always best placed to
provide the sort of rules that we are all going to have
to live by. Undoubtedly, the IFRS and Basel II made
life more difficult and meant that a lot of provisioning
was not as strong as it should have been.
Finally, I come to the point that my noble friend
Lord Lawson spoke of: the dialogue between auditors
and supervisors. A small point of definition is important
here, because at the bottom of the first page of the
abstract it says,
“the fact that, as our evidence revealed, confidential dialogue
between auditors and bank regulators had fallen away before the
financial crisis”.
That dialogue is immensely important. However, while
on that page it talks about dialogue between auditors
and regulators, at the end of the next page it says,
“dialogue between auditors and supervisors”.
It may seem to be a small point, but I draw attention
to this because it is very important to remember that
the functions of regulators are different from the
functions of supervisors. They overlap, but the regulator
makes the rules and sets the framework in which the
whole business has to operate. The supervisors are
meant to go institution by institution and satisfy
themselves as to the soundness of individual businesses.
Because these two words are often used interchangeably,

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I suspect that sometimes people have been doing what
they thought was regulating but in fact should have
been supervising, and vice versa. I do not want to
overstate it because I do not think that it is the cause
of too much mischief, but it is thrown up by the fact
that, until the legislation, there was no statutory provision
for auditors to talk to supervisors or regulators. The
need for that has been revealed enormously by what
has actually happened.
Finally, the move to a more judgmental approach
rather than too many rules is essential, but you also
need people who have the background and experience
to cope with these things. It will be very important
that audit committees have among their members
people who have come across some of the real business
questions of recent time and will more than take into
account the fact there has been a lot of discussion on
these things but there are still very many unanswered
questions.
5.16 pm
Lord Hodgson of Astley Abbotts: My Lords, I was
not a member of my noble friend’s committee, but I
add my congratulations to him and his fellow committee
members for a really interesting—indeed, fascinating—
report that raises many important issues, both within
and without the banking system. I have a number of
relevant interests declared on the register of your
Lordships’ House, but I draw the committee’s specific
attention to the fact that I am the senior independent
director—the SID, as it is known in the trade—of one
of the FTSE 250 companies. I am a member of its
audit committee and chair of its remuneration committee.
I will focus my remarks not on the banking issues,
which have been ably and decisively covered by my
noble friends Lord Stewartby and Lord Lawson. I will
focus my remarks on the first two issues that the
committee looked at: the dominance of the big four
and its effect on competition and choice and whether
the traditional audit still meets today’s needs.
The committee hit the nail on the head when it
mentioned in paragraphs 18.vi and 18.vii,
“the perception that big is best”,
and,
“the reputational assurance of using Big Four auditors”.
These things are at the heart of the difficulty that we
face. I do not wish to press the noble Lord, Lord
Currie of Marylebone, but I think it unlikely that my
co-directors would be prepared to take on a firm
outside the big four, even if it were demonstrably
cheaper and probably even if the service was the same.
We are reaching the tipping point, but we are not there
yet. There is more to be done along the lines that I
shall refer to in a minute and which he was hinting at
in his remarks. The noble Lord, Lord Shipley, asked
how we deal with conflicts of interest. Well, we have a
fairly clear way of doing that, in the sense that we
make sure that we measure the amount of non-audit
work that we are giving to the firm, we measure the
amount that we give to the firm in relation to the total
in the office—in other words, how big we are in
relation to that particular firm’s regional office—and
we disclose in the annual report. Where we have areas
where conflicts of interest are clearly irreconcilable,
such as international law, we use another firm. We go
outside for things where we cannot satisfy ourselves
that we can have a proper divide-and-rule situation.
I was not at all surprised that the committee reached
the conclusion that the Financial Reporting Council’s
market participants group had not really achieved
very much. The suggestion in paragraph 49 that the
way in which to encourage more participation by
firms outside the big four is by involving institutional
shareholders is, I fear, doomed, as my noble friend
Lord MacGregor said in his opening remarks. I am
not hopeful because it is pretty difficult to get institutions
or shareholders to engage at any level. It is very
depressing, with a few honourable exceptions. Apathy
and worse is the only description of their interest.
Why is that? In the company I am talking about,
three of our top 10 shareholders are tracker funds, so
they have no particular interest in what we are doing.
In fact, they would rather not see us as it might bias
them in a sense. They want us to follow the index
exactly or they do not want to see us at all. For others,
best governance practice suggests that the SID—senior
independent director—should meet the major institutional
shareholders once a year. Trying to get a meeting is
extremely difficult. Most of the time they say that they
are perfectly happy and do not want to meet you.
Meetings are cancelled at the last moment. You turn
up and find that the man with whom you had a
relationship is too busy and you end up with a junior
person who may have been in the investment business
for only two or three years. There is nothing wrong
with that; I am not trying to sound pompous and say
that I will not talk to him. The nature of the relationship
that you have with your institutional shareholders is
transitory in that sense. We are talking here about the
operations of a company itself, not the appointment
of auditors, which by its nature is of another degree of
importance.
A counsel of despair surrounds one, but things can
be done. First, I share the committee’s conclusion that
examination by the Competition Commission is a
worthwhile exercise, so that we get examination in
detail of the warp and weft of this difficult issue. As to
the advantage of a big bang conclusion with the
recommended breakup of one or more of the big four,
I am more doubtful about that. I am far from convinced.
To use the famous phrase, “You don’t strengthen the
weak by weakening the strong”. The halo effect will
continue and may well survive and you may have
damaged the firm’s international reach in the mean
time.
Clearly the Government have the reach and the
scale to offset some of this halo effect, so I very much
support the committee’s proposal about work previously
undertaken by the Audit Commission being a possible
way to build a new firm. The Government should go
further than the committee suggests. There are a number
of areas where the Government could help to create a
situation where the smaller firms reach a tipping point.
For example, within the Financial Services Authority—
I know that it is unfashionable to say anything good
about the FSA—a Section 166 report, or expert person’s
report, is increasingly being used. There is a tendency
to go for the big four firms there, but reports could

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easily be carried out by other firms. These and other
reports carried out by the FSA, and no doubt by other
government bodies that I do not know about, could
usefully suggest that a wider range of firms should get
involved with this. There are things such as encouraging
banks and private equity houses to use firms outside
the big four for due diligence purposes, and there are
the trade bodies—the Investment Management
Association and the British Insurance Association—that
could also lend their weight to ensure that over time
this situation could be improved. There is no silver
bullet, but with a concentrated effort from within the
profession, in whose interests this sort of development
must be, something will be achieved.
In my remaining remarks, I will deal with whether
the traditional statutory audit still meets today’s needs.
Clearly many people feel that it does not. Many people
feel that it lacks focus and priorities and emphasises
process at the expense of judgment. At our annual
general meeting, one of our more experienced private
investors said that reading the annual report was like
having a bucket of warm blancmange poured over
your head. Perhaps I can illustrate that in a very
simple way. The company of which I am the senior
independent director is a simple company. We are
entirely in the UK; we have no overseas operations.
Our final salary pension scheme is closed. The only
complication in our business is that we have some
hedging and some derivatives for our longer-term
borrowings. In 1995, our annual report was 25 pages
long; in 2000, it was 41 pages; in 2005, it was 76 pages;
in 2010, it was 104 pages; and it will be a bigger
number in 2011. I cannot see that this—
5.25 pm
Sitting suspended for a Division in the House.
5.35 pm
The Deputy Speaker (Lord Geddes): It is now 5.35 pm.
The noble Lord, Lord Hodgson of Astley Abbotts,
who was so abruptly cut off in mid-flow, may resume
his speech.
Lord Hodgson of Astley Abbotts: I was winding up,
talking about the value of the traditional statutory
audit and whether it now needs some serious revision.
I said that my company is a simple company, with
market capitalisation of £660 million, all in the UK,
no foreign exchange, none of those complications, no
open final salary pension scheme and, apart from
some hedging for our long-term debt, not a great deal
of complexity. I pointed out that in 15 years our
annual report has gone from 35 pages to 104 pages. I
questioned whether that is a useful exercise and how
many people read it. In the Companies Act 2006, we
thought we were being extremely clever in introducing
the e-mail opportunity for companies. In a strange
way, that has taken the pressure off auditors to think
about the thing because they can e-mail people. Many
fewer copies of the report can be printed. Increasingly
the default option is to send it by e-mail anyway, so
some of the self-restraint has been removed.
I think the auditing profession needs to follow this
report with some serious intellectual heavy lifting to
provide a greater degree of focus going forward. I turn
to another context: the City at the moment. Noble
Lords will have received papers from banks recommending
shares. On the back page there is half a page of tiny
type containing disclaimers. An investment bank put
halfway down that, “If you have read this far, call this
number and we will send you a bottle of champagne”.
In three months, it never had a call. That is how much
all this stuff is being read. It has become boiler plate.
Similarly, too much of annual reports has become
box-ticking and verbiage read by almost nobody. I think
the profession could do a really valuable service by
introducing a degree of rigour and focus. I hope that
above the desk of each of the members of that working
party, there will be a banner reading: “Less is More”.
5.38 pm
Baroness Hogg: My Lords, I, too, should like warmly
to congratulate the noble Lord, Lord MacGregor, and
his committee. First, however, I must declare my
interests—which are in the register—principally, today,
as chairman of the Financial Reporting Council.
The report was, as one would expect from this
distinguished committee, rigorous in its analysis, but
equally important, and much more unusual, have been
the results. As a former member of this committee, I
cannot think of another inquiry conducted by it in
recent years that has had such a powerful effect. I am
sure that the Minister will provide an excellent summary
of the actions taken by government and regulators
following this report, so I shall concentrate on those
taken by the FRC.
As many noble Lords have said in this debate, these
issues go to the heart of the effective functioning of
capital markets. The FRC’s mission is to,
“promote high-quality corporate governance and reporting to
foster investment”.
This reflects our recognition that the willingness of
investors to provide risk capital—a vital link in the
chain of economic growth—depends on their confidence
in how companies are run and how their accounts are
prepared and audited. So, after the financial crisis, this
report was timely and influential.
I would diffidently say to the noble Lord, Lord
MacGregor, that the committee did not have to tell us
at the FRC that the efforts we were making within our
remit to reduce concentration in the market had made
very little difference. We have been shouting that loudly,
hoping someone would take notice. We are delighted
that the committee did and that the alarm it sounded
penetrated more ears and led to the Office of Fair
Trading asking the Competition Commission to take
another look. This is a very important step which we
hope will also lead to thinking, at national and
international level, about what the government response
would be if there were to be another crisis and a threat
that the big four would come down to three.
We are also very pleased that a new point of alarm
on domestic concentration that we raised with the
committee has been taken up by it and then picked up
by the Government. Like the noble Lord, Lord Hodgson,
we welcome the action that the Government have

