NHS Reforms
Hugh Bayley (York Central) (Lab)
This is the moment I have been waiting for. An unprecedented number of representations have been made to me by letter, telephone, email and at my surgery from constituents of mine deeply concerned about the Government’s proposed NHS reforms. Those representations include a petition supported by almost 2,000 doctors, nurses, NHS patients and members of the public in my constituency, including Dr James Chan, one of the doctors at York district hospital.
The petition states:
The Petition of residents of York, and others,
Declares that the Petitioners believe that the Government’s health reforms will break up NHS services and that these reforms will result in business motives cutting deeply into the fairness, quality and value of the service at the expense of patient care; that the Petitioners believe the reforms will lead to a postcode lottery, with patients’ age, medical condition and home address affecting the quality of care they receive; that cuts to frontline jobs and services will lead to longer waiting times; that money will be wasted on the NHS market bureaucracy, draining it from patient care; and that there will be a big increase in private companies running the health service for profit.
The Petitioners therefore request that the House of Commons urges the Government to reconsider the reforms so that patients remain at the heart of the NHS.
And the Petitioners remain, etc.
[P000917]
pETITION
Hugh Bayley (York Central) (Lab)
This is the moment I have been waiting for. An unprecedented number of representations have been made to me by letter, telephone, email and at my surgery from constituents of mine deeply concerned about the Government’s proposed NHS reforms. Those representations include a petition supported by almost 2,000 doctors, nurses, NHS patients and members of the public in my constituency, including Dr James Chan, one of the doctors at York district hospital.
The petition states:
The Petition of residents of York, and others,
Declares that the Petitioners believe that the Government’s health reforms will break up NHS services and that these reforms will result in business motives cutting deeply into the fairness, quality and value of the service at the expense of patient care; that the Petitioners believe the reforms will lead to a postcode lottery, with patients’ age, medical condition and home address affecting the quality of care they receive; that cuts to frontline jobs and services will lead to longer waiting times; that money will be wasted on the NHS market bureaucracy, draining it from patient care; and that there will be a big increase in private companies running the health service for profit.
The Petitioners therefore request that the House of Commons urges the Government to reconsider the reforms so that patients remain at the heart of the NHS.
And the Petitioners remain, etc.
[P000917]
Special Representative for International Trade and Investment
Paul Flynn (Newport West) (Lab)
I speak under negative privilege. Privilege is given to us as MPs to expand our opportunities to make comments and talk about personalities while enjoying protection from libel laws. The situation that I am speaking under is one that does not expand our opportunities, however, because on this subject I am denied the opportunity of saying what I am entirely free to say in broadcasts or on blogs outside this House. In this House my mouth is bandaged by archaic rules that deny me the chance to be critical of certain individuals. I can be sycophantically, emetically in praise of those individuals—that is not limited in any way—but I am not allowed to criticise them. I therefore make the point that I am speaking under constraints that I hope we will remove at a later date. This debate is, I believe, a step on the way towards tabling a motion that will liberate us as MPs to talk freely about subjects that are discussed throughout the country.
The role of the special trade representative has been a matter of great controversy, discussion and debate. It is a hot topic everywhere, in the newspapers, in the pubs and on blogs, but the only place that we cannot discuss it fully is in this House—the place where we should be allowed to do so, because we can do something to reform the role if necessary. The role is a very strange one. There is no wage paid, but it is claimed that our present trade envoy has cost the taxpayer about £4 million in the last 10 years, not including the costs to protection officers. What is the job? It is impossible to find a job description, but one might say that skills in diplomacy, expertise in trade and industry, and sensitivity about our ethical standing would be needed in such a job.
The present envoy was appointed to his role by Her Majesty the Queen after consultation with the Cabinet Office, UK Trade & Investment, and the Foreign and Commonwealth Office, and he was given the title of UK’s special representative for international trade and investment. Is there a problem with the position at the moment? There certainly appears to be a problem with the lack of competition for the job. There is no open competition; there is no pre-appointment hearing or anything of that kind; and there seems to be only one qualification—namely, membership of a certain family, as the job was inherited from another member of that family.
Are there any matters that deserve our concern? Many groups have suggested that there are. A coalition of human rights groups is calling for a review into how the Government do business with non-democratic regimes around the world. Those groups say that the Government’s stated position on human rights, corporate responsibility and the rule of law is at odds with their apparent position of trading with autocratic or corrupt politicians. Human Rights Watch, Index on Censorship, the Corner House, Global Witness and Campaign Against Arms Trade say that recent publicity has underlined fundamental failings in this country’s supposedly ethical foreign policy. Tom Porteous, the UK director of Human Rights Watch and a Foreign Office adviser, said that recent publicity was making the UK “look stupid”.
Those calls for action follow concern about delays in implementing the Bribery Act 2010—delays that have left the Government open to claims that they are not really committed to fighting corruption. Campaigners allege that they have yet to receive a response from the coalition’s international anti-corruption champion, the Justice Secretary, after requesting details of the Government’s strategy on tackling dishonest business practices.
Tom Porteous, a member of the Government’s advisory group, which was created by the Foreign Secretary, and someone whose job is to examine the ethical dimension of British foreign policy, said that Ministers needed to rethink their way of doing business. Nicholas Hildyard of the Corner House has said:
“There is an absolute necessity to have an ethical foreign policy with very strict screening into what goes where, proper screening of all government-supported exports in the context of human rights.”
Robert Palmer of Global Witness makes a similar point. Richard Alderman, the director of the Serious Fraud Office and a key figure in cracking down on business bribes to win contracts, told the Home Secretary of growing concerns over the delays in implementing the Bribery Act. He reported warning that the Organisation for Economic Co-operation and Development and the US Justice Department had been unhappy with the coalition’s decision to push back the legislation’s introduction.
Those are bodies of great seriousness, and they are expressing concern about the present situation. Rather more telling, however, is the evidence from Stephen Day, a former ambassador. He writes:
“The suggestion that an envoy is needed to ‘open doors’ is insulting to our ambassadors. Has that not been their primary job, as representatives of the Queen to foreign Heads of State? And are they not fully competent to support serious business proposals, as welcome to the host country as they will be to Britain? Trade promotion is a serious, long-term commitment, in which the embassy can give the best informed guidance and work effectively in partnership with the British enterprise and in step with Whitehall and other agencies to consolidate reputations and build long-term success. The message being spread around the world at the moment is that Britain is so desperate for business, and so incapable of competing openly, that it needs a back-door approach and is content to work closely with dodgy fixers and politicians—i.e. that British business is incapable of winning contracts through professional, legal means .”
Stephen Phillips (Sleaford and North Hykeham) (Con)
I hear what the hon. Gentleman is saying about the message that is being given out at the moment, but he has given us no details of how it is being given out. In the absence of any evidence as to how it is being given out, I have to say that the House is very surprised not only at the message that he suggests is being given out but at the fact that it is being given out at all. Will he give us further details?
Paul Flynn
I am not in a position to give further details, because if I did so, I would transgress the rules of the House, as I did in a previous debate. That debate was interrupted. The Speaker would quite rightly abide by the rules of the House and tell me that I was not allowed to make any derogatory statements that might affect the envoy, his personality or his name. It is an illustration of how demeaned we are as politicians and Members of Parliament that I am allowed to make any points about the damage that is done only in an oblique way, by discussing the effects of the holder of the office, his role and the comments that are being made.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
I am not entirely clear, listening to the hon. Gentleman’s line of reasoning, whether he has called this debate obliquely to criticise Prince Andrew in his role as special envoy, or whether he has called it to query whether we need a special envoy at all. In my experience, having done the shadow trade job, Prince Andrew goes round the world, opens a lot of doors and does a lot of trade for the UK, and I would have thought that the hon. Gentleman’s constituency needed the jobs that are created by businesses that export round the world.
Paul Flynn
That is a wonderful example of how the hon. and learned Gentleman is free to praise the person involved, while I am denied the opportunity to attach any blame to him. It is entirely irrational and anti-intellectual, and contrary to the debating freedoms of this House that I am not allowed to answer his question or repeat the criticism that has appeared in almost all our national newspapers and media of the way in which that role is performed. I cannot do that, and that is the weakness that I wish to attack in this debate. I can, however, talk about the role and the opinion of certain serious people.
Stephen Phillips
May I suggest that the hon. Gentleman pushes the point? The Chair will no doubt rule on that. If he seeks to make the criticism that he suggests he is prevented from making and the Chair prevents him from making it, his point will be made good. If the Chair does not do so, his point will have been wholly undermined.
Paul Flynn
I am making the points as far as I can within the limits imposed on us in this Chamber. I first debated this subject on 17 March and hope to contribute to a debate tonight that will be within the rules of the House and will lead to a notice of a motion, which I hope I can get carried.
Stephen Phillips
For the final time, the hon. Gentleman has an opportunity either to press his points and make the criticism he seeks to make or to evade that criticism by not making the point at all. He has that opportunity and if he steps beyond the bounds of what is permitted and what is in order in this Chamber, the Chair will rule on it. As yet, he has not sought to make that criticism. As and when he does so, the Chair will make a ruling. Is he prepared to stand by the mettle of the argument he is making or—
Mr Speaker
Order. The hon. Gentleman will resume his seat. Interventions are getting longer; they need to get shorter.
Paul Flynn
This is the second part of the debate; the first part on 17 March was interrupted when I could not take the line that the hon. Gentleman urges me to take without transgressing the rules of the House. Those rules need to be changed.
Stephen Day, a former ambassador, talked about the ambassador in Doha as an example. His letter said:
“We have an excellent ambassador in Doha and Sheik Hamad is the most accessible of rulers, in person and on the telephone. To use such an intermediary strikes me as crassly inappropriate… Of course the Amirs and Sheikhs engage with trade and finance, but this is generally done privately through agents and associates, not by principals directly. To use”
an envoy
“for such a purpose is seen by Arabs as crude and unworthy of our historic connections. It is quite the wrong way to promote our interests in this important region of the world and the sooner we are seen to have re-learned how to engage with Arabs the better.”
That is what a greatly experienced ambassador says.
There is an argument for saying that the role is of great importance and has great potential to promote our industries and that many thousands of jobs depend on the relationships we have with other countries. Are we doing this the right way? There is powerful evidence from human rights organisations and from the former ambassador that we are not and that we are losing ground because of it.
Natasha Schmidt, assistant editor of the Index on Censorship, said people were angered by links between our trade envoy and President Aliyev of Azerbaijan, whose country is one of the most corrupt in the world. It routinely oppresses its own people and there are allegations involving torture of political opponents and rigged elections by Aliyev’s regime. There are also allegations by some of the employees of the agency of a close relationship with President Aliyev. Natascha Schmidt said:
“It is absolutely appalling that the envoy would have such close links with Aliyev, an authoritarian ruler who has shown himself to be completely intolerant to criticism and is an enemy of free speech”.
We live in an era of openness, transparency and scrutiny of appointments. A major advance is the system of pre-appointment hearings in the House, when someone going for a major job appears before a Select Committee to justify the appointment. That is wholly healthy and beneficial.
Geoffrey Clifton-Brown
I am listening carefully to what the hon. Gentleman has to say, but I must say that I am not entirely clear—perhaps he will enlighten the House—whether the purpose is to debate the role of our individual special envoy, to raise the question of whether we need a special envoy or to debate British trade policy and which countries we should or should not trade with. Will the hon. Gentleman enlighten us?
Paul Flynn
It is all those things: the question of whether we need a special envoy and whether it is beneficial or not. Within the limits I have set out, I am able only to point obliquely to my view that it is perhaps not always beneficial to have one. If we have one, that person should not be chosen merely on the basis of what advantages he or she has inherited, and the choice should not be limited to a single family. There should be open competition, so that we can acquire someone who can do the job in the manner that is required. It should not involve work that can be done far more effectively by ambassadors who know their countries and know what the opportunities are.
The need for this position, and the manner in which it serves or does not serve the country, should be examined by the House of Commons fully and fairly, and not under the restrictions by which I am governed tonight. The antique rules of the House frustrated my earlier attempts to debate this issue in a meaningful way. In a grown-up, modern Parliament, no issue should be beyond our surveillance and, if necessary, our criticism. It is our duty to remove this gag, and to speak freely as citizens rather than being silenced as subjects.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Mr Edward Davey)
The hon. Member for Newport West (Paul Flynn) has made a number of points that I do not think I can answer tonight, because they are not the responsibility of my Department. I consider that the question of whether he is gagged by the orders of the House is a matter for other House authorities, and I am sure that it will be dealt with in the usual way. I assume that he does not expect me to deal with those points. However, he managed to raise other important issues about the role of the special representative for international trade and investment, although I should say at the outset that I could not disagree more with his conclusions about that job.
The hon. Gentleman talked a great deal about what he considered to be the problem of a lack of competition in the job, as if membership of the Royal Family were open to competition. I think most people will find that a rather odd position for him to take. However, I am pleased to note that he is now in favour of competition, as he does not often take that line.
I, for one, believe that the Duke of York does an excellent job as the UK’s special representative for international trade and investment. He promotes UK business interests around the world, and helps to attract inward investment. He has been the UK’s special representative since 1 October 2001, and it is interesting that there has been no debate of this kind during the period of nearly 10 years since his appointment. During that time he has been a long-standing success in the role, representing a continued interest on the part of the Royal Family in supporting British business and international trade and investment.
Since taking on his role, the Duke of York has built a substantial network of contacts at high level in both Government and business overseas. Those links help the duke to make a major impact in a range of markets around the world. He has made a valuable contribution in developing significant opportunities for British business through the role, and continues to do so.
The hon. Gentleman could have talked about how he would assess that, and what evidence we could provide. Of course, it is often difficult to prove that a particular intervention by a particular person at a particular time results in a particular success. However, if we listen to the voice of British business, it is absolutely clear that it endorses the role of the Duke of York. Many who have worked with the duke have found that he is a real asset for our country in supporting UK business. A letter from a group of prominent business people published recently by The Sunday Times underlines the duke’s commitment to helping the country to respond to the current very difficult period for our economy through the work that he does in support of a trade-led recovery.
Paul Flynn
Does the Minister realise that that list, which was published a very short time ago, was four years old, and that many firms on it declined to refresh their support for the expression of sentiments of support for the envoy?
Mr Davey
I am surprised that the hon. Gentleman makes that point because, as I shall go on to set out, a lot of people have contemporaneously spoken out in favour of the Duke of York’s work. That letter did say that
“the efforts made by him need to be encouraged—for he does it well.”
I am surprised that the hon. Gentleman did not mention that, and I am sure that the vast majority of those who have seen the duke’s work at first hand would echo that sentiment.
Dr Julian Lewis (New Forest East) (Con)
Does the Minister agree that one reason why the Duke of York has considerable credibility is his distinguished record as a former member of the Fleet Air Arm who gave valuable service in the Falklands war? That shows a degree of commitment over and above any inherited responsibilities that he might be considered to have.
Mr Speaker
Order. We must take great care, and care has not been taken sufficiently on this front, to avoid straying into matters of conduct that render someone suitable or not suitable for a particular role. I believe I am right in saying that “Erskine May” is clear that matters may be raised only on a substantive motion and such matters include the conduct of the sovereign, which we shall therefore strive to avoid discussing.
Mr Davey
The duke is not paid for the work that he does in this role. UK Trade & Investment pays for the costs of UK-based and overseas visits undertaken by the duke and his supporting staff, and these visits are undertaken in agreement with UKTI and are in support of UKTI objectives. Let me give an indication of the cost of these visits. In 2008-09, the costs amounted to just over £149,000 and just over £154,000 in 2009-10, and the flights are paid for by the royal travel budget. I believe that these activities represent excellent value for money.
Paul Flynn
Does the Minister, a fair-minded person, recognise that what he is saying illustrates how out of balance our debating system is? He is free to praise the envoy, but I am not free to say anything derogatory about the envoy and so our debate is completely out of balance. Is the Minister not illustrating the need for our Standing Orders to be changed?
Mr Davey
As I recall it, the hon. Gentleman said that he was objecting to the cost of this post, so I am rebutting his argument, which he was free to make within our Standing Orders, by arguing that the duke’s work provides value for money. I am rebutting that point of substance.
Let me now deal with the duke’s appointment to this position. We are sometimes asked: what are the terms of the duke’s employment as special representative for international trade and investment? Does he have a contract? The hon. Gentleman wanted to have a job description and competition for the role. We are also asked who invited the duke to take on this job. In response, I wish to make a number of key points. First, the role is not an appointment within the remit of the civil service commissioners or the Commissioner for Public Appointments. It is a special role and it represents a continued interest by the royal family in supporting British business and international trade. Prior to the Duke of York’s appointment, the Duke of Kent was vice-chair of the British Overseas Trade Board from 1976 and latterly vice-chair of British Trade International until April 2001—the Duke of York was appointed in October 2001. So the royal family, in different roles and in different personages, have been fulfilling this type of role for many years. This is not a new thing and successive Governments of different persuasions have found this work to be valuable. Diplomats and business people in our country have valued the contribution made by the royal family in this regard.
Stephen Phillips
My hon. Friend makes the legitimate point that many organisations and British business have found this role to be valuable for how they conduct business overseas. This year, many British businesses have recorded in the printed media that they have found in the recent past that the role of the Duke of York—they made no reference to his specific conduct—to be useful to the way in which they have conducted their business and their exports overseas. I am sure that the Minister would agree with that.
Mr Davey
My hon. and learned Friend is absolutely right and I can certainly agree with that. It is also worth pointing out that the Duke of York not only helps UKTI and its related activities but assists in the objectives of other Departments, such as the Foreign and Commonwealth Office and the Department of Energy and Climate Change, when he is asked to do so.
The duke’s programme of visits is agreed by the Royal Visits Committee. A great deal of discussion and planning go into deciding where His Royal Highness should visit and UKTI works with the duke’s private office to develop a programme of visits that complement the work and support the objectives of UKTI and make best use of the duke’s time to support the strategic aims and goals of Her Majesty’s Government. It is not a question of the special representative freelancing: he plans his programmes to operate within a strict framework. The programme is reviewed regularly and is confirmed alongside other overseas visits undertaken by other members of the royal family and by senior politicians such as the Prime Minister, Foreign Secretary and Business Secretary.
The duke’s visits focus primarily on those priority markets for the UK where the duke is well placed to make a positive impact. His visit programmes generally include visits to priority markets in the middle east, south-east Asia, China, India, Russia, central Asia and South America, as well as to the US and other developed markets. The visits relate to sectors that are or will be key to the UK’s future export growth. They include financial services, energy, advanced engineering, information and communication technology, life sciences and creative industries.
The duke has been visiting many of those priority global markets since 2001 and has developed strong relationships with key opinion formers and decision makers. For example, in 2008-09, His Royal Highness undertook nine overseas visits, visiting 16 countries. These involved 117 business engagements and openings, 27 political engagements and 28 with Heads of State. In 2009-10, His Royal Highness undertook 12 overseas visits, visiting 18 countries. This involved 163 business engagements and openings, 39 of which were political and 18 with Heads of State. This is a record of engagement that this House should recognise.
Paul Flynn
I hesitate to interrupt the Minister reading from the websites of the person and the Department involved, but he has made no attempt to answer my questions or to respond either to the serious criticism by the human rights organisations I cited or to what the former ambassador said about there being a far better way of doing the job, which is to allow ambassadors to do the job for which they are paid and skilled. Is that not a fair criticism?
Mr Davey
I disagree. I have provided evidence rather than innuendo to show that the Duke of York is undertaking a very valuable role. Let us remember why the Duke of York does this role: because it is in Britain’s interests. It is in the interests of firms, their employees and our economy. The previous Government recognised that and so do we. We have inherited a sick economy where the prospects of growth funded by the public sector or by consumers are very limited, to say the least, after the poor management of the economy by Labour over 13 years. If we are to grow, there are only two sources of growth: trade and investment. Having someone with experience and clout as the UK’s special representative for international trade and investment is something that we throw away at our peril.
I do not know what has motivated the hon. Gentleman. His timing is particularly inappropriate, coming as it does four days after the royal wedding, when I believe the whole country showed the support that they give to the royal family and all its members. I am proud to be here to support the role of His Royal Highness.
Question put and agreed to.
House of Commons
Prayers
Oral Answers to Questions
(12 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John Robertson (Glasgow North West) (Lab)
1. What discussions he has had with the Secretary of State for Work and Pensions on the awarding of contracts for the Work programme in Scotland; and if he will make a statement.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
9. What weighting was given to the involvement of voluntary sector organisations in the assessment process of tenders of prime contractors for the Work programme in Scotland.
The Secretary of State for Scotland (Michael Moore)
Over the past year I have had numerous discussions with ministerial colleagues on the development of the Work programme. The Government are encouraging prime contractors to engage voluntary and private sector organisations in the delivery of the programme.
John Robertson
Does the Secretary of State share my concern that the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling), may have broken the ministerial code of conduct in awarding the contracts to some companies? Will the Secretary of State make a statement on the matter, and what is he going to do to protect the companies that missed out on the awards that were given out?
Michael Moore
The hon. Gentleman is making a very serious allegation, which my right hon. Friend absolutely refutes. As with any other instance in which people think something inappropriate is happening, there are appropriate channels through which it can be pursued. If there is some evidence on that or any other matter, those channels should be followed.
Dr Whiteford
I declare an interest as a non-remunerated director of the charity Turning Point Scotland.
There has been great unease in Scotland about the tendering process for the Work programme contracts. The tender document clearly outlined the expectation that at least 30% of a prime contractor’s subcontracts should be delivered by voluntary sector providers, and it stated:
“This will be a key factor in the tender assessment process.”
Yet the successful bids commit to a mere 8% and 6% voluntary sector delivery respectively. I hope that the Secretary of State shares my concern, and my question to him is simple: what went wrong?
Michael Moore
I acknowledge the hon. Lady’s work in the voluntary sector, and I believe that it has a very important role to play not just in getting people back to work but in many aspects of Scottish life. Let us remember that the Work programme is a step change in the provision of support for people to get back into work. We are determined to ensure that we tackle all the problems that have afflicted different parts of Scotland and the rest of the United Kingdom.
The invitation to tender document was absolutely explicit about the criteria, and they were the ones against which bids were measured. As far as the future involvement of the voluntary sector is concerned, the two preferred bidders have indicated that they fully intend to engage with the sector.
Mr Speaker
I call Sheila Gilmore, whose question has been grouped with Questions 1 and 9. She is not here.
Angus Robertson (Moray) (SNP)
Does the Secretary of State agree that to secure economic recovery, it is important to listen to the views of the job creators so that we minimise the number of people needing support from the Department for Work and Pensions in the first place?
Michael Moore
Of course it is important that as we recover from the terrible economic situation that we inherited, we focus on creating new jobs. That is why we set out in the Budget continued plans to ensure that we keep interest rates low, reduce corporation tax and reduce the burden of national insurance, compared with the previous Government’s plans. We will continue with those measures, to ensure that we rebalance the economy and create more private sector jobs in Scotland and elsewhere.
Angus Robertson
But does the Secretary of State acknowledge the significance of the fact that 200 leading Scottish job creators have today signed a public statement saying that the best approach for the future is to re-elect the Scottish National party Scottish Government, and Alex Salmond as First Minister?
Michael Moore
Funnily enough, I do not agree with the hon. Gentleman on that point. The best approach to the next Scottish Government is to ensure that we have Liberal Democrats at the heart of it, so that we can reinforce the central part that this Government are playing in rebalancing the economy of the UK as a whole. Our agenda for growth is absolutely essential to our recovery from the situation that we inherited.
Ann McKechin (Glasgow North) (Lab)
I note that the Secretary of State, in his answer to my written question yesterday, stated that at his recent meeting with Scottish voluntary sector organisations, to which he dragged along the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling), he had encouraged the successful bidders to
“engage effectively with the voluntary sector”.—[Official Report, 3 May 2011; Vol. 527, c. 662W.]
Will he confirm what he expects that will actually achieve? Can he guarantee that voluntary sector involvement will be more in line with the UK average for the contracts tendered in the Work programme, or is the voluntary sector in Scotland only going to get the crumbs from the table?
Michael Moore
May I first say that I was very pleased to invite my right hon. Friend the Minister of State to the employment gathering in Edinburgh, which was very well attended by representatives of the different stakeholders and by a representative of the Scottish Government? As we made clear at the time, it is our intention to ensure that the voluntary sector is as involved as possible. The two preferred bidders, Ingeus and Working Links, have made it clear that they are going to discuss the role of the voluntary sector in their supply chains. That discussion is ongoing and not yet resolved. Beyond that, there are other streams of work coming out of the Department for Work and Pensions for which the voluntary sector and others will be able to bid.
Ann McKechin
I note that the Secretary of State is still unable to provide us with a figure. Doubt will remain in the voluntary sector, which has suffered a massive drop in income as a result of the Work programme, which offers fewer places than were offered under previous Government-operated schemes. Does he agree that the experience and knowledge of the voluntary sector of the future jobs fund is testament to its strength? Does he agree that Scotland needs a new future jobs fund, so that we can offer places for the thousands of people who are coming out of school and college with nowhere to go?
Michael Moore
I am happy to acknowledge that under the previous Government, of whom the hon. Lady was a member, youth unemployment rose consistently through periods of growth as well as during the recession. I accept that we have a major challenge, which is why I will bring together different employment sector representatives in Irvine in a couple of weeks’ time.
It is important for all of us that we get the voluntary sector engaged. The future jobs fund was a very costly scheme, and its results do not bear out the hon. Lady’s assertions. It is not the case that it led to sustainable jobs—but the new Work programme will do exactly that.
Guto Bebb (Aberconwy) (Con)
2. What discussions he has had with the Secretary of State for Work and Pensions on the implementation in Scotland of the Government’s proposals for universal credit.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
The Secretary of State for Scotland and I are in regular contact with the Secretary of State for Work and Pensions on a range of issues concerning implementation of universal credit in Scotland.
Guto Bebb
In Scotland, the public sector accounts for about 50% of gross domestic product. If we are to succeed in making the country less dependent on the public sector, we need to ensure that the private sector has access to the personnel that it needs to grow. Does the Minister agree that universal credit will help to make work pay, and that it will contribute to the rebalancing of the economy of Scotland and the UK?
David Mundell
I do indeed agree with my hon. Friend, who will be pleased to note that already during the incapacity benefit reassessment trial taking place in Aberdeen, a large number of people who not only want to work, but also want the support to help them to work, have been identified and have found opportunities to work in the private sector.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Will the proposed universal credit in Scotland be affected by the Chancellor’s proposed changes in tax and national insurance, particularly in relation to the tax proposals in the Scotland Bill?
David Mundell
The hon. Gentleman has followed the progress of the Scotland Bill in detail, but he will know that in relation to the core aspects of universal credit and benefits, the Government have given an undertaking that no one will be worse off in cash terms when universal credit is introduced.
Iain Stewart (Milton Keynes South) (Con)
Does my hon. Friend agree that the current complexity of the benefits system means that too many Scottish claimants do not receive the benefits to which they are entitled, and that universal credit will help to target the right support on the right people?
David Mundell
I certainly agree with my hon. Friend. The amount of benefit that goes unclaimed in Scotland is a national disgrace. The system of universal credit will simplify the benefits system, as well as making work pay and combating worklessness and poverty. That is something that hon. Members on both sides of the House should welcome; it is a marked change from the 13 years of inaction from the previous Government.
Mary Macleod (Brentford and Isleworth) (Con)
3. What assessment he has made of the likely effect on the Scottish economy of the implementation of “The Plan for Growth”.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
Returning the United Kingdom to sustainable economic growth is the Government’s overriding priority. We are doing everything to create the conditions that enable all businesses in Scotland to be successful and create more jobs. Our plan for growth is a plan for the whole of the UK.
Mary Macleod
What views and reactions is my hon. Friend aware of among our colleagues in the Scottish Parliament and the business community in relation to the Government’s proposals to support small and medium-sized businesses?
David Mundell
The Government’s proposals for reducing corporation tax and for making changes to national insurance have been widely welcomed by businesses across Scotland. Of course, as my hon. Friend will know, small businesses in Scotland have particularly benefited from small business relief, which was delivered by Conservative MSPs.
Ann McKechin (Glasgow North) (Lab)
Inflation is at double the Government’s target, growth has been downgraded for the next two years, retail figures are down and consumer confidence is at rock bottom. Will the Minister for once stand up for Scotland and concede that while the cuts may be hurting, they are not working, and that it is time for the Government to have a plan B for growth?
David Mundell
This Government do have a plan for growth—unlike our predecessor. We have set out ambitious objectives to create the most competitive tax system in the G20, to make the UK the best place in Europe to do business, to encourage investment and exports, and to create the most flexible and educated work force in Britain.
I am sure the hon. Lady is good at figures. She will know that her party started the Scottish elections with a 10-point lead, and that today it has an 18-point deficit. That is good work with figures.
Mr Mike Weir (Angus) (SNP)
Can the Minister tell us what part of the plan for growth is behind the bright idea of his colleague the Chief Secretary to the Treasury to impose a massive increase in taxation on the oil and gas industry, jeopardising investment and up to 50,000 jobs?
David Mundell
The hon. Gentleman would have some credibility in asking that question had he not repeatedly raised in the Chamber the issue of the costs of petrol and fuel oil in his constituency. It is clear that the Chancellor and the Chief Secretary got the balance right in the Budget between the taxation of the oil industry and the taxation of the motorist. If the hon. Gentleman wants to tell his constituents that they should be paying 6p a litre more on their fuel, he is welcome to do so.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
5. By what date he expects the level of unemployment in Scotland to begin to reduce.
Nic Dakin (Scunthorpe) (Lab)
6. What steps he is taking to reduce the level of unemployment in Scotland.
Jim McGovern (Dundee West) (Lab)
8. What steps the Government is taking to reduce the level of unemployment in Scotland; and if he will make a statement.
The Secretary of State for Scotland (Michael Moore)
Unemployment has fallen steadily since August 2010 and employment has increased in the same period. This is a welcome sign. Supporting companies to create and sustain jobs and helping people into work are key priorities for the Government. On 19 May I am hosting a seminar in north Ayrshire, in the constituency of the hon. Member for Central Ayrshire (Mr Donohoe), on youth unemployment, and my right hon. Friend the Secretary of State for Work and Pensions will join me at this important event.
Mr Donohoe
I look forward to our meeting on 19 May. On a another matter concerning unemployment, does the Secretary of State think that the separation of Scotland from the rest of the UK would help or hinder employment prospects for people in Scotland?
Michael Moore
It would be an absolute disaster for Scotland to separate from the rest of the United Kingdom. It is interesting that even the Scottish National party appears to recognise that, because it is not campaigning very hard on the subject.
Nic Dakin
In the Secretary of State’s answer to my hon. Friend the Member for Glasgow North (Ann McKechin), our Front-Bench spokesperson, he recognised that youth unemployment continues to rise in Scotland. When does he believe that his actions will begin to bring it down to an acceptable level?
Michael Moore
In response to the question from the hon. Member for Glasgow North (Ann McKechin), I said that youth unemployment had been a problem for a good long period across the United Kingdom, including under the previous Government during periods of growth. The Prime Minister, the Work and Pensions Secretary, I and everybody else recognise the need to bring it down, which is why we are meeting to discuss the core issues behind the problem, and why, through the Get Britain Working programme and the Work programme, which we have discussed already, we are introducing measures to get young and old alike off the unemployment register and back into productive work.
Jim McGovern
When will the penny eventually drop for the coalition Government? Last week in response to the Scottish Affairs Committee report on the computer games industry, the Government said that there is no case for tax incentives for the computer games industry, which is very important to this country. That was rather callous coming a week after another computer games company in my constituency went bust. Will the Government accept the blatantly obvious fact that if we want companies to set up in this country, we have to offer incentives at least comparable to those offered by our competitors overseas?
Michael Moore
First, may I again recognise the hon. Gentleman’s consistent efforts on behalf of the computer games industry? I recognise the importance of the industry not just to Dundee and Scotland, but to the UK as a whole. As he knows—and as I hope the response to the Select Committee’s report reinforces—we have considered very carefully the incentives we need to offer not just to the computer games industry, but to a whole range of sectors in Scotland and across the country. It is our judgment that to get ourselves away from the danger zone we were in last May, it is important to tackle the deficit and to get ourselves on the path to growth. We have done that in successive Budgets setting out plans to reduce corporation tax, to keep interest levels low, to reduce the national insurance burden and to set out important new targets for banks and their lending to small businesses. That applies to the computer industry sector as much as to any others. Once again I will be happy to meet him to discuss the matter, if he would like.
Mr Alan Reid (Argyll and Bute) (LD)
Unemployment in Kintyre will be greatly reduced if the community group’s bid to buy the former air base at Machrihanish goes ahead. I thank the Secretary of State for meeting the community group recently. I have written to him with a list of outstanding issues that are still to be resolved. I ask that Scotland Office Ministers continue to work with Defence Ministers and the community group to resolve those outstanding issues as quickly as possible, so that the buy-out can go ahead, with exciting prospects for the Kintyre economy.
Michael Moore
Again, I pay tribute to my hon. Friend’s sterling efforts on this issue. I also welcomed the opportunity to meet representatives from the Machrihanish group a few months ago. I recognise that there are still issues that the group wishes to see resolved, and that these involve ongoing discussion with the Ministry of Defence. I will ensure that my right hon. and hon. Friends in the Ministry of Defence are aware of the details of my hon. Friend’s concerns, and that he receives a response to them.
Mr Philip Hollobone (Kettering) (Con)
7. Whether his Department and the Treasury have assessed the potential effect of banking failure on the economy of an independent Scotland.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
Banks and other financial institutions are vital to the functioning of the economy. Although no specific work has been commissioned on the banking bail-out in Scotland, a 2010 National Audit Office report states that the total amount at stake is currently £512 billion. As of December 2010, £124 billion in cash had been invested in Government financial interventions. Based on NAO data, the Scottish Parliament Information Centre, SPICe, has estimated that the Royal Bank of Scotland and the Lloyds Banking Group were provided with £470 billion. SPICe also calculated that this figure was three times the annual Scottish GDP, and that the total UK Government intervention of £751 billion was equivalent to just over half of UK GDP.
Mr Hollobone
Do those figures not show that, like Iceland and Ireland, a separate Scotland would simply not have been able to survive the international banking crisis on its own? Is it not the case that Scotland’s economy will always be better off inside, rather than outside, the United Kingdom?
David Mundell
I could not agree more with my hon. Friend. It is interesting that as we enter the Scottish Parliament election period, the Scottish National party appears to have forgotten its proclamation about the arc of prosperity and Scotland’s wish to join the economies of Ireland and Iceland. The First Minister, Alex Salmond, also appears to have forgotten saying in the 2007 campaign:
“We are pledging a light-touch regulation suitable to a Scottish financial sector with its outstanding reputation for probity, as opposed to one like that in the UK, which absorbs huge amounts of management time in ‘gold-plated’ regulation.”
Pete Wishart (Perth and North Perthshire) (SNP)
That response shows that what has characterised the Scottish election campaign is that positivity wins over negativity. Will the right hon. Gentleman at least acknowledge and recognise that the failure of those so-called Scottish banks was down to UK regulation?
David Mundell
I do not think that the hon. Gentleman was listening to my last response. His leader, Alex Salmond, previously described the UK regulation as “gold-plated” and, at the previous Scottish elections, offered the voters “light-touch regulation”. This is the same Alex Salmond who said that the banking crisis was down to “spivs and speculators”.
John Thurso (Caithness, Sutherland and Easter Ross) (LD)
One of the most pernicious effects of the banking failure in Scotland at the moment is the withdrawal by nationalised banks at short notice of funding for small businesses, such as TDI Ltd in my constituency. What will the Minister do to hold the moneylenders’ feet to the fire and get Project Merlin properly adhered to?
David Mundell
The Secretary of State and I are in regular contact with the banks operating in Scotland to ensure that Merlin goes forward as envisaged. We are also willing to take up individual cases such as the one that my hon. Friend mentions, which, if he refers it to us, we will refer directly to the banks in question. [Interruption.]
Mr Speaker
Order. There are far too many private conversations taking place in the Chamber. It is very discourteous, and I am sure that the House wishes to hear Mr Greg Hands.
Greg Hands (Chelsea and Fulham) (Con)
Thank you, Mr Speaker. Will the Minister join me in welcoming the report by the Independent Commission on Banking, under Sir John Vickers, and will he remind the House who, in the last Parliament, awarded Sir Fred Goodwin a knighthood for services to banking?
David Mundell
My hon. Friend’s interventions at Scottish questions are always welcome. He is quite right to suggest that it was the Labour Government who not only awarded Sir Fred Goodwin his knighthood but involved him in virtually every other initiative that they pursued in Scotland. The Vickers report is to be welcomed in Scotland, as it is elsewhere in the United Kingdom.
Karl MᶜCartney (Lincoln) (Con)
11. What progress he has made on measures to prevent the coincidence of elections to the House of Commons and to the Scottish Parliament in May 2015.
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
Government amendments to the Fixed-term Parliaments Bill deferring the 2015 Scottish Parliament elections until 5 May 2016 were agreed by the other place on 29 March.
Karl MᶜCartney
In addition to outlining those measures, will my right hon. Friend update the House on progress towards the establishment of the commission to examine the West Lothian question, on its membership and on when we might expect to see its conclusions and recommendations?
David Mundell
As my hon. Friend knows, the coalition’s programme for government promised to establish a commission to consider the West Lothian question. A commission will be established this year to consider it, and the Government are committed to addressing the issue. We are continuing to give careful consideration to the timing, composition, scope and remit of the commission. It will need to take into account our proposals for reform of the House of Lords to create a wholly or mainly elected second Chamber, the changes in how this House does its business, and amendments to the devolution regimes such as those in the Scotland Bill, which is now before the House.
Jo Swinson (East Dunbartonshire) (LD)
12. What discussions he has had with ministerial colleagues on the potential for renewable energy generation in Scotland.
The Secretary of State for Scotland (Michael Moore)
I have regular discussions with ministerial colleagues on a wide range of energy-related issues. Scotland has a growing reputation as a world leader in renewable energy, and we will continue to work with industry and the Scottish Government to develop these opportunities.
Jo Swinson
I thank the Secretary of State for that reply. Last month, six Scottish wind farms were paid a total of £900,000 to stop producing energy because the grid could not absorb it. What will the Government do to strengthen grid capacity and improve energy storage so that that kind of waste does not happen, and so that Scotland can properly harness its vast resources of marine, hydro and wind energy?
Michael Moore
First, may I highlight the fact that, under the complex energy management arrangements for the grid, arrangements have to be made from time to time to ensure that we can stop or increase energy production? Through those arrangements, payments are made for stopping and increasing production; that is understood. The Government have set out an ambitious programme for energy reform through our energy market reform proposals. The consultation on that programme was recently concluded, and my right hon. Friend the Secretary of State for Energy and Climate Change intends to publish a White Paper on the subject in the near future. Through that, and through other measures such as the transmission grid charges review, we will seek to ensure that we have the capacity and capability to exploit the renewable energy potential not only of Scotland but of the whole United Kingdom. Our other initiatives relating to the green investment bank and the offer to the Scottish Government to release the fossil fuel surplus are indicative of our intention to play a full part in the renewables revolution.
Mr Wayne David (Caerphilly) (Lab)
What meaningful discussions has the Secretary of State had with the Scottish Government on this vital issue? [Interruption.]
Michael Moore
I am afraid that I did not hear the hon. Gentleman’s question. I wonder whether he could repeat it.
Michael Moore
There have been regular and ongoing discussions with the previous Scottish Government on these issues. I have to record great disappointment that despite our offer to release the fossil fuel surplus—something that eluded the previous Government—they were not keen to take it up. I hope that the new Government elected tomorrow, with Liberal Democrats at the core of it, will take up that very positive measure.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
The Secretary of State may know that the Energy and Climate Change Committee has had meetings with investors in the renewables sector in which concerns have been raised that long-term capital investments are involved, and that if the price of carbon were to change in investors’ favour, future Governments might introduce a windfall tax to compensate electricity consumers. Will my right hon. Friend reinforce the point made in the debate on Treasury matters last night that the Government want to engage with the oil and gas industry to ensure that any concerns about the stability of the tax regime can be dealt with, so that we can have a constructive engagement with the aim of maximising investment in all energy futures for this country?
Michael Moore
My hon. Friend makes an important point. I followed his contribution and that of my right hon. Friend the Member for Gordon (Malcolm Bruce) last night with great interest. As my hon. Friend the Economic Secretary to the Treasury pointed out, their thoughtful and constructive contribution to the debate was very worth while. We are properly engaged with the oil and gas sector, as we will be with the renewables sector, to ensure that we can put in place long-term sustainable tax regimes and other arrangements that will help to boost those important parts of the British economy.
Jim McGovern (Dundee West) (Lab)
Q1. If he will list his official engagements for Wednesday 4 May.
The Prime Minister (Mr David Cameron)
This morning, I had meetings with ministerial colleagues and others, and in addition to my duties in this House I shall have further such meetings later today.
Jim McGovern
The abolition of council tax, the scrapping of student debt, the £2,000 endowment for first-time home buyers and, of course, the referendum on separatism were all promises made by the Scottish National party prior to the last Scottish elections, all of which were never kept. Will the Prime Minister inform me, the House and the country whether certain political commentators are correct when they say that he would prefer to see the separatists returned in Edinburgh for one reason only—to avoid a Labour victory?
The Prime Minister
I am happy to confirm that what I would like to see in Scotland is the greatest possible showing for Annabel Goldie, who has led the Conservatives with such distinction. I do not think I want to intrude on the private grief between Labour and the SNP, but one thing I will say: whatever the outcome of that election, I, for one, will always stand four-square behind the United Kingdom.
Dr Phillip Lee (Bracknell) (Con)
Is the Prime Minister aware of the significant fires raging in Swinley forest in my Bracknell constituency? I am sure he would like to join me in congratulating the fire and police services on the sterling work that is being done, and hope he will guarantee that the Government will be there if any requests are made by those services.
The Prime Minister
I certainly join my hon. Friend in praising the fire and other services taking part in this difficult endeavour. As he knows, there are well tried and tested procedures to make sure that central Government stand behind local government when there are excessive costs. I will happily write to my hon. Friend about that issue.
Edward Miliband (Doncaster North) (Lab)
Will the Prime Minister tell us how many experienced police officers are being forcibly retired as a result of his 20% cuts to police budgets?
The Prime Minister
The decisions about police officer numbers will depend on the decisions made by chief constables in individual parts of the country. The point is that we can see in case after case that there are far too many police officers in back-office jobs, doing paperwork and carrying out corporate development work who should be on the front line. Responsible chief constables are getting those officers out on the front line to fight crime—and crime is falling under this Government.
Edward Miliband
I do not know whether the Prime Minister does not know the answer to the question or whether he chooses not to answer it. Let me tell him the answer: 2,100 experienced police officers with more than 30 years’ experience are being forcibly retired. Let us take the case of former beat officer, Martin Heard, who was forced to retire from Wolverhampton police. He is now being asked to come back to the force as a volunteer special constable—unpaid—to fill the gaps left by the cuts. What does the Prime Minister have to say to Martin Heard?
The Prime Minister
What is absolutely clear is that what we are getting from the Labour party is complete and utter hypocrisy. We know at the time of the last election that Labour was specifically asked, and I quote the interview:
“Can you guarantee if you form the next government that police numbers won’t fall?”
The Home Affairs spokesman at the time, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), said “No”, he could not guarantee that. The question is not whether the budget should be reduced—of course it has to be—but who is going to cut the paperwork, who is going to get rid of the bureaucracy, who is going to trust the local managers to make sure we get police on the front line. Those are steps we are taking; those are steps his Government never took.
Edward Miliband
He is the guy who came along and said that cuts not of 12% but of 20% were necessary for efficiency savings in the police budget. It is his choice; why does he not defend it? Perhaps one reason people are so angry is that a year ago the Prime Minister said on the eve of the election:
“Any cabinet minister who comes to me…and says ‘Here are my plans’ and they involve frontline reductions, they’ll be sent”
packing. What does he say to the Home Secretary about cases such as that of Martin Heard—or has he just broken another promise?
The Prime Minister
What the Home Secretary is doing is what police leaders up and down the country are doing: trying to get more police on the beat. In my own force in the Thames valley, that is exactly what is happening.
When it comes to defending front-line services, is it not time that the right hon. Gentleman talked to Labour local authorities such as Manchester city council, which, although the average cut in local government spending power is just 4.5%, is cutting services by 25%? Are not Labour local authorities playing politics with people’s jobs?
Edward Miliband
The Prime Minister knows that he cannot defend his broken promises on policing. Let us talk about the other broken promises led by the Deputy Prime Minister. We know that the majority of universities are proposing to charge tuition fees of £9,000 a year. Can the Prime Minister tell us how many of them he expects to have their proposed fees cut by the Office for Fair Access?
The Prime Minister
That decision will depend on the Office for Fair Access.
The right hon. Gentleman talks about broken promises. The fact is that it was the last Government who introduced tuition fees and top-up fees—but we have a new doctrine on the leader of the Labour party’s attitude to the last Government, which he announced in an interview with The Sun. He said:
“I am not going to defend what happened in the past just because I happen to have been in the last Government.”
Presumably we should not listen to him now just because he happens to be the Leader of the Opposition.
Edward Miliband
Once again, the Prime Minister has not answered the question. We know from the Office for Fair Access that it is not going to cut the fees of the universities. The assistant director said at the weekend:
“We are not a free pricing regulator: that is not our role...we wouldn’t say to an institution we would only allow a fee of ‘X’ or ‘Y’.”
Will not the Prime Minister admit that on top of a broken promise not to raise tuition fees and a broken promise that £9,000 would be the exception, he is now breaking another promise on the capping of excessive fees?
The Prime Minister
The fact is that we will have to wait until July, when the access regulator—[Interruption.] Let me make this point to the right hon. Gentleman. Degrees have not suddenly started to cost £7,000, £8,000 or £9,000. Degrees have always cost that much. The question is, who will pay for them? We say that successful graduates earning more than £21,000 a year should pay for them rather than taxpayers, many of whom do not go to university.
I have to say this to the right hon. Gentleman. He made a promise: a promise that he would have a fully costed alternative to our fees programme by the end of the last year. Where is it? Another broken promise!
Edward Miliband
That is what we have come to expect from this Prime Minister. He is hazy on the facts, and unable to give a straight answer to a straight question. I know how the Energy Secretary must have felt in Cabinet yesterday. Remember what was said a year ago about two parties working
“Together in the national interest”?
Now what do we have? We have two parties threatening to sue each other in their own interests. That is what has changed in the last year.
What the public are saying, in relation to police cuts, tuition fees and the NHS, is “This is not what we voted for.” Given that the Government have broken so many of the promises that they made a year ago, how can the public believe anything that they say at the elections tomorrow?
The Prime Minister
Even the jokes have been bad this week. The fact is that what this coalition Government have done over the past year is freeze council tax, cap immigration, lift a million people out of income tax, introduce a pupil premium, link the pension back to earnings, cut corporation tax, and set up more academies in 10 months than the last Government set up in 10 years. At the council elections tomorrow, people should remember the mess that Labour left us in, and resolve not to let Labour do to their councils what it did to our country. [Interruption.]
Mr Speaker
Order. The Minister for Children is under no obligation to behave like a child. It is not required.
Caroline Dinenage (Gosport) (Con)
Q2. Does the Prime Minister agree with the comment of Lord Glasman, special adviser to the Leader of the Opposition, that the last Government lied to the British people about the extent of immigration?
The Prime Minister
My hon. Friend raises an important point, which is that the last Government did not tell it straight to people about what was happening on immigration and that it has fallen to this Government to take the steps to get the numbers under control. Indeed, Lord Glasman said something that I have said many times, which is that under the last Government there was
“very hard rhetoric combined with a very loose policy”
and that was the worst approach of all.
Mr Jack Straw (Blackburn) (Lab)
Does the Prime Minister share my profound anxiety about the recommendation of the advocate-general to the European Court of Justice for a European-wide ban on the patenting of stem cell research based on human embryos? Does he agree that were such a ban to be confirmed by the ECJ, it would have profoundly damaging effects on our science base and our pharmaceutical industries? Is he able to say what contingency plans the Government are putting in place to minimise the effect of any such ban?
The Prime Minister
The right hon. Gentleman makes an important point, and I thank him for giving me some notice of this issue. The point I would make is that this House and the House of Lords have had extensive debates to arrive at the policy that we have. I believe that it is right to try to maintain the UK as a world leader in stem cell research. Under European law, uses of human embryos for industrial or commercial purposes are exempted from patent protection. As I understand it, the legal opinion of the advocate-general at the ECJ on the scope of this exemption is advisory and does not bind the Court. As such, the opinion currently has no impact on British researchers, but we should keep this position under review.
Jeremy Lefroy (Stafford) (Con)
Q4. Several manufacturing businesses in Staffordshire, including Alstom in my constituency, have recently committed to significant investments and are increasing their work force. What measures does my right hon. Friend believe are necessary to ensure that the welcome growth in manufacturing in the UK continues for the long term?
The Prime Minister
My hon. Friend makes an important point, which is that we do want growth in manufacturing, which is very strong at the moment and has been over the past year, to be maintained. I well remember visiting the Alstom plant, although I was slightly less successful in winning Stafford than he was at the last election. Such plants will benefit from our policies of cutting taxes, boosting apprenticeships, investing in capital projects and doing everything we can as a Government and as a country to support our export industries and sell Britain around the world.
Mr Bob Ainsworth (Coventry North East) (Lab)
On 25 June last year, speaking on the Ark Royal, the Prime Minister told our armed forces that he would enshrine the military covenant in law. Why is he watering down that commitment to a useless referencing?
The Prime Minister
I do not believe for a minute that that is what is being done. What is going to happen is that we are going to clearly reference the covenant in law and then the covenant will be published and debated in this House every year. It is vital that we are able to update and improve it every year, because our military personnel face so many changing circumstances. We are looking across government at all the things we can do, for example, on health care, on education, and on things such as council tax for soldiers serving overseas—these are many of the things that the last Government failed to do—to look after our armed service personnel.
Jane Ellison (Battersea) (Con)
Q5. Later this month, Edward Lister, the Conservative leader of Wandsworth council for nearly 20 years, moves on to be the chief of staff to the Mayor of London. Will the Prime Minister join me in paying tribute to him for his leadership in consistently delivering the UK’s lowest average council tax along with top-rated front-line services? Will the Prime Minister urge more councils to follow suit?
The Prime Minister
I thank my hon. Friend for her question. It gives me the opportunity not only to praise Edward Lister, who has done a fantastic job over many years, but to pay tribute to Sir Simon Milton, who occupied that position and is admired on all sides of the House for the work he did at Westminster and then at the Mayor’s office. What Wandsworth has shown over many years is that it is possible to combine low taxes with good services if all the time you are trying to improve efficiencies. That is what councils up and down our country should be focused on, particularly in a year when we have to make spending reductions.
Pamela Nash (Airdrie and Shotts) (Lab)
One of Scottish Labour’s key manifesto commitments is the First Foot initiative, which will help thousands of first-time buyers to get a foot on the property ladder. What is this Prime Minister doing to help this generation of home buyers, who are crippled by unemployment, student debt and rising living costs, and therefore cannot save a deposit for a House?
The Prime Minister
The proposal in Scotland sounds quite like our proposal in the Budget for Firstbuy, which will help tens of thousands of young people to get on the property ladder by helping them with the deposit that many families find it extremely difficult to raise. There is a real worry in our country that the age of the first-time buyer is getting older and older, and that many families are finding that unless they have family help behind them they simply cannot get on the housing ladder. We must ensure that that is not the case and Firstbuy is a very good proposal that we are introducing in England. I will be interested to see what happens in Scotland.
Stephen Mosley (City of Chester) (Con)
Q6. Conservative-run Cheshire West and Chester council is saving millions by cutting waste, boosting efficiency and selling surplus property to help protect front-line services. Meanwhile, in next-door Labour-run Halton, the council is cutting back on bin collections and road maintenance instead. What does my right hon. Friend think can be done to help councils reach fair and sensible decisions?
The Prime Minister
I would encourage all councils to look at costs that can be cut that are not on the front line. Many Conservative councils are sharing chief executives with their neighbouring councils and cutting councillors’ allowances and chief executive pay. There are too many examples, particularly in Labour councils, of chief executives being paid far too much and of not nearly enough attention being paid to cut the back-office costs so we can keep the services going.
Jack Dromey (Birmingham, Erdington) (Lab)
The Government are cutting the police and Birmingham city council is cutting care to the elderly and disabled. There is dismay in my constituency that high-need, high-unemployment Birmingham is being hit far harder than the leafy shires such as Surrey. Will the Prime Minister therefore answer the question put to me by my constituents—why have the Tories got it in for Birmingham?
The Prime Minister
A coalition between Conservatives and Liberal Democrats has been doing a great job for Birmingham, ensuring that council tax is kept down, investing in housing and ensuring that there are good public services. Many of the things we have done, such as the regional growth fund, are targeted at areas such as Birmingham. The hon. Gentleman should go back to his constituents, and after he has apologised to them for the fact he was the winner of an all-woman shortlist he should tell them that coalition government between Conservatives and Liberal Democrats is working at Westminster and working well in Birmingham.
Mr James Clappison (Hertsmere) (Con)
Q7. In 2005, the previous Labour Government agreed to hand back part of the UK’s EU rebate at a cost to UK taxpayers of £9.4 billion over the lifetime of this Parliament. Has my right hon. Friend seen any evidence of what precisely was obtained in return for that remarkable generosity?
The Prime Minister
My hon. Friend makes an important point. Part of the rebate was given up and it was not given up for any proper promise in return. We were told that there would be a promise of real reform of the common agricultural policy and that did not appear. That shows me that we have to be incredibly tough in the budget negotiations this year and next so that when we go into the financial framework for the next seven or eight years we ensure that we keep the costs of this organisation under control.
Kelvin Hopkins (Luton North) (Lab)
Q9. The Government’s savage cuts are set to destroy some half a million jobs in the public sector and, according to PricewaterhouseCoopers, a similar number in the private sector. With thousands more on the dole, paying no taxes and dependent on benefits, the deficit will increase rather than reduce. As sure as night follows day, we will see a collapse in the housing market, a collapse in support for the Tories and a return to Labour government. Will the Prime Minister enjoy saying goodbye to most of his colleagues and sitting on this side of the House?
The Prime Minister
I thought the hon. Gentleman was from Luton, but he sounds like he is from fairy dairy land. Let me remind him that compared with this time last year 400,000 more people are in jobs in the private sector. That is what has happened through our getting the deficit under control, getting the economy growing and ensuring that we deal with the mess we were left by the Opposition.
Andrew Selous (South West Bedfordshire) (Con)
Q10. Is my right hon. Friend aware that Conservative-run Central Bedfordshire council has been rated as the highest performing council of all its statistical neighbours by PricewaterhouseCoopers for value for money, effectiveness and service delivery? Is this not the type of example that we should encourage more councils to follow?
The Prime Minister
My hon. Friend is absolutely right. Well-run councils that ensure they are cutting back-office costs can provide good services. When one looks at the figures, one can see that those Conservative councils are not just costing less for a band D property but doing better on measures such as recycling and other service delivery. It is simply not true to say that by cutting costs councils harm services. They have to be effective at keeping their costs down to provide good services.
Kerry McCarthy (Bristol East) (Lab)
Q11. Next Wednesday, the Hardest Hit campaign will be lobbying MPs in Parliament through constituents of ours with severe disabilities and chronic illnesses who are bearing the brunt of this Government’s attack on welfare benefits and public services. Will the Prime Minister have the courage to meet some of those campaigners face to face next week so that he can hear from them at first hand about the devastating impact that this callous and uncaring Government are having on their lives?
The Prime Minister
I make two points to the hon. Lady. First, the most important line of defence to help people with severe disabilities and severe need is the national health service and it is this Government who are putting more money into the national health service—£11.5 billion extra. That money would not have been available if we had a Labour Government; we know that because we can see Labour cutting £1 billion off the NHS in Wales. In terms of reforming benefits, I thought we had the support of the Labour party to reform benefits to make sure they are helping those who need the help most.
Jason McCartney (Colne Valley) (Con)
Q12. Last week, I joined 170 other Huddersfield Town fans in cycling from Huddersfield to Brighton to raise £200,000 for the Yorkshire air ambulance. Will the Prime Minister join me in praising Huddersfield Town for raising that money and will he also look into why the air ambulance has to pay VAT on its fuel although the Royal National Lifeboat Institution—another emergency charity service—does not?
The Prime Minister
First, I would like to congratulate my hon. Friend on his bicycling feat, as well as all those who took part from Huddersfield Town. I also pay tribute to our air ambulance crews across the country, who do an amazing and brilliant job. I have looked specifically at this issue. As he probably knows, the EU VAT directive does make an exemption for lifeboats, but there is no equivalent provision for supplies used by other charities and we are not able to change that. However, we are able to do more for charities, as we did in the Budget, including with the inheritance tax exemption, which I think is going to make a huge difference for charities up and down our country. I hope that he will do everything he can to encourage them to make use of that.
Tony Lloyd (Manchester Central) (Lab)
Q13. Child poverty is a cancer that means that children in our society go to bed hungry in homes that their parents cannot afford to heat. The Prime Minister will be aware of the recent Organisation for Economic Co-operation and Development report that says that the great progress that was made has now stalled and that the numbers are once again due to go up. If the Prime Minister agrees with me, as I think he will, that this is a moral imperative for any Government, will he tell the House what he will do now to change policy and make sure that our innocent children will not be the victims of Government cuts?
The Prime Minister
I do believe it is a moral imperative and I have looked at the OECD report carefully, which does show that things stalled under the previous Government in recent years. What I would say is that despite having had to take difficult decisions in the Budget we did make sure that there has been no increase in child poverty as a result of the Budget. I think it is time, frankly, for a more mature, cross-party debate on how we can make sure that we get people out of poverty rather than just looking at the transfer of money between rich and poor. That is why we are looking at things such as the pupil premium, free nursery education for deprived two-year-olds and making sure that Sure Start is working properly, because it is all those things that will help children out of poverty in a more sustainable way.
Greg Hands (Chelsea and Fulham) (Con)
Q14. This week, the three top-rated councils of Hammersmith and Fulham, Kensington and Chelsea and Westminster are discussing extending their combined services to save £35 million a year while still improving front-line services. What can the Prime Minister do to encourage this approach rather than that of Labour-run Hounslow, which is closing day care centres, squeezing parks maintenance and cutting mental health services in a slash-and-burn approach?
The Prime Minister
I think this is a very important point and I hope that councils up and down the country will look at it. Three large councils are coming together and saving £35 million because they are sharing back-office services, executive teams and so on. Frankly, if they can do it, as large councils that have big responsibilities, many other councils should be doing it in London and elsewhere. Until we see that happening, I do not think it is realistic to say that it is necessary for councils to cut front-line services.
Mike Gapes (Ilford South) (Lab/Co-op)
More than 100 years ago, Parliament legislated to make sure that local authorities provided allotments. Healthy local food is a very good part of good British values. Why therefore are the Prime Minister’s Government scrapping the obligation on local authorities to provide allotments?
The Prime Minister
I was as concerned as the hon. Gentleman when I read that report. I immediately checked, and found that that is not the case. It is extremely important that allotments are made available. Many Members will find that when they ask about that in their constituencies there are massive queues for allotments, as many people want to grow their own vegetables and food and understand more about where food comes from. It is a great movement, and it has my full support.
Mark Menzies (Fylde) (Con)
Q15. The chief executive of Conservative-run Fylde borough council has taken a 5% pay cut, whereas Labour-run Blackburn has cut services to young and vulnerable people while increasing its reserve to £12.7 million. What can the Prime Minister do to encourage councils to behave more responsibly like Conservative-run Fylde?
The Prime Minister
One of the most important things that we can do is make all that information available. This Government have massively increased transparency. Every council in the country has to declare its spending on any item over £500, and people have found that useful in seeing how much council executives are paid, how much councillors are paid, and making sure that they bear down on those costs. I commend what is happening in Fylde, and it is a matter of great regret that there is still one council—Labour-controlled Nottingham—that will not make that information available.
Mr Michael Meacher (Oldham West and Royton) (Lab)
Given that private borrowing was falling at the last election why, according to the Office for Budget Responsibility, do the Government plan to ramp it up by half a trillion pounds to a total of more than £2 trillion by 2015?
The Prime Minister
What the Government are doing is getting control of Government borrowing—that was the real crisis at the last election. It is an important point to make, particularly on a day when we read about Portugal going for an enormous bail-out. It is worth reminding ourselves that today we have a bigger budget deficit than Portugal. The reason we are not in Portugal’s position is that we took action in two brave Budgets and a spending round to clear up the mess left by the right hon. Gentleman’s hon. Friends.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
I am sure, Mr Speaker, that you and the Prime Minister have enjoyed the good weather, especially last Friday, the day of the royal wedding, and perhaps visited tourist hot spots such as Southwold and Aldeburgh. Just down the road from those hot spots, farmers might be about to suffer a drought, and are genuinely concerned about the lack of rain, as their ability to abstract water may be limited. Will the Prime Minister meet me to discuss those genuine concerns about restricting water for our farmers?
The Prime Minister
I am happy to meet my hon. Friend. Everyone has been enjoying the recent weather, and it was fantastic that the weather was so good for the royal wedding. However, farmers face real issues because, at a time of year when they expect a lot of rain, they have had virtually none.
Mrs Mary Glindon (North Tyneside) (Lab)
With the strong likelihood that the Lib Dems will come off worst in tomorrow’s local elections, and hopefully the rejection of the alternative vote in the referendum, what political words of comfort will the Prime Minister have for his by then beleaguered deputy on Friday?
The Prime Minister
Of course, we do not agree about the future of our electoral system. We are having a referendum and a debate about it, but the reason for having a coalition Government coming together and sorting out this country’s problems in the national interest is as good an argument today as it was a year ago, when we came into government to clear up the mess made by the Opposition.
Rory Stewart (Penrith and The Border) (Con)
In the light of the success of the royal wedding for public diplomacy, does the Prime Minister believe that it reinforces the importance of a different narrative for the diamond jubilee from the Olympics, in terms of what it can do for Britain’s international reputation?
The Prime Minister
We have a fantastic opportunity next year to show all faces of Britain, both modern and traditional. We are going to celebrate the jubilee, and I think that people will want to celebrate the incredible public service that Her Majesty the Queen has given over many years as an absolutely amazing model public servant. People will also want to celebrate the Olympics as a celebration of sport and all that is best about Britain. The royal wedding, as the Major of London said, was in many ways a dry run for how we handle some of those events, and everyone in the country has a lot to look forward to next year.
Alison McGovern (Wirral South) (Lab)
Many of my constituents in Wirral worry about the quality of care that older people, especially those with dementia, receive in hospital. How does the Prime Minister think that his now paused, top-down reorganisation of the NHS will help to make sure that older people are looked after with real dignity?
The Prime Minister
One of the aims of the changes that we are making to the NHS must be better to link the national health service, social service provision, local authorities and how we look after the elderly. All of us have seen too many cases in hospital where people who should be in residential or nursing care or being looked after at home are stuck in a large district general hospital or in a community hospital, when they should be getting alternative pathways of care. That is what the whole change should be about. What I am finding as I go round the country listening to doctors, nurses and clinicians is that we must make sure we take the opportunity to get this absolutely right. That is what the reforms should be all about.
Bob Russell (Colchester) (LD)
In last year’s general election in Essex 49% of the votes cast went to the Conservatives, but 95% of the seats went to Conservative MPs. It was an outcome that would embarrass Robert Mugabe. Apart from the fact that Essex is now a Labour-free zone, does the Prime Minister think that that result was fair?
The Prime Minister
My hon. Friend tempts me into debate. In Colchester everyone had one vote, it was counted once and he won. I congratulate him. In other parts of Essex everyone had one vote, they were all counted once and many of my hon. Friends won. But for all that he brings to the House, what the Liberal Democrats lack in number, he makes up in stature as a Member of Parliament for Essex.
Speaker’s Statement
Mr Speaker
I have to inform the House that I have received the following letter from the Clerk of the House:
Dear Mr Speaker,
As you know I have decided to retire at the end of September when I will have completed forty four years of service to the House, over a decade of which has been at the Table.
It has been an immense privilege to serve what I unashamedly regard as a Parliament second to none. Over this long period—which began during the Speakership of Horace Maybray King—there have been great challenges and many changes. There have been crises that have rocked the institution. Throughout these times it has remained my firm belief that only by having confidence in itself, in its ability to adapt to the new while keeping to the tried and tested, can the House retain its pre-eminent position as the sovereign body at the centre of our national, democratic life. Unwarranted and unfounded criticism from whatever quarter should not deflect Members from their duties which will necessarily ruffle and disturb the peace of consensus.
I would like to put on record my great debt to members of the staff of the House, at all levels, who have given me unstinting support. They make up a loyal and very effective workforce. I would like to thank my colleagues on the Management Board and in my own office for their invaluable help without which many of the changes that have happened in recent times could not have been made effective.
Friendships with Members and colleagues in the scattered Commonwealth parliaments, which together form an important parliamentary community, have given me much pleasure. Here at home fellow Clerks have kept me on my procedural toes and I have enjoyed working, across party divides, with Members of the House, past and present and with Members and colleagues in the other place.
Finally Mr Speaker may I thank you and your Deputies, with whom I have worked closely, for your trust and for the camaraderie we have enjoyed together which has greatly lightened what can be serious and sometimes difficult moments.
Yours sincerely,
Malcolm Jack
Members will wish to know that I have put in place a competition for the appointment of the Clerk’s successor.
There will be an opportunity to pay the traditional tribute to the Clerk at a later date. [Applause.] That spontaneous reaction demonstrates the respect and affection in which the Clerk of the House is held.
Points of Order
Paul Flynn (Newport West) (Lab)
On a point of order, Mr Speaker. As Many Members were inexplicably absent at 4.30 this morning, they will have missed an important debate that drew attention to a great weakness in our role: we are able to heap praise on certain individuals, but we are forbidden the privilege of everyone outside the House to be critical of those individuals. Can you suggest a way in which we can ensure that that rule, which demeans the office of MP, is changed and we can enjoy the freedom of everyone outside the House to be critical of anyone when necessary?
Mr Speaker
Criticism of the kind and in the direction that the hon. Gentleman has in mind can always be made on a substantive motion. That is the specific solution to the problem that he has just identified. More widely, if he is concerned, as I know he is, about the current Standing Orders and seeks their reform, it is open to him to seek support for such a proposition across the House. I must leave it there for today.
Derek Twigg (Halton) (Lab)
On a point of order, Mr Speaker. I ask for your advice, please. The hon. Member for City of Chester (Stephen Mosley) has inadvertently misled the House today by suggesting that the bin collection service in Halton has been cut. As someone who is not only the Member of Parliament for Halton but who actually lives there, I must say that this was the first I knew about it. The service has not been cut. There is a pilot scheme, which has come about as a result of consultation in two wards, to look at alternative bin collections as a result of the demand for more recycling and more recycling receptacles. There has been no decision to cut the weekly bin collection service, so the hon. Gentleman is wrong.
Mr Speaker
I am grateful to the hon. Member for Halton (Derek Twigg). I know that he may find this difficult to accept, but this is a matter of debate, and he has put his point firmly on the record—probably not for the first time, and certainly not for the last.
If there are no further points of order, we come now to the ten-minute rule Bill, for which the hon. Member for Mid Bedfordshire (Nadine Dorries) has been patiently waiting.
Sex Education (Required Content)
12:58 - The House divided: - Ayes: 67 / Noes: 61 - Question accordingly agreed to.
Nadine Dorries (Mid Bedfordshire) (Con)
I beg to move,
That leave be given to bring in a Bill to require schools to provide certain additional sex education to girls aged between 13 and 16; to provide that such education must include information and advice on the benefits of abstinence from sexual activity; and for connected purposes.
I am sure that many Members will be aware of the broadcaster Dame Joan Bakewell. I always had the impression that she and I were on separate sides of the political divide, but I was intrigued a year ago to read something that she had written in the Radio Times and in the newspapers, in which she said that Mary Whitehouse, who campaigned against declining moral standards on television, was right to fear that sexual liberation in the 1960s would damage society.
Dame Joan was a long-time and fierce opponent of Mary Whitehouse, and that is why her piece was intriguing. She has now changed her mind in terms of her opposition, saying that the freedom granted by the introduction of the pill has been abused, resulting in the sexualisation of young girls and the prevalence of pornography. She said:
“The liberal mood back in the ’60s was that sex was pleasurable and wholesome and shouldn’t be seen as dirty and wicked. The Pill allowed women to make choices for themselves. Of course, that meant the risk of making the wrong choice. But we all hoped girls would grow to handle the new freedoms wisely. Then everything came to be about money—so now sex is about money, too. Why else sexualise the clothes of little girls, run TV channels full of naked wives, have sex magazines edging out the serious stuff?”
In fact, in some newsagents now there are more sex magazines available than any other kind of magazine.
Nadine Dorries
That is a typically glib comment from the hon. Gentleman, who just does not understand and will oppose this measure. Indeed, it will be interesting to see a man stand and oppose a Bill that is about empowering young girls.
Dame Joan said that our society is saturated in sex: a typical prime-time hour on TV contains 2.6 references to intercourse, 1.2 references to prostitution and rape, and 4.7 sexual innuendoes.
Let us move on to look at some of the examples that are now available. Primark, a store that is frequented by many young girls, including my own daughters, was recently chastised for selling padded bikinis for seven-year-olds. Without going into too much detail, I am sure that everybody in the House understands why women would buy padded bikinis, but to make them available to and target them at seven-year-old girls seems to epitomise how far the sexualisation of young girls has gone within our society.
On 5 March 2010, explicit videos were shown in schools which depicted to seven-year-olds a cartoon graphic of a couple having sexual intercourse. This resulted in some children being removed from schools that showed those videos. It will not be a surprise to any mother, or parent, in the House that seven-year-old children do not want to see a cartoon of a couple having sexual intercourse. I have never yet met a mother who said, “I want my seven-year-old to see cartoons of couples having sexual intercourse”, so why on earth would schools think it appropriate to show such videos to seven-year-old children in the classroom? Some children were reported to be frightened, alarmed and disturbed by the videos.
In July 2009, a Sheffield NHS trust released into secondary schools—to children from the age of 11—a pamphlet which told them that sex every day keeps the doctor away. It also said that for too long experts have concentrated on the need for “safe sex” and loving relationships. Alongside this, there was a slogan saying that
“an orgasm a day keeps the doctor away”.
It also said:
“Health promotion experts advocate five portions of fruit and veg a day and 30 minutes’ physical activity three times a week. What about sex or masturbation twice a week?”
This is a pamphlet going out to 11-year-olds at secondary modern schools in Sheffield.
We have to ask ourselves whether, in the midst of this kind of society, with the over-sexualisation of children, we have got our sex education in schools right. It is often argued that compulsory sex education and effective teaching of “safe sex” will help to tackle a high pregnancy rate among teenagers and underage children. Sadly, the evidence suggests that this is not the case. The British Medical Journal found that 93% of teenagers who became pregnant had seen a medical professional prior to the pregnancy and 71% had discussed contraception. The journal found that
“teenagers who become pregnant have higher consultation rates than peers and most of the difference is owing to consultation on contraception”.
According to data published by the Office for National Statistics in 2007, Britain has the highest teenage pregnancy rate in western Europe, so we must be doing something wrong. That is why I am introducing this Bill.
I believe that the answer to ending our constant struggle with the incredibly high rate of teenage sexual activity and underage pregnancies lies in teaching our girls and boys about the option of abstinence—the ability to just say no as part of their compulsory sex education at school. I recently spoke to a 16-year-old who used these very disturbing words: “The thing is, if you reach the age of 18 and you’re still a virgin, and you meet somebody you’d like to be your boyfriend, he’s going to think you’re a freak.” It never enters the minds of young teenage girls, who are taught in sex education classes about “safe sex” and about making their decisions on whether to have sex based on how they feel that day or on their wishes—“feelings” and “wishes” are the key words—that they are empowered and have the ability to say no. That is not taught alongside information on making the decision based on their feelings and wishes and on “safe sex”, but it should be an equally viable option.
We have to re-examine thoroughly the content of sex education that is provided in schools, and consider whether what is currently offered is in the best interests of our children and society as a whole. Children learn about puberty and intercourse at the age of seven, and about pregnancy and contraception from the age of 11. Teaching a child of seven to apply a condom to a banana, without telling them that they do not have an obligation to go and do it, is almost like saying, “Now go and try this for yourself.” At no stage of the curriculum does the teaching cover anything about relationships and the option to say no. Girls are taught to have safe sex, but not how to say no to a boyfriend who persists in wanting a sexual relationship. They are given no guidance on that whatsoever.
In a letter to the Daily Mail, a 14-year-old, Josie Parkinson, described the sex education that she had received at her local secondary school:
“As a 14 year-old girl, I have had to attend four talks in the past nine months from a woman from a family planning clinic. I have been taught three times how to put on a condom; how easily pupils can acquire condoms free at a clinic; how to recognise sexually transmitted diseases and have them treated confidentially at a clinic; and that we do not need to tell our parents, GP, the police or anyone else in authority about being provided with contraception, or even having an abortion. There was not one mention of abstaining or any discouragement of sex.”
For a girl or boy to have sex before 16 is unlawful, but they are told in school, “It is unlawful, but it’s okay. You can have the condoms anyway.” They should be told, “It is unlawful. You can have the condoms anyway, but why don’t you consider, because it is unlawful, saying no and waiting until it is lawful?” That just is not taught to girls at school.
One factor constantly ignored by society is that peer pressure is a key contributor to early sexualised activity among the children of our country. Society is focused on sex. Our sex education teaches children how to have sex, not how to say no to sex. We ignore at our peril the fact that many girls feel pressurised into having intercourse when they are far too young, when what they actually need is their childhood.
