House of Commons
Prayers
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Oral Answers to Questions
(11 years, 11 months ago)
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Mrs Helen Grant (Maidstone and The Weald) (Con)
2. What plans he has to bring forward legislative proposals on the rules governing succession to the Crown.
Mark Lancaster (Milton Keynes North) (Con)
5. What plans he has to bring forward legislative proposals on the rules governing succession to the Crown.
The Deputy Prime Minister (Mr Nick Clegg)
We are working closely with the New Zealand Government to secure the agreement of all the Commonwealth realms to the introduction of UK primary legislation on royal succession. Legislation will be introduced once we have secured this agreement and when parliamentary time allows.
Mrs Grant
If the birds and the bees of the romantic Isle of Anglesey were to conspire and bless our future King of England and his wife with the patter of tiny feet before this law was enacted, and if that royal baby turned out to be a little girl, would she succeed to the throne?
The Deputy Prime Minister
If the birds and the bees were to deliver that blessing to the Duke and Duchess of Cambridge—and, indeed, the nation as a whole—that little girl would be covered by these provisions and changes to the rules of succession, because they operate as from the time of the declaration at the Commonwealth summit last October. It is important to remember that the rules are de facto in place, even though de jure they still need to be implemented through legislation in the way I have described.
Mark Lancaster
Will the Deputy Prime Minister confirm that there are no plans to change the requirement for the monarch to be a communicant of the Church of England?
Paul Flynn (Newport West) (Lab)
In the interests of democracy and dragging the monarchy and the office of Head of State into the 21st century, can it be arranged for the new Bill to permit alternative candidates to stand as Head of State, given the misgivings about King Charles III?
The Deputy Prime Minister
The hon. Gentleman mentions what sounds like another attempt to resurrect the alternative vote system, which I do not think was greeted with universal acclaim last year and would not apply in this area either. More seriously, I do not think he should belittle the enormity of this change. We are getting rid of some very long-standing, discriminatory anomalies on male primogeniture and the rule preventing heirs to the throne from marrying—uniquely among all religions—Roman Catholics. That is real progress that has not been achieved in a long time.
Mark Durkan (Foyle) (SDLP)
3. What assessment he has made of the effect of his proposals on House of Lords reform on the relationship between the two Houses.
The Deputy Prime Minister (Mr Nick Clegg)
The Government believe that the primacy of the House of Commons will be maintained. We accept, of course, that the conventions and agreements between the two Houses will continue to adapt and evolve, but this is compatible with the continued primacy of the House of Commons. I stress that this is not only the view of the Government; the majority of the Joint Committee on the Draft House of Lords Reform Bill said that the current basis
“on which Commons primacy rests would suffice to ensure its continuation”.
Mark Durkan
The Deputy Prime Minister will hear many Members wax precious about the primacy of this Chamber, but this Whip-tamed Chamber spends far less time considering legislation and has a poor rate of success with amendments. Is there not something pathetic about self-respecting democratic legislators having to rely on the fact that another House is unelected to claim legitimate primacy?
The Deputy Prime Minister
I share the hon. Gentleman’s view that, although some concerns about the primacy of the House of Commons need to be taken seriously, some are overstated, not least because the changes that we published in our draft Bill would mean that, because the other place would be elected in instalments, it would never have a more recent, fresher democratic mandate than Members sitting in this place. When combined with other differences of mandate, constituency and so forth, that approach will ensure that the relationship between the two continues to guarantee the primacy of this place.
Mrs Eleanor Laing (Epping Forest) (Con)
It is interesting that the Deputy Prime Minister quoted selectively from the Joint Committee report. That report also stated:
“We concur…that Clause 2 of the draft Bill is not capable…of preserving the primacy of the House of Commons.”
Does he accept that?
The Deputy Prime Minister
I accept that the Joint Committee received evidence, particularly from Lords Pannick and Goldsmith, suggesting that the two Parliament Acts should be incorporated and reflected in clause 2 to clarify this issue of primacy beyond doubt. We are actively considering that and all the Joint Committee’s recommendations.
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
Would it not have been sensible to start out by looking at the powers and responsibilities of the second House first, rather than just continuing as we are?
The Deputy Prime Minister
It is important to stress that the Joint Committee did not make that suggestion, and neither have a succession of cross-party committees and commissions over the last several years. All of them have agreed that there is nothing incompatible about increasing the legitimacy of the other place, on the basis of the very simple, uncontroversial principle that the people who make the laws of the land should be elected by the people who obey the laws of the land, and that this matter should in no way need to wait for a wider discussion on the respective powers of the two places.
Mike Crockart (Edinburgh West) (LD)
Given that we are now part of a multicultural and polytheistic society, does my right hon. Friend agree that now is the time to remove bishops from the House of Lords, rather than increasing the proportion of seats that they would hold?
The Deputy Prime Minister
I know there are strongly held views on this issue, as on many issues to do with reform of the other place. The balanced approach that we took as a Government in the draft Bill was to reduce the number of bishops from 26 to 12, but not to remove them altogether.
Sadiq Khan (Tooting) (Lab)
I thank the Deputy Prime Minister for the way in which he answered those questions. How soon does he expect to be able to publish the Bill, and how many days does he think it is reasonable for MPs to have to debate it?
The Deputy Prime Minister
We hope to publish the Bill well before the summer recess. The amount of time that would be allocated to it would be the subject of discussion through the usual channels and then a possible timetable vote in the House of Commons.
Amber Rudd (Hastings and Rye) (Con)
4. What steps he is taking to improve the completeness and accuracy of the electoral register.
The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
We are bringing forward our Electoral Registration and Administration Bill, which has its Second Reading in the House tomorrow, to improve the completeness and accuracy of the electoral register.
Amber Rudd
How does my hon. Friend expect individual voter registration to help with efforts to get more disabled people and young people registered to vote?
Mr Harper
It is certainly true that there has been a lot of focus on the possible risks to this approach. When we debate Second Reading tomorrow, I hope that colleagues will see that we have taken a lot of steps to deal with that. However, there are also a number of opportunities, one of which is through the online registration system that we are introducing. We hope that disabled people, particularly those with visual impairments, will find it more convenient and easier to register. We may therefore find that, among certain groups, we have a better chance of getting people registered to vote and able to exercise their democratic rights.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
Will the Minister publish an ongoing league table showing the number and percentage of people on the electoral register?
Mr Harper
Information about people on the electoral register is, I understand, already published by the Office for National Statistics. It is difficult to publish a league table showing the percentage of eligible voters, because no clear information is available about the number of eligible people in each parliamentary constituency. However, information on the number of people registered to vote in each area is regularly published by the Office for National Statistics.
Mr Robert Buckland (South Swindon) (Con)
Can my hon. Friend assure me that all appropriate steps will be taken to reduce the risk of people falling off the register, and that registration officers will have all the tools available to them to ensure that registration is maximised in their local areas?
Mr Harper
I can give my hon. Friend that assurance. We have made a number of changes to the Bill to reflect the recommendations of the Select Committee on Political and Constitutional Reform, whose Chairman, the hon. Member for Nottingham North (Mr Allen), is in his place today. When colleagues on both sides of the House study the changes, they will see that we have taken all the steps to maximise the accuracy of the register and to ensure that no one eligible to vote falls off it in the transition.
Mr Wayne David (Caerphilly) (Lab)
If the Government wish, as they say, to have a complete and accurate electoral register, why are they pressing ahead with their individual electoral registration legislation before the results of the next round of data matching are known? Can it be because they are thinking about the parliamentary boundary review of December 2015?
Mr Harper
That is not the case. The hon. Gentleman knows that, based on the data-matching pilots we have already run, we think that there is good evidence that we will be able to confirm two thirds of voters who are already on the electoral register and move them over to the new one, assured that they are real people registered at those addresses. We will run more pilots later this year, subject to parliamentary approval of the orders, to test that proposition further and see whether there are any other lessons to learn. However, we are confident from the work that we have done so far that the process is robust.
Huw Irranca-Davies (Ogmore) (Lab)
6. What plans he has to bring forward proposals on the regulation of the lobbying industry.
Mr David Crausby (Bolton North East) (Lab)
7. What plans he has to bring forward proposals on the regulation of the lobbying industry.
Stephen Timms (East Ham) (Lab)
9. When he plans to implement the commitment in the coalition agreement to introduce a statutory register of lobbyists.
The Parliamentary Secretary, Cabinet Office (Mr Mark Harper)
The hon. Member for Ogmore (Huw Irranca-Davies) will know that we have just carried out a consultation on our statutory register of lobbyists, which closed on 20 April, and we are now studying the responses. We will publish our response to that consultation before the summer recess, and we will publish a White Paper and draft legislation later this Session.
Huw Irranca-Davies
I thank the Minister for that helpful answer. Abuse of lobbying is nothing new, but in recent years we have had to deal with the issue of helpful calls to News International. We have seen the Conservative co-treasurer offering dinner dates with the Prime Minister, Bell Pottinger offering influence at No. 10, and Adam Werritty and so on. So may I ask the Deputy Prime Minister to get on with this register, because people were disappointed not to see it in the Queen’s Speech and this situation is undermining our democracy?
Mr Harper
I would add to that list of examples, because people are also concerned when trade unions write amendments for the Labour party. I will not take any lectures from the Labour party on dealing with this issue at speed, because it had 13 years to tackle the issue and made no progress at all. It is important that we get this right, so that we do not have to keep returning to it. We have published a consultation, I have set out the steps we are going to take to publish a White Paper and a draft Bill, and I have already made a commitment, when giving evidence last week to a Select Committee, that we will deal with this issue, as we have committed to do, this Parliament.
Mr Crausby
The Prime Minister has already been proved right when he said that lobbying would be the “next big scandal” to happen, so why this delay? Does the Minister not agree that any failure to bring forward meaningful legislation will justifiably feed the public mistrust of politicians? Is it not time that we completely cleaned up this place?
Mr Harper
I am very happy to agree with the first part of the hon. Gentleman’s question; the Prime Minister is, indeed, always right. On the second part of the question, the hon. Gentleman did not listen to my previous answer. I am not going to take any lectures from the Labour party, which did nothing on this subject. It is important to get this right. We have published the consultation document. He will know, from listening to what people have said publicly, that there are a range of views on how we deal with this. We are going to look at those consultation responses, publish our proposals and put them up for pre-legislative scrutiny, so that people can look at them, and we will legislate and deal with this matter in this Parliament, as we have committed to do.
Stephen Timms
The Minister still has not explained to us why the Government are dragging their feet. It was widely expected that this Bill would be in the Queen’s Speech and we have been told that the draft legislation is going to be available before long, so why not just get on with it and bring the legislation forward?
Mr Harper
Again, I remind the right hon. Gentleman that his party did nothing about this when in government. We will take one lesson from his Government: rushing forward with ill-considered legislation that then is not brought into force or which goes wrong when it is introduced and then has to be revisited is not a good way of legislating. We have published a number of Bills in draft so far, in the first Session of this Parliament, including the one dealing with electoral registration. That is a good way of legislating and it is generally supported across this House. It is better to get it right and do it well, rather than rush it and make a bodge of it.
Mr Christopher Chope (Christchurch) (Con)
What is my hon. Friend doing to regulate that most destructive form of lobbying—that which comes from Liberal Democrat Back Benchers and is designed to undermine the economic recovery by arguing against the regionalisation of public sector pay and against the Beecroft report?
Mr Harper
Speaking for myself, I enjoy being lobbied by Back Benchers of all descriptions, be they Members from the Government parties or Opposition Members. I am very happy to listen to views. The Government will then move forward with their proposals on lobbying, based on the evidence and on the responses to our consultation.
Stephen Lloyd (Eastbourne) (LD)
The Minister will know that there is considerable opposition on both sides of the Houses to any regulation on lobbying, and we all know why, certainly after 13 years of the Labour Government. However, will he confirm that the key is transparency? If the public know which politicians are meeting whom, it will be much harder for anything dishonourable to happen. I hope that that will be a key part of any announcement.
Mr Harper
The hon. Gentleman is right to focus on transparency. It is one reason why Ministers in this Government are much more transparent about those whom we meet than Ministers in previous Governments were—[Interruption.] It is no good the hon. Member for Rhondda (Chris Bryant) laughing; this Government are much more transparent about the meetings that Ministers have. Transparency is the key; that is where we have identified the problem and this is what we are going to solve with our proposals. As I said, it is important to get it right and get the job done, and that is exactly what we are going to do.
Steve Rotheram (Liverpool, Walton) (Lab)
8. What his policy is on upholding the principle of accountability in a reformed House of Lords.
The Deputy Prime Minister (Mr Nick Clegg)
Members of a wholly or mainly elected reformed second Chamber will serve long non-renewable terms. Non-renewable terms of three electoral cycles have been a feature of cross-party reform proposals since they were agreed over a decade ago by the Wakeham commission in January 2000. This is why the idea was reflected in the draft Bill. It has since been endorsed by the Joint Committee, and we expect to maintain it in the Bill shortly to be brought before Parliament.
Steve Rotheram
It appears that the Deputy Prime Minister has the anti-Midas touch and that great opportunities for lasting constitutional reform have been squandered because of poor political judgment. What is the Deputy Prime Minister’s rationale for believing that those 15-year non-renewable terms for the second Chamber will renew democratic accountability? As a result, will Lords reform simply be another failed Lib-Dem coalition policy?
The Deputy Prime Minister
I know that the hon. Gentleman meticulously wrote his question before he listened to the initial answer, so perhaps he will listen to this one. As I said in my first answer, the idea of three non-renewable terms is not something invented by this coalition Government or the Joint Committee; it was first identified on a cross-party basis over a decade ago. That is why—quite sensibly, in the name of consensus and in pursuit of real reform—we are maintaining that proposal now.
Jake Berry (Rossendale and Darwen) (Con)
If we are to have real reform of the House of Lords and to restore trust in politics, not only should the House of Lords be largely elected, but is it not now time to send the ermine up the motorway to one of our great northern cities, such as Manchester or Sheffield?
The Deputy Prime Minister
That is an excellent idea. We will include this novel proposal in our thinking. On a more serious note, all three main parties put before the country in May 2010 manifestos that committed us all collectively to House of Lords reform. If we are to honour our manifesto commitments, I think we should proceed quickly and swiftly.
Mr David Winnick (Walsall North) (Lab)
Can the Deputy Prime Minister explain why so few of his own party’s Members in the House of Lords support his proposals? Indeed, Lord Ashdown is almost a lone voice. What is the explanation for that?
The Deputy Prime Minister
The power of a whiff of ermine on people’s opinions on reform of the House of Lords has never failed to amaze me. All I can say is that the manifesto commitments of the hon. Gentleman’s party, my party and the Conservative party were clearly in favour of completing this century-long debate on the reform of the other place. I think we should now get on with it.
Laura Sandys (South Thanet) (Con)
When the Bill is published, will it come with a financial assessment of what will happen to the House of Lords if we do not reform it, and of what will happen once we get to, say, 2020, when we will have to equalise every time there is a change of government in this place?
The Deputy Prime Minister
We will, of course, publish the financial implications. The hon. Lady is right to highlight an issue that has not been given sufficient attention—how unsustainable the status quo is. Are people really comfortable with a second Chamber that will soon be composed of 1,000 or more members, in which more than 70% are there through nothing more than political patronage and in which they receive £300 tax-free just for turning up?
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Given that the House of Lords is often seen as a lifeboat for ailing political careers, so that there are vested interests in this place that are very much against reform, will the Deputy Prime Minister lead by example and guarantee that, in the event of his attempts at reform being unsuccessful, he will not take up a seat in the Lords?
The Deputy Prime Minister
I certainly hope that my reform proposals will be successful.
Mr Peter Bone (Wellingborough) (Con)
Mr. Speaker, we have a—[Interruption.]
Mr Bone
Thank you, Mr Speaker. We have a very courageous Deputy Prime Minister, and may I urge him to continue with House of Lords reform, because he will be a national hero to the 8% who vote Liberal Democrat? On accountability, will he promise that there will be no programme motion so that this House can fully discuss these major constitutional reforms?
The Deputy Prime Minister
Ample time will be allowed, but we should keep this in proportion. This is not something that the vast majority of people in the country care about a great deal. That does not mean that the Government cannot do more than one thing at once, and I have to say to those, perhaps including the hon. Gentleman, who want to block up all parliamentary business because they object to this simple reform that the burden is on them to explain why they want to protect an unsustainable and indefensible status quo.
Ann McKechin (Glasgow North) (Lab)
T1. If he will make a statement on his departmental responsibilities.
The Deputy Prime Minister (Mr Nick Clegg)
As Deputy Prime Minister, I support the Prime Minister on the full range of Government policies and initiatives. I take special responsibility for the Government’s programme of political and constitutional reform, including reform of party funding. Let me briefly update the House on that issue. I wrote to party leaders in February asking them to nominate representatives for cross-party discussions on party funding. Meetings took place on 11 and 30 April. Representatives are meeting again today, and will hold a further discussion next week.
We all know the parameters. This is not about reinventing the wheel. The Kelly report provides a sound basis for agreement. We simply need to demonstrate the political will to make progress, and I hope and expect that to be possible before the summer recess.
Ann McKechin
This week the Deputy Prime Minister spoke of the wasted talent in the country caused by the lack of social mobility, and I concur with his comments. However, given the direct link between poverty and some of the indicators that he will be using, such as birth weight, why are the Government pursuing cuts in tax credits and benefits, which will simply lead to more children living below the poverty line?
The Deputy Prime Minister
As the hon. Lady knows, our welfare reforms are based on the simple principle of ensuring that work always pays. That is what these controversial reforms are about, and that is what universal credit is about. For years and years under Labour the welfare budget ballooned and the incentive to work diminished. That is what we are seeking to change through our welfare reforms.
Anna Soubry (Broxtowe) (Con)
T2. People in Broxtowe will have been pleased by today’s news that inflation has come down. What other measures does the Deputy Prime Minister think the Government should be taking to help hard-pressed families throughout the country?
The Deputy Prime Minister
I think it is significant that in one week we have seen the release of official statistics showing that both unemployment and inflation are down, and today we have heard from the IMF that the policy prescription that we are pursuing is exactly the right one to repair the mess left by the Labour party. There are many reforms that we need to introduce, but one that I would highlight is a simpler, fairer tax system. Because of the tax reforms that we have introduced, as of next April more than 2 million people with low earnings will be paying no income tax whatsoever.
Ms Harriet Harman (Camberwell and Peckham) (Lab)
It has been a bad week for the Germans. First they are beaten by Chelsea, and then they get an economics lecture from the Deputy Prime Minister. Can he tell us why he is qualified to lecture anyone about economic policy when his Government have left us with a double-dip recession and 1 million young people looking for work?
The Deputy Prime Minister
The right hon. and learned Lady must be suffering from amnesia. Does she not remember how her Government sucked up to the City of London, went on a prawn cocktail offensive which let the banks off the hook and presided over increases in youth unemployment year after year after 2004, the biggest peacetime deficit ever seen in this country, and the largest decline in manufacturing—even larger than the decline in the 1980s? That is Labour’s record, and I am proud of the fact that we are trying to fix the mess that she left behind.
Ms Harman
When we left office, the economy was growing and unemployment was falling. Today the Deputy Prime Minister has been prancing around preaching about social mobility, which is frankly ludicrous when he is cutting tax credits for low-income families, providing a tax cut for millionaires, and scrapping an important measure designed to narrow the gap between rich and poor, namely clause 1 of the Equality Act 2010. It is always the same with this Deputy Prime Minister: he says one thing and does another. For all the difference that he makes in Government, he might as well be chillaxing or beating his own record at Fruit Ninja.
The Deputy Prime Minister
That was laboured even by the standards of the right hon. and learned Lady. She referred to the upper rate of income tax, and she is ranting and railing against the new 45p rate that we will introduce next April. Perhaps she can answer a simple question. Why did the Labour party maintain a lower tax rate of 40p in the pound for upper-rate earners for the 12 years and 11 months for which they were in office? I know that the right hon. and learned Lady does not like the 45p rate; perhaps she wants to advocate the rate that she maintained for most of her time in office.
Just today, Christine Lagarde of the International Monetary Fund that
“when I think back myself to May 2010, when the UK deficit was at 11%”
—that was Labour’s gift to us—
“and I try to imagine what the situation would be like today if no such fiscal consolidation programme had been decided…I shiver”.
That is a judgment on the legacy of the right hon. and learned Lady.
Rehman Chishti (Gillingham and Rainham) (Con)
T4. Can the Deputy Prime Minister confirm that House of Lords reform was in the manifestos of all three main political parties, and does he agree that it is absolutely right and proper that politicians should now keep to their promise and enact this much-needed reform?
The Deputy Prime Minister
Yes, I strongly agree that, as I have said, we should just get on with reforming the House of Lords with the minimum of fuss. I ask those who want to hold the whole of Government and parliamentary business hostage on this matter why on earth they think it is such a priority for the country that that business should be brought to a standstill. Given those manifesto commitments, we should work on a cross-party basis to finally complete reform of the House of Lords.
Kate Green (Stretford and Urmston) (Lab)
T5. I did not hear the Deputy Prime Minister say anything about ethnic inequalities in his speech on social mobility this morning, yet black youth unemployment is twice that of white British young people, ethnic minorities are under-represented in apprenticeships and although increasing numbers are entering higher education, they are more likely to attend less prestigious universities. If the Deputy Prime Minister is serious about social mobility, does he agree that we need targeted policies to address ethnic inequalities in education and employment?
The Deputy Prime Minister
I certainly agree with the hon. Lady’s characterisation of the problem for many young people in our black and minority ethnic communities. It is one of the reasons why I have commissioned some work to look at the strong anecdotal evidence that it seems to be harder for young black and minority ethnic entrepreneurs to secure loans from banks on the same reasonable rates as others. That is just one issue among many that we need to address. However, I draw the hon. Lady’s attention to the fact that the targeted interventions that we are delivering—£8 billion on pre-school support for two, three and four-year-olds, a new free pre-school support package for all disadvantaged two-year-olds as of April next year, the pupil premium and so on —disproportionately benefit those who are disadvantaged in the communities to which she refers.
Graham Evans (Weaver Vale) (Con)
T11. Last week we had some fantastic news: 700 new jobs at Ellesmere Port Vauxhall factory, making the new generation of Astras. Does the Deputy Prime Minister agree that that is a fantastic example of how flexible working can help rebalance the economy in the United Kingdom?
The Deputy Prime Minister
I strongly agree. That was a very important moment, as it underlines something that has been quietly building for some time: a real return to form for British manufacturing. The fact that as a country we are now exporting more cars than we are importing for the first time since the 1970s shows that, notwithstanding all the anxieties and concerns about the economic situation generally, this is an area of emerging strength for Britain.
Grahame M. Morris (Easington) (Lab)
T6. May I refer the Deputy Prime Minister to an answer he gave a few moments ago, and ask whether he is aware that figures have been placed in the House of Commons Library this morning showing that public sector debt has risen from £12,500 per head in May 2010 to £16,200 per head in April 2012? Is this figure—[Interruption.] It’s higher. Is this higher figure a result of the Deputy Prime Minister having taken his eye off the ball by concentrating on Lords reform instead of getting on with jobs and growth and getting our 1 million young people back to work?
The Deputy Prime Minister
The reason for those figures is the shocking state of the public finances left by Labour. Today’s IMF report very precisely identified three reasons why the British economy still faces real headwinds: first, increasing global commodity prices last year, which was not something we could control; secondly, the uncertainties of the eurozone, which is also not under our control; and thirdly, the hangover of monumental public and private debt, which was, indeed, a debt crisis made in No. 10—the No. 10 of Gordon Brown, aided and abetted by the backroom boys, the current Labour leader and shadow Chancellor. It is they who created the crisis in the first place.
Fiona Bruce (Congleton) (Con)
T14. Does the right hon. Gentleman agree that proceeding urgently and with vigour on the reform of political party funding is a matter of fairness and justice?
The Deputy Prime Minister
We all know that that is a problem for all political parties. The controversies and scandals about party funding, the opaque way in which it is organised and the imperfect way in which political parties are held to account has damaged all political parties. That is why it is overwhelmingly in our shared interest to come to an agreement. As I said earlier, it is merely a matter of political will. The Kelly committee has show in outline what the bare bones of an agreement should look like and I hope that we will now be able to reach one.
Huw Irranca-Davies (Ogmore) (Lab)
T7. The Government have been taking a bit of a “pastying” in the west country recently and, as a result, we are told that the Deputy Prime Minister is listening—at least to the voices of his own MPs in panic. Will he also listen to the voices of Welsh workers at Talgarth Bakery, the Old Parish Bakery, Ferrari’s, Pin-it Pastry, Jenkins the Bakers and Peter’s pies and make a hasty—or should that be a “pastry”—retreat on the pasty tax?
The Deputy Prime Minister
That is Christmas cracker stuff from the hon. Gentleman. As I said earlier, we have extended the period of consultation on that issue. I recognise the strength of feeling about the issue from him and from many Members on both sides of the House. We have listened very closely to the representations of many figures in the industry and I hope that we will be able to make proposals shortly.
Martin Horwood (Cheltenham) (LD)
On 10 May, Rosehill street in Cheltenham was devastated by a major gas explosion. Within 24 hours, 600 residents of Hatherley in my constituency had also been evacuated following a police explosives alert. Will the Deputy Prime Minister join me in congratulating the emergency services, the council and residents on their response to that unprecedented combination of emergencies and send a letter of special support to the jubilee street party in Rosehill street, which is going ahead anyway in a great show—
Mr Speaker
Order. We are grateful to the hon. Gentleman. I do not want to guide the Deputy Prime Minister unduly, but I should say that there is no violation of parliamentary rules in offering the House an answer that consists of a yes or a no.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
T8. Last week, the Deputy Prime Minister said:“There is going to be no regional pay system. That is not going to happen.”Are not his Government drawing up plans for precisely such a system?
Zac Goldsmith (Richmond Park) (Con)
Will the Deputy Prime Minister reassure the House that there was no reference to recall in the Queen’s Speech because it has been sent back for a much-needed redraft and not because it has been dumped altogether?
The Deputy Prime Minister
As my hon. Friend will know, the Select Committee is still carrying out its inquiry on recall. I know that he recently gave evidence to the Committee on the subject and, in keeping with our approach to many other items on the constitutional reform agenda, we are keen to gather views and consult widely before we produce draft legislation.
Kerry McCarthy (Bristol East) (Lab)
T9. The Deputy Prime Minister will know that Bristol has decided that it wants an elected mayor. Will he support the official Liberal Democrat candidate or the man who has just resigned his Liberal Democrat membership after 25 years because he thinks that being outed as a Lib Dem will sound the death knell for his political ambitions and is therefore standing as an independent?
The Deputy Prime Minister
I think the hon. Lady was trying to be stinging, funny or both, but I could not quite work out what the question was. It is up to the Liberal Democrats in Bristol, as it is to all political parties, to decide how to put forward candidates for mayoral elections.
Philip Davies (Shipley) (Con)
Given the allegations of voting fraud in certain parts of the country, including in Bradford in my part of the world, will the Deputy Prime Minister explain why photo ID should not be required before people are allowed to vote?
The Deputy Prime Minister
In deciding the new individual voter registration system, with which we are proceeding with, I hope, cross-party support, we have looked exhaustively at the checks we consider necessary to bear down on fraud in the electoral system. That is the whole point of individual voter registration and it was right that the Government brought forward the timetable we inherited from the previous Government so that it is introduced sooner rather than later.
Stephen Timms (East Ham) (Lab)
T10. Given the slow progress with the related legislation, will the Deputy Prime Minister tell us what share of the lobbying market is accounted for by companies that did not register with the UK Public Affairs Council? What will the penalty be for those companies that do not co-operate with the Government’s proposed statutory register?
The Deputy Prime Minister
I am afraid that I cannot give the right hon. Gentleman the statistic he asks for, but I will look into it and see whether I can provide it later. On his second point, we are consulting right now on that exact issue of penalties and sanctions.
John Stevenson (Carlisle) (Con)
If we are going to give more power to the electorate by removing privilege and patronage from a reformed House of Lords and giving voters the power of election, will the Minister confirm that there is no compelling reason for a referendum?
The Deputy Prime Minister
I am personally unpersuaded that we should waste £100 million of taxpayers’ money on an issue on which, unlike with electoral reform of this place, there is cross-party consensus, with manifesto commitments to reform from all three parties. I would take seriously advice from all those critics who say that we should not proceed with House of Lords reform at all. They claim that it is not an issue of significance to the British public, so I do not think we should waste a great deal of the public’s money on a referendum when we all, nominally at least, agree that this reform should happen.
Sheila Gilmore (Edinburgh East) (Lab)
T12. The Deputy Prime Minister has been quoted in the media as saying, rightly in my opinion, that social mobility will take a long time to change, so why, on coming to power in May 2010, did he agree to the reduction or elimination of measures such as the education maintenance allowance and Sure Start long before their long-term effects could be judged?[Official Report, 24 May 2012, Vol. 545, c. 15-16MC.]
The Deputy Prime Minister
As I hope the hon. Lady knows, we have protected the money for Sure Start, but there is, I acknowledge, greater discretion for local authorities to decide how to use it. I am aware of 10 outright closures of Sure Start centres across the country, and of course it is important to know why local authorities have taken those decisions. I hope that she is also aware of the extra investment that we are now putting in, particularly for early years—for children even before they go to school. We know from the evidence that that makes the most dramatic difference for subsequent social mobility. As of April next year, 40% of all two-year-olds in this country, including all two-year-olds from the most disadvantaged families, will receive for the first time 15 hours of free pre-school support.
Mr Philip Hollobone (Kettering) (Con)
Should there not be a civic duty on everyone to ensure they are on their local electoral register, and should that not be backed up by an enforcement system of civil penalties for those who do not?
The Deputy Prime Minister
Absolutely. We listened to many representations on this point when we considered what should be included in the Bill on individual voter registration and we have indeed, as I hope he has noticed, included a civil penalty to ensure that the civic duty to register to vote is properly maintained.
Dan Jarvis (Barnsley Central) (Lab)
T13. Following on from the G8 summit at the weekend, may I ask the Deputy Prime Minister how the plan to support the Afghan Government after 2014 will have the slightest prospect of success without real progress on problems of politics and governance, which, according to almost all reports, have got worse, not better, in recent years?
The Deputy Prime Minister
The hon. Gentleman makes a very serious point. Anybody who has visited Afghanistan or examined the conflict there will know that there was never any prospect of a military solution alone. In a sense, all that military intervention can do is create the space in which social and political stability can take root. I share his concerns that we are still some way from that. It is immensely important at this stage, as we are moving towards real transition in Afghanistan, that we include other countries in the region, notably Pakistan, so that they play their full part and bring their influence to bear in order that political stability can indeed take root in Afghanistan.
Stephen Williams (Bristol West) (LD)
My right hon. Friend the Deputy Prime Minister mentioned in his speech this morning plotting the advances made by children on free school meals. Some of the schools in my constituency have more than 50% of pupils on free school meals. Will he undertake to increase the value of the pupil premium over the life of this Parliament so that the schools already making huge progress can build on their achievements so far?
The Deputy Prime Minister
The pupil premium is currently worth £1.25 billion, and that will double to £2.5 billion by the end of this Parliament. That is additional money on top of the baseline funding provided to schools. Last year, on a per pupil basis, the pupil premium was worth about £480. It is now worth £600 and will go on to increase. Given those statistics, it is remarkable that Labour in Manchester voted to scrap the pupil premium altogether. How on earth is that going to help social mobility?
Hazel Blears (Salford and Eccles) (Lab)
In his speech on social mobility this morning, the Deputy Prime Minister said:
“It is my strongest political conviction that…if we have a chance to open up success to all, we must seize it.”
What is he going to do to put an end to the scandal of unpaid internships, particularly in politics, the media and our creative industries?
The Deputy Prime Minister
I pay tribute to the right hon. Lady’s work on internships, not least in this place as part of the Speaker’s Panel. As she knows, the legislation is clear: if an intern is, in effect, doing work that should be remunerated, he or she should be remunerated. There are cases of interns doing work that falls outside that legal definition. Having looked closely at the issue, and she and I have corresponded on this, we have decided that it could be self-defeating if we sought to outlaw altogether across the piece—not least, for instance, in charities—some unpaid internships. I agree, however, that even in those cases, it is incredibly important to ensure that internships are available to everybody, and that basic costs, such as travel costs and lunch costs, are properly covered, even in those cases.
Mr David Nuttall (Bury North) (Con)
When are we going to stop the constitutional scandal that, because of devolution, Scottish MPs can vote on legislation that affects my constituents but does not affect their own constituents?
The Deputy Prime Minister
As the hon. Gentleman may know, the McKay Commission, established to look into the so-called West Lothian problem, is doing its work and will report by the end of the Session. I urge him to give evidence to that commission, perhaps, and certainly to follow its work closely.
Mr Speaker
Order. I am sorry to disappoint colleagues who have been standing. I say in a spirit of impartiality that the Deputy Prime Minister is box office. Lots of people want to ask questions and, sadly, there is not time to accommodate them all, but the right hon. Gentleman will return to his slot ere long, and colleagues can doubtless reheat their questions.
Mr Peter Bone (Wellingborough) (Con)
1. How many prosecutions the Crown Prosecution Service brought for human trafficking in the last 12 months.
Keith Vaz (Leicester East) (Lab)
6. What steps he is taking to increase the number of prosecutions for human trafficking.
The Attorney-General (Mr Dominic Grieve)
The Crown Prosecution Service has charged and prosecuted 133 offences of human trafficking in the past 12 months, 1 May 2011 to 30 April 2012. The CPS prosecutes human trafficking-related cases under other legislation as well. The CPS is taking a number of steps to increase prosecutions, but is dependent on cases being referred for investigation by law enforcement agencies.
Mr Bone
We have another Minister at the Dispatch Box who is also box office. May I encourage him to look at the problem where police spend time, money and effort breaking up criminal gangs of human traffickers, only for the CPS to charge them with much lesser offences, getting shorter sentences that are no deterrent to the human traffickers? It is essential that we prosecute people for human trafficking. What can the Attorney-General do?
The Attorney-General
I agree entirely with my hon. Friend that it is important that the right offences should be prosecuted, and if he wishes to draw to my attention instances where he feels that has not happened, I am always prepared to take the matter up. It is also right to point out that in deciding how to prosecute, the Crown Prosecution Service will look very carefully at all the surrounding issues, including sometimes the vulnerability of the offender, and may on occasion consider that the best way in which the public interest can be served is in prosecuting a lesser offence, but the principle must always be that the offence charged and prosecuted should meet the gravity of the crime.
Keith Vaz
I agree with the hon. Member for Wellingborough (Mr Bone) and pay tribute to him for the work he does in this area. Some 100,000 people are trafficked around Europe every year. This is a cross-border crime that requires cross-border co-operation. What steps is the Attorney-General taking through the Crown Prosecution Service and the Metropolitan police to work with Interpol and Europol to find the perpetrators of this cross-border crime and make sure that they are brought to justice? It must be done on an international basis.
The Attorney-General
I agree entirely with the right hon. Gentleman. It is indeed an international crime. Within the European Union there are CPS liaison magistrates in other countries, the European Judicial Network contacts, the Serious Organised Crime Agency liaison officers and Eurojust to assist. Outside the EU the position is more complicated, but we have some liaison CPS working in a number of countries with which we have particular important links. The right hon. Gentleman will be aware that under the Protection of Freedoms Act 2012, the extraterritoriality provisions provided for in EU directives have been implemented, although they have not yet been brought into operation, so that these offences can now be prosecuted here even if they were committed abroad. Ultimately, the CPS will be dependent on the evidence produced to it. That will come from the police or SOCA, and for those reasons, the CPS, while doing its best, will always continue to be dependent on the quality of the information it gets.
Tom Brake (Carshalton and Wallington) (LD)
Does the Attorney-General agree that just as the CPS must increase the number of prosecutions against people guilty of human trafficking, it must also stop prosecuting those who have been trafficked, such as in the case of AVN?
The Attorney-General
Yes, I agree entirely with the right hon. Gentleman. As he knows, the CPS has a process in operation, which has been echoed by the Home Office, to provide protection for those who have been trafficked. He will also be aware that, with the encouragement of all political parties, the previous Government signed up to providing protection against deportation for those who had been trafficked.
Dr William McCrea (South Antrim) (DUP)
As the tragedy of human trafficking crosses all regions of the United Kingdom, what recent discussions have been held with the devolved Administrations?
The Attorney-General
I agree entirely with the hon. Gentleman. The best thing I can do is write to him. I am perfectly aware that the CPS liaises extensively with the CPS in Northern Ireland and the Lord Advocate’s Department in Scotland, and I will provide him with that information.
Yvonne Fovargue (Makerfield) (Lab)
2. If he will take steps to increase the public profile of the work of the Crown Prosecution Service on allegations of rape made by young women.
The Solicitor-General (Mr Edward Garnier)
The CPS and the specialist rape and serious sexual offences teams in every CPS area take all allegations of rape against every age group very seriously, and as a matter of general principle are keen that their work should be given the highest possible public profile. That said, they and the police have to make a judgment in each case about whether and to what extent to give publicity to it pre-trial, because quite apart from the laws of contempt and those prohibiting the identification of victims, the victim is entitled to be spared as much as possible any additional trauma beyond that caused by the rape itself.
Yvonne Fovargue
The conviction last month of Kabeer Hassan and another man for rape and conspiracy to engage in sexual activity with a child calls into question the original CPS decision not to charge the men because the young woman was deemed not to be a credible witness. Does the Solicitor-General share my concern that the CPS’s original decision sends out a very dangerous message to other young victims of rape that they will not be believed?
The Solicitor-General
If there is any good news to be had out of that terrible case, it is that the chief Crown prosecutor for the north-west, Mr. Nazir Afzal, revisited that decision, overturned it and ensured that the defendants were prosecuted, and prosecuted to conviction. I hope that the hon. Lady will be pleased by the result of that case.
Mrs Helen Grant (Maidstone and The Weald) (Con)
Does the Solicitor-General agree that the increased number of rape crisis centres opened by the Government helped to increase the number of rape prosecutions?
The Solicitor-General
Yes. It will be one of the many factors that have done so, and I hope that we will see them being better used and with greater efficiency in future.
Mr David Burrowes (Enfield, Southgate) (Con)
The Solicitor-General will be aware that high profile cases often attract resource and, in particular, early involvement of the prosecution. Can he ensure that victims of rape get similar attention and profile?
The Solicitor-General
Yes, I can. The specialist rape prosecuting teams and the specially trained police officers, as well as witness care units run by the CPS, are now working well together to ensure that rape victims receive the proper treatment they need.
Mr Stephen Hepburn (Jarrow) (Lab)
4. What recent assessment he has made of the effectiveness of prosecutions for forced marriage.
The Solicitor-General (Mr Edward Garnier)
None personally, but the Home Office recently concluded its public consultation on forced marriage and the Prime Minister has announced our intention to sign the Council of Europe’s convention on preventing and combating violence against women and domestic violence, which will require us to criminalise forced marriage. Currently, in this jurisdiction there is no specific crime of forced marriage, and offences within that term are prosecuted under, for example, the Offences Against the Person Act 1861, the Sexual Offences Act 2003, or other suitable statutes.
Mr Hepburn
Every year in this country, thousands of children are subjected to the cruelty of forced marriage. The Government are quite right in what they say and they will act against this, but nothing at all was mentioned in the Queen’s Speech. Can the Solicitor-General tell us exactly when we will have a Bill in this House so that we can outlaw this barbaric practice 100%?
The Solicitor-General
No, I cannot say precisely when we will have a Bill to outlaw this barbaric practice, but I can assure him that our signing of the convention will lead inexorably in that direction.
Bob Blackman (Harrow East) (Con)
Can my hon. and learned Friend inform the House what penalties are envisaged for this terrible crime once it is made a criminal offence?
The Solicitor-General
No, but the penalties will be quite severe. The only guidance I can give my hon. Friend is to look at the penalties imposed under existing convictions. For example, last year there were 42 prosecutions for forced marriage under the various statutes I have referred to, a number of which led to quite lengthy sentences.
Hugh Bayley (York Central) (Lab)
5. How many employees the Crown Prosecution Service has at (a) Athena house, York and (b) other locations in York.
The Attorney-General (Mr Dominic Grieve)
The Crown Prosecution Service has 65 employees at Athena house and 125 staff based at United house in York.
Hugh Bayley
Has the CPS consulted North Yorkshire police and the courts in York and Selby on the impact of moving staff from Athena house on administrative costs for those two bodies? If the staff have to be moved from Athena house, would not it be practical to relocate them to the offices in central York where the other York-based CPS staff are based?
The Attorney-General
Yes. As the hon. Gentleman might be aware, a consultation is taking place. An informal consultation procedure has now ended and a formal consultation procedure on any final decision on Athena house will follow. The argument for relocating a large part of the casework units to Leeds, in my judgment, cannot be argued against because, with the reduction in numbers resulting from the savings that have to be made, maintaining critical mass and having a regional hub makes sense, but I would like to reassure him that the need to maintain a presence in York is also accepted, because of its importance as the headquarters of North Yorkshire.
Mr Speaker
Order. If the hon. Lady’s intended supplementary question refers to York, it will be in order. If it does not, it will not.
Mr Speaker
Order. Does the question relate to York or other locations in York?
Mr Speaker
And it may not. The hon. Lady has got her point on the record, but it requires no answer. [Laughter.] I am glad that the House is in such a good mood.
Nic Dakin (Scunthorpe) (Lab)
7. If he will assess the effect on the cost of prosecutions of delays caused by the absence of an interpreter.
The Solicitor-General (Mr Edward Garnier)
The CPS has no central records on the cost of court delays caused by the absence of an interpreter, but common sense tells me that such delays resulting from the absence of a necessary interpreter waste time and money.
The Solicitor-General
It was a joke and, even if it was not a joke, he has been deregistered.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
What discussions is the Solicitor-General having with his colleagues in the Ministry of Justice to ensure that the contract provisions are carefully examined and, if necessary, penalties are imposed if the service is not up to the standard required?
The Solicitor-General
I am grateful to my right hon. Friend. I discussed that matter only this morning with colleagues in the Ministry of Justice and am assured by the Under-Secretary of State for Justice, my hon. Friend the Member for Reigate (Mr Blunt), that the contract with Applied Language Solutions is now running properly. The company has got a grip on it and we can expect nothing but progress from here on.
Mr Speaker
So that we get the full benefit of the Solicitor-General’s eloquence, perhaps he could—
Mr Speaker
I do not think that that will be necessary, but perhaps in future the hon. and learned Gentleman would face the House. We would all be greatly obliged.
Mr Andy Slaughter (Hammersmith) (Lab)
It is my pleasure to stand in for the shadow Attorney-General, my hon. Friend the Member for Islington South and Finsbury (Emily Thornberry)—I understand that she has informed the Attorney-General, if not the Solicitor-General. Reports from the media, the courts and interpreters themselves show that, contrary to the Solicitor-General’s briefing, problems with ALS are getting worse, not better. The MOJ intends to publish its analysis of ALS’s performance this week, based on data that I understand were collected by ALS itself. Will the Law Officers conduct their own investigation of the collapse of the interpreting and translating service in our courts, one that will put the interests of justice before the self-serving interests of the Ministry of Justice and its contractor?
The Solicitor-General
No, I genuinely do not believe that to be necessary, and I think that the hon. Gentleman has been misinformed. The ALS contract is working well. If he knows of any particular instances where it is not, no doubt he will tell the Ministry of Justice about them, but I think I am prepared to believe my hon. Friends in the MOJ a little bit before I believe him.
Stephen Phillips (Sleaford and North Hykeham) (Con)
What mechanisms exist for the CPS to communicate concerns with regard to the quality of interpretation both to the Law Officers and, indeed, to the Ministry of Justice?
The Solicitor-General
The CPS can tell us; my hon. and learned Friend can tell us; he can tell the Ministry of Justice; we can tell the Ministry of Justice—[Interruption.]
Mr Speaker
The demeanour of the Solicitor-General is eccentric. I cannot account for how he performs in Her Majesty’s courts, but in the Chamber it would be helpful if he looked in the direction of the generality of Members.
Ann Clwyd (Cynon Valley) (Lab)
8. What recent discussions he has had with the Director of Public Prosecutions on the Crown Prosecution Service’s handling of criminal allegations against police.
The Attorney-General (Mr Dominic Grieve)
I agree that allegations against police officers must be taken very seriously, and I have had discussions with the Director of Public Prosecutions about the Crown Prosecution Service’s handling of criminal allegations against the police. Any such cases are handled, as with any other case, by CPS prosecutors, who are independent of the police, applying the code for Crown Prosecutors.
Ann Clwyd (Cynon Valley) (Lab)
As the Attorney-General knows, the case of Lynette White in south Wales, which involved bringing eight former South Wales police officers to court after 10 years on charges of perverting the course of justice, collapsed and is now the subject of two inquiries. Can he give us some idea of when they are likely to report?
The Attorney-General
I am afraid that I am not in a position to give the right hon. Lady those details, but I will see whether subsequently I can supply her with further information. I entirely agree that the case revealed some very worrying features indeed, and I can assure her that the Director of Public Prosecutions takes those aspects very seriously and wishes to get to the bottom of them. I have no doubt that we will be better informed when we have those reports.
Grahame M. Morris (Easington) (Lab)
9. What recent discussions he has had with the Director of the Serious Fraud Office about the future of that organisation.
The Solicitor-General (Mr Edward Garnier)
I have had many, both with the new director, Mr David Green, and with his predecessor, Mr Richard Alderman. The SFO has a bright future.
Grahame M. Morris
In view of the really bad press that the Serious Fraud Office has been getting of late, has the Solicitor-General had an opportunity to consider the failure of the Department for Work and Pensions properly to assess the risk of fraud at A4e and, in particular, to obtain key evidence relating to internal audit documents, as identified by the National Audit Office this week? Does he believe that there is a role for the SFO in providing specialist help to Departments?
The Solicitor-General
No, the Serious Fraud Office has a remit to deal with high-end fraud, international fraud and corruption. The work of the Department for Work and Pensions is a matter for the Department for Work and Pensions.
Mr Robert Buckland (South Swindon) (Con)
Without going into specific case details, I must ask: does not recent adverse publicity about the incompetence of the Serious Fraud Office call into question the integrity of fraud investigation in our country? Is it not a matter of utmost importance that we should address urgently?
The Solicitor-General
Although, with the greatest respect, I do not entirely accept the premise of all my hon. Friend’s question, I can assure him that the Serious Fraud Office is pursuing investigations and prosecutions with competence and vigour. I appreciate that Lord Justice Thomas has had some interesting things to say about the SFO in a current case, upon which I shall not comment further.
EUROPEAN UNION DOCUMENTS
Motion made, and Question put forthwith (Standing Order No. 119(11)),
Posting of Workers and the Right To Take Collective Action
That this House considers that the draft Council Regulation on the exercise of the right to take collective action within the context of the freedom of establishment and the freedom to provide services (European Union Document No. 8042/12 and Addenda 1 to 3) does not comply with the principle of subsidiarity for the reasons set out in Chapter 1 of the First Report of the European Scrutiny Committee (HC 86-i); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.—(Angela Watkinson.)
Question agreed to.
VAT on Static Caravans
Mr Deputy Speaker (Mr Nigel Evans)
I advise the House that time is crucial and I would like to explain how we plan to do this. There are a large number of petitions to be presented and I hope that it will be of assistance to the House if I set out how we shall proceed.
Once the first petition relating to VAT on static caravans has been read to the House, with its prayer, subsequent petitions on the same topic should not be read out in full. Members should give a brief description of the number and location of the petitioners and state that the petition is “in the same terms”. Members presenting more than one petition should present them together.
When a Member has presented a petition, she or he should proceed to the Table and hand it to the Clerk, who will read its title and then hand it back to the Member. She or he should then proceed directly to the petitions bag at the back of the Chair. I will call the next Member immediately after the Clerk has read the title. At the expiry of half an hour, no further petitions may be presented orally, but they may be placed in the petitions bag and will be recorded as formally presented. Is everybody happy? I call Mr Graham Stuart to present his petition.
Mr Graham Stuart (Beverley and Holderness) (Con)
Normally at this time of night the House is emptying, not filling up. Instead, colleagues are coming into the Chamber because of their concern about the imposition of VAT on static caravans. If enacted, the Government’s proposal to impose VAT on static caravans will cost jobs. Only today, Willerby Holiday Homes, Britain’s largest caravan manufacturer, announced plans for 350 redundancies in anticipation of the tax rise. Jobs will be lost not only in manufacturing and the supply chain, but in the parks themselves, which employ 26,000 people directly across the country. I am grateful to Mr Speaker for allowing us half an hour this evening to present these petitions on behalf of so many constituencies across the country. Although I will read out the full text, Mr Deputy Speaker, you have asked that others do not do so.
In addition to presenting a petition on behalf of those in Beverley and Holderness, I am presenting petitions from the constituencies of: Birmingham, Northfield; Blackpool South; Blyth Valley; Bognor Regis and Littlehampton; Bridgwater and West Somerset; Carlisle; Christchurch; Clacton-on-Sea; Dwyfor Meirionnydd—I hope there are no more Welsh constituencies to trouble me; Eastleigh; Filton and Bradley Stoke; Forest Heath; Harwich and North Essex; Islwyn; Milton Keynes South; Montgomeryshire—I am confident about pronouncing that one; New Forest West; North Devon; North Norfolk; Poole; Rochdale; Selby and Ainsty—I am delighted to see my hon. Friend the hon. Member for Selby and Ainsty (Nigel Adams) in his seat and supporting this presentation; Shrewsbury and Atcham—I am also delighted to see my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) in his seat; South Dorset; South Down; Stirling; Tynemouth; Wells—I am delighted to see the hon. Member for Wells (Tessa Munt) in her seat; West Bromwich West; West Dorset; West Worcestershire; and Workington. Mr Deputy Speaker, you can tell the breadth and depth of concern about this issue.
The petition states:
The Petition of residents of Beverley and Holderness Constituency,
Declares that the Petitioners believe that levying VAT on static holiday caravans would cost thousands of jobs in caravan manufacturing, from their suppliers, and in the wider UK holiday industry; and notes that the Petitioners believe that such a levy would lose revenue for the Government.
The Petitioners therefore request that the House of Commons urges the Government to reverse its decision to levy VAT on static caravans.
And the Petitioners remain, etc.
[P001027]
The following petitions were also presented:
The Petition of residents of Rochdale.
[P001060]
The Petition of residents of Christchurch,
[P001061]
The Petition of residents of West Bromwich West.
[P001062]
The Petition of residents of Dwyfor Meirionnydd.
[P001063]
The Petition of residents of Clacton on Sea.
[P001064]
The Petition of residents of South Down.
[P001065]
The Petition of residents of Bridgwater and West Somerset.
[P001066]
The Petition of residents of West Dorset.
[P001067]
The Petition of residents of Filton and Bradley Stoke.
[P001068]
The Petition of residents of Montgomeryshire.
[P001069]
The Petition of Residents of Ceredigion.
[P001070]
The Petition of Residents of Eastleigh.
[P001071]
The Petition of Residents of Selby and Ainsty.
[P001072]
The Petition of residents of Birmingham Northfield.
[P001073]
The Petition of residents of Poole.
[P001074]
The Petition of residents of Blyth Valley.
[P001075]
The Petition of residents of Bognor Regis and Littlehampton.
[P001076]
The Petition of residents of Forest Heath.
[P001077]
The Petition of residents of Carlisle.
[P001078]
The Petition of residents of South Dorset.
[P001079]
The Petition of residents of Tynemouth.
[P001080]
The Petition of residents of North Norfolk.
[P001081]
The Petition of residents of North Devon.
[P001082]
The Petition of residents of Stirling.
[P001083]
The Petition of residents of Harwich and North Essex.
[P001084]
The Petition of Residents of Blackpool South.
[P001085]
The Petition of residents of Workington.
[P001086]
The Petition of residents of Islwyn.
[P001087]
The Petition of residents of New Forest West.
[P001088]
The Petition of residents of Shrewsbury and Atcham.
[P001090]
The Petition of residents of Milton Keynes South.
[P001091]
The Petition of residents of Ludlow.
[P001092]
The Petition of residents of West Worcestershire.
[P001093]
Sir Alan Beith (Berwick-upon-Tweed) (LD)
I present a petition in the same terms as those presented by the hon. Member for Beverley and Holderness (Mr Stuart), from constituents of mine at the Waren caravan park, Waren Mill, Bamburgh in the Berwick-upon-Tweed constituency. My constituents are deeply concerned about the impact not just on manufacturing, but on the holiday parks and caravan sites in whose business model sales are an important factor.
The Petition of residents of Waren Caravan Park, Waren Mill, Bamburgh, Northumberland.
[P001028]
Andrew Percy (Brigg and Goole) (Con)
I, too, present a petition, on behalf of the residents of the Brigg and Goole constituency, in the same terms as my hon. Friend the Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of Brigg and Goole.
[P001029]
Mr Philip Hollobone (Kettering) (Con)
Having voted against the imposition of VAT on static holiday caravans in the Budget resolution debate on 18 April, I have the privilege to present a petition in the same terms on behalf of residents of the Kettering constituency.
The Petition of residents of Kettering constituency.
[P001030]
Lisa Nandy (Wigan) (Lab)
I present this petition, on behalf of the residents of Wigan, in the same terms as the hon. Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of Wigan.
[P001031]
Peter Aldous (Waveney) (Con)
I present a petition in similar terms on behalf of residents of the Waveney constituency in Suffolk.
The Petition of residents of Waveney.
[P001032]
Laura Sandys (South Thanet) (Con)
I have the great honour of presenting this petition in the same terms as my hon. Friend the Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of South Thanet.
[P001034]
Mr Peter Bone (Wellingborough) (Con)
I present this humble petition of residents of Wellingborough in Northamptonshire and the surrounding areas in the same terms as those that have already been presented and, in particular, because there is the significant manufacturing of such caravans in my constituency.
The Petition of residents of Wellingborough.
[P001037]
Mr David Davis (Haltemprice and Howden) (Con)
It is my privilege to present a petition in the same terms as those of my hon. Friend the Member for Beverley and Holderness (Mr Stuart), who made it clear that this is being done to prevent enormous numbers of job losses around the country, with the highest concentration probably in East Yorkshire, not least in Haltemprice and Howden, on behalf of which I present this petition signed by 612 residents.
The Petition of residents of Haltemprice and Howden constituency.
[P001039]
Mr John Whittingdale (Maldon) (Con)
I thank and congratulate my hon. Friend the Member for Beverley and Holderness (Mr Stuart) on the way in which he has conducted his campaign. My constituency contains a large number of static caravan parks, and I therefore endorse all his remarks. It is my honour to present a petition on behalf of my constituents in Maldon.
The Petition of residents of Maldon.
[P001038]
Mark Garnier (Wyre Forest) (Con)
I add my gratitude and thanks to my hon. Friend the Member for Beverley and Holderness (Mr Stuart) for the effort he has made in representing the interests of this industry. In similar terms to the aforementioned petition, I have great pleasure in bringing to the House 400 signatures from the residents of Wyre Forest.
The Petition of residents of Wyre Forest.
[P001036]
Mr David Hanson (Delyn) (Lab)
In similar terms to those of the hon. Member for Beverley and Holderness (Mr Stuart), I have pleasure in presenting a petition to this House on behalf of more than 1,000 residents of Delyn in north Wales—not only those associated with caravan parks but those associated with the fish and chip shops, pubs and supermarkets that serve them.
The Petition of residents of Delyn constituency.
[P001040]
Diana Johnson (Kingston upon Hull North) (Lab)
I have pleasure in presenting a petition of 3,249 signatures from the residents of the constituency of Kingston upon Hull North, and also presenting, on behalf of my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), a petition signed by 1,788 of his constituents. This matter is of particular importance to both our constituencies owing to the manufacturing of caravans in the city of Hull.
The Petition of residents of Kingston upon Hull and East Yorkshire.
[P001044]
Martin Caton (Gower) (Lab)
I present a petition in the same terms from the residents of Gower.
The Petition of residents of Gower.
[P001035]
Karl Turner (Kingston upon Hull East) (Lab)
I present a petition with 1,401 signatures on behalf of the residents of Kingston upon Hull East. This issue is terribly important and even more so today, with Willerby Holiday Homes announcing a consultation on redundancies for 350 staff as a direct result of what the Government plan to do.
The Petition of residents of East Hull constituency.
[P001042]
Mr Alan Reid (Argyll and Bute) (LD)
I present a petition in the same terms signed by 346 people who are residents of, or visitors to, Argyll and Bute. Owners of static caravans bring a great deal of money to Argyll and Bute, and many businesses in the constituency are very worried that the impact of this tax will mean a loss of revenue and a loss of jobs.
The Petition of residents of Argyll and Bute constituency, and others.
[P001043]
Mr Andrew Turner (Isle of Wight) (Con)
I present a petition in similar terms from the Isle of Wight, from 356 residents or visitors.
The Petition of residents of the Isle of Wight Holiday Parks.
[P001047]
Ian Paisley (North Antrim) (DUP)
It is my honour and privilege to prevent a “Stop Caravan Tax” petition of behalf of my constituents, in the same terms as that presented to the House by my friend the hon. Member for Beverley and Holderness (Mr Stuart). In the wonderful villages of Bushmills and Ballycastle, and indeed in the Glens, caravan parks will potentially be destroyed by such a tax. As I voted against it, it is my honour to defend the rights of those villagers and prevent this tax on holidays.
The Petition of residents of North Antrim constituency.
[P001048]
Mr Greg Knight (East Yorkshire) (Con)
I seek to present a petition signed by approximately 1,000 residents of East Yorkshire and beyond. It is in identical terms to that presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart). My constituents who are petitioning agree with his, and I agree with him.
The Petition of residents of East Yorkshire.