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taken to ensure that work flowing from the abolition
of the Audit Commission is well spread among firms
of a certain size and not concentrated among the big
four.
The European Commission is right to see concentration
as an international issue. However, the reason why we
want a competitive audit market is to safeguard audit
quality, not to endanger it. We have therefore made
clear that we are opposed to certain EC proposals,
such as the break-up of the audit firms, which we
think would damage quality.
Equally, we want to encourage competition in order
to empower choice of auditors, not simply to disrupt
it. We believe that clearer guidance on non-audit services
will both deal with conflicts of interest and stimulate
market development. We will also shortly be publishing
proposals that do not enforce a merry-go-round of
compulsory auditor rotation but request companies to
retender their audits after eight to 10 years. This
should be introduced on a “comply or explain” basis
and with transition arrangements to prevent market
turmoil. We must not disempower the audit committee
from choosing the best firm for the job.
Whatever improvements are needed, we must not
shoot ourselves in the foot. Despite all its strictures,
the committee noted much evidence to support the
view that British auditing is among the strongest in
Europe and indeed is arguably the world leader. Moreover,
our approach to corporate governance, of which audit
is a key component, has helped give us the deepest
capital market in Europe. We must continue to strive
for improvement. The audit inspection unit continues
to highlight weaknesses—as the profession will tell
you, sometimes through gritted teeth. However, in
considering EU reforms, we must avoid a surfeit of
prescription designed to raise standards elsewhere.
Rules that are too detailed damage the willingness to
exercise judgment; and judgment is what we most need
in times of crisis, as the committee has rightly said.
Many of the key recommendations of this report
chime with the proposals that we at the FRC have set
out in our paper on effective company stewardship. I
hope that all Members of the Committee have had the
opportunity to read this report. I would be happy to
send copies to those who would like it. They may have
noted particularly the points on auditor scepticism in
this report.
We are very mindful of the questions that members
of the committee raised about the role of accounting
standard-setters, preparers of accounts and auditors
in the financial crisis. Put simply, the challenges were:
did they do their job; if they did not, what is being
done about them; and if they did, what does that say
about the value of accounting, reporting and auditing?
The most far-sighted members of the accounting
profession do not seek to answer these challenges
simply by reminding us of the limitations of accounting
and audit or by asserting that these are mysteries
others cannot challenge. They are willing to engage in
a more ambitious debate on how the value of audit
can be enhanced and how accounting standards can
be improved. The committee has challenged the monopoly
of wisdom of the technical standard-setters. Our reforms
at the FRC are designed to help us engage with the
wider debate. Many of the weaknesses in IAS 39 that
have been referred to have been addressed, in fairness
to the technicians, but we are still concerned about the
speed of implementation. Brussels seems to take the
view that all changes should be saved up to do together.
We believe this to be unnecessary delay.
Meanwhile, as the Minister will no doubt confirm,
at the FRC we have taken the lead on a key issue by
asking the noble Lord, Lord Sharman, to head an
inquiry into the role and value of going-concern
statements. His draft report has been published and
we expect the final report shortly.
For this report raised a deeper challenge for the
FRC. The committee criticised our structure, finding
it confusing and overcomplicated. Indeed, we have at
present some seven operating bodies to fulfil one
objective. The result is that too much of our work is
done in silos, and there are overlaps and underlaps
between them. This is no criticism of the excellent
people involved. Some of these barriers are statutory,
others derived from the way in which the FRC was
cobbled together. However, the committee was right to
call for change, and we are glad that the Government
have responded.
We need to share knowledge across the organisation
in order to operate more effectively, both in our conduct
role in the UK and in the international debate on
codes and standards. Our international task has become
a much more complex exercise, requiring us to mobilise
all the expertise in different operating bodies for maximum
effect, and for cross-silo challenge within the organisation.
We also need to ensure that the work of the audit
inspection unit is useful to chairmen of audit committees
and maximise the combined value of the work of the
audit inspection unit and the financial reporting review
panel. We also need to clarify the dividing lines between
ourselves and the professions so that we can truly
claim to be an independent regulator. Clarifying that
status will also help us to work more effectively with
other regulators. The noble Lord, Lord Lawson, rightly
highlighted the breakdown in the arrangements that
he put in place to ensure the Bank of England’s
assessment of macroprudential risk was informed by
what the major audit firms were seeing. He also used
this inquiry to probe at the gaps and overlaps between
regulators.
Legislation is not for us, but with these challenges
in mind we have with the Bank’s help put in place a
forum for information flow and discussion of risks
and appropriate responses between ourselves at the
FRC, the Prudential Regulation Authority, the Financial
Conduct Authority and the Financial Policy Committee.
The reform proposals that we put forward jointly with
government would streamline our work on codes and
standards on the one hand, and conduct—review,
inspection and disciplinary action—on the other.
I welcome the prompt that the committee’s report
gave to fresh thinking about this in government and at
the FRC. We have had a lively consultation on our
proposals and done our best to respond to the points
made without compromising our independence or
losing the opportunity to match our organisation to
today’s challenges. I hope that we will receive a statement
from the department on this soon, and look forward

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to hearing what the Minister has to say. I hope that the
resulting reforms will lead the committee to conclude
that we have responded to its challenge.
5.47 pm
Lord Northbrook: My Lords, we are all grateful to
the noble Lord, Lord MacGregor, and his committee
for a thorough, detailed and important report. Like
him, I am very sorry for the delay of nearly a year
before we have come to discuss it.
As other speakers have said, the report covers four
major issues: the dominance of the big four accountancy
firms; whether the traditional audit still meets today’s
needs; the effect on audit of the adoption of international
reporting requirements; and how banks were audited
before and during the banking crisis and what changes
there should be. Having carefully read the report, I
find that the second and third issues are well covered
but, though very reluctant to disagree with such an
eminent team on the committee, I find the conclusions
on the first and fourth issues slightly unsatisfactory.
I will go on to cover each issue in more detail.
There is no doubt about the dominance of the big
four accountancy firms in auditing large quoted
companies. As the noble Lord, Lord MacGregor, has
already said, in 2010 the big four audited 99 out of the
FTSE 100 leading firms, and around 240 of the next
biggest FTSE 250 firms. They also had about 80 per
cent of the FTSE smaller capitalisation firm audits.
I first make one comment based on my experience
as an investment manager. I always had a comfort
factor in seeing the name of a big four auditor, particularly
when looking at a small and growing company’s accounts.
Several companies with smaller-sized auditors came
to grief through, as it subsequently proved, being
allowed to adopt overoptimistic accounting policies,
which I am sure would not have been tolerated by the
big four auditors. I am not sure that that is fully
appreciated by the committee’s report.
The report also states that the chairman of the
Hundred Group of finance directors of FTSE 100
companies said they were, in general, content with the
service provided and the competition they noticed in
the market today. I know it may be heresy to say so,
but I do not know what is going to be usefully achieved
by a Competition Commission investigation, even though
the noble Lord, Lord Currie, has made an interesting
argument for the merits of BDO and Grant Thornton,
and I know it is supported by the Economic Affairs
Committee and the noble Baroness, Lady Hogg, of
the Financial Reporting Council.
What will it conclude? Are major companies going
to be forced to change auditors? I cannot see the
advantage of mandatory joint audits either, and nor
can the Government in their response to the committee’s
report. I also cannot really agree with the idea of
compulsory tender for audits every five years. The
reply from the Government—and that of the noble
Baroness, Lady Hogg—suggesting a more flexible
approach is better. I agree with paragraph 53, which
refers to the noble Baroness’s view that,
“the expected abolition of the Audit Commission would provide
an opportunity to increase competition and choice in the audit
market if it formed the basis of a substantial new competitor to
the Big Four”.
Paragraph 60 of the report also raises an important
question about whether the limited liability partnership
status of the medium and smaller-sized audit companies
will be sufficient to protect them from unlimited liability.
According to the noble Baroness, Lady Hogg, the
situation is not entirely clear on this matter.
The third issue is the major impact of international
financial reporting standards. Although I am far from
being an expert on these matters, I note—as have
many other speakers—with interest the sentence in
paragraph 113 that states:
“In short, a box-ticking approach is replacing the exercise of
professional judgment which allowed the auditor’s view of what
was true and fair to override form”.
The report then moves on to the application of IFRS
standards to UK banks. The letter by the noble Lord,
Lord Flight, in Appendix 7 of the report is very
interesting on this subject. He makes three interesting,
if rather technical, points: first, that the accounting
treatment of the granting of options to be booked
through the profit and loss account both obscures the
real trading position of the business and fails to advise
shareholders of actual or potential dilution. It is significant
that Adam Applegarth, then CEO of Northern Rock,
told the Daily Telegraph in 2005 that moving to IFRS
had introduced more volatility and led to “faintly
insane” profits growth.
Secondly, as the noble Lord, Lord Hollick, discussed
earlier, the IFRS mark-to-market standards served to
overstate capital resources in buoyant times; subsequently
they served to understate them in difficult times. Thirdly,
he considered that the requirement to discount pension
fund liabilities at a rate of interest measured by prime
bond yields overstates effective liabilities and has been
a major contributor to the demise of final salary
pension schemes.
The committee overall concludes that IFRS standards
are not fit for purpose. However, in their response, the
Government disagree and do not accept that they have
led to this loss of prudence. The results of the panel
convened by the FRC and chaired by the noble Lord,
Lord Sharman, which were published in November,
identified lessons on going-concern and liquidity risk
for companies and auditors. Again, as the noble Lord,
Lord Hollick, reiterated earlier, the key sentence of its
preliminary report, as far as I am concerned, is:
“Require the going concern assessment process to focus on
solvency risks”—
to the entity’s business—
“as well as liquidity risk”.
The final major issue of the report is how banks
were audited before and during the financial crisis and
what changes there should be, including to auditors’
relationships with financial regulators. I think overall
the committee is unfair in criticising the auditors so
strongly in paragraph 142. I support the comments of
the heads of KPMG, Deloitte and PwC: the role of
auditors, in my view, is to count the score at the end
of an accounting period. They are not trying to forecast
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look at the business model of a business; that is the job
of management. Surely the job of monitoring the
day-to-day activities of the banks should be for the
regulators. Auditors look at the company at a set time,
not throughout the year, as regulators should be doing.
Otherwise, what can be the limits of the auditor’s
responsibilities?
For instance, the FSA, in its report on Northern
Rock, tells us that its insurance team was in charge of
regulating the company. No wonder it totally failed to
understand the dangers of the company’s business
model. How could auditors influence the disastrous
tie-up between HBOS and Lloyds TSB which was
personally engineered by the Prime Minister? How
could they have influenced the RBS takeover of ABN
AMRO which Barclays was also interested in? It was a
management decision and seemed justifiable at the
time. Let us remember that neither the regulators nor
the rating agencies foresaw the major problems which
began in the USA with the abandonment of the
Glass-Steagall Act and the US Government’s decision
to allow cheap loans to NINJAs—those with no income,
job or assets.
Finally, I would just like to requote paragraph 151
of the Economic Affairs Committee report which
states that,
“very few in senior management positions in the major banks had
more than a ‘cloudy’ grasp themselves of the mathematical models
used to value the banks’ complex financial instruments”.
From my knowledge, I fear that that is true. Universities,
such as Reading, offer highly detailed courses in financial
instruments. This is a relatively recent development, so
I am not surprised that senior management is not up
to date. Surely they should do courses as well. Auditors
should also go on courses to familiarise themselves
more with these products. Overall I welcome this most
interesting report despite my disagreement with parts
of it. It has been an excellent undertaking, but the
important dialogue in my view is not between auditors
and regulators; it should be between regulators and
companies.
5.57 pm
Lord McFall of Alcluith: My Lords, I am delighted
to contribute to this debate and congratulate the noble
Lord, Lord MacGregor, and his colleagues on a very
cogent report. When the auditors came before the
Treasury Committee after the financial crisis in 2007
we concluded that they had done their job adequately
in auditing, but that if these are the limits, what is the
point of an audit? That question still haunts the audit
profession to this day.
Progress has been made with accounting standards
setters by the noble Baroness, Lady Hogg, and her
colleagues and with the Sharman committee. However,
the factors that led to the demise of RBS, HBOS and
Northern Rock, such as the dependency on home sale
markets funding in the case of Northern Rock, the
high exposure to property in the case of HBOS and
the very significant exposure to markets and businesses
in the case of RBS, were all clear to accountants and
auditors two or three years before the collapse. The
problem was that no one paid any attention. The Bank
of England and the FSA came before the Treasury
Committee and said that they sent out warnings but
nobody listened. There was no influence there and
people were not talking to one another. That is the
biggest issue in this financial crisis. The regulators
were not talking to one another and there were black
holes in between—that is the issue.
For the future, the question posed by McChesney
Martin, the chairman of the Federal Reserve, is relevant:
who will take the punch bowl away? We have to
support the regulators and others to ensure that that is
taken away. RBS was mentioned, where there was a
95 per cent shareholder endorsement. Where were the
auditors? Where were the non-executives? How was
corporate governance and risk organised? Abysmally—
that is how. Auditors need to engage on a statutory
basis with the FSA. It told us that it had six engagements
with Northern Rock in the previous two years—four
by telephone and two meetings with no minutes. If
you had been secretary of your local community club
or golf club, you would be thrown out at the AGM as
a result of that.
That is the state we are in. We have to ensure an
early warning system for the banks involved, which
should involve a very measured risk profile. The problems
were seen late. The issue with accounting is that it
looks backwards and largely aims to reflect the
transactions that have been committed to and not to
affect future events. An audit will be effective only if it
is underpinned by a thorough understanding of the
business model. Auditors are close to the management,
and they, above all, should have that understanding of
the business model. That is why engagement is very
important.
Simplicity of language is very important. One of
the things that I regret not doing when I was in the
other place was putting forward a 10-minute rule Bill
to say that annual reports should be a maximum of
80 pages in length. When I was on the Treasury
Committee, the HSBC report came to 500 pages.
I challenged the main auditor to sit by a fire on a
winter night with a nice good malt whisky and look at
that report. I guaranteed that he would be asleep
before he read it. Simplicity of language is hugely
important. Given that we now have the Financial
Policy Committee, that wider constituency should be
used by auditors to report. I suggest an annual report
from the FPC to Parliament to take these concerns
into consideration.
I suggest the curriculum for auditors and accountants
should be looked at. A result of the financial crisis was
that the economics profession’s efficient-markets model
was thrown out of the window. They have to look at
that again. I think a wider constituency is important. I
shall give my experience as an educationalist. I undertook
a MBA part-time—three nights a week—at Strathclyde
University. It was the best degree I undertook. Why? It
was because everything was black and white and then
went to grey as a result.
I shall give a six-point plan. Unlike the noble Lord,
Lord Lawson, I know my place in this House. My
six-point plan is: early warning; business model; wider
engagement; education; corporate governance and risk;
and culture and ethics.