In our sex education programmes, we need to promote the notion of abstinence and all the advantages that it brings, such as self-respect and not making relationship mistakes. It needs to be seen as a safe alternative. We need to let young girls know that to say no to sex when they are under pressure is a cool thing to do; it is as cool as learning how to apply a condom. It is as important as all the other issues that they are taught in sex education. It has to be taught alongside everything else so that young girls can say, “I have been told to say no.”
Chris Bryant (Rhondda) (Lab)
I note that the hon. Member for Mid Bedfordshire (Nadine Dorries) said that it would be a disgrace, or something like that, if I were to speak on this matter because I am a man. Of course, I am a gay man, so I am not exactly an expert on heterosexual sex or sex with girls. However, I say to her that this is the daftest piece of legislation that I have seen brought forward. I agree about many of the problems that she has highlighted, and I will come on to those, but this is not the way to solve any of those problems.
For a start, the Bill is just about girls. I said that I am not an expert, but it seems axiomatic to me that if we want to tackle teenage pregnancy, we have to talk to the boys and the girls. Secondly, the Bill is just about 13 to 16-year-olds. I did a lot of research on teenage pregnancy a few years ago, and one of the great distresses for a large number of girls was that they got to their first period without knowing what was happening to their body. I think that proper education in schools, which gives girls and boys an opportunity to seize hold of their lives and make good decisions for themselves, should start long before a girl’s first period.
Thirdly, the hon. Lady talks about an abstinence programme. Of course, the single most important thing that we can give any child in their education, boy or girl, is the self-confidence to make good decisions for themselves and, when they have made bad decisions, to be able to stand up to the consequences. There are things that we need to do through housing allocation and the benefits system to address those issues. However, there is no evidence anywhere in the world that an abstinence programme of sex education works in delivering the outcomes that she wants.
Fourthly, the hon. Lady refers only to sex education; she just wants sex education. She refers to the number of youngsters who are told how to put a condom on a banana. I have never understood why putting a condom on a banana or a cucumber is of any use to anyone, but she is absolutely right in saying that if sex education is just about teaching people the mechanics of having sex, it is effectively an advert. Rather than the present legal situation where the only obligatory bit is sex education—in other words, the mechanics and teaching people about sexually transmitted infections—there should be proper sex and relationship education starting at an early enough age to make a real difference.
The level of teenage pregnancy in my constituency is probably higher than in the hon. Lady’s, because the map of high teenage pregnancy figures is the map of poverty in this country. I feel absolutely passionately about trying to cut the number of teenage pregnancies. Indeed, I have done a great deal of work on trying to do that in my constituency. The hon. Lady rightly refers to the statistics showing that we have the highest rate in Europe. It is not just higher than anywhere else; it is fives times higher than in Holland, three times higher than in France and twice what it is in Germany. Yet countries such Holland, France and Germany have much better sex and relationship education in their schools that starts at a much younger age and is much more explicit. That is part of the difference.
There are many other elements to trying to rectify this situation, but one of the reasons why many Opposition Members think that teenage pregnancy is such an important issue is that it is not just wealth that is inherited in this country; all too often, poverty is inherited, in many cases because of teenage pregnancy. Lots of teenage mums are absolutely wonderful—they triumph against the odds—but many of the babies that are born to teenage mums are much smaller and have more health problems, and if they are girls, they are three times more likely to become teenage mums. We thus perpetuate the cycle of poverty, particularly in certain parts of the country. That is why I believe that we should have far better sex and relationship education in schools.
Incidentally, I am delighted that a Labour Government, through resolute work between the Department for Education and the Department of Health, managed to cut the figures significantly in this country. History shows that the time when the figures grew most dramatically was under Mrs Thatcher. We have now seen the figures for 2009, and they show that we have reached a record low compared with 1980. I am not at all complacent about that, because there is a great deal more to do. My own ten-minute rule Bill is in a charabanc situation and as unlikely to become legislation as the hon. Lady’s.
We need to address other associated problems. The number of children in care in this country is a shock and a disgrace, and it has risen dramatically to 65,000 in England. It has gone up from 3,000 to 5,000 in six years in Wales. It is difficult to find good care arrangements for many of those youngsters. Hospital admissions for self-harm, particularly among young girls, have risen by some 30% in Wales over the past few years.
Yes, we have achieved great things for young people in recent years. Drug use has decreased over the past decade—some 7% of youngsters between the ages of 16 and 24 have used a class A drug. Contrary to what hon. Members will read in the national newspapers, drinking among 15-year-olds has decreased quite dramatically. Ten years ago, 58% of boys said that they drank alcohol; the figure is now 36%. The figure for girls is down from 54% to 30%. [Interruption.] Government Members may ask what that has got to do with teenage pregnancy, but every time that I talk to young people about teenage pregnancy, they tell me what happens: everyone has a great idea and a strong set of moral principles at 6 o’clock in the evening, when they have not had a drink, but by the time that they are blotto at 11.30 at night, all those choices disappear out the window, and they start to take much more risky decisions. That is why tackling the consumption of alcohol by youngsters is just as important as every element of sex and relationship education.
Some of those figures relate specifically to girls, but many more young men commit suicide than young women. Although the number of suicides among young people has fallen by a third over the past few years, the single most important thing that we can give to any young person is a sense of their own worth. Of course, some of them are in families or schools where they do not feel valued, but to introduce legislation that applies only to girls and refers only to sex education, rather than to the broad experience that young people have to have fulfilled, is a complete mistake.
Better legislation would ensure that girls and boys had proper, thorough sex and relationship education in all schools, with no school allowed to opt out. Yes, if parents want to opt out, that is fine. Yes, they should be able to draw up the curriculum, but schools should not be able to opt out because, as Ofsted has pointed out, the provision of sex and relationship education is very patchy in England, and we are letting down far too many of our youngsters.
Many teachers are frightened of providing such education because it is not a formal part of the curriculum. Youngsters pick up that fear, and that informs some of the bad choices that they end up making. Yes, we should teach self-confidence and self-worth. Some work done by the Joseph Rowntree Foundation showing that many young girls choose to get pregnant almost as a vocation or are so careless about having sex that they end up pregnant is very distressing. They often have no self-worth, they are not valued at home, and they find the educational arrangements at school difficult; but the moment they get pregnant, suddenly everyone comes round and provides them with support. Would it not be better if we gave them the support that they needed before they made that wrong decision for themselves?
In addition, we need to enhance out-of-school activities. I worry that many local authorities will cut youth services because of the situation with local authority grants. Youth services are often where young girls and boys have a positive role model for the first time in life that is not just an authority role model in school. That is why those services play such an important part in changing all this.
Finally, the only thing that I would add is that, sadly, many youngsters get only 10 minutes of sex education in their whole lives. They do not get proper sex and relationship education; they spend less time on it than we have had to debate the issue today.
Question put (Standing Order No. 23).
Finance (No. 3) Bill
(12 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
15:03 - The Committee divided: - Ayes: 121 / Noes: 249 - Question accordingly negatived.
The Exchequer Secretary to the Treasury (Mr David Gauke)
It is a great pleasure to begin today’s proceedings by winding up today’s debate, or at least the first of our debates this afternoon, which was one of our debates this morning. It is on clause 4, which sets out the main corporation tax rate for the financial year beginning on 1 April 2011, reducing it to 26%. The measure introduces a further reduction of 1% for this financial year, in addition to the 1% cut that was legislated for last year. Further 1% reductions to the main rate will be made in each of the next three years, taking the rate to just 23% in 2014-15.
Those changes will lower the tax bill of around 45,000 companies that pay tax at the main rate, and of 40,000 companies that are taxed at the main rate but that benefit from the marginal relief. To explain that further, the changes will affect incorporated businesses that have profits of between £300,000 and £1.5 million that pay corporation tax at the main rate reduced by marginal relief, and those that have profits of more than £1.5 million that pay corporation tax at the main rate in full. As I said, clause 4 sets the rate at 26%—the adjustment to the marginal relief fraction is made in clause 6.
Clearly, a thriving private sector must be at the heart of our plan for growth. As we reduce spending, as we must if the UK is to live within its means, only the private sector can spearhead the recovery. We must therefore show that the UK has an attractive tax system and is open for business. This Government are taking action to show the international business community just that. The UK is the right place to do business, and our tax system is one reason why. Our priority is securing strong, sustainable and balanced growth, and clause 4 will help to see to that by supporting investment and by incentivising activity across the economy.
Mr David Hanson (Delyn) (Lab)
I realise that we debated this much earlier this morning, but much of our discussion was on the outcomes of this process. The Opposition do not object to the purpose of the corporation tax cut, but I would welcome clarity from the Minister. How many jobs does he believe will be saved because companies do not move abroad because of the cut, how many new jobs will the cut attract by bringing new investment into the country, and what growth does he expect to result from the investment that we are taking away? As was said last night, we are forgoing a considerable sum of corporation tax income, and I should like clarity on what the Minister believes will be the solid outcomes of that.
Mr Gauke
First, I warmly welcome what the right hon. Gentleman says about supporting the reduction in the corporation tax rate. In seeking to persuade investors to invest in the UK, it is important that we have a strong, solid, cross-party consensus that the UK should have competitive, low rates of corporation tax. To the extent that the official Opposition take a clear, supportive view of what the Government are trying to do, that is helpful to our ambitions, and I welcome it. I am keen to ensure that they maintain that position.
The right hon. Gentleman asked about the specific impacts and outcomes of the measure. If he will be patient and let me first set out why I think the steps that the Government have taken on corporation tax are helpful, I will say as much as I can about the likely outcomes later. I should also thank him for quoting at considerable length one of my speeches on this subject. I am tempted to refer him to his own speech when he quoted my speech, but that would be a little circular.
Mr Edward Timpson (Crewe and Nantwich) (Con)
On anticipating the outcomes of reducing corporation tax, does my hon. Friend recall that one key aspect of the Federation of Small Businesses general election manifesto was a reduction in corporation tax and the benefits that that would have to small businesses around the country?
Mr Gauke
I am grateful to my hon. Friend, because he brings me to the subject of the small profits rate of corporation tax. That is not specifically addressed by the clause, but the previous Government intended to increase the small companies rate, as it used to be called, from 21% to 22%. In the previous Budget, this Government announced that we would not increase it to 22%, but reduce it to 20%. That policy, along with our policy on employers’ national insurance contributions, was warmly welcomed by the FSB. That demonstrates the Government’s commitment, at a difficult time for the public finances, to ensuring that we have the strong, private sector growth that the economy so badly needs.
Mr Andrew Love (Edmonton) (Lab/Co-op)
When the Office for Budget Responsibility was informed late of the additional 1% reduction in corporation tax, it commented that the impact on growth would be minimal. How does the Minister explain that in the context of the claims he is making for that reduction?
Mr Gauke
Let me turn to the impact of this measure. When the OBR analysed the corporation tax package that was announced in 2010, it made it clear that that would help with the cost of new capital investment in the UK. It expected that the recovery would be supported by business investment, and the reductions in corporation tax underpinned its forecast for strong business investment growth over the next five years. In June, the OBR increased its estimate for expected investment and gross domestic product in response to the corporation tax package. Its analysis was that the resulting 3% reduction in the cost of capital would
“promote a higher level of business investment…than would otherwise have been the case.”
In total, that resulted in a forecast of an additional £13 billion of business investment by 2016.
The right hon. Member for Delyn asked about particular businesses and sectors. However, the best way to run an economy is not the Government dictating from the centre. Running an economy is about providing a competitive environment in which businesses from all sectors can grow. Making sectoral forecasts tends to be difficult, and there are severe accuracy questions.
Mr Hanson
I am trying to be helpful and to seek clarity on what the Exchequer Secretary would regard as success, given the investment he is making through not collecting the previous level of corporation tax. In our discussions on the National Insurance Contributions Act 2011 before Christmas, an amendment was tabled to ensure an opt-out in certain parts of the United Kingdom. An assessment was made of the number of jobs that would be created by the measure. I am asking whether he has made a similar assessment with his officials of the potential of this measure to have an impact on growth and jobs in our economy.
Mr Gauke
As I said, the OBR considered the package in the June 2010 Budget and incorporated the changes along with other announcements. From that it anticipated an increase in business investment, and clearly there was a link between the corporation tax package and that increase in investment. We believe that by reducing the cost of capital, we will increase business investment above the levels that would otherwise have been the case.
I was struck by the right hon. Gentleman’s speech this morning in which he took considerable time to outline more than once the unemployment numbers in various regions of the UK. I was struck by the contrast between the argument he appeared to be making this morning, which was that the corporation tax cut needs to be targeted at regions with higher unemployment, and the argument he made during our considerable debate on the National Insurance Contributions Act, which was that it was wrong for us to target the national insurance contributions holiday at regions where the public sector was strong and unemployment high. I am not sure there was much consistency there, but there was great ingenuity in his speech earlier today.
Jim Shannon (Strangford) (DUP)
Obviously any advantage to industry is to be welcomed. I understand that figures released show that only 4 million people are employed in the manufacturing sector. Has the Exchequer Secretary discussed how the corporation tax changes will benefit that sector? Is the cut acceptable to the sector? Does it feel that it will achieve the recovery in that important sector? The Government have recognised it as an important growth industry, so I would be interested to hear his response.
Mr Gauke
I suspect that we will debate manufacturing at greater length in the next group of amendments. However, manufacturing will benefit from the package as a whole, including the changes to capital allowances. It will benefit considerably. Indeed, it is one of the sectors that pays a great deal in corporation tax. We also believe that the changes will benefit all regions. It is perfectly right for the right hon. Member for Delyn to highlight the different requirements in different regions, and as the hon. Member for Strangford (Jim Shannon) will know, the Government are exploring the case for greater flexibility for corporation tax in Northern Ireland. We continue to explore that matter.
On the subject of jobs, the OBR, in its 2011 Budget publication, forecast that 2010-15 total employment would increase by about 900,000. That will not all flow directly from the corporation tax cut, but that reduction will play a part in it. We also have to recognise that most of the recent academic analysis—certainly a recent report published by the OECD—makes the case that taxes on corporation income are the most growth-inhibiting ways of raising revenue. They are inefficient, so it is right that we seek to have a lower rate of corporation tax to help the economy.
Mr Love
May I press the Exchequer Secretary on the benefits for growth and potential employment arising from these measures? According to the Red Book, the corporation tax decrease in the Budget will cost £1 billion by 2015. That is on top of £4 billion from the previous Budget. However, the changes in allowances and other aspects of the corporation tax bring in only £2.7 billion. That leaves a significant gap. The Opposition would not be doing their duty properly if they did not ask what benefits will be delivered by that significant cut in corporation tax.
Mr Gauke
I am grateful to the hon. Gentleman for acknowledging that it is a significant gap. It is a considerable tax cut for businesses in order to get them to grow. Reducing corporation tax will reduce the revenue we take from an inefficient tax, thereby increasing the rate of return on investment and resulting in greater business investment, greater productivity, higher wages and salaries and more jobs. It is important that we have a dynamic private sector, and that is exactly what we are about.
We have to be internationally competitive. Our tax system is not as competitive as it once was. Over the past decade, our competitors have seized the opportunity to cut their corporation tax rates faster than we have. In 1997, the UK had the 10th-lowest main rate of corporation tax among the 27 EU countries, but by 2010 we were 20th. As a result of the reforms announced in the Budget by my right hon. Friend the Chancellor, the UK will have the fifth-lowest corporation tax rate in the G20, and by the end of this Parliament, it will be the lowest of any major western economy and the lowest rate this country has ever known. By taking our corporate tax rate right down to 23%, we are going further in restoring Britain’s international competitiveness with a corporation tax rate 16 percentage points lower than America’s, 11 percentage points lower than France’s and seven percentage points lower than Germany’s. It will be the lowest corporation tax rate in the G7. We are pleased that we have been able to make progress in this area.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
I am sorry to have missed the many speeches yesterday by the Exchequer Secretary and in particular my right hon. Friend the Member for Delyn (Mr Hanson). I missed them because I was campaigning in west Worcestershire with 50 young people protesting against the decision of Worcestershire country council to withdraw funding from Rubery youth centre, which has played a key role in lowering antisocial behaviour in the area. Have the Exchequer Secretary or his Treasury colleagues considered the impact of the corporation tax cut on the funding of crucial public services, such as youth services?
Mr Gauke
Let me make this point. The hon. Gentleman talked about being in west Worcestershire. I was there two weeks ago for a meeting with local businesses. I met manufacturers who had full order books and were expanding, investing, welcoming the opportunity to expand their businesses and recognising that the Government were putting in place the conditions for strong private sector growth. It is through such growth that we can have sustainable public finances and we can afford to have the public services that we would all like. However, it is no good spending money that we do not have. The move towards a lower rate of corporation tax will enable us to have stronger, sustainable public finances and a dynamic private sector. It supports the Government’s ambition to achieve the most competitive tax system in the G20, and I therefore commend clause 4 to the Committee.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 10
Plant and machinery writing-down allowances
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss clause stand part.
Mr Hanson
You have caught me slightly off guard, Mr Hoyle. I was expecting my hon. Friend the Member for Hayes and Harlington (John McDonnell) to participate in the previous debate, but I shall plough on as ever. It is good to see you back in the Chair. I hope that you had a refreshing evening’s sleep after we had considered earlier matters.
Andrew Gwynne (Denton and Reddish) (Lab)
My right hon. Friend is making an important point that is indeed linked with the previous clause. Clause 4 deals with the corporation tax cut, which is one side of the coin, but the other side is obviously investment. Constituencies such as mine are still heavily dependent on manufacturing industries—indeed, almost disproportionately so. Although local businesses that have spoken to me about the Budget measures have welcomed the corporation tax cut, they are incredibly concerned about the changes to capital allowances, which they think will serve as a disincentive for them to invest in the long term.
Mr Hanson
My hon. Friend makes some valid points. I know that he defends his constituency and the whole of the north-west region strongly when it comes to the importance of manufacturing industries. One issue that I want to explore with the Minister is the very question of whether the capital allowance reductions proposed in clause 10—as well as other in clauses, which we will consider in due course upstairs in Committee—will have an impact on the job creation and investment proposals that we are considering today. Unemployment in my hon. Friend’s region in the north-west will be very high, at around 9%, which again indicates the importance of generating and regenerating manufacturing industries in those areas.
Capital allowances allow businesses to write off the cost of certain capital assets, including plant and machinery, to arrive at their business profits. Capital allowances take the place of commercial depreciation, which is not allowed for tax. There are certain first-year capital allowances that allow 100% of a business’s expenditure on specific, environmentally-beneficial plant or machinery to be written off in the year that the expenditure is incurred. There is also the annual investment allowance, which allows businesses to write off the whole of their expenditure on most plant and machinery, up to a limit in the year in which it is incurred. Expenditure on plant and machinery not covered by the allowances also attracts writing-down allowances, at either the main rate or a special rate.
The changes in clause 10 are part of the package of corporate tax reforms announced in the Government’s 2010 Budget, as the Minister will undoubtedly explain later. The amendment calls for a review of the impact of the Government’s abolition of capital allowances for smaller businesses in 15 to 16 months—that is, October next year—when these allowances will have been operational and we can see what the growth potential in the economy has been over that period thanks to the corporation tax measures in the Budget, as well as the impact of stringent public spending cuts and rising unemployment across the UK.
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
In the debate yesterday evening and earlier today, there were many references from Opposition Members to the concerns raised by the British Chambers of Commerce and the Federation of Small Businesses, and my right hon. Friend has referred to the CBI. Can he say whether those organisations support the review that is being requested, and whether he has had a chance to discuss the Government’s plans with them?
Mr Hanson
I want to refer to a number of comments that have been made in this debate. Perhaps I could start by being helpful to my hon. Friend and referring him to what Lord Northbrook said. Lord Northbrook does not take the Labour Whip in another place or even the Liberal Whip; he takes the Conservative Whip. He considered a range of issues on Second Reading in another place, and said of this proposal:
“How does the reduction in capital allowances square with the Government’s wishes to encourage a more manufacturing-based economy?”—[Official Report, House of Lords, 26 July 2010; Vol. 720, c. 1172.]
That is a tempered criticism, but it raises the very question that I wish to raise with the Minister. On the one hand, to help growth we have corporation tax cuts—which the Committee has just supported, although we want to see an estimate of the outcomes—but on the other hand, we have massive reductions in capital allowances, which are specifically designed to encourage businesses to invest in plant and machinery, and environmentally efficient equipment, all of which will help to build jobs and growth for the future. However, I will return to my hon. Friend’s point in due course.
The key reason to consider the matter in depth is that, as the Office for Budget Responsibility—the Government’s own creation—has said, even after this year’s Budget, which the Chancellor has dubbed a “Budget for growth”, growth will be lower this year and next year than it was predicted to be around this time last year, when my right hon. Friend the Member for Edinburgh South West (Mr Darling) was Chancellor of the Exchequer. Slower growth and rising unemployment will make it harder to make the deficit fall. It is therefore even more important that we encourage as much growth, manufacturing and manufacturing investment as we can, to help counterbalance the massive effects of large spending cuts, which will put many people out of work and have a knock-on effect in the private sector.
Even after the measures in the Budget are taken into account, the OBR has said that growth will be much lower this year and next. In 2011, growth is now forecast to be just 1.7%, compared with a forecast of around 2.6% a year ago. The estimated rate of unemployment has been revised upwards to 8.2%, from 8%. Despite all the discussions and the measures that we have seen so far, there is still fragility out there. We are not sure how the economy will perform in the next 12 months, nor are we sure whether it will retain its strength and grow, or whether manufacturing investment in particular will grow. We are taking a potential risk by balancing the growth in corporation tax, which the Minister believes will occur because of the cuts that have been proposed, against the cut—admittedly of 2%, but still a cut—in capital allowances proposed by clause 10.
The amendment simply says that at some point in the future—October 2012—we should have a break point, when we review what has happened since the allowances came into effect, which will be next year, against the corporation tax cuts, which come into effect now, and the other issues in the economy, which, although they are not before the Committee, are still relevant to this debate. As I did last night, I wish to refer to the fact that unemployment is still high across the United Kingdom. We need to grow the economy and grow manufacturing jobs, yet the cut in clause 10 may well impact on our current fragile growth. As I mentioned last night, unemployment in the UK is highest in the north-east, at 10.2%. I notice that my hon. Friend the Member for Hayes and Harlington is here, as well as my hon. Friend the Member for Poplar and—
Mr Hanson
I still think of my hon. Friend as the Member for Canning Town; it is a habit that is hard to break. Just as I was about to say “Canning Town”, I realised that I was wrong, which is why I paused for a moment. In London—including the constituency of my hon. Friend the Member for West Ham (Lyn Brown)—the unemployment rate is 9.4%. London is a centre of prosperity, and it has growth in many parts, but if we are to encourage manufacturing industry in London to soak up those unemployed people and get them back into jobs and spending, it will be necessary to have an assessment of whether, downstream, the capital allowance cuts have been good or bad for unemployment rates.
The unemployment rate in the west midlands is 9.9%. In Yorkshire and the Humber, it is 9.3%. In my own region, Wales, it is 8.7%, and in Scotland it is 8.1%. Those are high levels of unemployment, and I want the Government to make an assessment of whether the capital allowance cuts will particularly hurt manufacturing industry in the north, the north-west, Yorkshire and the Humber and in the north-east, where my hon. Friend the Member for Tynemouth (Mr Campbell) has his constituency, more than it might do in the south, the south-east and the south-west, where the unemployment level is only 6%. That level is still high—it is 100% for those people who are unemployed—but it is still only 6%, compared with the higher levels at the heart of challenging constituencies in London and in the north and north-east.
Jim Fitzpatrick
When I won the seat of Poplar and Canning Town in 1997, the level of unemployment there was almost 17%. When Labour left office last year, it was down to about 9%. That was still between two and three times the national average, but it was a lot less than it was when we won the election in 1997 because of the efforts that the Labour Government put into attacking unemployment as the scourge of our economy. My right hon. Friend is making a strong argument that unemployment is not now going to be attacked as aggressively as we would hope, because of the economic policies of the coalition Government. I would like him to continue in this vein and to outline how we think it ought to be attacked, because it is the scourge of our economy.
Mr Hanson
I am grateful to my hon. Friend for making that valid point. I know that he is committed to bringing jobs and investment to his part of east London, as indeed my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) is to the north-west and elsewhere.
I am not saying that we will not approve the cuts in capital allowances in due course. I am simply asking the Minister to monitor their impact, and if they are becoming detrimental, given the corporation tax cut to which they are inextricably linked, we shall need to look at how the process will continue.
Andrew Gwynne
My right hon. Friend is right to say that we shall need a regular assessment, because the regional economies do not stand alone. The decisions taken in one region might have an impact on another. An example is Mono Pumps, a manufacturing company in the Tameside area, part of which my constituency covers. It was one of just 50 schemes announced in the regional growth fund, and it is to relocate to a new facility on the Ashton Moss regional employment site in my constituency. That move is now being jeopardised because of supply chain issues with a manufacturing company based in Gloucestershire and south Wales. We need to ensure that manufacturing as a whole is supported across the United Kingdom, and only the kind of assessment that we are proposing will ensure that such regional disparities are properly looked into.
Mr Hanson
My hon. Friend makes my case for me very powerfully. I am simply saying to the Committee that these are important changes. We have approved the corporation tax cut, but we are still sceptical about whether the capital allowance cut will be a successful policy, rather than simply an addition to the public spending cuts that the Government are making across the board, which will have a knock-on effect on the private sector just as much as on public sector jobs.
Mike Freer (Finchley and Golders Green) (Con)
Just a quick question: if the higher corporation tax and the capital allowances were so valuable, why did manufacturing jobs shrink under the previous Government?
Mr Hanson
The hon. Gentleman will know that there are many challenges across the board, and manufacturing is always going to be a changing, moving field. In my area of north Wales, for example, manufacturing grew quite dramatically. In my constituency, we make the Airbus aeroplanes, which you will know very well from your constituency in Bristol, Ms Primarolo. That has been a major growth industry, in partnership with Government investment, Government backing for investment and Government loans and grants to help to grow the private sector and create jobs. The people who have those jobs then spend their wages in the local economy, creating further jobs in shops and in other manufacturing areas across the board. It is therefore an ever-changing field.
I have tried to make it clear to the Minister that we support the general direction of travel on cutting corporation tax, because we do not want the UK to be uncompetitive with our neighbours. In our discussion on clause 4, I was simply seeking an assessment of how the Minister will measure the success of the provision, because we will be forgoing a considerable amount of resource and we will need to measure a success that we do not yet know. The proposal on capital allowances goes hand in hand with the proposal on corporation tax. We will be paying for that cut in part with a major slashing of investment allowances by £2.6 billion under these proposals. Again, I am simply asking for an ongoing assessment of the impact of the measure, because it might work and it might not. I fear that cutting the allowances will lead to a lack of investment, a lack of growth and a further reduction in the manufacturing industry that the hon. Member for Finchley and Golders Green (Mike Freer) is seeking to protect and develop. I want to test the Minister on these issues so that he can justify to the Committee why he is making these cuts.
Nigel Mills (Amber Valley) (Con)
The right hon. Gentleman is making an interesting case. Would he care to comment on whether any work was done by the previous Government when the capital allowance rate was reduced from 25% to 20% to determine whether that cut had the kind of damaging consequences that he now envisages with the cut to 18%?
Mr Hanson
To be honest, I do not know. I was not a Treasury Minister in the last Labour Government. I spent my time in Northern Ireland, in prisons, in probation and in the Home Office—[Interruption.] Perhaps that is not an area into which we should progress this afternoon, however. In the spirit of cross-party discussion of these matters, I acknowledge that the hon. Member for Amber Valley (Nigel Mills) has made a valid point, but, whatever the previous Government did or did not do, the economy was stronger than it is now when those cuts were made to the capital allowances. We can debate the reasons for that for a long time, and we can disagree or agree on the issues, but we now have growing levels of unemployment, slowing growth and public spending cuts that have not yet hit the public and private sectors. There are estimates that up to 500,000 people in the public sector will lose their jobs, which will have a knock-on effect on the private sector. We are seeing the squeezing of the middle in relation to child benefit and working families tax credits, and poverty and wage freezes are hitting hard.
All those factors are going to hit the economy hard in the next 18 months to two years. The Minister is proposing to cut the capital allowances from April next year, and all we are asking in this modest amendment is that the Government review where we are in October 2012, given the tortuous procedures that we are going to go through in the next 18 months as the squeeze has its effect. The Minister will undoubtedly accept that that is going to happen, because it is part of the Government’s policy to make it happen, and we are keen to ensure that, at the end of that period, we do not lose valuable manufacturing capacity and jobs.
Mr Love
Is not the key point here the Minister’s inability to give us hard figures on the improvement in growth and employment? Our request, through the amendment, is that we look carefully at that, because the Government are making major claims about growth in the economy as a result of these measures, as well as rebalancing the economy away from financial services towards manufacturing. Surely the amendment will give us the opportunity to test those claims.
Mr Hanson
Indeed. We are dealing specifically with clause 10, but it overlaps, as will be discussed further, with clauses 11 and 12. Manufacturing is a key part of our economy, but it needs support in order to fuel future jobs growth. The Government thus need to explain today and later in Committee upstairs why they are cutting investment allowances for manufacturers by about £75,000 and using that money to give a corporation tax cut that will go predominantly not to manufacturing, but to financial services industries.
I have made a claim, and I am happy for the Minister to challenge it and to explain why the corporation tax cut we considered and agreed in clause 4 will be skewed towards the financial services industries which are not creating manufacturing jobs. I originally hoped to have clauses 4 and 10 considered in tandem as they are inextricably linked. The key issue is that the corporation tax cut is going predominantly to a certain sector, while the manufacturing capital allowance cut will predominantly hit manufacturing industry. We need to reflect on that.
I will refer briefly back to clause 4, but it is relevant, Ms Primarolo. The Chancellor’s “Budget for growth”, which he trumpeted in March, included an additional 1% corporation tax cut at the final moment. We know that, because the Office for Budget Responsibility said in paragraph B13 of the Budget 2011 policy costings:
“The OBR was notified of the change to corporation tax and the 1p cut in fuel duty from 1 April 2011 too late to incorporate any indirect effect of these measures in the economy forecast.”
If so, the capital allowances under clause 10 will come into effect with that reduction next year, but there is no assessment of whether the additional corporation tax cut, along with the fuel duty rise and other issues I have mentioned, will impact positively or negatively next year. Given the lack of thought and consultation on those issues, we need to reflect on them at an early stage, which is what the amendment says.
John McDonnell (Hayes and Harlington) (Lab)
There is anxiety about the lack of assessment; it was undertaken so perfunctorily by the OBR because it was a last-minute decision by the Chancellor. Will my right hon. Friend comment on the grounds for that decision being taken in such a last-minute manner? Was it a political stunt? Was there a rationale for it? How does he understand not just the decision itself, but the fact that it happened literally in the final 24 hours—at the last minute—before the Budget?
Mr Hanson
I could speculate on those points for my hon. Friend, but the Minister might be in a better position to comment on them. I will give my hon. Friend one thought, however. Perhaps the Chancellor realised that unemployment is rising because of the squeeze on public spending over the year; that growth is slowing because people feel uncertain in their jobs and businesses are not willing to invest; and that the level, depth and speed of public spending cuts over the next two years will lead to growing unemployment—not just in the public sector, but in the private sector, as people in private businesses depend on public investment. For those reasons, I suggest, the Chancellor has had to make additional changes to do what I believe is the right thing: to try to stimulate private sector growth.
If last-minute thought has been given to the impact of corporation tax changes and if full assessments have not been made of the impact of VAT on public spending cuts, we need to be aware that capital allowance reductions are coming into effect in April next year. The amendment simply says:
“The Chancellor shall publish, by 31 October 2012, an assessment of the impact of the changes to capital allowances on the UK economy.”
I find it difficult to think of anybody who would object to that. I am sure that the Treasury would make such an assessment as a matter of course in any case. Any good business—and the Treasury is a good business—would look at its outputs, outcomes and impacts and reflect on how they will affect the customer base, which in this case is manufacturing industry.
I have real concerns about the decision to reduce the rate of writing-down allowances for new and unrelieved expenditure, as I believe it could impact adversely on smaller businesses and on businesses that are more likely to invest, such as manufacturers. I say this because the Government regularly claim that small businesses are the key to future growth in the economy. Who depends on a capital allowance more—a very large or a smaller business? The argument I put to the Minister is that small businesses would be more affected.
Nobody disagrees with the fact that the UK should have a competitive tax regime, and the corporation tax cut should help with that in principle. The Government are paying for it by the measures in clauses 10, 11 and 12—slashing investment allowances by £2.6 billion. The package will penalise companies that invest, particularly manufacturing companies, in order to offer tax cuts that will disproportionately benefit the banks and the financial sector. At a time when the Government claim they are rebalancing the economy by trying to encourage manufacturing, this package could—I say could—do the reverse.
The Institute for Fiscal Studies has said:
“The largest beneficiaries from the package of measures”—
including corporation tax and capital allowances—
“will be high-profit, low investment firms”,
such as financial services, while the cuts to allowances under clauses 10, 11 and 12 will
“have the largest impact on those firms with capital-intensive operations”,
such as manufacturers. That is a direct quote—from page 229, for the Minister’s reference—from the IFS Green Budget 2011. The IFS also agrees:
“The losers would be firms that invested heavily but made little profit—notably in the manufacturing and transport sectors but also some capital-intensive service-sector firms. The winners will be less capital-intensive but more profitable firms, historically typified by the financial sector.”
I do not know whether it will pan out like that in real life, but my point is that if it does, clauses 4 and 10 together will mean giving a corporation tax cut that benefits the financial services sector most and a capital allowance cut that damages the private sector of small and medium-sized manufacturing industries most. That cannot be a good recipe for growth in the economy.
Andrew Gwynne
One of my concerns is that as we try desperately to rebalance the economy, we need to invest in some of the new high-tech and emerging industries, particularly in the renewable energy sector, which is incredibly capital-investment intensive. Does my right hon. Friend worry, like me, that these changes could put off growth in that emerging technology?
Mr Hanson
My hon. Friend makes a valid point, as it is exactly those companies that require capital investment support. The move will penalise companies that invest in manufacturing—for example, the car industry, advanced manufacturing, wind turbine manufacturing, and research and development across the board. These big manufacturing concerns are going to create the jobs of the future as well as protect current manufacturing jobs at a time when consumer demand might well be fragile because of high levels of unemployment, high levels of public spending cuts and general concerns about the squeeze on the economy and on people’s living standards and incomes generally.
PricewaterhouseCoopers has said:
“Many clients will balance the modest reduction in the capital allowances rates with the staggered reduction of the rate of Corporation Tax…Whilst the declining rates of capital allowances, in isolation, do not produce any winners, some businesses will benefit when the CT rate change is also taken into consideration. Capital intensive businesses”—
this is the key point—
“are likely to feel the reductions more, since they will have larger capital allowances pools.”
Deloitte has said:
“For some businesses the reduction in writing-down allowances for plant and machinery will be offset by the reduction in the main rate of corporation tax from April 2012.”
We accept that.
“However”—
and this is the key point—
“capital intensive companies…may not benefit to the same extent.”
Nigel Mills
It is with a small amount of pleasure that I rise to speak about tax issues, having spent 13 years advising companies on them, mostly under a Labour Government. It was kind of the right hon. Member for Delyn (Mr Hanson) to mention my two former employers and the various comments that they have made, which I happily endorse.
I want to comment on the request for a review of the proposed reduction in capital allowances partly because I think that we are in a strange position overall. The purpose of capital allowances is to give businesses tax relief on their capital investment in order to encourage them to invest in plant and machinery. We used to try to encourage them to invest in industrial buildings and factories, but we have stopped doing that now.
The attraction of the capital allowance system used to be the ability to incentivise people by accelerating tax relief. Forty years ago someone who invested in a piece of equipment with a 10 or 15-year useful life could accelerate the tax relief on it quite far in advance of the overall spread of its useful life, but I am not sure that that is where we are now. How many businesses in our constituencies will invest in equipment when they are not certain that its useful life will be even 10 years? If they expect it to be five or six years, the present mechanism will not work at all.
A simple calculation will show that, given an 18% writing down rate, an investor will still not have received tax relief on 30% of his investment in a piece of equipment. After eight years, he will still have not have received 20%. He may anticipate a fairly large residual scrap value if he can sell the equipment on, but that is on the assumption that a good deal of its useful life remains, and I am not sure how realistic that assumption is.
If we are to have a review, let us review the whole capital allowance system to establish whether it is really giving businesses an incentive to invest. Perhaps we should have a look at what they are actually doing in their accounts. The right hon. Member for Delyn mentioned that. What is the useful life over which they are writing off assets? I think that we may be adding a huge amount of complexity to the system by preventing all the businesses in the country from employing actual accounts depreciation for this purpose, and requiring the creation of a capital allowance pool requiring all the assets to be tracked separately. In the past it was said that businesses were receiving a tax incentive, but this huge and unnecessarily complex system may have an adverse impact on them. Our review should ask whether the capital allowance regime is the right one.
Later—not today—we will come to clause 12. The Government have responded to some lobbying, and have recognised that it will cause huge problems for manufacturing business in particular. The clause proposes that the lives of short-life assets should end after eight years. Someone who invests in equipment whose life he expects to be less than eight years will have to make a separate election to treat it as a short-life asset rather than putting it in his main capital allowance pool. He can try to obtain the tax relief over the eight years; otherwise, as I have said, he will still have 20% unrelieved. We are building additional complexity into the system, and I am not sure that that is necessary.
The Bill contains various responses to businesses that are trying to find ways around the capital allowance rules. Clause 33, for instance, proposes anti-avoidance rules for long-funding finance leases. Year in year out, we see new and complex rules intended to prevent businesses from getting around the rules. Sometimes they are trying to obtain extra deductions to which they are not entitled, and sometimes they are trying to find ways of receiving a deduction over the period for which they think they should receive it.
If we are to be a tax-simplifying, tax-reforming Government, perhaps the Office of Tax Simplification could conduct a review of whether the capital allowance is still fit for purpose, and whether it is the right way to attract business investment over the next 10 or 15 years. Should we, in fact, try to find a way out of it, and adopt a system that allows businesses simply to look at their accounts to be eligible for some kind of tax relief, rather than having to adjust the depreciation for those assets? I know that that too will be complex, because there will be a huge hangover from the existing system, and there will be problems when people try to accelerate relief over far too short a period. However, I think that all those problems can be addressed, and that we shall be able to stop increasing the complexity of the system.
I cannot vote for the amendment, because I think that it is merely an excuse for a debate. If we are to have a review, let us have a proper one.
Nigel Mills
If we want a competitive corporate tax system, the tax rate is key. However, we probably need to examine four things, which include the tax base, as the hon. Gentleman said, and the complexity, stability and predictability of the system. We are in danger of just ticking the first box; I am not sure we are ticking the tax-base box well with this approach, and we are adding extra complexity. Many regimes around the world do not have capital allowances but do let businesses take the depreciation that they see in their accounts. That is a far more attractive, simple and predictable system, because businesses would not think, “I might invest in this piece of equipment, but they might reduce this to 15% in three years’ time and my relief suddenly starts to look different.” As the hon. Gentleman was trying to say, this involves a combination of things. We need to get not only the rate right, but the base and the underlying system right; we will not get all the advantages from simply reducing the rate.
However, for most businesses the first headline comparison is about the overall tax rate, so that is the main thing to focus on. I am not going to vote against this rate reduction. Paying for the reduced rate partly by reduced capital allowances is the right way to go in this financial situation, but we need to go in the direction of simplifying our incredibly complex corporate tax system. We can all work out the statistics by saying, “When I started work 13 years ago, my tax legislation was so big and when I left a year ago it was much bigger, and I have not even got the VAT and inheritance tax book.” We can look at how many schedules on income—actual capital—we have and consider how many of them we actually need. The capital allowance regime is part of that problem, because it was written 50 or 100 years ago, when it actually worked. A lot of these things are out of date, so we must look to simplify things if we want to ask businesses to invest. I am not sure that they are going to worry about whether something is at 18% or 20%, but they do want tax relief for their investment over the useful life of their asset provided in a way that is simple for them to manage. I am not sure that we are anywhere near providing that at the moment.
A lot of my clients use the capital allowances regime to add flexibility to how they get tax relief in the years when they have profits and in the right entities in which they have profits. They will not entirely welcome my idea of simplifying this system and taking all that away from them. However, if we are to get a modern, competitive corporate tax system, it must be simple and easy to understand. It must also do what we want it to do: incentivise the investment that we desperately need to have a growing economy.
John McDonnell
I have a fair amount of sympathy with the hon. Member for Amber Valley (Nigel Mills), because if he ever wants to return to his former profession he may well find that he has lost a number of clients as a result of that speech.
The linkage between clauses 4 and 10 is inevitable, as my right hon. Friend the Member for Delyn (Mr Hanson) said from the Front Bench, because the corporation tax reductions are being paid for by these cuts in capital allowances. I do not want to upset the consensus that has emerged on the cuts in corporation tax, but I do not support them and believe that they will be an error in the long run. I address the issue of capital allowances in that context.
I am unclear as to what the Government’s strategy is on stimulating the economy to tackle the recession in a way that rebalances the economy. I thought that this was not just going to be a rebalancing between the public and private sectors. I listened to some of the statements made by the Chancellor and the Secretary of State for Business, Innovation and Skills about rebalancing the economy as between the finance sector and the manufacturing sector, which gained support across the House. We heard about the development of a manufacturing strategy that would enable us to have a balanced economy between the finance, manufacturing and service sectors, so that if there was a crisis in one sector, the whole economy would not collapse as a result of overdependence on that sector. However, these Budget measures seem to fly in the face of that balanced approach.
A number of methods can be used to re-stimulate the economy, one of which is tax cuts, including corporation tax cuts, as have been introduced in this Bill. Another method is the more directional approach of considering a form of tax cuts through the capital allowances, whereby the Government try to influence economic behaviour in a way they believe to be beneficial. The other method is to invest in largely capital expenditure through public services—I am talking about public investment.
John McDonnell
As my right hon. Friend said earlier, all these clauses are linked and it is difficult to disaggregate them. Clause 10 is certainly being used a mechanism to fund the allowances being distributed to companies overall. As I say, I find it extremely difficult to link that to the rationale that has been given by both the Chancellor of the Exchequer and the Prime Minister in the past.
Jim Fitzpatrick
One of the biggest elements of British manufacturing is the food industry. When I was a Minister of State in the Department for Environment, Food and Rural Affairs, the National Farmers Union lobbied me aggressively. Consequently, I lobbied the Treasury, as DEFRA does, about capital allowances in respect of buildings and equipment for the farming community. Has my hon. Friend had a chance to talk to the NFU about the comments he is making? Has he any understanding about whether it is being penalised in order to assist transnational corporations from outside the UK? Is this being done instead of supporting British manufacturing and British business people?
John McDonnell
Strangely enough, given that I represent Hayes and Harlington, an urban area, I do not have an awful lot of engagement with the NFU, although my area does still have one farm left in it. I have an engagement with Hillingdon chamber of commerce—I am meant to be hosting its annual parliamentary lunch at the moment—and a number of its members have explained to me their concerns about the impact on small firms. I share the view of the hon. Member for Amber Valley: capital allowances should not be used just as mechanisms to be manipulated in years of high profit. There is a need for an overall review of capital allowances, but I find it unacceptable to cut them in the short term to pay for corporation tax reductions and for the beneficial treatment of multinational corporations. That is why I support the amendment, which is fairly mild-mannered and simply asks whether we can reconsider the matter.
As my right hon. Friend the Member for Delyn said, I would expect a wise Government to have the Treasury carry out such an assessment regularly. The amendment asks for that process to be more open and transparent and for it to be reported to the House so that we can have a full and thorough debate. I hope that the Minister can assure us that he can at least give us some line of reporting on the implementation of the policy over the coming period.
It worries me that as we cut capital allowances, which will reduce corporation tax in this country, we will get into a cycle just like that in the 1930s with an internecine battle between countries about reducing corporation taxes. That will lead to a policy of beggar thy neighbour in order to secure some short-term gain in the form of overseas investment in the UK. I do not believe that that is the solution and I think it will be found to be counter-productive in the long term, even though there might be some short-term gains to tide the Government over for the next 18 months, if they survive that long.
I believe that the Government are mistaken in bringing forward this process of corporation tax reduction. If we are paying for that through the capital allowances changes, we will divide industry and the private sector. A large number of small firms, particularly in the manufacturing sector, will lose out and will not gain sufficiently as a result of the corporation tax cuts. Other areas of the economy, particularly the finance sector, will gain yet again and yet more anxiety will be expressed in the private sector about the Government’s divide-and-rule policy.
Andrew Gwynne
Is it not worse than that? Many of the small manufacturing industries in my constituency have been dependent on an old declining style of manufacturing. The capital allowances were the mechanism that they used to diversify. On my hon. Friend’s point about rebalancing the economy, if we are to do that in areas that are heavily dependent on manufacturing industry, we must allow them to diversify into the new technologies and new manufacturing sectors.
John McDonnell
That is exactly the point that my right hon. Friend the Member for Delyn made and that I wish to reiterate. Capital allowances were introduced as a method of the Government’s trying to shape behaviour within industry as best we could. They were a way to stimulate sectors of the economy, but they have also been used to stimulate innovation. The Government are committed to the stimulation of the green economy and I, like other Members on both sides of the House, deeply regret the Government’s failure to act sufficiently swiftly to establish the green investment bank and to get it up and running, but that is a subject for another debate.
The role of capital allowances, particularly in the environmental field, could be key and cutting them with this broad-brush approach will deny the opportunity to the environmental industries, particularly those involved in the development of renewables, to become world leaders as the Government envisaged that they would in the coming period, an idea that we all supported. This is my right hon. Friend’s point: if a review of the impact of the capital allowances were linked to the disastrous corporation tax policies overall, we would have the opportunity to consider the implications sector by sector and industry by industry as well as the design of the appropriate mechanisms, allowances or other things to stimulate those sectors of industry.
Mr Hanson
Does my hon. Friend accept that one key factor is the lack of a focus on outcomes in the consideration of the impact of the changes in both clause 4 on corporation tax and clause 10 on capital allowances? One key thing that the review would do, if we can secure from the Government today an aspiration to find out what the changes will mean for real jobs and the manufacturing industry, is test in 18 months’ time whether those changes have been successful.
John McDonnell
Let me put it this way, as mildly as I possibly can: we hardly have a description of evidence-based policy making before us. Let us go back to the example of the additional 1p cut given by my right hon. Friend. When the Treasury Committee considered the matter, it invited evidence and Paul Johnson, the director of the Institute for Fiscal Studies, was questioned about the impact it would have. He said that we did not know about that with any precision. We do not know with any precision what the impact of the overall cut in corporation tax will be and we certainly do not know with any precision, globally or sectorally, what the impact of the capital allowances cuts will be. We are stepping into the dark and going down the wrong path and that is why we should have the review.
I fear that a number of companies might have planned their development in advance based on the capital allowances that they thought were secure and would be forthcoming because of the statements of the previous Government as well of the Chancellor of the Exchequer over the past 12 months. They will now not proceed with that investment and as a result, the companies might not be put at risk but they will certainly not expand in the way that they planned and that will have consequences for jobs. In certain areas—my right hon. Friend has mentioned at great length the higher unemployment rates in certain regions—the effects on individual communities will be fairly catastrophic if this job growth does not go ahead.
I oppose the reduction in corporation tax, as I think it is misguided. I would prefer it if, instead of cutting taxes to companies and forgoing that income, we could use the income from the top companies and corporations to invest in public infrastructure projects that will get people back to work and stimulate the economy overall. The last thing I would suggest the Government should do, even if they are cutting corporation tax, is pay for that cut with cuts in capital allowances. In my view, that flies in the face of everything that the Government have said about rebalancing the economy, stimulating the manufacturing base and shaping behaviour so that there is a longer-term view of investment in the capital and manufacturing infrastructure of this country based on security and the knowledge of the income that a company will have to invest in the future.
Even if the Government cannot withdraw these provisions on the cuts in capital allowances and reconsider those on the corporation tax, I urge them at least to allow us to reconsider the matter within 18 months, as the amendment says, to see the implications overall. I honestly do not understand the fear within Government of having an open examination of this matter within that time scale. If I were a Minister, I would welcome it. If I were an advocate for this policy, I would welcome the opportunity to come back in 18 months or so and, if necessary, to gloat at its success. I certainly would not want to feel that I was on the run and hiding from the consequences of the decisions that I had proposed in a Finance Bill of this nature.
Mr Love
I echo the final comments of my hon. Friend the Member for Hayes and Harlington (John McDonnell) about the amendment. It mentions capital allowances—that is what we are discussing—and the impact they will have on the UK economy is of particular concern at the moment.
We must comment on the backdrop to this debate, as the economy has stalled over the past six months. We had a very bad final quarter of 2010 and although things improved in the first quarter of this year, the reality is that everyone was expecting much larger growth in the first quarter to compensate to some extent for the lack of growth in the final quarter of last year. If one reads what the commentators and forecasters have said, one sees that there is genuine concern, which is reflected in the figures provided by the Office for Budget Responsibility. The predicted growth rate has gone from 2.6% to 1.7%, but that figure might already be out of date, so there could be further reductions in the rate.
Andrew Gwynne
My hon. Friend is making a good start to his speech by setting out the background. Not long ago, when the Chancellor was promoting his Budget and introducing the measures that my hon. Friend is talking about, he did so on the basis that it was a Budget for growth. However, do not the OBR’s forecasts show that even with the measures in the Budget, growth is predicted to be lower than it would have been had Labour’s plans remained in place?
Mr Love
Absolutely. One has to question, as I am doing, the Government’s whole strategy, which they call a growth strategy but which does not appear to be delivering what we would expect from a proper growth strategy. Indeed, the previous Government’s growth strategy produced a far better result, as I shall discuss in a moment.
I want to cover two other issues that have caused quite a lot of surprise and concern in relation to the Government’s policies. First, on construction, the first quarter growth figures for this year show one glaring and prominent inadequacy is in construction activity, which is going down rapidly. If we add to that the incoherent policies that the Government are pursuing on house building, planning consents and oiling the wheels of the construction industry’s infrastructure, one can only be very gloomy about the prospects for the next year or two.
Secondly, I will mention manufacturing because it would be part of the report that we are suggesting the Government should produce. Manufacturing did rather better than I had suspected it would in the first quarter. Internationally, it seems to be delivering some of the changes in net exports that all the economic forecasters suggested, but we need a much more growth-oriented manufacturing sector if we are to bring about the changes that will be necessary if the changes in capital allowances are to go forward.
Those considerations lead me to conclude that the Budget proposals before us—the reduction in the headline rate and the compensatory measures widening the tax base to pay for that—are the main thrust of the Government’s growth strategy in real terms. The Government suggest that those measures will help to rebalance the economy. I look at all issues as objectively as I can and I have to say that, given the measures being undertaken in the comprehensive spending review in relation to the public sector, we certainly need to do something to boost the private sector. We are told that the measures will do that, but will they? That is the question being addressed in the amendment.
The Minister and the Chancellor have told us that a lower rate of corporation tax should act as a signal that we are open for business. There is some evidence that that approach has worked previously to a limited extent, but the question is whether it will work in the current economy. I am not a sceptic but, like the shadow Minister, I would like to see some Government projections about the number of businesses they expect to come from other countries either to expand existing operations or to start new ones here as a result of that signal.
In his Budget statement, the Chancellor proclaimed from the Treasury Bench that we have
“the lowest corporation tax in the G7”—[Official Report, 23 March 2011; Vol. 525, c. 955.]
but we already had the lowest rate of corporation tax in the G7. If all we are trying to do is send a signal, surely we could have proclaimed that. There is also the wider Group of Twenty to consider. Looking at countries such as Ireland we must ask whether it is feasible and rational for our strategy to be to compete with that in Ireland. As we know, there is debate in Northern Ireland about whether corporation tax should come down to the level in the rest of the island. There is genuine debate about that, but I do not think it is being suggested that we want to compete with Ireland. We compete with the major G7 economies and our rate is already below theirs. The cut in corporation tax will re-emphasise that, but what we would like to know from the Minister is what benefit that will deliver to the British economy.
Andrew Gwynne
Is it not a fact that for the international companies seeking to invest inwardly in the United Kingdom, corporation tax is only one small part of the overall picture? They are looking at much more than just the headline tax rate.
Mr Love
Yes, absolutely. If we look at business investment, which in some senses reflects how optimistic employers, manufacturers and other parts of the economy are about the future, we will see that we have not had the increase in business investment that all the forecasters, economists and coalition politicians have been telling us we should have. That reflects the wider issues in the economy that should be of such major concern. We cannot expect a cut in corporation tax to solve all the problems, but the merit of the amendment is that it proposes that the Government try to indicate how much additional growth and employment will be created as a result. In the previous debate, the Minister suggested that a cut in corporation tax would boost investment.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
Order. I appreciate that the Government themselves have said that corporation tax and capital allowances are part of a package, and I have therefore allowed a linked debate, even though we have finished debating corporation tax. However, the hon. Gentleman needs to focus a little more on capital allowances, which are the subject of the amendment.
Mr Love
Thank you for your guidance, Ms Primarolo. I will move swiftly on to capital allowances. The Government have discussed the need to widen the tax base and they have told us that reducing capital allowances is partly a method of paying for the cut in the headline rate. As I mentioned in an intervention, that phenomenon has been apparent in most western countries in recent years and, indeed, all the economists project that there will be much greater competition in business taxes. Corporation tax is likely to continue to come down, and the reduction will be partly made up by widening the tax base.
Like my right hon. Friend the Member for Delyn (Mr Hanson), I am prepared to consider the changes to capital allowances, although I am concerned about the cut in the annual investment allowance from £100,000 to £25,000. I am perfectly happy, however, to look at that if we are reassured that the proposal in the amendment will make a significant difference. As has been said—and I have said so myself—the Office for Budget Responsibility added a rather sceptical note to the debate by suggesting, even though it had been informed at a late stage of the 1% cut in corporation tax, that that would not have a great impact on growth.
Finally, I want to focus on the issue of who will benefit from the changes to capital allowances. As a number of Opposition Members have said, high-profit, low-investment companies will be the main beneficiaries of the package, which is unfair and, if I may say so, will not achieve the rebalancing of the economy that the Chancellor has promoted for a considerable period, away from financial services towards the manufacturing and production of export-oriented goods. The change militates against all that. In particular—and I refer to the cut from £100,000 to £25,000—it will penalise manufacturing, particularly businesses with high capital costs. My right hon. Friend the Member for Delyn mentioned the motor industry and others, but I am concerned, because I have a number of small, capital-intensive manufacturers in my constituency. Sadly, they are only a remnant of the manufacturing sector that we had 25 or 30 years ago, but we need them and we need to promote them. I am therefore worried about the Government’s proposals.
Andrew Gwynne
My hon. Friend has been incredibly generous in accepting interventions. I am not sure of the extent of the manufacturing base in his constituency, but I imagine that it is pretty similar to mine. Small manufacturing industries tend, as he said, to be a remnant of the larger-scale manufacturing that once operated in our constituencies. Does he not regard the capital allowances scheme as a mechanism for manufacturing industries, however small, to diversify into the new sector?
Mr Love
I agree. If we take the coalition at face value, it has suggested that we need a vibrant small business and manufacturing sector, much of it consisting of small businesses. I would think that it would want to promote that by incentivising it through the taxation system. One wonders whether the measure would achieve that. I do not want to suggest, without any concrete figures, that that will in fact happen. We urge the Government to produce those figures, so that we can all make a judgment. Indeed, they can make a judgment about whether their policy has achieved their objectives.
Jim Fitzpatrick
My hon. Friend, like most of the speakers in this debate, is generously supporting the modest amendment tabled by our right hon. Friend the Member for Delyn. It does not attack what the Government are trying to do; it is just asking for
“an assessment of the impact of the changes”.
We are therefore giving the Government the benefit of the doubt, as their proposal may well be beneficial and positive. As my right hon. Friend has said, the Treasury will examine, monitor and scrutinise the impact of the measure on businesses, so what is wrong about publishing an account as suggested by the amendment?
Mr Love
I agree, as other Members do, that that is not an unreasonable request. If the Government choose not to support the amendment, are they concerned about the impact of capital allowances and the prospects for the UK economy? One wonders whether they do not want the debate that would ensue in 2012 when, if we are to believe Government figures and the OBR, the economy should turn a corner. That would be an appropriate time at which to carry out that investigation.
There are 5 million small businesses in this country, and it is a symbol of the unity that we occasionally achieve in the Chamber that Members from all parts of the House recognise the role that they play now and, importantly, in future. If we add to the impact of capital allowances on small businesses the failure of the banking system in this country to provide the credit necessary to expand the sector, I wonder whether we can achieve all that the Government hope to achieve through the shift from public sector to private sector activity. I merely raise that as an additional issue, but I hope that the Government will address the credit needs of the small business sector a little more robustly. That is what underpins the amendment.
John McDonnell
I apologise, Ms Primarolo, for leaving the Chamber earlier. Should there not be some consultation of small businesses in particular so that they could describe the nature of the investments that they would forgo if they failed to secure the capital allowances that they normally secured under previous regimes? That would allow the Government to assess the overall impact of the loss of those investments to sectors of industry and on employment overall.
Mr Love
My hon. Friend makes my point. That is exactly why, once the changes have been introduced, we need to review and assess their impact, particularly on small businesses and more generally on the economy. We would like to be reassured that the headline rate cap with the changes to the allowances will make a material and positive difference to the economy.
I commend the amendment to the Committee and in particular to the Minister. I hope he will consider carefully what is asked for and agree that it is a constructive amendment that he can support. I hope that together we can make a real difference to the prospects for the UK economy.
Mr Gauke
Amendment 6 would require the Chancellor to publish by 31 October 2012 an assessment of the impact of the proposed changes to capital allowances on the UK economy, as we have heard. The amendment was tabled to clause 10, which reduces the rates of writing-down allowance on the main rate pool of plant and machinery expenditure to 18% and on the special rate pool to 8%. Before I deal with the amendment, I will explain the purpose of clause 10, which is key to the amendment.
Capital allowances allow businesses to write off their expenditure on capital assets, such as plant and machinery, against their taxable income. They act as a simple, statutory system in place of commercial depreciation. Capital allowances are given at different rates, depending on the year of investment and the type of asset acquired. The principal year-on-year allowance for plant or machinery expenditure is the writing-down allowance. The main rate is currently 20% per annum, and the special rate is 10%.
Both are calculated on the reducing-balance basis. We are making changes also to the annual investment allowance, in clause 11, reducing it to £25,000, as we have heard, and extending the short-life assets regime from four to eight years, in clause 12.
The changes announced last year, which are given effect by clauses 10 and 11, enable a reduction in the main rate of corporation tax, which will reaffirm Britain’s competitive tax system and support enterprise and growth. The right hon. Member for Delyn (Mr Hanson) was right to highlight the fact that this is part of a package. In his earlier remarks, the hon. Member for Edmonton (Mr Love) pointed out that this was a partial contribution. There is none the less a gap, and further funding has been found—from the bank levy, for example—which has enabled us to reduce the corporation tax rate.
We have already debated the benefits of reducing the corporation tax rate and we have returned to that topic to some extent in the present debate. I note that it does not have the support of all hon. Members, although it is supported by the Opposition Front-Bench team. It is helpful to repeat what was said by John Cridland, the director general of the CBI:
“The extra 1p cut in corporation tax will help firms increase investment.”
The objective is not just to reduce the amount of tax that companies pay, but to enable them to invest and grow businesses in the United Kingdom. I am pleased that that is welcomed throughout much of the Chamber.
Our initial assessment of the package as a whole suggested that that would lead to an additional £13 billion of business investment by 2016 by making the cost of capital investment cheaper. The additional reductions in corporation tax rate and the extension of the short-life assets regime will help to increase further the levels of investment by business. We estimate that the overall effect of these measures will be to reduce the tax liabilities of the manufacturing sector by around £700 million by 2015. The changes to the rates of writing-down allowances do not mean that businesses will not continue to receive full tax relief for their investments in plant and machinery. Rather, the relief will be over a slightly extended time frame.
Let me give an example. Where it would have taken 11 years under the current rate to write off more than 90% of the cost of a machine, it will now take 12 years. Meanwhile, the rates will continue to align broadly with average rates of depreciation across the economy. This does not mean that we intend to remove capital allowances in favour of pure accounting depreciation.
On the issue raised by my hon. Friend the Member for Amber Valley (Nigel Mills), the previous Government did consult in some detail on their reform of corporation tax between 2002 and 2004. I am sure you remember it well, Ms Primarolo. The business response to that consultation was strongly in favour of retaining capital allowances. It was argued that capital allowances provide certainty and a level playing field, with the same rates of allowances applying to all. The flexibility of the system allows the pooling of expenditure and the ability to claim less than full allowances, depending on the individual’s business circumstances. My hon. Friend set out the case for a different approach to capital allowances. He brings great expertise on the matter and there is ongoing debate, but we do not intend to reopen discussion of that point.
Nigel Mills
I am grateful to my hon. Friend for reminding me of that study from almost a decade ago. I gently point out to him that the rate of capital allowances was quite a bit higher at the time of the study. If he did the same exercise now, he might get a slightly different answer.
Mr Gauke
Again, my hon. Friend raises an interesting point. We look forward to receiving any representations that he may wish to make on that. He is right to say that the rate of capital allowances has changed since 2004, and he highlighted in an intervention the fact that the previous Government—as I am sure you will recall well, Ms Primarolo—reduced writing-down allowances in 2007, a point that my hon. Friend made to the right hon. Member for Delyn.
In response to those Opposition Members who raised their concern about the approach that the Government have been taking, I point out the approach taken by their Government in the previous Parliament, when they were all Members of this place. Whereas we are reducing the writing-down allowance from 20% to 18%, the previous Government reduced it from 25% to 20%. In our case that is a contribution towards reducing the main rate of corporation tax from 28% to 23%. The previous Government reduced it from 30% to 28%. Ours is a much more generous package for business and as a consequence a much better package for manufacturing than that contained in the 2007 Budget, where essentially the entire reduction in corporation tax from 30% to 28% was paid for by the reduction in the writing-down allowance from 25% to 20%.
On amendment 6, the Government are fully committed to providing greater transparency on the impact of tax measures. I am sure Opposition Members have examined the tax information and impact notes that we published on 9 December relating to clauses 10 and 11, and the additional note that we published at Budget in relation to clause 12. It is clear that there is no need to publish a report into the impact of the capital allowances changes. We have provided a great deal of detail already, but for those hon. Members who have not had the opportunity to read the published notes, let me provide a brief summary.
The note states:
“The OBR assessment of the package was that the cuts in CT”—
that is, corporation tax—
“rates more than offset the reductions in investment allowances”,
and that the businesses affected
“will benefit from related reductions in the rates of CT.”
As I said earlier, we expect the overall effects of the cuts in corporation tax rates and capital allowances changes to lead to an additional £13 billion of investment, and the additional changes to increase that further.
Although this is not strictly in scope, as the amendment is to clause 10, I hope I may be allowed to make a few comments about the other changes to capital allowances in the Bill, to which we shall return in Committee upstairs. The reduction in the annual investment allowance to £25,000 is estimated to affect between 100,000 and 200,000 businesses. As the tax information and impact note clearly states, however:
“The CT reform package will promote higher levels of business investment than would otherwise have been the case.”
Further, more than 95% of businesses in the UK will be unaffected, as the qualifying capital expenditure will continue to be completely covered by the annual investment allowance, so companies, be they small, medium or large, will benefit from the CT cuts, including the cut in the small profits rate in clause 5, while most unincorporated businesses, which by their nature tend to be the smallest businesses in the economy, will still have their expenditure covered by the annual investment allowance.
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
I call Mr Hanson.
Mr Hanson
Good afternoon, Mr Evans. Can I welcome you to the Chair of this seemingly unending Committee, which has been going on for the past couple of days?
I have listened very carefully to the Minister, but I think that the amendment is very modest: we are asking for a report in 18 months’ time, in October 2012, on the impact of the changes. We ask for that, because my right hon. and hon. Friends retain an element of concern that the cut in manufacturing capital allowances will damage some manufacturing sectors. Based on those concerns, we wish to continue to reflect on those matters, and I therefore wish to put the amendment to a Division, so that we can place on the record our concerns about the capital allowance cuts and state that we wish to review the matter very clearly in 18 months’ time, in October 2012.
Question put, That the amendment be made.
Mr Hanson
Once again, Mr Evans, I welcome you and look forward to your time in the Chair as we debate clause 35 of the Finance Bill. You will of course be aware that we tabled an amendment to the clause that you have chosen not to select, which is your prerogative; we are relaxed about that. However, it is important that we test and discuss the issues in the clause with Ministers to examine its impact, as well as the impact of other changes that form part of this package of measures.
Our concerns centre on the effects of the various changes that have been made to child care support. Clause 35 introduces changes to the higher rate taxpayer relief for child care—an issue that caused some discussion in the last months of the previous Labour Government and will undoubtedly cause further discussion today. We need to look at the clause not only in its own context but in the light of the wider taxation and benefit policies that the Government are progressing. This is part of a number of measures that will address a range of issues to do with child care and families generally. I also want to consider some of the technical matters that outside groups have raised with me and with other hon. Members regarding the wording of the clause and, if I may slightly stray outside the scope of the debate, the wording of schedule 8, which is related to it and to which we will return in Committee in due course.
The background to clause 35 will be familiar to my right hon. Friend the Member for Edinburgh South West (Mr Darling) because it had its genesis in discussions that took place as part of the previous Labour Government’s proposals. Members will be aware that in 2009 my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), as Prime Minister, announced to the Labour party conference proposals that he brought before the House later that year regarding child care relief and basic rate relief.
In government, Labour’s plan was to use the savings from limiting child care relief to basic rate relief to fund an expansion of child care places for two-year-olds in England, with potential consequential reliefs and amendments for Wales, Scotland and Northern Ireland. There was some controversy and discussion on those matters. The Exchequer Secretary will be aware that there was extensive discussion in the Labour Government about those matters, and that under the leadership of my right hon. Friend the Member for Kirkcaldy and Cowdenbeath, they settled on limiting child care relief to basic rate relief, with the purpose of funding an expansion of child care places for two-year-olds.
I would like clarification from the Exchequer Secretary today on—[Interruption.] Don’t worry, I am still here. The hon. Member for Crewe and Nantwich (Mr Timpson) will know that one picks up the occasional sedentary remark. Unless I reflect back on the last remark, it will not appear in Hansard, and on this occasion, I will not reflect back on it. As can be seen, Government Members have expressed an interest in my speech.
The Government have made changes to the Labour Government’s proposals on basic rate relief and the expansion of child care places for two-year-olds. Indeed, the Government’s proposals are markedly different on the child care element, to which the relief is linked. The Labour Government had planned some 250,000 child care places for two-year-olds from low-income families, although I accept that that was scaled down to about 65,000 child care places. The Government proposals before the Committee will increase from 10 to 15 the hours for the pilot of child care places for 28,000 children. There is a significant expenditure saving in clause 35, compared with the Labour Government proposals. I think that it is worth focusing on those issues today, because if the scope of the discussion that I have given is accepted, this measure cannot be divorced from the reasons why the Labour Government intended to undertake the purpose of clause 35 and what the current Government are now doing with that resource.
From January this year, value added tax will cost families with children an extra £450 a year on average. That is one of a range of measures on the table that will press hard on the ability of individuals to provide child care at affordable levels.
The Government are pressing ahead with the change that my right hon. Friend the Member for Kirkcaldy and Cowdenbeath proposed in government to pay for the trebling of the number of free child care places available to the most deprived two-year-olds. We accept that the relief, which is manifested in clause 35, was badly targeted. That is why we made those changes in government, and our proposal would have paid for more of the poorest in our society to have child care. I want the Exchequer Secretary to explain how the resultant savings from the proposals will be invested to support issues such as child care for people in our community.
At the same time, the Government are hitting family finances in other ways, such as through child tax credits and through child benefit being frozen, and indeed being cut for many people in the years ahead. The families who will be affected by this measure will soon be affected by other measures, particularly that on child benefit. The taxation changes in clause 35 need to be seen in the light of the decision to withdraw child benefit from April 2013 from households containing at least one higher rate taxpayer.
Mr Gauke
I am following the right hon. Gentleman’s speech closely. Will he clarify for the Committee whether the Labour party has a specific proposal on what the savings from this measure should be used for? Is it committed to using them for nursery places, or for something else?
Mr Hanson
As I have said, the Labour Government’s original proposal, which was announced by the then Prime Minister, was to use the resources saved from this badly targeted tax relief to support the extension of child care for two-year-olds in poorer families. Our purpose at the time was to expand the number of places to about 250,000. There were discussions in the Government, and the Exchequer Secretary knows that the figure we settled on was about 65,000 child care places. I understand that he proposes to stick to the pilot of 28,000 places, and I would be grateful for clarification on that, and to extend the number of hours to 15 hours per week. That is significantly less than what was proposed by the previous Government.
Mr Hanson
Actually, Ministers answer the questions and the Opposition ask them. I have been clear with the Exchequer Secretary about the proposal that we outlined in government, and that will be our view. We are potentially four years from government.
I am simply pressing the Exchequer Secretary to explain what the impact is of clause 35, and why there has been a significant change—unless he wishes to clarify that further—to the proposals announced by the previous Government on extending child care for two-year-olds. It is important that we know not just what the clause means, because it will restrict child care support for higher rate families. The purpose of our proposal in government was to expand child care arrangements for poorer and lower-income families. The Government are now squeezing the middle while—unless the Exchequer Secretary clarifies that the contrary is the case—not providing the same level of child care places that were originally proposed by the Labour Government.
This measure is coupled with a range of other measures, which are not before the Committee in clause 35, but which I hope you will give me the scope to touch on, Mr Evans. There are real-terms cuts to child benefit, which is frozen at £75.40 this year for families; the baby element of child tax credits, which is worth £545 a year, has been scrapped; benefits have been set on a permanently lower path of inflation; the basic and 30-hour elements of working tax credit have been frozen; and the second income threshold for the family element of child tax credit has been cut. Those measures all add to the pressures on child care responsibilities and on families.
Andrew Gwynne
My right hon. Friend has set out a series of measures that the Government are implementing in the Budget. Does he find it ironic that those measures come from the Conservative party, given that the Prime Minister claimed before the general election that he would lead the most family friendly Government in history? Those measures are penalising hard-working families, and women more than men.
Mr Hanson
Indeed. It is a fact of life that child care often remains the prime responsibility of the woman. Child benefit is paid to the woman for that purpose. Clause 35 does not deal with child benefit—I do not wish to test your patience, Mr Evans—but, in principle, the purpose of the Labour Government’s original policy proposals was to expand free child care for people who could not afford it otherwise, to help to support women to get back into work and to help individuals to support their children.
As I understand it—I am willing to be contradicted and to hear clarification from the Minister—the impact of the proposals is that fewer child care places will be available than the previous Labour Government proposed. That must be a matter of some concern. Indeed, in our original amendment, we proposed a review of child care provision to consider the impact of all these measures. Clause 35 proposes changing higher-rate relief to basic-rate relief for higher-rate taxpayers, but we should not consider it in isolation; it is only one change among many on child benefit and the other issues that I have mentioned that raise concern among the official Opposition.
Mr Geoffrey Robinson (Coventry North West) (Lab)
My right hon. Friend touches on the great steps made under the previous Government to alleviate child poverty. Was he by any chance present during Prime Minister’s Question Time today, when the Prime Minister made it clear that we had reached the end of the road in terms of taxation measures to achieve that? In particular, he said that he was absolutely against further redistributive measures. The proposals, which are separate from straightforward taxation measures, will take further steps to aggravate, not alleviate, child poverty.
Mr Hanson
The Minister has an opportunity to clarify the Government’s approach to the provision of child care. That is clearly linked to clause 35, because the Labour Government’s original proposals were designed to meet the objectives that my hon. Friend has indicated. That point is made, and I want the Minister to clarify his approach to child poverty and how the Government propose to fund child care places for two-year-olds.
Agencies and organisations outside the House have made a range of comments on clause 35. It is worth giving the Minister an opportunity to respond to them, and I hope that he will offer some reassurance. Some of the comments also relate to the accompanying schedule. I appreciate that the Committee is not considering that now, but it is very much linked to the clause.
The Low Incomes Tax Reform Group, which, as the Minister will know, is an initiative of the Chartered Institute of Taxation, has raised with me some real concerns about clause 35 and schedule 8. It is concerned about the complex interactions of tax-free vouchers with tax credits and child care cost support, the dynamics of which it believes changed again after 6 April 2011. It is important that the Minister responds to its concern about the poor channels of advice for employees and employers about the implementation of the scheme proposed under clause 35.
The group believes that there may have been errors—under the previous Government, I admit—in HMRC’s online calculator, and it is concerned about how the implementation of these measures will be taken forward. It is particularly concerned that although the system is designed for fairness, the results that it produces may not be fair. I shall give some examples, if I may, of its concerns about clause 35.
The group is particularly concerned that the clause will remain reliant on interpretation according to guidance published in draft on HMRC’s website, which it believes is inconsistent with the clause. I am not making any assessment of the group’s judgment call on that matter, I am simply placing it on the table because this Committee debate gives the Exchequer Secretary the opportunity to examine whether that concern is justified. He may be able to provide some comfort by giving his interpretation.
The group has raised the concern that under schedule 8 —the schedule will be discussed in the Public Bill Committee, but it is worth mentioning now—the changes will apply only to those whose employer estimates them to be higher rate or additional rate taxpayers at a particular point in time, rather than to those who are actually found to be so by a final assessment. It is important that either now or when we discuss schedule 8 in the Public Bill Committee, the Exchequer Secretary reflects upon that concern and provides some clarity about when the assessment will be made on whether individuals are higher rate or additional rate taxpayers. We need to know at what stage in the financial year that assessment will be made, who will make it, how much of a burden it will be on employers and employees and whether the figures and facts that HMRC will use in the calculation are sound and to his satisfaction. They must be seen to be just and fair.