[P001049]
Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)
I fervently wish to present a petition on behalf of my constituents in the beautiful county of Ayrshire, which depends heavily on tourism and will be most adversely affected if this measure goes through.
The Petition of residents of Ayr, Carrick and Cumnock.
[P001045]
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
I am delighted to present three petitions in similar terms to those presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart), on behalf of residents of the Wood Park Caravans, Celtic Holiday Parks and Perran Sands parks and many other people in my constituency.
The Petition of residents of Carmarthen West and South Pembrokeshire constituency.
[P001052]
The Petition of residents of Perran Sands.
[P001053]
The Petition of residents of Wood Park Caravans.
[P001054]
Amber Rudd (Hastings and Rye) (Con)
My constituency has the most beautiful caravan sites in the country. I have the honour of presenting this petition on behalf of my constituents.
The Petition of residents of Hastings Rye constituency.
[P001055]
Martin Vickers (Cleethorpes) (Con)
As a representative of Cleethorpes, which I have said on many occasions is the premier resort of the east coast, I am privileged to present this petition in similar terms to that presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of Cleethorpes.
[P001056]
Mr Mark Williams (Ceredigion) (LD)
I present this petition on behalf of residents of Ceredigion in west Wales, in similar terms to that presented by the hon. Member for Beverley and Holderness (Mr Stuart). In particular, I wish to bring to the House’s attention their concerns about job losses in the small business sector, which supports the tourism industry.
The Petition of residents of Ceredigion.
[P001051]
John Healey (Wentworth and Dearne) (Lab)
I have a petition here, “Stop the Caravan Tax”, signed by Scott Staniforth of 45 Vicar road, Wath, and others from my constituency. They see that the tax on static caravans could add £8,000 to the price of a caravan, price families out of their regular holiday and thwart many people’s ambition to own an affordable second home. They have therefore signed a petition in similar terms to that presented by the hon. Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of Wentworth and Dearne constituency.
[P001050]
Andrew George (St Ives) (LD)
In the 11 minutes remaining, I should like to deliver a petition on behalf of Mr Norman Bliss of the Lower Treave caravan park at Crows-An-Wra, near Penzance, in my west Cornwall and Isles of Scilly constituency, the premier holiday destination of the United Kingdom. In handing me this petition, the petitioners pointed out that the measure, far from resolving the anomaly that the Government said they had identified, created a new anomaly between static caravans and static bricks and mortar. I am proud and very pleased to support the hon. Member for Beverley and Holderness (Mr Stuart) in his excellent campaign.
The Petition of residents of the St Ives constituency.
[P001058]
Simon Reevell (Dewsbury) (Con)
I am delighted to present a petition on behalf of my constituents in similar terms to that presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart). Up to a quarter who signed the petition expect to lose their jobs if the proposal is not reversed.
The Petition of residents of Dewsbury.
[P001041]
Point of Order
Mr Denis MacShane (Rotherham) (Lab)
On a point of order, Mr Speaker. In Deputy Prime Minister’s questions, there was an exchange about something called a Fruit Ninja. Sir, I do not know whether you know what a Fruit Ninja is, or whether it is a parliamentary expression as defined by “Erskine May”, but, given that apparently the Prime Minister spends an awful lot of time with one, can we all be given one so that we can understand what he is up to?
Mr Speaker
Well, I plead ignorance myself. I am not familiar with the thing or practice concerned, but I am comforted by the knowledge that I share that ignorance with one so learned as the right hon. Member for Rotherham (Mr MacShane). Sadly, his intervention, whatever its merits, did not constitute a point of order.
Privilege
(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Speaker
We come now to the main business. As I advised the House yesterday, the hon. Member for Maldon (Mr Whittingdale) has tabled a motion for debate on a matter of privilege which I have agreed should take precedence today. To move the motion, I call Mr John Whittingdale.
Mr John Whittingdale (Maldon) (Con)
I beg to move,
That this House notes the conclusions set out in chapter 8 of the Eleventh Report from the Culture, Media and Sport Committee, Session 2010-12, on News International and Phone-hacking, HC 903-I and orders that the matter be referred to the Committee on Standards and Privileges.
Let me begin, Mr Speaker, by thanking you for granting precedence to this motion, which I move on behalf of all the members of the Culture, Media and Sport Committee. I am aware that the motion is unusual, if not almost unprecedented in modern times, but as the Committee set out in the conclusions to our report, we believe that the integrity and effectiveness of Select Committees relies on the evidence that we are given being given truthfully and completely. We therefore regard the finding of the Committee that we were misled by specific individuals as an extremely serious matter, and we think it only right that it should be brought to the attention of the whole House of Commons and referred to the Committee on Standards and Privileges. I apologise for throwing this hot potato into the lap of the right hon. Member for Rother Valley (Mr Barron), but I think that it is important that his Committee consider this matter, first, to establish whether my Committee was indeed misled in the evidence that it was given; and secondly, to deal with the perhaps rather more difficult question of what Parliament should do in response.
It might help the House if I briefly describe the events that have led to this afternoon’s debate. At the beginning of 2007, the Culture, Media and Sport Committee decided to hold an inquiry into the self-regulation of the press. Three events triggered that decision. The first was the harassment of Kate Middleton —then a commoner, now the Duchess of Cambridge—that was taking place, which was felt to go well beyond what was acceptable.
The second issue was the publication by the Information Commissioner of his report “What price privacy now?”, at the end of 2006. In that report, he published details of the very large number of journalists working for a wide variety of publications who had employed the services of Steve Whittamore, a private investigator who was subsequently convicted for illegally breaching the police national computer and the driver vehicle licensing database in order to obtain information. Although no prosecutions of the journalists were brought, there was certainly a widespread suspicion that many members of the press had been involved in what appeared to have been illegal activity.
The third matter that the Committee decided we needed to consider was the conviction, just a few months previously, of Clive Goodman, the royal editor of the News of the World, and Glenn Mulcaire, a private investigator, who were found to have conspired to intercept communications without lawful authority. On that third specific issue, the Committee took evidence from the then chairman of News International, Mr Les Hinton. During our evidence, I put this question to him:
“You carried out a full, rigorous internal inquiry, and you are absolutely convinced that Clive Goodman was the only person who knew what was going on?”
Mr Hinton replied:
“Yes, we have and I believe he was the only person, but that investigation, under the new editor, continues.”
In the absence of any evidence to the contrary, the Committee had to accept the assurance that we were given, but we did make some fairly strong comments about the culture that had allowed payments to be made by Clive Goodman without any apparent authority from the management of News International. However, although we concluded that we had not seen evidence that proved otherwise, I think we all heard alarm bells ringing, since we were very much aware that Glenn Mulcaire had been convicted of hacking into the telephone voice messages of Mr Max Clifford, Mr Sky Andrew, Mr Gordon Taylor, Ms Elle Macpherson, and the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), none of whom had any obvious connection with the royal family. Yet we were told that the only person at the News of the World who had any knowledge or involvement was the royal editor. There was therefore certainly a suspicion in our minds that the phone hacking may have gone much wider than we were led to believe.
During 2009, two years later, the Committee conducted an inquiry into press standards, privacy and libel. During that inquiry, in July 2009, The Guardian reported that News Group Newspapers had paid more than £1 million to settle privacy cases that had been brought by Gordon Taylor, one of those on the charge sheet for Glenn Mulcaire, and by Jo Armstrong and a lawyer, all of whom were involved in football matters. We decided that the size of that settlement was so large that it cast doubt on the previous testimony that we had received. On that basis, we decided to reopen our inquiry.
That decision, and certainly the report that appeared in The Guardian, was vigorously attacked by News International to such an extent that when we summoned the editor of The Guardian and the journalist who had written the story, Mr Nick Davies, to appear before us, they responded by providing the Committee with certain documents. In particular, there was a contract between Glenn Mulcaire, the private investigator, and Greg Miskiw, a senior executive on the News of the World, and also what has become known as the “For Neville” e-mail. That was a heavily redacted transcript of an exchange that took place between Gordon Taylor and Jo Armstrong on their voicemails.
To us, that clearly suggested that others had been involved. We therefore took evidence during the course of our inquiry in 2009 from quite a number of senior executives of News International, including Tom Crone, the legal manager; Colin Myler, the then editor of the News of the World; Andy Coulson, the previous editor of the News of the World; Stuart Kuttner, the managing editor; and Les Hinton, the executive chairman. Mr Crone told us that he had become aware of the e-mail in April 2008, but in his evidence to us he suggested that an investigation had found little real evidence that it had gone any further. His implication was certainly that it did not amount to much. As we commented in our report:
“In summary, Mr Crone’s investigation, he said, had established that nobody remembered the ‘for Neville’ email, apart from Mr Hindley”—
the journalist who taken the transcription—
“who could not remember what he did with it.”
We went on to note:
“In spite of the allegations contained in the Guardian, the News of the World has continued to assert that Clive Goodman acted alone. Les Hinton, the former Executive Chairman of News International, told us: ‘There was never any evidence delivered to me that suggested that the conduct of Clive Goodman spread beyond him.’”
Simon Hughes (Bermondsey and Old Southwark) (LD)
I thank the hon. Gentleman not just for his work and that of his Committee but for the measured way in which he is putting the case.
May I make it quite clear—this is in the public domain, so I am not breaching any prospective prosecutions —that there was substantial evidence, at all material times soon after the arrest of the two people who were subsequently convicted, that a series of other people at higher levels in the same newspaper had been involved, because they had been told what was going on? That is now in the public domain, and some of us believe that that knowledge cannot have been limited to those who were named in the documents seized by the police. It must have been held more widely.
Mr Whittingdale
I hope that the full facts will continue to emerge, not just through the work of the Committee but through that of Lord Justice Leveson and the police investigation and the possible charges to follow. I have to say that the Committee reached that conclusion in our work. Initially, it was suggested that the “For Neville” e-mail might have been going to any old Neville in the News of the World. We made inquiries and discovered that in fact there was only one person called Neville in the employment of the News of the World, and he was its chief reporter. Therefore, in 2009 the Committee concluded:
“Evidence we have seen makes it inconceivable that no-one else at the News of the World, bar Clive Goodman, knew about the phone-hacking”.
In relation to the previous assurance about the rigour of the inquiry, we said:
“The newspaper’s enquiries were far from ‘full’ or ‘rigorous’, as we—and the PCC—had been assured. Throughout our inquiry, too, we have been struck by the collective amnesia afflicting witnesses from the News of the World.”
We published that report and nothing happened. It is perhaps a matter of regret that no further action was taken for another two years. However, evidence then started to emerge from the civil cases being brought by the victims of phone hacking, which led to the initiation of Operation Weeting—the police inquiry—and an Adjournment debate introduced by the hon. Member for Rhondda (Chris Bryant), in which he suggested that the Committee had been misled. Those events, plus the decision of James Murdoch to close the News of the World and to make a statement saying that the evidence and statements given to Parliament were wrong, caused the Committee to decide to reopen the inquiry.
We took evidence from a wide range of people, including John Yates, then of the Metropolitan police, Rupert and James Murdoch, Rebekah Brooks, Jonathan Chapman, Daniel Cloke, Tom Crone, Colin Myler, Les Hinton and Julian Pike. We were assured at the time that News International was extremely keen to co-operate with the Committee and to establish the facts, but during the course of our subsequent inquiry three crucial documents emerged. It is worth noting that none were supplied to the Committee by News International, and that they actually came from various lawyers acting for the personalities involved.
The first document was the letter sent in March 2007 by Clive Goodman to Les Hinton, the then chairman, objecting to his dismissal. The reason Clive Goodman gave for his objection to his dismissal was as follows:
“This practice [phone hacking] was widely discussed in the daily editorial conference, until explicit reference to it was banned by the Editor. The legal manager, Tom Crone, attended virtually every meeting of my legal team and was given full access to the Crown Prosecution Service’s evidence files. He, and other senior staff of the paper, had long advanced knowledge that I would plead guilty.”
The second document we obtained was an internal e-mail sent from Tom Crone to Colin Myler before a meeting with James Murdoch to discuss the terms of the settlement with Gordon Taylor. The e-mail states that
“this evidence, particularly the e-mail”—
the “For Neville” e-mail—
“from the News of the World is fatal to our case.”
Tom Crone went on to say:
“Our position is very perilous. The damning e-mail is genuine and proves we actively made use of a large number of extremely private voicemails from Taylor’s telephone in June/July 2005 and that this was pursuant to a February 2005 contract.”
Of course, that was written almost a year before Mr Crone appeared before the Committee and suggested that the “For Neville” e-mail was of no real significance because they could not remember where it had gone or find any record of it.
The third document was the opinion obtained by Michael Silverleaf QC, who advised News Group Newspapers that it should reach a settlement because, as he said:
“there is a powerful case that there is (or was) a culture of illegal information access used at News Group Newspapers in order to produce stories for publication.”
The Committee, in its conclusions, comments on several specific issues that I will not go into in great detail, but they include such matters as the decision to authorise payments to Clive Goodman following his conviction; the importance of confidentiality in the size of the Gordon Taylor settlement; and the commissioning of surveillance of at least some members and former members of the Culture, Media and Sport Committee. These are matters that we describe in detail, and I hope that the Standards and Privileges Committee will also consider them.
Our overall conclusion was that the evidence that we had obtained made it clear that the evidence given to us in our previous inquiry, when the individuals involved had once again attempted to assure us that there was no real suggestion or evidence that anyone else at the News of the World was involved in phone hacking other than Clive Goodman, was not true. They certainly did have documents that indicated very clearly that that was not the case. It was for that reason that the Committee concluded that we had been misled by Les Hinton, Tom Crone and Colin Myler—
Philip Davies (Shipley) (Con)
I commend my hon. Friend for the skilled way in which he has chaired the Committee over a long period, including during these very difficult inquiries, on which there was not always agreement. Will he just reiterate that, despite all the controversy over other parts of the report, on the chapter we are discussing today the Committee was united in finding that these people had misled the Committee, and there was no disagreement about any part of this chapter?
Mr Whittingdale
My hon. Friend is correct: on whether the three individuals whom I have just named misled the Committee we were unanimous in our finding. It is for that reason that I was very pleased that the Committee agreed to support the motion that I am moving.
We took evidence from other individuals, and the Committee deliberately decided that we would reach no conclusion on the evidence given to us by people who have since been arrested and could face criminal charges. The Committee reserves the right to return to that question once proceedings are concluded, but the three individuals we identified have not been arrested, and we therefore felt it was right that we should draw the conclusions that we have and bring them to the attention of the House.
We are under no illusion: these are serious matters. The conclusions we have reached bear profound consequences. I am not entirely clear what those consequences are, but there is no question but that these are very serious matters. It was also brought to our attention that those individuals should have a right to rebut the charges and to respond to them. We respected that, and we therefore felt that the right procedure was to refer the matter to the Standards and Privileges Committee, so that it had an opportunity to consider the evidence that led to our findings and to consider the responses that have already been given by two of the individuals named. On that basis, I ask the House to refer the Committee’s report and the evidence we received to the Standards and Privileges Committee.
Mr Tom Watson (West Bromwich East) (Lab)
I support the hon. Member for Maldon (Mr Whittingdale) in his recommendations. These are very serious matters and they mark a parliamentary milestone in an investigation that began in 2003, when my hon. Friend the Member for Rhondda (Chris Bryant) asked the now infamous question about payments to the police. Furthermore, as the hon. Member for Maldon said, this marks the beginning of the end of the role of the Culture, Media and Sport Committee in this inquiry, although obviously we have reserved the right to return to the other arrested members of News International.
The matter is not over for News Corporation, the police officers who failed to investigate properly back in 2006 or the computer hackers and other rogue private investigators who some evidence suggests played a wider role. There are other investigations going on, but for now it is important that the Committee is united and that the House unites to send this document to the Select Committee on Standards and Privileges. I am sure that other Committees will play a role, but we are united in ensuring that the three people named receive some form of parliamentary justice. The last thing we want to do is interfere with the process of criminal justice. I hope that the House can unite around the motion.
The Leader of the House of Commons (Sir George Young)
I want to make a short contribution and to begin by commending my hon. Friend the Member for Maldon (Mr Whittingdale) and his fellow members of the Culture, Media and Sport Committee for their painstaking and at times challenging inquiry into News International and phone hacking, building on the Committee’s work in the last Parliament. I thank them for their comprehensive report.
The motion is a narrow one inviting us to note the conclusions of chapter 8 of the report and to refer it to the Select Committee on Standards and Privileges. I believe that this is the right course of action in the first instance and I support the motion. The Committee rightly observes:
“The integrity and effectiveness of the Select Committee system relies on the truthfulness and completeness of the oral and written evidence submitted.”
The Committee’s report contains four specific conclusions relating to possible contempt, which are set out in paragraph 275. The findings are, of course, disputed vigorously by the individuals and organisation concerned. Although it would be for the House itself to reach a final determination on whether a contempt has been committed and, if appropriate, to respond in the light of any recommendations by the Standards and Privileges Committee, it should do so on the basis of a full and impartial consideration of the facts and appropriate steps by that Committee.
Should the Standards and Privileges Committee conclude that the Culture, Media and Sport Committee was knowingly misled, it would be right for the Standards and Privileges Committee to consider any appropriate action, having regard to the House’s 1978 resolution to use its penal jurisdiction in respect of non-Members as sparingly as possible and only when the House is satisfied that it is essential to act in order to provide reasonable protection from improper obstruction causing or likely to cause substantial interference with its functions. The Committee on Standards and Privileges, which is chaired with such distinction by the right hon. Member for Rother Valley (Mr Barron) and whose members are accustomed to the impartial consideration of complex and contested issues, is well equipped for this role. The House should concern itself today, therefore, with the specific question whether to refer to the Standards and Privileges Committee the issues identified in chapter 8 of the report. I believe it should, and I support the motion.
Ms Angela Eagle (Wallasey) (Lab)
I echo the comments of the Leader of the House by paying tribute to the Culture, Media and Sport Committee for its significant work on the ongoing, complex and important matter of News International and phone hacking. Throughout its long inquiry, the Committee has been chaired admirably by the hon. Member for Maldon (Mr Whittingdale), and his Committee has pursued its inquiries in a commendable and dogged fashion. Just as the Treasury Select Committee pursued its inquiries into the banking crisis, so the Culture, Media and Sport Committee has pursued its investigations into the media crisis. I know the work has been exhaustive and exhausting for the members of the Committee, past and present, and the House staff supporting them, and once more I pay tribute to all involved.
Members will be well aware of the context of this report, which the hon. Member for Maldon has just set out. The Committee’s inquiry began in the last Parliament and has taken place against a background of rapid external developments. Despite the challenges, it is a tribute to the Committee that it has produced its report in spite of the ongoing police investigation and the Leveson inquiry. Lord Justice Leveson’s inquiry, which we expect to report in the autumn, will be of great importance. We are inevitably constrained in what we can say today, given the context, but the House will have further opportunities to debate the wider issues. The motion before us is therefore a narrow one, as the Leader of the House has just told us.
From their introduction in 1979, Select Committees have had the power to send for persons, papers and records. They have relied largely on written and oral evidence to perform their duties. Over more than two decades, and during hundreds and hundreds of separate inquiries, Select Committees have ably and satisfactorily used mainly informal powers to ensure that they can access the evidence they need. However, we should not forget the purpose of such inquiries: Select Committees exist not just to hold the Government to account and to examine in detail the implication of Government bodies and policies, but to shine a light across the public realm. The powers of the House are for a purpose: to enable Parliament, on behalf of our constituents, to hold the powerful to account. Today the Select Committee system works well, but it would not if witnesses felt they could mislead a Committee without consequence.
Although Committees rarely take evidence on oath, the House of Commons 2011 guidance for witnesses giving evidence to Select Committees is clear. It states that witnesses are expected to answer fully, honestly and truthfully, and:
“Deliberately attempting to mislead a committee is a contempt of the House”.
The Culture, Media and Sport Committee concludes, at paragraphs 274 to 280, that three individuals—Les Hinton, Tom Crone and Colin Myler—and, corporately, News International and the News of the World misled Parliament in their evidence to the Committee. Under these circumstances, it is right that the matter be referred to the Standards and Privileges Committee for further investigation and consideration. We should not seek to pre-judge or second-guess the work that the Standards and Privileges Committee may undertake, under the able chairmanship of my right hon. Friend the Member for Rother Valley (Mr Barron). It is enough that we agree today to refer this important matter to that Committee, which is why the Opposition support the motion.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
It is a privilege to speak in today’s debate, and I wholly endorse the motion before the House today. It is fair to say that the Culture, Media and Sport Committee was absolutely united in saying that Les Hinton, Tom Crone and Colin Myler had misled Parliament. That was evidenced by just one aspect of an external lawyer’s perspective. Julian Pike from Farrer & Co. affirmed that Parliament had been lied to when responding to a question from the hon. Member for Newcastle-under-Lyme (Paul Farrelly). When asked by the hon. Gentleman, “When did you first know about the evidence given to this House?”, he answered, “At the moment they said it, back in 2009.” Such affirmations from external parties give confidence to members of the Committee on the conclusions reached in our report.
In preparing our report, we were advised not to take on the principle of lawyers, in serving their clients, not having regard to allowing falsehoods to be perpetuated, but instead to accept that lawyers are there to serve their clients. However, we all have to show personal leadership. I wonder at times whether lawyers should take a look in the mirror—individually and, as the legal profession, collectively—and decide to take a certain view on these ethical matters, including whether they wish that position to continue to be part of their ethical code.
I think it is fair to say that the Committee was not entirely united on chapter 8, owing to the fourth point in paragraph 275. However, we all accept the established principle of vicarious liability, and that the company should accept responsibility for what happened in that terrible time.
As I have stated before, News International will have a long time to regret not taking action after our excellent predecessor Committee’s 2009 report—as it now appears to be doing through its internal management and standards committee. I point to paragraph 278. Parliament—our Select Committee—was careful to try not to trample on criminal proceedings, for which we could not have been forgiven. However, we should reflect on the fact that it is thanks to parliamentary privilege that we were able to uncover and bring certain information through to Parliament that the Leveson inquiry would not have been able to bring. It is not acceptable to evade the truth when speaking to parliamentarians. It is not acceptable simply to try to leave people second-guessing, so that they may be misled—often deliberately so. It is imperative that people are prepared to tell the truth, the whole truth and nothing but the truth, and we demand nothing less for our constituents.
Mr Robert Buckland (South Swindon) (Con)
I am grateful for all the work that has been done by the Committee, so ably chaired by my hon. Friend the Member for Maldon (Mr Whittingdale). Does my hon. Friend the Member for Suffolk Coastal (Dr Coffey) agree that the issue about taking an oath is irrelevant, as when a witness comes before a Select Committee there is an expectation that they must tell the truth, whether or not they swear an oath?
Dr Coffey
That is absolutely right. As the shadow Leader of the House said, that was in the guidance. I agree with my hon. Friend that it is irrelevant whether or not somebody puts a Bible or some other thing in front of them; they are in this House because they have been asked, on behalf of the people of this country, to come to answer questions. People should do that honestly, straightforwardly and without reservation.
Kevin Brennan (Cardiff West) (Lab)
The taking of the oath is not irrelevant, because if someone gives evidence under oath that turns out to be untrue—these powers of a parliamentary Select Committee exist for a reason—they can subsequently be charged with a criminal offence under the Perjury Act 1911.
John Hemming (Birmingham, Yardley) (LD)
Does the hon. Lady accept that such comments given to Committees are subject to article 9 of the Bill of Rights and therefore cannot be questioned by the courts, and so that situation probably does not apply?
Dr Coffey
I am not a lawyer; I stand here as a parliamentarian who passes law. In response to the points raised by my hon. Friend the Member for Birmingham, Yardley (John Hemming) and the hon. Member for Cardiff West (Kevin Brennan), my understanding is that any information given as evidence during parliamentary sittings cannot necessarily be used in a court of law. That is part of the basis of parliamentary privilege.
Chris Bryant (Rhondda) (Lab)
I, too, pay warm tribute to the Chairman of the Committee, the hon. Member for Maldon (Mr Whittingdale), because this task has been particularly difficult, not least because it has followed on from previous inquiries, not only while he has been Chairman, but carried out when my right hon. Friend the Member for Manchester, Gorton (Sir Gerald Kaufman) chaired the Committee.
This is a debate about privilege, and I always think that the word “privilege” is an unfortunate one to use in relation to Parliament, as I am sure would most voters. The truth is that we have not yet seen all the evidence. It is important to note that, precisely for the reasons that the hon. Gentleman has adduced that nobody has wanted to trample on the toes of a criminal investigation, we are so far—this is true of Leveson as well—seeing only the tip of a very large iceberg. The issues that have been presented to us in the report refer to just three people, but more than 40 have been arrested and there may be further arrests yet.
When the whole story has come out, as I hope it will eventually, I think this instance will prove to have been one of the most flagrant examples of contempt of Parliament in Parliament’s history. It was not just one person at one time or one organisation for a brief period of time; a series of people systematically and repeatedly lied so as to protect themselves, to protect their commercial interests and to try to make sure that they did not end up going to prison. They did that knowing fully that they were telling lies to Parliament, and I believe that that is a fundamental contempt. If we look through the history of Parliament, it is difficult to find a moment when there was such a concatenation of deliberate abuses—contempt of Parliament. That is why we need to take this moment very seriously.
There was covert surveillance of Members of Parliament, deliberately to intimidate them in going about their duties. That applied particularly to members of the Committee. As we know, the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) had his phone hacked, as quite possibly did some four score others. Indeed, News International managed to turn the Metropolitan police into a partially owned subsidiary, whereby members of staff from one organisation were going to work for another and then coming back. [Interruption.] I note that some of my hon. Friends suggest that the subsidiary was not partially owned.
The important thing for us to decide is what we do about this. I think that everybody is agreed that something egregious and terrible has happened. The question is what we do now. The Government have published a White Paper on parliamentary privilege, and it seemed to me that the Leader of the House was trying to suggest to the Committee on Standards and Privileges that it should be very wary of using penal powers or recommending that penal powers should be used. The Scottish Parliament, however, has precise powers under section 25—I think—of the Scotland Act 1998: where people refuse to give evidence to a Committee of the Parliament or to the Parliament or where they lie to Parliament, they are liable to imprisonment for up to three months. That provision is not written into statute for us, but we should certainly consider it.
Perjury before a court attracts a maximum sentence of up to seven years’ imprisonment, and even perjury by making a false declaration in a statutory declaration is liable to a sentence of up to two years’ imprisonment. The factors considered when sentencing would be whether the lie was said just once, whether it was inadvertent or deliberate, the impact that the lie caused, whether there was more than one lie, and on how many occasions the lie was perpetuated.
Kevin Brennan
Further to my earlier intervention, does my hon. Friend remember the point of order I raised on this matter on 14 July 2011, when Mr Deputy Speaker confirmed that under the Parliamentary Witnesses Oaths Act 1871 and the Perjury Act 1911, Select Committees can require witnesses to give evidence under oath and make them subject to criminal charges of perjury if they are subsequently proved to have lied?
Chris Bryant
I do remember that point of order, which is why when my hon. Friend intervened on the hon. Member for Suffolk Coastal (Dr Coffey), I knew what he was going to ask her. It is a point that he rightly makes and has made repeatedly.
We are congratulating ourselves today on the Select Committee process bringing us to this point, but if the Select Committee process had worked better, we might have reached this point three years ago. The Select Committee might have been able to require Rebekah Brooks to give evidence in 2009 and it might have been taking evidence under oath from the very beginning. Then we would not have to decide what we should do about these people, as the courts would be doing so. If we were to apply all those elements of how to decide a sentence for perjury before a court to this case, I would have thought one of the lengthier sentences would be handed down. The same is true for contempt of court, which carries a sentence of up to two years’ imprisonment.
Dr Thérèse Coffey
I hear what the hon. Gentleman says, but does he accept that Select Committees do have the power of summons, which was in fact used during part of the current inquiry?
Chris Bryant
Yes, but Committees have quite often been rather tentative about using those powers. I remember discussing this with the hon. Lady in the Library, and she was uncertain whether that power existed—and I kept on telling her, “Yes, it does exist. It can be used. All we have to do is make sure that the Clerk of the House uses the proper processes.” It is important to remember that we have these powers and that they need to be used more effectively. For instance, it seems extraordinary that no member of the Murdoch family had ever given evidence to the Culture, Media and Sport Committee until the day on which Mr Rupert Murdoch and Mr James Murdoch were summoned last summer. I am sure that that was not because Committees did not want to interview the most important significant player in the British media landscape in this country.
As well as using such powers more effectively, we need to decide for ourselves that we have these powers. I know that there are those who say that we are not a High Court of Parliament anymore; that we are not a court. They say that we are not able to provide a fair tribunal, as the Human Rights Act or, for that matter, the European convention on human rights, might determine. So would it be possible for the House of Commons to make a determination in relation to any individual, for instance requiring that individual to be arrested and brought to the House? Some people think that the very idea of bringing someone to the Bar of the House is anachronistic.
We must have some powers to be able to do our job properly. We must be able to summon witnesses, and if they do not want to come here—as happened with the Maxwell brothers, and seemed at one point to be going to happen with the Murdochs—we must be able to send the Serjeant at Arms to summon and, if necessary, arrest them and bring them to Parliament. We need to be able to arrest. Most Members will not have been here on the occasion when the Chamber was invaded, but the Serjeant at Arms has to be able to arrest. It is quite a simple power.
Mr Speaker
Order. Before the hon. Gentleman takes an intervention from the hon. Member for South Swindon (Mr Buckland), may I gently remind him that the narrow matter under consideration today is the question of whether to refer it to the Standards and Privileges Committee—to which subject I know that he is addressing himself?
Chris Bryant
Indeed, Mr Speaker. It has been customary in all the debates that have taken place historically on such motions to try to provide a little bit of advice for the Select Committee that will be dealing with the matter, so that it knows how to deal with it.
I shall give way first to the hon. Member for Maldon (Mr Whittingdale), and then to the hon. Member for South Swindon (Mr Buckland).
Mr Whittingdale
I shall bear your warnings in mind, Mr Speaker, but the hon. Gentleman is raising matters that I think Parliament needs to consider. In particular, the Select Committee did decide to dispatch the Serjeant at Arms to serve a summons on Mr James Murdoch and Mr Rupert Murdoch after they had initially said that they were not willing to attend the Committee at the time when we had asked them to attend. I have to say, however, that we did so with some trepidation, because we genuinely had no idea what would happen if they maintained their refusal to come. That too is something that Parliament needs to think about.
Chris Bryant
I absolutely agree, but I also think that we should no longer live in an era of trepidation in this House. I think that we should step more boldly.
Mr Buckland
I entirely agree with the hon. Gentleman about being bold in regard to contempt of Parliament and how the House enforces its rules, but does he not share my sense of trepidation about involving the prosecuting authorities in dealing with any alleged lies that have been told to us? Does that not present a danger that the courts will be brought in to determine issues that are properly the province of this House and no other?
Chris Bryant
The hon. Gentleman has taken me into much wider subject matter, but he too is trepidating—if that is the verb from “trepidation”—and I do not want to trepidate. I want to step boldly.
I believe that the House, and the Select Committee itself, should consider, in terms, first whether or not the three individuals mentioned, and perhaps, corporately, News International, should be summoned to the Bar of the House. I believe that that must still be an important power available to the House. Secondly, I think that the House and the Committee should consider whether or not the individuals should be fined, not least because considerable expense has been incurred by Parliament and by the prosecuting authorities through the process of lying to Parliament. Thirdly, I think that it must be right for us to consider whether or not to imprison. If this had happened in the Scottish Parliament, it would have led to imprisonment. If it had been a contempt of court, it would have led to imprisonment. If it had been perjury in court, it would have led to imprisonment.
It has been said that some of these people are not in this country. What can we possibly do about it? The last person who was arrested and imprisoned by Parliament, in 1880, Charles Grissell, also fled the country. He went off to France, to Boulogne. The Speaker sent the Serjeant at Arms’s messenger to Boulogne, and when Charles Grissell came back to the country he was arrested and sent off to Newgate until the end of the parliamentary Session.
I simply think that we were hoodwinked. Indeed, for a long period politicians were so nervous and frightened of what the press would say about us that we effectively put the hoodwinks on ourselves. Now the temptation will be for the Committee to shy away from using any of its penal powers, and I think it a shame that that seemed to be the direction in which the Leader of the House was pushing it. I think that would be a profound mistake, because, surely to God, it is time we asserted the freedom of Parliament—in fact, the rights of Parliament. We must do so not for our own sakes—it is irrelevant for our own sakes—but simply because if Parliament is lied to, we cannot do our job on behalf of our constituents, and if Parliament is lied to and there is impunity thereafter, people will lie again, and then the democratic process unfolds.
Damian Collins (Folkestone and Hythe) (Con)
It is a pleasure to follow the hon. Member for Rhondda (Chris Bryant), and I join him and other Members in paying tribute to my hon. Friend the Member for Maldon (Mr Whittingdale) for the great care and skill with which he chaired what was a lengthy and challenging inquiry.
I want to address the key point that the hon. Member for Rhondda brought to our attention: there must not be no sanction for lying to a parliamentary Committee. However, although we may like reassuring ourselves about the traditions of this House and its rights, it is not clear what the sanctions should be. It is unclear whether someone giving evidence not under oath to a Select Committee has the same obligations as if they were under oath. The Committee obviously considered that before the Murdochs gave evidence to us last July. I believe it is very important that there are consistent procedures. There should not be some witnesses who are made to swear on the Bible and some witnesses who are not.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
Are we not in danger of getting into a situation where all witnesses before Committees have to appear under oath? The vast majority of witnesses who appear before Select Committees do so willingly in order to give of their information and expertise, and these issues therefore do not arise.
Damian Collins
I agree, but it should be implicit that someone giving evidence to a parliamentary Committee is telling the truth. I therefore do not think there should be a separate group of people who are made to take an oath. It should be implicit in the act of their giving evidence that they are telling the truth and openly answering the questions asked by Members of Parliament. It must be built into the processes of our methods of inquiry, particularly in Select Committees, that witnesses will tell the truth and there is some form of sanction against them if it can be demonstrated that they have not done so.
At present, however, that is not clear. It is not clear what powers the Standards and Privileges Committee has to punish or recommend punishment. There may even be a question as to whether the recommendation of a penal sentence, as the hon. Member for Rhondda suggested, would itself be open to some form of legal challenge in the courts, including the European Court, which may seek to overrule the House on any such decision. We therefore need much clearer guidance about the available punishments and the processes for summoning witnesses to appear before a Committee.
The Select Committee is posing an interesting challenge to the Standards and Privileges Committee, because in our conclusions in chapter 8 of the report we make recommendations about three named individuals—Colin Myler, Tom Crone and Les Hinton—in respect of instances where we believe they gave misleading evidence to the Committee. Members can read the report, the evidence given in previous sessions and the written evidence presented to the Committee, and thereby see that there are discrepancies in testimony and, I feel, clear evidence that we were given misleading testimony by those witnesses.
There is a second issue that the Standards and Privileges Committee must consider: the corporate guilt of News Corporation, as also expressed in the conclusions of the report, and what sanctions there should be against a company and its directors and representatives, as opposed to a named individual who has given misleading testimony to Parliament. This is an important issue, and my hon. Friend the Member for Maldon touched on it in his speech.
We must consider what in the evidence that was given has undone the News Corporation executives. They were not undone by a witness changing their story or a new witness giving evidence that was different from evidence given to our predecessor Committee in the last Parliament. They have largely been undone by documents that have always existed and were in the possession of the company, and which subsequently came to light as a result of the inquiry—by information that was always there and was always accessible to those executives, and that we believe they could, and should, have had access to. Indeed, we know that some of them—including Tom Crone and Colin Myler, who played a pivotal role in these investigations—did have access. We know that they had access to the Queen’s Counsel opinion suggesting that phone hacking and the use of illegal methods to obtain information was widespread. We know that information was received by the legal department of the company. We know that Clive Goodman suggested in his letter to Les Hinton that phone hacking was widely discussed within the company, and that that was rejected. We know that that information was known, and these executives have been undone by information that was neither presented to Parliament nor freely given but released as a result of cross-examination of witnesses by the Committee or released by lawyers or other people who chose to make it available to us. It would have been much better if the company, when it gave evidence last July, had provided that information. If the Murdochs had sought it themselves, they might have given us clearer and better evidence last July and we would have been able to conclude our inquiry somewhat sooner.
We were consistently given false reassurances about the rigour of internal investigation, the work that was done to uncover phone hacking and those who had knowledge of it. Indeed, we have received information from Surrey police that states categorically that the police discussed the hacking of Milly Dowler’s phone with executives at News of the World in 2002. That was not a minor discrepancy or new information that had recently come to light; the information was known by people within that company for a very long time. Parliament was misled over a long time by some of those people and I agree with the hon. Member for Rhondda that we will probably not get the full picture until the conclusion of the police investigation and any subsequent trials. I am sure that the Committee, next year or in future years, will wish to return to the matter and give the House a fuller picture of exactly what happened based on all the evidence that has come to light.
Paul Farrelly (Newcastle-under-Lyme) (Lab)
I congratulate the Chair of the Select Committee, the hon. Member for Maldon (Mr Whittingdale), on his excellent introduction. I agree very strongly with the hon. Member for Suffolk Coastal (Dr Coffey), who has just left the Chamber. Not a single member of the legal profession—not a single legal adviser to News International—has resigned their services when they knew that evidence that was being given to the Committee was false and misleading, and that is an issue for the legal profession to consider.
I will be brief, because I believe our report’s conclusions are clear and speak for themselves. Our Committee has pursued the issue of phone hacking and how it reflects on press standards for five long years and, sadly, because of the forthcoming criminal trials, this might not be the final word. As the House has already heard, so as not to prejudice any prosecutions, we have taken great care in what we have said.
The report is not just about phone hacking per se; it is about the integrity of the Select Committee system in Parliament. Two years ago, in our report on “Press standards, privacy and libel”, on the evidence we found it “inconceivable” that News International’s “one rogue reporter” defence could possibly be true. Yet on the same evidence, the Press Complaints Commission cleared the News of the World of wider wrongdoing and shot the messenger—The Guardian—instead. The PCC is, of course, now on the scrap heap, a busted flush, waiting for Lord Leveson to pronounce and the Government—possibly—to act on the future shape of regulation.
After revelation upon revelation from the civil cases, last summer the then chair of the PCC, Baroness Buscombe, put her hands up. At long last, she was scathing about News International’s conduct and its so-called co-operation with PCC inquiries.
Mr Speaker
Order. I remind the House that the motion for debate is the question of whether to refer the Select Committee’s conclusions to the Select Committee on Standards and Privileges. As has already been indicated, it is perfectly legitimate to record and, in a sense, almost to report to the House the basic findings of the Committee and to offer to the House, as the Chair of the Culture, Media and Sport Committee did, the background to and context for our debate. That seems eminently reasonable, but this is not an occasion to rehearse all the issues, the evidence and the chronology of events that have led to where we are today. Although I do not in any sense seek to prescribe what people should say, there could be advantage in recalling the pithy observations of the hon. Member for West Bromwich East (Mr Watson).
Paul Farrelly
Thank you, Mr Speaker, and the background has been rehearsed well enough by the Chair of the Select Committee. I will now move on to what the Committee did about the lies to us, which the Press Complaints Commission’s chairman admitted when she said that there was only so much that the commission could do when people were lying to it.
Mr Speaker
Order. I just want to be clear that the hon. Gentleman has understood what I have said and intends to be guided by it. I presume that he is adducing this material in support of the proposition that the report should be considered by the Standards and Privileges Committee.
Paul Farrelly
You are right, as always, Mr Speaker.
On the conclusions of the report that we are asking the House to note, if “collective amnesia” was the one phrase from our 2010 report that echoed long afterwards, I hope that our “wilful blindness” conclusion will be one of those that resounds with the Select Committee on Standards and Privileges this time. That is the wilful turning of a blind eye to wrongdoing, not just phone hacking, over a period of time as long as any repercussions could be contained through the exercise, if need be, of raw press political power.
We were invited to lay most, if not all, of the blame for the cover-up on just two executives through News International’s damage-limitation exercise—Tom Crone, the company’s long-time in-house lawyer, and Colin Myler, the new and final editor of the News of the World. In our report, after months of deliberation and very patient amendment, with very skilful chairing, we declined that very unappealing invitation. As we navigated the issue of possible prosecutions, we asked whether it could be right to find wanting just a few executives who had so far not been arrested. We wondered whether it would be right, based on the evidence, to limit a critical verdict in our report if not just to one rogue reporter or one rogue newspaper, to just one rogue subsidiary, News International. After careful deliberation, we decided that it would not be right.
During that time, the group’s founder, Rupert Murdoch, and his son James were directors both of the parent company, News Corporation, and of News International. At the same time, News International misrepresented the investigations it had actually undertaken and attacked the Select Committee remorselessly, and its executives authorised surveillance on certain members of the Committee. So, we found that it was important that the report, based on the evidence, drew a strong corporate conclusion about a culture that was set right from the top. I conclude by drawing the House’s attention to the final sentence of paragraph 275 on page 84 of the report:
“In failing to investigate properly, and by ignoring evidence of widespread wrongdoing, News International and its parent News Corporation exhibited wilful blindness, for which the companies’ directors—including Rupert Murdoch and James Murdoch—should ultimately be prepared to take responsibility”.
I commend the motion to the House.
Louise Mensch (Corby) (Con)
Following on from the excellent speech of the hon. Member for Newcastle-under-Lyme (Paul Farrelly), I am glad that the motion calls for us to “note” the report, because—it is worth beginning by saying this—three members of the Committee, of whom I was one, did not agree with the very last paragraph of the conclusions, particularly the wilful blindness allegations against James and Rupert Murdoch. Nevertheless, I support the motion as it is written, and I think it is important that we refer this matter to the Standards and Privileges Committee because that is the least worst choice before the House. Frankly, there is no ideal answer to the situation in which we find ourselves. Parliament is in a difficult position, but that does not mean that we should take no action.
We are here debating this motion because it is not usual for a witness before a Select Committee deliberately to mislead and lie to the Houses of Parliament. I must take issue with the hon. Member for Cardiff West (Kevin Brennan), who has inferred again and again that our Committee ought to have put witnesses under oath, after which, had they lied to us, they could have been charged with the common criminal offence of perjury. The Committee considered this issue very carefully indeed, but decided that it would be better for our inquiry not to take evidence under oath because certain legal privileges would not then kick in, which would allow witnesses to deny us certain information when we requested it and would allow their lawyers not to co-operate with us. The Committee decided that taking evidence that was not under oath would give us greater flexibility in our inquiry. The point has already been made that one does not wish to get into a situation in which, in order to protect the integrity of Select Committee proceedings, we routinely put every witness under oath. Indeed, it is part of the dignity of Parliament that there should be a simple assumption that there is a requirement to tell the truth to Parliament.
The hon. Member for Rhondda (Chris Bryant) adduced the example of the Scottish Parliament and the powers that exist within that Parliament to punish those who lie to it. There is another example currently taking place across the Atlantic, where the baseball player Roger Clemens is about to go on trial for contempt of Congress, for having misled Congress. It is alleged that Mr Clemens lied to the American equivalent of a Select Committee of Parliament in, I think, 2009, when under oath he denied taking steroids, the allegation being that he did indeed take steroids, that he misled Congress and that a contempt of Congress was committed.
Perhaps when we consider this jurisdiction, that may be one way for us to square the circle. I completely agree with the thesis of my hon. Friend the Member for Folkestone and Hythe (Damian Collins) that it cannot simply be the case that somebody lies to Parliament, sends a stiff letter to the Select Committee saying, “I don’t agree with your conclusions”, and that is the end of the matter. That cannot be acceptable. Nevertheless, we can all immediately see the problems inherent in the suggestion from the hon. Member for Rhondda that we should seek to imprison somebody without their being able to testify in their defence and without the legal protections that the European Court of Human Rights might demand in a procedure that was to terminate in imprisonment.
In America we see, perhaps, the way to square the circle. It is prosecutors who have brought the case for contempt of Congress. That will be tried within the courts system. We have determined that we have been lied to. A simple method, perhaps, would be that we could refer the matter to the Director of Public Prosecutions and a trial could proceed on the basis that defendants would have all the protections of the court.
After the referral to the Standards and Privileges Committee, perhaps there should be a wider debate in the House about what punishments ought to exist for serious contempt of Parliament. In the American system, the case against Mr Clemens is not merely that he lied to Congress. There is also a materiality test, as the hon. Member for Rhondda noted. The lies told to the US Congress must materially have affected the investigation that was ongoing. In the case of the Select Committee, that test would manifestly have been passed, as lies of substance were repeatedly told us by lawyers who should know better. There is a test of proportionality built into the offence.
Jim Sheridan (Paisley and Renfrewshire North) (Lab)
The hon. Lady and others mentioned the situation in the Scottish Parliament. Depending how things evolve, the powers of the Scottish Parliament could be tested in the near future. I am concerned about the legal situation of witnesses who gave evidence via a video or conference link. Is that any different from witnesses who gave evidence face to face?
Louise Mensch
That is an interesting question. There ought to be no difference. People are testifying before the Parliament of the United Kingdom when they testify before a Select Committee, and Parliament has the right to expect that it is not materially lied to. In my opinion, the same sanctions should apply.
The whole House is familiar with the offence of contempt of court that is routinely used. Let us hope that it would not be so routinely used, but I believe an offence of contempt of Parliament ought to be created. It would be used only in the most exceptional circumstances and as with any other offence, it should be up to prosecutors to try it, and the protections of the court system and the defence system should kick in.
As the old joke says, I wouldn’t have started from here, yet that is where we are. We must rely on the Standards and Privileges Committee because there is nothing else for the House to do in the present circumstances. Perhaps we need to look at the wider powers of Parliament, the importance of Select Committee hearings, procedures for creating offences, and the material problem that Parliament has a right to be told the truth in serious inquiries, whether or not a witness is under oath. That is something that the House ought to consider in future deliberations. For now, I am delighted to commend to the House the motion to note and not to endorse the report.
Mr Kevin Barron (Rother Valley) (Lab)
If the House decides to refer this matter to the Committee on Standards and Privileges, we will ensure that all our processes are rigorously fair and impartial. It is likely that there will be widespread speculation before we are in a position to say more about the Committee’s plans, but we will not be rushing into making any hasty decisions and will consider our actions carefully, thoughtfully, and with professional advice from the appropriate sources.
At its meeting this morning, the Committee agreed that none of its members would discuss this matter outside the Committee, whether with colleagues or other third parties. I trust that Members and others will respect the Committee’s decision, and will not try to engage Committee members in discussions about this inquiry.
Philip Davies (Shipley) (Con)
I rise briefly to commend once again my hon. Friend the Member for Maldon (Mr Whittingdale) for the way in which he chaired what has been, at times, a challenging and difficult Committee, not just in this Parliament, but in the previous Parliament, when our conclusions were not always unanimous and we had a number of disagreements along the way. He, as ever, chaired the Committee expertly.
I would also like to take the opportunity to commend the other members of the Committee. We did not always agree on these matters, but everybody put a lot of hard work into the report. There was a lot of dedication over a long period, and even though we may well have had an honest disagreement at the end of it on some matters, people should not underestimate the efforts that Committee members on both sides of House put in to get to where we are today, not least the hon. Members for West Bromwich East (Mr Watson) and for Newcastle-under-Lyme (Paul Farrelly), who put in a lot of time and effort to uncover the wrongdoing that clearly took place at News International.
I absolutely endorse the case that was put by my hon. Friend the Member for Maldon at the beginning of the debate on why the matter should be passed on to the Standards and Privileges Committee. I want to emphasise that the Committee did not come lightly to the decision that Tom Crone, Colin Myler and Les Hinton had lied to the Committee in its previous inquiry, and, it might be said, in this one too. I do not think that any Select Committee would lightly decide overtly to state that certain named individuals lied to it in the course of its inquiry. I want to press that point to the Chairman of the Standards and Privileges Committee so that he appreciates that the decision was not entered into lightly. Those conclusions did not come flippantly, but after much serious consideration and deliberation.
I also want to emphasise how our inquiry was repeatedly impeded by News International, not just this inquiry, which, to be perfectly honest, showed for the first time elements of News Corporation co-operating with the Select Committee, but particularly the previous inquiry, when News International repeatedly, consistently and corporately made it clear that it was impeding our inquiry. In case people are not aware, I have to report that News International attempted to have the hon. Member for West Bromwich East and me thrown off the Committee during the last Parliament because it thought that we would not be particularly favourable to them in our deliberations. As the hon. Member for Wallasey (Ms Eagle) made clear, it would be absolutely unacceptable if people could come to Parliament and know that they could get away with repeatedly lying to the Committee. If that did happen, it would open the floodgates for witnesses not to tell the Committees about anything that might be inconvenient to them.
Let me make one brief point to emphasise how we did not enter into these matters lightly. The lies were not just little white lies, but deliberate attempts to mislead the Committee on serious matters. For example, my hon. Friends the Members for Maldon and for Folkestone and Hythe (Damian Collins) mentioned the letter that Clive Goodman sent to appeal against his dismissal to Les Hinton, saying that this practice was widespread in News of the World and that it was discussed on a daily basis. Yet Les Hinton made it clear that he had seen no evidence at all to suggest that the practice was more widespread, which was quite a palpable lie.
We must also remember that on the back of the letter that Les Hinton received, he was responsible for making sure that, one way or another, Clive Goodman received a payment totalling around £250,000. That happened only for him to say quite flippantly that there was no evidence at all; there was certainly sufficient evidence for him to authorise £250,000 to be paid out from News International to Clive Goodman—somebody who was convicted of a criminal offence, caused huge embarrassment to the company and could have been dismissed for gross misconduct. I would like to press upon the House, and the Standards and Privileges Committee, the fact that that was not only repeated, but very serious and blatant.
Finally, I would like the Standards and Privileges Committee to consider the motives of the people who lied to us—my hon. Friend the Member for Corby (Louise Mensch) touched on this in her contribution—because it is not entirely clear why certain people lied. Was it to protect themselves, which might have been the case for some people, to protect colleagues, or was it to protect the company and its reputation as a whole? The Committee might like to consider what motivated those people to lie and whether different motivations should come with different punishments. I am not offering any particular opinion, but I think that that is something that should be put on the record.
The reason I mention motives is that it was perfectly apparent during the previous inquiry in the last Parliament that witnesses from News International came to the Committee with a corporate game plan: nobody knew anything, nobody could remember anything, and nobody knew anybody who might know anything, and that was everybody’s defence at every possible turn. Whatever question was asked, that was the corporate defence from everybody who appeared before us under the News International banner, and it was particularly striking. I recall asking Les Hinton during that inquiry whether he had received any coaching before the evidence session so that we would know where we stood and whether News International had employed someone to advise them on how to answer the questions.
That is something the Standards and Privileges Committee might want to look at, because to my mind, and that of the Committee as a whole, the three individuals we named palpably lied to us, and it is very interesting to consider how on earth that came about. Were they told to give those answers, or did they make that decision themselves? I certainly have a feeling that on some occasions they were told what to say and that it was a corporate decision, rather than one they made themselves.
Alun Cairns (Vale of Glamorgan) (Con)
I pay tribute to my hon. Friend, the Committee and its Chair for the way they have conducted their inquiry and today’s debate. Will he reassure me that, as this ever-changing situation evolves, if any other witnesses are found to have misled or lied to the Committee, it will take the same action and call for them to be referred to the Standards and Privileges Committee?
Philip Davies
I am grateful to my hon. Friend but fear that his question is slightly above my pay grade, as those are not decisions I can take for the Committee as a whole. I am sure that my hon. Friend the Member for Maldon, the Chair of the Committee, listened carefully to his intervention. He is probably the best person to direct that request to. I would certainly be sympathetic to the idea of the Committee looking again at certain individuals, if the legal situation allowed, who might also have lied to us, if that is what we conclude.
In conclusion, these are very serious matters, matters about which the Committee was absolutely unanimous, with regard to the three individuals concerned, and that we did not enter into lightly. We might have had some very well-publicised disagreements about parts of our report, but on this we were absolutely united. On the report as a whole, and on the inquiries as a whole, there was far more that united the Committee than divided it.
Kevin Brennan (Cardiff West) (Lab)
I, too, will attempt to be brief. Far from being critical of the Culture, Media and Sport Committee, I praise it for the work that it has undertaken on this matter over many years, dating back, as my hon. Friend the Member for West Bromwich East (Mr Watson) said at the beginning of his remarks, to the question that my hon. Friend the Member for Rhondda (Chris Bryant) asked way back in 2003 of the then Rebekah Wade about the payment of police officers, a practice that he and I were strongly convinced—shall I put it that way?—was not uncommon but was taking place at the time.
May I pick up on the matter, and slightly disagree with my hon. Friend the Member for Rhondda, regarding the Committee on Standards and Privileges? I support the motion before us, but it is unfortunate that we have to talk about referring the issue to the Committee on Standards and Privileges and about the possibility of Parliament imprisoning individuals because they have lied to a Select Committee. That is the essence of the point that I have made for some time, and to which the hon. Member for Corby (Louise Mensch) referred, about the need for evidence to be taken under oath by Select Committees.
The hon. Lady started by saying that taking evidence under oath would be a bad idea because, in effect, lawyers would make witnesses clam up, and she is absolutely right that, at the moment, a Select Committee chooses whether to do so, but, as in the case that she cited from the United States, it is common practice for committees of Congress to take evidence under oath, and that is exactly why Roger Clemens can be held accountable on a charge of contempt of Congress.
I do not mind whether the criminal charge that results from such practice is contempt of Parliament, because there is no question but that News Corporation and News International, in their attitude to our Select Committees, showed over many years utter contempt for the proceedings of Parliament. They did so because they thought that those Committees had no power, no authority and no teeth—exactly because they were not taking evidence under oath.
Louise Mensch
The situation is not quite as simple as a simple perjury charge, which would apply on any occasion that one gave evidence under oath. The case in the United States refers specifically to contempt of Congress, which in respect of Parliament is the offence that we should create. As a corollary, does the hon. Gentleman not agree that there must be grave disquiet when a non-judicial body, such as Parliament, agrees to imprison a person? Does he agree also that the offence should be prosecuted by a prosecutor and decided by the courts in the normal way—after it has been committed against Parliament?
Kevin Brennan
I am not quite sure how the hon. Lady disagrees with me, to be perfectly honest. As I pointed out earlier, there is an Act of Parliament in place, the Parliamentary Witnesses Oaths Act 1871, which means that oaths can be taken before Select Committees, and any false evidence given under those oaths would be subject to prosecution under the Perjury Act 1911. If she would prefer to substitute a criminal offence of contempt of Parliament for that, I would be perfectly happy, but my point is that I feel uneasy that the only option available to us, because in the case before us an oath was not taken, is referral to the Committee on Standards and Privileges and the possibility of Parliament having to consider using that rarely used power of imprisonment.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
Will the hon. Gentleman allow me?
Kevin Brennan
I will, because the hon. Gentleman is the Chairman of the Public Administration Committee, but I will not take any further interventions.
Mr Jenkin
I am very grateful to the hon. Gentleman. I regret the fact that I have been in the Chamber for only part of the debate, but I heard the opening remarks. I feel it is appropriate for me to inform the House that the Liaison Committee has charged me with working with colleagues to investigate the whole question—it is very germane to this debate—of how Select Committee powers should be exercised.
Listening to these exchanges, I hear many matters that we have discussed and considered carefully, and I hope that the Chairman of the Standards and Privileges Committee will have regard to the findings that I hope we will produce in short order, which should provide not only some guidance on how the Committee should conduct its investigation into the matter, but some guidance to the House on what the consequences of contempt should be and, in future, on whether we will need to avail ourselves of the courts or of our own procedures. I am very grateful to my right hon. Friend the Leader of the House for emphasising that we are a House with a penal jurisdiction. That was a very important thing to put on the record.
Kevin Brennan
I am grateful to the Chairman of the Public Administration Committee for that intervention. He knows that I was a member of the Committee for many years, briefly under his chairmanship and in previous years under the chairmanship of Tony Wright, when we also considered a number of these issues.
I have appeared, as the hon. Gentleman may and others will, both as a member of a Committee and as a witness, giving evidence to a Committee, and I have never understood why an oath, although it is implicit for a Member of Parliament, is not administered while giving evidence to a parliamentary Committee. I shall say nothing further, other than that I support the motion before the House.
John Hemming (Birmingham, Yardley) (LD)
We are elected here to represent our constituents, and the privileges of Parliament are their privileges. One of those privileges is their right to talk to us even if people bully them; the other is to get answers. If we do not act when people lie to Parliament, we are failing our constituents.
I agree with pretty well everything that the hon. Member for Rhondda (Chris Bryant) said. We need to take a particularly robust approach to this. Contempt of Parliament is a very detailed matter; a barrister, Kieron Wood, wrote a book about it recently. I gave a copy to the Library, so any hon. Member can take it out and read the details of what has happened in the past. It is important that we operate robustly to protect the rights of our constituents to have us act on their behalf to find out what is going on.
As the hon. Member for Rhondda said, if we had been more robust at an earlier stage, perhaps all this would have happened at an earlier stage. We need a separate jurisdiction. There are questions about how the police have behaved in respect of this situation, so simply passing the matter over to them is an inadequate response. If, as some people have suggested, there has been an issue with the activities of the Crown Prosecution Service, then we need a separate jurisdiction for that. I have concerns about people being banned from court proceedings, even criminal court proceedings, as has happened recently. At the end of court proceedings, Parliament must have the chance to find answers and to explain to citizens what is going on. In the interests of our constituents, and so that we can stand up and protect democracy, we must take robust action.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I, too, will be brief in speaking in support of the motion. I repeat my tribute to the members of the Select Committee, all of whom have worked very effectively for us, including my hon. Friend the Member for Torbay (Mr Sanders), who made sure that all three parties were well represented.
