Second Reading Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Gibson of Market Rasen)
My Lords, before the Minister moves that the Bill be considered, I remind noble Lords that Motions before the Committee will be that the Committee do consider the Bill or the instrument in question. The Motions to give the Bill a Second Reading and to approve the instruments will subsequently be moved in the Chamber in the usual way. I also remind your Lordships that if there is a Division in the House, the Committee will adjourn for 10 minutes.
Trusts (Capital and Income) Bill [HL]
(12 years ago)
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The Minister of State, Home Office (Lord Henley)
This is a short but technical Bill to amend the law of England and Wales relating to capital and income in trust. Capital, for these purposes, is trust property that constitutes a pool or fund of assets, and is to be distinguished from the income earned on those assets. For those who remember their Bar or solicitor exams, the distinction has traditionally been illustrated by the homely metaphor of a tree and its fruit. The tree is the capital—for example, an office block or shares in a listed company—and the fruit is the income—for example, the rent received from renting out the offices or the dividend paid on the shares.
Before turning to the substance of the Bill, I would like to say that I am very pleased to be presenting it today, although with considerable trepidation. I know that it should be my noble friend Lord McNally, who is otherwise engaged in the Chamber; he is the Minister in the Ministry of Justice who is responsible for the Law Commission and he has been a great supporter of the Bill. He is disappointed not to be able to be here, but I can assure the Committee that he will be available at later stages of the Bill.
I also know that several noble Lords present today have had the advantage of attending a briefing on the Bill by Professor Elizabeth Cooke, who is the Law Commissioner responsible for the Bill, and Stephen Roberts, who is head of litigation and legal policy at the Charity Commission. I regret that I was unable to attend that session but have had the advantage of a private tutorial from Professor Cooke and Mr Roberts to prepare me for our debate today. Otherwise I would have had to rely on my lecture notes, if they still existed, from Bar exams some 35 years ago.
The Government are very grateful to the Law Commission and the Charity Commission for all the help they have given in the preparation of the Bill for introduction and their continuing support for the Bill as it goes through Parliament.
The Bill will implement, with minor modifications, the legislative reforms recommended by the Law Commission in its 2009 report Capital and Income in Trusts: Classification and Apportionment. These reforms owe their genesis to concerns expressed by various noble Lords, including the noble Lord, Lord Phillips of Sudbury, during debates on the Bill that became the Trustee Act 2000. This led to the publication of a Law Commission consultation paper in 2004 and the Commission’s report in 2009. The Ministry of Justice then carried out a public consultation in 2010 on the draft Bill published by the Law Commission in its report and published a response in 2011 explaining how it intended to finalise the Bill. This extended process of detailed and responsive consultation has, I believe, created a measure with a large degree of consensus, which is suitable for this special Law Commission procedure in your Lordships’ House.
The overall aim of the Bill is to simplify three distinct but linked areas of trust law in England and Wales relating to capital and income. These areas are apportioning receipts between income and capital beneficiaries; classifying receipts by trustees as income or capital; and investing by charity trustees who, in deciding what investments to make, have to distinguish between investments that will produce income on the one hand and investments that will produce capital on the other.
I will start with the first point addressed in the Bill, the rules of apportionment in Clause 1. They deal with apportioning trust receipts between income and capital beneficiaries. For example, a trust—let us call it the AB trust—may be established by a person making a gift of investments on trust for person A for life, with remainder to person B. This means that the trustees will pay the income arising on the investments to A until A dies, and then transfer the investments to B. Because of the different entitlements to income and capital, the trustees must distinguish between investment receipts according to their legal classification as income receipts due to A, or capital receipts which must be held ultimately for B and can be invested to produce income for A during his or her life.
As noble Lords will remember, in the 19th century various cases came before the courts in which the judges had to decide how to split receipts in this way. Sensible though the decisions were in their time and circumstances, the application of some of them as general rules of trust practice is now problematic.
Clause 1 therefore disapplies for new trusts the first and second parts of the rule in Howe v Earl of Dartmouth, the rule in Re Earl of Chesterfield’s Trusts and the rule in Allhusen v Whittell. This means that in the absence of express provision in a new trust, these rules will not apply and the relevant receipt will belong in its entirety to the income or capital beneficiary, depending on its classification as one or the other. This will bring new trusts into line with modern trust drafting practice, which almost always excludes these rules in the document setting out the terms of the trust. This will simplify the administration of trusts without any loss in fairness. Clause 1 also disapplies for new trusts the statutory rule requiring the apportionment of income over time imposed by the Apportionment Act 1870.
The reforms effected by Clause 1 will mean that complex and time-consuming calculations, generally affecting relatively small sums of money, will be avoided.
The changes in Clause 1 are restricted to new trusts so that there is no interference with the intention of settlors, who may have wished the existing law to apply.
Clause 2 amends the law relating to the classification for trust law purposes of specified tax-exempt distributions by companies on demerger for all trusts. This is relevant because trustees holding shares in a company which demerges may receive a dividend in the form of a distribution of shares which represent an equivalent stake of ownership in the demerged company. The clause provides that, unless the trust specifies to the contrary, all the distributions falling within Clause 2 will be treated by the trustees for the purposes of the trust as capital. At present, rather confusingly, this is only the case on indirect demergers.
The distributions to which Clause 2 applies are those that are tax-exempt under Sections 1076, 1077 and 1078 of the Corporation Tax Act 2010 and, in the future, those that are tax-exempt and are specified by an order made by statutory instrument by the Lord Chancellor. No such order is envisaged at present.
In practical terms, Clause 2 will move the classification of dividends received by trustee shareholders on direct demergers from income to capital, and will secure that classification for dividends on indirect demergers, which currently rests on a decision of the High Court. As a result of the Bill, all distributions received by trustees on tax-exempt corporate demergers will be classified as capital for trust law purposes. This will remove not only the potential injustice to capital beneficiaries of seeing significant proportions of the capital holding of the trust assets converted to income by reasons beyond the control of the trustees, but also the pressure on trustees to sell investments in companies proposing demerger purely to avoid the outcome of the present inconsistent classification.
Demergers may be structured by companies in a variety of ways. In some cases of demerger, where Clause 2 applies to classify the distribution as capital, the company may have held off paying the usual dividends pending the demerger. The income beneficiary may then be unfairly disadvantaged because dividends that would have been income in the normal course of events have not been paid and the receipt on the demerger is classified as wholly capital. To prevent Clause 2 perpetuating this problem, Clause 3 gives the trustees power to compensate the income beneficiary from the trust capital. We do not expect that this power will be exercised often but we believe it is necessary in the interests of fairness.
That brings us to Clause 4, which relates to investment by charities with a permanent endowment on a total return basis. Before describing the working of the clause, I will briefly explain the meaning of these two concepts.
First, there is permanent endowment. A charity has a permanent endowment if its constitution places restrictions on the expenditure of property held for the purposes of the charity. Typically, a permanent endowment will be a capital sum donated for charitable purposes on terms that the income it generates may be used for those purposes, but the capital itself must remain untouched to create more income for the future.
Secondly, there is total return basis. Total return investment involves the charity trustees selecting investments on the basis of risk and return, and then spending an appropriate proportion of the total return, irrespective of the form individual returns take, as capital or income. As a result, the trustees are not constrained in their investment choices by the need to generate income returns and can select appropriate investments in the same way as the trustees of charities that do not have permanent endowment.
It may be helpful to illustrate this by way of an example. Let us assume that there is a charity set up to help homeless people, with a permanent endowment of £100,000. At present, the trustees must decide how much expenditure they think is appropriate and then set up an investment strategy to try to achieve it. For example, they might invest in a portfolio of fixed-income investments and shares that they anticipate will produce £2,000 a year. Whatever income that portfolio actually produces is expendable on the charity’s objects; the capital cannot be spent. That is the case even if the portfolio performs below expectations or some returns unexpectedly take the form of capital. In those circumstances, trustees today either face an income shortfall which could jeopardise their planned operations or have to undertake a process to enable them to spend some of their permanent endowment.
Under total return investment, the charity trustees do not have to anticipate expenditure when making investments. Instead, like trustees who do not hold permanent endowment, they can invest in a portfolio which balances risk and return, ignoring the form of returns. The trustees are then able to allocate a fair proportion of the eventual total return to expenditure, whether the investment receipts in question would be classified for trust law purposes as capital or income.
Total return investment is not a new concept. Charity trustees can already apply to the Charity Commission for authority to adopt it and a small number have done so. Clause 4 provides a new framework for obtaining that authorisation. Instead of making an application, charity trustees with a permanent endowment will be able to opt in to this type of investment on the terms prescribed by regulations to be made by the Charity Commission by resolution, if the trustees consider it is in the best interests of the charity to do so. This new administrative approach will reduce the costs of embarking on total return investment for both charities and the Charity Commission.
The change will enable charity trustees responsible for a permanent endowment to bring themselves broadly into the same position in relation to investment decisions as charity trustees without a permanent endowment. This will allow them to invest in the same way as other trustees in accordance with their duties under the Trustee Act 2000 and the trust instrument.
The detailed terms on which total return investment can be pursued will be determined by the regulations to be made by the Charity Commission. The regulations will be finalised only after the Charity Commission has carried out a consultation, which it intends to do after the Bill has been enacted.
Lord Phillips of Sudbury
My Lords, I endorse the commendation of my noble friend Lord Henley for the work of the Law Commission. It is one of the unsung heroes of the forest of the law and, within it, it is a true forester.
It is particularly warming to know that the report upon which this Bill is based is but three years’ old, which, in terms of this kind of legal reformation, is but a twinkling of an eye. Indeed, the Minister said that the reform vis-à-vis the fruits of demergers was partly in the Bill to rectify the fact that as the law presently stands only indirect mergers are, so to speak, saved, and now direct mergers will be in the more flexible regime.
It is perhaps amusing to remind the Committee that the ruling to which the Minister referred which enabled indirect mergers to result in the apportionments that the court decided was given in the case of Bouch and Sproule, which was no less than 125 years ago. So spreading the benignity of Bouch and Sproule has taken rather than longer than some of us would have wished.
I also cannot resist a nostalgic view of this debate. The Minister talked of his time at the Bar. My earliest days in the law were spent studying trust accounts in 1958. The very cases to which he referred—Howe v Earl of Dartmouth, Allhusen v Whittell and Re the Earl of Chesterfield’s Trusts—are names that adorn the wall of my lavatory. Incidentally, I think Howe was a predecessor of our dear friend, the noble Earl, Lord Howe. They are some of the most complex, arcane, time-wasting and lawyer-infested rules that still apply in our world. Therefore, this is a happy day and I have little to say apart from expressing happiness, except for two points.
The first relates to the drafting of Clause 3. As the Minister clearly described, this provision gives trustees the power to compensate income beneficiaries when there is a direct demerger. I am well briefed on this point by the Law Society, which has a committee to look at such things that is comprised of horny-handed practitioners. They and I feel that subsections (1), (2) and (3) could be more clearly drafted. The particular point that exercises us is that exactly what the trustees are empowered to do is not as clear as it could be. That is, what is the nature and extent of their discretion? Is it an absolute or a qualified discretion? The language of the three subsections states, for example, “the trustees are satisfied”, “the trustees may” and “the trustees consider”.
It is perhaps unfair to ask the Minister to comment on these matters instantly, but after today I hope we will at least consider the potential improvement of three quite difficult subsections. We do not want to put trustees—who, let us not forget, are nearly all volunteer trustees—into a position whereby some aggressive beneficiary or potential beneficiary could try to sue them over the way in which they have exercised the power given to them by this clause.
My second point concerns the Charity Commission, which is extremely useful. At present, for many charities that have permanent endowment—which more have than some realise—it is a real palaver to apply to the commission for an order, and for that order to be considered, made and executed. A great deal of time, effort and expense is wasted because of that state of affairs. It is therefore extremely beneficial and has no down side at all that the Bill will allow the commission—if it so wishes, as I am sure it will—to make regulations that will enable all charities in the future to make provision vis-à-vis endowed property, without applying formally for an order from the commission.
With those few remarks, I thank the Government and all those involved for bringing forward an arcane but none the less very important and practical set of proposals that will make more of a difference than many realise.
Lord Hodgson of Astley Abbotts
My Lords, I am afraid that I am not a barrister or a solicitor and so the Earl of Chesterfield and Howe versus the Earl of Dartmouth do not adorn my lavatory walls—or, indeed, have not, until now, swung into my ken.
I welcome this small, technical but important legislation and I wish to address particularly the charitable aspects covered by Clause 4. I declare my interests, which are on the register in your Lordships’ House: I am president of the National Council for Voluntary Organisations; chairman of the Armed Forces Charity Advisory Committee; and I have been appointed by the Government to review the Charities Act 2006.
The existence of permanent endowment, as my noble friend clearly explained, has caused trustees of charities with permanent endowment a great deal of difficulty. If you force trustees to consider primarily the form in which they will get their return, you will get a series of artificial distinctions. By investing the capital gain—as opposed to dividend income or interest—you may end up with a seriously suboptimal result.
In recent years, a number of investment opportunities have arisen that are for capital gain only, particularly in the world of private equity. Where you are able to invest in smaller companies your return will almost certainly be in the growth of the value of the company. These companies cannot—and probably should not—pay dividends because they need to retain their profits to grow the business. It is therefore very important that this flexibility is built in to charitable investment.
As I understand it from my noble friend, this, of course, does not remove from trustees—I am sure that it does not—the need to balance future capital appreciation against the need to run the charity in the mean time, and, of course, the need to balance risk and return, which still applies as if these provisions had not been made. I welcome these proposals on the grounds that they are deregulatory and will free individual charities with permanent endowment and the Charity Commission from some administrative work.
As I understand it—and my noble friend Lord Phillips will correct me on this because he has forgotten more charity law than I will ever know—the right of the Charity Commission to make regulations on this matter has been in some dispute. Some lawyers have questioned whether it actually has these powers. The commission’s powers are, of course, open to challenge, as we saw with the public benefit test considerations last summer.
I have a further point of concern which the Committee may wish to explore. I have described the Bill as deregulatory, but in proposed new Section 104B (1), (2) and (3) there is a list of regulations. If, as I am sure my noble friend will tell me, the normal duties of trustees apply, do we really need to have this extensive list of regulations? Are we not able to trust the trustees? For example, proposed new Section 104B(2)(c) would require charity trustees to,
“notify the Commission of the passing, variation or revocation of such a resolution”.
That takes us back almost to where we started because, if resolutions are made in that way, they will have to be sent to the Charity Commission, the only difference being that the Charity Commission will not have to give its permission. I flag that up as a possibility we might wish to explore later.
I have given prior notice that I would like my noble friend to address the specific issue of the special position of English cathedrals under this legislation. The Church Commissioners and the Association of English Cathedrals are anxious to make a small amendment to Clause 4 which would enable cathedrals to resolve to invest their permanent endowment on a total return basis in accordance with the regulations which the Charity Commission is going to make. This comes about because ecclesiastical corporations are specifically excluded from the definition of a charity in Section 10 of the Charities Act 2011, which means that the powers of this Act do not apply to them, nor will the powers to be conferred by proposed new Sections 104A and 104B.
However, the relevant bodies corporate which are now established for each cathedral under the Cathedrals Measure 1999 exist for exclusively charitable purposes and are therefore charities for the purposes of the general law.
In recent years a number of cathedrals have expressed increasing interest in a total return investment, as the requirement to generate income from their permanent endowment is distorting their investment decisions. Cathedrals, of course, as ancient institutions, have more permanent endowment than most. Access to the total return investment allows for a more strategic portfolio of investments, which will provide a better balance between the needs of current and future beneficiaries. I hope that my noble friend, either now or at a later stage of the Bill, can address that point.
I described this earlier as a small, technical but important and welcome measure. However, it is only the first in a series of changes that need to be made if we are to realise the full value and potential for social impact investment. It does not, for example, address the issues or challenges arising from mixed-motive investment, a practice which is very close to total return investing. Mixed-motive investments are made by trustees on the basis partially that they are financial investments, and partially that they are programme-related investments. Programme-related investments are made to advance the charity’s purpose and are not considered to be financial investments at law.
I will give the Committee a brief example of how this might work. A charity which aims to improve educational opportunities and address homelessness invests in a property fund that will invest in properties for social enterprises. The fund focuses investments around three areas of social impact: homelessness, education and community development. Based on conversations with their fund manager, the trustees assess that 60 per cent of their investment can be justified as a programme-related investment that furthers their social mission. They decide that the remaining 40 per cent must be justified as a financial investment. Conversations with their investment advisers indicate that a commercial return on this sort of investment should be, say, 15 per cent per annum. To justify their investment, the trustees decide that there must therefore be a commercial return of 40 per cent and that they must get back the remaining 60 per cent in their PRI investment. When you blend the whole thing together, you have a return across the whole piece of 6 per cent. You can see how close this balanced rate of return is to the whole idea of total rate of return; it is very close indeed. It is a sadness to me that we have not been able to grasp this particular issue and extend this Bill by a series of small amendments to take in this additional way in which charities are now seeking to invest.
If I could glance over my noble friend’s speaking notes, I am sure that the answer to this will be, “Resist this”. It will be resisted because mixed-motive investment might be considered controversial—this is a Law Commission Bill—and because the Law Commission has not consulted on this precise point. Law Commission Bills are invariably consulted on in every aspect.
If that is my noble friend’s answer—and I am sure that it is going to be, but I may as well try—it would be helpful if he could give some indication during the later stages of the Bill whether his department has it in mind to bring forward ideas to tackle the mixed-motive investment as part of the overall approach to social investment.
Social impact investment is coming of age. It is a strategic issue for this country. However, there is a real danger of the necessary legislative changes required to facilitate it falling between departmental stools. My noble friend’s department, the Ministry of Justice, is producing this important but modest measure, yet not tackling other critical issues. The Law Commission will consult this autumn on further charity law reforms, but seems unlikely to tackle the necessary innovative leading edge issues.
The Financial Services Bill, at the Committee stage, is deeply depressing reading. I invite the Minister’s officials to look at the proceedings of the eighth sitting on Thursday 1 March, where attempts were made to raise the social impact investment idea. The amendments themselves were wrong; they were not acceptable. However, the Minister’s reply—it was Mark Hoban—indicated the dead hand of the Treasury across the whole of this area, still thinking in conventional investment terms of invested protection, whereas social impact investment melds financial and social return. It is not an investment for everybody, but the present situation, whereby one can easily give money to a project, but find it difficult to lend money to it, must be counterintuitive. People will be more encouraged to support these leading-edge charities and voluntary groups if there is a prospect of them getting their money back. That might encourage them, if they are successful, to put more money into the next project.
The Government have laid great stress on the need to create innovative ways of financing charities and voluntary groups that are seeking to tackle some of these most deeply entrenched social problems in our society. I hope that somebody, somewhere, in Whitehall is getting a grip of these various separate legislative proposals to ensure a proper degree of co-ordination and impact. The statutory stars are in alignment at the moment with all these pieces of legislation around, and it would be a great opportunity missed. Indeed, strategically, from the country’s point of view, it is a chance to make London the world centre of expertise for this rising and new activity.
Lord Wakeham
My Lords, I rise briefly to support my noble friend on these proposals. First, I should declare an interest as a trustee of a substantial charity, which at the moment does not operate a total return investment policy but I am pretty sure would want to do so in the future. I could not help smiling at my noble friend Lord Phillips, because I too have enjoyed being here with the nostalgia of thinking of all the time I wasted as a young man learning about Howe v Earl of Dartmouth, Allhusen v Whittell and all of these cases, which are from many years ago so far as I am concerned.
My concern is a relatively simple one. I am perfectly content with what is being proposed, but recognise that all these things take quite a long time. As the Minister said, the Charity Commissioners have for a number of years now operated a scheme on a one-off basis to deal with cases that came forward, for suitable charities, where they allowed a total return investment policy to happen. I am concerned that there should not be a delay between that system and the new system, bearing in mind there has got to be consultation, regulations have to be drafted and implementation has to take place. I would like the Minister to be able to tell me that the existing system of the informal but important way the Charity Commissioners have worked in the past will continue to operate until the new system, with consultation and everything else, has been finalised. There should not be a gap when neither the old nor the new system is in operation for charities that wish to adopt this total return investment policy. When you stop and think about it, for the appropriate charities, it is very hard to consider a trustee is doing his job properly today if he does not think in terms of that. That is the only consideration I have and I hope that my noble friend can give me some encouragement on that point.
Lord Higgins
My Lords, I am in no sense an expert in this area, but over the past two or three years I have been involved in negotiations with the Charity Commission. I certainly join with those who have expressed appreciation to the Law Commission for its work on this. I think I have only on one previous occasion had a debate in this Chamber on one of its reports. Am I right in thinking that this does not go to the Commons at all and is dealt with exclusively in your Lordships’ House? I was not clear about that.
I also pay tribute to the way the Charity Commission has handled the particular negotiations in which I have been concerned. I understand it is being quite severely affected by the cutbacks but it managed to get through these particular negotiations before that had too serious an effect.
I will raise only some very simple points. The explanation given by the noble Lord, Lord McNally, points out that the four burdensome 19th century rules requiring apportionment between capital and income, which are described so adequately in the Explanatory Memorandum, will be renewed for new trusts. My very simple question is: will it apply only to new trusts, or can existing trusts make arrangements to take advantage of the changes as well?
The Explanatory Memorandum draws rather a charming analogy with trees and the fruit of trees. In the trust about which I am concerned, we had considerable problems over whether to regard a particular asset as income or capital. In addition to the original trust being set up, it was then given the royalties from a particular operation and was therefore continually topped up in this way. This gave us considerable problems in deciding whether that should be regarded as capital or income. However, it will be very helpful overall if time and costs can be saved by the Charity Commission making regulations, rather than people having to apply on a case-by-case basis, as is the present position.
The Minister’s letter has a final line which states that the Bill is expected to be beneficial to small firms and micro-businesses. I am rather puzzled as to how that will be the case but no doubt the Minister can explain.
Lord Beecham
My Lords, I join other noble Lords in congratulating the Minister on the clarity of his exposition of this intrinsically complex area, and in congratulating the Law Commission on producing the report. As the Minister reminded us, the process began eight years ago, so it has not quite reached the proportions of Jarndyce v Jarndyce. The commission has certainly done a thorough job.
My acquaintance with the rules of apportionment began with my law degree and effectively ended with the solicitor’s final examinations to which the noble Lord, Lord Phillips, referred, save that I learnt to take the precaution of ensuring that the rules were excluded from any will I subsequently drafted. Of course, that will now no longer be necessary. It will be a case of opting in rather than opting out, for which the commission and the Government should certainly take credit.
This afternoon I find myself visited by a slight sense of déjà vu. Many years ago I found myself acting in a divorce case and waiting for my case to be called on behalf of my petitioning client. I sat next to the counsel in the preceding case, a delightful if somewhat eccentric individual. For the avoidance of doubt, it was not the Minister on that occasion. At one point counsel turned to me and said, “Mr Beecham, where is the petition?”. I had to reply, “I am not instructing you”, to which he replied, “I know, I know, but where is the petition?”. Around three weeks ago, my noble friend Lord Bach said to me, “You are to be in charge of this Bill”. It was a visitation that was quite unlooked for. Nevertheless, I am here today to represent the Opposition on this matter and to welcome the simplification that the Bill embodies, in relation to both the rules of apportionment and, in particular, the position in respect of charities and the question of total return. I declare an interest as a trustee of the Trusthouse Charitable Foundation, which already operates a total return policy.
The noble Lord, Lord Phillips, referred to the Law Society briefing, for which I am very grateful. The Law Society is a body to which President Kennedy’s memorable injunction is often thought by solicitors to apply: “Ask not what the Law Society can do for you, but what you can do for the Law Society”. On this occasion, the Law Society has done us all a service in a briefing that contains the recommendations that the noble Lord, Lord Phillips, referred to in respect of Clause 3, where it suggests a new subsection and some clarification. I hope that can be shared with the Minister following this Second Reading, if he has not yet seen those proposals. They seem to make sense in exactly the way that the noble Lord, Lord Phillips described.
Other of your Lordships have made points particularly in relation to the position of charities and, in the case of the noble Lord, Lord Hodgson, in respect of cathedrals. Those matters seem to be worth pursuing. I had the same question in my mind as the noble Lord, Lord Higgins, about whether it is necessary to include a reference to existing trusts in the Bill. That is a matter that I am not qualified to make a judgment about, but it might usefully be considered, because if it is not currently possible for existing trusts to modify the rules then it would seem that they ought to be given that opportunity. They would not have to take it but it might be relevant. That is perhaps, again, a matter that we could return to in Committee.
In principle, and so far as the thrust of this short Bill is concerned, we are completely at one with the Government and look forward to concluding this matter rapidly for the benefit of trustees, beneficiaries and charities.
Lord Phillips of Sudbury
My Lords, I should have declared an interest earlier, which I need to do now. I am the founder of, and am still a consultant to, a firm of charity lawyers, Bates Wells & Braithwaite. I should have said that and apologise for not so doing. I will not enumerate the charities of which I am a trustee.
Lord Henley
The Committee will be grateful to the noble Lord for that declaration of interest.
I start by congratulating the noble Lord, Lord Beecham, on being the first speaker in this debate to mention Dickens, in this bicentenary of his death. I was wondering how long it would be before Jarndyce v Jarndyce appeared, and assure him that I was about to mention it. Although the noble Lord says that this has been only eight years in gestation, as my noble friend Lord Phillips put it, if we go back to a case that I was not familiar with but which is no doubt up on the wall in the noble Lord’s lavatory, Bouch v Sproule, that was some 125 years—so it has been going on for a considerable amount of time.
I hope to deal with some of the points that have been raised, but give an assurance to the House that this is the beginning of proceedings. We have rather a good form of procedure before us for these Law Commission Bills, which will allow this Bill to be properly scrutinised later on in Committee. Another place will also scrutinise the Bill properly—as it always does—in due course. I am sure we do it slightly better, but another place will have its role to play. I can give that assurance to my noble friend Lord Higgins—this is not some odd procedure whereby the Bill comes only to this House. It will go to another place in due course.
The first point that came up was raised by my noble friend Lord Phillips about Clause 3 and the discretion that is available to the trustees. What qualification was there for that discretion and might there be some alarm among trustees about whether they could be liable for how they exercise it?
I say to my noble friend that the Bill has so far been very carefully constructed. It has been looked at by many people of much greater erudition than me and, possibly, of even greater erudition than my noble friend. They have taken these points into consideration but the great advantage of this procedure is that we can look again as the Bill goes through the House. It is certainly something to which my noble friend might want to come back in Committee when we get to that stage, at which point our mutual noble friend Lord McNally will be dealing with the Bill for the Government. It will be a matter for that Committee.