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6.02 pm
Lord Young of Norwood Green: My Lords, I enter
this debate with great trepidation, not being a financial
expert by any means. I do not envy the Minister her
task in trying to sum up. I am only going to touch on a
few points. I did not read all of the report and did not
have a single malt, but I certainly had a good look at it
and at the government response. I think we should
congratulate the committee on doing a good job. I am
indebted to the noble Lord, Lord MacGregor, for the
history. I was fascinated by Deloitte’s involvement as
the first auditor of the Great Western Railway. Knowing
Brunel’s propensity for raising cash from investors and
very rarely giving them any return, I can see that it is a
historic problem.
Some key points have arisen during this debate,
which focused on the banking crisis. Time and time
again, although not everybody seems to agree, the
question of whether there should be a dialogue between
auditors and regulators was raised. The noble Lord,
Lord Stewartby, drew to our attention the subtle
distinction between regulators and supervisors. I am
sure the Minister will deal with that. It seems to me
that that is part of solving this difficult problem.
Then we got to the nature of the audit and the
IFRS and GAAP approaches. We had a debate between
box ticking and prudence, and it seemed that most
noble Lords erred on the side of prudence. I think it
was the noble Lord, Lord MacGregor, who talked
about professional scepticism and the feeling that it is
important that auditors exercise their judgment.
I was also interested in what the noble Lord, Lord
Lawson, said when he asserted that there has been a
decline in moral standards in the City of London. In
fact, he talked about moral bankruptcy. What we saw
in 2007 and 2008 was quite clearly the product of a
catastrophic failure of governance and the failure of
regulators to understand the nature of the systemic
risk in the financial system. It may be that we should
be taking the opportunity to reassert the existence of
the fiduciary duty on those who are responsible for
managing the assets of savers and investors to act in
their interests, exercise good judgment and be accountable
for that judgment.
There has been a lot of discussion about the dominance
of the big four, but no one has come up with a solution
to that particular problem yet. I was exercised again
by the noble Lord, Lord Stewartby, reminding us first
of all of this 48-year relationship in what I would
describe, in a variation on the word oligopoly, as a
“quadropoly” and secondly that there seemed to be a
“unification of outlook”—I hope I have not paraphrased
him—and a “suspension of critical faculties”. None of
the people involved seemed to have recognised the
risk. He talked about the Queen’s comment that no
one saw this train crash coming. Then he referred to
the slicing and dicing of products, these financial
derivatives that were so complicated yet nevertheless
managed to achieve an AAA rating when we knew
they were rotten at their core.
Clearly there is a need, as I think both the noble
Lord, Lord Northbrook, and my noble friend Lord
McFall of Alcluith said, for auditors and indeed
management to be trained to recognise risk. That is
something else I hope the Minister will address. On
the question of risk and risk committees, that seemed
to be one of the important recommendations, although
the report seemed to refer just to banking and finance
companies. I was thinking about that and reflecting
that there were other companies that took substantial
risks, which resulted in the Government footing some
of the bill. The one that came to mind was Southern
Cross, which became so leveraged that it could not
sustain itself, and I recalled the impact the foundering
of those care homes had on society as a whole. When
it comes to big companies and risk committees, it
seems to me that it is not just the banking and finance
sectors that should be required to submit to them.
I am also indebted to, I think, the noble Lord, Lord
Shipley, for reminding us of the human consequences
of the Northern Rock crisis, which he saw every time
he looked out of his window in Newcastle; and not
just for shareholders, but for the employees who suffered
as a result. It seems to me that a risk committee and
auditors being involved in that is fundamental.
I am not sure how we are to resolve the dominance
of the big four. I hope that the noble Lord, Lord
Northbrook, is wrong that the Competition Commission
will not be able to shed any light on that. We had the
noble Baroness, Lady Hogg, suggesting—and she was
not the only one—that now the Audit Commission is
going this should present an opportunity for other
auditing companies to emerge. Somebody else suggested
that the FSA reports would be a good vehicle to assist
in this process. I do not feel competent to comment on
that but no doubt the Minister will, although she was
given a get-out clause there when the noble Lord,
Lord Lawson, said that she could deal with his seven
recommendations by letter. I felt the Minister should
be eternally grateful for that because they got more
and more complex towards the end.
I think it was the noble Lord, Lord Lawson, who
made the point that no auditors have been sued as a
result of the banking crisis. Amazingly, nobody seemed
to take any responsibility. There must be something
wrong if everybody apparently was exercising their
responsibilities and yet we had this financial crisis. As
the noble Lord said, nobody at this point in time is
willing to accept responsibility. We know that there is
plenty of work to be done. When I look through the
government response, I do not think that they have got
it right in all cases. I gave the example of the question
of risk. It is important that all companies should have
that. The relationship between the auditors and the
risk committee will be important. I look forward to
the Minister’s response and once again thank the
committee for its work.
6.10 pm
TheParliamentaryUnder-Secretaryof State,Department
for Business, Innovation and Skills (Baroness Wilcox):
My Lords, I thank my noble friend Lord MacGregor
of Pulham Market for calling this debate. We have
heard some well informed and constructive contributions
from the House. It has been a particular master class
for me, and certainly for my civil servants behind us
because they have had evidence today of what a Lords

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Select Committee can do with a subject all by itself.
At the moment, every time we can show how well a
Lords committee does, we should do so.
Of course, I will not be responding to the noble
Lord, Lord Hollick, who asked my permission to be
able to speak and to leave. He therefore knows that I
will be writing to him rather than answering his questions
while I am on my feet. As we have already heard, my
noble friend Lord Lawson decided to let me off the
hook today and gave us those seven biblical
recommendations that he left us to reflect upon. We
will, of course, write to him. As for the rest of the
questions from your Lordships, I hope that I will be
able to answer a goodly few of them along the way. Of
course, I will write to anybody to whom I have not
been able to immediately respond.
I start by paying tribute to the Economic Affairs
Committee’s chairman, and to the report and
recommendations, some of which have already resulted
in action. One of the recommendations in the report
was that the audit market should be investigated by
the competition authorities. As my noble friends Lord
MacGregor and Lord Stewartby, and the noble Lord,
Lord Currie, noted, within two months the Office of
Fair Trading had announced its provisional decision
to refer the market for the audit of large companies to
the Competition Commission, which plans to publish
its provisional findings by the end of November.
I emphasise what an important development the
Government consider this investigation by the competition
authorities to be.
The Select Committee report made several other
recommendations. I recognise that the committee
expressed disappointment with some of the elements
of the Government’s response to its report. It might
help if I start by covering two issues where I know that
the committee continues to have concerns. The first is
the issue of international financial reporting standards—
IFRS. Under EU law, listed companies in the European
Union are obliged to prepare their consolidated accounts
in accordance with IFRS. My ministerial colleague,
Norman Lamb, replied to a letter from my noble
friend Lord MacGregor on this issue last week; I think
that he is coming out with a statement fairly soon. In
line with the conclusions of the G20 last November,
we continue to support the aim of a single international
system of standards. These will develop with time and
aim to address issues, on an international basis, as
they arise. The Financial Reporting Council—FRC—is
engaged in that process, as are the Government when
revised standards come to be adopted in the European
Union.
The other area where the committee expressed concern
was the need for discussions between auditors of financial
institutions and the prudential regulator. The Government
continue to support the code of practice that now
requires discussions twice a year, with one discussion
including the relevant bank. The code of practice
appears to be working. For this reason, and in accordance
with better regulation, we will not be introducing a
statutory requirement. The Government, the Bank of
England, the FSA and the FRC all support this.
However, we will be watching the issue closely.
My noble friend Lord MacGregor asked what the
FSA code of practice requires. The code of practice
now requires discussion about each of the banks between
the relevant auditor and the prudential regulator twice
a year, with one of those meetings including the bank
itself. These discussions are happening and the code,
as I say, appears to be working. My noble friend Lord
Stewartby asked why auditors did not recognise the
risks. The banking crisis had a range of causes. More
or better assurance alone would not have stopped it,
but we have certainly learnt lessons.
The systemic problems that caused the banking
crisis have been well rehearsed and include a failure of
credit judgment, a failure on the part of central banks
to recognise asset bubbles, weaknesses in regulation
and deficiencies on the part of credit rating agencies.
Audit has never had a financial stability role, and is
only one element of the regulatory framework that
ensures that we have working capital markets. The
issue of systemic risk falls to the regulator, as well as
to the boards of companies, rather than to the auditors.
In terms of the audit of banks, the Government are
committed to the objective of improving bank corporate
governance, and will continue to work closely with the
European Union and internationally to increase
transparency and accountability in a proportionate
manner.
I now turn to some other recommendations of the
committee, where the Government and the FRC have
taken action. On the long tenures of some auditors of
large companies, BIS and the FRC consulted separately
last year as to how discussions between auditors and
audit committees about the appointment of auditors
might be improved. Amendments to the FRC’s corporate
governance code and audit committee guidance will
follow this year. This will include a new requirement
for auditor retendering by FTSE 350 companies, on a
“comply or explain”basis, every 10 years. My department
will publish a summary of responses to the consultation
on narrative reporting shortly and we will set out the
Government’s position as regards wider assurances of
corporate reporting beyond the audit of accounts.
My noble friend Lord MacGregor asked whether
the Government are proposing to encourage company
boards to form risk committees. Well, the Government
are reviewing the structure of the corporate reporting
framework. We propose splitting the current single
corporate report into two documents: a strategic report
and the annual directors’ statement. The strategic
report, as its name implies, is strategic. It will allow
companies to tell their story, describing their business
model, the strategy to deliver this and the risks to this
strategy through the directors’ remuneration. It is not
the Government’s intention to create legislation to
mandate that companies have specific risk commitments.
My noble friend Lord Hodgson asked why we need
to change the current narrative framework. The results
from the August 2010 BIS consultations, “The future
of narrative reporting” and “A long-term focus for
corporate Britain”, demonstrated a consensus among
respondents that change to the current narrative reporting
framework was required. They struggled to glean the
key messages from the mass of data presented. We
propose to divide the current annual report into two

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[BARONESS WILCOX]
documents. The first is called strategic, as I have
already mentioned, and the second—the annual directors’
statement—will contain information that is used by
some, but not everyone. Our proposals will, I hope,
help companies and investors concentrate on strategic
issues for the business, and encourage more integrated
reporting, giving a clear line of sight from the company’s
results through to its business model, strategies and
risks.
On the abolition of the Audit Commission, the
Audit Commission announced the award of contracts
to outsource its audit work to private-sector providers
last week. This was very good news in terms of
concentration in the audit market. Grant Thornton,
from outside the big four, has been awarded the largest
share of new work of any of the recipients. These
contracts were awarded on the basis of cost and
quality criteria, and demonstrate the confidence we
can have in auditors outside the big four.
The noble Lord, Lord Currie, spoke of the need to
promote the use of middle-tier audit firms by large
companies. At present, under the EU directive, statutory
auditors have to be majority-owned by qualified auditors.
We are continuing to support an exploration of the
likely demand for and consequences of alternative
structures, and this might help smaller firms grow. It
might also help recapitalise an audit firm in the event
of its failure. We recognise that other member states
have differing views on this and are continuing to
discuss this issue with the presidency and the Commission.
The noble Lord, Lord Hodgson, asked whether the
Government are enabling non-big four firms to win
public sector work. The answer is yes. The Government
are committed to improving value for money from
public procurement. We are centralising within Whitehall
the procurement of common goods and services, including
for audit and assurance. Central government purchases
from small and medium-sized companies doubled to
£6 billion in the past year as the coalition has pursued
its pledge to realign its spending away from multinationals.
The shift will see almost 14 per cent of Whitehall’s
£44 billion budget secured by SMEs this year, up from
6.5 per cent in 2010.
The noble Lord, Lord Northbrook, asked whether
proportionate liability or a statutory cap on auditor
liability could serve to encourage more audit firms to
bid for large company audits. The Government have
no plans to do that. The Companies Act 2006 already
allows for contractual limitation of liability, and some
auditors’ liability agreements have been signed. The
committee supported the exemption of more SMEs
from audit. My department’s consultation closed in
December, and we will be setting out our response to
the findings in the spring. In Europe, we are making
the case for raising the exemption thresholds. The
committee expressed concern about fragmentation
between regulators of audit, accounting and corporate
reporting. In October, BIS and the FRC consulted on
changes to streamline the internal structure of the
FRC and improve its regulatory efficiency and
effectiveness. My colleague Norman Lamb intends to
make a Statement on this in the other place shortly.
On non-audit services, my department has now
amended regulations on disclosure of auditor
remuneration to bring them into line with the revised
ethical standards.
The noble Lord, Lord Shipley, talked of the conflict
of interest if one company provides audit and other
services and the noble Lord, Lord Hodgson, said that
he did not see a problem with it—I thought I would
put both those pieces in. In answer to the noble Lord,
Lord Shipley, as the committee heard during its inquiry,
the standards were revised following the financial crisis.
The disclosure framework is now in line with the
categorisation of non-audit services in the standards.
It also reflects the concerns the committee raised
about internal audit services and tax advisory services,
in particular, where the regulations ensure separate
disclosure will be made. Shareholders can then question
the audit committee on the discussions it had with the
auditor on those services and the safeguards to the
auditor’s independence.
On accounting standards for SMEs, the FRC is
continuing to consult on how UK GAAP should be
developed, including how it should apply to medium-sized
companies. I recognise that I have not covered all of
the committee’s recommendations. There were a number
of others which the committee suggested should be
taken forward as part of the Competition Commission’s
investigation and there are others that the commission
has voluntarily included within the scope of its
investigation.
The noble Lord, Lord MacGregor, spoke about
living wills. The FRC has begun work with the six
largest audit firms to develop a framework. It will be a
sort of “how to” guide by a firm for regulators who
might have to dismantle or separate various parts in
an orderly fashion.
I would like to answer one of the questions from
the noble Lord, Lord Young, because questions from
the speaker for the Opposition always come at the very
end and rarely get answers. The noble Lord asked
about conversations between auditors, banks and
regulators. That has been well received in the UK and
by banking regulators overseas, which are looking
at—or already are—implementing similar approaches
in their jurisdiction. I will write answers to the rest of
the questions that he asked.
The committee made some proposals that are now
reflected in the European Commission’s proposals and
which we welcome. These include removing the audit
firm ownership rules from the directive, making big
four-only clauses ineffective and making audit reports
more informative.
As far as the Government are concerned, this has
been a very useful debate and I am sure everyone else
in this room has enjoyed every single moment of the
two and a half or three hours that we have been doing
this. It has been a useful debate on an important
subject and I thank noble Lords very much.
Lord Young of Norwood Green: Before the noble
Baroness sits down, there was just one area I wanted
her to elaborate on. Paragraph 184 is very emphatic.
It says:
“We believe that every bank should have a properly constituted
and effective Risk Committee of the Board”.