The other day, we had a memorial service for Lord St John of Fawsley, who set up the Select Committee system back in the 1980s. This case has taken us to a crucial point in the development of Select Committees. We listened carefully to the right hon. Member for Rother Valley (Mr Barron), who said things that have been gratefully received about how his Committee proposes to do its business, and we have no doubt that it will do it appropriately.
Bluntly, though, it is no good having a Select Committee system that is the only way in which Parliament can interrogate people, quiz people and ask people questions on our collective behalf unless sanctions can be enforced when they do not follow the rules. The whole exercise has led us to this point. The Leader of the House made it clear, and Parliament is now clear, that we need to address the difficult questions of how we deal with breaches of the understandings or commitments that people undertake. Is it by our taking a criminal sanction? Is it, as the hon. Member for Corby (Louise Mensch) suggested, by our referring the matter to others to prosecute in the criminal courts? We cannot duck the question, and it needs to be picked up.
Colleagues know of my interest. I was the only Member of Parliament originally to give evidence in the trial that convicted Mr Goodman and Mr Mulcaire. Throughout the last part of the previous Parliament, I argued that we needed a public inquiry and needed to increase the criminal sanctions on those in the world of the press, not only those at the News of the World, who broke the law. Very recently—I wanted to leave it until late in the day—I took civil proceedings against the News of the World.
For me, there are two remaining substantive points. First, the serious issue is not so much that these individuals flaunted their positions, refused to co-operate with the Select Committee, and are found to have given dubious evidence, but that people from a very large national and international company did so. In Thomas Fuller’s famous phrase of 1733, which is oft used by lawyers,
“Be you never so high, the law is above you.”
We need to make sure that the law is above the News Corporations of this world and that Parliament is above the News Corporations of this world. The fact that someone is from a big company or an international company should not preclude them from telling the truth and from being answerable and accountable. We have remitted to the regulatory body, Ofcom, the duty of deciding who is a fit and proper person to hold a licence, and it is doing that. These are relevant matters, and corporate responsibility has to be accepted.
Finally, I am not at all vindictive about these things, but I am clear that we now have to bring the matter to a conclusion. The police are doing their job and Lord Justice Leveson is doing the job that we have asked him to do very well. Parliament has to complete its job, too. I trust that the motion represents the right way to do it and that the Standards and Privileges Committee will start its work unencumbered by pressure. We have to find ways of holding people to account when they abuse this place and ensuring that they understand that this is the Parliament of the people, and that they will be answerable and tell the truth.
Mr Adrian Sanders (Torbay) (LD)
I, too, congratulate the hon. Member for Maldon (Mr Whittingdale) on his chairmanship of the Culture, Media and Sport Committee during not just this inquiry but previous ones, including those for which I was a member of the Committee. I also thank members of the Committee past and present, and I thank the members of staff who have supported it for their patience and counsel. It has not necessarily been easy for them.
I will be brief, because much that needed to be said has already been said. I hope that the Standards and Privileges Committee will take into consideration one of the difficulties that the Culture, Media and Sport Committee had, which was that the circumstances were changing week by week as new evidence became available. That may also become a challenge for the Committee chaired by the right hon. Member for Rother Valley (Mr Barron). Ongoing inquiries and investigations may influence its decision making.
The most important issue, as has been mentioned, is the ability of Select Committees to seek out facts and uncover the truth. If there is no penalty for misleading a Committee, it affects our entire Select Committee system. I suspect that that concern lay behind the unanimity of the Culture, Media and Sport Committee on the relevant part of the report. Our experience has highlighted the need for Parliament to consider its powers and the procedures that we follow.
I end with a note of concern, although I fully support the motion. It is that the Standards and Privileges Committee meets in secret, which could be a difficulty. Those who, in our view, have misled the Culture, Media and Sport Committee could seek to challenge anything that the Standards and Privileges Committee does if it meets in secret.
Question put and agreed to.
Resolved,
That this House notes the conclusions set out in chapter 8 of the Eleventh Report from the Culture, Media and Sport Committee, Session 2010-12, on News International and Phone-hacking, HC 903-I and orders that the matter be referred to the Committee on Standards and Privileges.
Business without Debate
Financial Services Bill
(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
18:15 - The House divided: - Ayes: 225 / Noes: 266 - Question accordingly negatived.
20:01 - The House divided: - Ayes: 218 / Noes: 271 - Question accordingly negatived.
Chris Leslie (Nottingham East) (Lab/Co-op)
I beg to move amendment 75, page 43, line 16, at end insert—
‘(3) Within a year of Royal Assent to the Financial Services Act 2012, the Treasury shall publish a report on measures to improve the stewardship of institutional investments, which may require amendment under subsection (1).’.
Madam Deputy Speaker (Dawn Primarolo)
With this it will be convenient to discuss the following: Amendment 45, in clause 14, page 64, line 8, at end insert—
‘(3A) In section 73, subsection (1), insert at end:
“(g) to foster ethical corporate behaviour, including respect for internationally-recognised human rights.”.’.
Amendment 38, in clause 22, page 82, line 10, at end insert—
‘(c) provide for a requirement that an employee representative should be a member of the remuneration committee of a relevant body corporate, and
(d) provide for a requirement that the remuneration consultants advising on remuneration policy shall be appointed by the shareholders of a relevant body corporate.’.
Government amendments 5 to 8.
Amendment 73, in clause 40, page 127, line 38, at end insert—
‘Complaints by small businesses
234I Small businesses—complaints and proceedings
‘(1) The Treasury and Secretary of State shall bring forward proposals within three months of Royal Assent to the Financial Services Act 2012 in the following areas—
(a) to introduce provision for collective proceedings before the court in respect of financial services claims made on an opt-out basis by small and medium sized enterprises; and
(b) to introduce provision for complaints by small and medium sized enterprises to the FCA that a feature, or combination of features, of a market in the United Kingdom for financial services is, or appears to be, significantly damaging the interests of small business.’.
Government amendment 9.
Amendment 74, in schedule 5, page 204, line 37, at end insert—
‘(2) In subsection (1) after “approved persons”, insert “and the standards of stewardship expected of approved persons who are institutional investors.”’.
Government amendments 13 to 17.
Chris Leslie
This important Bill took a considerable amount of time in Committee, but it was still insufficient to cover many of the amendments that will be necessary to ensure that it is fit for purpose and able to fulfil the job for which it was designed. The Opposition believe that the Bill can still be improved, so many of the proposals we did not reach in Committee or that were not addressed on day 1 on Report are in today’s amendment paper.
This long group of amendments under the generic title, “Stewardship, etc.” covers a few issues, so I would be grateful, Madam Deputy Speaker, if you would bear with me while I touch on the details. Although amendments 75 and 74 relate to stewardship, other amendments are on different topics, which I should also like to address under this group.
On amendments 75 and 74, it is important to take the opportunity to ensure that the Bill properly improves institutional investors’ stewardship of pension funds or other savings or investments. Such funds are looked after by others on our behalf. In an ideal world, those who have pensions or other savings would spend time considering where they are invested, and whether they are invested ethically or in sustainable organisations and so forth. For reasons of practicality, however, that is often impossible, and investments are often grouped together in a basket of different products, so following the detail of where funds are invested is incredibly difficult.
That is why many people choose to use institutional investors—to ensure their best interests are being served. That means ensuring a good and strong rate of return, but many people care about where their money is invested. Most of British industry is partly owned by the collective pension funds of our constituents. They have voting rights through the shares and equity they hold, but they are often exercised without reference to our constituents and delegated to institutional investors to make decisions on their behalf.
The previous Administration and this one have therefore sought to address the quality of stewardship by institutional investors. Amendment 75 is on the threshold tests in the Bill and the Financial Services and Markets Act 2000 on whether people are suitable or fit and proper, whether they have adequate resources to fulfil their responsibilities, whether they have close links with others in the sector, and so on. The Opposition felt it would be a good idea to ask Ministers to consider whether the array of reforms that should be made to corporate stewardship should be reconsidered in the light of those threshold tests.
Amendment 74 also looks to the 2000 Act and the general rules of conduct of approved persons and seeks to amend the Bill so that it addresses key aspects of the good stewardship agenda. We argued in Committee and earlier that the Bill is a missed opportunity radically to improve the stewardship of some of the key players in corporate Britain, especially those large firms—banks and institutional investors—that have such a direct impact on society at large.
The stewardship code was brought into force in 2010. We have had reasonable progress, with around 230 asset managers, asset owners and service providers signing up in the first 18 months, but sadly, the Bill does not reference the Financial Reporting Council, which is the UK’s independent regulator responsible for promoting, among other things, high-quality corporate governance. We want the Bill to do more to give regulators a proper and clear mandate to strengthen the stewardship code where appropriate and give them sufficient teeth to ensure that significant culture changes can happen. These things do matter. We have to build a framework that roots out bad habits and addresses what some people have called the principal agent dynamic—the fact that shareholders are often very fragmented and, when faced with unified managers, are often unable to make any headway. Senior executives can sometimes respond only if there is a 50% plus one coalition of shareholders.
We need to rekindle that dynamic. Some have said that it is time for a shareholder spring or awakening, and there have been some suggestions recently that certain company shareholders, at the annual general meetings and elsewhere, have begun to ask fundamental questions of the senior executives. It is the mismatch between the power that senior executives can have and the lack of power of—paradoxically—the owners of some of these large companies that needs addressing. In legislative terms, we often have debates about firm rules and fixed ways of doing business. Obviously, it would be preferable if the dynamic between owners and managers were able to ensure that we had a healthier, more open and transparent way of doing business.
I commend those institutional investors who show an active interest in how they use the voting rights of their investors and use that leverage to try and influence positive corporate behaviour by the relevant companies. It must be tempting for many institutional investors, when faced with a company perhaps with a management dysfunction or some behavioural failing, to sell up and walk away from that company. That is too often the history of such shareholding. It would often be far better if shareholders, as owners, could stay and try to fix the culture of the organisations that they own. It is that sort of change that we need to find a way of addressing. Yes, some shareholders will not want to say publicly that they disagree with senior executives, because that could affect the share price and they would therefore be affecting their own financial interests in some ways, but there are several ways in which institutional investors need to have the ability, directly or indirectly, to influence what is going on.
Protests in recent months have, in some cases, seen the rejection of some of the larger pay deals in big companies—for instance, the executive remuneration packages at Trinity Mirror, Pendragon and Aviva. The banking sector has also seen some significant shareholder disquiet, including at Citigroup with the rejection of the chief executive’s pay package. Nearly a third of Barclays shareholders voted against the pay policies in that particular company.
So there have been some signs that shareholders are becoming interested in that more active role. This is perhaps to commend the work of the Association of British Insurers, which has done good work recently in encouraging its members to take a more active role. Those members account for some 15% of the stock market, and they recently wrote an unprecedented letter to the chief executives of some of the major banks in particular, saying that they were not happy and would no longer tolerate a “business as usual” approach when it came to remuneration, especially for executive directors.
Those moves are very positive, but we should not feel that the balance between shareholders and executives is sufficient. The persistent imbalance needs addressing in a number of specific ways. For a start, a shadow is often cast across the Atlantic as many institutional investors feel that what are known as the “acting in concert” rules affect them here. To what extent can institutional investors come together and discuss with each other their ability to voice common concerns about the behaviour of managers? I have sometimes heard concerns expressed that this may somehow be in conflict with anti-trust regulations. If the Government could clarify the “acting in concert” rules, it would help to send a clear signal to institutional investors that it is possible to have those discussions, to come together to form a significant majority and to express a view about corporate behaviour.
Stewart Hosie (Dundee East) (SNP)
Is the hon. Gentleman concerned that, if the amendment is passed, financial institutions might stop providing the hedge products against interest rate changes or forex changes that SMEs might need and from which they might benefit? Is there not a slight risk of those products no longer being available, adding to the risk for SMEs over a period of time during which interest rates and foreign exchange rates might change?
Chris Leslie
I am grateful to the hon. Gentleman, but no, I do not think that is a risk. Amendment 73 does not propose to outlaw interest rate swap products; indeed, it is not specifically related to those particular products. It is really about the powers of small firms to complain and to take proceedings if they feel that they have been mis-sold a particular product.
On the particular issue in the news about interest-rate swap products, there are some serious questions that the Financial Services Authority and the Minister need to answer. Were those interest-rate hedge products a requirement of loan agreements, or were they optional? Were the minimum and maximum parameters fair and balanced, or was the downside risk always likely to hit the consumer more than the banks? How frequently was there a mismatch between the term of the loan agreement and the term of the hedge product obligation? Sometimes the term of the hedge product obligation continued even though the loan term had concluded. Were there asymmetrical rights to cancel? In other words, could the banks cancel the arrangement for a particular product, with which the consumer or small firm had to continue? Those are some of the key questions.
David Mowat (Warrington South) (Con)
The hon. Gentleman is right to raise this serious issue. What I do not understand in his amendment, however, is what additional powers it would effectively give to a small business, given that the Financial Services Authority can already investigate all these things. Am I missing something?
Chris Leslie
When it comes to complaints procedures, particularly about market failure, which the Financial Conduct Authority can look at, there is a trigger that small firms could have, but it is not available in the Bill. Just as the Minister has given super-complaint powers to a certain number of consumer bodies, so a case can be made for doing a similar thing for representative bodies of small firms. I am not claiming that the amendment is drafted to the perfection that the Minister’s officials might want, but I hope he gets the gist—that there is a gap here. Small firms might have written to him, expressing the fact that they feel that they have no power. I have certainly had some of them writing to me to say that they feel intimidated about complaining—to the regulator or to their bank—because of the sheer power that the bank has to withdraw lines of credit if it feels that the boat is being rocked.
There is an important underlying issue here, which the business community wants addressed. To what extent were small firms told to seek independent advice before signing up to the swap contracts? How widespread was the take-up of these particular agreements? I know that the Financial Services Authority is beginning to look at these questions, but I want to see more action and a swifter response from both the Government and the regulator.
David Mowat
Many of us want to see more action, but what I do not understand is the extent to which the hon. Gentleman believes that the FSA does not have the powers to investigate mis-selling of this type. If mis-selling has occurred—the hon. Gentleman provided some good examples of unfair and asymmetric contracts—surely the FSA is already able to investigate it.
Chris Leslie
Indeed it can, but it is the way of triggering an FSA investigation that is the case in point. The FSA can choose not to listen to the voices of dozens or hundreds of small businesses, not necessarily in regard to this product but in regard to other products in the future. It is a question of giving some power to small firms, as consumers, to trigger an investigation by the regulator. This is not just a pro-consumer amendment; it is a pro-business amendment, as I hope can be agreed on all sides.
I have spoken about the amendments tabled in my name; there are others on the list. I shall be interested to hear what the Minister has to say.
John Hemming (Birmingham, Yardley) (LD)
Let me begin by referring Members to my entry in the Register of Members’ Financial Interests. I think that I should declare registrable holdings in RBS and Lloyds as regulated entities. I have just checked my entry in the register, and note that I have a declarable interest in Highway Capital. It is a stock exchange rather than a parliamentary interest, but I think that it should be declared because it is relevant to the debate. I also founded, and still chair, John Hemming and Company LLP, which supplies software to the financial services sector. Although it is not itself regulated by the FSA, it trades with FSA-regulated entities, so I think that interest should be declared as well.
My hon. Friend the Member for Solihull (Lorely Burt) sadly cannot be here today, although she attended 16 of the Committee’s sittings. She has, however, passed me certain comments that she has received from interested parties, which she wishes me to raise with the Minister.
Payday lending has been a substantial issue throughout the debate. My personal view is that it is not a good thing, because it traps people in many circumstances. The question of what is the best way of dealing with it is a complex one, and I think that the Government are entirely right to ask the University of Bristol to investigate it. However, I have spoken to companies in my constituency and have said that I do not think that it is a very good thing.
In Committee, my hon. Friend the Member for Solihull said that the Bill should explicitly encourage the Financial Conduct Authority to seek to maintain and extend consumers’ access to financial services that meet their needs, and that when making regulatory decisions, it should assess their impact on markets and consumers. It should place value on policy proposals and regulations that increase access to savings, protections and other financial products, and also on financial advice. In the absence of such a requirement, there would be a risk of the FCA always being steered towards a risk-averse regulation. Markets might be restricted to large groups of consumers to avoid any consumer getting sub-optimal products.
The Government seek to encourage the development of simple financial products. If we are to succeed, we must have a regulator working with the grain of the policy rather than acting as an obstacle to it, as appeared at times to be the case with the last Government’s stakeholder products initiative. Does the Minister agree that the FCA now has the “teeth” to engage with the industry and engage in issues such as the maximum number of rollovers that a payday lender should be permitted to allow? Could the FCA set a threshold for market entry? Could it impose on companies real penalties that hurt, rather than the £50,000 limit imposed on the Office of Fair Trading, and make lenders pay compensation to consumers who have suffered detriment?
Let me now turn to the reflections of industry practitioners. The smallest businesses are keen to ensure that the cost of the regulation to them is not disproportionate. Forty per cent. of credit licence holders are sole traders. What cost-benefit analysis has been carried out for the smallest practitioners?
What about the implementation time? The Finance and Leasing Association has observed that the less far-reaching Consumer Credit Act took four years to implement. It estimates that implementation of this legislation would take between five and seven years. I am sure that the Government will work with all the professional bodies in devising a sensible implementation plan, but I should be grateful for any reassurance the Minister can give.
The Association of Independent Financial Advisers is fearful about the lack of a limit on time for complaints, which it says will place a burden on provisions that it will need to make to cover this open-ended provision—
Madam Deputy Speaker (Dawn Primarolo)
Order. The hon. Gentleman is speaking quite quickly, but I am trying to follow what he is saying. Will he explain how it is relevant to the amendments that we are discussing?
Madam Deputy Speaker
In that case, it is out of order. Perhaps we should move on, unless the hon. Gentleman is going to speak in order.
Madam Deputy Speaker
Order. I should like the hon. Gentleman to do it now. Otherwise I am going to sit him down straight away, given that he knows that he was out of order. Presumably that is why he was speaking so fast. I ask him to speak directly about the amendments.
John Hemming
The Opposition have raised interesting questions about the issues of shareholder activism and the interrelationship between shareholder activists and companies, and I would be interested to hear what the Government have to say in response.
Lisa Nandy (Wigan) (Lab)
After that exchange, I rise to speak to amendment 45, which stands in my name and that of other Members, with some trepidation. I shall try to keep to the point.
The amendment places a duty on the Financial Conduct Authority, in its role as the UK listing authority, to require all applicants to the stock exchange to report on the human rights and sustainable development impacts of their operations. The Minister has said that the FCA needs to be a single-minded regulator. The amendment would not distract the FCA from its strategic objective, but would serve to uphold the integrity of the market and the London Stock Exchange in the fullest sense of that term. As the hon. Member for Hereford and South Herefordshire (Jesse Norman) has said, we must uphold honour and morality in the markets, but we must also maintain Britain’s international competitiveness. The amendment will achieve both objectives.
Conveniently, the amendment is also in line with the Government’s policy commitments. In June last year, the UK, along with every other member of the United Nations Human Rights Council, endorsed the UN framework on human rights and transnational corporations, which for the first time provides a framework for business and human rights. It was an historic agreement, and the Government are very supportive of it. The Foreign and Commonwealth Office has been particularly enthusiastic in its support for its principles, but so far the Government have not spelled out how they intend to fulfil them. Listing requirements specifically relating to human rights and sustainable development will be a very strong first step. As some Members may be aware, the LSE is currently host to a number of companies that have been found guilty of gross violations of human rights, particularly in countries that are in conflict or deemed high risk, yet very few companies have been held properly to account for such actions.
Last June, Richard Lambert, former director general of the CBI, wrote an opinion piece for the Financial Times. He said:
“It never occurred to those of us who helped launch the FTSE 100 index 27 years ago that one day it would be providing a cloak of respectability and lots of passive investors for companies that challenge the canons of corporate governance such as Vedanta…Perhaps it is time for those responsible for the index to rethink its purpose.”
Our amendment would clarify rather than rethink the purpose of the stock exchange, allowing the FCA to take into account an applicant’s respect for human rights and sustainable development, in protecting the integrity and respectability of the exchange. That has been done elsewhere, such as in Hong Kong, and Istanbul, Brazil, Indonesia, Shanghai, Egypt, Korea and South Africa have all taken steps in that direction.
Such regulation would not be burdensome on applicants. Publicly listed companies already report on their social and environmental impacts as part of the requirements under the Companies Act 2006. This amendment would simply make explicit the requirement to include human rights and sustainable development in their reports and demonstrate to applicants that the Government do not tolerate or accept failure to respect human rights.
Apart from the moral argument, there is a strong business case for such requirements. There is increasing recognition that environmental and social factors can have a material impact on business returns and a wider impact on reputation. The gulf of Mexico oil spill—which forced BP to cancel its dividend for the first time since the second world war and to report its first annual loss in 19 years—should have removed any doubt that environmental and social issues can be vital to company success.
One of the virtues of London’s financial services sector is its sustainability, security and stability, yet we are falling behind other countries in our commitment to sustainability. The Bill provides a great opportunity for Ministers to get on the front foot in respect of this agenda. The FCA’s purpose is to uphold the integrity of the markets. I ask Ministers to consider that term in its fullest sense in respect of companies’ environmental and social impacts.
This is a probing amendment, so I shall not press it to a Division, but I will listen very carefully to the Minister’s response.
John McDonnell (Hayes and Harlington) (Lab)
I apologise, Madam Deputy Speaker, for coming and going from the Chamber during the debate; I have been chairing another meeting.
I congratulate my hon. Friend the Member for Wigan (Lisa Nandy) on the way in which she has promoted the debate on the issue and on her amendment. She has approached the matter articulately and with considerable compassion. She has demonstrated that ability to the House on a number of issues, and I congratulate her on her promotion to the Labour Front Bench.
Steve Baker (Wycombe) (Con)
The hon. Gentleman makes a compelling case, but are not directors already responsible under the Companies Act 2006 for many of the matters he raises? Would it not be more expedient to pursue directors?
John McDonnell
I understand where the hon. Gentleman is coming from but we have tried that and it has not worked. We sought under the recent Companies Act to increase the responsibilities on directors, but unfortunately we were unsuccessful. The evidence that came to the London Mining Network report, which I shall send to the hon. Gentleman, clearly shows that the existing system is not working, and this Bill provides an opportunity to enhance the powers of the regulatory authorities in this country.
My hon. Friend the Member for Wigan will not push the amendment to a vote. I understand why, although I am a bit more proactive on these matters. May I suggest to the Minister that the Government usefully look at the report and bring together the relevant representatives, including the existing authorities and the new individuals who will sit on the various authorities when the Bill has gone through, to discuss where we go from here? How do we ensure that we have an effective mechanism that includes the monitoring of corporate ethical behaviour within companies that are listed in this country and that gain all the advantages from that, such as reputational advantage, but that are doing our country a disservice through their operations in the developing world?
The Financial Secretary to the Treasury (Mr Mark Hoban)
I am grateful for the opportunity to reply to this debate. The hon. Members for Wigan (Lisa Nandy) and for Hayes and Harlington (John McDonnell) have raised some very important issues and there is a lot of truth in what they say. The reputation of the UK listing regime depends partly on the behaviour of companies, and we need to think about that quite carefully. However, there are other forums in which these issues should be explored—I do not believe that the Financial Services Bill is the place for it. In the regulatory reforms we have brought forward, we have tried to be very clear about the responsibilities and focus of the new regulators, the Financial Conduct Authority, the Prudential Regulation Authority, and the macro-prudential body the Financial Policy Committee.
Matters of stewardship and corporate behaviour are predominantly the responsibility of the Financial Reporting Council, which is responsible for the stewardship code and corporate governance issues. I encourage both hon. Members to engage with the FRC on this issue. Of course, it is not only the FRC that is relevant. The hon. Member for Hayes and Harlington talked about the mining sector, and the Government are engaged in that debate. We are a strong supporter of transparency in the extractive sector and we are pressing for requirements to be placed on EU extractive companies to disclose the payments they make to Governments. That is flowing from the accounting and transparency directives. We are also very supportive of the extractive industries transparency initiative, under which companies publish the payments they make to companies in resource-rich countries, so we are aware of the need to increase transparency.
Lisa Nandy
I am grateful to the Minister for giving way, but I urge him to speak to his colleagues, particularly in the Foreign and Commonwealth Office, because this amendment is supported by a wide range of organisations. They include investors and members of the business community, as well as non-governmental organisations that represent those whose lives have been so appallingly blighted by some of the companies that my hon. Friend the Member for Hayes and Harlington (John McDonnell) and I have been discussing.
Mr Hoban
The hon. Lady makes a good point, and if my colleagues in the Foreign and Commonwealth Office are not reading this debate carefully I shall certainly raise the matter with them and ensure that they think carefully about their role. I encourage her to speak to the FRC about these issues.
Mr Andrew Love (Edmonton) (Lab/Co-op)
The Treasury Committee interviewed members of the Financial Reporting Council this morning. They explained to us that their powers are about implementing or explaining and that they do not have powers to deal with companies that break the rules in this regard. Would it not therefore be appropriate to involve a body such as the FCA, which really could deal with implementation?
Mr Hoban
As my hon. Friend the Member for Wycombe (Steve Baker) highlighted, there is a responsibility on directors and there are criminal sanctions for criminal behaviour. We need to be very careful that we do not duplicate powers that already exist elsewhere and that we do not confuse the role of the regulators. It was the Treasury Committee that highlighted some of the problems in the existing regulatory system with the confusion of roles and remits. We want to be very clear in these reforms about what we seek to achieve.
The FSA—and in future the FCA—has a role to play. The FSA supports the FRC’s stewardship code through mandatory requirements on asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy. Those powers will transfer to the FCA.
John McDonnell
I hope that what the Minister just said was helpful. Is he saying that the stewardship role that he envisages for the FCA will include an element whereby judgments can be made about behaviour in terms of corporate ethics?
Mr Hoban
I am saying that what we need to ensure in terms of the stewardship code, and what the FCA does, is to require asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy, so the obligation is on asset managers rather than necessarily on companies themselves to disclose their adherence to stewardship matters.
John McDonnell
All right, I will not be a pain any further. To be frank, that does not move the matter on. The Minister need not give an answer on this tonight, but it would be incredibly helpful if he or one of his colleagues met my hon. Friend the Member for Wigan (Lisa Nandy), me and representatives from the London Mining Network to talk this issue through because there is clearly a gap between the different institutions, which corporate ethics seem to fall down when it comes to their being pragmatically adhered to.
Mr Hoban
I am always loth to offer meetings on behalf of colleagues, because it has happened to me, but the hon. Gentleman may wish to approach the Minister with responsibility for consumer affairs, who is also responsible for corporate governance and the role of the FRC. That might be the most productive furrow to plough.
On amendment 38, the hon. Member for Nottingham East (Chris Leslie) is absolutely right that we have heard it before. It is identical to amendment 150, which we discussed at some length in Committee before rejecting it. I do not think his arguments today were any more persuasive than they were a few months ago. I know that he will find that personally disappointing but I am sure he will get over it. In short, the objectives of each authority are broad enough to enable them to make the rules suggested in the amendment.
More generally, these issues are better considered in other forums, including those concerned with governance across the corporate sector. I also point out gently to the hon. Member for Nottingham East that the Department for Business, Innovation and Skills recently consulted quite widely on executive remuneration and that it included in that consultation both the suggestions that have been made, neither of which received significant support. [Interruption.] The hon. Member for Nottingham East says that it depends whom we consulted but it was an open consultation. Views were encouraged from across a wide range of bodies, including investor organisations, and I am sure that institutions such as the TUC and others would have taken part. I know that the Treasury Committee is also looking into this matter, so perhaps the hon. Member for Edmonton (Mr Love) can illuminate us about the conversations he has had this afternoon with Baroness Hogg.
Mr Love
I thank the Minister. What we were told today was that remuneration committees draw from a very select pool and are heavily influenced by the argument that their chief executive has to be at or above the average of all chief executives and that comparisons are made directly with the United States, which may be inappropriate. It was also made clear to us that we should widen that pool. One suggestion of how that could be done was to put an employee on the remuneration committee. If that is not acceptable, how is the Minister going to address this problem?
Mr Hoban
That is why the Government have embarked upon a consultation to look at ways to enhance the accountability of boards to their shareholders, looking particularly at the issue of executive pay. That is a welcome move and the Government will shortly respond formally to the responses to that consultation. I agree with the hon. Member for Nottingham East that shareholders must play a more powerful role in these issues, and in recent months they have put across their views more powerfully.
The hon. Member for Nottingham East spoke about the disclosure of voting patterns. As he mentioned, there is provision for such a power in the Companies Act 2006. The previous Government made it clear that they would use the power only if market practice did not improve. The outcome of the stewardship code has been to encourage institutional investors to vote more and to disclose that. The latest Investment Management Association survey of institutional investors shows that 66% of those surveyed now publish their voting records. That is up from 21% in 2004. Professor John Kay, in his review of equity markets and long-term decision making, is considering the issue and will report in the summer.
Let me move on to Government amendments 7 and 8 and Opposition amendment 73. Amendment 8 makes two minor technical corrections and allows firms and the Financial Ombudsman Service to make referrals to the FCA on matters of mass detriment. Amendment 7 deals with super-complaints. The new provision in the Bill for the FCA to receive super-complaints from designated consumer bodies has been widely welcomed. I am grateful for the scrutiny provided in Committee and in particular for the arguments made by the hon. Member for Makerfield (Yvonne Fovargue), who is in her place, who tabled an amendment in this connection.
It has never been the Government’s intention that the super-complaints mechanism could be made available to bodies whose purpose is to represent professional investors, but the debate in Committee highlighted the fact that the drafting would allow that. The amendment therefore revises the definition of “consumer” used in the super-complaints mechanism to exclude representatives of authorised firms.
Amendment 73 seeks to require the Government to introduce a provision allowing for collective proceedings for small and medium-sized firms and to give them access to super-complaints. The amendment has created confusion in the minds of hon. Members about the rights currently available to businesses to make complaints. Paragraph (b) of the amendment suggests that small and medium-sized businesses cannot make complaints. That is not the case, but I shall return to that.
I deal first with collective proceedings. The Government are consulting on a range of proposals to make it easier for consumers and small businesses to bring private actions in competition law, including on whether to extend to businesses the current right of consumers to bring a collective action following a breach of competition law, and whether to make it easier to bring such actions. We should take the opportunity to learn from the outcome of that consultation and reflect on what the implications might be for the financial services sector before proceeding to legislation. It would not be appropriate to legislate today in haste, without having consulted.
On access to super-complaints, the provisions in the Bill will not prevent bodies representing small and medium-sized enterprises which fit the relevant definition of consumers from making super-complaints. Within the new statutory framework the issue of what type of consumer body should have access to super-complaints is complex and will require more detailed criteria than can be set out in the Bill. These criteria will be of interest to parliamentarians and to organisations seeking to become super-complainants. I can therefore announce to the House that the Treasury will publish draft criteria for consultation later in the year.
On paragraph (b) of amendment 73 about the rights of small and medium-sized businesses to make complaints to the FSA, there has been much discussion about the mis-selling of interest rate hedges. I do not want to comment on that directly, as it is a matter for the FSA. However, I can point out that the FSA already has a powerful toolkit that can be very effective. That includes its powers to establish industry-wide or firm-specific redress schemes under section 404 of FSMA, which was recently used in the case of Arch Cru. The FSA is consulting on such an arrangement to help people who lost out as a consequence of the issues at Arch Cru.
The FCA will have the powers that the FSA already has to refer firms to enforcement, to use supervisory measures, to agree with or require a firm to undertake the necessary remedial action, including carrying out a past business review, and the payment of redress, or obtaining redress for firms through their use of their restitution powers under section 384 of FSMA. There are therefore provisions in place that will help the FSA to tackle complaints of mis-selling that businesses as well as consumers have brought to it. I hope that provides the clarity and reassurance that my hon. Friends are looking for.
My hon. Friend the Member for Warrington South (David Mowat) picked up in his interventions the confusion that amendment 73 has created. The FSA has the power to take action to help businesses which feel that they have been mis-sold products and to ensure that restitution can take place.
Steve Brine (Winchester) (Con)
I am listening carefully to what the Minister says, and I agree that paragraph (b) has caused some confusion and may have planted some hope that did not need to be planted in some of my constituents, who have some sympathy with amendment 73, as do I. The Minister said that the FSA or FCA has a toolkit at its disposal, and I am sure it has been listening carefully to what he has said at the Dispatch Box this afternoon. Will he consider writing to the FSA to make that crystal clear, giving clarity to Members and constituents listening to the debate today?
Mr Hoban
I would not say that amendment 73 sowed seeds of hope. Rather, it sowed seeds of doubt by suggesting that those powers were not available. Of course they are available. I have written to hon. Members in respect of Arch Cru and also about interest rate swaps recently, setting out the work that the FSA is doing in this regard. It is looking carefully at the sales practices of a number of institutions in respect of interest rate swaps and will take action, as appropriate. I can reassure my hon. Friends and those who take a close interest in these matters on behalf of their constituents and businesses in their constituency that the FSA has the powers that it needs to tackle these issues properly and fully and to get to the bottom of them.
Mike Freer (Finchley and Golders Green) (Con)
Sadly, I am none the wiser. I have three constituency cases in front of me on this very issue. Two of them include a letter from the FSA which clearly states that this is a matter for the courts to decide and is not part of its remits under the complaints procedure. Can my hon. Friend clarify why the FSA is telling constituents that it is a matter for the courts, but he says it is a matter for the FSA?
Mr Hoban
There are two issues here. There is a route through the courts that any type of consumer, whether retail or a business, can use if they have been mis-sold a product. That is a normal commercial right. What the FSA has identified as a consequence of the number of complaints on the issue that it has received from businesses is that it needed to undertake more work. It started that work in mid-March. It was looking at products that were sold in the run-up to the financial crisis, and as a consequence of its investigations it believed that more work was needed to establish the scale of the problem and to determine what action should be taken.
There is nothing contradictory about the letter that the FSA sent. Thanks to the efforts of a number of hon. Members who raised with the FSA the concerns of businesses in their constituency, it recognised that they were not just isolated examples and that there was a wider issue that needed to be addressed. Its powers under FSMA enable it to address the problem in the right way. That is a welcome step forward by the FSA.
Mr Love
Looking at the issue from a small business perspective, small businesses are not allowed, as the amendment proposes, to take collective action on these matters through the courts, which is frustrating. They feel that the FSA is not responding to them adequately. There are great delays in the system. The Minister has commented on the legal aspect of collective actions currently going through. May we have some reassurance today that the FSA will act more promptly in dealing with these matters?
Mr Hoban
As a consequence of the reforms that we are introducing, we are giving the FSA, and now the FCA, tougher powers to tackle these problems. The FSA has a much-reduced appetite for risk and a more interventionist approach to tackling matters where there appears to be consumer detriment. Some people feel very uncomfortable with this, but it is right for the FSA to act vigorously in defence of consumers and to take the necessary action to ensure that consumers get a fair deal. The Bill takes that one step forward and that is why we have been keen to ensure that we give the FCA more powers, which it has demonstrated the appetite to use.
Amendments 5 and 6 require the FCA and the PRA to publish a statement explaining how they consider making the proposed rules compatible with the principles of regulation set out in new section 3B. Given the important framing role of these principles, I agreed with the suggestion made by the hon. Member for Nottingham East in Committee that the Bill should be explicit about the regulator’s duty in that regard, and I committed to tabling the appropriate amendments when the Bill returned to the House. I am sure that the hon. Gentleman will be keen to support them.
Amendments 13 and 14 are minor and technical and are designed to maintain a position currently provided for in FSMA whereby the FSA is not required to make rules for the FSCS that provide cover over all regulated activities. The amendments ensure consistency with section 214(1)(g), which provides that the scheme may in particular provide for a claim to be entertained only if it is the type of claim specified by the scheme. These are technical changes and I hope that hon. Members will support the Government amendments and reject those tabled by the Opposition.
Chris Leslie
I am sorry that the Minister has not reacted to the importance of the issues in the amendments that we have tabled today, particularly when it comes to the need for small firms to have a greater capacity to complain or to make collective proceedings when there is lack of clarity about their capability to do so. The issues were raised not only by the Opposition; Government Members also felt it necessary to clarify these issues. The Minister should at the very least have committed to write to hon. Members so that they could pass on to the businesses in their constituencies a clear route map for communicating some of these questions, such as interest rate swap mis-selling. All we sought was that small firms that feel aggrieved should have their concerns taken seriously as consumers of financial products, but hopefully the point has been made in the debate.
I am sorry that the Minister felt it necessary to reject our amendments on stewardship issues. It is not good enough for the Government to rebut such questions. The Prime Minister had plenty of warm words in January when this issue was high on the media agenda, but we have seen precious little action subsequently. The Government are not taking the stewardship issue seriously and it is important that they do so, particularly with regard to the remuneration committees of some of the largest corporations and our banks and the idea that these obscene bonuses and excessive pay packages can continue to roll on. As my hon. Friend the Member for Edmonton (Mr Love) said, the remuneration committees are self-perpetuating. Would it not be a good idea to broaden them out and try to put an employee voice on their panel, and make sure that they appointed consultants in a way that did not conflict with their own management’s vested interests?
After we have voted on amendment 40, which we debated on day one of Report, on the need to regulate some of the excessive high-cost credit arrangements, I will press to a Division amendment 38 on remuneration committees, because it typifies one of those areas on the stewardship agenda where we need to see action most swiftly. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 22
Rules and guidance
Amendment proposed: 40, page 80, line 2, at end insert—
‘(2A) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.’.—(Stella Creasy.)
Question put, That the amendment be made.
Chris Leslie
I beg to move amendment 72, page 130, line 38, at end insert—
‘(g) making provision for the increased diversity of the financial services sector and promotion of mutual societies, including arrangements to measure the number of members of mutual societies, and the market share for mutual societies as a proportion of the UK financial services sector.’.
This simple amendment suggests that within six months of Royal Assent the Treasury should bring forward proposals to foster diversity in financial services and promote mutual societies. For the avoidance of doubt, Mr Deputy Speaker, I should declare that I am not only a Labour Member of Parliament but a Labour and Co-operative party MP. Inasmuch as there are interests involved in that, I am proud to support the Government’s stated intention to promote mutuals. I have before me page 9 of the coalition agreement—I am sure that all hon. Members have it emblazoned on the walls of their offices—where it says:
“We will bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry.”
It is perhaps not clear that the Prime Minister, the Chancellor and the Minister remember that they made that commitment. Therefore, in an act of generosity—the Minister will recognise the positive spirit in which we have tabled the amendment—we felt it important to suggest that the Treasury might want to enshrine that coalition pledge in statute and to make arrangements to measure the progress that it is making in promoting the mutual societies model. For example, each year the Treasury could publish the number of members of mutual societies so that we could see whether good progress was being made, and publish the market share of the mutual society sector as a proportion of UK financial services.
The amendment is fairly innocuous, and I hope that it can gain some cross-party support. After all, let us not forget that the mutual sector is all about ensuring that members own and govern their own financial institutions, have a stake in their future, and can set their agenda. That member-owned and member-governed ethos rightly ought to be promoted. Sadly, we have a small mutual sector, but it should be encouraged to grow, and that is the purpose of the amendment.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
My hon. Friend is right to say that the Government made that commitment in the coalition agreement. Following their decision not to take seriously the case for Northern Rock to be converted into a mutual, many people, like him, doubt the coalition’s commitment to financial diversity. Is that not a further reason for the Government to take seriously his amendment to put right what they might see as a mistake in the public mind?
Chris Leslie
I thank my hon. Friend, who is entirely correct. He is an assiduous campaigner for the mutual sector and the mutual model, and he knows more than most about the Government’s failures over the past two years to make headway on this issue, on which they made a promise that remains to be fulfilled. Indeed, he recently wrote an article about how the Queen’s Speech could have been an opportunity to promote the mutual agenda in which he talked about ways in which the sector could be put more at the heart of banking reform. He said that we should consider expanding the credit union and CDFI—community development finance institution—sectors to reconnect banking with its local communities, and that we should look beyond the financial services sector to think about energy co-operatives, employment ownership measures, and co-operative housing tenure.
It is an important time for us to be debating the issue, because, as you will know, Mr Deputy Speaker, this is the international year of the co-operative.
David Rutley (Macclesfield) (Con)
The part of the Bill before us is mainly about transferring powers between the FSA, the FCA and the Prudential Regulatory Authority, and adding new powers, so I am not sure that it sits very well with the hon. Gentleman’s amendment. Will he explain in more detail why legislative measures are required when such objectives can be measured in other ways?
Chris Leslie
We are trying to ensure that the Government fundamentally address the question. These provisions give the Minister and the Treasury the power to make by order amendments to many of the rules, statutory instruments and suchlike that affect mutual societies. We think that they should have the capability to measure progress on mutuality in order to help to smooth progress towards fulfilling the coalition’s pledge.
Given that we have before us a financial services Bill, our constituents would expect us to be talking about firm and defined measures to make progress on diversifying the financial services sector. Unfortunately, they would be disappointed by the Treasury’s progress on that. The Treasury website has a very scant, short set of paragraphs stating the coalition agreement’s desire to promote mutuals. It says:
“The Treasury is developing policy and delivering legislative changes to…meet this aim.”
That is basically it—a statement but no substance. I want the Minister to tell us what progress is being made in fulfilling that objective. It is not good enough merely to talk about consolidating existing rules or legislation and wrapping that up as though the Law Commission’s recommendations somehow fulfil Government promises. We want to see more action.
Geraint Davies (Swansea West) (Lab/Co-op)
Given that there is an appalling sovereign debt crisis in Europe affecting Greece, Spain, and so on, with the possibility of contagion, and given that we learned the lessons about the stability of mutuals following what happened in 2008, does my hon. Friend agree that it is remarkable that the Government are not pressing forward to reduce such risks by increasing diversity and promoting co-operatives?
Chris Leslie
My hon. Friend is entirely correct. When the Government have an opportunity to return to the market state-owned assets that the Treasury took in the height of the financial crisis, they simply look for a return to the vanilla plc model. They take a business-as-usual approach rather than taking the opportunity to rethink how we might have diversity in the financial service sector and in business operations. Yes, we need some organisations run on a plc model, and we have plenty of those, but why not think about opportunities to promote the non-profit or mutual sector? Northern Rock was a classic case in point. No adequate consideration was given to that option. A member buy-out suggestion would have been entirely feasible, but it was not considered seriously enough.
At this point, I pay tribute to the all-party group on building societies and financial mutuals. It made a series of recommendations a year ago, urging the coalition to adopt
“a comprehensive policy strategy to implement its Coalition Agreement commitment to promote mutuals.”
It stated that the Treasury should be proactive in promoting the interests of financial mutuals within the Government. One of the first conclusions in the summary of its report was:
“HM Treasury appears to have taken a reactive stance to the mutual sector beginning to deal with important issues such as building society capital, but little else of substance.”
I do not want to labour that point, because time is short.
Mr Mike Weir (Angus) (SNP)
For cross-party purposes, may I say that we will support the hon. Gentleman’s excellent amendment? It is important to push forward credit unions, in particular, as an alternative to high street lenders, which are currently not lending to many people. The Treasury needs to take a more proactive approach to building up existing credit unions as well as creating new ones.
Chris Leslie
The credit union sector deserves far more support and encouragement than it receives, and previous Governments of all parties have failed to do enough to promote it. The demutualisation agenda of the 1980s and early 1990s significantly reduced the size of the building society sector, and compared with other developed countries mutual providers have a very small market share, particularly in the financial services sector.
Geraint Davies
We used to hear about the share-owning democracy, but there have been tidal shifts in people’s desire to take risks and own shares. Does my hon. Friend agree that we have a moment in time at which we can change direction and have more diverse ownership among the population and a new culture of business? The Government are missing a trick.
Chris Leslie
Now is the time to think about the culture change that we want to see in the financial services sector. Yes, there are some good plc structures, but we have an insufficiency of good mutuals, building societies and so on. There should be new entrants of that type, and current ones should grow to provide some proper competition to the big banks.
Mr Thomas
My hon. Friend is being characteristically generous. One big concern examined in some detail in the all-party group report that he mentioned was about the future of friendly societies. Does he agree that the debate provides the Financial Secretary with a good opportunity to set out how the Treasury is responding to concerns about the effect that a particular interpretation of case law by the Financial Services Authority is having on the future of friendly societies? Their proportion of the insurance market is at risk of going into reverse because of how the FSA has approached the matter, and the amendment may well help to achieve a culture change in the FSA and get its lawyers to adopt a slightly more helpful mindset.
Chris Leslie
It is important that we have some metrics by which to measure the Financial Secretary’s performance on his coalition promise. After all, it is there in black and white—the Government said they would bring forward not just proposals but detailed proposals for promoting the mutual sector. This is his moment. We want him to explain to us what those measures will be. I am sure he does not believe in putting such promises in an agreement straight after an election and then letting them drift as though they did not need to be attended to. Many people want to see greater diversity in the financial services sector, and it is important that he is held to account.
Steve Baker
Looking at the amendment, I wonder whether it illustrates the tensions in the contemporary labour movement. On one hand, this should be a time of celebration for all those who believe in mutuality, co-operatives and voluntary self-help, because Members of all parties are signed up to the idea. There is a Conservative co-operative movement, and many of us are very serious about it. On the other hand, Labour insists on top-down control and state direction. It wants to enshrine in legislation measurement, management and the direction of Ministers’ performance.
Is it not time that, rather than insisting on the production of numbers and pretending that the Financial Secretary can direct people to help one another voluntarily and mutually, we eliminated barriers to entry, accepted spontaneous order and encouraged people to build up the bonds of friendship and mutual co-operation? Ministers cannot direct or legislate for those bonds.
Steve Baker
I was not suggesting that it would create a barrier to entry. I was suggesting that it would put in place measurement and management. That may well appeal to some people, but if we want spontaneous order, mutual societies and bonds of friendship, we cannot get them by state direction. There is very little point in measuring the Financial Secretary’s performance when we want spontaneous order and the bonds of mutuality. I do not support the amendment, but like many other Government Members, I certainly support the thrust of the Government’s policy.
John Healey (Wentworth and Dearne) (Lab)
I congratulate my hon. Friend the Member for Nottingham East (Chris Leslie) on tabling the amendment. He is doing the job that the coalition parties promised to do in the coalition agreement but are failing to do.
I shall remind the House of a quotation from the coalition agreement. That is the benchmark for the action that the Government have pledged to take, so the House and others can judge them on it. It states:
“We will bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry.”
I applaud the aim of greater diversity and competition, but missing from that statement is the aim of greater confidence and trust in financial services. My hon. Friend’s amendment captures the aims of diversity, the promotion of mutuals and greater growth in mutuals. Crucially, it would also require an action plan from the Government within six months. We have not had one after two years. It would also require regular public reports and stock-takes of progress. I say to the hon. Member for Wycombe (Steve Baker) that those reports would be about not the Minister’s progress but the growth of mutuals, the diversity of the industry and the growth of competition in the sector—all the aims that the Government set for reform.
Mutuals bring something quite special—a concern about values, not just valuation. That is the root of the consistently greater levels of confidence and trust demonstrated by those who deal with and borrow from building societies and mutuals compared with those who deal with their corporate competitors. Mutuals display a prudence born of concern for and knowledge of their members. If we look back over the past several years, we see that building societies and mutuals have not run the reckless risks that banks and other financial services have. They have not lost their core business purpose and their sense of what they are there to do and who they are there to serve, as many banks and other financial service companies have. Mutuals did not need a public bail-out and did not cost the UK taxpayer billions of pounds to make up for their mistakes like others in the banking and financial services sector did.
Mr Thomas
Is not one of the unsung successes of the building society movement that it has sought to maintain an effective and broad-based branch network in the communities from which they grew, which sadly is not necessarily something that can be attributed to the major banks? There were wholesale bank branch closures in the last generation, and they are beginning again.
John Healey
My hon. Friend, who knows far more about this matter than me and many in the House, is absolutely right. At a time when a loss of trust and confidence in financial services is evident across the board, that local presence and face-to-face relationship counts for a great deal.
John Hemming
Amendment 72 is a permissive amendment, and yet clause 47(3)(f) mentions
“making provision that appears to the Treasury to be necessary or expedient in consequence of the provisions of this Act.”
What will the amendment enable the Government to do by order that is not already possible under that measure?
John Healey
I am disappointed in the hon. Gentleman, because he, too, has a strong track record on this matter, and that sort of nit-picking misses the point of the amendment. The point of the amendment is to hold the coalition parties in the Government to their coalition pledge, which he is unable to do. It is a way of making public two years of failure and saying, “Within six months, you must do better.”
John Hemming
The amendment does not make the Government do anything, because clause 47 states that the
“Treasury may by order amend the legislation”.
If the Treasury does not want to do so, it does not have to do so. The amendment does not hold the Government to account. No wonder you are failing as an Opposition; your amendments are badly drafted.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. I am not failing as an opposition, so I do not think that is parliamentary.
John Healey
I have not seen the hon. Gentleman’s amendments to make the measure not permissive, but a requirement of the Government—Mr Speaker must not have selected it. Clearly, anything in statute would be a significant step forward, as the shadow Minister, my hon. Friend the Member for Nottingham East, has argued. Those on both sides of the House who have an interest could use a permissive measure in future.
John Hemming
Does the right hon. Gentleman believe that we make a man any taller by measuring his height?
John Healey
No, but by measuring height, one makes a statement that height matters. The amendment makes a statement that the coalition pledge on mutuals, and on greater diversity and competition in financial services, matters. That is the purpose of the amendment and the debate. I hope that my hon. Friend presses it to a Division because it will expose the Government’s complacency in making promises and failing to live up to them.
Mark Durkan (Foyle) (SDLP)
I wanted to respond to the hon. Member for Birmingham, Yardley (John Hemming), who seems to rest everything on clause 47(3)(f), on the basis that it could easily include what the amendment proposes. In the same vein, paragraph (f) could mean that there is no need for paragraphs (a) to (e) because it is all encompassing.
John Healey
I am grateful to my hon. Friend, who has an eye for detail that I cannot match—it almost matches the eye of the hon. Member for Birmingham, Yardley (John Hemming).
Geraint Davies
The amendment requires the Government to measure the number of mutuals and their share of the market. In so doing, it brings the Government to account. If there is no point to that, and if we want only what the hon. Member for Wycombe (Steve Baker) called “spontaneous order”, we would not have the Office for Budget Responsibility, and we might as well forget measuring and management. The amendment seeks to bring the Government to account, and should therefore be supported.
John Healey
There is a saying that what is measured matters, and if it matters, measure it. In many ways, that is the core of the argument being made by Opposition Members.
Sixteen per cent. of those who aspire to own their own home and who borrow to buy do so from building societies. Roughly one in six of us borrows our mortgage from a building society. That significant market share is gradually growing. That is why I have argued that building societies are the unsung success of British financial services. They are certainly unsung by a Government who promised to be their champion.
In my view, building societies are the quiet strength of British financial services, but it is time that that strength was properly supported by Government policy and action. Mutuals look at the coalition agreement and point to the words on the paper, but they cannot point to the action that followed. The amendment is designed to force the hand of the Minister, the Treasury and the Government. I am surprised that it finds any objection on the Government Benches, because it simply seeks to hold the Government to the promise they made
Mr William Cash (Stone) (Con)
I have found this debate both curious and inconsequential in many respects. There has been a great deal of talk about the technicalities of achieving the objective, but not, as far as I can judge, a great deal about the reasons why mutual societies are so important. However, I share the view expressed by the right hon. Member for Wentworth and Dearne (John Healey) that the coalition agreement, of which I am not an uncritical observer, clearly stated that there should, in effect, be support for mutuals.
I declare an interest, because my family founded the Abbey National building society and the National Provident in the 1830s and later in the 19th century. The Abbey National is now Santander, and we need only look at what is happening in Spain to hope that there is some ring-fencing for its customers in the United Kingdom. The reason why mutuals are so important is the same reason why John Lewis is so important. It is the reason why the co-operative movement, which was founded in Rochdale—I do not apologise for also pointing out that that was where John Bright was born—is important. The Rochdale co-operative movement was the means whereby people could buy houses that they could not otherwise afford.
I have always been very much in favour of the right to buy, because having a property stake is important for individual responsibility. The great thing about the mutuals—and it still pertains, because they still exist, but need to be enhanced, improved, developed and encouraged—is that they enable people to come together in a proper and balanced relationship, with a sense of individual responsibility and, by co-operating together, to benefit each other and society as a whole in relation to the most fundamental aspects of property and insurance, without excessive profits, or indeed any real profits, for the people who put it together. That does not mean that I am against capitalism. Indeed, those who promoted mutual societies were invariably capitalists, and I count my own family in that number. William Cash founded the National Provident with the Lucas family, and the Cadburys were much involved in similar objectives. A raft of Quakers and other Dissenters were integral to the development of this incredibly important movement, which changed the face of society in the 19th century. We could do with that now.
Some five years ago, I wrote a letter to The Times, criticising aspects of the manner in which the banking system had given way to greed and self-indulgence. The Minister knows my views on the subject of the transfer of jurisdiction from the City to Brussels, including the point that legislation is no substitute for self-help. My hon. Friend the Member for Wycombe (Steve Baker) understands that better than anyone else. Indeed, Samuel Smiles, who wrote the famous book on self-help, was devoted to all these objectives because he knew that individual responsibility, operating within the framework of co-operatives and mutuals, would and should provide the kind of society that is worth living in. I put it as high as that, because to me this is a moral objective. We do not talk enough about morality. Law is no substitute for morality.
Mr Thomas
Will the hon. Gentleman accept that one lesson regarding the regulation of building societies, friendly societies and other financial mutuals arising from the inquiry by the all-party group on building societies and financial mutuals, to which my hon. Friend the Member for Nottingham East (Chris Leslie) referred, was that regulators did not put enough time and effort into understanding the mutuals market and that this simple amendment will help to prevent a repeat of that scenario?
Mr Cash
It may well. It behoves the Government to take this kind of amendment very seriously, despite drafting imperfections. It is important to the integrity of our financial system and, above all else, the sense of individual ownership in a mutual context for this movement not merely to be nudged along but to be massively encouraged. The more people have a stake as a result of being in a mutual condition, the better society will be.
I am completely in favour of capitalism—that might disappoint Opposition Members—but each category of activity in financial markets requires its own remedy, and the mutual system is vital to ensuring that there is a proper balance in society and that those who, for one reason or another, cannot get on to the capitalist ladder in the way that some can have the benefit of mutuals and can share in the prosperity that others provide. I regard that as a very important objective.
Even if the amendment is not perfect, the intention behind it is important. Wrapping the whole thing up in jargon—some of us are very familiar with jargon—will not solve the real problem in the way that mutual societies can. I hope, therefore, that the Minister will give careful attention to the objectives and purposes of mutuals, in the context of the amendment, and not simply say that the Opposition are talking nonsense or that the Opposition spokesmen are trying to be troublesome and criticise the coalition agreement. It is time we grew up, actually. By that I mean that instead of constantly talking about the Opposition as if they were simply trouble making and mischievous, we should recognise that in such matters we are trying to achieve something worth having.
Mr Cash
The Opposition spokesman says, “Hear, hear”, but I do not want to give him too much encouragement. We need to understand, however, that the objective behind the Opposition’s amendment is important, not because of party politics but because it is about having a stable, good and fair society. That is what we should all be seeking.
Mr Love
It is a great pleasure to follow the hon. Member for Stone (Mr Cash), whose strictures I shall try to address. First, however, I want to appeal to the Minister, who, I know, is personally sympathetic to mutuals: this will be a modest contribution that tries to reflect his own coalition manifesto commitment to foster diversity and promote mutuals. In answer to the hon. Member for Wycombe (Steve Baker), I say that the amendment seeks to do that by trying to measure the strength and complexity of the mutual movement using the regulator.
No one has said why we would want to foster diversity and promote mutuals. I want to address that question, because it goes to the crux of what the hon. Member for Stone talked about. First, members benefit greatly from membership of mutuals. The tables of the best savings rates or lowest mortgage rates are populated by mutuals, which provide basic but risk-averse financial services—exactly what the ordinary consumer is looking for. Of course, the reason they can provide such services is that they do not have any shareholders and, therefore, no demands for dividends each year, allowing them to deliver their services efficiently.
Perhaps even more importantly, mutuals provide a consumer benefit by offering a competitive spur in the marketplace. The hon. Member for Stone says he believes in capitalism. I believe in a market system, and competition is a very good spur, and that is exactly what the mutual movement provides. The reduction in the number of building societies has meant that they have not been able to provide a stronger spur, which provides another reason for the amendment.
Mutuals provide choice in financial services. Does someone want a mutual member benefit or to contribute to shareholder value? People will make that choice in all sorts of ways, for all sorts of reasons, but it is important in a marketplace to have choice. We are confident that people will choose mutuals, because all the studies and polling of consumers of financial service show that mutuals are more popular and, perhaps more importantly, more trusted than their plc rivals. That is a very important consideration.
Why move the amendment now, other than to reflect the coalition agreement? Currently, the marketplace is dominated by the plc model, which is unhealthy. We all know what happened in the lead-up to 2007 and 2008: heightened risk, and the search for yield followed by the credit crunch. I am not suggesting that the Government are not taking steps, including in this Bill and forthcoming legislation this Session, to address some of these problems. I am saying that there developed a monoculture—group-think—in which everybody thought exactly the same. We need to avoid that. This modest amendment will help us to do so.
The amendment will also address the danger of the one-size-fits-all attitude displayed in recent years by the regulator, who did not deal effectively with life funds for friendly societies and mutual insurers. At the heart of the ongoing dispute is the failure to understand the essential difference between a mutual and a plc. The amendment would go some way to address that. The regulator now admits that the Financial Services Compensation Scheme, which was introduced some years ago, got it wrong by basing what each organisation had to pay on deposits, discriminating directly against building societies. There was no understanding or empathy in the regulator to address the issue. The Minister will say to me, “But the FSA has now updated its regulatory role. It’s opened a department to deal with these specific matters.” That is all to be welcomed; however, I hope that the Government will welcome this amendment, which represents a small step towards creating greater understanding and trust in the regulator’s dealings on these matters.