The Low Incomes Tax Reform Group has expressed concern that the change may have equality impacts, for example on employees who become long-term sick or disabled, on women or on those who switch to part-time work in the course of the year. It suggests that there should be some flexibility in the interpretation of clause 35 and schedule 8.
The Library has calculated that overall, families will be some £1,700 a year worse off due to the Government’s tax and benefit changes, of which clause 35 is one. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) mentioned, the Prime Minister promised to lead the most family-friendly Government ever, and I should like to hear from the Exchequer Secretary where the proposal, when linked to the proposals on child benefit and the working tax credit and the others that we know about, fits into the Government’s overall strategy for child care.
We accept that there will have to be difficult and challenging decisions, and I reconfirm that the previous Labour Government wished the targeting now set out in clause 35 to progress.
Grahame M. Morris (Easington) (Lab)
Is there not also an issue to consider about clause 35 breaking the principle of universality—the idea that benefits apply irrespective of income?
Mr Hanson
There is, and my hon. Friend will know that we have been very clear that the Government’s wider proposed changes to child benefit are not fair or equitable, and that child benefit should remain universal. The former Prime Minister, my right hon. Friend the Member for Kirkcaldy and Cowdenbeath, and the former Chancellor, my right hon. Friend the Member for Edinburgh South West, decided that child care was poorly targeted, but that if universality was to be broken, we must provide help and support to the poorest families to ensure that they had child care for two-year-olds. The Labour Government planned some 65,000 to 68,000 child care places as a result of the measures that are now in clause 35. The current Government have accepted those measures in principle, as we did, but unless the Exchequer Secretary tells me otherwise I do not believe they are delivering the outputs that we planned as a benefit of saving resources.
John Cryer (Leyton and Wanstead) (Lab)
We know that whenever means-testing is put in place, there is a cost because of the bureaucracy that is needed to administer it. Does my right hon. Friend have any idea how much this particular method of means-testing will cost?
Mr Hanson
My hon. Friend raises an interesting point. That is another issue that we wish to explore not just today, but when we debate schedule 8 upstairs in Committee at a later date. The element of complexity and randomness in the application of the clause has been raised with me by the Low Incomes Tax Reform Group. It is incumbent on the Exchequer Secretary to answer those criticisms before we consent to the clause.
There are choices to be made in tackling the deficit and we must look at the options. The then Labour Government made the same choice, but would have ensured that more child care places were available.
Andrew Gwynne
My right hon. Friend makes his case on clause 35 and says that the previous Labour Government considered the possibility of targeting. However, they did so in the context of a wider range of measures available to families to support them in the upbringing of children. Does he share my dismay that clause 35 is being introduced against a backdrop of absolutely clobbering families hard and removing benefits that have made a huge difference to them in my constituency, and no doubt in his?
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. I am delighted that Members mention clause 35 from time to time, but it is really quite specific. This is not a general debate on child care or indeed on other policies. Perhaps we could focus more on the provisions contained in clause 35.
Mr Hanson
We have known each other since our elections to the House on 9 April 1992, Mr Evans, and as ever, I shall try to keep to your strictures as the good Chairman that you are. You will note that amendment 8, which you did not select, would have prompted a wide-ranging discussion on the impact on child care. I am trying to focus on clause 35 and not to stray into amendment 8 or the issues that my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) touched on. However, those issues are important when we are looking at the impact of clause 35 on a particular group of people, because that same group of people will lose child benefit and a range of other child care support measures because of their income, and that will shatter the principle of universality that my hon. Friend the Member for Easington (Grahame M. Morris) mentioned.
The Opposition will listen to the debate on clause 35, but we might oppose it. However, there are important points to be examined and answered in detail today. First, how do we use the resource? Secondly, how do we implement the policy? Thirdly, will the Minister answer the challenges made by external bodies about the operation of the clause in practice?
Grahame M. Morris
As my right hon. Friend the Member for Delyn (Mr Hanson) has already indicated, clause 35 introduces schedule 8, which contains the provisions for reducing child care relief for higher earners. My understanding is that the latter measure will be dealt with at a later stage upstairs in Committee.
As has been indicated, Labour considered proposing a similar change, but at its heart, it was trebling the number of free child care places available for the most deprived two-year-olds. That is the problem with the Government’s measure. The Labour party considered better ways of targeting support for child care to support both child care and the family throughout its time in government, but it seems that the coalition is taking money away from families completely, without retargeting it at those who are most in need. There is a basic contradiction between Labour’s position and that of the coalition Government. Indeed, the Government’s policies across the board seem to be an attack on families, and other groups in our society. Under their policies, middle-income and working-class families are hit harder than those at the top of society, and their policies do not redirect money into better-targeted child care.
Mr Robinson
Rather than a redirection of money, is this not simply camouflage for a straightforward cut? It is a breach in the universality principle that strikes at the very foundations that hold the nation together.
Grahame M. Morris
My hon. Friend has hit the nail on the head: there is a fundamental point of principle here. I suspect that there is much more in the clause than is apparent that breaks this principle of universality. The debate on clause 35 concerns not only the immediate measure of removing child care tax relief from higher earners, but the course that the Chancellor is charting against families and the welfare state. On child care tax relief, it is worth remembering that it was John Major, when he was Chancellor in 1990, who first introduced relief for employer-supported child care, and as has been pointed out, that was extended by my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) when he was Chancellor. It is right that Labour considered changes to this relief in order to better focus Government support on child care.
The last Labour Government considered tax rate reliefs of this kind. Hon. Members have referred to expert bodies. However, the tax faculty of the Institute of Chartered Accountants argued that it would
“be burdensome, disproportionate and open to manipulation and abuse”,
so it ruled out this tactic of preventing benefit from being paid to higher earners or excluding them from the system. As I mentioned earlier, the real danger of the Chancellor and coalition Government’s tax and benefit policies is that they could push middle Britain out of the welfare state. It is a squeeze on middle England. Taken with the decision to end child tax credits and child benefit for families with a single high-band earner from 2013, it seems to me and Opposition colleagues to be a concerted attack on the fabric of the universality of the welfare state.
In the light of the rhetoric that surrounded the measure, and given that it appeared that the Government were intent on making immediate cuts, it came as a surprise to me and other Opposition Members that when it was announced, it was delayed until as late as 2013. That was a surprise because it seemed to be an attack on a core vote area of the Conservative party—perhaps it is no longer such a core vote area. It was a further surprise that a party that in opposition had consistently called for tax cuts for married couples seemed in government to want to attack them as soon as they had children. At the time—I believe it remains the case today—there was considerable concern that this policy was ill-thought-out, and that it was a party political stunt from a Conservative party and a coalition Government still finding their feet.
John Cryer
Does my hon. Friend agree—this is in line with the intervention from my hon. Friend the Member for Coventry North West (Mr Robinson)—that this badly thought out measure is an attack on the collective ethos of society, which is always dangerous?
Grahame M. Morris
I am grateful for that point. Others have made it, and I have tried to echo its sentiments. The Government have the opportunity to rethink the implications of this decision, because implementation is not until 2013, so I hope that the Minister will address that point at the close of the debate. I am sure that hon. Members will recall that when the measure was proposed, Labour was engaged in a leadership election. Perhaps it was an attempt to steal the headlines.
However, from representations that I have received from expert groups, individuals and constituents—I am sure that other Members have received similar representations—it seems that the policy has been shown to be ill thought out. Whatever one’s views about middle England—whether it exists, whether it should be protected —it is crystal clear that the policy will disproportionately affect families with a single high earner. As someone who considers himself a socialist and something of a champion of the working classes and those at the lower end of the income spectrum, I think that there is a basic issue in this debate about justice and fairness. For families with a single high earner and perhaps no second earner, there is a clear injustice and anomaly when compared with a family with two high earners, as both families would lose the same amount.
Julie Hilling (Bolton West) (Lab)
I wonder whether my hon. Friend has come across people in his constituency, as I have in mine, who are talking about giving up work—contrary to the belief shared on both sides of the Committee that work should pay and that the best thing for families is for parents to be in work—because of the effect of everything that is happening, including losing child care and the other benefits that higher earners receive. Does he share my view that that is clearly not the best thing for families or our society when we are trying to grow our economy again?
Grahame M. Morris
I am grateful to my hon. Friend: that is a good point well made. There are a number of levels where the Government now have an opportunity to stop, reflect and listen to representations—to steal a phrase from the Health Secretary—about the impact of the policy on the economy. I am sure that that impact was never intended, but it should certainly be taken into account if people now have a perverse incentive not to engage actively in earning a living and making a contribution to society.
Child benefit is a key part of the welfare state, and one that applies the principle of universality to all families in recognition of society’s duty to support not just families, but future generations. I had always assumed that that was a cross-party commitment, irrespective of party political allegiance. However, by taking away £1,000 in child benefit and child tax credits from families earning just over £40,000, the coalition Government are damaging our system of welfare for the future. We know—or at least we suspect—that the measure is more to do with trying to undermine the strong support of middle England and the middle classes for the welfare state. We on the Opposition Benches suspect that the purpose of the measure is to move British politics in a new direction. My concern is that an Americanised system of low taxation with a basic safety net to catch those at the very bottom would be a move in the wrong direction.
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. This is becoming more of a general debate about the welfare state, which is clearly not what is dealt with in clause 35, which is actually quite specific. I have given a lot of latitude up to now, but we must now focus on clause 35.
Grahame M. Morris
Thank you, Mr Evans. I shall try to ensure that we focus on the clause.
Let me quote some figures from the House of Commons Library that give some detail on the implications of the clause. The Library has calculated that some families will be £1,700 a year worse off owing to the Government’s proposed tax and benefit changes. The Chartered Institute of Taxation has warned of the
“considerable increase in the effective tax burden of those on incomes in the £40,000 to 50,000 bracket”,
which the clause deals with. The Chartered Institute of Taxation also said that
“increasing the tax burden on middle-income households while withdrawing tax credits and child benefit from them will result in their being squeezed proportionately more than those on higher incomes”.
In addition to families on more than £40,000 a year losing benefits, as set out in the clause, families will lose £450 a year on average because of the VAT increase. Added to that, child benefit has been frozen for three years, which equates to a real-terms cut of more than £75 this year for a family with three children, and the baby element of the child tax credit, which is worth £545 a year, has been scrapped. Added together, that all amounts to a quite astonishing attack.
The Chancellor’s answer to cutting the deficit has been to shrink growth and cut support for families and the most vulnerable. In my constituency, take-home pay is almost 20% lower than the national average. Young men and women have struggled to raise families in my area, which has been blighted by unemployment for more than three decades. The previous Government not only provided greater financial support for those struggling families; they also invested in schools and communities, and tried to revitalise and diversify the economy and create new jobs. The programme offered by this Government, and particularly the provisions in clause 35, will turn the clock back to the 1980s, not only for Easington and large parts of County Durham and the north-east but for many of the great cities in the north and for many people who aspire to raise themselves up and to progress.
My contention is that the clause breaks with the principle of universality and that that is likely to be followed up with tax cuts as a pre-election sweetener. In that way, the Government are beginning the process of undermining our welfare state, which they appear to have opposed in one form or another since its foundation 60 years ago. The last Labour Government significantly increased income-related support for families through tax credits, and they also systematically increased child benefit and maintained their commitment to progressive universalism. The Chancellor has frozen child benefit for three years, ditched progressive universalism and hiked up VAT—
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. The hon. Gentleman is now going much wider than clause 35. Does he wish to resume?
Grahame M. Morris
Yes, I will try to bring my remarks back to the clause.
I am fully aware that the amendment that was tabled in the name of my hon. Friends on the Front Bench was not selected—[Interruption.] We shall not be able to talk about it in the debate. Getting back to clause 35, we would require the Government to look at how their policies of tax and spend are affecting families right across Britain—
The Parliamentary Under-Secretary of State for Education (Tim Loughton)
Have you read the clause?
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)
Will my hon. Friend give way?
Grahame M. Morris
I am grateful for that intervention. My hon. Friend makes a reasonable point. All that we are trying to do is give the Government a chance to reflect on a bad decision that has been made in haste, and to look at the impact that these measures will have on families. That is not a revolutionary approach. It seems quite reasonable to me. The Government will have ample opportunity to reflect on these matters, because the provisions will not be implemented until 2013. Were they to do so, I hope that that would provide the impetus for a wide-ranging debate on whether the coalition will push ahead with its policy on child benefit and child tax credits, and on what the implications of that will be for families, for the broader economy and for society.
Mr Robinson
I am conscious of your strictures, Mr Evans, and I am in no way challenging the Chair, but I understand the difficulty that my hon. Friend is having in considering clause 35 on its own. It can be considered only in the wider context of the other measures that together amount to an attack on families by a Government who said that they were going to be the most green-friendly Government ever—never mind the most friendly Government ever. It is the cumulative effect of all those measures that makes those claims so vainglorious and empty. That illustrates the difficulty that my hon. Friend is having, and that I would have if I were to contribute to the debate, although I would try to be a little stricter if I could. We cannot isolate the clause from the whole package of proposals that will compound the effect of this one.
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
I thank the hon. Member for his advice, which I am not going to take. We are talking very narrowly about clause 35.
Grahame M. Morris
I am sure you will be pleased to hear, Mr Evans, that I shall conclude my remarks in a few moments.
Mr Hanson
Does my hon. Friend accept that the original proposals of the previous Labour Government to increase the number of child care places for two-year-olds in the poorest areas would have benefited Easington, County Durham and many other poor areas in the north of England, as it would have benefited similar parts of constituencies elsewhere? That is why we are focusing on the impact of clause 35 not just on tax relief for higher earners but in respect of what could have been done with the spending.
Grahame M. Morris
I am glad that my right hon. Friend has taken the opportunity to place that excellent point on the record.
I hope that the Government will take the opportunity to take a breath and reflect further on clause 35 rather than digging into the position announced last October, as the provisions will not be implemented until two years from now. Why does the Chancellor not agree to look again at the effect of his taxation policies? He has an opportunity to do so before 2013. He needs to reflect on the impact of the removal of child care tax relief, child benefit and child tax credits, which, taken together, mark an attack not just on families but on the welfare state as a whole.
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
I now have to announce the result of the deferred Division on the Budget report and the UK’s convergence programme. The Ayes were 249 and the Noes were 139, so the Ayes have it.
[The Division list is published at the end of today’s debates.]
Andrew Gwynne
It was not my intention to speak in the clause 35 stand part debate. Having listened to my right hon. Friend the Member for Delyn (Mr Hanson) and my hon. Friend the Member for Easington (Grahame M. Morris), however, I have decided that it is important for me to do so.
As has already been said, the clause introduces schedule 8, which introduces changes to the higher rate taxpayer relief for child care. That was first announced by the Government and, as my right hon. Friend the shadow Minister said, Labour does not oppose it, except for the important point—I bear in mind your earlier strictures on not extending the debate too widely, Mr Evans—that the measure has a wider impact on the Government’s child care policy and how it fits in with the Budget measures.
I have some sympathy with the notion of expanding child care places for two-year-olds. The previous Labour Government made greater provision for early years education, which has been incredibly beneficial to those children. I declare an interest in that all three of my children went through early years education under a Labour Government and, thanks to that Government’s investment, they are doing brilliantly at primary and secondary school.
Andrew Gwynne
I am happy to say that all three of my children went to St Anne’s primary school in Denton, where my wife, who is up for election tomorrow, is a chair of the governors. My eldest son goes to Audenshaw high school, which is also in my constituency, and all my children are getting a first-class education in those schools.
Let me return to clause 35, Mr Evans, for fear of being told off by your good self for straying too wide of the issue. The issue, for Labour Members, is this. We support the extra investment in child care for two-year-olds, especially in constituencies such as mine. Denton and Reddish is quite a deprived constituency, which covers five wards in the Tameside metropolitan borough—which is, I believe, the 52nd most deprived local authority in England—and the two Reddish wards in Stockport, which, although Stockport itself is a much more prosperous borough, are the two most deprived wards in the constituency. Investment in early years education has made a big difference to young people in constituencies such as Denton and Reddish. I would particularly welcome extra investment in nursery education in those deprived communities and, indeed, the Labour party proposed to provide it. I am pleased that the present Government are pressing ahead with a change that we proposed when we were in government.
Where we differ is in our approach to targeting. My hon. Friend the Member for Easington made a valid point about that. Although I understand the arguments for targeting as a way of ensuring that communities such as his and mine receive the benefit of extra early years provision, some constituents who are better off than the average in my constituency tell me—and it is difficult to argue against what they say—that they pay considerably higher taxes and pay into a welfare state system, and that they expect to get at least something in return. Those payments are their buy-in to the universal welfare system. I take on board your strictures, Mr Evans, but I also take on board the points made by my hon. Friend.
John Cryer
What concerns me about the changes is their incoherent nature. It appears that there have been knee-jerk reactions to save a bit of money here and a bit of money there. I fear that the Tory party may be moving from being, as Disraeli said, the party of organised hypocrisy to being the party of disorganised hypocrisy. For the benefit of Government Members, incidentally, Disraeli was a Prime Minister, and a Tory Prime Minister.
Andrew Gwynne
I entirely understand what my hon. Friend has said. There is a real inconsistency in the Government’s approach. While I think it commendable to raise additional money to target early years provision, particularly in constituencies such as mine, I also think that the Government’s so-called family-friendly approach is deeply questionable. As I said earlier in an intervention, when the Prime Minister was Leader of the Opposition he made it clear that he would be proud to lead the most family-friendly Government in history. Whether the Government are family-friendly is, of course, a matter for debate and conjecture. I can only say that the constituents who regularly come to my advice bureau seem to have been clobbered time and again by the changes that the Government are implementing, many of which—
The First Deputy Chairman
Order. The hon. Gentleman is much too wide of the mark again. If he cares to look at page 21 of the Bill, he will see that clause 35 is only 11 words long and is drafted quite precisely. Will he now please focus on the clause?
Mr Robinson
We are not opposing the 11 words per se. [Interruption.] We are not going to vote on them, to my knowledge. The point is that the expansion of child care for two-year-olds is not funded, and that is what the whole of our modification to the existing legislation was intended to do. Does my hon. Friend agree that that is the problem with this legislation?
Andrew Gwynne
Absolutely. The funding of these measures needs to fit within the wider context, as set out perfectly eloquently by my right hon. Friend the Member for Delyn (Mr Hanson). He was given a certain degree of leeway by the Chairman to put all this in the context of the wider changes that this Government have introduced on family policy.
Clause 35 goes some way towards dealing with the issues raised about tackling child poverty. The clause intends to ensure that extra resource is released for early years provision, and we support that. As I said, we proposed to do that when we were in government and, as my right hon. Friend mentioned, it highlights the real progress that was made on tackling child poverty during the Labour years, as was highlighted in the OECD report. I do not know whether the clause will have any impact on the Government’s ambitions to tackle child poverty, because that remains to be seen, but some of these changes could well start to have an impact. The explanatory notes state:
“Approximately 450,000 parents currently qualify for the relief.”
I am sure that the Treasury stands by that figure, as it produced the explanatory notes. Those 450,000 people will be concerned by these changes and the Government will have to answer the question that they will be asking: what do they get out of the system? If they are to miss out on this relief as a result of the Government’s changes and the extra child care places are targeted, the Government will have to deal with the points that my hon. Friend the Member for Easington was answering on the general principle of universality.
Having said that, it is important that this Government maintain a commitment to early years education. There is a degree of consensus across the House on the benefits of ensuring that children can start their education as young as possible, whether or not that is education through play in the context of early years provision—I think that we probably all agree on that. I note that the Under-Secretary of State for Education, the hon. Member for East Worthing and Shoreham (Tim Loughton), who has responsibility for children, is in his place. During the last general election campaign he visited a Sure Start centre in Horton Green, in my constituency, with the Conservative candidate. He also had his photograph taken outside my house as part of that campaign, and I was pleased that the then Opposition had visited a Sure Start children’s centre in my constituency. That underlined the background motive of the clause, which is to ensure that more resource is put into the early years.
However, as my right hon. Friend the Member for Delyn made clear, people have concerns that this Government are not family-friendly, because what they are giving with one hand, they are taking with another. Many of the measures that they have introduced in this Budget, of which clause 35 is part, are deeply damaging to families.
Mr Hanson
As I mentioned in my speech—it is further confirmed by the Institute of Chartered Accountants in England and Wales—the provision in clause 35 is based on an estimate of whether the employer will have earnings that exceed the higher rate limit on a particular payday. That causes some difficulties with fairness because there will be people who work part time, who change circumstances or who are on maternity leave for part of the year and the implementation of this is as potentially worrying as the policy—
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. The shadow Minister is talking about the schedule, which, as he knows, will be discussed in the Public Bill Committee.
Andrew Gwynne
Having heard your ruling, Mr Evans, I would not wish to stray on to the issue of the schedule. Suffice it to say that HMRC is often very good at making a complicated system far worse, as we have seen in the past with tax credits. That is straying quite wide of clause 35, however.
Let me bring my comments to a close. The Government’s intentions are good—they want to invest more in early years—but I think they are going about it in the wrong way. Their wider family-oriented policies are deeply flawed and clause 35 fails the fairness test. We need the Government seriously to rethink the range of family policies that they have introduced in the Budget, of which clause 35 plays an important part.
Ms Abbott
I am grateful to have the opportunity to say why clause 35 should not stand part of the Bill. As my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) said, the fundamental problem with the clause, which in principle at least the outgoing Labour Government were going to promote, is that in its new guise it fails the fairness test. As we go into election season tomorrow and tomorrow night, the fairness of what the Government are doing will be foremost in our electorate’s mind.
Clause 35 deals with higher rate taxpayer relief for child care. In Hackney, I represent one of the most deprived areas of the country but I do have some higher rate taxpayers. It being Hackney, my higher rate taxpayers are people of discernment and intelligence and they are Labour-voting higher rate taxpayers, but none the less my concern overall is for the most deprived in our community.
When clause 35 is stripped of any pretence of helping low-income families with child care, it is astonishing to see that this Government should so nakedly seek to attack many of their supporters. It is unthinking, chaotic and disorganised and it is not even politically coherent. When we put it in the context, as my right hon. Friend the Member for Delyn (Mr Hanson) sought to do, of the other changes in taxes and benefits that will affect middle England—the cuts in the amount that parents can claim for child care, the freezes to child benefit, the changes to the baby element of child tax credit, the freezing of the basic 30-hour element of working tax credit, the changes to the second income threshold for the family element of child tax credits or the withdrawal rates for tax credits—we see a frontal financial assault on middle England, the very people who the Government will look to for support not just in the local elections in 24 hours’ time but as they move forward.
Why are the Government seeking to attack middle England in such a way? Is it because we have a Cabinet of millionaires? Do they not understand what it is to struggle to make ends meet, even on a relatively middling salary in a relatively middling condition of life? Is it ignorance or uncaringness about how the majority of people live? Who knows: there can be no question but that as the totality of the changes to taxes and benefits as well as the job losses in the public sector come to the attention of middle England, it will be hard for those people to understand or believe that the Government have their interests at heart.
Another significant consideration about clause 35 and the suite of changes to child care, family tax and welfare issues is the effect they will have on women. One reason why issues such as tax relief on child care and particularly child benefit remain so emotive in public discourse is that they go back to the original child benefit which some Members might remember was paid to the mother, who had her own child benefit book. For many mothers, that was the only money of their own that they had—that was certainly the case in my family. Even though those payments are now paid through the tax system and to the family as a whole, these are still emotive issues in ordinary families who remember the old child benefit system and remember that the money went to mothers. The reason why it went to mothers was that it was always understood that child benefit was an effective benefit because mothers spent it on their children.
With a Cabinet of millionaires, the Government do not understand how middle England is struggling. They do not understand how people in middle England fear for the future even if, on paper, they have good salaries and good jobs. They do not understand the emotive content of issues such as child benefit and child tax credit to ordinary women in ordinary families. Ordinary women are looking at the totality of the changes that the Government are making and asking, “Do they really understand my life? Do they really understand what it is to pay bills at the end of the month or to juggle a job and child care and to support the rest of my family?” When one looks at clause 35, presented naked, without the commitment that we had to help lower-paid families with child care, the answer seems to be that, no, they do not understand. The Cabinet of millionaires does not know what it is to be in the middle and to feel as though you are just one wage packet away from a really difficult situation.
In the past decade, middle England has been encouraged to over-leverage itself and been facilitated in doing so, and people are now trying to down-leverage by paying off more of their credit cards and trying to bring down their burden of debt. The Government may say that the £1,000 that people will lose because of changes to this tax relief is only a small amount, but for someone who is juggling their salary to pay off debt, worrying about paying their children’s tuition fees as they go through university and also worrying about how to pay for the care of elderly family members, that money will make the difference between their sums adding up or not adding up at the end of the month.
The Government’s lack of understanding of the reality of life for many ordinary British people, even those who are, on paper, so much better off today, such as some of my constituents in Hackney, shines through in the clause and in the thoughtless and heedless way in which the Government have brought the measures forward. They have not sought to balance them with measures that might help the poorest, although that might have helped middle England to understand why the changes are being made. Currently, given the way in which the measures are being introduced, all that middle England can understand is that the Government do not understand what a struggle it is for middle-income families, and even some families in which the sole wage earner is a higher rate taxpayer, to make ends meet. Of course, similar proposals were originally brought forward by Labour, but in a very different context. Clause 35 has been brought forward in the context of a series of other measures that will also have an impact.
Mr Robinson
Not only were the Labour proposals brought forward in a different context, but the Labour Government were going to use the money to extend child care for two-year-olds in the least well-off families. Is not that the whole point? Is it not strange that the Government, who are so concerned about cost-effectiveness and getting the most out of every penny they spend, do not realise that all the studies show that the earlier an intervention is made the more effective it is? By not doing what the Labour Government wanted to do and extending that child care to two-year-olds, they are denying themselves the very basis on which they could have realised that principle.
Ms Abbott
That is an important intervention. This is a Government who know the price of everything and the value of nothing. Had they been willing to continue both halves of our policy—taking away tax relief for higher-income taxpayers and extending child care to two-year-olds for low-income families—in the long run, they would realise a cash benefit. I know from my own constituency that the earlier we can make an impact on people, the earlier we can give families support with properly funded child care, the sooner we can save the state money on education and a range of social issues. As I said, these are people who know the price of everything and the value of nothing.
Clause 35 is the shell of something that the outgoing Labour Government introduced, but it lacks the counterbalancing measures that we were going to introduce. It reflects a Government who do not understand that families are struggling in the current climate, and who do not understand the significance of those tax and welfare arrangements for women. They will pay a price for that lack of understanding in the local elections tomorrow, as middle England looks on the Conservative-led coalition and says, not that this is the most family-friendly Government ever but that this is the most middle-income-family-hostile Conservative-led Government ever.
Kate Green (Stretford and Urmston) (Lab)
I am pleased to speak in this stand part debate. I, too, want to express concerns about the proposals on child care, particularly the intention to change taxation.
It is not the change to taxation in relation to child care with which I wish to take issue but the broader context of funding and provision for child care, and the lost opportunity that the clause represents. Opposition Members accept that in straitened financial circumstances it is appropriate to look at the taxation system and tax breaks for higher earners and better-off families, and that it may be appropriate to rebalance the tax take and those tax breaks. However, we believe very strongly that there are better ways to redistribute—a word that is perhaps more popular among Opposition Members than Government Members—that money for the benefit of families and children and, in relation to clause 35, to achieve adequate child care provision.
Mr Robinson
Did my hon. Friend attend Prime Minister’s questions, given that she said that “redistribute” was a word heard more often among Opposition Members, and redistribution is perhaps a policy more often pursued by the Opposition? The Prime Minister ruled out redistribution almost unilaterally as a means by which we could help—
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. I listened to the Prime Minister at PMQs, and I did not hear him refer once to clause 35. This is rather specific. I know that the hon. Member for Stretford and Urmston (Kate Green) wants to talk about the broader generalities, but that is not what clause 35 is about; otherwise the debate would be very general indeed.
Kate Green
I am grateful, Mr Evans. I am mindful of the provisions in clause 35, which is specifically about taxation and tax breaks for child care. This is about redistribution, and I will say in passing—just one sentence, I promise—that I am proud of Labour’s record on redistribution. We do not talk about it as loudly and proudly as we should in my view, but a set of redistributive policies since 1997 took 600,000 children out of poverty.
To return to the meat of the clause, I am proud of the way in which we redistributed spending in favour of families and children, particularly the spending that we directed towards building significantly increased child care provision. That is a significant creation of child care provision. It is not perfect, as a number of families are still not provided for, but by any measure it was a step change in provision and a fundamental change in the child care landscape which resulted from Labour policies over the past 13 years.
Ms Abbott
Does my hon. Friend agree that the failure to grasp the opportunity to redistribute income in favour of child care for some of our more poorly paid families is the more surprising, given that the Tory-led coalition allegedly believes in the big society? What more important anchor of the big society is there than high-quality child care?
Kate Green
My hon. Friend is right. She highlights another of the Government’s key strategic objectives, an objective that commands great support and interest across the House, but the Government fail to put in the infrastructure and the investment that would enable them to deliver such an objective. Again, that is a matter of regret.
Any parent will say that child care remains an enormous challenge for families, particularly in terms of helping parents to access the labour market, but much more broadly than that. We know that UK parents already pay the highest child care charges of any parents in the OECD. That is probably why in the OECD report just last week on progress on child poverty across the OECD nations, it was specifically identified—
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. This is turning into a general debate on child poverty and that is not what clause 35 is about. It is about higher earners. I am sure the hon. Lady has read the clause. Will she speak just to clause 35, please?
Kate Green
I beg your pardon. This was not intended to be a general discourse on child poverty. There was a specific reference in the OECD report to the importance of child care, and it is specifically that element of the report that I feel is relevant to the clause, but I entirely accept that we are discussing the implications particularly of the provision to remove the tax break for higher earners. My point is what do we do with that money. That must be a financial consideration too.
Mr Robinson
Does my hon. Friend agree that a big opportunity is missed to extend more widely the provision of child care for two-year-olds? That is directly relevant to clause 35. In my constituency, for example, there are two child centres that already have facilities in place for that extension, which cannot be funded because the Government have decided not to pursue the policy that we had in mind. That could have been the basis for using those facilities, which now lie idle.
Kate Green
Indeed, and that does not make good fiscal sense. It cannot be sensible for public money to be invested but then not exploited for the benefit of the community, those families and, indeed, the economy. In the context of this Finance Bill debate, that surely has to be at the heart of our scrutiny of its clauses.
It is also important that we understand just how much is going on to make it even more challenging for parents to afford child care, and therefore why it was all the more important to use the funding that the tax break before us is saving in order to replace some of the funding that is being lost for the provision of child care.
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. Just to inform the House, I am not going to allow a general debate, either, about what the money could have been spent on. We are talking about the merits, just simply, of clause 35.
Kate Green
I am grateful.
What is important about the legislation behind clause 35 is that it retained all parents, higher-income parents as well as lower-income parents, in a single integrated child care market. It ensured that all parents received some financial support that helped to create, expand and ensure the quality of that market.
When lots of families participate in a child care market, the market is sustained, secure and improved in terms of what it can offer to families, and that is important for raising the aspirations of families and children, a particularly important strand of the Government’s social mobility strategy. If we are to remove higher-income families from the ambit of the child care market, and Opposition Members all understand why the Government might choose to do so, it is very important indeed that we recognise the potentially deleterious effects on the quality of the child care market for those families who remain within it—those families whom we want to remain within it because of the improvements that it can secure for children’s outcomes. Importantly, therefore, when removing that tax advantage we must be very careful to ensure that we compensate for any damaging effects that its removal might have on the general landscape of child care provision, including its quality and its availability for other families who remain within its ambit.
This is very much a debate in the context of a Finance Bill. It is therefore a debate about what works most effectively for the economic strength of the country, and it is very much a debate about how best we come through the recovery and start to promote the return of the growth that we all hope to see. We have just begun to see it return hesitantly and slowly, but we now want to see it improve.
Ms Abbott
My hon. Friend touches on the fact that this is a debate about clause 35 of the Finance Bill, but it is also about how we as a society get through the current financial crisis. Does she agree that one way we will get through the current financial crisis is by something that clause 35 undermines: social cohesion and the principle of universality? To have the clause without the counter-balancing arrangements of child care for two-year-olds and the lower paid is to undermine the process of social cohesion, which is the only way we will get through the current financial crisis.
Kate Green
My hon. Friend leads us into really important territory: the issue of universal provision. If we are going to start to eat into that universal approach, for good reasons, we have to be very mindful of and careful about the consequences, so my hon. Friend is right to highlight the consequences for social cohesion, which is a key fundamental of good economic growth.
We are not going to do well as a national economy if we have to compensate all the time for a fractured society, a society of strains and tensions, in which the public pick up the cost all the time in order to remedy the damage that that causes. My hon. Friend is therefore absolutely right to point out that undermining the universal approach has potentially dangerous consequences for our economic performance down the line—[Interruption.] I sense that the Chairman fears that I am straying slightly—
Kate Green
Not slightly—straying from the ambit of clause 35.
My hon. Friend’s point is correct: fundamentally, the clause removes a universal approach, an approach that keeps everyone in the context of the child care market and the wider social community. That is a really important point.
It is also important to recognise that we are talking about developing children’s long-term economic potential. I do not like to think of our children as future economic actors—I like to think of them enjoying and making the most of their childhood now—but they are the next generation of providers and sustainers of our economy and community care for us in our old age. Removing this financial support from some families and not placing it in the child care market means that some children will be more likely to lose the advantages that good-quality, professional, formal child care can bring.
Andrew Gwynne
My hon. Friend is adding great expertise to the debate with her background in this area of policy. Although clause 35 was a mechanism that was suggested by the previous Labour Government, is not the difference between our approach and that of the Government that we would have invested the money raised back into child care provision?
The First Deputy Chairman
Order. I am not going to allow any further discussion as to what the money could have been spent on. This debate is simply about clause 35. I know that the hon. Lady has expertise in this matter, so I ask her to restrict herself to clause 35, which relates to higher earners’ child care.
Kate Green
I am grateful, Mr Evans. I was mindful of your earlier injunction not to stray into a discussion of what the money be spent on, and I do not intend to do that.
Kate Green
In a moment.
I should like to talk about what this provision will mean in terms of the number of children likely to access good-quality child care provision in future. The knock-on effect of clause 35 will be that not only the children of the families from whom this tax break has now been removed will be affected, but so too will the increased number of children who will fall out of the ambit of affordable, good-quality child care. I say that not only because of the importance of a universal market that tends to raise quality and aspirations but because starting to chip away at the money that is flowing into this market, which will inevitably happen, means that some parents who are currently able to afford to access the formal child care market will decide not to do so.
As money starts to be withdrawn from the market, provision generally will start to be reduced, and in turn other parents will find it more difficult to access it, whether or not they have financial support from other measures such as the child care element of the working tax credit to enable them to do so. Then we will be in a downward spiral. By removing funding at the top but not putting it back elsewhere, we start to shrink the child care market, and the more it shrinks the more it continues to shrink. The problem with this market, as we have seen again and again, is the insufficiency and unpredictability of provision, and those elements will be put under further pressure because there will be less money to sustain the market even at the current levels.
I am conscious that a couple of my hon. Friends wanted to intervene, and I do not want to deprive them of the opportunity to add their comments if they would still like to do so.
Ms Abbott
I have listened with great interest to what my hon. Friend has said about the effect of clause 35 on the child care market, which is very germane to the discussion. We heard from the Chancellor of the Exchequer many months ago that we were all in this together. What message does clause 35 send to people? It says to higher income tax payers that they are not in it with everybody else, and it says the same to the very poorest families with two-year-olds who will not get the improvement in child care that we would have promised them. That is a very divisive, non-communitarian message.
Kate Green
My hon. Friend is right. We are beginning to say that child care is only for some children, not for all children. Yet we know that it is universal, mixed child care settings that produce the best outcomes for the most disadvantaged children. It is key to social mobility and to raising aspiration that children engage with other children in mixed child care and educational settings. The clause will make further inroads into that approach.
Mr Hanson
Does my hon. Friend agree that the context in which the Labour Government decided to restrict the tax relief on child care for higher earners, as under clause 35, did not include the proposal to freeze and then cut child benefit for higher rate taxpayers? The context is therefore entirely different, even though some of the objectives in clause 35 are similar to those of the previous Government.
Kate Green
My right hon. Friend is right. Family budgets are under pressure, including the family budgets of higher-income families. They are under pressure from the serious and regrettable attack on the universal principle. The means-testing of child benefit at the top will put those families under financial pressure. We know, too, that families are facing higher living costs. We have talked in other debates about the rise in living costs, through VAT, fuel prices, food prices and so on. Families that are suffering the loss of a tax break for their child care costs are also seeing other costs going up.
Child care costs themselves will continue to rise. I cannot recall one year since the Daycare Trust began its annual survey of child care costs when they came down. It is highly likely that they will continue on an upward trajectory, and on a dramatic upward trajectory in some parts of the country. That is certainly the case in London, as it has been for a number of years.
Mr Hanson
Is my hon. Friend aware of any consultation that has taken place since the previous Government’s proposals on the restrictions in clause 35? The landscape has changed since the original discussions. Does she think that there should be wider consultation on this matter?
Kate Green
Of course, my right hon. Friend proposed a full review of the overall impact of the Government’s provisions on child care. Naturally, a full review would be informed by the fullest possible input from experts in the field, including child care professionals and providers, families and even children and young people. I certainly am not aware of any such consultation or discussion.
It would have been very useful if the Government had carried out such a consultation, because they would have begun to understand the impact of this provision not just on individual families but on the child care market. The impact of clause 35 on the child care market is just as important an issue because of the wide social and economic consequences that it will have for the Government. I am confident that a proper consultation at this point, taking account of the economic context and the other financial measures brought forward by the Government in the emergency Budget, the spending review and this year’s Budget, would produce useful input from experts and families on the pressures and stresses that would be faced, and on the consequences they would have, not least on the propensity to take, extend or remain in paid work. I think we can all agree that paid work will be key in getting our country out of recession, and into recovery and economic growth.
Mr Robinson
Listening to my hon. Friend, it is clear that she has an in-depth knowledge of this sector and of how child care can most effectively and cost-effectively be used. Reflecting on her experience, does she see any economic rationale or moral principle underlying the idea inherent in clause 35 that if only one parent is working and is in the higher rate tax bracket, they are not eligible for child care, but if two parents are working, they are? That seems to be a perverse incentive. All it will do—this is why some Labour Members had reservations about our Government’s policy, which led to clause 35 —is to put higher rate taxpayers in the same position with child care as they choose to be with comprehensive schools, whereby they do not bring their middle-class, extreme commitment to them. We will force them out of the national provision of child care and create social division as opposed to greater social cohesion.
Kate Green
I am confused by the Government’s direction of travel, specifically on the clause and on its interaction with their other choices about financially supporting parents to make or not to make decisions about child care, such as whether both parents in a couple go to work or whether one parent stays at home to care for the children—the Government’s preferred model that we seem to see in the development of universal credit and the different treatment of lone parents and parents in couple households, as well as in the differential support that the Government want to provide for child care that is targeted at the most vulnerable people. We might say that clause 35 is part of that package.
The Government have welcomed the work of my right hon. Friend the Member for Birkenhead (Mr Field), who suggested that bringing all children within the ambit of Sure Start, for example, is good for communities, families and children, so I am also confused about the philosophical direction of travel that the Government are taking in relation to child care. Indeed, I am forced to conclude that there is no philosophical direction of travel. There is entirely opportunistic fiscal decision making—grab a bit of money here, take a bit of money there, forget those families over there—that might save the Government some money in the short term, but it will be absolutely disastrous in the long term for our economic future and for children’s outcomes.
Grahame M. Morris
I wonder about the specific impact of clause 35 on bankruptcy and personal insolvency, given the loss of tax credits for middle-income families who will be faced with quite considerable personal burdens. That is part of the transfer of debt from the state to the individuals in low-income families, as highlighted by my hon. Friend and by my hon. Friend the Member for Walthamstow (Stella Creasy). The Insolvency Practitioners Association highlights the rapid increase in the number of personal insolvencies and bankruptcies, and perhaps the increasing cost of child care will be a factor—
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
Order. Interventions must, by definition, be short. That was wide of the mark and does not need a response.
Kate Green
We are aware of the difficulty in planning the paying for child care. Parents are often required to pay a lump sum at the beginning of term or for a group of sessions. They are often required to pay for sessions that they subsequently cannot use for various reasons, but there is no money-back guarantee. Parents will often pay for sessions for more than one child, but there is no financial advantage to them; there is regrettably no bulk discount when buying child care.
Removing money from parents that they could have used to meet some of the burden and the lumpiness in the structure of the way that child care charges are often levied will be a real financial burden on family budgets. Some families will take on debt to meet those commitments, because parents will always try to put their children’s best interests first. If they are happy with their current child care setting, they will do all that they can to keep their child in that stable child care place.
Even if parents are worried that they might be unable to afford that place because of the loss of the tax advantage but can see a time coming when they could resume paying for that place, they will none the less not want to give up that child care place. If they think that they can afford the place again in six or 12 months’ time because their economic prospects might improve, they will stagger on through those six or 12 months, desperate to keep their child in that child care place for two reasons. First, they know that child care places are like gold dust and that, if they give one up, they might not get one back again very easily. That is certainly the case in some parts of the country. Secondly, they know that it will be good for the child. If a child is thriving, doing well and prospering in a settled, high-quality child care place, a parent will make all sorts of sacrifices elsewhere to sustain that child in that place.
Andrew Gwynne
My hon. Friend has hit the nail on the head. Is not the underlying impact of clause 35 that the Government know that, although the allowance will be taken away from higher-rate taxpayers, many of those parents will still fund those places and make sacrifices elsewhere in their family budgets?
Kate Green
That is right. There is plenty of evidence that parents, especially women, will always make financial sacrifices for their children’s well-being. We should be concerned by the fact that families will have to stagger under considerable financial pressure for the best of reasons—to keep their children in good-quality child care places. They know that that will help their children’s well-being, because they will be happy and enjoy their child care setting and the friendships and relationships that they make there. Let us not underestimate the importance of social interaction in child development, and good-quality child care can offer that.
Parents will do everything they possibly can in the interests of their child’s well-being and happiness. They will do everything to hold on to a good-quality child care place, even if they find themselves under financial pressure, possibly for a prolonged period. That has a knock-on effect elsewhere in the family budget, which might lead to the problems of debt, financial difficulty and stress that my hon. Friends have mentioned.
Financial stress among parents tends to feed back into children’s well-being, and children become aware of it in the household. They are aware of tensions and anxieties in their parents’ attitudes and behaviour. We have to understand how central good-quality, sustainable and stable child care is to children’s much wider well-being. That is why it is of concern that funding for that child care provision is being eaten away at by the provisions of clause 35.
There are opportunities to compensate for what is happening within the market. I particularly highlight the need to ensure that we maintain a supply of well-qualified child care workers, because pressures elsewhere in the public finances may mean that we see fewer good-quality child care workers coming through from training. Indeed, the loss of education maintenance allowance may have an impact on that. There are real concerns among parents about the nibbling away at the different pillars of the child care market.
When we ask parents what they worry about in balancing the family budget, they repeatedly highlight the high cost of good-quality child care. They do not want to buy poor-quality child care if it is at all possible to avoid it, because they are mindful of the value of getting their child into a high-quality, professionally run child care setting with excellent developmental and social activity, which the children can enjoy and in which they can flourish. Parents know that quality costs, and they do not want to compromise or cut corners when it comes to their children’s well-being, so they want to spend all they can on quality care.
Mr Robinson
Does my hon. Friend agree that one of the encouraging things that took place under the previous Government was that the quality aspect of Sure Start and child care provision was emphasised right from the beginning? Expansion was not allowed to go unchecked—it could only follow the existence of quality. That high quality has, on the whole, been maintained, but of course it is now under threat from the cuts.
Kate Green
We are worried about whether the quality of child care will be maintained as less funding becomes available in the child care market. Achieving quality is partly about ensuring that children from mixed backgrounds—
The Temporary Chair (Dr William McCrea)
Order. The hon. Lady is aware that Mr Evans has drawn her attention to the narrow nature of the clause. I am sure that she would like to get back to the clause as soon as possible.
Kate Green
Of course, Dr McCrea. I was simply going to make the point that quality is partly about diversity and about children from a range of backgrounds and settings being able to meet, play and learn together. One of the consequences of clause 35 is that we will see less of that.
There are a lot of stresses and pressures on the financial support for the child care market, and they will also be felt in families as parents struggle to pay what is typically a very substantial proportion of their regular monthly outgoings. Child care takes a big bite out of the family budget. I am sure all hon. Members are familiar with parents who say, “It’s almost not worth my while going back to work by the time I’ve paid my child care costs,” but those parents want to go back to work, because they recognise that that is in their long-term interest and that of their children. It is also important to our national economy that parents continue in the workplace.
Mr Gauke
Clause 35 makes changes to ensure that all recipients of employer-supported child care who joined schemes on or after 6 April 2011 receive the same amount of income tax relief as basic rate taxpayers. After all the talk about the attack on universality, it is worth pointing out that clause 35 ensures that everyone receives the same amount of income tax relief as basic rate taxpayers.
Reform of this provision was announced in 2009 by the previous Government. One might therefore have expected the Labour party to support the measure. When the right hon. Member for Delyn (Mr Hanson) spoke, it seemed likely that they would do so, but then we heard clearly and unambiguously from the hon. Member for Hackney North and Shoreditch (Ms Abbott) that she would oppose it—of course, she is a Front Bencher and a leading light within the Labour party, and she very nearly became its leader. The hon. Member for Easington (Grahame M. Morris), in a lengthy speech, condemned the measure, although he may in fact have been talking about another measure altogether, and the hon. Member for Denton and Reddish (Andrew Gwynne), in an important speech—his word, not mine—also set out his opposition.
It is striking that the Opposition are now walking away from a proposal of the right hon. and absent Member for Kirkcaldy and Cowdenbeath (Mr Brown) and a policy of the previous Government, just as they walk away from any attempts at economic credibility.
Ms Abbott
For the record, I am the hon. Member for Hackney North and Stoke Newington, not for Shoreditch, and I came this close to being leader of the Labour party. [Laughter.] Yes, this close! Perhaps the alternative vote system would have done it for me—who knows!
Of course we supported the proposal made by the outgoing Labour Government, but as we have said throughout this important and illuminating debate, we did so only in combination with the redistributive measures in relation to child care for two-year-olds.
Mr Hanson
I want to make it clear to the Minister that I have said from the Dispatch Box that this measure had the support of the previous Labour Government, but it had that support on the basis, first, that through the funds saved it would provide child care places to the poorest in our community, and, secondly, that there would be no cuts to, or freezing of, child benefits. That support was also given in the context of the other measures that my hon. Friends have outlined today. There is a difference.
Mr Gauke
That is very clear, and I am grateful for that intervention. Clause 35 will result in a saving to the taxpayer of £100 million per year, because higher and additional rate taxpayers will no longer receive beneficial treatment. That target would not be met if the clause was defeated. The Opposition’s position is therefore very clear: they would spend this money on child care. That is an additional spending commitment that we will add to their considerable total of spending commitments. I understand that all additional spending commitments from the Labour party have to be cleared by the shadow Chancellor and the Leader of the Opposition, so I am sure that they have gone through that process. However, we note that additional spending commitment. We believe that we need to get the deficit down. I am sorry that the Labour party does not accept that, or at least does not have proposals to do it. We note also that even in this time of financial crisis in the public finances, it is making additional spending commitments.
Kate Green
It is not an additional spending commitment; it is a commitment to moving spending from one group of families to elsewhere in the child care market. However, will the Minister tell us what assessment he has made of the long-term economic impact of moving parents out of the workplace because of this cut?
Mr Gauke
Because of the crisis in the public finances that we inherited, we have taken a range of measures to provide credibility and to get our deficit down. That is what the country needs, and I am sorry that the Labour party is not willing or able to engage sensibly in that debate.
Employer-supported child care allows participating employers to offer their employees support with their child care costs. The latest HMRC modelling suggests that about 450,000 parents are members of ESC schemes, and that about 40% of them are higher or additional rate taxpayers. This support is offered through tax relief and the associated national insurance contributions disregard, with employers able to offer their employees up to £55 per week, free of income tax and NICs. Most employers offer this support through child care vouchers delivered either by salary sacrifice or flexible remuneration arrangements. Such arrangements can also benefit employers, because they, too, make NIC savings. At present, basic rate taxpayers can receive up to £900 of support a year through ESC, whereas higher rate taxpayers can receive up to £1,200 of support a year.
Mr Robinson
What is the economic rationale or moral principle underlying the distinction the Government are still making, I think, between families with a single higher rate taxpayer and families in which the mother and father are both higher rate taxpayers? It does not seem to make any sense, moral or economic.
Mr Gauke
In part, the hon. Gentleman is trying to draw me into the debate on child benefit, but I have no intention of straying off the subject, Dr McCrea. I am sure that you would not want me to. I should also point out that the previous Government’s original proposal was to abolish employer-supported child care altogether. I would be interested to know what the moral principles were at that point.
The clause introduces schedule 8, which makes changes to ensure that from April this year, all recipients of employer-supported child care will receive the same amount of income tax relief as basic rate taxpayers. Although we are very much in favour of employers helping their employees share the cost of child care, it is neither progressive nor well targeted for wealthier households to derive more benefit than those on lower incomes, and I am rather surprised that Opposition Members should advocate that. All parents who join ESC schemes on or after 6 April 2011 will now receive the same amount of income tax relief as basic rate taxpayers. That is achieved by limiting the amount that higher rate taxpayers and additional rate taxpayers can receive each week to £28 and £22 respectively, so that all parents receive the same amount of income tax relief support each week—about £11. To avoid the measure having a retroactive effect, all existing members who joined a scheme before April 2011 will be able to retain their current rates of tax relief. I assure the Committee that the change will not affect the tax and NICs relief available for workplace nurseries.
We understand how valuable the support is to working parents. However, it is simply not fair that wealthier parents should be able to receive up to £300 more support for their child care costs than basic rate taxpayers. The changes that we are making to employer-supported child care are needed to make the benefit fairer, better targeted and more progressive, and I commend the clause to the Committee.
Mr Hanson
I am sure that we will be drawing to a conclusion shortly, but I want first to place on record my thanks to my hon. Friends the Members for Easington (Grahame M. Morris), for Hackney North and Stoke Newington (Ms Abbott), for Denton and Reddish (Andrew Gwynne), for Coventry North West (Mr Robinson), for Stretford and Urmston (Kate Green) and for Leyton and Wanstead (John Cryer) for their contributions. They have highlighted the concerns that we have expressed by asking for the clause to be debated today. Those concerns were summarised in the points that we made at the beginning. The Minister has not really answered those points to our satisfaction, although I will not press the clause to a vote today, because as I have said to him, whatever—[Interruption.] I am grateful to the Under-Secretary of State for Education for his contribution. It is good to see him here. Perhaps he would like to answer the questions that the Minister has not answered about why this Conservative Government have refused to invest those resources in child care provision for the poorest in our community, as the previous Labour Government planned to do.
The key question in this debate is about that very issue. When the Labour Government originally produced clause 35-type proposals, we were investing those resources in helping poorer families with child care, at a time when wider considerations about child tax credits, child benefits and the pressures of family life were not on the agenda, as my hon. Friends said. Clause 35 ties down an anomaly, which the official Opposition think is the right thing to do in the current circumstances—not as a spending commitment, but as a supportive measure for the Minister—just as we believed it was right in previous circumstances. The previous Labour Government’s financial commitments and budgeting planned for that investment to be used to support wider child care. This Government have reneged on that promise.
We will look in detail at schedule 8, which clause—[Interruption.] [Hon. Members: “Clause 35.”] I am sorry, Dr McCrea, it has been a long 24 hours. Clause 35 brings schedule 8 into effect. When we reach schedule 8, we will make a decision on whether to support the proposals put forward by the Minister today. With those few comments, I thank my hon. Friends for raising important issues about the impact of the measure on already hard-pressed families. I will allow the Minister the opportunity today to have his clause without a Division, but we will return to schedule 8 in due course.
Question put and agreed to.
Clause 35 accordingly ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill (Clauses 4, 7, 10, 19, 35 and 72), as amended, reported, and ordered to lie on the Table.
Business without Debate
Delegated Legislation
Mr Deputy Speaker (Mr Nigel Evans)
With the leave of the House, we shall take motions 4 and 5 together.
Motion made, and Question put forthwith (Standing Order No. 118(6)),
Pensions
That the draft Pensions Appeal Tribunals Act 1943 (Armed Forces and Reserve Forces Compensation Scheme) (Rights of Appeal) Regulations 2011, which were laid before this House on 22 March, be approved.
That the draft Pensions Appeal Tribunals Act 1943 (Time Limit for Appeals) (Amendment) Regulations 2011, which were laid before this House on 22 March, be approved.—(Jeremy Wright.)
Question put and agreed to.
BUSINESS OF THE HOUSE (9 MAY)
Ordered,
That, at the sitting on Monday 9 May, paragraph (2) of Standing Order No. 31 (Questions on amendments) shall apply to the Motion in the name of Edward Miliband as if the day were an Opposition Day; proceedings on the Motion may continue, though opposed, for three hours and shall then lapse if not previously disposed of; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Jeremy Wright.)
ADJOURNMENT (WHITSUN, SUMMER AND CONFERENCE 2011)
Motion made, and Question put forthwith (Standing Order No. 25),
That this House, at its rising on Tuesday 24 May 2011, do adjourn till Tuesday 7 June 2011; at its rising on Tuesday 19 July 2011, do adjourn till Monday 5 September 2011; and at its rising on Thursday 15 September 2011 do adjourn till Monday 10 October 2011.—(Jeremy Wright.)
Question agreed to.
Rights of Adoptive Parents
(12 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The House divided: - Ayes: 249 / Noes: 139 - Question accordingly agreed to.
Mark Pawsey (Rugby) (Con)
I am pleased to have been able to secure this debate to consider the rights of adoptive parents. In respect of the adoption of children, we hear a great deal about the children involved, about what is best for them, and about how to provide them with stable and happy upbringing. Given the need to protect such children, who are often very vulnerable, it is right and proper that they should remain the main focus of attention. We also hear a great deal about the rights of the birth parents, particularly when they wish to have access to those children, but we hear rather less about the parents who adopt such children. They are often people who have given up a substantial proportion of their lives to provide a stable home and family background to children who are in desperate need of love and support. We must not forget that group of people and the unique set of challenges that they face.
I hope to raise a number of the issues that affect adoptive parents. These include: the confidentiality of information relating to adoption; the way in which a birth parent, often years after an adoption has taken place, is able to challenge terms of contact; and the lack of support available to adoptive parents in difficult circumstances. As with many issues raised in the House, I learned about this subject when I was visited by a constituent at one of my surgeries, a lady whose family is engaged in a complex legal case involving her adopted daughter.
The Minister and I have already corresponded about this case, and I have similarly contacted the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly) in respect of matters relating to legal aid that I shall talk about in a moment. Following the family’s wishes, they will remain anonymous in the debate. I will do my best to explain the elements of this rather complicated case, which raises a number of issues.
The first issue relates to the security of data in matters of adoption. In the case to which I am referring, the birth mother was just 13 years old when she gave birth to her child. Both mother and child—the mother came from London—were put into care in London with the original ambition of finding a foster placement for them both. However, professionals in the field at the time quite reasonably decided that, given the mother’s age, the best long-term interests for both lay in putting the child up for adoption. The birth mother, despite her very young age, was reluctant to go ahead with the adoption and wished to keep the child. This wish to retain and gain access to the child has led to many of the difficulties facing my constituent and her family.
In 2001, my constituent and her family successfully adopted the child, who was just 23 months old at the time; she is now 12. They carried on with family life, and adopted a further child. During these years—pretty happy years from what I understand—the family were keen to do what was right for the child. The contact agreement, which was to facilitate indirect contact with the birth mother through letters a couple of times a year, was honoured; and it continued quite successfully through to 2008. The birth mother’s reluctance to part with the child led to concerns that she might attempt an abduction, so the indirect contact did not include the ability to send photographs to the birth mother.
Given that distance between the birth mother and the parent, one can imagine the adoptive parents’ concern when, seven years after the adoption, when the child was nine, the birth mother arrived unannounced at the family’s home. The question is how the birth mother was able to locate the family. The mother is and was resident in London, and this was an out-of-area adoption, with the child resident some 80 miles away. Clearly, the birth mother should not have been able to find out the name and address of the adopting family without their consent. This was the first of things to go wrong for my constituent and her family.
This matter also raises questions about the very objective of adoption legislation. As the Minister has confirmed in his recent response to me, adoption legislation is there to provide a framework for protecting confidential information, such as the names and addresses of the individuals involved. That requires local authorities to obtain the consent of the individuals if disclosure is requested. The individuals might be concerned that disclosure could lead to them being identified. In this case, the adopting family had specifically not given such consent. I hope that the Minister will be able to give some guidance in his comments about the security of information in such cases.
Seeing the birth mother on her doorstep, my constituent attempted to make the best of what was then a difficult situation and sought to avoid a distressing scene in front of the child. She invited the birth mother into her home. She did so on the basis that the birth mother had seen her daughter and that it might affect her adversely if further contact was denied. The adopting family reluctantly felt that they had no choice but to permit ongoing and regular contact. That happened for a couple of years, although it proved extremely difficult when, over time, the birth mother became increasingly aggressive and confrontational about access.
After a period, the mother’s behaviour became such that the family felt obliged to contact the police, leading to the birth mother receiving a police caution for harassment. With that in mind, the family quite reasonably requested that direct contact should be stopped, as it was starting to have serious consequences on the child who had become afraid of being abducted. The matter became so serious that at one stage the police provided both child and adoptive mother with alarms in case of an attack. One can only imagine the family’s horror when, a few months after contact was stopped, the family received a court summons through the post, advising them that the birth mother was attempting to force direct contact once again. Even more than that, the birth mother had secured legal aid in order to do so.
That brings us to the issue of the ability of a birth parent to challenge an adoption order. Unfortunately, under the existing rules my constituent and her family—the adopting family—are not eligible for legal aid, but they are also not sufficiently wealthy to afford expensive legal representation. They have been given an estimate of a cost of some £6,000 to fight the case in court, and they have no access to such a sum. I believe that the case raises serious issues about the rights of adoptive parents compared with those of birth parents, and about access to legal representation in such circumstances.
According to the Adoption and Children Act 2002, the effect of an adoption order is to give parental responsibility to the adopters. It refers to the extinguishing of parental responsibility from those who had it previously. Once an adoption order has been made, birth parents cease to have any legal rights over the child, and therefore cannot simply claim him or her back. As I explained earlier, a particular cause for anxiety is the fact that the direct contact came about not as a result of the wishes of the adoptive family, but because the birth mother had somehow managed to locate them.
Where does that leave the adopting family? They are left feeling that the birth mother has more rights than they have. It surely cannot be right for a birth parent who has breached the agreements of a contact order to be allowed to take the adoptive parents to court in order to make contact. I think most people would feel that in such circumstances the rules seem to be loaded in favour of the birth parents, with a lack of regard for the feelings and treatment of the adoptive family.
The availability of legal aid to the birth mother has become a matter of real concern to my constituent and her family. I am aware that the Government are currently undertaking a review of legal aid, and have presented proposals that will result in 500,000 fewer instances of legal help and 45,000 fewer instances of legal representation being funded by legal aid annually. I am also aware that family law is the single most expensive area of legal aid. In 2009-10, the most recent year for which figures are available, it cost the taxpayer £597 million. It is therefore understandable that the Government wish to make changes.
The Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon, has confirmed to me that legal aid is granted on the strength of information provided by applicants and their solicitors. I realise that it is calculated on a means-tested basis and takes no account of previous behaviour, but while I also understand the importance of safeguarding access to legal advice, I feel that in a case such as this the existence of legal aid complicates matters unnecessarily. I therefore welcome the Government’s measures to restrict it, especially in cases such as this in which it pitches one person unfairly against another, and especially when options such as mediation may be more effective. It seems fundamentally unfair that in the case that I have raised, legal aid is available to the birth mother but not to the adoptive parents. I realise that this issue is not within the Minister’s portfolio, but perhaps he will clarify the effect that changes to legal aid provisions will have on cases involving adoption.
Finally, I want to draw attention to the apparent lack of support measures for adoptive parents. My constituent and her family have been subjected to the behaviour of an aggressive birth mother, and must now deal with a complex legal case without the funds that would enable them to instruct a lawyer. They feel that throughout this time little or no support has been available to them. My constituent feels that she has been left with no choice but to trawl the internet to search actively for advice and guidance from adoption charities. That situation cannot be right, so will the Minister take the opportunity to advise us on what system of support and guidance exists for parents of adoptive children?
In highlighting this case and the cause of adoptive parents, I wish to make it clear that I do not expect the Minister to comment on this particular case and I simply seek his views on the broader issue of policy. I join my constituent in making the point that the legal importance of adoption orders often seems worthless if birth parents are able to take adopting families to court simply because they decide that they want to have more or full access. I fully appreciate the difficulties facing birth parents, particularly those who may not have wished to give up their child for adoption in the first place, but they should not be allowed to force legal proceedings and wreak havoc on new families who will have worked so hard to provide stability and security for the children they are adopting. If moves are made to encourage more direct contact, more guidance ought to be available for adoptive parents and more support measures must be established for them. I recognise that the law involved in this case is complex and that it is further complicated by the Government’s review of legal aid. They must do all they can to educate both adoption agencies and adoptive families to understand what their position is. However, I accept that the most important factor throughout all these cases is the requirement to facilitate happy and successful adoptions for years to come.
The case I have described has been most distressing to my constituent and her family. For 10 years they have brought up an adopted child as their own in a happy and stable environment, but it is now one where both they and the child are extremely uncertain about their future together. I recognise that much of this unfortunate situation cannot be changed and that the clock cannot be turned back, but I wish my constituent and her family every success in their legal battle, and the best and happiest future for them and their adopted daughter.
The Parliamentary Under-Secretary of State for Education (Tim Loughton)
I congratulate my hon. Friend the Member for Rugby (Mark Pawsey) on securing this evening’s important debate. It seems that we have been debating for days in this Chamber and he was unlucky enough to draw the short straw of having his debate at the tail end, after a night when some of us have been left short of sleep.
Leaving aside the specific case behind today’s debate and the correspondence between my hon. Friend, myself, the Department for Education and the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly), to which reference has been made, I know that, like many of us across the House, my hon. Friend the Member for Rugby is a big admirer of the many thousands of wonderful parents in this country who have chosen to adopt a child. His closing remarks absolutely affirmed the nobility of such an activity, and I very much wish to encourage, and have been seeking to encourage, it in my time as the Minister with responsibility for adoption and children in care.
My hon. Friend raised several crucial issues and I wish to address as many of them as possible because, as he knows, adoption is an issue on which the Government have been working extraordinarily hard over the past year. As he said, I cannot refer to the specific case of his constituent because it is before the courts. It is clearly a difficult case and it has been going on for some time. As he says, the child has been placed with the adoptive parents for some 10 years and that child is regarded as their own. He was also right to mention the oft-referred-to rights of children that are at the heart of the Children Act 1989. The welfare of the child must be the paramount consideration when dealing with any matters to do with children in the care system. He also mentioned that we hear, quite rightly, about the rights of birth parents. Only in extreme circumstances should a child be taken away from their birth parents and the process should end in adoption only when it is not safe for that child to be returned to the birth parents or parent.
Most importantly, perhaps, we have made it clear from day one that we have a lot of work to do to get an adoption system that is truly fit for purpose. I have been coming at it from the angle of wanting to ensure that we have more adoptions as well as speedier and smarter adoptions, but I am also conscious that we must ensure that we get the right adoptions. The right children should be adopted and everything should be done to restore children to their birth families wherever possible.
My hon. Friend raised quite an interesting scenario that falls in between those two points, in which parents had come forward as adopters, were confirmed in that role and took on a child as their own, but their position was challenged at a later date after which legal action was brought to bear on them. Such a situation is quite unusual, but he has certainly made me aware of such cases and in formulating our approach to adoption, I want to take them on board. If we are to promote adoption as providing a suitable home for a number of children who were not lucky enough to be able to be brought up with their birth parents, it is crucial that we ensure that there are safeguards so that the right children are placed for adoption and the people who adopt them have their interests protected, too. After all, they have come forward with the noblest of intentions. We need an adoption system that is truly fit for purpose in all those respects.
No one could fail to be concerned by the fall in the number of adoptions of looked-after children over the past few years, particularly the decline in the timeliness of placements. When it has been decided that a child’s future best lies in an adoptive placement, we owe it to that child to get on with placing them as swiftly as we can so that they have as good a chance as possible to secure a second chance at the stable family upbringing that was denied to him or her in the first place.
At this stage, I would particularly like to commend the campaign that has recently been promoted by The Times and, in particular, by the journalist Rosie Bennett, who has highlighted a lot of the shortcomings in the adoption system and has worked with us in the Department for Education to try to highlight the problems and to promote some of the solutions. We are working with a number of organisations and people who are interested in the field of adoption.
As I have said before, both in the House and outside it, we want to see the decline in adoption stopped in its tracks and more children adopted quicker and more smartly when that is in their best interests. I also want local authorities to consider carefully the support that adopted families need—my hon. Friend mentioned that—so that everything possible is done to increase the number of successful adoptions. It is not just a question of getting more adoptions to happen; adoptions must be sustainable and they must not break down. It is all the more important that we get a good match and that the right support is provided at an early stage and for as long as it takes so that everything possible is done to increase the number of lasting and successful adoptions.
Placing a child for adoption with prospective adopters is only the start. Adoptions need to succeed and that is why I set up a ministerial advisory group on adoption. At our next meeting we will consider adoption breakdowns and how better adoption support can help to prevent them. As part of a wider programme of adoption reform, we have recently published revised national minimum standards, revised statutory guidance and an adoption data pack to inform and stimulate debate both nationally and locally about the volume and timeliness of adoption.
In addition, as many hon. Members will know, we have asked David Norgrove to review the family justice system. The review panel’s interim report, which came out just last month, provides a valuable initial assessment of the challenges that the family justice system faces. We encourage everyone who has experience of the system to contribute their views over the coming months so that the panel has as much information as possible on which to base its final recommendations, which are due out later in the year. I have also had very productive discussions with Sir Nicholas Wall, the president of the family division, and I will be holding further discussions with judges and members of the judiciary who are involved in adoption.
To come back to the specific circumstances outlined by my hon. Friend, the Adoption and Children Act 2002 makes it quite clear that in reaching a decision about the adoption of a child, the paramount consideration of the court or adoption agency must be the child’s welfare. In reaching a decision, the court or agency must take into account a number of issues, including the likelihood of any relationship with birth family relatives continuing, as well as the benefits to the child, and it must have regard to the child’s ascertainable wishes and feelings. I know from some of my constituency cases that ongoing contact with birth parents is a difficult and sensitive issue; great sensitivity and, often, the judgment of Solomon, is required.
As my hon. Friend knows, during the period between a placement order and an adoption order, the adoption agency must satisfy itself as to the child’s welfare and consider any additional requests for support by the adoptive parents. Once an adoption order has been made, adoptive parents are in exactly the same position as birth parents, but adoption support services are available. An adoption order is, of course, final and irrevocable, other than in exceptional circumstances. The courts have consistently emphasised the special, permanent nature of adoption orders because they affect people’s status and alter the most fundamental of human relationships. However, the High Court has the power to set aside an adoption order on appeal in cases of mistake or where there has been a failure of natural justice due to procedural irregularities or fraud, but that is extremely rare and is to be avoided if at all possible as it is greatly unsettling for the child.
Children, adoptive parents and birth family members all have the right to an assessment of their needs for adoption support services on request and it is for the local authority to decide what services to provide. Sensitive, proactive post-adoption support can sometimes make all the difference to the success of an adoption. Having looked at the record of some independent adoption agencies in particular, I know that it is invariably those agencies that offer good pre-adoption placement support and good-quality post-adoption support for as long as it takes to make sure that the adoptive placement is sustainable and able to last that tend to have the lowest disruption rates and the best records of giving children a decent second chance. The cost of not providing such support, in terms of children returning to care, can be very great in financial terms and, more importantly, in the human and social effects for the children involved.
There is a legal framework under the 2002 Act that protects the identity of the adopted child and the adoptive family. My hon. Friend rightly raised the important issue of security of information for adopters and I would be interested to hear how the case he has discussed evolves and to learn where security breaches might have happened, because it is essential that the anonymity of new arrangements is paramount. If there are flaws in the system that enable people to exploit it in a way that is not in the best interests of the child, we need to be able to do something about that. We need to be able to identify such problems and I would appreciate further discussions with him as the case he mentioned is unravelled.
No information should be disclosed that would reveal the child’s identity or whereabouts or the identity or whereabouts of the adoptive parents. Although there are safeguards in place, in today’s electronic world a determined person with little information about an individual might be able to find them, but that is no excuse for our not having in place systems that are as watertight as possible.
As regards contact after adoption, my hon. Friend will know that before a child is placed for adoption, the adoption agency must assess the needs of the child in relation to future contact arrangements with members of their birth family. It must ascertain the wishes of the child, birth parents and any other person whom the agency considers relevant about future contact. As I said, that is a sensitive and difficult area. Contact plans are reviewed at the various stages of the adoption process, and are considered by the court when making a placement order and an adoption order. It is not something that is static—it is constantly assessed and reassessed.
It is important that adoptive parents are made aware that, as part of the support services available to them, they can receive help in relation to any contact arrangements and, like the birth family and of course the child in question, the adoptive family can ask the adoption agency that placed the child to review the contact arrangements if they are not working or if the child’s needs for contact have changed. That is not uncommon as the child grows up and begins to ask questions about his or her origins. I must emphasise that once an adoption order is made, a birth parent has no automatic right to contact, and can only make an application to the court for an order for contact with the court’s permission. The court may make a contact order requiring the person with whom the child lives or is to live to allow the child to visit or stay with the person named in the order, or for that person and the child otherwise to have contact with each other. It bears repeating that a court will do so only if, having weighed the evidence, it is clear that such contact would be in the child’s best interests. The paramountcy consideration always comes into play. The revised adoption guidance that I mentioned earlier covers those matters.
It is worth noting that if adoptive parents are unhappy with the way in which they have been treated by the local authority they have the right to make a formal complaint under the local authority complaints procedure. If they are unhappy with the council’s response, they may request a panel hearing, which will have independent representation. If they remain dissatisfied, and think that a local authority has treated them unfairly as a result of bad or inefficient management—“maladministration”—they can refer their complaint to the local government ombudsman.
My hon. Friend mentioned legal aid, and I am aware of his correspondence with the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon. I will not deal with the detail of that issue, but he is right to refer to the review. It is worth noting, however, that the legal aid review is intended to achieve a level playing field for various aspects of family justice, as that is clearly not the case at the moment. Legal aid changes might affect adoption in some cases, but I am happy to take another look at that if, in the light of my hon. Friend’s case, he thinks that there is not a level playing field, and I am happy to take part in discussions with my colleagues at the Ministry of Justice.
The Ministry of Justice recently consulted on changes to the legal aid system, with the aim of focusing resources where they are most needed, and it is currently considering a response to the consultation, so its final judgments are a little way off. Decisions about legal aid funding in civil cases are a matter for the Legal Services Commission, which is responsible for administering the legal aid scheme. Generally, legal aid in civil cases is available to anyone who qualifies, provided that the applicant is using the courts of England and Wales and that the case is within the scope of the scheme. Civil legal aid is available for cases involving the welfare of children. Each application, which may include the child if they are a party to proceedings, is considered on an individual basis and is subject to statutory tests of the applicant’s means and the merits of the case.
Let me finish by repeating our absolutely, intently serious commitment to improving adoption services in this country, in particular to those people who come forward to provide loving and supportive homes to children who desperately need the second chance that they were denied with their own parents. With the wider reforms that we are introducing, we want to get people talking and thinking about adoption again, and we want all that to translate into action, with better-quality, sustainable placements right across the country. If there are examples from this case and others that hon. Members wish to raise that show in some way that the ability of adoptive parents, who have often gone through a long, drawn-out and intrusive process, to continue to offer a stable, loving family placement to an adopted child is impaired, we will need to look at that, and I am happy to review the situation if that is the case. I am grateful to my hon. Friend for raising the issue, and I hope that his constituent’s case, which is behind today’s debate, reaches a satisfactory conclusion. Equally, if there are important lessons to be learned that we can apply to the whole area of adoption, I should very much like to learn them.
Question put and agreed to.
Petition
Bus Services (Hartlepool)
Westminster Hall
(12 years, 11 months ago)
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Family Policy
(12 years, 11 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Jessica Lee (Erewash) (Con)
It is a pleasure to serve under your chairmanship this morning, Mr Meale, and I am delighted to have secured this important and wide-reaching debate on family policy.
I will begin by reflecting on the royal wedding last Friday. There are, of course, many joyful moments on which to reflect, but I want to focus on the prayer that their Royal Highnesses the Duke and Duchess of Cambridge prepared in advance of their special day. It is telling that before going on to give thanks for their marriage and expressing their wish to serve others, in the first sentence of the prayer they thanked God for their respective families.
The value of the first relationships that we develop, and the care afforded to us by our first carers and family unit, plays a key role in the formation of the years ahead. For the avoidance of doubt, I am not suggesting that one needs to marry into royalty or luxury to value the importance of family and stability—far from it. That prayer reflects the wishes and aspirations of thousands of newlyweds up and down the country, and it was a valuable statement to make.
Since the coalition Government were formed nearly a year ago, there has been a focus on commissioning reports to examine how to tackle child poverty and how to best assist children and families in the important early years development. Most notable are the reports by the right hon. Member for Birkenhead (Mr Field), which looks at the foundation years, and that of the hon. Member for Nottingham North (Mr Allen) on early intervention. The report by Dame Clare Tickell presents her results on the evidence regarding the foundation years. Professor Eileen Munro has examined child protection procedures, and David Norgrove has published an interim report on the Family Justice Review. Most of those reports are at the interim stage, but they have already provided a detailed and highly informative overview for how to approach the complex issue of assisting families, particularly in the early years.