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I do not want to go on to quote the rest of the
paragraph but that is very firm. Despite the banking
crisis and the concern expressed—almost unanimously,
or at least by almost every contributor—the Government’s
response was that it is “desirable” for banks and other
institutions but not absolutely mandatory. It then goes
on to say:
“There is a strong presumption that banks and insurers that
are included in the FTSE 100 are examples of types of firm that
should have separate risk committees”.
In the light of what has happened and the strength of
that recommendation, I would like to understand exactly
why the Government felt they should not go further
than they have done in their response.
Baroness Wilcox: The answer to that is that we are
still considering it.
6.28 pm
Lord MacGregor of Pulham Market: My Lords, I
thank my noble friend Lady Wilcox for that very
helpful and comprehensive reply. We have had a highquality
debate, rich in contributions, and I am particularly
grateful to the noble Baroness, Lady Hogg, for her
kind words about our committee’s report. I cannot
begin to sum up the debate properly as it would take
much longer than this reply is conventionally allowed.
However, I will quickly make five points.
First, it is unfortunate that such a high-quality
debate has taken place in the Moses Room because of
the pressure of legislation in the main Chamber. However,
I hope that this report will be widely read and followed
up. Secondly, we are probably going to face a House of
Lords reform Bill, but if anyone had followed this
debate they would have seen the high quality of debates
that take place in this House and would not always
necessarily occur in the other place. I say that fully
aware that at least half of the colleagues who have
taken part in this debate have, for a long time, been in
the other place. I am not criticising the other place, but
the contribution from those who would probably not
have stood for election to Parliament has been very
valuable in this debate and it shows the quality of the
House of Lords on topics such as this.
Thirdly, I say to my noble friend Lord Stewartby,
who was sceptical about whether we had found answers
on the first part of our report, where the main thrust is
about the oligopoly of our auditors, that we never
expected to have a magic wand and find a magic
solution. As I said at the beginning, finding solutions
is not so easy. I hope that a number of issues that we
have put forward and that have been pursued further
will help to deal with a number of aspects of this.
However, of course, the problem we face of finding a
way of extending the major auditing firms beyond the
big four is a very difficult one.
Fourthly, as I said at the beginning, some thought
that this study would be rather dry and esoteric.
I think that is largely because of the title we gave it,
which probably put a lot of people off. However, it has
been clear from this debate that the issues we have
raised go to the heart of many aspects of our financial,
economic and business life; not to mention, as my
noble friend Lord Lawson pointed out, behavioural
and cultural attitudes. It is a much more widely based
debate than one just dealing with audit matters.
That leads me to my final point. The noble Lord,
Lord Currie, very kindly said that this debate was
merely a staging post, and I entirely agree with him.
Clearly, this issue will be debated further and I hope
that at some stage our committee will be able to come
back to it again. This will not be immediate, because
we have just agreed that our next topic will be the
economic implications for the United Kingdom of
Scottish independence, so that will obviously take up
much of the next year. However, I do hope that we can
come back to address these issues in one way or
another because there is clearly still so much to be
followed through.
I thank all those who have contributed and particularly
all my colleagues on the committee for all that they
have done and all the hard work that they have put
into it. I think it has been well worth it.
Motion agreed.
Committee adjourned at 6.30 pm.

WS 19 Written Statements [14 MARCH 2012]
Written Statements
WS 20
Written Statements
Wednesday 14 March 2012
Adoption
Statement
The Parliamentary Under-Secretary of State for Schools
(Lord Hill of Oareford): My honourable friend the
Secretary of State for Education (Michael Gove MP)
made the following Written Ministerial Statement:
I am publishing today An Action Plan for Adoption:
Tackling Delay. It explains the changes the Government
will be making to speed up the adoption system in
England. This is the first part of a radical wider
programme of reform to improve the lives of all
children who enter local authority care.
Adoption gives vulnerable children the greatest possible
stability and security, in a permanent loving family
and it can bring great joy and reward to adoptive
parents. But the number of children adopted from care
has been decreasing in recent years. Just 3,050 children
found new homes through adoption last year, the
lowest number since 2001. Many of the children who
are adopted are forced to wait far too long. The
average time between a child entering care and moving
in with their adoptive family is one year and nine
months. If a child enters care at the age of two and a
half, on average they will be nearly five by the time
they move in with their family.
Delay can cause lasting harm to the ability of
babies and children to make secure attachments to
their caregivers and increases the likelihood that they
will develop emotional and behavioural difficulties.
And as children grow older in care, waiting for an
adoptive family, it is less likely they will be adopted
at all.
The action plan sets out a range of proposals to
speed up the process for children; to overhaul the
service for prospective adopters; and to strengthen
local accountability for the timeliness of adoption
services. Last week the Prime Minister announced
measures to speed up the process for children. We will
seek an early opportunity to introduce new legislation
that will prevent local authorities from delaying an
adoption by searching for a perfect match for a child,
particularly one based on the child’s ethnicity. We will
also change the regulatory framework to make it
easier for children to be fostered by approved prospective
adopters, while courts consider the case for adoption.
Finally, if a match has not been found locally within
three months of a child being recommended for adoption,
local authorities will have to refer them to the national
adoption register.
One of the reasons for delay in the adoption system
is a mismatch between children in need of adoption
and the families approved to adopt them. We need to
recruit a greater number and wider range of prospective
adopters, for the children who are waiting, many of
whom have high levels of complex needs because of
their earlier experiences of abuse and neglect. We
believe that there are many more people willing to give
a child a stable, loving home through adoption than
those who complete the assessment journey at present.
So we want to reform an assessment process which
many prospective adopters find unresponsive, intrusive
and lengthy—it can take as long as two years to
complete.
With the help of an expert working group of local
authorities, voluntary adoption agencies and adoptive
parents we have developed a set of proposals for the
reform of the recruitment, training and assessment
process. The action plan gives strong support to a new
six-month approval process and assessment agreement
and sets out our intention to consult on the necessary
regulatory changes. And it welcomes the concept of a
national gateway to adoption—a national first point
of contact for the adoption system.
We will hold local authorities more sharply to
account for the speed of their adoption processes
through an adoption scorecard linked to a performance
threshold and statutory intervention regime. Delay in
the adoption system is not universal. Some local
authorities already ensure that all their children who
need adoption are placed with families in a timely
fashion. Some adopters speak of receiving an efficient,
professional and supportive service. Building on the
other changes we are making to the system, the new
scorecard and intervention regime will make good
practice more widespread.
The action plan contains the most urgent changes
we need to make to the adoption system, as part of
our broader work to transform outcomes for children
in care. My department will bring forward a further
set of proposals on other changes to the adoption
system and wider reform to services for children in
care in the summer.
Copies of An Action Plan for Adoption: Tacking
Delay have been placed in the Libraries of both Houses.
Corporate Governance
Statement
The Parliamentary Under-Secretary of State, Department
for Business, Innovation and Skills (Baroness Wilcox):
My honourable friend The Secretary of State for Business,
Innovation and Skills (Vince Cable) has today made
the following statement.
On 23 January, I announced a package of measures
to address failings in the corporate governance framework
for executive remuneration. This includes:
Greater transparency in directors’remuneration reports
Empowering shareholders and promoting shareholder
engagement through enhanced voting rights
Increasing the diversity of boards and remuneration
committees
Encouraging employees to be more engaged by
exercising their right to information and consultation
arrangements
Working with investors and business to promote
best practice on pay-setting.

WS 21 Written Statements [LORDS]
Written Statements
WS 22
These measures will be taken forward through a
combination of primary and secondary legislation,
and business-led good practice. My objective is to
enable shareholders to promote a stronger, clearer link
between pay and performance in order to prevent
rewards for mediocrity or failure, while still allowing
for exceptional performance to be rewarded.
Enhanced voting rights for shareholders will require
primary legislation and, subject to parliamentary time,
we aim to include this in the next legislative session.
Today I am publishing a consultation document which
provides more detail on a model which will give
shareholders greater influence on the issue of executive
remuneration. The main components of this are:
An annual binding vote on future remuneration
policy
Increasing the level of support required on votes on
future remuneration policy
An annual advisory vote on how remuneration
policy has been implemented in the previous year
A binding vote on exit payments over one year’s
salary.
The purpose of the consultation is to seek evidence
on the impact, costs, benefits and likely behavioural
effects of the proposals. I want to ensure that these
measures promote effective dialogue between companies
and their shareholders.
In developing this consultation document, we have
engaged with investors, non-executive directors, company
secretaries, HR directors, lawyers and other experts.
We will continue to do this during the consultation
period and to build our evidence base. Today I have
also published the Regulatory Policy Committee’s verdict
on our consultation-stage impact assessment.
Following this consultation I hope to confirm the
precise measures we will take forward in primary
legislation early this summer. At the same time, I plan
to publish draft regulations which will determine the
content of directors’ remuneration reports so that the
proposals can be scrutinised as a whole. Together,
these measures will create a more robust framework
within which executive pay is set, agreed and reported
on.
I am placing a copy of the consultation document
in the Libraries of both Houses.
Correction to Lords Oral Answer
Statement
Earl Attlee: In the course of the debate following
Lord Avebury’s question about Gypsies and Travellers
on 6 March 2012, I stated that,
“Between 2000 and 2010, the number of caravans
on unauthorised developments increased from 728 to
3,895.” (Official Report, col. 1668).
The number of caravans on unauthorised developments
did increase over that period, but I should have said
that the number increased from 728 to 2,395.
Crime: Hate Crime
Statement
The Minister of State, Home Office (Lord Henley):
My honourable friend the Parliamentary Under-Secretary
of State for Equalities and Criminal Information (Lynne
Featherstone) has today made the following Written
Ministerial Statement:
Today, we are publishing Challenge it, Report it,
Stop it—the Government’s plan for tackling hate crime.
Hate crime—crime which is motivated by hostility
to the victim’s personal characteristics, such as disability,
gender-identity, race, religion or sexual orientation—can
have devastating consequences for victims, their families
and communities. It is hugely underreported, as many
victims are reluctant to come forward for fear of
attracting further abuse or because they do not believe
that the authorities will take them seriously.
This is an issue the Government take very seriously,
as demonstrated by our coalition commitment to improve
the recording of such crimes.
We have a responsibility to reduce the incidence of
hate crime and to protect victims. However, getting the
response to hate crime right depends on deep local
knowledge of victims, offenders and communities, so
the lead must come from professionals at the front
line, working with the voluntary sector and communities
to respond to local issues and priorities.
The Government have a vital role to play in setting
the direction at national level, and supporting those
locally led efforts, with a clear, consistent message on
the importance of tackling hate crime and protecting
victims and communities. That role includes making
more and better national-level data available, so that
we have a better understanding of where hate crime
is happening and why; encouraging new ideas and
highlighting examples of good practice, so that local
professionals can see what has worked in other areas;
and, where necessary, giving victims of hate crime
more protection under the law.
Challenge it, Report it, Stop it is our blueprint for
the remainder of this Parliament. It brings together
activity by a wide range of government departments—
working with local agencies and voluntary sector
organisations, as well as with our Independent Advisory
Group on Hate Crime—to meet three key objectives:
To prevent hate crime—by challenging the attitudes
that underpin it, and Intervening early to prevent it
escalating;
To increase reporting and access to support—by
building victim confidence and supporting local
partnerships; and
To improve the operational response to hate crimes—by
better identifying and managing cases, and dealing
effectively with offenders.
Hate crime is also a global issue and our responsibility
to share our experience, ideas and good practice should
also extend to partners overseas. We will therefore
continue to push for action on hate crime at international
level, through a range of organisations, including
the United Nations, the European Union and the
Organisation for Security and Co-operation in Europe.
A copy of the action plan will be placed in the
Library of the House.