John Hemming
I think there are two issues in this debate. First, everybody agrees that mutuals are good. They are good in a number of ways, one of which is that “boring” is good in finance. We need more boring finance —we need things that will not double one day, fall by a half the next, and go bust by next Wednesday. We have had too much “interesting” stuff in finance; we need some more boring stuff. Building societies have always been relatively stable—nothing much has changed; things are gradual, with perhaps a few mergers. Some building societies have suffered as part of the financial problem, and in other countries some credit unions have suffered. I should declare what is perhaps a non-declarable interest, namely my membership of Citysave, Birmingham city council’s credit union.
I think there is a major role for such bodies—the hon. Member for Stone (Mr Cash) highlighted the issue of people having a stake in society. That is a very good thing, as is the fact that mutuals look to serve their depositors—often they will be depositors and borrowers. To that extent, I welcome the fact that the Opposition have raised this issue for discussion. The difficulty is that the amendment—it is a permissive amendment; it allows, for instance, the number of members of mutuals to be counted—is the sort of thing that would be done anyway. A mutual could be sent an e-mail saying, “How many members have you got?” It really does not require a statutory instrument to—[Interruption.] The hon. Member for Nottingham East (Chris Leslie) says from the Opposition Front Bench that the number of members of credit unions is not being tracked. However, the amendment does not require it to be tracked, as he knows.
Mark Durkan
The hon. Gentleman makes the point that this is a permissive amendment, but it is actually an amendment to a permissive clause, which anticipates that there may, for various reasons, be all sorts of changes. However, in transferring the functions relating to disparate types of mutuals and so on, surely it is right to suggest that someone should have regard to ensuring that mutuals as a sector are promoted and that somebody should measure what is happening. If those in the coalition are committed, why do they not want to be able to know or show what is happening?
John Hemming
The amendment does not compel anything to happen; it merely makes it possible, if the Government wish, to change the law if necessary—which it almost certainly is not—to measure the number of members of credit unions. The Opposition may be right that the figure is not being measured, although that would surprise me, as the industry bodies will almost certainly have total numbers of members. If we contacted the Council of Mortgage Lenders, for instance, and asked how many members the building societies in the council had, it would probably give us the answer. Getting the answer should not be that difficult; however, as the amendment does not compel the Government to do anything, it will have no effect if accepted.
I return to the point that we have to welcome the fact that the issue of mutuals is being kept on the agenda. I would be interested if any Opposition Member wanted to liaise with me over the coming months to see whether we could find the answers that the amendment makes it possible to find—which are probably possible to find anyway, if the Government wish to find them. Indeed, I would have thought that the Government would not be that averse to knowing what the market share was.
Chris Leslie
This is a very confusing speech. The hon. Gentleman is in an honoured position, speaking on behalf of the Liberal Democrats. They helped to write the coalition agreement, so he has a responsibility to say what progress is being made on the detailed proposals to promote mutuality. Do the Liberal Democrats agree with that objective, and, if so, what are they doing to achieve it?
John Hemming
I think it is a good idea to encourage mutuality. There is no question about that. As for asking me, randomly, to answer such detailed questions on what the Government are doing, I must admit that I am not a Minister. This is, admittedly, a debate about mutualism, however, and I am quite happy to do a certain amount of research to see whether I can find the answers that the amendment would allow the Government to find—if they wished to do so by changing legislation, which almost certainly is not necessary.
That brings us to the nub of the problem with such an amendment. It would have almost no effect, because if the Government wanted to find out how many members the building societies had, they would simply ask the building societies, without going through the process of tabling a statutory instrument, whether through the permissive approach or whatever it may be.
On that basis, although we should welcome the fact that the issue of mutuals is being kept on the agenda, it would be better done by an amendment that had some effect.
Mark Durkan
I had not originally intended to speak to this amendment, as time is tight and we need to make progress. I have also dealt with some of the points in interventions.
The Government say that they are committed. This Bill gives them an opportunity to go a bit further on that commitment. That is what the amendment offers them. The Government have said that they want to encourage mutualisation. I have heard Ministers talk about the damage done by the rampant trend towards demutualisation in the past—they have blamed that on others, as well as perhaps accepting some blame on behalf of a previous Government. However, clause 47 is a permissive clause, and there is good cause for saying that if the Treasury amends legislation dealing with mutuals—let us remember that we are talking about industrial and provident societies, building societies, credit unions and friendly societies—and if it transfers functions to the FCA, the PRA or both, given that the clause provides that functions can be transferred between different bodies, the Treasury should, in making those arrangements and exercising those powers, have regard to ensuring that someone can measure the size of the mutual sector overall and show progress where that is relevant. That is what the amendment would provide for. Such information will be relevant for Parliament’s interests and purposes—I am sure that future Treasury Committees will want to know what is happening and who is responsible for measuring such things, rather than relying on the market players. The information will also be hugely important for consumers, because if, as the hon. Member for Stone (Mr Cash) said, we are to encourage more people to have confidence in this option, then the more people we can show are using it successfully, the better.
When the hon. Gentleman suggested that the mutual sector would, by its nature and character, not need detailed regulation and legislation, it occurred to me that he was going off in a different direction. Given the experience that some of us had with the Presbyterian Mutual Society and others, I can say that mutuals do need to be regulated by their nature, so that people can be sure that they are living up to the good name that they properly have. Consumers embrace mutuals on the basis of that confidence. They need to be able to rely on the fact that legislators have put in place a regulatory system to ensure that what they are getting is what they think they are getting.
Mr Cash
I would not want the hon. Gentleman to misunderstand what I meant. It is not that I do not think that there should be a degree of regulation. Rather, I am concerned about over-regulation to the point where the purposes of mutuals, as with so many other sectors of society, are sucked out by a vast amount of oppressive legislation, which is so bureaucratic and impossible for people to understand that they cannot see the wood for the trees. The whole objective of the mutual arrangement is that it is very much a personal relationship in a society to enable people to benefit one another.
Mark Durkan
I thank the hon. Gentleman for that clarification. That brings us to the point that we go through all this complicated legislation, with all this complicated jargon, to try to give consumers confidence that a regulatory regime is policing these matters for them, so that they know that the people they are entrusting with their money—their savings and so on—are performing to a due and proper standard. I would not want the House to create a situation where people felt that mutuals were, by their nature, less safe and less regulated, because non-mutuals would use that on a predatory basis in their marketing.
John Hemming
Let us come back again to the amendment. I noted, on the internet, a report from the Building Societies Association indicating that in 2011 the market share of the mutual building societies increased by 16%, which contrasts with growth of 3% and a figure of 7.7% in the whole market. So the coalition Government are obviously delivering on their promise to have a larger mutuals sector, and the information has already been measured.
Mark Durkan
The information may well be measured by that group of building societies. In terms of industrial and provident societies and others, surely it makes sense that the Treasury will want to make provision on who measures the different sectors or who measures them in aggregate terms as the mutual sector—this amendment would allow that. We must remember that, as the hon. Gentleman says, the amendment is entirely permissive, and it would be set in a clause that is permissive. The clause is meant to demonstrate the coalition’s commitment to mutuals.
Jonathan Evans (Cardiff North) (Con)
May I apologise for the fact that I missed the beginning of this debate? The hon. Member for Nottingham East (Chris Leslie) spoke for the Opposition, and he knows that I chaired the mutuals inquiry to which he refers. Is the problem not the one outlined by the hon. Member for Edmonton (Mr Love): the amendment is modest? I do not think our inquiry was seeking that modest a response from the Government. We are looking for something that matches up to the commitment made in the coalition agreement, and what is being proposed is very much short of that.
Mark Durkan
I thank the hon. Gentleman for that intervention, as it shows exactly why people should be worried. If the best argument that Government Members can make is that this amendment is modest and merely permissive, people should be worried that the Government are opposing and rejecting such a straightforward, common-sense amendment.
Geraint Davies
I shall be brief, Mr Deputy Speaker. The coalition Government say that they want to encourage diversity in the market and increase the proportion and number of mutuals, yet they refuse to agree with measuring the number of mutuals or their market share. Anybody who is serious about any policy should want to measure it in order to manage it and show that it has been successful; otherwise they come across as completely hollow. Given that we have the Office for Budget Responsibility and so on measuring important things such as outputs and economic performance, I cannot understand why we cannot include mutuals as part of that portfolio.
David Rutley
I understand the hon. Gentleman’s strength of opinion, but is he not aware that these data are readily available? We need only go to a market research firm or to researchers in the City to find that the data are readily available.
Geraint Davies
But as I have just said, if that is the case why do we need the OBR? We could go on the internet, like the hon. Member for Birmingham, Yardley (John Hemming) did, and then say, “I’ve got a figure from a reliable mate in the City.” This is completely absurd—
John Hemming
Just for clarification, I looked up the BSA figure for the market share of mutuals, and it indicated that the market share was increasing. The BSA is not a friend of mine in the City, and the information is already being measured and reported on.
Geraint Davies
My point is that second-hand information is available in all sorts of marketplaces, but the Government make a great virtue of the OBR, and of other reliable and robust statistical sources, in order to measure the effectiveness of the outcomes of their policies.
Geraint Davies
I hope that this intervention is not just another repetition of the same thing.
John Hemming
It is difficult to see where the OBR comes into all this; it is not being handed the task of measuring things.
Geraint Davies
This is about having the reliable and consistent measurement of data in order to measure the effectiveness of policies, rather than having to rely on looking at the website of whatever trade association we are talking about. That is the essence of this amendment and it is why I support it.
The hon. Member for Stone (Mr Cash) mentioned the Rochdale pioneers, and I am glad that he did so. At that time, the idea of co-operation, co-operatives and mutuals was forged very much in the fire of unbridled capitalism and an economic Darwinism that I know some hon. Members would like to see return in the so-called “spontaneous order” of things. In that unbridled free market, the weaker members of society were being crushed, and a collective, mutual ownership emerged, through mutual societies and co-operatives, that enabled normal people to share risks, benefits and ownership, and to reinvest surpluses in their mutual. That is why those organisations grew, and I am very proud consistently to a have supported them.
One of the questions that arises is: why has there been a slight falling away of mutuals over the past few decades? Partly it has been because the Conservatives pushed demutualisation to get quick profits for their friends, who are involved in the capitalist system to make quick profits. Then, in 2008, we have this tsunami and suddenly people wake up in the debris of this chaos realising that some of the surviving organisations are mutuals, and they rightly ask why that is. The answer, of course, is that the focus of mutuals—their raison d’être—is not about just reaching out to maximise profitability and taking irresponsible risks; it is about delivering services for their members, who have equal shares. As a result, the time of mutuals is back.
This is a time of enormous global financial turmoil. We all know about the risks from the sovereign debt of Greece, Spain and elsewhere, and the knock-on impacts of that. We also face a great deal of risk from German banks and other financial institutions that do not have the inherent solidity and risk management of the co-operative system. If the Government are serious about this, now is the time to move forward. The coalition Government have said that they will move forward, but they cannot even be bothered to measure the market share and the number of mutuals. So how seriously can we take them? The answer, self-evidently, is: not seriously at all. The top management consultancy McKinsey has the mantra, “If you can’t measure it, you can’t manage it.” That company knows that that is self-evidently the case, but we are saying here, “We don’t really want to manage it. We won’t measure it. It does not really matter.” That is what is coming across, and it is a great shame that it is.
Labour Members are saying, “Let’s paint a picture of how things are changing. Let’s try to use that to make progress and to actively encourage credit unions, housing co-operatives and so on.” Such organisations tend, by their very nature, to be locally owned, with local benefits for local people. That contrasts with the situation described by the hon. Member for Stone, whereby a member of the Royal Bank of Scotland may find that Santander has suddenly sent them part of their bill, and they wonder why that is and whether there is a risk from the Spanish contagion, linked into the Greek risk. Somebody was mentioning that sort of situation to me the other day, and of course it arises because of the global nature of these organisations.
People want the security and assurance of knowing that they can go to local co-operatives and be offered loans if they save, whereas they would be excluded from high street banks, which would say, “You’re too poor. We can’t give you an overdraft”, but if people were in a credit union they could get one. A lot of this is about risk management and stability, but it is also about ethics. We know that mutuals—the Co-op in particular—are trying to promote fair trade, sustainability and so on. If we are serious about encouraging risk management, and a better and fairer future for all our communities with mutuals, we should be serious about pushing forward the top line of this amendment—that to manage it, we should measure it. I very much hope that the Minister will accept this modest amendment.
Mr Hoban
We have had a wide-ranging debate on mutuality, and it has acted as a peg for discussion. As is clear from this evening’s contributions, we all recognise the strength of the mutual sector, its importance in providing choice and diversity, and the benefits it brings. A couple of times, however, Opposition Members seemed to elevate mutuals into semi-religious institutions. Let us be realistic about some of the issues that mutuals faced during the crisis. Some mutuals had to be bailed out by others, and the first use by the previous Government of the special resolution regime was on the Dunfermline building society. A number of mutuals strayed from their core business model, which had consequences.
One hon. Member—I think it was the hon. Member for Harrow West (Mr Thomas), who is no longer in his place—referred to mutuals supporting their branch network. I recall that one of the first Adjournment debates I replied to as a Minister was as a consequence of Nationwide closing a number of branches in south-east London. All mutuals face commercial pressures, which needs to be acknowledged.
Geraint Davies
What the Minister says is true, but does he accept that there is a differential outcome and that, on balance, because of the lower-risk structure, the mutuals do better than conventional capitalist banks?
Mr Hoban
It depends on risk management and the business model that mutuals follow. There is a different set of constraints around building societies, which helps to ensure their stability, but that does not mean that they are immune from some of the mistakes that have caused failure in the past.
The clear intention of the Bill—we discussed this at length in Committee—is to ensure that regulation does not discriminate against mutuality, or indeed any other type of ownership, simply because it diverges from the norm of public or private ownership. I believe that the Bill delivers that result. For example, in clause 22, new section 138K requires the Prudential Regulatory Authority and Financial Conduct Authority to analyse the impact of the proposed rules on mutual societies. This will help to build up a base of impartial evidence to allow the regulators to continue to assess whether mutuals are being treated appropriately within the regulatory system. It is important that regulators think through very carefully the impact that their rules will have, particularly on mutuals.
Jonathan Evans
My hon. Friend will recall coming to our all-party group on insurance and financial services, when we asked him some questions on these issues. In fact, the regulator thinks that the Financial Services Authority has changed its processes in order to recognise the specific position of mutuals. What it is that the Government have changed, other than their even-handed approach?
Mr Hoban
The new duty in the Bill goes beyond what the FSA currently does. It imposes a requirement separately to identify the impact of regulation on mutuals. Let me continue my remarks and set out some of the other things we have done to promote mutuality. As I was saying, the regulatory principle of proportionality also bites in this regard. If the regulators are taking action that impacts on one type of firm more than another, it should be done on the basis that the action is necessary and proportionate.
Let me highlight a number of ways in which the Government are promoting mutuality outside of this Bill. In January this year, the relevant provisions of our Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011 came into effect, allowing credit unions to grow faster and compete better by offering interest on deposits and admitting corporate bodies like local charities and firms as members.
My colleagues in the Department for Work and Pensions recently commissioned and published a report on enhancing the sustainability of the credit union sector. It looked at some of the initiatives undertaken by the previous Government, how they have helped the credit union sector and how best to take that work forward. Important recommendations were made to the Government that will help to enhance the sustainability of credit unions and ensure that if there is further public sector investment in them it will be used to expand their base and ensure that they are sustainable.
The capital requirements directive, CRD4, includes a capital instrument that is available for use by mutuals and building societies. That was not on the agenda when we came into office two years ago. It is a consequence of the work that this Government have done with their European partners to ensure that that instrument can enable building societies to issue capital instruments so that they can expand and deal with some of the challenges they face. A number of Members of the European Parliament, as well as the Government, have been working to ensure that within CRD4 a particular capital instrument is available for the Co-op, which, because of the nature of its ownership, falls outside the instrument that is available to building societies.
The Prime Minister announced earlier this year that we intend to bring forward a Bill to consolidate most legislation governing co-operatives and mutuals. The industry greeted the announcement of this Bill warmly, and I believe it is important to bring forward this consolidation. Ed Mayo, the secretary-general of Co-operatives UK, stressed the importance of bringing together a series of nearly 20 Bills or Acts of Parliament, which will make it easier and cheaper to establish co-operatives and remove some of the ambiguity in the sector. Co-operatives UK is looking forward to working with the Government to bring forward this consolidation Bill.
Mr Love
The Minister has already admitted that credit union deregulation goes back many years. I was frustrated by the lack of progress under the previous Government; it has taken us a long time to get here. As for a consolidation Bill, I asked the Secretary of State for Business, Innovation and Skills why it was not included in the Queen’s Speech, given that it is a relatively modest and non-controversial measure—yet the Government could not give enough priority to it. Is there not some concern—
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman spoke earlier and interventions are meant to be short, not to be another speech.
Mr Hoban
Consolidating something like 18 pieces of legislation is not a simple task. It needs to be done properly and well, and we would need to do it in conjunction with the co-operative movement, as well as with the Law Commission. Other pieces of legislation need to be implemented before the introduction of the consolidation Bill. It represents an important step forward, which is why it has been welcomed by people like Ed Mayo as a way of making it easier to set up mutuals in the future.
In the Government’s response to the recommendations of the Independent Commission on Banking, we committed to assess whether the Building Societies Act 1986 should be updated in line with the reforms to the wider banking sector. We want to work with building societies to identify the barriers to their growth. We will shortly publish a paper, alongside the White Paper on ICB implementation, as a consequence of that work, to identify where the Building Societies Act 1986 needs to be amended to enable building societies to take advantage of the opportunities that are out there.
I believe that this Government have demonstrated a clear commitment to promote mutuality and to diversify the mutual sector. Our commitment takes its shape in many forms—whether it be the new capital instrument, the protection given to members of Northern Ireland’s credit unions, legislation to help to take forward and grow credit unions, or the increased public investment in credit unions that should flow from changes to the model on which they operate. That demonstrates the practical concrete steps that the Government are taking to strengthen the mutual sector.
The information requested by the amendment is clearly widely available, if my hon. Friend the Member for Birmingham, Yardley (John Hemming) can Google it in a minute, and it will be maintained and kept. I do not think that this requirement to provide information, placing additional burdens on the regulator and the sector, is necessary. Actions speak louder than words and they speak louder than data. What this Government have clearly done is bring forward a series of measures to strengthen the mutual sector, which will be to the benefit of all our constituents.
Chris Leslie
“Actions speak louder than words”: that is the conclusion that the Minister reached when rebutting this modest amendment. Some Opposition Members said that it was too modest, and not strong enough. You cannot win when you are in opposition. Sometimes Opposition Members propose amendments and are told that they go much too far, but it seems that this amendment did not go far enough.
The aim of the amendment was simply to hold the Government to account in respect of their own promise in the coalition agreement to produce detailed proposals to promote mutuality. The Minister tried his very best. My hon. Friends could probably hear the sound of the barrel being scraped as he listed all the papers, reviews and consultations—half of which, by the way, had their genesis under the last Labour Government, or were thanks to the European Commission.
The Government’s commitment to mutuality is conspicuous by its absence. They have an embarrassing dearth of commitment to the mutual sector. The Minister must do far better than this. As my hon. Friends have said, it is no wonder that the Government do not want to measure the progress that is being made in any modest way. I think it is time that we held them to account.
Members in all parts of the Chamber care about the mutual sector. I greatly respect the work that is being done by the all-party group, and the commitment of others who believe that it is important for us to take the steps that are necessary to support the mutual and co-operative sector. All that we were trying to do was obtain from the Government some sense of how they were doing in relation to the coalition agreement, but the best that we have been able to secure is a scraped-together consolidation Bill that does some administrative tidying up. It is not good enough, and I therefore wish to press amendment 72 to a Division.
Mr Hoban
I beg to move, That the Bill be now read the Third time.
It is worth stepping back at this point to look at why this is such a crucial Bill and why we must get it right. The UK banking system is emerging from the most serious financial crisis in over 100 years. It was a global crisis, but in the UK it highlighted fundamental dangerous flaws in the existing tripartite system of regulation. That system was put in place by the previous Government and designed by the shadow Chancellor—a system that, because of its flaws, failed its first major test.
The Bill addresses the most serious weaknesses in the system. Currently, all responsibility for financial regulation rests with the Financial Services Authority, resulting in an unwieldy remit across prudential and conduct-of-business regulation. The conflicts and challenges involved in that dual mandate were highlighted in the recent FSA report on the failure of RBS. The Bank of England is responsible for financial stability, but it did not have the tools with which to effect change, and the Treasury has no clear remit in a crisis, in spite of the immense threat to public funds in such scenarios. The confusion and lack of clarity in respect of roles and responsibilities triggered the asking of this question: who is in charge? The system’s structural flaws were compounded by flaws in approach. The FSA’s focus on tick-box compliance in the run-up to the financial crisis meant that insufficient time and resource was dedicated to thoughtful and challenging analysis of risk.
The Bill gives a clearer mandate to the regulatory structure and ensures that the regulators are equipped with the powers they need to tackle the problems both of today and, crucially, of the future. The Bill gives the Bank, through the new Financial Policy Committee, a much clearer mandate to protect financial stability and the ability to develop and use levers to fulfil that role. In Committee, we discussed at length the remit of the FPC and the tools that would be required, and I reconfirm what I said then: we will consult on the macro-prudential tools later this year, to ensure that there is full public discussion of them and their effects both in the outside world and here in Parliament.
In response to questions about who should be the prudential regulator, and recognising the close synergy between macro-prudential regulation—the task of the new FPC—and micro-prudential regulation, we have established a new subsidiary of the Bank of England: the Prudential Regulatory Authority. The PRA will have a new emphasis on a judgment-led approach to regulation. We will ask it to act proactively and to look ahead at problems that may emerge. The PRA will be empowered to act to tackle problems before they emerge, rather than waiting to clean up afterwards.
Andrea Leadsom (South Northamptonshire) (Con)
Does my hon. Friend agree that it is important that the PRA and the FPC consider the need for greater bank competition in the UK? Does he also agree that it is important that when the Bill moves into the other place consideration is given to any changes that might encourage greater competition through the new PRA?
Mr Hoban
The FPC’s remit does not cover the consideration of competition in the system. Its role is to consider stability and the threats to it. On the question of the Prudential Regulatory Authority, one of the challenges we need to accept is that, for a host of reasons, the failure of a bank is costly and expensive. We saw that in the UK with the response to the banking problems during the crisis, when a huge amount of public money was pumped into banks to prevent some of the problems that bank failure would create. Part of the responsibility for tackling the problem lies with the previous Government, who introduced living wills through recovery and resolution plans in the Banking Act 2009, work which is now being taken forward.
Of course, the Vickers report includes in its recommendations ways in which it will be easier to allow the orderly failure of a bank. Helping a bank to have an orderly failure where there is a problem will help to tackle the problem with barriers to entry. At the moment, the cost of failure is so high that the barriers to entry are proportionately higher. The regulators want to know that a bank is safe and to have huge confidence in that bank and they will require it to have high levels of capital because the cost of failure is so high. If we can tackle the barriers to exit from the banking sector, it will be easier to tackle the barriers to entry. That will help enormously in improving competition.
We have also given the Financial Conduct Authority an explicit objective of improving competition in markets. We have strengthened that objective, taking into account the work of the Treasury Committee and the representations of others, and I believe, as I think my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) does, that competition plays an important role in improving outcomes for consumers. That is why we see competition as one of the key new roles for the FCA, which will be a specialist regulator of conduct and will have strategic objectives not just to promote competition but to focus on consumer protection and to ensure that markets function well and have integrity.
We have also listened to the widespread concerns about the regulation of consumer credit. The Bill gives us powers to transfer the responsibility for regulating consumer credit from the Office of Fair Trading to the FCA. That will bring significant benefits and will ensure that consumer credit is well regulated. The FCA has a wider range of penalties than the OFT and can take a wider range of enforcement action, which will help to reassure our constituents that we are tackling the issue of consumer credit properly and sensibly.
Mr Hoban
The hon. Gentleman makes an important point. I emphasise that it is the Bank of England that is getting more powers, as I do not think we should be personalising matters in the context of who within the Bank will get more power. It is the institution that will get more power. We have taken steps in the Bill to increase the accountability and transparency of the Bank. It is very important, for example, that the FPC, in explaining its actions, uses the financial stability report to communicate the risks it identifies and what its responses should be. I expect that the FPC will be held to account by business, the banking sector and this House. That is important but, as I said on our first day on Report, the Treasury Committee has raised a number of issues—I pay tribute to the work of the Committee and its Chair in highlighting them—and we will return to them in the other place.
It is important to get the arrangements for the governance of the Bank right. I believe that accountability and transparency should be at the heart of the regulatory system, which applies not just to the regulators but to some of the tools that we have given to them, which I think will help. For example, at the moment no one knows when a financial promotion has been withdrawn at the direction of the regulator, but that information will now be made public, which will help consumers to know which financial services firms push the boundaries with promotions. That is why we want to see the publication of warning letters. I know that that is controversial, but it is right that consumers should know when enforcement action is being proceeded with and that that information should be in the public domain. The powers we are giving to the FCA to ban toxic products are also an important strengthening of that regime. In a range of areas, we are changing not only the structure of the regulatory organisation of this country but the approach. Transparency and accountability are part of that, as are the increase in competition and the new powers that we are giving to the FCA.
The process of scrutiny has been constructive, I think, and I pay tribute to the Treasury Committee for its work. We also had pre-legislative scrutiny of the Bill by a Joint Committee of both Houses chaired by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley). As we have developed the Bill, the way in which we have listened to the arguments being made inside and outside Parliament has demonstrated that we listen carefully to what is said and will amend the legislation as appropriate. We passed a number of Government amendments on Report that reflected comments that were made—even those made by the hon. Member for Nottingham East (Chris Leslie). That just shows that we are prepared to listen. The fact that there has been such widespread support for the Bill in the Commons demonstrates that our aim to ensure that there is widespread consensus behind our reforms to the structure and approach of regulation was achieved through the consultation process we adopted. That consensus is important. It demonstrates confidence in our proposed changes and shows that this Bill should receive its Third Reading.
I hope that the Opposition are not going to oppose Third Reading. If they do, it will demonstrate that they have not learned the lesson of the past—[Interruption.] The deputy Opposition Chief Whip says, “You never know,” from a sedentary position, but if the Opposition vote against this Bill on Third Reading people will wonder whether they are so wedded to the constructs of the past that they cannot move on. People will think that they are so wedded to the system put in place by the shadow Chancellor that they cannot move on and that they cannot recognise the flaws in both its structure and approach. If they choose to vote in such a way, the world will know that they have not moved on and that they have not learned those lessons.
The Government have looked at the financial crisis and the reforms that must be made. The structure we are proposing today will help to deliver better outcomes for consumers and to strengthen and improve the resilience of the financial system in the future. I commend the Bill to the House.
Chris Leslie
Let me start by thanking those of my colleagues who served on the Committee that considered the Bill, as well as the trade bodies, consumer groups and others who made representations about it. In particular, I thank members of the Treasury Committee for the time and attention they gave to trying to improve the legislation. I thank also the members of the pre-legislative scrutiny Committee, who did a phenomenal amount of work in the months ahead of the legislative process, albeit to make a series of recommendations that the Government then promptly ignored. However, we will come to that when the Bill goes to the other place. I pay tribute to my hon. Friend the Member for Foyle (Mark Durkan). His contributions were from a different political party but he made a very constructive contribution to the Committee. I also thank the officials and others who work hard behind the scenes on legislation such as this.
It is a shame that we have had such woefully insufficient time to debate this massive piece of legislation, which consists of more than 300 pages and hundreds of clauses. We tabled more than 200 amendments but the best we could get from the Government, even though they have nothing else going on in the Chamber—they are padding out the legislative process—is one and a half days, with three hours for the second day on Report. We ran out of time to debate some of the key, critical issues concerning how the Governor of the Bank of England and the Chancellor of the Exchequer would manage in a crisis, and we did not even get an opportunity to debate those crisis-management arrangements. However, I am glad that we extracted one major achievement from the Government and No. 10: when it comes to public funds, when there is a direction to the Bank of England from the Treasury, the Government will now require the Bank to report back on its progress on that direction. That is a positive change, which we did not get a chance to debate in discussions on the previous section of the Bill. I am grateful for the change.
When it comes to some of the other problems to do with crisis management, the Government are relying on a non-statutory memorandum of understanding between the Bank of England and the Treasury, which leaves gaping holes in knowing how things would work in a crisis. They say that there will be a temporary standing committee or an ad hoc committee but there is no sense of who will be on it or how it will be constructed. No advance thought is going into that and I worry that if we get into a crisis we might waste hours or even days figuring out how on earth to convene this ad hoc committee.
Similarly, there are serious difficulties to do with whether the heads of the new regulators and bodies that the Bill creates will have a direct line of communication with the Treasury or whether everything will have to be filtered through the Governor of the Bank of England, in whom enormous new powers will be vested under this legislation. There is an irony in that yesterday or the day before the Bank conceded—this was dragged out of it—that it ought perhaps to have minor reviews and partial inquiries into what went on in parts of the financial crisis. We still have not had a fundamental review by the Bank of England about its role in the crisis, and that is a great shame. It should be big enough and have the humility to undertake the review that the Treasury and even the FSA have undertaken. It is time that the Bank also opened up and looked inwardly and seriously at its own capabilities.
There are positive aspects to this legislation. We agree with the concept of prudential regulation and we wait to see the detail. The Minister said that he is going to consult on some of the macro-prudential tools. It is very important that we get right the concept of the greater systemic overview of the system—the eagle-eye view that needs to be taken rather than getting too bogged down in the detail of firm by firm, company by company regulation—but the theory needs to be translated properly into practice. That is where the devil is in the detail. In a number of respects, the Bill falls short and could have done with massive improvement. The Opposition tried their best to make recommendations, including many of those made by the pre-legislative scrutiny Committee and the Treasury Committee. I sometimes see the Minister as—I will not call him an irresistible force—an immovable object resisting time and again attempts to improve the Bill.
We need more transparency and accountability for the regulators that the Minister is creating. The degree to which the new Financial Conduct Authority will publish its minutes is still unclear—we need a firmer commitment from the Government on that—and as I have said, the crisis management memorandum of understanding is still insufficient. There is a severe risk that costs that firms pay in their levies to the new regulators will be duplicated and that there will be inefficiency in the expense of splitting the regulator and having two new regulators. We know that the PRA is already in aggrandising mode, securing beautiful new offices in Moorgate right next door to Threadneedle street because, apparently, Canary Wharf is far too far away. It is about 12 or 13 minutes on the tube, but apparently that is a major problem. So millions more pounds are to be spent on those offices in Moorgate, and the Government have resisted attempts to bring about greater efficiencies by means of the Bill.
The key aspect that is missing is proper attention to the necessary parliamentary scrutiny of those macro-prudential tools. Many of our constituents would baulk at that phrase and ask what on earth it means. It is about the regulator and the Bank of England deciding, for example, that the minimum repayments on their credit card may need to change at a moment’s notice. The Governor of the Bank of England will have the power to say, “I’m sorry, we’ve got a particular issue coming on, so instead of paying back 2% a month, you’ve got to pay back 10% a month on your credit card.” The Governor of the Bank of England will have the power to intervene on business lending, on the terms and duration of loans, and possibly even on the cost of those loans, and will be able to do that at a moment’s notice.
We have a bit of a debate about whether loan-to-value ratios and loan-to-income ratios on mortgages will also be in the hands of the Governor. Interestingly, one of the deputy governors has said, “This is a bit too hot to handle. Maybe this is for the Treasury, which is accountable to do that.” The point is that there are phenomenal powers invested in the Bank of England, and we need that thread of accountability to come back to Parliament at some point. This is why we have suggested that there should be a super-affirmative process, rather than a rubber-stamping statutory instrument Committee which many Members have attended and where they know orders go through on the nod with a formal vote.
I detect some cynicism on the part of the Government Whips, but of course they want to nod these things through. We should give Parliament a proper opportunity to consider the impact of those phenomenal powers on our constituents and on the economy. I hope that in the other place the Government will think again about the need to improve the parliamentary scrutiny of the new powers.
When it comes to consumers, the Bill has not properly addressed what we wanted to see, particularly the powers of the Financial Conduct Authority. There has been no movement on compulsory financial education. The Money Advice Service, which is the body tasked with trying to improve the financial literacy of the population, will not be adequately focused in statute on the most deprived in society and those who are most financially excluded. We saw the Government rebut attempts today to give the FCA a proper mandate on the regulation of high cost credit. The Government refused to give the FCA a proper role to take account of social investment, charity finance and other needs. We know they have a chip on their shoulder about charities and philanthropy generally, but it is a shame that they did not recognise those needs in the Bill.
There are a number of consumer aspects, whether debt management plans, helping customers plan ahead for their mortgage finances, or giving firms a fiduciary duty to have regard to the best interests of consumers, on which the Bill should have been improved. We have spoken separately about how the corporate culture in the financial services sector could have been improved. Today we tried to press the Government on improving the stewardship, the corporate governance arrangements and the actions of remuneration committees in reining in some of the excessive bonuses and pay packets.
It is with particular reference to the impact on the economy that I close my remarks on Third Reading. A powerful new committee is created in the Bill—the Financial Policy Committee, which will make the decisions about macro-prudential tools. It will be under no proactive obligation to have regard to growth and employment in this country. We may well see a mismatch between the obligations under which the Monetary Policy Committee remains: it must have regard to the growth and employment objectives of the Government, but the FPC does not mirror that obligation on the MPC. It is told, “Don’t do anything to harm growth”, but it is not given an obligation to have regard to the Government’s proactive—we hope—strategy on growth. Maybe that is because they do not quite understand what the growth agenda ought to be, or they do not know how to get there. They cannot see why that is important. In addition to that general obligation, it is also important that there should be an assessment of the impact of each of the macro-prudential tools on the economy—on growth and employment—but the Government have neglected to do that. Also, there was not a sufficient duty placed on the Bank of England to take care of public funds. Those are some of our concerns.
The Bill does not properly fit with the European level of supervision for financial services. There is the sense that it was dreamt up on the back of a cigarette packet by the Chancellor in opposition, when he wondered how the previous administration, the FSA, could be blamed for all the ills of the global financial crisis. But he forgot to recognise that most of the financial regulations in this country come from Brussels, the EU and Commissioner Barnier, on that conveyor belt as it throws out all the directives and regulations. The regulators that we are creating in this legislation are merely there to transpose a lot of the decisions taken in Brussels. That is essentially their function. The Bill does not properly recognise how our regulators should fit with the European decisions and those realities. We should be framing legislation not just to influence those European decisions, but to steer those decisions. The Government still have not addressed that point properly.
David Mowat
The hon. Gentleman makes the point that the twin peaks structure that we are implementing here does not fit with the European sectoral structure. Is it the Opposition’s position that we should have had a sectoral rather than a twin peaks Bill?
Chris Leslie
I am pointing out that there is a fundamental mismatch. We know that the supervisory authorities have gone for a thematic approach and the Government have gone for a twin peaks approach. Then there is this bizarre committee or secretariat in between to try and be an interlocutor. It is a tremendous spaghetti, diluting our influence on those supervisory decisions. We can already see that the Government have had to cave in on a number of ways in which the European Banking Authority can overrule many of the capital requirement arrangements. Perhaps that is the result of a deeper weakness in the Government’s diplomatic stance.
I am not saying that the Bill cannot be salvaged. There are ways in which it falls short, but there is still time for the Government to listen. The Bill is deficient, but it can be improved, and I hope that the noble lords in the other place will take the opportunity to do so. We agree with the concept of prudential regulation. There is virtue in some of the theory in the legislation. But it is because of the way in which the Government are yet again incompetently putting that theory into practice that we have our doubts. We will not oppose Third Reading, but I hope that the other place, perhaps with the more time that they have under the rules, will do a serious job and pick up on some of the issues that the Government, by timetabling the Bill in such a draconian way, failed to give the House of Commons the proper opportunity to do.
Mr Andrew Tyrie (Chichester) (Con)
I much agree with the sentiment of the remarks of the hon. Member for Nottingham East (Chris Leslie) a moment ago, and I will elucidate a little on some of the points that I think their lordships might want to look at. The Bill is the most important overhaul of financial regulation ever undertaken in this country, and it has implications for the health of the whole economy and affects everybody—every citizen, every business up and down the land. Along with the forthcoming banking reform Bill, it will change the landscape of our financial services industry, in which we lead the world in many areas and on which so many jobs in the UK depend.
The legislation certainly leaves this place in better shape than it might have done, which I think has something to do with the number of amendments that have been tabled and arguments that have been listened to by Ministers. Sometimes those arguments have come from those on the Opposition Front Bench, sometimes from the Public Bill Committee, sometimes from the Joint Committee, and sometimes from the Treasury Committee, which I chair. On that, I would like particularly to thank my colleagues with whom I work on the Committee who have been so helpful and generated so many ideas, helping put together the succession of reports that we have put out. They have, to some degree, influenced the shape of this Bill.
None the less, it is the Treasury Committee’s considered conclusion that the Bill is still defective in a number of respects. On the first day on Report, the Committee proposed a new clause to make the court more transparent and to require it to act more like a proper board. The Bank must have a board that is capable of assessing the institution’s performance, but it is explicitly prohibited from doing so at present. In view of the Minister’s favourable response to that new clause in the debate a few weeks ago, I look forward to seeing movement on the issue in another place. A number of other defects remain in the Bill, a few of which I will list in a moment.
It is important to put on the record one or two other points. Right from the beginning, the Government made decisions about the reform and the timing of the Bill that, in my view, have made the legislative process more complex and difficult than it could have been. For a start, we should have had a new Bill, something on which the Governor of the Bank of England and the Treasury Select Committee wholly agree. The complexity of the Bill could turn out to make it a lawyers’ charter—I only hope not.
Then there is the rush to get all this done quickly. After all, the horse has bolted. We have just had a most serious financial crisis; a crisis of the sort that we might have hoped the legislative framework would have protected us from. We now seem to be legislating to what can only be described as an arbitrary timetable in order to get the Bill through by the end of the year. Neither I nor the Committee have heard a good reason why we cannot take a few more months to get the legislation right. That meant that the Bill was produced without taking into account a number of views, including that of the Treasury Select Committee, on the shape of the Financial Conduct Authority. Some of the Bill’s current weaknesses owe something to the fact that not enough attention was paid to those views. We must therefore depend on the other place to get the legislation right.
I will briefly summarise a number of areas to which the Treasury Select Committee has drawn attention and which I hope the other place will look at. First, I have already mentioned the new clause that my colleagues and I proposed for improving accountability, and I am glad that there has been Government movement on that.
As I said on Report, all proposals to improve accountability, both of the Bank to its board and to Parliament, should be judged against two criteria. First, does the proposal hold out the prospect of improving the performance of the institution, meaning the quality of public policy decisions that the Bank will take, and secondly, does the proposal help secure public consent for the decisions? That is particularly important in a powerful body that is remote from the citizenry, such as the Bank of England. On both criteria, and particularly the second, the appointment and dismissal of the Governor would benefit from a parliamentary veto. The Treasury Committee’s second point is that the independence, authority and, in a sense, legitimacy of the Governor’s decisions will be enhanced if there is a parliamentary veto, through the Committee, over the appointment and dismissal of the Governor.
Thirdly, the Financial Policy Committee and the court should publish full minutes. The Government’s proposed compromise, that a so-called record be published, simply will not do and will not be enough to satisfy the Treasury Committee. We will inevitably end up demanding the full minutes and, one way or another, will persist until we get them.
Fourthly, the Chancellor needs a general power to direct the Bank of England in a crisis when public funds are at stake, not the rather strictly circumscribed powers the Bill currently contains. The Government picked up part of the proposal that the Committee made in our report on the need for some kind of limited power of direction for the Chancellor over the Bank in a crisis in order to deal with the problem to which the previous Chancellor has alluded, not least in his rather graphic memoirs of that period. The measure that the Government are proposing to put on the statute book might deal with the current crisis, which we have had over the past few years, but it might not put at the Chancellor’s disposal the right tools in some future crisis.
Fifthly, there needs to be enhanced scrutiny of the secondary legislation that will accompany the Bank of England’s macro-prudential tools. The hon. Member for Nottingham East referred to exactly that when he talked about the need for a super-affirmative procedure, and the Treasury Committee agrees: we must have something that provides for full debate and time to consider the proposals, except in case of emergencies.
Sixthly, the MPC and the FPC should both have a majority of external members. We on the Treasury Committee think that, in the longer term, this is essential in order to guard against group-think on those committees.
Seventhly, the Lords needs to look again at the Financial Conduct Authority’s objectives. The FCA would work better if it focused on a single set of objectives. Midway through the process, the Government added to the proposals what they describe as overarching strategic objectives, but the Treasury Committee concluded that they add nothing to the operational objectives in the Bill and might, indeed, take something away by creating confusion.
Eighthly—but by no means last, and certainly not least, although I probably will end on this point—the Financial Conduct Authority’s accountability mechanisms need strengthening. The FCA should publish its minutes, its chief executive should be subject to pre-appointment scrutiny and it should review its own performance without the need for the Treasury Committee to force it to do so. The Committee managed to get the Financial Services Authority to review the collapse of RBS, but it was hard work persuading it to do so.
The Financial Conduct Authority has been the poor relation throughout this process of parliamentary scrutiny, and regrettably the legislation carries over into the new body many flaws—the box-ticking culture, the burdensome problems of regulation, its cost and some of the regulation’s apparent pointlessness—in existing FSA practice, so I very much hope that their lordships get their teeth into that problem.
Overall, therefore, this legislation is a big step forward from the legislative framework that was in place at the time of the crash, but much more could be done to improve it further. It really could be so much better, and there is still time to do something about it. Let us hope that, when it comes back from the other place, that work has been done.
Mark Durkan
It is a privilege to follow the hon. Member for Chichester (Mr Tyrie), the Chair of the Treasury Committee. Like him, I recognise that the Bill represents an improvement but that it is capable of being improved further in a number of respects. He has touched on some issues, such as the balance of membership on the MPC and the FPC, which we addressed in Committee, and the future accountability of the new regulatory players.
There are deficiencies, and the hon. Gentleman at the very end of his remarks touched on what for some Members in Committee was a difficulty: when we put forward many amendments, we were told by the Minister that they were not necessary or were redundant, because the FSA was already doing what they proposed. For quite a lot of the time in Committee, we appeared to be told that the new regulatory regime was essentially going to be “Continuity FSA”, and that we could take it for granted that every good and acceptable thing that it was doing would carry on regardless. It was very much “Carry on FSA” throughout large parts of the debate in Committee.
Like other hon. Members, I recognise the deficiencies in the Bill. As I stressed in Committee, it has significant holes in its provisions for compelling consumer interests, which the hon. Member for Nottingham East (Chris Leslie) touched on. The Government rejected key amendments to the provisions on consumer credit, and the related but very distinct issue of debt management, that would have given the Bill more meaning and relevance to people and offered them a bit more of a promise. Instead, the Government are merely saying, “We will attend to these things in future, and there is enough future-proofing in the Bill to allow us to amend it for all sorts of reasons and purposes.” They rejected, as they have again today, amendments that would have coloured in how those amending powers could be used—in particular, they rejected the amendments that would have indicated where the regulators were meant to reflect on certain matters and to advise on where regulation may need to change.
The hon. Members for Nottingham East and for Chichester emphasised the importance of parliamentary oversight and reporting. The need for crisis provisions may not be far away in the current circumstances, and we require clarity about that. After the next crisis, when there is confusion about who is responsible and which bit of furniture is meant to support which particular aspect, people will not accept that hon. Members did not know about these issues, because we are the authors of this legislation. As the hon. Member for Chichester said, it is a pity that the Bill, instead of having its own full sweep of provisions, tends to rely on going in and out of various bits and pieces of all sorts of other legislation, which are bumping into each other and not connecting very well. It is a bit like that Johnny Cash song, “One Piece at a Time”.
Mark Durkan
No, I will absolutely resist the idea of singing it. The only people who ask me to sing are bouncers, because it helps them to clear the premises.
Another deficiency relates to stewardship and the fiduciary duties of institutional investors and fund managers. Again, the Government assiduously resisted straightforward amendments in that respect. I cannot understand why they would refuse to have in a Bill principles that they say are reflected in common law. If this about consolidating legislation and making sure that there are no ambiguities in future, it would have made sense to include such provisions.
There is another serious gap in relation to consolidated oversight, and I hope that the Lords will pick up on that. The Bill provides for consolidated oversight in relation to regulated authorities where the parent holding company is itself a financial institution and a regulated authority, but not where it is not. That gives rise to the whole question of the “Tescofication” of banking services. While the Bill provides that there can be changes in future, it does not specify where they might happen. The Government resisted amendments that would have coloured in the responsibility for considering where changes might be needed and, in particular, ensured that the new regulators did that.
On a more regional level, there is particular interest in Northern Ireland about the progress of the Bill and its associated measures because of the change to the regulation of credit unions. I hope that the Minister is aware that there is still deep disappointment among those in the credit union movement in Northern Ireland about the impact of the new regulations, which will take them back from where they should be and diminish their existing capacity to make sound investment choices. They look forward to being able to offer more services. Although that will be possible under regulation by the FSA and, in future, the PFA, they are disappointed that the price for that, from the first day of the new regulatory system, is that they will be restricted in making the sensible, prudential investment decisions for their members that they have been making very successfully.
David Mowat
The Whips have asked me to be brief, and I will.
The Chairman of the Treasury Committee, my hon. Friend the Member for Chichester (Mr Tyrie), listed eight issues. I am pleased to say that he did not get to the one that I wish to raise, which is the area in which the Bill could be improved. That is international regulation.
The Bill is very strong on the national position. There are bail-ins, capital buffers and ring fences—the whole macro-prudential suite. In fact, there is a whiff of over-regulation in the ring fence. There is not such a whiff, however, in how we are going to deal with the international issues that confront us. If there is another crisis, it will not occur in a national bank, and I say that to whoever is in charge when the next crisis arrives.
I was on the Joint Committee on the draft Bill and listened to the risk managers from Barclays Capital, Goldman Sachs and J. P. Morgan, and it struck me that their outlook was entirely global. They have global IT systems and global profit and loss accounts, and they manage risk and divvy up bonuses globally. To the extent that the national position matters to them at all, it is because they have to produce accounts, often three, four, five or six months later, so that they can pay taxes and satisfy statutory requirements.
We must consider the issue of risk arbitrage, but what we need to do is not just about that. The regulatory structure must follow the structure of entities such as those that I mentioned. The Bill is national in its outlook, which was why I probed the hon. Member for Nottingham East (Chris Leslie) on his point about Europe. Perhaps it has to have such an outlook, but that leaves us a big issue to consider.
It is instructive to consider the two big things that have gone wrong in the past year, while the Bill has been going through the House. They have been at MF Global and, more recently, J. P. Morgan. I do not believe that much of what is in the Bill would have had any effect on either situation. MF Global had a £40 billion balance sheet, and it would not have been regulated by the FPC. The case of J. P. Morgan is even more interesting. It lost £2 billion—in fact, yesterday it was suggested that it may have been £4 billion. Even if there were another nought on the end of that, I am not sure the situation would have been picked up under the Bill, but it would have started to get serious. That loss occurred in London, but only because that happened to be where J. P. Morgan put its risk management function. It could have been anywhere.
When we design a regulatory structure, it has to mirror the organisation of the bodies that it is regulating, or it is just irrelevant. I am concerned that too much of what is in the Bill is irrelevant to where the risks will emerge in the next decade or two. I want to give three examples of potential problems. The first is one of co-ordination. We have heard the point about twin-peaks regulation versus sector-based structures. The situation is not brilliant, but there is a committee to fix it and we will do our best.
The second potential problem is ambiguity. We talk about judgment-based regulation in the UK, whereas the Europeans talk about rule-based regulation. Those two methods will be regulating the same entities, and possibly the same departments of those entities. How will that be sorted out? Where ambiguity exists risk exists, because things always go wrong on the boundaries.
The third potential problem is one of international risk management. In my judgment, there is nothing more important than how the college of regulators works.
Civil Aviation Bill
(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Department for Transport (Mrs Theresa Villiers)
I beg to move, That the Bill be now read the Third time.
Throughout the consideration of the Bill, the debate has been informed and constructive. I thank all Members who have taken part, including Opposition Front Benchers such as the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), the shadow aviation Minister. We have also been assisted by the excellent report prepared by the Select Committee on Transport. I reiterate the thanks that I have given to the Committee and its Chair for their work on pre-legislative scrutiny.
The Bill has enjoyed considerable cross-party support at every stage in its passage through the House, and its key elements have been broadly welcomed by airports, airlines and a number of other stakeholders. That reflects the efforts made not just by this Government but by our predecessors in office to listen to the industry’s concerns and respond effectively to them to put together a balanced reform package.
In the year of the London Olympics and the diamond jubilee, we are reminded once again of the crucial role that the aviation industry plays in bringing millions of tourists to this country. That is just one element of its wider contribution to the UK economy. The Bill will modernise the framework for the economic regulation of airports, greatly improve transparency and accountability and put the passenger interest right at the heart of the new regulatory system. There is widespread agreement that the current one-size-fits-all regulatory regime is inflexible and outdated. The system proposed in the Bill will deliver more effective protection for passengers and a lower regulatory cost for industry.
At the heart of our proposals is a new primary duty to further the interests of passengers and freight owners. The Bill will also enable the Civil Aviation Authority to tailor measures to each individual airport, allowing it more flexibility to target intervention in the most proportionate way.
With a strong emphasis on the price control process, the current rules leave the CAA with very limited options if problems occur between five-yearly reviews. The new licence system in the Bill will allow for real-time regulation, empowering the CAA to act swiftly if an airport is failing its customers on, for example, service quality, winter resilience, volcanic ash or any challenges that it is not yet possible to foresee.
Clause 1(3) and (4) require the CAA to carry out its economic regulation functions in a transparent, accountable, proportionate and consistent way. To respond to points made in earlier debates, we are strengthening the scrutiny to which the CAA is subject by giving a new accounting direction to the regulator, requiring it to include an efficiency statement in its annual report, which will be subject to validation by its external auditors.
The primary duty to passengers, which is so pivotal to the Bill, will provide greater certainty and clarity for airport operators, which in turn will encourage long-term investment in the improved facilities that passengers want. A shift to more independent economic regulation also removes risks associated with political interference, which is why it is a common feature of modern regulatory regimes.
The Bill will also make the CAA’s decisions more accountable than they have ever been by introducing a new appeals process. The Government worked hard with both airlines and airports to come up with an appeals system that gives effective redress to airlines without turning the new regulatory regime into a two-tier system, which would have dragged the Competition Commission or the Competition Appeal Tribunal into everyday CAA decision making. The result of that work is that the Bill provides appeal rights to both airlines and airport operators that are significantly more effective than existing remedies. However, not just businesses benefit from greater transparency and clarity. The Government believe that providing the right information for consumers can sometimes achieve better results than traditional regulatory intervention, so the Bill will give the CAA new functions on collecting and publishing information on issues such as service quality to help consumers to make informed decisions on competing operators in the aviation sector.
The Bill contains important security provisions—keeping people safe and secure when they travel is paramount. The Secretary of State is responsible for aviation security policy and for giving security directions. That will not change under the new approach we are advocating, but the Government believe that giving the experts in aviation operations a greater say in how security is delivered will improve our ability to guard against the very real threats we face.
The CAA has valuable experience not just of regulation generally, but of safety management systems that ensure that risks are controlled as effectively and efficiently as possible. We believe that that track record on safety will assist the CAA in overseeing the delivery of the new security management systems, which are an important element of the move to an outcome-focused, risk-based approach to security, which has been debated extensively during the Bill’s passage through Parliament.
I am also convinced that vesting those regulatory functions for security in the CAA will benefit the aviation industry, because it will henceforth be able to deal with a single regulatory body rather than the current two bodies. Moreover, we expect that the complementary measure—the introduction of an outcomes-focused, risk-based approach to security—will enable security checks to be integrated more closely into the general business of the airport. That should open the way to more cost-effective and more passenger-friendly ways of delivering security outcomes.
Plans for the proposed move of responsibilities in relation to security regulation to the CAA are already being developed. The Department for Transport is in discussions with the Department’s staff who are likely to be affected and with their trade union representatives, because we are keen that as many employees as possible stay in post when their jobs transfer to the CAA, taking their skills and valuable experience with them.
Julie Hilling (Bolton West) (Lab)
The Minister said that the Department has had conversations with the staff and their representatives. Can she give us any more information about that, because—as she will be well aware—one of the concerns we raised during the passage of the Bill was about the loss of expertise if staff did not follow their jobs to the CAA?
Mrs Villiers
We are in discussions with both the CAA about the practicalities of the move and with those Department for Transport staff whose posts we expect to move. At the moment, we are not able to give them all the answers on all the issues, partly because the Bill has not passed as yet, but also because issues such as pensions are under review both in the civil service and in the context of the CAA. But we are very conscious of the need to try to provide as much visibility and information as possible, and we are working to do that, although it will take time to work through certain issues.
On environmental matters, the Opposition tabled an amendment on Report—it was extensively debated—that would have imposed a supplementary environmental duty in relation to the CAA’s airport economic regulation functions. I understand the motivation for such an amendment, as I said on Report and in Committee, but I believe that its aim is already provided for in the Bill, which already allows the CAA to approve reasonable investment in measures that mitigate environmental impact. No doubt the discussion on whether further clarification on that point is needed on the face of the Bill will continue in the other place in the same constructive and thoughtful way that it has in this House.
I must emphasise, however, that the Bill already includes important new information provisions to help us address the environmental impact of aviation. The Bill gives the CAA powers to collect and publish information about the environmental effects of civil aviation. Not only could that be used to give more information to communities affected by aircraft noise—hon. Members know how significant an issue that is for many people—but it will ensure that passengers have better information about the environmental impact of their travel choices than is currently available. We believe that improving transparency will help us to harness consumer power in pushing for progress towards cleaner and quieter planes.
Some have called for more on the environment to be included in the Bill, but to be effective, environmental measures need to be applied proportionately across the whole sector and not just focused on those airports that happen to be subject to economic regulation. So separately from our efforts contained in the Bill to reform economic regulation, a number of initiatives are under way to deliver cross-sectoral action on the environmental impact of aviation. Adding aviation to the European emissions trading system is expected to deliver carbon savings across Europe of some 480 million tonnes in the period to 2020. Both NATS and the CAA have a strong focus on reducing fuel burn and addressing noise in their work on improving airspace management, and the Government will soon publish a consultation on a sustainable framework for aviation. We are clear that aviation should be able to grow, but it must also play its part in delivering our environmental goals and protecting the quality of life of local communities affected by aircraft noise and other local impacts.
Julie Hilling
The Minister said that the consultation document will be published “soon”. During the passage of the Bill, we have talked about future legislation that would enable environmental concerns to be addressed, so can she tell me what “soon” means in this context?
Mrs Villiers
We will publish the consultation in the summer alongside a call for evidence on maintaining the UK’s hub capacity.
Last, but definitely not least, the Bill will grant the Government the power to extend ATOL protection to flight-inclusive holidays sold by airlines and those sold on an agent for the consumer basis. Extending the ATOL scheme has received strong support in the House and has the long-term support of the Transport Committee. If the Bill is adopted, we would expect to consult next year on whether the new powers should be exercised.
In conclusion, by establishing a single, clear, primary duty to passengers as the overriding principle of economic regulation, the Bill will incentivise investment in our airports by providing greater clarity and certainty for airport operators and investors; put passengers’ interests at the forefront of the regulatory regime; give the CAA far more effective powers to intervene swiftly if an airport fails its customers; and open the way for a further extension of the ATOL scheme, which for nearly 40 years has provided financial protection and peace of mind for millions of holidaymakers. I urge the House to support the Bill.
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
I begin by thanking all my colleagues who sat on the Bill Committee for their support, assistance and advice, as well as those who helped on Report, outside stakeholders who sent submissions and/or gave evidence and the Transport Committee for its scrutiny of the Bill.
We welcome and support the Bill. On Second Reading, my hon. Friend the Member for Garston and Halewood (Maria Eagle) said that we would support the Bill. That was no surprise. Much of it was drafted when we were in government, so there was a legacy. However, the timing of its arrival was a bit of a surprise, so the Transport Committee scrutiny was a little dislocated. Indeed, the Government’s response to the Select Committee was published only last Friday. It is good that it is out, but it demonstrates that there were surprises in the timing.
Not only was the arrival and timing a surprise but the inclusion of the security clauses, which were not in the original Bill, was not expected. Also, importantly from our point of view, the environmental protection measures, which were in the original draft Bill and mentioned in the Department for Transport press releases announcing the publication of the Bill, surprisingly did not appear in the Bill. That was a disappointment to the Opposition, and I shall return to it.
I do not want to appear too critical, however, although it might come across that way in due course, because, as I said, we support the Bill. In Committee, the Minister was as courteous as usual, although she and the Government did not accept a single amendment—she did so quite politely—even when she was injured and might have been a bit more vulnerable. The fact that Ministers did not accept any amendments was a matter of considerable disappointment to us, particularly given that we had the support of many stakeholders and recommendations from the Transport Committee.
The Minister has well covered two of the obviously key elements of the Bill—putting the passenger at the core of the CAA and updating the industry’s economic regulation. However, a number of other issues were raised in Committee, highlighting the strengths and weaknesses of the Bill, and I wish briefly to refer to some of them. We had a good discussion on security and the outcomes-focused, risk-based system. We support those arrangements, but, as my hon. Friend the Member for Bolton West (Julie Hilling) said, we were concerned about the arrangements for staff transfers and the certainty of their entitlements on wages, conditions, pensions and redundancy agreements. The staff side raised concerns that members of staff might be worried and often not accept or apply for transfers. The potential haemorrhaging of staff in such a sensitive area was of concern to the whole Committee, so it was good to hear the Minister provide additional reassurances before and after my hon. Friend’s intervention.