Lord Phillips of Sudbury
Can I take it that the Minister will be happy for consultation with his officials to take place on this matter?
Lord Henley
Obviously, we are always more than happy for there to be consultation before, during and whenever to deal with these matters. They ought to be looked at and that is how we get the right result in the end on all Bills. It is something that we would more than encourage. I am sure the noble Lord will be in touch with the officials, and that he has already spoken to them, the Charity Commission and the Law Commission at some stage.
I move on to my noble friend Lord Hodgson’s concerns about whether the regulations in Clause 4, particularly the total return investment regulations in new Section 104B, will be too restrictive. Again, this is a matter that we will need to look at in some detail. However, it is a matter that the Charity Commission should be able to get right following consultation. I am certainly confident that it will strive to ensure that the regulations achieve just the right level of trusting the trustees to get things right and protecting charity funds. It is a matter that I hope the House will look at in detail.
I understand my noble friend’s concerns about English cathedrals and that he raised the matter at the Peers’ briefing in March. As a result of ongoing discussions at official level between the Ministry of Justice, the Law Commission, the Charity Commission and the Church Commissioners, they are all looking at the issue. In essence, the Association of English Cathedrals, which represents all the corporate bodies of our 42 cathedrals, has asked that Clause 4 be extended to include the cathedrals in its scope. The association considers that this would benefit the 20 or so cathedrals that have permanent endowment. That would put those English cathedrals on the same footing as the Welsh cathedrals. However, unlike cathedrals in Wales, cathedrals in England are not subject to the general regulation of the Charity Commission. The Government will consider the request from the Association of English Cathedrals carefully, but at present no final decision has been taken.
I cannot remember whether it was on this issue or another that my noble friend speculated as to whether the word “Resist” appeared in my briefing. I can assure him that it does not, although it might appear later as we discuss these matters further. However, this is not really a matter for the Government to resist; it is a matter for all of us to make sure that we get right. Again, I stress that this is not a government Bill; it is a Law Commission Bill, which we are ensuring gets on to the statute book.
My noble friend also asked about social impact and mixed-motive investment. The Government acknowledge that social or mixed-purpose investment is a highly important issue and are grateful to the noble Lord for drawing attention to it, both today and as part of the work of his ongoing review of charity law. The Government’s ambition is that social investment should become a major source of finance for the social sector. To this end, the Cabinet Office’s social investment team is working with other government departments to make this vision a reality. Social or mixed-purpose investment did not, however, form any part of the Law Commission’s work on capital and income in trusts and therefore has not been included in the Bill, by the Law Commission in its report or by the Ministry of Justice in its consultation. Therefore, at this stage we would not want to see anything further added.
I have already dealt with the question from my noble friend Lord Higgins as to whether the Bill will go to the Commons. I can give that assurance. My noble friend also asked whether it will apply only to new trusts, which I think was a question also raised by the noble Lord, Lord Beecham. I can give an assurance that the reform is prospective only. We believe that retrospective interference with existing trusts could frustrate the intention of the person who created the trust, contrary to the general principles of trust law. However, as the noble Lord, Lord Beecham, reminded us, in any drafting of trusts that he has been doing over the last however many years, he has been excluding the rules in Howe v Earl of Dartmouth and others, just as, I imagine, most practitioners have been doing.
My noble friend Lord Higgins also asked about the letter and whether there was going to be any effect on small and medium-sized businesses. We believe that it is unlikely to have a major effect on small and medium-sized enterprises. However, the impact assessment published by the Ministry of Justice states:
“While a reduction in the complexity of the current legal rules may lead to a very marginal reduction in trust related business for small legal firms and trust service suppliers, this is expected to be more than offset by reduced costs for trusts. Small legal firms and trust service suppliers may also benefit from additional business if there is an increase in the number of charities operating total return investment … We do not consider that the Bill is likely to have a disproportionate impact on the operations and performance of small businesses compared to others”.
Lord Higgins
I am still slightly puzzled about this. It says that the Bill is expected to be beneficial to small firms and micro-businesses. Does it mean small legal firms? The idea of a small legal micro-business strikes me as a little unlikely, so I do not understand how it affects small businesses and micro-businesses.
Lord Henley
My Lords, I had better look at the letter more carefully myself in due course and write to my noble friend to deal with that point.
My noble friend Lord Wakeham talked about the possibility of delays of the sort one finds in law, which no doubt provided the noble Lord, Lord Beecham, with his opportunity to bring in Jarndyce v Jarndyce. I hope that there will not be undue delay in dealing with this, but I can certainly give him an assurance that there will not be the gap that he was talking about. We will continue with the old system until we have the new system.
Lastly, I will correct a point that I made earlier, when I said that this was a Law Commission Bill. I must make it clear that it is actually a government Bill. However, the Government recognise that it is uncontroversial and that it has been put forward by the Law Commission; it can therefore continue through Parliament under this special procedure, which I think is appropriate for Bills of this sort.
I hope that I have dealt with most of the points. I will look carefully at what I have said in due course and if necessary write to noble Lords to deal with any points that I have missed. I commend the Bill to the Committee.
Grand Committee
Public Bodies (Abolition of Courts Boards) Order 2012
(12 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Henley
That the Grand Committee do report to the House that it has considered the Public Bodies (Abolition of Courts Boards) Order 2012.
Relevant documents: 53rd Report from the Merits Committee, 41st Report from the Joint Committee on Statutory Instruments.
The Minister of State, Home Office (Lord Henley)
My Lords, the purpose of this order is to abolish 19 courts boards across England and Wales. The order provides for abolition with no transfer of functions. Before addressing the order I will give some background on courts boards and their proposed abolition.
In 2010, the Government announced a review of all public bodies which aimed to increase transparency and accountability, cut out duplicated activity and discontinue unnecessary activities. In conducting reviews, departments were asked, first, to address the question of whether a body needed to exist at all. In the case of courts boards, the Ministry of Justice considered that the answer was no. This view reflected that of the previous Administration, who announced in March 2010 their intention to close courts boards. The abolition of courts boards was therefore listed in the Public Bodies Bill which received Royal Assent in December 2011.
Courts boards were established in 2003 with a remit relating to the Crown Court, county courts and magistrates’ courts. They do not manage or administer the courts themselves but advise HM Courts and Tribunals Service to improve its service. Courts boards were established partly because there was a fear that magistrates’ voices would be lost within a unified courts system. However, their role has diminished in recent years as other structures are now in place to ensure magistrates’ views are heard. Locally, there are strong relationships with magistrates’ Bench chairs and, nationally, views are represented by the Magistrates’ Association and the National Bench Chairmen’s Forum.
Another function of courts boards is to ensure that the voices of local community court users are heard. However, amalgamations within HM Courts and Tribunals Service areas have reduced courts boards areas from 42 to 19 in recent years, diminishing their ability to represent the whole community. While the Ministry of Justice fully recognises the need to respond to local needs, the Committee should recognise that it is not trying to recreate a like-for-like structure in place of what it is abolishing. One reason for reforming public bodies is to make necessary savings, and this could not be achieved by simply filling the gap with something similar, especially where functions are duplicated. Abolishing courts boards will save the public purse approximately £450,000 per year. Given their reduced role over recent years, retention cannot be justified in the current financial climate.
The proposal to abolish courts boards was included in a public consultation published in October 2011. Of the 23 responses received, seven were in favour of abolition, three were neutral and 13 were against. Arguments against abolition focused on concerns around the loss of a body to oversee Her Majesty’s Courts and Tribunal Service’s performance from a local perspective. As I will discuss, there are other ways in which these local voices can be heard. Those in favour of abolition agreed with the Government’s view that HMCTS is capable of addressing the gaps left by abolition. The department found no compelling argument within this consultation to change its proposal.
The order was laid on 31 January. Orders under the Public Bodies Act have a minimum 40-day scrutiny period, with a committee of either House able to extend this to 60 days by resolution if it feels it necessary. This order been scrutinised by several Select Committees within Parliament: in this House, the Merits of Statutory Instruments Committee; in the other place, the Justice Select Committee; and, collectively, the Joint Committee on Statutory Instruments. None of these triggered the optional 60-day extended scrutiny period.
The Merits of Statutory Instruments Committee reported on this order on 16 February, having requested supplementary information. The committee specifically asked the Minister to address several questions during the debate. On his behalf, I will now take these point by point. First, the report asked that the other avenues that could perform the same functions as courts boards should be more fully articulated, in order to support the assertion that courts boards’ functions are being duplicated. Courts board representatives can have their views heard through structures such as justice issue groups, area judicial fora, local criminal justice boards, victims and witnesses subgroups, and court user groups.
There are also strong local relationships between HMCTS and local magistrates’ Bench chairmen. Additionally to these groups, Section 21 of the of the Courts Act 2003 requires the Lord Chancellor to ascertain the views of magistrates on matters of relevance to them. This will of course continue after courts boards have been abolished. As for engagement with members of the public, courts already use a variety of methods to engage with their local communities, such as open days, open justice week, representation at local community meetings, customer satisfaction surveys and mock trials. These methods provide more direct engagement with local communities than courts boards do. Members of the community may also air their views through direct communication with their courts, writing to the relevant Ministers via their MPs or by responding to consultations.
I turn to the second point that the report requests be addressed specifically, that of giving reassurances about what provision will remain to monitor and influence how court services are tailored to the needs of the local areas. The Ministry of Justice remains committed to preserving the links between courts and local communities. Under the new agency framework, HMCTS regions will be encouraged to explore local options suitable to them, such as making more effective use of court user meetings, to engage the wider community in improving service delivery. This idea is already being developed in one HMCTS area and initial best practice has been circulated to other areas.
Furthermore, delivery directors and jurisdictional leads are working with the judiciary, stakeholders and other agencies to deliver a joined-up justice system that is responsive to the communities it serves. Further plans are being developed that will promote more direct engagement with communities. Neighbourhood justice panels are just one example of this. These panels will, through community volunteers, involve communities in finding restorative and reparative solutions to anti-social behaviour and low-level crime.
The department is also committed to increasing the transparency of the justice system in order to encourage better engagement with the public and enable citizens to hold services to account. This will, among other measures, allow for the release of various data with contextual information to promote public understanding of the justice system. This has already begun. For instance, earlier this year, the department published timeliness data for courts on the open justice system website, allowing users to see how their local court is performing.
The Ministry of Justice has taken on board the views of the Merits Committee and would like to thank it for its thorough reporting. Courts boards are an advisory non-departmental public body whose role has greatly diminished in recent years. Their functions can now be carried out in other ways. The Ministry of Justice remains committed to improving courts’ and tribunals’ performance and to listening to the local community. The department will continue to do this in the future, through the other means I have laid out today.
However, in the current financial climate, it is right that duplicated functions across government should be removed. As I said earlier, abolishing these boards will save around £450,000 per year. I therefore commend this order to the Committee and beg to move.
Lord Beecham
My Lords, again I thank the Minister and congratulate him on his very clear exposition of this order. I indicate at the outset that, as in the House of Commons, the Opposition do not in any sense oppose the proposals.
However, although the Minister has rightly referred to issues raised by the Merits Committee, it should be noted that, as well as raising individual issues, the committee expressed some concerns about how the whole process had taken place. In particular, in relation to the explanatory document, paragraph 13 of the Merits Committee report points out that both the Magistrates’ Association and the Law Society thought that the current system was better than nothing. The Government have made a judgment on that and I do not necessarily quibble with it. The Merits Committee came to this conclusion:
“On balance the low number of consultation responses would seem to support the Government’s view, that Courts Boards are not operating particularly effectively”.
However, it also pointed out that while the,
“Explanatory Document suggests that other existing avenues may perform the same function better”,
that would need to be articulated “more fully in debate”. Up to a point that has happened in another place and here today, but it did not happen unprompted. Similarly, on the impact assessment, the committee pointed out that,
“in order to demonstrate compliance with the statutory tests”—
departments—
“should, as a minimum, include in the ED a clear statement of the factors that have been included in their calculation of net savings”.
They have subsequently done that and, again, there is no issue over that. However, as the Merits Committee indicated, it would be better to have had that in place in the first instance.
The committee made a point about the reassurances over provision to monitor and influence how court services are tailored. Its conclusion was a modest rebuke to the Government, which said:
“In our consideration of future draft Public Bodies Orders, we will expect the Government to present a properly argued case that the tests in the 2011 Act have been satisfied, supported by objective evidence”.
I am sure that the Minister will wish to ensure that that is carried through in the event of any further orders coming from his department. I hope that the Government as a whole will take that point.
One or two issues remain outstanding, which relate partly to the answers that were given by the Minister, Mr Djanogly, in Monday’s debate in the House of Commons and those given by the noble Lord today. These refer to the other structures that are in place, such as justices’ issues groups and the Magistrates’ Association. As the Minister said on Monday, there are other bodies, which mean that,
“court users … can have their views heard through structures such as justices’ issues groups, area judicial forums, local criminal justice boards, victims and witnesses sub-groups, and court user groups”.—[Official Report, Commons, Delegated Legislation Committee, 23/4/12; col. 4.]
That raises the question of the number of bodies that might be involved and suggests rather a more fragmented approach to looking at the issues that arise in an individual area. It is striking that there is no mention of local authorities among those groups. I invite the Minister to consider whether it would be appropriate to encourage HMCTS to promote the involvement of local authorities, which are important partners in community safety and can make a significant contribution to dealing with the problems of crime and disorder, which manifest themselves locally and end up in the courts.
Useful experiments are taking place in different parts of the country in relation to some of these matters. For example, I am currently chairing a scrutiny panel in my own authority dealing with the mental health of offenders. In the course of that we have discovered that there are experiments about providing professionals at court who can assist those who might have mental health problems at a very early stage in proceedings. It is also something that the young offender teams are involved in, closely linked to the local authority services.
The point is that it will not be sufficient simply to have different groups of people relating to the HMCTS.
Lord Haskel
I am sorry to interrupt the noble Lord, but a Division has been called and so the Committee stands adjourned for 10 minutes.
Lord Beecham
My Lords, I shall resume my suspended sentence—which is not an inappropriate term in the circumstances. I invite the Minister to explore a couple of aspects, in particular in relation to the role of local government.
First, it would be interesting to know whether the experiment that the noble Lord has referred to includes the relevant local authority, or authorities, in that area; and secondly, whether he would encourage the system to co-operate with any local authority scrutiny committee, because it would of course be open to a local authority to scrutinise what is happening in this area. Also, in relation to monitoring and reporting on what is happening—which can be done locally, and the local authority scrutiny committee may be a suitable vehicle for that—there is the question about whether the department itself would collate information, so that what is happening and what improvements might be made to the system can be seen nationally, rather than simply leaving it at the local level. That was the thrust of the implicit suggestion of the Merits Committee when it inquired as to that.
Finally, I note that some £450,000 will be saved by this process. It is not an inconsiderable amount of money but has to be seen in the light of the £1 billion shortfall in the anticipated savings from the abolition of public bodies of one kind or another. It will be interesting to see how much more is to come in various other regulations or orders that we will no doubt be considering. Not just in the context of this department, but generally, there seems to be a long way to go to meet the Government’s target of £2 billion of savings. However, as I said at the outset, we will not oppose the order and trust that, in the developing system, there will be an adequate exchange of information. There might for example be peer review and, in particular, there should be an annual report by the department or the agency on the progress that is being made.
Lord Henley
My Lords, I thank the noble Lord for those comments and will deal with some of the points he has raised. Starting at the very end, when he talked about the savings that are necessary, he is right—£450,000 is a relatively small amount in the great scheme of things and we will continue to have to look across all departments and the whole of government for further savings to try to get the deficit down and, ultimately, to start reducing the debt that we inherited. The noble Lord knows that full well, and all parts of the Government will continue to do that. However, at this stage, discussing this particular order, he would not expect me to go any further.
I am grateful that he made clear that the Opposition do not oppose these proposals. It would be very odd if they did since they intended to do exactly this and announced it in the Budget in 2010. He then went on to talk about the various concerns that the Merits Committee had had and alleged that it had issued us with a modest rebuke. I appreciate that it was a modest rebuke, which we will take on the chin, but it could have given us a much more severe rebuke—it was open to it to insist on a 60-day period rather than a 40-day period. It is open to the Merits Committee to do even more than that. It is a very effective committee and one that we all, quite rightly, live in fear of and whose considerations we take very carefully. That is why I can give an assurance on behalf of the department that future Explanatory Memorandums will be clearer, with the financial impact fully laid out and the assessment against the various tests fully spelt out. We will make sure that that is the case. There are four further orders due from the MoJ in due course and we will try to make sure that we comply with the wishes of the Merits Committee.
The noble Lord then raised questions about my opening remarks and those of my colleague, Mr Djanogly, in another place, suggesting a fragmented approach and asking about bringing local authorities into consultation on these matters. As an old local authority hand—one with more experience than many people in this area—he is right to talk about local authorities, and we shall certainly look at how we can work with them and involve them. He suggested making use of their scrutiny committees and there are various ways in which we can look at that. Courts and the wider criminal justice system certainly try to work hard and liaise with local authorities and local authority groups, and they will look at how they can improve that in due course.
The noble Lord asked whether we will publish data nationally. Under the transparency agenda we are publishing data on a national basis in relation to the courts programme so that the public can see local and national performance directly. If the noble Lord would like further details about that and how to access it, I am more than happy to write to him in due course.
I hope that has dealt with the noble Lord’s points. If it has, I beg to move.
Apprenticeships (Alternative English Completion Conditions) Regulations 2012
Baroness Wilcox
That the Grand Committee do report to the House that it has considered the Apprenticeships (Alternative English Completion Conditions) Regulations 2012.
Relevant document: 42nd Report from the Joint Committee of Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, apprenticeships are synonymous with employment. It is the experience of genuine employment that sets an apprenticeship apart from most other forms of vocational training. It is the fact that apprentices have a unique opportunity to learn from one or more mentors and to develop, practise and hone real occupational skills which gives them a real head start in their careers. We all, I am sure, can envisage an apprentice working alongside the mentor or master, watching, copying and refining their skills. For his part, the master will demonstrate, guide and correct the apprentice’s work. Both apprentice and employer have a real stake in the apprentice’s development and success.
When this Administration came into office, approximately 21 per cent of 16 to 18 year-old apprentices were on a programme-led apprenticeship. This meant that one-fifth of our younger apprentices were not employed and did not get paid. Following the initiative of the previous Government to introduce statutory apprenticeships, we went ahead with that work and last year we stopped funding programme-led apprenticeships. The introduction of the apprenticeship agreement regulations in April of this year will end the few remaining programme-led apprenticeships. This means that we can be increasingly confident that apprentices following our statutory programme will be employed and remunerated.
However, this House agreed to make provision for limited exceptions to the requirement for apprentices to be employed. That is why we are here today—to agree those circumstances as specified in these regulations. This issue was thoroughly debated during the passage of the Apprenticeships, Skills, Children and Learning Act. The proposed exceptions fall into three categories, the first being where employed status is not the norm. This applies in a very small number of jobs or occupational areas. Apprentices in this category covered by the regulations will be engaged in specified occupations following a specified framework. A characteristic of such apprenticeships is that they will be supported by experienced colleagues involved in a collective venture— for example, share fishermen.
Secondly, there are those employed apprentices who are made redundant during the course of the apprenticeship. In such a difficult economic climate it would be unfair further to penalise people who have lost the opportunity to complete their apprenticeship through no fault of their own. Knowing that they can complete their apprenticeship, even if they are not able to find alternative paid employment, will, I am sure, offer some consolation. The regulations provide that they may complete their apprenticeship within six months of the date of their redundancy by working other than for reward—for example, by working in a voluntary or unpaid capacity. Having completed their apprenticeship, they should be better placed in the labour market.
Thirdly, we have considered the unique position of our elite athletes. Apprentices undertaking the Advanced Apprenticeship in Sporting Excellence with a view to competing in the Olympic, Paralympic or Commonwealth Games are covered by this final category. In the year of the London Olympics, we are reminded of how important it is to support young athletes to develop their skills. We have sought to ensure clarity over which sports and games are included in these regulations. They must be listed as an official sport from one of the Games mentioned and they must not be from a sport in which we would expect an apprentice to be employed. Such business sports include cricket and football. Apprentices in business sports will still be able to access apprenticeships using the standard conditions.
I hope that noble Lords will agree that these regulations balance the Government’s desire for apprentices to be employed with the need to allow for some flexibility in those circumstances where employment is not possible. That is what this House expects and it helps to enhance the quality of the learning experience by allowing apprentices to apply their blossoming skills as they work. This is also consistent with recent announcements introducing a minimum duration of 12 months for apprenticeships undertaken by 16 to 18 year-olds, and for adults unless they have prior relevant qualifications. I commend the regulations to the Committee.
Baroness Byford
My Lords, I am grateful to the Minister for explaining the reasoning behind the regulations. I reinforce again my commitment to apprenticeships, which are hugely important across whatever aspect of work people are able to secure. Apprenticeships are a wonderful way of learning. As the Minister rightly said, mentoring and the passing on of skills and knowledge are crucial in all this.
I apologise for not taking part in the Bill to which the Minister referred. Looking at Schedule 1, I was intrigued to see the fishing industry, which relates to the Minister’s background, listed. I rise to speak to ask for a little more clarification on that. One of the things that struck me was that the fishing industry, which the Minister knows so well, sometimes has restrictions on the days when it can sail. Therefore, I wondered whether there was enough flexibility for the apprentice to be able to complete their six months within six months or whether, under those circumstances—maybe because the ship cannot go out to sea—they could take a longer period. I am not being critical; it is because of my own ignorance that I am raising this particular issue.
Another question arises: if, for any reason, the person is made redundant for obviously commercial reasons, is that apprentice then able to transfer to another fisherman, for example, and reallocate the time that they have done already, or do they have to start afresh? I may have missed this when I was looking through the papers on this order, but I am not clear and I seek clarification.
I agree with the Minister that this is a unique opportunity. It is a shame that, over many years, apprenticeships have been perhaps underrated and undervalued. I am glad that the Government have taken up the role and are much more committed to encouraging and promoting apprenticeships. However, I seek clarification from the Minister.
Baroness Sharp of Guildford
My Lords, I too would like to thank the Minister for her explanation of the statutory instrument and I apologise for arriving late. The Committee moved on more quickly than I had anticipated.
I have two questions. First, am I right in thinking that these alternative regulations apply to relatively few young people? Given that this is an Olympic year, perhaps the numbers under Schedule 3 are rather greater than they might otherwise be, but the numbers under Schedule 1 are relatively small. On the issue of those made redundant, it will be impossible to tell because we do not know who might be made redundant. However, the total number of young people to whom these instruments might apply is relatively small.
The other thing to note, of course, is that these regulations are the result of an amendment that was carried when we discussed the Bill. At that point, we discussed at some length what would happen to those who were made redundant, and this has been put in specifically to make sure that there is a way forward for those who have more or less completed their apprenticeships. I am very pleased to see that. Perhaps the Minister could respond on the relative numbers in relation to the total number of apprenticeships.
Lord Young of Norwood Green
My Lords, I too thank the Minister for her explanation. I make no apologies for repeating a number of questions and concerns expressed by my honourable friend in the other place, Mr Gordon Marsden, as we—the royal “we”—are still awaiting written responses from the Minister.
On the question of quality, I was looking at the report of the Eighth Delegated Legislation Committee and read through the Minister’s contribution. At one point, he said:
“There are those who feel that I have gone too far on quality”.—[Official Report, Commons, Eighth Delegated Legislation Committee, 17/4/12; col. 3.]
I do not think that we have gone too far on quality, even allowing for a certain amount of his ministerial flamboyance, as I would describe it, in a nice way. I do not question his integrity or commitment on this issue but I do think there is no room for complacency
I listened carefully to what the noble Baroness said in her opening statement, where she described a fairly traditional approach to an apprenticeship. I do not know if noble Lords had the opportunity to watch a recent “Panorama” programme on apprenticeships which showed, unfortunately, a significant amount of exploitation of young people, who were led to believe that they were going to get training from this particular subcontractor. There was little or no training whatever. It was in no way the kind of quality we should expect.
Baroness Wilcox
My Lords, I thank everyone for taking part and asking some interesting and important questions. It is not necessarily the number of people who are in the Room but the questions that they ask, as I have discovered before in the Moses Room. I am always very careful when I see that there not many people here. It is usually the ones who really know what they are talking about who are.
I thank my noble friend Lady Byford for her question and for noting that I come from the fishing industry and am therefore interested. In opposition she led on Defra, so she knows the subject very well. Only sea fishing is covered by the maritime occupations in these regulations, namely share fisherfolk, crew and deck hands. The numbers are small. There were 30 apprenticeships in 2010-11. There has been no demand to develop other types of fishing apprenticeship. Officials will explore the potential to develop this sector further with the National Apprenticeship Service and the sector skills councils.
When I was in the industry I first knew about share fishing when my grandmother left me my little fleet of fishing boats. The captains of the boats said to me, “We’ll be share fishing, then”. I said, “Oh, right”. That meant that I got half of whatever catch came up to pay for the boat, the oil and everything else that was needed, while the other half went to them. It did not work terribly well so I think that what share fishing means has changed nowadays, but that is how it was explained.
It is sad that there is very little demand for apprenticeships in fishing now. I am delighted to see that the National Apprenticeship Service will explore this, particularly since I am involved with the National Lobster Hatchery in Cornwall. There are other ways of being in the fishing industry, along the lines of research into what we used to call fish farming but is now carried out wild at sea. Certainly, in the lobster hatchery it is being done as a scientific project. That area has moved to what look like scientific apprenticeships but are about the fishing industry, which may explain why we do not have more figures than that. I will look into that for my own information and see if we can find a better answer in the future.
My noble friend Lady Byford then talked about the fishing transfer. As she suggested, a fishing apprenticeship would take place over a longer period, as required to complete the training. Six months applies only to redundancy. Those made redundant can transfer their apprenticeship to another employer. However, although a fishing apprenticeship is about going to sea and fishing, in my experience apprentices also spend time on the quay, learning how to look after their nets, selling their catch and learning how to grade their catch. It is not just about days at sea and seamanship but their workmanship with the fish that they catch and the things that they have to use. I hope that that is helpful; it certainly gave me the opportunity to get an answer as well.