WS 23 Written Statements [14 MARCH 2012]
Written Statements
WS 24
EU: FISCUS
Statement
The Commercial Secretary to the Treasury (Lord
Sassoon): My honourable friend the Economic Secretary
to the Treasury (Chloe Smith) has today made the
following Written Ministerial Statement
I wish to inform the House that the Government
have opted in to the proposal for a regulation of the
European Parliament and of the Council establishing
an action programme for customs and taxation in the
European Union for the period 2014-20 (known as
FISCUS).
This proposal establishes a tax and customs
co-operation programme to support the effective
functioning of the internal market and operation of
customs procedures, and to improve the functioning
of taxation systems within the EU by increasing
co-operation between member states. The programme
aims to contribute to the Europe 2020 strategy for
smart, sustainable and inclusive growth, by strengthening
the functioning of the single market and EU customs
union. It also has the objective of driving technical
progress and innovation in national tax administrations
with the aim of developing e-tax administrations and
contributing to the establishment of a digital single
market.
The UK has benefited from participation in predecessor
programmes, in particular, through involvement in
multilateral controls which can assist with the detection
of tax fraud and through using Customs 2013 activities
to reduce administrative burdens for compliant businesses.
The programmes also fund the maintenance and
development of EU communication and information
exchange systems. This is an area where spend on
research and development can represent good EU
added-value by providing economies of scale in the
development of cross-EU networks.
EU: Justice and Home Affairs Measures
Statement
The Minister of State, Home Office (Lord Henley):
My honourable friend The Parliamentary Under-Secretary
of State for Crime and Security (James Brokenshire)
has today made the following Written Ministerial
Statement:
We believe that European Union measures that
impose Justice and Home Affairs (JHA) obligations
only apply to the UK if we choose to opt in to them.
Since the entry into force of the Lisbon treaty, there
has been a number of JHA proposals that repeal
measures that we are currently bound by, and replace
them with new ones. We have not opted in to all of the
replacement proposals and there has been a question
as to whether the measures that we currently do take
part in (the “underlying measures”) would still bind us
once the replacement has entered into force.
The policy we inherited from the previous Government
was that the UK was not bound by an underlying
measure when we did not opt in to a measure repealing
and replacing that underlying measure. Following a
review of this policy, the position of the Government
is that:
i) the UK considers itself bound by an underlying
measure when we do not opt in to a new measure
that repeals and replaces it; and
ii) Article 4a of the Title V Opt-in Protocol
(Protocol No 21 of the Treaty on the Functioning
of the European Union) should be interpreted as
applying not only to amending measures but also
to repeal and replace measures.
Our position has been reinforced by the fact that
the Commission has started to introduce express wording
in repeal and replace measures which makes it clear
that the underlying measures will continue to bind us
if we do not opt in. It is highly likely that the Commission
will in future routinely insert such language into new
measures.
We acknowledge that this new policy carries a small
risk of the UK being bound by arrangements which
no longer operate in relation to the EU as a whole but
continue to apply as between the UK and Denmark
(and sometimes Ireland). This would happen when
only the UK and Denmark (and sometimes Ireland)
remain bound by an underlying measure following a
“repeal and replace” proposal. However, we already
accept this position in relation to amending measures
as a consequence of Article 4a of the Title V Opt-in
Protocol. Article 4a of the Title V Opt-in Protocol
provides that the UK remains bound by an underlying
measure where a new measure amends it unless “the
non participation of the UK and Ireland in the amended
version of an existing measure makes the application
of that measure inoperable for other member states of
the Union…”. In such cases, the measure would cease
to apply to the UK.
Our decision to accept that we continue to be
bound by an underlying measure where it has been
repealed and replaced has a direct read-across to the
interpretation of Article 4a of the Title V Opt-in
Protocol. Our view is that a broad interpretation of
Article 4a is the correct one and that repeal and
replace measures should be considered to be a type of
amending measure for the purposes of Article 4a. In
practical terms, if we accept that the UK continues to
be bound by the underlying measure where we do not
participate in the new “repeal and replace” measure,
we believe that we must also accept that, in such cases,
the UK would cease to be bound by the underlying
measure where it was deemed to be “inoperable”.
Queen’s Diamond Jubilee: Civic Honours
Statement
The Minister of State, Ministry of Justice (Lord
McNally): My right honourable friend the Deputy
Prime Minister (Nick Clegg) has made the following
Written Ministerial Statement:
I am pleased to announce that Her Majesty The
Queen has commanded that city status be granted to
Chelmsford, Perth and St Asaph; and Lord Mayoralty
to Armagh to mark her Diamond Jubilee.
Although the grant of these honours remains a rare
mark of distinction, the Queen accepted the Government’s
recommendation to grant these honours to more than
one place to commemorate her Diamond Jubilee and
in recognition of the high quality of applications
received. City status and Lord Mayoralty, which confer

WS 25 Written Statements [LORDS]
Written Statements
WS 26
no additional powers or functions on the successful
applicants, will be granted by Letters Patent, which
will now be prepared for presentation to Armagh,
Chelmsford, Perth and St Asaph in due course.
The unsuccessful applicants will, of course, be
disappointed not to have been honoured on this occasion.
The standard of application was very high, and those
who missed out should not be downhearted. I hope
the competition has given the residents of all of the
places which applied a sense of civic pride, of collective
ownership and of community spirit. Across the United
Kingdom, I have been impressed by the pride and
passion which people have shown in putting their
nominations forward.
I offer my congratulations to Armagh, Chelmsford,
Perth and St Asaph which have been granted these
rare honours from a field of exceptional entrants.
Westminster Foundation for Democracy
Statement
The Minister of State, Foreign and Commonwealth
Office (Lord Howell of Guildford): My right honourable
friend,theSecretaryof StateforForeignandCommonwealth
Affairs (Mr William Hague) has made the following
Written Ministerial Statement.
I wish to inform the House of the Foreign and
Commonwealth Office’s plans for continuing support
to the Westminster Foundation for Democracy (WFD).
I am also able to inform the House that my right
honourable friend the Secretary of State for International
Development has also agreed to provide additional
funding to WFD.
The FCO will provide WFD with funding of
£3.5 million for 2012-13 and plans to provide them
with similar sums for 2013-14 to 2014-15, dependent
on future performance across all aspects of their work.
The Department for International Development (DFID)
will provide WFD with an accountable grant of
£6 million over the next three years (2012-13 to 2014-15),
which is the first time DFID has provided funding to
WFD in this way.
WFD delivers an important service in its work to
strengthen parliaments and provide assistance to political
parties to support democracy across the world. The
promotion of multi-party democracy, good governance,
transparency and accountability help to support the
UK Government’s priorities and the UK national
interest.
The joint support of our two departments will help
WFD to become a more efficient, effective, and evidencebased
organisation and to achieve greater impact with
its important work.

WA 63 Written Answers [14 MARCH 2012]
Written Answers
WA 64
Written Answers
Wednesday 14 March 2012
[The following Answer should have been published in
the Official Report of 13.3.12 but was omitted as a
result of a processing error.]
Questions for Written Answer
Question
Asked by Lord Laird
To ask Her Majesty’s Government what they
estimate is the average cost of a media question to a
government department. [HL15952]
Lord Wallace of Saltaire: This information is not
collated.
Abortion
Question
Asked by Lord Alton of Liverpool
To ask Her Majesty’s Government whether,
following the Department of Health’s recent procedural
change in abortion data collection, they plan to
collect information on the amount of income generated
by abortion providers. [HL16152]
TheParliamentaryUnder-Secretaryof State,Department
of Health (Earl Howe): The department has no plans
to collect information relating to the income generated
by abortion providers over and above their existing
statutory responsibilities, for example through the Charity
Commission.
Agriculture: Schmallenberg Virus
Questions
Asked by Baroness Masham of Ilton
To ask Her Majesty’s Government what action
they are taking to find a cure for the Schmallenberg
virus. [HL16095]
TheParliamentaryUnder-Secretaryof State,Department
for Environment, Food and Rural Affairs (Lord Taylor
of Holbeach): Defra is funding research into finding
out more about this virus that will help in understanding
how best it can be managed.
Currently, there is no treatment or preventative
vaccine for Schmallenberg virus (SBV) available. However,
laboratories and vaccine manufacturers in the EU are
considering the possibility of developing an effective
vaccine in the future. Defra is supporting research and
diagnostic test development at the UK and international
level to help inform whether developing potential vaccine
candidates would be worth while. To this end, we are
collaborating fully with our international colleagues,
involving research laboratories and commercial companies.
While there is no information at this stage about the
progress of vaccine development, we understand some
commercial companies are in the early stages of
development.
Asked by Lord Glentoran
To ask Her Majesty’s Government whether the
Department for Environment, Food and Rural Affairs
was given early warning of the Schmallenberg virus
by the European Commission; and whether British
farmers were provided with any assistance in preparing
for the virus. [HL16110]
Lord Taylor of Holbeach: A team of experts from
Defra and the Animal Health and Veterinary Laboratories
Agency (AHVLA) constantly monitors diseases in the
UK and across the world. As a result, we are well
informed of the threat of both emerging and spreading
diseases.
In autumn 2011 there were indications of an
unidentified syndrome in the Netherlands causing milk
drop, fever and diarrhoea in cattle.
Key industry representatives were alerted to the
issue and asked to raise awareness and increase vigilance
for signs of similar disease in the UK.
Once the virus had been characterised as Schmallenberg
virus and further cases were emerging in Europe,
letters were sent out to key stakeholders and information
made widely available through the industry press.
Stakeholders across the UK are being kept informed
of developments. Defra’s and AHVLA’s animal diseases
web pages are being updated regularly as new information
emerges from Europe.
Guidance has been provided by the Commission on
trade and funding for collaborative research and further
advice and information for vets and farmers will also
be provided through the AHVLA.
Association of Chief Police Officers
Questions
Asked by Lord Willis of Knaresborough
To ask Her Majesty’s Government what is the
total budget for the operation of the Association of
Chief Police Officers; who provides the funding;
and how expenditure is audited. [HL16218]
To ask Her Majesty’s Government what was the
total expenditure on the employment of consultants
by the Association of Chief Police Officers in each
of the past three years. [HL16219]
To ask Her Majesty’s Government what are the
procurement protocols for the Association of Chief
Police Officers; and who approved them. [HL16220]
To ask Her Majesty’s Government, in each case
where consultants were employed by the Association
of Chief Police Officers, whether the relevant
procurement protocols were adhered to; and whether
each contract was advertised for open tender.
[HL16221]
The Minister of State, Home Office (Lord Henley):
The Association of Chief Police Officers (ACPO) is a
private limited company and is not owned or controlled
by the Home Office. As such, this information is not
held by the department.

WA 65 Written Answers [LORDS]
Written Answers
WA 66
Civil Service
Question
Asked by Lord Liddle
To ask Her Majesty’s Government what was the
size of the Senior Civil Service, and how many civil
servants were employed, in each year from 1979 to
2010 inclusive. [HL16050]
Lord Wallace of Saltaire: The Cabinet Office has
collected information on the number of senior civil
servants on a headcount basis since the creation of the
Senior Civil Service in April 1996 when around 3,050
senior staff were brought together into a centrally
managed single service-wide group. Time series data
for Senior Civil Service headcount for the period 1996
to 2010 has therefore been provided in the table below,
along with overall full-time equivalent Civil Service
employment for the period 1979 to 2010.
Civil Service and Senior Civil Service Employment 1979 to 2010
Year
Total Civil Service
employment
Senior Civil Service
employment
1979 733,000 n/a
1980 708,000 n/a
1981 695,000 n/a
1982 675,000 n/a
1983 653,000 n/a
1984 633,000 n/a
1985 620,000 n/a
1986 596,000 n/a
1987 599,000 n/a
1988 583,000 n/a
1989 572,000 n/a
1990 562,000 n/a
1991 576,000 n/a
1992 591,000 n/a
1993 582,000 n/a
1994 558,000 n/a
1995 534,000 n/a
1996 517,000 3,050
1997 495,000 2,988
1998 484,000 2,973
1999 482,000 2,963
2000 492,000 3,108
2001 497,000 3,331
2002 511,000 3,507
2003 529,000 3,700
2004 538,000 3,893
2005 537,000 3,906
2006 524,000 4,031
2007 505,000 4,072
2008 489,000 4,212
2009 493,000 4,271
2010 487,000 4,353
Source: Civil Service 1991 to 2010: Quarterly Public Sector
Employment Survey. ONS (FTE basis)
Civil Service 1979 to 1990: Civil Service Statistics. ONS (FTE
basis)
SCS 1996 to 2010: SCS Database Cabinet Office (Headcount
basis)
Notes: n/a—data not available as the Senior Civil Service
was created as a centrally managed single service-wide group in
1996.
Civil Service: Strategy
Question
Asked by Lord Tebbit
To ask Her Majesty’s Government whether they
have determined the terms of reference of their
review of the Strategy for the Civil Service 2008-13.
[HL15944]
Lord Wallace of Saltaire: I refer my noble friend to
the reply I gave him on Monday 27 February 2012
(Official Report, Column WA 261).
Coroner Service
Question
Asked by Baroness Miller of Chilthorne Domer
To ask Her Majesty’s Government what progress
they are making in appointing a chief coroner.
[HL16231]
The Minister of State, Ministry of Justice (Lord
McNally): Under the Coroners and Justice Act 2009 it
is for the Lord Chief Justice to appoint the chief
coroner, in consultation with the Lord Chancellor.
The Ministry of Justice is in detailed discussions with
the Judicial Office regarding the appointment and
terms of the office of chief coroner and we will make
an announcement as soon as possible.
Education: Special Educational Needs
and Disability
Questions
Asked by Lord Bradley
To ask Her Majesty’s Government when they
plan to publish their White Paper on special educational
needs and disability. [HL16022]
To ask Her Majesty’s Government whether their
proposed White Paper on special educational needs
and disability will include measures to improve
testing in schools for attention deficit hyperactivity
disorder. [HL16023]
The Parliamentary Under-Secretary of State for
Schools (Lord Hill of Oareford): The Government will
publish shortly a report on the Green Paper, Support
and Aspiration: A New Approach to Special Educational
Needs and Disability, setting out progress to date and
next steps and a summary of the consultation responses.
We remain committed to achieving the ambitious
programme set out in the Green Paper and will place
the document in the Library of the House when it is
published.
Energy: Green Deal
Questions
Asked by Baroness Smith of Basildon
To ask Her Majesty’s Government what
consideration they have given to the assessment in
the Europe Economics Report The Green Deal and