The Minister mentioned the ATOL reforms, which we all support, despite the delays. We will do what we can to help the Secretary of State and the Minister of State introduce and enact the reforms, because that is what we all want. Recent pronouncements have perhaps pointed towards more complications arising, which is obviously frustrating not only to the Department and the Government, but to all concerned.
Let me turn to the opportunities that were missed. On the environment, we proposed a duty, as the Minister mentioned. We also suggested including environmental aspects in the licensing conditions for Heathrow, which we think would be reflected right across the industry. On the passenger experience, we proposed that the responsibility for producing welfare plans should be a matter for the licensing arrangements for Heathrow, given the experiences in recent years of passengers being stranded, with all the difficulties that we have seen, heard about and, in some instances, experienced. It is interesting that the indicative licence produced for the Civil Aviation Authority suggested that the licence that it will produce for Heathrow ought to contain passenger welfare elements. We think that the Government could have given a firmer steer by referring to that in the Bill, which would have helped. We also made various suggestions about the efficiency and scrutiny of the Civil Aviation Authority, although I will return to those presently.
There are two additional areas that the other place will want to take account of: one was mentioned in Committee, whereas the other was not. The first is the honesty and accuracy of ticket prices, particularly from the bucket airlines, and the hidden surcharges. The CAA could clearly play a role in addressing that, and I am sure that the issue will be raised in the other place. The other issue, raised most recently, is the suggestion that certain passengers should be able to fast-track themselves through security and immigration for a price, which has caused quite a bit of consternation among passengers generally. Given that the suggestion has been made since Report, I suspect that the other place will want to see how things could be obviated to ensure fairness for everybody going through our airports.
Let me look briefly at the three areas I have mentioned. On the environment, we had a bit of banter with the Government about their mantra, which we hear all too frequently, of wanting to be the greenest Government ever. We obviously had quite a bit of disagreement about whether the Bill reinforces that claim. Indeed, the Minister for shipping, who is in his place, and I had a discussion this afternoon about this being the greenest Government ever in terms of environmental protection. However, I do not think that Mr Deputy Speaker—[Interruption]—if he was paying attention—will let me go there. [Hon. Members: “Ooh!”] My apologies, Mr Deputy Speaker: I wanted to ensure that you did not allow me to stray, because, seeing the hon. Gentleman in his place, I could easily have gone down that cul-de-sac.
On reporting and giving information to passengers, clauses 83 and 84, which we covered extensively, are welcome. However, we thought that there ought to be a duty on the Civil Aviation Authority, as there is on every other economic regulator, to take account of the environment. Reading between the lines, I am not sure whether the Minister’s comment that she expects the matter to be raised in the other place was perhaps an indication of more openness from the Government or that they might be prepared to look at this again.
One element of licensing to do with the environment that was raised by a number of my hon. Friends concerns protection for neighbourhoods, planning permissions and the rest of it. We think that including that in the licence would give communities greater strength and the certainty that airports and the aviation industry would take account of the sensitivities mentioned by the Minister of State.
The last thing we suggested—which the Government did not think it was appropriate to pick up—was the requirement for ticketing to show the environmental impacts of different modes of travel, thereby helping passengers to make decisions based in part, perhaps, on the difference between the environmental impact of going by air and the impact of travelling by rail or coach. I will be surprised if that suggestion is not examined further in the other place.
On the passenger experience, the reporting, information gathering and publishing will, again, be welcomed. However, as I have said, we think that the welfare plans should have been included in the licence, and that represents a missed opportunity by the Government.
Mrs Villiers
I feel that I ought to reiterate the reassurance I gave in Committee and on Report. We, too, are very supportive of a focus on passenger welfare plans. We just do not believe that the content of the licence should be hard-coded in legislation. We believe that the best approach is to give the independent, expert regulator the responsibility to decide what licence conditions are appropriate.
Jim Fitzpatrick
I fully accept that; we have a disagreement over whether this ought to be in the licence. We think that putting this in the Bill would strengthen the requirement and give a much clearer indication to the regulator that the Government expected it to look at this as a key area, particularly given the experience in recent years. We are talking about a difference in emphasis, rather than a difference in principle, because we all want passengers to be better protected against the vagaries of the weather or other factors detrimentally affecting them.
Labour Members raised the whole question of the information on queuing times, and not just in baggage-handling areas. The key area where we disagreed was on whether immigration queues could or should be counted and measured, with information given to the public. Obviously, the Government’s position is that immigration and the immigration service, the UK Border Agency and the UK Border Force are the responsibility of the Home Office, and therefore it is not appropriate to deal with them in this Bill. However, given the further recent confusion over what the queuing time actually is, particularly at Heathrow, and given the disagreements on measuring between the airports and the immigration service, we think that the CAA could have played a very constructive role in that area, authoritatively collating the evidence and publishing it. As with a number of the other amendments that we failed with, I am sure that the Lords will wish to return to that.
On CAA efficiency and National Audit Office scrutiny, we again agree to differ, but at least the Minister did come up with a proposal to strengthen the scrutiny, which, in some way, addressed the concerns we were raising. Obviously, we will monitor how the proposal works in effect. We hope that it will give greater reassurance to the airlines and other customers that the CAA will operate as we would all wish.
In conclusion, this was a good Bill in draft and, in essence, it remains a good Bill, but there is still much room for it to be even better. We hope that the other place will be able to make the improvements that we were, sadly, unable to make.
Henry Smith (Crawley) (Con)
It was a pleasure to speak on Second Reading and an honour to serve on the Public Bill Committee earlier this year. As I said on those occasions, and it is worth repeating now, the airport and airline industry has changed significantly in the more than a quarter of a century since this area of legislation was significantly addressed. Since the British Airports Authority—latterly known as BAA—was privatised in 1986, London’s largest airports, Heathrow, Gatwick and Stansted, have been subject to the same economic regulatory regime designed to ensure that they did not abuse their monopoly position. The prices that Gatwick airport, which you will know is in my constituency, Mr Deputy Speaker, charges airport passengers are currently capped by the CAA, which sets them in accordance with Competition Commission recommendations. The revenues from those prices often appear listed on passenger tickets simply as “airport charges”, but of course they are used to pay for things such as runways, airfield facilities, terminal security, baggage systems and future development. Price caps are normally reviewed every five years. The Bill rightly reforms this process.
Gatwick airport supports the Bill’s key principles, which herald a more flexible regulatory system that better reflects the way in which today’s aviation sector operates. Nevertheless, Ministers should recognise the relationship between the economic regulation of London’s airports and the Government’s priority of attracting new direct routes to emerging economies, which will help to grow the UK economy. My right hon. Friend the Prime Minister recently acknowledged that, under new ownership, Gatwick is emerging as a business airport, competing with Heathrow. Indeed, the airport’s operators have established new routes to countries such as China, Vietnam, South Korea and Hong Kong. Such progress shows that Gatwick can compete to provide direct links to those emerging economies, fulfilling the ambition it has of being a gateway to Asia.
Graham Stringer (Blackley and Broughton) (Lab)
My point probably applies more to Heathrow than it does to Gatwick, which is obviously the hon. Gentleman’s main interest, but does he agree that the decision of COMAC—the Commercial Aircraft Corporation of China—to locate in Paris rather than in London, mainly for airport capacity reasons, shows that the Government’s aviation policy has failed because it is essentially an anti-aviation and anti-business policy?
Henry Smith
I would not accept that the Government’s aviation policy is either anti-aviation or anti-growth, as shown by the fact that we are now on Third Reading of a Bill that will produce greater flexibility in this sector—vital for a trading nation such as ourselves. I believe the Government should be congratulated by hon. Members on both sides of the House on that achievement.
Returning to my principal interest of Gatwick airport—I am the local Member of Parliament—I believe that it can grow by a further 11 million through-passengers than the current market share shows. The airport’s overall market share is only about a quarter of the total. Gatwick is not a monopoly, so it does not need to be economically regulated. The market should be allowed to work. Deregulation would allow Gatwick the flexibility to invest with pace in new infrastructure to accommodate developments such as the new A380 aircraft and undertake much-needed investment in areas such as the border zone. Through deregulation, Gatwick can emerge fully in line with the views expressed by my right hon. Friend the Prime Minister as an airport that can fairly compete with Heathrow and others. As an economically regulated airport, Gatwick cannot invest flexibly or price services according to what individual customers want or what the market will support.
The Bill outlines a series of tests that must be met for an airport to be regulated. These aim to determine whether an airport has substantial market power and, if so, whether there is a risk of abuse of that position, which existing competition law is insufficient to control. An airport that meets the market power test requires from the CAA a licence to operate, which may include a price cap on what can be charged to carry passengers.
With Gatwick being sold by BAA two and a half years ago and now separately owned and operated, I very much agree with the Transport Select Committee’s findings:
“Given the greater degree of competition that now exists between airports in the south east of England…the CAA should undertake its economic regulatory duties with a relatively light touch.”
Several members of the Public Bill Committee expressed a similar view. On Report, my hon. Friend the Member for Rochester and Strood (Mark Reckless) said, correctly in my opinion:
“If Gatwick feels that it should invest significant sums of money in better terminal facilities in order to service the A380s and…allow the sorts of routes to high-growth markets in Asia that we so strongly support, I see no strong reason why it should be prevented from doing so and charging what the market will bear. I believe that that could be to the benefit of the consumer.”—[Official Report, 25 April 2012; Vol. 543, c. 1031.]
Similarly, in Committee my hon. Friend the Member for Amber Valley (Nigel Mills), whom I am pleased to see in the Chamber, noted that the CAA started
“from a position that… airports are regulated, and appears to want to keep them that way…. we should regulate airports only where there is a definite need to do so, and where there is a real advantage to the user, rather than looking to regulate unless we can find a way out of it.”––[Official Report, Civil Aviation Public Bill Committee, 28 February 2012; c. 153.]
There is clear evidence that Gatwick is now competing with other London area airports. Airlines and passengers are moving between those competing airports in the south-east, and airlines are choosing Gatwick in preference to other airports to establish brand-new routes to countries that are key trading partners. Any legal test should reflect those trends, and there should be no risk of presumption towards regulation.
The correct threshold for economic regulation of any company, including an airport, involves the application of the legal concept of dominance, which is well established in both European Union and United Kingdom competition law. It is used, for example, to determine whether telecom network operators should be subject to economic regulation in all EU member countries. Any test for market power should also be one of dominance. That would ensure a consistent approach to assessing whether there is a need to regulate in line with the regulation of other industries.
I welcome this updating of legislation for the air industry. I believe that it gives us an opportunity to enhance our gift as an innovative aviation and trading nation, and to grow the economic prosperity and employment that we need.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
I am pleased to be able to speak in the debate because this is an important Bill that reflects the significance of aviation to our economy. I am glad that there is so much agreement on the essentials, and I am pleased that the Select Committee on Transport was able to consider aspects of the Bill not once but twice, given some rather curious timing which my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) described as “dislocated”. I have not heard that word used before in connection with consideration of a Bill, but perhaps it is indeed relevant.
We conducted pre-legislative scrutiny, but the parliamentary debate on the Bill began within about two days of the publication of our report. We then considered separately the proposals for reform of ATOL holiday insurance, when we had fuller information about the Government’s plans. In both our inquiries we generally supported the Bill, but we sought a number of changes and made a number of criticisms, some but not all of which have been taken up. I want now to refer to some of the concerns that we raised, which have been reflected in other parts of the debate on the Bill.
The Bill’s focus on passenger experience and welfare is greatly welcomed, but it is important for that work to be conducted efficiently and effectively, particularly when it comes to the production of information about different experiences in different airports. When we were considering the Bill, concerns were expressed by a number of airports—especially regional airports—which were suffering as a consequence of the current economic hardships, and were worried about the increased cost that could result from the new regulation for which the Bill provides. It is important for the light-touch regulation to be effective, producing correct and appropriate information that can benefit passengers by enabling them to decide how they wish to travel.
How to deal with adverse weather conditions has exercised the House for a long time. Although the Bill does address the issue, we were disappointed to note that its proposals were not strong enough to ensure that all airports would draw up proper plans to deal with bad weather. We were told that the CAA would deal with the matter, but, although we are glad that it has been highlighted to a greater extent, we still feel that sufficient emphasis has not been placed on it in all instances.
Our greatest concern, which has been vindicated by events since the publication of our report, was the need for much more effective co-ordination and working together by the Department for Transport and the Home Office. Our report addressed immigration queues—and, indeed, if we are interested in questions of passenger experience, we should note that among travellers’ greatest concerns are baggage handling and queues at immigration. However, such queues are controlled by the Home Office through the UK Border Agency. We expressed concerns about a lack of co-operation, and subsequent events have reinforced that point. It is unclear how much co-ordination there is between the Department for Transport and the Home Office on how to deal with queues such as those at immigration and passport control. I hope that will be addressed once the Bill is enacted.
Security is a linked area of concern. There has been a change in aviation security policy—a move to an outcome-focused, risk-based approach—and a split in responsibility for security between the Department for Transport and the Civil Aviation Authority acting on behalf of the airports. There is concern about how that division of responsibilities will operate while ensuring we maintain the highest standards of security in the most cost-effective manner. More thought needs to be given to how that is to be achieved. We also raised concerns about staffing and the initial proposals to move staffing from the Department to the CAA. We wondered whether expertise would be lost. The Department has addressed that in its response to our report, but concerns remain.
Holiday insurance and ATOL reform are long-standing issues. The Committee has looked at that for many years, both in the previous Parliament and this one. The ATOL scheme was introduced in the 1970s. At that time it fitted the way most people went on holiday, which was on conventional package holidays. The situation has changed dramatically, however. Before the changes that came into force a few weeks ago, only about 50% of people going on holiday were covered by ATOL, and there was a £42 million deficit in the scheme. We support the Government’s proposed changes, such as the extension of what constitutes a package holiday—or, rather, a qualifying holiday—the introduction of flight-plus and requiring tour companies and transport operators to provide a certificate where ATOL is in force, giving clearer information to the traveller about what is covered by the insurance.
I understand that about 60% of travellers will be covered under the new scheme, but I urge the Minister to use the powers under the Bill to extend ATOL further to incorporate holidays sold by airlines. Other tourism companies and operators feel a deep sense of grievance that while they have to pay the levies associated with ATOL, when airlines sell holidays they do not have to do so and do not face the same costs. I hope that will be dealt with, along with companies designated as agents for the consumer also being able to avoid some of the liabilities that other holiday companies have to take up. Although we welcome these changes, a much broader look at how the scheme operates is needed.
We also think there is a need for more information on what the consumers—the travellers—actually want. There is little information about the views of travellers. They might, for instance, want more information on other forms of available insurance. Although I repeat that we certainly welcome the Government’s measures, they need to go further.
More work can be done on all those points of concern, although I reiterate that there is general support for the Bill. I view the items of concern I have mentioned as works in progress and I hope that the Minister can assure us that she sees them in that light too. I hope that she can give us an absolute commitment that there will be closer working between the Department and the Home Office on the queues at our airports so that that problem, at least, can be dealt with satisfactorily as soon as possible.
Dr Julian Huppert (Cambridge) (LD)
I welcome the Bill. For too long, regulation across Government has been too centralised in Whitehall and has not focused on its core consideration, which is the needs of the public. The general duty to passengers in the Bill is an excellent step forward.
For far too many decades, we have seen top-down central control of transport policy. Even if all we had was a general duty for passengers the Bill would be good, but it has more to it, as has been outlined by the Minister, such as the ATOL reforms. Under clauses 83 and 84, extra information must be provided for passengers so that they know what is going on, whether it is about transport options for getting to the airport or the environmental impact. It lets passengers know and lets them decide what they want. I particularly welcome the environmental information required under clause 84.
It is clear that we must tackle the growing environmental impact of aviation. Even if we simply stick with the framework set by the Committee on Climate Change back in 2009, by 2050 aviation is due to make up at least 25% of our allowed carbon emissions. Its relevance to the future of our planet is hard to quantify but also hard to overestimate. Aviation already has a huge impact on people’s daily lives. Hundreds of thousands of people live under the Heathrow flight path—indeed, a quarter of all people in Europe who are affected by aircraft noise pollution are under the Heathrow flight path.
I have made it clear throughout the progress of the Bill that I want an enhanced environmental duty and a strengthening of the Bill in that regard. I have been talking to the Minister about that point, as we have not yet reached a solution that works. I am optimistic that the Minister will be able to work out the exact wording before the Bill reaches the other place, but we are not there yet.
Dr Huppert
I was about to be nice about the shadow Minister, but I shall let him speak first.
Jim Fitzpatrick
In that case, my timing is appalling. It might have been the first time that the hon. Gentleman had been nice to me—[Hon. Members: “Aah!”] I am not getting this right at all tonight, Mr Speaker. I apologise for that.
In Committee, the hon. Gentleman and I had a very difficult exchange. He rightly said that our first amendment on the environment did not have the quite the right focus or the right wording, was not strong enough and did not mention the Climate Change Committee. We took his advice, changed all those points and tabled an amendment on Report that covered all those elements, but he still could not vote for it. Will he give us some indication whether he will be more successful with the Minister this time than we were last time?
Dr Huppert
I thank the shadow Minister for his praise and I am glad that he listened to my comments about the first version of the amendment. I was about to say that I welcomed its intentions and was very pleased that it was improved. I think that it is almost at a stage where it could be accepted. Unfortunately, it was not quite there.
I was wondering whether to use some of the criticisms that I had stored up, and I shall use one. One thing that concerns me about the shadow Minister’s position is his party’s overall position on the environment. The new shadow Environment Minister whose post was announced in the recent reshuffle—the hon. Member for Glasgow South (Mr Harris)—said on Second Reading that he hoped his party would support the third runway at Heathrow and argued that concern for the environment was really a form of class warfare, saying that we were coming up with environmental concerns because people with less money were able to fly. I am sure that that is not what the shadow Transport Minister, the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), means and I hope that he will be successful in persuading his colleagues to take a more sensible approach.
Mr Peter Bone (Wellingborough) (Con)
I refer the House to my entry in the Register of Members’ Financial Interests. Is the hon. Gentleman arguing for an additional runway at Heathrow? The impact of flying to Heathrow and flying around until the plane can land—stacking—must be environmentally wrong. He is right to argue for an additional runway.
Dr Huppert
I do not think anyone here believes I am arguing for a third runway at Heathrow. If the hon. Gentleman has misunderstood that, I am sorry. This highlights the problem that there are people on the Back Benches on the Government side who are in favour of a third runway at Heathrow. I wish Ministers good luck in persuading them. Unfortunately, it seems that Back Benchers and Front Benchers on the Opposition side hold such views, although I realise that is not the shadow Minister’s official position.
I hope we will be able to get the outcome that we all want, party political bickering aside, and that the Minister and the Secretary of State will be able to deliver that in the other place. One concern that has been raised is that the current proposals will tackle only regulated airports. I would like them to go wider than that. For example, the Aviation Environment Federation suggested amending section 4 of the Civil Aviation Act 1982. That would be a more general approach and would not hit just particular areas, so that is one possibility. This is a good Bill. It could be tweaked to be even better, but it should be greatly welcomed on both sides of the House. It will give us a sustainable future for civil aviation in this country, with open data, proper regulation, support for sustainable transport and proper passenger-led reforms. I am delighted to support it.
Gavin Shuker (Luton South) (Lab/Co-op)
I am extremely grateful for this opportunity to speak. It is particularly expedient that I should do so after the hon. Member for Cambridge (Dr Huppert), for reasons that I shall come to. First, let me address one of the issues at the heart of the Bill: passenger experience. We welcome the Bill, which we sought to amend and improve in Committee. I was proud to serve on the Committee with colleagues from the Opposition Benches, some of whom are present. When things go wrong for someone at an airport their first instinct is to blame the airline, but it is rarely the airline that is at fault. We have seen such experiences at several airports and some bubbling discontentment, particularly more recently as a result of immigration and other issues such as poor weather. That is why we sought to put welfare plans for passengers into the Bill and why we sought to help disabled passengers more explicitly by putting such measures in the licence conditions. The two Front-Bench teams have explained their differences on where the emphasis should be.
For me, the key issue is about holding airport operators to account. I served on the Select Committee on Transport, and I remember seeing the chief executive of BAA come before the Committee shortly after the December 2010 snow disruption and confess that, of the 80 different measures of Heathrow’s success that were taken in December 2010, only three or four had been breached and marked as red, whereas every other box had been ticked green. In a sense, that underlines why we need to be really explicit about what we want to measure. I am sure that the CAA will be good at that, although the Opposition would have preferred the Government to have a more active role at the legislation stage.
The second issue I want to address is environmental responsibilities. In Committee, we felt it would be extremely helpful and effective if the CAA had a clear duty on the environment, and at one stage it appeared that the Department for Transport believed that too. Certainly, as the Bill came through, we saw from its drafting that that would not be included. I am talking about giving environmental information to passengers so that they can make smarter choices and about making sure that the CAA, as an economic regulator, can do its job, balancing the needs of the economy alongside the needs of the environment.
I wanted to speak to this Bill not just because I represent an airport constituency—Luton airport, which many people will know and love—but because I am deeply concerned about growth. We know that there is limited growth in the economy, to put it mildly, and that we need a long-term strategy for growth. As the Minister has pointed out, if aviation is one of the routes for that growth, it is important to have continuity and consistency in the Government’s approach. That is why I am so concerned about the remarks that we heard in Committee, which the hon. Member for Cambridge spoke about.
A Liberal Democrat member of the Committee whom I shall not name—okay, I will, it was the hon. Member for Cambridge—said in Committee:
“I would very much like to see an environmental duty in the Bill. That is an important issue, and I raised it on Second Reading.”
He went on:
“I am confident that she”—
the Minister of State—
“will…find a way to deliver an environmental duty in this Bill…It is not a trivial issue.”––[Official Report, Civil Aviation Public Bill Committee, 28 February 2012; c. 116-17.]
We wait to see whether the Minister is willing to give to her coalition colleague that assurance. We certainly felt that the point might have been more easily pressed home had the hon. Gentleman voted for it in the first place. I say that not to embarrass any particular Member on the Government side—honestly—but because I think the issue goes to the heart of aviation strategy more broadly under this Government. As with many issues under the coalition Government, we have one party on the accelerator and one party on the brake. Sometimes those flip around, but on aviation strategy the nature of the coalition becomes even more disparate. We have two people on the accelerator and one on the brake, or one on the accelerator and two on the brake at different times. There is no clarity for the industry about where this Government want to take aviation. That should be a big concern for us.
We know the issues in aviation; the big one that needs to be tackled is the requirement for greater capacity in the south-east. With reference to Luton airport, we know that the Minister is deeply interested in point to point and she is right. We should make more effective use of the capacity that we have. I hope the ministerial team will bring forward commitments on that in the coming months. We can go from 8 million passengers to a greater number without doing significant ground works or extending the runway.
We need resolution on whether there will be a genuine hub airport—one that does not fall over when it snows, when it rains, when there are small amounts of disruption. While that issue remains unresolved, perhaps because of the nature of coalition government, perhaps because of geographic requirements on Ministers or individual MPs, simply saying no is not a policy.
Graham Stringer
I wish Luton airport well; I have used it on a number of occasions. However, the recent report from BAA shows that if we do not have a third runway at Heathrow, which is the only solution to providing a hub airport, we will lose £100 billion in the economy. That is a non-trivial amount. Not having a third runway, as the hon. Member for Wellingborough (Mr Bone) said, is actually bad for the environment.
Gavin Shuker
I thank my hon. Friend. I want to make it clear that I think the right approach is to reach a cross-party consensus on the future for a hub airport. In that context, the moves by the shadow Secretary of State and the shadow Minister of State to write to Ministers at the Department for Transport saying, “We will take the option of a third runway off the table,” acknowledging that it has been taken off the table by Ministers, is the right way to go. However, the issue does not go away. In the course of developing policy in both major parties, we cannot continue to dodge the bullet. We need a hub airport that is fit for purpose. That is why I believe it is so important, given the passage of the Bill through the House tonight, that we find a way to tackle the big issues in aviation.
Mr Greg Knight (East Yorkshire) (Con)
Does the hon. Gentleman agree that more people who wish to travel to and from London could and should use Luton airport?
Gavin Shuker
Sometimes one is bowled a googly in the House. I am not sure whether I have been with that question. I agree absolutely with the right hon. Gentleman. More people could use the four or five other airports around London instead of Heathrow and use existing capacity well.
I believe that the Minister’s heart is in the right place on the issue. We should speak positively and give a clear direction for industry, because without that the Department will not make its vital contribution, which we need for growth.
Jim Shannon (Strangford) (DUP)
I congratulate the Minister and the Government on bringing the Bill to the House on Third Reading, and the Opposition on the hard work that they did in laying the foundations for legislative change when they were in power. It should be recognised that the Opposition have done a lot of work on the matter.
The thrust of the Bill is to reform the economic regulation of airports, with particular focus on those airports with market dominance. We are talking about Heathrow, Gatwick and Stansted. As a Northern Ireland MP travelling every week, I have become very familiar with Heathrow and Gatwick. Since the British Airports Authority was privatised in 1986, London’s largest airports, Heathrow, Gatwick and Stansted, have been subject to the same economic regulatory regime, which was designed to ensure that these major airports did not abuse their monopoly position.
The prices that Gatwick charges airport passengers are currently capped by the Civil Aviation Authority, which sets them in accordance with a Competition Commission recommendation. The revenues from these prices often appear on passengers’ tickets as airport charges. They are used to pay for runways, airfield facilities, terminals, security, baggage systems and future development. Price caps are usually reviewed every five years, but the Bill reforms that process.
As a Northern Ireland MP, I would ask for some clarification on a number of issues. The Bill has some consequences for all Northern Ireland airports, which I will briefly touch on. The Government are rightly always looking to consult the public, but sometimes the cost is astronomical. Airports have expressed concern to me that the CAA is running a consultation that may lead to a significant increase in the charge it levies on airports, so a cost element comes into the CAA process, which it is important to take into consideration.
In addition, there is the proposal to transfer some of the aviation security oversight functions from the Department for Transport to the CAA, which in turn will directly charge airports for those services, which is not currently the case. As the Bill contains no provision for the airport operator to pass the charges directly to users, that will mean an increase in cost that the operator has to absorb, and those costs are extreme. At Belfast International airport, it is likely to be in the region of £100,000 to £120,000 annually. Obviously, that is unwelcome, because it eats into the capability to reinvest in infrastructure, yet the Government’s first objective was to encourage reinvestment in the airports. There are perhaps unintended consequences, but they are significant when we take into account the fact that the annual CAA licence, which is based on passenger numbers alone, presently costs the likes of Belfast International airport £202,000 a year, which is a 50% increase on top of what it already pays. That is very concerning. Who can absorb such colossal sums of money annually?
It has also been pointed out to me by officials from Belfast International airport that we must recognise the relationship between the economic regulation of London’s airports and the Government’s priority of attracting new, direct routes to emerging economies that will help the UK economy to grow. The Bill is about regulating, but it is also and should be about encouraging growth in our airports to encourage growth in our businesses and tourism, and the Bill has a part to play in that. We in Northern Ireland want a balance between regulation, growth and opportunity for our airports, Belfast International, Belfast City and Londonderry.
The hon. Member for Crawley (Henry Smith) also referred to that in relation to Gatwick, and he outlined the issue of regulation. Gatwick wants the regulation system to reflect the way in which the aviation sector operates. Gatwick is clearly emerging as a business airport, competing with Heathrow, and it has space available—another issue that has emerged. In determining whether an airport should be regulated, the CAA must find that an airport is dominant, as interpreted in competition law by the European Commission and referred to in the CAA’s own competition assessment guidelines, and Ministers should provide clarification on that matter.
The CAA has said that it fully expects more than 50% of all decisions to be appealed under the new system. That suggests that the present system is not perfect, and that changes should be made sooner rather than later. Will the Minister clarify how the Government have assessed the financial and business impact that the new appeals system will have, and whether they will consider additional safeguards to reduce the burden that it will place on regulated airports, such as a narrower right of appeal?
The Transport Committee recommended that the information publication requirements should not create disproportionate burdens for the aviation sector, and that is another issue of concern. Gatwick is now competing with other London airports. There is clear evidence of that, with airlines and passengers moving among competing London airports and Gatwick, and airlines choosing Gatwick over others to establish brand new routes to key trading partners. There should be no risk of presumption towards regulation.
I will conclude with a final comment on the CAA. It has been indicated to me that the CAA is unable to deliver slots for Heathrow airport. Indeed, it has been identified that the European Union needs to amend regulations in order to enable flight slots for regions, for example for Belfast International airport and Belfast City airport. Can the Minister confirm that the Government have no power as a result of EU regulations to retain or safeguard routes between Belfast and Heathrow? I understand that if she is unable to confirm that, amendments to the Bill will be tabled in the other place. I look forward to the Minister’s response to those questions.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Business without Debate
Delegated Legislation
petitions
Mr Deputy Speaker (Mr Nigel Evans)
I advise the House that time is crucial and I would like to explain how we plan to do this. There are a large number of petitions to be presented and I hope that it will be of assistance to the House if I set out how we shall proceed.
Once the first petition relating to VAT on static caravans has been read to the House, with its prayer, subsequent petitions on the same topic should not be read out in full. Members should give a brief description of the number and location of the petitioners and state that the petition is “in the same terms”. Members presenting more than one petition should present them together.
When a Member has presented a petition, she or he should proceed to the Table and hand it to the Clerk, who will read its title and then hand it back to the Member. She or he should then proceed directly to the petitions bag at the back of the Chair. I will call the next Member immediately after the Clerk has read the title. At the expiry of half an hour, no further petitions may be presented orally, but they may be placed in the petitions bag and will be recorded as formally presented. Is everybody happy? I call Mr Graham Stuart to present his petition.
Mr Graham Stuart (Beverley and Holderness) (Con)
Normally at this time of night the House is emptying, not filling up. Instead, colleagues are coming into the Chamber because of their concern about the imposition of VAT on static caravans. If enacted, the Government’s proposal to impose VAT on static caravans will cost jobs. Only today, Willerby Holiday Homes, Britain’s largest caravan manufacturer, announced plans for 350 redundancies in anticipation of the tax rise. Jobs will be lost not only in manufacturing and the supply chain, but in the parks themselves, which employ 26,000 people directly across the country. I am grateful to Mr Speaker for allowing us half an hour this evening to present these petitions on behalf of so many constituencies across the country. Although I will read out the full text, Mr Deputy Speaker, you have asked that others do not do so.
In addition to presenting a petition on behalf of those in Beverley and Holderness, I am presenting petitions from the constituencies of: Birmingham, Northfield; Blackpool South; Blyth Valley; Bognor Regis and Littlehampton; Bridgwater and West Somerset; Carlisle; Christchurch; Clacton-on-Sea; Dwyfor Meirionnydd—I hope there are no more Welsh constituencies to trouble me; Eastleigh; Filton and Bradley Stoke; Forest Heath; Harwich and North Essex; Islwyn; Milton Keynes South; Montgomeryshire—I am confident about pronouncing that one; New Forest West; North Devon; North Norfolk; Poole; Rochdale; Selby and Ainsty—I am delighted to see my hon. Friend the hon. Member for Selby and Ainsty (Nigel Adams) in his seat and supporting this presentation; Shrewsbury and Atcham—I am also delighted to see my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) in his seat; South Dorset; South Down; Stirling; Tynemouth; Wells—I am delighted to see the hon. Member for Wells (Tessa Munt) in her seat; West Bromwich West; West Dorset; West Worcestershire; and Workington. Mr Deputy Speaker, you can tell the breadth and depth of concern about this issue.
The petition states:
The Petition of residents of Beverley and Holderness Constituency,
Declares that the Petitioners believe that levying VAT on static holiday caravans would cost thousands of jobs in caravan manufacturing, from their suppliers, and in the wider UK holiday industry; and notes that the Petitioners believe that such a levy would lose revenue for the Government.
The Petitioners therefore request that the House of Commons urges the Government to reverse its decision to levy VAT on static caravans.
And the Petitioners remain, etc.
[P001027]
The following petitions were also presented:
The Petition of residents of Rochdale.
[P001060]
The Petition of residents of Christchurch,
[P001061]
The Petition of residents of West Bromwich West.
[P001062]
The Petition of residents of Dwyfor Meirionnydd.
[P001063]
The Petition of residents of Clacton on Sea.
[P001064]
The Petition of residents of South Down.
[P001065]
The Petition of residents of Bridgwater and West Somerset.
[P001066]
The Petition of residents of West Dorset.
[P001067]
The Petition of residents of Filton and Bradley Stoke.
[P001068]
The Petition of residents of Montgomeryshire.
[P001069]
The Petition of Residents of Ceredigion.
[P001070]
The Petition of Residents of Eastleigh.
[P001071]
The Petition of Residents of Selby and Ainsty.
[P001072]
The Petition of residents of Birmingham Northfield.
[P001073]
The Petition of residents of Poole.
[P001074]
The Petition of residents of Blyth Valley.
[P001075]
The Petition of residents of Bognor Regis and Littlehampton.
[P001076]
The Petition of residents of Forest Heath.
[P001077]
The Petition of residents of Carlisle.
[P001078]
The Petition of residents of South Dorset.
[P001079]
The Petition of residents of Tynemouth.
[P001080]
The Petition of residents of North Norfolk.
[P001081]
The Petition of residents of North Devon.
[P001082]
The Petition of residents of Stirling.
[P001083]
The Petition of residents of Harwich and North Essex.
[P001084]
The Petition of Residents of Blackpool South.
[P001085]
The Petition of residents of Workington.
[P001086]
The Petition of residents of Islwyn.
[P001087]
The Petition of residents of New Forest West.
[P001088]
The Petition of residents of Shrewsbury and Atcham.
[P001090]
The Petition of residents of Milton Keynes South.
[P001091]
The Petition of residents of Ludlow.
[P001092]
The Petition of residents of West Worcestershire.
[P001093]
Sir Alan Beith (Berwick-upon-Tweed) (LD)
I present a petition in the same terms as those presented by the hon. Member for Beverley and Holderness (Mr Stuart), from constituents of mine at the Waren caravan park, Waren Mill, Bamburgh in the Berwick-upon-Tweed constituency. My constituents are deeply concerned about the impact not just on manufacturing, but on the holiday parks and caravan sites in whose business model sales are an important factor.
The Petition of residents of Waren Caravan Park, Waren Mill, Bamburgh, Northumberland.
[P001028]
Andrew Percy (Brigg and Goole) (Con)
I, too, present a petition, on behalf of the residents of the Brigg and Goole constituency, in the same terms as my hon. Friend the Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of Brigg and Goole.
[P001029]
Mr Philip Hollobone (Kettering) (Con)
Having voted against the imposition of VAT on static holiday caravans in the Budget resolution debate on 18 April, I have the privilege to present a petition in the same terms on behalf of residents of the Kettering constituency.
The Petition of residents of Kettering constituency.
[P001030]
Lisa Nandy (Wigan) (Lab)
I present this petition, on behalf of the residents of Wigan, in the same terms as the hon. Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of Wigan.
[P001031]
Peter Aldous (Waveney) (Con)
I present a petition in similar terms on behalf of residents of the Waveney constituency in Suffolk.
The Petition of residents of Waveney.
[P001032]
Laura Sandys (South Thanet) (Con)
I have the great honour of presenting this petition in the same terms as my hon. Friend the Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of South Thanet.
[P001034]
Mr Peter Bone (Wellingborough) (Con)
I present this humble petition of residents of Wellingborough in Northamptonshire and the surrounding areas in the same terms as those that have already been presented and, in particular, because there is the significant manufacturing of such caravans in my constituency.
The Petition of residents of Wellingborough.
[P001037]
Mr David Davis (Haltemprice and Howden) (Con)
It is my privilege to present a petition in the same terms as those of my hon. Friend the Member for Beverley and Holderness (Mr Stuart), who made it clear that this is being done to prevent enormous numbers of job losses around the country, with the highest concentration probably in East Yorkshire, not least in Haltemprice and Howden, on behalf of which I present this petition signed by 612 residents.
The Petition of residents of Haltemprice and Howden constituency.
[P001039]
Mr John Whittingdale (Maldon) (Con)
I thank and congratulate my hon. Friend the Member for Beverley and Holderness (Mr Stuart) on the way in which he has conducted his campaign. My constituency contains a large number of static caravan parks, and I therefore endorse all his remarks. It is my honour to present a petition on behalf of my constituents in Maldon.
The Petition of residents of Maldon.
[P001038]
Mark Garnier (Wyre Forest) (Con)
I add my gratitude and thanks to my hon. Friend the Member for Beverley and Holderness (Mr Stuart) for the effort he has made in representing the interests of this industry. In similar terms to the aforementioned petition, I have great pleasure in bringing to the House 400 signatures from the residents of Wyre Forest.
The Petition of residents of Wyre Forest.
[P001036]
Mr David Hanson (Delyn) (Lab)
In similar terms to those of the hon. Member for Beverley and Holderness (Mr Stuart), I have pleasure in presenting a petition to this House on behalf of more than 1,000 residents of Delyn in north Wales—not only those associated with caravan parks but those associated with the fish and chip shops, pubs and supermarkets that serve them.
The Petition of residents of Delyn constituency.
[P001040]
Diana Johnson (Kingston upon Hull North) (Lab)
I have pleasure in presenting a petition of 3,249 signatures from the residents of the constituency of Kingston upon Hull North, and also presenting, on behalf of my right hon. Friend the Member for Kingston upon Hull West and Hessle (Alan Johnson), a petition signed by 1,788 of his constituents. This matter is of particular importance to both our constituencies owing to the manufacturing of caravans in the city of Hull.
The Petition of residents of Kingston upon Hull and East Yorkshire.
[P001044]
Martin Caton (Gower) (Lab)
I present a petition in the same terms from the residents of Gower.
The Petition of residents of Gower.
[P001035]
Karl Turner (Kingston upon Hull East) (Lab)
I present a petition with 1,401 signatures on behalf of the residents of Kingston upon Hull East. This issue is terribly important and even more so today, with Willerby Holiday Homes announcing a consultation on redundancies for 350 staff as a direct result of what the Government plan to do.
The Petition of residents of East Hull constituency.
[P001042]
Mr Alan Reid (Argyll and Bute) (LD)
I present a petition in the same terms signed by 346 people who are residents of, or visitors to, Argyll and Bute. Owners of static caravans bring a great deal of money to Argyll and Bute, and many businesses in the constituency are very worried that the impact of this tax will mean a loss of revenue and a loss of jobs.
The Petition of residents of Argyll and Bute constituency, and others.
[P001043]
Mr Andrew Turner (Isle of Wight) (Con)
I present a petition in similar terms from the Isle of Wight, from 356 residents or visitors.
The Petition of residents of the Isle of Wight Holiday Parks.
[P001047]
Ian Paisley (North Antrim) (DUP)
It is my honour and privilege to prevent a “Stop Caravan Tax” petition of behalf of my constituents, in the same terms as that presented to the House by my friend the hon. Member for Beverley and Holderness (Mr Stuart). In the wonderful villages of Bushmills and Ballycastle, and indeed in the Glens, caravan parks will potentially be destroyed by such a tax. As I voted against it, it is my honour to defend the rights of those villagers and prevent this tax on holidays.
The Petition of residents of North Antrim constituency.
[P001048]
Mr Greg Knight (East Yorkshire) (Con)
I seek to present a petition signed by approximately 1,000 residents of East Yorkshire and beyond. It is in identical terms to that presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart). My constituents who are petitioning agree with his, and I agree with him.
The Petition of residents of East Yorkshire.
[P001049]
Sandra Osborne (Ayr, Carrick and Cumnock) (Lab)
I fervently wish to present a petition on behalf of my constituents in the beautiful county of Ayrshire, which depends heavily on tourism and will be most adversely affected if this measure goes through.
The Petition of residents of Ayr, Carrick and Cumnock.
[P001045]
Simon Hart (Carmarthen West and South Pembrokeshire) (Con)
I am delighted to present three petitions in similar terms to those presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart), on behalf of residents of the Wood Park Caravans, Celtic Holiday Parks and Perran Sands parks and many other people in my constituency.
The Petition of residents of Carmarthen West and South Pembrokeshire constituency.
[P001052]
The Petition of residents of Perran Sands.
[P001053]
The Petition of residents of Wood Park Caravans.
[P001054]
Amber Rudd (Hastings and Rye) (Con)
My constituency has the most beautiful caravan sites in the country. I have the honour of presenting this petition on behalf of my constituents.
The Petition of residents of Hastings Rye constituency.
[P001055]
Martin Vickers (Cleethorpes) (Con)
As a representative of Cleethorpes, which I have said on many occasions is the premier resort of the east coast, I am privileged to present this petition in similar terms to that presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of Cleethorpes.
[P001056]
Mr Mark Williams (Ceredigion) (LD)
I present this petition on behalf of residents of Ceredigion in west Wales, in similar terms to that presented by the hon. Member for Beverley and Holderness (Mr Stuart). In particular, I wish to bring to the House’s attention their concerns about job losses in the small business sector, which supports the tourism industry.
The Petition of residents of Ceredigion.
[P001051]
John Healey (Wentworth and Dearne) (Lab)
I have a petition here, “Stop the Caravan Tax”, signed by Scott Staniforth of 45 Vicar road, Wath, and others from my constituency. They see that the tax on static caravans could add £8,000 to the price of a caravan, price families out of their regular holiday and thwart many people’s ambition to own an affordable second home. They have therefore signed a petition in similar terms to that presented by the hon. Member for Beverley and Holderness (Mr Stuart).
The Petition of residents of Wentworth and Dearne constituency.
[P001050]
Andrew George (St Ives) (LD)
In the 11 minutes remaining, I should like to deliver a petition on behalf of Mr Norman Bliss of the Lower Treave caravan park at Crows-An-Wra, near Penzance, in my west Cornwall and Isles of Scilly constituency, the premier holiday destination of the United Kingdom. In handing me this petition, the petitioners pointed out that the measure, far from resolving the anomaly that the Government said they had identified, created a new anomaly between static caravans and static bricks and mortar. I am proud and very pleased to support the hon. Member for Beverley and Holderness (Mr Stuart) in his excellent campaign.
The Petition of residents of the St Ives constituency.
[P001058]
Simon Reevell (Dewsbury) (Con)
I am delighted to present a petition on behalf of my constituents in similar terms to that presented by my hon. Friend the Member for Beverley and Holderness (Mr Stuart). Up to a quarter who signed the petition expect to lose their jobs if the proposal is not reversed.
The Petition of residents of Dewsbury.
[P001041]
Littering and Fly-tipping
(11 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Andrew Selous (South West Bedfordshire) (Con)
I am very grateful to Mr Speaker for granting this debate on a subject about which I have always felt strongly. I spoke of my dislike of fly-tipping in my maiden speech on 2 July 2001, and unfortunately, despite more money being spent on clearing up litter and fly-tipping, the problem has got worse and not better.
Although the Government have reduced the deficit by a quarter in the two years they have been in office, they are still spending more than their income, which is why the £863 million spent on street cleansing in 2011 is such a huge sum. If we add the cost of cleaning the highways and railways, and the cost of removing fly-tipping from public and private land, the actual amount of public money spent on cleaning up litter in England is well over £1 billion annually. If people behaved responsibly and cared for their local areas by not littering, that money could be used to care for the needy and the vulnerable in our communities.
My argument is that we need rigorous and robust action from the Government, the police and local authorities, as well as a massive increase in personal responsibility and care for our local environment from an army of concerned citizens. I pay tribute to street cleansing staff up and down our country. They do an important and valued job, and I thank them for it, but they cannot keep our country clean on their own, which is why I wholeheartedly welcome the Daily Mail “Spring Clean for the Queen” campaign and pay tribute to the Campaign to Protect Rural England “Stop the Drop” campaign. I also note that the Country Land and Business Association says that it costs its members an average of £800 per incident to remove non-toxic fly-tipped waste, and several thousand pounds per incident if the waste is hazardous and includes, for example, asbestos.
All of us have a responsibility not to drop litter and to keep our immediate environment clean. We can all keep the area around our homes clean. Shopkeepers can clean in front of their premises, and businesses can keep their immediate environment clean as well. Public servants should also join in. When I go round schools in my constituency, one of the ways in which I judge head teachers is whether they pick up litter as they show me around their school. I have noted that the schools in which the head teachers pick up litter tend to be cleaner. If it is not beneath the head teacher to pick up litter, the other staff tend to get the message fairly quickly.
I also commend the material to combat littering produced by the Campaign to Protect Rural England for use in our schools. This work is really important. If children are not learning at home that littering is wrong, they need to be told this very clearly in schools. I was delighted to read recently that Mrs Patricia Prosser, in the village of Stanbridge in my constituency, has just been nominated as villager of the year for the regular litter-picking that she undertakes in her village. She does not have to do it, it is not her job specifically, and she is not paid to do it, but she does it because she cares about her village and her environment. All of us could well follow her example, whether we live in a town, village or city.
Jim Shannon (Strangford) (DUP)
I thank the hon. Gentleman for bringing this important issue before the House tonight. Does he think that increased penalties for those who drop litter and fly-tip are the way forward? In Northern Ireland, council officials have the authority to issue fines on the spot to those whom they observe littering. Is that the way forward, rather than letting people get away with it?
Andrew Selous
The hon. Gentleman makes a good point. I hope that he will have been pleased, as I was, by the announcement made by the Government today that they will make it a criminal offence regularly to dump rubbish in gardens and that those who are guilty of “persistent unreasonable behaviour” and who have ignored warnings to clear away unsightly rubbish will be subject to on-the-spot fines of £100—which is higher than some of the current penalties—or a court-imposed fine of up to £2,500. All of us know how it ruins a neighbourhood to have sofas, mattresses or fridges lying around in gardens, making an area look a complete mess. It is not fair on the decent householders who have to live in proximity to such situations. I urge the Government to bring in these community protection notices as quickly as possible as they are very much needed.
Much of the litter in the UK is thrown from vehicles and I was very interested to see that some London local authorities now have the power to impose a £100 fine on the registered owner of vehicles whose occupants throw litter from those vehicles and that this has become a civil offence. Can this scheme be spread across the whole of the United Kingdom?
I understand that local authorities across the UK and not just in London can now introduce similar byelaws into their areas. Can the Minister explain how local authorities can go about this? A poll released by the AA yesterday of 8,800 of its members showed that 61% think that people caught throwing litter from cars should be punished with three points on their licence, a fixed-penalty fine and possibly a community service order. There seems to be a public appetite for taking more robust action on this issue, and when the newsreader, Alice Arnold, recently threw a plastic bottle back into the car in front of her whose occupants had just chucked it on to the road, she was rightly widely praised for her actions.
I wonder whether we could make it possible for fly-tipped waste to be taken to tidy tips for no charge. We need to make it easy for landowners, both public and private, to clear up fly-tipped waste—after all, it is not their fault it is there—and not disincentivise them from doing so. It might be helpful if the local authority certified that the waste had been fly-tipped.
I also wonder whether it is possible to increase the fines for littering. I understand that in Los Angeles the fine for dropping litter is $1,000 and that it is vigorously enforced by the police. People do not tend to drop litter in that city, and unsurprisingly it is much cleaner than many British cities as a result. Do the Government plan to increase fines? Does the Minister believe that more police officers should be involved in enforcing the penalties? I understand that, at present, the issuing of fixed penalty notices is mainly done by local authority officers and police community support officers. Does the Minister think that there is scope for all police officers to join the front line of the fight against the litter louts?
We need to take every opportunity to tell the public that littering is offensive and wrong, and will be punished. I am pleased, therefore, that the Highways Agency is trialling anti-littering signs on its electronic gantries across motorways in three areas. I would like this initiative rolled out across the whole UK.
In many European countries, plastic bags are simply not offered at supermarkets. Customers can either buy a permanent bag for a few euros or are given a brown paper bag. Unsurprisingly, those countries have many fewer plastic bags littering the countryside. Plastic bags do not biodegrade easily and consequently remain as litter for very long periods. Will the Minister update the House on the Government’s plans to vastly reduce the number of single-use plastic bags being used in the UK?
Some other countries also have deposit refund schemes. Do the Government believe that such schemes could be introduced in the UK? I understand that the CPRE has done some research in this area and believes that such schemes would make a difference and could be introduced at no cost to the Government. What assessment have they made, then, of how successful these schemes are in other countries?
All Members care for our country and want to make it a better place. We all have a role, therefore, in trying to make Britain a country in which there is less litter. The amount of litter throughout our country is symptomatic of how people view their country and their local community. If someone litters, it means they do not care about their immediate environment or the impact their actions have on others. Litter is about personal responsibility and whether we, as citizens, care about the country we live in. As we approach a moment of great pride in our country’s history, celebrating the diamond jubilee of Her Majesty the Queen, I hope that we can all—those in authority and individual citizens—play our part in making this country one that has far less litter and fly-tipping in it.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
I congratulate my hon. Friend the Member for South West Bedfordshire (Andrew Selous) on bringing this matter to the House and on continuing his long-running and cogent campaign. I share his phobia of litter and fly-tipping. Without wanting to sound sanctimonious, I will tell the House that during the election campaign, so concerned were my supporters about litter that we took a day off campaigning to pick up litter in the otherwise fairly tidy town of Newbury. The issue goes to the heart of what we feel about our communities, our sense of place and this country.
My hon. Friend referred to his constituent, Mrs Prosser. I am sure that we can all think of Mrs Prossers in our constituencies who, unthanked and unrewarded, do amazing work, because they have pride in, and mind about, their community. As a society, we have to find a better way of rewarding and thanking people such as Mrs Prosser for their wonderful work.
Stephen Phillips (Sleaford and North Hykeham) (Con)
The simple fact is that Mrs Prosser and others should not have to undertake such activities, but at least while they do have to I hope that my hon. Friend will join me in congratulating her and all those in my constituency who clear litter from the verges on the valuable work they do.
Richard Benyon
I entirely agree with my hon. and learned Friend and thank the volunteers in his constituency who do that, and I resent, in almost equal measure, the people with such little regard for our communities and countryside that they throw the litter in the first place, thereby requiring those volunteers to perform the selfless act that he describes.
Let me set out to the House the Government’s plans for good-quality local environments and the actions that we are taking to tackle littering and fly-tipping. We know from repeated public surveys that the appearance of local neighbourhoods matters greatly to people, ranking alongside or above concerns such as global climate change or rising fuel prices. Poor quality environments can destroy neighbourhood pride and create a climate of fear and neglect. These are therefore important issues, and it is right that we take a close interest in addressing them. Local authorities are on the front line of dealing with littering and fly-tipping. They have the duty to clean up public land and the powers to take enforcement action to fit local circumstances. Although most fly-tipping on public land is handled by local authorities, the Environment Agency also has a role in investigating large fly-tipping incidents, in particular those involving hazardous waste or organised crime. As my hon. Friend the Member for South West Bedfordshire said, on private land the responsibility for dealing with fly-tipping rests with the landowners—often at great cost to them and their businesses—although many local authorities offer advice, guidance and, in some cases, help.
Tessa Munt (Wells) (LD)
I wonder whether the Minister could address the problem of different local authorities having different responsibilities. In my area, Somerset county council has shut a number of local recycling centres, leaving the district councils as the level responsible for dealing with fly-tipping. That transfers the cost from the county council’s budget, but means that district councils have to deal with an increasing problem. Indeed, they are left having to charge, through council tax, which seems most unfair.
Richard Benyon
I understand that all local authorities, like the Government, face difficulties and have to set priorities. If we are to be a truly localist Government, we have to leave decisions about priorities to be taken locally. In areas with unitary councils there is less misunderstanding on the part of the public about who is responsible. When I was a district councillor, people were always blaming the county council for things that were my responsibility, and vice versa. I know that this is a difficulty in areas with two-tier local authorities, but I understand the point my hon. Friend makes.
The charity Keep Britain Tidy carries out a survey for DEFRA each year, and this year the 10th report was produced. It provides an opportunity to look across the changes in the last decade and highlights the fact that litter levels are not much better than when the survey was first carried out, in 2001, with 15% of areas deemed “unsatisfactory” for litter. Yet since that time, the costs to local authorities of sweeping the streets, including dealing with litter, has risen by hundreds of millions of pounds, as my hon. Friend the Member for South West Bedfordshire said, to little short of £900 million.
DEFRA and the Environment Agency host the collection data on fly-tipping, through the Flycapture reporting system, which helps to provide evidence of the nature and scale of fly-tipping and allows decisions to be made locally and nationally on the best interventions to tackle the problem. Fly-tipping continues to have too great a detrimental impact on the local environment. In 2010-11, there were 820,000 fly-tipping incidents in England. Although that is a reduction compared with the previous year, this is in part due to changes in reporting practices by some authorities. The true figure is likely to be considerably more, as it is recognised that many incidents, particularly those on private land, go unreported. We also know that a lot of fly-tipping involves domestic waste, which can ordinarily be collected by local authorities or taken, as has been said, to civic amenity sites.
So what can be done to make real inroads into the persistent levels of litter? The Government’s commitment in this regard is clearly set out in the coalition’s programme for government. We aim to reduce litter as part of our drive towards a zero-waste economy. Changing the attitude and behaviour of those who drop litter and casually fly-tip is essential, which is why the Government are committed to working with Keep Britain Tidy, businesses, local authorities and community groups on their “Love Where You Live” campaign. It appeals to all sectors of business and across all sectors of society, and support is coming from Wrigley, McDonald’s, Network Rail, Coca-Cola, Waitrose and many others. Businesses can contribute in many ways: by supporting the campaigning effort; by carrying their message to customers, staff and others; and, directly, through changing the design of their products, packaging and services to reduce the possibility of litter from the outset. The “Love Where You Live” campaign holds promise in being able to attract widespread support to capture the public’s imagination and inspire civic pride, especially in this year of the Queen’s diamond jubilee, and the London Olympic and Paralympic games.
Richard Benyon
I am very short of time and I must answer the questions put by my hon. Friend the Member for South West Bedfordshire, but I will certainly give way at the end if I have time.
I, like my hon. Friend the Member for South West Bedfordshire, welcome the Daily Mail’s “Spring Clean for the Queen” campaign to encourage clean-up events for the Queen’s diamond jubilee.
I know that littering from vehicles is a particular problem for local authorities. In March, the Secretary of State met businesses, trade associations and local authority representatives to look at what more can be done to tackle this. There was great enthusiasm for voluntary action and for innovative ideas coming forward from business, including carrying branding and anti-litter messages in vehicles, in outlets and in communications with customers and staff to raise awareness of the issue. I was interested in what my hon. Friend was saying about the Highways Agency, because there is much more we can do, working with it.
Changing attitudes and behaviour is key. Much can be done through voluntary approaches to tackle littering from vehicles, but the Government’s mind is not closed to the regulatory route if that will work. London boroughs will soon start using powers under private legislation to issue a civil penalty against the registered keeper for littering. We want to see how that works in practice—to see if it helps to support behaviour change efforts elsewhere. If it works well, we will consider applying the approach more widely across the country.
The CPRE proposal for implementing a bottle deposit scheme has been mentioned. As part of the review of waste policies in 2011, the Department undertook a full analysis of the costs and benefits of implementing such a deposit system, based on the CPRE’s report “Have we got the bottle?” Although such a scheme may increase recycling rates for the materials covered and reduce litter, the estimated costs of running such a scheme are very high; they are much higher than alternative measures that could achieve the same aims. Taking that into account, it was decided not to take forward this option for the time being and instead to concentrate on other ways to increase recycling and address litter.
My hon. Friend mentioned bags. Concern about single-use carrier bags has also been raised frequently with my colleague Lord Taylor of Holbeach, who leads on this issue. We share the concern about the effect that those bags have on the environment, and about the increase in their distribution. We are looking carefully at all options to make sure that we further reduce their usage, and we are paying close attention to developments in Wales, where a 5p per bag minimum charge was introduced in October last year. The Welsh Government are currently evaluating their policy, and we will consider our position on carrier bags further following the evaluation of that scheme in July.
Let me deal with other issues that my hon. Friend raised, particularly the action we are taking against fly-tipping. The Government’s review of waste policy in England, published in June 2011, set out a range of measures to tackle fly-tipping. The approach advocated in the review is to make it easier for businesses and others to do the right thing with their waste, while also ensuring that the sanctions available act as a real deterrent to those responsible for waste crime.
A major area of concern is the cost incurred by public landowners for clearing up fly-tipping on their land where local authorities are not under any obligation to act. We do not have an accurate figure for fly-tipping on private land or for clearance costs, as landowners are not required to report them to Government. As my hon. Friend the Member for South West Bedfordshire says, however, the Country Land and Business Association estimates that it might cost their members, or landowners across the country, in the region of £50 million to £100 million a year to dispose of fly-tipped waste.
This issue was highlighted in recommendations made by the Farming Regulation Task Force in 2011. We are working towards the development of best practice on the prevention, reporting, investigation and clear-up of fly-tipping through the National Fly-tipping Prevention Group and the taskforce implementation group. The aim is to allow local solutions that will free landowners of much of the “hassle” associated with clearing fly-tipped waste from their land. We are also looking at developing a partnership approach between landowners and local authorities that will encourage clearance of fly-tipped waste and the adoption of measures to improve local environmental quality. We will be presenting our approach at a ministerial summit to be held with key stakeholder groups later this summer.
As for sanctions for fly-tipping, these include stronger powers for the Environment Agency and local authorities to seize vehicles further to investigate suspected involvement in fly-tipping, as well as revoking the registration of waste carriers who repeatedly flout the law. While the penalties for fly-tipping are sufficient—up to a £50,000 fine on summary conviction—we want to ensure that the levels of fines and sentences handed down by the courts act as a deterrent. We have provided evidence to the Sentencing Council, which is considering producing a separate sentencing guideline for magistrates on fly-tipping. I am now happy to give way to my hon. Friend the Member for Tamworth (Christopher Pincher), if he still wishes to intervene.