The noble Baroness, Lady Sharp, asked about the numbers affected by redundancy. I am told that we do not collect data on this. Surveys tell us that less than 5 per cent of the total number of apprenticeship starts finish in that way. However, we are considering what measures to put in place to collect these data. I thank the noble Baroness for that question.
I come now to the noble Lord, Lord Young. I have a note here from an expert whom I know the noble Lord recalls from his days as a Minister, which says, “A written and, I expect, flamboyant response from John Hayes will follow. However, I will attempt to address some of your questions now”.
As to the “Panorama” programme, my honourable friend the Minister for Apprenticeships has commissioned a detailed investigation into the cases identified by “Panorama” and the National Apprenticeship Service will report in the coming weeks on its findings. We are committed to rooting out and eradicating poor quality wherever it is identified, continuing the work that the noble Lord, Lord Young, and his people did before.
As to the monitoring and review of these regulations, the National Apprenticeship Service works in partnership with sector skills councils and other sector bodies and keeps the need for exemptions under review. The regulations will be formally reviewed every 12 months.
We considered the World Championships with DCMS, but the thinking at the moment is that to include not formally recognised sports would be too open-ended. On balance, we have decided to restrict it to only Olympic, Paralympic and Commonwealth sports. I am sure that if the noble Lord, Lord Young, were to pursue this matter we would no doubt look at it again, if provoked.
Lord Young of Norwood Green
All I was trying to point out is that this year is a good example because the World Championships were definitely a preparatory stage for the Olympics. Indeed, selection for the Olympics often depended on a person’s performance in the World Championships.
All I am making a plea for—I am not expecting this to be a negotiating session and for the Minister to say, “Yes, that is perfectly okay”, because I understand that there will be cost implications—is that it should be recognised that the Olympics come every four years, people prepare for them and that ought to be taken into account. For these sporting excellence apprenticeships, it depends how the phrase about working towards competing in the Olympics is interpreted. Perhaps the Minister will take that aspect away.
It is nice to see a wise adviser, who I remember from my days, still actively assisting the Minister.
Baroness Wilcox
I am sure that he has noted that.
I thank everyone for the time they have given and the contributions they have made. If I have missed anything, obviously they will have picked it up and we will take it back. There is clearly consensus on the underlying principle that apprentices must be employed. These regulations do not undermine that principle but, rather, they acknowledge that there are only a limited number of circumstances where we will accept that apprentices are not employed in order to complete their apprenticeships. Setting out those circumstances clearly in these regulations can serve only to ensure that the vast majority of apprentices will benefit from employed status and will help stamp out the ambiguity that has been a feature of the programme in the past. I commend the regulations to the Committee.
House of Lords
Death of a Member: Baroness Ritchie of Brompton
The Lord Speaker (Baroness D'Souza)
My Lords, I regret to inform the House of the death yesterday of the noble Baroness, Lady Ritchie of Brompton. On behalf of the House, I extend our sincere condolences to the noble Baroness’s family and friends.
Roads: Private Investment
(12 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Kennedy of Southwark
To ask Her Majesty’s Government what lessons learned from the privatisation of British Rail they will apply to any plans for increased private investment in the United Kingdom’s motorway and trunk road network.
Earl Attlee
My Lords, we are considering a number of options for the future ownership and financing of the strategic road network, looking at a greater role for private funding to provide more investment. This feasibility study is considering a wide range of possibilities, and it will be taking account of the experiences of water, electricity, telecoms and gas as well as rail and other transport sectors.
Lord Kennedy of Southwark
That is a rather disappointing response from the noble Earl. I was hoping for “We’ve looked at it, it’s a stupid idea, and we’re not going to do it”. What words of comfort does the noble Earl have for the motorist, the small business and the taxpayer that they are not going to have additional costs to bear if proposals to introduce further private capital to our road system come to fruition?
Earl Attlee
My Lords, the first comfort that I will give is that the feasibility study will consider the role that tolling can play, but it will not consider tolling existing capacity or road pricing. The purpose of the feasibility study is to look at how we can better run the strategic road network into the future so that investors can make long-term decisions rather than the short cycles that we are experiencing at the moment.
Lord Mawhinney
My Lords, will my noble friend learn two lessons from the privately designed, built, financed and operated stretch of the A1 between Alconbury and Yaxley? The first is that without that privately funded scheme—which I declare to the House I authorised—motorists on the A1 would still be bogged down in horrendous traffic jams with very little likelihood that that road would have been financed directly from the public purse. The second lesson that I hope he will learn is that when cost negotiations are taking place with the private sector they should be done with maximum vigour on behalf of the taxpayer.
Earl Attlee
My Lords, I regularly used to use the bit of road that my noble friend refers to. Particularly impressive was the rate at which the construction project went ahead. It had all the signs of an efficient process.
Baroness Scott of Needham Market
My Lords, given that the objective of government is to encourage the investment of private finance in the transport sector, do the alternatives include the slightly less risky idea of creating a fund into which private investors can put money to invest in a portfolio of transport projects both new and existing?
Earl Attlee
My Lords, I am not quite sure about the exact proposal that my noble friend puts forward, but we are looking at all options and I will be grateful for any input from noble Lords into possible models.
Lord Davies of Oldham
My Lords, it may well be the case that the noble Lord, Lord Mawhinney, authorised an effective improvement to the roads, but I am concerned that the Minister effectively told the House that pretty well everything could be covered by this initiative. For example, would it be possible that there would be designated lanes for those who paid a road toll, so that we had the equivalent of first-class passengers on rail operating on our roads? Or would it mean that a mere resurfacing of the road, or just the addition of a junction, would effectively mean that the road had been upgraded and therefore could be subject to one of these initiatives?
Earl Attlee
My Lords, the noble Lord has made just the same points as I made to my officials. The key question is: is it additional capacity or is it merely an enhancement? If it is additional capacity, we would consider tolling it, but if it was just an enhancement, perhaps that would not justify tolling. The noble Lord puts his finger on an extremely important point.
Baroness Gardner of Parkes
Can the Minister tell me on this Anzac day whether he knows that Sydney Harbour Bridge is a toll road? It has paid for itself probably thousands of times over, but as far as I know there is still a small toll payable. Does he not think that it is a great advantage for people to have a road that otherwise they would not have, but that the cost should not be so high that it creates a major problem, particularly for local people in meeting the toll cost?
Lord Anderson of Swansea
My Lords, the Sydney Harbour Bridge may well be a successful toll bridge. The Severn Bridge is a successful bridge but it is causing a major impediment to investment in Wales. Given the other problems we face, could that be looked at afresh?
Earl Attlee
My Lords, as the Question is linked to railways, I can point out that we are electrifying to Wales.
Spencer Perceval
(12 years ago)
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Lord Blair of Boughton
To ask Her Majesty’s Government whether they intend to mark the 200th anniversary of the assassination of Spencer Perceval, Prime Minister and parliamentary supporter of the abolition of slavery, on 11 May 2012.
Lord Wallace of Saltaire
My Lords, the National Archives holds a number of records relating to the assassination of Spencer Perceval. To mark the 200th anniversary, a selection of these will be digitised and made available online through the National Archives website. The full range of records held by the National Archives about Spencer Perceval can be viewed in the reading room at Kew. The noble Lord might also like to know that a number of events are planned by the House authorities to mark the anniversary. These were set out recently in response to a Written Question by the Chairman of Committees.
Lord Blair of Boughton
I am most grateful to the Minister for that Answer. I confess to being somewhat surprised that there is no memorial to such a grave and unique event within the precincts of Parliament. Perhaps, before I get to my supplementary question, I may beg the indulgence of the House for a momentary reflection on this man and his relevance to our times. Above all, he was the House of Commons end of Wilberforce’s great campaign for legislation to abolish slavery. Will the Government use the anniversary of Perceval’s death to consider whether enough is being done in this country to combat the pernicious and degrading trafficking of women and girls for sexual purposes by organised crime, of which we have seen appalling examples in recent years in Lancashire and Yorkshire and, only a few weeks ago, allegedly in Oxford?
Lord Wallace of Saltaire
My Lords, there is a rather large monument in Westminster Abbey to Spencer Perceval. On the question of whether there should be one here, since I also have connections to Westminster Abbey, I am not enormously in favour of adding more political statues within the Abbey and I am not sure how many more memorials we necessarily want around here—that is a personal view, not the Government’s view. On the trafficking of women, the Government issued their human trafficking strategy last year as a White Paper. We are carrying further the excellent work already undertaken by our predecessors on this very serious problem. It is not just a matter of the trafficking of women; a quarter of those who were trafficked in the last two years were children. The trafficking of children to this country is also a very serious problem.
The Lord Bishop of Chichester
My Lords, does the Minister agree that the continuation of slavery and quasi-slavery in very many parts of the world 200 years after the so-called abolition of slavery continues to be a scandal, and could he outline what Her Majesty’s Government intend to do in order to continually influence our partners in the international community to bring this to a speedy end?
Lord Wallace of Saltaire
My Lords, sadly, slavery has been with us from time immemorial. Governments have worked for more than 200 years now to get rid of slavery, but we are conscious that we do find instances, even within this country, where effective slavery is imposed, even occasionally on men. We are therefore working within and outside Britain through the United Nations, the Council of Europe convention and EU directives, and closely with our partners across the Channel, to see what we can do to operate against this worldwide problem.
Lord Walpole
My Lords, does the Minister know that I am directly descended from Spencer Perceval’s sister, and that Henry Bellingham, the Member of Parliament for King’s Lynn and now in the Foreign Office, is directly descended from his assassin? Mr Bellingham and I do speak to each other.
Lord Wallace of Saltaire
My Lords, I should like to know which sister he is descended from, because my understanding is that he had at least six sisters and at least six brothers. I should therefore explain that he was one of the many sons of the Earl of Egmont, so he was not entirely a commoner.
Lord Lexden
My Lords, would my noble friend think of reminding Mr Henry Bellingham that he has already experienced the Perceval family’s taste for revenge, having been deprived of his Commons seat at the 1997 election by a direct descendant of the assassinated Prime Minister?
Lord Wallace of Saltaire
I have to admit that that was not in my brief. Perhaps I might add that Spencer Perceval was, like Wilberforce, an evangelical, and having read a little about him, I have to say that he was something of a prig. Included within his entry in the Dictionary of National Biography is the fact that in 1800 he wrote a pamphlet on Biblical prophecy in which he referred to the French Revolution as,
“a divine instrument destined to destroy popish superstitions”,
and identified Napoleon Bonaparte as the woman in Revelation, chapter 17,
“who [sits] upon a … beast … the mother of harlots … drunken with the blood of the saints”.
Lord West of Spithead
My Lords, does the Minister agree that a suitable memorial to the 23,000 Royal Navy sailors who died stopping the slave trade might be more warships for the Royal Navy?
Lord Wallace of Saltaire
I note that the noble Lord makes a very strong point, which I have no doubt he will make again on a number of occasions.
Baroness Benjamin
My Lords, if the ghost of Spencer Perceval was to pass through this Chamber today, surely the question he would ask is, “Why, 200 years after my assassination, are not just slavery but discrimination and racism so rampant, and what is being done to eradicate them from society?” In honour of Spencer Perceval, therefore, will my noble friend tell the House how determined the Government are to completely wipe out this evil practice that affects certain parts of our society today who feel excluded?
Lord Wallace of Saltaire
My Lords, it might be beyond the capacity of government in an open society completely to eradicate all forms of prejudice. The Government are actively aware of the problems of the trafficking of women and children. Going around Yorkshire, I am aware that one of the things that the police come across, for example, is Vietnamese children trafficked into Britain to tend illegal cannabis factories. The trafficking of Nigerian children is also a problem. We are working closely with the authorities in a number of other countries. The Government and the relevant agencies have close liaison with their Chinese opposite numbers to combat Chinese people-smuggling. We are working as actively as we can.
Lord Foulkes of Cumnock
As far as I know, I am not descended either from Spencer Perceval or, thankfully, his assassin. On the more serious matter of anniversaries, I congratulate the Government on agreeing to support the 800th anniversary of the signing of the Magna Carta in 2015. Will they seriously also consider supporting the centenary of the start of the Great War in 2014 rather than the Battle of Bannockburn, which some people north of the border want to celebrate? I believe that it would be better to celebrate what Scots soldiers did to bring freedom to the whole of the United Kingdom.
Lord Wallace of Saltaire
My Lords, the question of which anniversaries we celebrate, particularly battles, is very sensitive. If any Members of this House find themselves in the Palace of Versailles, I recommend that they visit the Galerie des Batailles. It is a wonderful wing above the Congress room in which the two Chambers of the French Parliament met that celebrates French victories between, I think, the seventh century and 1813. It contains information on a large number of battles about which we were never told and on a very few battles about which we were told.
Baroness Butler-Sloss
My Lords, I congratulate the Government on their White Paper on human trafficking. However, is the Minister aware that a large number of men are trafficked both by debt bondage and by labour exploitation? They include not only those coming into this country but those being taken out of this country, particularly to Sweden.
Lord Wallace of Saltaire
I am aware that a number of men are trafficked. The figures I have suggest that the number is considerably smaller than that for women or children. I will check and will write to the noble and learned Baroness if she thinks that my figures are wrong.
Health and Social Care Act 2012
(12 years ago)
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Baroness Deech
To ask Her Majesty’s Government whether they have any plans for post-legislative scrutiny of the Health and Social Care Act 2012.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, all government Bills receive post-legislative scrutiny within five years of receiving Royal Assent. However, I can reaffirm the commitment that I made at the Second Reading and Committee stages of the passage of the Health and Social Care Bill. Although five years would normally elapse prior to the Department of Health undertaking post-legislative scrutiny of a Bill, we will bring that forward to three years for the Health and Social Care Act 2012.
Baroness Deech
My Lords, I am grateful to the Minister for his reply. However, does he agree that the reputation of this House rests largely on its ability to scrutinise, and that there is still insufficient capacity for this House, not a department, to carry out post-legislative scrutiny? Does he further agree that the Health and Social Care Act is very different in the end from what was proposed? It aroused huge concern and must be a number one candidate for monitoring, not necessarily by the department but by this House to ensure the appearance of total objectivity.
Earl Howe
My Lords, I am in tune with the sentiments that the noble Baroness has expressed. I am sure that she will be in no doubt that my department will be monitoring the implementation of the Act very closely. Of course Ministers will continue to provide information to Parliament—for example in response to Questions and in Select Committees and, indeed, in debates if noble Lords put down Motions. I am sure that we will provide a lot of information both on the implementation of the Act and on health and social care more widely in the months and years ahead.
Baroness McIntosh of Hudnall
I wonder if the noble Earl can explain a remark that he made early in his original Answer to the noble Baroness, Lady Deech, when he said that all government Bills are subject to post-legislative scrutiny within five years. I am sure that that is true in some way, but not in a way that I personally understand, and I am sure that it is not entirely clear to the House in what way such scrutiny is carried out. It certainly is not what is commonly meant by post-legislative scrutiny—that all Bills should be subject to it.
Earl Howe
My Lords, my understanding is that formal post-legislative scrutiny is a relatively new invention. It came in under the previous Administration in, I think, 2008. So until now there have been very few if any—there may have been one or two, a handful—formal post-legislative scrutiny processes. But we will, of course, see this as a more regular feature going forward.
Lord Mawhinney
My Lords, my noble friend has just reconfirmed that post-legislative scrutiny will take place in three years—that puts it in 2015. Can he tell your Lordships’ House whether the Government have a policy to have that scrutiny before or after the general election which is alleged to be taking place that year?
Lord Campbell-Savours
By whom is this post-legislative scrutiny on a five-year basis being conducted?
Earl Howe
My Lords, it will be conducted by the Health Select Committee of another place. The process is that the Department of Health will submit a memorandum to the Health Select Committee and that memorandum will include a preliminary assessment of how the Act has worked out in practice relative to the objectives and benchmarks identified during the passage of the Bill.
Lord Patel
My Lords, the noble Earl said in response to the Question of the noble Baroness, Lady Deech, that in the interim period the department will be undertaking scrutiny of the work of the bodies set up. Can he tell the House how the results of that scrutiny will be reported to Parliament?
Earl Howe
My Lords, the performance of the health service will be very visible as we go along: we will have the NHS Commissioning Board producing its annual report; each clinical commissioning group will be publishing an annual report; directors of public health must produce an annual report; the Secretary of State has to report annually on the overall performance of the health service; and HealthWatch England has to publish an annual report. So there will be no shortage of transparency along the way.
Baroness Jolly
My Lords, as for the Health and Social Care Act, scrutiny was, of course, done by this House. However, there is still more to be done, because there is quite a lot of secondary legislation still to come down the track. Can the Minister give the House some indication of how many pieces of secondary legislation are still to come, when they might be introduced and what areas they will cover?
Earl Howe
My Lords, I cannot yet give my noble friend a precise number, but before the House breaks up in the summer we hope to lay a number of statutory instruments. Some will come into force this October, others are designed to come into force next April, but we will of course be consulting, where appropriate, on all of those and I shall be happy to give the House further information when I have it.
Baroness Masham of Ilton
My Lords, does the Minister agree that HealthWatch has been left in limbo? Would he agree to a fast-track legislative scrutiny?
Earl Howe
I do not agree that HealthWatch has been left in limbo; in fact, only this morning I was attending a round table of pathfinder local healthwatches and witnessing for myself the tremendous energy and enthusiasm that they were devoting to HealthWatch. So the short answer to the noble Baroness is no, I think the process as regards HealthWatch is very much on track.
Baroness Thornton
My Lords, my question follows on very nicely from that of the noble Baroness, Lady Masham, because “No decision about me without me” was the Government’s mantra when they first introduced the White Paper and the Bill. I would like to know not only how soon that mantra might become a reality but also, in terms of post-legislative scrutiny, how the Minister thinks that post-legislative scrutiny might be carried out to allow independent scrutiny given that the two bodies that will essentially control the funding for the patients’ voice, HealthWatch, are the Care Quality Commission and local government—in other words, government bodies?
Earl Howe
My Lords, we should not forget the capacity of Parliament, particularly the Health Select Committee in another place, to conduct scrutiny whenever it chooses. Indeed, your Lordships' House could if it wished configure itself in a way to conduct scrutiny of any aspect of the Health and Social Care Act.
Police: Racism
(12 years ago)
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Lord Sheikh
To ask Her Majesty’s Government what recent assessment they have made of the level of racism within British police forces and how this can best be addressed.
The Minister of State, Home Office (Lord Henley)
My Lords, the Government take allegations of police racism very seriously. Any such allegations must be investigated thoroughly and, when and where required, perpetrators must be dealt with robustly. I have confidence in the ability of leaders of the police service to deal with this issue.
Lord Sheikh
My Lords, I thank the Minister for that reply. What assurance can my noble friend give your Lordships' House that police officers and staff are receiving appropriate training in community and race relations following on from recent events? Academic research has found that there is still a low level of diversity in senior and specialist ranks of the police forces. What more can be done to encourage police forces to recruit, retain and promote police officers from a diverse background?
Lord Henley
My Lords, taking the noble Lord’s first question first, he is right to talk about the importance of appropriate training, which all police forces are doing up and down the country. We will encourage them to continue doing so. As for his second question about low levels of diversity in the senior and specialist ranks of the police force, he is right to emphasise that point. It is important that we improve diversity at all levels and that police forces remain representative of the communities that they serve so that they can better understand their needs and ensure that the services they provide are appropriate. That is something that the leadership of police forces up and down the country is ensuring is done.
Lord Mackenzie of Framwellgate
My Lords, in fighting racism, which the whole House will support, does the Minister agree that the routine use of the race card is not helpful? Is he aware that when I made a complaint to the commissioner about Commander Ali Dizaei—they were serious allegations—who subsequently went to prison, a complaint was lodged against me with the Clerk to this House, alleging racism and abuse of authority? That complaint was written on behalf of the National Black Police Association by the Society of Black Lawyers. Does he agree that those organisations that seek to represent their members should check the facts far more clearly when making serious allegations that can affect people’s reputation and even livelihoods, and that it is not helping the fight against racism?
Lord Henley
The noble Lord makes a very important point about the problems that we are dealing with. What I want to get over is that we do not believe that the police are institutionally racist. It is very encouraging that in the case of the recent allegations the police officers themselves reported that issue, and it is evidence of the fact that there is no institutional racism in the police force. Obviously, cases will nevertheless come to light from time to time, and they must be dealt with in the most appropriate manner. That is why we are looking at the leadership of all police forces, and why we want ACPO and the Met to do their bit and the Mayor of London to do his bit—and in future we want police commissioners to do their bit—to make sure that racism is tackled at every possible level.
Lord Dear
My Lords, I am sure that we all deplore racism and discrimination wherever it occurs, particularly in organisations as pivotal as the police service, which can intervene and interfere in everyday life. I have two questions for the Minister, both concerning leadership, which have already been mentioned tangentially. Will he agree with me on the Floor of the House that in any organisation, and particularly in the police, leadership is absolutely key in influencing the culture of the service—its standards, ethics and so on? If he does agree, as I am sure he will, will he then go further and agree with me that part two of the recently published report from Mr Tom Winsor presents a golden and once-in-a-lifetime opportunity to seize the issue of police recruitment of top-level people and their advancement into rank at an early stage, that it will remain at the top of the Home Office agenda, and that there is a real will to continue to pursue that to its final conclusion?
Lord Henley
My Lords, I am grateful to the noble Lord, Lord Dear, for emphasising the importance with which we see the role of leadership within the police force in dealing with these matters and getting the culture right. I hope that will continue. As regards his second point about Winsor, I agree with him on that and we will pursue it. However, I believe that a degree more consultation is needed, and we will certainly do that in due course.
Baroness Hussein-Ece
My Lords, is not the failure to deal with incidents of racism, particularly in the Metropolitan Police, a stain on our tolerant civilised society? Is it not further in stark contrast to the case of Liam Stacey, the student who was jailed for 56 days for posting offensive comments on Twitter after the collapse of the footballer Fabrice Muamba? What urgent action is being taken to restore trust between the police and the communities, and to stamp out the evil scourge of racism that still exists in certain sections of the force?
Lord Henley
My Lords, I am afraid that I do not agree with my noble friend that there is a failure on this occasion. What has happened is that the police themselves have recognised that there is a problem. It was the police officers themselves who raised these allegations and are dealing with them. That is the encouraging sign, indicating that there is not the institutional racism that has been alleged existed in the Met in the past. I am very grateful therefore that that is happening and that those matters are being dealt with.
Lord Hunt of Kings Heath
My Lords, on the question of leadership I take this opportunity to commend the police commissioner on his robust action in relation to the matter to which the Minister has just referred. Can I, however, take the noble Lord back to the Statement that he gave yesterday? He told us that the Home Secretary is considering whether an independent inquiry should be established into allegations of corruption in relation to the original investigation into the murder of Stephen Lawrence. If the Home Secretary agrees to set up an independent inquiry, will the Minister consider passing on to her the suggestion that that inquiry might look at what progress has been made by the Metropolitan Police since the Macpherson report was published?
Lord Henley
My Lords, I echo the noble Lord’s opening remarks. As regards his other remarks about the Statement I made yesterday, I think he will remember that there was a general consensus in the House that this was a matter on which we needed to move relatively slowly. I can therefore say to him that things have not moved on much further in the 12 hours since I made that Statement. My right honourable friend the Home Secretary is therefore still considering what to do, and will go on considering those matters while the Met’s internal review continues. I will also make sure that she takes note of the comments that the noble Lord has made when she comes to make a final decision on that matter.
Sunday Trading (London Olympic Games and Paralympic Games) Bill [HL]
Lord De Mauley
That the Bill be committed to a Committee of the Whole House.
Lord Steel of Aikwood
My Lords, before we pass this Motion I want to ask a question of the Minister about how and which Bills are selected for expedited procedure and others not. I am particularly concerned because this Bill is due to go through all its stages in this House tomorrow, and all its stages in the other House on Monday. That is in stark contrast to what has happened to the Bill which we passed in this House unanimously, the House of Lords (Amendment) Bill, of which I was a sponsor, which was a very modest measure that would improve the workings of this House. I am increasingly annoyed that although that Bill was sent to the other place on 1 March, and despite all the representation that has been made, nothing has happened to it since.
My Bill does not need expedited procedure. It is such a small measure, purely internal to this House. It does not affect anybody in the outside world, or indeed the House of Commons. The current position is that it is due to be debated on Friday, thanks to my honourable friend the Member for Argyll and Bute, who has tabled it. But of course it has absolutely no chance of passing into law, despite the days that we spent on it in this House, unless the Leader of the House of Commons tables an expediting Motion tomorrow. That is what I am hoping the Minister will agree should be done. I remind the Minister that the Bill is purely internal to this House. It involves no public expenditure. It simply authorises the House authorities to do what the all-party committee under the noble Lord, Lord Hunt of Wirral, recommended, which was to draw up a retirement scheme. It enables the House authorities to consider withdrawing the Writ of Summons from those who without due cause do not turn up for six months or so. It also brings this House into line with the House of Commons on the ability to expel serious wrongdoers.
The reason for my mounting irritation on this matter is that I spoke to the Deputy Prime Minister about it at the start of the Easter Recess. He said he was going to speak to the Leader of the House of Commons. I have heard nothing since. I pay tribute to the Leader of the House here and the Leader of the Opposition, who have both made their representations on this matter.
I am asking the Minister to undertake today to convey to the Leader of the House of Commons that we want an expedited Motion tabled tomorrow to enable the Bill to go through. In doing so he could gently say to the Leader of the House of Lords that, if we do not get that, we might find a sudden outbreak of Sabbatarianism in this House. I have the Bill in my hand; it is capable of at least 300 amendments. That would make life rather difficult if he wants to get this Bill through. This may not be the right approach; I leave that to the Minister. However, do not underestimate my irritation that this matter has simply not been addressed properly. It is an insult to this House, which spent so long putting the Bill through to the House of Commons.
Lord De Mauley
My Lords, the House of Lords (Amendment) Bill which my noble friend introduced was passed by this House and sent to the House of Commons in March, as he says. My noble friend is quite right to point out that it contains a series of worthwhile measures which this House has shown it supports. However, the Bill is now in the hands of another place. It is a Private Member’s Bill, and will therefore be subject to the procedures which apply to Private Members’ Bills in another place. Having said that I will of course pass his comments to the Leader of the other place.