WA 67 Written Answers [14 MARCH 2012]
Written Answers
WA 68
Energy Company Obligation that the energy company
obligation neutral approach would allow the
Government’s target of 1.95 Mt CO 2 savedtobe
reached in 2019. [HL16270]
TheParliamentaryUnder-Secretaryof State,Department
of Energy and Climate Change (Lord Marland): DECC
is currently carefully reviewing the responses to the
Green Deal and energy company obligation consultation.
Our final impact assessment, to be published alongside
the government response to the consultation, will contain
our analysis and assumptions, including those relating
to the design of the energy company obligation and
the carbon savings it will achieve.
Asked by Baroness Smith of Basildon
To ask Her Majesty’s Government what assessment
they have made of the assessment in the Europe
Economics Report The Green Deal and Energy
Company Obligation that between 6 million and
9 million homes in the United Kingdom can still
benefit from full loft insulation; that there are between
1.4 million and 3.6 million untreated homes with
easy to fill cavity walls; and that it is possible to
phase in the Energy Company Obligation in a way
which encourages take-up of loft insulation and
cavity insulation without increasing the overall costs
already assumed. [HL16272]
Lord Marland: DECC has worked closely with the
insulation industry to gain a detailed understanding
of the remaining potential in the sector, including
reviewing the Europe Economics report and other
evidence received since our draft impact assessment
was published in November 2011.
Our final impact assessment, to be published alongside
the government response to the consultation, will contain
our analysis and assumptions, including those relating
to the scope of the energy company obligation and the
number of cavity walls and lofts that still need to be
treated.
Asked by Baroness Smith of Basildon
To ask Her Majesty’s Government what assessment
they have made of the demand for solid wall insulation
under the Green Deal; and what plans they have to
ensure that the training and accreditation of installers
of loft and cavity wall insulation will be in place to
meet demand. [HL16273]
Lord Marland: DECC has worked closely with the
insulation industry to gain a detailed understanding
of the sector’s capacity to increase solid wall installation
rates in a safe and sustainable way.
DECC has put in place an accreditation framework
relating to solid wall insulation to assure the quality of
installations. The British Standards Institute has already
published a publically available specification which
covers installation standards relating to each of the
measures eligible for Green Deal finance.
Our final impact assessment, to be published alongside
the Government’s response to the consultation, will
contain estimates of annual solid wall insulation volumes.
In addition, the department has made available
£2 million to support the training and up-skilling of
solid wall installers.
Asked by Baroness Smith of Basildon
To ask Her Majesty’s Government what assessment
they have made of the assessment in the Europe
Economics Report The Green Deal and Energy
Company Obligation that the industry could
realistically install solid wall insulation in 60,000
homes in the first year of the Green Deal, with
subsequent increases in capacity of around 25 per
cent annually. [HL16274]
Lord Marland: DECC has worked closely with the
insulation industry to gain a detailed understanding
of the sector’s capacity to increase solid wall installation
rates in a safe and sustainable way, including reviewing
the Europe Economics report.
Our final impact assessment, to be published alongside
the government response to the consultation, will contain
our analysis and assumptions.
Asked by Lord Jenkin of Roding
To ask Her Majesty’s Government what assessment
they have made of the introduction of a transition
period for the change from loft and cavity wall
insulation to solid wall insulation under the Green
Deal. [HL16321]
Lord Marland: The Government’s consultation on
Green Deal and the ECO noted that Green Deal
finance should generally enable householders to invest
in loft and cavity wall insulation at no up-front cost.
The energy company obligation (ECO) could leverage
private sector capital and help develop the market for
measures such as solid wall insulation, where the
Green Deal golden rule does not apply (ie, where
energy bill savings from energy efficiency measures do
not fully repay the cost of the measure).
We are currently considering responses to the public
consultation on the design of the ECO and the Green
Deal, and we will issue a formal consultation response,
including on how we will manage the transition period,
later in the spring.
Asked by Lord Jenkin of Roding
To ask Her Majesty’s Government what assessment
they have made of the willingness of private
householders to take up solid wall insulation in
sufficient numbers to meet the targets set out in the
impact assessment to the Green Deal and energy
company obligation consultation. [HL16322]
Lord Marland: DECC has primarily drawn on two
types of evidence to understand the willingness of
private households to take up solid wall insulation:
direct market research 1 in order to understanding
what consumers say they would take up in the context

WA 69 Written Answers [LORDS]
Written Answers
WA 70
of a Green Deal, and findings from pilots and research
projects such as the Sutton pilot results and evaluation
report, published in 20112 . DECC has then developed
an econometric model which enables analysis of the
levels of take-up based on the amount of ECO finding,
alongside the financial offering and supply-side constraints.
As such, the numbers in the published impact assessment
represent DECC’s view of the likely take-up of solid
wall installation.
1 www.decc.gov.uk/assets/decc/11/consultation/green-deal/3504green-deal-consumer-research-data-table.pdf
2 www.bioregional.com/files/publications/Helping-to-inform-the-
Green-Deal-green-shoots-from-Pay-As-You-Save.pdf
Asked by Lord Jenkin of Roding
To ask Her Majesty’s Government what assessment
they have made of the timescales to which local
government will be subject in any procurement of
solid wall insulation under the Green Deal.
[HL16323]
Lord Marland: Local authorities procuring solid
wall insulation projects under the Green Deal will be
subject to existing national and European procurement
rules that apply to such activity.
A number of local authorities are currently considering
their options for delivering the Green Deal. For example,
Birmingham City Council is currently procuring a
Green Deal delivery partner; given the scale of the
contract being tendered this is subject to European
procurement rules.
Asked by Lord Jenkin of Roding
To ask Her Majesty’s Government what measures
will be included in the “time limited introductory
offer” of £200 million announced by the Minister
for Climate Change on 20 February (HC Deb,
col 477W), to support the introduction of the Green
Deal. [HL16324]
Lord Marland: We are currently considering which
measures will be included in the Green Deal introductory
scheme and will provide further details later in the
year.
Energy: Wind Farms
Question
Asked by The Duke of Montrose
To ask Her Majesty’s Government, further to
the Written Answer by Lord Marland on 6 March
(WA 403), what is their estimate of the power
generated by wind farms in each region of the
United Kingdom. [HL16330]
TheParliamentaryUnder-Secretaryof State,Department
of Energy and Climate Change (Lord Marland): The
following table shows the amount of electricity generated
by wind in each region in 2010, the latest year for
which this information is available.
Region
Generation of electricity from wind 1
(GWh)
England 3,657.6
East Midlands 756.1
East of England 838.7
North East 235.1
North West 787.8
London 4.9
South East 750.4
South West 92.9
West Midlands 0.7
Yorkshire and the Humber 191.0
Wales 999.4
Scotland 4,861.1
Northern Ireland 641.5
1 In total, around 2GWh of generation from shoreline wave and
tidal is included in the data.
Extremism
Question
Asked by Baroness Miller of Chilthorne Domer
To ask Her Majesty’s Government for what actions,
including actions which were not, or were not intended
to be, criminal, a person would be classified a
“domestic extremist” and so qualify to appear on
the police database of domestic extremists.
[HL16234]
The Minister of State, Home Office (Lord Henley):
There is no legal definition of domestic extremism in
the UK. Police databases, including those containing
data on domestic extremism, are maintained in compliance
with the statutory Code of Practice on the Management
of Police Information. This provides a framework for
the police to collect information for policing purposes,
which are described as protecting life and property,
preserving order, preventing the commission of offences,
bringing offenders to justice, or any duty or responsibility
of the police arising from common or statute law. This
applies to protestors or a person alleged to be a
domestic extremist who had not committed any
criminal act.
Firefighters
Questions
Asked by Baroness Smith of Basildon
To ask Her Majesty’s Government what is the
breakdown by age and gender of serving front-line
firefighters in each county in England and Wales.
[HL16119]
To ask Her Majesty’s Government what assessment
they have made of the age profile of firefighters in
England and Wales. [HL16120]
TheParliamentaryUnder-Secretaryof State,Department
forCommunitiesandLocalGovernment(BaronessHanham):
The department holds fire and rescue service staff
numbers for each fire and rescue service in England.

WA 71 Written Answers [14 MARCH 2012]
Written Answers
WA 72
This includes totals by age and by gender for all
wholetime and retained firefighters. The latest data
relate to 31 March 2011.
A copy of this information has been deposited in
the Library of the House.
Government Departments: Circulars
Question
Asked by Lord Laird
ToaskHerMajesty’sGovernmentwhatdepartmental
circulars the Department for Business, Innovation
and Skills (1) has issued in the last 12 months, and
(2) plans to issue in the next 12 months; and what
issues those documents cover.
[HL16296]
TheParliamentaryUnder-Secretaryof State,Department
for Business, Innovation and Skills (Baroness Wilcox):
The Department for Business, Innovation and Skills
does not produce any regular circulars. We do however
put information about policy updates on our website
(including public consultations) and send a weekly
bulletin newsletter to around 2,500 stakeholders who
have subscribed online.
Our list of publications can be seen at http://
www.bis.gov.uk/publications and access to the BIS
stakeholder bulletin and blogs is through http://
www.bis.gov.uk/site/connect
Government Departments: Staff
Questions
Asked by Lord Liddle
To ask Her Majesty’s Government how many
staff (civil servants, special advisers, secondees or
other staff) were employed in (1) the Prime Minister’s
Delivery Unit, (2) the Performance and Innovation
Unit, (3) the Policy Unit, (4) the Strategy Unit and
(5) the Social Exclusion Unit, for each year since
1997. [HL16051]
Lord Wallace of Saltaire: The table below sets out
headcount for each unit requested for each full financial
year from 1997-98 to 2010-11.
Headcount 31/03/1998 31/03/1999 31/03/2000 31/03/2001 31/03/2002 31/03/2003 31/03/2004
Performance &
Innovation Unit
4 21 34 38 60 0 0
PM’s Delivery
Unit
0 0 0 0 29 39 47
PM’s Policy
Unit
17 23 30 27 31 27 33
Social Exclusion
Taskforce
4 3 4 23 20 3 1
Strategy Unit 0 0 0 0 18 34 25
Headcount 31/03/2005 31/03/2006 31/03/2007 31/03/2008 31/03/2009 31/03/2010 31/03/2011
Performance &
Innovation Unit
0 0 0 0 0 0 0
PM’s Delivery
Unit
49 61 72 4 0 0 0
PM’s Policy
Unit
28 10 5 19 17 20 28
Social Exclusion
Taskforce
0 0 24 25 31 26 0
StrategyUnit 33 51 44 73 81 43 45
Fluctuations in headcount within individual units
reflect the nature of the work carried out and the
speed at which change is required to meet changing
priorities.
The Social Exclusion Taskforce was transferred to
the Office of the Deputy Prime Minister during 2003-06,
before returning to the Cabinet Office. During 2010-11
the task force was wound down and the work was
subsumed by the Office for Civil Society.
Asked by Lord Tebbit
To ask Her Majesty’s Government, further to
the Written Answer by Lord Wallace of Saltaire on
27 February (WA 260-1), when they expect the
findings of the review of Promoting Equality, Valuing
Diversity—A Strategy for the Civil Service 2008-13
to be made public. [HL16063]
Lord Wallace of Saltaire: In the next few months.
Asked by Lord Marlesford
To ask Her Majesty’s Government, further to
the Written Answer by Lord Henley on 13 December
2011 (WA 257-8), how many members of the staff
of the UK Border Agency and its predecessor
bodies have been convicted of criminal offences in
connection with their official activities over the past
seven years; and, in each case, what was the name of
the offender, the date, and the nature of the offence
and the sentence received. [HL16133]