Christopher Pincher
If the offer is still on the table, I will; I am grateful to the Minister for sweeping me up in his remarks. He rightly says that public attitudes need to be changed. Does he agree that the flexible attitude of some councils to supporting volunteers is to be commended? In my Tamworth constituency, Streetscene, the street cleaners, offer volunteers bags, litter pickers and gloves, and come back at the end of the litter-picking exercise to take the bags away. Is not that sort of positive flexibility to be commended?
Richard Benyon
It certainly is. I commend those sorts of schemes, which I have seen happening elsewhere. There is also good partnership working to be had between parish councils, town councils and higher tiers of local authorities where equipment can be shared and know-how and guidance can be supplied to volunteer groups and communities that wish to carry out their own spring cleans. This is clearly to be welcomed.
What about people who put their waste out for collection incorrectly? This is a matter of concern. Hard-working people, who already have enough worries, should not face the threat of being punished for innocent mistakes such as putting their bins out an hour or two early. It can be a problem when that is wrongly labelled as somehow similar to fly-tipping. That is why we want to change the law so that only the small minority whose behaviour causes problems for their neighbours and harms the local environment as my hon. Friend described will be punished; we want to make the fines more proportionate. As a first step, we are changing the law to reduce the level of fines under the current fixed penalty notice regime. These changes are due to come into force on 30 May. We intend to make longer-term changes, including removing the current criminal sanctions, as parliamentary time allows.
My hon. Friend raised the issue of sanctions. He is right that littering is an offence under the Environmental Protection Act 1990. The litterer can be prosecuted in magistrates courts and can on conviction face a fine of up to £2,500, as well as getting a criminal record. As an alternative to prosecution, local authority enforcement officers can issue a fixed penalty notice of between £50 and £80; it can be set locally, and is soon to rise. So there are sanctions, and they do hurt the perpetrators of this crime—for it is a crime.
Underlying all that, however, is the need for us as a Government, and, perhaps, us as a society, to view the problem as a culture of littering which has been allowed to develop and which we see regularly in some corners of our constituencies. It requires education in schools, it requires education of the adult population, and it requires a true partnership between those who love and respect their communities—and who constitute the vast majority—and the inconsiderate minority who are apparently happy to see their communities trashed. I am a great believer in the “broken windows” theory of policing, and dealing with littering is at the heart of that. I hope that what I have said tonight provides clear evidence of the Government’s commitment to tackling the blight caused by litter, fly-tipping and waste.
Andrew Selous
I should be grateful if the Minister would return to whether local authorities throughout the United Kingdom can now follow the example of London authorities. Has the Localism Act 2011 given all our councils the power to make byelaws similar to those being made in London to deal with the problem of litter being thrown from vehicles?
Richard Benyon
Yes. Under the neighbourhood planning scheme and the Localism Act, authorities elsewhere in the country will be able to do what is being done in London, and I expect that to prove very welcome.
I think that this is an ideal issue for Members to discuss. My hon. Friend the Member for South West Bedfordshire and others who have remained in the Chamber to take part in the debate have demonstrated that it is possible for us to show real leadership and, together, to remedy a problem that has become much too prevalent throughout the country.
Question put and agreed to.
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Child Benefit
(11 years, 11 months ago)
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Mr Gary Streeter (in the Chair)
There is obviously a lot of interest in this important debate. I have the power to impose a time limit, but I will not do so from the outset—let us see how we get on. However, a little self-restraint by colleagues would be most appreciated.
Roberta Blackman-Woods (City of Durham) (Lab)
It is a pleasure to serve under your chairmanship, Mr Streeter. I thank Gingerbread, the Child Poverty Action Group, the Institute of Chartered Accountants in England and Wales and the House of Commons Library for producing excellent briefings for today’s debate.
Eleanor Rathbone, the great advocate for family allowances, which we now know as child benefit, entered politics in 1909. It is extraordinary that, more than a century later, we have once again had to secure a debate in Parliament to champion the basic principles of child benefit. There have been threats to child benefit before, but since 1945 when family allowances legislation was introduced—a watered-down version of the child support that Eleanor Rathbone and others had campaigned for—only the coalition Government have introduced legislation for the demise of the principle of universality that underpins child benefit.
Not everyone on the Government side is happy with the proposed changes, as demonstrated by the lack, bar one or two, of any Back Benchers on the Government side who wish to take part in this debate. In an earlier debate, the hon. Member for Christchurch (Mr Chope) pointed out that the Government’s proposals ask those on higher incomes with families to contribute more, while those on higher incomes without children are not asked to contribute more. I do not see how that can be fair. I do not usually quote from the hon. Gentleman, especially in agreement, but he has hit the nail on the head.
I would like to concentrate on two issues: the destruction by the Government of the universal principle, and the unfairness and unworkability of the proposed changes. The principle long established and supported on a cross-party basis is that society as a whole should contribute towards the upbringing of children, because we all share in the benefits of a properly supported future generation. Arguing for family allowances, Eleanor Rathbone captured that exactly:
“Children are not simply a private luxury. They are an asset to the community”.
The logic of accepting that view is that in a properly functioning society transfers are made to families with children—not away from them to pay for tax cuts to millionaires.
Her Majesty’s Revenue and Customs recently put out a press statement on the proposed changes, which told us that the Government’s plans for changing child benefit are legal. I have been in the House for a number of years and I am not familiar with Government Departments telling us that policy changes are legal. I can only imagine that it must reflect a measure of concern about the Government’s incompetence that Departments have taken to doing so. My concern, however, is not about the legality of the proposed changes, but that they are wrong and should not happen.
The CPAG has summarised the benefits of child allowances. They achieve horizontal distribution between families, from those without children to those with children, life-cycle redistribution—most people have children at some point and we want to help whenever families are most pressed—and intergenerational redistribution, and they place a value on all children. For those reasons and many others, the benefit should be kept in its universal form. The changes are grossly unfair and probably unworkable.
The ICAEW has branded the legislation seriously flawed in principle and in practice. It points to many problems and I will highlight a few. HMRC will be using the tax system to claw back from one individual a benefit paid to the other, which could be extremely difficult as families in similar situations will be treated differently. Despite the introduction of the taper, the changes could still lead to a huge disincentive for individuals to earn more. The worst aspect of the proposed changes is that a family with a single earner who has an income of more than £60,000 is significantly worse off through the withdrawal of the benefit, while two-earner couples with incomes of up to £50,000 each will not lose the benefit.
Barbara Keeley (Worsley and Eccles South) (Lab)
My hon. Friend is making a great start to the debate. When meeting people in her constituency during the local elections, was my hon. Friend struck by how hard that unfair and unworkable aspect of the change is hitting them? One voter I met, who voted Conservative at the last election, said that he will never vote Conservative again because of the unfair nature of the changes. I spent a long time talking to him and he just could not believe that they were going to be introduced.
Roberta Blackman-Woods
My hon. Friend has made an excellent intervention. The unfairness of the changes goes to the heart of the debate. I suspect that as more and more people wake up to what will happen to their child benefit next January, we will see an even greater public outcry.
The changes disadvantage single parents, and partnerships where one person has decided to stay at home. With changed family circumstances, it may be very difficult to claw back payments or decide who should pay them. Taxpayers could be penalised for failing to submit information that they have no access to, particularly if the relationship breaks down. The extra administration involved could place huge burdens on HMRC at a time of budget restraint, and particularly at a time of cuts in staffing levels. We are therefore left with a number of questions.
Kate Green (Stretford and Urmston) (Lab)
Does my hon. Friend agree that one problem is that it will be very difficult for HMRC and families to manage this process, given that family circumstances may change in the course of a year? What a person may believe at the beginning of the year is their child benefit entitlement or their tax liability could turn out to be different, leading to problems such as lump sums having to be paid back and the amount of time required by HMRC for administration.
Roberta Blackman-Woods
My hon. Friend makes an excellent point. The workability of the proposals will have to be reconsidered. We seem to be building into the system a number of problems for families. The Government could have learned from previous practice and not gone down this road.
We are left with a number of questions about the workability of the changes and the need for them, as well as questions about fairness. As late as 2009, the Chancellor was promising not to scrap child benefit. No doubt we will hear today that it has not been scrapped, but changed massively. More significantly, it has already been cut massively because of the lack of uprating with inflation. Therefore, child benefit and families with children have already been targeted for cuts, even without the cuts that have been made to tax credits.
Sheila Gilmore (Edinburgh East) (Lab)
Will my hon. Friend reflect on the fact that, in the run-up to the Budget, there was debate about child benefit and the coming changes to working tax credit, which affect some of the lowest-paid working couples in our society? The Government found enough time and energy to make some amendments on child benefit, but none to the proposals on tax credit.
Roberta Blackman-Woods
My hon. Friend makes an excellent point. She is right. The overriding question is, why have the Government chosen to target cuts in respect of families, particularly those with children? None of us have received a satisfactory answer; perhaps the Minister will provide us with one.
The second question is, why are women being targeted again by this Government? It is not only families with children that are being targeted, but women—mostly women who are single parents—and it is more likely to be women who are put under pressure not to claim by their partners, so that their partner’s tax does not change. Whether or not that happens in reality, the Government should not even countenance the possibility. Women will suffer in terms of pension credits if they do not claim. This is a real mess and is just one more aspect of the omnishambles Budget that needs to be changed.
It took more than 70 years from Eleanor Rathbone’s entry into politics to get universal child benefit paid to the mother for all children. I hope that it does not take another 70 years for these appalling changes to child benefit to be reversed.
Mr Christopher Chope (Christchurch) (Con)
I congratulate the hon. Member for City of Durham (Roberta Blackman-Woods) on securing this debate, which follows up debates during the Budget, during Second Reading of the Finance Bill and on clause 8 of the Finance Bill, and a similar debate before the Budget in this Chamber, which I had the privilege of introducing.
As the hon. Lady said, we have never had a satisfactory answer to why, if it is necessary to find a greater contribution towards reducing the deficit from those on higher earnings, we are targeting people on higher earnings with children, rather than those who do not have children. If my hon. Friend the Minister wishes to intervene at this stage and give the definitive reply, I shall happily give way.
The hon. Lady mentioned loss of support among Conservatives. I am worried and do not wish the Conservatives to lose support, which is why I have put a lot of energy into trying to ensure that this legislation is improved. If the Opposition had just asked to look at clause 8 during the Finance Bill debate on the Floor of the House—we considered clause 8 and schedule 1—we could have discussed the principles and referred to schedule 1, and those privileged to serve on the Finance Bill Committee would then have been able to consider the schedule in more detail. It is now apparent, according to the report by the Institute of Chartered Accountants in England and Wales, that an enormous amount of detail needs line-by-line scrutiny. Sadly, as a consequence of the earlier debate, such scrutiny cannot now be delivered, given the structure of the Committee stage of the Finance Bill, because schedule 1 has already been considered. That is a problem. I shall not ascribe blame or responsibility for that, but it means that the Government do not have the benefit of detailed scrutiny of the workability of their proposals, or, as in this case, the lack of workability.
We have a real problem. I hope that the Opposition spokesman, the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), will say what she thinks we can do to bring this issue back on Report in a form that finds favour not just with me and my hon. Friend the Member for Rochester and Strood (Mark Reckless)—two Conservative Back-Benchers. Incidentally, we happen to be men and it is all ladies on the Opposition Benches this morning. Let us see what we can bring about.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
I hear what the hon. Gentleman says about clause 8 and schedule 1. We proposed to delete the schedule, as well as the clause, because it was a shambles. However, I hear what the hon. Gentleman says about Report. I am more than happy to consider what we can do together, because, of course, we want the Bill to come out of Committee better than it went in.
Mr Chope
I am grateful to the hon. Lady. On such issues, there is a slow fuse as far as members of the general public are concerned. They do not realise what the implications are until quite a long period has elapsed. We must look to people from outside the House—third parties, perhaps—to try to alert our constituents more to the full implications.
Barbara Keeley
Has the hon. Gentleman seen the Asda Mumdex index—a panel of 4,000 mums—sent to Members of Parliament yesterday? The optimism figure on the future of their family finances dropped from zero to minus eight in February, and the latest research found that it has dropped to minus 16. The issue may be on a slow fuse, but people out there—certainly, women in families—are starting to understand that the future looks rather bleak.
Mr Chope
I have not seen those figures, but they obviously speak for themselves. Despite that, I am not receiving as many angry letters from constituents as when, for example, I was the junior Minister dealing with the community charge. Let us recall that in 1987 the Government were elected with a specific manifesto commitment to introduce the community charge on the back of its success in Scotland. The proposal on child benefit that we are discussing today was not even in our manifesto. Indeed, it was expressly ruled out by comments made by both the Prime Minister and the Chancellor of the Exchequer in their shadow positions before the general election.
Sheila Gilmore
As an aside, I am not so sure that, in 1987, the community charge was such a great success in Scotland. One thing that caused the eventual collapse of the community charge was not just its unfairness, but the sheer impracticality of collection, which had not properly been thought through. The operational issue was as important as anything else. It may be the same in this case.
Mr Chope
The hon. Lady makes a good point. There are two issues running in parallel. One difficulty for those of us proposing the community charge was to explain how it was fair that a duke and a dustman should pay the same amount. That difficulty ran through the public debate. At the same time, we went into great detail about exemptions for particular groups of people and an administratively burdensome system of rebates, which created a lot of fresh cliff edges, with people feeling that they had been treated unfairly. I fear that that is exactly what is happening with this ill-conceived proposal.
Mark Reckless (Rochester and Strood) (Con)
The difference between the community charge and the abolition of the 10p tax rate by the previous Government and the present issue is that, at some point, taxpayers received a bill for a sum, making it clear that they had to pay it. The alternative, if this is not to become a slow-burn issue, is that come January, taxpayers will be unaware that they have to give up their child benefit or unaware of what their partner earns, so they will simply not pay or will be followed up by the Revenue and there will be mass non-compliance involving people who are unaware, or at least say that they are.
Mr Chope
My hon. Friend makes a good point. I am grateful to him for reminding us about the 10p tax rate, because that introduces a bit of political balance into this debate. It is not just the coalition Government, or the previous Conservative Government, who can get on the wrong side of such issues, both in respect of the principle and of the detail. We need an answer to the question of why the single-parent earner on £60,000 loses the equivalent of all her child benefit, while next door the two-earner couple on up to £100,000, with their incomes spread equally between the earners, keep their child benefit. Will there be an answer to that question? Perhaps the Minister would like to intervene. Unless we get answers to those fundamental questions, it will be difficult for us to sell the concept to our constituents.
Fiona O'Donnell (East Lothian) (Lab)
The hon. Gentleman is making an excellent contribution. Does he agree that the unfairness of the measure goes beyond income? It does not take account of the number of children in any household.
Mr Chope
Of course it does not, because the whole thing is arbitrary. It is all based on the false premise that people on £20,000 or £30,000 a year are cross-subsidising those on higher incomes with children. I have had a letter published in The Daily Telegraph and the Minister has replied to my questions, but it is apparent from my hon. Friend’s answers that there is no cross-subsidy from a person on £20,000 a year to someone on £60,000 a year with however many children—that is a fallacy. I suspect that the policy is based on someone going to a focus group and asking, “Is it fair that someone on £20,000 should be subsidising a family on £60,000 with a whole lot of children?” Of course it would not be fair if it was true, but it is not true—it is a false premise and, on the basis of that, we have a policy that I fear will lose the Conservative party a large number of votes.
Let us not forget, however, that the origins of the policy lie not in the Conservative party but with the Liberal Democrats. Before the general election they were campaigning to interfere in that policy area. With the knowledge that the measure was originally proposed and supported by the Liberal Democrats, this is another example of an area in which the Prime Minister can feel free to make significant change if he wishes to respond to agitation on his Back Benches for a bigger Conservative element in Government policy. Officials have previously suggested that something should be done about taking child benefit away from those on higher earnings but my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), who was a Treasury Minister, said that, after looking at it from all angles, we reached the conclusion that it could not be done fairly. So what are the present Government going to do? They are going to do it, and they are going to do it unfairly.
What worries me is that the measure will be administratively burdensome as well, costing more than £100 million in extra administration. We will be taking on tens of thousands of additional civil servants when the Government are saying that we want to simplify tax policy, reduce the size of the state bureaucracy and so on. There is no consistency, and I fear for my party.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
It is a pleasure to serve under your chairmanship this morning, Mr Streeter. I congratulate my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) on securing this important debate and on her excellent speech. If the Minister was not already worried, he should be by now because, as anyone familiar with my hon. Friend knows, she is a tireless campaigner for her constituents and against injustice generally. I am sure that this debate will not be the last we hear from her on this issue.
I am also pleased to follow the hon. Member for Christchurch (Mr Chope), who gave an excellent speech. It is great to see him on the right side, even if he was not on for the poll tax. That shows that with age comes wisdom; I am pleased that the wisdom of his longevity has brought him to the right side on this issue.
We are discussing a complete mess, created by the omnishambles of a Budget, that has been allowed by Ministers to carry on for way too long. If we were being generous, we might suggest that the idea had been sitting on Whitehall shelves for some years, repeatedly pitched by numerous Sir Humphreys and batted away by successive Ministers until a particularly out-of-touch set of Ministers was easily convinced. Once the idea was out there, those same Ministers were too afraid to perform yet another 180° U-turn, so they turned only 150° instead. That would be the scenario if we were being kind.
If we were being less generous, we might wonder whether those out-of-touch Ministers were driving the idea through themselves, despite officials briefing them fully on how ludicrously complex it would be to implement and on the unfairness it would create. Perhaps the Minister will tell us which of those scenarios is the more accurate.
Either way, the high-income child benefit charge—that is what it is called—is a ridiculously complicated idea that fails the basic test of fairness. It is ridiculously complicated because the proposal is to introduce a tax in January 2013 that will not be collected until the following financial year, meaning an affected family with three children will be landed with a bill of more than £600 in additional tax during that following tax year.
If the Government are so determined to drive the charge through, why can they not at least marry up its introduction with the start of collection? The situation is ridiculously complicated; the charge will create hundreds of thousands of new self-assessed taxpayers while HMRC centres around the country, including some in my area, are being thinned out or closed entirely. Can the Minister tell us how many more staff HMRC will need to cope effectively with the increased flurry of returns over the Christmas and new year period as a result of the change? The charge is ridiculously complicated because it seeks to claw back tax from individuals for a benefit paid to other individuals who are separate in the eyes of the taxman, leaving the system open to both fraud and genuine errors.
Worse than all those complications is the fact that the measure fails the test of fairness because, for hundreds of thousands of families, it will take away a benefit that is supposed to be universal, as we heard from my hon. Friend the Member for City of Durham; when the benefit was brought in by Eleanor Rathbone, the principle was that it should be universal.
The evidence shows overwhelmingly that the benefit is used to meet the costs of looking after children, such as ensuring that they are well fed and have the clothes and uniforms that they need for school and the bus fare that they need to get there. Such things apply to all families. The charge fails the test of fairness because it will penalise children in single-earner families, as we heard from the hon. Member for Christchurch, while many in double-earner families who are much better off will continue to receive the benefit. It fails the test of fairness because it is yet another policy from this Tory-led Government, whose leader claimed he wanted to create the most family-friendly Government in history, that will directly hurt children and families. Among many other changes, the policy comes on top of huge cuts to Sure Start and early-years provision, the scrapping of extended free school meal eligibility and child trust funds, and a hike in VAT.
In addition, the proposed measure will take even more money out of our local economies when demand for goods and services is at rock bottom. The Treasury aims to claw back £1.5 billion from 1.2 million households, or an average of more than £1,200 from every family affected, just in the first year, with more families becoming liable as incomes creep up and the threshold remains static. That is £1.5 billion a year that will not be being spent in local shops and businesses on our struggling high streets.
Barbara Keeley
My hon. Friend’s figures are useful, but apparently the vast bulk of child benefit is spent on clothes, books and food, which shows the areas where the measure will have an effect.
Mrs Hodgson
As I highlighted myself, those are the findings. That money is spent on our high street—on books, clothes and food; it is not put into trust funds or saved up. The majority of people, whether in two-earner or single-earner families, will be hurt by the proposal because they use the money for daily necessities and not for luxuries. That is £1.5 billion a year that will not be put to work improving the quality of life of any of the children in the affected families or preserving and creating jobs in my constituency or the constituencies of any other hon. Members.
Children did not cause the financial and economic situation, yet the Government seem intent on making them pay for it. At the same time, high fliers in the City, who might well have played a part in that situation, are rubbing their hands together in glee at the cuts to the top rate of tax. Those are not the actions of a Government who have their policies straight, or who understand the lives of hard-working families; the more the public see of the coalition Government’s choices, the more they realise how out of touch they are.
The Government will regret this ridiculous decision, just as our country will regret voting this incompetent shower of a Government into power. Thankfully, there will be a chance to undo that decision at the next election, and policies such as the child benefit charge will ensure that this incompetent Government serve no more than one term.
Helen Goodman (Bishop Auckland) (Lab)
It is a pleasure to see you in the Chair, Mr Streeter. I congratulate my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) on securing this extremely important debate. The more I listen to speeches from both sides of the Chamber, the more problems I see. I want to focus on the independent taxation of women.
Clause 8 of the Finance Bill introduces a tax charge on a child benefit recipient if they or their partner’s income is above £50,000. That is wholly objectionable from the perspective of equality for women. One person is being given a tax bill because another person has a high income. Nothing could be more unjust than that. The Government have said that they want to be family-friendly, but there is nothing family-friendly about this provision. Furthermore, the information-sharing requirements to make the system work will cut across the privacy that is intrinsic to independent taxation for men and women.
Treasury Ministers seem to have taken no account of the fact that people’s family circumstances may change during a year. Incomes may go up or down and, more seriously from the point of view of the independent taxation of men and women, partnerships may come together or, unfortunately, collapse. That will provide something else to argue about, and will be the cause of yet more disputes between partnerships particularly, as my hon. Friends have said, when the tax bill arrives months after the income has been secured by the other person in the partnership.
Kate Green
Does my hon. Friend agree that it is surprising that the “most family-friendly Government ever” might want to disincentivise couples from forming households and relationships? If someone is considering moving in with a new partner and realises that his income is a bit higher so the child benefit will be taxed away, he might be discouraged from forming that new relationship.
Helen Goodman
My hon. Friend is absolutely right. The permutations and problems are too numerous to mention.
We raised our questions with the Minister during the debate in Committee on clause 8 on 19 April. I asked him specifically whether independent taxation for men and women could be maintained. He responded:
“Independent taxation will still apply, each partner will still have their own personal allowance and tax rate bands, and the amount of child benefit, even if it is received by the taxpayer’s partner, will not increase the amount of income liable to tax.”
That is absurd, because it is not what independent taxation means. He continued:
“Where there are two high earners in a household and they do not want to tell each other their incomes, there will be a mechanism whereby they can find out whether they have a higher or lower income but without the full details.”––[Official Report, Finance Public Bill Committee, 19 April 2012; c. 617.]
He then said, “my time is up”; he could not explain in any more detail, and we were dismissed. Since then, tax experts at the Chartered Institute of Taxation and the Institute of Chartered Accountants have examined the matter and identified exactly the same problem. The Minister should take account of what hon. Members say. Now that tax experts are saying the same thing, I hope that he has asked his officials to re-examine the matter and can tell us today that he has changed his mind.
When I was first elected in 2005, I had the great pleasure of serving on the Finance Bill Committee with the Minister. He was always telling us what Mrs Gauke thought about things; she is an accountant.
Helen Goodman
I want to hear from him today what Mrs Gauke thinks about the proposal, because I do not think that she can be happy with it.
This matter is serious. What the Minister said on 19 April shows that either he did not understand it or that he was misleading the House. In either case, I would like him to withdraw what he said then and apologise for it.
Kate Green (Stretford and Urmston) (Lab)
I am pleased to participate in this debate, and I congratulate all hon. Members who have spoken, particularly my hon. Friend the Member for City of Durham (Roberta Blackman-Woods) on securing it, and the hon. Member for Christchurch (Mr Chope), who has been a vocal and powerful advocate for families in the context of the Government’s proposals. I am pleased to see him here today.
I am sad—I suspect that the hon. Gentleman shares that sadness—to see a Conservative Government introducing this proposal. There have been threats to child benefit in past decades, but there has always been an alliance with strong Conservative voices that has stood up to protect against those threats and attacks. Conservative women have been particularly strong in their understanding of why the benefit matters so much to families—[Interruption.] As my hon. Friend the Member for Bishop Auckland (Helen Goodman) pointed out, it is disappointing to see so few of them in the Chamber.
Mr Chope
I am grateful for the hon. Lady’s generous remarks. It was not only Conservative women who campaigned. She will recall that John Major made the matter a cause célèbre. He said that it was wrong to take away child benefit, and that it should remain as a universal benefit.
Kate Green
The hon. Gentleman is right. I hope to come on to the situation when John Major was Prime Minister, and some of the arguments then.
For the benefit of many hon. Members who do not seem to appreciate the underlying principles of universal child benefit, I want to put them on the record this morning. I am sorry that they are not in the Chamber to have the benefit of my exposition, but they can read it in the Official Report. As hon. Members have said, this benefit, which is important for families, is a mechanism that is redistributive horizontally and vertically, as my hon. Friend the Member for City of Durham said. As other hon. Members have said, in practice that means that families with children receive extra help to meet the cost of raising their children because, as a society, we all share the benefit of those children making a future contribution to our communal well-being. It is right to provide that support universally, and to recognise that we all share in the social obligation to maintain those families.
Over its life, the benefit is redistributive, and it enables all families to manage the additional costs that they face when raising young children, and to plan their finances across their whole lifetime. Importantly, in practice—this has been alluded to—it is a benefit that has been paid mostly to mothers. The vast majority of child benefit is paid to mothers. Even in the richest families, it is the only source of independent income for many women, and it is essential that they have access to it to provide for and to meet the needs of their children.
As hon. Members have said, we know that that money is spent for the benefit of children, either directly on toys, books, activities, clothes, shoes and so on, or indirectly by paying down family debt, ensuring that basic household bills are covered. Things that are essential for children’s well-being are prioritised in all families, and one reason is the label it bears. There is good research evidence showing that because it is called “child benefit”, it is understood that it must be spent for the benefit of children, and that is what happens.
Fiona O'Donnell
Does my hon. Friend agree that we are talking not only about the income received, mostly by women, but also about national insurance credits that build up to a pension? People may not be in the same relationship when they retire, but the risk is that women will make a credit-only claim and that they will lose out in the long term.
Kate Green
My hon. Friend makes an important point. If women come under pressure to forgo child benefit, rather than their partner seeing an increase in their tax bill—I believe that that will happen in some families—they will lose the benefit of their national insurance credits. That will have a lifetime impact on those women and their pension entitlement. We cannot wish to pursue a policy that risks making women poorer throughout their life.
This benefit is directed towards children and has been designed to follow a child and stay with them even if their family circumstances change. That is particularly important if a relationship breaks down, because a woman may have no other source of income at that point. It may be an acrimonious dispute in which she is struggling to extract money from her former partner, and child benefit is often the only source of income on which she can rely to get through that family breakdown and make the transition to single parenthood. When I was director of the National Council for One Parent Families, even women in relationships that were financially well off described to me how important child benefit had been at that moment of family change. If women start to forgo that benefit under pressure from a partner who later decides to leave the household altogether, I worry that we will disadvantage those women and their children, which is something that we will regret.
I am surprised by the Government’s approach because it introduces a policy that will act as a disincentive to work. Universal child benefit does not disadvantage those who move into paid employment, because the benefit remains. The incentive to increase income through more working hours or going for a promotion will be removed for some families, and I cannot understand why Ministers, who are often concerned to incentivise people to maximise their income from employment, wish to go down such a route. The Government have the right objective, but this policy seems particularly perverse.
As my hon. Friends and the hon. Member for Christchurch have highlighted, the complexity that is being introduced into the system is completely at odds with the Government’s stated intention to simplify the tax system. Simplicity is not just an advantage in itself, but it means that payment is more reliable, and more likely to be accurate and more predictable. There is also much less stigma attached to the receipt of a simple universal flat-rate payment for all families.
One criticism is often levelled against the payment of child benefit to richer people, and it would probably have been made this morning had more hon. Members attended the debate—today there are mostly proponents of child benefit in the Chamber, which is perhaps why the point has not been raised. I want to put on record my response to those who ask why we are giving child benefit to people on higher incomes and asking those on lower incomes to help pay for that. The fact is that we do not—and should not—make the same argument when it comes to the national health service or our children’s education, and we do not make it for the tax system or say that higher earners should not receive the benefit of the recent increase in the tax threshold. As I am sure the hon. Member for Christchurch will remember, the higher rate of child benefit for the first child was intended to replace what had previously been the married couple’s tax allowance. It seems particularly perverse that we are now effectively seeking to tax a tax allowance, instead of understanding that in every other part of the tax system, such allowances stretch across the income spectrum. Now, we have decided to treat child benefit differently.
Roberta Blackman-Woods
My hon. Friend is making an excellent speech and she has touched on the heart of the problem caused by the proposed changes. The Government are destroying the principle of universality that has underpinned this benefit for years. We should think of all children as being important to our community, and we all share in the benefits that children bring to society. To denigrate the principle of universality says something about the values of this Government. What will be next?
Kate Green
I am grateful to my hon. Friend. Her point about universality is fundamentally about the social glue, integration and the sense of communal interest in our children that universal benefits bring.
As others have said, these proposals are unjustifiable as a matter of principle, and unworkable in practice. Hon. Members have alluded to the difficulties of coping, both for families and for the Revenue, when family circumstances change. It may be complicated to pick out who has been a member of a household over the course of a year, or to state at what point they became one, so it may be difficult to assess at what point that should result in a tax liability.
Barbara Keeley
Does my hon. Friend intend to refer to the breach of confidentiality in an individual’s tax affairs? That is a serious issue with couples. Years ago, my first piece of casework as a councillor involved a constituent who was being chased by bailiffs for his wife’s community charge. At the time, there were rules on joint liability for the community charge, and that caused huge problems between couples. It seems to me that we are back in the same territory.
Kate Green
I have no doubt that if one member of a household is liable for another household member’s income—which is what will happen—that will distort the balance of power, and in some cases compromise the safety of women in that relationship and lead to something that feels fundamentally irrational and unjust. Why is one member of the household being taxed for a benefit that is paid to another member of the household for the benefit of the children? If Ministers want a fairer and more justifiable taxation system, I suggest that they look at having a more progressive system overall. If they want to take more from the rich and have a more progressive system, they should not have begun by reducing the top rate of income tax, which seems to be the Chancellor’s preferred route.
I will conclude with a couple of questions for the Minister. Has he made an assessment of whether couples are likely to continue receiving child benefit and sweep it up at the end of the year in their tax return, or whether they are they more likely to forgo child benefit at the point of payment? In the latter case, what assessment has he made of the impact that that will have on children’s well-being and on family stability? May we see that impact assessment before any further steps are taken to introduce the proposed policy?
Will this measure be reversible? The Opposition are committed to universal child benefit, and I hope that the Government will consider this change as temporary. Will the changes to IT and the taxation system be reversible? What is the IT plan for this development? Could this policy be unwound, or are we stepping towards a major change in attitude to universal benefits from which it will be impossible to retreat? What advice has the Minister received—this is the point touched on by my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley)—on individual confidentiality in relation to tax affairs? How will one member of the household be advised about tax liability on a confidential basis without understanding the income of another member of the household, and can that be reconciled with the principle of tax confidentiality? Ministers seem confident that it can be reconciled, but Opposition Members have their doubts.
Sheila Gilmore (Edinburgh East) (Lab)
I do not intend to say very much in this debate. The reason why I did not seek to catch your eye before, Mr Streeter, was that I thought that I might have to leave. I will have to leave before I have the benefit of the Minister’s response and I apologise for that, but I am serving on the Finance Bill Committee.
I want, however, to say a little about the difficulties that can arise in relation to family structures and so on. As someone who was a family lawyer, I know how relationships can not only break up but re-form, and that may happen over a relatively short period. That is a practical aspect of this issue that I am not sure has been taken fully into account. As family lawyers, we used to joke that we achieved a higher rate of reconciliation than marriage guidance counsellors. People’s lives are not linear. They do not necessarily go straightforwardly through this process: “Oh, I’ve fallen out with my partner. Now we’re separating and that’s it.” It is very common for people to encounter a circumstance that leads to a break-up and then to reconcile. It may be a very serious situation. Even in cases of domestic violence, people reconcile. As a solicitor, I might sometimes have wished that they had not; nevertheless, they do so.
A relationship structure can change quite a lot, even in a single financial year. That is an additional layer of complication. It should not be assumed that just because people are paying higher rates of tax that relationship breakdowns do not happen, because that is far from the case. That is yet another practical issue that must be addressed.
The position could have been very different. Perhaps all Governments wonder how they arrived at certain decisions. If we look back at this one, it seemed to arise from what looked like a clever wheeze. It was announced at a party conference, which is never a good time to announce policy, because it is the headline of the day that is very much wanted. I suspect that the thinking was, “Ah! We can really get the Labour party here. We are going to take a benefit away from higher rate taxpayers and the Labour party won’t dare to oppose that, so we will have got them on the run.”
We said right from the beginning, as well as dealing with all the issues about fairness and the reason why child benefit and its predecessor, family allowance, were introduced in the first place, that there was a practical issue. Many of the practical criticisms were voiced at that time. This all dates back to October 2010. A year later, those practicalities had apparently not been thought through very carefully. Some amendments have now been brought into being—at the last gasp—but those changes produce yet more anomalies. They produce a marginal rate of tax for some families that is far higher than presumably anyone would think was desirable for people who are in the middle ranges of income. Some families will face marginal tax rates of 50% to 60% because of how the changes take place and particularly the tapering. That has been introduced to try to make things a bit better, but arguably may make things a whole lot worse, because it introduces a whole new level of complexity.
Hon. Members have mentioned not just the community charge but the ill-fated and, in my view, ill-thought-out 10p tax rate abolition proposal. I have said this before and I know that many of my colleagues have. I was not in this place at the time, but as party members and activists, we have a view on these things and we thought, “Oh no, this is not good.”
Roberta Blackman-Woods
Is not the point about the 10p tax rate debacle—I think we would all accept that that is what it was—that when the outcome of that policy was made obvious, the Labour Government of the day reversed most of the adverse consequences of the policy? We see no indication from the current Government that they will do the same.
Sheila Gilmore
I agree. The point that I was making was that, sometimes, what looks like a clever idea to start with quickly unravels into something that is much more difficult. The slight amendments that were made to the current proposal before it was introduced into the Budget, far from addressing the issues, are making the whole thing even more complicated. Not much time seems to have been given to work these things through. Some campaigners are suggesting to the Government that it is not too late. If they are still minded to implement this proposal in some way, shape or form—I hope that they will not want to—they should at the very least not go ahead with it starting from January of next year, given that it has been so poorly thought out and the implications and problems have not yet been fully resolved. To put a hold on it and perhaps come back if they think that they have solved those problems—ideally, they would not come back with it at all—would be sensible at this stage. I urge the Minister to give that very serious consideration.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
It is a pleasure to speak under your chairmanship, Mr Streeter. It has also been a pleasure to listen to passionate and well-thought-out and well-delivered speeches from hon. Members who feel very strongly about this issue. I congratulate my hon. Friend the Member for City of Durham (Roberta Blackman-Woods), who brought it to Westminster Hall this morning to give us slightly more time to debate it than we had on the Floor of the House. I remember that the hon. Member for Christchurch (Mr Chope) pointed out then that we had 52 minutes to debate both the clause and the schedule. I heard what he said earlier today and I responded at that time, but I will say again that if we can find ways, across the Chamber, to ensure further scrutiny on Report of both the clause and the very important points in the schedule, that will be very helpful. I would certainly be more than willing to lend our support to see how we can do that.
Fiona O’Donnell
As well as welcoming the contributions this morning, would my hon. Friend agree that perhaps the Minister should be concerned that not a single hon. Member has turned up to support his proposals?
Cathy Jamieson
I thank my hon. Friend for that intervention. I was not going to point out that the Minister seems to be on his own this morning. I am sure that none the less he is very capable of dealing with the questions that have come up and will receive inspiration from various sources in order to do so. However, I will take the opportunity to repeat gently the advice that I tried to give the Minister during the discussion on the Floor of the House: “When you’re in a hole, it’s better to stop digging and find a ladder to get yourself out of that hole.” At that time, we were suggesting that we would be willing to work with the Government to see what could be done to mitigate the worst outcomes of this flawed policy, and that offer still stands.
Mr Chope
If I were the hon. Lady, I would take comfort from the fact that there are no Back Benchers here, because it shows that notwithstanding the very powerful Conservative Whips Office, they have not been able to dragoon anyone into coming here to support the Government’s policy today.
Cathy Jamieson
I thank the hon. Gentleman for that intervention. It is not for me to interpret what the Conservative Whips Office is able to do to deliver people to the debate and ensure that they turn up. None the less, we have heard some very powerful speeches, not least from the hon. Gentleman himself.
Roberta Blackman-Woods
Perhaps we should also note, especially as the idea for the policy appears to have come from Liberal Democrat members of the coalition, that there are no Liberal Democrats here at all to defend their ridiculous policy.
Cathy Jamieson
I thank my hon. Friend for putting that on the record. I am sure that note will duly be taken.
I want to use this opportunity to explain how we have got to the position we are in and what we need to do to resolve the problems. It is worth remembering that when the plans were announced, a single-income household earning just over £43,000 would have lost all the benefit, but a dual-income household on £84,000 would have kept all of it. The 2012 Budget increased the threshold for the withdrawal of child benefit to those earning £50,000 or more from 2013-14. That might have gone some way towards solving the problem for some families—the estimate was that about 750,000 might be in a better position—but it does not get away from the essential point that the principle of universality is fundamental to child benefit, as my hon. Friend the Member for City of Durham and other hon. Members have said.
We heard powerful speeches from my hon. Friend the Member for Stretford and Urmston (Kate Green) and others about why the principle is important and why we must do everything we possibly can to defend it. Child benefit is supposed to be about providing families, particularly mothers, with a dependable source of income for the benefit of the children and which a mother knows she will get irrespective of what goes on in the family. As we have heard, research from Child Poverty Action Group and others shows that the money is by and large spent on the day-to-day necessities for children.
I do not want to take us off-track, but the hon. Member for Christchurch mentioned the community charge. He was a junior Minister when it was introduced, as he explained, and I was a young mum. I spent many a wet Saturday campaigning against the introduction of the community charge in Scotland. If anything at that time politicised me and many other women, it was the unfairness of what the Government were doing. I do not say that to be critical of the hon. Gentleman—he has been very helpful this morning—but simply to say that when put in front of Ministers, sometimes issues look like a wonderful wheeze on the basis of the paperwork that the Government have produced, but it is when we look at the impact on people’s lives that such policies begin to fall apart. That is what is happening here.
I want to say a few words about the other issues raised in the debate. My hon. Friend the Member for City of Durham spoke not only about the principles of child benefit and the unworkability of the proposals, but about their legality. She made a powerful statement: these changes are wrong and they should not happen. That is absolutely right and it is the position that we are coming from this morning.
My hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) mentioned workability and the fact that the proposals were far too complex. She critically identified the real impact on real families. A family with three kids could find itself with a bill of £600 at the end of the year. That might not seem to be a big deal when someone is writing it in a policy proposal, but for many families that £600 bill will mean the difference between being able to buy necessary items for their kids and not being able to do so. Being asked to pay such a bill suddenly can throw a household budget out for months.
Fiona O’Donnell
I thank my hon. Friend for her generosity in giving way again. Does she agree that we need clarification from the Minister? If a parent who is entitled to child benefit throughout the year receives a bonus from an employer at the end of the tax year that takes them over the threshold, what will happen to the family?
Cathy Jamieson
My hon. Friend makes another useful point. We raised that issue with the Minister on the Floor of the House. Many people, because they get a bonus at work or because they are self-employed, will find at the end of the year that they have earned either more or less than they anticipated. Many self-employed people are not earning huge sums of money, so such issues are critical to them.
Roberta Blackman-Woods
My hon. Friend is being most generous. A back-dated pay increase is another circumstance that must be quite common.
Barbara Keeley
I have a further serious example. I have a constituent who from time to time works with his firm in Afghanistan. His firm pays him a bonus because of the difficulties of working in a theatre like that. There must be hundreds, if not thousands, of people who get that sort of payment.
Cathy Jamieson
My hon. Friends have given very practical, real-life examples of the kind of circumstances in which people may feel penalised for doing particular types of work or for taking on additional risks and responsibilities. A thing that we hoped that we could persuade the Government to do, if nothing else, was not to implement the changes straight away, and perhaps the Minister could come back on that point. If they are intent on doing this—the Opposition believe that they would be wrong to do so, and I hope that they will pull back—at the very least would they be prepared to pause, produce a report and look at the circumstances in which people would be adversely affected?
My hon. Friends the Members for Bishop Auckland (Helen Goodman) and for Stretford and Urmston raised the tax implications, and my hon. Friend the Member for East Lothian (Fiona O’Donnell) mentioned national insurance contributions. The main concern around those is that when organisations such as the Institute of Chartered Accountants and others that deal with tax issues day to day say that the principles are wrong, it is of serious concern. The Minister has to say whether taxing an individual in respect of money that was paid to someone else is not a fundamental change in how individual taxation is dealt with. I will give him the opportunity to intervene if he wishes, but perhaps he prefers to answer in his speech. Such organisations have looked at the proposals and raised serious concerns. It is a shift and could open opportunities in other ways for similar proposals to be brought in, which would be extremely concerning for the reasons that other hon. Members have set out.
Until I heard the Minister’s earlier comment, I was not aware that his wife was a lawyer. I am sure that she has some views about how, rather than defending the policy, the Government now seem to be relying on describing it as absolutely legal, as was identified earlier. None the less, there are questions about how they arrived at that position. When the regulations to justify the legality of this were introduced in Parliament, were they discussed in relation to child benefit or any other benefit issues? Was it ever anticipated that those regulations would be used in such a context? Could he deal with that issue in his response? If he cannot answer today, I have tabled a parliamentary question that I hope he will answer in due course.
I want to give the Minister time to respond, so I will speed up. I have made those points because the report from the Institute of Chartered Accountants identified the issue of HMRC using the tax system to claw back a benefit from one individual that was paid to another. The tax system is based on individuals and the benefit system is based on households, so that undermines the principle of taxation. I have not seen anything from the Minister that describes how a household will be interpreted in the tax regulations. Families in similar financial situations could be treated quite differently, which undermines the policy of fairness. Changed family circumstances could, as we have heard, make it difficult or impossible to calculate the clawback, or determine who should pay it; and, indeed, we have heard examples showing that if family circumstances change during the year someone will be presented with a tax bill at the end of it, leading to greater uncertainty about family budgets.
There has also been concern about collecting the charge through PAYE coding. The report by the Institute of Chartered Accountants in England and Wales states that it could lead to delays of up to three years, and undermine the efficiency of the whole system, because any coding adjustment is an estimate, and it would be necessary to re-estimate the code repeatedly. We are no longer just dealing with the principle of child benefit; we are dealing with a fundamental change to the taxation system. That should be scrutinised further. I hope that the Minister will be able to give some responses to the issues that have been raised this morning. Will he also address the point made by my hon. Friend the Member for East Lothian—she raised, it, indeed, on the Floor of the House—and others about women who might forgo the opportunity to claim child benefit, but would not receive credits for their national insurance contributions? That is a serious matter that has not been addressed.
Roberta Blackman-Woods
Is it not critical that women should understand at this stage that that is a possible outcome of the changes? People have already started writing to me on the issue, and the Government need to take action.
Cathy Jamieson
It is an important point. I want to put another couple of related questions to the Minister. In the budget for dealing with the consequences, a certain amount of money was put aside for marketing. I raised with the Minister on the Floor of the House the issues of what information is available, and how to assess who is likely to be caught by the circumstances. I would like to hear exactly how the Minister intends to communicate to the individuals involved—to get the information out, and get the advice to those likely to be affected. How will he ensure that people do not make damaging decisions at a point in their lives when it may be easier to do that, without looking at the longer-term consequences? We all know that there are situations—we heard examples in the debate—in which an individual in a household may feel under pressure to do something that is not particularly to their advantage.
I hope that the Minister will be able to deal with the points I have made. I will finish by returning to the point about section 18(2)(a) of the Commissioners for Revenue and Customs Act 2005, which the Government have cited, arguing that it makes the use of the tax system legal in the present context. The understanding of the Association of Chartered Certified Accountants is that that use of the provision is a last resort in the giving of one partner’s information to another. ACCA suggests that only where taxpayers who must talk to one another to make the system work correctly do not do so should the section be brought into play. How will the Government assess when to use it and breach confidentiality? There are serious issues about what information about one partner will be given to another. Will it be only “Your partner is in a higher tax band”, or will it be detailed information? I do not think we have had an answer to that.
I hope the Minister can give us the information this morning. It is worth noting that earlier in the week the Institute of Chartered Accountants warned that the new tax would be an “operational disaster”. Surely that should be of concern to the Minister, and should mean that we get answers this morning, and that the Government think again.
The Exchequer Secretary to the Treasury (Mr David Gauke)
It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate the hon. Member for City of Durham (Roberta Blackman-Woods) on securing the debate, and thank all the hon. Members who have contributed. A number of factual questions have been asked about the operation of the policy on child benefit, and I shall deal with as many as possible.
The changes that we announced at Budget 2012 ensure a balance between reducing the cost to the Exchequer of child benefit and ensuring that those on low incomes will not be affected. I must put the measure in context; it is the consequence of the state of the public finances that the Government inherited. We have to make decisions because of the Budget deficit that we inherited—the largest in our modern history. It is, unfortunately, the British people who will have to pay for the debt left to us by the previous Administration.
Fiona O'Donnell
I follow the Minister’s argument about the need to reduce the deficit, but will he acknowledge that that is no excuse for a bad policy that even Members on his own side acknowledge is intrinsically unfair?
Mr Gauke
It is because of the state of the public finances that we must take difficult decisions. I will strongly defend the policy, but I must make the point to hon. Members who oppose it that it is helping us to reduce the deficit by £1.8 billion. If we do not find that sum in the way in question, we will need to find it somewhere else, or borrow more. That is the decision that we all face.
Kate Green
I understand, although I do not agree with, the point that the Minister makes, but why is he singling out to bear the burden those families in higher-rate tax brackets who have children, rather than equivalent-income families with no children?
Mr Gauke
My hon. Friend the Member for Christchurch (Mr Chope) made that point. The reason is that child benefit is essentially the only item of welfare spending that goes to households with individuals who earn more than £60,000 a year. I understand the argument that the hon. Lady and my hon. Friend are making: let us keep on spending and raise taxes. That is a tax and spend approach. I do not know whether the hon. Member for Stretford and Urmston (Kate Green) speaks for her party on that; I know that my hon. Friend the Member for Christchurch does not for ours.
Kate Green
I am confident of speaking for my party when I assert our absolute commitment to the universal payment of child benefit.
Cathy Jamieson
It is just a brief point. The Minister correctly referred to the ONS. When will that assessment be made, and when will we be told what it decides?
Mr Gauke
If memory serves, the ONS will make that assessment after the policy has come into effect, in January 2013.
As I said, we face a large deficit and seek to reduce it in a way that is both fair and reasonable. It is only right and proper to ask those with the broadest shoulders to bear the greatest burden; because of this measure and others announced by my right hon. Friend the Chancellor in the Budget, that will be the case. Considering the universality of child benefit was never our first choice, but that is the position in which we have been left.
I recognise that many are concerned about the change. Some argue that child benefit must be sacrosanct. However, it is not fair that an individual who earns £15,000, £20,000 or £30,000 should be paying for benefits for those earning £80,000, £90,000 or £100,000. When Government need to raise revenue, it makes sense for them to turn to a measure with a broad base because significant numbers of recipients will not be reliant on the additional payment they receive. Child benefit is just that sort of payment.
The steps that we are taking will raise £1.8 billion for the Exchequer by 2014-15. That is why my right hon. Friend the Chancellor announced in 2010 that we would seek to withdraw child benefit from higher-rate taxpayers. We have always said that we would consider the ways in which to implement the measure, but we made it clear that a new complicated means test is not a sensible way forward. Instead, we should look to the existing systems and processes to ensure that we can achieve our goal.
Let me turn to the changes that we are introducing.
Kate Green
The Minister thinks that we do not have a new complicated means test, but does he not accept that we have a new complicated tax test—and that from a Government who want to simplify the tax system?
Mr Gauke
The alternative method, which would have been to do this on household income, would mean applying the tax credit system to all 8 million child benefit recipients. That would widely expand the tax credit system and impose a burden on a far greater number of people.
We propose to withdraw the financial gain from child benefit from those families where one partner has income of more than £60,000, and reduce the gains where one partner has income of more than £50,000. By applying a tax charge on those on high incomes using existing processes, we are doing it in the most efficient and pragmatic way. The charge will apply to an individual in receipt of child benefit, or their partner, where they are married or in a civil partnership, or living as if they are married or in a civil partnership. I hope that that answers the point about what a household is. It uses the current definitions of partners within social security legislation, and means that other adults living within the household do not affect the liability.
It will remain the case that two earners just below the threshold will not have their child benefit withdrawn. To introduce a new means test for family income would be complicated, costly and confusing—the very things that we wish to avoid. We would need to assess all of the 8 million households receiving child benefit, and we would need to do so each year.
Let me turn to the mechanics behind the changes that we are introducing. First, the changes will not affect those receiving child benefit who have income under £50,000, or whose partner does. That will mean that 85% of families receiving child benefit need not be troubled by the changes—85% means more than 7 million families. Where an individual or their partner has income of more than £50,000, the charge will be tapered depending on their income. The equivalent of 1% of the child benefit award will be charged for every £100 increase over £50,000 in adjusted net income. That means that child benefit is fully withdrawn at an income of £60,000. Furthermore, the thresholds between which the taper operates are not dependent on the number of children.
Those affected—around 1.2 million taxpayers—will declare their liability through the income tax self-assessment process, though just over half are already within the SA system. Although we recognise that the charge will bring some taxpayers into self-assessment for the first time, using self-assessment means that the tax can be calculated on the basis of the amount of child benefit received, and the taxpayer’s actual income. That is preferable to including an estimate in a taxpayer’s PAYE code, only to discover an underpayment or overpayment of tax at the year end as actual income proves to be different from estimated income. Even as small a change as £100 will change the amount of tax due for an individual on the taper. As a third of taxpayers affected will benefit from a reduced liability as they are on the taper, using PAYE rather than self-assessment would generate large numbers of under and overpayments.
The changes will take effect from 7 January 2013, with individuals affected including information relating to the charge for the first time in their self-assessment returns for the tax year 2012-13. The first payments of the charge will be due by 31 January 2014 if a taxpayer chooses to pay in a lump sum. Otherwise, the amount due for 2012-13 will be collected through the tax code in 2014-15.
Cathy Jamieson
I have a quick point. The Association of Chartered Certified Accountants is concerned that there will be further confusion over the fact that although the new scheme starts in January, the tax year does not start until April. How does the Minister answer that criticism?
Mr Gauke
Initially, we said that the scheme would be introduced from 1 January 2013—actually, it is from 7 January because that is the first day on which child benefit is payable. Such a time scale is perfectly operational, and there is no reason why we cannot run it from that particular point. Obviously, were we to delay the introduction of the scheme until April, there would be a cost to the Exchequer.
The introduction of the taper means that the vast majority of taxpayers with income between £50,000 and £60,000 will still gain from taking on extra work or getting a pay increase, even if it does take them over the £50,000 threshold.
A taxpayer or their partner would need to receive child benefit for at least eight children before the tax due on their additional income equalled the amount of income itself. Equally, an individual’s income may reduce so that they are no longer liable to the charge. That may also mean that tax due in respect of previous years can no longer be collected through the tax code. In such cases, HMRC will use its usual debt management processes.
Let me address the issue of opting out, which has been raised by a number of hon. Members. We are enabling individuals to opt out of receiving child benefit. Understandably, the point has been raised about state pensions and so on. Let me be clear. National insurance credits, which protect a person’s future entitlement to basic state pension and the state second pension, will remain available to all those who take time out of work to bring up children. The protection is given to anyone claiming child benefit for a child under the age of 12, even if they do not receive any payment or if they or their partner has to pay the new tax charge. The introduction of the tax charge will not affect a person’s right to claim child benefit. Child benefit will remain available to be claimed by anyone responsible for the child.
Parents and carers will have two options to safeguard their state pension, and they will be made clear on the child benefit claim form. First, they can claim child benefit and receive the payments. If liable, they or their partner can pay the new charge. Alternatively, they can submit a claim form for child benefit to establish their entitlement for state pension purposes, but choose not to receive the actual payments. That means that neither they nor their partner will be liable to pay the new charge, but the national insurance credits will still be received.
As for compliance, our approach means that we can use the current HMRC systems. That reduces the cost of implementation both for HMRC and the individuals affected. HMRC will use existing penalty regimes for those who choose not to tell it that they are liable to the new charge or who declare the wrong amount on their self-assessment return.
In the interests of time, let me turn to the issue of taxpayer confidentiality that the hon. Member for Bishop Auckland (Helen Goodman) raised. We have some disagreement over the meaning of independent taxation. It is about individual allowances and assessment of own income. In the 1980s, it replaced the system whereby a husband declared his wife’s income on his return, which increased his income. I understand the concern over taxpayer confidentiality. Information that should be shared between partners relates to whether child benefit is being claimed and which of the partners should have the tax charge—in other words, which tax partner is earning the most income.
The mechanisms in place will provide the minimum of information. Partners who may not be talking to each other can discover who is earning the most, but not the full details and whether or not child benefit is being claimed and for how many children. That is the extent of the information that needs to be shared, and HMRC is developing a process that enables it to share limited information with an ex-partner.
As I have already said, the Government have had to make difficult decisions. To continue to provide child benefit, we must do so in a sustainable manner. The current cost to the Exchequer for those recipients less in need is too high. To pay almost £2 billion to higher-rate taxpayers does not represent good value for money in these challenging times. We also recognise that we must withdraw child benefit to higher earners in a fair manner. The increase of the threshold to £50,000 and the introduction of the taper ensure that we are taking this action only in relation to those who can most afford it.
NHS (Foreign Nationals)
(11 years, 11 months ago)
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Chris Skidmore (Kingswood) (Con)
Thank you, Mr Streeter, for calling me to speak. It is an honour to serve under your chairmanship.
I very much appreciate having the opportunity to speak on the issue of foreign nationals’ use of the NHS today. I know that it is of concern to all Members of the House, regardless of political party, because for many of us it is a huge issue for our constituents, who are genuinely concerned about the NHS, which is free at the point of use.
Obviously, the constituents I speak to accept that we should never turn away at the door anybody who is in genuine need, whether they are asylum seekers or not. Obviously, there are big public health issues and I welcome the fact that the Government have extended HIV treatment to those people in need regardless of nationality, because that will benefit the whole of our society. However, we cannot get away from the fact that there is a large issue, and one that is growing, regarding the use of NHS facilities by foreign nationals who are ineligible for free care.
As a member of the Health Committee, I am particularly concerned about this issue and I have put down several parliamentary questions, dating back to last year. The Government responded that roughly £35 million had been written off by hospital trusts, in terms of debts that had been accrued by foreign nationals and that had neither been paid back nor claimed back. The trusts involved did not include foundation trusts, so I made a freedom of information request of all trusts across the country. The data that I received back from the 118 NHS trusts that replied to me showed that just over £40 million of debt accrued by foreign nationals had been written off.
Those data also showed that there is a huge variation in relation to the collection of debt accrued by foreign nationals. The highest figure for such debt was for Guy’s and St Thomas’ NHS Foundation Trust, which had written off almost £6 million of such debt since 2004. My own local trust, North Bristol NHS Trust, had written off £1.7 million of such debt. The data showed that some trusts were acting contrary to the regulations and the current guidance, which
“place a legal obligation on the trust providing treatment to identify those patients who are not ordinarily resident in the United Kingdom; establish if they are exempt from charges by virtue of the Charging Regulations; and, if they are not exempt, make and recover a charge from them to cover the full cost of their treatment.”
That is what trusts should be doing when foreign nationals who are ineligible for free care come through their doors. However, it was clear from the information that I received in response to my FOI request that many trusts were not even collecting those data, which is contrary to the guidance. Of those trusts that were collecting the data, some had gone back to 2000 to collect them and some had gone back to 2004. There was a large variation in the data that cannot simply be explained by the fact that some trusts were more willing than others to claim back the debt that they were owed from foreign nationals.
There is anecdotal evidence, too. I have heard from some Members who wanted to be in Westminster Hall today for this debate but were unable to make it, and they asked me to raise some issues. In particular, one MP had a constituent who had come to them regarding an American visitor who was staying with them. During their holiday, the American visitor became ill and attended NHS facilities for treatment. They then contacted their medical insurer in the US, which suggested that they provide proof of the cost of their treatment; the American visitor would need a receipt from the NHS, so that they could claim back the money from their medical insurer. However, when they contacted the trust in question, they were told that no such receipt was available and the trust itself had not collected the data about the nature and cost of their treatment, even though this visitor was a foreign national and ineligible for free NHS care, and actually wanted to pay the bill because they were very grateful for the fantastic treatment that they had received. Consequently, a receipt could not be provided.
So there are examples of how trusts are clearly not following the guidance and collecting NHS debt from foreign nationals. It is particularly worrying that a 2008 survey of NHS managers suggested that a third of them did not even bother to ask patients whether they were eligible for free treatment when they arrived at hospital.