It is important to mention the valuable role played by the voluntary sector in supporting and caring for families. That role varies from national charities and organisations, such as Action for Children or Barnardo’s, to small local organisations that provide niche help and assistance. That work is underpinned by the vision and aspirations of, among others, my right hon. Friend the Secretary of State for Work and Pensions. He has sought to get to grips with the reasons behind the cycles of poverty in the UK, and he has looked at how best to improve the lives of the most disadvantaged people.
Such an aspiration cannot be achieved by central Government alone, and I believe that we need to empower the most disadvantaged people to make sustained changes and to aspire for their children. The complexities of family breakdown, drug and alcohol misuse, personal debt and educational failure have created long-standing problems for many families. The benefit reforms proposed and implemented by the coalition Government will make work pay, so that providing and taking responsibility for children, and the creation of a work ethic, will hopefully move some families away from those generations of people who did not feel equipped to work. Such people should be equipped with the skills and self- esteem that they require to move into work. I hope that this debate will pull together some of the strands that run through those different reports, and give hon. Members the opportunity to contribute their own views and experiences.
The contribution of the report into foundation years by the right hon. Member for Birkenhead is an excellent place to start such a debate. The report confirms the importance of the early years, and presents evidence to show how critical those years can be in determining the likely outcomes for children as they move into adulthood. Essentially, it proposes to place equal emphasis on the first five years—the foundation years—of a child’s life, as on the primary and secondary sections of a child’s education and development. It is a plan for long-term investment—not only financial investment but investment in services and skills—so as to achieve long-term results and improvements.
The proposal to set life chance indicators to support work undertaken during the foundation years is a bold step, and such indicators would help the Government to understand how investment in the early years is bearing fruit. The right hon. Gentleman seeks ring-fencing for some services, but the report makes it clear that that is not simply a request for funds. Trying to help the most disadvantaged children is not a new approach taken by the coalition Government, because previous Governments have also aspired to tackle that complex issue. The previous Labour Government set a target of abolishing child poverty by 2020, but in my view their approach ignored the long-term complexities behind cycles of poverty. The policy of child tax credits was never going to be a sufficient step towards resolving the social and economic problems for the next generation.
We need a structure where help for the foundation years can be accessed by those most in need. The proposals in the report for Sure Start centres to be refocused make great sense. In my constituency, Erewash, we are blessed with excellent Sure Start centres, and the staff and volunteers work with families and provide a great service to everyone who comes through the doors. Commissioning children’s centres and making them places where child benefit forms can be collected or parenting classes accessed are just some of the proposals aimed at making such centres attractive. In other countries, parenting classes are often a given, and it is part of the culture to undertake them when a new baby arrives. I want to see a shift in culture in the UK to make parenting classes fun and become the norm.
My friends who have had children often describe the sudden sense of responsibility that they felt when they first held their newborn child. As godparent to three young children, I have only to take care of the enjoyable stuff such as presents and day trips and so on, which is great fun. We know, however, that babies do not arrive with an instruction manual, and the shock of suddenly providing for another human being can be overwhelming. Indeed, that shock can be overwhelming for well-supported, financially secure and well-educated parents, so it is easy to see how a parent who, for example, is struggling with their finances, has an unreliable partner, lacks a good family support network or has no knowledge of where to access help could suddenly fall apart. We must reach out and help those parents. We need more health visitors and easily accessible support for parents. If we can provide the right support from the outset, the prospects for children in the future will be much improved.
The report by the hon. Member for Nottingham North sits neatly with the work on foundation years. He has been an advocate of the theory and practice of early intervention work for many years, and we are all grateful for his first report on that subject. The forward to the report reiterates a point that I have made from the outset: the call for early intervention is about not only asking for money but the impact of social disruption, the effect of fractured lives and the sadness of broken families.
The introduction to the hon. Gentleman’s report contains the startling fact that a child’s development score at 22 months is an accurate indicator of educational outcomes at the age of 26. Other indicators in the report show how depression in adult women can often be traced back to their childhood experiences, and how adult criminal activity in men can be a reflection of their formative years. In my view, such facts only increase the need to look at long-term strategies for how we support families with young children, and how we structure support for those vital early years. The use of early intervention work to nip in the bud any struggles or problems faced by families has to be a goal for the future.
The work of Dame Clare Tickell includes data collated from various providers, schools and voluntary organisations. She has considered how best to implement measures to support the foundation years. It is one thing to identify the early years as an area that we need to assist. What we really need to do is to ensure that the work that is undertaken is correct. A question was asked about the most important skills that young children—pre- school children—should learn. Of the 1,184 responses, 81% listed helping to build good personal, social and emotional skills as the highest priority, with developing communication, speaking and listening skills coming a close second. Those are notable responses, as they are just the skills that could be monitored through early intervention work and assessed as part of a foundation years programme.
Another conclusion in the report was about the enthusiasm among professionals to speak, with permission of course, to other professionals involved with families, such as health visitors and support workers, which would very much assist work with families. It, too, is a significant theme and threads through to the steps that we take, but need to improve, in working with the most vulnerable children in society and those at risk of harm.
I come now to the important topic of child protection and support for the most vulnerable families. There is a need to tackle delays in the system and to ensure that the important work that social workers undertake is valued and respected. That is long overdue. My mother was a children’s nurse for about 40 years—probably longer than that—and her role would be considered a front-line role. That would also be the case for nursing staff in accident and emergency departments in particular. Similarly, the role of a child protection social worker, stepping into the unknown in people’s homes, is front-line work and needs to be recognised as such. I am a family lawyer, and most if not all of the social workers with whom I have worked over the years have been subject to verbal abuse and physical assaults. They have to walk into homes where there are alcoholic parents or drug misuse with not a clue about what will happen on the other side of the door. That is not a role to be taken lightly. The reason for dwelling on those experiences is that we need to structure children’s services correctly, so that they can best support the vulnerable children for whose care and well-being they are responsible, which is no small responsibility. Professor Munro set out in the conclusions to her report the need to reduce bureaucracy for social work teams and how we can better structure working practices in children’s services.
I want to champion the role of the voluntary sector in supporting local children’s services. In my constituency of Erewash in Derbyshire, we have an excellent Home-Start organisation, with which I have been honoured and delighted to be closely involved. It provides valuable support for mums, who are often young, who need advice and guidance—it is a supporter. It usually involves an older figure to whom they can turn for advice without fear of judgment or criticism. Such volunteers do not step on the toes of children’s services when they perform their statutory duties. I would object to any suggestion that by supporting the voluntary sector, we are trying to take statutory roles away from government. We are not trying to do that; we are trying to embrace the voluntary sector, support it and give it the voice that it needs. Such volunteers add to the much-needed fabric of a support network for inexperienced parents. I support Home-Start in Erewash and throughout the country, and I support the many other similar organisations.
In Derbyshire, we also have an excellent scheme, which has been rolled out through the county council, for a volunteering passport. After training, volunteers can be awarded the passport as a sign of their commitment and experience, and they can then go forward to assist families. Again, it is often young mothers who need a friendly face and some guidance on parenting skills. The scheme is a success, and it reduces bureaucracy. It could easily be incorporated in new and different projects across the county—indeed, I would like to see it rolled out across the country.
For too long, patterns of abuse and neglect have been passed down the generations in families involved with social services. To link back to the earlier reports, it is often the lack of early intervention work that leaves a vulnerable family without support in the home, which can escalate to emergency situations and then to the statutory involvement of social services. That is not how social workers wish to work with families and, most importantly, it is very damaging for children. Sadly, by that stage, the level of harm to children can be so great that their attachment to their parents and siblings is irreparably damaged and beyond repair, despite attempts to weave the family back together.
An additional factor in this rather depressing scenario is the structure of the family justice system. The family justice system is served by hard-working people who have often worked in it for many years and who have a passion for, and a commitment to, supporting vulnerable families. However, there are long delays in cases being heard and problems with the availability of experts and court time. David Norgrove has been commissioned to tackle those problems head-on, and he has provided a detailed interim report. The proposal to create a free-standing family justice system is well argued and evidenced in the report. It is important, because the current delays impact on planning for a child. If a baby of, say, six months is taken into foster care, it can be a further nine months or so before decisions are made about their future. The baby will therefore have lived more than half their life with an uncertain future. That matters, because it is at that stage that babies and young children are forming important attachments to their carers. Any disruption to their placement and delay in forming those attachments impact on the long-term prospects for young children. That takes us back to the concerns raised in the report by the right hon. Member for Birkenhead on the foundation years. To help the most vulnerable and damaged children in our society, we simply must speed up the decision making and court processes for them.
Finally, I come to the outcomes for looked-after children, which have also, sadly, remained poor. That has been the situation for many years. It was my privilege the other week to meet some young people from Cardiff who had travelled to Westminster. They were all children in foster care. One teenager told me that she had been through nine foster care placements in the past two years and that she did not think that that was fair. I did not hesitate in agreeing with her and saying that if I had been through so many placement changes in such a short time, I would be angry and upset with the system. Fortunately, that young person has now hit it off with an excellent support worker and has a focus and ambitions for the future. She knows where she wants to go. But what about the thousands of other young people who are—rightly—angry and upset? I applaud the Government’s steps to improve the adoption numbers in the UK and the wish to cut out political correctness and delays in approving matches for adoption. We must do that, because a whole generation of children on care orders depend on it.
My reason for initiating the debate is so that the Minister can, I hope, assist us all by responding to it and bringing together the threads of all these different and important reports. For any reforming Government who have recently come to power, there are many issues to tackle. We have all seen what the new Government have had to deal with in relation to the financial situation, reforming welfare benefits, foreign policy and so on, but to me, there is nothing more important than how we deal with young people and families. That takes me back to my opening comments. The Duke and Duchess of Cambridge recognised the point in their thoughtful prayer, which they set out before they were married. For any person who wants to get on in life, the love and support of a family is the most important foundation. Our duty as parliamentarians is to help as many young people as possible to have a stable and supportive start in life.
Andrew Selous (South West Bedfordshire) (Con)
It is a pleasure to speak under your chairmanship, Mr Meale. I congratulate most warmly my hon. Friend the Member for Erewash (Jessica Lee) on securing the debate and on her excellent introduction to this very important subject. I am pleased that so many hon. Members have come along this morning to take part.
We know that the country faces a very severe financial crisis and we are reminded almost daily of the huge challenges that we face internationally in the middle east and elsewhere. However, the crisis facing family life is the most serious of all the issues facing this country. I do not say that lightly, because the data on family breakdown are extremely alarming. The most recent analysis from the Office for National Statistics in the millennium cohort study shows that 48% of all children born today will not grow up with both parents. It is alarming that nearly one in two children born today will experience some form of family breakdown, because although single parents do heroic and fantastic work on many occasions, and I give them all the credit they deserve for performing a tough role, the data show that outcomes for children overall across the country—obviously, there are exceptions—are much less good than when two parents stay together.
There has been a view across academics, policy makers and journalists that Governments cannot really go near this issue and that although they can build schools, run a health service, maintain decent roads and try to promote economic growth, they cannot or should not get involved in the issue of family life, even though that is the most important to many of our constituents, as my hon. Friend said. I want to challenge that contention because if we go about this in the right way, we can make a significant contribution to preventing family breakdown and strengthening family life.
Mr Gregory Campbell (East Londonderry) (DUP)
The hon. Gentleman is elaborating on the severe problems that family breakdowns cause society. Does he share my concern that the financial cost of such breakdowns is in excess of £40 billion, according to statistics from last year? Whatever investment the Government put in is worth while if it can address that fundamental problem, which will otherwise be with society for generations to come.
Andrew Selous
I am most grateful to the hon. Gentleman for raising that point, and he is absolutely right. The recent study by the Relationships Foundation put the cost of family breakdown at £42 billion. In a recent speech, the Secretary of State for Work and Pensions put it at between £20 billion and £40 billion per annum. Whatever the figure, we can all agree that it is massive, and if we can reduce it, there will be many better uses to which the money could be put in our constituencies; indeed, we could also reduce taxes. I am grateful to the hon. Gentleman for putting that point so firmly on the record.
As I said, success or failure in marriage and relationships is not merely a matter of luck. Nor do people in a troubled marriage or relationship have just two options—to stay together and be miserable or to split up. That is absolutely and emphatically not the case, and I want to spend the rest of my time explaining why. I also want to praise the Government for some of the things they have done recently and to commend the Minister for some of the excellent initiatives she has introduced. I will perhaps also outline some of the areas where we can go a little faster and a little further to match the scale of the problem.
I praise the recent funding from the Department for Education for a range of relationship support initiatives, from Relate to Care for the Family and its Let’s Stick Together project, which I am particularly keen on. I commend the Minister for that excellent start, which is an early down-payment on the coalition’s promise to take this issue seriously. I also commend the Secretary of State for Work and Pensions, who has committed his Department to recognising marriage in its data and analysis. Under the previous Government, the issue was just wiped off the piece, and we could not look at the data on it. I am not talking about tax, which the Minister and I will disagree on as far as marriage is concerned, but about having an honest analysis of the data. Such an analysis is a good thing, and we should just see what the data say. That is a significant issue.
I want to comment a little on the funding that the Minister has given Care for the Family to roll out the Let’s Stick Together course. People ask what we can do about family breakdown, and this course is really practical. It is run by health visitors up and down the country for new parents, whatever type of relationship they are in. It takes an hour or so. Often, it is run by new parents who have recently done the course. It gives some of the basics about how to have a healthy, strong and happy relationship or marriage that will last. The early feedback is very positive and suggests that the course is well received. Surely, it is better to give people the tools, support and skills to make a success of their relationships than to come round and sort things out afterwards, when everything has gone wrong. In Bristol, where the course has been trialled, it now reaches nearly 30% of new mothers, and there has been very positive feedback. I commend Harry Benson of the Bristol community family trust, in particular, for the pioneering work that the trust has done. I also commend Bristol health visitors for the enthusiasm with which they have picked up the course. If that can be done in Bristol, why can it not be done in every other great city, and in every market town, village and rural area, in our country, because this really matters?
I hope that we will see a little more support from registrars for marriage preparation. Two thirds of all weddings take place in registry offices, but registrars do not offer good enough signposting towards the marriage preparation that is available from local and community groups. That is an obvious thing we could do, it would not cost any money and it would lead to better outcomes. What do we have to fear? What is there to prevent us from doing that? I hope that we can go further and faster on that.
At the moment, all our local authorities are preparing local child poverty strategies. I welcome that exciting development, which is taking place alongside the Government’s excellent work nationally to reduce child poverty. We can see different and pioneering initiatives at the local level, and I hope that strengthening families will be a key part of what local authorities look at. From the early evidence I have seen of some child poverty strategies, however, I am not convinced that that is yet the case. I know that we are all localists now, and that we are not really in the business of telling our local authorities what to do, but an emphasis on strengthening families would be enormously helpful and useful, given that a child who grows up with one parent rather than two is twice as likely to grow up in poverty as one whose parents stay together. I therefore hope that strengthening families will be an aspect of local child poverty strategies and that authorities will work with the community and voluntary sector. There is a community family trust in my constituency, which could do this work very well with my local authority, and that would be helpful.
My hon. Friend talked about the importance of parenting courses, and I completely agree with her. The additional point I would make is that internationally peer-reviewed academic work, particularly from Professors Cowan and Cowan at the university of Berkeley in California, shows that parenting work is even more successful if the relationship between the two parents can be enhanced at the same time. Where parenting work is being done and there are two parents, let us also strengthen the couple’s relationship. We could usefully do that, and it would not cost us any more money where parenting work was already being done. That would lead to better results.
We can also do more in our schools. I recognise that our school curriculum is completely packed, and whenever anyone tells me that they want to add something to it, I ask them what they want to take out. However we do have assemblies in our schools, and teachers and head teachers are often looking for material to present. There is very good material around. Care for the Family has its evaluation material. There is also an excellent charity called Explore, which is based in Hampshire. I have met both, and they have really excellent material, which is welcomed by students in schools. It speaks to children in a language they understand and tries to give them some of the skills and support they need to make a success of adult relationships when they leave school. We could do more work on that.
My final suggestion to the Minister before I sit down, as many colleagues want to speak, is not to ignore what we can do in prisons. That might seem an odd area to mention; however, strengthening the relationships of prisoners is important. It is not a fuzzy thing to do, akin to giving prisoners televisions in their cells. The academic evidence tells us that prisoners who have a strong relationship to return to after they leave prison are 35% less likely to reoffend when they come out. If their relationship breaks down while they are in prison, they are 40% more likely to reoffend. Why does that matter? Because you and I, Mr Meale, are less likely to have our back door kicked in on a Saturday night, or our car radio stolen, if we can support the relationships of prisoners. We might not immediately think of that when we discuss family policy, but it is important.
Once again, I congratulate my hon. Friend. I look forward to hearing the Minister’s response; I commend her for the excellent start her Department has made. However, I would say it is a massive challenge. If we are to make Britain the country we all want to see, we need to go a little further and faster in this area.
Jim Shannon (Strangford) (DUP)
I, too, congratulate the hon. Member for Erewash (Jessica Lee) on raising the subject. All of us believe that family values are important; I certainly do as an elected representative. They are the core of society, and it is important that they are in place. That is the thrust of what was said by the hon. Lady and the hon. Member for South West Bedfordshire (Andrew Selous). I missed the beginning of the hon. Lady’s contribution, but I understand that she mentioned Kate and William’s marriage as an important example. That was also important for me: it was not just the pageant, the grandness of the occasion and that 2 billion people around the world watched; it was that it was about two young people in love. That is the core of the marriage relationship. They are two ordinary people, if one takes away all the grandness of last Friday.
I have a couple of points to make about marriage. In correspondence that we all received as elected representatives, the Secretary of State for Work and Pensions and the Prime Minister clearly stated that family values are important to them. They intended to take action to help, which I would welcome. I will return to that later, but I am conscious that others want to speak, so I will not deliberate for too long.
I have one of those long-suffering wives who from the beginning realised that the guy was going to be away most of the time, and that she would have to look after the family, which is what happened. The role of the lady is important in any marriage. Ultimately, they run the household and look after the children. That bond between mother and child is stronger—perhaps more than it should be—than the one between the father and child. Statistics indicate that 90% of those in a married relationship are happy, and a similar percentage of those cohabiting are also happy. That is an indication that lots of people are committed to the married or cohabiting relationship.
It is not just about the relationship between the mother and father; it is also about the families and the time they spend with their children. The only mealtime I spend with my children is on a Sunday. There is an indication that families should eat together on a more regular basis. A family eating together three times a week provides that strong bond for a marital relationship.
My comments focus on the marriage relationship and the need to build upon it, and the need for Government to play a role. Words are all very well, but actions are needed to back them up, and I want to see that happen. If my wife is watching, she would probably say that that man is talking about love and romance, and wondering whether that is the man she married. I hope it is, but maybe we do not always show our emotions in the way that we should.
Will the Minister indicate the progress of the Conservative promise of a tax break for married couples? I do not think that we should base marriage on finance alone. People do not get married because of a house, car or good job; I hope people always marry for love. The Conservatives and the coalition have clearly stated that they wish to bring in a tax break for married couples, so I want to hear from the Minister where that features in the process. We heard the suggestion discussed a lot in June and July last year but not much since. In Hungary, it has been proposed that families should be allowed an extra vote on behalf of their children. I am not saying that we should do that here, but I am interested to see what we are doing to assist families with a tax break.
My final point is about breaking up. The hon. Member for South West Bedfordshire hit on the fact that not every marital relationship works out. We all have friends who tried hard but the relationship fell down. That happens. We must have a process in place to ensure that those who experience marital break-up can survive and get by. I hope the Minster will state whether there should be a mediation process. I believe that there should be. Should both parties be committed to that mediation process? Yes, they should. That has perhaps been overlooked. It is all too easy, when a relationship falls down, to walk away and leave it. It is almost a part of the disposable society: the car breaks down, get a new car; household appliances break down, get a new one; the marriage breaks down, move on.
Jessica Lee
Does the hon. Gentleman agree that although families sometimes break down, it is at that point that the parents need to put the interests of their children first and foremost, and set aside their own differences, for the well-being and the future of those children? To emphasise that, the Government have taken various steps in welfare benefit reforms, as well as through the Department for Education.
Jim Shannon
A lot of things are being done. I am not saying that things are not being done; they are. I suggest that there are some things we can do but have not been. There is an indication that, with the removal of legal aid, people contemplating divorce or separation might decide to do a quickie and get it over. That means that they would not go through the process. As the hon. Lady has said, children who are clearly part of the relationship are pushed aside and forgotten. Will the Minister indicate where mediation should be in the process?
Mrs Helen Grant (Maidstone and The Weald) (Con)
Does the hon. Gentleman agree that, in the unhappy circumstance of a breakdown, the emphasis should be on relationship repair, keeping people out of courts and moving on in a much more civilised, less expensive way?
Jim Shannon
I agree wholeheartedly with the hon. Lady. Sometimes, when relationships have fallen down, anger comes to the fore. I feel mediation provides a method for focus, strategy and drive in the direction that she has mentioned. That would be good. It is much better in every case to have mediation rather than battles in court—or out of court, and battles everywhere else. I would like to see mediation from that point of view as well.
Mr Justice Coleridge of the Family Division has said that
“almost all of society’s…ills can be traced directly to the collapse of the family life”.
The judge deals with such problems each and every day, and he has knowledge and experience of family breakdowns. He also referred to a
“never ending carnival of human misery.”
We have to move on from that.
We need more commitment from people outside the marriage to make the marital relationship work. We need a commitment to young families, to children and to doing the things that are important. We all have to work at it. We cannot say, “It’s great to do that.” We have to work at it and try to make it happen. We need tax breaks from the coalition Government and an indication of how they might work. We also need mediation. If we have that, there is a chance of people holding on to their relationships, which will ensure that families and children are helped.
Again, I congratulate the hon. Member for Erewash on introducing the debate. It is a good and timely debate, especially as the whole nation is thinking about that special marriage last Friday.
Mrs Helen Grant (Maidstone and The Weald) (Con)
I congratulate my hon. Friend the Member for Erewash (Jessica Lee) on securing this important debate.
The family is a fundamental and vital tool in holding society together. It can provide security, stability and commitment. In the family we learn how to give, how to share, we learn how to be kind and how to care, and we learn how to build relationships. However, the family has been and continues to be badly neglected as an institution, notwithstanding the fact that it is a key element in dealing with issues such as gun crime, knife crime, teenage pregnancy, truancy and antisocial behaviour. The Government need to do everything they can to support and protect the family.
Mr David Burrowes (Enfield, Southgate) (Con)
My hon. Friend puts the matter in its proper context, referring to issues such as antisocial behaviour and gun crime. Would she commend the work of Barry and Margaret Mizen following the tragic murder of their son Jimmy? They helped to set up Families United because they wanted to channel their grief into the positive energy of trying to support such families, that being the best way of dealing with those very deep issues.
Mrs Grant
I am happy to commend that special initiative, and the bravery of the individuals affected.
Since the general election, some good and positive family policies have been announced; they include underpinning Sure Start, more health visitors, flexible working and parental leave. However, much more is needed.
I was a legal aid family lawyer for 23 years—I am giving away my age—prior to becoming a Member of Parliament. I declare an interest, in that during those years I saw a relentless rise in family breakdowns. As the hon. Member for Strangford (Jim Shannon) said, Mr Justice Coleridge described family breakdown as a
“never ending carnival of human misery—a ceaseless river of human distress”.
The judge went on to say:
“We are experiencing a period of family meltdown whose effects will be as catastrophic as the meltdown of the ice caps”.
From practice, I know that the situation is indeed dire. Our family courts are overstretched and under-resourced, and there are many delays. The situation will be made even worse with the demise of legal aid and the increasing number of litigants in person. This comes at a time when ever more people need family lawyers, and families are marching through the family courts at an ever-increasing rate and with no sign of decline. Sir David Norgrove, in his interim family justice review, acknowledges the capability and dedication of those who work in the family justice system, but he also says that the family justice system is no system at all. He identifies fundamental failures and faults, and he concludes that our children are badly let down.
Successive Governments seem to have been oblivious to the realities of family life for many—and oblivious, too, to the profiles and personalities, psychological and otherwise, of those who rely on the family justice system and use the family courts to resolve their problems. If those Governments had appreciated the situation they would not have hesitated in comprehensively reforming the family justice system, including the substantive law of divorce, and questions of money and cohabitation; they would also have adequately funded the system, including giving legal aid for family cases.
My firm looked after about 14,000 clients in south London, Surrey and west Kent. The family profile that I shall describe to the House is, sadly, not unusual.
Mother presents with some learning difficulties, a history of violence and a history of drug abuse, but says that she is now clean. She has three children, all girls, with three different fathers. Mother seeks a non-molestation injunction order against X, the youngest daughter’s father, mum having been hit over the head with a pickaxe. There are numerous other incidents of violence. The two older children, too, need injunctions to protect them from X. There are also allegations by the eldest girl that X had touched her in an inappropriate manner. All the girls are having problems at school. The middle girl has been diagnosed with ADHD—attention deficit hyperactivity disorder. The school has threatened suspension because of disruptive behaviour. Mother is on income support and feeling suicidal. All the children are on the child protection register. When I took instructions from this lady, her physical appearance and her demeanour when she came into the room led me to think that she was about 50; only when I asked for her date of birth did I realise that she was only 25 years old. That is a true story.
Tragically, the children growing up in these families are watching and learning from bad behaviour and absent boundaries, and they will breed future generations of victims and perpetrators. It is an absolute vicious circle.
Jessica Lee
I am grateful to my hon. Friend for giving way at this important point in her speech. Does she agree that after taking instruction from such clients, a further question is often posed? We might be dealing with a young mother whose baby may be taken into foster care, and the question is, “Who is there for you? Who can help you and support you?” Sadly, the answer is often no one. The client will have lost the family support network. They may have managed to extricate themselves from an abusive relationship, but they will be on their own and that is such a difficulty.
Mrs Grant
My hon. Friend makes an excellent point, and I could not agree with her more. I know that in her practice she has also come across the very situation I described. The answer to her question is that often, there is nobody, which neatly brings me on to my next point in this sad scenario.
It is worth noting that under the Government’s proposals for legal aid, this highly vulnerable woman, with nobody there to help her, would not be entitled to help with her residency and contact issues, with her debt problems or with the educational difficulties that she had with her children.
Mr Andrew Turner (Isle of Wight) (Con)
Will my hon. Friend help me by saying how many of the 14,000 clients whom she referred to fall below the lady whose story she has spelt out for us? I ask that not because there is a disagreement that there is a problem, but because we must say how much money would be needed to put it right.
Mrs Grant
It is very difficult to give an exact figure, but probably 80% of clients in my family law legal aid practice in south London have a profile very similar to that of the family I described.
When Mr Justice Coleridge made his remarks about family meltdown, he was criticised for sounding off by some in the media and others, whom I think should have known better. That learned judge, of some 20 years’ experience at the sharp end, was absolutely right. There have been at least seven reviews of the family justice system since 1989, and yet precious little has changed or improved. We cannot allow this to continue. We ignore the family at our peril. I urge the Government not to avoid the issue but to be brave and robust in dealing with it.
Mr David Burrowes (Enfield, Southgate) (Con)
It is a pleasure to take part in a debate on such an important subject, and I congratulate my hon. Friend the Member for Erewash (Jessica Lee) on securing it. It should be noted that it is only six hours since we were in the main Chamber, and you will forgive me, Mr Meale, for saying that today we have shown our capacity to be full-time MPs without a change in the electoral system.
As all speakers have noted, family policy is not shaped around living in an ivory tower. As my hon. Friend the Member for Maidstone and The Weald (Mrs Grant) said, we are dealing with a policy that affects intractable problems in society—the poverty-stricken estates and the areas in all our constituencies where we see the need to support and strengthen the family, which at its core would provide a stronger community, as the hon. Member for Strangford (Jim Shannon) mentioned, and by its essence would support the weakest and most vulnerable.
When we debate family policy, we are talking not about the washing powder advert, sanitised version of the family, but about families affected by the deepest problems. I draw attention to the 250,000 to 350,000 children living in households where a parent is misusing drugs; barely four in 10 fathers in such families are in any contact with those children. At least 2.6 million children live in households where a parent is a hazardous drinker, and 750,000 live in a household with an alcohol- dependent parent. Those are deep problems, which are affected by our family policy.
Moving away from those statistics, one can drive down into the individual stories. A number of years ago, when taking part in the Centre for Social Justice’s study of addiction issues, I came across Ruth, who told me that, once, when politicians and others talked about family values she did not have a clue what they were talking about. She was a victim of drug and alcohol abuse, and went through the experiences of children’s homes and further abuse, which previous speakers have described. In words that have long stayed with me, she said that at the age of eight,
“I longed for someone to cuddle me and tell me they loved me, as I just didn’t belong. I cried and I cried but no one heard. My tender heart was breaking.”
Thankfully, Ruth managed to get through the system, going through numerous social workers, homes and allocated workers. The great value of voluntary sector organisations has been mentioned today: Ruth eventually found herself and landed on the help and care of one of those organisations, Victory Outreach UK, run by a Christian couple acting on their own family values of reaching out to others and to the most vulnerable, not just keeping to themselves. They supported Ruth and enabled her to understand what family values were about. She ended up saying that she did understand families and that they were about belonging. She wanted me to ensure that we take account of that as a matter of policy.
Mark was one of my regular clients as a criminal solicitor. No doubt he gave my firm good trade, but he blighted his life and the lives of those around him by being one of the most prolific criminals in Enfield. He was the subject of intergenerational drugs misuse, knowing only what he saw: he saw his mother taking drugs and he continued to take drugs, and from what he saw around him, he knew that the way to get more drugs was to commit more crime. His life was full of potential—he had the potential to train for the Olympics next year in weight-lifting, rather than watch the hatch lifting on cell doors in Pentonville and other prisons around London, which is what he spent his time doing. What made a difference to him and made the lights flicker on, just for a while, was the involvement of family.
I remember a time when Mark had gone through a spate of criminality and ended up in the cells of Enfield magistrates court. The bravura of being a high-profile criminal left him, and he did not demand a cigarette as he usually would, but said, tears running down his face, “Where’s my father? I want to speak to my father.” That was the big issue for him and what he had missed through his life. The lights flickered on again when Mark himself became a father—he suddenly realised that life was not just about himself and feeding his addiction habits and the criminality around him, but about his responsibility to others and his profound responsibility to the most vulnerable person in his vicinity: his child. That was when he realised that he had a responsibility beyond himself to his child and to the community. Sadly, that opportunity was not grasped the first time round and was taken from him, but it was grasped for the second child. There were people and community organisations around him who helped him to engage with the child. Mark is now, thankfully, turning the corner, being a great dad to his child and trying to break that intergenerational cycle of crime and drug misuse.
Anna Soubry (Broxtowe) (Con)
In many ways, what my hon. Friend describes, drawn from his experience as a solicitor, is very similar what our hon. Friend the Member for Maidstone and The Weald (Mrs Grant) said. She too was speaking from the heart as well as from her experience, as was our hon. Friend the Member for Erewash (Jessica Lee). Does he agree that it is imperative that the Government understand and appreciate that lawyers, be they solicitors or barristers, play an invaluable role in bringing families together? We are much more than just lawyers: we bring together other services through our work when we represent people.
Mr Burrowes
I am grateful to my hon. Friend for that intervention. I do not want the debate to be too much of a mutual admiration society. The reality is that lawyers are not top of the bill in terms of our promoting them. What they are about is providing a service, especially to the most vulnerable, and we need to ensure that they are part of the picture—it is quite right that they should be part of it—of supporting and strengthening families.
My point is that we do not need a family policy for just one Government Department. I say that with respect to the Minister, and it is excellent to see her here today. She recognises, as we all do, that family policy affects all Departments. When we look at individual cases, we see that support and welfare structures have tended to treat people as one-dimensional clients rather than as the complex and unique individuals they are, who are part of complex and unique families. We need to look at the whole person and beyond them at their whole family, however dysfunctional it might be. We need to look at the mum, the dad—if he is around—the brothers and sisters and the grandparents. The Government need to assess at all times and in all policies the impact on whole families.
As my hon. Friend the Member for Erewash mentioned, family policy is not simply about having a centrally directed policy. Let us take the example of early years child care. High-quality nursery care provision is important, but it is not just about the Government directing that provision; it is about nurturing children in their early years—indeed, in their early days and weeks. That is why we can all welcome the increase in the number of health visitors and the empowerment that that provides. If the parents are dealing with drugs or alcohol misuse, early intervention could indeed mean intervening as soon as pregnancy has been confirmed and creating the opportunity to prevent more children from entering the intergenerational cycle of abuse.
Supporting early years provision also means recognising the value of parents in their nurturing role. More often than not, it is the mother who is involved in full-time care of children in their early years. I want to see a time when that practice is not the preserve of the few who can afford it but a choice that is available to many.
Family policy is not just about money—and more money. Yes, resources help to provide the opportunity for children to have a good start in life, but the most important element in any family is good relationships, which most likely involve having both a mother and father around and, the evidence shows us, the parents being married. That is where Government can play a role. We are having the debate about the proper incentives and support that can help that family structure.
Finally, family policy is not only about mothers. As I said when I talked about Mark, it is about fathers too. It is worth saying that the time that my hon. Friend the Member for Erewash spoke for this morning—15 to 20 minutes—is roughly the time in the average working day that that a father 30 years ago would spend with his child. That that has improved is positive: indeed, a father today typically spends about the entire length of this debate—an hour and a half—and perhaps even a bit more time with their child in the average working day.
We must all recognise that the absence of a father has a profound effect, whether that be seen in problems for the children at school or in their future mental health, employment, and involvement with crime or misuse of drugs. That is why we welcome the approach right across Government of encouraging payment by results, giving incentives and measuring outcomes in all those policy areas that have at their heart the health and well-being of children. In particular, that approach will help to support and incentivise relationships that can become so frayed, but that are so fundamental to improving the outcomes for children.
We have spoken about strong family attachment, the supervision of children, establishing boundaries, affection and emotional warmth, all of which are crucial not only to protect children but to enhance their health and well-being. I believe that this Government will be judged by results and should be judged most profoundly on whether we are protecting and doing our best for the most vulnerable and fighting poverty. The way that we will do all that is by strengthening the family.
Fiona Bruce (Congleton) (Con)
It is a pleasure to serve under your chairmanship, Mr Meale. I congratulate my hon. Friend the Member for Erewash (Jessica Lee) on securing this important debate. I thank her and my other hon. Friends in Westminster Hall today for all the excellent contributions that they have made.
This debate on family policy comes at a particularly auspicious time following the royal wedding, which I mention because I believe the most important relationship is marriage. I believe that Government should support marriage, particularly for the sake of children—many of which I wish upon the happy royal couple, in the fullness of time.
Like many of my hon. Friends in Westminster Hall today, I have practised in the field of law. I did so for well over 20 years—actually, nearly 30 years, but I was reluctant to say that—as the head of a high street law firm. As a result, I do not have a completely doe-eyed view of marriage. In my time practising law, I witnessed the incalculable cost of relationship breakdown, not least the financial price and the personal price paid by children. However, even after taking that cost into account, I still believe that it can be argued persuasively that marriage is good for the stability of family life and that stable families are good for society.
That being the case, if a key question in policy making is about fairness, why do many parents who choose to marry feel penalised for doing so by our tax system? Fiscal policy that was intended to help single mothers, which is a wholly worthy cause, has created the odd situation whereby some couples who want to live together actually live in separate homes because the tax system rewards them for doing so. On a national scale, that is terribly wasteful, not only because shared housing is more efficient but because, as we have already heard today, cohesive family life brings immeasurable benefits to both individuals and society as a whole.
In a research paper produced by the Christian charity CARE in January 2011, “The taxation of families 2009/10”, Phillip Blond, the director of ResPublica, wrote:
“The family is the most fundamental, basic and rooted unit of society…The centre of the family, the thing that holds it together…is the relationship between parents… There is an increased unwillingness for parents to commit to each other which has given rise to a significant increase in cohabitation which in turn has major implications, not only for adults but also for children… A child born to cohabiting parents has a nearly one in two chance of living in a single parent family by the time they reach their fifth birthday, whilst a child born to a married parent has only a one in twelve chance of finding themselves in this situation. The consequences are far reaching. Children from lone parent families—who today constitute nearly one quarter of all children—are 75 per cent more likely to fail at school, 70 per cent more likely to become drug addicts and 50 per cent more likely to become alcohol dependant. Girls from fatherless homes are an over-represented demographic in teen pregnancy statistics, while boys from fatherless families are typically over-represented in criminal gangs.”
Even if one’s ideals do not include marriage as a public act of commitment, there is evidence that marriage as an institution is mutually beneficial, both to the partners in the relationship and to society as a whole. It is also the most important factor in predicting a child’s well-being. Some see supporting marriage through the tax system as regressive, but I see it as progressive.
In the UK, we support single parents financially—directly or indirectly—because it is right to recognise that bringing up children is a hard job at the best of times, particularly if one is more or less alone in doing so. Many single parents are courageous, self-sacrificial and deserve commendation. Sadly, it is also true that many children who grow up in a single-parent household live in poverty. That is not right, but it is also true that almost half of children who live under the poverty line come from two-parent households. It seems wrong that we should incentivise single parents through the tax system to remain single, simply because of the financial benefits that that status affords.
Other research shows that it is harder for couples with children to lift their children out of poverty than it is for single parents. Again, I quote from the CARE paper:
“Although designed to deal with child poverty, tax credits are now locking children into poverty in working households, especially couple households. The latest poverty statistics are those for 2008/2009 which show that of the 2.8 million children living in households with incomes below the official poverty line (60 per cent of median equivalised income), 1.5 million were in households with one or both parents in paid work, 1.3 million (a number that is increasing) were in couple households… The problem arises because tax credits do not take account of the way income is measured for calculating the number of children in poverty. The DWP say that a lone parent with two children would have required net income of £293 per week to be on the poverty line, whereas a couple with two children would have needed £374 per week. However, a couple family’s entitlement to tax credits is the same as that for a comparable lone parent family. Couple families therefore have to earn more, but because of the way the means testing formula works they receive fewer credits… However, there is a further problem. As pre-tax income increases, tax credits reduce… In 2008/09, a lone parent would have needed to earn only £95 per week to be out of poverty. By contrast, the couple family would have needed to earn £283 per week.”
For a number of years, CARE has been pointing out that many couples would be better off financially living apart than living together. Seventy-eight per cent. of the families in CARE’s sample were shown to be better off living apart, even after the additional housing costs were taken into account. Families find themselves better off living apart principally because of the way in which tax credits are structured and means-tested.
Mr Alan Meale (in the Chair)
Order. May I ask the hon. Lady to proceed very quickly? I need to call the Front Bench speakers.
Fiona Bruce
Certainly, Mr. Meale. I will conclude my remarks.
Marriage is good for society. It is a public institution as well as a private relationship, and as such society as a whole has a stake in supporting the family unit. If society benefits from the family, as it undoubtedly does, families should benefit from society and its fiscal policies, especially for the sake of our children and their children.
Mr Alan Meale (in the Chair)
I thank the hon. Lady for speeding up. It is unfortunate that she was called at the very end, but we have to give the Front Benchers time to speak.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
It is a pleasure to serve under your chairmanship this morning, Mr Meale, after just about five hours’ sleep.
I congratulate the hon. Member for Erewash (Jessica Lee) on stepping in to lead this debate, which I understand was secured by the hon. Member for Loughborough (Nicky Morgan). I also thank her for providing me with notice of the particular aspects of family policy that she addressed. Yesterday, I learned that in a former life she was a lawyer specialising in family law, and that background certainly came to the fore today in her very well-informed speech. She praised Sure Start centres in her constituency and made the suggestion, which has a lot of merit, that parenting classes should become the norm. She also said that early intervention is not only about the money but about how it is used. I note that my hon. Friend the Member for Nottingham North (Mr Allen) highlighted evidence on specific early interventions that work in his excellent report—I am sure that the Government are paying particular heed to that report. The hon. Lady also spoke about the speed of the safeguarding process, which we all agree takes far too long, especially for babies and toddlers.
I pay tribute to all the other hon. Members who have spoken this morning. There have been many excellent contributions, covering the whole gamut of family policy issues. We have heard some harrowing cases that have been used not to sensationalise but to highlight the worst that can happen when families break down, or when they were never whole or healthy in the first place. There is a cycle of damaged people having children, who are then in the system in one way or another, throughout their lives, from day one. I think that we are all united in an ambition to end the cycles of deprivation that we know exist right across the country, despite decades of initiatives and interventions.
Although the debate has been very well-attended, there are other hon. Members who would have wanted to be here but are no doubt tied up with campaigning around the country. Many of them will be speaking to families at this very moment, about the issues we are discussing here.
It goes without saying that families are the bedrock of our society, and one of the most important duties of Government is to support the parents of today in providing a stable and loving environment in which the parents of tomorrow can flourish. No two families are the same, however, and the needs of parents and children vary widely, making developing policy in this area as difficult as it is important.
On safeguarding, we are clearly waiting for the outcome of the Munro review, which was commissioned following the tragic case of Peter Connelly, and I would not want to presuppose what any of its final recommendations might be. Needless to say, I welcome Professor Munro’s initial findings, and I look forward to the final recommendations and to the Government response. It is welcome that the Government are seeking the advice of the professionals who deal with at-risk children and families every day to find out how we can improve the systems to help those children.
I have not been working on this particular area, but I think that I am safe in saying that we accept the need for a balance between the guidance and processes that adults and professionals working with children are given, and their ability to act on the basis of their judgment and to respond swiftly in co-operation with other agencies when a risk to a child’s safety or well-being is identified. There are concerns about whether the cuts to local authority budgets will mean a reduced social worker work force in some areas; many local authorities certainly expect an increased case load, and foresee problems due to cuts to police, mental health and primary care trust budgets. I hope, therefore, that we can implement any sensible changes quickly and seamlessly, to ensure that no children slip through the gaps in the meantime. As the hon. Member for Erewash described in highlighting a particularly concerning case, the unintended consequences of our care system often do not help or improve the life or outcomes of an already damaged child, and we must do all that we can to ensure that the system does not cause harm.
An area in which I have done a lot of work is that of early years and early intervention. This is another very important topic, and although the Government have been making some positive noises, it is actions that count, and their actions, so far, have left a lot to be desired. Again, they have sought wise counsel, and we have seen some very thoughtful, and at times convergent, reports from my right hon. Friend the Member for Birkenhead (Mr Field), my hon. Friend the Member for Nottingham North and Dame Clare Tickell.
One of the programmes that my hon. Friend the Member for Nottingham North praises in his report is that of family nurse partnerships, in which young, first-time parents, possibly from families with multiple problems, are given help and support from the point of identification, past birth and into the early years of their child’s life. The intervention does not focus on just the health of the mother and the child—important though that is—but crucially on the aspirations that parents have both for their child and for themselves, and on how to achieve those aspirations. I have heard great things about the results, and look forward to shadowing a family nurse in my constituency later this month to see the work for myself as part of the Royal College of Nursing’s campaign for everyone to shadow a nurse. The Government have made a commitment to reach 12,000 families in that way by the end of this Parliament, but I hope that, given the strong recommendation in the Allen review, the Minister and her colleagues will look at rolling that kind of intervention out more widely, particularly as it focuses wholly on families who might not actively engage with other services, such as Sure Start children’s centres.
I also welcome the fact that the Minister has assembled an early years working group to advise on further policy development in this area, but I hope that she will listen to the group if it turns around and says that what she and her colleagues have done to early intervention funding—cutting the budget by some 22% this year and removing the ring fence—negates what we ought to be trying to achieve, which we all agree is to improve outcomes for all children. I have been trying to get that message across for a while now, but do not seem to have had much success, with the Opposition day debate on children’s centres last Wednesday a case in point. I have to place on record the fact that the Minister was very much missed from that debate, and I sincerely hope it was not through illness. The Under-Secretary of State for Education, the hon. Member for East Worthing and Shoreham (Tim Loughton), might have his eye on her job. He is a very charming man, but I have to admit that I have grown to enjoy my little jousts with the Minister, so I am very pleased to see her in her place today.
On the afternoon of last Wednesday’s debate on children’s centres, the OECD published a report, “Doing Better for Families”, that called on Ministers to rethink their decisions to cut support for families, particularly support for early years services. The Government enjoy quoting OECD reports, so I hope that they will listen to this one. Perhaps the Minister will give us a few comments in a moment.
On wider policies affecting families, one key element that a family needs to thrive is the parents’ ability to earn a decent income with which to bring up their children. In the vast majority of cases, that means that they must be able to organise child care in order to go out to work. I do not want to take this collegial and serious debate down too political a route, but it is clear to most people that many of the choices made by the Minister’s colleagues over the past year have not been a great help to ordinary working families in that respect.
One decision that keeps coming up relates to working parents’ ability to pay for early education and child care. Hon. Members will be aware that Save the Children’s report on child well-being, published yesterday, places the UK 23rd out of 43 developed countries on that measure. That might be the subject for a later debate, but Save the Children’s chief executive, Justin Forsyth, said that the Government should reverse their cut to support for child care in tax credits, which reinforces what I have heard time and again from the sector.
I wanted to say a few more things, but I will conclude, as I think that everybody here wants to hear the Minister’s response to the debate. I am grateful to the hon. Member for Erewash for leading this debate. Given the day and many Members’ commitments to the campaign trail—and to catching up on sleep—it has proved to be a useful discussion. I hope that we will have many more opportunities to continue this vital discourse.
The Minister of State, Department for Education (Sarah Teather)
It is a great pleasure to serve under your chairmanship, Mr Meale. I congratulate the hon. Member for Erewash (Jessica Lee) on—I was going to say winning this debate, but I am not sure whether “winning” is the right word, considering what time she probably got to bed last night. There is some irony in discussing family policy in the least family-friendly institution in the UK. I congratulate all hon. Members on being here and on an interesting and informative debate. I particularly enjoyed the opening remarks of the hon. Lady, which addressed family policy across the piece. I doubt that I will be able to respond to everything in the time remaining, but I will do my best to pick up on as many of the points raised as I can.
I thank the hon. Member for Washington and Sunderland West (Mrs Hodgson) for her profound affection for my colleague, the Under-Secretary of State for Education, the hon. Member for East Worthing and Shoreham (Tim Loughton). I will of course pass on her remarks to him. I am sure that he will be terrified, but I will draw his attention to her flattery of his great skills.
The hon. Member for Washington and Sunderland West said that this goes without saying, but I think it is worth saying again: strong and stable families are the bedrock of a strong and stable society. They are key to ensuring that children grow up in a loving and nurturing environment and develop into healthy, happy, successful adults. The quality of relationships matters. Adults in good, stable relationships have better life outcomes, and so do their children. Families are also the social capital that builds and sustains neighbourhoods and communities, as the hon. Member for Maidstone and The Weald (Mrs Grant) said eloquently in her introductory remarks. They are the basic unit of society, and they are where we learn the social skills we need to survive and flourish in life. They are where we learn how to form relationships with other people, and the success of those relationships will affect our life outcomes as well as those of our children.
The make-up of the family unit is changing, as several hon. Members said. Families come in many varied shapes and sizes, including single-parent, multi-generational and foster families. Fathers are becoming more involved with their children, which I believe is a positive step forward that the Government should do much to support. Despite the many different changes referred to by the hon. Member for Strangford (Jim Shannon) in his speech, families are, as he also said, happy on the whole with family life. Most families say that they are fairly or very happy; 93% of respondents to a recent BBC poll said that they were happy with their family life.
However, it is vital that we support families as much as we can, and this Government believe that we should do much better. It is our ambition to make this country the most family-friendly in the world. At the heart of all our policy making is the determination to ensure that family services are designed around parents’ needs rather than the other way around, and take account of changing work patterns, the evolving roles of parents and the financial pressures families face.
The hon. Member for South West Bedfordshire (Andrew Selous) said that some people believe that families are not the Government’s business. Sadly, many politicians who consider themselves progressive believe that the family is not an area in which the Government should be involved. There is sometimes a dichotomy between believers in a small state and in a big state regarding what they believe the role of Government should be. However, I believe that the Government have an important role in supporting families, systematically removing the barriers that prevent them from thriving and creating the right environment through legislative change, financial systems and the design of public services so that families can be the best that they can be. That matters to our children, and to their children as well.
It is also important that we intervene to support vulnerable families when things are difficult. All families go through times when things are harder. We know, for example, that there are pressures on families when they have a first child or when children move into the teenage years. Those with many social networks might manage to get through such times, but if life is stacked against people, as in some of the examples given in several hon. Members’ speeches—if they suffer from a mental health problem, have unstable relationships, live in overcrowded housing or have a drug or alcohol problem—it is much more difficult to do so.
That is why the Government are investing in extra health visitors, for example, to support people in the early years. It is why we are doubling the number of family nurse partnerships—to refer to the remarks of the Opposition spokesperson—and why we feel so strongly that Sure Start matters and must be focused particularly on families that need support at that time. It is also why we have begun a new campaign to support families with multiple problems to ensure that they get the support they need, rather than being passed from one service to another.
We will shortly consult on new proposals for family parental leave, an issue about which I feel strongly. Several hon. Members discussed fathers and the need to involve them more. Involving fathers at an early stage makes a difference to children’s outcomes. If the worst happens—if all the other things we are doing to support relationships do not work and the relationship breaks down—fathers who are engaged at an early stage are much more likely to remain engaged later.
I am running out of time, so I will not be able to speak about all the things that I wanted to address, but I will refer a little to our work on relationship support, which I believe is important to sustaining families who might go through difficult times, as any family will. As the hon. Member for South West Bedfordshire said, the Prime Minister recently announced that my Department will fund relationship support to the tune of £30 million, a substantial increase. As part of that, we are also providing funding through a series of voluntary sector organisations—at the moment, telephone and internet services are going out to tender—to ensure that all sorts of relationship support mechanisms are available to families.
The hon. Member for South West Bedfordshire will be pleased to know that we already support prisoners’ families with £1.3 million through about six voluntary sector organisations. I agree that it can have a dramatic impact on reducing reoffending. I have long been interested in the ideas that he mentioned involving greater availability of guidance and support before marriage. Having the skills to negotiate difficult times and knowing where to go for support can make a difference when couples hit rocky periods.
The work we are doing—
Mr Alan Meale (in the Chair)
Order. We now move on to our second debate. Can Members who are not going to participate in it please leave quickly and quietly?
NHS Prescribed Medicines
(12 years, 11 months ago)
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Margot James (Stourbridge) (Con)
It is a pleasure to serve under your chairmanship, Mr Meale. I am grateful for the opportunity to open this debate on the crucial matter of securing the supply of medicines in the interests of the patients for whom they are prescribed.
Ever since the pound gained against the euro a few years ago, the UK has experienced shortages of medicines, because some stakeholders find it more profitable to sell medicines intended for use by patients in the UK abroad, where higher prices, aided by the exchange rate, will prevail. Ministers are making efforts to resolve the problem, and I will return to the action that is being taken when I discuss some of the potential solutions.
First, I want to focus on the nature and scale of the problem and its effects on patients and pharmacists. It used to be the case that, if someone was prescribed a medicine by a GP, they went to their local pharmacy, handed over the prescription, waited for a few minutes and then went home with the pills. Occasionally the pharmacist would apologise, because they did not have the item in stock, and the patient would return the next day to collect their medicine.
Some years ago, I was responsible for the various medicines prescribed to my elderly parents. I was annoyed to find that, sometimes, the medicine that I collected from the pharmacy was Greek or Spanish, with inadequate English language directions. The pharmacist had dispensed a parallel imported drug, on which extra profit had been made by the wholesaler and, possibly, the pharmacist. Back in 2005, parallel imported medicines accounted for 18% of the value of branded medicines dispensed by UK pharmacies.
The tables have now been turned and our continental partners are being prescribed medicines intended for the British market that have been subject to parallel export. This has led to patients in Britain being prescribed a medicine, taking the prescription to their local pharmacy and being told that the product is not in stock and that it might be a few days before it will be. Patients are advised that they can shop around but, if it is a particular type of drug that is routinely demanded at a higher price on the continent, the chances are that neighbouring pharmacies are experiencing the same problem in accessing supply.
The effect of that shortage can range from minor inconvenience to potentially serious health risks. The BBC programme “You and Yours” featured the problem at the beginning of April. It interviewed an organ transplant patient who needed continuous treatment with the drug Rapamune to ensure that their body did not reject the new organ. The very idea that such a drug should be hard to obtain is absolutely scandalous, which is also true of that person’s experience.
How widespread is the problem? Chemist and Druggist, the pharmacy trade publication, conducted a survey of pharmacists last September that highlighted the difficulties caused to pharmacists, 90% of whom are not profiting from the shortages caused by selling medicines abroad. The survey found that pharmacists have had to turn patients away, because they had not been able to source the medicine prescribed. Moreover, 93% of pharmacists had at some stage had to ask the doctor to change a prescription in order to secure the supply of something similar. More than two thirds of pharmacists are spending between one and five hours a week chasing around, trying to get hold of out-of-stock medicines. That is a complete waste of pharmacy time and, now that the Department of Health has agreed to pay for that time, it is also a waste of NHS money.
Research conducted at the end of last year by the Devon local pharmaceutical committee supports the findings of the Chemist and Druggist survey and provides additional insights. Seventy pharmacists monitored medicine supply issues for a two-week period and identified 537 such issues, which was up from the 379 issues reported in a similar study by the same group a year previously. The problem has, therefore, been getting worse.
The Devon audit found that the average delay caused by one of those instances to the medicine being available was four and a half days, which is pretty much a whole working week. It was found that those delays caused minimal harm in 13% of cases, but in just over 5% of cases the harm was defined as moderate. For example, a missed dose of an anti-epilepsy medicine caused a patient to fit. In nearly 20% of those cases, the pharmacist had ultimately to go directly to the manufacturer to order the medicine via the emergency procurement procedures.
I have mentioned that the principal cause of the problem is the export of medicines intended for UK patients to other European markets. I should point out that it is not possible to prevent the export of UK medicines per se, because that would be contrary to the free movement of goods guaranteed by European trade laws. We might, therefore, expect the same problems to be experienced by other countries when the exchange rate boot is on the other foot. There is no doubt that, during the years when extra profit was obtained by importing medicines into the UK, there were similar shortages of medicines in some countries, such as Greece and Spain. There was, however, no such shortage in other markets such as Germany, so we cannot lay the blame for this problem on the liberal trading laws of the EU, which are something that I think we all support.
The cause of our problem goes beyond the trade in medicines across national boundaries. The law governing the supply of medicines derives, in part, from article 81 of European Union directive 2001/83. The directive simply requires the maintenance of appropriate and continued supply of medicinal products by marketing authorisation holders and distributors. It was introduced into UK law via statutory instruments in 2005. At that time, the UK Government did what I would applaud in all normal commercial situations. They incorporated the directive into UK law with minimal—well, zero—gold-plating. It was, in fact, a textbook example of how we would want our Government to deal with European regulations under normal commercial circumstances. Medicines, however, are different from other products, especially medicines that treat serious conditions such as cancer, Parkinson’s disease, which is another area in which there have been significant supply problems, and organ transplant patients. Sometimes, medicines can make the difference between life and death, which is why the research, manufacture and promotion of medical products are such highly regulated activities. That is not true, however, of distribution. The reason for the difference between the UK and continental markets, such as Germany, Belgium and France, is that those and other markets that signed up to the EU directive incorporated their own more stringent conditions in respect of securing a continuous supply of medicines.
Before I conclude by giving the Minister some recommendations on action to resolve the problem, I want to acknowledge the efforts that the Minister and his team have made thus far to improve the safety and supply of medicines to the public. Efforts have also been made by manufacturers, wholesalers and pharmacists. The Department of Health hosts a supply chain forum, which has recently published best practice guidance and will meet again in a few weeks’ time. I welcome the steps being taken by the forum to address the problem. Participants represent all stakeholders in the complex system of medicine supply. However, I want to ask the Minister whether patients are represented, because I have not seen any reference to patient organisations in the notes that I have seen from the meetings thus far.
All stakeholders involved in the group have committed to the principle of enabling a minimum standard of 24 hours to supply any prescribed medicine to a pharmacy, and manufacturers and wholesalers will risk prosecution if they breach the code of ethics in relation to that supply standard. The Government have promised to raise the standards for wholesaler dealers’ licences, which I very much welcome.
I wish all those actions well, but I am concerned on two fronts: first, that those actions do not go far enough and, secondly, that the MHRA, which is charged with policing the system, is not adequately resourced to monitor and enforce the recommendations. Given the financial incentives to sell certain products abroad and the number of traders with wholesale licences in the UK, my concern is that the difficulties of policing all the organisations, combined with the lack of prosecutions to date—I think that there have been nil prosecutions—for breaching existing duties to supply medicines do not bode well and make me think we need to strengthen those existing duties.
I want to express my appreciation to the British Association of Pharmaceutical Wholesalers and the Association of the British Pharmaceutical Industry for the help they have given to me during my research for the debate. The ABPI and the BAPW have called on the Government to strengthen the existing duty of wholesalers, and indeed all stakeholders, to supply medicines within 24 hours in the way other European markets have done. The introduction of what has become known as a patient service obligation, which obliges wholesalers to guarantee permanently an adequate range of medicines, is required to enable patients to receive an NHS prescribed medicine in the necessary time scale and to allow pharmacists and dispensing doctors to receive a medicine following its order and dispense it within 24 hours of a patient presenting the prescription.
Manufacturers and wholesalers should be obliged to hold buffer supplies, as those who operate to a high standard currently do, to help pharmacists to manage spikes in demand. That is really no different from obliging banks to hold capital reserves. Banks have recently been required to hold a higher proportion of capital on reserve, and I am calling for the same principle to be applied to the essential supply of medicines. Public health is as important as the supply of money, so why should similar precautions not be applied?
Finally, the patient service obligation needs to be backed up by the more stringent regulation of wholesalers. Germany and other countries place much stricter obligations on wholesalers than those that are required in this country. They are required to have appropriate facilities to hold a full range of products and a reserve supply of those products. Indeed, I am not sure why we need so many wholesalers in the UK. Another aspect to the problem the MHRA has in policing the system is that we have 1,800 licensed wholesalers. That number leapt up mysteriously over the past two years in response, I suspect, to the exchange rate. There are just 39 wholesalers in France, 90 in Belgium and six in Denmark. Across the EU, only Germany has more wholesalers than the UK.
I trust that I have given the Minister food for thought, and I urge the Government to consider more rigorous regulation in this essential area of the provision of medicines to the general public. I hope that the Minister will share with us some of his forward thinking about how the steps he has taken so far will be policed, monitored and might pan out over the coming months.
The Minister of State, Department of Health (Paul Burstow)
I congratulate my hon. Friend the Member for Stourbridge (Margot James) on securing the debate and on setting out so clearly the issues that affect many of our constituents. Ensuring that NHS patients have access to the medicines they need when they need them is absolutely vital. My hon. Friend is right to have described the situation in such terms herself. I can assure her that the Department takes the supply issues she has raised very seriously indeed.
It might be helpful if I start by giving a sense of the scale that we are talking about. There are about 16,000 licensed presentations of medicines. That covers different formulations such as tablets, capsules and injections, and different dosages. The most recent figures record that there were more than 10,600 community pharmacies in England and nearly 900 million prescription items are dispensed each year. The production of medicines is truly a global business, with ingredients supplied from all over the world. In such a large and complex system, there will from time to time be problems with the supply of medicines. However, where there is evidence of systemic or real issues, the Government need to act and intervene appropriately.
Such problems are not new, and nor are they confined to the UK. They can occur for a number of reasons; for example, there might be manufacturing problems or difficulties in obtaining raw materials. They can also occur as a result of distribution problems, or through the parallel exporting of medicines when exchange rates or prices make that a lucrative trade. The increasing trend towards the concentration of manufacture within global pharmaceutical companies has exacerbated the situation. That means there is little flexibility if problems are experienced at particular manufacturing sites. Production schedules have to be planned months in advance, and if one company is unable to supply a product, others may be unable to make up the shortfall at short notice. Therefore, there is a need for the regulatory framework that my hon. Friend talked about.
Supply issues can also arise as a result of the parallel trade. The strong euro means that parallel imports into the UK have declined and the incentives for UK medicines to be exported to other European countries have increased. I stress that, as my hon. Friend said, parallel exporting is legal and that it can be carried out legally by anyone who holds the necessary licences under the medicines legislation. She has rehearsed some of the statistics on the number of companies that have such licences, and as has rightly been said, prevention of the export of UK medicines would be contrary to EU trade laws.
However, there are legal duties on marketing authorisation holders and manufacturers and distributors within the limits of their responsibilities to ensure appropriate and continued supplies to pharmacies, so that the needs of patients are met. The Government work closely with pharmaceutical companies, wholesalers, pharmacists and the NHS to ensure that the system delivers medicines to patients quickly. They also monitor individual supply problems and work closely with individual manufacturers to prevent shortages, and manage consequences when there are shortages.
As has been said, the Department has published joint best practice guidelines with the Association of the British Pharmaceutical Industry and the British Generic Manufacturers Association in order to help manage shortages as and when they arise. Those give guidance to companies on what to do in the event of a shortage, and recommend that companies communicate with the Department as soon as possible about impending shortages that are likely to impact on patient care. The Department, the Medicines and Healthcare Products Regulatory Agency and pharmaceutical supply chain stakeholders—the manufacturers, wholesalers and pharmacy representatives—continue to work collaboratively, better to understand and mitigate the impact of supply difficulties associated with parallel exports, so that patients receive the medicines they need.
We have also established, as was said, the medicine Supply Chain Group as a forum for organisations to meet and exchange information, understand the causes of the supply problems, including those due to parallel trade, and seek possible solutions. The Supply Chain Group continues to meet with individual companies in order better to understand the issues, and to explore ways of mitigating them and to take forward the action points agreed at the ministerial summit last year.
My hon. Friend asked about lay and patient representation on that body. As I understand it, the British Medical Association plays a part in acting as a conduit for that voice. There is a good case for looking at whether that should be changed, so that such representation is not simply through the BMA and that patients have their own voice in those deliberations—not least given the Government’s commitment to the introduction of Health Watch England and the desire to see a greater place for patient interests across the system.
The summit made a number of recommendations. The first, as we have discussed, was the publication of “Best practice for ensuring the efficient supply and distribution of medicines to patients” in February 2011. That also offers practical guidance on the use of quotas by manufacturers. Also published was the joint guidance on the legal and ethical obligations on the supply chain, “Trading Medicines for Human Use: Shortages and Supply Chain Obligations”, in November 2009. That was updated and republished in December 2010. We also developed and are maintaining a list of products in short supply. That is published on the Pharmaceutical Services Negotiating Committee’s website, so that no one—I repeat: no one—trading in those products has the excuse that they are not aware of supply difficulties. The MHRA is conducting a series of targeted inspections aimed at those who jeopardise patients, in order to ensure that they comply with their supply duties and that those who breach existing duties face the consequences.
My hon. Friend said that there have been no prosecutions. The intention is to change behaviour and ensure compliance, rather than undertake regulatory intervention, which would result ultimately in suspending licences or in criminal proceedings, although in many other cases licences are suspended for other reasons. As a result of those arrangements, medicines are getting through to patients. I am concerned, however, to hear the examples given by my hon. Friend today. As she documented, there are in some cases completely unacceptable periods of delay. However, the latest evidence from the pharmacies at the end of the supply chain is that in England there are supply problems with approximately 50 products.
My hon. Friend raised a point about standards and the work being done by the MHRA to ensure that packages are consulted on to improve quality standards across the system. The approach to inspection is a risk-based one involving targeted inspections, and there has been an increase in the number of staff to support the resulting increased work load. I stress that the 50 products currently identified as being in short supply have to be seen in the context of the 16,000 licensed presentations of medicines. The affected medicines are used to treat a wide range of conditions. They include treatments such as Femara for breast cancer, Cipralex for depression and CoApprovel for hypertension. For that reason, the guidance we issued in February recommends that pharmacy and general practice staff should advise patients to request their prescriptions in good time. Most companies have put contingency arrangements in place, so that pharmacies can obtain supplies of medicines directly from them if they are unable to obtain them from their usual wholesaler. The time taken for supplies to be obtained in that way varies from company to company, depending on the nature of the arrangements, but we have been assured by the companies concerned that they endeavour to supply their products as soon as possible. However, I will draw the attention of officials and others to the evidence that my hon. Friend has drawn my attention to today.
I would like to take this opportunity to pay tribute to the efforts made by pharmacy staff, who have worked tirelessly to ensure that patients have not gone without their medicines—it is key to stress that. Patients and prescribers also have an important part to play. Prescribers should, where appropriate, consider a change in medication for patients, and advise patients to request prescriptions in good time where there are supply difficulties.
My hon. Friend referred to article 81 of directive 2001/83 as a textbook example of the UK Government’s not gold-plating such a regulation, but said that in this case, that was possibly not the thing to do. I hope that I have outlined a series of measures that this Government are taking to secure the supply chain and to ensure that everyone in the supply chain understands their obligations to patients. I stress, however, that we have not ruled out taking any of the further steps she has suggested. We want to be sure that we have proper evidence of resulting harm to the patient interest before we act. That is why we are keeping matters under review, and targeted inspections will play their part in gathering further evidence. If there is other evidence from other parts of the supply chain, we would certainly want to look at that carefully. The London School of Economics is doing some comparative work, looking at other jurisdictions where such public service obligations have been introduced, and that will also inform our thinking.
I am grateful to my hon. Friend for raising these important matters. I assure her that the Government are committed to patients getting their medicines quickly. If all parties in the supply chain adopted the best practice guidance issued in February, the problems caused to patients by parallel trade would reduce. The guidance sets out the aim that, under normal circumstances, pharmacies should receive medicines within 24 hours, although there may be circumstances where that is not always the case. We do not believe that increasing the regulatory burden at this point is the right answer, but we will keep that under review. The Government will continue to work closely with all those involved in the supply chain to ensure that NHS patients get the medicines they need when they need them. That is our enduring commitment.
Margot James
Thank you, Mr Meale, for your chairmanship. I thank the Minister for his generous and comprehensive response. I remain concerned that the measures do not yet go far enough, but I am reassured that measures have been put in place and that the 60 or so medicines affected will be monitored closely. I hope that I am wrong and that it will not be necessary to introduce more stringent regulations, because I am a great campaigner against increasing the regulatory burden on industry. Patient safety, however, has to be paramount. I am not yet convinced that the measures will have the desired effect, but I am willing to keep an open mind, monitor the situation and bring any further evidence of problems to the Minister.
Private Finance Initiative Hospitals
(12 years, 11 months ago)
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Mr Dave Watts (St Helens North) (Lab)
It is a pleasure to have the opportunity to debate this subject under your chairmanship, Mr Meale.
Before I set out my concerns, I put on record my appreciation and that of my colleagues for the work of the excellent St Helens and Knowsley Teaching Hospitals NHS Trust. I pay tribute to its doctors, nurses, technicians, cleaners and all its support workers, who provide an excellent service to my community and to the communities of my colleagues.
I am pleased to have the opportunity to debate this important subject. St Helens and Knowsley is a five-star hospital trust, benefiting from excellent staff and management and delivering well run hospital services that are clean and safe. The trust now provides state-of-the-art treatment to the people of our communities. I asked for the debate in an attempt to discover the details of the secret discussions currently taking place between the trust, the strategic health authority and the Department of Health.
The trust provides services mainly for St Helens, Halton and Knowsley, but for the wider north-west community as well. Its burns and plastic surgery department provides treatments for patients over a wide area, including the Isle of Man, Cheshire and north Wales, altogether serving a total population of more than 4 million. The trust operates on two sites, St Helens and Whiston. The new hospital opened in 2010 and, as is the norm for the trust, did so on time and on budget. There was new hospital investment of £350 million, so the trust now boasts world-class services at the St Helens site as well as the newer Whiston site.
The trust has a strong performance record: three stars, a “double excellent” rating and performing above average in all key indicators. It is one of the few trusts to have achieved the maximum overall score in the auditor’s local evaluation. The hospital trust is well run and well managed, and the financial problems it faces are not of its making. It has managed to achieve high standards over the past five years despite having a low level of funding and extremely high levels of demand—its accident and emergency units have some of the highest levels of use in the whole country—and serving a community with poor health indicators. The trust used to operate from two run-down main buildings, one of which was a workhouse before being turned into a hospital, and from 40 separate sites in total. Imagine the difficulty of providing health care to a community when operating from so many different sites, with the related management problems.
The trust’s current problems stem from it having to become a foundation trust hospital by 2014; that is something the Government are insisting on, not something the trust is attempting. To achieve that aim, the trust must make efficiency savings. Every hospital, as we know, is having to struggle to make the efficiency savings expected by the Government. On top of the efficiency savings to meet the Government’s financial requirements for FT status, the trust must save a further £20 million a year to pay for the PFI estate. That is impossible and will not happen.
The trust commissioned its own report, I think by Coopers & Lybrand, on the feasibility of those savings. Coopers & Lybrand came back and made it absolutely clear that such levels of efficiency savings are not possible. Efficiency savings are already being made, but the requirement to save a further £20 million a year is impossible to meet. At the same time, the trust must run a state-of-the-art hospital on virtually the same budget as when it had three worn-out hospital buildings in St Helens.
The Government need to act, and to do so transparently, but the discussions so far have been held behind closed doors. The local MPs believe that such important discussions taking place in private is totally unacceptable. The community, health professionals, local MPs, councillors and the House need to have the information in the public domain, so that we know exactly what is going on behind closed doors and what options the Government are considering. Despite written questions, letters to the Minister and an oral question last week, that information has still not been put into the public domain. That is not acceptable. We wonder what is happening not only in our trust but in others. Are the same sort of secret discussions taking place throughout the country? If so, why are they taking place behind closed doors, instead of openly and transparently?
In case some people wonder whether a new hospital was required, as I said earlier, the trust was previously working out of 40 buildings, including two old hospitals, one a former workhouse. Clearly, new hospital buildings were needed. Furthermore, the health problems of St Helens, Knowsley and Halton are extremely well known: we have poor health indicators, high levels of deprivation and had poor medical services for many years. Before the new hospitals were built, we had poor health services provided in poor buildings.
One of the health indicators is that St Helens, Knowsley and Halton males are likely to live 10 years less than the national average, and women seven years less. The poor health indicators are partly owed to the poor lifestyles of many of our constituents: smoking, obesity and drinking levels are all higher than the national average. The local partnership is addressing some of the issues successfully, but not all our problems are related to lifestyle; we also have an industrial past to deal with and high levels of poverty. In my constituency of St Helens, the traditional industries of coal, chemicals and glass left a legacy of poor health. My colleagues in Knowsley and Halton would say the same.
Not everyone is in favour of PFI schemes; they have their critics. Frankly, I would welcome a change in the rules, which are controlled by the Treasury, because they are inefficient and ineffective. I want my hon. Friend the Member for Halton (Derek Twigg) and his Front-Bench colleagues to consider whether there is a better way than PFI to provide the capital required for public services. At present, however, no political party—not the Liberal Democrats, nor the Conservatives, nor the Labour Opposition—is proposing to change the Treasury rules. I understand that the Conservatives are looking at a new vehicle, resembling PFI mark 2, which the Government claim would cost the Treasury and the public purse less and provide better value for money, but all Governments say that when introducing new schemes, and few succeed in achieving those aims. I wish them well with delivery, but I suspect that they will have similar problems to those the Labour Government had when introducing our PFI schemes.
The private finance initiative has achieved a great deal. It has created Britain’s biggest hospital building. The previous Labour Government delivered 118 new hospitals—88 PFI schemes and 30 with public capital, amounting to a £10 billion investment in our hospitals. In its last report in 2003-08, the National Audit Office confirmed that PFI schemes provided guaranteed price certainty. Much hospital building before the PFIs—under the old Health Department schemes—came in well over budget, and delivery was delayed. Even before PFI schemes, hospital building programmes often came in at a much higher budget than expected when they were first approved.
The second issue, which was often raised by the then Opposition, is that health investment was simply unaffordable. That is not true. Most of the investment in our health and public services was made at a time when the national debt was lower than in most European countries. On top of that, under the Labour Administration we had long-term economic growth, unlike what we are seeing now under the new coalition Government. However, when the world financial crisis came, it hit countries such as the UK, which had large financial sector industries: the USA, Britain, Ireland and Iceland all had large financial institutions and were hit harder when the financial crisis came. It is worth remembering that in 1997, 50% of our hospitals had been built before 1948. Now, only 20% of hospitals remain to be modernised. It was a substantial achievement by a Labour Government to turn around the hospital-building programme as we did.
I do not accept the point, which I am sure that the Minister will make, that in the past the coalition and its friends called for greater regulation of the banking industry—I am moving a little away from PFI schemes—and one reason given was that it was unaffordable. Banking regulation rules were weak, and I accept that they needed to be changed, but I will take no lessons from the Conservatives, who claimed for many years that we had too much regulation and that we needed to loosen our grip on the financial institutions.
Why was such major investment required? The Government would have us believe that before 1997, Britain was a success story. That is simply not true. It had run up massive public debt not to invest in Britain’s public services and future, but to pay for mass unemployment and economic failure. It had failed to invest in our schools, hospitals, roads and railways. Many of my colleagues have been involved in local government and we remember the state of our public buildings before 1997. I remember schools and hospitals with holes in the roof; I remember the shortage of nurses and doctors; I remember people waiting six or seven years for operations. The investment the Labour Government need to put in to deal with the problems caused by the preceding Tory Government was clear for anyone to see.
Returning to the main point of the debate, I want the Minister to be open and transparent. I want him to set out his own views on the options open to the hospital trust in my constituency. I want him to agree today to publish all the documents on discussions between the Department and the trust, which he has failed to do so far. I have one here, but we have not seen the other documents. There is only one option. The Government should invest in and reflect the cost of running the PFI scheme at St Helens and Whiston hospitals by increasing the budget in proportion to the increased PFI cost.