WA 73 Written Answers [LORDS]
Written Answers
WA 74
The Minister of State, Home Office (Lord Henley):
The detail requested was set out in my reply of
13 December 2011. In addition to this there have been
the following convictions:
Name Charges Conviction date Sentence
Samuel
SHOYEJU
Radhakrishnan
KITTOOR
RAMMAKRISHNAN
Misconduct in
public office
Misconduct in
public office
and moneylaundering
Wayne DAVIS Misconduct in
public office
Martin
BARKER
False
Accounting
10 November
2011
05 December
2011
07 December
2011
21 December
2011
Asked by Lord Laird
7 years
8 years
2 years nine
months
6 months
suspended
To ask Her Majesty’s Government, further to
the Written Answer by Lord Wallace of Saltaire on
27 February (WA 261), whether they will ascertain
how many civil servants are paid as departmental
trade union side staff in the Department for Business,
Innovation and Skills, the Department for Work
and Pensions, the Ministry of Justice, and HM
Revenue and Customs. [HL16175]
Lord Wallace of Saltaire: I refer the noble Lord to
the reply I gave him on 27 February 2012 (Official
Report, column WA 261).
Asked by Baroness Smith of Basildon
To ask Her Majesty’s Government how many
staff working in the Department of Energy and
Climate Change are seconded from outside companies
and organisations; from which companies and
organisations they are seconded; and how many are
seconded from each such company or organisation.
[HL16209]
TheParliamentaryUnder-Secretaryof State,Department
of Energy and Climate Change (Lord Marland): As of
29 February 2012, there were 31 people working in the
Department of Energy and Climate Change who were
seconded from outside companies and organisations.
The table below shows which companies or organisations
they are from and how many are seconded from each
such company or organisation.
Companies or Organisations Number of people
Bright Futures NZ Limited 1
Cambridge University 1
Carbon Trust 7
Committee on Climate Change 1
ConocoPhillips (UK) Ltd 1
Deloitte LLP 1
Energus 1
Energy People Ltd 1
Environment Agency 2
KPMG LLP 1
Living With Environmental Change
(Fellowship Placement)
1
London Development Agency 1
Met Office 1
Mount Wellington Mine Ltd 1
Companies or Organisations Number of people
National Audit Office 1
National Grid 2
Nuclear Decommissioning Authority 1
Pinsent Mason LLP 2
RET—Australia 1
Rolls-Royce 2
UK Petroleum Industry Association 1
Total 31
Government: Cars
Question
Asked by Lord Jopling
To ask Her Majesty’s Government, further to
the Written Statement by Earl Attlee on 27 February
(WS 86), which Ministers will have an official car
allocated permanently; how many Ministers will be
expected to travel using public transport to, from or
between their London homes, their departments,
and the Palace of Westminster; and what arrangements
they have made for similar journeys for the transport
of official papers. [HL16070]
Earl Attlee: Under the new arrangements announced
in the Written Ministerial Statement of 27 February,
Ministers will no longer have a dedicated or allocated
car from the Government Car and Despatch Agency
(GCDA). Instead the GCDA will provide departments
with pool car(s) and driver service that will meet the
official car needs of their respective Ministers.
In certain circumstances Ministers will not need to
travel in an official car but will be expected to use
public transport or make their own arrangements in
line with the Ministerial Code.
Healthcare: Costs
Question
Asked by Lord Laird
To ask Her Majesty’s Government, further to
the Written Answer by Earl Howe on 10 February
(WA 117), whether presentation of a Europe-wide
entitlement document is necessary before citizens
of other European Economic Area (EEA) countries
can obtain healthcare in the United Kingdom; and
how many individuals doing so have been identified
from each relevant EEA country from which such
healthcare costs can be reclaimed in each of the
past five years. [HL16137]
TheParliamentaryUnder-Secretaryof State,Department
of Health (Earl Howe): Citizens of other European
Economic Area countries are expected to present an
entitlement document if the holder requires medical
treatment free of charge, on the basis that the United
Kingdom can claim reimbursement from that individual’s
member state.
No such documentation is required if the individual
is prepared to pay for treatment, or, for the individual
to register with a general practitioner in the UK. In

WA 75 Written Answers [14 MARCH 2012]
Written Answers
WA 76
addition, under existing bilateral arrangements, entitlement
documents are not exchanged between the United
Kingdom and Ireland.
The following table shows the number of reclaimable
treatments provided to individuals from each member
state, since the introduction of an internet-based portal
for National Health Service staff to report such treatments
in October 2009:
Emergency treatment using European Health Insurance Card:
Country Total treatments Total cost
Austria 106 £134,251.45
Belgium 97 £206,605.18
Bulgaria 168 £277,284.36
Czech Republic 149 £207,572.78
Denmark 158 £313,883.64
Estonia 25 £46,735.74
Finland 82 £112,681.32
France 791 £1,433,778.42
Germany 862 £1,267,220.15
Greece 164 £375,012.72
Hungary 181 £288,123.47
Iceland 27 £39,149.57
Ireland 374 £876,062.99
Italy 981 £1,275,386.93
Latvia 94 £148,621.95
Liechtenstein 2 £3,755.27
Lithuania 103 £123,966.46
Luxembourg 14 £4,609.89
Malta 49 £90,608.68
Norway 230 £378,718.03
Poland 731 £1,583,473.25
Portugal 227 £542,109.41
Romania 216 £516,823.50
Slovakia 113 £115,876.11
Slovenia 11 £11,422.95
Spain 707 £1,563,747.48
Sweden 333 £568,881.35
Switzerland 178 £303,284.09
The Netherlands 346 £611,277.61
The Rep of Cyprus 141 £268,389.47
Total 7660 £13,689,314.22
Planned Treatment; treatment carried out in the UK at the cost of other
member states:
Country Total treatments Total cost
Austria 10 £70,799.78
Belgium 43 £99,254.31
Czech Republic 2 £1,330.07
Denmark 43 £447,948.72
Estonia 10 £106,618.62
Finland 2 £211,806.00
France 20 £70,120.48
Germany 37 £351,252.83
Greece 312 £1,329,001.15
Hungary 4 £71,190.27
Iceland 1 £1,721.66
Ireland 2550 £16,009,531.35
Italy 230 £1,041,057.14
Latvia 35 £98,667.31
Lithuania 10 £27,017.92
Luxembourg 25 £116,534.23
Planned Treatment; treatment carried out in the UK at the cost of other
member states:
Country Total treatments Total cost
Malta 1967 £6,238,790.05
Poland 115 £256,343.36
Portugal 37 £342,435.03
Romania 10 £36,140.10
Slovakia 1 £1,732.00
Slovenia 12 £89,213.23
Spain 59 £327,501.02
Sweden 31 £223,678.00
The Netherlands 30 £77,365.01
The Rep of Cyprus 26 £58,934.30
Total 5622 £27,705,983.94
Infanticide
Question
Asked by Lord Alton of Liverpool
To ask Her Majesty’s Government, in the light
of the publication in a recent edition of the Journal
of Medical Ethics of an article arguing that killing a
newborn should be permissible in all the cases
where abortion is permissible, what consideration
they have given to the implications of its publication
in the United Kingdom; and what steps they are
taking to ensure that infanticide is not practised in
the United Kingdom. [HL16151]
TheParliamentaryUnder-Secretaryof State,Department
of Health (Earl Howe): The law is clear that a person
who kills a child commits an offence and will be
charged with murder, manslaughter or infanticide as
appropriate. There are no plans to review the law.
Jewellery Industry
Question
Asked by Lord Kennedy of Southwark
To ask Her Majesty’s Government what is their
assessment of the prospects for the United Kingdom
jewellery industry. [HL16331]
The Minister of State, Department for Business,
Innovation and Skills & Foreign and Commonwealth
Office (Lord Green of Hurstpierpoint): Sales of precious
metal jewellery have been affected by the high price of
gold, and the industry’s best prospects in the UK and
internationally are for products that fit the luxury
goods market, which continues to grow worldwide.
UK Trade & Investment supports the industry in
overseas markets, through funding for a designer jewellery
showcase in Beijing in November 2011 and at trade
fairs in Hong Kong, the United States, Germany and
Switzerland.
Migration
Question
Asked by Lord Kennedy of Southwark
To ask Her Majesty’s Government what is their
assessment of the report of January 2012 by the
Migrant Advisory Committee analysis of the impacts
of migration. [HL16336]

WA 77 Written Answers [LORDS]
Written Answers
WA 78
The Minister of State, Home Office (Lord Henley):
Her Majesty’s Government are considering the Migration
Advisory Committee report. Discussions are currently
taking place across government with the aim of agreeing
how best to reflect the recommendations in future
migration policy impact assessments.
North Korea
Questions
Asked by Lord Alton of Liverpool
To ask Her Majesty’s Government what discussions
they have had with North Korean refugees and
exiles in the United Kingdom about their experience
of the situation in North Korea, and any requirements
they may have for training, development and capacitybuilding
while they are in the United Kingdom.
[HL16057]
Baroness Northover: The UK Government have not
had any discussions with North Korean refugees and
exiles based in the UK. The Minister of State at the
Foreign and Commonwealth Office met Shin Dong-Hyuk,
a North Korean activist now living in South Korea,
when Mr Shin visited the UK in October 2011.
Asked by Lord Alton of Liverpool
To ask Her Majesty’s Government what efforts
they are making to encourage the Government of
North Korea to invite the United Nations special
rapporteur on the right to food to visit the
country. [HL16059]
Baroness Northover: Her Majesty’s Government have
not raised the UN special rapporteur on the right to
food with North Korea. However, the UN special
rapporteur on human rights in North Korea has addressed
the issue of chronic malnutrition there and Her Majesty’s
Government have long asked that he be given access to
North Korea.
Asked by Lord Alton of Liverpool
To ask Her Majesty’s Government what is their
response to the recommendation by the United
Nations Under-Secretary-General for Humanitarian
Affairs and Emergency Relief Co-ordinator that
the international community should provide more
financial support and creative solutions to overcome
food shortages in North Korea. [HL16060]
Baroness Northover: We believe that the Department
for International Development’s investment in the
various humanitarian organisations working in the
Democratic People’s Republic of Korea (DPRK)
represents the best way for the UK to assist the people
of the DPRK. We are in close contact with these
humanitarian agencies and continue to monitor the
situation.
Asked by Lord Alton of Liverpool
To ask Her Majesty’s Government what funding
they are providing to educational initiatives in North
Korea or for North Koreans in the United Kingdom;
and whether they intend to increase this funding in
order to strengthen educational and cultural exchange.
[HL16108]
Baroness Northover: Through the Foreign and
Commonwealth Office and the British Council the
Government have been funding English language training
in the Democratic People’s Republic of Korea (DPRK)
for over 10 years. The number of benefitting universities
has recently been increased, and a letter of understanding
outlining the programme’s objectives for the next three
years was signed with the DPRK Commission of
Education in June 2011.
People Trafficking
Questions
Asked by Baroness Goudie
To ask Her Majesty’s Government when the
Inter-Departmental Ministerial Group on Human
Trafficking will publish reports on progress in
implementing the strategy to prevent human
trafficking. [HL16184]
The Minister of State, Home Office (Lord Henley):
A report will be published in autumn 2012.
Asked by Baroness Goudie
To ask Her Majesty’s Government whether they
will publish the revised terms of reference for the
Inter-Departmental Ministerial Group on Human
Trafficking. [HL16187]
Lord Henley: Revised terms of reference are being
drafted and will be published shortly.
Police: Drones
Question
Asked by Lord Avebury
To ask Her Majesty’s Government whether they
will conduct an assessment of the potential for the
use of drones by the police, especially in relation to
the cost of the equivalent use of helicopters.
[HL16156]
The Minister of State, Home Office (Lord Henley):
At present, the only unmanned aerial vehicles (UAVs)
licensed by the Civil Aviation Authority (CAA) for
civil use in UK airspace are those weighing less than
20 kilograms. These may be used only within the line
of sight and within 500 metres of the operator at
altitudes up to 400 feet. The UAVs would not be
suitable for most police air support purposes. Decisions
about the use and relative cost-effectiveness of such
vehicles are matters for chief constables and their
police authorities and, from November 2012, police
and crime commissioners.
I understand that, subject to any changes in CAA
licensing, the Association of Chief Police Officers
intends to keep under review the potential for UAVs to
contribute to the provision of police air support.

