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Lord Haskel: The noble and learned Lord, Lord Fraser, is absolutely right: we are legislating so that business can go on in Scotland. The effect of the noble and learned Lord's amendment is that there would be no rate of interest operable in Scotland until a Scottish parliament was in existence. It seems a bit rich, coming from the noble and learned Lord, who played a leading part in the "No, no" campaign, to suggest that everything should wait for the very parliament that he wanted to stop.

Lord Fraser of Carmyllie: Could I interrupt the noble Lord? I hope he will take a rather more serious approach to this issue than his opening remarks would indicate. I hope he will address this matter, because it is

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very important. Even if we start from a position of not particularly caring for the establishment of this Scottish parliament, clearly, if such a parliament is to be established, we should examine what is being done to ensure not that the parliament does not work or that it is unduly constrained in what it can do, but that there should be a minimum number of points of conflict between the two parliaments. That is the issue I have been addressing in my arguments to the noble Lord, and I hope he will answer me on that basis.

Lord Haskel: Just to continue the argument about the facts, if we accept the noble and learned Lord's amendment, as there would be no power to prescribe a rate of interest for Scotland there would be no power of a Minister of the Crown which could transfer to Scottish Ministers by virtue of Clause 49 of the Scotland Act when enacted. Thus, not even the Scottish Ministers, when there was a Scottish parliament, would be able to prescribe a rate of statutory interest under this legislation.

Turning to the question of the competence of the Scottish parliament, the rate of statutory interest applicable in cases of late payment of commercial debt will be set by the Secretary of State until that power is devolved to Scotland on the enactment of the Scotland Bill. The setting of a rate of interest for late payment in Scotland and the rest of the UK will then be underpinned by consultation between the Scottish administration and their Whitehall counterparts.

The noble and learned Lord raised the question of interest on taxes and excise duties. The Bill does not cover this as these are matters of private law.

The noble and learned Lord commented that the matter should be the preserve of the Scottish parliament, but this is not a matter which I can debate with the noble and learned Lord in Committee at this stage. We will have to lay out our arguments and write to the noble and learned Lord.

4.30 p.m.

Lord Fraser of Carmyllie: I am sad to say I find that an unsatisfactory answer. I appreciate perfectly well that, under Clause 49 of the Scotland Bill, where legislation is passed in this Parliament certain functions would pass to the First Minister, or whatever he is called, in the Scottish parliament. However, that is not true of the issue that I am concerned about. I have not received an answer yet as to why it is regarded as compelling that we should be legislating for Scotland at this stage. I must say that the Minister's answer has certainly provoked me to ask some further questions and put down some further amendments to deal with that interesting circumstance where a contract is indeed between parties on different sides of the Border. If I understand what he said about Clause 49, it is at least potentially the case that the statutory rate of interest in Scotland could be different from that established in England. That seems to me to be a rather extraordinary state of affairs, and it is a matter to which I shall return with some interest at a later stage. In the meantime, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

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Lord Ezra moved Amendment No. 10:

Page 3, line 15, leave out ("may") and insert ("shall").

The noble Lord said: Amendment No. 10 is grouped with Amendment No. 11 in the name of the noble Earl, Lord Home, and no doubt he will speak to that amendment. Amendment No. 10 is a very small but nonetheless important amendment in which the word "may" is replaced by "shall". I realise that parliamentary draftsmen are always very careful to give Ministers a maximum degree of flexibility in making orders under legislation. However, in this case I believe they have gone a little too far because, if the flexibility is left in the Minister's hands either to fix a rate of interest or not to do so, then it is in his hands to negate the whole purpose of the Bill. I beg to move.

Lord Haskel: The Government have placed in the Library of the House a draft order under Clause 5(1) which I hope noble Lords will have had a chance to look at.

I understand that the legislation would not work if no rate of interest or its formulation was announced. As the Government are bringing forward the Bill, clearly it would be our intention to announce an interest rate. That is why we have published a draft order which sets a rate of the Bank of England's official dealing rate plus 8 per cent. However, we will certainly consider further the noble Lord's amendment because I believe he has made rather a good point.

