Details of how restorative justice encounters will operate will be set out in a new clause of the crime and courts bill being debated in the House of Lords, reports the Guardian.
At present, the practice is used in relatively few areas. Its formal inclusion in the bill is being presented as a victory for Liberal Democrats.
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Mr Banks has given Ukip leader Paul Nuttall an "ultimatum", saying if he is not made chairman he will stop supporting the party.