Parliament Square (Management) Bill [HL]
(12 years ago)
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Lord Martin of Springburn
My Lords, I have no intention of seeking to delay this piece of legislation, but I would like some assurances from the Minister. This is obviously a beautiful square, which was greatly enhanced by the cleaning up of the stonework at Westminster Abbey, and of the stonework and the creation of the visitors’ centre here at the Palace of Westminster. However, approximately 10 years ago, the Home Office promised and delivered a Bill through both Houses which stated that it would stop the permanent encampment of people like the late Mr Brian Haw in the square. He turned the square into an absolute eyesore and indeed a health hazard. All sorts of strange things happened at that place because of his permanent encampment. Every time that the police acted on the legislation that was introduced by the Home Office, a judge—and I make no criticism of the judges—duly instructed them to put Mr Haw’s dirty and unsightly equipment back on to the square, facing the House of Commons, where visitors from all over the world would turn up. It was a disgraceful situation.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, we are just passing my noble friend Lord Marlesford’s Bill, and it will then go to another place. However, I assure the noble Lord, Lord Martin of Springburn, that at the very highest level of our Government there is a great interest in what is happening in Parliament Square. There has been considerable improvement in recent months, but no stone is being left unturned—using legal means—to try to improve the situation. I hope that we can move on to whether the Bill do now pass.
Legal Aid, Sentencing and Punishment of Offenders Bill
(12 years ago)
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17:00 - Division on Motion B1 - Ayes: 238 / Noes: 238 - Motion B1 disagreed.
Lord McNally
That this House do not insist on its Amendment 1B to which the Commons have disagreed for their Reason 1C.
1C Because it would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this reason may be deemed sufficient.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, Motion A is the Commons response to the amendment by the noble Lord, Lord Pannick. That amendment has prompted a great deal of high quality, thoughtful and principled debate, and I am extremely grateful to the noble Lord and other legal luminaries in this House who have given us the benefit of their expertise in exploring its effects. Although we have not been able to agree on precisely what those effects are, I thank the noble Lord for his clear argument and his commitment to the important constitutional principle of access to justice. I fully understand his motives in doing so. However, the House of Commons has given us its view on the amendment, and I ask the House to support the position that it has taken. I beg to move.
Lord Pannick
My Lords, I am very disappointed by the Government’s response to the amendment on the purpose of legal aid, approved by this House on Monday. Noble Lords will know that this amendment had its origins in a recommendation of your Lordships’ Constitution Committee, of which I am a member. The recommendation was strongly supported by many noble Lords at Second Reading and in Committee. The amendment was approved in this House on Report by a majority of 45 votes. After the other place disapproved of the amendment, this House voted again on Monday night, and your Lordships approved an amendment in similar terms, this time by a majority of 15 votes.
At no stage during this parliamentary process has the Minister or anyone else on behalf of the Government made any proposal, publicly or privately, for meeting the concerns of this House, whether by a revision of the wording of the amendments approved in this House or in any other respect. That is despite what the Minister kindly described as the very high quality debates that we have had in this place.
In my view, to ignore the views of this House in this way by bringing forward no proposal whatever to meet the concerns expressed here is, at the very lowest, most regrettable. It is all the more regrettable when the issue is of constitutional concern. I hope that these views may be shared, even by noble Lords who did not support the substance of this amendment.
The sorry state of this saga is exacerbated by the application of financial privilege to this amendment, even though it expressly stated that the allocation of financial resources was a matter for the Lord Chancellor’s discretion. This raises issues of considerable concern, which I hope will be shared on all sides of the House. Of course I recognise that financial privilege is not a matter for the Government, but I have had no indication at all that the Government made any representations in support of my contention, shared by many other noble Lords, that it would be quite inappropriate to apply financial privilege to an amendment that expressly stated that financial resources were a matter for the discretion of the Lord Chancellor.
Notwithstanding these matters, I have, with regret, come to the conclusion that I can take this amendment no further. Noble Lords have asked the other place to think again and it has done so. Although I disagree with the result, I do not think it appropriate to invite the House to press the matter further. I should add that if I were a Member of a House of which 80 per cent of Members were elected, I would certainly persist on this matter. Furthermore, given the very limited time made available in the other place for consideration of the amendments that we passed in this House, and given the general absence of scrutiny of this legislation in the other place, I suggest that it is not the procedures of this House that are urgently in need of reform.
I hope I will be permitted to make one other observation; I do so despite the genuine respect I have for the Minister. The unsatisfactory manner in which the Government have treated this amendment is, I regret, typical of the unsatisfactory manner in which the Government have proceeded on this Bill generally. The Government were defeated on this Bill on 11 occasions on Report and three times again last Monday. So large a volume of defeats occurred because the Government adopted inflexible attitudes and lost the arguments on their merits. Part 1 of the Bill has been made marginally better by the amendments, which are the product of the considerable work done on all sides of this House. The Bill would have been marginally better if this amendment had been accepted, but this remains a bad Bill and there remains in particular a bad Part 1 in it on legal aid.
The Government’s general inflexibility on the Bill, as with Amendment 1 in particular, has involved a failure adequately to assess the impact of the provisions before their implementation, a refusal to take on board the fact that many of the financial savings at which Part 1 is aimed are illusory because the denial of access to legal services will result in other financial costs to the state for disadvantaged persons who will be denied the benefits to which they are entitled, and because of a refusal to recognise that the limits on the scope of legal aid imposed by Part 1 will hit hardest the weakest and most impoverished sections of our society, often on complex questions of law such as are raised by immigration law.
The Government’s treatment of my Amendment 1 is, I regret, consistent with this inflexibility and narrow perspective. I am sorry to say that the product of the Minister’s hard work and the process followed by the Government on the Bill do not reflect well on this Government’s reputation. They have damaged access to justice, a fundamental constitutional principle, as this amendment sought to recognise. The Minister has repeatedly emphasised in this House that the Government have accepted amendments during the passage of the Bill, but those amendments have mainly been on matters that should never have been excluded from the scope of legal aid in the first place.
I pay tribute to the noble Lords, Lord Bach and Lord Beecham, for their tireless and eloquent work in exposing the defects in Part 1. I thank them, the noble and learned Lord, Lord Woolf, and the noble Lords, Lord Faulks and Lord Hart of Chilton, for adding their names to the amendment. I thank all other noble Lords who supported the amendment during the passage of the Bill.
Lord Howarth of Newport
My Lords, the amendment moved by the noble Lord, Lord Pannick, on Monday, and the sense of it being approved twice in your Lordships’ House, sought to enshrine in Part 1 of the Bill access to justice as the objective of the Bill. Such a statement of principle was made in the Legal Aid and Advice Act 1949 and has been reaffirmed in every Act of successive Governments, including Conservative Governments, dealing with legal aid. When the Labour Government introduced the Access to Justice Bill in 1998, it included Clause 4(1), which instructs the Lord Chancellor to promote,
“the availability to individuals of services of the descriptions specified … and, in particular, for securing (within the resources made available, and priorities set, in accordance with this Part) that individuals have access to services that effectively meet their needs”.
At that time, the Liberal Democrats and Conservatives, in opposition, wanted to place further duties on the Lord Chancellor. The noble Lord, Lord Goodhart, speaking from the Front Bench on behalf of the Liberal Democrats, said:
“What needs to be stated at the outset is the reason for providing the funding”.—[Official Report, 19/1/99; col. 480.]
It would be helpful if the Minister, the noble Lord, Lord McNally, speaking as a Liberal Democrat, would explain to us why the Liberals have now changed their tune.
Lord Howarth of Newport
If I may be allowed to finish my sentence, I would be grateful if the Minister would be willing to help us understand why the Government felt it appropriate to make that claim. As I have now finished my sentence, it is with pleasure that I give way to the noble Lord, Lord Thomas.
Lord Thomas of Gresford
The noble Lord suggested that the Liberal Democrats have changed their tune. The noble Lord will recall that in Committee, on Report and on Monday I said that this amendment meant nothing and added nothing to the Bill. I was supported by my noble friend Lord Lester, who said it was just water.
Lord Howarth of Newport
That may be the view of the noble Lord and his noble friend. It is not the view of the noble Lord, Lord Pannick, and those of us who supported him on two occasions in inviting the other place to think again about this matter.
Baroness Butler-Sloss
My Lords, I strongly support the noble Lord, Lord Pannick. It is manifestly absurd—to me, at least, and it may be to other Members of this House—that this particular amendment should be treated as having anything to do with financial privilege. I have always been very hesitant to vote against the Government at the ping-pong stage, as I have always thought that they should get their business through. I voted with the noble Lord, Lord Pannick, on Monday because of the financial privilege point, and for that reason I say today that, whatever else has been said, I find it inconceivable that the Minister in the other place should again have called it financial privilege.
Lord Mackay of Clashfern
Perhaps it is worth pointing out that when this amendment was called, the Speaker of the House of Commons intimated that financial privilege was involved in the amendment. The reason for that is not explained as part of House of Commons procedure. Your Lordships know that I have had some difficulty in the past with references to this feature in relation to other Bills. The fact is that it is not for the Government, at the beginning, to mention this point. It is taken by the Speaker on behalf of Parliament and on behalf of the House of Commons. I have no doubt that, as Speaker Martin told us the last time, he does so on advice from the Clerk of the House of Commons. The Government then proceed from there. They could, if they wished, ask the House of Commons to support the amendment, notwithstanding that it involved financial privilege, but the basic ruling that financial privilege is involved seems to come from the Clerks of the House of Commons. I confess that their way of dealing with the matter is not something that I fully understand.
Lord Woolf
Before the noble and learned Lord sits down, perhaps he could assist me with regard to the question of financial privilege. In view of what he just said about the Government’s ability to invite the House of Commons to consider the amendment notwithstanding the point of financial privilege, does he accept that the Government could also have taken the action of saying, “We do not accept the amendment for good reasons”—which would be identified—“and, in those circumstances, we ask the House to indicate, in view of what has been said in this place, what its view is of those matters”? Financial privilege has no substance in fact. As all lawyers know, if the facts are totally inconsistent with the conclusion that is reached, that is wrong as a matter of law. An appellate court will always interfere with a fact-finding tribunal’s decision if it is wrong in law in that sense.
Lord Woolf
It is. Perhaps I may make that clear to the noble and learned Lord, whose views I respect so much. I therefore request him to assist.
Lord Mackay of Clashfern
My Lords, the practice of the House of Commons, as I understand it, is that when an amendment is called that involves financial privilege—in the opinion of the Speaker acting on the advice of the Clerks—this is intimated; and my understanding is that the Government would not be able to challenge that at all, just as we, as a matter of practice, do not challenge it either, although sometimes there have been occasions when some have felt there was a possible reason for challenge. However, as a matter of practice, we do not do that. It is open to the Government—notwithstanding the fact that financial privilege is involved—to invite the House of Commons to agree to an amendment that involves financial privilege. Then the Speaker has to certify in the Journal that a matter involving financial privilege has been passed by the House of Commons. The reason for that is that the House of Commons requires, generally speaking, a money resolution in respect of any expenditure involved in a Bill; and if a Bill involves expenditure, a money resolution has to be passed at some stage during the course of the Bill.
In this procedure, there is no room for a money resolution as such, because that happens earlier, but the signification made by the Speaker—in that situation where the House of Commons has decided, notwithstanding that financial privilege is involved, to agree to the amendment, in whole or in part—goes into the Journal in order to replace the need for a money resolution, and it of course authorises the Treasury to disperse money on the basis of that resolution of Parliament. That has nothing to do with the question of whether or not the amendment should be agreed, but, so far as concerns this House, if the resolution is based on financial privilege, the understanding has been—notwithstanding how difficult it might be on occasion for some of us to understand exactly how it arises—that we do not dispute that proposition.
Lord Howarth of Newport
Perhaps I may put it to the noble and learned Lord that while the exposition he has just given seems to be entirely correct, what is interesting—and this may not be a matter on which he personally would wish to comment, although I hope the Minister will do so—is why the Minister chose to emphasise at the outset of his speech that the amendment was subject to financial privilege. Of course it was. The Speaker made it clear to the House that that was the case. However, the Government could have asked the House to waive financial privilege and chose not to do so. That seems curious in an instance where nobody has been able to identify the expenditure implications of the particular resolution. That is what is perplexing us. Some of us have a larger worry about the practice that the Government have adopted of brandishing financial privilege at the outset of speeches in which they seek to refute or reject the advice of the House, because it tends to close down the argument. It leaves us wondering what the Government consider the useful role of this House to be.
Lord Clinton-Davis
Before it is too late, perhaps I may pay tribute to the noble Lord, Lord Pannick, to whom this House owes a tremendous debt. Throughout, he has argued passionately in favour of something he really believes in: legal aid. It is important that the basic principles that were laid down so long ago are observed. Like him, I believe passionately in the purposes of legal aid. Many people outside this House are indebted to what has been achieved.
Lord Bach
My Lords, I can be very brief. The Official Opposition share the disappointment of the noble Lord, Lord Pannick, in the Government’s response to his amendment. The Government have approached that amendment—a modest and sensible one by any standards—in a most unsatisfactory and unconvincing manner. We certainly agree with what the noble Lord had to say about financial privilege in the context of his amendment. There will be many inside and outside Parliament who will wonder for some time to come why the Government were not able to accept his amendment. We had no satisfactory reason given at any stage, and people will fear the worst as far as concerns this Government’s intentions in relation to legal aid.
I, too, would like to pay a compliment to the noble Lord, Lord Pannick, as my noble friend Lord Clinton-Davis did. He is a model of the way in which a noble Lord can assist this House when dealing with difficult and complicated legislation, and he does it from a point of view that always has justice as its base. The noble Lord made some strong strictures on the Bill and I agreed with every word he said. I will be less polite than he was. There are parts of Part 1 of the Bill—the bits that destroy social welfare law—that are not just bad but actually wicked; and I choose that word with great care. They are wicked because they set this country back from the position it was in.
The noble and learned Lord, Lord Mackay of Clashfern, has a great reputation for making sure that the system of social welfare law worked well and to the benefit of the poorest in our society. I very much regret that the Government have changed all that for no savings at all. Even if the savings were great, they would not be worth it—but there will be no savings at all. Why do I say “wicked”? Because I think it makes this country more uncivilised and it diminishes something that is very precious to all Members of this House: our legal system. As such, it diminishes our country, too.
Lord McNally
We have heard that speech several times over the past few months. I repeat that the big betrayal of the poorest in our society would be to lose control of our economy. Sometimes noble Lords opposite take the biscuit in the way they put their arguments. The noble Lords, Lord Pannick and Lord Clinton-Davis, do not have a monopoly of passion in this area. The noble Lord, Lord Howarth, has used his argument before. We have consciously changed the direction of the 1949 and subsequent Bills that were open-ended in their commitment and now have one that is specific in its commitment. That is at the heart of our resistance to the Pannick amendment. It is to mislead the House to argue that the Government have not made clear from the start the purpose of the Bill and of the Lord Chancellor. I tremble to take on a former Lord Chief Justice or a most distinguished QC, but Part 2 states:
“The Lord Chancellor may make such arrangements as the Lord Chancellor considers appropriate for the purpose of carrying out the Lord Chancellor’s function under this Part”.
It is all laid out there in Part 2. To argue that it is not will mean that we will go round in circles.
I have never used the financial privilege argument. As is well known and as we have heard from some very experienced parliamentarians, if an amendment infringes privilege, that is the only reason that will be given. If noble Lords want a major reconstruction of our constitution going back 300 years, that is all very well; but, as I said, the financial privilege of the House of Commons is not something to be lightly dealt with. Our opposition to the Pannick amendment from the beginning was that it was flawed, providing as it does a duty that is unclear in both application and effect, as well as displacing a duty that is precise, unambiguous and inherently tied to the Bill and the legally aided services available under its auspices.
I therefore ask the House to support the House of Commons in rejecting the amendment—I understand that the noble Lord, Lord Pannick, is not going to press it. This is really the time to ask the House to agree with the House of Commons.
Lord McNally
That this House do not insist on its Amendments 2B and 196B to which the Commons have disagreed for their Reason 196C.
196C Because it is appropriate for provision about evidence of abuse for the purposes of an application for civil legal services described in paragraph 10 or 11 of Part 1 of Schedule 1 to be made by regulations.
Lord McNally
My Lords, we now move to Motion B, which contains amendments in relation to domestic violence. The noble and learned Baroness, Lady Scotland, told this House on Monday that we had a choice to make. Let me reassure this House that the Government have made a clear choice in favour of victims. The Lord Chancellor made this very clear last week when he stated:
“It was never in doubt that there would be legal aid for the protection of victims of domestic violence. Domestic violence is an issue that this Government, like any Government, including the previous one, take extremely seriously”.—[Official Report, Commons, 17/4/12; col. 219.]
The debate on the Bill that we have had over the past few months has not always reflected the extent of the Government’s clear commitment to victims, so I will give some examples.
The Home Office will provide more than £28 million of stable funding until 2015 for specialist local domestic and sexual violence support services, and will provide £900,000 to support national domestic violence helplines and the stalking helpline. The Ministry of Justice will contribute towards the funding of independent advisers attached to the specialist domestic violence courts a total of more than £9 million up to the end of 2012-13. We will also allocate nearly £3 million a year for the next three years to 65 rape crisis centres and are working with the voluntary sector to develop the first phase of new rape support centres where there are gaps in provision. Domestic violence protection orders are being piloted in three police force areas. We have also announced a one-year pilot that will take place from this summer to test out a domestic violence disclosure scheme known as Clare’s law.
We have always been clear that where there is a need for a protective order to prevent victims coming to further harm, legal aid will be available regardless of means. Separately, legal aid will be available for victims of domestic violence for the secondary issue of private family law proceedings—we have always made clear that this should be the case. The issue in hand is how best to apply this principle.
I will remind the House how far the Government have moved. The evidence list has been very significantly lengthened to include protective injunctions, criminal conviction or ongoing proceedings, undertakings, police cautions, evidence of admission to a refuge, evidence from social services and GPs, referral to a multi-agency risk assessment conference and a finding of fact by the courts. We have doubled the time limit on evidence to two years, other than for convictions, where the only limit will be if the conviction is spent. This is a wide-ranging evidence set, which we are confident will meet the needs of victims in these cases.
I remind the House that our package of proposals contains two very important safeguards that will provide genuine victims with a route into legal aid even if they do not have the headline forms of evidence, the need for which may not have been fully appreciated. One is a finding of fact by the court. This is not part of the UK Border Agency list, which is often cited when assessing proposals, but it is extremely important because it means that where someone does not have the evidence we have stipulated but the courts determine that domestic violence is a relevant factor, perhaps on the basis of evidence from friends or family or a domestic violence support organisation, legal aid will be triggered. As such, even in older instances of domestic violence that go beyond the two-year limit, funding will still be available where a court has determined that it is still pertinent to the case. Of course, there remains the more generic safeguard of the exceptional funding scheme.
I submit that this package represents significant movement by the Government. I remind the House that we have now accepted the ACPO definition of domestic violence in full. We have listened and we have learnt from what noble Lords, Members of the House of Commons, and others said about our proposals. We absolutely agree that victims of domestic violence should receive legal aid. However, other than in protection cases, there needs to be evidence, and this should be covered in regulations because of the level of detail that will be required. This package is now worthy of support. The House of Commons gave its support to this, and now should we. I beg to move.
Motion B1 (as an amendment to Motion B)
Baroness Scotland of Asthal
Leave out from “House” to end and insert “do insist on its Amendments 2B and 196B”.
Baroness Scotland of Asthal
My Lords, I listened with very great care to what the Minister said in support of his Motion. I listened to see whether there had been significant movement in the Government’s understanding of the damage that the restriction that remains in relation to domestic violence provision would do to victims, to their children and to the men engaged in this sort of behaviour. I have to say that I listened with disappointment.
I do not hesitate to adopt all the comments made by the noble Lord, Lord Pannick, on the Government’s approach to Part 1 of the Bill. I reiterate immediately my appreciation for the fact that the Government have at last moved on definition, and to an extent in relation to the evidential gateway, but I find myself echoing what was said by the noble Lord, Lord Pannick: it was something that we should not have had to ask and press for for so long. It should have been freely and immediately given because it was founded on a fundamental joint understanding of domestic violence, which had been shared, I believed, by all sides of the House for the past 13 years of our Government, and which I was innocent enough to believe was still shared and understood today.
In looking at the amendments, I reassure the noble Lord immediately that I understand that the Government seek to break with the past and with the way in which we provided justice for individuals in our country through the provision of legal aid. That is something that I understand and regret. I also acknowledge that it is the Government’s intention to limit their exposure to costs incurred by legal aid and to narrow the scope of provision. At the moment, 265,000 people a year get legal help. That will reduce by 79 per cent to 55,000 under the Bill. I understand that that is the Government’s intention and it is something that I regret. At the moment, 112,500 people a year get legal representation. This will reduce by 40 per cent to 67,500 people a year under the Bill. That is something I also regret.
The impact that changes to private family law and legal aid will have on women is another area where it was accepted in the equality impact assessment in the reform of legal aid consultation that it would be the largest number of potential users of legal aid who would be affected by these reforms. It was also accepted that clients in this category were more likely to be female than in any other category of law except education. They represent 63 per cent of total clients, excluding those who have not identified their gender. This proportion exceeds that of the 16-plus population, which is 51 per cent, and that of all affected cases involving females, which is 56 per cent.
I accept that it is an intentional policy decision by the Government to remove that support. I have just told the noble Lord that that is something that I regret, but I accept it. However, we have to look at the provision that will be lost if the amendments go through. The noble Lord knows that at the moment, for ancillary leave proceedings, if an applicant fulfils the financial criteria and is given legal aid, any money that they receive over and above £2,500 can be recouped from them by the Legal Services Commission. If the person has money, £2,500 is the extent of the support that we as a country are minded to give litigants.
The noble Lord knows only too well that the longevity of the domestic violence issue far outlives a two-year period. Many women will never go to the police, to local authorities, to refuges or to their GP. They simply run. Sometimes they run to their families, and sometimes they do not even seek ancillary relief. However, those women and their children will still have to respond if the perpetrator brings ancillary relief proceedings against them, whether in relation to maintenance, residence or contact, and if that comes after the arbitrary two-year time limit, the perpetrator, who will often be the more financially advantaged, will have the wherewithal to bring those proceedings, and the victim and her children will have no legal aid to support them. That is why, unlike the noble Lord, Lord Pannick, I will insist that we look at this again. The other place gave cursory attention to these issues. If this is the only issue that will be returned to it, perhaps it will be able to consider it at greater leisure. If it does, perhaps the sagacity of this House will assist it to do a little better than it has to date.
The Lord Bishop of Chichester
My Lords, I strongly support the noble and learned Baroness in everything that she has just said. She has very starkly set out the figures and the likely impact of not sending this back to the Commons. She has quite rightly said that people could die as a result.
It is hard to engage in this discussion without having a rerun of the long debate that we have just had about the non-pursued Pannick amendment. It seems to me that we are in considerable confusion—and I have to say, with all due respect, that I do not think that the Minister helped us at all in this—about whether what is really at stake is the focus, orientation and purpose of the Bill, or whether it is a genuinely financial provision. We are really—I nearly used the expression “having the wool pulled over our eyes”. I feel profoundly unsatisfied and unpersuaded by what we heard earlier this afternoon.
This boils down to the question of what kind of society we want to live in, and that is why it was so important to pursue the amendment in the name of the noble Lord, Lord Pannick, earlier on. I know that we have lost that, but this amendment gives us one more chance to say to the House of Commons, “If we do not get this right, people—in numbers that we cannot calculate, but certainly there will be people, women and children mainly, but some men as well—who will die as a result”. I want to give the strongest possible support from these Benches to the noble and learned Baroness, Lady Scotland. I hope very much that we will support her this afternoon.
Baroness O'Loan
My Lords, the serious dangers of restricting legal aid in this area have been recognised by Members of this House and the other place and by the third sector as well as by the churches. The leaders of the Christian, Sikh, Jewish and Hindu communities have all written to the Lord Chancellor saying that the Bill risks leaving domestic abuse victims,
“in dire need of support but without the ‘right kind of evidence’ to secure it”.
They also warn that,
“arbitrary time-limitations on the validity of evidence risk leaving victims without access to support, even when they may still be at risk of further abuse”.
There is no accommodation for those who cannot secure admission to a refuge because it is full, or they have complex needs, or they have little boys who are older than 11, or perhaps because they fled an abusive situation, going to a friend or relative rather than to a refuge. Or even because, unable to access a refuge, they have still accessed non-residential domestic abuse services. There is no logic in excluding these women. Their need is not necessarily any less, and may indeed be greater, than those who manage to make it into the refuges.
Bringing time limitations on the validity of evidence in line with the civil standard would be an appropriate and fair move, not least, as the noble and learned Baroness, Lady Scotland, has said, because of the considerable time—if it ever happens—that it takes victims to be able to face legal process.
Without these changes our legal system will let down many of the most vulnerable people in our society. It will leave them potentially trapped in violent and abusive circumstances. The risks of that are potentially grave if not, as the right reverend Prelate said, fatal.
Lord Macdonald of River Glaven
My Lords, I spoke on the issue of domestic violence on a number of occasions during the Bill’s passage. As the noble and learned Baroness, Lady Scotland, said, domestic violence is a phenomenon that breeds insecurity, violence and, as we know, sometimes death. Perhaps as bad as any of those, it travels across generations, repeating itself over and over, in worse and worse spirals of crime. In recent years, as noble Lords know, very much progress has been made by people working in social services, by medical professionals, lawyers, judges and others, in recognising and identifying domestic violence, sometimes in prosecuting it—winning convictions more often than we used to—and in dealing appropriately with its victims.
My concern was that, in its original form, the Bill plainly failed to heed some of these lessons. It failed to recognise that victims do not always present themselves in predictable ways, and that the justice system should—indeed must—offer a broad, expansive and empathetic approach to this crime, and to the victims of this crime.
I had two particular concerns. First, the definition of domestic violence within the Bill was far too restrictive, much more restrictive than the definition that is employed by ACPO and the CPS regularly, successfully and happily and to the good understanding of all agencies involved, including the courts. Secondly, I felt strongly that the range of material allowed to evidence domestic violence so that there was a gateway into legal aid for its victims was far too narrow. I am inclined to agree that neither of these defects should ever have been in the Bill in the first place, and I was surprised, to be frank, that they were.
I am extremely grateful to my noble friend, who has been happy—perhaps I do not know how happy he has been—to have many conversations with me on this topic. I am grateful to the Secretary of State, the Lord Chancellor, as well. I believe that the Government’s response has been broad. I have enormous respect for the noble and learned Baroness who, when she was a distinguished Attorney-General, was an inspiration to prosecutors on this topic, as well as on many others. Her distinguished period of office is remembered with great affection in the CPS.