The Earl of Home: In speaking to Amendment No. 11, I hope noble Lords will forgive me if, in order to make myself clear, I stray slightly into Amendment No. 13 as I believe we might consider these together, although I am happy to repeat myself at a later stage.

I believe it is important that industry should know at any one moment on what basis the rate of interest is calculated. The Minister said at Second Reading that he needed flexibility in the legislation so that it could stand the test of time. I entirely accept the Minister's sincerity when he said he was not trying to pull the wool over anybody's eyes in this respect. I further accept that a formula related to the Bank of England base rate may not at some time in the future stand that test.

However, it seems to me that purchasers, and particularly purchasers overseas, would find it hard to understand and accept a rate of interest which is not fixed in accordance with an explicable formula. I would be perfectly happy for a formula to be set in consultation with that part of government most involved with money, namely the Treasury. I believe that that formula could then be explained clearly and openly to any purchaser, even a foreign purchaser who may not be conversant with our systems.

Without any disrespect to any past, present or future Secretary of State--who I am sure would consult the Treasury as a matter of course before changing the rate--it would make life very much more difficult for an exporter to explain why he has to change a rate of interest apparently set at the whim of an individual. While it may be necessary to change the formula from time to time--and indeed I have already accepted that it may have to change from a Bank of England base

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rate--at least if there is a formula sellers will know the system. If the Secretary of State is to be able to act individually to any interest rate volatility I believe that it will be very hard to explain that to a purchaser, particularly a foreign one.

Lord Meston: I was simply going to follow what the noble Earl has said by posing a question as to the reason for the reference to a formula in Clause 5. Am I right in understanding that it is not enough to say that the Secretary of State may--or, if the amendment of my noble friend Lord Ezra is agreed, "shall"--

    "set the rate of statutory interest by prescribing ... the rate of statutory interest",

but that the Bill also has to provide for the alternative to a formula simply in order to cover the formulation of the interest by reference to base rate? If that is all that is intended by the reference to a formula then I am happy.

I did raise this matter at Second Reading. I have a horror of formulae, and it looks as though the reference to a formula might allow for something far too sophisticated in the calculation of interest for the purposes of the people who have to use this Bill, if it is enacted, in practice.

Lord Haskel: Perhaps I may respond to Amendment No. 11. First, I say to the noble Lord, Lord Meston, that he is correct; there has to be a formula.

Perhaps I may assure the noble Earl, Lord Home, that in setting a rate of interest the Government will wish to consult parties both within and outside government. This is how we arrived at the rate that has been set in the draft order, and I can assure the Committee that if any change is made it will not be made by the Secretary of State acting on a whim. However, on a theoretical level, I understand the concern of the noble Earl, and the Government will be willing to consider his amendment.

Lord Ezra: In the light of what the Minister has said about Amendment No. 10, I beg leave to withdraw it.

Amendment, by leave, withdrawn.

[Amendment No. 11 not moved.]

Lord Haskel moved Amendment No. 12:

Page 3, line 15, leave out ("made by statutory instrument").

On Question, amendment agreed to.

The Earl of Home moved Amendment No. 13:

Page 3, line 17, leave out from ("interest") to end of line 18.

The noble Earl said: As drafted, this amendment gives the Secretary of State the ability to set the rate of interest without reference to anybody. I am grateful to the noble Lord for what he has said, and the assurances that he has given that the Government will always consult both within and outside government. However, we cannot entirely be certain who will be future Secretaries of State and whether they will always be quite as responsible as no doubt the current and former incumbents have been. If the Secretary of State can act on his or her own, how will that rate be publicised? Will the Secretary of State take out paid space in the press every day so that companies will have to look through newspapers to see what that rate is? Small and

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medium-sized enterprises do not have time to look through newspapers to see which side of the bed the Secretary of State has got out of on that morning. I beg to move.

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