Mr Virendra Sharma (Ealing, Southall) (Lab)
Is the hon. Gentleman now talking about those foreign nationals who arrive here specifically to receive treatment, or those foreign nationals who come here as visitors, become ill and are then unable—for whatever reason—to pay for their treatment? We must not mix the foreign nationals with political asylum seekers, overstayers and others who, for whatever reason, live here for many years but are not eligible to receive NHS treatment. Is the hon. Gentleman mixing those two groups, or separating them?
Chris Skidmore
No, I am certainly not mixing them and I will come to the issue of eligibility that is defined around the term “ordinarily resident”. I want to talk about that in terms of the historic issues that determine whether foreign nationals should be charged for treatment. Obviously, there have been various reports in the past decade, including a 2007 report by the Joint Committee on Human Rights that examined services available to asylum seekers, and those reports have raised that very issue. If access to care and treatment was denied to those who are vulnerable and in genuine need of care, that would undeniably make the situation worse and cause them far greater distress and harm. In those circumstances, we have a right and a moral duty to ensure that people are treated.
On the other hand, we have what some red-top newspapers might call “health tourism”. I use that phrase with some trepidation, because the situation is certainly more complicated than that phrase implies; it suggests that people are simply flooding in across our borders to ensure that they can receive NHS treatment, and that is certainly not the case. There are eligibility criteria that apply, but my concern is that they are not being applied strictly enough by various trusts. On the back of the previous Government’s consultation on this issue, between February and June 2010, the current Government have now decided to tighten certain eligibility criteria, particularly regarding asylum seekers and specifically when asylum seekers have their right of asylum refused.
There is obviously an issue with border security as well, and I welcome the fact that the Government have introduced measures, through the Home Office, in relation to those who have left the country with unpaid debts to the NHS of more than £1,000. I put down a written question that suggested that each year there are 3,600 foreign nationals who accrue such a debt for their NHS treatment and that they should not be allowed re-entry to this country unless those debts were paid off. There is a spectrum through which one has to view who is a foreign national and who is “ordinarily resident”.
I do not deny that establishing the difference between those two groups can be very difficult and that there is a very fine balance to strike. Nevertheless, it is clear from the data that I have received in response to my FOI request that the current system is not working. If there is a situation, as there is at the moment, whereby debts are being accrued and not reclaimed, and whereby a third of NHS managers are not even asking patients whether they are eligible for free treatment or whether they are a foreign national, that is a very big issue.
In many ways, one can understand why someone working within an NHS trust would not want to ask someone about their nationality; it might simply be easier to provide treatment. That is because of the simple fact that, once someone has been categorised as a foreign national and therefore they must be charged because they are ineligible for free care, those charges must be recouped. The costs of recouping those charges could far outweigh the charges themselves.
Moreover, I do not deny that some patients will turn up at an accident and emergency department or trust with a particular complication, which becomes severely worse. For whatever reason, they happen to die and there is no way in which the charges for which they would have been liable can be recouped. All those particular situations need to be taken into account.
In the Health Committee, we looked at how different trusts operate and collect their debts, or even monitor which people coming through their doors are eligible for free care and treatment. West Middlesex University hospital has what is called a “stabilised discharge system”. If a foreign national is admitted to hospital, the doctor first establishes whether there is a need for urgent life-saving treatment, which is obviously a priority for the NHS. If that is not the case, the person is told what treatment is required and how much it costs. If they are unwilling to pay, they are asked to leave. That policy in the hospital nearest Heathrow airport has saved the hospital £700,000 in each separate year. Even within the existing guidance and criteria, there are the means and possibilities by which trusts can ensure that the criteria are followed correctly and that savings can be made. I am sure that if every trust acted in the same way as the West Middlesex University hospital, we would see the amount of debts incurred by foreign nationals drop significantly.
The hon. Member for Ealing, Southall (Mr Sharma) mentioned the criteria around a foreign national and who is and is not eligible for care. The context of this debate, as I mentioned, is an historic one. It was not until 1989 that the British Government began to require certain overseas visitors to pay for hospital treatment. That was defined in regulations in 1977, when legislation permitting persons not ordinarily resident in the United Kingdom to be charged for NHS services began to be looked at.
How we define someone who is not ordinarily resident, as opposed to someone who is ordinarily resident, is interesting. In a way, it is a common law concept, but in NHS health care legislation there is no definition of “ordinarily resident”. The only definition comes from a 1982 judgment in the House of Lords, which was actually in the context of the Education Bill that was passing through the other place at the time. The definition of “ordinarily resident” was:
“living lawfully in the United Kingdom voluntarily and for settled purposes as part of the regular order of their life for the time being, whether they have an identifiable purpose for their residence here and whether that purpose has a sufficient degree of continuity to be properly described as ‘settled’ ”.
That means that UK citizenship and past or present payments of UK taxes or national insurance contributions, contrary to what many of our constituents might think, are not directly taken into account in the way that “ordinarily resident” has been defined.
In the review that they are currently conducting, I urge the Government to consider how we will define “ordinarily resident” in future. The NHS is a contributory system that people pay into to receive free care at the point of treatment. That is right. The NHS is free for citizens who have paid into the system. It cannot be a free-for-all for everybody to use. Our constituents wish us, as legislators, to address that concern.
It is clear that the current rules and regulations, having been addressed and re-addressed over time, have caused some confusion. In 2007, the Joint Committee on Human Rights produced a report on services to asylum seekers. It suggested that the new rules introduced in 2004 regarding asylum seekers and whether they were eligible for free care—or, once their asylum application had been turned down, whether they were still eligible for free care—caused confusion about entitlement. It suggested that the interpretation of the rules appeared to be inconsistent, and that in some cases people who were entitled to free treatment had been charged in error.
At the time, the Labour Government began a consultation looking at the use of primary care by foreign nationals using the NHS. It is clear that in acute and secondary care, charging regulations apply. The problem is that the implementation of those charging regulations has not been effective, and we need to be more stringent about the implementation of current guidance.
Currently, there are no charges for primary care, whether people are eligible or not. People can register with a GP for primary care, regardless of status. The Labour Minister at the time, in 2004, held a consultation on whether there should be charges for foreign nationals and people who were ineligible for free care. He suggested that the consultation was necessary because
“the rules about entitlement to primary care are best described as a muddle.”
I agree. In my own experience as MP for Kingswood, I have found a firm of lawyers in Bristol—Deighton Pierce Glynn—that has been writing to doctors urging them to register patients and saying that if they do not, it will take legal action, regardless of the patients’ nationality and eligibility for free care. I raised the matter in the local media, in the Bristol Evening Post. It is wrong, and I am concerned that our NHS will become a legal paradise for lawyers piggy-backing on doctors who are doing the best that they can with the resources that they have. They know that NHS resources are stretched and need to be rationed and that there is a big problem.
One lawyer responded in the Bristol Evening Post by saying that lawyers were not trying to change the law:
“We are trying to apply the law as it is. Nobody is excluded from GP treatment. It is very clear. Hospital treatment is different. People come to us when they have been refused registration with a GP. There is nothing in the law that permits them to do that. Refusing them isn’t lawful.”
This particular case concerned asylum seekers who had had their asylum applications refused. When the GP in question received the letter from Deighton Pierce Glynn, an unnamed member of staff said:
“Someone at the PCT read the letter and panicked. Do we just register everyone who is illegal?”
There is clearly confusion being stoked by certain members of the legal profession who seem to be taking advantage of the uncertainty of eligibility within primary care so that they can profit when their clients wish to apply to the NHS.
On the situation in primary care, I was interested in a question asked by the right hon. Member for Birkenhead (Mr Field) on 23 April 2012. He asked the Secretary of State for Health
“(1) what documentation a foreign national who seeks to register with a GP is required to provide;
(2) whether a foreign national on a six month visitor's visa is entitled to register with a GP;
(3) on what grounds a GP whose list has not been closed may refuse an application to register from a foreign national.”
The reply was:
“Under the terms of their existing contract, general practitioners (GPs) have discretion in accepting applications to join their lists. However, they cannot turn down an applicant on discriminatory grounds. They can only turn down an application if the primary care trust has agreed that they can close their list to new patients or if they have other reasonable non-discriminatory grounds.
There is no formal requirement to provide documentation when registering with a GP. However, many GPs, when considering applications, request proof of identity and confirmation of address, but in doing so they must not act in a discriminatory way.
A decision on whether to register a foreign national who has a six-month visitor visa is therefore currently for the GP to consider.”—[Official Report, 23 April 2012; Vol. 543, c. 701-02W.]
That raises issues. I do not like to quote Sir Andrew Green, the chairman of Migration Watch UK, but he stated:
“What this means is that someone getting off a plane with a valid visitor’s visa is, in effect, able to access the GP services of the NHS without ever having paid a penny into the system. Over one and a half million such visas were issued last year.”
Once someone is registered with a GP, the regulation and guidance mean that if they need further secondary care, it is the relevant NHS body’s duty and not the GP’s to establish the requirement for free hospital treatment. That raises the issue of the extent to which that takes place. Once someone is on the GP’s books, that is almost a rubber stamp into receiving secondary care.
I am not suggesting that GPs act as pseudo-immigration officials checking people’s eligibility for free care, but there clearly needs to be a more joined-up approach between the people who end up on GPs’ books and who are then referred by GPs to secondary care specialists, and what that then involves in terms of charging. When it comes to the issue of primary care and foreign nationals, I do not believe that foreign nationals should be entitled to free primary care. We should extend the charging regulations further.
Mr Virendra Sharma
I apologise; I should have congratulated the hon. Gentleman earlier on securing this debate, which is important not only to his constituents but to people all over the country, who take the issue seriously. It is also important in my constituency, where it is discussed every day.
I am a bit confused; I hope that the hon. Gentleman will clarify. He is mixing foreign nationals and those who have been here for many years. As I see it, in this debate, foreign nationals are those who come especially to register themselves for a few days, who receive treatment and who disappear without paying, due to system failures, although I will not get into that debate. For those already here, if GPs act as immigration officers or work on behalf of the UK Border Agency, that will mean health problems.
Chris Skidmore
I certainly do not mean to confuse or mislead. When I say foreign nationals, I mean those who come to this country requiring care who are not defined as ordinarily resident under the current regulations. Personally, I think that we should consider the definition of “ordinarily resident”. I have no problem with people’s nationality, whether they are British or a citizen of whatever country. If they work in this country and are contributing to society, it is right that they should receive the free care towards which they have contributed.
Equally, exemptions apply for matters of public health and vulnerable groups. As the hon. Gentleman mentioned, if denying access to treatment could worsen the health of the community, let alone the individual, it is right that we should act responsibly. However, that should not preclude the creation of a clear definition of who is and is not eligible for care. One reason why we are having this exchange is that there is no clear, black and white definition. There will, obviously, be shades of grey, as there always are in health care. Health care professionals have a moral obligation to treat people in need, the sick and the vulnerable. I do not deny that, but we also have a moral obligation to our taxpayers to ensure that NHS money is spent as well as it can be.
A few people have come to me and said, “Mr Skidmore, it’s only £60 million out of a budget of £110 billion. Surely you’ve got to factor in debt. We should be able to expect that amount of debt to be written off.” I do not accept that argument. My local community hospital, Cossham hospital, is undergoing a £20 million refurbishment at the moment, and my constituents are so excited that it is taking place. That £60 million is a lot of money; it could have paid for the refurbishment of Cossham hospital three times over. We must count millions in order to save billions. During this efficiency drive, when we are trying to reinvest 15% to 20% of NHS resources in front-line care, it is a key aspect of the Nicholson challenge that we look for waste in the system and for instances where regulations are not being applied effectively.
I agree with the hon. Gentleman that we must be careful about how we define a foreign national. I do not want this to be seen as a xenophobic campaign, because it certainly is not. It is based on the conviction that the NHS is a national health service that provides free care at the point of use, but should not be abused; it should be free at the point of use, but not at the point of abuse.
The GP situation includes the lawyers at Deighton Pierce Glynn, who have been contacting GPs, and the Minister of State’s answer to the right hon. Member for Birkenhead about the issue of visas and documentation, which raises an issue that I think GPs would welcome.
Part of the consultation involves clarity about what GPs must look for when patients register in their practices, and whether they can say, “I’m afraid I cannot register you, because you don’t have the necessary data documentation.” As far as I understand it, the lawyers have been writing to GPs saying that by not registering patients, they are applying a discriminatory process. However, I was interested to read that paragraph 5.16 of the guidance on charging, in the section on GPs in primary care, says:
“It is important to see that all patients are treated the same way, to avoid allegations of discrimination.”
That is also clear in the Minister’s answer. The guidance goes on to say:
“It is not racist to ask someone if they have lived lawfully in the UK for the last 12 months as long as you can show that all patients—regardless of their address, appearance or accent—are asked the same question when beginning a course of treatment. The answer to that question may result in others needing to be asked, but again you will not be breaking any laws as long as those questions are asked solely in order to apply the Charging Regulations consistently.”
It is in the guidance that GPs have the right to ask, as long as they ask everybody. They will not be applying a discriminatory process.
As I said, in 2004—they reported in 2009—the previous Government began to consider whether we should extend charging to primary care and how eligibility criteria should be tightened. The review suggested that charging would not be extended to primary care. I hope that we as a Government might be able to reconsider. I know that this Government are committed to ensuring that national health care resources are spent in the right way. My constituents appreciate that, as I have said.
The Home Office has introduced measures so that anyone owing the NHS £1,000 or more will not be allowed to enter or stay in the UK unless the debt is paid. When that is implemented, the Home Office hopes to capture 94% of outstanding charges owed to the NHS; hopefully, it will have a significant impact. Encouragingly, the review commissioned on 18 March 2011 suggested:
“The existing system is still too complex, generous and inconsistently applied. While the NHS remains committed to providing immediate or necessary care, it is important that a balance of fairness and affordability is also struck.”
I agree entirely.
The review taking place will now consider
“qualifying residency criteria for free treatment; the full range of other current criteria that exempt particular services or visitors from charges for their treatment; whether visitors should be charged for GP services and other NHS services outside of hospitals”,
as I suggested; and
“establishing more effective and efficient processes across the NHS to screen for eligibility and to make and recover charges”.
I suggest that as part of the consultation, they consider West Middlesex University hospital and the good work being done there. Finally, the review will consider
“whether to introduce a requirement for health insurance tied to visas.”
I was encouraged when the Minister said:
“The NHS has a duty to anyone whose life or long-term health is at immediate risk, but we cannot afford to become an international health service, providing free treatment for all. These changes will begin the process of developing a clearer, robust and fairer system of access to free NHS services which our review of the charging system will complete. I want to see a system which maintains the confidence of the public while preventing inappropriate free access and continuing our commitment to human rights and protecting vulnerable groups.”
I agree with all those words.
I initiated this debate to ensure that Members have an opportunity to put their views as part of the consultation, which, hopefully, will report later this year. To reiterate, the NHS is a national health service, not an international one. Although we all believe that health care treatment must be free at the point of use, it cannot be free at the point of abuse. I urge the Minister to consider carefully what I have said and what other Members will say in this debate. We care passionately about the NHS. We want the NHS to continue as it has for six decades now. This issue is one that I know all our constituents and everyone in the House, regardless of party politics, will wish to ensure is solved.
Jim Shannon (Strangford) (DUP)
I congratulate the hon. Member for Kingswood (Chris Skidmore) on securing this debate. He tried hard to keep a balance—it is important for us to do so—as did the hon. Member for Ealing, Southall (Mr Sharma) during his interventions. However, whenever I read the background information, I cannot but feel shocked. On 3 May, an article in The Daily Telegraph on the foreign national debt stated that official figures suggest that
“more than £40 million is owed to NHS hospitals by foreign patients who were not eligible for free care”
and that freedom of information requests showed that
“the average unpaid debt for the provision of care to foreign nationals was £230,000 in the 35 trusts which responded.”
The article went on to note the doctors’ trade magazine Pulse’s claim:
“If this figure was the same across all 168 English acute trusts, the total debt would be almost £40 million”.
Those are worrying figures. The article continued:
“The FoI requests showed St George’s Healthcare Trust in South London had the largest outstanding debts, totalling £2 million from £3.55 million invoiced to foreign nationals for health treatment from April 2009.”
Everyone present is proud of our NHS and of the high esteem in which it is held, not only in this country, but throughout the world. I do not want to be a scaremonger. I want to keep my comments balanced. It is not in my nature to stir up angst or discontent. As the hon. Member for Kingswood has mentioned, we do not want xenophobia or discrimination, but the figures are unsettling and there are concerns that our health system is being taken advantage of by some people, which is to the detriment of British people who are waiting to be seen and receive treatment.
Anyone who knows me either inside or outside this Chamber will know that I often put my hand in my pocket to help those in Africa, India and other parts of the world. The same is true of other Members and of our great nation, because we are a nation of givers. Our charity contributions in a time of economic restraint are still above the norm—we are holding our own. In Northern Ireland in particular, our charity giving per head of population is second to none. I am all for international development and believe that we as a nation have a role to play in helping others who need it. The UK makes a significant contribution to third world aid, and we continue to do so—our commitment is to give—while other countries are cutting back. We as a nation are making a significant contribution and will continue to do so. I and other Members support the Government entirely on that issue.
I am also a constituency man and know that people are becoming discouraged. I am conscious that I am speaking as a Northern Ireland MP and that health is a devolved matter. Cancer patients talk to me about new treatments that cannot be paid for on the NHS because of lack of funding. I have asked questions on the Floor of the House about whether new treatment will be made available for those constituents of mine who clearly need it. In the past few days, we have heard on the news about the postcode lottery—that terminology is often used—whereby the treatment depends on the funds available where someone lives and the demands on the system. That is not necessarily a criticism—it is a fact of life. My constituents deserve to have the best treatment in the world and I will work as hard as I can to ensure that that happens.
The fact that £40 million is owed by some foreign nationals needs to be addressed. The Minister and the Home Office have indicated that they intend to introduce a £1,000 threshold to
“capture 94 per cent of outstanding charges owed to the NHS.”
I hope that that will be the case.
I hear that people now believe that we have a lax system. Again, we need to keep a balance. We cannot provide a world health service—it just cannot be done; the moneys are not there. We need to draw the line, and I believe that we should draw it in this place and that it should be a straight, firm line. Will the Minister indicate whether there will be a review or a reassessment of the six-month visa that allows GP registration and access to NHS care? That needs to be clarified, so that we can see where we are going.
There is a clear difference, as the hon. Member for Ealing, Southall has mentioned, between those who are taken ill on holiday and those who come here directly to take advantage of our health system. Again, it is about balance.
I have been encouraged to hear the Government’s proposals, but as a Northern Ireland MP I am concerned about whether they will make their way over to Northern Ireland. I will chat with my colleagues at home to ensure that we implement like-for-like proposals. Health is a devolved matter in Northern Ireland and the Health Minister is a member of my party. I will certainly have some discussions with him. The hon. Member for Kingswood has touched on this issue, but will the Minister explain what interaction there will be with the regional Assemblies—the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly—so that we have a UK-wide policy? It is important that all of the devolved Administrations have a similar policy to that on the mainland in England.
There are so many people in need of our health system at home that if we were to take in every sick person who was able to travel to the UK, it would not take a week until we imploded because of the demands on our system. We have to be realistic about what is expected of us and how we can help others. It about getting the balance right. The NHS is our national health service and one into which we have paid over many years through our tax system.
I had the privilege—some would say that it was not a privilege—of serving on the Health and Social Care Bill Committee, on which both Government and Opposition Members discussed the figures and tried to devise a reorganisation that would save money and still provide a good service. As well as delivering what is best for our citizens in the United Kingdom, it is important that we are able to help those who need it and who come here not with any specific intention to take advantage of the NHS, but who find themselves in need of it due to ill health. Any of us can be taken ill on holiday, so we take out insurance, which covers us for so much. It does not cover for circumstances in which ill health might result in a longer stay than anticipated, but it does help part of the way.
Some have taken advantage of the system. The Government are right to tighten the system and to ensure that there is a good NHS for the whole of the United Kingdom. The hon. Member for Kingswood referred to the term “health tourism”, which others have used and which sends out signals. Whether that term is correct or not, some people are doing it. We need to make sure that we have a system that can help those when they need it. We are a caring nation—we do not want to turn people away—but our system needs to ensure that that is done correctly. As I have said, this is all about balance. It is about ensuring that we, as a caring nation, can offer help to those who need it. No one who needs help should be turned away—that is clearly where I am coming from—but at the same time we need to tighten the criteria, close loopholes and at least ensure that the £40 million drain on NHS care is restricted or comes to an end.
Mr Virendra Sharma (Ealing, Southall) (Lab)
We are all proud to have such a wonderful NHS in Britain. It is a unique service compared with those available in the rest of the world. Everybody appreciates that, but at the same time we need to consider how much it costs us and how best we can improve it. This debate is not only about the NHS, but about immigration, the role of the UK Border Agency and the Home Office, and the delays in the Ministry of Justice that mean that people have to wait for years before learning whether they can stay, until which point they need the services. That is why I intervened on the hon. Member for Kingswood (Chris Skidmore) to ask which foreign nationals he was talking about. My main concern is to control those people who abuse NHS services by coming here especially to receive treatment.
Other foreign nationals, however, have been here for many years, yet their position has still not been recognised. There is no clarification about whether they are entitled or not entitled. We have all heard about GPs who have a dilemma when somebody approaches them and says, “I’m living in this area. I want to register with a GP”, but from a health service point of view, everyone must receive a good quality of health provision. We—and GPs—need to consider whether we can deny such families or individuals the ability to register. That is what needs to be clarified before we can find the solution.
Through the Minister, can we put pressure on the Minister for Immigration to ensure that the Home Office takes such cases seriously and decides on them as quickly as possible? In my experience—and I am sure that of many other Members who deal with immigration cases—people are waiting for many years for a decision. What will happen to those people? We need to clarify that point.
I did not intend to make a major speech, but I was impressed by the contributions made. I can assure the hon. Member for Kingswood that there is no question about his credibility on the subject or about there being any intention on his part to criticise an individual or a particular community. He has raised a serious issue that affects all of us in our constituencies and our lives. I hope that the Minister will note that it is not only a question of the £40 million or £60 million, but of how we can solve the problems relating to immigration and health together rather than separately.
Mr Jamie Reed (Copeland) (Lab)
It is a pleasure to contribute to a debate under your chairmanship for the first time, Mr Streeter. I congratulate the hon. Member for Kingswood (Chris Skidmore) on securing the debate. The use of the NHS by foreign nationals is a growing problem and it is important to take a moment to reflect on why we are discussing the issue today. It is a concern among hon. Members from all parties and, as my hon. Friend the Member for Ealing, Southall (Mr Sharma) said, among people representing all communities throughout the country. The issue is of paramount importance to a number of people.
As the previous Labour Government delivered the lowest ever waiting times and the highest ever level of patient satisfaction, along with 44,000 more doctors and 89,000 more nurses, the NHS became the envy of many other countries. The recent Commonwealth Fund comparative study of the state of the NHS makes that absolutely clear. However, a consequence of having one of the—if not the—best health services in the world was, and is, that it became increasingly attractive to foreign visitors. That has brought a number of issues that need to be addressed.
The commonly agreed figure that the hon. Member for Kingswood has mentioned is that the debt accrued by foreign nationals to the NHS is around £40 million. He is right to point that out. It is a lot of money—whether it is £40 million or £60 million—that would buy a lot of medicine and fund a lot of projects in a lot of communities. If the figure is £40 million, it is approximately 0.1% of the £3.5 billion that the Government are wasting on NHS reorganisation now. None the less, that figure is an awful lot of money.
The NHS is built on the principle that it should provide a comprehensive service based on clinical need, not ability to pay. However, at the same time, it is a national health service—not, as has been repeated on a number of occasions, an international health service. There must not and cannot ever be any doubt about that. Therefore, it is right that we impose charges for overseas visitors, who are defined in respect of NHS hospital treatment as people who are not ordinarily resident in the UK.
The previous Labour Government were committed to maintaining the existing system of charges, but they proposed a series of further safeguards, including amending the immigration rules so that anyone who accrued substantial medical debts would not be allowed back into the country if they left without settling their bill. I am genuinely pleased that the current Government have adopted so many of those recommendations. However, we need to look again at the ability to make and recover charges, and we would be happy to work with the Government on that issue. For example, the previous Government considered whether foreign nationals should be charged for NHS services outside the hospital. That issue warrants further close discussion.
We also need to learn from those hospitals that are more successful at recovering charges. The hon. Member for Kingswood referred to some of those. Hospitals have a legal duty to recover any charges made to overseas patients and, frankly, some hospitals need to be much better at that. Sometimes dealing with that problem can be as simple as improving the recording of contact details, so that the patient can be pursued for payment, but I accept that the rules and procedures could be demonstrably improved. The Government should ensure that that is done and, again, we will support them in their efforts to do so.
A relevant issue that has not been touched on today is the Olympics. It would be helpful if the Minister explained what plans are in place to ensure that the NHS can meet the rise in demand from overseas visitors during the games. Will she tell hon. Members what exemptions are in place for athletes and officials? “Newsnight” recently reported that Olympic VIPs could receive fast-track emergency care. With A and E waits already increasing, is there not a danger that taxpayers who are paying for the NHS and the Olympics will be pushed to the back of the queue?
Chris Skidmore
I would have raised the Olympics in my speech had it not been for the fact that I wanted this to be a cross-party debate. The criterion that Olympic officials and athletes should receive free treatment was part of the bid that was successful in 2005 under the previous Government. We would not have been awarded the Olympics if that had not been part of the 2005 bid.
Mr Reed
The hon. Gentleman makes a good point. He is obviously aware of the fact that although he, I and other hon. Members are privy to those details, the general public are not. There is a salient concern out there about the perceived emergence of a better standard of care being afforded to people who are involved in the Olympics. I visited Homerton hospital in Hackney, which is one—if not the—Olympic hospital in London. I saw some tremendously innovative professionals there who are developing innovative medical treatments and systems of working. They need to get the message across that local people who use that hospital on a daily basis will not be disadvantaged by the Olympics. We need a clear exposition of why that will not be the case.
Although I have considerable sympathy with the contributions I have heard this morning, all hon. Members must recognise that, under the UN convention on human rights, the UK has an international obligation to provide free NHS treatment to those seeking asylum here. All of the contributions I have heard today indicate that that will not be too hard to achieve, but hon. Members must guard against those Members who advocate that we should not fulfil that obligation, because the temptation will be too much for some. When we produce facts and figures used in support of the arguments, that must be acknowledged.
We must also guard against Members from all parties who advocate that the NHS should turn away pregnant mothers or patients in need of emergency care. Overall, this issue requires a diligent, careful approach. It is not the platform for a weird, xenophobic virility contest. I look forward to hearing what the Minister has to say. There may be little common ground between my party and the Government on the NHS, but we can agree that NHS care must always be based on clinical need, not ability to pay. At the same time, first and foremost, the NHS must serve the people of the United Kingdom—those whose taxes fund the NHS, those who believe in it passionately as the guarantor of a better society and those who expect it to be there for them when they need it. I hope that we can agree on that principle as we continue to debate the issue constructively and develop the fair and appropriate policy responses that the issue deserves.
The Parliamentary Under-Secretary of State for Health (Anne Milton)
It is a pleasure to serve under your chairmanship this morning, Mr Streeter. I thank my hon. Friend the Member for Kingswood (Chris Skidmore) for securing the debate, which has provided a useful opportunity for hon. Members from all parties to come together and share their views. I express some disappointment at the fact that the shadow Minister, the hon. Member for Copeland (Mr Reed), was somewhat party political, but I commend the hon. Member for Ealing, Southall (Mr Sharma) for his generous comments. It is important to have that on the record: we all want clarity and fairness in the system.
I have met my hon. Friend the Member for Kingswood before to discuss the matter and, again, I commend his efforts in raising the subject, which has provided an opportunity to put some things on the record. Access to NHS care is very poorly understood—indeed, that is also the case for Members of Parliament. This is about foreign nationals using and potentially abusing the NHS. Like the health system of any country, the NHS provides for foreign nationals. Millions of people come to this country every year for various purposes and stay for different periods of time. Some become ill or have accidents, and have immediate health care needs that need to be met. We have a duty to treat them, just as other countries have a duty to treat British citizens who become ill abroad. I assure the shadow Minister that there is no question of anybody wanting to undermine that duty—nobody has raised that in the debate, it is not being discussed either and that will remain the case. However, we have a duty to taxpayers who pay for the system.
Questions were raised about who should be charged. To clarify the situation again regarding ordinary residence—settled, lawful residency in the UK—access to the NHS is not based on nationality, the payment of taxes or national insurance contributions. I accept that that is not widely understood. The service is paid for by taxpayers, so they have an interest in who has access to it. We exempt some categories of visitor from charges, such as those working or studying and those visiting from countries with which we have bilateral health care agreements. A few services are free to all—my hon. Friend the Member for Kingswood may have mentioned them—such as treatment in an A and E department, which I have mentioned, and treatment for certain infectious diseases, as there are wider public health reasons for ensuring that people receive prompt treatment.
Under the legislation, charges can only be made for hospital treatment. Charging is not in place for registering with or seeing a GP, although prescriptions are subject to the usual charges. GP registration or the holding of an NHS number does not trigger free hospital treatment. The hospital to which a non-resident has been referred should check separately for eligibility, but I know that that does not happen as it should. Current legislation allows only for charging overseas visitors for NHS hospital treatment. There are therefore no rules of entitlement governing overseas visitors’ access to GP services, and visitors are able to register.
GPs are self-employed and are contracted to provide primary medical services for the NHS. Under the terms of their contract, GPs have a measure of discretion in accepting patients on their list, but they can only turn down an applicant on reasonable, non-discriminatory grounds. My hon. Friend discussed that at length and made it quite clear what the guidance says. In practice, a GP’s discretion to refuse a patient is limited, and a GP cannot refuse to register a patient just because they cannot provide identification or proof of address—that is unlikely to be considered reasonable grounds.
The European economic area confuses the issue further, but our obligations are simple. Each country is responsible for the cost of providing treatment for their own citizens while they are in other EEA countries, unless they are working. Workers are entitled to the same access to health care as that country’s own residents, on the principle that the country to which an individual makes social security contributions is liable for that person’s health care needs. In practice, that means we pay other EEA countries for treating our state pensioners who have retired there, and for the emergency needs of our own citizens who need health care when visiting another country, using their European health insurance card. The same is also true in reverse—other countries must reimburse the UK for treatment provided to their citizens. EEA nationals who come here to work are entitled to free NHS provision.
Overall, we pay out more than we receive, simply because many more of our state pensioners choose to settle in Europe than vice versa. This is sometimes the subject of large tabloid headlines, but it is important to make that point. We may see that change in the coming months. I acknowledge, however, that we need to do more to recover income due to us from other EEA countries for providing health care to their visitors and pensioners. We have an extensive programme of work under way to address that.
As the shadow Minister said, unpaid debts are a small amount of the total spent on the NHS. However, as my hon. Friend pointed out, £30 million or £40 million pays for a lot of treatment, a lot of care and a lot of medicine. Although it is a small percentage of the total budget, for an individual it is significant. We need to recognise that in any system that charges, debts are sadly inevitable. Guidance is clear that hospitals should not provide non-urgent treatment until a chargeable patient has paid in full, but they have a legal duty to provide emergency care. When a patient is responsible for repaying a debt, if a debt is incurred, the NHS has a duty to the taxpayer to recover that debt. Audited NHS trust accounts and data from Monitor show that last year, £14 million was written off due to unpaid debts—a small but significant amount for taxpayers. We are determined to reduce that write-off without compromising the provision of urgent treatment. My hon. Friend related the terrible story of the American visitor for whom the hospital could not even provide any documentation for him to claim from his health care insurer. The statistic of a third of NHS trusts not even pursuing debts is shocking. On the other hand, we have the example of West Middlesex, which is clearly doing an excellent job.
The hon. Member for Ealing, Southall expressed his frustration with some immigration and Home Office issues, and he is absolutely right to discuss the UK Border Agency. My hon. Friend the Member for Kingswood discussed the fact that GPs do not want to be gatekeepers on immigration issues. We are therefore reliant on UKBA to ensure that people who are entitled to be here are here, and that people who are not entitled be here are not here. He also made a distinction regarding foreign nationals who come here specifically to access NHS care. I remind the shadow Minister, probably because I am significantly older than him, that this issue goes back a great deal further than the previous Labour Government. It probably goes back further than previous Conservative Governments, which have to be thanked for making the NHS such an attractive option that people came here as health-care tourists a long time before 1997.
I share the concern and frustration of the hon. Member for Ealing, Southall about immigration status. I have a university in my constituency. A lot of foreign students try to regularise their status in this country and fail to do so—their passports are left with the Home Office for goodness knows how many months and the situation becomes very confusing. I think that the people he is talking about are in the grey area in the middle. We need to address this matter and will continue to work with the Home Office. To repeat for the record, the recently amended immigration rules state that a person with a debt to the NHS of £1,000 or more can now be refused a new visa or extension stay. That should not only assist in recovering more debts, but act as a deterrent against failing to have health insurance when visiting the UK.
[Mr David Crausby in the Chair]
Anne Milton
It will bring the focus closer to home. I would expect the shadow Minister to welcome this change, because GPs will now be much more acutely aware that registration with them should not automatically entitle people to NHS acute trust care. We are undertaking a review that I will mention in my concluding remarks. It is early days in respect of the UK Border Agency and the change in the immigration rules, so we do not have sufficient information adequately to evaluate how effective they are, but I think that we will see a significant impact. The shadow Minister asked specifically about the Olympics.
Jim Shannon
The Minister said that £14 million in debts was written off by the Government. Do the Government contact the countries that people have come from to try to recover some of those debts, or is it too costly administratively to do that? Is it cheaper to write off debts than to chase them up?
Anne Milton
That is true of all debts. Trusts are not always aware of the rules and the obligations placed on them. Sometimes, they do not have the infrastructure in place to chase such debts and sometimes the costs of chasing debts are greater than the debts themselves, so they write them off. Either way, it is clearly not fair on the taxpayer. West Middlesex is an exemplar. We in the NHS are not good at sharing best practice, but practice at West Middlesex should be spread more widely.
Back in 2005, when the Labour Government were in power, as part of the UK’s successful bid for the 2012 Olympics they committed to provide games family members with free medical care. The games family is a tightly defined group of people—athletes and their support teams, officials, accredited media and IOC members—who are directly involved in taking part in or supporting the games. We have introduced a specific exemption for those people in respect of hospital treatment that might otherwise be chargeable, which will last for only nine weeks around the time of the Games and will be limited to treatment, the need for which arises here, so pre-planned or routine ongoing treatment that can wait will not be free. Normal charging rules will apply to all other visitors, including those coming to see the games.
The NHS has been briefed to be particularly vigilant in screening visitors who seek treatment and in applying the charging rules, given the large influx of visitors to the country. Let me reassure the residents of Hackney—the shadow Minister rightly said that Homerton is one of the designated hospitals—that treatment will be given on the basis of need. Local people should not suffer at all as a result of these rules which, as the shadow Minister will be aware, were an important part of the previous Government’s bid.
My hon. Friend has mentioned some of the details of our review. It is important that there should be qualifying criteria, a full range of other criteria exempting services or visitors from charges, and criteria for charging for services outside hospital, as we move towards more care being delivered outside hospitals. We need to be mindful of costs that could be incurred, thereby ensuring that we have more efficient and effective processes throughout the NHS, including the ability to screen eligibility. Let me reassure the hon. Member for Strangford (Jim Shannon) that it is important that we work closely with the devolved Administrations, and have close discussions with them, to ensure that there are not unforeseen and unintended consequences.
Once again I thank my hon. Friend the Member for Kingswood for introducing the debate, and I thank hon. Members for the balanced, moderate nature of the discussion. It is important that we set an example—all parties desire to do so—and demonstrate to the public that such difficult issues, which can involve distinct communities, can be discussed and considered in a fair and balanced way and are matters of cross-party concern, with all political parties working together. It is not becoming for any politician to score party political points on an issue of such fundamental importance to the taxpayers of this country.
Incandescent Light Bulbs
(11 years, 11 months ago)
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Sheila Gilmore (Edinburgh East) (Lab)
It is a pleasure to serve under your chairmanship, Mr Crausby. This debate will not be a complaint about poor light quality, which some people have mentioned in the past, or about the ugliness of some of the light bulbs in question when they appear under a beautiful lampshade. [Interruption.] Some hon. Members are raising their eyes towards the ceiling as I speak. Finally, I do not seek to become part of a crusade by the Daily Express against the European Union, as happened when I tabled an early-day motion on this subject.
This debate is about a serious issue for people, perhaps relatively small in number, who could not sit in this Chamber, as I and other hon. Members are doing, underneath these lights. Those people could not stay in this Chamber to take part in this discussion, even if they were able to, because of the effect that these light bulbs would have on them.
My interest in this matter was stimulated by a constituent, Catherine Hessett, who contacted me shortly after my election in 2010. She is the co-ordinator of Spectrum Alliance, a group that campaigns on behalf of individuals who have suffered negative effects from low-energy lighting. Those people have suffered ever since the roll-out of low-energy lighting, and they need to use what are considered to be the old-fashioned, high-energy, incandescent bulbs in their homes. At the moment, they can do that because they are still able to source those bulbs, but that is coming under serious threat from the regulations that are set to remove incandescent light bulbs from the market by September this year.
Until my constituent contacted me I was unaware of such concerns, and I imagine that that is widely true elsewhere. After some investigation, however, I concluded that the views of the Spectrum Alliance needed to be raised in Parliament, and that the Government need to do something to prevent people such as my constituent from being forced to live in the dark for the rest of their lives.
I will go on to talk about the legislation, but first I will give a little more detail about the impact of this problem on certain individuals. The Spectrum Alliance has evidence to suggest that low-energy lightning—for example, compact fluorescent lamps such as those above us—aggravate a range of pre-existing medical conditions that include lupus, migraines, autism and ME.
The first example I will cite is that of a woman who suffers from lupus, a systemic auto-immune disease in which the immune system attacks the body’s cells and tissues. She develops a visible burning skin reaction, sore red eyes and a headache within minutes of exposure to fluorescent lights. In the past, doctors have suggested the use of bulbs that screen out ultraviolet light, but that makes no difference. Other lupus sufferers have reported similar experiences. It is important to stress, however, that although some individuals do not have recognised pre-existing conditions such as lupus, they nevertheless find that these bulbs impact on their health.
My second example is of a lady who has no pre-existing medical condition. She worked for an employer for several years, was happy in her job and had good prospects. However, when her employer moved into a newly-built office, she developed disabling headaches from the first day as a result of the low-energy lighting in the workplace. She had to take time of work because of the problem, and is likely to lose her job.
James Wharton (Stockton South) (Con)
I congratulate the hon. Lady on securing this important debate. To add some context, I should say that a close relative of mine suffers, although not as seriously as the people in the cases mentioned by the hon. Lady, from migraines brought on by a pre-existing condition that is worsened by long-term exposure to this sort of bulb. Although there are extreme examples, there is also a whole spectrum of ways in which these bulbs can have a negative impact on the lives of our constituents.
Sheila Gilmore
I thank the hon. Gentleman for his helpful intervention. In the two examples that I mentioned, the reaction to exposure to the bulbs was extreme and rapid. Many people suffer in a lesser way, but it is nevertheless an issue for them and something that we could, and should, avoid. However committed we may be to our energy obligations—and we should be—it is important not to ignore the adverse effects on some of our population.
The scale of the problem is not insignificant. In answer to a written parliamentary question on 1 February 201l, the Under-Secretary of State for Health (Anne Milton) referred to figures that estimated that 250,000 people in the EU are at risk from increased levels of ultraviolet radiation or blue light generated by compact fluorescent lamps.
Joan Walley (Stoke-on-Trent North) (Lab)
I am grateful to my hon. Friend for securing this debate. Does she agree that the Departments for Environment, Food and Rural Affairs, for Business, Innovation and Skills, and for Energy and Climate Change should work in a cross-departmental way to see what further research could be done in the European Union to look at the long-term effects of new technologies on people who have a pre-existing condition? We must start looking at what long-term changes might be needed, while also having regard to those who are suffering now, and we must see whether there is a way of obtaining a dispensation so that such people are not exposed to those causes of ill health, as appears to be the case at the moment.
Sheila Gilmore
As chair of the all-party lighting group, my hon. Friend has extensive knowledge of that subject and the issues that should be raised. Although long-term research is always helpful, we must also focus on the impact on individuals. As the Health Minister indicated, the figures she gave could equate to 30,000 or 40,000 people in the UK being affected by this problem. Those, however, are people who are known to have a pre-existing condition, and the Spectrum Alliance estimates that the true number of people affected in the UK—with, as has been said, varying levels of impact—could be as many as 2 million, many of whom are already suffering from conditions such as migraines or autism.
The science behind this issue may not yet be entirely resolved, and although the light bulbs in question have a clear impact on people, we must do some research into the matter. Low-energy lighting operates differently from incandescent bulbs in terms of levels of ultraviolet radiation, electric fields, flicker and peaks in light wavelength, especially with blue light. As yet, research has not been sufficiently in-depth to enable us to say which features of fluorescent bulbs have an effect on health, because they differ from incandescent bulbs in multiple ways. We do know, however, that people’s health is not affected in the same way when they use incandescent bulbs.
Let me be clear: I do not seek to discourage the use of low-energy light bulbs and lighting where that is useful and helpful. I acknowledge that climate change is one of the most significant challenges that we face as a country and I welcome the positive contribution that lighting can make in reducing our energy consumption. However, I do not believe that it would be right to implement the ban on incandescent light bulbs so dogmatically that people suffered. That is the crux of what I am saying.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I am grateful to my hon. Friend for securing the debate. I am sure that many hon. Members agree with the point that she is making. This is not about being against low-energy light bulbs as a generality, but about recognising that some individuals have a particular problem with that lighting. There is a danger in just dismissing their concerns, which need to be taken seriously. That is all we are asking for, and I hope that the Minister will respond positively at the end of the debate.
Sheila Gilmore
I thank my hon. Friend for his intervention; that is indeed the outcome for which I am hoping.
The key legislation in this area started with the ecodesign of energy-using products directive in 2005. That was updated and recast four years later by the ecodesign directive of 2009. Those directives set down rules on the environmental performance of products that used energy, such as light bulbs, and those that related to energy use, such as windows. They set the framework for further implementing measures, and the relevant Commission regulation of 2009 set out a timetable for the phasing out of the manufacture and import of incandescent bulbs. The position is that 100 W bulbs were banned in 2009, 75 W bulbs in 2010 and 60 W bulbs in 2011. The remaining 40 W and 25 W bulbs will be banned as of 1 September 2012. That regulation was not voted on by the European Parliament—it went through without debate—and it is directly applicable. That is why there is no transposing legislation at our level.
Concerns about health impacts have been acknowledged at EU level, although that has not yet been reflected in better policy. In 2008, the European Commission scientific committee on emerging and newly identified health risks—commonly referred to as SCENIHR—produced a report that concluded that although single-envelope CFLs could induce skin problems among some people, that might be alleviated by the use of double-envelope CFLs. However, Spectrum Alliance is clear that its members have tried those double-envelope bulbs and that, although they are an improvement for some people, they still induce similar symptoms in most of those affected.
The concerns were acknowledged when the European Commission asked SCENIHR to produce an updated report in March 2012. That was published in draft form in July 2011 and in full in March this year. It, too, referred to the possible health impacts of low-energy lighting, but SCENIHR itself does not carry out first-hand research; it simply reports on research that has been carried out. It concluded that because of the considerable variability of the components for lighting technologies, no general advice could be given to individuals about how they could avoid those health impacts.
It is possible that some people will be able to find means of lighting other than incandescent bulbs. It has been suggested that they could try light-emitting diodes—LEDs—or the double-envelope CFLs, but again the Spectrum Alliance campaigners are clear that neither of those technologies has yet succeeded in overcoming the problems that people are suffering.
My hon. Friend the Member for Stoke-on-Trent North (Joan Walley) chaired a meeting of the all-party lighting group last October. Present were representatives from Spectrum Alliance, the lighting industry and the relevant Departments: BIS, DEFRA and the Department of Health. We discussed a number of options. It was made clear that the Government would not wish to defy the regulation, that they did not simply not implement things that they did not agree with and that they could be fined under the infraction proceedings if they sought to do so.
We then discussed the possibility of an exemption for people with medical needs. There is a precedent: rough-service lamps are already exempt under the regulation. Rough-service lamps are incandescent bulbs that are used for industrial purposes where a low-energy alternative would not work properly. There is, therefore, a precedent for having an exemption for industry. We argue that an exemption should also be made for people with specific health needs.
Earlier this year, my hon. Friend and I met Lord Taylor of Holbeach, the Minister with responsibility for this area. On hearing the arguments, he expressed some concern that people might seek to take advantage of any exemption, but I would have thought that it was possible to configure a system to prevent, or at least to minimise, that risk. For example, incandescent bulbs could be dispensed by prescription at pharmacies.
The Minister also expressed the strong hope that emerging technologies would resolve the problem for us. That may be the case in the future. There may be—I sincerely hope that there is—a lighting technology around the corner that will resolve the problem. It would meet the low-energy requirements but without the health effects that I have described, but at the moment it does not exist. That is a serious practical problem.
Lord Taylor also indicated that he would be keen for further research to be carried out, and I certainly would not in any way say that there should not be further research. However, although I support further research, I want to suggest that both the Government and the European Commission are coming at this issue from the wrong direction. It makes sense to resolve any uncertainty about the safety of products before we force people to use them—rather than afterwards, when the alternatives have been withdrawn. In this case, consumers are being expected to prove that certain products are unsafe, rather than the Commission and the Government having ensured that they were safe in the first place.
I ask the Minister this central question: if nothing is done, what are my constituent and many more like her to do? Are the Government comfortable with forcing people to live in the dark for the foreseeable future? I am sure that the Minister finds that situation no more acceptable than I do. I understand that limited options are available, but I ask him to do whatever he can to allow people who suffer negative health impacts from low-energy bulbs to continue to purchase incandescent bulbs when the ban comes into full effect in September.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
I congratulate the hon. Member for Edinburgh East (Sheila Gilmore) on securing the debate and on representing her constituents—indeed, all our constituents—who are suffering in the way that she describes. There can be an extensive discussion about the extent to which the problem exists, but I think that we all recognise that it is a problem and that she was right to bring it to the House today.
It is important to place on the record the context in which the current changes are being made. Then I shall talk about the health issues that the hon. Lady raised so forcefully. The Government recognise, as I think the hon. Lady does and as the hon. Member for Stoke-on-Trent North (Joan Walley) certainly does in her role as Chair of the Environmental Audit Committee, that climate change is one of the gravest challenges that we face and that urgent action is required to tackle it. Failure to transform how we produce and consume in the UK will expose the economy to many risks—from the damage wreaked by the effects of climate change to constraints on future growth from unsustainable depletion of our natural capital. The Government have set out clearly how they want to be the “greenest Government ever” and that that must be based on action, not words. Ensuring the sustainability of products is one way in which we can act now.
The amount of energy consumed by household electrical goods is staggering. Products targeted by the European eco-design and energy labelling directives account for an astonishing 50% of the European Union’s energy consumption. We need to promote the most efficient products to consumers, which in turn rewards the businesses developing and selling them. Energy labels are an effective way of doing that. The EU’s A to G energy labels enable consumers to choose efficient appliances. Labelling also enables manufacturers to compete against one another on the environmental performance of their products.
There are, none the less, occasions on which policies such as labelling and consumer awareness fail to produce the necessary switch to more sustainable products. In those cases, choice editing by removing the least efficient products from the market remains one of the most cost-effective ways of reducing energy consumption, while at the same time benefiting consumers and businesses by reducing their energy bills. As a member of the European single market, the UK cannot by itself introduce mandatory minimum energy performance standards for appliances because it would inhibit free trade. The EU eco-design for energy related products framework directive is a single market directive under article 95 of the EU treaty and provides the legal framework within which implementing measures set standards for the environmental performance of products or product groups. Those measures can take the form of regulations or voluntary initiatives.
To date, 12 regulations have been agreed under the eco-design directive and two voluntary initiatives are close to agreement. The regulations are expected to save the UK almost 7 million tonnes of CO2 a year by 2020. They are expected to generate just over £850 million a year in net benefits for British consumers and businesses through reduced energy bills. I recognise that the hon. Member for Edinburgh East is keen for me to move on to the health issues, but it is important to put these points on record. Lighting is a major contributor to global energy consumption. The International Energy Agency estimates that electricity consumption for lighting represents almost 19% of global electricity use and is responsible for approximately 8% of world greenhouse gas emissions.
The regulation of 2009 became directly applicable in all EU member states after agreement by the European Parliament and Council in spring of that year. It sets minimum standards for non-directional household lamps—in other words, bulbs that provide a spread of light, such as those under which we are sitting, as opposed to, say, spot lamps. Incandescent light bulbs waste 95% of their energy as heat. They are therefore too inefficient to meet the standards, so are being in effect phased out in the EU. Other countries phasing out or planning to phase out incandescent light bulbs include Australia, Brazil, China, Japan, Russia, South Korea and the United States. The regulation is predicted to save 39 TWh across the EU annually by 2020. Within the UK, it will mean net savings each year of 0.65 MtCO2e and 0.3 TWh by 2020. The average annual net benefit to the UK between 2010 and 2020 is predicted to be £108 million.
CFLs use 20% to 25% of the energy an incandescent light bulb uses. Halogen light bulbs offer anything between 20% to 45% energy savings on incandescent bulbs. The Government are working to encourage the development and use of ultra-efficient lighting, which could produce even greater savings. For example, DEFRA and the Technology Strategy Board ran a successful £1.2 million challenge to develop LED lighting to replace conventional incandescent lamps. The initiative successfully supported two small and medium-sized enterprises—Juice Technology and Zeta Controls—to prototype stage. That is an excellent example of how minimum standards are driving innovation and transforming the market.
Problems, such as slow warm-up times and poor quality light, were reported with some early CFLs. However, the industry has responded well to the challenge to produce new quality products. Regulation 244/2009 assisted by putting in place minimum standards for the performance of CFLs, which protects consumers from substandard products and the manufacturers of quality products from unfair competition. The hon. Lady mentioned flickering, which did cause problems in older light bulbs, and it was believed that that contributed to considerable difficulties for migraine sufferers, but it has been improved, although not to the satisfaction of all. I will come on to those issues now, but both the performance and the choice of CFLs has improved a great deal.
Although energy efficient lighting produces significant environmental and financial benefits, we need to ensure that lighting solutions remain available for people with light-sensitive health conditions. CFLs can generate higher levels of UV and blue light than incandescent lamps. Those levels are much lower than a typical summer’s day, but present a potentially greater risk to a number of people with light-sensitive skin disorders. The European Commission’s scientific committee on emerging and newly identified health risks—I, like the hon. Lady, will call it SCENIHR—estimates that up to 30,000 people in the UK are potentially at risk, but I accept that the figure is disputed and could be higher.
DEFRA and the Department of Health have been closely engaged with patients’ support groups and charities, the lighting industry and the Health Protection Agency. In fact, as the lead DEFRA Minister, Lord Taylor of Holbeach, whom the hon. Lady met, will shortly meet one such group—Spectrum, to which she referred—and I hope that the meeting will include the constituent she mentioned. The Department of Health and Health Protection Agency have fed evidence into SCENIHR’s opinion on the health effects of artificial lighting, published in 2008, and its updated opinion, published in March this year. SCENIHR concluded that the use of double-envelope CFLs, which look like a traditional light lamp, can mitigate the risk of aggravating the symptoms of light-sensitive individuals. The hon. Lady has reported that there is some scepticism on that, and we have more work to do.
Anecdotal evidence suggests that halogens might be an adequate alternative in some cases. Most LEDs for general lighting emit little or no UV radiation. They therefore potentially offer an even better alternative. Nevertheless, the updated opinion recommended further research on the relationship between artificial lighting and various health conditions.
Richard Benyon
I will give way very quickly, but I am coming to the key point.
Sheila Gilmore
Will the Minister clarify whether, while waiting for all the research to come to fruition, he is prepared to support an exemption that would enable people to get the lamps?
Richard Benyon
We are lobbying the Commission to bring the research forward before 2014. That is a key point that we want to get across. I will discuss the matter with my colleague, Lord Taylor, and he in turn will talk to Health Ministers to see if there is any wriggle room that will allow some form of exemption, such as the one that the hon. Lady described. I liked her suggestion about the possibility of using pharmacies. We are open-minded. What we do must be legal and recognise that there is a problem that we want to resolve.
The regulation includes a requirement for it to be reviewed before 2014, but we think that that should be done sooner. We will work with our European partners to ensure that the review takes full account of the best available scientific evidence on the health effects of artificial light. We are therefore pressing the Commission to ensure that the research is completed much earlier in order to feed into the review.
Energy efficient lighting, with other energy efficient products, can produce significant energy savings.
Joan Walley
I am listening hard to the Minister. Can he give my hon. Friend an indication of the time scale? Will he report back to her on the discussions that he intends to have with Lord Taylor about the health issues and what he referred to as the “wriggle room” within what is legal?
Richard Benyon
I will talk to Lord Taylor, as I agreed, subsequent to the debate. If the hon. Lady will allow me to say so, it will be for him to contact her and the hon. Member for Edinburgh East to see how we can take things forward. I recognise the genuine concerns that have been brought to the attention of the House through the early-day motion and today’s debate. I assure the hon. Member for Edinburgh East that the Government take these matters seriously and we will seek to resolve the concerns of her constituent and our constituents who are affected.
Fracking
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David Morris (Morecambe and Lunesdale) (Con)
I am delighted to have secured this debate on fracking—or, to give it its proper title, hydraulic fracturing. I hope that by the end of the debate we shall have laid some myths to rest, and that the House will be satisfied that the opportunity that fracking presents is being explored in a responsible manner.
I would not describe myself as either pro-fracking or anti-fracking; I support the exploration of any new energy source as long as it is safe. We need a mix of different energy sources, so that we are never reliant on one in particular. I think that we all agree with that. I understand that the Minister who would usually respond to the debate, my hon. Friend the Member for Wealden (Charles Hendry), is unable to be here and I thank his colleague, my hon. Friend the Member for Bexhill and Battle (Gregory Barker), for stepping in. Both my hon. Friend the Member for Wealden and his Parliamentary Private Secretary, my hon. Friend the Member for Fylde (Mark Menzies), have done a huge amount to help explore the important technology in question, while dealing with the safeguarding of our constituents and calls for tighter regulation. The House owes them a debt of gratitude for their tireless work.
I suppose I should explain my interest in this subject. The Bowland basin is not in my constituency, but many of the people who would work in the industry are. Furthermore, Morecambe and Lunesdale is one of the biggest energy producers in the UK. Heysham 1 and 2 produce 4.5% of the national grid’s capability; Centrica’s liquefied natural gas support station brings gas in from across the world to the UK; a number of offshore drilling operations exist in Morecambe bay; and, most controversially, wind farms, if they cannot be built in the lakes, are threatened in our area.
Engineering and energy production are major exports for my constituency and the whole of north Lancashire, so we are positive about any opportunities, especially given that 5,600 jobs could be created nationally—and, potentially, 1,700 in the wider Morecambe and Lunesdale area. Obviously, when local people are trained to do that sort of work they will have opportunities to go abroad, as happened in Aberdeen after the North sea oilfield opened—something that became known as the Aberdeen effect.
Fracking is not a new technique; it has taken place in the UK for decades. What is new is that the established technology is being used to extract shale gas, which has revolutionised gas production in north America. In the past, the USA and Canada had a shortage of gas, but today their industry is booming. The rise in shale gas production is striking, going from 28 billion cubic metres in 2006 to 140 billion cubic metres in 2010. Gas reserves are now at their highest since 1971—an amazing thought, given the dire predictions for their supplies a few years ago. I think we would all like the UK to benefit from that kind of gas supply.
The industry is keen to point out that we are unsure how much shale gas we have in the UK, but one estimate by Cuadrilla suggests that the Bowland site alone could have 5.6 trillion cubic metres. Obviously, not all that gas can be extracted, but that estimate would make the field comparable in size to the second most productive field in America—the Barnett shale in Texas.
In 2010, the Department for Energy and Climate Change predicted that gas prices would rise by 21% by 2030. Suddenly, by taking into account more and more shale gas, they revised that estimate down to 11%, so shale gas may well halve the rise in gas bills over the next 20 years—a welcome thought to those struggling to pay energy bills.
Guy Opperman (Hexham) (Con)
I congratulate my hon. Friend on securing this debate on an important issue. I am a supporter of the economic and environmental benefits of shale gas. Does my hon. Friend agree that the data show that it has cut carbon emissions in a way that wind, solar and biomass have singularly failed to do?
David Morris
Yes, I agree, and we should be striving towards a lower-carbon economy. Shale gas would contribute to that. It is better for the environment than other energy sources—that has already been acknowledged—and it now helps to meet Government targets for low emissions, as my hon. Friend has just said. Research by Policy Exchange states that if China were to switch from coal to shale gas that would cut its emissions by five times the UK’s total carbon output, so there is a big prize. If we get things right and sort out the concerns, we can have a good and healthy market in the UK.
At the end of the process, we will need to know that we made the best use of our technology and natural resources, but in an environment that protects the public, so I want to ask the Minister to clarify some points. What steps are being taken to ensure that waste water does not contaminate the environment? How will we prevent fugitive emissions? What steps are being taken to reduce seismic activity? What rights will landowners and local communities have to benefit from mineral rights? Overall, what steps are the Government taking to ensure that our regulatory environment is fit for purpose?
Eric Ollerenshaw (Lancaster and Fleetwood) (Con)
I congratulate my hon. Friend, and neighbour, on securing the debate. On the issues he listed, does he agree that what is not understood by the powers that be is that the water source for residents in my area—particularly in Bleasdale—is their own bore holes? Residents are extremely worried about a process that involves the water table, which fracking seems to hit. My hon. Friend talked about mineral rights; again, it is not understood that in most parts of my constituency the mineral rights do not belong to the landowners, but to the Duchy of Lancaster, even if the land is sold on. There is little direct benefit to the farmers who own the land on which the fracking will potentially take place.