On 26 April, during Health questions, the Minister stated that the Government are not and will not seek to privatise my trust or any other trust. Will he explain why his Department produced a document containing three options, of which the first is a national solution; the second is a merger with another trust, although no one knows where that would take place, and the Minister and the Department seem unwilling to discuss it; and the third option, which requires a proper explanation, is a joint venture with a private provider? I am not sure what that means, but most people I have spoken to in the health industry in St Helens, and my political colleagues believe that that is an element of privatisation. I would welcome the Minister setting out what the comment in the document about a joint venture with a private provider means. I have here a copy of that document, and the Minister should explain why it was produced and what the implications are, and provide the assurances that we seek today.
The Minister of State, Department of Health (Mr Simon Burns)
I am somewhat confused. At the beginning of his speech, the hon. Gentleman made an important comment: that one problem is that no documents are available for people, including MPs, to see. As he is now quoting one of those documents, surely it must be in the public domain. He has produced it at this debate, and I know that it has been written about in the Liverpool Echo. Is there not a contradiction in what he is saying?
Mr Watts
It seems that the Minister is the only person who has had difficulty getting hold of a copy. Mine is a leaked copy, but it is clear that it is from the Department of Health. When I raised the matter with him, he seemed to have great difficulty in finding it. He should get a grip on his Department, and find out what documents are being produced and why he is unable to obtain a copy when he needs one.
Mr Watts
I understand why the Minister asked for more detail, because another document was also produced. I do not have a copy of that, but I hope that when he returns to his Department he will publish the second document. I understand—the Minister will clarify whether this is the case—that when the document was produced, and the option for private sector involvement partnership was suggested, my local trust refused to endorse that option. I am told that it endorsed it only on the back of the fact that a sentence would be included stating that it was at the direction of the Department of Health—not only was the Department involved in the discussions, but it was driving them. I understand that when the document went back to the Department, it refused to accept the amendment to the original document. That leads me to believe that the Government are trying to influence the trust to go down a path that it does not want to go down, but that they are unwilling to do so publicly.
The only way to clarify the matter is for the Minister to guarantee that he will produce the original document, a copy of which I have, and the second draft, so that we can see what is going on between the Department and the trust. Discussions are being held behind closed doors for obvious political reasons, and my colleagues and I suspect that they are being kept quiet until the outcome of the local elections. Frankly, I think the Minister knows that my constituents and voters who support his party in St Helens, Halton and Knowsley would not support the proposal that is being pushed forward by the Department.
Mr Watts
I do not normally believe in conspiracy theories, but I have seen a document that everyone claims does not exist. I passed that document to the national media, and an article was written for The Sunday Mirror by an excellent journalist, Vincent Moss. Apparently, when he contacted the Department of Health the officials asked whether the document existed and whether he had a copy and he replied that he did. They asked to see the document but he said that they could not. The Department then refused to comment on the matter.
The reason behind the conspiracy theories is clear: the Department is acting in an underhand way. Those discussions should take place not behind closed doors but in an open and transparent way so that the community, local health care providers, MPs and the House can understand what is driving Government policy and where it is going. My view is that the Government intend to try to privatise hospitals. Unless the Minister publishes the documents in question and clarifies some of the points raised, people will be left to come to their own conclusions.
I do not believe this is an isolated case. My hon. Friend the Member for Blackley and Broughton (Graham Stringer) and other hon. Friends with new PFI hospitals in their constituencies will experience similar problems to those faced by the trust in my constituency. Unless the Minister can clarify how the costs of running those estates will be paid for in the future, the uncertainty will remain and many people will believe that he intends to do exactly what he claims not to be doing.
I hope the Minister will provide some reassurance today. I am looking for one particular assurance. The only way to resolve the outstanding problem is if the Minister gets to his feet and says that he will provide the £20 million a year extra funding required to run state-of-the-art hospitals at Whiston and Knowsley, rather than the old workhouses we had before. If the Minister can do that, I will gladly congratulate him. Most of my constituents and the trust itself would welcome such a decision.
Mr George Howarth (Knowsley) (Lab)
May I repeat what my hon. Friend the Member for St Helens North (Mr Watts) said about it being a pleasure to serve under your chairmanship, Mr Meale? I congratulate him on being fortunate enough to secure this debate on a matter that is of great concern to our constituents, and on the manner in which he presented his case.
It is right and proper to begin by repeating something mentioned by my hon. Friend, which is that the hospital staff, whether medical, support or care staff, are highly regarded by the local community. The St Helens and Knowsley primary care trust is highly thought of, and has been prominent in ensuring that we get the health service we deserve. The new hospital facilities at Whiston and St Helens are considered to be at the cutting edge in technology, the use of space and the way that services are conducted, and we appreciate the service that we currently receive. I know from recent personal and family experiences that those who make use of the hospital facilities on both sites have every reason to be grateful that they are available.
The communities served by the two sites have particular, and in some ways difficult, health needs. Some of those health needs are related to former and current occupations, and some to the prevalence of poverty and consequent lifestyle choices. In parts of my constituency, for example, we have abnormally high rates of cancer. That is partly a result of high levels of smoking, but in some cases it is the result of former occupations. My hon. Friend mentioned the mining industry and the legacy left by that in St Helens. Some of the chemical processes that have taken place over the years in and around that area have also taken their toll on people’s health, and we therefore need a very good hospital service. We also need a good primary care trust that can provide a lot of the treatment people need, but hospital services are an important part of that mix.
As my hon. Friend rightly said, the difficulties we seem to have arrived at are due to the deficit carried by the hospital. We could have a long discussion about how that deficit was created, but that would not necessarily be fruitful. The deficit appears to stand in the way of the hospital achieving foundation trust status, and that seems to have been the impetus behind the three options referred to by my hon. Friend and mentioned in the tripartite document of which he has a copy.
I do not for one minute underestimate the seriousness of the deficit. Any responsible Administration or Government should take a deficit of that size seriously, and I understand that is the case. The difficulty arises, however, because the three options under discussion leave people concerned about what might be going on. I will talk about what has and has not been published, because the Minister tried to cast some doubt on that a few moments ago.
Mr Howarth
Had the Minister been listening, he would know that I said that a little later in my speech, I will try to cast some light on what has and has not been published. He cast some doubt on whether there is in fact material that we should have seen but have not, and I will return to that issue in a moment.
My hon. Friend referred to the three options that have been suggested. The document refers to a national solution, and even if it is not spelled out in clear terms, I take that to mean that it is intended—presumably by Department officials—for some means of closing the deficit to be found nationally, in order to get rid of the £20 million deficit that is creating the problem. I am not in a position to say whether that is a likely solution; hopefully, the Minister will be better able to explain that. To me, however, that solution is the most preferable of the three options.
The second option would involve some kind of amalgamation or merger with other existing NHS facilities, although that seems fraught with inevitable difficulties. If an existing facility already carries some sort of deficit, presumably it will not be keen to add to that by amalgamating or merging with another institution that might bring even more of a deficit to the table. Furthermore, I do not see any of the synergy that would need to exist between the St Helens and Knowsley trust and other nearby hospital trusts for such a move to be thought of as a likely solution.
We are therefore left with the third option, which is some kind of merger or joint venture with the private sector. I was interested to see that when my hon. Friend the Member for St Helens North referred to that option, the Minister, from a sedentary position, seemed to indicate that it was not an option. [Interruption.] Well, I am glad that he clarified that. When my hon. Friend mentioned that option—I think that he used the word “privatisation”—the Minister said no.
Mr Howarth
But presumably the Minister is not ruling out now the possibility that something could happen that would involve the private sector in the long-term future of these hospital sites. No doubt he will enlighten us on that when he replies to the debate.
Mr Howarth
I have to warn the Minister that I am not someone who believes that everything should be owned by the state. There are occasions when I can understand that some co-operation with the private sector is required. In fact, the PFI in itself is in many ways an exemplar of that. On occasion, such an approach is appropriate, but any wholesale transfer of these hospital facilities would meet strong opposition from the public in St Helens, Knowsley and Halton, and it would certainly include my hon. Friends and me, because we do not see that as a viable way forward for these hospital sites. The body language coming from the Minister is encouraging. I just hope that the words that follow are equally encouraging.
Before I conclude, I want to clear up one point, which is what we know and do not know and what we hope the Minister can enlighten us on. I am sure that he is aware that my right hon. Friend the Member for St Helens South and Whiston (Mr Woodward) wrote to the Secretary of State about this matter several weeks ago, seeking clarification; my hon. Friend the Member for St Helens North tabled written parliamentary questions about the subject; and I wrote under the terms of the Freedom of Information Act to the regional health body, the Department and the hospital trust, asking not only for the tripartite document that my hon. Friend has a copy of, but for any advice and other, associated documentation that would throw any light on it. It is because we do not have all the information that there is a great deal of suspicion on the part of local people.
The Minister is a reasonable man whom I know will want to be as open and frank as possible in the debate. I hope he will be able to dispel those fears and leave people with the belief that no conspiracy is going on, that the Government are not trying to manoeuvre our hospitals into some kind of private sector solution and that a solution will be found that is within the NHS and is acceptable to all concerned. If he can do that, the debate that my hon. Friend the Member for St Helens North has promoted today will have been a worthwhile exercise.
Derek Twigg (Halton) (Lab)
It is a pleasure to speak under your chairmanship, Mr Meale. I congratulate my hon. Friend the Member for St Helens North (Mr Watts) on securing this very important debate and my right hon. Friend the Member for Knowsley (Mr Howarth) on the contribution that he made. As you will have picked up, we are constituency next-door neighbours, but there are wider issues that we need to discuss and that I intend to raise with the Minister.
Derek Twigg
I will say more about the St Helens and Knowsley Teaching Hospitals NHS Trust a little later, but I have a lifelong relationship with the Whiston hospital, which is used by many thousands of my constituents. As I said, my right hon. Friend the Member for Knowsley, my hon. Friend the Member for St Helens North and I work very closely on issues relating to it, as neighbouring MPs.
I congratulate the hospital on delivering the PFI six months ahead of time and to an excellent standard. The chief executive, the board and the staff have done an outstanding job. The many medical staff, support staff and ancillary staff do an amazing job, and the hospital has the highest reputation, but I will talk specifically about the hospital in more detail later.
It is important to understand the use of PFIs, what was required and what was achieved. In 1997, after 18 years of Conservative disinvestment in the NHS, the service was in crisis: 1 million people were on waiting lists, hospitals were in disrepair, staff felt undervalued and buildings had been neglected. As my hon. Friends will confirm, people regularly complained to us in 1997 and thereafter—my right hon. Friend will say that they were complaining before then—about waiting more than two years to have an operation or even to be seen by a specialist in some instances. It is important to make that point.
The Labour Government made a firm commitment to improve, support and protect the NHS. In government, we did what was necessary to turn it from an organisation that was struggling for survival into the world-class and world-leading service it is today. It is important to make that point about the improvements made under the previous Labour Government, which included achieving the lowest waiting times, the highest public satisfaction, a two-week turnaround to see a specialist, a massive decrease in the number of those dying early from heart disease and cancer, and improved facilities. In the context of PFI, investment in the NHS is important.
As my hon. Friend said, 114 new hospitals were built over Labour’s 13 years in government to replace the existing ageing and neglected infrastructure. In 1997, half the NHS estate dated from before 1948; in 2010, that figure was down to about 20%. That rapid modernisation was unprecedented, but vital to the regeneration of the NHS, and PFIs played an important part in making that possible. They made possible the move from the previous workhouse-style provision of health care to a modern, technically advanced health care system for the 21st century. [Interruption.] The Minister tuts, but an old workhouse building was still being used on the Whiston site at the time. In fact, back in the 19th century, one of my distant relatives died in that building when it was still a workhouse, so it was a workhouse and it was used for health care. Now, we have a modern hospital to replace it. It is important to make that contrast, as my hon. Friend did.
Graham Stringer (Blackley and Broughton) (Lab)
Even with the massive investment and improvement under the previous Labour Government, my local hospital is still 60% a Victorian workhouse, and we need more. [Laughter.] The Minister laughs, but I mean that we need more investment, not more workhouses. Does the shadow Minister agree that although PFI was incredibly valuable in bringing that expansion about, it had two fundamental flaws? In a pragmatic way, it relied on the private sector being more efficient than the public sector to recover the higher borrowing costs, but that has not happened in many cases, because of the strict configuration of the contracts. Secondly, when the private sector is involved—I am not totally against that—we have the secrecy that my hon. Friend the Member for St Helens North (Mr Watts) mentioned. There are commercial interests, which is bad when public money is being used for the public good, because we cannot find out what is going on.
Derek Twigg
I totally understand my hon. Friend’s concerns. As regards his local hospital, he will realise that I never said that every hospital was modernised and improved. The issue now is how they will be modernised and improved under this Government, and I will return to that because we need to know from the Minister today what the Secretary of State’s and the Prime Minister’s plans are for modernising our NHS estate. The massive improvement under the previous Labour Government was unprecedented, but my hon. Friend is right that there were concerns. Not everybody supported PFIs, and there were issues, which I will come to later. My hon. Friend raises an important point.
It should be remembered that PFIs were also used under the previous Conservative Government. As noted in the Public Accounts Committee report entitled “PFI in Housing and Hospitals”, which was published on 18 January,
“PFI has delivered many new hospitals and homes which might otherwise not have been delivered”.
It is also important to note that the report’s summary says that hospitals are mostly
“receiving the services expected at the point contracts were signed and are generally being well managed.”
Again, I accept there were some problems, but the Public Accounts Committee recognised that they were generally well managed. Labour not only invested in the NHS, we invested in protecting its future. The contracted maintenance of buildings under the PFI agreements will ensure that the standard of NHS buildings will be as high in 30 years as it is today. The present generation is only the custodian of the NHS. Future generations are its owners, and PFI agreements will ensure that they are served by the same exceptional standard of facilities as today. That is an important point.
The system is not perfect, but at least it guarantees the maintenance of the buildings over a 30 to 35 year contract period. We all know that, with financial pressures, funding was cut for maintenance. Rather than being a one-off, that became a regular occurrence. That is why we found hospitals in the state they were in 1997—for which we, too, had some responsibility, as we had been in government for various periods before then. The fact was that there was massive under-investment, which was exacerbated by the Thatcher Government.
Under Labour, PFIs gave private sector partners responsibility for the completion of large infrastructure projects. A crucial point—of importance to my hon. Friend the Member for Blackley and Broughton (Graham Stringer)—is that accountability for services and the satisfactory completion of such projects remained in the public sector. That meant that the Government were still accountable to the people and Parliament for improving services to patients.
The PFI arrangement is a tool; it is a method that can be used badly or well. It would be disingenuous, as I said to my hon. Friend, to suggest that we were all in favour of PFIs when we were in government. It is important to be frank and honest and acknowledge that. There are strong views opposed to PFIs—it would be wrong to suggest otherwise with regard to some schemes. What we can be sure of is that, under Labour, the PFIs formed part of a carefully managed NHS in which the private sector could play a limited role. Sadly, under the Government’s current reforms, that will no longer be the case. The Government continue to rush through their NHS reorganisation; despite the so-called pause, work is still going on, without sufficient evidence or consultation on its true effect. Pressure has been relentlessly piled on to the NHS and foundation trusts, with insufficient consideration for the future. Through these costly, unwise and unwarranted reforms, spending cuts and efficiency savings, the Government are showing once again that they cannot be trusted on the NHS.
My hon. Friend the Member for St Helens North and my right hon. Friend the Member for Knowsley highlighted the issues surrounding the St Helens and Knowsley Teaching Hospitals NHS Trust, with which they have had a long association. However, it is important to repeat some of the things they said. This trust has a strong track record of high performance, achieving three stars and consecutive double excellent ratings from the Care Quality Commission. That high standard of care has been maintained: in 2010, it was the only acute trust in the country to perform above the national average in every indicator of quality of services and care in the CQC assessment. Therefore, I believe it could be described as the nation’s top-performing hospital. In addition, the trust achieved the maximum overall score in the auditors’ local evaluation for the use of its resources, for the fourth year running, acknowledging the trust’s excellent financial management.
Therefore, the trust performs to an excellent standard, not only in services and hygiene, but in financial management. The benefits of the PFI scheme for the hospital have been tremendous—more than 80% of the accommodation is new build on two sites, to which my right hon. and hon. Friends have referred; there has been capital investment of £350 million, with a 35-year concessionary period; radiology imaging equipment through a managed equipment services has been provided by GE Medical Systems; and hard and soft facilities management services, including catering, domestic estates, grounds, gardens and so on, have been provided. An important point for the Minister is that there is also 50% single room provision, with en suite facilities, as per Department of Health guidance. That is important in meeting both what we wanted and what the Government have said in respect of single-sex wards.
In 2009, the Secretary of State for Health, who was then the shadow Secretary of State, said this in an interview on Mumsnet about the pledge regarding single-sex rooms:
“This pledge will be delivered as part of our plans to provide 45,000 more single rooms in the NHS.”
Funnily enough, that pledge was dropped, and we have heard no more about it. I am interested to know, in the context of any PFI plans or hospital building programmes that the Minister has to comment on, whether there are plans to increase the number of single rooms, which is an important part of improvements in the NHS. I look forward to hearing any details that the Minister might give us.
My hon. Friend the Member for St Helens North, backed up by my right hon. Friend the Member for Knowsley, made some important points about secret documents. One has now been put into the public domain, though not officially, but we have not been able to see the other one. The Minister must answer who suggested as an option that a private sector provider could be brought in to manage this specific trust, and perhaps other trusts. Who suggested that that was the case? I understand that the trust board rejected that option and would only deal with it if directed to do so by the NHS, whether that involved the strategic health authority or the Department. I understand that that was the case. Will the Minister clarify that important point? I understand that one reason why the trust board would not accept the option of voluntarily considering a private sector provider coming to run it was a concern for patient safety. The cuts it was being asked to make to get to foundation trust status were too great and, in its opinion, were threatening patient safety. Will the Minister tell us whether that was the case?
What part of the NHS would suggest that option for a hospital that has achieved a double excellent rating, that has excellent financial management, that has been well run for years, that has a brilliant chief executive and management board, that has a committed staff and that has the support of the community? What person in their right mind would suggest a private sector provider? How could a private sector provider run it better than a double excellent rating?
Mr Simon Burns
I want to deal with this in detail when I come to my contribution. The hon. Gentleman said, “What man in his right mind would consider the private sector being used in the NHS for the management of an NHS hospital?”
Mr Burns
I am talking about the generality. I can answer the generality and will come to the specifics in my speech. The gentleman concerned, who accepted the principle in a generality, was the right hon. Member for Leigh (Andy Burnham), who was Secretary of State for Health before the election.
Derek Twigg
I am not sure that that is worthy of a reply. I am being specific. The Minister may remember—and the hon. Member for Broxtowe (Anna Soubry) sitting behind him will—that when the Health and Social Care Public Bill Committee discussed foundation trusts and insolvency, I made the point that it does not always follow that a hospital that gets into financial difficulties is badly run. That is the issue that the proposals in the Bill do not take into account. What was the logic behind the proposal for this specific hospital to have a private provider brought in to help manage it? That is a different point from the one that the Minister took.
I also want to make the point that the Government are placing NHS trusts under intense pressure through the policy of forcing foundation status within three years, coupled with the costs of reorganisation and the efficiency savings that trusts have been asked to find. That is leaving many NHS trusts in peril as they struggle to meet foundation trust status, or become foundation trusts with financial difficulties from day one. The Minister knows a number of hospitals are in financial difficulty. I do not know whether he has yet decided to put that list in the public domain.
The dangers are clear. St George’s hospital in Tooting, London, recently decided that it was too risky to push ahead with the Government’s preferred timetable for NHS trusts to become foundation trusts. Speaking after announcing a two-year delay to the plan to become a foundation trust, the board of the hospital said:
“The board recognises that if we put the organisation under pressure to become an FT during 2011-12 then this could impact on the quality and safety of the patient care that we provide.”
I wonder whether parallels can be drawn with the St Helens and Knowsley trust, as the board is not prepared to take the risk. Put simply, existing pressures on NHS trusts are too great to risk a massive reorganisation. Hospitals realise that, and so should the Government. It is important to understand that the pressures are great, and what is being asked behind the scenes at particular foundation trusts is important.
Now more than ever, the dangers of an FT or NHS trust experiencing financial difficulties are growing. Under the Tory-led Government’s plans for the NHS, a struggling FT will be faced with two options. One is insolvency in line with commercial insolvency procedures, and the other is the sort of takeover dictated by clause 113 of the Health and Social Care Bill, which the Committee discussed in some detail, or a takeover on unknown terms. The Minister refused to be drawn on giving an example of what hospitals might be in difficulty and what sort of takeover might be considered. I do not know whether he has changed his mind since then, because an example would help us with the detail of our deliberations.
Although the debate on PFIs and their appropriate use will continue, it is important to be clear on one issue. During our time in government, we supported the NHS. We undertook no step that would have endangered its position as a world class public health care system. In comparison, this Government’s policy on health care has been in turmoil from the very beginning. It is hated by the public and despised by the professionals, and we believe that that is dangerous for the NHS.
We need to know what plans the Government, the Secretary of State and the Prime Minister have for capital investment in the NHS. What will hospitals and NHS facilities have to do if they require large capital investment? Is it the case, as reported in the Financial Times last year, that the Secretary of State has ruled that they should no longer have access to public sector cash for big capital projects? Is that the Government’s current policy? Alternatively, will the Minister confirm that future investment in NHS capital projects will be determined solely by the market, as part of the Government’s plans to place the market at the centre of the NHS?
The Minister will expect me to remind him that he was forthright—it is not what the Secretary of State would have wished—in identifying the extent to which EU competition law will increasingly apply to the NHS. Just as importantly, we need to understand where the Government are going on PFI. Much has been said about what they are considering, but when will they publish their plans?
I remind the Minister that he is now in government. Whatever matters he raises this afternoon, he must realise that he needs to supply the answers to these difficult questions. There is great uncertainty within the NHS, which is not helped by the lack of policy detail on which course the Government intend to pursue. It is a crucial question for NHS services, and the answers need to be heard.
The Government should make no mistake about it that their massive reorganisation proposals are putting the future of the NHS as we know it in peril. They are causing massive uncertainty and distracting the professionals, and, as the Health and Social Care Bill impact assessment shows, it could have an impact on the safety and care of patients. The fact remains that opposition to the Health and Social Care Bill, which has been led by the Labour party, and the increasing rejection of the Government’s plans by medical professionals, health experts and patients groups alike have forced the Government to take this humiliating pause. If it is to be more than a simple political ruse to get through the local elections tomorrow, real and significant changes will need to be made to the Bill, including the crucial deletion of part 3, which has severe implications on the issues that we have been discussing today.
Labour left the NHS with record levels of public satisfaction, record low waiting lists and world class hospitals such as those at St Helens and Whiston. It is becoming increasingly clear that the NHS is moving backwards because of this Government’s cuts and broken promises. I have no doubt that that will inform the choice that people will make tomorrow at the ballot box.
Mr Alan Meale (in the Chair)
I call the Minister to reply. As an ex-Whip, you will be aware that you have extra time—11 minutes will be added to our debate because of the Division.
The Minister of State, Department of Health (Mr Simon Burns)
Thank you for that, Mr Meale. It is a pleasure to serve under your chairmanship.
I congratulate the hon. Member for St Helens North (Mr Watts) on securing this important debate. I take the opportunity to pay tribute to the many who work so hard to deliver high-quality NHS services and health care for the benefit of his constituents and the constituents of the right hon. Member for Knowsley (Mr Howarth) and the hon. Member for Blackley and Broughton (Graham Stringer). I pay particular tribute to the St Helens and Knowsley Teaching Hospitals NHS Trust’s approximately 4,500 staff and its many trainee specialty doctors, who bring a consistently high level of care to patients throughout Merseyside and Cheshire.
The trust has a track record of first-rate clinical performance. As we heard, it achieved three stars and consecutive double excellent ratings from the Care Quality Commission, a feat that was maintained in 2010. It also achieved the highest score nationally for cleanliness in the recent national in-patient survey. The people of St Helens and Knowlsey can be very proud of what has been achieved. The hospital’s staff do a tremendous job, and the Government will support and empower them and all front-line staff in continuing to improve services free from the interference of meddling politicians in Westminster—and free at the point of use for all who are entitled to use the national health service.
The fact has been underlined that in 2010-11 we increased PCT allocations for the area to just under £600 million, a cash increase of £17.2 million or 3%. I know that the House will share with me the pleasure of knowing that, in the last two years for which figures are available, there was an increase in the number of nurses, consultants and doctors who serve the local community.
The hon. Member for St Helens North raised the important issue of PFI contracts. I shall deal with this topic in two parts. First, I shall outline the coalition Government’s approach to the private finance initiative generally. Secondly, I shall examine the situation at St Helens and Knowlsey.
The Government confirmed at the end of last year that we remain committed to public-private partnerships, including those delivered via PFI, if they can be clearly shown to represent good value for money. Such arrangements will continue to play an important role in delivering NHS infrastructure. However, we believe not only that too many PFI schemes have been undertaken but that some were too ambitious in their scope, a point made in an intervention by the hon. Member for Blackley and Broughton.
Mr Watts
Will the Minister say which PFI schemes should not have gone ahead? Frankly, we had a legacy of neglect under the previous Conservative Government, and most people believe that we should increase the hospital building programme, not decrease it. Will the Minister itemise those schemes?
Mr Burns
I do not share the hon. Gentleman’s blinkered view of what went on in the health service prior to May 1997. I am probably of a more generous spirit, in that I am prepared to pay tribute to the achievements of the last Labour Government, although it would be more difficult to discover those of the Wilson-Callaghan Government and before that the Wilson Government because of the chronic economic situation.
Unfortunately, the hon. Gentleman is not as generous of spirit; he seems to think that everything changed in May 1979 and did not improve again until May 1997, despite the fact that for every year between those dates we saw a real-terms increase in health spending. Indeed, health spending went up from just under £9 billion a year in 1979 to more than £39 billion in 1996-97, which at the time was an incredibly large sum, although due to inflation and other factors, it now seems far more modest. However, I am prepared to be more open-spirited and to acknowledge achievement when justified, but also to criticise when justified.
Derek Twigg
No one suggested that everything was renewed and changed under the previous Labour Government, but there was record investment and an unprecedented hospital building programme. How many hospitals did the Thatcher and Major Governments build?
Mr Burns
This is the point. Perhaps the hon. Gentleman is taking a punt on something with which he is not very familiar, but if he had been in the House in the mid-1990s, he would know beyond doubt that there were record levels of investment in the NHS. Even he said, looking at the report in front of him, that the Major Government used PFI, and there was considerable investment in infrastructure. He would probably argue—with some justification because one can always argue this—that there should have been more investment, but there was more. I shall give one example, but—
Mr Burns
I will. There are so many examples of old and dilapidated buildings or buildings that were past their sell-by dates that the Thatcher and the Major Governments knocked down and replaced through new investment. One example was the moving of the European-renowned burns and plastic surgery facility on a Billericay site in Essex, which wanted to expand to maintain its position at the forefront of providing highly specialist services and was moved to Broomfield. I remember a particularly happy day in February 1997 when, as a junior Health Minister, I accompanied the then Prime Minister to open it.
May I now get back to the point I was making to the hon. Member for St Helens North? However reasonable the hon. Member for Halton is trying to be, his hon. Friend was not quite so generous, suggesting that everything was appalling prior to 1997 and everything was magnificent after it. The hon. Member for Blackley and Broughton rather unfortunately brought the speech of the hon. Member for Halton to a bit of a halt by highlighting some of the perceived criticisms of the PFI system under the Blair and Brown Governments, but the hon. Member for Halton very neatly sidestepped the issue. He did not want his story of good news on investment in hospital buildings to be punctured, and neatly avoided it.
Mr Watts
The Minister must understand that St Helens was served by three Victorian workhouses. After the Labour Government were elected in 1997, three brand-new, state-of-the-art hospitals were built and we had a walk-in centre, new GP services and more doctors and nurses. He should understand that my experience is that after 1997 there was massive investment, and before 1997 there was very little.
Mr Burns
To pick up the point made by the hon. Member for Blackley and Broughton, until October last year, I, too, for the 13 years of the previous Labour Government had a hospital in my constituency that was an old, Victorian workhouse, with ancillary wards that were improved Nissen huts. We could go round the country and find many buildings that needed improvement.
I am sure that Labour Members will accept that even the NHS is restricted in that it cannot have unlimited funding, there will be priorities for improvements and reinvestment, and not everything will be done all the time. The process is ongoing. To answer another point before I focus on St Helens, the hon. Member for Halton asked about what is happening to the capital spending settlement and programme. As I am sure he is aware, as an outcome of the spending review, the Government have a capital spending settlement up to 2014-15, and capital will continue to be used to provide investment for NHS development, as well as PFI.
Mr Burns
The hon. Gentleman wants me to list some more new hospitals. There is the Chelsea and Westminster hospital on Fulham road, which was a flagship hospital for the centre of London initiated by Baroness Bottomley, I believe. I could continue round the country, but I will not because my time is limited. I think that the hon. Member for St Helens North would prefer it if I spent more time discussing his local PFI project, because there is a lot to be said to clear his mind and reassure him, if only he has the open ears to listen; an open mind would help as well.
As the Government confirmed at the end of last year, where they can be clearly shown to represent good value for money, we remain committed to public-private partnerships, including those delivered via PFI. Such arrangements will continue to play an important role in delivering future NHS infrastructure. However, the Government also believe that not only have too many PFI schemes been undertaken, but some were too ambitious in their scope. The Treasury has now reviewed the value for money guidance for new schemes and looked at how operational schemes can be run more efficiently. We are clear that the focus should now be on releasing efficiencies at the many existing PFI schemes.
In January, the Treasury published new draft guidance, “Making Savings in Operational PFI Contracts”, which will help Departments and local authorities to identify opportunities to reduce the cost of operational PFI contracts. As part of that initiative, my noble Friend Lord Sassoon, the commercial secretary, launched four pilot projects to test the ideas raised in the Treasury’s draft guidance. The focus of the pilots is to find efficiency gains and savings within the PFI contract itself, allowing the quality of care for patients to remain the priority. The pilots should end by the end of this month. The lessons learned will be used to finalise the Treasury guidance and to improve other relevant PFI contracts, including the one at Whiston hospital. One essential element is that all NHS trusts will retain any savings made to reinvest in improving patient care.
The other important aspect of operational PFI schemes and their cost to local health economies is their effect on NHS trusts seeking NHS foundation trust status. The coalition Government have set a clear commitment for all remaining NHS trusts to achieve foundation trust status by April 2014. That policy will finally realise the ambition of the previous Labour Government. It is about ensuring high quality and sustainable NHS services by giving trusts the freedom to serve their patients to the very best of their ability, unhindered by top-down bureaucratic control.
An issue facing some NHS trusts in their move towards attaining FT status is the affordability of their PFI schemes, as hon. Members are aware from examples in their constituencies. We are tendering for an independent review to establish where PFI schemes may, in some organisations, be the root cause of problems that prevent them from becoming foundation trusts. St Helen’s and Knowsley NHS Trust is one such organisation, and will be considered as part of the scheme. In addition to the independent assessment, the Department and the NHS are developing solutions in a systematic and comprehensive way to manage the PFI schemes in the very small number of trusts where a local or regional solution cannot be found.
When the current management of St Helens and Knowsley NHS Trust signed their PFI agreement in 2006, with the agreement of the then Secretary of State for Health, Patricia Hewitt, and other Ministers, local PCTs agreed to make up the shortfall between the revenue generated by the hospital through the national tariff and other means and the cost of the unitary payment—the annual PFI charge, which was some £20.3 million. Unfortunately, that decision built a deep lack of sustainability into the trust’s finances—a lack of sustainability that the trust, the strategic health authority and the Department are now working extremely hard to rectify. To that end, the trust’s board and the strategic health authority, NHS North West, are developing a tripartite formal agreement, or TFA, to be agreed with the Department of Health, which will support the work to achieve foundation trust status.
Every trust is required to produce a TFA, setting out how it plans to progress to FT status by 2014, the challenges that it faces and how it plans to overcome them. In the case of the St Helens and Knowsley trust, the TFA is still in draft form and is very much a work in progress. Beyond what was leaked to the Liverpool Echo and to the hon. Member for St Helens North, I have not seen the draft and while discussions are ongoing it would be inappropriate for me to do so and I will not see it. Therefore, it would also be inappropriate at this stage to publish the documents.
Mr Watts
Minister, the local community and the local MPs will believe that that is a totally unacceptable stance to take. It is clear that there are grave doubts about the future financial viability of the trust—the St Helens and Knowsley Teaching Hospitals NHS Trust, including the Whiston hospital—and that a number of options are being considered in the current discussions about the trust. For the Minister to hide behind the fact that he does not want to see that report removes the accountability that we would expect him to have. Will he reconsider that decision and will he look at that document? Also, will he rule out some of the options, including the private provider option? If he does not do those things, people will continue to suspect that his Department is being driven by the fact that it wants to privatise our hospitals, but he and other people in the Department do not want to see the documents that are being discussed now. I can see no reason why he should not see that draft document and why we should not see it.
Mr Burns
First, of course, the hon. Gentleman has seen the first draft document—it was leaked to him and I think that he held it up during his remarks this afternoon—so it is slightly stretching the point to say that local MPs have not seen it. I have no doubt that he has shown it to his hon. Friend the shadow Minister for Health, the hon. Member for Halton, and I would be rather surprised if the right hon. Member for Knowsley has not seen it too.
Mr Burns
Because it was a first draft document, drawn up between officials in the Department of Health, the SHA and the trust, and I do not think that at that stage it was appropriate for me to see it. Also, I suppose that if one is being totally candid, which often gets me into trouble when the hon. Member for Halton or particularly the hon. Member for Leicester West (Liz Kendall) are around, it does make it slightly easier for me because I can say, “In all honesty, I have not seen it.”
I will now make some progress, because I think that what I am about to say may answer some of the questions put by the hon. Member for St Helens North and it may well help the right hon. Member for Knowsley, too. If it does not and I have time to do so, I will give way then.
The TFA process should be completed soon, with the final approved version hopefully being published some time in June or July. I can confirm—if the hon. Member for St Helens North would like to listen to me, because I think that he will find what I am about to say particularly interesting, as he has expressed a degree of confusion about the issue—is that one of the options under review is not, I repeat not, to somehow “privatise” the NHS. As I said to the hon. Gentleman during Health questions last week, this Government will never privatise the NHS and we have no intention of doing so at the St Helens and Knowsley trust.
Perhaps it would be a help if I took a moment to explain the process through which the trust, like all trusts in a similar position, is progressing towards becoming an FT. First, the trust, along with local health authorities, will attempt to find a local solution to whatever financial issues there may be. If a simple local solution cannot be found from within its own resources, then a more radical solution may be necessary, such as merging with another trust and examining whether services need to be reconfigured. On that point, it may be of some consolation to Opposition Members that the benefits of a merger with another trust are that it reduces the percentage of the unitary payment of the PFI in relation to income, which helps with the financial situation, and for other FTs in a merger it increases the income base and economies of scale become possible, which again potentially helps with the finances of a trust.
If the problems cannot be resolved in that way, we would work to a national solution, which is being developed by the Department and which will be agreed with the Treasury. If there is no foreseeable solution, a final option would be to consider tendering the management of the trust. Under that option, management teams from within the NHS, from a social enterprise or from the private sector would put forward their ideas on how to find a way forward for the trust.
Mr Burns
May I just continue, because this is rather important?
While that option is a very long way down the line of potential solutions, it is only what is currently being done at Hinchingbrooke hospital in Huntingdon, in the constituency of the Under-Secretary of State for Justice, my hon. Friend the Member for Huntingdon (Mr Djanogly). The decision on that hospital was taken by the previous Labour Government, when the right hon. Member for Leigh (Andy Burnham) was the Secretary of State for Health. So it is not a new option dreamt up by the present Government since coming into office. We are simply taking an option that is already on the table and that was there when we came into power, which the previous Secretary of State for Health—a Labour Secretary of State for Health—was prepared to accept.
Mr Burns
Just one minute. I must say that at the time, during the discussions about what should happen to Hinchingbrooke hospital and about the use of the option that the right hon. Member for Leigh agreed to, nobody said that that was privatising the hospital, because it was not. If—and it is a big if—that solution were to be considered the right way to solve the problems at the St Helens and Knowsley trust, that would not be privatisation either.
Derek Twigg
With respect to the right hon. Gentleman, we are not comparing like with like.
Derek Twigg
We have a double-excellent hospital at St Helens and Knowsley; it has excellent financial management and excellent services. It meets all the standards. I put the question back to the Minister. On that basis, why is the Department—whether we call it the SHA or not, it is part of the Department and it has responsibility to the Secretary of State—
Derek Twigg
Well, I understand the SHA discussed this as an option with the hospital. I want the Minister to ask my question. Did the hospital voluntarily reject the third option of a private sector provider coming in to manage or run the hospital? Did it refuse that option and also say that it would not accept the cuts being asked of it by the SHA as that would put patient safety at risk? Is that correct or not? If he does not know, will he find out?
Mr Burns
That the trust rejected consideration, or the possible consideration, of that option, because—[Interruption.] What I want to do is to put it in context. As I said in my comments earlier, that is very much a last possible solution if the other solutions are not able to be worked out.
Derek Twigg
I understand that the SHA, not the hospital trust, suggested as a third option having the private provider, on the basis that the hospital—I understand that it was approved by the board—would not accept what was on offer because of the cuts that it would have to make and it was concerned about patient safety. It therefore would not accept voluntarily an option to have a private sector provider come in. The question is whether that option was proposed by the SHA and whether the trust, because of concerns about patient safety, rejected it on that basis, on a voluntary basis. I make that point very clearly.
Mr Burns
If—I will pursue the matter after the debate—there is anything in that that is incorrect, I will come back to the hon. Gentleman as quickly as possible, but my firm understanding and the advice that I have been given is that the answer is no.
May I reassert what I said earlier about the processes of the options, because it seems to be getting lost in the telling? I have said that it is important to find a local solution to whatever financial issues there may be. That is what the trust and the local health authorities are working to try to secure. If a simple local solution cannot be found from within the trust’s own resources, a more radical solution may be necessary, such as merging with another trust and considering whether services need to be reconfigured.
I think that it was the hon. Member for Halton but it may have been the hon. Member for St Helens North who said, “But nobody has ever said what other trust there might be.” I may be able to help the hon. Gentleman who asked that question. One of the options is the North Cheshire trust.
Mr Watts
I am extremely grateful to the Minister for giving way, because this goes to the heart of the matter. The lack of accountability comes from the fact that he has not seen the documents and therefore does not know what is in them. If he published the reports, he would see that there is a first draft and a second draft, and that the idea of the privatisation of the management comes from his Department. I do not want to see the Minister embarrassed. The best way for him to resolve the problem is to publish the two documents, and everyone will then be able to see that the third option was not wanted by the trust but is being driven by the Minister’s Department.
Mr Burns
May I return to the intervention made by the hon. Member for Halton? I said that as soon as I heard anything I would get back to him. He asked whether it was the trust that said it would not accept the option, and about the patient safety and quality of care recommendation. My answer should have been “I do not know,” not “No.” The advice I have been given is that I do not know, and we do not know.
As time is running out, may I reiterate the process? I do not want any confusion. I have said that if a simple solution cannot be found from within the trust’s own resources, more will be done to find a radical solution, perhaps involving a merger with another trust and examining whether services should be reconfigured. Although that option is a very long way down the line of potential solutions, it is similar to the one at Hinchingbrooke hospital that was embraced by the previous Labour Government and accepted, in principle, by the former Labour Secretary of State for Health, the right hon. Member for Leigh, as the way forward in a particular hospital with a particular problem. However, even if that were, in any circumstance, to become an outcome for a hospital, to suggest that it somehow equates to hospital privatisation is nonsense, for a number of reasons.
First, the hospital will remain a wholly owned NHS hospital, with NHS assets and NHS staff remaining entirely within the public sector. Secondly, I remind the hon. Gentlemen that the hospital has achieved its record of sustained excellence in part due to the significant involvement of private sector companies, a policy that was actively encouraged under the previous Labour Government. All the Labour Members present for this debate were proud members of that Government at some point during the Administration’s 13 years. Examples of that policy in operation in the hospital are that radiology imaging equipment has been supplied through a managed equipment service provided by GE Medical Systems since 2006, when Patricia Hewitt was Labour Secretary of State for Health. Facilities management services, which the hon. Member for Halton rightly praised and which have been vital to delivering high levels of cleanliness throughout the trust, have been provided by two companies—Vinci FM and Medirest—also since 2006. The use of the private sector does not mean privatisation, nor does it lead to a poorer quality of patient service, and I hope that hon. Members will acknowledge that the hospital trust’s excellent clinical reputation is evidence of that.
This Government want all NHS trusts to become foundation trusts because they will provide better patient care. Foundation trusts will be free to respond to the needs and wishes of local people and will be far stronger, both clinically and financially. To become a foundation trust hospital, an NHS trust must prove that it has passed strict tests on clinical care—the care that patients deserve. It also must prove that it is financially sustainable in its own right, which is what all taxpayers deserve.
Hospitals that are built on sand will sink, and this Government will not stand idly by and allow that to happen—the people of St Helens North deserve no less. I am sure that in due course, when the proper procedures have been adopted and the strategic health authority, the primary care trust, the hospital trust and the Department of Health have reached conclusions, documents will be published and decisions will flow.
This is not a conspiracy; it is a sensible and coherent way to move forward and discover a viable, practical and proper decision to help what is, in many ways—as all speeches in the debate have shown—a very good hospital that has a problem because of its PFI scheme. I gently remind Members that the PFI was approved by the trust and the Department of Health under the Labour Government, not the coalition Government. That is what has caused the problem, and it is why a viable solution is important. I wish everyone well in seeking a solution that is relevant and meaningful to the future success of the trust.
For a variety of reasons, it is always nice to have a conspiracy theory tucked in one’s back pocket to cause concern, but this is not a conspiracy. Just as I said earlier, Americans did land on the moon in 1969, John F. Kennedy was sadly shot in 1963 and, contrary to some people’s views, Barack Obama was not born in a manger.
Equitable Life
(12 years, 11 months ago)
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Mr Brian H. Donohoe (Central Ayrshire) (Lab)
It is good to see you in your place, Mr Meale. I thank Mr Speaker for allowing me to participate in this very short debate on a subject about which the Minister has corresponded with all Members, and which has been a problem since 1992, the very beginning of my time in this place. It has been a problem all those years, and no Government have addressed it as my constituents deserve, a fact on which I will concentrate in my speech.
Guidance has been given to Members. The Government first gave it to us in a round robin letter from the Minister on 15 November, and an update was given on 26 January this year indicating that things were moving apace and that solutions and a process had been found. I am after an update from him and the Treasury on where we are at and when the first payment will be made to those who seek and deserve compensation.
There is absolutely no doubt that there was foot-dragging during the 13 years when we were in government. I participated in debates on the other side of this Chamber and was critical of the Government of the day. I also remember occasions when the Minister was on this side of the Chamber, making all sorts of promises to the public that were most effective at the time. That is what I will concentrate on.
The place to look in order to understand a party’s position on any given subject is its manifesto. The Liberal Democrat manifesto referred to
“Meeting the Government’s obligations towards Equitable Life policyholders who have suffered loss. We will set up a swift, simple, transparent and fair payment scheme.”
The Conservative manifesto said:
“We must not let the mis-selling of financial products put people off saving. We will implement the Ombudsman’s recommendation to make fair and transparent payments to Equitable Life policy holders, through an independent payment scheme, for their relative loss as a consequence of regulatory failure.”
That was in the Conservative party manifesto for last year’s general election. Having read those, I would have thought that measures would be in place by now. We are a year into the coalition Government, and I understand that not a single payment has been made. Perhaps the Minister will update us on when it can be expected.
The Conservative manifesto says “mis-selling”. It is a somewhat unfortunate choice of phrase, as many pensioners feel that they were mis-sold an election promise by the Conservatives. That is a fairly serious accusation. I get letters in my mailbag almost weekly—34 of my constituents write to me regularly on the subject—and I am sure that that is repeated across the land and that every Member of Parliament is being written to by those most affected by the mis-selling of that fund.
More recently, the hon. Member for Southend West (Mr Amess) said in the Chamber:
“I know that the Treasury team are working extremely hard to try to balance the books, given the terrible legacy that we were left, but I must tell the Deputy Leader of the House that I am worried about the promises that were made before the general election. Some of my elderly constituents feel that we have not honoured them.”—[Official Report, 5 April 2011; Vol. 526, c. 987.]
That is a Conservative speaking. There is concern across the House about what this Government are doing, and it must be considered.
What are the problems, and how are the Government and the Treasury addressing them? Although they made that promise, they almost immediately excluded some 10,000 elderly people from the compensation scheme because they took out policies before the September 1992 cut-off date, which seems unfair. Those trapped policyholders arguably suffered the same maladministration as the others. We were told that they would be paid 100% compensation, but they will not receive anything. That should, indeed must, be addressed.
I must concede one thing—I have already done so publicly in this place, during the last debate on the subject. Investing in anything involves taking a gamble. People must understand that even a pension scheme, which could be described as a gold-type investment, can never be expected always to go one way. It is always possible to lose money. I have seen that at first hand. At the same time, we are talking about investments made when the Government of the day—and particularly one Minister, Eric Forth—said that they did not want any form of regulation whatsoever governing the finance sector. If we trace back the history, that is where the problem was first created. There should have been regulation. The whole fund was tied up in a system that had no regulatory body to examine what was going on.
It is simply wrong for the Treasury to have revised the amount of money that will be available from the public purse for the payment scheme. It promised total payment—that is what was said and understood. That is what was in the correspondence I received. I was challenged at the hustings during the run-up to the last election, and that was what was read to me as the policy of this Government. They made that clear to those constituents of mine who were concerned about the question.
Even to suggest that the money is not being paid as intended due to this country’s financial situation is absolute nonsense. Anyone could see that the global financial crisis would affect Government thinking and that the Opposition of the day were being foolhardy in making the promises they made. It almost indicated—to some of my constituents, at any rate—that there was no chance that the Tories would form an Administration. That is part of the reason why they were in a position to make such promises, which still have yet to be met.
The Minister said in a written answer:
“The Government have accepted all the parliamentary ombudsman’s recommendations in full. The Government’s ambition is to start making payments in the middle of this year.”—[Official Report, 31 March 2011; Vol. 526, c. 472W.]
Can the Minister indicate or commit to a date when that will start to happen? Who will first receive the moneys outstanding?
There is no doubt whatever that, just as with previous Governments, there has been delay after delay. It is immensely frustrating, particularly for those very elderly people who have been deprived of the pension they expected from the company. The matter has been addressed by ombudsmen and all sorts of courts, yet even today no money has been paid. I am looking for an update from the Minister, and I expect to hear something this afternoon.
Neil Parish (Tiverton and Honiton) (Con)
I do not know that I necessarily thank the hon. Member for Central Ayrshire (Mr Donohoe) for how he has introduced this debate. For 13 years, the Labour Government prevaricated about doing anything about Equitable Life. To be blunt, many policyholders believed that it was the Labour Government’s policy to wait long enough that they would not have to pay out to so many people. He has stood up and criticised what we as a Government are trying to do to put that right, yet his party lived through probably the most profligate times that any Government ever lived through and did absolutely nothing about the problems with Equitable Life.
I sat on a European inquiry on this issue, because Equitable Life sold policies not only in this country but in the Republic of Ireland and Germany. The problem was that it was mis-selling—it mis-sold the product by saying that these were with profits insurance policies when, of course, the profits it predicted were never going to be met. Every time we inquire into the matter, we find that all the people who used to manage Equitable Life have mysteriously disappeared and that the new bunch of people running it had no knowledge of what was happening before. We never seem to be able to pin down exactly who was to blame among all the people who were valuing those policies.
The whole issue now rests on the question whether the policies were mis-sold and whether the company acted outside the legislation. I say to the hon. Gentleman that the previous Government had plenty of time to look for and find a way of compensating those who had lost money. Why did they refuse to accept the ombudsman’s report? Why did they go to virtually every court they could find to avoid paying any compensation?
Mr Donohoe
I should like the hon. Gentleman to address one issue. What was in his party’s manifesto and why does he think that this Government have acted under the auspices of that particular entry in the manifesto?
Neil Parish
The manifesto referred to compensating people who had policies with Equitable Life and lost money, and what we are now introducing is a package of measures to compensate them. Whether we can compensate them 100% or not is a difficult question, especially in the financial circumstances that we inherited from the previous Government. I made the point at the beginning of my speech that the hon. Gentleman’s party had the opportunity, when tax receipts were flowing into the Treasury and when there was plenty more money sloshing around in the economy, to make those payments. That was a much less painful time than now, when we have to take into account the financial situation in which we find ourselves. The Minister will explain exactly what we are doing.
I agree with the hon. Gentleman that people want to know exactly when they will receive compensation. I hope that we will hear about that from the Minister. Many of us would like to see as much compensation as possible. In fact, we would like to see greater compensation, but we have to realise that the funds are competing against everything else for which the Government have to find money, at a time when we have inherited such incredible debts. I am sorry to say it, but I find it almost unbelievable that the hon. Gentleman can stand up and accuse this Government of not honouring their pledges when, as I have said, the previous Government had plenty of time to do something about the issue. What we have done is to put together a package of measures that will find ways of compensating people.
This is about when and on what date the policies were sold. Some of those issues are sensitive and I imagine that people who bought policies before 1992 are concerned, because they were also mis-sold policies. The issue has been painful for many of my constituents and many others throughout the country because of the money they have lost, but the one thing we have failed to talk about in this debate is that we have to be absolutely certain that this will never happen again. Lessons must be learnt, because this has caused so much suffering for people who were putting money away for their retirement. Do not forget that all Governments—Conservative Governments in particular—always want people to save for their retirement in order to look after themselves. In this case, people lost money, which is to be regretted.
I am happy to have spoken in the debate and will be interested to hear what the Minister has to say. The coalition Government have introduced a package of measures that will give people compensation after 13 years of a Labour Government who failed.
Mr Alan Meale (in the Chair)
Before I call the Minister, I apologise to you, Mr Donohoe, because I presumed you had given permission to the last speaker to speak. I tell the hon. Member for Tiverton and Honiton (Neil Parish) that it was wrong of me to bring you in. Having said that, at least in the latter part of your speech, you joined Mr Donohoe in hoping that we will get clarity on this issue.
Neil Parish
I apologise. I did not realise that I had to do that. I did not do it on purpose.
The Financial Secretary to the Treasury (Mr Mark Hoban)
I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing this debate. It is the first time for some time that we have had the opportunity to discuss Equitable Life, and I am grateful for the opportunity to update Members on the progress that we have made on resolving the issue.
The hon. Gentleman was right to highlight that some time has elapsed since these problems first arose. A number of reports that established that maladministration had taken place had been published, but the previous Government failed to act on them. When the ombudsman published her report in July 2008, we immediately accepted her recommendations and her findings of maladministration. We were clear that compensation should be paid for relative loss, but we also accepted the second leg of that recommendation, which was that it had to be subject to the constraints of the public purse. We have been clear throughout. If the hon. Gentleman looks at the speeches that I have made in this Chamber and in the main Chamber on Opposition day motions, he will see that we have been explicit about the two legs of the ombudsman’s recommendations. As my hon. Friend the Member for Tiverton and Honiton (Neil Parish) has said, if the issue had been resolved earlier, perhaps policyholders would have been in a better position than they are now.
I remind the hon. Member for Central Ayrshire that, while we accepted the ombudsman’s findings on the day on which they were published, Labour Ministers waited until the January of the following year before accepting only some of her recommendations, and they were challenged on that in court.
The hon. Gentleman asked when we are going to make payments and claimed that there had been a series of delays. However, I made it clear in the House last July, when I made an oral statement on the day on which we published Sir John Chadwick’s work, that we would start to make payments before the end of the middle of this year—that is, before the end of next month—and it remains our intention to do so. I am not sure where these mythical delays have emerged from, because over the course of the past nine months it has been clear when we expected to start to make payments.
Mr Donohoe
Will the Minister be specific and say what the payments will be and when they will start to be made?
Mr Hoban
As I have said, we will start to make payments before the end of next month. I will address the structure of the payments and the next formal step in the process later in my speech.
We have been clear from the date on which the coalition was formed that we want to end the plight of policyholders. Indeed, one of our first pledges—it is in our coalition agreement—was to implement the ombudsman’s recommendation to make fair and transparent payments to Equitable Life policyholders for their relative loss as a consequence of regulatory failure. We have kept that promise. In the year since we came into government, we have made significant progress towards achieving that ambition. Last July, we introduced the Equitable Life (Payments) Act 2010, which gave the Treasury the authority to incur expenditure when making the payments. I am grateful to both Government and Opposition Members for supporting the 2010 Act and for allowing it to receive Royal Assent to an accelerated timetable. That has enabled us to press forward with our preparations for making payments as soon as possible.
We published Sir John Chadwick’s advice on the financial losses sustained by policyholders, as well as the calculations of the actuaries, Towers Watson, of the relative loss figure. At that time, I invited all interested parties to make representations to the Treasury so that they could be considered as part of the preparations for the spending review. We considered the full range of those representations, including those from individual policyholders and lobby groups, such as the Equitable Members Action Group and Equitable Life Trapped Annuitants, and from Equitable Life itself. After final refinements of the calculations by Towers Watson, we quantified the relative loss at £4.1 billion. That is based on the Government’s full acceptance of the ombudsman’s findings of maladministration. That is more than 10 times the figure arrived at through Sir John Chadwick’s methodology, which was based on the previous Government’s limited acceptance of the ombudsman’s findings. In last October’s spending review, we announced that approximately £1.5 billion would be made available for payments to policyholders through the scheme. That is perhaps not as much as we would have liked but, as the ombudsman herself has acknowledged, the impact of the scheme on the public purse has to be taken into account.
It is also important to note that, even in the midst of last year’s understandably constrained spending review, we still found a way to cover the losses of the with-profits or trapped annuitants in full. That was achieved by paying their losses through annual payments that reflected the structure of their policy. Those policyholders were particularly vulnerable to their losses because they were unable to move their funds elsewhere or mitigate the impact of their losses through employment. They were also generally the oldest policyholders.
The hon. Member for Central Ayrshire raised his concerns about the exclusion of those with-profits annuitants who purchased their policy before September 1992 from the scheme. He is not the first to do so, but this is an important opportunity to restate what I have said in correspondence to a number of hon. Members and what I said in the Committee that considered the 2010 Act. In her report, the ombudsman recommended that the aim of the scheme should be
“to put those people who suffered a relative loss back into the position that they would have been in had maladministration not occurred”.
With-profits annuitants who bought their policies before September 1992 did so before maladministration could have affected their investment decision. The first returns that the ombudsman found were affected by maladministration were those of 1991, which would not have influenced policyholders’ decisions until September 1992. Once a with-profits annuitant had purchased their policy, they did not have the option to move it elsewhere. Therefore, the correct question is not what these policyholders would have received if they had invested in a different company or had transferred their policies at some date after September 1992, but how their Equitable Life policy would have performed if maladministration had not occurred. Calculations by Towers Watson show that, if there had been no maladministration, those policies would not have performed better than they actually did, so no loss has been suffered.
For pre-September 1992 with-profits annuitants, the reduction in the levels of annuity payments is largely due to a combination of circumstances, such as poor investment market performance and the fact that early annuity payments were artificially high due to the structure of the product and over-bonusing. I understand that this is a complex issue, and I have happily engaged in correspondence and discussions with hon. Members on it. However, I hope that my explanation about the situation facing with-profits annuitants clarifies our position.
I want to move on to the principles that have guided our decisions on Equitable Life. At all times we have sought to ensure that our choices have been both fair and transparent. In that vein, we set up an independent commission to advise on the distribution of funds to people with policies other than with-profits annuities. The commission reported in January and we accepted the principles it recommended: that we should introduce a pro rata allocation of funding in proportion to the size of relative losses suffered; that we will take a single policyholder view wherever that is fair and practicable to offset relative gains against relative losses for individuals with more than one policy; and that we should announce a minimum amount in the region of £10 beneath which payments should not be made. The reason behind that decision is that administering payments below that amount would be disproportionate to the administrative costs of making them in the first place. Subject to practical constraints, payments to the very oldest policyholders and the estates of deceased policyholders should be made an absolute priority. I want to make that clear to hon. Members today.
We are working on translating those principles into a quick and efficient payment scheme. That work is nearly complete and, as promised during the debates on the 2010 Act, I will be placing a scheme design document before Parliament imminently. In that document, hon. Members will find details on how the new payment scheme will work, including information on who will receive payments, how those payments will be calculated and how they will be made.
We have appointed National Savings and Investments as the scheme delivery partner to oversee that process. I am confident that its experience in processing large numbers of payments makes it the best choice for this important and complicated role. To reduce the complexity of the scheme, we announced in the spending review that payments will be both tax-free and should not affect eligibility for tax credits. That is both fair and sensible, and I know that hon. Members here today will welcome it. A statutory instrument introduced under the 2010 Act to put that into effect is currently before Parliament, and it will be debated shortly.
I want to make one final point to set policyholders’ minds at rest. Policyholders do not need to do anything to claim their payments. Those operating the scheme will contact them in the first instance. A website and call centre will be up and running for the duration of the scheme to guide policyholders and address any queries they may have.
Mr Donohoe
Will the Minister tell me for how long the scheme will be up and running and whether payments will be made over a three-year cycle?
Mr Hoban
The hon. Gentleman has raised an important point. We need to distinguish between two groups. The first is the eligible with-profits annuitants. Payments will be made to them over the lifetime of their policy. That has enabled us to extend the cost of this beyond the spending review and therefore to spend more on resolving the problem than would otherwise have been the case. Other policyholders who have suffered losses and are eligible for compensation will receive a single payment at some point over the next three years, with priority being given to the oldest policyholders and the estates of deceased policyholders. That is to ensure the cost of the scheme is manageable and that the scheme is deliverable in the period.
We have spent a lot of time making sure that the administration and delivery of the scheme works as effectively and as quickly as possible. However, I do not want to give any false promises to people. We said that we would start to make payments before the end of next month. It is a three-year scheme for people, apart from for those who are with-profits annuitants. For with-profits annuitants, payments will be made over their lifetimes, which is the right way to maximise the amount of money available to policyholders given the economic situation that we inherited.
I look forward to hon. Members’ comments on the scheme design document, which aims to be as simple and clear as possible both for policyholders and for those who take a more detailed interest in the technical details of the scheme design. The scheme holds out a prospect that policyholders will receive compensation, and it brings to an end a long-running saga that has not reflected well on how such issues are handled. Of course, as my hon. Friend the Member for Tiverton and Honiton has rightly said, we need to ensure that people have confidence to save for the future. That is why, as part of our reform of financial regulation, which focuses principally on the lessons to be learned from the financial crisis, we are introducing a dedicated financial conduct regulator—the Financial Conduct Authority—which will be responsible for all aspects of the regulation of financial conduct. That will help to strengthen consumer confidence in this area, and we hope will ensure that a problem on the scale of Equitable Life does not happen again.
Small and Medium-sized Businesses (Witham)
(12 years, 11 months ago)
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Priti Patel (Witham) (Con)
I am grateful for the opportunity to draw attention to small and medium-sized businesses across the Witham constituency. I welcome the Minister responsible for business and enterprise, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), to the debate. Like me, he is a strong champion of business enterprise and economic growth, and he has a great deal of experience in the business sector. I know that he understands from first-hand experience many of the challenges facing businesses across the country. I also have absolute faith that he will want to hear some of the concerns and issues that I have, and that he will want to do what he can to help and support business growth in my constituency. As such, I would like to extend to him an open invitation to come to Witham and meet local business men. After today’s debate, when he has got a feel for some of the businesses we have, I hope he will grasp with open arms that compelling invitation.
By way of background, the Witham constituency has a variety of businesses across a number of sectors. That reflects its diversity and the wider strength of Essex, which I call a county of entrepreneurs. We have some great businesses and some passionate advocates of enterprise. In Witham town itself there are many shops, industrial estates, manufacturing industries and services. In the villages alongside the town, in the more rural part of the constituency, we have farms, village shops, market areas and some impressive post offices that do all sorts of creative things. They managed to survive the previous post office closure programme and I pay tribute to the work of the sub-postmasters and sub-postmistresses. Those businesses across the constituency would benefit enormously—I touched on this point in the House—if Essex was made a designated enterprise zone. That would give added zeal to the spirit of enterprise that we have in the county. May I urge the Minister to consider that, as part of the wider proposition, with Treasury colleagues? We would love to be a prime candidate for that status.
Businesses in my constituency vary in size, from one-man operations and family businesses—we have many family businesses—to companies employing hundreds, which have multi-million pound turnovers. They provide everything from glass, plastics and clothing to food. Over the years, some businesses have grown to become world-renowned household names. The village of Tiptree is synonymous with Wilkin & Sons jam. It produces the finest preserves and conserves in the world—Tiptree jam, as it is known. Last year, Crittall Windows employed more than 200 local constituents. It is a pioneer in window making and has a tremendous local history in the Witham constituency. Silver End is the garden village founded by the Crittall family. Last year, it won the Queen’s award for enterprise.
We have a dynamic company called Servowatch, which is based in Tollesbury. Witham is a coastal constituency, and Servowatch provides alarm and monitoring systems and software programmes for yachts and boats. It is very creative and highly innovative—a small, family business doing incredible things. Hayman Distillers is another family business in Witham. There are historic homes that are open to the public. They are creative, and house many small businesses. We have Braxted park. Layer Marney Tower is the largest Tudor gatehouse in England, and hosts the “Antiques Roadshow” programme next week. All sorts of small businesses and enterprises are based there.
As important and essential to the local community are the small business men and women who day in, day out open shops at the crack of dawn, struggle to make ends meet, and provide essential goods and services and, importantly, local jobs. I pay tribute to the local chamber of commerce and the Federation of Small Businesses in Essex for the support network they provide to many of those small and medium-sized businesses. They have been a great avenue for networking and, as I discovered not long after being elected, are a good sounding board for many of the challenges that small businesses face. More than 80% of jobs in my constituency have been created by small and medium-sized businesses. Compared with a national average of approximately two thirds, that is very high. Those businesses showed tremendous tenacity coming through the downturn with very little help from the previous Government, and keeping many thousands of local people in work. I pay tribute to them, because they have struggled and are on the front line. Their priority is to keep their heads above water while at the same time securing local jobs through this difficult period.
Many businesses did not make it through the recession. I put that down to the underlying failure of the previous Government to support private enterprise. Too many local high streets have been left struggling and dying. In Witham town we are, like many, scarred with empty premises and shop fronts.
The Minister knows that the nature of what constitutes a small business has changed over the years and decades. I am the daughter of a small shopkeeper—my parents started a business in the 1970s. The term “small business” has changed beyond all recognition compared with 30 or 40 years ago. The Minister will therefore be aware that Government policies need to adapt to the changing needs of SMEs in order to keep pace with job opportunities and the changing labour market, and to provide opportunities for the private sector to grow and avoid past mistakes. I am a champion of our high streets and independent retailers. Speaking personally, whatever the Government can do—I look forward to the Minister’s remarks—to support them is vital. I emphasise that in the past 10 years our high streets have been neglected. There are three areas where action is needed, and I would like to raise those directly with the Minister: tax, regulation, and access to credit for small businesses.
There is a lot to talk about with regard to tax. I welcome the cut in the small profits rate introduced by the Chancellor, and the cut in the main rate of corporation tax, which was subject to some debate last night during consideration of the Finance Bill. Those measures sent a clear signal that business should not face excessive demands to repay the debt legacy left by the previous Government. In contrast, the previous Government had plans to increase the small profits rate, which would have stifled our entrepreneurs and put investment and job growth at risk. However, I urge the Minister, in his discussions with his colleagues in the Treasury, to keep making the case for those important tax cuts for small businesses. We need to give them the freedom to succeed, and take away the shackles of bureaucratic taxes that eat away at enterprises and stifle their creativity. Businesses have felt far too squeezed for a long time, particularly given the rising costs of doing business—costs in materials, fuel and energy. Of course, tax just eats into that.
I would like to touch on the role of Her Majesty’s Revenue and Customs. It is a constant burden for business—full stop. In particular, I emphasise the attitude of HMRC towards business. I have raised with the Exchequer Secretary in previous debates a number of cases which were drawn to my attention through my casework. Given the way it conducts itself, I doubt whether anyone working in HMRC has any experience of running a business. Bureaucratic language is used. There is unfairness, a failure to get the facts right regarding individual self-assessment, and many issues arising from late-payment charges levied by HMRC. There are some desperate situations. I might write to the Minister following this debate to highlight some areas where we could work with the Treasury to introduce reforms. HMRC is over-zealous in the way it conducts itself with small businesses. We need a degree of common sense, better understanding and better dialogue. HMRC is far too faceless and bureaucratic in dealing with small businesses. We need to stop persecuting the people whom I call the nation’s wealth creators. Let them get on and do what they do best, and treat them in the right way on issues of taxation. There are some key areas of improvement for the HMRC.
On regulation, the Minister and the Government deserve a great deal of praise for the actions they have taken in the past 11 months, and for the commitment they have given to slashing the costs arising from red tape. The announcements in the Budget—long overdue—and the moratorium exempting the smallest of businesses, employing fewer than 10 people, from additional red tape for a three-year period are particularly welcome.
Businesses in Essex would welcome more support to take on apprentices, a cut in the red tape that hampers exports and more opportunities for our goods and services, in particular in the public sector. I have come across many small businesses that have struggled in that area, and more can be done. I will welcome the Minister’s thoughts. We would like to see more action taken.
The Minister must already be aware of an issue I raised with his colleague, the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for Kingston and Surbiton (Mr Davey), regarding the Agency Workers Regulations 2010. They are having a significant impact and have been a constant worry for many small businesses. From talking to the businesses I have been dealing with locally, it seems the regulations will have a disproportionate impact on SMEs. Small businesses will struggle to absorb such additional costs and burdens.
I thoroughly appreciate the complexity of the issue, which was dealt with by the previous Government, the CBI and the trade unions. However, SMEs felt excluded from the process under the previous Government. SMEs tell me constantly that more could have been done on direct engagement and listening to them and their concerns. The Under-Secretary has been most helpful in taking concerns on board, but it is too little, too late, because a lot of the regulations were sewn up under the previous Government. I would welcome an update from the Minister on the regulations, as well as some more detail about the progress on the one in, one out rule. Businesses in my constituency definitely do not want to see more regulations and new burdens coming their way.
Clarification is also needed on the future of EU regulations. We welcomed with open arms the announcement that gold-plating would end; it was shameful that the previous Government disadvantaged British business to the extent they did. However, SMEs in Witham are eager to know how the current Government plan to protect them from further regulation by Brussels. Given my constituency’s manufacturing businesses, that is a big concern. The Minister is aware of the 2020 strategy developed in Brussels and its implications: we want assurances that it will not go unchecked. I ask for vigilance.
I also press the Minister to look at how to reduce regulation for the beer and pub sector. We have a lot of rural pubs in the constituency, and they create many jobs and have a good impact on the local economy.
Access to credit is a significant challenge for businesses in the constituency. Last autumn, I held a business advice surgery for all small businesses—with the Federation of Small Businesses and the banks, which were very good, actually—to facilitate dialogue and listen to businesses’ concerns. Obviously, without the credit lines, businesses cannot survive. My local businesses are struggling, and little progress has been made on access to credit. We welcome Project Merlin, but for me and my businesses locally it is about the money cascading down and going to the front line.
I would like to highlight an example—my constituent Amelia Rope, who runs an amazing chocolate business. She is an inspirational entrepreneur, as far as I am concerned. Her order books are growing—her clients range from Harvey Nichols to Selfridges—and she is desperate for funding. In fact, the Secretary of State saw her about a month ago. Despite even his interaction, no progress has been made with bank lending. That is simply extraordinary. Interestingly, her business seems to fall outside the scope of initiatives such as the enterprise finance guarantee, which should be available, and the banks are not helping her. I would welcome some thoughts on practical measures.
I have one further of example of where we would like to see credit going down to small businesses. A local convenience store in Witham wants to respond to local customer demand by opening a post office counter facility, and it is working with the Post Office to make what would be a good thing happen. Adapting the shop needs some investment, the cost of which is about £10,000. We have made lots of inquiries and have been told that for such a business to get any money, it would have to be making an investment of more than £1 million —that is the level of investment required under the terms of the available schemes, in particular the regional growth fund. That does not help small businesses of that nature, and certainly not that small shop, which I want to see survive, thrive, grow, expand and provide great postal services. I would welcome the Minister’s views on that as well.
To sum up, business is doing well in Essex and we want it to grow. We have the right Government with the right policies and initiatives to take away the shackles of regulation and other burdens. I would welcome the Minister’s thoughts, and his accepting the invitation to come to Witham at some stage to meet our local businesses.
The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)
I congratulate my hon. Friend the Member for Witham (Priti Patel) on securing the debate.
As we have heard, my hon. Friend is an outstanding advocate for small businesses in her constituency—the wealth creators, as she has rightly described them. Although I am a Member of Parliament for a Hertfordshire constituency, I recognise that just across the border in Essex there are some fantastic wealth creators. She spelled out the passion of people who start and run a business, and who take that risk to create not only wealth for them and their family but jobs for their community. We often forget that role of small and medium-sized businesses. She has mentioned a remarkable variety of SMEs, including larger businesses, the self-employed sole traders, family firms and a household name. Tiptree, for those of us who enjoy a little jam on the side, is a fantastic household name, and it is seen around the world.
I note—I will go no further than that—my hon. Friend’s bid for the enterprise zone. I add that my hon. Friend is absolutely right to spell out the role of the business representative organisations. With 80% of SMEs in her constituency in that group, the networking opportunity is crucial. In many ways, that is the foundation for our thinking, as a new Government, on mentoring and business support, which have an important part to play. Government have a role in helping small businesses. That is not to tinker and meddle in every aspect of business, as perhaps we saw under the previous Government, but to create the stable, long-term framework sought by businesses so that they have the confidence to start, to build and to invest in their ventures.
My hon. Friend has mentioned three areas in particular. I am mindful of time, so I want to respond to her points, if I can. First, with tax, we are taking a comprehensive approach, starting by simplifying a system that has become hideously complex and has for far too long soaked up too much productive time, effort and resource. Simplifying the tax system would give businesses greater clarity and certainty, allowing people who are investing and trying to build a business to have some confidence about not only the current financial year but the next. Part of the process has been cutting the main rate of corporation tax from 28% to 23% and, as she has rightly pointed out, down to 20% for smaller businesses, which is one of the best rates in the G7. However, I am sure that the Chancellor is as open as I am to her suggestion that, in the right time and when the finances allow us, we keep that direction of flow with the tax burden, by reducing the rates further in due course.
My hon. Friend has also rightly raised the issue of high streets. The charges that matter, alongside business taxes, are business rates and national insurance contributions. We have sought to double the threshold of the small business rate relief and extended the duration of the scheme by a year. At the same time, we have reversed the previous Government’s bizarre attempt to increase the cost of employing people, through national insurance contributions, with the express intention of keeping jobs affordable. She rightly pointed out that many of the job creators are SMEs. If payroll taxes increased, as planned, how would businesses have been able to take on new people?
Equally important in such a context is capital gains tax. I am proud to be the member of a Government who in less than 12 months took capital gains tax entrepreneurs’ relief from £2 million to £10 million. That might seem somewhat technical, but we are saying to the business owner that we want to reward hard work and endeavour, which is an important part of the change.
I was concerned about the attitude described by my hon. Friend with regard to Her Majesty’s Revenue and Customs. It has a business payments support service which, on the whole, works well, in particular with the time-to-pay initiative allowing people to defer VAT and other business taxes. However, I am not unaware of complaints about some offices and some officers, and if she writes to me I would be happy to discuss that with my hon. Friend the Economic Secretary to the Treasury, because we want to ensure that a service that exists to help people with cash flow is operating effectively and consistently.
Let me turn to regulation, which is a perennial problem for all SMEs. During the past 12 months, we have sought to change a culture rather than just a few regulations. As Sir Humphrey might say, it is a courageous step for Ministers, because it is easier to find a few elements, and to say that we have got rid of them, without dealing with the system. The one-in, one-out system is intended to deal with the core of the problem, which is to get Ministers to understand, as SME owners do, that it is not the single measure of regulation that lies heavily on the shoulders of a business, but the cumulative burden. That is why we are forcing Ministers to show, before they introduce additional costs on businesses from regulation, where they can make a corresponding cut. That is the balancing act that we are seeking to achieve.
I can update the hon. Lady. Our first statement, for the first six months of this year from January to June, shows that proposals for 157 measures have been reduced to 46. That is a 70% reduction in the volume of regulatory measures. What is encouraging about that is that just 11 have a net cost on business. Most importantly, it allows us to deliver real savings. For example, the previous Government introduced the right for employees to request time to train, and were going to extend it suddenly to every small business. That would have cost £150 million, but we are scrapping it, not because we are against training, but because many SMEs are doing it anyway. The regulation would have subjected SMEs to paperwork and processes to prove what they were already doing. That was a needless cost, and we have got rid of it.
The net result overall in the first six months will be a reduction of £3.2 billion in the cost of prospective regulatory burdens on SMEs, which is mirrored in other areas. We are scrapping 16 of the regulatory bodies that exist at the moment. We are putting sunset clauses into new domestic regulations and, as my hon. Friend has rightly pointed out, we introduced from last month a moratorium for the smallest firms on the burden of regulation for the next three years.