The Government have adopted the ACPO-CPS definition, for which we were asking since before Report stage, and included it in the Bill. I commend them for that. They have also broadened significantly—with respect, more significantly than some noble Lords’ speeches have allowed—the categories of evidence that will trigger legal aid in these cases for the victims of domestic violence, including evidence from social services and medical professionals in addition to the other gateways which existed, and where the court wishes to consider a finding of fact that domestic violence exists so as to grant legal aid, it can consider matters such as police call-outs and referrals to domestic violence centres, as the noble and learned Baroness, Lady Scotland, has called for.
After considering the Government’s response with as much care as I can, I have concluded that this has been a strong example of a Government who were clearly—and who, with respect, had been badly in error, in my view—listening to the concerns of this House and responding. For my part, I shall support the Government on this issue.
Lord Blair of Boughton
My Lords, I lent my name to the first iteration of the amendment put forward by the noble and learned Baroness, Lady Scotland. I want to speak again for a moment about this. I accept and, as has the noble Lord, Lord Macdonald, I praise the Minister for the movement that the Government have produced. However, in my experience of 35 years of dealing with these kinds of cases, there is something very specific about a certain category of offender, including the offenders of child abuse, domestic violence, stalking and partner rape—namely, their deviousness and the control that they exercise on their victims. Therefore, I strongly support the idea that we should not let down this group of victims by imposing an arbitrary limit on the time in which the evidence can be produced in a way that will provide legal assistance to those victims.
Some of your Lordships will be experienced enough to remember the great Erin Pizzey, who was the first founder of women’s refuges. Her book had the most staggeringly accurate title about the kind of man who would commit these offences. I do not mean to say that there are no women who do this but we are primarily talking about men. The title of that book was Scream Quietly or the Neighbours will Hear. I think that we should say, just one last time, will the Government please look at this time limit again, because this group of offenders works in a completely different way from most other criminals?
The Earl of Listowel
My Lords, I wish to speak about the time limit as regards the abused children who come under paragraph 1 of Schedule 1. The noble and learned Baroness referred to these children. I have been approached by the Grandparents’ Association and Grandparents Plus, which have expressed their deep concerns about the time limit. For example, in the case of a mother who is a drug addict, child protection proceedings may be started. The mother may enter prison or disappear from the scene for some time and the grandparents step in to care for the child. The mother may return to the scene but is not be happy with the situation and wants to have her child back. The grandparents would need to apply for a special guardianship order or a residence order.
It would be helpful if the Minister would be prepared to go even further as regards paragraph 11 of Schedule 1 and lift the time limit in order that those grandparents who provide such an important role do not risk having to invest their life’s savings in trying to protect their relationship with the grandchild for whom they are caring.
Lord Mackay of Clashfern
There is one question I would like to ask the noble and learned Baroness. I understand the point about time limits; I listened carefully to what was said about that. I tried to follow fully what she was saying and I think that, on the whole, I succeeded in doing that. However, she said—and I know that this can happen—that a woman subjected to domestic violence may do nothing about it at the time and then wants to bring it up, very properly, later on. I do not at the moment see where that situation is covered in her amendment. I can see the relevance of the time limit, but when the woman in question has not done anything about it at all—except suffered it, which is enough—I do not at the moment see that that situation is covered, unless it be of the type prescribed in regulations. That is an open-ended thing, but so far as the rest of it is concerned—having listened, I hope, carefully and understood fully, I think, what the noble and learned Baroness was saying—I have not quite grasped that particular point.
Baroness Scotland of Asthal
I hope that I can help the noble and learned Lord. On the last occasion on which I spoke, I said that I accepted that even my amendment would leave out many people who needed and should have help and assistance, and that I was not happy that even my amendment would go as far as it should, but I was drawing back from the ideal, accepting that the Government wanted a very narrow gateway. That is point number one.
Point number two is that if, in such a situation, the woman had available to her and could produce evidence that there had been a number of police calls to her home, notwithstanding the fact that she had not pursued it to the extent of asking for or supporting a charge and a conviction, then she would still have evidence available to her which she could rely upon, notwithstanding the fact that while the parties lived together she had not pursued it as she should have. One reality that we have had to face for a number of years is that, quite often, victims will hide from the perpetrator, as opposed to confronting him, but there are occasions when the perpetrator will find and pursue the victim and then the victim has no choice but to respond. It is in those sorts of cases that, if we do not give a greater degree of flexibility, we will find that there is difficulty. That woman might have not gone to the refuge, but she may have received telephone or other support from it indirectly. Therefore, part of our amendment is asking for not only admission to a refuge to be included, but also other evidence that could be given by the third sector or professionals to say that there was valid evidence upon which the woman would be able to rely to prove that there had been domestic violence.
Baroness Hamwee
My Lords, I hope that my noble friend, in responding to this, can help the House as to how extensive regulations can be to cover the concerns that have been expressed. I have spoken on many occasions over the years about domestic violence, and my response to a lot of what has been said, particularly comments made by the noble Baroness, Lady O’Loan, whom I respect enormously, is to think that we should be doing more with the services that we give to, mostly, women who find themselves in this situation. However, that is about services—refuges and other sorts of help—and it does not go to the evidence, so I hope that my noble friend can help expand on the answer that we have been given by the Commons: that regulations should deal with these matters.
Lord McNally
My Lords, the noble and learned Baroness, Lady Scotland, is a powerful advocate. Throughout, she has presented a case against the Government which I am sure has swayed a number of your Lordships. That is why I sometimes get a little bit exasperated. For example, the right reverend Prelate says that the wool was pulled over his eyes, but I assure him that I made every effort to make clear where we are going, how we are going there and why we are going there on this Bill. Rather like the outgoing Labour Government in their manifesto, we sought to cut legal aid. The noble and learned Baroness read out a load of statistics that suggested that this Bill might achieve that purpose. I point out that part of our approach from the very start was to try to move away from litigation to arbitration, mediation and the alternative settlement of disputes, and we will do so in the various parts of the legal system that were covered by legal aid.
I worry sometimes when I listen to the language that is used. I heard what the noble Baroness, Lady O’Loan, said, and I read in a Sunday newspaper that women who could not get into refuges would be denied legal aid—as if that was it, and they were like Oliver Twist being turned away from the workhouse door. The noble Baroness knows that that is not true.
Baroness O'Loan
My Lords, with great respect, I did not say that women who could not get into a refuge would necessarily be excluded, but it is a fact that that is one of the forms of evidence. If you do not have either that form of evidence or the other forms of evidence that are required, you will not get in.
Lord McNally
But isolating one aspect and saying that if a woman goes to a refuge and cannot get in she will not get legal aid ignores the fact that I have put before the House—the whole list of options that people can turn to. I do not think that it serves the case of women subject to domestic violence to somehow suggest that the passing of this Bill will cut them off from legal aid. The fact is that we will be spending something like £120 million a year in legal aid in this area of law. As I pointed out in my opening remarks, one thing that I am most proud of about this Government is that we have put funding into domestic violence issues in a very detailed way—in a way to which the noble Lord, Lord Blair, referred.
We are talking about a very specific area of assistance in a very specific area of law, with victims seeking legal aid for private family matters. With her skills, the noble and learned Baroness, Lady Scotland, has turned this into a debate again and again on who is in favour of helping domestic violence victims, and who is against. I think that is a clever way of putting it to the House, but it is not a fair way. We have tried and listened and moved on all these areas. Long ago, the request from the Opposition was for the ACPO definition; when the ACPO definition was conceded, it was the UK Border Agency that became the mark. The fact that we have done ACPO-plus does not seem to matter. The fact that we have brought in funding for specific aid in this area does not matter. We will always find there is another bar to clear, so that as noble Lords come in asking, “What’s this about?”, it can be said to them, “It’s about voting for legal aid for those affected by domestic violence”. But legal aid is there for those affected by domestic violence. The criteria by which they qualify have been widened. We have listened to this House and acted on its advice.
On the point raised by the noble Earl, Lord Listowel, about family legal aid in children and kinship, where private family law proceedings are being taken as an alternative to public law proceedings—for example, where it is more sensible for grandparents to care for a child rather than the parents—legal aid will be available. If there is evidence of child abuse, it will also be there. I will look at the further points the noble Earl made, and if I may I will write to him, but we believe that exceptional funding will also kick in in this area.
The noble and learned Baroness, Lady Scotland, is a powerful and sometimes an emotive advocate but it is sometimes worth cutting through the emotion, and I ask the House to do that—to cut through the threat that this will cause death—and look at the facts. The fact is that this Government have listened and extended the criteria for this form of legal aid beyond what the House first asked for. This Government have put real money into real, pioneering services in terms of this terrible scourge of domestic violence. The Commons has considered this, and was right to return it to your Lordships. I believe this is the moment to ask your Lordships to accept the view of the Commons. I beg to move.
Baroness Scotland of Asthal
My Lords, perhaps I might say to the Minister straight away that I hope it has been clear from everything I have said that I have always believed, and still believe, that all sides of this House—and, I hope, of the other place—are of one mind in the approach that they take towards helping domestic violence victims. Nothing I have said from this Dispatch Box has undermined that. What I have been clear about is that this Government have been wrong not to widen the gateway. With respect, we have consistently argued about the time limit and the evidential criteria, right the way through, and we have not changed.
I also say gently to the Minister that in looking at reducing litigation, the one happy thing about domestic proceedings—both in private family law and in relation to domestic violence cases specifically—is that family lawyers worth their salt always appreciate that if a family has got to the stage of having to litigate, they are dealing with damage limitation and not winning or losing. That is why only about 5 per cent of the cases ever go right the way through into contested matters, so in this area of law we are not looking at cases running away and people litigating when it is unnecessary. The Government are continuing the approach that the previous Government took in advocating mediation whenever it is proper.
However, we have a difference of view. I thank the noble Lord very much for his compliments about my advocacy, but I have to tell him that this is not about advocacy. This is about truth and fact, and if I do nothing else I will always stand side by side with the victims of abuse. I believe that is where the Government should be too.
Lord McNally
That this House do not insist on its Amendment 31 and do agree with the Commons in their Amendment 31C.
“Sections 43 and 45 and diffuse mesothelioma proceedings
(1) Sections 43 and 45 may not be brought into force in relation to proceedings relating to a claim for damages in respect of diffuse mesothelioma until the Lord Chancellor has—
(a) carried out a review of the likely effect of those sections in relation to such proceedings, and
(b) published a report of the conclusions of the review.
(2) In this section “diffuse mesothelioma” has the same meaning as in the Pneumoconiosis etc (Workers’ Compensation) Act 1979.”
Lord McNally
My Lords, I would like to start by paying a sincere tribute to the noble Lord, Lord Alton of Liverpool, for his vital role in pursuing his cause conscientiously and relentlessly. I know how conscientious and relentless he can be when he gets hold of a campaign, this time in the cause of mesothelioma victims and their families. I know others have followed his lead, but, as he pointed out, when this Bill first came before the House, there was no mention of this cause and he has, quite literally, put it on the front pages. He can take great personal credit for helping us achieve the position we have reached today and on which I hope all sides can agree.
In the past few days, we have had the opportunity to debate at some length issues in relation to the plight of sufferers of this terrible disease. I and ministerial colleagues have also held a number of meetings with the noble Lord, Lord Alton, and others, including my noble friend Lord Freud, which have been extremely productive. I am grateful for the general recognition of the value of what the Government now propose in respect of a pause in commencement of the reforms in Part 2 in relation to mesothelioma.
Let me be clear about what we are doing. The Jackson reforms in Part 2 of the Bill are due to come into effect in April next year. They will continue to come into effect then, except in so far as they affect mesothelioma claims. Mesothelioma claims will therefore continue for the time being with the current arrangements of recoverable success fees and insurance premiums. As I informed your Lordships on Monday, we are working hard to agree an acceptable scheme to help victims who are unable to trace their employer’s insurers; as I said, I hope that we will be in a position to make an announcement before the Summer Recess. The arrangements for any new process will obviously take some time to bring forward. We will review the position in due course and publish the findings of that review. Only after we have done so, and we are satisfied that the time is right to implement the provisions in Part 2 in relation to mesothelioma, will we do so.
Amid general approval in the House of Commons yesterday, one issue was raised which related to the terms of the review that we have committed to undertake. I hope that your Lordships will understand that I cannot say much more at this early stage about the precise terms of that review, but it will be a proper and appropriate one. My right honourable friend the Lord Chancellor will publish the results, and we will not commence our reforms as far as mesothelioma is concerned until we are satisfied that a structure exists which enables swift and fair compensation for victims and their families.
The strength of feeling in this debate has been palpable and genuine. I am glad that we have been able to meet some of the concerns expressed by tabling the amendment that we have. I beg to move.
Lord Alton of Liverpool
My Lords, I first thank the Minister for the kind remarks at the outset of his speech. I suspected that he might have meant that I have been a bit of a pain in the neck on this subject.
Lord Alton of Liverpool
He put it rather more elegantly. The Minister having had a tough time during proceedings on Part 1 this afternoon, he will be glad to know that I can be very warm in what I am about to say to him, and also to the noble Lord, Lord Bach, and my good friend, the noble Lord, Lord Avebury, for the encouragement and support that they have given me as I have taken this amendment forward at every stage of the Bill.
It puts me in mind of a passage from EM Forster’s book, Two Cheers for Democracy. He said that only “love, the beloved republic” deserved three cheers, but that sometimes the cantankerous, difficult, awkward Member of Parliament who sees some minor injustice and is able to get it right is the justification for our system. I suspect that that is something that unites us on all sides of this House and, indeed, in another place as well. On that note, the noble Lord, Lord Cormack, is about to intervene.
Lord Cormack
I was going to draw the House’s attention to the fact that our dear friend Tam Dalyell from another place recently published his autobiography and entitled it The Importance of Being Awkward.
Lord Alton of Liverpool
I am happy to be in the company of another member of the awkward squad on this occasion; I was happy to be in the Division Lobby with the noble Lord, Lord Cormack, during earlier proceedings on this Bill. Although it has not been possible for us to achieve all of the things that we would have wished to achieve during the proceedings, it speaks well of your Lordships’ House that we were willing to send back to the House of Commons for the second time, on Monday, the provisions in the Bill which relate to men and women who have been exposed to asbestos and, as a result, have developed the fatal illness of mesothelioma.
Yesterday in another place, Mr Jonathan Djanogly, the Parliamentary Under-Secretary of State, moved an amendment in lieu of Amendment 31, which was agreed in the other place, as the noble Lord has told us, without Division. The amendment specifies that the mesothelioma provisions may not be brought into force until the Lord Chancellor has carried out a full review of their potential impact and has published a report on the conclusions of the review. The practical effect of this is that terminally ill victims will not have to surrender up to 25 per cent of the compensation which they have been awarded in success fees over and above the base fees which lawyers will already have received. There is now an opportunity to recast what many of us believe is, in any event—and the noble Lord, Lord Thomas, alluded to this during our proceedings earlier in the week—an immoral use of success fees in cases where causation is not in issue, as well as to devise a new scheme which the noble Lord, Lord Freud, told us on Monday is now being worked on by the Department for Work and Pensions.
Therefore, before we leave this matter I would like to ask the Minister—and during a conversation yesterday I was able to give him some notice of my intention to do this—if he would clarify one or two questions which arise from the Government’s announcement and the amendment in lieu. First, is the Minister able to assure us that there will be absolute synchronisation between the Ministry of Justice and the Department for Work and Pensions to ensure that the mesothelioma provisions in the Bill will not be implemented in advance of the new regime coming into force? Secondly, Mr Jonathan Djanogly told the House of Commons yesterday that the new proposals,
“could well require DWP legislation, in which case we would look to roll the ending of the provisions into the commencement of the DWP provisions”.—[Official Report, Commons, 24/4/12; col. 839.]
That would certainly be the best way to proceed; can the Minister tell us when he expects his noble friend Lord Freud to be able to make a statement on the shape of the new scheme and whether there will be formal consultation with victims’ groups and other interested parties before a Bill is introduced? Also, do we have any idea of a timetable for the proposed legislation?
Let us assume for a moment that such a scheme—which has proved elusive in the past—were not brought forward, and that the insurance industry simply decided to play fast and loose with the Government: what would the Government do in those circumstances? Would they simply rely on the outcome of the review which they have instigated, and if the internal Ministry of Justice review concluded that it wanted to proceed with the mesothelioma provisions which have now been suspended, can the Minister assure us that there would be robust parliamentary scrutiny and opportunities to contest such an outcome? Will formal commencement orders be required, for instance, before the now dormant mesothelioma provisions in the LASPO Bill can be put into effect? Would such orders be introduced by statutory instrument, and, if so, is it the case that they would not be subject to parliamentary debate? In those circumstances, can the Minister assure the House that the Government would find a way for both Houses to be able to return to this question? It would be a pretty unsatisfactory situation if we were unable to do that.
With regard to the review itself, will it be conducted entirely by Ministry of Justice officials? Will the Minister at least reflect upon the desirability of involving some independent voices—perhaps, at least, a representative of one of the asbestos victims’ groups? Will those conducting the review call witnesses, take evidence and have a record of proceedings—will it be transparent?
I will end by making two short observations. First, as I have said, I am extremely grateful to all noble Lords, and indeed honourable Members of another place, who have supported this amendment at every stage. In particular, I want to put on the record that the right honourable Member for Wythenshawe and Sale East, Mr Paul Goggins, and Tracey Crouch, Member of Parliament for Chatham and Aylesford, gave considerable help, across the political divide, to ensuring that the case there did not go by default. The cross-party concerns which were raised in this House and in another place, and which were followed through by votes in the Lobby, were crucial in persuading the Government to think again.
I also pay tribute to the indefatigable efforts of Mr Tony Whitston of the Greater Manchester Asbestos Victims Support Group, whom I met with the noble Lord, Lord Avebury, and Mr John Flanagan of the Merseyside Asbestos Victims Support Group, for keeping these issues before us. The information and case histories which they have provided have been focused, understandable and rooted in their own day-to-day experience of working with the victims of this killer disease. Their resolve and dignified approach do them, and those who they represent, great credit. I know how grateful they are to your Lordships for insisting that their case be heard.
Secondly, and rather topically, this outcome says something about the particular strength of your Lordships’ House. Like the Minister, I served in another place for 18 years before I stood down. When the Bill came to us, I was staggered to find—as the noble Lord mentioned at the beginning of his remarks—that the issue of mesothelioma, which has after all claimed the lives of 30,000 British people, had not been debated or scrutinised at any stage. I repeat the observation I made on Monday last, that that is a vivid example of the vicious use of guillotines and programme Motions. The revising role of this Chamber—carefully scrutinising legislation and assessing its impact—is a strength that should not be lightly dismissed.
Finally, in three days’ time it will be Workers’ Memorial Day, which commemorates those killed, injured or made ill through work—a day that is meant to highlight the importance of good health and safety in the workplace. Asbestos disease is often called “the widowmaker”. In 2010, asbestos-related diseases accounted for 93 per cent of all industrial injuries disablement benefit payments for respiratory disease. It is a wretched disease—a death sentence with fatal consequences. All over this country, men and women were exposed for decade after decade to toxic substances, mainly at work, which ruined their lives and cost many their lives. As well as those 30,000 who have already died in the United Kingdom from mesothelioma, an estimated 60,000 more are yet to lose their lives due to past exposure—the vast majority of which, of course, occurred at work. The victims of this disease sacrificed their health and often their lives while working to support their families and contributing to the wealth of this country.
Throughout our debates, I have argued that it is iniquitous that such people should have to surrender up to 25 per cent of the damages they have been awarded. Happily, the Government have been persuaded that there is no racket involved in these cases, no ambulance chasing, and no compensation culture. They are right to have thought again, and I welcome that. We all now wish them well in coming forward with a far better approach to dealing with such cases. Linked to that is a promise that we remain diligent in monitoring the progress that has been made.
Once again, I am appreciative to the House for the support and encouragement that it has given in pursuance of this important matter.
Lord Avebury
My Lords, I want to add only a few words about the outstanding role of the noble Lord, Lord Alton, in leading this campaign during the proceedings on the Bill over many weeks and months. I do not think that anybody else could have had the success that he has achieved, because he is one of the most assiduous Members of this place. If he likes the label given him by the noble Lord, Lord McNally, it is a title that he well deserves and which we would all be proud to wear.
I want to add only one question to those that have already been posed. In the review of the potential impact, will it be possible for asbestos victims and their relatives to make representations and be heard orally by those conducting the review? This is important, if I may say so, because some of the material provided to us by Tony Whitston was of great importance in deciding certain questions—in particular, whether or not people would be deterred from taking proceedings if the Bill had come into effect in its previous form. There was abundant written evidence from victims that if they knew that 25 per cent was going to be deducted from their damages, they or their bereaved relatives would not have bothered to go into the fray. It is important that that evidence is presented to the review.
Perhaps I may say, finally, how grateful we are to my noble friend Lord McNally, because he has listened carefully all the way through. In particular, as he mentioned earlier, he was willing to meet the noble Lord, Lord Alton, myself and others, and take carefully back to his department the arguments that we put. That meeting and the further meetings that the noble Lord, Lord Alton, had with him have been instrumental in enabling the Government to arrive at this welcome conclusion.
Lord Wigley
My Lords, I also welcome the Government’s shift on this matter. I am sure it is one that will give the noble Lord, Lord McNally, considerable satisfaction, given the family dimension and his understanding of this condition. It will, I hope, be of considerable benefit to many thousands of sufferers and their families. I join in congratulating the noble Lord, Lord Alton. I am aware of his campaigning ability from many years in another place. We campaigned sometimes together and sometimes on opposite sides. When one was on the opposite side, my goodness, one knew one had a contender to deal with. The diligence that he and other colleagues across parties have applied to this issue will be of considerable satisfaction to the groups of campaigners who represent sufferers and their families.
I want to raise a couple of points with the Minister. I note with interest that the definition of diffuse mesothelioma used here is the one that was incorporated in the Pneumoconiosis etc. (Workers’ Compensation) Act 1979. Another dimension of what he mentioned a moment ago is the fact that there are still people who cannot trace their employers or pinpoint which employer was responsible at the time at which the disease may have developed. That is the case for a number of diseases. The 1979 Act, as noble Lords will remember, arose largely from the position of slate quarriers, but many other workers were affected in the cotton and pottery industries and some in the steel industry.
I am not going to reopen the debate that we lost the other night. We lost that one, and so be it, but there will be some cases in which there is suffering that is not covered by any other provision. When the review is undertaken, I hope that some consideration can be given to whether there are other cases of industrial workers who have suffered loss of health, and in many cases loss of life, and do not have an avenue through which to get compensation. If they do get compensation, they should not have that compensation unreasonably eroded. I hope that can be taken on board by the DWP. I understand that the noble Lord, Lord Freud, the Minister in the DWP who may be handling this, also has a good understanding of the suffering that arises from these conditions, so hopefully we can make progress.
Finally, this may be a lesson for us in this House to try and try again. We could have abandoned this the other night without insisting on the amendment that we put through to the other place. We did not and that is what enabled progress to be made on this occasion. There may be other instances when we need to be equally tenacious and determined in order to make sure that the other place gives adequate attention to a subject and that progress such as this can be made.
Lord Thomas of Gresford
I add my congratulations to the noble Lord, Lord Alton, on all the very hard work that he has put into this matter. I also pay tribute to the work of the Greater Manchester Asbestos Victims Support Group, in particular to Tony Whitston, who has lobbied so hard on behalf of victims; and there are other support groups, such as the Merseyside support group, which have lobbied just as hard.
I argued on Monday that success fees ought not to be claimed by solicitors in this type of case. I was pleased to hear the Minister in another place, Mr Djanogly, say yesterday:
“this is not an issue of causation. I heard Lord Thomas speak in the other place yesterday, and I very much agree with what he had to say, which was essentially that in cases in which causation is not an issue, there is—in many respects—no reason why solicitors should have a success fee for that type of work”.—[Official Report, Commons, 24/4/12; col. 831.]
I was strongly supported on Monday by my noble friend Lord Faulks, and I am grateful to him for the concern that he has shown on this issue. An objection was made by the noble Lord, Lord Bach, that it was impossible to guarantee that solicitors would not charge a success fee against their clients’ damages.
I interjected that if public opinion saw it as an abuse, no doubt the Lord Chancellor would step in to deal with it by way of regulation. There is another way in which this issue could be approached. I suggest to Mr Whitston, his excellent organisation and other similar support groups that he should draw up a list of solicitors who have indicated to him that they would not charge a success fee when, ultimately, the new regime for CFAs is introduced for mesothelioma sufferers. The support group could receive applications from solicitors to be put on an approved list and satisfy itself that firms that are accessible to victims in those industrial parts of the country where the disease is most prevalent—shall we say Newcastle, Leeds, Manchester, Birmingham, Bristol and, of course, the industrial areas of north and south Wales?—are geared up and competent in this area of work. Sufferers from mesothelioma turn to the support groups, and if they had a list of solicitors who had undertaken not to charge success fees against the damages they receive and who they are satisfied are competent, that would be a great way forward.
Lord Wigley
I follow the point that the noble Lord made the other night; I well understand it and have some sympathy with it. Clearly, if the sort of provision he is suggesting were to be made, it would be very helpful. Does he feel that it should be limited to mesothelioma, because there are many other cases of compensation in which it is equally unreasonable that there should be a deduction of up to 25 per cent from the compensation?
Lord Thomas of Gresford
The noble Lord will recall that on Report, I referred not only to cases of mesothelioma that Mr Tony Whitston drew to our attention from the Brymbo steelworks in Wrexham but to cases of pneumoconiosis that I have known. He is a slate quarry person; I come from a colliery area and I know of the long-term suffering of those victims. With mesothelioma, that could be done now and could be extended to other diseases in due course.
The support groups would be uniquely placed to monitor the service that such firms gave to mesothelioma sufferers, who could report back on their experiences to both the support groups and their successors. That is the answer to those who say that solicitors will not do this work at all unless they are cosseted by success fees. It spreads the work around the country to areas that are particularly concerned with this disease, where experience could be built up by firms of solicitors. It may discourage any idea of focusing litigation of this type in the City of London branch offices of firms that then claim to be paid at City of London rates. Anecdotal evidence suggests that that happens in some CFA cases.
As my noble friend Lord Faulks said on Monday, there are lawyers who are dedicated to achieving the best result for their clients and not so much for their fees. I have no doubt that they would flock to be placed on an approved list and forbear charging a success fee at all. I hope that such an approach will appeal to the Minister, the Lord Chancellor and the Ministry of Justice.