WA 79 Written Answers [14 MARCH 2012]
Written Answers
WA 80
Police: Firearms
Questions
Asked by Lord Laird
To ask Her Majesty’s Government, further to
the Written Answer by Lord Henley on 27 February
(WA 251-2), how many firearms administration
staff, managers, firearms inquiry officers, firearms
licensing officers and other administrators have
been employed (1) full-time, and (2) part-time, in
the administration of grants, renewal and variations
of firearms and shotgun certificates in each police
force for the last 12 months until March 2012.
[HL16171]
The Minister of State, Home Office (Lord Henley):
Figures for the number of officers and staff employed
within the function of firearms/explosives licensing
within each police force in England and Wales will be
available in the summer, after the publication of the
statistical bulletin Police Service Strength in England
and Wales, 31 March 2012.
31 March
2008
31 March
2009
31 March
2010
Asked by Lord Laird
To ask Her Majesty’s Government what reductions,
if any, were made in the number of firearms
administration staff, managers, firearms inquiry officers,
firearms licensing officers and other administrators
employed (1) full-time, and (2) part-time, in the
administration of the Firearms Act 1968 in respect
of grants, renewals and variations of firearms and
shotgun certificates in each police force area over
the past four years. [HL16203]
Lord Henley: The latest available information shows
the full-time equivalent number of police officers and
staff with the function of firearms or explosives licensing,
in each police force area in England and Wales, as at
31 March in each of the years 2008 to 2011. Figures
broken down into full-time and part-time staff, or by
specific role within this function, are not held centrally.
Number of police officers and police staff within
the function firearms/explosives 1 in each police force
area in England and Wales, as at 31 March 2008 to
31 March 2011 23
Police Officers Police Staff
31 March
2011
31 March
2008
31 March
2009
31 March
2010
31 March
2011
Avon & Somerset 0 0 0 0 32 27 18 15
Bedfordshire 1 1 1 0 4 4 5 4
Cambridgeshire 1 0 0 0 10 11 15 14
Cheshire 1 0 0 0 13 12 13 10
Cleveland 0 0 0 0 0 0 0 0
Cumbria 0 0 0 0 11 11 12 10
Derbyshire 0 0 0 0 12 12 14 13
Devon & Cornwall 0 0 1 0 19 17 41 22
Dorset 0 0 0 0 11 11 11 10
Durham 3 0 0 0 4 4 4 6
Dyfed-Powys 0 0 0 0 19 18 20 19
Essex 0 0 0 0 17 19 20 20
Gloucestershire 8 6 6 5 3 6 6 6
Greater Manchester 0 0 0 0 7 12 16 16
Gwent 0 0 0 0 11 8 5 5
Hampshire 0 0 0 0 19 18 19 17
Hertfordshire 0 0 0 0 15 15 13 10
Humberside 0 0 0 0 6 5 6 6
Kent 0 0 0 0 19 18 18 19
Lancashire 0 0 0 0 10 12 12 12
Leicestershire 0 0 0 0 12 12 10 10
Lincolnshire 1 1 1 1 15 12 19 16
London, City of 0 0 0 0 0 0 0 0
Merseyside 0 0 4 4 6 6 6 6
Metropolitan Police 30 26 29 24 75 51 53 55
Norfolk 0 0 0 0 17 12 21 18
Northamptonshire 0 0 0 0 10 9 11 11
Northumbria 0 0 0 0 1 11 15 16
North Wales 2 0 1 1 7 0 13 15
North Yorkshire 3 2 0 0 17 15 20 0
Nottinghamshire 0 0 0 0 0 0 8 9
South Wales 0 0 0 1 11 12 12 10
South Yorkshire 2 2 3 2 4 4 10 9
Staffordshire 0 0 0 3 8 8 12 6
Suffolk 0 0 0 0 15 14 16 15
Surrey 0 0 0 0 16 15 14 13

WA 81 Written Answers [LORDS]
Written Answers
WA 82
31 March
2008
31 March
2009
31 March
2010
Police Officers Police Staff
31 March
2011
31 March
2008
31 March
2009
31 March
2010
31 March
2011
Sussex 3 2 2 2 21 24 27 27
Thames Valley 1 0 0 0 10 13 12 25
Warwickshire 6 1 0 0 12 10 10 9
West Mercia 0 0 0 0 24 23 24 22
West Midlands 0 0 0 0 18 19 20 13
West Yorkshire 0 2 1 1 14 17 16 17
Yorkshire 0 0 6 1 10 12 10 12
Sum 61 43 55 45 562 538 626 568
1. Firearms/explosives function is defined as staff who are predominantly employed in the processing of applications and in making
inquiries for firearm and shotgun certificates, renewals, rejections, appeal and firearms surrendered to police custody, or in connection
with the licensing and security of explosives and explosives stores.
2. Staff with multiple responsibilities (or designations) are recorded under their primary role or function. The deployment of police
officers is an operational matter for individual chief constables.
3. This table contains full-time equivalent figures that have been rounded to the nearest whole number. Because of rounding, there may
be an apparent discrepancy between the totals in this table and totals in similar published tables.
Public Prayers
Question
Asked by Lord Alton of Liverpool
To ask Her Majesty’s Government why, further
to the answer by Baroness Hanham on 28 February
(HL Deb, col. 1175), they fast-tracked the
commencement of the general power of competence
in the Localism Act 2011, and what are the implications
of this power for the voluntary saying of prayers at
the start of council meetings in England and
Wales. [HL16153]
TheParliamentaryUnder-Secretaryof State,Department
forCommunitiesandLocalGovernment(BaronessHanham):
The commencement of the general power of competence
for principal local authorities was fast-tracked in response
to the outcome of the High Court case against Bideford
Town Council. The general power should provide sufficient
legal powers for local authorities in England to include
prayers as part of the formal business at council meetings.
Subject to parliamentary process, the power should
also be available to eligible parish councils from April
2012. It will be for councils to decide whether to hold
prayers at the start of council meetings. We are considering
if further steps need to be taken to remove legal
obstacles to town hall prayers.
Union Learning Fund
Questions
Asked by Lord Laird
To ask Her Majesty’s Government what are the
aims and objectives of the funding they provide to
the Union Learning Fund (ULF) and unionlearn;
what were the priorities agreed between ULF and
the Department for Business, Innovation and Skills
for 2011 and for 2012; what funds they have committed
to be paid in 2012, and what is the total of government
funding since the ULF was founded. [HL16176]
TheParliamentaryUnder-Secretaryof State,Department
for Business, Innovation and Skills (Baroness Wilcox):
The ULF enables trades unions and union learning
representatives (ULRs) to work with employers, employees
and learning providers to encourage greater take-up of
learning and raise skill levels in the workplace. Aims
and objectives for 2011 were:
to help provide opportunities for workers to access
higher level skills
to work with employers and employees ensuring
learning opportunities through government
initiatives such as apprenticeships
provide quality information, advice and guidance
and support to learners
provide an enhanced trade union education service
manage and administer the ULF on behalf of the
department in accordance with the criteria
outlined in the grant funding agreement
promote the benefits of informal adult learning
develop the role of ULRs in raising demand for
learning, from those who need help and support
the most.
Key priorities agreed between ULF and the department
for 2011 were:
engaging disadvantaged learners
tackling skills gaps and shortages
developing high performing workplaces
reaching out to non-unionised workplaces.
We are in the process of agreeing priorities and
funding for 2012-13.
As referenced in Hansard [HL 4650], 2 Dec 2010,
col. WA 489, ULF funding has been as follows:
Year Amount
2005 - 06 £15.4 million
2006 - 07 £16.9 million
2007 - 08 £18.4 million
2008 - 09 £21.4 million
2009 - 10 £21.5 million
2010 - 11 £21.5 million
2011 - 12 £21.4 million

WA 83 Written Answers [14 MARCH 2012]
Written Answers
WA 84
Asked by Lord Laird
To ask Her Majesty’s Government whether the
work and training with employers, employees and
learning providers carried out through the Union
Learning Fund to encourage a greater take-up of
learning and a raising of skill levels in the workplace
is available in educational and vocational institutions;
and whether private sector employers are recompensed
for the cost of the absence of employees when on
training and learning. [HL16198]
Baroness Wilcox: It is the role of trade union learning
representatives (ULRs) to encourage employers to
sign up to learning agreements.
The majority of the learning that takes place is
conducted within the workplace but there is also work
carried out in colleges from a vocational level up to a
higher education level through a partnership with the
Open University.
No funding is provided to employers through the
union learning fund.
Universal Credit
Question
Asked by Baroness Lister of Burtersett
To ask Her Majesty’s Government, with reference
to their estimate that more than 350,000 children
and around 550,000 adults will be lifted out of
poverty as a result of the introduction of the universal
credit, (1) how long they expect reaching those
figures will take, and (2) how many children and
adults they estimate will be in poverty at the date of
the implementation of universal credit. [HL16096]
TheParliamentaryUnder-Secretaryof State,Department
for Work and Pensions (Lord Freud): (1) We expect to
see the full impact of universal credit on child poverty
by the time that universal credit is fully implemented
by the end of 2017.
(2) The Government have not forecast how many
children or adults they expect to be in poverty at the
date of the implementation of universal credit. The
level of poverty is dependent on a number of factors
which cannot be reliably predicted.
Watch and Clock Industry
Question
Asked by Lord Kennedy of Southwark
To ask Her Majesty’s Government what is their
assessment of the prospects for the United Kingdom
watch and clock industry. [HL16332]
The Minister of State, Department for Business,
Innovation and Skills & Foreign and Commonwealth
Office (Lord Green of Hurstpierpoint): Sales of precious
metal jewellery have been affected by the high price of
gold, and the industry’s best prospects in the UK and
internationally are for products that fit the luxury
goods market, which continues to grow worldwide.
UK Trade & Investment supports the industry in
overseas markets, through funding for a designer jewellery
showcase in Beijing in November 2011 and at trade
fairs in Hong Kong, the United States, Germany and
Switzerland.

Col. No.
Adoption ........................................................................... 19
Corporate Governance ...................................................... 20
Correction to Lords Oral Answer ...................................... 21
Crime: Hate Crime ............................................................ 22
Wednesday 14 March 2012
ALPHABETICAL INDEX TO
WRITTEN STATEMENTS
Wednesday 14 March 2012
Col. No.
EU: FISCUS ..................................................................... 23
EU: Justice and Home Affairs Measures ........................... 23
Queen’s Diamond Jubilee: Civic Honours.......................... 24
Westminster Foundation for Democracy ........................... 25
ALPHABETICAL INDEX TO WRITTEN ANSWERS
Col. No.
Abortion............................................................................ 63
Agriculture: Schmallenberg Virus ...................................... 63
Association of Chief Police Officers .................................. 64
Civil Service....................................................................... 65
Civil Service: Strategy........................................................ 66
Coroner Service ................................................................. 66
Education: Special Educational Needs and Disability ....... 66
Energy: Green Deal ........................................................... 66
Energy: Wind Farms.......................................................... 69
Extremism ......................................................................... 70
Firefighters ........................................................................ 70
Government: Cars ............................................................. 74
Government Departments: Circulars................................. 71
Col. No.
Government Departments: Staff........................................ 72
Healthcare: Costs .............................................................. 74
Infanticide ......................................................................... 76
Jewellery Industry.............................................................. 76
Migration .......................................................................... 76
North Korea ...................................................................... 77
People Trafficking.............................................................. 78
Police: Drones.................................................................... 78
Police: Firearms................................................................. 79
Public Prayers.................................................................... 81
Questions for Written Answer............................................ 63
Union Learning Fund........................................................ 81
Universal Credit ................................................................ 83
Watch and Clock Industry................................................. 84
NUMERICAL INDEX TO WRITTEN ANSWERS
Col. No.
[HL15944] ......................................................................... 66
[HL15952] ......................................................................... 63
[HL16022] ......................................................................... 66
[HL16023] ......................................................................... 66
[HL16050] ......................................................................... 65
[HL16051] ......................................................................... 72
[HL16057] ......................................................................... 77
[HL16059] ......................................................................... 77
[HL16060] ......................................................................... 77
Col. No.
[HL16063] ......................................................................... 72
[HL16070] ......................................................................... 74
[HL16095] ......................................................................... 63
[HL16096] ......................................................................... 84
[HL16108] ......................................................................... 77
[HL16110] ......................................................................... 64
[HL16119] ......................................................................... 70
[HL16120] ......................................................................... 70
[HL16133] ......................................................................... 72

Col. No.
[HL16137] ......................................................................... 74
[HL16151] ......................................................................... 76
[HL16152] ......................................................................... 63
[HL16153] ......................................................................... 81
[HL16156] ......................................................................... 78
[HL16171] ......................................................................... 79
[HL16175] ......................................................................... 73
[HL16176] ......................................................................... 81
[HL16184] ......................................................................... 78
[HL16187] ......................................................................... 78
[HL16198] ......................................................................... 83
[HL16203] ......................................................................... 80
[HL16209] ......................................................................... 73
[HL16218] ......................................................................... 64
[HL16219] ......................................................................... 64
[HL16220] ......................................................................... 64
Col. No.
[HL16221] ......................................................................... 64
[HL16231] ......................................................................... 66
[HL16234] ......................................................................... 70
[HL16270] ......................................................................... 67
[HL16272] ......................................................................... 67
[HL16273] ......................................................................... 67
[HL16274] ......................................................................... 68
[HL16296] ......................................................................... 71
[HL16321] ......................................................................... 68
[HL16322] ......................................................................... 68
[HL16323] ......................................................................... 69
[HL16324] ......................................................................... 69
[HL16330] ......................................................................... 69
[HL16331] ......................................................................... 76
[HL16332] ......................................................................... 84
[HL16336] ......................................................................... 76

Volume 736 Wednesday
No. 281 14 March 2012
CONTENTS
Wednesday 14 March 2012
Questions
Finance: Credit Rating Agencies ................................................................................................................................... 267
Education: Skills ............................................................................................................................................................. 269
Police: Vehicles................................................................................................................................................................ 271
Armed Forces: Vehicles................................................................................................................................................... 274
Business of the House
Timing of Debates .......................................................................................................................................................... 276
Misuse of Drugs Act 1971 (Amendment) Order 2012
Statistics and Registration Service Act 2007 (Disclosure of Social Security and Revenue Information)
Regulations 2012
Immigration and Nationality (Fees) Regulations 2012
Schedule 5 to the Anti-terrorism, Crime and Security Act 2001 (Modification) Order 2012
Motions to Refer to Grand Committee ......................................................................................................................... 277
Legal Aid, Sentencing and Punishment of Offenders Bill
Report (4th Day)............................................................................................................................................................ 277
Grand Committee
Auditors: EAC Report
Considered in Grand Committee ............................................................................................................................... GC 47
Written Statements......................................................................................................................................................... WS 19
Written Answers.............................................................................................................................................................. WA 63