My hon. Friend has mentioned EU regulations, and I shall touch on that matter, because I know that they cause great concern to her and many of her constituency businesses. We are taking three steps in this regard, first to ensure that Ministers engage far earlier in the process with Brussels so that we do not find ourselves behind the track, and that France, Italy, Germany and others have decided what the principles of the change will be. Secondly, we are ending gold-plating, whereby we have often tied the hands of UK businesses too tightly. Thirdly, on the 2020 strategy, the Prime Minister is leading the way in pressing the Commission to help small businesses, particularly with an exemption for SMEs in EU regulation. We have already taken that step in the UK, and we are looking to roll it out across the other half of the regulatory burden.
My hon. Friend has mentioned the agency workers directive and, as she has said, my hon. Friend the Employment Relations Minister is dealing with that specifically. The deal that was struck in May 2008 included a 12-week qualifying period before an agency worker is entitled to equal treatment. We recognise that some businesses will have real problems with the way that the directive will work from the autumn. If we seek to change the arrangement but do not secure the agreement of the CBI and the TUC as part of that, the danger is that we could find ourselves in a worse position. The dilemma is difficult, which is why we are consulting carefully, and I am pleased that, as my hon. Friend has said, the Employment Relations Minister is looking carefully at the matter to ensure that large and small businesses are engaged in the process.
Access to credit is also a difficult issue for many small firms. I understand the issue of Amelia Rope—what a super business it is. It can be frustrating, and I certainly find it difficult when the Government cannot intervene successfully in an individual case, but the Secretary of State is leading the way in challenging the banks to make sure that they are not only lending, but behaving reasonably.
Mr Prisk
If my hon. Friend does not mind, I want to answer the questions asked by my hon. Friend the Member for Witham.
We are taking various steps to help SMEs. First, we have secured an effective lending code and an appeal process, so that, for the first time for a dozen years or more, businesses can tackle the unreasonable behaviour that they sometimes encounter. I have encouraged hon. Members—I suspect that I do not need to encourage my hon. Friend—to back up their businesses, because that is the sort of direct action that has an impact on the chief executive of a major bank.
Secondly, we are extending the enterprise finance guarantee—it is not directly relevant to Amelia Rope’s business—so that a further £2 billion of lending can be unlocked. For example, in Essex we have seen 397 businesses secure EFG funding to the value of around £34.5 million. I recognise that that is not the only answer, and my hon. Friend rightly has raised the issue of capital. Debt funding is important, but for many SMEs the capital side—the equity side—is also crucial. That is why we have sought to provide an additional £200 million through enterprise capital funds, which have been designed deliberately to unlock a total of £300 million—£200 million plus £100 million—in equity funding for capital investment for businesses.
Alongside that—this is specifically relevant to the regional growth fund—we recognise the value of business angels. I am a great believer that business angels sitting alongside a business often bring not only funding, but a little grey hair—I declare an interest in that aspect—in terms of experience. We must ensure that small businesses have someone to bring experience of funding. That is why the regional growth fund has been able to extend the way in which we invest through a business angel co-investment fund. The Government should be careful not to invest public money in the wild belief that we have great wisdom in what to invest in, but if we invest alongside those who are experienced, and have a little skin in the game, we can make a sensible investment and grow that market.
That leads me to a broader point about access to credit. I strongly believe that although we need to take short-term measures with banks, we must deal with the long-term issue of competition in the banking system. If we get more entrants—I believe that we will—we will have a golden opportunity to enable people to choose. Every market works when there is a choice of providers. The problem with our banking system at the moment is that most SMEs have a choice between three or four players who have similar terms.
My hon. Friend has raised some excellent points about tax, regulation and credit, as well as about how the agency workers directive will work. She has rightly pointed out that we must enable not only the CBI and larger businesses to have the ear of the Government, but also smaller businesses, which sometimes struggle. In the first 12 months, the Government have started to take effective action by cutting red tape, simplifying the tax system, ensuring that the tax system rewards endeavour through the capital gains tax changes, making it easier to start, fund and grow a business and, in particular, by ensuring that we send a message that the Government include people who have run businesses and who understand them and, just as importantly, that we are on the side of small businesses in Witham and throughout the country.
Mr Alan Meale (in the Chair)
That concludes the debate. I place on record my thanks to the Commons staff, who have worked vigorously throughout the day.
Question put and agreed to.
Written Ministerial Statement
(12 years, 11 months ago)
Written StatementsRead Full debate Read Hansard Text
Terrorist Asset-Freezing Regime (17 December 2010 to 31 March 2011)
(12 years, 11 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mr Mark Hoban)
The Government are committed to reporting quarterly on the operation of the UK’s terrorist asset-freezing regime. We believe this is essential to ensure transparency and accountability of the regime. The Terrorist Asset-Freezing etc. Act 2010 (the Act) has enshrined in law the commitment to report quarterly to Parliament on the operation of the UK’s asset-freezing regime mandated by UN Security Council Resolution 1373.
This is the first report under the 2010 Act and it covers the period from when the Act came into force on 17 December 2010 to 31 March 20111. This report also covers the operation of the UN al-Qaeda and Taliban asset-freezing regime.
As of 31 March 2011, a total of just under £230,0002 of funds relating to terrorism were frozen in the UK. This covers funds frozen under the UK’s domestic terrorist asset-freezing regime, mandated by UN Security Council Resolution 1373, and also funds frozen under the UN al-Qaeda and Taliban asset-freezing regime, mandated by UN Security Council Resolution 1267.
(1) UK’s domestic terrorist asset-freezing regime under the Terrorist Asset-Freezing etc. Act 2010
As of 31 March 2011, a total of 85 accounts containing just over £120,000 were frozen in the UK under the domestic terrorist asset-freezing regime.
Operation of the Terrorist Asset Freezing etc. Act 2010
Asset-freezing designations
In the period 17 December 2010 to 31 March 2011, the Treasury made one new designation under the Act. The final designation was made in respect of the military wing of Hezbollah, including the External Security Organisation (ESO). This replaced a designation of the ESO only, extending the freeze to the entire military wing of Hezbollah.
Reviews under the 2010 Act
The Act contains a transitional provision that ensured that all designations made under the Terrorism (United Nations Measures) Order 2009 which were in force at the time the Act came into force remained valid as final designations under the Act until 17 March 2011, whereupon they would lapse if not already renewed. All 57 UK domestic asset freezes were therefore reviewed during the quarter to see whether they should be renewed as final designations under the Act.
The review process was completed by 17 March 2011 and as a result of these 57 reviews:
37 persons3 had their final designations renewed;
Three persons ceased to be designated and the asset freezes in respect of them were lifted;
A further 16 persons and entities ceased to be designated under the Act but remain subject to asset freezes under EU or UN asset-freezing regimes; and
The designation of the Hezbollah External Security Organisation was revoked and replaced with a new final designation of the military wing of Hezbollah, which includes the ESO.
Licensing
Maintaining a fair and effective licensing system is crucial to ensuring the overall proportionality of the asset-freezing regime, whether the individuals concerned are subject to an asset freeze in accordance with a UN or EU listing, or domestic designation. A licensing framework is put in place for each person in the UK on a case-by-case basis. The key objective of the licensing system is to strike an appropriate balance between minimising the risk of diversion of funds to terrorism and implementing asset freezes in a proportionate way. Licences contain appropriate controls to protect against the risk of the diversion of funds for terrorist finance.
A total of 12 licences were issued this quarter under the Act in relation to four persons subject to an asset freeze. Of these, two were new licences, whereas the other 10 were existing licences which were reissued under the Act so as to reference the current legislation rather than the Terrorism (United Nations Measures) Order 2009, under the authority of which they were originally issued.
In addition to issuing licences relating to a specific person, the Treasury may also issue general licences, which apply to all persons designated under a particular regime or regimes. Licences are granted where there is a legitimate need for such transactions to proceed and where they can proceed without giving rise to any risk of terrorist finance.
Six general licences that had been issued under the 2009 order were reissued this quarter under the Act:
Prisoners’ funds—permitting the payment of funds to prison governors to be held and/or applied for the benefit of a designated person;
Provision of insurance to designated persons;
Legal Aid—licensing of payments of aid to designated persons’ lawyers;
Provision of emergency goods and services under insurance policies;*
Payment of designated persons’ legal expenses by third parties.
*During this quarter, this general licence was subsequently revoked and reissued with amendments.
Legal Challenges
Two legal challenges against designations made under the Terrorism (United Nations Measures) Order 2009 were ongoing in the quarter under review.
(2) UN al-Qaeda and Taliban Asset-Freezing Regime
The UN al-Qaeda and Taliban asset-freezing regime, established under UNSCR 1267, is implemented in the UK by Council Regulation (EC) No. 881/2002. Enforcement measures are provided for in the UK’s al-Qaeda and Taliban (Asset-Freezing) Regulations 2010.
As of 31 March 2011, a total of 83 accounts containing just under £110,0004 were frozen in the UK under the al-Qaeda and Taliban asset-freezing regime.
Designations
During this quarter, the EU added three people to the list in Annex I to Council Regulation (EC) No 881/2002.
Six people were de-listed during the quarter, three of whom had UK connections.
Licences
No individual licences were issued, varied or revoked in this quarter in relation to persons subject to an asset freeze under the al-Qaeda and Taliban asset-freezing regime.
The general licences referred to above also apply to the UNSCR 1267 regime, with the exception of the general licence for insurance, the provision of which is not prohibited under the UNSCR 1267 regime.
(3) Proceedings
In the quarter to 31 March 2011, no proceedings were initiated in respect of breaches of the prohibitions of the Act or the al-Qaeda and Taliban (Asset-Freezing) Regulations.
1 The detail that can be provided to the House on a quarterly basis is subject to the need to avoid the identification, directly or indirectly, of personal or operationally sensitive information.
2 This figure reflects the most updated account balances available and includes approximately $64,000 of suspected terrorist funds frozen in the UK. This has been converted using exchange rates as of 08/04/11.
3 In this statement, “persons” is taken to refer to individuals and legal entities or bodies.
4 Includes approximately $64,000 of suspected terrorist funds in the UK.
House of Lords
Charity Commission: Bogus Charities
Lord Naseby
To ask Her Majesty’s Government what assistance they are giving to the Charity Commission to identify bogus charities for overseas freedom movements, proscribed organisations and terrorists to prevent them benefiting from United Kingdom tax relief.
Lord Taylor of Holbeach
My Lords, a number of government departments, including Her Majesty’s Revenue and Customs, work closely on these matters with the Charity Commission, which has a range of statutory powers and regulatory tools with which to investigate allegations of possible abuse and to ensure that charities are complying with their obligations. The commission also works closely with the police and other law enforcement agencies where there is evidence of criminality and works to raise awareness of the risks of terrorist finance to the charitable sector.
Lord Naseby
Is my noble friend aware that there are two further areas on which the Charity Commission needs help? First, in relation to Sharia law, all Islamic financial institutions must by law give charitable donations. Secondly, in relation to Sri Lanka, despite the ending of the war, there are still bogus Tamil charities collecting money for Eelam rather than sending it to Sri Lanka. In both cases, should not there be a case for better monitoring, particularly of where the money has gone that has been collected in the UK? Might Her Majesty's Government consider our embassies and high commissions checking on the ground on what exactly the money has produced? After all, the British public provide gift aid.
Lord Taylor of Holbeach
My Lords, I hope that the House will forgive me if I do not comment particularly on individual cases. It should be stressed that links between charities and terrorism are very rare. By far the vast majority of charities operating overseas are to be commended for their inspirational work and the relief they bring, often operating in very difficult circumstances. We must be able to identify and tackle any abuse but at the same time be careful to enable the vast majority of legitimate charities to get on with their important work without being bound up in red tape. In my view, the regulatory framework gets it about right.
Lord Phillips of Sudbury
Does my noble friend accept that it would be wise for the Government, when they undertake the shortly to be commenced review of the Charities Act 2006, to review the present planned reduction in Charity Commission funding of one-third over the next four years? Will they not at least think to ring-fence that part of the commission expenditure that relates to enforcement, which is vital to maintain the cherished integrity of charities?
Lord Taylor of Holbeach
I cannot deny that there is always a link between resources and function. My noble friend points out that there is a review of the functioning of charities legislation coming up at the end of this year, which will be very important and I am sure will have these matters in mind. But I am also sure that noble Lords will appreciate that the Government’s priority at the moment is about spending priorities, given the need to provide deficit reduction.
Baroness Royall of Blaisdon
My Lords, what criteria does the Charity Commission apply in its assessment of whether UK charities with expenditure overseas do conform to charitable objectives as defined by statute?
Lord Taylor of Holbeach
My Lords, it is up to the trustees of all charities because they are responsible for the audit trail of their financial expenditure. On scrutiny, all charities are subject to proper regulation of their gift aid through HMRC.
Lord Boateng
My Lords, one of the joys of charitable law is the fact that it is possible to establish a charity in England without having to consult a lawyer. Will the noble Lord please make sure that the Government do not introduce such a high level of regulation that the strong and dynamic voluntary sector is held back by the necessity to employ lawyers and accountants before ever getting a charity under way?
Lord Taylor of Holbeach
I hope the noble Lord will accept that in the first supplementary answer I gave I said that I totally agree with that view. It is the voluntary impulse that makes charitable giving and charitable activity so important and useful. On the other hand, in asking the Question in the first place, my noble friend pointed out that Governments do have to be aware that there are people who will use charities for malicious ends, so we in Government have to be on our toes to avoid that happening.
Lord Elystan-Morgan
Does the Minister recollect that our late colleague Lord Pilkington was in possession of clear documentation showing that on many occasions the Charity Commission had been offered confidential information by intelligence agencies on both sides of the Atlantic but did not feel able to avail itself of that advantage on account of the conditions under which such information would be released? Is the Minister aware of that, and is he able to comment on the situation, albeit, of course, in general terms?
Lord Taylor of Holbeach
My Lords, my response will have to be in general terms. I am well aware that the Charity Commission receives quite a lot of information, and the pursuit of validating that information takes up quite a lot of the commission’s time. It is right and proper that any allegations are investigated, and I am sure that that is exactly what happens.
Lord Tebbit
My Lords, I gained the impression from my noble friend’s original Answer that he does not think that anything more needs to be done about this problem than is being done at the moment. Am I right in that assessment?
Lord Taylor of Holbeach
I hope I can reassure my noble friend that I am not complacent on this issue. What I am saying, however, is that considerable resources across Government are devoted to making sure that there is no abuse of charitable funding and no misapplication of funds for terrorism. We have the Charity Commission itself, HMRC, the police and the National Terrorist Financial Investigation Unit. All these bodies, as part of Government, are dedicated to making sure that there is no abuse of charitable giving.
Lord Foulkes of Cumnock
As charity legislation is devolved, will the Minister discuss the issue with the Scottish Executive to make sure that they are also keeping an eye on this?
Lord Taylor of Holbeach
I am sure that the review of the Charities Act 2006 will take into account the connection with the devolved authorities, and we will want to make sure that they are fully in the picture. Indeed, I hope that the noble Lord is in a position to reinforce the determination of the Government here in Whitehall to deal with this problem.
Manufacturing: Economic Policy
Lord Sheldon
To ask Her Majesty’s Government what representations they have received from manufacturers on their economic policy.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the Government receive representations from manufacturers and representative bodies such as the manufacturers’ organisation, the EEF, which contribute to the debate on a wide range of topics, including the Government’s economic policy. EEF recently stated that the Government’s growth review has now started to deliver tangible progress in removing barriers to growth, investment and job creation in the United Kingdom.
Lord Sheldon
My Lords, I thank the noble Baroness for that Answer. The United Kingdom, of course, is now the world’s sixth largest manufacturer by output. Although some emerging economies are able to produce goods cheaper than in our country, we still have a number of advantages in design, research, pharmaceuticals and technology. However, there is still a problem between the level of economic activity in high employment regions and areas of high unemployment. What action do the Government propose to limit these variations?
Baroness Wilcox
My Lords, the Government fully recognise that a strong manufacturing base across the whole of the country is an essential component of a balanced and dynamic economy. We are working with business, taking action to strengthen manufacturing capability, addressing the barriers to growth in areas, trying to cut excessive red tape, encouraging innovation, export and business investment and improving skills throughout the country. It is a long haul but we are certainly on the move.
Lord Bilimoria
My Lords, there is a perception that manufacturing in Britain is dead. However, as the noble Lord, Lord Sheldon, said, we are still the sixth largest manufacturer in the world and manufacturing makes up almost 15 per cent of our GDP. What are the Government doing to help address this misperception? Furthermore, does the noble Baroness agree that the increase in manufacturing recently has been as a result of the weak pound and strong exports? Does she further agree that if consumption suffers because of cuts and tax increases, manufacturing may suffer as well?
Baroness Wilcox
My Lords, there were many questions in there and a great deal of good information too. Perhaps I should say that I agree with an awful lot of what the noble Lord has said and see whether that helps me. We are aware that we should look at tax and all the other things which hold back business, and we are doing so all the time. It is important for us to make the United Kingdom Europe’s leading exporter of high-value goods and related services, and anything the noble Lord can do to encourage and help me I will listen to.
Lord Razzall
My Lords, bearing in mind that the clear objective of Her Majesty’s Government, as has been articulated by the noble Baroness, is to rebalance the economy away from financial services, particularly in London and the south-east, is she concerned about today’s statistics indicating that growth in manufacturing is now slowing?
Baroness Wilcox
My noble friend has read the same newspapers as me this morning. I think he is referring to the purchasing managers’ index, which suggests that there is a slowing of the growth rate in orders and output although it remains positive. What has been slowing is consumer spending at home and, in some ways, it is difficult to say that people should go out, get themselves into further debt and spend just to help our industries. The most important thing our industries can do is to make sure that we have the right skills and the right people doing the right jobs. The fact that we are doing so well at exports is the one thing that is absolutely glowing ahead for us.
Baroness Wall of New Barnet
My Lords, we have heard from employers about the importance of apprenticeships and the way in which they are encouraged in economic policy. The Minister referred to the skills which come from apprenticeships. Does she agree that apprenticeships are very important?
Baroness Wilcox
I of course agree with noble Baroness. The Government are putting in place funding for 75,000 more adult apprenticeships than the previous Government were providing—and they were providing a lot, too. So we are on the way. The Government are committed to increasing the number of apprenticeships —particularly advanced apprenticeships—so that we bring people up with the skill base that will be relevant for this century and the next.
The Earl of Courtown
My Lords, as many noble Lords are aware, I have run an SME for many years. One of the real problems we have found is access to funding. Can my noble friend say how Her Majesty’s Government can help access to funding, particularly where growth is concerned?
Baroness Wilcox
My noble friend Lord Courtown speaks well for SMEs, as he always does. We are trying to ensure the flow of credit to viable SME manufacturers. This is essential for support and growth and is a core priority for government. Some of the things we are doing to help include: continuing the enterprise finance guarantee until 2014-15, potentially enabling more than £2 billion of additional SME funding; continuing the enterprise capital funds programme to provide £300 million of venture capital for early stage innovation SMEs with high growth potential; and working with the British Banking Association on a range of commitments to assist SMEs with accessing the finance that they need. In addition, the Government are taking forward a package of investment readiness support for high-growth potential SMEs through the Business Coaching for Growth programme. My gosh, we should not fail with all that going on.
Lord Davies of Oldham
My Lords, the House will have noted that the Minister agreed with the noble Lord, Lord Bilimoria, that the single most positive factor in favour of manufacturing at present is the decline of the exchange rate. What does the Minister say in response to the independent Office for Budget Responsibility which has reported that government policies on the economy and in particular on manufacturing are likely to have a minimal effect?
Baroness Wilcox
My Lords, I repeat what the Chancellor said when we started on this rocky road last summer: we face the deepest recession that we have ever faced and we are going to go through very choppy waters. I have no doubt that, if I read out the hundreds of words that I have here to the noble Lord, we would agree that there are times when we get it right and times when we do not, but at the moment we are on the right trend.
Education: Gypsy, Roma and Traveller Children
(12 years, 11 months ago)
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Baroness Whitaker
To ask Her Majesty’s Government how they will address the shortfall in the provision of the Teachers’ Education Service for Gypsy, Roma and Traveller children.
The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford)
My Lords, this year the Government have allocated £201 million to schools for ethnic minority achievement via the dedicated schools grant. This is higher than the amount provided in 2009-10 via the former ethnic minority achievement grant. Schools may use this grant to purchase additional support for Gypsy, Roma and Traveller children or, if schools forums agree, local authorities may retain some or all of the allocation to deliver centralised Traveller education and ethnic minority achievement services.
Baroness Whitaker
My Lords, I thank the Minister for that reasonably sympathetic reply, but is he aware of the NUT report of last November which found that the Traveller education services were taking a disproportionate share of the cuts? Eight local authorities had completely abolished the service. Does he agree that the 20 per cent drop-out rate between primary and secondary school is disastrous for Gypsy and Traveller employment chances and that the school exclusion rate is higher than for any other ethnic group? What can be done?
Lord Hill of Oareford
My Lords, I agree with the statistics mentioned by the noble Baroness. Exclusion rates are, I think, three times higher for Gypsy, Roma and Traveller children than they are for the average of the population. Their achievement both at primary and secondary school is far lower. Unfortunately, the attainment gap over the past four years has widened rather than narrowed, despite all the efforts that have been made. There is clearly not a simplistic answer to this problem. I know that the noble Baroness has been concerned and acted in this area for a long time, as have other noble Lords. There is no simple answer. Clearly, the Government hope to go in the direction of devolving more responsibility to schools. As I said in my Answer, schools forums can choose to carry on funding a centralised service if they think that will work better. I hope that the pupil premium will provide additional resources for schools where they have Gypsy and Roma Traveller children. A lot of this is cultural and educational. Ideas that the noble Baroness and other noble Lords may have as to how one can chip away at this problem will be gratefully received.
Lord Laming
My Lords, does the Minister accept that the best way of hoping to integrate future generations of children from Traveller families is through education? Because of the higher levels of illiteracy in the adults and the low value which is attached to education in many areas, it is necessary not only to support the specialist service but to ensure that children are helped to get ready for school in the morning and to make sure that they are able to attend school on a regular basis. That is why this service is so important.
Lord Hill of Oareford
My Lords, I accept the points that the noble Lord has made. It is the case that we are already seeing that in some parts of the country where the problem is more acute—because it is not geographically equal across the country—it will make sense for school forums to come together and to continue with that kind of service.
Lord Avebury
My Lords, does my noble friend agree that, without a framework of targeted support at local and national levels, the outcomes for this group of children are likely to remain unacceptably low? Although he says that additional support is being given to the local authorities for deprived and disadvantaged children, does not experience show that local authorities will not spend this money on Traveller education services because they are busy sacking such staff and getting rid of them?
Lord Hill of Oareford
The difficulty that we have—and one of the questions I asked about this whole area—is in trying to evaluate what in the past has been successful in making progress. As far as I have been able to see, the evidence for what has worked in the approaches that have been tried so far does not seem very clear or compelling. Unfortunately, as I indicated earlier, the gap has widened. So I do not believe that there is a simple answer. I know that many Members of this House know far more about this than I do. If the noble Lord has particular suggestions, I would be keen to discuss them with him.
Baroness Hughes of Stretford
I wonder whether the Minister is aware, as noble Lords are indicating, that Gypsy, Roma and Traveller children are much more likely to do better and to get into paid work if they are educated in schools and colleges than if they are not. What assessment has he made of the particular impact on these children of the withdrawal of education maintenance allowance? I ask that particularly in the light of the Government’s equality impact assessment, which I understand now admits that there is likely to be unintended discrimination as a result of the withdrawal of the EMA on certain groups of children, of which these are one.
Lord Hill of Oareford
I clearly accept the noble Baroness’s first point—that if children, wherever they come from, stay on at school and do well there, they are more likely to do better thereafter. As for the education maintenance allowance, one issue that we have with Gypsy, Roma and Traveller children is that half of them are dropping out well before they would be entitled to claim EMA. As I have said before, there is a complex of difficult issues to which there does not appear to be a simple answer; if there were a simple answer, I know that the approaches that were in place under a previous Government would have worked in delivering improvements. Sadly, despite the best efforts of all sorts of people, including local authorities, central government and everyone else, with all the tools that they used, that did not appear to work.
Lord Boswell of Aynho
My Lords, the Minister has already referred to a large number of the matters that have concerned those of us who have taken an interest in this area, including the high level of exclusions. I might add to the pot the concern about current implications of a large-scale eviction, which can of course threaten the viability of an individual school as well as the pupils’ education. Would he or his department be amenable to receiving representations from across the House to try to get to the bottom of some of these issues and to have a more informed and extended discussion on what are clearly complex issues?
Lord Hill of Oareford
Yes, of course, my Lords. I am glad to say that a group chaired by the noble Lord, Lord Avebury, is already in existence, but I shall be very happy to do that and to facilitate a meeting with my honourable friend Nick Gibb, who is the Minister responsible. I would be delighted to do that.
Hallmarking
Lord Trefgarne
To ask Her Majesty’s Government whether they will extend the consultation period in respect of their proposal to abolish hallmarking of items made from precious metals.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, there is no such consultation. The Government recently launched their red tape challenge initiative, aimed at reducing the burden of unnecessary regulation on business. Under its terms, anyone is invited to suggest which regulations might be scrapped or retained, with the emphasis on regulations which impose costs on business. The retail sector is the first theme to be considered and thus hallmarking legislation is among those on which comment is invited. Where regulations are identified as burdensome, Ministers will need to justify to an independent review panel any decision to retain them.
Lord Trefgarne
My Lords, I am grateful to the Minister for that reply. If I am under some misapprehension on this matter, as she appears to suggest, most of the hallmarking industry is also under the same misapprehension, including the heads of the four United Kingdom assay offices. Will she therefore be good enough to receive a delegation from me with such people so that she can set that misapprehension to rights?
Baroness Wilcox
I am happy to see my noble friend at any time and I am happy to see him with a delegation. I was wondering how I was going to answer his second question, which I thought was going to be about why hallmarking was included with this initiative at all. The reason is that we are looking at retail, and things that are sold from jewellery shops are usually retail. That is the only reason why it is in there. We have had an awful lot of responses; more than 5,000 people have contacted us to say how much in favour they are of keeping it. I am sorry that this story has gone out, but it is a misapprehension. Anyone in the retail trade can write in with anything that they think is too much red tape. The consultation is for three months. It finishes for this particular group on 5 May, which is tomorrow. After consultation, a decision will be taken on the letters and e-mails received. I hope that helps.
Lord Corbett of Castle Vale
Is the Minister aware that those who make use of the Birmingham assay office, set up by Matthew Boulton and his chums, do not regard the activities of that office as in any way burdensome? What it does, as the other assay offices do, is guarantee the integrity and quality of the massive array of goods produced by Birmingham’s viable jewellery quarter. Will she feed that in as part of this consultation?
Baroness Wilcox
My Lords, your Lordships can be sure that I will be feeding back in everything that is said in this exchange today. I should add that, when I chaired the National Consumer Council, there was quite a lot of pressure from the European Union for British hallmarking to be considered unnecessary, but it is something that we hold dear. Your Lordships can be sure that I shall be feeding this back in on this, the very last day.
Baroness Trumpington
My Lords, is the Minister aware that I have had the great good fortune of watching the excellent workers in the assay office turn down a large silver tea service because the metal was not of sufficient quality and was therefore returned to its country of origin? Does she not agree that, if it had not been for the assay office, that silver tea service would have been sold on the open market as being the real thing?
Baroness Wilcox
The assay office has always made a very special contribution, as is being shown all through the House today. I am happy to have this exchange sent back.
Lord Palmer of Childs Hill
My Lords, I welcome the Minister’s reply about the length of consultation, but would it not be a good idea to extend the consultation to something like 100 years in order to protect the value of the hallmarking of antiques? To remove hallmarking would destroy things like “Antiques Roadshow”.
Baroness Wilcox
My Lords, this ambitious project, which has been opened up to the public by the Government, is being conducted over a two-year period, during which time some 21,000 individual regulations will be scrutinised. I say again that this affects the whole of the retail sector. I am not really sure—none of us is—why the hallmarking industry feels under such threat, but certainly, from the responses that we have had in support of hallmarking, it can be seen that the general public hold it very dear. Although I cannot say at this stage that things will be done, it is part of the whole project.
Lord Davies of Oldham
My Lords, the Minister doth protest too much. The problem is that the Government that she serves have a slash-and-burn attitude with regard to essential areas of consumer protection on the grounds that all that they are dealing with is so-called red tape and bureaucratic interference. Here we have a very clear illustration of why it would in fact be quite wrong to pursue that policy. I hope that the Minister will think again.
Baroness Wilcox
I hope that the noble Lord will look at the result of this first tranche, which has gone through in the earliest months, and feel at the end that the results coming through were well worth having.
Baroness Oppenheim-Barnes
My Lords, my late father was a royal warrant holder for two generations of British royalty. His hallmark was something of great importance in our family. In subsequent years at the Department of Trade, I introduced regulations to have country-of-origin marking on all manufactured goods in the UK, which was welcomed by all but struck out by the EU, which described it as a non-tariff barrier. If we are to lose hallmarking and country-of-origin marking, it will be a sad day for consumers in this country.
Baroness Wilcox
My noble friend has now put that on the record. It has gone into Hansard and I am sure it will be of great value. For your Lordships’ information, the next section being looked at is hospitality. If any of you wish to write in to the Cabinet Office, I am sure it will be delighted to receive that.
Lord Foulkes of Cumnock
If the Government are going to consider any options for changing this, could this House first be given a vote by first past the post?
Baroness Wilcox
I am checking to make sure that I have absolutely the right answer for the noble Lord. At the end of the three months, an independent panel will review the comments received and Ministers will be asked to justify the retention of legislation proposed for repeal. It is fairly straightforward and an open process, which I am sure your Lordships will be interested to hear the results of.
Charities (Pre-consolidation Amendments) Order 2011
(12 years, 11 months ago)
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Baroness Verma
That the draft Order laid before the House on 3 March be approved.
Relevant Document: 18th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 27 April.
Postal Services Bill
(12 years, 11 months ago)
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16:02 - Division on Amendment 1 - Ayes: 155 / Noes: 227 - Amendment 1 disagreed.
16:43 - Division on Amendment 2 - Ayes: 165 / Noes: 218 - Amendment 2 disagreed.
17:37 - Division on Amendment 4 - Ayes: 175 / Noes: 198 - Amendment 4 disagreed.
18:19 - Division on Amendment 7. - Ayes: 137 / Noes: 191 - Amendment 7 (to Amendment 6) disagreed.
Lord Lea of Crondall
“Restriction on disposal of shares in a Royal Mail company by Initial Public Offering
A relevant disposal by an Initial Public Offering may only issue or transfer shares representing no more than 30% of the value of a Royal Mail company within the period of one year after this section comes into force.”
Lord Lea of Crondall
My Lords, if the Bill reaches the statute book in its present form, in a year or so we will almost certainly have a repeat of the public interest being prejudiced by the modalities of the sale by merchant banks, as has happened some times before. However, as all noble Lords are surely aware, Conservative Governments have form on the modalities of sales of public assets—in effect, selling the family silver on the cheap. As Harold Macmillan remarked, you can only do that once. How do we then protect the public interest?
During the debate in Committee on the sale of Royal Mail, whenever noble Lords sought to ensure that value for money for the taxpayer would be achieved if Royal Mail is sold, the response came that it would be foolhardy to reveal a valuation, because once the bidders got to hear of it they would never exceed it. One could of course imagine arrangements whereby an independent valuation was obtained and not published for the world to see. It could even be shared on a strictly confidential basis with, for example, members of the Public Accounts Committee. However, that is not the main point. As these arguments flew back and forth, I realised that in some noble Lords’ minds was a fixed picture of a set of competing companies bidding to buy Royal Mail as though it were a valuable silver cream jug at Christie’s—in other words, what is known as a trade sale.
However, I ask noble Lords to consider the scenario that the company will be put up for sale in an IPO—an initial public offering or a sale of shares to the public. From Richard Hooper’s 2010 report, this certainly seems to be a possibility that he has in mind. However, after that report and in our previous debate on 14 March, the noble Lord, Lord Razzall, who I am glad to see in his place, declared that,
“anybody who thinks, in the Royal Mail's current circumstances, that there can be an IPO, is living in a total fantasy world”.—[Official Report, 14/3/11; col. 102.]
Richard Hooper and Ministers, however, have repeatedly included that option. In his most recent report Richard Hooper stated that,
“there are now greater options for introducing private sector capital and disciplines. It does not have to be a sale to a partner. The much needed equity capital could, for example, be raised by means of an IPO (Initial Public Offering), turning Royal Mail into a publicly listed company. The company’s need for cash, and the timing of that need, will influence the choice of preferred option”.
More recently, in oral evidence to the Public Bill Committee in another place, he said:
“There are various ways of getting private sector capital. One is a trade buyer and another is a private equity player”.
He went on:
“There could, of course, be an initial public offering”.—[Official Report, Commons, Postal Services Bill Committee, 11/11/10; col. 109.]
Coalition colleagues are also open to an IPO. At Second Reading the Conservative noble Baroness, Lady Wheatcroft, in a well-considered contribution, stated:
“I hope that as the sale of Royal Mail approaches the possibility of an IPO will be top of the list of favoured options. I know that the Government's position is that the sale is open to all comers, but an IPO would get my vote”.—[Official Report, 16/2/11; col. 743.]
In the BIS document, Delivering for the Future: A Universal Mail Service and Community Post Offices in the Digital Age, published in October 2010, paragraph 2.6 states:
“We will retain flexibility so that we can negotiate the best possible outcome, including keeping options open as to whether a trade sale or initial public offering is more appropriate”.
Let us consider the possibility of an initial public offering. There is a very strong case that shows that in the heyday of privatisations in the 1980s and 1990s, privatised companies were consistently sold at too low a price. For British Airways, British Gas and British Telecom alone, the undervaluation on the first day of trading amounted to more than £2 billion. Indeed, it has been estimated that for 1986 alone the average share issue premium on major share issues was 7 per cent, but on privatisation issues the average premium on the first day of trading was 77 per cent.
One case illustrates the point very well. British Telecom shares were sold in three tranches. It was difficult to establish a correct sale price. There had not been a market by which to establish a clear and correct opening share price, as there will be for Royal Mail if its sale comes about. After the first tranche of shares was sold, the share price rose. Over the course of a year, the BT shares increased in value by 84 per cent. Several factors could conceivably have caused that increase, very sharp though it was. All share prices could have been rising, or there could have been an improvement in the company’s prospects, but what if I tell noble Lords that on the day after the original flotation anyone who had bought the shares at the offer price saw the value of those shares increase by some 90 per cent in 24 hours? The obvious conclusion is that a higher price could have been achieved for the taxpayer—in other words, the shares were underpriced and the taxpayer was short-changed. Fortunately, not all the shares had been put on the market on that fateful day.
Having regard to that experience, with the second tranche there was still an increase the next day but it was 5 per cent, rising to 22 per cent a year later. In the third and final tranche, the shares rose by just 5 per cent the next day and were still just 5 per cent higher a year later, so the pricing was much closer to the right level and the taxpayer was saved a very large sum. That is not surprising as the offer price in the new tranches could be judged against an existing traded price of shares from the original tranche. Therefore, this amendment proposes that in the event of the sale of Royal Mail by means of an IPO or general sale of shares, the sale should be phased in tranches, with no more than 30 per cent being sold before 31 July 2012 and no other shares being disposed of before 31 July 2013.
Baroness Turner of Camden
My Lords, I rise to support my noble friend’s amendment. As he rightly says, the new clause that he is presenting to the House would set a restriction on the sale of shares in an initial public offering to 30 per cent of the value of an RM company within the first year of the clause coming into force. The text of the Bill places no constraints at all on what the Secretary of State may do. It is true that he has to report to Parliament, but that is after the decision has been taken. No constraints at all are placed on what he may or may not do. That is unfortunate because we are talking about what is after all a major public institution, and it is very important to ensure that it is not underpriced. It is important to avoid a scandal whereby a valuable part of our national infrastructure is underpriced. My noble friend has set this out in detail. The new clause would be an important addition to the Bill. We need to ensure that some constraints are put on what the Secretary of State may do when, and if, the Bill eventually becomes law.
Lord Young of Norwood Green
My Lords, I support the amendment in the name of my noble friend Lord Lea of Crondall. It provides for the disposal of shares to take place in tranches or batches, rather than all at once. The Government have not set a clear timetable for the sale, and they have not explained whether there will be a general sale of shares to the public, an IPO, a restricted sale to certain categories of buyer, or a trade sale by auction to a single buyer, such as a private equity firm or postal competitor, which may raise competition issues. The Government have not explained whether they would sell the whole company at once, with all the risks of selling cheaply, or whether they would be prepared to sell in tranches.
There is a huge amount of evidence, of which we have heard some details from my noble friend Lord Lea, that when privatisations have taken place, the value for which the businesses were sold was too low. That has been most clearly demonstrated when a general sale of shares has taken place and the shares traded. It is easy to see what price they traded at and how that compared with the original sale price. If there is a big gap and the original sale price is much lower, it indicates that shares should have been sold at a higher price. The taxpayer has lost out and someone has made a successful profit as a result.
A number of examples were given by my noble friend Lord Lea. I should also mention other sales. The sale of Associated British Ports was 35 times oversubscribed and the share price rose by 23 per cent on the first day of trading. Amersham International sold for £71 million and the share price rose 32 per cent on the first day of trading. As early as 16 May 1984, the Public Accounts Committee, in its 17th report, expressed concern at stock in public corporations being sold, in the words of the committee,
“at an immediate substantial premium creating windfall gains for the investor at public expense”.
That is what we should be concerned about. The report recommended considering sales in tranches, as was normal practice in the sale of large quantities of government bonds. Selling by tranches worked in a number of cases. For example, in the case of National Power, the share price rose by 22 per cent a day after the first tranche sale but only 4 per cent after the second tranche was sold. There was a similar situation during the sale of Powergen, whose shares rose by only 3 per cent in the second-tranche offer.
The amendment proposes that shares representing no more than 30 per cent of the value of the business can be transferred in the first year after the Act comes into force. I hope that the Minister can give us a reasonable assurance that serious consideration will be given to the danger of a sale that does not take place in tranches, and that the Government will be prepared to address this issue. I look forward to her response.
Lord Borrie
My Lords, I apologise for not rising quickly enough for my noble friend on the Front Bench to notice that I wished to speak. I do so now because my noble friend Lord Lea of Crondall made a practical, reasonable and strong case for his amendment. We are not at this stage of the Bill discussing or arguing about whether there should be a sale of Royal Mail. We are discussing the practicalities of such as sale. We were all around in some way or another during the 1980s and 1990s, and there is no doubt that when industries were privatised, they were often sold off under value. That has been well recognised after the event, if it was not adequately recognised as being likely before the event.
The practical purposes of the amendment are to ensure that we have an initial public offering, an IPO, of the shares, and that they will be offered in tranches. My noble friend is not rigidly proposing any particular dates or percentages, but in any amendment he tables he must put forward something that is reasonably clear. If an improvement can be made on that, there is no doubt that he would be willing to accept it. However, he wants, and we all should want, a practical procedure for ensuring that the public does not get an undervalue. There is to be a sale. Let the public have a good return on that sale, and that is what the amendment is all about.
Lord Razzall
I stand by the point that I made in Committee: in the current climate, it would be extremely unlikely that there would be an IPO for the Royal Mail.
The noble Lord, Lord Lea of Crondall, demonstrates another reason why that is highly unlikely. The fundamental difference between this and the privatisations to which he and his colleagues referred in the 1980s and 1990s is an ideological belief on behalf of the then Conservative Government that those industries were better held not by the taxpayer but by public shareholders. In those circumstances, there was clearly an interest in creating an aftermarket, so that as many individual shareholders—in the case of BT, it was a huge number of individual shareholders—should have an incentive to buy shares and then make a profit. The reason why that would not apply in this case is that the fundamental reason for the transaction would be to get resources into the Royal Mail. In those circumstances, the Government would not have an interest in creating the sort of aftermarket that the noble Lord, Lord Lea, fears. The significant interest of the Government would be to maximise the financial return for the Royal Mail, because the whole purpose of this is to get investment into Royal Mail, not to provide a windfall for shareholders.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, Amendment 1 would restrict the number of shares that can be sold in an initial public offering—an IPO—to 30 per cent of the value of shares, and imposes a time limit for the sale of one year from the new clause coming into force.
First, the Government believe that Royal Mail needs an injection of private sector capital to meet its needs in a fast-changing postal market. Unlike the previous Government, we do not believe that there should be any barriers in legislation to prevent a disposal of a majority of the shares. The Government’s objective in disposing of shares in Royal Mail is to secure the future of the company and to secure the best value for the taxpayer. To achieve that, the Government must have flexibility on when to sell shares and how much should be sold.
The noble Lord, Lord Lea, is concerned that previous privatisations have resulted in the taxpayer losing out through undervaluation; the noble Baroness, Lady Turner, spoke in support of his concerns. Noble Lords have a great deal of knowledge of previous privatisations; it is one of the great assets of your Lordships' House. I cannot answer for why they were done as they were, or what were the objectives of those privatisations. I am absolutely clear that our intention will be to secure the best deal for the company and the taxpayer consistent with our objectives. We will ensure that whatever form private sector investment takes in this instance, it will be with those objectives in mind. I thank the noble Lord, Lord Razzall, for his clarifying statement on that.
As I said in Committee, the Bill would allow the sale of a minority of shares in Royal Mail, and a sale by means of an IPO, if either or both were decided to be the best route to achieve our objectives. We do not, however, believe that there should be a time limit on the sale. The Government must have the flexibility to choose the right time to dispose of shares to ensure that we can get the best result for Royal Mail and the taxpayer.
The noble Lords, Lord Lea, Lord Young and Lord Borrie, also asked how Royal Mail will be valued. If I may, I will come back to those issues when we discuss Amendment 3, which directly addresses that point. Arbitrary deadlines in legislation would mean that the process might be rushed through, which is not the best way to conduct what would be a significant commercial transaction. I do not believe, therefore, that Amendment 1 would be in the interests of either Royal Mail or the taxpayer, and I would therefore hope that, following my explanation, the noble Lord will feel able to withdraw his amendment.
Lord Lea of Crondall
I thank the noble Baroness for her courteous reply. I am obviously very pleased to have heard the three contributions from these Benches but I want to pick up on the point made by the noble Lord, Lord Razzall.
Of course, nothing is exactly the same as it was 20 or 30 years ago but it remains the case that the only way that the Government can get a very high price is to say that there will be no universal service obligation. I do not know whether the noble Lord, Lord Razzall, and others would generally agree with that, but clearly the less you guarantee a universal service obligation, the more you can get, whether through an initial public offering, Deutsche Post or anything else. Furthermore, we are still waiting to see the guarantees on the inter-business agreement.
The public interest—that is, the public in cities, towns and villages—is at risk, as is, by the way, the workers, and if I say “by the way, the workers”, noble Lords will know where I am coming from. Later in our debates on the Bill we may hear something more specific and concrete from the noble Baroness in terms of commitments on the universal service obligation or the inter-business agreement. That is the context in which we are talking. As regards arbitrary deadlines, I am not the first person to mention dates with regard to the Bill. Indeed, it is self-evident that you have to mesh what we are talking about today with all the other dates that are flying around.
I do not think that noble Lords should be denied the opportunity to express their opinion on this question and I therefore wish to test the feeling of the House.
“Royal Mail companies to be publicly owned
(1) Each Royal Mail company must at all times be publicly owned.
(2) Accordingly—
(a) any issue or transfer of shares in a company will have no effect if it would cause a Royal Mail company to cease to be publicly owned, and(b) any issue or transfer of share rights to a person will have no effect if the acquisition by the person of the shares to which the share rights relate would cause a Royal Mail company to cease to be publicly owned.”
Lord Young of Norwood Green
My Lords, in rising to move this amendment I cannot help reflecting that last Friday the vast majority of the nation was enthralled by the marriage of Prince William to Kate Middleton, now the Duke and Duchess of Cambridge. Even those who have doubts about royalty as an institution could not help but wish the young couple well. One of the ways in which the nation celebrated the wedding was through a series of special stamps featuring the royal couple during their engagement, and now I understand that stamps are to be issued featuring the wedding itself. What a fitting way to celebrate this royal occasion, through commemorative stamps issued by Royal Mail—and I stress Royal Mail. It is royal because it was founded by the monarch more than 350 years ago; opened to the public during the reign of Charles I, it has operated as a public service ever since. The Bill before us marks a momentous and historic change—it is an iconic Bill.
In Clause 1 the Government have made it clear that they propose to sell off 100 per cent of Royal Mail, albeit with up to 10 per cent of shares held by employees. The Royal Mail Group has an annual revenue of some £9 billion. Royal Mail itself has an annual turnover of some £6.5 billion and employs more than 155,000 staff. That is impressive. However, this privatisation represents something more: the sale of one of the nation’s oldest and most cherished enterprises.
The Royal Mail is a great public institution that has a fine history in the development of the culture, social cohesion and economic strength of this nation, and that still today provides a vital public service. We should not underestimate the importance of a trusted, secure and relatively efficient means of common communication for our economic and social development as a nation. Indeed, it became a template copied around the world. The penny post introduced by Rowland Hill was arguably as vital to this country's development as the railway or the electricity grid. It was an early information superhighway—a social network, in fact, ahead of its time.
As for the modern day, Richard Hooper described Royal Mail and the service it provides as,
“part of our economic and social glue”
that binds communities together. I think that he was absolutely right. Many Members of this House have praised the work of Royal Mail and the social value of the country’s 11,900 local post offices, but let us also remember that despite the fact that we send fewer letters than we used to, in common with people in developed countries around the world, Royal Mail still delivers some 70 million letters a day to the 28 million homes and businesses of the United Kingdom. The 100 per cent sale of one of our greatest and most cherished national institutions is therefore a momentous step by any standard. I am sure that the whole House appreciates that regardless of whether they support the move.
Referring to the Postal Services Bill in 2009, the noble Lord, Lord Hunt, said that all those on the Front Benches were in favour of it. Indeed they were. However, I remind noble Lords that the Bill before the House at that time did not propose 100 per cent privatisation of Royal Mail. Indeed, it was remarked at the time that no one was proposing 100 per cent privatisation. The Bill stated explicitly that each Royal Mail company must be publicly owned, which meant that it must be in overall public ownership.
The Postal Services Act 2000, still in force today, permits joint ventures between Royal Mail and private companies. Though the 2009 Bill envisaged a minority private-sector partner, majority ownership would remain within the public sector. Neither the 2000 Act nor the 2009 Bill permitted 100 per cent privatisation, which the Bill before us today proposes. The amendment that we have tabled reinserts the original intent of the 2009 Bill that each Royal Mail company should remain in overall public ownership, with the majority of the company in public ownership. As the noble Lord, Lord Hunt, observed, all the Front Benches at the time, and indeed the Liberal Democrats, supported that proposition. At the time, there was broad consensus that Royal Mail should remain in overall public ownership, with the possibility of a joint venture or a minority private sector partner but, I repeat, not 100 per cent privatisation of Royal Mail.
We might find a clue in the 2010 general election manifestos of the two parties that came together to form the coalition Government. If you searched in the Conservative or Liberal Democrat manifestos of 2010 for the privatisation proposals in the Postal Services Bill, you would search in vain. Even the coalition agreement speaks cryptically of introducing private capital into Royal Mail, but does not say that that would mean 100 per cent privatisation. There was no Green Paper or White Paper to pave the way for this Bill, but our debates on Royal Mail have been usefully informed by two reports produced by Richard Hooper’s panel in May and December 2008 and by him, sitting alone this time, being asked by the current Government to review his work in 2010.
We all recognise the technological, social and competitive pressures on postal operators in modern times, including new ways of communicating. Last year, Royal Mail experienced a drop of 7 per cent in letter volume. Other operators taking advantage of liberalisation and of what are now regarded as generous terms for access to Royal Mail networks have been taking over upstream business faster than expected. Royal Mail’s competitors have already won more than 60 per cent of the upstream, pre-sorted bulk-mail market and deliver their customers’ mail into the Royal Mail system for final delivery. The pace of technological change continues apace through e-mail, web-based advertising, text messaging, mobile phones and all the other means we have of communicating with each other. Other developed countries are facing the same issues. The worldwide postal market is expected to decline by 25 per cent to 40 per cent over the next five years. The problems with the pension fund, which had their origin in the 13-year pension holiday until 2001, have been recounted.
There was therefore a consensus that action needed to be taken. Just over two years ago, in December 2008, Richard Hooper’s report entitled Modernise or Decline recommended a series of proposals, including dealing with the pension deficit and changes to regulation. He called for two major changes in the structure of Royal Mail: the injection of private capital and the involvement of private sector management. However, he rejected full privatisation, declaring:
“This option would only be appropriate and feasible if modernisation had been completed”.
He concluded:
“In short, we believe that partnership is the only approach which can deliver Royal Mail’s … universal service”.
At that time, there was a wide degree of consensus in this House about the nature of the action that needed to be taken. Royal Mail needed to be transformed to become more efficient and competitive, and that transformation would need new management and vastly improved industrial relations. There was agreement that regulatory oversight should be by Ofcom dealing with the wider world of communications rather than by a body restricted to the postal sector only. There was consensus that access pricing needed to be addressed, which is still a live issue.
Richard Hooper's 2010 report also identified a need for private sector capital, but was markedly more confident about the quality of existing management and the capacity for change, given the changes that had already taken place. It states that:
“The specific need for corporate experience is reduced today”.
He praised the progress that had been made by Royal Mail’s management and by the CWU in adopting a ground-breaking modernisation agreement, which is proceeding and has done significantly well.
The chief executive of Royal Mail, Moya Greene, giving evidence to the Public Bill Committee in another place on 9 November, said:
“I look at what Royal Mail has been able to do in just two short years, when they finally got access to capital, and it has been amazing. We have been able to consolidate 10 mail centres. We have been able to introduce innovations, such as 47,000 new PDAs”—
hand-held personal digital assistants to help with tracking and tracing postal items—
“for all of our letter carriers. We have been able to introduce 10 new world-class mail sites. I invite you all to come and visit them—they are now being recognised internationally as some of the best mail processing centres in the world”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 8.]
Hooper maintained his stance on those issues, but he came up with a different recommendation on the future of Royal Mail in proposing a 100 per cent sale. There are a number of elements in this Bill that we would broadly support, including employee share ownership. The possible mutualisation of the post office network deserves positive examination. We agree with the recommendation of Sir Richard Hooper, this Government and others that the historic pension fund deficit must be dealt with. We agree that regulation should move to Ofcom, but we fundamentally disagree with the 100 per cent privatisation of Royal Mail.
Although Richard Hooper recommended the 100 per cent sale of Royal Mail in his 2010 report, he seemed less sure in giving oral evidence recently. On 11 November 2010 he said:
“The important point I want to make is that private sector capital is needed in this business—it is needed urgently, it was needed two years ago and it is needed now. Whether it is a minority or majority shareholding, I would prefer to leave that to the political process”.—[Official Report, Commons, Postal Services Bill Committee, 11/11/10; col. 108.]
We probably endorse that view, but it is an interesting shift from that previous rather firm statement.
The debate over whether to privatise Royal Mail is about what kind of postal service the public want. We all want a strong, universal, six-deliveries-a-week, one-price-goes-anywhere service and a network of post offices at the heart of our communities. The universal postal service is a public service of vital infrastructure that supports the entire UK economy. Though the postal market might be changing, it remains central to businesses in the UK.
A survey by the Federation of Small Businesses conducted by ICM found that 84 per cent of small businesses use Royal Mail to despatch parcels and express items; 88 per cent of small businesses send post every day; and 59 per cent deliver goods and services by mail. Clearly it is a vital part of our business community. If we are to deliver on growth in those local communities and encourage small businesses and entrepreneurial activity, the Post Office will be at the heart of that success. There are many similarities between the Bill that we proposed in 2009 and the Bill before us today, but there are also glaring differences. Moving from overall public ownership to 100 per cent privatisation of Royal Mail makes a massive difference. All that has been cast aside by the Government.
Our Bill was a proposal for partnership. This Bill is a proposal for privatisation. We were in favour of employee shares, but in a different context. It is interesting that the majority of incumbent postal operators in western economies remain publicly owned. The United States, Canada, Australia, France, Italy, Spain, Switzerland, Ireland, Finland, Israel, Japan and Norway have all retained fully publicly owned postal services, so this is a big and fundamental change. Some would say that it is a bit of a leap in the dark.
Richard Hooper’s underlying point, which I do not fundamentally contest, is that additional access to capital is necessary, and that capital might well need to be private capital. However, that is not the same as making a case for the total privatisation of Royal Mail, which is what the Government are doing. Government members need to justify and validate that stance.
Royal Mail already has a substantial modernisation programme that is worth some £2 billion. It has reached an agreement with the workforce to implement modernisation, which everyone giving evidence to the Bill Committee in another place confirmed was an important landmark agreement and, as I have said, is making substantial and significant progress. Royal Mail’s modernisation programme is fully funded and expects to make normal profit levels by the end of the programme in 2012-13. Furthermore, it will benefit from the Government’s proposed action on pensions and hopefully from changes to regulation, which will provide a more substantial buffer during the current difficult economic climate.
We also need to look at the consequences of 100 per cent privatisation. It is at the heart of our concerns about the future of the universal postal service and the future of the nation’s post office network. The danger with a totally privatised Royal Mail is that a private company will not necessarily want to invest in a business that is burdened by a costly universal service. Such a company might lobby the regulator and the Secretary of State to reduce the level of the universal service. Noble Lords might recall that Pieter Kunz, the managing director of TNT, said that the universal service obligation was,
“a kind of Jurassic Park and we should get rid of it”.
Clause 30 sets out the terms of the universal postal service obligation, which include the requirement to collect and deliver mail six days a week at one price anywhere in the country. The USO has other elements, including packet delivery, letter and packet collection, affordable and uniform tariffs, registered and insured items, legislative petitions and addresses. It also includes, as we agreed during the course of the last Bill, services for the blind and partially sighted. We know from the contributions of the noble Lord, Lord Low, how much they are valued, but this Bill, particularly in Clause 33, proceeds to provide for changes to the level of the universal service. Later we will look at the ways in which this Bill might deliberately or inadvertently open the door to the diminution of the universal service.
Lord Jenkin of Roding
My Lords, it was interesting to hear how the opposition Front Bench justifies the amendment. The noble Lord, Lord Young of Norwood Green, has not disappointed us. It took him 18 minutes to do it, but he has done it and he has made the case that he said. However, I think he is wrong and I shall explain briefly why.
During the debate on the previous amendment there was a question about what the objective was, for instance, of the privatisation of British Telecom, which I mentioned briefly at Second Reading because I was the Secretary of State who published the White Paper and put the Bill before Parliament. The objective there was absolutely clear: the chairman of British Telecom, Sir George Jefferson, came to me early on after I had become the industry’s Secretary and said, “We are not going to be able to develop this business without access to a great deal more capital investment”—and he mentioned very large figures indeed. I had previously been the Chief Secretary to the Treasury and I said, “You do not think you are going to get it from the Treasury, do you?”. He said, “We need it”. I said, “The only way you are going to get it is for 51 per cent, at least, of shares in the BT company to be in the private sector”. He was quickly persuaded that that was an overwhelming argument for privatisation and we moved ahead from that.
It is exactly the same with Royal Mail—it needs capital for investment. I have discussed this with Moya Greene, the chief executive of Royal Mail, and she is very clear that we cannot develop this business unless we have a greater introduction of new capital. She is very clear, too, that this has got to come from the private sector. The amendment requires that a Royal Mail company shall at all times be in the public sector. I do not know whether the noble Lord, Lord Young, recognises that, if it is, it cannot then borrow without the borrowing going on to the public sector borrowing requirement—and that, in the present circumstances, would be totally impossible. British Telecom, by becoming 51 per cent privately owned in its initial stages, was immediately able to go to the market and borrow money without having to bother the Treasury at all. For that reason, the majority of shares being in the private sector was an integral part of the process of getting new capital into British Telecom.
Exactly the same applies to Royal Mail. If the majority of Royal Mail is going to remain in the public sector, as the amendment requires, then the Government can say farewell to any suggestion that they will be able to raise substantial capital sums from the market. It will be difficult enough to sell the company anyway, but to require that a majority of shares should remain in the public sector is a complete nonsense. I listened carefully to what the noble Lord, Lord Young, said. He marshalled his arguments, as he always does, with considerable skill but they were totally unconvincing. If he decides to call a Division on the amendment, I hope my noble friend will advise the House that we should vote against it.
Baroness Wilcox
My Lords, Amendment 2 seeks to keep the Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill, which this House considered in 2009. As I said earlier in response to Amendment 1, the difference between the position of this Government and the previous Government is that we do not believe it is necessary for the Government to retain overall ownership of Royal Mail. Public ownership has not helped Royal Mail to move with the times and to make the changes that it needed to succeed. That is why we need a different approach if we are to safeguard the universal postal service, and that is what we are committed to doing.
The noble Lord, Lord Young, questioned the Government’s mandate for the Bill. The Liberal Democrat manifesto was explicit about the need for private sector investment and employee shares. The coalition agreement was explicit that:
“We will seek to ensure an injection of private capital into Royal Mail, including opportunities for employee ownership. We will retain Post Office Ltd in public ownership”.
The Bill does exactly what we said we would do. There are several reasons why we should not seek to retain Royal Mail in public ownership. I covered these at length in Committee but, to summarise: first, the Government cannot provide capital fast enough and any funding we provide has to be cleared by the EU under state aid rules. My noble friend Lord Jenkin of Roding spoke most eloquently from his past experience in support of that. Secondly, limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company.
The noble Lord, Lord Young, asked about the provision to amend the minimum requirements of the USO in Clause 33. Again, I will come to those issues when we discuss his Amendments 65 and 66. I ask the noble Lord to withdraw his amendment.
Lord Young of Norwood Green
My Lords, I listened carefully to what the noble Lord, Lord Jenkin, said. I remember that occasion well, given my interests at the time and the continuing interest which I declared on a previous occasion. As I said, we do not seek to oppose the injection of private capital. Interestingly, there was almost unanimous support for the 2009 Bill, which applied the same formula that I applied to the House today. I hear the points made by the Minister on private sector investment but it is not quite true that it said “100 per cent privatisation” in either the coalition agreement or Liberal Democrat manifesto; I noticed that those were not the words that she used. I stick by my original assertion that this is new territory. It is an important and fundamental decision and one on which we should test the opinion of the House.
“( ) Before making a decision referred to in subsection (1), the Secretary of State shall lay before Parliament a report setting out how the value of the shares in the Royal Mail Group to be disposed of has been assessed, and shall make available to the Public Accounts Committee of the House of Commons an independent overall valuation of the business.”
Lord Young of Norwood Green
My Lords, before I get on to this amendment, one problem with quoting when you have the author of the report in the Room is the danger of being corrected. I feel that I owe an apology to Richard Hooper, who said to me that he studiously avoided mentioning 100 per cent privatisation in his more recent report, for which error I humbly apologise. I wanted to put the record straight—before I see him in court.
The ability of Governments to value a utility accurately at the point of its privatisation is mixed. The first two large privatisations of the 1980s, British Gas and British Telecom, saw the share values of those businesses rise quickly following privatisation. That was of course the objective then; privatisation had to achieve legitimacy and the Government of the time was about creating a shareholder democracy. However, our economic needs now dictate that the Government cannot be so generous towards shareholders if privatisation goes ahead in the form of a share sale. They should set a share price for Royal Mail that properly reflects its valuation. As the noble Lord, Lord Lea, said in Committee—he reiterated this view in today's debate—the public have on many occasions not got a particularly good deal out of privatisations.
Ministers have been coy about the value of Royal Mail. Estimates have ranged from £700 million to £7 billion but the managers and employees who stand to gain 10 per cent of the value of the business will be particularly keen to know whether the upper or lower ends of the estimates are correct. They will want to know that the Government have undertaken a forensic and accurate valuation of the business prior to putting it up for sale. In Committee, my noble friend Lord Stevenson made a strong case for Parliament to receive a report on the valuation of Royal Mail. We believe that it is wrong to ask Parliament to give approval for the disposal of Royal Mail while denying it the powers to scrutinise the effectiveness with which the Executive go about their tasks in this regard.
Amendment 3 seeks an independent valuation of Royal Mail to be made available to the Public Accounts Committee prior to any sale of the business. Such a valuation can be received and scrutinised by that committee in full commercial confidence. The PAC and other committees regularly receive restricted or confidential briefing. Parliament has a long tradition of receiving evidence in confidence. If necessary, the PAC could call the Minister to give evidence in camera but any parliamentary body tasked with ensuring good governance in this area would want to be reassured that an effective valuation of the business has taken place. That would include an assessment of its assets and liabilities, along with the proposed regulatory regime and how that would impact on its future prospects.
The coalition Government make a strong case for transparency in government. We are able to access limitless information about government and local government spending. Freedom of information laws and parliamentary questions and debates are all there to oil the wheels of our democracy. As another great historic public institution sadly shrugs off the blanket of public ownership, it is only right that the people who once owned it are allowed to know how the Government have come to their conclusions of the value of that business.
Baroness Wilcox
My Lords, Amendments 3 and 13 seek to place additional reporting requirements on the Secretary of State, while Amendment 5 would introduce additional parliamentary procedures before there can be a disposal of shares in a Royal Mail company.
Amendment 3 would require the Secretary of State to report to Parliament how the value will be assessed, and to make available to the Public Accounts Committee of the other place an independent valuation of the business. As we debated in Committee, there are incredible sensitivities about revealing the estimated value of Royal Mail shares prior to a commercial negotiation. We would be giving the whip hand to the potential investor. This does not make commercial sense and would greatly reduce the potential for getting the best value for the taxpayer from any future transaction. The Government will work with their advisers to consider the potential value of Royal Mail so that they can properly assess bids from buyers. Before a sale, the accounting officer for the Department for Business would need to scrutinise any future transaction to ensure that it represented value for money for the taxpayer.
I reiterate what I said in Committee: we would expect that, after a sale had completed, both the National Audit Office and the Public Accounts Committee in the other place will wish to review the sale process. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer. This is completely in line with the reporting requirements for previous sales of government assets.
Amendment 5 would require that the Secretary of State made an Oral Statement and that an order was laid that was subject to the affirmative resolution procedure before there could be a relevant disposal of shares in a Royal Mail company. As I said in Committee, further parliamentary procedures should not be required before there can be a disposal of shares in Royal Mail. The disposal of shares, as set out in the Bill, has been debated fully in both the other place and this House. The Opposition’s Postal Services Bill of 2009 did not include a requirement for additional parliamentary procedures before there could be a disposal of shares. As they said at the time, such a requirement would cause uncertainty for potential investors. That uncertainty is the same whether we are selling a majority or a minority stake. I said in Committee that I fully agreed that an Oral Statement might be appropriate for the first sale of shares. We will discuss with the House authorities the appropriate format for such reports at the relevant times.
I turn to the last amendment in this group, Amendment 13. The purpose of Clause 2 is to ensure that Parliament has transparency about the way in which shares or share rights in Royal Mail that reduce the proportion owned by the Crown are disposed of. The amendment would require reporting on any subsequent disposal of shares by the original purchaser. I do not consider that such a reporting requirement is appropriate. I know of no precedent for this type of “open-ended” reporting in any previous privatisation. The Companies Act requires that a private company has to disclose a full list of its shareholders on incorporation and then with the first annual return to Companies House following incorporation. It then has to provide such a list every third annual return after a full list has been provided. Information on ownership of Royal Mail will, therefore, continue to be publicly available.
As with discussions we had in Committee on other aspects of the Bill, I see no reason to impose more onerous reporting requirements on a privately owned Royal Mail than those that are currently imposed on privately owned companies. Clause 2 does, of course, continue to apply to any disposals of shares by the Secretary of State himself after the initial sale. The crucial issue, however, is not ownership but securing the future of Royal Mail, and in doing so securing the future of the universal postal service. Regardless of who owns the company, it would still be the universal postal service provider in the United Kingdom. It will still need to comply with any conditions issued by Ofcom in the universal postal service order to be made under Clause 29 of the Bill. The purchaser would, therefore, be fully aware of the obligations that the company it is purchasing must deliver.
The initial conditions in the universal postal service order will follow those currently set out in the licence issued to Royal Mail by Postcomm. Condition 12(5) of that licence requires Royal Mail to notify the regulator if there is any change of control in the company. It will be for Ofcom to decide whether to impose similar conditions in the future as part of delivering its overall duty to secure the future of the universal service. With these reassurances, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I have listened carefully to what the Minister said and I welcome her assurance regarding the Oral Statement. That represents some progress, but we still feel that she has not fully addressed our concerns about the presale valuation and the ability to report to the Public Accounts Committee in confidence. We will reflect on the situation, but in the light of what has been said I beg leave to withdraw the amendment.
“( ) A disposal of the Crown’s interest in a Royal Mail company will not be authorised until the Secretary of State has secured a written contract from the proposed purchaser that at least one representative of employees within Royal Mail or its successors will sit on the board of the new body.”
Lord Stevenson of Balmacara
My Lords, we discussed the issue of a representative of employees serving on the board of Royal Mail in Committee and it received support from across the Chamber. The noble Lord, Lord Cotter, from the Liberal Democrat Back Benches, drew on his experience as managing director of a manufacturing company. He said on 8 March at col. 1553 of Hansard:
“It is crucial that employees have not only shares but a real voice in one way or the other. Without that, so many companies fail. We want the new conglomerate to succeed, to go forward and to bring its employees with it, as opposed to management and employees being at each other's throats as has sometimes been the case in the past”.
My noble friend Lord Myners pointed out that the shareholders in a privatised Royal Mail,
“—whether it is a large corporation, perhaps based overseas, or is floated on the stock market with a large number of investors—will nevertheless individually have a very modest interest in the company … few … will own more than 1 per cent of the company; they will have diversified their risk through portfolio construction. The employees cannot do that; they will have what investors would call a high-conviction portfolio, with all their money invested in a single share and all their employment in one place of work. It is surely right that people who exhibit such a high conviction to a company should have some voice in the leadership and management of the business”.—[Official Report, 8/3/11; cols. 1553-55.]
Postal workers already have a major stake in the company, and their livelihoods are dependent on its viability. This is more than just an issue of immediate employment, because postal staff invest their livelihoods and pensions in the company. We will suggest later under Clause 3 that they should be able to invest in trust-owned employee shareholdings in the company. Surely it is not too much to ask that they have a seat at the board table for their chosen representatives.
What do we see when we look across the channel? Employee representation is commonplace. In fact, some of the companies that are held up as shining examples of privatised postal services have employee representatives on their boards. The Minister for Postal Services, in Committee in another place, stated:
“I have never been opposed to the idea of employee representatives being on boards, or on board committees”.—[Official Report, Commons, Postal Services Bill Committee, 23/11/10; col. 325.]
We invite the Minister here to go one step further and make provision in the Bill for this good idea. Failure to introduce representation of postal workers would risk missing a real opportunity to create trust and confidence for the long term. I beg to move.
The Deputy Speaker (Lord Skelmersdale)
If the amendment is agreed, I cannot call Amendment 5, by reason of pre-emption.
Baroness Wall of New Barnet
My Lords, I shall speak to my Amendment 11 in the group. Like other amendments, it requires the Secretary of State to lay a report before Parliament detailing his decision to dispose of shares in a Royal Mail company. This must be done within a reasonable and practicable time, as we have discussed. My amendment seeks to strengthen the reporting requirements of Clause 2 and to make sure that Parliament has the opportunity to scrutinise the training and skills agenda of the newly privatised Royal Mail.
Royal Mail has a strong and well established culture of training and development, supported by comprehensive agreements with its union, the CWU. The business is committed to modern engineering apprenticeships through the 2010 business transformation agreement that underpins the current process of modernisation. An illustration of how that takes place and the level of that commitment is that last year the company was involved with 300 core apprentices and 200 advanced apprentices. That is a record about which the Minister will share my enthusiasm.
The Government have been vocal, today and previously, in their support for apprenticeships. In the Budget they announced 50,000 new apprenticeship places at a cost of £180 million. This support should ensure no erosion of current positions and opportunities in Royal Mail. I am sure that the noble Baroness would agree that it would be very disappointing if any of the positive and evolving culture of training in Royal Mail disappeared or diminished.
The Government’s vision is hugely important and has led Royal Mail in many ways. The impact of privatisation and the short-term cost-cutting agenda makes some people worried that the private shareholder may not bring the commitment that I mentioned. Royal Mail’s strong culture in training and skills development is underpinned by a range of robust agreements between the union and the business to ensure effective training for new starters, ongoing training and up-skilling, in line with the introduction of new equipment.
A culture of training and development at Royal Mail is crucial, as it is in many organisations. The noble Baroness will know that most businesses benefit and progress with a culture that encourages apprenticeships and skills improvement at all levels. My worry, and the worry of many people, is that short-term cost savings may need to be made by a reduction in investment in training and development. That would be detrimental to the future success of the business.
Royal Mail and its union, the CWU, have worked hard to introduce a comprehensive training framework that is available to all employees. When employees join the business, they are supported by an induction programme through which they are guided over a 13-week period. This involves induction days, and on-the-job and off-the-job training. This leads to a culture of encouraging further advancement into apprenticeships. Royal Mail embraces and continues many other schemes.
I want to make the quick point that, having grabbed hold of the culture that my Government and now this Government are pursuing and have pursued in apprenticeships, we must at all costs ensure that any sell-off of Royal Mail will in no way be detrimental to the business. A number of young people in Royal Mail are benefiting from that. The whole status of the business is dependent on that skill level being supported. I hope that the noble Baroness will assure me and the House that she is well and truly committed to that and that it will be enshrined in how Royal Mail moves forward.
Lord Clarke of Hampstead
I shall speak to Amendment 36 standing in my name, dealing with trade union recognition. Again, I declare my interest: 65 years ago this month, I joined the then UPW and I am still a member in the retired members’ section.
My amendment directs the Secretary of State to ensure that in any relevant disposal there will be a guarantee that existing rights of workforce recognition are maintained. That is very important, and I very much hope that the Government will see the benefit of the amendment.
I shall make two main points. First, the workforce, by its own efforts, has unionised the industry to such an extent that recognition of the union was achieved more than a century ago, when the Fawcett Association became the Union of Post Office Workers, founded in Finsbury Circus. Long before the existence of recognition rights, postal workers came to agreement with the employers and, behind them, the Government, on the existence of workforce trade unions. This has shaped employment relations in the industry. Both workforce and management have seen the benefit of organised bargaining and representation. We are now looking at a Royal Mail and its staff who have a mature attitude to industrial relations. Both parties know of each other's interests and concerns and are usually able to reach accommodation.
Despite the media caricatures, the reality is that organised industrial relations have created ways of working which make the industry productive and safe. Every day, many thousands of hurdles, small and large, are overcome by timely recourse to the recognised framework of industrial relations in the industry. Both management and union representatives know that the job gets done better if the workforce is convinced that it is being done in a right and fair way.
The media are interested only when those relationships break down. They turn an ordinary little conflict in the sorting office or a pillar box into a massive federal case, as the Americans would say. They love that. The media will attack unions just for the sake of it. The reality is that countless efforts by management and union reps ensure that, every day, smooth running of the industry takes place.
The first theme of the amendment is to ensure that the hard-won legal recognition of union organisation is protected in any share disposal. Recognition has been won not just as a legal right; it has been established by the efforts of generations of postal workers and managers. Any new owner must begin by recognising that they are buying into an organised workforce.
As an aside from the comments that I have drafted, I have one recollection. After the Second World War, when the Control Commission of Germany was setting up Germany’s new industry on the basis of industrial democracy, it was the British TUC and the UPW, as it then was, who took part in helping that country rebuild itself. As we know, that led to worker participation on boards, which was the subject of the lead amendment.
Being unionised does not mean being unproductive. On the contrary, many studies demonstrate that unionised workforces are productive. If any new owner may be in doubt, the Secretary of State should be obliged to dispel that doubt, as a new owner must learn to live with a unionised workforce.
My second point is that bargaining is a natural part of recognition and relationships. It may be argued that under TUPE the transfer of the workforce will carry across existing terms and conditions. That is true but it is insufficient. It is an organised workforce that will address any new employer with the expectation of its bargaining rights remaining intact too. This is not just about what is currently earned or currently an entitlement, such as annual leave, allowances and so on; it is also about the right of the workforce to address its future conditions with the confidence that it can resolve its problems through negotiations. The past couple of years have shown that after a long period of unhappiness these changes can be negotiated.
Any new employer that buys into Royal Mail on the assumption that it will simply impose its vision, priorities or methods on the workforce will be in for a rude awakening. I do not say that with any sense of a threat, but people who have given their lives to the industry will not just roll over while their conditions are reduced and made much more difficult. The workforce expects any changes to be negotiated, and that is why the amendment is necessary. It is not a conflict-ridden process; on the contrary, the only cost in the vast majority of agreements has been the time and patience of management and union reps. Such rights are valued greatly by the workforce.
Postal workers know that the industry is constantly changing. As a postal worker, I have had to recognise that. Being in attendance at this funeral of our great Royal Mail over the next few hours does not give me any happiness but I have had to come to terms with it. The vast majority of workers have understood that it is constantly changing and that working arrangements and conditions also change, but that is on the understanding that postal workers will buy into the changes by helping to shape them.
We expect the Secretary of State to be entirely clear with a new owner of Royal Mail that recognition of the workforce and its union involves a negotiated and bargained framework for employment relations in the workplace. This fact of life will have to be addressed. It is best that we make this clear in the legislation to any potential investor or buyer of the industry, and carrying this amendment would do exactly that.
Earl Attlee
My Lords, this group of amendments covers matters relating to the employees of Royal Mail, without whom of course there would not be a Royal Mail. These matters are employee representation on the board, union recognition and employee training.
I thank the noble Lords, Lord Kennedy, Lord Clarke and Lord Christopher, for tabling Amendments 4 and 10 relating to employee representation on the board of Royal Mail or any new successor body. I say this because, when we debated similar amendments tabled in Committee, it was clear to me that your Lordships had concerns about my response. These amendments give me the welcome opportunity to provide more clarity about the Government’s position on this issue.