Lord Bach
My Lords, I begin by congratulating the Minister on being a member of the luckiest Government there can ever have been in the history of Parliament. The odds against drawing three votes on crucial amendments, two on Report and one at this stage of proceedings so that the Government win the vote, as it were, must be immense. He has managed to do that and I congratulate him on it. I just hope for his sake and the Government’s that their luck does not begin to run out.
On this issue, the Minister also deserves some congratulation if, as I suspect he did, he played a part in persuading his fellow Ministers, and the right honourable and learned gentleman the Lord Chancellor, that there had to be some give or concession. If he played a part in that, I congratulate him and think that he has served the House well in that regard.
I, too, want to compliment those outside the House. As the noble Lord, Lord Alton, stressed, the co-ordinator of the Greater Manchester Asbestos Victims Support Group, Mr Tony Whitston; Mr John Flanagan, the Merseyside equivalent of that organisation; and many others outside have worked incredibly hard to make sure that people who do not always have a very loud voice have had a say in Parliament—or rather in this House of Parliament. It is absolutely clear that when these matters were raised in the House of Commons when this Bill was first taken through, they were completely dismissed. It was only when the Bill came to the House of Lords that the noble Lord, Lord Alton, with his usual courage and zeal, managed to raise these matters, with the help of the noble Lords, Lord Avebury and Lord Wigley. Eventually, at the very last minute, he got a concession from the Government.
I pay tribute, too, not only to those I have mentioned but to the noble Baroness, Lady Doocey, the noble Lord, Lord Avebury, and the Conservatives who abstained in the vote on Monday night. Had they not played the part that they did, the amendment in the name of the noble Lord, Lord Alton, would not have gone through. I remind the House that it won by nine votes. If it had been lost there would have been no review or concession; there would have just been rejoicing in the Ministry of Justice. It was as close as that. It is because of the bravery of those who were prepared to abstain or vote against their own Government that we are here today congratulating the Government, quite rightly I am sure, on their concession.
Seriously, it is a good concession and we know, or trust, that the review will be genuine. We look forward to playing our part in making sure that the sufferers of this terrible disease get a fair deal when the Government have had their review. Not only the noble Lord, Lord Alton, but all of us will be watching very closely to see how developments move forward in this very vexed field. As for this House, for once it can congratulate itself.
Lord McNally
I think that if the noble Lord were to ask Señor Torres, he would find that a draw is also sometimes a victory. He is the Chelsea centre forward. I know that the noble Lord, Lord Bach, is a Leicester City supporter and does not mix in that kind of high-class company.
I was very grateful for the comments at the beginning of the speech of the noble Lord. I notice that he quickly tailed off towards the end to start initiating rebellions, and so on. I have continually made the point that I am well aware that any Minister is a bird of passage, but I have always been a lover of this place—I mean the whole Parliament building. I sometimes say when I show visitors around that I never come into this place without a sense of awe for what it stands for and what it does. Anyone who stands at this Dispatch Box takes the buffeting and advice and has to work through very much with the help of the awkward squad. The only problem with the awkward squad is that when one campaign is over it immediately starts on another. I noticed from the remarks of the noble Lords, Lord Avebury and Lord Wigley and, indeed, the noble Lord, Lord Alton, himself that further campaigns will be on the way.
Leveson Inquiry
(12 years ago)
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Baroness Garden of Frognal
My Lords, with the leave of the House, I will now repeat a Statement made in another place by my right honourable friend the Secretary of State for Culture, Olympics, Media and Sport. The Statement is as follows:
“With permission, Mr Speaker, I would like to make a Statement following yesterday’s developments in the Leveson inquiry. Although I intend to respond fully to allegations about my conduct and that of my department when I present my evidence to Lord Justice Leveson, I believe it is important to update the House on actions that have been taken as a result of evidence released yesterday.
We are 273 days into a process whose early stages will last until October. This is not the time to jump on a political bandwagon. What the public and all colleagues want to hear is Lord Justice Leveson’s views after he has considered all the evidence. I do, however, think it is right to set the record straight on a number of issues in light of the evidence heard yesterday at the inquiry.
Specifically on the merger of News Corp with BSkyB, I would like to remind the House of the process I followed. Throughout, I have strictly followed due process, seeking the advice of independent regulators and, after careful consideration, acting on their advice. I have published all advice that I have received from Ofcom and the OFT, together with correspondence between myself and News Corporation, including details of all meetings I have held in relation to this process. As part of this process, my officials and I have engaged with News Corporation and its representatives, as well as other interested parties, both supporters and opponents of the merger.
Transcripts of conversations and texts published yesterday between my special adviser, Adam Smith, and a News Corporation representative have been alleged to indicate that there was a back channel through which News Corporation was able to influence my decisions. That is categorically not the case. However, the volume and tone of those communications were clearly not appropriate in a quasi-judicial process, and today Adam Smith has resigned as my special adviser. Although Adam Smith accepts that he overstepped the mark on this occasion, I want to set on record that I believe that he did so unintentionally and did not believe that he was doing anything more than giving advice on process. I believe him to be someone of outstanding integrity and decency and it is a matter of huge regret to me that this has happened.
I only saw the transcripts of these communications yesterday. They did not influence my decisions in any way at all, not least because I insisted on hearing the advice of independent regulators at every stage of the process.
I will give my full record of events when I give evidence to Lord Justice Leveson. However, I would like to resolve this issue as soon as possible, which is why I have written to Lord Justice Leveson asking if my appearance can be brought forward. I am totally confident that when I present my evidence, the public will see that I conducted this process with scrupulous fairness throughout”.
Baroness Jones of Whitchurch
My Lords, I thank the Minister for repeating the Statement.
It has not come as a great surprise to many on this side of the House, and perhaps around the Chamber, that we are debating this issue this afternoon. For those of us who over the past 18 months have been regularly debating the wisdom of allowing one media organisation to own 40 per cent of market share, it has often felt that the Secretary of State has interpreted the rules so as to give maximum advantage to News Corp’s bid. We may be surprised by the source of the new allegations—old friends settling scores, perhaps—but not the substance.
The Secretary of State’s current predicament might have been averted if he had listened to those of us around this Chamber, and many in the wider media world, who urged him to refer the merger of News Corp with BSkyB directly to the Competition Commission in the first instance. Instead, he chose the quasi-judicial role in overseeing the process that his previous support for the Murdochs would always have left open to question. The serious allegations made in yesterday’s e-mails seem to bear out the concerns that he proved unable to carry out this role in a suitably impartial and transparent way.
There are serious questions at the heart of this issue about the operation of the Ministerial Code, to which the Secretary of State must now be held to account—which is why it is important that he give a full and frank explanation to Parliament rather than waiting for Leveson to take its course. As we have seen over the past few months, many other careers have foundered on the evidence presented to Leveson in advance of his findings, and there is no reason for MPs to be immune from facing up to their immediate responsibilities and failings. Ultimately, it is not the job of the Leveson inquiry to oversee the implementation of the Ministerial Code.
First, therefore, in the light of the Statement, perhaps I may ask the Minister whether the Cabinet Secretary has been consulted on the process now being pursued to scrutinise Mr Hunt’s role, and is he happy that the Secretary of State continues to have responsibility for overseeing the BSkyB bid rather than Parliament? Is it the view of the Cabinet Secretary and the Prime Minister that consideration of any breaches of the Ministerial Code should now be put on hold until the end of the Leveson inquiry? If not, what steps have been put in place to pursue this issue further?
Secondly, in the light of the resignation of Adam Smith, Mr Hunt’s special adviser, does the Minister accept that this does not absolve Mr Hunt from responsibility for the actions of his adviser as set out in paragraph 3.3 of the Ministerial Code? Can she clarify what instructions were given to Adam Smith by Mr Hunt throughout the negotiating period, and whether he specifically disobeyed those instructions? Can we also be told the precise reasons for Mr Smith’s resignation?
Thirdly, can the Minister confirm whether the DCMS Permanent Secretary sanctioned the use of Adam Smith as a go-between with News Corp over that period? Did Mr Smith keep notes of his discussions, and, in the interests of transparency, can she assure us that they will be published?
Does the Minister accept, with the benefit of hindsight, that if there was to be any liaison between News Corp and the department during this highly sensitive period, it would have been better carried out by a departmental official? Does she also accept that it would have been improper for the Prime Minister to have any private discussions with Mr Murdoch on the subject of the bid regardless of whether he had direct quasi-judicial responsibility for the decision? Can she now tell us what the nature of that discussion was and whether it was minuted? If it was, should it not also now be published?
Next, can the Minister explain the rationale of giving News Corp private advance notice of Ofcom’s advice and the Secretary of State’s intentions before they were presented to Parliament, and can she state categorically that those opposing the bid were given equal access to the advance information?
Finally, what is the Government’s response to the question raised today by Robert Peston about the potential involvement of the Financial Services Authority in assessing whether there has been a leak of price-sensitive information? Mr Peston suggests that if Fred Michel did indeed receive advance information on 24 January that Mr Hunt intended to make an announcement the following day that he was minded to accept undertakings in lieu in order to prevent a referral to the Competition Commission, then that had price and market sensitivity and the FSA should investigate. Does the Minister agree that the FSA should be asked to check whether any breaches of financial trading rules were involved?
I do not apologise for raising a range of significant questions on this issue today, as there are important issues of propriety and confidence in government processes at stake. I look forward to hearing the Minister’s answers and would ask her to write if she does not have the full details and responses to hand.
Baroness Garden of Frognal
The noble Baroness asked some highly pertinent and relevant questions on this rather complex and difficult matter. I will answer as best I can while recognising that most of the evidence will be pulled together for presentation to the Leveson inquiry and may not be readily available at this stage.
My right honourable friend the Secretary of State answered extensive questions this morning in the House of Commons on many of the matters that the noble Baroness raised, including the fact that before he took over the BSkyB bid he was on record as having expressed some sympathy with the Murdoch media. He reported that to the Cabinet Secretary and it was fully discussed. He assured the House of Commons that, from the time he took over responsibility for it, he took steps at every stage to demonstrate his impartiality, to ensure that there was openness and objectivity in the process.
My right honourable friend the Secretary of State cited in particular four decisions, each of which were against News Corporation’s wishes: first, that he was minded to refer the bid to the Competition Commission; secondly, that he would not accept the bid until Ofcom and the OFT had advised on issues of plurality; thirdly, that he would extend the consultation more widely; and finally, after the Milly Dowler evidence, that the coalition Government would set up the Leveson inquiry to try to ensure that all these matters were very fully looked into. Now that BSkyB has withdrawn its bid there are matters that no longer need pursuing in that respect, although obviously the reasons behind that and all the factors leading up to it are still open for debate.
The noble Baroness mentioned Adam’s Smith’s resignation. He stated in his resignation letter that,
“the content and extent of my contact was done without authorisation from the Secretary of State. I do not recognise all of what Fred Michel said, but nonetheless I appreciate that my activities at times went too far and have, taken together, created the perception that News Corporation had too close a relationship with the department, contrary to the clear requirements set out by Jeremy Hunt and the permanent secretary that this needed to be a fair and scrupulous process”.
It is certainly a matter of regret that Adam Smith has resigned, but he has obviously taken that decision in the light of events as they have unfolded. The noble Baroness asked whether his role had been agreed by the Permanent Secretary. As I understand it from my right honourable friend, the Permanent Secretary was indeed in discussion regarding the roles at every stage. There is a complex set of contacts at many levels for such a bid, but my right honourable friend has given assurances that he operated with transparency throughout.
On the details of meetings and communications, my right honourable friend stated that he published all relevant material and meetings, and that these are still available on the DCMS website. For the sake of clarity, in response to a PQ from Mr John Mann, he stated:
“Records of meetings, telephone calls held between officials and press officers with outside parties and records of telephone calls and email exchanges between officials and Ministers and outside parties are not recorded centrally and would incur a disproportionate cost to collect”.—[Official Report, Commons, 7/9/11; col. 616W.]
In the light of all that has been published today, we are more than ever aware of just how amazingly convenient e-mail can be and just how amazingly dangerous it can be when misused. Undoubtedly, the evidence that is available will be presented in full to the Leveson inquiry. If there are aspects of other matters that the noble Baroness raised that I have not covered but could, I will indeed take her up on her offer and write to her afterwards.
Lord Fowler
My Lords, although I am very touched by the Government’s faith in the independent review—my noble friend might remember that that was not always the view of her department when refusing to set up an independent review—I wonder whether she agrees that not everything should wait for Leveson, particularly in one respect. Is it not a fact that the current way of deciding media bids is, frankly, now bust? Do not politicians need to be taken out of the decision-making process and a demonstrably independent system, with either Ofcom or the Competition Commission deciding, set up, and set up now? If that change requires new legislation and there is no room in the programme, we can all think of a Bill that can be dropped to make way.
Baroness Garden of Frognal
There is one aspect of my noble friend’s question to which I shall resist replying at this stage. He is absolutely right. Under the Enterprise Act 2002, the Secretary of State has the power to intervene in the public interest and in a quasi-judicial capacity. My right honourable friend is on record as stating publicly that there are very strong arguments for politicians to be taken out of discussions on these sorts of matters and for them to be undertaken by the regulators. We will certainly look to be taking that forward.
Lord Low of Dalston
My Lords, I do not envy the noble Baroness having to answer questions on matters which are so obviously a matter of the personal responsibility of the Secretary of State. However, does she agree that the focus on the Leveson inquiry in this instance is a complete smokescreen? The terms of reference of Leveson, which I have just looked up, are entirely general and directed towards the future. It is not the role of the Leveson inquiry to pronounce on the Secretary of State’s handling of the Murdoch bid for BSkyB. Does the noble Baroness not agree that the Secretary of State has to answer to Parliament and not to Lord Justice Leveson?
Baroness Garden of Frognal
The noble Lord is quite right that Leveson has a very broad remit. However, it is a vehicle for all manner of evidence to be brought into the open and fully discussed. It appears to be doing an extremely thorough job on that basis. The Secretary of State is very well aware that he needs to answer to Parliament, which is one reason why he gave the Statement today followed by a full set of answers to questions. That will continue to be the position. We are not simply pushing these questions to the back of Leveson, but once you have set up an inquiry of this nature, you might also ask—and indeed Lord Justice Leveson has also asked, having set up the inquiry—that it be allowed to proceed.
Baroness Bonham-Carter of Yarnbury
I thank my noble friend for repeating the Statement. As so often, I find myself echoing my noble friend Lord Fowler. Does the Minister agree that this affair demonstrates that there should be safeguards to ensure that no one organisation should be in a position to own a disproportionate share of the British media—which, by the way, is possible thanks only to the Communications Act 2003 and despite prescient warnings by my noble friend Lord McNally and the noble Lord, Lord Puttnam—and finally, as my noble friend said, that decisions on media mergers should not be taken by politicians but openly and transparently by an appropriate and independent regulatory body?
Baroness Garden of Frognal
I entirely agree with my noble friend. As I mentioned in my reply to my noble friend Lord Fowler, these measures are under way. We are not intending to delay taking this forward. We recognise that in the past the Murdoch empire was an enormously powerful factor for both the Labour Party and the Conservative Party. The coalition Government have now set up a thorough inquiry into those matters, which we hope will come up with some really good answers.
The Minister of State, Ministry of Justice (Lord McNally)
Perhaps we may hear from the noble Lord, Lord Puttnam, first.
Lord Puttnam
My Lords, while entirely agreeing with the noble Lord, Lord Fowler, that the situation must change, many of us worked in this Chamber for two years on the Enterprise Act 2002 and the Communications Act 2003 to ensure that no Secretary of State was ever placed in the position in which Jeremy Hunt placed himself. We thought that we had achieved that. I agree with the noble Lord, Lord Fowler, that we need to find another way forward.
However, I have a greater concern that I will put to the noble Baroness. On 9 July 2009, David Cameron, who was then the Leader of the Opposition, made a speech that became known as the “bonfire of the quangos” speech. He mentioned only two quangos but picked out Ofcom as one that needed to be trimmed back and to have its powers curtailed. I do not think that there is anyone in this Chamber or in the other place at the moment who would suggest that this is a moment for Ofcom’s powers to be curtailed. Three months later, the Sun came out in support of the Conservative Party. Was this a coincidence, and could politicians of all parties think twice before they start talking about reducing the power of regulators and regulation?
Baroness Garden of Frognal
The noble Lord makes a very powerful point. What he said about Ofcom was of course proven to be absolutely valid in the light of the events that unfolded. The sequence of events unfolded fairly rapidly, and the power of the regulator and the respect in which regulators are held have been enhanced by what has happened. We certainly see that Ofcom still has a role to play in matters such as this.
On the matters concerning my honourable friend the Prime Minister, I cannot comment directly.
Lord Smith of Finsbury
My Lords, as a former Secretary of State I re-emphasise the point made by the noble Lord, Lord Fowler. Matters relating to media ownership, public interest and plurality are surely matters to be determined by Ofcom or by the Competition Commission, not by any Secretary of State, however honourable.
Baroness Garden of Frognal
My Lords, we are hearing consensus from all sides of the Chamber on that, and I entirely agree with the noble Lord.
Lord Cormack
My Lords, is there not another issue we should be considering: the exact role of special advisers? I cast absolutely no aspersions on Mr Jeremy Hunt, for whom I have a very high regard, but it seems to me that while special advisers have an understandable role in liaising with party politicians and so on, they should not usurp the role of the career civil servant. I believe—I raised this as long ago as the early 1970s in another place—that Governments of all parties have tended to be careless in the way in which they have used special advisers. This is not the first example we have had in the past 12 months. Could we have a review of the exact role, position and duties of special advisers within government departments?
Baroness Garden of Frognal
My understanding is that in this case the special adviser was one of a number of people, including officials, who had particular roles in respect to the BSkyB bid—but I hear what my noble friend says and if there are matters I can write to him on, I will do so.
Lord Myners
My Lords, while the House has very many concerns about plurality and media ownership, the issue here is a very narrow and precise one. It is about ministerial accountability and compliance with ministerial regulations and the code. This is not to be left to Leveson, who will take a long time and no doubt do a very good job. This is a Secretary of State whom I hold in high regard—I have been very impressed by the way in which Mr Hunt has conducted his affairs, particularly in support of arts institutions—but the simple fact is that there was a complete breakdown of control within DCMS and for that the Secretary of State, who appointed the special adviser, must take entire responsibility. I cannot believe that there was not daily contact between Mr Adam Smith and the Secretary of State and, as we have seen from the e-mails, decisions to be announced by the Minister were disclosed to News Corporation in advance—textually precisely accurately. This is also a breach of Financial Services Authority regulations, which the Permanent Secretary of DCMS should immediately investigate and report to the FSA. Will the noble Baroness confirm that that will be done, and explain why the Secretary of State is not taking responsibility for the people he appointed and who reported to him?
Baroness Garden of Frognal
My right honourable friend in the other place this morning pointed out that he had a number of people in the department working for him to whom he gave responsibility for particular tasks, and he did not then monitor them in precise detail—but I hear what the noble Lord says.
Lord Martin of Springburn
I put it to the noble Lady that the impression I got when I listened to the Secretary of State and the Prime Minister was that they were far keener to allow this matter to go to Leveson than to speak to the House. Perhaps she could convey to the Prime Minister that in my experience, if a Prime Minister or a Minister of the Crown in some way feels that they can hedge the situation over to Leveson, it is highly likely that my successor, the Speaker, will allow an Urgent Question and even, in a very serious case, put aside the business of the House. Only two or three years ago, when Mr David Cameron and the Cabinet were in opposition, they put the case that Ministers must come to the House and be accountable. They cannot have it both ways.
I will ask another question on the point that has already been raised about special advisers. I am deeply concerned at their behaviour. Is it the case that special advisers have a code of conduct? If they do, then the young man, Mr Smith, would have known that he was in breach of that code by breaking a confidence and giving information before it was conveyed to the House. Today the name of Damian McBride was shouted out. It is alleged that Mr McBride, as a special adviser, was keen to blacken the name of the Prime Minister and the Chancellor when they were in opposition, and of the honourable Nadine Dorries. It is sad situation when the taxpayer has to pay for people who are not only incompetent but prepared to blacken the name of decent men and women.
Baroness Garden of Frognal
The noble Lord asked a number of questions. I was in the Chamber during Prime Minister’s Questions and while the Secretary of State was making his Statement. On his point about the Secretary of State being accountable to the House, I say that my right honourable friend was doing just that in coming to the House to take questions in great detail for well over an hour from Members of the House. I hope that he proved himself accountable to the House on that front.
The noble Lord asked about the role of spads and whether they have a code of conduct. My understanding is that they do. They perform an incredibly useful function, as successive Governments have discovered—but obviously, if something has gone wrong, that needs to be looked into on an individual basis. He also mentioned some of the evidence that we saw in the media today. We need to be somewhat cautious about taking at face value all the reports that appear in the media. This is the very aspect that we are discussing today, and it might be wiser in some respects to wait until the evidence has been fully investigated so that we know which parts of the reports of the media are true and which are somewhat creative.
Lord Davies of Stamford
For the avoidance of doubt, will the noble Baroness confirm to the House that what the Government are asking us and the country to believe is that a special adviser, whose office was no doubt next door to that of the Secretary of State, who saw him several times a day, who worked in close collaboration with him and had been appointed by him as a person of trust, without any instruction from the Secretary of State, without any encouragement, without any connivance, took it upon himself to become deeply complicit with one particular party to a highly controversial decision that the Secretary of State was going to have to make, got into the business of leaking documents, talking about tactics and substance, exchanging views, and never thought to tell his Secretary of State what was going on, to check with him that he was happy with that or to report to him on any of the content of those exchanges? Is that actually the story that the Government is inviting the House and the country to believe?
Baroness Garden of Frognal
Once again, the noble Lord is fielding reports from the media that have not necessarily been substantiated, and it would be wise to wait to see which of them are true. All I can say on the question of Adam Smith’s role is to refer to his letter of resignation in which he states that,
“the content and extent of my contact was done without authorisation from the Secretary of State”.
Lord Inglewood
Does my noble friend agree, first of all, that the allegations made about the Secretary of State are extremely serious; and, secondly, that the Secretary of State’s Statement in the House of Commons was an explanation of what occurred but what we need to see is the evidence on which the explanation was based so that Parliament and the public can make up their mind about the events that have occurred?
Baroness Garden of Frognal
Yes, my Lords, what my noble friend says is probably right.
Lord Bates
Are we not missing something of the big picture here? The questions over News International have not appeared only in the past 18 months. They have run beneath the surface, at the core of public life in this country, for some 15 years. Now what we have is an inquiry that is tasked to look at this. I, too, looked at the terms set out for the Leveson inquiry. The case has been made that they are not relevant, but they are exactly relevant. What is being considered now is the relationship between press and politicians and, specifically, the extent of unlawful or improper conduct within News International and other media organisations. That is highly relevant. We now have an inquiry that is two-thirds of the way through its consideration, which should be allowed to consider this important issue in the round—and which this Government actually set up.
Baroness Garden of Frognal
I agree with my noble friend that that is the position, and that a lot of lessons will come out of the Leveson inquiry that could range very much wider than the remit that was set for it. We certainly hope that the end of the inquiry will not be the end of the matter and that these various disturbing cases will be taken forward and we will reach a resolution.
Lord Storey
Where are we up to on the Government’s commitment to a statutory register on the lobbyists of public affairs committees, and when are we likely to see legislation enacted?
Baroness Garden of Frognal
My noble friend is quite correct that in January the Cabinet Office announced that it was looking actively at a statutory register of lobbyists. It was interesting that we saw in the debate just before this one support for the positive power of lobbyists to make valuable changes to things going forward. On the actual dates, I am afraid that I do not have the answer, but I will write to him.
Lord Beecham
Will the Minister say whether the Government think it right that they should seek from the most interested party in an application of the kind that has precipitated this affair a comment on the submission of another interested party opposing that application?
Baroness Garden of Frognal
My Lords, there were many aspects of the matter that need more inquiry and further looking into. On the issue that the noble Lord raised, we need to look at exactly what happened and who was told what, and why. There may well come out of that lessons about what we could learn to do better in future. But he is right that that is certainly an area of concern.
Lord Stoneham of Droxford
I congratulate the Minister for handing these questions in difficult circumstances on behalf of the coalition Government. Would she like to join in congratulations to the Department for Business for the way in which it conducted itself during these troubles? Also, while we have had a number of attacks on the role of special advisers, we should also congratulate the behaviour of the special adviser in that particular department during this time.
Baroness Garden of Frognal
I thank my noble friend. We can see that there was much that went correctly in the Department for Business—but as we all know, the matter was transferred to the DCMS. On all these things we need to look and see what went right and what went wrong and try to do it better next time. This is definitely not the end of this particular matter.
European Communities (Amendment) Act 1993
Lord De Mauley
That this House approves, for the purposes of Section 5 of the European Communities (Amendment) Act 1993, the Government’s assessment as set out in the Budget Report, combined with the Office for Budget Responsibility’s Economic and Fiscal Outlook, which forms the basis of the United Kingdom’s Convergence Programme.
Lord De Mauley
My Lords, I welcome this opportunity to debate the information that will be provided to the Commission this year under Section 5 of the European Communities (Amendment) Act 1993. As in previous years, the Government report to the Commission on the UK’s economic and budgetary position in line with our commitments under the EU’s stability and growth pact. The Government are to submit their convergence programme by 30 April. It explains our medium-term fiscal policies as set out in the Autumn Statement, Budget and OBR forecasts, and is drawn entirely from previously published documents that have been presented to Parliament. It makes clear that this year’s Budget reinforces the Government’s determination to return the UK to prosperity, and it reiterates our number one priority—tackling the deficit and restoring economic stability.
Last month’s Budget builds on the foundations laid in the 2010 Budget to safeguard our economic stability; to create a fairer, more efficient and simpler tax system; and to drive through reforms to unleash the private sector enterprise and ambition that are critical to our recovery. As my right honourable friend the Chancellor of the Exchequer said in his Budget speech, Britain will earn its way in the world.
Today’s news that UK GDP fell 0.2 per cent in the first quarter is, of course, disappointing. We face a very tough economic situation. It is taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime, even taking account, for example, of the recent fall in unemployment. But over many years this country has built up massive debts, which we are having to pay off, and it is made much harder when so much of the rest of Europe is in recession, or heading into it. The one thing that would make the situation even worse would be to abandon our credible plan and deliberately add more borrowing and even more debt. You cannot borrow your way out of a debt crisis.
We can succeed only if we continue to safeguard our economic stability. But because of actions we had already taken, we were able to put forward a Budget this year that has a neutral impact on the public finances, implementing fiscal consolidation as planned, and keeping us on course to achieve a balanced structural current budget by 2016-17, with debt falling as a percentage of national income in 2015-16. Fiscal sustainability is the vital precondition for economic success, but there is much more that we are doing to catalyse growth. First and foremost, we are undertaking far-reaching reform to ensure that our tax system is simple, predictable, fair and supports work. We are committed to creating the most competitive tax system in the G20, cutting, for example, the rate of corporation tax to 22 per cent by 2014, the lowest rate in the G7, fourth lowest in the G20. But as well as creating the right and competitive conditions for business to flourish, we will continue to invest in our future.
We have announced that we will take forward many of Alan Cook’s recommendations for roads and developing national road strategy. We have confirmed investment to provide ultrafast broadband to 10 cities across the UK, with a second wave of cities to follow, and we will continue to support the establishment of a new pension infrastructure platform to unlock an initial £2 billion of investment by as early as 2013.
Of course, a return to prosperity depends not only on what we do here in the United Kingdom, but on events beyond our shores. As the Office for Budget Responsibility said in its March report,
“the situation in the Euro area remains a major risk”,
to the UK’s economic forecast. More than 40 per cent of our exports are to the euro area. In that regard, it is encouraging that progress has been made over the last year. The European Central Bank’s monetary loosening has helped stabilise the banking system. There has been progress in stabilising Greece, and a number of countries have announced economic reforms.
Lord Eatwell
My Lords, on the day that the British economy has fallen back into recession, it might have been expected that the Treasury spokesman would take the advantage of this economics debate to explain himself to the House. Apparently, he prefers to stay away and avoid the embarrassment. I am sure we are all grateful to the noble Lord, Lord De Mauley, for valiantly throwing his body into the breach.
We have learnt over the past couple of years that quarterly GDP figures should be taken with several grains of salt, but the figures released this morning are consistent with all the revised numbers over the two years that the coalition Government have been in office. Basically, the economy has ground to a halt and growth is negligible, and because of this the rate at which government borrowing is being reduced has also slowed down. Indeed, the deficit in March this year was higher than in March a year ago. No one can doubt that these dismal results are the consequence of the coalition policy of austerity. As the Financial Times has pointed out:
“Official figures on Tuesday showed five more years of grinding austerity were in prospect”.
Tightening your belt to pay back a debt is becoming painfully familiar to many households in this country, so simple arguments about austerity being the price of excess borrowing resonate with daily experience. Yet the analogy is false; coalition austerity is impoverishing not only the borrower but the lender too, for from whom have the UK Government borrowed this money? None other than our pension funds, our insurance companies and our investment trusts, all of which are suffering from the recession created by coalition austerity policies.
The Budget documents before us reveal the true dimension of the failure of the coalition policy of general impoverishment. It is that general failure that I wish to concentrate on today, rather than pick over the decaying bones of the Budget itself. I remind the House of the state of the economy that the coalition inherited; it was growing at 2 per cent per year, an almost inconceivable figure today. The coalition’s actions on taking office reduced that to zero in just a few months, primarily, as has been so effectively argued time and time again by the noble Lord, Lord Skidelsky, by destroying business confidence. They followed this by imposing the coalition one-club policy: austerity as the cure for all economic ills. Also, as is made clear in the Budget report, 90 per cent of planned government cuts are still to come—squeezing the life out of the British economy.
The Government also inherited an economy in which the public sector was running a fiscal deficit unprecedented in peacetime. That deficit inheritance is well illustrated in Chart 2.5 of the convergence programme report. Noble Lords will note that at the beginning of 2008 the deficit was about 2.5 per cent of GDP and was falling, as it had been doing for the previous two years. Then, in mid-2008, the Government’s finances were engulfed by a veritable tsunami as the financial crisis resulted in rapidly falling tax revenues and rapidly rising expenditure, such that the deficit rose to over 11 per cent of GDP by 2010. The question before us today is simple: is austerity securing recovery? Is it securing an effective elimination of that deficit and building strong foundations for future growth?
The answer to these vital questions can be found in the OBR report that accompanied the Budget, and indeed is embodied in the convergence report. The OBR points out that the austerity programme does not simply result in loss of output over the next five years or so, but results in a permanent loss of output as the productive potential of the economy is reduced, undermined by the lack of investment in productive capacity and the erosion of skills among a lost generation of the unemployed. The OBR could not be clearer in stating that,
“our estimates of potential growth do imply a significant and persistent loss of potential output relative to the pre-crisis trend … Our … estimates for 2011 imply a potential output loss of around 8 per cent … This shortfall widens to around 11 per cent by 2016”.
The permanent loss of potential output also results in a permanent loss of potential revenue for the Government and hence worsens the deficit, prolonging the age of coalition austerity. As the OBR argues,
“the output gap determines the ‘structural’ or cyclically adjusted component of the deficit. A more negative output gap”—
that means greater productive potential—
“implies that more of the deficit will disappear automatically as the economy recovers, pushing up revenues and reducing spending”.
As chart 6.7 in the report shows, the output gap is being narrowed, productive potential is being reduced by the recession itself. So according to the OBR, the policy of austerity is itself reducing the beneficial impact that growth can later have on the elimination of the deficit. Put another way, if the growth rate of the economy were to be stimulated now, if the policy of austerity were to be abandoned, not only would growth be higher now, but the long-term output of the economy would be permanently higher, and the potential for cutting the deficit would be strengthened.
The essence of the OBR’s powerful case against the Government’s austerity policy is the starting point of a case for a policy of fiscal stimulation put forward by Professor Larry Summers of Harvard University, the former US Secretary of the Treasury. In an important paper, co-authored with Professor DeLong of the University of California, Berkeley, delivered at the Brookings Institution on the very day before the Chancellor presented his Budget, Professor Summers provided empirical estimates of the long-term impact of austerity, and of the alternative policy of fiscal stimulation. He demonstrated that under current depressed conditions, a fiscal expansion would pay for itself by enhancing the permanent potential output of the economy—the OBR’s point—and producing higher long-term revenues for the Government. As Summers put it,
“temporary expansionary fiscal policies may well reduce long-run debt-financing burdens”.
What if the Government were to take up the Summers policy, and undertake “temporary expansionary fiscal policies” that are self-financing in the long run? Where would the money come from to pay for such policies today?
Fortunately, the Chancellor himself has provided the answer. If the nation can afford to lend £10 billion to the IMF, then it can afford to lend to £10 billion to a national infrastructure bank directly to attack the decline in productive potential that the austerity policies have produced. Mr Osborne said the IMF loan would come from the UK's reserves, was not money that would otherwise have been available for public spending, and would not add to the national debt. Okay, let us perform the trick again, but this time at home.
However, it might then be argued that the rating agencies—to which the Chancellor regularly pledges allegiance—and the bond markets may not be convinced by the Summers argument, resulting in a loss of confidence in Britain with knock-on effects on interest rates. Summers presumes no increase in risk premia, resulting in no increase in interest rates. His point is that the expansion would be self-financing and therefore an increase in risk premium would be irrational. However, perhaps it is too much to expect rational behaviour from Mr Osborne's friends in the ratings agencies. After all these are the clowns who told us that securitised sub-prime mortgages were as safe as Uncle Sam. How might we protect Britain from their irrationality? May I offer two proposals that have been floated elsewhere?
First, it has been suggested in the United States that austerity policies—cuts in spending or increases in taxes—should be contingent on the economy reaching predefined goals in terms of growth and/or employment. Legislation would commit the Government to cutting the deficit when the growth target had been hit. The potential flaw in this proposal is obvious. Cuts in demand might stifle a recovery before it had properly begun. But at least this idea of contingent deficit reduction provides some escape from coalition austerity.
Secondly, the fact that the 2010 deficit was unprecedented should have prompted some thought. Coalition austerity might have been appropriate if we were facing normal cyclical swings in the economy, rather than the most severe economic shock since the Second World War. And it is the funding of World War II that is instructive. The war was a severe economic shock, and Britain borrowed heavily to pay for it. We finally paid off our borrowing to pay for the war in 2006, 61 years after the war ended. That is a sensible way of dealing with unique financial shocks, with important lessons for economic management. Even though the debt to GDP ratio in 1945 exceed 250 per cent, rather than the 70 per cent of today, this did not stop the Government creating the NHS, introducing major educational reform, expanding the welfare state and starting the difficult process of rebuilding the postwar economy.
Given that we are facing an extraordinary event, why not place the excess debt created by the circumstances of the global crisis into a sinking fund? The fund could be financed by selling the long-term bonds that the Chancellor has suggested be issued, and bond redemption could be tied to a dedicated revenue stream. The repayment of the debt could then be extended over, say, 20 years—it need not be 61—and the Government could pursue a sensible growth strategy managing the normal residual debt on an annual basis. Neither of those proposals is a perfect solution. There is no perfect solution. But at least they are alternatives to blindly following coalition austerity. Of course, these rational responses to a unique event may not convince the irrational ratings agencies, but we cannot allow Britain's future to be dominated by their irrationality.
The failure of the policy of austerity is becoming more evident day by day, not only here in Britain, but in Europe, too. Even Germany is coming to realise that impoverishing your own customers may not be a wise policy. Only the coalition fails to recognise reality. A source close to Mr Osborne is quoted by the Financial Times as arguing that, with respect to low growth in the eurozone:
“It’s not too much austerity: it’s too much debt and not enough competitiveness”.
That is how out of touch they are. They have not understood the OBR's case that austerity is weakening competitiveness and making debt reduction more difficult. However, abandoning the austerity policy will require a new framework, within which to construct a sensible fiscal and monetary platform. The OBR and Professor Summers have provided the necessary framework. Their demonstration that austerity is permanently destroying future production, and hence future government revenue, is the starting point for a sensible new policy debate both in Britain and in the eurozone. Policy must be changed now, before coalition austerity does yet more permanent damage to the UK economy.
Lord Skidelsky
I take it that the question for debate this evening is not whether Britain is on track to meet the Maastricht budget criteria, but why, nearly four years after the economic collapse of 2008, our country finds itself officially back in recession.
Since July 2010, the policy for recovery has been set by the coalition Government. The main plank of that policy has been an accelerated programme of deficit reduction. Since the coalition came to office, recovery has gone into reverse. In 2010, Britain’s economy grew by 2.1 per cent. In 2011 it grew by 0.8 per cent. With today’s figure showing a fall of 0.2 per cent in the last quarter, the OBR forecast of 0.8 per cent growth this year has been exposed as a fantasy. I feel sorry for the Treasury official who wrote in paragraph 6.1 of the convergence report, just published:
“We still expect the economy to avoid a technical recession with positive growth in the first quarter of 2012”.
The truth is that the economy is smaller now than it was in September 2010. According to the latest NIESR report, the present slump is the longest in British history. Naturally, the Osborne Treasury denies that its recovery policy was in any way responsible for the non-recovery. A correct policy, it claims, was derailed by external shocks such as the rise in import prices, the euro crisis, the structural impact of the financial crisis, and so on. Now the extra bank holiday for the Diamond Jubilee will apparently be a further impediment to growth this year, so the Queen joins the list of shocks. No, these are excuses, not explanations. The policy was wrong from the start and would therefore never have got us out of the hole into which we had fallen.
The eurozone crisis, for example, which has now spread from the Mediterranean to Holland and France, results from exactly the same austerity policy that is being implemented in this country. I never believed that the policy would work, either to promote recovery or to meet the Government’s own deficit targets. Speaking in this House on 1 November 2010, I said:
“I have never been able to understand how cutting the budget deficit in present circumstances is supposed to help employment and growth”.—[Official Report, 1/11/10; col. 1501.]
I still await enlightenment.
Chart 2.4 of the convergence report shows that the ballooning of the Budget deficit in 2009-10 was almost entirely caused, as the noble Lord, Lord Eatwell, has pointed out, by the collapse of national output. This ballooning was quite common, and there is a good comment on it dating from 1931, penned by none other than Keynes, who remarked that the rise in the deficit was,
“nature’s remedy for preventing business losses from being ... so great as to bring production altogether to a standstill”.
It has always seemed bizarre to me to believe that the best way to eliminate a deficit caused by the collapse of output is to pursue a policy that retards the recovery of output. The OBR itself estimated in 2010 that every 1 per cent of GDP decline in current government spending knocks 0.6 per cent off economic growth. It believes that without the Osborne cuts in government spending, GDP in 2016 would be 2 per cent higher than forecast—that is, nearly £50 billion higher. Translate that into extra jobs and houses, schools and hospitals that will not be built as a result of current policy.
That brings me to a second bizarre feature of the Treasury document, which is almost too arcane to discuss in polite society. Most people understand the notion of the deficit; it is the gap between what Governments spend and the revenues that they raise in taxes. The task that the Chancellor set himself in his first Budget was to liquidate not the deficit but the “structural” deficit—the deficit that would remain after the economy had recovered and actual output was again equal to potential output. Unlike the actual deficit, the structural deficit depends on estimates of such things as potential output, the output gap and the trend rate of growth—all intellectual constructs to which a high degree of uncertainty attaches, yet the Government have tied their programme to this particular shaky mast.
One might suppose that the actual deficit would shrink as the economy recovered. The structural deficit, though, has to be eliminated by policy; that is the argument. The latest OBR forecast shows it on track to fall from 7 per cent of GDP in 2010-11 to 0.7 per cent in 2016-17. En route to this mandate that the Government set themselves, something very mysterious happened. The structural deficit, which had been chugging along at about 2.5 per cent in the Brown years without causing any alarm or increasing the national debt, suddenly turned into a structural deficit of 8.9 per cent in 2009-10, with the threat of large permanent additions to the national debt. How did a deficit mainly caused by the cyclical downturn mutate into a structural deficit that threatened the Government’s long-term solvency? That was the mutation that caused alarm bells to ring and anathemas to be rained down on the Brown chancellorship for having left his successors such a horrendous mess to clean up.
The Treasury report suggests two interesting reasons for the mushrooming of the structural deficit. The first, in chart 6.2, is that the pre-recession economy had been growing above trend. The actual level of output, it claims, was 2 per cent above the potential level consistent with inflation in the long term. Since the inflation rate was almost always below the target of 2 per cent between 2000 and 2007 and the Treasury’s current assumption of the sustainable level of unemployment, at 5.25 per cent is exactly the same as the rate that prevailed in the Gordon Brown years, it is difficult for me to understand why the Treasury thinks that the pre-recession level of output was too high.
The second explanation, in paragraph 2.8 of the report, is something that the noble Lord, Lord Eatwell, referred to: that the crisis itself has left potential output 11 per cent below its pre-crisis trend. In other words, the economy will emerge from the slump permanently smaller than it was before the recession. Again, no explanation is given for this assertion. Of course, if your policy closes down capacity, it is quite likely that you will get that result. It is on this mixture of assertion, slippery definitions, and dodgy calculations that the logical foundation of the present policy is built. The Government and Treasury clearly believe in the power of incantation—if they say often enough that their policy is restoring confidence and credibility, that will make it true.
Some time last year the penny started to drop and the Chancellor produced his Plan for Growth, a belated admission that deficit reduction is not itself a growth policy and that the Government cannot just stand back and wait for the private sector to spontaneously ignite. There were a lot of measures designed to stimulate growth: lower corporation tax, bigger capital allowances, enterprise zones, green investment and so on, and now a £20 billion credit guarantee for bank loans. The measures are useful but too small, and will hardly offset the 25 per cent reduction of public capital spending this year alone. So much for the Treasury’s claim that the Government have been,
“using the savings over the Spending Review period to fund infrastructure investment critical”.
That claim is simply wrong.
It is clear that the main plank in the Government’s growth strategy is what the report calls “monetary activism”, defined as,
“additional monetary stimulus through quantitative easing”.
There was £200 billion of it in 2009-10, and the Chancellor has recently authorised another £125 billion. Studies have shown that this is useful; it has raised GDP growth by between 1.5 per cent and 2 per cent more than it would have been in its absence. And yet the effectiveness of additional quantitative easing is far more limited—there are fewer bonds left to buy and less scope to move bond yields—so this source of growth is, at best, highly uncertain.
We are sure to get out of this recession; we always do. If, however, we are to escape from semi-slump in a reasonable period of time, we have to break free from Angela Merkel’s strategy of bringing Europe to a standstill and take some initiatives of our own. The noble Lord, Lord Eatwell, has made some suggestions, and I add three of my own. First, in its April world economic outlook, the IMF advocated “balanced budget fiscal expansion”—that is, tax increases matched by increases in government spending, a fragment of forgotten wisdom from the Keynesian era. Secondly, we could follow the example of Ireland and set up a bad bank to buy illiquid assets from the banks at fair present value, aiming to minimise losses to the taxpayer from their later realisation. That would address one cause for the much noted breakdown in bank lending. At least Ireland is growing, which is more than we are. Thirdly, I have long been an advocate of setting up a national investment or infrastructure bank to afford institutional investors such as pension funds a higher yield than they can earn on gilts. I believe that we will be driven to one or other of these unorthodox measures in the end—so why not act now, without wasting more time on excuses?
Baroness Bakewell
My Lords, I wish to address a small example of what has so far been elucidated in highly theoretical and impressive terms. In the course of this austerity Budget, the Government imposed what they hoped was an unnoticed small adjustment to taxation, but it was not unnoticed. It made the headlines and became known as the granny tax—a misnomer that was joked about on several television programmes in which I took part to discuss this move.
What was interesting about the days subsequent to the Budget and the discussion of the granny tax was the implication that pensioners had done well by the Budget. One segment of the population had been treated better than the rest. I wish to challenge that; I have on record that this is by no means the situation and that the Budget missed an opportunity to improve the economy among consumers. Some 50 per cent of pensioners pay no tax because they earn so little. The increase in the pension, which the Chancellor boasted about, was £5 for each pensioner and was merely a catch-up with inflation that had gone before; 4.5 million pensioners lost out, but not by very much. It allowed Age UK to refer to the Budget change as “small beer”, by which I think it meant small sums of money. Small sums of money for people who do not have very much are far more significant than large sums of money for people who have plenty. Those turning 75 were hit more by this Budget change than the 4.5 million who had the small loss.
Pensioners are suffering and they suffered from the Budget. They suffer because VAT affects all they consume; they suffer from the inflation in food, fuel and heating prices. I simply want to make the point that 10 million people over 65 are spending all they earn and all they get from their pension because they need to. Small adjustments in their favour would have increased spending across a large segment of the population and helped to boost the economy. This was a missed opportunity and the pensioners noticed.
Lord Pearson of Rannoch
My Lords, I trust that the noble Lord, Lord De Mauley, knows that he has my sympathy in his very difficult, some might say impossible, task. I trust he will forgive me if I start by asking whether it is not surreal, even grotesque, that we have to submit anything, let alone our Budget, to the corrupt, expensive and now pointless outfit in Brussels, which has not been able to have its own accounts signed off for the last 17 years in a row. In the background, and as a related matter, is it not even more absurd that this outfit in Brussels now presumes to tell us how to reorganise our own accounting standards, how much our banks and insurance companies should reserve and much other mischief that is actively designed to diminish the City of London and our vital financial services generally?
Could the noble Lord tell us what exactly the United Kingdom’s convergence programme is? With what are we converging and to what benefit? We are told that we are doing this in pursuit of the EU’s stability and growth pact. Surely even the Government must now acknowledge that this is a dead duck: that the whole EU adventure has not brought any stability or growth but merely civil unrest, unpayable debt and slump. The countries of the future sail on, including the Commonwealth, while we stay on the “Titanic”, with the iceberg obvious in front of us.
The European Communities (Amendment) Act 1993 was the Act that put the destructive Maastricht treaty into our national law. Perhaps the worst aspect of that treaty, at least for our friends in Europe, was that it paved the way for European economic and monetary union, or the EMU, the bird that cannot fly. It came complete with its attendant single currency, the euro, which is now causing so much havoc among its members and elsewhere. The United Kingdom was of course right to avoid that part of the treaty, and credit for this is often given to the then Prime Minister, Mr John Major, and later to Mr Gordon Brown when he was Chancellor of the Exchequer. However, I understand from friends in the Civil Service that neither of these gentlemen deserves much credit for this fortunate deliverance. The credit should instead go to the bureaucrats in the Treasury and the Bank of England, who disliked the EMU because it would have passed much of their power to the European Central Bank in Frankfurt. The Treasury would no longer have been top dog in the British pecking order. That position would have passed to the Foreign Office—perish the thought.
Be that as it may, it seems that our proceedings today have their justification in the failed process of European economic and monetary integration. I cannot see, therefore, why we should have anything to do with it. Why should we submit anything at all to Brussels, let alone our Budget? It is true that the Government have rightly refused the insolent demand by Brussels that they should submit our Budget to Brussels before the House of Commons sees it. They are to be congratulated on that small show of defiance. However, I come back to the question: why are we doing this at all? I fear the noble Lord’s answer will be that it is a treaty commitment, that we take our treaty commitments seriously and that we will be fined by Brussels in the Luxembourg Court if we do not do it.
I conclude with some advice for the Government, which I have attempted to give before but which I do not think has quite sunk in yet: that there is no way in which the EU can enforce a fine against a donor member state such as the United Kingdom. EU fines can be enforced against individuals and companies in the national courts where they reside. Recipient nations can have their fines deducted from the money Brussels sends to them. This, however, does not work for donor nations such as us or Germany or, dare I mention it, Holland.
Perhaps the Minister could pass this advice on to his right honourable friend, Mr David Lidington, the Europe Minister, who I learned from today’s Daily Telegraph does not want us to pay the extra £890 million now being demanded by the Commission into the bottomless pit of Brussels. A senior EU official has apparently told the Daily Telegraph that we could be sent to the Court and fined if we did not pay up. So what? Just knock the fine off the £10.2 billion in net cash we sent Brussels last year—and it is more this year. Just knock it off and see whether they dare to do it again. If Mr Cameron and his Conservative colleagues started to behave like this, they might even win the next election. So it should be with this insulting Motion before us, which I oppose.
Lord Davies of Stamford
My Lords, I will come back to the Budget, if I may, and not take up the very challenging, provocative and frankly misconceived points that the noble Lord has been talking about in the European Union context. I do not want to come back to the macroeconomic stance represented by the Budget for more than two very brief remarks, because that matter has been thoroughly dealt with by my noble friend Lord Eatwell and the noble Lord, Lord Skidelsky. I also want to talk about two particular tax proposals in the Budget, the significance of which has unfortunately not been sufficiently understood so far.
Before I do that, I have those two brief comments on the macroeconomic debate. First, it is clear that the Government are committed to the Pigouvian idea, which was discredited in the 1930s and is clearly being discredited now, that if the Government cut borrowing and spending, then the reduction in aggregate demand following from that would be automatically compensated by an equal and opposite increase in borrowing by the private sector to finance consumption or investment spending. That is a very hoary doctrine that, as I said, has been proved to be wrong in the past. The Government seem to continue to be committed to it. It has become a sort of Panglossian piece of self-deception on their part.
The phrase that the noble Lord from the Treasury used this afternoon—I heard the Prime Minister use exactly the same phrase earlier today in another place—that the solution to a borrowing crisis cannot be more borrowing reflects the preference of this Government to fall back into PR slogans rather than to think through matters carefully. It is a completely nonsensical statement. Clearly, if you have a deficit, you cannot get rid of it overnight. If you are going to continue with a deficit, you are going to continue to increase borrowing. We are merely talking about the rate at which you continue to increase borrowing. There is no doubt that the solution, whatever it is—whether it is the one we on this side of the House propose, or the one to which the Government opposite are committed—would involve more borrowing. We want more clarity, a bit more analysis and perhaps a little more straightforwardness with the public, and rather less of the generation of PR slogans to disguise reality from the public.
The two particular points emerging from the tax proposals in the Budget which I want to highlight this evening are not matters which will rouse great passion around the breakfast tables of millions of families in this country. They might even seem, at first glance at least, rather technical and esoteric but they are extremely important in terms of the vibrancy of the supply side of the economy, the ability of the economy to respond to opportunities, and the willingness of people to risk their money—to invest in new or expanding businesses, to generate wealth and employment in the future. I have already raised in the earlier Budget debate the first measure that I am concerned about. I was given a one-sentence response by the noble Lord, Lord Sassoon, which made me feel that the Government either did not want to or could not be bothered to engage seriously with the issue. This concerns the introduction of a general anti-avoidance rule. I am in favour of the introduction of a general anti-avoidance rule, with the important condition—I always make this clear in any debate on the subject—that, to avoid doing considerable damage to the economy, it must be accompanied by a provision under which HMRC would provide pre-transaction rulings to taxpayers.
Briefly, what a general anti-avoidance rule—a GAAR—means is that every taxpayer is exposed to the risk that HMRC will suddenly challenge his or her tax return and say, “We are not accepting this particular structure or bottom line of taxable income because we think that you have engaged in some artificial practice for the purpose of tax avoidance. Therefore we are going to see through this structure and tax you on a completely different basis”. Under a GAAR regime, you never quite know when you may be exposed to such a risk. I suppose that it is true to say that if you always make sure that you adopt structures which cost you the most tax of any structure that you could adopt to solve a particular problem or to arrange for a particular transaction, you would not be exposed to a revenue challenge of this kind. That, of course, would mean that there would be an enormous increase in the tax burden. That would be a very undesirable thing. It is not something that the Government have ever thought of, I am quite certain. If, in fact, you have a reasonably tax-efficient structure which you have adopted for totally respectable operational, strategic or other reasons, you are always exposed to the Revenue saying, “No, no; you only did this in order to avoid tax, so we are going to attack you with the GAAR”. The only way around this is to have a system under which you can ask HMRC in advance whether or not it would accept a particular structure and, if it does, you know that you are safe. The IRS regularly provides pre-transaction rulings, and there is no reason whatever why HMRC should not do so. I will come on to that in one moment.
The first proposition that I put to the Minister is that the effect of introducing a GAAR without a pre-transaction ruling facility is greatly to increase tax uncertainty in this country, or to reduce tax certainty. I do not think that he will argue with that, but he will argue with my second proposition, which is that tax certainty is an important factor in the determination of willingness to exist and the location of investment decisions. That decision process which sometimes may be more intuitive and sometimes may be an explicit equation will always include certain key factors. Of course, these include political stability, the real output cost of labour, access to markets, availability of skills and monetary stability. All these things are important, but tax rates are important and tax certainty is extremely important. Therefore, if you change the variable of tax certainty, or produce a greater degree of tax uncertainty, you will change the outcome of that particular equation. You will have less investment. That is a very undesirable thing to do.