First, I should make it clear that the Government do not have any fundamental or philosophical objections to employee representation on the boards of companies, but we do believe that the make-up of any company’s board should remain the responsibility of the company and its shareholders.
As many of your Lordships said in Committee and again today, employees will have a pivotal role in the future of Royal Mail, and there needs to be continual and meaningful interaction between the workforce and the management. In the CWU and Unite, the employees of Royal Mail have strong, active and effective unions. The business transformation agreement reached in March 2010 laid the groundwork for a new relationship between the management and the CWU. This was a ground-breaking achievement and, as recognised by the noble Baroness, we do not want to see the improvements set back.
I have looked back at whether the Postal Services Bill 2009 contained provisions requiring an employee representative on the board. It did not. In fact, the previous Government rejected such amendments to that Bill. The noble Baroness, Lady Vadera, said in Committee debates on the Bill that the Government would have to be persuaded that direct worker representation on the board,
“would make a real difference to the transformation and modernisation of the Royal Mail and deliver the change that is necessary for the company”.
She said that the Government,
“do not believe that that case has been made”.—[Official Report, 24/3/09; col. 612.]
While this Government have no objections to an employee representative being on the board of Royal Mail, we do not see that it should be a requirement laid down in statute. I do not believe that there is any precedent for this in any previous privatisation. Under the Bill, the employees will have a shareholding of at least 10 per cent. Whether there should be an employee representative on the board is a matter for the company and its shareholders, not something to be laid down in statute.
The noble Lord, Lord Stevenson, referred to the clear example given in Committee by the noble Lord, Lord Myners, of why large shareholders should not have a representative on a company’s board. The noble Lord, Lord Myners, told us that it is quite customary for a body of investors which has a large shareholding, as will the employees under our Bill, to seek board representation. He gave the example of News International and the BSkyB board, but the lesson to draw from this example is that it was a decision taken by the company and was a circumstance of the size of News International’s shareholding. It was not a mandatory requirement. I do not see why Royal Mail should be treated differently from other companies in this regard.
The noble Lord, Lord Stevenson, spoke also about the experience in Europe. There is a mixed picture there. Some member states have mandatory requirements for employee representation on boards in certain circumstances, but the majority do not. The Government consider that placing such a requirement on Royal Mail, when it is not a requirement on companies generally in the UK, is not appropriate. The wider issue of employee representation on boards is best discussed in the context of company law and not this Bill.
Amendment 11 would place a duty on the Secretary of State to report on Royal Mail’s intended policies on training, apprenticeships and skills once a decision has been taken to dispose of shares in Royal Mail. I thank the noble Baroness, Lady Wall of New Barnet, for raising these vital issues. I know that she brings considerable experience to this debate through her work on the sector skills council and her contribution to the All-Party Group on Further Education, Skills and Lifelong Learning. The Government absolutely recognise the importance of training and believe that skills are key to economic competitiveness. Apprenticeships are our preferred vocational route for people of all ages to gain the skills they need to succeed and progress in their careers and for employers to build a workforce with the motivation and expertise they need to compete globally. We are committed not only to increasing the number and range of apprenticeships on offer but also to improving their quality. We want apprenticeships to become the gold standard for workplace training. We are determined to take real action to improve and expand the apprenticeships programme and create more apprenticeship opportunities than ever before.
It has been recognised throughout the debates on this Bill that the workforce is vital to the success of Royal Mail. The company is introducing new working practices and new technology as it adapts to developments in the postal market. It is clear that, to make the modernisation of the company a success, it will need to ensure that its workforce is properly trained and has the right skills, as pointed out by the noble Baroness.
Royal Mail recognises the importance of training, which is reflected throughout the business transformation agreement between the Royal Mail and the CWU. I have no reason to believe that the new owners of Royal Mail would take a different approach given the importance of the workforce. Why would it? The noble Baroness suggested that cost pressures might be an issue, but surely a business of this size must look to the long term and not take short-term decisions. If it did, it could adversely affect its own share price, sending entirely the wrong signals to the market.
Lord Stevenson of Balmacara
I thank the Minister for his comments. I agree that these debates have allowed us to touch on important issues that affect not just Royal Mail but the wider world of work and how Governments should relate to that. I also thank my noble friends Lady Wall and Lord Clarke for their contributions. The Minister responded positively to their speeches, but unfortunately has not been sufficiently moved to incorporate the amendments in the Bill. Perhaps we can come back to them at a later stage.
The issue raised in Amendment 4 is whether, at the point of transition from its present position as a wholly owned subsidiary of government, Royal Mail should be imbued with many attributes that will allow it to sustain and carry on its work. As I understand it, the Minister is very positive about the need for employees to be engaged at all levels in the work of companies, but believes that the responsibility for that must lie with the company and not the Government. We on this side of the House believe that the change from a wholly owned subsidiary to a 100 per cent private company changes the nature of the debate.
History is with us all the time in this debate. It is important to bear in mind that Royal Mail is a public service. It is a company in all but practical separation from the Government, but it is also a public service, and I think that those who work in it believe that that is what drives their motivation and allows them to engage with the public interest more widely than any ordinary employee would do. It also allows them to have high levels of staff retention and works to ensure that their productivity is high. These are public servants in the true sense of the phrase and the change that the Government wish to make—to sell them and their company to a private sector operation—will of course make that completely different. They may or may not be right; time will tell. However, I think that the Government are missing a great opportunity by not building into the new arrangements something of the past and the history of the public service which it represents.
I believe, and I think that many noble Lords on this side would support the view, that company law has perhaps not kept up with the needs of the modern employment world. It does not play well to the idea to which the Minister referred in terms of how companies operate in relation to staff, and it is perhaps not the right place to look for better employee engagement on this. The Government have the option of leaving a mark on the new, privatised Royal Mail. They could do so by a simple amendment—accepting what we have said in this amendment—but they have not done so. The warm words which we have heard are encouraging to those who will read them but they do not lead us to permanent change. I therefore think that we should test the opinion of the House.
Baroness Wilcox
(c) the objective intended to be achieved by the undertaking of it.(3A) The report must—
(a) contain information about the expected commercial relationship, after the proposed disposal, between the Royal Mail company in question and any Post Office company, and
(b) if the proposed disposal would result in shares or share rights being owned by or on behalf of an employee share scheme for the first time, give details of the scheme.
In paragraph (b) “employee share scheme” has the meaning given by section 3.”
Baroness Wilcox
Amendment 6 is intended to increase transparency in relation to any future disposal of shares in Royal Mail, as well as to provide further information on the commercial relationship between Royal Mail and Post Office Ltd. At the same time I will speak to Amendment 7 in the name of the noble Lord, Lord Whitty, and Amendment 8 in the names of the noble Lords, Lord Clarke and Lord Christopher. I hope that Amendment 6 will ease the concerns expressed by many noble Lords in Committee and provide further reassurance that the Secretary of State will be open and transparent about decisions taken on the future of these two businesses. The amendment relates to the report which will be laid by the Secretary of State before Parliament once he has made the decision to undertake a disposal of shares in Royal Mail.
Amendment 6 serves three purposes. First, it clarifies that the Clause 2 report must state the objective intended to be achieved by the share disposal. Secondly, it will ensure that when shares are proposed to be put into the employee share scheme for the first time, the report must include details of the scheme. Thirdly, it will ensure that the report includes information on the ongoing relationship between Royal Mail and Post Office Ltd after any disposal.
Perhaps I may take these in turn. In terms of objectives, I said in Committee that the Government’s overarching objectives from the disposal of shares is to secure the future of the universal service and to ensure that we negotiate the best deal for both Royal Mail and the taxpayer. However, I appreciate that Parliament will want confirmation of these objectives once a decision has been taken to dispose of shares. This amendment will ensure that this is included in the report to Parliament made under Clause 2.
Moving on to employee shares, we understand the concerns of both Houses about the sort of scheme that will be put in place for employees, and I would remind noble Lords that the Bill already makes the strongest statutory commitment to an employee share scheme of any major privatisation. This commitment has been strengthened further by the Minister for Employment Relations, Consumer and Postal Affairs, who put on record in the other place that shares would be put into the scheme at the same time as the first disposal of shares. This commitment was repeated by my noble friend Lord De Mauley in Committee in this House. It is too early to commit to a particular scheme structure as this will depend on factors that are as yet undecided, such as the type of sale, but we have considered how we can provide additional comfort to both Houses. As the amendment sets out, we propose to place a specific duty on the Secretary of State to report on the details of the employee share scheme when shares are proposed to be put into it for the first time.
Finally, the amendment also ensures that the report will include details of the ongoing commercial relationship between Royal Mail and Post Office Ltd after the proposed disposal of shares in Royal Mail. We hope that this amendment will address the concerns expressed by several noble Lords in Committee, in particular the noble Lord, Lord Whitty, and his colleagues on the Front Bench. It will also work in tandem with Amendment 50, which we will discuss later, to ensure that information on the relationship between the Post Office and Royal Mail continues to be publicised in the Post Office’s annual report, as required under Clause 11.
Perhaps it will be helpful if I provide a little more detail about what we expect the reporting requirement will provide in practice. We envisage that the details published will be akin to those which a listed company might provide in relation to a material contract when issuing a prospectus offering shares to the public. This provides a fine balance between ensuring that the public—in that example, potential investors—have sufficient information and making sure that no commercially damaging information is inadvertently disclosed. In practice, the information is likely to include much of that which the noble Lord, Lord Whitty, seeks to include in Amendment 7. The contract has yet to be finalised. It does not need to be finalised until the two companies are formally separated prior to completion of a Royal Mail transaction, but negotiations are under way and we would expect a new contract to be ready to be signed by next spring.
Noble Lords will already be aware that Royal Mail and the Post Office management have committed that the contract will be for the longest legally permissible duration. I would hope that this could be for the 10-year period that noble Lords opposite have sought, but the final duration will depend upon interlinked factors such as volume commitments or exclusivity arrangements. Since the contract has yet to be finalised, the specific details required under Amendment 7 are impractical. For example, it would most likely be impossible to provide accurate annual total contract values to the Post Office as these are likely to depend on the volume of mail and parcels handled over Post Office counters during the relevant years. That is certainly the basis of the current arrangement.
I turn now to Amendment 8, which would require the Secretary of State to include in the report that he has to make under Clause 2 a risk assessment of the proposed disposal and information on due diligence made of the purchaser, along with a comprehensive analysis of the due diligence work. As I have said before, the Government’s intention is that a sale of shares will help to secure the future of Royal Mail, and this in turn will help the company to continue to provide the universal postal service. We will, of course, assess the risks and carry out appropriate due diligence as part of that process. The report in Clause 2 is required when the Secretary of State has made a decision to undertake the disposal of shares in Royal Mail, and the report must include details of the kind of disposal. The process of a disposal is unlikely to have begun and so the information set out in the amendment would not be available at the time of the report.
As I said in response to Amendment 5, we expect that after a sale had completed both the National Audit Office and the Public Accounts Committee in the other place will wish to review the sale process. They would look at the process that was conducted prior to a sale, including the risk assessments and the due diligence. This is recognised as standard parliamentary process to assess whether the Government have achieved value for money for the taxpayer. I certainly expect that process—that is, the work of the NAO and the PAC—to cover work undertaken by the Department for Business to assess the financial and other risks associated with the buyer because they can directly impact, in the longer term, the taxpayer. We do not believe that Amendment 8 reflects the nature of the reporting requirement in Clause 2, which is to report when a decision is taken to undertake a disposal—not on subsequent activities prior to a sale. We also believe that there are existing parliamentary processes in place to scrutinise risk assessments and any due diligence that has been undertaken.
With the assurances that I have given to the House about what the Secretary of State will intend to include in a Clause 2 report, I hope that the noble Lord, Lord Whitty, and the noble Lords, Lord Clarke and Lord Christopher, will feel able to withdraw their amendments at the appropriate time. I beg to move.
Amendment 7 (to Amendment 6)
Lord Whitty
“(i) the minimum contract length for the commercial relationship;(ii) the details of any contractual break period that may be exercised by any party who enters into the commercial relationship;(iii) the total value of the contract to the Post Office company for the services provided under the terms of the commercial relationship for each year that the contract runs”
Lord Whitty
My Lords, I am grateful to the noble Baroness for both tabling the amendment in her name—particularly the new subsection (3A)(a)—and for the additional information that she has given today. I am not sure, however, whether that goes far enough to meet the anxieties.
As noble Lords will be aware, the interbusiness agreement is absolutely essential for the future operation of both the Royal Mail part of the unravelled company and, particularly, for the post office network, which is my concern. It is therefore important that when the Secretary of State reports to Parliament on the basis of the procedure, the terms of the agreement between the two parts of Royal Mail are clear, understood and give a robust and sustainable basis for both parts to continue. It will also, of course, have a significant effect on the value of both parts of the set-up—the value to investors in the Royal Mail part and the value to the taxpayer and the community of the network.
The specifics in my amendment to the government amendment would require part of the report to set down the minimum contract length. I know that the Government have said that they wish it to be the maximum that is legally possible, but we have never had a proper explanation of why they feel that there is a serious legal constraint on the length of the contract. It is therefore important that, at the point at which the contract is concluded and the report comes back to Parliament, the terms of the contract are spelt out and that any legal reasons for those terms are likewise spelt out. In terms of the risk that both parts of the organisation take in their new form, there is the issue of which party and in what circumstances can break that contract.
Lord Christopher
My Lords, I rise to move Amendment 8. I did not move Amendment 13 because, frankly, I was confused by the way in which the Order Paper came through, but it seems that the essential issues are the same. References have been made to the value of this company and the lack of knowledge of that value. It is certainly not BT or British Gas. The closest I can come to previous privatisation operations is British Rail, which I think at least one Conservative spokesman in the past has said might have been carried out more felicitously. It is still being heavily subsidised. As to value, the only thing I know for certain is that it is not a Glencore, which is valued at the moment at some £34 billion. There are going to be considerable problems in achieving a proper valuation of this company.
The problem with the Bill is that we do not really know what we are addressing. We do not know what the Government will do—I am not sure that the Government know that for sure. There are three options: the sale; the mutual, on which we are waiting a report from the Co-operative Society; and the prospect of an IPO. My purpose is not to divide on this but to persuade the Minister that there are still some safeguards that need to be put into the Bill. It is not good enough as it is, when we are dealing with post that is so close to the public, to sell it, wash our hands of it and leave it all to a regulator. We are here in this goldfish bowl of the House of Lords, yet outside things are happening that are bound to make people uneasy about what might happen to Royal Mail if it is sold off to A, B or C under whatever terms. I have sought in my amendment to tighten up what due diligence means, to widen it beyond finance and to look much more carefully at exactly how a buyer has conducted itself and its business history.
We all remember Ford, which bought Volvo, Jaguar and Kwik-Fit. At the end of the day, Kwik-Fit was sold to a private equity house, CVC, at the third of the price that Ford paid for it. Stagecoach bought the American company Coach USA for £1.2 billion, which almost made Stagecoach broke. Closer to present times, Southern Cross, which is the largest provider of care homes in the country—it has 31,000 homes—was owned by Blackstone, an American private equity company. It ensured massive expansion on the basis of sales and leaseback. In the valuation of Royal Mail, I understand that most if not all its sites and buildings have already been sold and are back on leaseback. Some 17.5 per cent of the shares of National Express are owned by the hedge fund Elliott. It is now actively seeking changes in the board, which has been interpreted as a move to make sure that National Express comes on the market. We need something that ensures not just the prima facie suitability of an initial buyer but the opportunity, if things are sold off—for example Parcelforce, which seems to be Royal Mail’s one growing asset—for the Government to ensure that whatever happens is right and proper.
I mentioned the Netherlands at Second Reading. Four companies now handle the Netherlands’ mail. The people of that country can expect to receive mail delivered from these four companies. There is the half-orange post, which is owned by TNT. It delivers six days a week. There is the blue post, a company called Sandd—an acronym for the “sort and delivery” postal service. It delivers two days a week. There is the yellow company, Selekt, jointly owned by Deutsche Post and DHL, which delivers twice a week. That company is interesting because it has never made a profit and is now, it hopes, going to be sold. It is run by home workers, who sort and deliver at and from their homes. The legal low limit for pay in the Netherlands is between £8 and £9 an hour, but this company is very careful to ensure that none of its workers reaches that figure and that they are kept on a monthly basis below the rate that is required by the Netherlands Government of £580 a month. They are seeking now to sell it to Sandd.
The fourth company is called half-orange, which is owned by TNT, and it calls once a week. Again, that is interesting, because there we have TNT competing with itself. Why? Because it is using not full-time post staff but casual labour. This is not something that is happening in a third world country. It simply carries the somewhat dogmatic belief that we can privatise and get competition and that it always works best. I do not think we want to risk anything like what has happened in the Netherlands happening in this country. If the Government do not make it clear in the Bill that the likes of this will not be tolerated and that that is provided for in the Bill, I will think there is something seriously wrong with the Bill—and if things go the wrong way, we will know exactly who is responsible for that.
We are seeking to sell the service at a very bad time in economic terms. There is no queue out there of people saying, “Let me buy the Post Office”, so I hope the Minister will think hard about what has been said, not just by me but by others, and will try to ensure that the Government come back at the final Reading with some proposals that comfort us and the British people that this is not being sold off just for fun but is something that we are trying to ensure is properly financed and properly run in Britain.
Lord Young of Norwood Green
My Lords, we welcome the amendment moved by the noble Baroness, Lady Wilcox, and believe that it is a step in the right direction. The question is whether it goes far enough in that direction. We welcome the Government’s acceptance of the kind of information that ought to be made available before Royal Mail is sold. We have already stated that there are still many unanswered questions about the disposal—the timetable, the qualification of the future owner, the nature of the sale, how value for money will be secured, the danger of asset-stripping, safeguards for the universal service, and safeguards for the post office network. Yet the scope that is being given to the Secretary of State to make the sale is still very large indeed, with only a factual report to Parliament.
There is a significant improvement in the scale of information that is being offered, but it is certainly not the whole answer. I listened carefully but I did not quite get the assurance given on the nature of the contract between Royal Mail and the Post Office. I would welcome the Minister, in responding, clarifying the point that she made about next spring, when this contract is likely to be signed, and saying how strong the guarantee is on the 10-year period. Is it still just a hope, and are there still likely to be legal barriers to the 10-year period being a part of the contract?
I want to speak to Amendments 7 and 8. The House will be aware that we have consistently put the case for a long-term agreement between Royal Mail and the Post Office, to run from point of sale. We have proposed a 10-year duration. As my noble friend Lord Whitty said, it is certainly not an academic issue; it is a matter of commercial survival. The Government’s assurances are an improvement but still fall short of the commitment that we seek. I have no doubt that we will continue to return to this issue until we get a satisfactory assurance.
My noble friend Lord Whitty’s amendment provides a useful elaboration of the information that we seek, including the contract length, any contractual break period and the total value of the contract to Post Office Ltd. We urgently support his amendment and urge the House to do so.
Amendment 8 seeks further guarantees, and important ones, on the risk assessment of the proposed disposal of Royal Mail. My noble friend Lord Christopher rightly seeks confirmation that due diligence of the prospective buyer has been undertaken. These are sensible steps to take before such an important transaction, and I thought that his graphic and interesting description of the Netherlands postal system was an important contribution to this debate.
Once again, we support this amendment.
Baroness Wilcox
My Lords, I rise to respond to the noble Lords, Lord Whitty, Lord Christopher and Lord Young, on my amendment and the other two amendments. In response to the concerns expressed by the noble Lord, Lord Whitty, about the details to be provided in the Clause 2 report, I reiterate some of the sentiments I mentioned earlier. The information that we propose to include in the report includes much of the information that the noble Lord seeks in his Amendment 7. I would hope that the contract’s duration would be for the 10 years that many noble Lords are seeking, but the longest legally permissible duration will depend on other factors, such as volume commitments, which must be commercially negotiated between the companies. Finally, we must not require in Clause 2 the disclosure of information that might inadvertently damage the commercial interests of either business. That would damage the commercial sustainability of the post office network, which I am sure is not the noble Lord’s intention.
The noble Lord, Lord Christopher, raised a number of important points about how the postal service is provided in the Netherlands. I believe that these are consequences of the regulatory framework in the Netherlands, not of the ownership of its postal companies, but we will come to those matters when we debate Part 3 of the Bill, and I hope I will be able to provide him with further reassurance then.
The noble Lord, Lord Young, asked me to clarify what I said about the timing of a new contract between Royal Mail and the Post Office. As I said, negotiations are under way, and we expect a new contract to be ready to be signed by next spring. I hope that with those reassurances the noble Lord feels that he can withdraw his amendment.
Lord Whitty
My Lords, I appreciate that the noble Baroness has gone some considerable way. However, from what she just said it is clear that the information that the Government envisage in the report is on potential investors and the financial viability of both halves. There is a bigger public interest issue here. The post office network, which is so dear to many of our communities, depends on this agreement for one-third of its income. Unless this Bill spells out that part of the report to Parliament will cover something like the details that I have in my amendment, I do not think that the Government will be bound to provide a sufficient report on which Parliament can judge. Therefore, I would like to test the opinion of the House.
Lord Kennedy of Southwark
( ) how the name “Royal Mail” will be protected and used by the universal postal service provider”
Lord Kennedy of Southwark
My Lords, this is a similar amendment to one that I tabled in Committee. I was not convinced by the Minister’s response then and said I would bring it back. I hope that the Minister has had time to reflect on this. As I said before, people do silly things all the time and doing nothing is, in my opinion, unwise. This amendment would only require the Secretary of State to report on how the name “Royal Mail” will be protected. If the noble Baroness is not minded to accept the amendment, can she explain how we avert another Consignia debacle? Saying that this is such a well-known and recognisable brand name that no new owner would ever consider getting rid of it just does not stack up—Consignia proved that. Future owners may decide to change the name to some other well-known name and Royal Mail as a brand would be lost. That, I contend, would be a matter of much regret. I beg to move.
Lord Boswell of Aynho
My Lords, perhaps I may comment first on the amendment which has just been moved by the noble Lord, Lord Kennedy of Southwark. We all have an interest in the continuation of the proud name “Royal Mail”, which honours those who have worked in that service over 300 years. All of us here should respect that, not only those who are historians or antiquarians. At this point, perhaps I had better declare my interest in archives and my involvement with the all-party group, of which the House may be aware. However, if the noble Lord looks forward to the proposed new clause in government Amendment 54, which has been grouped with this amendment for convenience, we might have a more substantive discussion. I look forward to the Minister's comments on that amendment, on which I shall speak in a moment.
I make no apology for wanting to see that this is got right because it is not necessary to be a fan of TS Eliot’s poetry—although I am one—to understand that the past is very much part of the present and the future and that it should not be possible, in a mechanistic way as it were, to unpick them or to take no notice of them. It is really important that the heritage and pride which have gone with that name and its tradition are celebrated and maintained, not least because it is a matter of obvious sensitivity in relation to the monarchy. We do not need to speak about that in detail but the monarch’s head appears on our postage stamps and her title attaches to our postal service. We hope that will continue.
However, as I said in Committee, any of us who have been to see the Royal Mail’s museum and archive, which is the subject of the government’s proposed new clause tabled in Amendment 54, will know the richness of what is there. There is complexity and fascination in how designs were considered, modified and put into circulation and that is all part of the tradition which should go with this. It is important that we make these commercial changes—I am not resiling from that—and that we do not spend unreasonable money on resourcing the past, however important it is. I said in Committee that there were some concerns about the resources available for the existing archive.
I thoroughly welcome the proposed new clause in Amendment 54 which is really, if I may say so, a considerable tribute to the noble Lord, Lord Clarke of Hampstead, to his colleague, the noble Lord, Lord Christopher, to my noble friend Lord Brooke of Sutton Mandeville and, modestly, I hope, to the little contribution that I made on a warm early April afternoon when we first discussed this in Committee. We raised it with the Minister, who said that she would go and think about it. She has clearly done so and we should give her a good measure of credit for that.
The proposed new clause which the Minister intends to bring forward in the Government's name is promising. For a start, it is prescriptive as to duty in that the Royal Mail company will have to send a report, which she will have to consider. That report will have to come to Parliament and anyone who has been here for any length of time is aware that that provides a channel for questions, an opportunity for expressions of dissatisfaction and so forth. Yet it does not inhibit the company in the nature and form of what it does, which is the right approach. If we sat there saying, “This is what we will do with the archive and this is the precise specification of the new and successor arrangements”, we might live to regret that and not be able to deliver it, so flexibility is desirable.
However, because these things tend to be forgotten—unless I am under a misconception; if so, my noble friend the Minister will no doubt disabuse me—it is also probably right to record that in creating this new duty, which goes beyond the existing obligation of Royal Mail, there will be obligations in relation to the archive and what we call the state process of the business. The opportunity to retain postal material and the obligation to report on what is being done is a new and welcome duty. However, we are substantially talking about a concern, which we should never forget when the ownership of public assets is moving from the public to the private sector either in whole or in part, to impose the right kind of traditions and conditions to ensure that the element of public service is not overlooked and that a great archive’s future is adequately secured.
Finally, the Government have been wise in not being too precise on the nature of this by providing, in effect, an ongoing and if necessary contingent liability on successor organisations. I do not particularly mind who owns the archive, provided that it is available publicly as a jewel in the crown and an asset that is on display, that it is adequately resourced and that we may long continue to celebrate it despite the ownership changes which are taking place under the Bill.
Lord Clarke of Hampstead
My Lords, first, I thank sincerely the Minister and her team for producing Amendment 54. I am touched by how this has been done, which satisfies to a great extent concerns that have been in my mind ever since privatisation was first mentioned—I think that was in 1970-something. Amendment 55 may appear to be going over the top a bit but any report dealing with sold-off public assets should have some reference in the accounting procedure to the donations received in cash or in kind by the museum, so that people can keep track of what has come in and what is going out.
Before I sit down, I should say that I have slipped up, as I should have mentioned in an earlier discussion the wonderful GPO film unit, which is another one that seems to have slipped off the edge. Anybody who wants to see how the GPO prepared for the Second World War—for maintaining its services during that period—should go to the archives, where the DVDs are on sale. They really are worth watching. Again, I thank the Minister for her courtesy.
Lord Young of Norwood Green
My Lords, I also support Amendment 9 in the name of my noble friend Lord Kennedy. It asks that the report should include information about how the name of Royal Mail is to be protected and used by the universal postal service provider. I listened with interest to the noble Lord, Lord Jenkin, when he mentioned the value of the brand. We should remind ourselves that it was not that many years ago that the dreaded Consignia reared its head. Nobody understood why such an appalling name was chosen. It received no public understanding or acclaim, but no doubt the consultancy did quite well out of it. There is a bit of previous in this respect, which is why my noble friend Lord Kennedy was absolutely right to draw this aspect to our attention.
I will deal also with Amendment 54. As others have said, the House will agree that we owe a debt to my noble friends Lord Clarke and Lord Christopher, who deserve enormous credit for persuading the Government to bring forward this amendment, which will require the Post Office to tell us in an annual report how these collections are being looked after. I also pay tribute to the enthusiasm of the noble Lord, Lord Boswell, in his support for this. He made the point about ensuring that the collection is on public display and adequately resourced. While we welcome the amendment, producing a report is not the same as making sure that the heritage is taken care of. However, it will certainly concentrate minds and provide a degree of transparency that was not in the original Bill. Again, I congratulate my noble friends Lord Christopher and Lord Clarke, and the Government for listening to their case, which we welcome.
We also support Amendment 55, which would improve the government amendment by requiring that the report include details of donations, both in money and in kind, from Royal Mail to the British postal museum and the Royal Mail archive. I hope that the Government feel able to take another positive step in this direction by supporting the amendment.
Baroness Wilcox
My Lords, I will respond to the amendment of the noble Lord, Lord Kennedy, and then move on to Amendment 54 and also respond to Amendment 55 at the same time.
I said in Committee that I fully appreciate the sentiment behind the amendment of the noble Lord, Lord Kennedy, and understand why he seeks reassurance that the Royal Mail name will be preserved. However, the name of the company that delivers the universal postal service should be a commercial decision for that company and its shareholders. As the noble Lord, Lord Kennedy, said in Committee, Royal Mail is a great brand name. My noble friends Lord Jenkin of Roding and Lord Boswell have agreed. The commercial reality is that any owner will see this name as an asset. It is instantly recognisable in the United Kingdom in relation to the provision of the universal postal service. As a brand it is up there with Coca-Cola and McDonald’s—brands and goods that your Lordships might not necessarily purchase but will no doubt recognise.
I have heard what has been said about companies doing daft things. I agree that this can happen, but it is very rare for any company completely to abandon its leading brand. For example, there has been much discussion of the decision by the Post Office corporation in 2001 to change its name to Consignia once its operations were transferred to a public limited company. With hindsight, all involved—Parliament and the general public—saw this as a poor decision. However, even in this situation the brand name Royal Mail was not abandoned, nor was Parcelforce or the Post Office. These brand names continued to be used in all customer-facing operations, regardless of the name of the top company. A similar example is Centrica’s continued use of the brand name British Gas. To all intents and purposes, the public-facing side of the business in the United Kingdom is British Gas. This can be seen in its advertisements in newspapers and on television. I have listened carefully to the points raised in the debate today but I am not persuaded that it is necessary to include in primary legislation a requirement for a company to be called a particular name after a privatisation. This would not be good use of the legislative process.
Lord Brooke of Sutton Mandeville
The following line is not totally transparent:
“Before preparing the report, the company must consult any Post Office company”.
Consultation can take a wide variety of forms. Could the Minister give your Lordships’ House some idea of what kind of consultation she envisages?
Baroness Wilcox
I will get a note and come back to that. I will continue with my point for the moment. Amendment 55, tabled by the noble Lords, Lord Clarke and Lord Christopher, would amend Amendment 54 to require the Royal Mail company’s report to include details of financial support, both in cash and in kind, for the museum collection and its archive. In tabling Amendment 54 we have not been prescriptive about what should or should not be included in the report. As I have said, we fully expect a Royal Mail company to continue to recognise the importance of its heritage. How it chooses to support the museum and archive will be a matter for the company. However, any support that it gives to the museum and archive will be an intrinsic part of its activities, and it follows that the report will include these details. It is not, therefore, necessary specifically to include this requirement in the new clause.
The Government want to see the heritage of Royal Mail preserved. Amendment 54 provides the right balance and places a sufficient spotlight on Royal Mail’s activities to ensure that the Government and Parliament have the opportunity to scrutinise those activities, and for Royal Mail to demonstrate its ongoing commitment to its heritage. I hope that your Lordships will be able to support Amendment 54. I ask the noble Lords, in view of the reassurances that I have given, kindly to withdraw Amendment 9 and not to move Amendment 55.
Lord Kennedy of Southwark
My Lords, I thank all noble Lords who have spoken in the debate. I also thank the Minister for her response, although it was disappointing. My amendment does not seek to affect the disposal of Royal Mail; it seeks merely to protect the name. I will not press the amendment to a vote, but the Government have taken an unnecessary and risky decision. I hope that they are right, but if they are proved to be wrong a tragedy will result which could so easily have been avoided. I beg leave to withdraw the amendment.
Lord Rogan
“( ) The Secretary of State shall submit a report to the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly setting out the impact of the proposals in Scotland, Wales and Northern Ireland respectively, including the effect on post offices, small and medium-sized businesses, rural communities, pensioners and people with disabilities.”
Lord Rogan
My Lords, I wish to move Amendment 15 standing in my name and that of the noble Lord, Lord Laird. This amendment seeks to ensure that there is adequate consultation with the devolved Governments, small and medium-sized businesses, rural communities, pensioners and people with disabilities prior to the disposal of shares in Royal Mail. In light of the news I read this morning that 9,000 post offices could close under the current proposals, this amendment seems all the more important and pertinent.
As the Bill has progressed through the House, noble Lords from Scotland, Wales and Northern Ireland have been keen to ensure that it protects the current level of postal services in those nations. We have sought, and received assurances from the Minister, that consultation will take place with service-user groups prior to any changes being made to the universal service obligation. This is most welcome. I now ask the Minister to ensure that that same sensible process is undertaken for largely the same reasons prior to the disposal of shares in Royal Mail.
In Committee, the Minister referred to Sections 3 and 7 of the Communications Act, which gives Ofcom a duty to have regard to a specified range of groups when carrying out any of its functions. In particular, Ofcom must have regard to the needs of four user groups: persons with disabilities; the elderly; those on low incomes; and the devolved Administrations. This amendment refers to matters that I believe fall outside Sections 3 and 7. It relates to the need for consultation to take place with the devolved Administrations as soon as is practical after the Minister has taken the decision to dispose of shares in Royal Mail.
I am somewhat bemused that Clause 2 does not already contain this provision. Noble Lords on all sides of the House have been keen to ensure that this privatisation does not result in services being cut back in remote rural areas. I believe that noble Lords are equally keen to ensure that what we broadly call “vulnerable service users” do not see their postal services denuded. Let us be clear: this legislation is not without controversy. I believe that it will benefit from a far greater sense of legitimacy if Ministers are able to report on their intentions to the devolved Administrations and key service user groups as the Government undertake a share disposal in Royal Mail.
The postal services are not devolved matters for logical reasons, as my noble friend Lord Empey so eloquently put it in a previous debate. Royal Mail is a part of our national infrastructure which is highly valued by the British public. I would not want to see the type and quality of postal services that we receive differ from one area of the United Kingdom to the next. It is precisely because this is not a devolved matter that I believe the Government must go that extra mile and ensure that their intentions in respect of privatisation are communicated to the devolved Administrations.
As many noble Lords have explained in Committee, small businesses in Scotland, Wales and Northern Ireland are particularly reliant on Royal Mail services and it would seem sensible that this user group is consulted prior to disposal, particularly in the current economic climate. Other key service user groups, such as people living in rural communities, pensioners and disabled people in the devolved Administrations could be affected by the sale of Royal Mail, and as a result deserve to be consulted prior to Royal Mail moving from the public to the private sector.
This amendment, and others similar to it, that were moved during Committee reflect deeper concerns about the impact that privatisation of Royal Mail will have on services in our communities, particularly in rural areas of Scotland, Wales and Northern Ireland. Noble Lords set out in Committee a number of worries they have about the lack of a commitment from the Government to use this Bill to ensure that postal services are continued at a level users currently enjoy, and that no one user group is impacted on negatively.
We are equally concerned that plans to privatise Royal Mail will be forced on the devolved areas without a meaningful consultation with the devolved Administrations. There is real concern about the consequences of Royal Mail privatisation on service users in Scotland, Wales and Northern Ireland. Failure to consult specifically in these areas will lessen the credibility and legitimacy of the privatisation—a potential problem that is easily rectified by Ministers agreeing to the terms of this amendment.
I trust that your Lordships will be able to support this well intentioned amendment, which aims to increase the legitimacy of this legislation and ensure that the Government's plan to privatise is fully communicated through the proper channels to those who most rely on Royal Mail services.
Lord Low of Dalston
My Lords, I apologise to the House for missing my cue at the beginning of this group but I should like to speak briefly to my Amendment 14, which is in this group. It seeks to ensure that service-user groups are consulted before Royal Mail is sold off and would require the Secretary of State to bring a report to Parliament setting out how the universal service provider will maintain the minimum requirements contained in the universal postal service obligation. Before I do that, I want to say a word about the debate we had on this issue on the second day in Committee on 14 March. In that debate, the noble Lord, Lord Razzall—I am not sure whether he is in his place today—whom the Minister described as having all the subtlety of an air raid, said:
“If we are to preserve the reputation of this House for knowing the facts and having expertise, we really must not say things that are not true … I said earlier, it is more expensive for the Royal Mail to deliver to Norwood Green or Hampstead than to maintain the service to the Orkneys and Shetland … if we are to be the serious House that knows the facts, we should take that on board”.—[Official Report, 14/3/11; cols. 113-14.]
Having a concern for the truth which is at least as great as that of the noble Lord, Lord Razzall, I undertook to follow up the matter and come back to it on Report, if it was necessary to set the record straight. The Minister helpfully sent us a note on the subject and I have also taken the matter up with the Royal Mail. From this it appears that the cost of delivering the universal service in urban areas other than London is approximately 11 per cent lower per postal item than the average cost across the country as a whole. The cost of delivering the universal service in rural areas is approximately 11 per cent higher per postal item than the average cost across the country as a whole. However, the cost of delivering the universal service in London is an anomaly at approximately 10 per cent higher per postal item than the average cost across the country as a whole, largely due to higher wage rates in London.
From this it is apparent that the cost of delivering to London and rural areas is roughly the same and far higher than the cost of delivering to other urban and suburban areas. Royal Mail comments that, other than in London, delivery of an item to an urban area is on average 22 per cent less costly than delivery to a rural area. I repeat that the claim of the noble Lord, Lord Razzall, that it is more expensive to deliver to Hampstead and Norwood Green than to Shetland and the Orkneys is not quite correct. I have actually toned down what Royal Mail said. As Shetland and the Orkneys are more remote than the average rural area, delivery costs substantially more per item than it does in London—more than double. It is not clear where the noble Lord was getting his figures from. He was probably comparing wage rates that are higher in London; and he was probably not comparing like with like. Myriad other costs are involved in delivering to places such as Shetland and the Orkneys. I hope that that is now clear and that we can put that matter behind us.
Lord Empey
My Lords, I should like to speak briefly. I am sure that the Minister in her response will argue that the amendment is not required because the main purpose of the Bill is to ensure the survival of the universal service obligation. However, the amendment indicates the level of concern in rural and remote areas that somehow, once the service is passed into the hands of the private sector, other things may happen. I hope that the Minister will again attempt to allay those concerns, which I know are real.
I said in my previous remarks in this House that many people regard the Royal Mail as a piece of national infrastructure. It is in that context that people, particularly those in remote areas who are already disadvantaged, fear—perhaps irrationally, but I nevertheless assure the noble Baroness that their fears are genuine—that somehow, despite the intentions of the Bill, things will ultimately change. I hope that that is not the case, but perhaps I may assure her that these concerns are genuine, and I hope that in her response she can give comfort to those of us who have these anxieties.
Lord Whitty
My Lords, I support the amendment in the names of the noble Lords, Lord Rogan and Lord Laird. The Minister will be well aware of my past engagement with Consumer Focus, the statutory body for postal services, which operates as separate entities in Scotland, Northern Ireland and Wales. It has become apparent, when assessing the needs of domestic consumers of postal services and post offices, and also those of small businesses in using those services, that there are somewhat different considerations relating to the firm commitment to the network and the universal service, particularly in rural areas and in those countries.
In Northern Ireland, there are particular issues relating to the north and the south, to An Post, and to getting mail across the sea. While preserving the universal service, the body of the post office and the body of Royal Mail as parts of our United Kingdom national infrastructure, it is important that we recognise that any dilution of the service or differential treatment of the parts of the United Kingdom would be particularly detrimental to those countries. It is therefore important that the devolved Administrations are fully involved in any changes.
Perhaps I may gently say to the noble Baroness that it has been obvious that her department in Whitehall has not always been the best when consulting devolved Administrations on a whole range of issues, including this one. The department is getting better, but acceptance of at least the principle of the amendment would be appreciated and would help the Government’s approach. It would meet the fears of many businesses and individuals in those countries, particularly in rural areas and small towns.
Lord Razzall
My Lords, I was not going to intervene, but because the noble Lord, Lord Low of Dalston, raised the point I made in Committee, we should put on the record that after the noble Baroness looked into this point she wrote to both of us and said that we were actually both right. As the noble Lord indicated, the cost of delivering items of mail in London is more or less the same as the cost in rural areas, and is significantly greater than the cost in other United Kingdom cities. The point that I was trying to make, obviously inelegantly, was that if I was really worried about what would happen I would worry about London. It is not only that the cost of delivery in London is greater, but London is such a huge element in the costs of Royal Mail, which has huge overheads, any third party looking at the overall cost of the Royal Mail—rather than looking at the Orkneys and Shetland—will have to look at the costs in London. It is Hackney that ought to worry, rather than the Orkneys and Shetland. That was the point I was trying to make.
Lord Low of Dalston
If it is truth that we are concerned with, as a serious House concerned about its reputation, it is not correct to say that it is more expensive to deliver to Norwood Green and Hampstead than to the Orkneys and Shetland.
Lord Stevenson of Balmacara
I hesitate to interfere in what is obviously an important battle of words; perhaps the Minister will take on the mantle of responding to ensure that we have equity at the end of this debate.
I shall speak to the substance of the amendments in the names of the noble Lords, Lord Low and Lord Rogan. The sale of Royal Mail and the separation of the post office network is a momentous event and is bound to cause concern and have genuine repercussions on the universal service and on the post office network, as we have heard and will continue to hear during debates on Report. We are very pleased by the stress that the Government are placing on retaining the universal service. There has not been a sitting in which we have discussed the Bill without that provision being at the heart of the remarks that have been made; we welcome that.
I pay tribute to the noble Lord, Lord Low, whose representations led the then Government to incorporate a service to blind and partially sighted customers into the universal service minimum requirement and to put it in the 2009 Bill. Nine million items a year are sent free of charge through the Articles for the Blind service, and the Bill carries through that decision, a move which will be welcomed on all sides of the House.
That experience illustrates the value of proper consultation to improve results and help people to feel part of the decision rather than the victims of one. It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups, but the amendments would require—just at the time it is needed—proper consultation with user groups, including small business, pensioners, people with disabilities and people in rural areas. People with a disability are more likely to use mail services as a means of communication. Disabled people visit the post office to post mail more than the average. Equally, other groups who I mentioned in that list need to be consulted, and the amendments would ensure that.
The other amendment deals with concerns in those parts of the UK which would be most vulnerable to any reduction in the USO or the post office network. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK.
I am not sure whether Ministers have had the chance to read the current edition of the London Review of Books and, in particular, the article by James Meek entitled “In the Sorting Office”. It is an extremely good tour d’horizon of some of the problems facing modern post services. He spends some time describing his experiences visiting the Netherlands and the operations being carried on there, some of which were mentioned by my noble friend Lord Christopher.
In particular, I draw attention to the points Mr Meek made in the article about when he visited rural parts of the United Kingdom. Muck is a Scottish island two and a half miles south of Skye. The article states:
“There are 12 households on Muck, and they get mail when and if the ferry arrives from Mallaig … Bad weather can cut the ferries down to one a week in winter. There have also been times—it happened the other day”—
when one puts a first-class letter on the early ferry and it reaches London the next morning. So they get a very variable service. The problem is that Muck now has a satellite dish for broadband internet. You can even, if you are lucky, catch a mobile signal in some parts of the island, if the wind is in the right direction—I added that last bit, but it is true.
“Nowadays email’s so important for communication that the post is getting less and less important”,
says one islander:
“I'm afraid the Royal Mail's in a losing battle”.
The article goes on to draw something to the wider public's attention which I had not known, which is that Jersey,
“has just announced it is abandoning Saturday deliveries in an attempt to staunch the flow of red on its balance sheet”.
I think that Jersey is still a part of the United Kingdom, although it is obviously a separate entity, so we are in danger of some dilution of the USO.
We will return to the question of the USO and how we will protect it. We know that the Government are on our side, but I think that there are measures that might strengthen that protection. The amendments are about consultation to make sure that user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas, are consulted, and I urge the Government to accept them.
Baroness Wilcox
I turn first to Amendment 14. As I said earlier, Ofcom will be required to report annually to the Secretary of State on its activities, including the provision of the universal service, and the Secretary of State is required to lay this report before each House of Parliament.
In performing all its duties—those in this Bill and those in the Communications Act 2003—Ofcom must have regard to various areas and groups as set out in Section 3(4) of the 2003 Act. These include: the needs of persons with disabilities, of the elderly and of those on low incomes; the opinions of consumers in relevant markets and of members of the public generally; and the different interests of persons in the different parts of the United Kingdom, of the different ethnic communities within the United Kingdom and of persons living in rural and in urban areas.
That list covers all the groups set out in the amendment tabled by the noble Lord, Lord Low, and I hope that he will be reassured by that. As I said in Committee, those requirements on the performance of Ofcom’s duties will apply to all future regulation of the postal sector. That is far more enduring than a snapshot assessment at the time of a sale.
The noble Lord, Lord Low, mentioned the power in Clause 33 to amend the minimum requirements of the universal service. We will come to that power when we discuss amendments to Part 3, but I know now that the power in Clause 33 is subject to the affirmative procedure.
On Amendment 15 in the name of the noble Lords, Lord Rogan and Lord Laird, to which the noble Lord, Lord Rogan, spoke this evening, I reiterate what I said in response to a similar amendment laid by the noble Lord, Lord Touhig, in Committee. The overarching objective of the Bill is to secure the universal postal service in the United Kingdom. It is about securing a postal service that is available to all in the United Kingdom and delivers to all addresses in the United Kingdom.
As I said in Committee, the Government have already produced an impact assessment on the Bill’s proposals. The assessment considered the impact of the proposals on all parts of the United Kingdom, together with the impact on small firms, rural communities and disadvantaged groups.
As I said earlier, Ofcom will report annually on its activities, including ensuring the provision of the universal service throughout the United Kingdom. In addition, we expect Royal Mail to continue to report on its quality of service performance, broken down by postcode area, so that there continues to be transparency about the provision of the universal postal service to all parts of the United Kingdom.
With regard to post offices, the Government recognise the need for accessibility by specific groups. The report by a Post Office company required by Clause 11 must include information about that. Clause 11 also requires that the Secretary of State give a copy of the report to Ministers in the devolved Administrations, as well as, of course, laying the report before this Parliament.
The information that is already in the public domain and that which will be provided as a result of the Bill will provide long-term transparency on the protection of the universal postal service and the accessibility of post offices throughout the UK. Those reports and the activities of the regulator will, as I have explained, take into account the needs of disadvantaged groups and those in rural areas.
I hope that, with these reassurances, the noble Lord will withdraw his amendment.
Lord Rogan
My Lords, I thank those Members who have spoken to my amendment. I have listened to the Minister and thank her for her remarks. I beg leave to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, the amendments make the case for employee shares being held as a trust and for employees to have a voice on the board in the light of the employee share scheme being established. We agree that that should be in the Bill because we have heard a lot of Ministers’ warm words for employees, but we need more assurances.
The benefits of employee share schemes, which were rehearsed to some extent in Committee, are widely recognised. They can include motivating employees to become more productive, helping to align employees’ interests with those of shareholders, remunerating employees in a tax-efficient way, increasing loyalty and reducing staff turnover. Of course, employee share schemes cannot do that on their own. They have to be part of a wider approach to good industrial relations. Employee shares will not be welcomed if they are felt to be a sop, to be at the expense of pay or a substitute for the usual channels of interaction between management, unions and staff.
However, given the more generalised benefits of such schemes and the very significant efforts made by current employees to implement the modernisation programme within Royal Mail, it seems appropriate to reward that effort by making available an increased proportion of the company for an employee share scheme. Carole Leslie of the Employee Ownership Association spoke of the benefits of such a scheme in evidence to the Public Bill Committee in another place. She said:
“The benefits for the Royal Mail in considering employee ownership would be giving employees who work in that organisation a real stake in the company, a real interest in delivering an excellent service to the customers and service users, finding … the right way to solve problems. They look at it not as something that is done to them, but as something they own and have a bit of control and influence over. They also have the information to use that influence wisely. A huge benefit is what I see”.—[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 76.]
If we accept the principle of employee shares, we are still short of detail. The Government have said that there will be a scheme but they have not said exactly what it will be. Having said that, we welcome two important concessions that the Government have made. First, we have pressed for greater detail about the scheme and are therefore pleased that the Government have brought forward an amendment so that, before the disposal of Royal Mail takes place, there will be a report to Parliament setting out the detail of the proposals for an employee share scheme.
Secondly, in Committee we pointed out that the Bill as it stands requires employee shares to be offered only when the last Crown share in Royal Mail has been sold. We argued the case for a trigger that kicks in when the first shares are sold. I think I heard the Minister suggest that that might indeed be acceptable to the Government, in which case we welcome that as well. However, whenever it is, we think that the Government should make some employee shares available when the first disposal is made.
The amendment proposes that shares should be held in trust for the benefit of employees, as we think that that is the right way to settle this matter. We now understand that this would be difficult for some employees to accept, as they would expect to be able to cash in the shares if they were taking them up, but we do not think that that is the right way forward to build in long-term value in the company. We believe that, for example, on leaving employment, shares held by employees should be disposed of only by way of transfer for consideration through the trust. It is obviously fair that employees who leave employment and leave a scheme should be able to capitalise on their shareholding, particularly if there has been capital growth. That is a scheme incentive. However, to maintain the integrity of the scheme as a whole, the disposals should go back into the scheme.
The amendment also calls for representation on the board for the employee share scheme once it is established. I have already made the arguments in favour of generalised employee representation but I think that they acquire additional merit when it is seen that some 15 per cent, we hope—but certainly 10 per cent under the Government’s proposals—of the shares will be available to be held by the employees of Royal Mail. This means that they should as of right have a chance to have a collective voice at the highest level, and we think that that should be stated in the Bill. I beg to move.
Lord Razzall
My Lords, having sat through what I would describe as “Lord Mandelson’s Bill” under the previous Government, I am absolutely delighted at the Labour Party’s conversion on the road to Damascus regarding their commitment to employee participation here. The noble Baroness would not be surprised if I indicated that, were the Government minded to go from 10 to 15 per cent, I could not be more delighted. However, whether she can persuade the Treasury of that, I have my doubts.
Lord Brooke of Alverthorpe
My Lords, I support my noble friend Lord Stevenson. I do not think that there has been any conversion on the part of the Labour Party. I was an employee when NATS was a PPP. I was an employee share representative acting on behalf of the employees and I was a partnership director. It is true that the employees had 5 per cent of the shares, which is less than what is on offer at the moment, but the Labour Government’s policy was to try to develop more employee involvement than there had been in the past. I suspect that, had they stayed the course with the previous Bill, we might have seen the emergence of something like that. There were certainly plenty of private discussions about the possibilities. Indeed, prior to the Bill being presented, some of us had conversations with Royal Mail about the prospects of creating a trust for employee shares, and we tried to be quite innovative in our approach. Some of us identified that one of the major issues facing postal employees was problems over home ownership. If we created employee shares within the company, while those shares would not be on the open market but would be kept within the trust, why could an arrangement not be created whereby the share ownership was offset against support from building societies to assist employees in purchasing or part-purchasing their homes? Royal Mail looked into that at one stage. Therefore, I welcome what the Government are trying to do. Perhaps the Minister, with all her powers of persuasion, can get round the Treasury and convince it that it should move from 10 to 15 per cent.
It has been pointed out to me that this offer is the biggest ever to be made during the course of a privatisation. I believe that if we check the records to see what happened with the bus industry, where deregulation and privatisation took place on a great scale around the country, we will find that many employees and managers had the opportunity to purchase shares in many of the bus companies in the country. Indeed, in some instances, they took them over 100 per cent, some of them also being put into trusts and some into ESOPs. Therefore, I believe that there is a precedent for offering a level of ownership higher than 10 per cent. I suggest that the Minister has a look at the bus industry if she needs some supporting evidence for her arguments in persuading the Treasury to go beyond the 10 per cent offer.
Secondly, I believe that there should be a trust, although I shall not repeat all the arguments that have been made before. There is a natural temptation for some people to get their hands on the shares and perhaps to dispose of them fairly quickly, as we have seen happen in several privatisations, but I believe that a trust provides a means for an employee to be more permanently committed to the company and to the welfare and profitability of the company in the long term. I hope that the Government will come forward with proposals on a trust.
Thirdly, that leads me to the final point made by my noble friend Lord Stevenson concerning representation on the board. I hope that shares will be issued on the basis of equality, regardless of people’s grades within the company, so that the managing director will get no more shares than a postal worker. Equally, I hope that, if there are instances in which votes have to take place within the trust, each vote will carry the same weight and value. In particular, an opportunity should be created—probably for the first time; certainly my Government did not do it—for there to be an employee director on the company that would be created under the privatisation proposals to represent the interests of the employees’ shares.
This is a chance for the Government to be progressive and to effect some changes in a new way. I see that on 7 June Mr Francis Maude is to speak to a gathering on employee ownership in the Strangers’ Dining Room in the other place. Perhaps he will float what the Government have in mind regarding further changes in the nature of ownership within the public service, with a greater push for employees to have a greater stake in the ventures in which they are involved. This could be linked up with what is happening in Royal Mail.
The Deputy Speaker (Lord Brougham and Vaux)
My Lords, I should have announced that, if this amendment is agreed to, I cannot call Amendment 17 due to pre-emption.
Lord De Mauley
My Lords, I again say that I am grateful to noble Lords on the opposition Front Bench who agree with us on the establishment of an employee share scheme. I think that we all agree that this is a key feature of the Bill and will help improve employee engagement and the culture of the company.
However, we should not lose sight of the fact that the overriding purpose of the Bill is to safeguard the universal service and secure the future of Royal Mail. A key means of doing that is enabling the introduction of private capital. In a previous debate, the noble Lord, Lord Tunnicliffe, stated that the Government should strike the right balance between employee shares and attracting private capital. He also said that we should learn lessons from previous privatisations. Yet, through their Amendments 16 and 17, noble Lords seem to suggest that we have not gone far enough.
So let me put in context the commitment we are already making through Clause 3. The minimum 10 per cent share requirement in this Bill is the largest statutory employee share scheme of any major privatisation. There is no doubt that it is a meaningful share, but one which, in our judgment, will not harm our ability to attract private capital. As I have said previously, most major privatisations did not even refer to employee shares in their respective Bills. Furthermore, the eventual share schemes in those past privatisations offered generally smaller stakes—5 per cent in the case of BT and British Gas and less than that for the other utilities of electricity and water. Only Rolls-Royce and BA came close, at 10 per cent and 9.5 per cent respectively, but I reiterate that we are committed to at least 10 per cent. The noble Lord, Lord Brooke, referred to the bus companies. We of course looked at them, but they were generally very much smaller companies. We consider that a stake of at least 10 per cent already strikes the right balance between a meaningful stake and attracting private capital.
Amendment 16 would also require that the shares be allocated to employees on a pro-rated basis in line with the reduction of the Government’s shareholding. The Bill already allows for that and, as the noble Lord, Lord Stevenson, mentioned, the Government have committed to place shares into the scheme simultaneously with the first sale of its shares.
In Amendment 18, noble Lords have sought to specify the design of the scheme such that it is structured as a share trust. As I said during our debate in Committee on a similar amendment in the name of the noble Baroness, Lady Dean—ably spoken to by the noble Lord, Lord Brooke of Alverthorpe, in her absence—an employee share trust certainly has its attractions, particularly its ability to deliver the Government’s objective to ensure a long-standing employee stake in Royal Mail. The Minister for Postal Services, too, has been clear that he sees many attractions to establishing such a trust. However, it is important to keep options open on the design of the scheme at this stage. Individual share ownership also has its merits, giving employees a very real sense of ownership through their share certificates.
The design of the scheme will in part depend on the type of sale we undertake. For example, individual share ownership could be appropriate if Royal Mail were floated on a stock market. There are circumstances where it could also make sense to have some combination of a trust and individually held shares. The noble Lord, Lord Tunnicliffe, suggested in our debates in Committee that perhaps some shares could be used for training or bursaries. Again, there could be merits in such ideas. However, until we have reached a firm decision on the form of a transaction, it would be unwise to set in stone the form of the employee share scheme. However, I remind your Lordships that government Amendment 6, which we debated a little while ago and your Lordships accepted, requiring us to give details of the scheme when we put shares into it for the first time, will provide the House with further assurance about its proposed design at the appropriate time.
Finally, Amendment 18 returns to the issue of having an employee representative on the board. As my noble friend said when responding to Amendment 10, while the idea may well have some merits, it is for Royal Mail and its shareholders to determine whether the board should include an employee representative. Thanks to this Bill, Royal Mail’s shareholders will of course include its employees in the future.
The future ownership of Royal Mail, by both private investors and its employees, inextricably links them. Within the important boundaries set by Clause 3, the exact size and form of the scheme should therefore be informed by the type of transaction and the circumstances at the time of sale. I ask noble Lords to accept that it is imperative that we keep our options open. I therefore ask them not to press their respective amendments.
Lord Stevenson of Balmacara
My Lords, I thank the noble Lord, Lord Razzall, for his support for the amendment, and my noble friend Lord Brooke for sharing again his experience of working in this operation. We can laugh about it even if we cannot always agree on the absolute detail of what the figures mean. My noble friend Lord Brooke said that this was an opportunity for the Government to show themselves to be progressive in these matters, a theme which has run through most of our debate today. I am grateful to have had confirmation that the Government feel that the employee share scheme should be pushed forward and supported. We are pleased to have had confirmation that shares will be available from the first tranche.
The Minister said that the Government were minded to go for a trust but were not quite sure. There will be a point where they have to come down on one side of the fence or the other. We can see the argument for keeping options open—we are not so daft as not to—but what the purchaser is going to get needs to be clear. I would have thought that any purchaser who wanted to put a very large stake into Royal Mail would want to know that it is a well run and productive corporation and will do the job in which they are investing. That must require them to have good employee relationships, and we have argued—I think that the Minister agrees—that there is a case for ensuring that the employees’ involvement is proper, appropriate and at the level which will mean that we will get a well run and productive firm.
We have argued for greater than 10 per cent—I got a sense of some support from the noble Lord, Lord Razzall, on that. I do not think that the Minister is minded to go that way and he produced a long list of previous privatisations. But it is the future. Why not boldly go where others have not gone and take it up to 15 per cent, and then reflect on that? However, I shall withdraw the amendment.
Middle East Peace Process
(12 years, 11 months ago)
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Baroness Tonge
To ask Her Majesty’s Government what assessment they have made of progress in the Middle East peace process.
Baroness Tonge
My Lords, I was going to apologise this evening for drawing your Lordships’ minds away from the tumultuous events in the Middle East, the dubious NATO campaign in Libya and the capture and assassination of Osama bin Laden, but I shall not in view of other developments over these past few days. This debate is very timely.
I want to make an appeal that we all remember the Palestinians and the injustice that has been meted out to them since 1948. It is an injustice which lies at the very heart of Arab Muslim angst against the West and which has allowed one country, Israel, supported by the USA and the European Union, consistently to break international law since 1948, when it was decided that the Palestinians would pay the price of the Holocaust even if they had had nothing to do with it.
Let us remind ourselves quickly of the facts on the ground. The wall or security barrier has been built between Israel and the West Bank. Fair enough, I would say. I witnessed during the second intifada the sheer terror of Israeli citizens as they experienced the suicide bombers—the al-Aqsa martyrs as they were then—encouraged and supported by Fatah. Let us remember that Fatah is now Israel's chosen partner for negotiations. The barrier was quite understandable, but what was outrageous was that the course of that barrier grabbed a huge amount of land and water in the West Bank from Palestinian farmers and families.
Palestinians have difficulty accessing healthcare and education, and humiliation continues daily at the check-points. The settlements go on expanding despite exhortations from the international community and repeated criticism from this Government. Farmers are attacked, crops are ruined and children are brutalised and imprisoned. Nowhere is this better demonstrated than at al-Walaja near Bethlehem. The town and its people are being strangled. I have no time to give noble Lords the details, but I hope that the Minister will comment on what is happening.
In Gaza, little has changed. Food is scarce if you are poor, as most Gazans are. Together with the terror of constant overflying and sonic bombing, and the poor education that the children are getting, the international community, by its inaction, is allowing a whole generation of children to grow up malnourished, undereducated and deeply traumatised by the actions of their neighbour, Israel. A more recent development is the targeting of children by snipers as they attempt to collect gravel for building purposes, because building materials are not allowed in. Gaza is an academy for the terrorists of the future: I cannot repeat this often enough.
We must not forget, in this overview of the situation, the plight of Israeli Arabs and Palestinians living in Israel, who are subjected to an apartheid-like regime of control and lack of freedom, let alone the 7,000 to 8,000 prisoners languishing in Israeli jails. Will the Minister update us on the humanitarian situation in Gaza and the West Bank, and on what the Government intend to do about it?
There have been great changes recently in the situation. In March, after a meeting with Mahmoud Abbas, the Foreign Secretary said:
“The Peace Process must not be allowed to become a casualty of uncertainty in the region. It is too important to be allowed … to falter”.
He said that a big hindrance to any negotiations taking place was the divisions between Fatah and Hamas. He also cited the problems of the settlements, East Jerusalem and Gaza. William Hague looked forward to the upgrading to mission status of the Palestinian delegation to the UK, but did not comment on the fact that, a month earlier, the USA had vetoed a UN Security Council resolution condemning the settlements, even though it used the same words that Hillary Clinton used a year before when the USA called for an end to settlement expansion. Is this yet more evidence of the power of the Israel lobby in the United States?
The Palestinians have made progress and, thanks to the good offices of the new Egyptian Government, and Mr Al-Arabi in particular, a reconciliation has been brokered between Hamas and Fatah, and promises have been made by Egypt to open up the Egypt-Gaza border crossing at Rafah. Mr Al-Arabi is a very distinguished man and a former judge at the International Court of Justice. He is to be applauded for his efforts and I hope that we will encourage him in every way possible.
The Israeli Government, predictably, has said that Fatah must chose between Israel and Hamas. They always produce another hurdle when one is removed, and never miss an opportunity to miss an opportunity. They have also decided to withhold taxes worth $56 million that they have collected on behalf of the Palestinian Authority on the grounds that the money may be used by Hamas to buy arms. Mr Al-Arabi has made it clear, as have the negotiators in Cairo, that a unity Government composed of independents and technocrats from the West Bank and Gaza will run the Palestinian Authority until elections have taken place. It will not be run by Fatah or Hamas. Israel must be told that this could be its last chance to get a two-state solution. A huge opportunity was missed after the Palestinian elections in 2006, when we refused to give the Palestinian people the Government they wanted after a monitored, free and fair democratic process.
Israel's fear of Hamas is based on the old Hamas charter, which is a relic, and on the fact that neither Israel's leaders nor ours have ever bothered to talk to Hamas leaders. On numerous occasions I and other parliamentarians have been assured by Hamas leaders, in particular Khaled Meshaal, that they will accept a two-state solution based on the 1967 borders, and will maintain a truce. However, things are getting more difficult. The rockets fired recently were from dissident groups in Gaza, which get more numerous and better supported as Hamas is seen not to be able to make progress in its negotiations with Israel.
Finally, Israel has been indulged for too long in the interests of American foreign policy as well as its own. The rights of Palestinians under international law have been ignored, and much suffering and injustice have been endured. International law was not mentioned in the 2003 road map, which was meant to provide a framework for negotiations. The International Court of Justice ruling on the separation barrier was ignored, and President Obama, after he took office, ignored completely international law in his speech in Cairo on Israel and Palestine. Why?
International law is for everyone. It is for Israel, Palestine, Bahrain, Syria, the European Union—and even the United States of America. If we continue to apply it selectively, there will be no future for Israel, and the world order will ultimately collapse. I implore the Minister to tell the House that we will bring pressure to bear on Israel to co-operate with Egypt and the Palestinian negotiators in Cairo. We must not miss the great opportunity of the Arab spring—however difficult it is, and however many road blocks are put in the way—to bring justice also, at last, to the Palestinians.
Baroness Northover
My Lords, I gently remind noble Lords, before we move into the main part of the debate, that it is time limited and that when noble Lords see two minutes on the clock, their time is up.
Lord Dobbs
My Lords, I thank the noble Baroness for introducing this very important debate. I remind the House that peace is a puzzle of many parts, and in the Middle East one of the important parts is Pakistan. It is a country in great crisis. It also has an arsenal of nuclear weapons. The price we would pay for the failure of Pakistan would be devastating. It would destroy the prospects for peace in Afghanistan and infect the entire Middle East. That failure would almost certainly be lived out also on the streets of this country. It could put in the hands of extremists like bin Laden the most terrible weapons of destruction.
It is very easy to lay blame. Did Pakistanis know that bin Laden was hiding there? Of course some of them did, but it would be folly to kick over the entire barrel simply because some of the apples are rotten. Perhaps it is scarcely surprising to see the media sneering, but I was desperately disappointed to hear the CIA director, Leon Panetta, publicly proclaiming that Pakistan could not be trusted over bin Laden. In one broad, sweeping, trite statement, he humiliated them all. It is precisely that sort of insensitivity that could push Pakistan into the abyss.
The country needs help, not humiliation. A stable Pakistan is a precondition for a wider peace. We in Britain have a unique role to play. Our ties are abundant. We have educated their politicians, trained their officers—and one day we might even beat them at cricket. Britain needs to be the sort of good and patient friend to Pakistan that only we can be. Restoring stability will not be easy. It will not be completed in one year, or probably even in 10; but the prize is worth every effort, because if we fail, the alternative is not just a subcontinent but an entire Middle East in nuclear chaos.
Lord Anderson of Swansea
My Lords, I will make four points. First, the prospect six months ago of achieving peace in the Middle East through the peace process appeared very bleak. Progress made by Prime Minister Olmert and President Abbas in 2008 was reversed by the new right-wing coalition led by Prime Minister Netanyahu, who could plausibly point to the fact that there was no negotiating partner on the other side who could deliver, and to the increasingly sophisticated rocketry passed by Iran to Hezbollah and Hamas. Again the hopes raised by President Obama's Cairo speech were dashed, and most commentators at the time were confidently predicting the renewal of armed conflict.
Secondly, much remains unchanged, but there are now flickers of a positive movement both in the Palestinian economy and in their security services. The Arab spring has weakened the rejectionist Syria, and the new Egyptian initiative today unites the Palestinian factions. It would be helpful to have the Government's analysis of the significance of this. However, the way in which Hamas is mourning the death of bin Laden is surely not helpful.
New factors put Israel on the defensive; Egypt will shortly open its borders with Gaza, and a Government responsive to their people in Egypt might in fact repudiate the 1979 treaty with Israel. Again, the Palestinian Authority will press the United Nations General Assembly in September for recognition. There will be much international support, and this Government will have to have a clear position by that time.
Finally, the status quo is no longer tenable. Friends of Israel should urge Prime Minister Netanyahu to respond positively to the new challenges. Time is not on their side. One hopes that the challenge today of President Abbas—choose settlements or peace—will be answered positively.
Lord Alderdice
My Lords, the strategy that has been adopted for some time—isolating Hamas in Gaza—seems no longer tenable. As many of us have advised, it was not a long-term option. In the case of Egypt itself, the Arab spring has meant that instead of standing in the way of an accommodation between Fatah and Hamas, Egypt has within weeks facilitated it. It has also, as the noble Lord, Lord Anderson, indicated, pledged to open the borders. This in practice makes the siege of Gaza impossible to sustain. However, while we might focus on others in the few minutes available to us for this debate, I should like to put to the Minister the question of how Her Majesty’s Government will respond to two developments.
The first development is the move towards a Palestinian Government who are more inclusive and supported by Fatah and Hamas. Will Her Majesty's Government engage with that new Palestinian Government, or will they do what they have done in the past, and what they did after the Mecca agreement, and avoid engagement because of the support or participation of Hamas?
Secondly, in the event—as seems extremely likely, as the noble Lord, Lord Anderson, said—that the United Nations General Assembly approves a Palestinian state on the 1967 borders, albeit a relatively virtual one, what will be the approach of the United Kingdom Government? Will we support such an application? If it is approved by the General Assembly regardless of whether we support it, what will be the attitude? This is not, of course, a question only for us or the United States. If Hamas is part of a UN-approved Palestine, what will be its reaction to a UN-approved Israel? Everyone is put under pressure to recognise each other. However, I would appreciate the Minister's response on those two questions.
Lord Weidenfeld
My Lords, I am afraid that the two-minute speaking limit prevents me arguing certain basic facts with the noble Baroness, having myself been involved for over 60 years with Israel. There are many facts concerning even its creation which I should very much like an opportunity to discuss here at greater length.
I think that the Arab spring is a mixed blessing. On the one hand it has given fresh hopes; on the other, the symbolism of Tahrir Square has also meant assault and savagery against a hopeless American woman. I think that the important thing now is the attitude of the reunited two forces, Hamas and Fatah. If Prime Minister Abbas, whose Administration has a great record of economic improvement and recovery, were willing to prove to the whole world that Hamas is unmistakably and irrevocably prepared to accept the existence of the state of Israel and of two adjacent states, an Arab state of Palestine and a Jewish state of Israel—and, indeed, if Hamas itself would endorse that—then I think that the road is open for negotiations.
I had the opportunity in recent weeks to be in Israel and to speak to leaders of the Government, the opposition and other people of importance and influence in the country, and I can tell your Lordships that there is considerable desire for true peace along the lines of two countries, Arab Palestine and Jewish Israel. However, Hamas has to submit to the supreme test—that it is unmistakeably and irrevocably agreeable to the existence of Israel. Nothing else would suffice or enable a negotiation to start.
I also believe that in the shadow of the death of the greatest terrorist of all time, we will all have to be watchful. The fanatical followers of bin Laden will try to wreak revenge. We therefore need to have an iron will, patience and understanding, and still not falter in our desire to have peace.
Finally, I believe that the unilateral recognition of a state of Palestine is a disastrous move that would aggravate the issue unless it were immediately preceded by efforts to get the parties to the table. I know that responsible European leaders are using their influence in every way to prevent this proposal coming before the United Nations, and certainly not before the Security Council.
I believe that we should all now be working together under the leadership of the United States, reinvigorated as it now is by the success against bin Laden; try to see the position fairly; and bring the parties together on the basis of total and unconditional mutual recognition.
Lord Dubs
My Lords, I recently visited the West Bank; it was my first time there. Of course any solution must acquire security for Israel, but also dignity, self-respect and justice for the Palestinians.
As part of the visit I went to see the Israeli military courts in Ofer. I believe that the way in which these courts operate is an obstacle to achieving a just peace in the region. We went to see how children are treated by this system of military justice. Approximately 700 Palestinian children are prosecuted every year in these courts, and at the end of January this year some 222 were in jail. In the court we visited we saw a 14 year-old and a 15-year-old, one of them in tears, both looking absolutely bewildered. What shocked me as much as anything was to see that these young persons—children—had chains or shackles around their ankles while sitting in court. They were also handcuffed as they went into court. Although the handcuffs were taken off while they were in court, they were put on again as they left the court.
When being interogated these young people do not have the security of video recordings, lawyers or parents present. In fact, if parents want to visit, their permission might take 60 days to come through, by which time the young person might have served his or her sentence. The court proceedings are in Hebrew, with translations of a doubtful quality. The verdicts are mostly based on uncorroborated confession evidence. The evidence against one young person that we saw was of throwing stones at an Israeli armoured vehicle, for which he is likely to get 60 days in custody.
I do not believe that this process of humiliation represents justice. I believe that the way in which these young people are treated is in itself an obstacle to the achievement by Israel of a peaceful relationship with the Palestinian people. I think that the Israelis should apply proper standards of human rights to the way in which they treat them.
Lord Hannay of Chiswick
My Lords, I raise three questions, and I hope that the Minister can respond to them.
The first is whether this is the moment at which we should be trying to revive the peace process, or should we be—as the Israeli Government would wish us to—sitting back, waiting for the dust to settle, doing nothing hasty, and making no innovations? I am sad to have to say that I think that the second choice is disastrous. I hope we will explain to our Israeli friends that we think it is disastrous because the new regimes that are emerging in Arab countries will be more sensitive to public opinion and will be open to radicalisation, and if there is no process to engage with we can be quite sure what will happen. We will drift towards confrontation and perhaps even hostilities. I believe in everything that the Minister and her colleagues have said in recent weeks, and I hope that they share this view and will be active in trying to revive the process.
Secondly, how is the vacuum in the peace process best filled? I do not think we can hope that Israel or the Palestinians will fill it spontaneously. In those circumstances, I feel that it is important to argue with the United States that it, together with the quartet, should put some kind of outline down on the table and test the views of the parties to that outline. It need not be anything particularly ambitious. It could be within the parameters of the Clinton negotiations at the White House and the subsequent Taba negotiations, but we need some substance on the table, otherwise the thing will just go round in circles.
Thirdly, who should we, Britain, and our European allies be talking to? I believe we should be talking to everyone, and that includes Hamas. We must surely now make a distinction between talking to everyone and negotiating. That is the essence of diplomacy. We should not negotiate with anyone, including Hamas, who does not desist from violence and does not accept the Arab peace initiative, but we should talk to everyone because we will have something to say if an outline is put on the table, and preserving the old system of boycotting Hamas completely will be counterproductive.
I hope that we can hear a response from the Government on those three points. We are at an important moment, and I hope that we will turn it into an opportunity, not another entry in the long catalogue of missed opportunities.
Lord Palmer of Childs Hill
My Lords, I think it is worth restating that, quite rightly, the coalition Government’s, and I hope most people’s, policy is for a two-state solution. To carry this forward, all sides have to put the past behind them, however unpleasant—and much of it is unpleasant—and concentrate: first, on understanding that Israel's natural priority is its own security; secondly, on ensuring that Israel understands that settlements, other than the large towns grouped near the 1967 border, will eventually need to go, just as Israel moved all its settlements out of Gaza; and, thirdly—these all go together—understanding that Hamas needs to accept, albeit reluctantly, the state of Israel permanently and that no longer will rockets pour down on Israeli towns such as Ashkelon and Sderot.
Progress has been made between Israel and the Palestinian Authority. However, the Fatah-Hamas agreement does raise real difficulties and challenges. The noble Lord, Lord Anderson, referred to this, and I shall give greater detail. Ismail Haniya, the leader of Hamas in Gaza, said about Osama bin Laden:
“We condemn the assassination and the killing of an Arab holy warrior”.
The Times, which is not noted as a pro-Israel newspaper, carried an interesting editorial on 29 April. It stated:
“Hamas … promotes its own concept of peace, founded on the Islamic concept of hudna, or an extended ceasefire. Yet it seeks an Islamic state from the Jordan to the Mediterranean, promulgates The Protocols of the Learned Elders of Zion, launches rocket attacks against Israeli civilians, and has received money and arms from Iran”.
So my question to the Minister is: how does this affect the securing of an eventual settlement that, as the Times put it,
“respects Israel's security needs and creates a viable, pacific Palestinian state”?
I firmly believe that this is the way to create a stable Palestine alongside a secure state of Israel. Both sides have to sit down at the negotiation table, put the past behind them and look towards the future. This Question is about the “assessment … of progress”. That is the future.
The Earl of Sandwich
My Lords, today’s meeting in Cairo provides some hope of reviving the peace process, but we cannot count on it while Mr Netanyahu is in charge of Israel. Our Prime Minister has described Gaza as a prison camp. Conditions there have deteriorated. Far from withdrawing, Israel has in fact tightened its grip, and IDF restrictions have made life for Palestinians almost intolerable. There are innumerable stories of people unable to get even proper medical help.
One aspect of present policies is the trauma and psychological damage done to young children in the West Bank and Gaza. The poorest Palestinian children include those who have suffered from conflict, street violence and the worst kinds of abuse. One admirable service in Jerusalem is the Spafford Children’s Center, which provides counselling and speech therapy to children who would otherwise drop out of the school system. Arts therapy and cultural alternatives to violence have been highly effective in relieving post-traumatic stress disorders. The centre's work now also extends beyond the city and the separation wall through outreach clinics, but it now takes hours for Palestinian health workers and students even to get from Bethlehem to Jerusalem, let alone to obtain visas to train abroad. What are Her Majesty's Government doing to convince Israel that freedom of movement is essential for this kind of work? Are they urging Israel to ease the blockade? Finally, will the EU have to pick up the pieces if Israel suspends payments to the Palestinian Authority?
Lord Sheikh
My Lords, I care about humanitarian issues, and I have been involved in facilitating two convoys of humanitarian aid being sent to Gaza through the Rafah crossing. I have also visited Gaza with the consent of those on my Front Bench and the Conservative Party. I, along with three other British parliamentarians, visited Israel and the West Bank last month. While in Ramallah, we had a meeting with Prime Minister Salam Fayyad of the West Bank. During our meeting, the Prime Minister said that if and when the Palestinians get full independence, the half a million Israelis would be welcome to stay in the West Bank. We also spent the best part of a day with an Israeli army officer and high officials in the Israeli Foreign Office to hear the Israelis’ point of view. I have therefore visited Gaza, Israel and the West Bank and have first-hand knowledge of the various issues.
In regard to Fatah and Hamas, the leaders of both groups have today signed a reconciliation pact in Cairo aimed at ending their four-year rift. The agreement paves the way for a joint interim Government and fixes a date for general elections next year. The Palestinians are aiming for a declaration of statehood in September, and I very much hope that all parties involved in the dispute will have something positive to say before the declaration. I think that the peace plan submitted last month, whose signatories included two former leaders of the Israeli intelligence agency, Shin Bet, a former chief of Mossad and a former chief of the Israeli defence forces, needs to be considered. Israel is a mighty military power, but it must be magnanimous and arrive at a two-state solution whereby it has a guarantee of security and nationhood, but in return it must ensure that Arabs are fairly treated and have full independence. To achieve this, we need active participation and help not only from the two countries involved but from the United States, the European Union and, of course, other members of the quartet.
Lord Judd
My Lords, I am particularly glad that the noble Baroness, Lady Tonge, the noble Earl, Lord Sandwich, and my noble friend Lord Dubs mentioned children in this debate. The plight of children is deeply disturbing. The condition in which children in particular are being held in prison in both parts of Palestine is an affront to any decent humanitarian standards, but it is also totally inexplicable in terms of peacebuilding because of the bitterness it must engender in the young.
The coming together of Hamas and Fatah certainly provides a great opportunity, but I would like reassurance from the Minister that the Government are totally convinced that if a success is to be made of this opportunity, the process, as well as the solution, in making peace must be owned by the parties themselves. It has to be inclusive and preconditions have to be kept to a minimum. The point about peacebuilding is that you build commitment in the context of the process. Insisting on too many preconditions before the process begins prevents the process getting under way. That is the whole challenge of a peace process.
Finally, I believe that the outside world, including the United States—I would like an assurance from the Minister that this is the Government’s position—must realise that it cannot impose or manage a solution here. As I have said, that solution has to be built by the parties. There is a difference between facilitating, which we should all seek to do, and trying to impose or manage, which we must try not to do, because the solution will be the solution of the people themselves.
Lord Pannick
My Lords, the noble Baroness, Lady Tonge, says that we must not miss this opportunity to advance the peace process. But progress depends on repudiating the noble Baroness’s thesis that Israel and what she describes as the Israel lobby are solely responsible for barriers to peace. Progress essentially depends on a recognition of the interests, the concerns and the mistakes of both sides.
Lord Pannick
I will not give way. I have only two minutes.
The unfortunate Palestinian people continue to be denied freedom of expression and an independent judiciary. It is therefore very difficult for leaders to emerge who are able to say clearly to their own people what needs to be said. What needs to be said is, “It is in your interests to abandon the futile attempt to destroy the state of Israel. Let us concentrate on education, prosperity and the development of a civil society of our own”. That, more than anything, would give confidence to the leaders and the people of the state of Israel that a peace settlement can be achieved which is a lasting solution to an extremely difficult problem so that security walls, blockades and military courts are no longer needed.
Lord Sacks
My Lords, I welcome this debate because it allows us to focus on both words of the phrase “peace process”. We who pray for peace understand by that word a state in which I recognise your right to exist and you recognise mine. That is what peace minimally means. How can we be speaking about peace when Hamas remains committed as a matter of principle to the elimination of the state of Israel; when it engages in missile attacks against innocent civilians and uses its own innocent civilians as human shields; when it propagates some of the most vicious anti-Semitic myths ever to have inflamed the hatred and to have anaesthetised the conscience of human beings, and two days ago praised Osama bin Laden as a holy warrior; and when it refuses to agree to the fundamental principles laid down by the quartet, not least of which is the recognition of Israel’s right to exist? Until Hamas undergoes fundamental change, there may be a process but there will not be peace. Peace is more than a resting place on the road to war. I cannot make peace with one who denies my right to exist.
No one familiar with the history of the Jewish people through its 4,000 years of history can fail to appreciate how deeply Jews within Israel and outside long for peace, pray for peace and long for the ability to live as other people live—without fear, without hate, without being treated as a pariah, without being blamed for the troubles of the world and without being denied the right to exist. That is why I urge the Government to be resolute in their insistence that the path to peace in the Middle East must begin with the unequivocal recognition of the state of Israel’s right to be.
Lord Triesman
My Lords, given the time that I have, I am going to have to restate a position. The conditions for peace require a major development in good faith on all sides. Good faith in the pursuit of peace imposes a clear duty. Any progress cannot be destroyed by either party by taking steps or striking positions which they know in advance are abhorrent to the other.
The quartet, which we support, has set out what must be pursued actively, in good faith and in a climate of restraint. Israel should desist from expansion, from building illegally on Palestinian land and from making it ever less possible to create a viable Palestinian state. The question inevitably will arise about the sincerity of a desire for a two-state solution when that two-state solution becomes more difficult by the day in the financial, economic and other arrangements.
An equally plain and equally great impediment is the routine and continuous firing of sophisticated rockets and other munitions into Israel, which undermines confidence among ordinary people that a peaceful solution is possible. The refusal to recognise the right to exist of the Israeli state, not least by Hamas—whatever the noble Baroness may have said at the beginning—speaks to a long-term resistance to peace and that cannot be ignored. In terms of recognition, we also welcome the extension of the diplomatic status of Palestinian entities.
Two viable states, respect for life, respect for law including international law, and recognition of legitimate states and their right to exist are the foundations of what will strike an honourable peace.
Baroness Verma
My Lords, first, I thank my noble friend Lady Tonge for allowing us to have this debate which is so crucial at this time. I should also like to thank all noble Lords for the measured way in which this debate has been approached, considering the circumstances in which we find ourselves.
We are seeing unprecedented change across the Middle East combining immense potential for greater democracy with the risk of instability and violence. Both the Prime Minister and the Foreign Secretary have made it clear that the peace process cannot become a casualty of regional uncertainty. This Government are working with international partners—the US and the E3—to get the Israelis and Palestinians to return to direct negotiations as soon as possible.
The negotiations should be based on a two-state solution on the basis of clear parameters. As noble Lords know, these parameters are: an agreement on the borders of the two states, based on the 1967 lines with equivalent land swaps agreed between the parties; security arrangements that, for Palestinians, respect their sovereignty and show that the occupation is over and, for Israelis, protect their security, prevent the resurgence of terrorism and deal effectively with new and emerging threats; a just, fair and agreed solution to the refugee question; and fulfilment of the aspirations of both parties for Jerusalem. A way must be found through negotiations to resolve the status of Jerusalem as the future capital of both states.
Both the Israelis and the Palestinians must be determined to enter into meaningful negotiations. We look to both parties to return to negotiations as soon as possible on the basis of the clear parameters I have outlined. Our goal remains an agreement on all final status issues. We will contribute to achieving this goal in any and every way that we can. Noble Lords have raised important questions and crucial points, many of which I am sure will be raised this evening when the Prime Minister meets with the Prime Minister of Israel.
I will now respond to some of those points and questions, but I hope I will be forgiven if I cannot answer all of them. I undertake to write to noble Lords and have copies placed in the Library.
The noble Baroness, Lady Tonge, asked about the expansion of settlements, especially at al-Walaja. We are aware of this and the Parliamentary Under-Secretary of State for Foreign Affairs visited the settlement in January during his visit to Israel and the Occupied Territories. Our view is that all settlement activity in the occupied Palestinian territories is illegal and an obstacle to peace, and therefore we will raise this issue with the Prime Minister of Israel again.
We remain concerned about the prevailing situation in Gaza, although some welcome progress has been made on the humanitarian aid side, the move from a white to a black list, and the increased volume of imports. But a fundamental change is needed to achieve pre-2007 levels of exports as soon as possible, along with improved co-operation with the United Nations and the NGOs. The recent Israeli measures to facilitate exports out of Gaza are welcome, but they need to be made swiftly and implemented quickly. This means action on the ground. It is also vital that Israel should allow Gaza to import the raw materials necessary for manufacturing exports. We are discussing with Israel, the EU and the UN how we and others in the international community can help to move the issue forward. We continue to encourage the Government of Israel to enable Gaza exports this year to attain the levels of 2007. The British Government believe that a strong economy in the Occupied Territories is key to promoting peace, stability and prosperity.
The noble Baroness also spoke of Hamas, as did a number of other noble Lords. Our policy on Hamas is clear. The quartet has set out clearly that Hamas must renounce violence, recognise Israel and accept previously signed agreements. Hamas must make credible movements towards these conditions, which remain the benchmark against which its intentions should be judged. The clear focus for now must be on a return to direct negotiations between Israel and Palestine as soon as possible.
The noble Lord, Lord Anderson of Swansea, asked about the United Nations General Assembly in September. Our focus remains on getting the parties back to the negotiations as the best way to achieve a two-state solution, but as we approach September, we are all clearly going to be faced with some very difficult choices which we are currently considering.
The noble Lords, Lord Anderson, Lord Weidenfeld and Lord Hannay, and my noble friend Lord Alderdice all talked about the Fatah-Hamas reconciliation. We renew our calls to both sides to commit to peace talks leading to a Palestinian state that exists in peace and security alongside Israel. Britain hopes that the announcement of reconciliation between Fatah and Hamas will lead to the formation of a Government who reject violence and pursue a negotiated peace, and we will judge a future Palestinian Government by their actions and readiness to work for peace. Intra-Palestinian reconciliation remains a critical component of the peace process. We are of course examining the detail of the recent announcement and we are in discussions with our partners.
On Palestine’s recognition and on state building, we see negotiations towards a two-state solution as the only way to meet the national aspirations of Israelis and Palestinians, leading to a sovereign, viable and contiguous Palestinian state living in peace alongside a safe and secure Israel and its other neighbours in the region. The UK is fully committed to supporting the Fayyad plan and helping to build the institutions of a future Palestinian state, but a negotiated solution remains the only result that will actually bring peace and justice to the Palestinian people. We therefore call on the parties urgently to return to negotiations. The noble Lord, Lord Weidenfeld, can be reassured that our focus is on bringing the parties back to negotiations, that it must be that both parties feel safe and secure, and that it is a settlement which is agreed by all and recognised by all.
My noble friend Lord Dubs was absolutely right about a stable Pakistan. It is crucial that we have a stable region, and that is why our aid programme has been increased. By working with Pakistan, we will be able to tackle terrorism.
A number of noble Lords spoke about the importance of the Palestinian Authority, and that is why we have upgraded the Palestinian general delegation. It was agreed by the Foreign Secretary on 8 March that, in view of the signs of improvements made by the Palestinian Authority in its state-building agenda and the progress being made on its road-map commitments, the upgrade of the delegation office means that it will now be renamed as the Palestinian mission. There will be simplified visa arrangements, but it is important to make it clear that this is not the first step towards recognising the Palestinian state, which I repeat must be achieved through negotiations. Diplomatic status will only be conferred on diplomats from states that we recognise.
There are many points that I have not addressed, on which I undertake to write to noble Lords, but in my closing paragraphs I will address some further questions. The most important lesson we have learnt from the Arab spring is that legitimate aspirations cannot be ignored and must be addressed. If we cannot create a path for those legitimate aspirations to be secured through negotiation, there is a risk of violence and a generation of people who see little hope for the future. This should not be allowed to happen. We understand Israel’s deep and justified security concerns, and we will work with Israel to preserve her security and the stability of the region around her. We hope that the signing today of the reconciliation agreement between Fatah and Hamas in Cairo will lead to the formation of a Government who reject violence and pursue a negotiated peace. As I have said, we will judge a future Palestinian Government by their actions and readiness to work for peace.
We are extremely concerned about the escalating violence and the deaths of civilians in Israel and the occupied Palestinian territories, including the bomb attack at a bus station in Jerusalem and the surge in rockets and mortars from Gaza. We have condemned the extremists for instigating this violence and deliberately attempting to wreck the chances for peace. They should not think that while the attention of the world is elsewhere, we will turn a blind eye to their actions. Israel has the right to defend herself, but we will call on her to be proportionate in her retaliation, and we call on both sides to do all they can to prevent the further loss of innocent life.
We recognise the significant progress made by the Palestinian Authority in building the foundations of a viable Palestinian state in line with its road-map commitments. The UK continues to support the creation of a sovereign and viable Palestinian state alongside a secure Israel, but also continues to believe that the best way to achieve a lasting solution that delivers a sovereign, independent and contiguous Palestinian state alongside a safe and secure Israel at peace with her neighbours is through a negotiated solution. We will be working with the international community to do everything we can to achieve this, and we look to both parties to come to negotiations based on the clear parameters as soon as possible.
I have a note on children being held in custody. I would just like to reassure the noble Lord, Lord Judd, and others who raised the issue that we are taking it very seriously and are raising it with the Israeli Government at every juncture. We continue to monitor the situation, but in the interests of trying to get the two parties back into negotiations, it is really crucial that, while we treat Israel as a close and candid friend, we are also able to be frank about those things that we disapprove of.
I have reached my 12 minutes but I reiterate that I will write to those noble Lords whose questions I have not managed to answer. This has been an important debate and it is one that I suspect we will keep returning to.
Postal Services Bill
(12 years, 11 months ago)
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Baroness Wilcox
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I shall speak also to Amendments 22, 24, 28, 29, 31 and 32 in order to reflect their purpose in its entirety. I shall also address Amendments 21, 23, 25, 26, 33, 34 and 35 in the names of the noble Lords, Lord Young, Lord Tunnicliffe and Lord Stevenson, as well as Amendments 20, 27 and 30 in the name of the noble Lord, Lord Kennedy. This is a large group of amendments but it covers ground with which we will all be familiar from earlier stages. I shall try, therefore, to be as brief as I can while still, I hope, addressing the concerns of noble Lords. I hope that the government amendments will help to ease the noble Lords’ concerns as well as the concerns raised in Committee by the noble Lord, Lord Whitty.
All sought to increase the parliamentary scrutiny around the transfer of Post Office Ltd to a mutual ownership structure. The Government believe strongly that a mutual structure should not be imposed on Post Office Ltd from the top down, and this has not changed. We are still of the opinion that Parliament should not dictate the structure of a mutual Post Office Ltd or the make-up of its board. When the company is mutualised these details must be agreed by all of the interested parties and the interests of stakeholders such as sub-postmasters and employees must come first.
As I have said before, the Government have asked Co-operatives UK to report on recommendations for a move to a mutual model. This report will be presented to Ministers shortly and we will of course make it public. Should your Lordships wish, I shall also ensure that a copy of it is placed in the House Library. I hope the report will provide more detail of what a mutual Post Office Ltd might look like in practice. The Government plan to launch a public consultation later in the year, which will develop further details of how a mutual Post Office Ltd might work.
Your Lordships will understand that the suitable model for a mutual Post Office has yet to be designed and that we cannot know its governance structure. As I said in Committee, it is by no means clear at this early stage that the selection of both sub-postmaster and employee representatives to the board would necessarily be the best option. Enshrining governance arrangements in legislation goes completely against our commitment to ensuring that the mutual is developed by the people who know it best. The Government do not, therefore, agree with Amendments 34 and 35 in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe.
I understand the desire of both Houses to be able to exercise further scrutiny over a move to a mutual. Until we have fully consulted, we will be unable to define specifically what the Post Office mutual will look like and we recognise that, in order for Post Office Ltd to transfer to mutual ownership, it must have become commercially self-sustaining. Indeed, the noble Lords, Lord Young, Lord Tunnicliffe and Lord Stevenson, recognise this too in their Amendments 21, 23 and 33. We are confident that the strategy mapped out by Post Office Ltd, backed by the Government’s £1.34 billion funding package, will deliver a commercially self-sustaining business.
There are a number of elements to this, as set out in detail in the Government’s policy statement published last November, particularly the aspiration that the Post Office should become a front office for both central and local government. There are great opportunities for the Post Office to develop this ambition and a number of pilots for new services have already been agreed. For example, the Department for Work and Pensions has recently announced plans for three pilots, including document verification for pensioners and support for jobseekers in more rural areas. The DWP has also confirmed that it will work with the Post Office to explore its role in supporting new ways of delivering welfare, including universal credit. Post Offices are also of course a trusted and natural place for people to access face-to-face government services such as identity verification services. Currently, the ambition to be a front office for government builds on existing capabilities and strengths.
As Paula Vennells, the Post Office’s managing director, explained to a number of us at the briefing meeting last week, the Post Office is working closely with the Cabinet Office to explore the services it could offer the Government to help them to make the savings that this demanding fiscal environment requires. Paula has also been working with Martha Lane Fox to ensure that the Post Office can have a sustainable role as services are increasingly delivered digitally—a trend which is set to continue. This could include supporting those who are unable or unwilling to access services in this way.
As Paula Vennells also emphasised last week, the front office for government strategy must not be considered in isolation. The Post Office must continually improve, with quicker transactions, shorter queues and longer opening hours. The better the Post Office’s customer-service offering, the more attractive it will be as a channel for government departments. That is why the Post Office’s network strategy—the introduction of 4,000 main post offices and 2,000 Post Office Locals across a network that remains above a total of 11,500 outlets—is so important. That is why the Government’s investment of £1.34 billion and their commitment that there will be no programme of Post Office closures are also so important. We will no doubt discuss that network strategy in more detail when we come to Clause 11.
On the question of a post bank, I reiterate what I said in Committee. The Government have already looked carefully at the options and arguments for establishing a standalone post bank. Regrettably, our conclusion is that it is just not a viable option, particularly in the current fiscal environment. Setting up and capitalising a post bank would be prohibitively expensive as well as creating a much more volatile and risky balance sheet for the company. Yet it is important to remind noble Lords quite how extensive the Post Office’s existing financial services business already is. For example, the Post Office offers savings accounts, ISAs, mortgages and credit cards and, following the recent agreement with RBS, it will provide access for more than 80 per cent of all UK current account holders. That is in addition to the wide range of basic bank accounts available to those who do not use conventional current accounts. As I said in Committee, from this strong base financial services have significant potential for growth.
These are some of the key strands of the strategy which we are confident will put the Post Office on a commercially sustainable footing. We have been clear that this is not an overnight solution. It will take a few years, and possibly more than the two years allowed under the amendments of the noble Lord, Lord Kennedy, for Post Office Ltd to become self-sustaining—that is, Amendments 20 and 30. The process of moving to a mutual model should not be rushed through and the Government have no intention of setting deadlines which Post Office Ltd and its stakeholders must meet in order to speed up this process. We recognise that some time will pass between the debates we are having now and any subsequent move to a mutual model. As such, Parliament should be given the opportunity, nearer the time of a proposed mutualisation, to scrutinise those proposals in more detail.
The amendments in my name in this group ensure that both Houses will need to approve a move to a mutual through the affirmative resolution procedure before it can proceed. They also ensure that a report giving details of the proposed move to a mutual will be laid before Parliament before any order is made. We hope that this addresses the concerns raised by the noble Lord, Lord Kennedy, and other noble Lords, since the government amendment seeks to ensure that the report will now be laid before Parliament before it votes on whether the company should be mutualised.
I reiterate that the proposals eventually brought before Parliament must be developed with the full involvement of all interested parties. The Post Office’s commercial position must have improved as we expect. Provided that these things happen, I am confident that proposals for a mutual Post Office will, after careful scrutiny, be implemented. The reports in Amendments 21, 23 and 33 will not be required because the improvements to the Post Office’s commercial position on which they seek comfort will necessarily already have occurred. Parliament will in any event have the safeguard of a vote on a move to mutual ownership.
Amendments 25, 26 and 27 are technical amendments that I hope I can clarify as unnecessary. As I stated at Committee, Clause 4(4) makes quite clear the only people who can own an interest in the Post Office. The clarification envisaged by Amendment 25 is not required to achieve this. Amendment 26 seeks to ensure that any disposal made by a relevant mutual would be a disposal of its entire interest. Again, as I said in Committee, we believe this amendment to be unnecessarily restrictive. Clause 7 provides sufficient safeguards to ensure that it is perfectly possible for different stakeholders to form separate corporate bodies to take their interest in the Post Office. Provided the safeguards in Clause 7 were met, why would we want to prevent this prior to completion of the process of designing what a mutual might look like?
Finally, Amendment 27 in the name of the noble Lord, Lord Kennedy, is technically unnecessary as Clause 4(1) ensures that a disposal of shares can be made only pursuant to a direction under subsection (2) or an approval under subsection (3). In addition, the government amendments brought forward today will ensure that any direction made by the Secretary of State under subsections (2) or (3)(b) must be subject to approval by Parliament through an affirmative resolution procedure.
I therefore hope that these government amendments will provide noble Lords with further reassurance regarding the move to a mutual model. I hope, too, that the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, will feel they need not move their amendments. I beg to move the amendment in my name.
Lord Stevenson of Balmacara
My Lords, we welcome government Amendments 19, 22, 24, 28, 29, 31 and 32. They are a very positive response to the representations made inside this House and beyond for greater accountability before Post Office Ltd is made a mutual. They also deal with the case of that mutual disposing of Post Office Ltd subsequently in whole or in part to another mutual or set of mutuals, and we are very pleased to see them. We are particularly pleased that provision has been made for the Secretary of State to come back to Parliament to provide details and seek approval of an order under the affirmative procedure before it is too late to influence events. We welcome these amendments and support them.
I shall speak to a number of the amendments in this group that we have tabled, but I have taken comfort from what the Minister has said in her response and will give her some assurance that we will not press the amendments to a vote. However, one or two points need to be made for the record.
Amendments 25 and 26 seek the safeguard of maintaining Post Office Ltd as a single entity before and after the creation of a mutual. From what the Minister has said, that is probably not necessary. Amendments 21 and 23 seek to ensure the Government give proper consideration to the case for a post bank. We have heard from the Minister that she has looked hard at that proposal. Given that that is the case, would it be possible for the Minister to share some results of the investigation with us? That would put our concerns beyond all doubt. Perhaps she could write to me with as much detail as she feels she can.
What I am left with is to reiterate the comments that we made earlier but to add more flesh to the suggestion about the volume of government business being transacted at post offices before the disposal takes place. We should be given more information about that, and a report should be provided to both Houses.
On the amendment in the name of my noble friend Lord Kennedy, who is not in his place at the moment, I understand the wish to avoid unnecessary sloth over creating the mutual, but I agree with the Minister that the overriding consideration must be to have Post Office Ltd in good shape before mutualisation. That is why we put in Amendment 33 a call for a sustainable development plan for Post Office Ltd before any change of ownership is mooted.
It would be nice to see the Co-operatives UK report when it comes. It was promised in April but has still not been delivered. When it does come, we would like to have a look at it as well. The Minister said that she would publish it, and we are grateful for that. That will get us only to the stage where we understand better what the options are. We will need to know what the Government intend to do; as we have discussed, the Government intend to provide a full report on that before any proposals come through. I hope that in preparing a report for both Houses of Parliament, the questions that we have about what obligations a privatised Royal Mail will be under to utilise the Post Office network will be answered and, in the case of Post Office Ltd, what type or range of mutual bodies may end up owning our post office network. What will the rules be and what will be the extent of its powers? Who will be eligible to be a member? How will a board be constituted and could the mutual-owned post office have ownership and nationality tests that would be appropriate for a company-owned Post Office Ltd? Those are all questions that we will want to come back to at that time.
I turn to Amendment 23 and government business. The amendment puts in context some of the difficulties facing those who run the network of post offices throughout the United Kingdom. The Post Office is a trusted and traditional outlet for government services on the high street, and the future of the service lies in the redevelopment of that role. The post office network needs new sources of revenue to survive without subsidy; the Government need a reliable means of communicating with and serving the public directly in their local communities and, in this time of economic downturn, access to government services is more crucial than ever.
The Government should consider making the Post Office a first-choice provider of local and national government services on the high street. A systematic policy of using the Post Office as a shop front for government services could help the Government reach vulnerable and marginalised members of society in rural and urban deprived areas. Moreover, it could further the Government’s regeneration agenda, tackle the financial exclusion that is rife in communities across the UK and, in so doing, ensure a future for the post office network. Despite some of the removal of government services over recent years, post offices remain a massively popular and a reliable source for information and assistance to the public.
If the Post Office is to survive as a mutual, it cannot continue along its current trajectory. This can happen only if it keeps the work that it gets from two major clients—Royal Mail and the Government. Already there is concern about the Post Office’s business relationship with Royal Mail. A survey by the Communication Workers Union this week, widely published in the papers today, found that nine out of 10 sub-postmasters said that they could not survive without Royal Mail business. Assurances from the Minister about that relationship do not hide the fact that the Bill contains no real protection for Post Office Ltd in that regard. Equally, there are reservations about the so-called locals model of franchised post offices, which by their nature make it difficult for customers to interact with staff on anything other than the most superficial transactions. A recent report by Consumer Focus highlighted some of the problems in this regard.
The Post Office is dependent on Royal Mail’s business for its survival. Over one-third of its revenue, £343 million, and one-third of its sub-postmasters’ pay, £240 million, is generated by selling Royal Mail products and services. If the two businesses are forced to separate, a privatised Royal Mail will be likely to look elsewhere for retail outlets to sell its products. There is no guarantee that it will use post offices to the same extent. The loss of accounts such as TV licensing and the “green giro” was a bitter blow, particularly for those post offices operating at very tight margins. Taking those contracts away was a classic case of the Government’s left hand not knowing what the right hand was doing.
Having said all that, we think that the move to mutualisation is highly welcome, but employees and managers within Post Office Ltd will be concerned that the business they inherit has a real future. They will want to know that future revenue streams from the Government are secure and that business planning can proceed accordingly. Our amendment provides that assurance by setting out which government business will be transacted through post offices. Such a report will also enable the Government to consider what other types of their business the Post Office might be able to develop. We have a range of thoughts about that which echo many of the points that the Minister made, and we will be happy to exchange views on that, perhaps outside this discussion today.
We think that the Post Office banking remains a prize that could help sustain the future of the network. I heard what the Minister said about it not stacking up, but it is surprising that many of Post Office Ltd’s overseas equivalents have developed comprehensive banking services to offset losses of other traditional services which have made substantial contributions to the viability of those national post office networks. Even if they are not like-for-like comparisons, they are useful examples of where the future might lie.
The post office network, mutualised or not, can prosper as a standalone business with the Government and Royal Mail as key customers. Our amendments do not seek to force that choice upon the Government but ask them to consider what business they intend to transact via Post Office Ltd over the next few years so that the people who run our post offices, whom the Government want to take ownership of the business, can do so with certainty and security.
Lord Cotter
My Lords, I thank the Minister for putting forward the government amendments, which both clarify and assist us in being sure that various points have been taken on board that have been raised in previous debates. She mentioned Post Office Locals, which are an excellent idea. For example, in my village of Congresbury in Somerset, where I live, the local post office is doing an extremely good job. I welcome what has just been said by the previous speaker—that wherever possible we should do all that we can to expand the sort of services that they can provide. Many suggestions have been made and I am sure that we all look forward to adding to them when we can get some ideas accordingly. I ask the Minister to do the same.
It is tremendously encouraging that the Government are committed to ensuring not only that we maintain services through the local post office network, but that where necessary there will be financial support so that we can carry on having representation of a post office service in all parts of the country.
I referred a moment ago to my local post office. As I said, it provides a wide range of services. I am sure that the Minister will answer me by saying that there is no problem in this direction, and that no post offices that give a good service will be reduced in scope to become just Post Office Locals. The post office that I am talking about gives the full range of services, so I will be urging the Government to maintain that full range where at all possible.
Post Office Locals are a welcome idea as the concept ensures that at least a basic provision will be there. Over time, it will be useful to clarify ideas on exactly how Post Office Locals will operate and what encouragement they will be given to do so. With my congratulations to the Minister on the amendments being put forward tonight, and on the Bill as a whole, I look forward to hearing her response to the various matters that have been raised.
Baroness Wilcox
My Lords, thank you very much indeed for those contributions. The noble Lord, Lord Stevenson, was most reassuring for me. He asked if I could expand in due course on the assessment of the case for the post bank and I will certainly write to him on the matter. I agree that it would be lovely if we could have a Post Office bank. At the moment the numbers do not add up, but that is not to say that it could not be the case in the future so I am with him on that. When the report comes out, he will of course see it. There will be a copy put in the Library and we will make sure that he has a copy too.
My noble friend Lord Cotter gave a vote of confidence in the Post Office Local idea, which I was delighted to hear. In the ones that we have already started, we are ironing out the problems which you always have with a new idea but they seem to be becoming successful. People like them and, because the opening hours are extended, it means that the footfall and the other business transacted within the shop seem to be improving by leaps and bounds. The noble Lord, Lord Kennedy, was not here to be able to speak to his amendments but the noble Lord, Lord Stevenson, did. Unless there is anything further, I hope that covers any of the points that other noble Lords wished to make.
Baroness Wilcox
Baroness Wilcox
“(3A) An order under subsection (2) or (3)(b) is subject to affirmative resolution procedure.”
Baroness Wilcox
The Deputy Speaker (Lord Haskel)
If Amendment 29 is agreed, I cannot call Amendment 30 because of pre-emption.
Amendment 29
Baroness Wilcox
“(2) The Secretary of State must lay before Parliament a report on the proposed issue or transfer before making the order.”
Baroness Wilcox
“(a) give details of the proposed issue or transfer (including the expected time-scale for the issue or transfer),”
“Closure of post offices
(1) Where any company or any other person proposes to close a post office, it shall at the earliest opportunity begin consulting representatives of the employees affected and community and other groups with an interest in the proposed closure, including consulting on that company or person’s plans for alternative provision of services provided by the post office.
(2) No decision to close may be made within the period of six weeks from the start of the consultation required by subsection (1).
(3) No decision to close a post office in a Crown post office shall be taken within 12 weeks of the start of the consultation required by subsection (1).
(4) No decision to close a post office in a rural or a deprived urban area or an outreach service shall be taken within 16 weeks of the start of the consultation required by subsection (1).”
Lord Young of Norwood Green
My Lords, as you are all very aware, post offices continue to provide a lifeline to residents in rural and urban deprived areas, not only through access to postal services but as a shop front for government services, a means of benefit collection and, often, as the only source of cash withdrawal in an area. This amendment aims to ensure that proper consultation procedures are followed when a post office closure is considered. It is not intended to prevent all post office closures; it simply aims to strengthen stakeholders’ opportunity for input into the consultation process. It also provides for a longer consultation process on potential closures in rural and urban deprived areas.
Rural and urban deprived areas clearly suffer disproportionately when a post office closes. Post offices have closed in vast numbers in recent years, both through formal closure programmes and through natural wastage when sub-postmasters close their businesses and post offices are not replaced. At Second Reading, the noble Lord, Lord Dobbs, proposed a 16-week consultation period for rural post offices due to close to give time to find an alternative. Over the past 10 years, the post office network has declined from 17,845 in 2000-01 to 11,905 in 2009-10. This is in large part due to two major closure programmes: the urban reinvention programme from 2003 to 2005 and the network change programme from 2007 to 2009. Approximately 11 per cent of the post office network is in urban deprived areas. Consumer Focus clearly states:
“Urban offices play an even more important role in urban deprived areas, particularly as they provide free access to cash, plus pensions and benefit payments”.
The 2003-04 urban reinvention programme was an attempt by Post Office Ltd to reduce the size of the network with a view to developing a more commercially viable network. It further hoped to manage the so-far unplanned decline in network size that arose from sub-postmasters’ decisions to close their businesses. At the time of the programme there were serious concerns over the fate of post offices in urban deprived areas. The Government stated that they would not close post offices in urban deprived areas unless there was another branch within half a mile, or unless there were exceptional circumstances to justify the closure.
The Post Office’s code of practice for network change programme closure consultations included a six-week consultation process. Many stakeholders felt that the consultation processes were inadequate. This was in large part because of the criteria for closures and the decision to close 2,500 post offices had already been made prior to the consultation process. This meant that opportunities for preventing individual closures were very limited.
Post offices are still closing every week. More than 150 closed on a long-term temporary basis in 2010 alone. There is no guarantee that these will reopen; many are likely to stay closed indefinitely, as Consumer Focus has said. Since the last programme of post office closures finished we have continued to see a dwindling in the overall number of branches. According to the National Federation of Sub-Postmasters, 900 post offices—an unusually high number—are currently up for sale. Many sub-postmasters are retiring or leaving the business because of the low levels of revenue generated by some offices. The Post Office is struggling to find alternative premises and service providers. It is vital that adequate measures are in place to protect rural and urban deprived communities from these closures. I urge support for Amendment 37, which puts current practice into law, allows extra time for rural post office closures and ensures consultation ahead of any closure, planned or unplanned. It also provides additional protection for rural and urban deprived post offices. I beg to move.
The Deputy Speaker
I have to inform your Lordships that there is a misprint in proposed new subsection (3) in the Marshalled List. It should read:
“No decision to close a Crown post office shall be taken within 12 weeks of the start of the consultation required by subsection (1)”.
Lord Jenkin of Roding
My Lords, one of the best things that the Government have said in the context of the Bill is that there will be no more mass closures of post offices. I am very conscious of the damage done by closures in recent years in an area that is not necessarily “urban deprived” but where quite a lot of poor people live. It is the area surrounding Vauxhall, which in the past few years has lost three post offices. The result is that the nearest post office is right across Vauxhall Bridge, half way to Victoria station. Whenever one goes past or tries to use that post office, there are queues that reach out into the street. It has been a disastrous programme for that part of London. Therefore, I very much welcome what the Government have said about closures. Of course, one cannot have an absolute ban on closures because inevitably sub-postmasters die or fall ill and businesses are sold. Although great efforts are made to try to keep the post office going, it cannot always be guaranteed. However, that is totally different from the sort of mass closure programme that we had over the past decade.
Like the noble Lord, Lord Cotter, I have been very impressed by the potential offered by Post Office Local. Up to 2,000 Post Office Locals may be coming forward in the next few years, offering the great majority of services that are available in a Crown post office. They will be able to offer the customer a much better deal because they will be open during shop hours. One knows that many of the shopkeepers, who are often from minority communities, work very long hours and their shops remain open long hours—and so, of course, will the post office services offered by Post Office Local. This is perhaps one of the brightest and most optimistic scenes on the horizon. It will make post offices a good deal more viable than they have been. However, post offices also need new business. I have been impressed by what I have heard about the plans—in some cases these are already being trialled—to let these post offices offer identity services, as it were. They can check identity through biometric photographs and this service is already being used by the UK Border Agency. There must be government departments which could make good use of such services. I hope that my noble friend on the Front Bench can expand on that.
I too have talked with the chief executive and was impressed by what she had to say about the range of services which need to be available in post offices. This will require investment and nobody is going to pretend that Post Office Ltd will become a fully self-sustaining business; it cannot. It will continue to require support, and everybody has recognised that. However, it seems to me that if it is given the freedom to expand into new areas and the Government support it through government departments using its services, thus enabling it to be, as it were, the front office for government, there is every chance that the post office network will survive and prosper in a way that it has not done in recent decades. Therefore, I very much support what is being planned.
I accept the argument that my noble friend put forward when we were discussing a previous amendment —that some of the proposals we are putting forward may not be necessary, but no doubt we will hear about that. In the mean time, I very much congratulate the Government on the efforts that have been made to make Post Office Ltd a more viable business than it has been in the past.
Baroness Wilcox
My Lords, Amendment 37 seeks to impose consultation requirements on companies or people that propose to close a post office. As we well know, 97 per cent of post offices are privately owned and operated businesses. As I said in Committee, neither Government nor Post Office Ltd can ensure that there is always time to carry out a consultation before an office closes. A sub-postmaster may retire or move away or the premises may be damaged by fire or flooding. It cannot be appropriate to impose a consultation requirement on a retiring sub-postmaster before he can shut his store, as this amendment would do.
My noble friend Lord Jenkin of Roding spoke warmly of the Government’s commitment to ensure that there will be no further programme of post office closures and that the network of at least 11,500 post offices will be maintained. I confirm that commitment. Therefore, if a post office is to close, there is a strong likelihood that this will have been driven by a choice of the sub-postmaster rather than by Post Office Ltd. In the unfortunate event of a post office closure, other than in very exceptional circumstances, Post Office Ltd will seek to maintain services. If a permanent closure without any replacement is proposed, the Post Office must undertake a local public consultation for a six-week period, in line with its code of practice. In addition, Post Office Ltd will contact local councillors and parish councillors about service changes.
It is worth stressing that the code of practice has been agreed with Consumer Focus. I mentioned in Committee that the code of practice has recently been amended to introduce a telephone helpline providing information on temporary breaks in service and on new notification requirements.
The noble Lord, Lord Young, mentioned that at Second Reading and the noble Lord, Lord Dobbs, in his maiden speech, called for a 16-week consultation. He spoke eloquently about the problems faced by rural communities as a result of the previous Government’s closure programmes. However, this Government have committed that there will be no programme of post office closures and a network of at least 11,500 post offices will be maintained. As I said, if a post office is to close, there is a strong likelihood that this will be driven by the choice of a sub-postmaster rather than by Post Office Ltd.
In considering the appropriate duration of local consultations, it is important to strike a balance between giving communities sufficient opportunity to express their views and allowing the Post Office to get on with providing the services on which those communities so rely. A 16-week period—that is four months—as Amendment 37 envisages in some cases, seems to be disproportionately long. That is especially so when we recall that we are talking predominantly about individual small businesses operated by sub-postmasters. Furthermore, the six-week period currently required by the code of practice was introduced, following a national consultation, as part of the previous Government’s closure programme.
I therefore hope that the noble Lord will be reassured by the arrangements already in place and will consent to withdraw the amendment.
Lord Young of Norwood Green
I thank the Minister for her contribution. It goes some way towards providing reassurances and we will reflect on what she said, after carefully reading it in Hansard. In those circumstances, I beg leave to withdraw the amendment.
Lord Whitty
“(i) within three miles of a post office outlet;(ii) within one mile of a post office outlet; (iii) in urban areas within one mile of a post office outlet;(iv) in urban deprived areas within one mile of a post office outlet;(v) in rural areas within three miles of a post office outlet;(vi) in rural areas within three miles of a post office outlet;(vii) at the level of each postcode district, within six miles of a post office outlet,”
Lord Whitty
My Lords, I shall speak also to the earlier amendments that were previously grouped with this amendment, and the amendment to which my noble friend has just spoken. They deal with the criteria for access to the post office network. I very much welcome the noble Baroness’s reiteration of the commitment to maintain a level of post office network and her comments on the criteria in relation to what the Post Office rather bizarrely calls “business as usual” closures, whereby a sub-postmaster gives up or the post office has to close for another reason. The criteria there are much tighter.
I am a veteran of the last stage of the previous closure programme, which was in many ways unsatisfactory and ended in anomalies. I am familiar with the territory in Vauxhall to which the noble Lord, Lord Jenkin, referred, and the effect of what happened on the other side of the river. That experience has been repeated in rural areas and in deprived suburbs up and down the country. The determination to maintain a minimum network is very welcome.
The jury is still out on the move to Post Office Local. There are significant advantages, particularly in relation to opening hours and the flexibility that that provides. Consumer Focus has heard varying reports on the first batch of Post Office Locals, and that the range of services they provide is differentiated. For example, the USO for the parcel service refers to a 20 kilogram parcel service being available in all post offices, but a lot of locals were not doing that until about this time last year, when the Post Office advised them to do so. It is still not the case that all Post Office Locals, or some other post offices, are providing that service. I am not saying that there should be an absolutely rigid range of services available under Post Office Local, but we need to know that what will happen as a result of normal retirements and closures, new post offices opening, post offices opening in host premises will provide something like the previous minimum access criteria.
The new access criteria will be a matter for the Secretary of State and for Ofcom, but the amendments would require that there be a reporting mechanism which indicates not only how good the access is, in terms of mileage in rural and urban areas, to the nearest post office but what range of services is available. In other words, there would be a matrix that would indicate the services available as well as the number of outlets. In order to be able to monitor over time the effectiveness of post office services and the accessibility to them for communities who have, over the past two rounds of closures, seen some diminution in the number of outlets and now some diminution in the range of services, we need reporting criteria roughly along the lines that I propose here, which are the criteria which were broadly agreed at the end of the last round of closures.
I shall not press the amendments tonight, but the Government and the regulator will need a clear reporting process which covers not only the number of outlets but the range of services provided. As others have said, that range of services needs to include some enhanced commitment across Whitehall and local government to provide a wider range of government services—and digital access to them—than currently exists. Unfortunately, over the past 15 years, we have seen a diminution of government business going through post offices. Some of that has been due to technological and behavioural change; some of it has simply been due to false economies. Post offices have missed out there. The post offices should in most communities be the front office of government. In rural communities and more deprived outer suburbs, they are the point at which the community has access to the range of state services. We need to retain that, we need to build on it and we need to know under laid-down reporting criteria how well we are doing.
Although I welcome much of what the Government are committed to in enhancing the number of services that go through post offices as well as preserving the number of post offices in the network, we need to be able to monitor that. That is what my two amendments are about, and I will be interested to hear the noble Baroness’s comments. I will not press the amendment tonight, but we may need to return to it. I beg to move.
Lord Young of Norwood Green
I shall briefly support my noble friend Lord Whitty. He has made all the key points about the importance of the additional information that the amendments would provide.
I tend to agree with the points made by the noble Lord, Lord Jenkin, in a previous debate about the potential for locals. They have to get the formula right; they have to get the transition payments right as well. The managing director, Paula Vennells, has assured us that they are learning quite a lot from the 60 or so pilots that are currently running. Interestingly, I received an assurance that they have all been instructed to accept parcels of up to 20 kilograms in weight. Clearly, the message has not filtered through to all of them but the intention is clear. Amendments 40 and 41 pose some important questions and I, too, will be listening intently to the Minister’s response.
Baroness Wilcox
My Lords, I shall speak to the amendments to Clause 11 in the name of the noble Lord, Lord Whitty. I thank him for telling me in advance that he is not going to press them tonight and I hope that my response will at least reassure him.
Amendment 40 seeks to oblige the Post Office to report against its compliance with the access criteria at a UK level and also in each of England, Wales, Scotland and Northern Ireland. The access criteria are national criteria. Five of the six of them apply across the entire United Kingdom but they recognise the country’s diversity by including individual protections for urban, urban deprived, rural and remote rural locations. The sixth criterion—for 95 per cent of the population in each postcode district, such as BA2 or GU27, to be within six miles of a post office—applies to each and every one of the nearly 2,800 postcode districts in the UK. This provides a very real guarantee that post offices will be broadly spread and accessible to communities in every corner of the United Kingdom. I reassure the noble Lord that the annual network report will include details of the Post Office’s compliance with the criteria. Indeed, such reporting is already done. Your Lordships will recall that last year’s Postcomm network report showed that the Post Office continues comfortably to exceed the access criteria.
It is most upsetting to have the opposition Chief Whip sitting here with me. I want that noted.
Baroness Wilcox
However, we believe that obliging the Post Office to report against the access criteria separately for each of England, Wales, Scotland and Northern Ireland would be of limited assistance. The previous Government recognised that too when, following a national consultation in 2007, they rejected suggestions from some that the access criteria should apply at an individual national level. This additional reporting obligation would place a significant additional administrative burden and subsequent cost on the Post Office. For example, 17 postcode districts straddle national borders, such as postal district TD15 around Berwick-upon-Tweed. For this reason, I urge the noble Lord, Lord Whitty, to consider withdrawing Amendment 40, which I think he has already agreed to do, and to reflect on what I have said.
I turn to Amendment 41, which again is in the name of the noble Lord, Lord Whitty. It relates to the services offered over Post Office counters on behalf of a universal service provider—in other words, Royal Mail. I hope that the noble Lord will be reassured by the Government’s Amendment 50, which obliges the network report to contain details of the services offered by the Post Office on behalf of a universal postal service provider. The report must also contain details of the wider postal services that are available, so services that are not regulated under universal service conditions must also be covered.
I also reassure the noble Lord that new Post Office Locals all offer the full range of Royal Mail’s universal service products. Some have voiced a concern that certain Post Office Locals do not offer full universal postal services—for example, through not accepting parcels weighing more than 6 kilograms. However, I reassure noble Lords that the Post Office has, through the current pilot process, now developed the Post Office Local model so that new local outlets will all accept parcels up to the full universal postal service standard of 20 kilograms.
I hope that in the light of those reassurances the noble Lord will feel happy to withdraw his amendment.
Lord Whitty
My Lords, I am grateful to the noble Baroness for those reassurances. Behind them is a recognition that some reporting provisions need to be laid down and maintained.
The main disappointment in her response was the reference to not accepting the need for separate reporting for Scotland, Wales and Northern Ireland. As we said before dinner when debating an amendment in the name of the noble Lord, Lord Rogan, the situation is somewhat different. The criteria need to be universal, but it is also important that the particular positions of Northern Ireland, Wales and Scotland must be focused on. There are some fudges at the border, but they are relatively small, and it is important that the Post Office network is seen as part of the social provision of the Government, particularly in remote rural areas, for the rural population and rural businesses. The devolved Administrations have a role in that. Therefore, it is very useful for them to have a separate reporting provision. This does not mean that the criteria should be significantly different, but it does mean that the kind of problems that meeting those criteria may create in those countries could perhaps be devolved by wider rural and social policy in those areas. I would be disappointed if the final form of reporting did not allow for separate or parallel reporting to the devolved Administrations.
Subject to that caveat, I beg leave to withdraw the amendment.
Lord Lea of Crondall
Lord Lea of Crondall
My Lords, Clause 11 provides for the annual report on the post office network. The amendment seeks to include information in the report on,
“any major change in contractual terms affecting sub-postmasters as a result of the change to the ‘Post Office Local’ model”.
The document produced by the Department for Business, Innovation and Skills in November 2010, Securing the Post Office Network in the Digital Age, claimed success for the local pilots in the Post Office Local model. Under pilot schemes, Post Office Local branches have offered longer opening hours of up to six hours per day. Services have been restricted to core services, with what are described as more complex and time-consuming transactions being channelled through main post offices. Post Office Ltd reports that Post Office Locals are being trialled in around 60 locations across the UK. Many operate a small counter located within the premises of another business such as a supermarket. Some have replaced sub-post offices that have closed and some have been set up as new branches. The physical layout of the counter-based model has been replaced by more open-plan arrangements alongside the retail till.
The BIS report says that over the next four years, 2,000 small sub-post offices will convert to the local model, either on-site or in neighbouring premises, with what is described as a major rollout in 2014 following further piloting. It is unclear whether the rollout will be to reach the figure of 2,000 Post Office Locals—or essentials, as they are called—or whether this marks an intention to roll out beyond 2,000. It could be a precursor to a much wider application of the model.
The paper proposes two key strands of the network. The Government have asked POL by 2014 to have about 4,000 main post offices in towns and city centres and to convert about 2,000 sub-post offices to the local model. The 4,000 main post offices and 2,000 new locals will leave more than 5,500 branches in the current network untouched. However, the BIS paper states that, under POL's commercial strategy, the Post Office Local model will become the mainstay of the smaller post offices over time. This will mean a fundamental change to the current network.
Consumer Focus, which represents post office customers, has said that the conversion of 2,000 sub-post offices into Post Office Locals will be a major change. For millions of people, it will mean a shift from what they know and trust. The problems that people have experienced with pilot Post Office Locals—some of which are known as essentials—include benefit capping, where branches limit the amount of money that people who are collecting benefits such as pensions can withdraw in a single day. This is to prevent the branch running out of money. Other examples of problems which people have experienced with Post Office Essentials include not being able to access counters if in a wheelchair, staff with inadequate knowledge of services and a lack of privacy when carrying out transactions.
A more recent investigation by Consumer Focus, in March 2011, concluded:
“While consumers are likely to welcome the convenience and extended opening hours provided by PO Locals, without clear improvements to the in-branch experience, some consumers will be likely to perceive the shift in provision negatively … In particular, our research has found worrying evidence of examples of cash and benefit withdrawals being capped; temporary breaks in service because there are not always trained staff on hand to serve at the counter; and the inconsistent provision of parcel services, which in many instances seems to vary from one PO Local to the next”.
Just over half of customers—53 per cent—have had to use an alternative post office because their Post Office Local did not offer the product or service they wanted. Some 43 per cent of customers say that the privacy available is poor, especially for banking or financial transactions. Finally, 61 per cent of customers said that their overall experience was good, but a large percentage —38 per cent—said that it was average or poor.
The Post Office Local model clearly has the potential to impact on the terms under which sub-postmasters operate sub-post offices, and the terms and working arrangements of the staff working in them are also significant, not least the significantly increased opening hours. Those issues therefore deserve a word or two.
The changed physical working arrangements in the open-plan post offices envisaged by the pilot carry implications for the terms, safety and well-being of staff members which need to be taken fully into consideration. Some postmasters have expressed concern that they will see a major shift in their contractual terms away from secure payments to income based largely on commission. That is not just a rumour; I think it has been confirmed by the Post Office. While existing sub-postmasters may have their current income protected for a limited time, this would not last. At the same time the range of services on offer under the pilot is restricted to core services, meaning that customers needing to access a more time-consuming or complex transaction will need to go to the main post office. The report does not envisage restrictions being imposed on which services may be regarded as core by a local post office, and which may be dispensed with. Over time this would mean a high percentage of the population having to travel further to access the full range of post office services. I think that I am touching here on some of the points made by my noble friend Lord Whitty.
The problem is likely to be particularly acute in rural areas, where the distance to a main post office is likely to be greater. Although commercial terms between Post Office Ltd and individual sub-postmasters is confidential, it is reported that sub-postmasters converting to the essentials model are seeing a worsening in the terms of their contract and a larger reliance on commission on sales. I shall not cite the many examples from the local newspapers and so on, but Ministers could reassure sub-postmasters by stating that they will not be compelled to move to the Post Office Local model.
The sub-postmasters’ fears are summarised in a survey which was commissioned by the Communication Workers Union and reported in today's newspapers. It says that up to 9,300 post offices could close as a result of the Government’s sell-off. This prediction is worrying for people living in villages whose post office is the only shop that provides a vital service, particularly for those without cars. Perhaps I may read one or two bits of information from this survey; I do not think that anyone doubts the quality of the very well known company which was invited to undertake this research.
More than 90 per cent of sub-postmasters told researchers that they are very unlikely or unlikely to survive without Royal Mail business if it dries up. This clearly overlaps with all the other questions about the interservices agreement and the universal service obligation. Billy Hayes, the general secretary of the CWU, has said that it clearly demonstrates the fears of sub-postmasters about the fate of the network, which faces a greater threat than anyone previously dared believe.
John Denham, the shadow Business Secretary, has said that postal services policy is now in utter disarray. I am sure that the Minister has a brief prepared to read out on all this, and I look forward to hearing it. Then we will have to consider where this question rests before we come to Third Reading.
Lord Young of Norwood Green
My Lords, I shall be brief because my noble friend Lord Lea has covered the waterfront, as they say. He raises a key point, which I referred to in my previous contribution. There are some concerns about the quality of the service offered by locals, but we have had some useful assurances from the managing director, Paula Vennells, about the nature of pilots that will genuinely seek to improve the level of service. The concerns about the quality and range of services have been adequately described by my noble friend Lord Lea.
On the transition arrangements in converting those sub-offices to the local model and what the payments are likely to be, I do not know whether the Minister is in a position to reiterate the statement made by Paula Vennells, who said that broadly speaking the fixed and variable income ought to be more or less on a par with the income at the moment.
I wish to pick up on what my noble friend Lord Lea said when he talked about the importance of government business and it being a key part of the future of these offices; and my final point is that it would be useful if the Minister could confirm that remote rural offices that need a fixed income to survive will not be moved to the local model on a compulsory basis.
Baroness Wilcox
My Lords, Amendments 46 and 49, tabled by the noble Lord, Lord Lea, require the Post Office to provide details in its annual reports of major changes in its sub-postmaster contracts from the introduction of the Post Office Local model. In Committee, I spoke at length about the Post Office Local model, but I would like briefly to reiterate some of the key points. The Post Office Local model was introduced under the name Post Office Essentials in September 2008, and I know that the noble Lord, Lord Young, is therefore familiar with the format. The Post Office Local does away with the impersonal, screened-off, fortress post office counter that requires separate staff. Instead, it provides open-plan access to post office services alongside the retail till for the hours the shop is open. This will involve a significant increase in opening hours for the customer while also providing a much more flexible and lower cost operating model for the retailer. The Post Office Local model currently provides 97 per cent of post office transactions by volume and there are over 50 Post Office Local pilots operating across the country right now. Customer satisfaction with these pilots has been excellent with 94 per cent of customers being very or extremely satisfied with the local model. Some noble Lords will have been unable to hear Paula Vennells, the managing director of the Post Office, speak last week, although I know that the noble Lord, Lord Lea, was there when she spoke. Paula explained very eloquently that it is plainly not in the Post Office’s interest to introduce a model of contract that is not viable for sub-postmasters.
The model will involve pay being rebalanced from fixed to variable pay in those outlets affected. But this cannot be accomplished simply by eliminating fixed pay without evaluating rates of variable pay to ensure the model works for sub-postmasters and Post Office Ltd alike. Over the next two years, there will be continued and widespread piloting to develop understanding of the locations in which a Post Office Local may be viable and the services that may be offered from one.
In 2014, we expect a larger scale rollout so that by 2015 around 2,000 of the network of at least 11,500 will have converted to the local model. To give some perspective over the same period, the Government’s £1.34 billion funding package will enable the Post Office to invest in around 4,000 main post offices in towns and city centres across the country. These will more closely follow the traditional post office model. Of course, that will leave almost 6,000 post offices whose operating model will remain unchanged. I understand that any change in sub-postmaster contracts is of great significance for the many independent businessmen and women who operate post offices up and down the country. But I do not think that a public annual report is the appropriate place for a business to detail its contractual terms with its agents. That is certainly not something that one would see any competitors of the Post Office doing.
I hope that I have provided sufficient explanation and reassurance to the noble Lord to encourage him to withdraw his amendment.
Lord Lea of Crondall
I thank the Minister. However, the competitors of the Post Office may not do this, but they are not the Post Office. They are not what the British people understand to be the service of post offices right across the country. They do not cherry-pick like their competitors, which is why they are part of the fabric of the community. Perhaps one could agree the terms of reference of a public opinion poll whereby all the facts are on the table, as spelt out by the managing director of the Post Office, the noble Baroness and the unions. I include the national federation and George Thompson who, according to the Independent yesterday, said:
“The NFSP has made clear that a minimum 10-year inter-business agreement … between the Post Office and Royal Mail is required if the companies are separated, both to allow the public and business to continue to access Royal Mail services at their local post office and to secure the large proportion of subpostmasters’ income which comes from carrying out work on behalf of Royal Mail”.
Parliament is the backstop if something goes wrong with these negotiations. I am not saying that it is a negotiation between an elephant and a mouse. But the idea that the negotiations have as much leverage on the part of the sub-postmasters as on the part of the Post Office under the plans in this Bill is rather fanciful. We will just have to consider where we are. I asked the noble Baroness whether she would comment on the interesting study which says that sub-postmasters believe that 9,000 post offices could close under the Government’s plans. I should like to know what was wrong with the methodology of this study. The Government have had 48 hours to look at it. I do not know whether the noble Baroness would like to take this opportunity to say more about that.
Baroness Wilcox
Is the noble Lord, Lord Lea, speaking about the CWU’s recent survey on the future of the Post Office?
Lord Lea of Crondall
I am referring to the survey conducted by an opinion research company, which was commissioned by the union.
Baroness Wilcox
I understand that the National Federation of SubPostmasters said in response to recent claims by the CWU:
“We (the NFSP) have played a pivotal role in ensuring that both companies are working well together towards securing a mutually beneficial arrangement and we are confident that a 10-year commercial deal will be achieved”.
It continues:
“Scaremongering about the future without an IBA and the forced introduction of the Post Office Local model does nothing but harm to the post office network and to subpostmasters”.
Lord Lea of Crondall
I thank the noble Baroness for reading out what I have in front of me as well. I was asking whether she thinks this so-called scaremongering is actually the survey of the membership of the national federation. It is all very confusing and I do not know any more than the noble Baroness does how one reconciles these two things. But before we get to Third Reading, it is incumbent on BIS to make a more considered evaluation of this remarkable survey.
Lord Lea of Crondall
That is all that can usefully be said at this stage, and I beg leave to withdraw the amendment.
Lord Kennedy of Southwark
( ) until delivered, the progress of developing the back office integration with credit unions”
Lord Kennedy of Southwark
My Lords, the link-up with the Post Office is one of the most exciting innovations for the credit union movement and my amendment places a requirement on the Government to report back on the progress to achieving this until such time as it has been delivered. Getting people on the lowest incomes into the habit of saving and giving them access through the Post Office network to affordable credit is something that we can all support. Would this not be the big society in action?
What we do have is some of our poorest and most vulnerable people who are unable to get affordable credit. They are either put into the hands of illegal loan sharks or into the payday loan shops with their exorbitant interest rates. The Government need to take action, and take action quickly. The noble Baroness is fully aware that I have pursued this issue with questions to her and other Ministers, as well as in debates such as this one. It is something that I feel very strongly about. It is an area for which I think there is considerable support around the House in all political groups and on the Cross Benches, but it does require the Government to take action to move it forward.
I look forward to the noble Earl’s response. If he is not able to accept the amendment, can I refer him to page 11 of the House of Lords’ Proceedings covering the Questions for Short Debate and my Motion on a similar subject? Any help he can give me with the Government Whips’ Office in getting that Motion brought forward for debate will be much appreciated. We could then spend a little bit longer discussing these important issues and the progress being made by the Government on them. I beg to move.
Lord Young of Norwood Green
My Lords, I rise briefly to support the amendment. Each week something like 6.5 million visits are made to the Post Office network with a view to withdrawing funds from the Post Office card account. It has been calculated that those aged under 65 who hold such an account are 28 times more likely to be unbanked. These same people, those in receipt of state benefits and tax credits, are the most likely to use high-cost credit. That is evidence of the justification of the point being made by my noble friend Lord Kennedy about the valuable contribution that credit unions can make. The Post Office product range is such that it will not make personal loans of less than £2,000, yet evidence shows that sums of between £300 and £600 are the primary amounts sought by those using high-cost credit.
In short, the Post Office has the facilities and credit unions have the ability. Would it not be good if we could bring these two groups together to serve the public?
Earl Attlee
My Lords, since he arrived in your Lordships’ House the noble Lord, Lord Kennedy, has spoken passionately about the role of credit unions, and with good reason. We all know about the activities of loan sharks. As my noble friend the Minister said in Committee, the Government place a high importance on access to affordable credit and believe that the use of credit unions should be encouraged as a means of saving and obtaining access to short-term loans.
Co-operation between Post Office Ltd and credit unions is already very strong and we support an even closer link-up between the Post Office and credit unions. We have demonstrated clear progress against this aim. The noble Lord’s amendment seeks details on that progress and I hope that I can give him some reassurance today. The Department for Work and Pensions recently announced a significant package of support for the credit union sector, including funding set aside for a shared credit union banking platform, which will be subject to a feasibility study, in which the Post Office will participate fully.
The Post Office also continues to develop individual services and assistance to facilitate close working with credit unions, including a new pay-out service which allows people to collect their credit union loans at their local post office branch, and guidance to facilitate local arrangements between post offices and credit unions where both parties wish to participate. These developments build upon existing arrangements whereby many credit union current account holders can access their accounts at post offices through arrangements with the Co-operative Bank. Post Office Ltd expects that around 170,000 credit union transactions will be carried out in post office branches in this way in the coming year. Facilities are also available at post offices whereby credit unions issue customers with a payment card, which they can use to pay off the loans they have received via the electronic bill payment facilities that are available at every post office. More than 60 credit unions have established this facility.
The noble Lord, Lord Kennedy, referred to the possibility of a debate. As he will understand, I can give no assurances on that because it is a matter for the usual channels.
As my noble friend the Minister said in Committee, we recognise the worthy intention behind the amendment and I hope the noble Lord will be reassured by the good work that is already under way in these areas. We will continue to encourage co-operation between the credit unions and Post Office Ltd and to support the Post Office in its provision of wider financial services. However, placing this reporting requirement—and, indeed, others tabled by noble Lords—in legislation would simply increase bureaucracy, and the greater the reporting requirement imposed on the Post Office the greater the cost and, therefore, the impact on its competitiveness.
With the reassurance that I have given today, I hope the noble Lord will withdraw his amendment.
Lord Kennedy of Southwark
My Lords, I thank the noble Earl for his response; he has provided some reassurance. I shall return to this issue again but, at this stage, I beg leave to withdraw the amendment.
Baroness Wilcox
“( ) In subsection (2)(b) the reference to postal services includes postal services provided pursuant to arrangements made with a person who provides a universal postal service.”
Baroness Wilcox
“( ) A Post Office company’s duties under this section are enforceable in civil proceedings by the Secretary of State—
(a) for an injunction,(b) for specific performance under section 45 of the Court of Session Act 1988, or(c) for any other appropriate remedy or relief.”
Baroness Wilcox
“Annual report on postal museum collection and archive
(1) A Royal Mail company must send to the Secretary of State each year a report on its activities in relation to—
(a) the British Postal Museum Collection, and(b) the Royal Mail Archive.(2) Before preparing the report, the company must consult any Post Office company.
(3) The Secretary of State must lay a copy of the report before Parliament.
(4) A Royal Mail company’s duties under this section are enforceable in civil proceedings by the Secretary of State—
(a) for an injunction,(b) for specific performance under section 45 of the Court of Session Act 1988, or(c) for any other appropriate remedy or relief.(5) This section applies irrespective of whether the British Postal Museum Collection or the Royal Mail Archive alters the name by which it is known or forms part of a wider collection or archive.”
Baroness Wilcox
My Lords, during an earlier debate on Amendment 54 the noble Lord, Lord Brooke of Sutton Mandeville, asked what was meant by a consultation with the Post Office company and I should like to respond to that point now. Amendment 54 will require Royal Mail to consult a Post Office company about its activities in relation to the proportion of the archive and museum collection for which it is responsible. I hope the noble Lord finds that helpful. I beg to move.
Lord Brooke of Sutton Mandeville
My Lords, I am most grateful for being guided on the procedures of the House and grateful to my noble friend for remembering that I raised this and providing me with the opportunity of coming to listen to her at this hour. I am still not absolutely certain that I understand what the process of consultation that she envisages will consist of, but at this late hour I would certainly not wish to press her any further than I have already.
Baroness Drake
“( ) Before making an order under subsection (1)(c), the Secretary of State must obtain a certificate from the government actuary stating that in the actuary’s opinion, the allocation of assets between the different sections is appropriate having regard to the liabilities and obligations of each section.”
Baroness Drake
My Lords, in moving Amendment 56, I will also speak to Amendment 57.
I thank the noble Lord, Lord De Mauley, for his courteous and helpful letter that addressed several issues relating to the Royal Mail pension plan raised by the noble Viscount, Lord Eccles, my noble friend Lord Young and myself. I welcome the assurances that: the Government are developing a joint communication plan with the trustees so that members are provided with information on the benefits that will transfer to the new public service scheme ahead of that transfer; active members will receive a seamless service from the new public service scheme and the Royal Mail scheme, including the provision of combined benefits statements; benefits which transfer from the Royal Mail scheme to the new public scheme will be replicated exactly; the governance arrangements for the new public service scheme will be the subject of consultation with the trustees and members’ representatives; and the Government must consult the trustees on the use of powers set out in Clause 17. I welcome that and the Minister’s confirmation that I am correct in my understandings.
However, there remains a matter of continuing concern. The Bill gives the Secretary of State considerable powers to make amendments to the Royal Mail pension plan, including the smaller Royal Mail pension plan—I call it “Mark II”—that is post transfer of assets and liabilities to the new public service scheme. These powers include the ability to transfer assets between the Royal Mail scheme and the new public service scheme, to which accrued pension rights will be transferred, and to divide the Royal Mail scheme into different sections, to allocate assets between the different sections and to determine which company or companies is a participating employer in any given section—this in preparation for the sale, retention and restructuring of different parts of the business. I am concerned that the Bill does not allow for some balancing mechanism of protection for scheme members when the Secretary of State exercises those powers. These amendments seek to address that.
I accept that, on the setting up of the new public service scheme, the Bill limits the assets that the Secretary of State can transfer out of the Royal Mail scheme such that the ratio of assets to liabilities in the Royal Mail scheme is no worse immediately after the transfer of those assets than it was immediately before. However, the valuation of those liabilities and assets is to be done in a manner determined by the Secretary of State. There is no explicit role for the Royal Mail scheme trustees, acting on the advice of their scheme actuary, to exercise a judgment on whether the assets remaining in the Royal Mail scheme are adequate in terms of value or appropriate in terms of the types of assets retained or transferred. Similarly, under Clause 17, when the Secretary of State exercises his or her power to divide the Royal Mail pension plan into sections and to allocate assets and liabilities between those sections, there is again no explicit role for the trustees acting on the advice of the scheme actuary.
Amendments tabled by my noble friend Lord Young in Committee sought to address this concern by strengthening the consultation rights of the trustees and involving the Pensions Regulator in any assessment of the transfer of assets and liabilities, particularly between the new sections of the Royal Mail pension scheme. Having reflected on that debate in Committee, I recognise that the Government would probably not want to give the Pensions Regulator the power to impose any methods, assumptions or penalties on the Secretary of State when transferring assets between schemes or sections of the Royal Mail pension plan. Similarly, the Government may well be reluctant to give the Royal Mail scheme trustees a potential power of veto on the transfer of pension assets, which could impact on the sale process itself. None the less, the concern remains that the Secretary of State retains considerable powers when it comes to determining the adequacy and appropriateness of the actual assets transferred.
The issues that we are dealing with here are fundamentally actuarial, ensuring that the assets of the Royal Mail pension plan and its sections are adequate and appropriate in terms of matching assets to liabilities. If these decisions have to be justifiable as a matter of actuarial opinion and the actuary concerned cannot be the Royal Mail scheme actuary acting for the trustees, the best candidate for the job in my view is the Government’s own actuary, GAD.
Amendment 56 to Clause 17 would address transfer of assets between the newly created sections of the Royal Mail scheme and Amendment 57 to Clause 21 would address assets transferred from the Royal Mail pension scheme to the public service scheme. The amendments would require the Secretary of State to obtain a certificate from the government actuary stating that in his opinion, in the first instance, the allocation of assets between the different sections is appropriate, having regard to the liabilities and obligations of each section and, in the second instance, the selection of assets transferred and the assets remaining in the Royal Mail scheme is appropriate, having regard to the liabilities and the obligations of the Royal Mail scheme and the new public service scheme established under Clause 16. In my view, requiring such a certificate from the government actuary would provide a form of protection to the scheme, its trustees and its members when the Secretary of State exercises his powers under Clauses 17 and 21.
The Secretary of State has very wide powers to allocate assets and liabilities and materially alter the strength of an employer covenant backing any of the new sections of the Royal Mail pension plan. These must be seen in the context that, under Clause 8, the Secretary of State has powers to transfer property rights and liabilities between the holding company and other companies that are wholly owned by the Crown, which may occur prior to, and be in preparation for, sale or mutualisation. These powers in Clause 8 could be exercised so as to have the effect of materially weakening the employer covenant supporting any section of the remaining smaller Royal Mail pension plan. To give an example, the Secretary of State could create a separate section of the Royal Mail scheme for Post Office Ltd under Clause 17 and determine which assets and liabilities are allocated to it. The Secretary of State also has the power to decide which assets and property rights are held by Post Office Ltd as a company under Clause 8. When these are taken together, they are considerable powers and reinforce the need for a protection mechanism for scheme members. I believe that certification from the Government’s actuary will provide, before assets and liabilities between schemes and sections are transferred, that degree of protection. I beg to move.
Lord De Mauley
My Lords, I thank the noble Baroness, Lady Drake, for giving us another opportunity to discuss the vital provisions in the Bill on the RMPP. Amendment 56 relates to the selection of assets left with individual sections of the RMPP created under Clause 17. That clause allows the Secretary of State by order to divide the RMPP into sections. The Government intend that this power will be used to create a separate section in the RMPP for Post Office Ltd. This is necessary as Post Office Ltd will be separated from Royal Mail, because it is not part of the sale under Part 1 of the Bill. Amendment 57 relates to Clause 21 and the selection of assets left with the RMPP as a whole once the deficit is transferred to the Government.
Part 2 of the Bill will allow the Government to take over the historic deficit in the Royal Mail pension plan. We intend to do this by transferring approximately £35.9 billion of liabilities and £27.5 billion of assets from the RMPP to the Government. This means that Royal Mail will be left with an appropriately sized pension plan to manage.
We intend that only liabilities relating to the salary link—that is, real growth in salaries for active members—and ongoing pension accruals will be left with the RMPP. We estimate that the salary link portion will amount to approximately £1.5 billion of liabilities remaining with the RMPP at the point at which the Government implement the measures in Part 2. Subject to state aid clearance, we intend to fund fully the liabilities remaining with the RMPP at the point of transfer, which would mean the RMPP also retaining £1.5 billion of assets.
In dealing with both amendments, I want to provide some reassurance on the process that will be followed to transfer assets from the RMPP to the Government. Before any assets are transferred, a valuation of the RMPP will indeed be undertaken by the Government Actuary. That valuation will follow standard actuarial principles and reflect the assumptions agreed between the trustees and Royal Mail for the March 2009 triennial valuation. The output of that valuation will be an up-to-date view of the value of the assets and liabilities in the plan. As a result, there will be no benefit in value for the RMPP, or a section of it, in selecting one type of asset rather than another. As noble Lords have highlighted in their proposed amendments, however, it is important that careful consideration be given to the type of assets that are left with the RMPP and to how those assets might be allocated between the Royal Mail section and the Post Office Ltd section of the plan.
We fully recognise that the assets to be left with the RMPP, and the individual sections, should reflect the future investment strategy of the trustees, and that it should be the trustees, in consultation with the respective employers, who set that strategy, rather than the Government. Jane Newell, the chair of the RMPP trustees, stated during her evidence to the Public Bill Committee in the other place that she would look to engage with us on the selection of assets to be left with the RMPP. I assure noble Lords that officials, with advice from the Government Actuary’s Department, have indeed been engaging with the trustees of the RMPP and are making good progress. Indeed, the Government are obliged under Clause 24 to consult the trustees before any orders are made under Part 2 of the Bill.
It is also important to bear in mind that the trustees would be free to sell any assets left by the Government and to change their investment strategy as they see fit. Of course, given the costs that this would involve, it is in everyone’s interest that we continue to work with the trustees to reach a satisfactory agreement on this issue.
I understand that concerns have been raised—the noble Lord, Lord Young, and I have corresponded on this—that the Government may seek to make changes to the RMPP by way of the powers in Part 2, even after the pensions changes that I have described have been implemented. I am happy to make clear that the Government intend to use these powers on a one-off basis only, and have no intention of making any substantive changes to the RMPP under Clauses 17 or 18 after the implementation of the pensions solution.
Baroness Drake
I thank the Minister for that detailed response. I am conscious of the lateness of the hour and that the detail of pension valuations is not everyone’s cup of tea. I took from what the Minister said that the Government’s actuaries will be involved in making a full assessment of the value and type of assets in relation to liabilities before any transfers are made under Clauses 17 and 21. It would be very helpful for the record to show that. That is exactly what I sought to achieve.
I noted the assurance that the Government would not seek to deploy Clause 18 in a way that weakened the employer covenant. Wholly hypothetically, if Post Office Counters did not retain the Crown offices on its balance sheets and did not get a good settlement on the transfer of assets and liabilities, my concern is that the combined effect would not be very helpful to the members in that section of the Royal Mail scheme. However, the Minister has given assurances that that is not the Government’s intention, and that they will actively seek to ensure that the application of Clause 18 does not weaken the employer covenant behind any of the sections. Those assurances are very helpful and, if the record shows them, I can withdraw my amendment.