Lord Myners
My Lords, I hesitated for a moment to rise to speak because I was assuming that there would be contributions from the other side of the House. However, not only has the Minister, the noble Lord, Lord Sassoon, decided to desert the House on what is a particularly important day for an economic announcement and debate, but we have not had a single speech from the other side, and, as far as I can see, not a single Member on the other side of the House is even trying to speak in this debate.
Let me suggest that the Government’s proposal to accord with our obligations under Article 121 of the European Union Treaty on Functioning could be achieved in a better way than by submitting 500 pages of documents, as is proposed. I suggest that the Chancellor instead write a shorter letter to Commissioner Barroso, as follows.
“Dear Manuel, here is our annual submission on convergence. The news is good. We are converging with Europe on policies—austerity is the byword for everything we talk about now here at Horseguards—and we are converging on outcomes: we are back into recession, just like most of Europe.
“We are now officially into recession. In fact, output at the moment is 4.5 per cent below the previous high. We are seeing a contraction in output capacity. We are contemplating the inevitability of the longest recession for over 100 years. I have had to reduce my growth forecasts, or those produced by my Office for Budget Responsibility, on five occasions, and increase my debt forecasts each time. Between you and me, Manuel, I am beginning to lose confidence in Mr Chote and his two colleagues. To put it at its mildest, they have made an absolute Horlicks of their economic forecasting. Now I am afraid that they are going to tell me that lower growth and taxes will mean even greater public sector spending cuts in order to meet the fiscal policy constraint that I have imposed on myself.
“I also suspect that they are going to tell me very shortly that the output gap is even smaller than they previously believed it to be and accordingly the cyclically adjusted deficit and the adjustments that I will have to make in public expenditure are going to be even greater. You may remember that I was able to tell Parliament during the last Budget that we were still on course to meet my fiscal objectives. I did rather fudge the issue, as I pushed out the target date, and, importantly, pulled the wool over the eyes of my Liberal Democrat colleagues by pointing out that I was going to make a further £16 billion of unidentified public expenditure cuts in the two years after the general election—cuts which the Liberal Democrats will presumably have to reflect in their own manifesto at the time of the next election.
“I am loath to admit that perhaps Vince Cable and Andrew Tyrie were on to something when they said we needed a credible and coherent strategy for growth. I have promised Parliament on many occasions that I will produce a strategy for growth, but somehow I have not been able to find one. But needs must: I have painted myself into a corner with a policy of expansion through fiscal contraction. By the way, if you can give me any examples of where this has worked elsewhere in the world, or some academic sources, to rebut the evidence that comes at me from the Opposition Benches and Cross Benches in the House of Lords, that would be most welcome.
“I take some comfort from the fact that you in Europe are, on the whole, following the same policy. By the way, how is it going for you fellows—do you see any light at the end of the tunnel? Things have not been helped here in the UK by inflation. The Bank of England appears to have got this completely wrong: in all the time I have been Chancellor it has never hit the inflation target for a single month. Now the inflation figure is rising again. This is really squeezing consumption, particularly for the poorest in society, who, regrettably, have had to bear the largest burden of the fiscal adjustments I have announced to date. I must not, of course, be too critical of the Governor of the Bank of England. The governor keeps reminding me that he is older, wiser and more experienced than me, and writes me regular letters—one every three months—explaining that, when it comes to inflation, everything will be fixed before he leaves next year. By the way, he appears fixated now with his legacy.
“We continue to do this QE thing. I am damned if I can really understand it, but the governor says that it will be easier to reverse than to implement. I cannot see that myself, but I cannot risk asking him about how he has reached this conclusion, in case he does not know the answer, or I will not like it.
“Consumer demand in the UK economy has not been helped by unemployment. The news is not too bright here. We now have the highest level of unemployment since we were last in office. We have 1 million young people out of work, and the figure is increasing. We have the highest level of female unemployment for over 30 years. Business investment is also a bit in the doldrums. They say it is all about confidence. I do not understand that myself. There is some better news on manufacturing and exports, which are up. But this is largely due to trade with Europe, which rather pulls the rug from beneath my feet when I say that our economic problems are caused by the difficulties currently being experienced in Europe.
“Things would obviously be lot easier if the banks lent more. The Bank of England has just produced a credit report showing a further very substantial contraction in lending to SMEs. You may remember we tried that Merlin thing last year. Quite frankly, it did not work at all: the banks lent less in the end than they did before it started. We are now working on something called credit easing, although between you and me, it has all gone rather quiet on that front, and the banks do not seem very keen on it at all. Of course, it does not stop the bankers taking huge bonuses. Mr Diamond at Barclays is about to trouser another £20 million. There is very little prospect of any of that ending up in the accounts of HMRC, as he is a non-dom. In any case, he seems to have negotiated a deal under which his tax is paid for him by the bank.
“However, I must not get too annoyed about the bankers: it is not as if they got us into this problem in the first place. Nor must I get upset with the pension funds, which seem to be remarkably loath to step forward and support any of the infrastructure investment that I so proudly announced in my Autumn Statement last November.
“By the way, I am going to have to adjust the words in my speeches about the fact that the Government are increasing capital expenditure, because I realise that we confused a negative figure with a positive figure and, in fact, we are reducing public expenditure at a time when we have excess capacity.
“Interest rates, of course, are low. I claim this as one of our successes, and I have precious few others to offer in competition. But I recognise that this is largely because of QE, where we are buying back our own debt, and the generally recessionary tone of our economy. The consequence of low interest rates is hugely damaging to savers and pensioners. Please don’t mention to me the Japanese experience, where low interest rates had no positive impact on economic growth.
“I mentioned the poor earlier in my letter. I have just given 10,000 or so bankers, and others who are earning over £1 million a year, an extra £50,000 in tax benefit. Fat chance that they will give me any thanks for that. In fact, I am finding it increasingly difficult to get business people to speak up in favour of the Government’s economic policy now. All those people who signed letters just before the last general election seem reluctant to come to our kitchen suppers.
“House prices continue to fall—although fortunately not here in Notting Hill. We have introduced a new scheme, regarding which some people tell me I will be legged over by house builders, but at least we are seen to be doing something positive in encouraging new house building.
“You probably know that my opposite number, Ed Balls, is having a rather good run at the moment. Quite frankly, I find him very frustrating. But that hand gesticulation he makes about flat-lining is beginning to look as though it is right. Mr Balls has come up with a five-point plan for growth. Some of the ideas are quite good. In fact, one for abolishing or reducing VAT on housing improvements and repairs is rather a good one to me, although the house builders tell me that it isn’t. But I can’t really reduce VAT on repairs to domestic houses when I have just put VAT on repairs to cathedrals.
“Well, there we are. We are converging. We are tightening our buckles. We are tightening our belts. I even had to tell my father, after that rather injudicious interview he gave to the Financial Times’ How to Spend It magazine, that it really wasn’t sensible to say that my next ambition is to spend £19,000 on buying a desk. Yours ever, George.
“PS—it is going to be like a hole in the head if that Frenchman Hollande gets elected. How are we going to cope with that? By the way, can you please make sure that the IMF and the OECD don’t go through a further change of mind and begin to say that perhaps my fiscal policy is wrong and I should be doing something to encourage growth because that is the best way of reducing the deficit and the debt.
“As you know, Manuel, I have got to keep my distance from you because that is our policy as far as Europe is concerned. However, my colleague Jeremy Hunt says that you can always call me on the mobile”.
Lord Stoddart of Swindon
My Lords, I should like to join the noble Lord, Lord Myners, in pointing out that the Benches opposite are virtually, but not quite, empty. The one occupant is from the junior partner of the coalition. I have to sympathise with the Minister who is to reply, the noble Lord, Lord De Mauley, because his party has completely deserted him. It is a very serious matter for a Government when a Minister is confronted by so many erudite speeches from the Labour Benches and, indeed, the Cross Benches. The last speech that we heard was very amusing indeed. This has enabled the Opposition to make a concerted attack on the Government’s Budget, and their economic policy, without one criticism or speech of reply from the Benches behind the Minister. That is quite shocking and I hope that in future the Whips, or whoever else is in charge, will ensure that the Minister is far better supported than he has been this evening.
This debate is,
“to move that this House approves, for the purposes of section 5 of the European Communities (Amendment) Act”.
As I have already said, what we have had, except for the excellent speech of the noble Lord, Lord Pearson of Rannoch, is a debate on the Budget and economic policy. I have to say that I congratulate all those who have spoken, because the speeches have in some ways been superior to those made in the House of Commons. That is something that noble Lords and people who read Hansard might care to consider when we debate, perhaps in the next Session, the future of this House.
First of all, I support what my noble friend, if I can call him that, Lord Pearson raised—the matter of Europe and whether we should be having this debate at all tonight. When I saw the item on the agenda, my mind went back to 1992 when the Maastricht treaty was before Parliament, having been signed by the then Foreign Secretary, who then said, “Perhaps I had better now read what it says”. We had a long debate about what was going to happen with regard to the Maastricht treaty. At that time, people such as me and the noble Lord, Lord Pearson, warned that what was contained in that treaty would eventually lead to many powers reverting from this House and the Government to the institutions of the European Union. So it has happened. As the noble Lord, Lord Pearson, rightly said, it is absurd and outrageous that we, the Government and Parliament, should have to send our economic policy and our Budget over to Brussels to be supervised by the Commission and 26 other countries. That is not self-government, if I can put it that way; it represents being governed from abroad by bureaucrats who are completely unaccountable and insensitive to what our own nation state requires, or what is required by the other nation states in the European Union.
The document I am holding here is the Convergence Programme for the United Kingdom, but convergence with whom and for what purpose other than to create a single European state? Why would we wish to be concerned with the basket-case countries on the brink of default and collapse? The Conservatives say that they want to be in Europe but not governed by Europe, but convergence is about government, and about European governance. As I have already said, it is outrageous that this country should be obliged to submit its plans to Brussels bureaucrats for oversight by 26 other countries, many of which are very much smaller and less important than us.
What if Parliament refuses to agree? We could have a vote tonight. Probably everyone has gone home, so we might even win it. What if Parliament refuses to agree to submit the convergence criteria? What then? The noble Lord, Lord Pearson, raised this matter. He told the House that it was impossible for the Commission—or the Community or the Union, as it is now called—to fine, but we have been amazed at the sort of things that the European Union and its institutions can do, so I am not at all certain that he is right that no attempt would be made to fine this country if we refuse to submit our economic policy under Section 5.
Lord Pearson of Rannoch
My Lords, I did not say that no attempt would be made to fine us. It is certain that an attempt would be made to fine us. A fine would indeed be issued by the Luxembourg so-called court of so-called justice. All I said was that there is no way that Brussels and Luxembourg can force a donor nation to pay a fine.
Lord Stoddart of Swindon
I hope the noble Lord will be able to answer that question. They could not send troops over here to enforce their will. I do not want to keep the House for much longer, although there have been some long speeches tonight, but people in this country are getting quite disillusioned with politics. The Hansard Society published its latest figures today, which show that only 42 per cent of the electorate are interested in politics—a 16 per cent drop since the 2011 figures. Their disillusionment is understandable because they have realised that the United Kingdom is increasingly governed not by its own elected Parliament but by the EU and other international institutions. No wonder percentage turnouts at elections are now so low because people see no point in voting for a Parliament in which EU treaties hand decisions and governance to the EU and its institutions.
Lord Layard
My Lords, I agree with every criticism that has been made, and I note that this is not wisdom in hindsight, because all these criticisms were made before the policy was embarked on after the election.
The basic problem, which is making the policy not work, is that it is based on a misdiagnosis of the underlying issue. This is exactly the same situation as we have in Europe. The policies which are not working there are based on the same misdiagnosis. That misdiagnosis is that Governments have been behaving irresponsibly and that is why we have a problem. That is not why we have a problem. One or two Governments have—Greece, certainly—but most countries have not had irresponsible behaviour by their Governments. The irresponsible behaviour was by the private banks. That produced the economic collapse, and the economic collapse is what produced the government deficits. The government deficits were not produced by the Governments; they were produced by the misbehaviour of the private sector.
These deficits sprung up because tax receipts had collapsed. Corresponding to that there was the increase in the surpluses of the private sector as private households and companies were trying to retrench. As for how the public deficits could be financed, they would be financed by private savings. That is how it works, and it could work perfectly well provided that private savers had some assurance that they were putting their money in a safe place. What did that require? It required only two things. First, it required some guarantee by the Governments of our own country and other European countries that there would be no increase in government expenditure until tax receipts had come back up as a result of the return of growth. That was a perfectly reasonable requirement from investors. The other thing which was required was some underwriting of the public debt by the central banks.
Lord Lea of Crondall
My Lords, like the noble Lord, Lord Stoddart, I have not failed to notice the empty Benches opposite. I think that the view of members of the Conservative Party is that they do not need to worry about things such as this because they do not support the Maastricht treaty and perhaps do not support the present economic policy of the Government, although they have not been able to produce anybody to say so tonight.
Contrary to what the noble Lord, Lord Stoddart, said, I have no doubt that the Minister will have no difficulty at all in waving aside all the points made from this side with his Etonian insouciance. It is obviously tempting to have a vote, but I think, on balance, the fact is that for many years—10 or 15—we have been committed to this procedure and Labour Governments, as well as Conservative Governments, have thought it right to make a proper contribution to the debate about the EU stability and growth pact. That includes the input of the social partners, the trade unions and employers. That has been to the good.
On this occasion, I think that the future environment of the stability and growth pact is a big question, and I am surprised that the Treasury, with its excellent syntax and arithmetic, has not addressed any of the bigger issues which confront us at what I think is the end of one chapter in Europe and the opening of a new one.
I am referring, among other things, to the fact that we have a presidential election in France. As the Prime Minister said that he supports President Sarkozy, I will take this opportunity to give my maximum support to our comrade over the other side, François Hollande, and wish him well in 12 days’ time, or whatever it is. I shall sketch out a hypothetical scenario to which the Treasury should pay some attention. If and when President Hollande is in place and has his first meeting, as he will, with Chancellor Angela Merkel and they reach some agreements and then, one way or another, our Prime Minister meets him in Paris or London, what is he going to say? Is he going to say, “Bingo, the French and the Germans have reached a good agreement”? Have we nothing to contribute to their implicit complete relook at the stability and growth pact? Of course, there is not a word in this document, but I do not know whether any thinking is going on in the Treasury at all. I do not think that it has had any green light from Mr Osborne to do any such thinking, but it had better start in the next 10 days.
Where do we start from? The position of the incoming President Hollande, to take that hypothesis, would be—as he has said pretty consistently—not to undermine the fiscal pact but to but to add a big dimension of growth to the stability and growth pact. So this is the time to examine how on earth they would, without some highly innovative banking ideas, square the circle of getting out of a general slump. It is different from when the Maastricht treaty was created. We were there at its creation and there was a relatively good level of employment. At that phase of the economic cycle, with the underlying position at that stage, it was not unreasonable to have the figure of 3 per cent. By the way, there was a quite separate debate as to whether Greece should not have been treated much more stringently in inquiring about its position when it joined the euro. Allow me to say that that discussion has got totally mixed up with our discussion now, although in principle it is not central to it.
The circle is impossible to square unless we recognise that the arithmetic entails at least 4 per cent economic growth in Europe per annum for a few years to get the 2 per cent underlying growth of productive potential. That is to do with new technology, productivity, science and so on. I have no reason to believe that in Europe generally, one should put the underlying productive potential at less than 2 per cent growth per annum.
Lord De Mauley
My Lords, I am grateful to all noble Lords for their contributions and for the opportunity to do my best to reply. Following this debate, as I said earlier, the Government are required to report to the European Commission their assessment of the UK’s medium-term economic and budgetary position as they have done since the stability and growth pact came into operation.
There has been a large number of questions, so let me make a start on them. I cannot guarantee that I will have time—I have as much time as I like, but your Lordships may tire. I will do my best. The noble Lord, Lord Eatwell, suggests that the Government’s economic policy is not working. I acknowledged in my opening remarks that it is taking longer than anyone hoped to recover from the biggest debt crisis of our lifetime, even after the recent fall in unemployment. Over many years, this country has built up massive debts, which we are having to pay off. That is made much harder when so much of the rest of Europe is in recession, or heading into it. Fiscal consolidation is critical for the UK to maintain confidence and minimise risks. International institutions and credit rating agencies support the Government’s fiscal strategy, with, for example, the IMF recently saying that it had,
“concluded that the degree of fiscal consolidation for 2012 is right”.
That is why Standard & Poor’s recently reaffirmed the UK’s AAA credit rating. Reversing the historic rise in public debt will strengthen the UK’s medium-term growth prospects. A recent OECD study showed that high levels of debt damage growth but, with respect to the noble Lord, Lord Eatwell, considerable action is being taken to stimulate growth. We are supporting investment in energy. The Government will introduce a package of oil and gas tax measures to secure billions of pounds of additional investment in the UK continental shelf and publish a strategy for gas generation in the autumn of 2010, recognising that gas-fired electricity generation will continue to play a major role in UK energy supplies over the next decade and beyond.
We are supporting the housing market by providing an additional £150 million to the Get Britain Building fund to help to deliver more than 3,000 more homes. We are expanding private investment in infrastructure. The Government have supported the establishment of a new pension infrastructure platform, which will make the first wave of the initial £2 billion of investment infrastructure by early 2013. We are making rail investment. The Budget gives the go-ahead to Network Rail to deliver three elements of the northern hub proposal at a cost of £130 million, subject to a final value-for-money assessment.
We are supporting technology. The Government are setting an ambition to make the UK the technology hub of Europe. To help achieve this, we will extend mobile phone coverage to 60,000 rural homes and along at least 10 key roads by 2015 and will set up a new £100 million fund to support investment in major new university research facilities. I earlier referred to what we are doing in the area of ultrafast broadband.
We are reforming planning. We are supporting investment across the United Kingdom and are decentralising decision-making power away from central government. We have agreed to proposals by the Greater Manchester Combined Authority to pilot a new model that is set to unlock £1.2 billion of infrastructure investment.
The noble Lord, Lord Eatwell, suggested that the recession was the result of the Government’s policy of austerity. Our credible fiscal plan has helped us maintain our top international credit rating and has lowered interest rates to record lows, making, for example, family mortgages and business loans cheaper. In fact, the one thing that would make us lose our credit rating would be a deliberate decision to increase borrowing and debt. As the noble Lord knows well, we argue that spending more would be counterproductive. It would increase the deficit and put the UK’s status as a safe haven at risk. Cutting the deficit is critical to maintaining market confidence. That is why the Government’s deficit reduction plan is endorsed by the IMF, the OECD, the European Commission, the credit rating agencies and UK business organisations.
The noble Lord, Lord Eatwell, proposed that long-term bonds should be issued. There has been evidence of demand for gilts with long-term maturities against the backdrop of historically low long-term interest rates which provide a direct benefit to the economy and help keep interest payments lower for families, businesses and the taxpayer. In 2012-13, the Debt Management Office will consult on the case for issuing gilts with maturities significantly longer than those currently issued.
The noble Lord, Lord Skidelsky, referred to a line in the convergence programme document stating an expectation that we would avoid technical recession. The Government established the independent Office of Budget Responsibility, and it is the OBR that expects a recovery in underlying growth momentum over the year and that measured GDP growth will be broadly flat in the first half of 2012. That forecast is unchanged, as is the overall OBR forecast for 2012. The noble Lord made quite a number of suggestions. I refer to the Government’s focus on encouraging greater investment in infrastructure, increasing access to finance for SMEs and reforming tax policies to ensure that the UK is the best place to build finance and set up a business. I would like to consider what he said and write to him addressing the issues he raised.
The noble Baroness, Lady Bakewell, is no longer in her place, so I will leave her points.
The noble Lord, Lord Pearson, supported by the noble Lord, Lord Stoddart, asked why we are converging and who we are converging with. Those who are not members of the euro are legally obliged to submit convergence programmes to the European Commission. All the euro-outs, as they are known, with the exception of the UK and Denmark, are committed to join the single currency when they meet the relevant convergence criteria. As noble Lords well know, the UK has an explicit opt-out from joining the single currency under its protocol to the EU treaties, and the Government have made clear that we have no intention of joining or preparing to join the single currency in the lifetime of this Parliament, so we are not converging and we have no intention of doing so. However, it is a legal requirement under the Lisbon treaty to submit this document.
Lord Stoddart of Swindon
I am a little puzzled by what the noble Lord has just said. He appeared to say that we do not need to converge and that there is no requirement for us to do so. Is that what he said, or have I misunderstood him?
Lord De Mauley
There is no requirement to converge, but we none the less believe that we should honour our legal commitments.
I think the gist of what the noble Lord, Lord Pearson, said is that we should not be contributing to the EU budget. The UK remains a committed member of the European Union. However, it is unacceptable for the Commission to impose an inflation-busting budget increase for the 2013 EU budget when Governments across Europe are making difficult decisions on public spending, and we will be pressing for a more realistic budget that recognises the economic reality across Europe.
The noble Lord also suggested that there was no accountability for EU spending. For the 17th successive year, the European Court of Auditors is unable to grant an unqualified positive opinion on the EU accounts. That is entirely unacceptable. The UK Government demand concrete action by the Commission and member states to improve EU financial management.
I am just coming to the noble Lord, Lord Davies of Stamford, and perhaps he will let me have a go at his initial questions.
Lord Davies of Stamford
In response to what the noble Lord just said to the noble Lord, Lord Pearson, is it not the case that the auditors have consistently declined to sign off on those aspects of the accounts of the Union which involve money disbursed by member states—for example, structural funds and CAP funds? There have been a number of difficulties in a number of countries, but there has never been any doubt at all about the robustness of the accounts of the Commission and the institutions of the Community. Therefore, this issue is an indictment of a lack of federalism, not of too much feudalism. If the Commission were directly responsible for disbursing all these funds, there probably would be no problem. The problem is with member states that have had a lot of difficulty in keeping accounts properly.
Lord Pearson of Rannoch
Before the noble Lord rises to reply to that well known canard, it is, of course, true—is it not?—that a third of the budget is under the direct control of the European Commission. If the noble Lord, Lord Davies, would like to understand how it really works, instead of continuing to produce Europhile propaganda, I suggests he reads Brussels Laid Bare by Marta Andreasen. Then he will understand how the whole thing works, and we will no longer have these fruitless debates trying to pretend that this is not the fault of the corrupt octopus in Brussels but entirely the fault of the wicked nation states, which are also at fault, of course.
Lord Lea of Crondall
Is it not absolutely clear that the funds directly being disbursed in Brussels by the Brussels bureaucracy, as is often said, are the funds that have a clean bill of health in the auditing? It is the funds down to the nation states that are the reason why the auditors cannot sign off all these accounts. It is as simple as that.
Lord De Mauley
My Lords, I am not going to enter into this discussion any further.
The noble Lord, Lord Davies of Stamford, talked about the general anti-avoidance rule. I am not sure it is entirely relevant to this debate, but I can say that the Government will consult on the GAAR in summer 2012 with a view to bringing forward legislation in the Finance Bill 2013. A targeted GAAR is the right solution to tackle the persistent problem of artificial and abusive tax-avoidance schemes. I will take the noble Lord’s specific points back to the Treasury and write to him on them.
In an amusing speech, the noble Lord, Lord Myners, referred to, among other things, IMF and OECD support. The IMF and the OECD support the Government’s policy. The IMF’s Madame Christine Lagarde said that under the current circumstances the policy in place is the “right thing to do”, and the OECD Secretary-General said on our Budget 2012:
“The Budget announced today is another important step towards a sound fiscal position for the United Kingdom. The confirmation of the UK’s fiscal consolidation programme should keep bond yields low and support the recovery”.
Lord Myners
Will the Minister also acknowledge that the OECD has said that if the UK’s growth performance is lower than that forecast by the OBR, it will be necessary to revisit the fiscal strategy being pursued, and to ask whether that was contributing to the problem rather than solving it? In the interests of completeness, the Minister should give the full position of the OECD rather than a highly selective summary.
Lord De Mauley
Perhaps I can come back to that in a moment. The noble Lord, Lord Layard, suggested that there were optimistic assumptions in the OBR forecast, in particular on oil prices and risks from the euro area. The OBR says that,
“oil prices remain a significant uncertainty and the possibility of a further temporary spike in prices represents a risk to our forecast”.
Renewed upward pressure from the record oil prices in recent weeks is also recognised as a risk to the Bank of England’s forecast, most recently in the minutes of April’s MPC meeting.
The noble Lord, Lord Lea of Crondall, spoke about what might happen in the forthcoming French presidential election. He will appreciate that it is not for me to speculate on the outcome of the French election. Of course, the UK is not a party to the fiscal compact; it does not apply to us. The SGP was strengthened last year. Any proposal for fundamental change would require treaty change and that would require the consent of all 27 nations.
Lord Davies of Stamford
Can the noble Lord tell the House why, apparently on two occasions, the Prime Minister has refused to meet with Monsieur Hollande? Are his judgment and power of prediction in political matters as bad as in economic matters?
Lord De Mauley
My Lords, no, I cannot answer that question. The noble Lord, Lord Stoddart, asked what would be the repercussions if the House voted against this Motion this evening. The result would be that the Government would not have the statutory authority to submit the information that forms the basis of the convergence programme. The UK would therefore breach its obligations under the EU treaties, which could lead to infraction proceedings brought by the Commission under Article 258 of the treaty, for failure “to fulfil an obligation”. As I have said before, the Government take their legal obligations seriously.
It is worth saying that a strong Europe is in the UK’s economic interests. The Government want to contribute to a strong, prosperous Europe, while safeguarding our interests.
Lord Stoddart of Swindon
Can the Minister explain what would happen if Parliament decided that it did not want to obey this particular instruction or law under the treaty, and infraction proceedings took place? Is it possible for the United Kingdom to be fined? If it refused to pay the fine, what would then happen?
Lord De Mauley
My Lords, as I said, we would be in breach and subject to infraction proceedings and, yes, I am sure that we would be subject to a fine. I do not want to speculate on what would happen if we did not pay it.
There were a number of questions that I have been unable to answer, including the recent question posed by the noble Lord, Lord Davies. I will, of course, write to noble Lords with answers to those questions.
It is right that we share our budgetary and economic plans with the European Commission and other member states through the convergence programme and our national reform programme. This is a key step in the European semester process. These plans are provided after the Budget is presented to Parliament, and the Budget makes clear that Britain will earn its way in the world. It shows our commitment to fiscal consolidation and economic growth and, along with the OBR’s forecast, it forms the basis of the UK’s convergence programme.