David Morris
I thank my hon. Friend, whose constituency is next to mine, for the work that he has done locally on the issue. There are issues to be addressed in the contexts that he mentioned. Like him, I am worried about contamination of water supply in the area. I want to touch later on the possibilities of mineral rights for landowners.
Guy Opperman
I am sure that my hon. Friend is coming on to this point. I endorse the comments of my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). Just as mineral rights and the benefits from wind power are felt not by the wider community but by an individual farmer or energy company, so it is with fracking. I suggest that if mineral rights were to benefit the whole community, rather than an isolated individual, fracking would be a great deal more popular and bring much more benefit to the community.
David Morris
Hear, hear! I agree with everything that my hon. Friend said.
We have all seen things go wrong in certain parts of America, but we must also bear in mind that last year the Americans drilled 45,000 wells, with very few problems. They are also operating much older wells that exist in a less strict regulatory environment than here in the UK. That must be understood. I hope that we can benefit from their success and, most importantly, learn from their mistakes.
Today we stand at the beginning of a revolution in UK gas production. We have a community with the expertise. Lancaster university, the nuclear power industry and small and medium-sized enterprises are already geared up to exploit that resource and we look forward to falling energy bills as a result. I hope that the Minister can clarify my concerns. Most of all, will he assure me that DECC is doing everything it can to push this project forward in a safe and responsible way? That is the road to a safe, profitable and cheap supply of energy for the 21st century.
The Minister of State, Department of Energy and Climate Change (Gregory Barker)
I congratulate my hon. Friend the Member for Morecambe and Lunesdale (David Morris) on securing the debate and giving the issue such rigorous, thoughtful and well researched attention, as it deserves.
The role of unconventional gas and hydraulic fracturing, or fracking, is indeed topical. I have just come back from the United States, and no one there who takes the slightest interest in the energy or climate change agenda can fail to be moved by the huge impact that it is having on the economics and politics of energy—the huge potential benefits to the US economy, the challenges presented to other parts of the energy sector, and the questions raised about the long-term climate change implications of the new fossil fuel.
Guy Opperman
I am grateful to the Minister for giving way and I apologise for interrupting his speech just as he was gaining momentum. He talks eloquently about the way in which America is transforming its energy provision and dramatically reducing its energy bills. In his State of the Union address in January 2012, President Obama said that any company drilling on Government land would have to disclose the chemical used for fracking so that
“America will develop this resource without putting the health and safety of our citizens at risk.”
Is not that the right way for us to be going ahead as well?
Gregory Barker
Absolutely. I could not agree more, and I will elaborate on those points during the course of my speech and endeavour to answer the questions that have been raised.
There are not only huge opportunities here for us, but some big challenges. We need to be rigorous and thoughtful in addressing this issue, not least because of the significant impact that the exploration and development of shale gas is having on the US, and stands to have in the UK, Europe and Asia.
The resource has, as I have said, revolutionised the energy market and allowed the US significantly to increase its indigenous production and benefit from lower gas prices, which have not proportionately flowed through into lower electricity prices to consumers. None the less, there are benefits feeding right through to the manufacturing base, which obviously raises the question of what impact shale gas would have on the UK and its energy supplies. I hope to shed some light on that pertinent matter during this debate.
As my hon. Friend the Member for Morecambe and Lunesdale will be aware, the Government are considering the implications of the seismic tremors that occurred last year in the Blackpool area, adjacent to his constituency. The Royal Society and the Royal Academy of Engineering are currently conducting a study of the potential risks of shale gas extraction. For the UK, therefore, the subject is very much in the public eye, and the debate here is timely.
Let me be clear about the Government’s position. This weekend, press stories suggested that there has been a sudden reversal in the Government’s position on shale gas, but I am afraid that that is not the case. The Government’s position has remained cautious but balanced throughout. If there is a change, it is only in media perceptions.
There has been some rather breathless speculation that shale gas in the UK could be the “game changer” that it genuinely is in the US. What has happened in the US has been dramatic. Shale gas production has grown from a very small base in the 1990s to supply about a fifth of US demand today, and it is set to increase still further. However, there have been problems, such as the reported pollution of drinking water, and there are concerns about the fracking process on which shale gas production depends.
Our position on UK unconventional hydrocarbon resources is a balanced one, and matches that which we take towards conventional oil and gas exploration and development. We support the tapping of these resources where it is technically and economically viable. As imperative as it is that we meet our climate change targets, it is also a matter of common sense that we continue as an economy and nation to be dependent on fossil fuels for many years to come. Wherever there is an opportunity to harvest or extract those fossil fuels in the UK or in our territorial waters, of course we should do so, provided that it can be carried out with full regard to the protection of the environment.
Eric Ollerenshaw
May I raise another problem on top of the two that I raised with my hon. Friend the Member for Morecambe and Lunesdale (David Morris)? The north part of Lancashire, which is in the constituency of my hon. Friend the Member for Fylde (Mark Menzies), faces shale gas exploration, and across the river Wyre from Fylde, there is a proposal to excavate salt mines to store imported liquefied gas. We also have a proposal for new wind farms to be sited off the Isle of Man, and the National Grid is proposing to bring in the power down the river Wyre—between fracking on one side and the storage of gas on the other. At the top end of my constituency, near the seat of my hon. Friend the Member for Morecambe and Lunesdale, there is a proposal for another nuclear power station. Added to that, National Grid wants to bring power from existing wind farms off Cumbria through even bigger pylons that will be sited in the middle of my constituency, adjacent to the M6 motorway. Although people in Lancashire recognise the nation’s need, they wonder who will secure a balance in relation to what they will get out of it. Will Lancashire be left covered with pylons, transmission towers, and wind farms on the hills and out at sea? After the extraction underground of everything in the region, will Lancashire even exist in 25 years?
Gregory Barker
But apart from that—[Laughter.] No, my hon. Friend makes a serious point and I understand his concerns. No one could suggest that Lancashire is not taking more than its fair share of the burden of the energy economy. However, there are many opportunities to be gained. Each of the points that he raises bears serious consideration. Let me assure him that my Department not only looks at these things individually, on their own merits and in their own right, but takes into account the wider picture that is created by these individual interventions.
Guy Opperman
I welcome the point about the wider picture. In Northumberland, which is no less deserving than Lancashire, there are applications for two open-cast mines. Given that those open-cast mines will exist for years and will produce barely eight to 10 days’ worth of coal for particular power stations, and that fracking has the potential to produce about 150 billion cubic metres of gas, one has to add up the relative benefits. The people of Northumberland, and of the wider country, want an energy strategy that takes into account these points. On that issue, I endorse entirely what was said by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw).
Gregory Barker
My hon. Friend’s eloquent intervention is on the record, and I certainly take on board his points. I now want to crack on because I want to reply in some detail to the serious points that my hon. Friend the Member for Morecambe and Lunesdale raised in his opening speech.
Sir Gerald Kaufman (Manchester, Gorton) (Lab)
I very much welcome the cautious way in which the Minister is explaining this issue to the Chamber. It is important that we balance the apparent short-term gain against the serious danger of long-term detriment, which will be impossible to reverse once the process is under way.
Gregory Barker
There are good reasons to think that, whatever the resource may be, shale gas will not develop as dramatically here as it has in the US. Britain is a much more densely populated country, and shale gas is still in its very early days here. Just one well in the UK has been drilled and fracked, so the production prospects are simply unknown at this stage. Whatever they may be, the Government will continue to seek full economic recovery of UK hydrocarbon resources—both conventional and unconventional—when that can be done safely and with environmental integrity.
Joan Walley
I am very grateful to the Minister for giving way; I know that time is of the essence. Regarding the environmental integrity that he has just mentioned, can he tell us what cross-cutting work he is doing, first with the Department for Environment, Food and Rural Affairs in respect of the concerns about the possibility of groundwater contamination, and secondly with the Department of Health in respect of the health concerns about the potential risk of air pollution?
Gregory Barker
I will come to the points about groundwater pollution later in my remarks—if I am able to get to them. In respect of the work with the Department of Health and DEFRA, I fear that I will have to write to the hon. Lady to let her know about that work in more detail.
I turn now to the role of gas and carbon capture and storage in UK energy supply, because changes in the UK energy sector during the next 10 to 20 years will create new sources of gas demand. We will need gas to retain sufficient electricity generation capacity margins in the face of coal-nuclear closures, to manage intermittency from increased use of renewables, and to continue to meet the majority of our heating needs. Equally, we are taking steps to address the possible use of fossil fuels in the low-carbon energy economy of the future.
In the long term, there will be a fundamental shift in the role of gas in electricity supply. By 2050, a major role for gas as a base load source of electricity will only be realistic with large numbers of gas CCS plants. One of our key policy objectives is to enable cost-competitive deployment of CCS by the early 2020s. Last week, we announced the names of the companies who have indicated their interest in the new UK CCS competition, which is a flagship policy for this Government. I am very encouraged by the high level of interest that those companies have demonstrated. It shows that we are on track with CCS, a key technology that is enabling us to make use of fossil fuels while protecting, enhancing and driving forward our climate change objectives.
I now turn to shale gas specifically. It has been said that it is still very early days for shale gas in the UK. However, I am told that the pattern of development of a new shale gas basin in the US has shown roughly three phases: first, initial discovery and the use of appraisal wells to prove the presence of the gas and the size of the resource; secondly, an experimental phase in which the explorers work out the best techniques to obtain production from the particular type of shale; and thirdly, the production phase, in which an efficient pattern of production wells can be drilled to extract the gas on a commercial basis.
Clearly we are right at the beginning of this whole process; only a handful of wells have been drilled and their production potential has yet to be quantified. However, it is encouraging that Cuadrilla believes that there are good quantities of shale gas in the rocks underlying its licence area in Lancashire. Nevertheless, it is still too early to say whether those resources can be extracted economically and safely.
The answer to the question, “What contribution might shale gas make to UK energy supplies?” is even more uncertain. I will not speculate on that issue today. However, if shale gas can be safely and economically exploited here, the Government would obviously welcome any positive contribution it would make to energy supplies, jobs and the economy.
I will now address the specific questions put by my hon. Friend the Member for Morecambe and Lunesdale. First, what steps are being taken to ensure that waste water does not contaminate the environment? That question was echoed by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). Secondly, how do we prevent fugitive emissions, which is a big problem in the US? Thirdly, what steps are being taken to reduce any seismic activity? Fourthly, there is the overall question of what steps the Government are taking to ensure that our regulatory environment is indeed fit for purpose?
In response to the first question, which was about water waste, I must say that my hon. Friend the Member for Morecambe and Lunesdale made a very important point, which was echoed by my hon. Friend the Member for Lancaster and Fleetwood. It is essential that any waste water or flow-back fluids that come from fracking operations are handled carefully and treated properly. Disposal of waste water falls within the regulatory responsibilities of the Environment Agency, which has a range of regulatory powers to ensure that such operations are carried out without causing harm to the environment. The agency will consider all proposed operations and will only permit them if it is satisfied that the intended disposal route will not harm the environment. The waste water could either go to a waste treatment plant that is already permitted, or specific disposal arrangements would need to be agreed with the agency. With regard to Cuadrilla’s current operation, the return fluids are currently being retained on-site by the company and stored in double-skinned tanks. A permit for correct disposal of them is required, and Cuadrilla is in discussions with the Environment Agency.
Secondly, how do we prevent fugitive emissions? That is a very important issue; indeed, I was also asked about the control of fugitive emissions. Most aspects of shale gas operations—for example, the construction of the well, the well-head equipment and any pipeline—use exactly the same technology as conventional gas production. Provided that that technology is competently constructed, there is no reason to think that unintended emissions from shale gas will be different from conventional gas emissions or will pose new problems. At present, methane emissions from gas production are estimated to comprise less than 1% of our total greenhouse gas emissions, so fugitive emissions from current gas production activities are not a major contributor to greenhouse gas emissions.
At the exploration stage, however, it is normally necessary to dispose of any produced gas by venting or flaring, as there will not be any export facilities in place. Nevertheless, my Department imposes controls to ensure that venting—the release of methane—is minimised, so far as it is technically possible, and to ensure that any gas that is released is flared, which reduces the greenhouse warming potential of the gas by a factor of at least 20.
However, there is one aspect of shale gas production that is different from conventional gas production: with shale gas production, the rock is, of course, fracked by injecting water under pressure. Much of that water flows back and is collected at the surface. That flow-back water will then contain methane, which could add significantly to emissions if it was simply allowed to escape. Having said that, there is technology available—described as green completions—that can capture that methane. If the well is purely for exploration, the gas can be flared; as I have said, that reduces its greenhouse warming potential. In production, the gas will be exported and sold. As we have no proposals for production as yet, it is too soon to say precisely how that aspect of production operations will be controlled, but my Department will continue to control flaring and venting, and the Environment Agency is also considering how its powers might apply if there is production.
What we can safely say at this stage is that both my Department and the Environment Agency will expect all shale gas projects to demonstrate best practice, including green completions, and they will apply suitable controls to the operations in question, with exploration or production to ensure effective control of emissions.
Thirdly, what steps are being taken to reduce any seismic activity? If any future shale gas operations are allowed to commence, it is vital that they do not result in further seismic activity at the level that was experienced near Blackpool last year. That is why detailed analysis has been undertaken to determine the linkage between the seismic activity and the fracking, and to consider the best way to mitigate the risk that such events will occur again.
An expert study was commissioned by my Department, which found a link between the fracking and the seismic tremors near Blackpool, and it recommends a number of measures to mitigate the risks in any future operations. They include micro-seismic monitoring on the site and a traffic light system that would shut down operations if early signals suggest that seismic events are being generated. However, the Government have not yet decided whether to allow fracking to recommence. We will not be finalising a view on that issue until we have considered all the additional comments that have come in as part of the consultation process, which finishes this week.
Finally, what overall steps are the Government taking to ensure that our regulatory environment is fit for purpose? Although we do not have a robust regulatory regime for the onshore industry—[Laughter.] Sorry, we do have a robust regulatory regime for the onshore industry. I apologise; my contact lenses are a bit blurry. However, it is important that we consider how that regime sits for any longer-term development of shale gas. Consequently, we are proactive in relation to the regulatory position.
My Department, the Health and Safety Executive and the environmental agencies work closely together to share relevant information on shale gas activities, to ensure that there are no material gaps and to ensure that all material concerns are addressed. We consider that the regime and the co-ordination of the work of the regulators are adequate, at least for the current exploratory phase of shale gas activity. However, with a view to ensuring the continued adequacy of the regime if shale gas proves to be commercial and moves into the development phase, the Environment Agency is currently undertaking a detailed environmental assessment of shale gas extraction, so that it has all the information it needs to ensure that regulation is appropriate to protect the environment. Other regulators, including my Department, will contribute to that review. Furthermore, the Royal Academy of Engineering, along with the Royal Society, is currently conducting a review of the risks posed by shale gas extraction. That review is expected to report in the summer.
The Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Wealden (Charles Hendry), or I will be delighted to meet my hon. Friend the Member for Morecambe and Lunesdale to address any further concerns he has that have not been addressed in this debate.
Art Asia (Southampton)
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Mr John Denham (Southampton, Itchen) (Lab)
I am grateful for the opportunity to have this debate and I thank the Minister for his offer yesterday of a meeting. The problems that I will raise have been going on for more than two years and it is time to put them on the public record, but I hope that the Minister will still be prepared to meet after we have had the debate.
There are serious questions about how Arts Council England, with Southampton city council, has treated the important arts charity, Art Asia. Art Asia was offered a capital grant to develop new facilities, but today it faces the loss of the grant through a murky and underhand process to which it has had no proper chance to respond.
Over the past 30 years, Art Asia has become one of the country’s more significant south Asian arts organisations. Under its director, Vinod Desai, it began with two simple aims. The first was to enable young people, usually the children of first-generation migrants, to learn, perform and appreciate the music and dance of their parents’ and grandparents’ home culture; and the second was to bring high-quality live performances to those older generations.
Art Asia has how moved well beyond achieving those initial aims, and has brought Asian culture to a wider audience, notably through the highly successful Southampton Mela, which attracts tens of thousands of people from all communities each July. The charity has also influenced mainstream arts programming. For example, because Art Asia has been able to establish that there are audiences for Asian culture, the Turner Sims concert hall and the Nuffield theatre now include it in their own mainstream programmes. World-class musicians have been brought to many parts of the UK, including to Southampton and other parts of Hampshire, so Art Asia is a significant organisation regionally and nationally, as well as in Southampton itself.
In 2000, Arts Council England established a £20 million capital programme for black, ethnic minority and Chinese arts organisations, which recognised that such groups had not received their fair share in previous funding rounds. Given Art Asia’s strength, it is not surprising that it applied for and, in 2001, received, a promise of funding of just short of £750,000 from the programme. Clearly, Art Asia would not have received the award unless there was confidence in its leadership, management and financial conduct, and in the quality of its programming.
There are, of course, limits to what can be achieved with £750,000. At the time, Southampton city council was developing, with Arts Council England, plans for a city arts complex. Everyone sensibly recognised that more could be achieved if Art Asia joined as a full partner in the arts complex, and there were also the potential advantages of VAT-liability reduction in a joint, but city-led, project. In 2003, Art Asia agreed to pool its award as part of the funding for the larger project, a deal that would guarantee the organisation its own dedicated facilities and give it a clear, formal role in the management of the centre.
Perhaps Art Asia was a little naive in assuming that Arts Council England and the city council would act in good faith and with integrity, but rather than insisting on a formal legal agreement it relied on written assurances. The paper that went to the Arts Council England management committee to approve the joint project stated that
“the public benefits from Art Asia’s element of the project are that it will place south Asian arts in the mainstream of Southampton’s cultural life; through high-quality facilities enable Art Asia to attract first-class national and international artists to Southampton; provide a wider range of audiences with performance and participatory work of the highest standards; through larger premises enable Art Asia to offer greater accessibility to participants in its classes; provide audiences with high-quality auditoria of an appropriate size; and offer an increased range of education services”.
Art Asia’s role was, therefore, recognised at the most senior level within Arts Council England, and a cost allocation between the partners was agreed.
Arts Council England’s south east office wrote to Art Asia on 4 January 2007 confirming that an award of £5.7 million to Southampton city council included
“the £724,000 awarded to Art Asia in July 2005 in recognition of Art Asia’s decision to be part of Southampton’s New Art Complex”.
The letter continued:
“Art Asia’s involvement in Southampton City Council’s capital development is strategically important to us. We will continue to support your organisation as it prepares for the opening of the new building and an increased regional presence”.
That seems to have been a clear commitment of principle and practice by Arts Council England.
The planning of the major arts centre project went ahead, moving slowly as such things often do, but in early 2010 things began to change. First, in the run-up to the 2010 election, Arts Council England began to raise doubts about the whole arts complex project. A report by Arts Council England officers recommended the withdrawal of the project, citing among other things concerns about the artistic leadership of the arts partners, which included not only Art Asia but the Nuffield theatre and the John Hansard gallery. It was the first time that such concerns had been raised, and they were less than specific.
I intervened with the then Secretary of State to secure a further review of the project. That happened, but it became clear that Arts Council England wanted to exclude Art Asia from its central role in the project. By April 2010, Arts Council England was negotiating with only the city council and excluding the other partner organisations. In June 2010 the city council submitted a new proposal, which replaced Art Asia and the Nuffield theatre with an unspecified “Performing Arts Organisation”, and Arts Council England agreed a grant on that basis in July 2010.
The grant, which had been awarded because of Art Asia’s work as an ethnic minority arts organisation, was absorbed into the Southampton arts complex funding, and Art Asia itself was excluded. In effect, Arts Council England and the city council took the money and made off with it, without taking any measures to secure the public benefit that had been identified by Arts Council England’s management in 2005.
With Art Asia, I have spent two years trying to establish how and why that happened. At no stage has either Arts Council England or the city council given any reasonable justification, reason or excuse to Art Asia. At no point has any organisation raised any clear concerns about Art Asia’s work, management or programming to which it could respond, nor has any reason been given for totally ignoring the whole basis of the original award, which was to support black and minority ethnic arts programming.
In 2010, I wrote three times to Arts Council England requesting an explanation, and also to the then leader of Southampton city council, who replied:
“It was made very clear to us by officers at the Arts Council that some significant changes were required if it were to have any chance of succeeding in securing the funding provisionally allocated to the project”.
His letter referred to
“fundamental concerns about the performing arts offer, including the two organisations identified to provide this: Art Asia and the Nuffield”.
In the end, it has taken freedom of information requests to shed more light on what happened. An internal memo from a senior Southampton council officer, Mike Harris, dated 18 May 2010, records a meeting he had with Arts Council England. In saying that Arts Council England was rethinking its “total investment” in Southampton, the note reports
“grave doubts about Art Asia’s artistic quality and sustainability”,
and
“a potential need to free the project from the Nuffield and, possibly Art Asia.”
A note of a conference call on 2 July between Arts Council England—ACE—and city council offices recorded that the
“Arts Council is nervous that some of the arts partners may lobby against the application”—
the city council’s new application—
“as there is no longer a guaranteed place for at least two of them (Nuffield and Art Asia). This would be unfortunate as it would look to the ACE Investment SubCommittee as though Southampton was divided in their desire for the arts complex”.
My reason for referring to those internal memos is that it is crystal clear that the Arts Council was active and instrumental in bringing about a situation in which Art Asia would be excluded from the project and lose its grant funding. However, it must be remembered that none of the criticisms uttered behind closed doors and used to force the city council to exclude Art Asia from the project were ever shared with Art Asia—nor was any evidence produced to support them, nor was Art Asia ever given a chance to respond or address them. Nothing in previous public assessments of Art Asia’s work substantiates the criticisms made in private.
In public, the Arts Council was telling a totally different story. I received a typical reply from its south-east executive director in January 2011, in which she mentioned an
“unwieldy and unviable business case”,
but then went on to say:
“Southampton city council and Art Asia requested that their capital grants be brought together in one single funding agreement that named Southampton city council the client. At this stage, Southampton city council and Art Asia are still in discussion about Art Asia’s role and space in the project”.
Given what I discovered through a freedom of information request, that response is disingenuous in the extreme and does not reflect well on the Arts Council. It is clear that decisions were being taken behind the scenes of which Art Asia was not aware and to which it could not respond. Significantly, none of the material that I have seen through my FOI request seems to have considered the moral and perhaps legal responsibility to respect the original reasons why the grant was made in the first place. There is no record of any attempt to secure the future of south Asian arts in the city of Southampton and the wider region.
Dr Alan Whitehead (Southampton, Test) (Lab)
I fully support my right hon. Friend’s comments about the huge respect in which Art Asia is held throughout Southampton and the whole of south Hampshire. It undertakes extensive artistic endeavours and brings ethnic minority art and cultural activities to the region.
As I understand it, Southampton city council gave a written assurance of the position of Art Asia’s grants, and informal assurances on the usability of its grants should the arts centre project not go ahead. Does my right hon. Friend agree that the record certainly appears to suggest throughout that Art Asia had a grant that was absorbed into the larger arts centre proceedings for technical and operational reasons, and that—morally, at least—Art Asia’s grant should remain protected if Art Asia wishes to use it for purposes other than the arts centre, if it is not to be a part of the arts centre in future?
Mr Denham
My hon. Friend makes a good point. Nothing in the early discussions, when Art Asia and the city council sensibly came together to pool their resources, suggested that Art Asia was putting its grant award at risk, but that is what now seems to have happened.
The Minister is responsible for voluntary organisations—as I have been in the past, as my hon. Friend has been and as you may well have been, Mr Crausby. Anyone who has funded voluntary organisations knows that there are times when frank discussions must be had, and when it must be made clear that changes will be needed in an organisation’s work for funding to continue. But that never happened in this case.
I have appreciated hugely the contribution that Art Asia has made to the life, culture and vibrancy of Southampton and the surrounding region. I am not an expert on south Asian arts; if there were criticisms of Art Asia, it should have been given the chance to respond to them. That would have been a proper process and natural justice, but it simply has not happened. As my hon. Friend said, that leaves Art Asia in a difficult position. It has been excluded from the leading role in the arts complex project that was originally proposed, it is being denied the right to remove its original grant funding from the arts complex project to develop its own facilities and, as I understand it, should the arts complex project not go ahead for any reason, Art Asia’s money will be withdrawn along with any other Arts Council funding.
I am sure that the Minister will agree that that is an unsatisfactory position. I have four points to put to him. First, I hope that he will acknowledge—if not today, then after he has had a chance to consider what I have said—that the issue has not been handled well, and that the Arts Council has not operated with the transparency and openness that a public body distributing taxpayers’ money should have shown.
Secondly, I hope that he will reaffirm his commitment to the original aim of the Arts Council BME and Chinese capital programme, which was to ensure that minority arts organisations get a fair share of public funding. That means ensuring that in one way or another, the original intention of giving the grant to Art Asia is fulfilled, whatever happens in future. Thirdly, will the Minister use his best endeavours to find a way forward that works for all parties, including Art Asia?
Finally—I hesitate to raise this point—I hope that the Minister will give his commitment to ensuring as far as possible that Art Asia is fairly treated in future. I have tried to be as accurate and factual as I can in what I have said, but such organisations are heavily dependent on grant funding. Like many arts organisations, Art Asia has suffered a significant cut in revenue funding, about 60%, although the funding for the Mela is to continue.
At the moment, members of Art Asia are torn between their feeling about the unfairness with which they have been treated and their fear that by raising questions, they will suffer further cuts. One reason why this debate refers to events that happened two years ago is, frankly, that everybody wanted to complete the Arts Council funding round before the issues were raised in a public forum.
I know that the Minister would not want Art Asia to suffer for raising these issues legitimately with its Member of Parliament. I look to him for a public assurance of fair treatment in the future.
The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (Mr Edward Vaizey)
I am grateful for the opportunity to speak under your chairmanship, Mr Crausby, and to respond to this important debate secured by the right hon. Member for Southampton, Itchen (Mr Denham) on an issue important to his constituency that might have wider implications.
As a colleague in the House, I know only too well how rare an opportunity it is to secure a Westminster Hall debate. I am looking at two colleagues with distinguished careers. The fact that they have taken the time to come to the Chamber to raise the issue speaks volumes about how important it is. To put it in a slightly more vernacular way, I do not think that either the right hon. Gentleman or the hon. Member for Southampton, Test (Dr Whitehead) would use any weapon in his locker on an issue that was frivolous or unimportant. It goes without saying that it should be taken extremely seriously.
It is also nice, as I have some time, to be able to take a brief moment to praise Southampton as a city of the arts and an important cultural city, being the home of the great film maker Ken Russell, the great hymn-writer Isaac Watts and, of course, the songwriter sans pareil, Mr Craig David. I congratulate both Members on their contribution to Southampton’s return to the premier league. I look forward to seeing Southampton play at the home of the European champions next season, perhaps accompanied by the Chancellor of the Exchequer.
Despite my mildly humorous opening, the serious point is that the Arts Council has made a commitment to the arts in Southampton. That is why we are here today. We would not be here if the Arts Council had not made serious capital commitments to the city. As has been indicated by the right hon. Gentleman, that capital commitment is now focused exclusively on Southampton’s new arts centre. He went into a great deal of necessary detail about the issue, but to rehearse some of the chronology, the decision was made in June 2005 to grant Southampton’s new arts centre—known, I gather, by its acronym SNAC—some £5 million and give a £750,000 grant to Art Asia. At the time, neither organisation wanted to accept the money and put it in its bank account. There were a number of complicated reasons for that—all related to getting the project off the ground—including changes of developers, difficulty in meeting funding conditions, issues of leadership and artistic vision, and a concern that capital costs were increasing.
It was later agreed by the Arts Council’s management committee that a revised funding agreement of £5.724 million would be awarded to Southampton city council for SNAC, which named Art Asia and other arts organisations in its bid, and that included Art Asia’s award, which by that time was £724,000, not £750,000, because it had already received a capital sum of £26,000. However, things became slightly more complicated and an extraordinary review of the entire project took place under the auspices of the Arts Council between January 2009 and March 2011. I am told that since March 2010, the Arts Council’s south-east office has worked closely with Southampton city council to develop the governance and artistic vision for SNAC. As the right hon. Gentleman has mentioned, the office has also worked with the university of Southampton, because it is responsible for the John Hansard gallery, which is based on its campus. The aim of the review was to ensure a shared understanding of the strategic direction and any other issues before going ahead with the project.
I am pleased to note that a great deal of progress has been made. There has been a change to the operating model and design, and about two years ago, in July 2010, ACE provided another £1.5 million of capital to support SNAC. That means that the total capital investment for the project is about £7.2 million. The current position, as I understand it, is that Southampton city council has reviewed the design of the new arts complex as well as the governance and operating model. I also understand that the Arts Council regularly meets Southampton city council to discuss the project as part of the monitoring of the award of capital. Discussions are taking place on the external context in which the new development is taking place—that is, its place in the local, regional and national arts ecology—as well as on the design of the centre. The Arts Council’s clear goal is to give Southampton a high-quality arts offer and to galvanise its position as a cultural hub in the south-east. That is why Southampton city council has become a national portfolio organisation. It will receive almost £350,000 over the next three years to recruit an arts champion to lead on artistic vision and to work with SNAC.
That is the current position, but I have listened to what the right hon. Gentleman has said and will set out briefly what I am able to do. We fund the arts at arm’s length through the Arts Council, which is what every Government have done since the Arts Council was established. That is the absolutely appropriate way to fund the arts. Since we are debating controversial issues relating to the Arts Council, I should put on record the fact that, certainly during my time as a Minister, overall it has done an excellent job. In Alan Davey, it has a fantastic chief executive who has tackled a difficult financial position, as well as the review of the organisations that the Arts Council funds, with a deft hand. It is testament to his leadership that the Arts Council is now a widely respected institution.
I should also note that the problems that the right hon. Gentleman has brought to our attention began some time before Alan Davey was in post. Indeed, the Arts Council has had to cope with a recent inquiry into the funding of The Public in West Bromwich—given that one of the Members of Parliament there is the hon. Member for West Bromwich East (Mr Watson), it is not a place to make too many errors—and there were some criticisms, but I would not hold that against the current chief executive, who, to a certain extent, has inherited one or two problems that arose before his time.
I agree completely with both the right hon. Gentleman and the hon. Member for Southampton, Test that if there were problems with Art Asia as an organisation, it should have had the chance to respond. Although Art Asia’s funding has been reduced—as has the funding of many arts organisations—it continues to receive regular funding and to be a national portfolio organisation. Alan Davey and his colleagues at the Arts Council handled the process well, and one of the reasons why the process was held in high regard and earned a great deal of respect is that it was rigorous and based on artistic merit. Art Asia would not have survived and would not have continued to receive funding unless it was a well-run and important arts organisation. The fact not only that local MPs have been prepared to back it and give their time to raise the issue in Parliament, but that Art Asia has continued to receive funding from the Arts Council, speaks volumes—without my knowing a huge amount about Art Asia as an organisation—about its status as an important organisation that deserves support.
Turning to the four issues raised by the right hon. Member for Southampton, Itchen at the end of his contribution, first, I would hesitate to go on record at this early stage and agree with him that the issue has not been handled well. It might be worth while to undertake some form of independent review of the process in the future, to decide whether that is the case. Of course, as the right hon. Gentleman acknowledged, that relates to events that have already taken place and what we are concerned with is the here and now.
Secondly, the right hon. Gentleman invited me, almost as an issue of national policy, to commit myself to the aims of the BME and Chinese capital programme. I would not hesitate to agree with him that it is important that the Arts Council focuses on support for BME organisations. That is not an issue of political correctness. It is a straightforward matter of fact that many such organisations are not well represented and, to be frank, many of them do not necessarily have the insider knowledge—if I can put it that way—of how to apply to the Arts Council or of what opportunities it presents. I would always encourage the Arts Council to reach out to such organisations to encourage them to apply and be part of its funding programmes.
Thirdly, and perhaps most pragmatically, the right hon. Gentleman invited me to use my best endeavours to find a way forward. I will certainly agree to do that. I have written to him to suggest a meeting. I like nothing better than a good round table. I invite him and his colleagues from Southampton, Southampton city council, the Arts Council and Art Asia to sit around a table to discuss the issues and see whether we can find a way forward. Such comments tend to give my officials a dose of the heebie-jeebies, but given that they are also trying to deliver a £9.2 billion Olympic games, this should be a walk in the park for them. I promise that I will not cross the line by interfering in the Arts Council’s decision and that I will act exclusively as a neutral operator to bring the two sides together to discuss openly and frankly, but behind closed doors, a possible way forward.
That leads me to the right hon. Gentleman’s final point, namely whether Art Asia will continue to be fairly treated and avoid any comeback as a result of raising this issue in such a prominent fashion. I wholeheartedly agree with him that it is absolutely right and proper that any organisation that feels that it has been unfairly treated or that has concerns about something should be able to talk to its local MP, and that that local MP should be able to raise that issue in a way that he or she thinks appropriate. I can tell the right hon. Gentleman that I am completely confident, given how closely I have worked with the Arts Council over the past two years and the excellent men and women who work there, that there will be no comeback on Art Asia for raising the issue. I very much hope that all that will have been achieved is that we can progress at a more rapid pace than has been achieved in the past. I will certainly, along with the right hon. Gentleman and his colleagues, put my shoulder to the wheel to try to establish a way forward.
Question put and agreed to.
Written Ministerial Statements
(11 years, 11 months ago)
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Government Pipeline and Storage System
(11 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Defence (Peter Luff)
A draft Energy Bill has been published today, including provisions to enable the sale of the Government Pipeline and Storage System (GPSS).
The GPSS was established at the beginning of the second world war to supply aviation fuel to military airfields across the country. Since then it has grown to become an important commercial asset, serving a number of major civil airports such as Heathrow and Gatwick. Military use now only equates to around 10% of the GPSS throughput, with the system distributing around 40% of aviation fuel in the UK.
Following a review of the GPSS it has been concluded that it does not need to remain under MOD ownership and could benefit from the investment that a private sector operator can be expected to bring, although a final decision on sale will be subject to market conditions at the time. Such investment has the potential to increase the resilience of the system and allow even greater commercial development by removing current restrictions unless there is an underpinning defence requirement. Sale will not impact on defence outputs and military requirements can be met through contractual arrangements with the purchaser of the system. Consultation is being undertaken across Government to ensure other outputs are similarly accounted for.
The primary purpose of the legislation is to create a set of transferrable rights to maintain, use, remove, replace or renew the GPSS, to restore land if any part of it is removed or abandoned, to inspect or survey the GPSS or the land on or under which the GPSS runs and to access the land on or under which the GPSS runs for these purposes.
The legislation will also provide that where an interest in land is depreciated as a result of the creation of these rights, the owner will be entitled to compensation and impose an obligation on the owner of the GPSS to pay compensation in respect of loss caused by the exercise of these rights.
An exercise is being launched today to notify those landowners on or under whose land the GPSS runs and interested bodies of the impact the legislation will have on them and provide them with the opportunity to comment on the draft provisions, which have been published as part of the draft Energy Bill. As part of this exercise I am also writing today to all those MPs within whose constituency it is situated.
More detailed information can be found on the MOD’s website at: http://www.mod.uk/gpss.
Comments on the draft provisions should be submitted by 31 July and the Government’s response will be published on the MOD website shortly thereafter.
Successor Submarine Programme
(11 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Defence (Peter Luff)
I wish to inform the House that the Ministry of Defence (MOD) has signed contracts, worth approximately £350 million (excluding VAT), for the first 18 months of work on the assessment phase of the Successor submarine programme.
The Successor submarine programme will deliver the replacement for the Vanguard class submarines that carry the UK’s strategic nuclear deterrent. Hon. Members will recall that, my right hon. Friend the Member for North Somerset (Dr Fox), the then Defence Secretary, announced to the House on 18 May 2011, Official Report, columns 351-53 that the programme had obtained its initial gate approval and was commencing its assessment phase leading up to main gate consideration in 2016.
The assessment phase is expected to cost some £3 billion in total, and focuses on design and engineering activities, the purchase of long lead items, preparation for production, technology development, information and knowledge management, and project management. These latest contracts are part of that investment.
To deliver the assessment phase effectively, the MOD has signed a collaborative agreement with the three key suppliers in the UK submarine industry: BAE Systems Maritime—Submarines, Rolls-Royce and Babcock. We have also signed contracts with these companies, which include the first 18 months of assessment phase activities, as the start of a rolling programme of work.
The highest value contract is with BAE Systems Maritime—Submarines: it is worth around £328 million and covers submarine design. The contract with Babcock is worth around £15 million and covers the design aspects of in-service support. In addition a contract amendment with Rolls-Royce has been placed and is worth around £4 million for Successor design work.
These contracts, along with our continued commitment to the Astute submarine programme, will sustain thousands of jobs across the UK submarine industry, and will allow us to maintain this vital capability that underpins the nation’s long-term security.
Draft Energy Bill (Pre-Legislative Scrutiny)
(11 years, 11 months ago)
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The Secretary of State for Energy and Climate Change (Mr Edward Davey)
I am pleased to be publishing a draft of the Energy Bill today, in order for pre-legislative scrutiny to be carried out on it.
The draft Bill includes measures necessary to reform the electricity market to deliver secure, clean and affordable electricity.
At the heart of our Electricity Market Reform (EMR) measures are feed-in-tariffs with Contracts for Difference (CFDs), long-term instruments which will provide stable and predictable incentives for companies to invest in low-carbon generation. CFDs are more affordable than alternative incentives and will mean a better deal for consumers. Through the work on Final Investment Decisions (FID) Enabling we are committed to working with developers to enable some of this investment to come forward in advance of the CFD regime coming into force, and the Bill contains measures to support this process. This will be complemented by a capacity market that will, if required, provide security of electricity supply by ensuring sufficient reliable capacity is available. Measures relating to conflicts of interest and contingency arrangements will ensure that the system operator which will deliver these schemes is appropriate. Renewables transitional measures will ensure that existing investments under the renewables obligation remain stable. Finally, an Emissions Performance Standard (EPS) will limit carbon dioxide emissions from the most polluting fossil fuel power stations by setting appropriate standards for all new fossil fuel powered generation. Taken as a whole, EMR will enable large-scale investment in low-carbon generation capacity in the UK and deliver security of supply, in a cost-effective way.
In addition to EMR, the Energy Bill will also improve regulatory certainty by ensuring that Government and Ofgem are aligned at a strategic level through a Strategy and Policy Statement (SPS), as recommended in the Ofgem review of July 2011.
The Bill also ensures that the Office for Nuclear Regulation will be fully able to meet the future challenges of regulating the nuclear industry, as the first new power plants since the 1980s are built.
Finally, the Bill contains provisions that will enable the sale of the Government Pipeline and Storage System (GPSS). The Under-Secretary of State for Defence, my hon. Friend the Member for Mid Worcestershire (Peter Luff) who has responsibility for equipment, support and technology, is laying a separate written ministerial statement today.
I am confident that measures contained in this Energy Bill will enable us to keep the lights on, bills down and air clean. I am pleased to commend it to the House today for PLS and will look forward to the publication of the Energy and Climate Change Select Committee’s report.
Independent Agricultural Appeals Panel (Review)
(11 years, 11 months ago)
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The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice)
I announced on 15 December 1911, Official Report 123WS that I had commissioned a review of the Independent Agricultural Appeals Panel (IAAP). I have considered the findings and recommendations of the review, and following consultation with the Minister for the Cabinet Office I am pleased to announce the Government’s decision on the future of this body. The IAAP will be retained in its current form (an advisory NDPB) and business processes supporting the appeals function are to be strengthened by DEFRA and the Rural Payments Agency (RPA), providing a more accessible and informative appeals service.
The review concluded that there remains a need for the IAAP in its current form and that it is a service valued by stakeholders. The report makes a number of recommendations that will strengthen and improve how the appeals function is operated and increase its transparency and accessibility for customers. The Government have accepted these in full. DEFRA and the RPA will work together to implement the recommendations as part of the wider programme of work announced in the RPA’s five-year improvement plan (published on 9 February). Further details are available on the DEFRA website (www.defra.gov.uk) and the RPA’s website.
Copies of the review report, “Review of the Independent Agricultural Appeals Panel” have been placed in the Libraries of both Houses.
Foreign Affairs Council and Development Foreign Affairs Council
(11 years, 11 months ago)
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The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
I attended the Foreign Affairs Council (FAC) in Brussels on 14 May. My right hon. Friend the Secretary of State for International Development attended the Development FAC held later the same day.
Both meetings were chaired by the High Representative of the European Union for Foreign Affairs and Security Policy, Baroness Ashton of Upholland. A provisional report of the meeting and all conclusions adopted can be found at:
http://www.consilium.europa.eu/uedocs/cms Data/docs/pressdata/EN/foraff/130248.pdf
Foreign Affairs Council
Afghanistan
Ministers discussed Afghanistan ahead of international meetings in Chicago 20 and 21 May, Kabul 14 June and Tokyo 8 July. Conclusions were agreed (see link above) which reaffirmed the EU’s and individual member states’ commitment to support Afghanistan beyond its transition. Ministers agreed to continue to prioritise Afghanistan over the long-term through making an enhanced contribution to support the country. This commitment would be dependent on reciprocal efforts by the Afghan authorities to meet their agreed reform obligations.
Middle East Peace Process
Ministers agreed conclusions (see link above) stressing their commitment to a two-state solution to the conflict, and expressed concern about developments on the ground that could threaten the goal of a two-state solution, including in area C of the west bank and in East Jerusalem. They also reiterated the importance of Israel’s security.
I welcomed the conclusions and expressed hope that the new Israeli coalition could benefit the peace process. I also reminded colleagues of some recent positive steps including the import into the UK of textiles from Gaza for the first time since 2007. There is an urgent need to relax the restrictions imposed on Gaza in order to allow products to be exported to the west bank, Israel and the EU.
Southern Neighbourhood
Ministers agreed conclusions (see link above) and a further round of sanctions against Syria. I made the following statement after the meeting:
“I welcome the EU’s agreement on a new round of sanctions on Syria. As long as the violence and repression continues we will continue to increase the pressure on the regime and its supporters. We will also press others to adopt and implement similar measures”.
“The UK fully supports the work of the joint UN and Arab League special envoy to resolve the crisis in Syria. The regime must implement rapidly and fully its commitments under two unanimous UN Security Council resolutions and Kofi Annan’s plan. This plan remains the best hope of ending the violence, but it is not open-ended and we will not hesitate to return to the UN Security Council if it is not implemented swiftly and in full”.
Ministers discussed Algeria’s parliamentary elections. I had already made the following statement on 12 May:
“I congratulate the people of Algeria on the conduct of these elections and welcome the Algerian Government’s decision to allow EU observers for the first time. Over the past 16 months people across north Africa have clearly expressed their desire for greater openness and accountability, and it is encouraging that the Algerian authorities have responded in this positive way. I particularly welcome the greater representation of women in the new Parliament, in line with Algeria’s recent reforms”.
“I hope this progress will lead to further reforms in the forthcoming discussion of constitutional change, and in the run up to the local elections later this year and the presidential elections in 2014. The UK has a good relationship with Algeria and I am confident that British Parliamentarians will seek to further strengthen ties with their newly elected Algerian counterparts”.
Ministers had a short exchange on Libya where many expressed their concern about increased migration flows through the country. I noted that that the EU’s border management assessment would soon be complete and that following this up should be a priority.
Mexico
Baroness Ashton briefed Ministers on her two recent visits to Mexico and preparations for the EU-Mexico summit due to be held on 17 or 18 June. During the following discussion many stressed that the summit was an opportunity to discuss a number of issues important to EU partners, including the EU-Mexico Free Trade Agreement and wider trade and investment within the region.
Russia
Ministers reviewed Russia in the light of the upcoming EU-Russia summit of 3 and 4 June in St Petersburg. I highlighted the importance of focusing on issues which were priorities for both Russia and the EU. We need to continue to engage with civil society groups. Although many colleagues highlighted the importance of the EU-Russia new agreement, others pointed out that progress on this was likely to be slow.
Ukraine
During discussions some Ministers expressed concerns about developments in Ukraine and the EU’s inability to exert any influence. Many Ministers agreed that it was too early to take any EU-wide decision on governmental attendance at the Euro 2012 championships.
Bosnia and Herzegovina (BiH)
Under a short AOB item, the Slovenian and Austrian Ministers briefed on their recent visit to BiH. This is likely to be a full agenda at the FAC on 25 June.
Other business
Ministers agreed without discussion a number of others measures, including:
A Council regulation suspending certain restrictive measures against Burma.
Conclusions on Somalia highlighting the steps needed for completion of the transition process, committed to continuing “significant support” for African Union Mission in Somalia (AMISON), and stressing concern over the humanitarian situation. The conclusions also noted the imminent mandate of EUCAP Nestor (Regional Maritime Capacity Building) and extension of the mandate for Eunavfor Atalanta (counter piracy).
Conclusions on Yemen.
A Council decision to extend the EU special representative in Afghanistan.
The fifth implementation report of the EU action plan for Afghanistan.
A common position on the fourth meeting of the EU-Albania Stabilisation and Association Council.
The establishment of the EU’s position for the 15th meeting of the EU-Ukraine Co-operation Council.
Development Foreign Affairs Council
Commissioners Piebalgs (Development), and Potocnik (Environment) attended the meeting chaired by Baroness Ashton.
Council Conclusions on “Agenda for Change” and “The Future Approach to EU Budget Support”
Ministers discussed and adopted Council conclusions for both the “Agenda for Change and The Future of EU Budget Support”. There was broad support for the principle of focusing EU grant funding on the poorest countries, with the exception of Spain who argued for a continued focus on middle-income countries in Latin America. The Secretary of State outlined UK priorities including the focus on results, impact and value for money in all EU aid. He noted the importance of rigorous analysis before providing budget support, support for improvements in domestic accountability during the provision of budget support and the importance of co-ordination within the country receiving the support. Commissioner Piebalgs stated that the EU could learn from the UK on how to better communicate its development results.
2012 Annual Report on EU Development Aid Targets
Ministers discussed the findings of the Commission’s annual report 2012 on EU development aid targets and adopted Council conclusions. Commissioner Piebalgs and Baroness Ashton both stressed the need for the EU to continue to meet its 0.7% aid target. The Secretary of State highlighted that the millennium development goals (MDGs), would not be met if we did not meet our commitments. He argued that it was in the EU’s interest to support development as well as being the right thing for the world’s poor. In spite of the economic climate there was significant public support for continuing development aid. The Secretary of State noted that the Prime Minister had recently been announced as co-chair for the UN’s high-level panel for the post MDG framework.
Burma
Ministers discussed the situation in Burma. The EU would spend €150 million in the next two years. Commissioner Piebalgs made the case for joint programming in the country, supported by a number of other Ministers. The Secretary of State informed EU Ministers that the UK had recently quadrupled its aid to Burma, and that donor co-ordination was essential.
Rio+20
Development Ministers discussed the EU position for Rio+20, stressing that there should be a development focus to the Rio summit. Some Ministers noted their support for a sustainable development Council and sustainable development goals.
Council conclusions on food security under the horn of Africa initiative
Commissioner Piebalgs presented the Commission’s approach to SHARE (Supporting Horn of Africa Resilience) stressing the importance of private sector involvement and the rural sector. The Council adopted conclusions welcoming the approach and recognised the importance of support to build resilience in the horn of Africa. Commissioner Piebalgs informed Development Ministers of ongoing discussions under the G8 regarding food security.
Council Conclusions on Policy Coherence for Development (PCD)
Council conclusions were adopted by Ministers with no discussion.
State of play on Joint Programming
France welcomed the Commission’s written note on joint programming and called for an extension of joint programming to additional countries, adding that partner countries needed to be fully involved.
International Family Planning
The Secretary of State called for financial and political support from EU development Ministers for the family planning summit on 11 July 2012, co-hosted by the UK and the Gates Foundation.
I will continue to update Parliament on future Foreign Affairs Councils.
Putting Victims First
(11 years, 11 months ago)
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The Secretary of State for the Home Department (Mrs Theresa May)
I am later today publishing “Putting victims first — more effective responses to anti-social behaviour”. It sets out the Government’s plans to deliver on the commitment to introduce mote effective measures to tackle anti-social behaviour, and puts them in the wider context of the reforms to the policing and criminal justice landscape and work to turn round the lives of the most troubled families.
The term “anti-social behaviour” masks a range of nuisance, disorder and crime which affects people’s lives on a daily basis: from vandalism and graffiti; to drunk or rowdy behaviour in public; to intimidation and harassment. All have huge impacts on the lives of millions of people in this country. None is acceptable.
Many police forces, local authorities and social landlords are working hard to deal with these problems. However, too often, the harm that anti-social behaviour causes, particularly when it is persistently targeted at the most vulnerable people in our society, is overlooked. At the heart of our new approach is a fundamental shift towards focusing on the needs of victims, rather than the type of behaviour.
We know what victims of anti-social behaviour want. First and foremost they want the behaviour to stop, and the perpetrators to be punished for what they have done. They want the authorities to take their problem seriously, to understand the impact on their lives and to protect them from further harm. They want the issue dealt with swiftly and they do not want it to happen again.
The mistake of the past was to think that the Government could tackle anti-social behaviour themselves. However, this is a fundamentally local problem that looks and feels different in every area and to every victim. Local agencies should respond to the priorities of the communities they serve, not to those imposed from Whitehall. From November this year, directly elected police and crime commissioners will be a powerful new voice for local people, able to push local priorities to prevent anti-social behaviour from being relegated to a “second-tier” issue.
The Government do, however, have a crucial role in supporting local areas. We will do that by:
Focusing the response to anti-social behaviour on the needs of victims—helping agencies to identify and support people at high risk of harm, giving frontline professionals more freedom to do what they know works, and improving our understanding of the experiences of victims;
Empowering communities to get involved in tackling anti-social behaviour—including by giving victims and communities the power to ensure action is taken to deal with persistent anti-social behaviour through a new community trigger, and making it easier for communities to demonstrate in court the harm they are suffering;
Ensuring professionals are able to protect the public quickly—giving them faster, more effective formal powers, and speeding up the eviction process for the most anti-social tenants, in response to recent consultations by the Home Office and Department for Communities and Local Government; and
Focusing on long term solutions—by addressing the underlying issues that drive anti-social behaviour, such as binge drinking, drug use, mental health issues, troubled family backgrounds and irresponsible dog ownership.
It is vital that those who will be affected by these changes, from the professionals who will use the new powers, to victims seeking protection from targeted abuse, can continue to shape the reforms so that we get them right first time. We will therefore publish a draft Bill for pre-legislative scrutiny before introducing legislation.
Copies of “Putting victims first” will be available in the Vote Office.
Equality Strategy (Building a Fairer Britain: Progress Report)
(11 years, 11 months ago)
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The Secretary of State for the Home Department (Mrs Theresa May)
When I launched the equality strategy “Building a Fairer Britain”, in December 2010, I made a commitment to report back on its progress.
I have today published a progress update, “The Equality Strategy—Building a Fairer Britain: Progress Report”. It sets out how the coalition Government’s new approach to equality, which is based on transparency, local accountability, and reducing bureaucracy, is beginning to make a difference across the five key priority areas set out in the equality strategy.
Copies of the report are available on the Home Office website.
Appointment of the Chief Coroner
(11 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly)
The Lord Chief Justice, following consultation with the Lord Chancellor, has announced today that His Honour Judge Peter Thornton QC is to take up post as chief coroner in September 2012.
His Honour Judge Thornton, a senior circuit judge at the central criminal court, was originally appointed to the post in May 2010 but did not formally take up his duties while the Government were reviewing the position.
As chief coroner His Honour Judge Thornton will, for the first time, be responsible for providing national leadership to coroners in England and Wales. He will also play a key role in setting new national standards and developing a new statutory framework for coroners including rules and regulations, as well as guidance and practice directions, within which coroners will operate. This will help to bring about much greater consistency of practice between coroner areas and improved services to the bereaved.
While His Honour Judge Thornton will not formally commence his duties until September, he will in advance of that familiarise himself with issues facing the coroner system. He will also continue to sit in the administrative court to hear judicial reviews on coronial matters.
Work is ongoing on implementation of the chief coroner’s statutory functions and other powers in Part 1 of the Coroners and Justice Act 2009, with a view to bringing them into force in 2013.
City of Liverpool Cruise Terminal
(11 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Transport (Mike Penning)
On 26 January, Official Report, columns 26WS, I undertook to report back to the House after taking external advice on an appropriate figure for grant repayment by Liverpool city council in order to assuage competition concerns sufficiently to withdraw the Department for Transport’s objection to turnaround cruise at the City of Liverpool Cruise Terminal.
The grant condition precluding turnaround had originally been set in 2007 in order to avoid unfair competition with other UK ports, which had invested in facilities without grant support. Liverpool city council had requested that the condition be lifted and it was agreed that a proportion of the grant be repaid.
I have now received this advice and have decided to accept the recommended figure of £8.8 million as a lump-sum repayment, or a total of £12.6 million if phased over 15 years. In my view this represents a fair outcome that addresses competition concerns while enhancing the benefits to secure which the grants were initially paid.
Final removal of the grant condition by DCLG will be dependent on securing state aid clearance from the European Commission, which will now be sought. The Department will assist in that process.
Dartford-Thurrock River Crossing (Charging Regime)
(11 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Transport (Mike Penning)
On 30 June 2011, the Department for Transport launched a consultation on proposals to revise the road user charging regime at the Dartford-Thurrock River Crossing. The consultation closed on 23 September.
The Government had to make hard choices at the time of the 2010 spending review, and accepted the need to increase revenues from the crossing to enable the continuing prioritisation of planned improvements.
The Department’s proposal was that cash charge for cars would increase from £1.50 to £2 from late 2011, and then to £2.50 in spring 2012, and that prices for other vehicles would also increase at broadly proportionate rates. These increases were part of a strategy to both manage demand at the crossing and to continue to prioritise short, medium and long-term improvements at the crossing.
On 24 November 2011, I informed the House that in recognition of the number of representations made, and to allow the Department time to carefully consider the responses further, there would be no increase in either 2011 or spring 2012 as set out in the consultation.
The Government remain committed to tackling the current and forecast traffic congestion at the crossing in recognition of its strategic importance, its role in facilitating the movements of goods and people and its contribution to national and local economies.
The Department received over 1,300 responses to its proposals for revising the charging regime at the crossing. Following careful consideration of all the points made during that consultation, I am today announcing the Department’s conclusions and the actions it intends taking.
The Department has decided to keep the road user charging regime at the crossing as part of its strategy to manage demand for its use, and also to allow the Department to delivery its strategy for future improvements. This includes the medium-term measure of implementing free-flow charging technology at the crossing in autumn 2014. To achieve this, consultation on the necessary secondary legislation will begin in autumn this year, followed by awarding the contract for customer charging and enforcement management services in autumn 2013.
In terms of the charges, the Department intends to increase these in two successive steps, as originally proposed, but to introduce the first increase in October 2012 (after the Olympic period), and the second at the same time as implementation of new, free-flow charging technology at the crossing, currently scheduled for October 2014.
In terms of the levels of increase, the Department intends to increase the level of the cash charge for cars by 50p in October 2012, and again by a further 50p in October 2014. The cash charges for other vehicle classes will rise by broadly proportional amounts.
Discounts offered to regular users of the crossing who pay in advance through the electronic DART-Tag system will remain, with the costs of the discounted crossing charge increasing at the same rate and at the same time as the increases for cash payments.
Delaying the increases until after September responds to views expressed in the consultation about the proposed timing of increases, particularly in relation to the Olympic and Paralympic games, and about adverse impacts on the national and local economies.
As promised, the Department will maintain the levels of discounts to those eligible through the local residents’ discount scheme, and there will be no increases in the levels of the crossing charge for them. The Department is committed to ensuring that the discount scheme for residents remains effective and easy to use, and I have asked my Department to undertake a full review of the scheme to ensure it provides suitable discounted benefits to local communities who are impacted by the crossing.
One of our short-term measures to improve the crossing included the deployment of a charge suspension protocol which was trialled during 2011 by the Highways Agency. The agency has reviewed the effectiveness of the suspension protocol, taking into consideration the views expressed during the consultation on charges and we will shortly announce the conclusions of that review.
Subject to the completion of the necessary parliamentary processes, the Department intends to revise the road user charging regime as set out above.
The full response to the consultation can be found on the Department’s website.
Government Car and Despatch Agency Business Plan
(11 years, 11 months ago)
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The Parliamentary Under-Secretary of State for Transport (Mike Penning)
I am today announcing the next stage of the reform of the Government Car and Despatch Agency. By the end of this calendar year we intend to have ended GCDA’s agency status and to have integrated it into the Department for Transport.
We expect potential savings in administration costs of around £1.3 million to be achieved from the ending of agency status once all of the functions have been successfully merged with the Department. We will continue to publish information on expenditure and income to maintain financial transparency.
I am also announcing the publication of the 2012-13 business plan for GCDA.
The business plan sets out:
the services the agency will continue to deliver until agency status ends and details of the continuing significant change and reform programme being implemented there;
the resources they require, and
a framework of measures by which their performance will be assessed
The measures allow service users and members of the public to assess how the agency is performing in delivering its key services and reforms and in managing agency finances.
The business plan will be available electronically on agency websites and copies will be placed in the Libraries of both Houses.
Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Brougham and Vaux)
My Lords, good afternoon and welcome to the Grand Committee. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Police (Collaboration: Specified Function) Order 2012
(11 years, 11 months ago)
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Lord Henley
That the Grand Committee do report to the House that it has considered the Police (Collaboration: Specified Function) Order 2012.
Relevant document: 44th Report from the Joint Committee on Statutory Instruments
The Minister of State, Home Office (Lord Henley)
My Lords, the order concerns the arrangements for providing air support to the police forces of England and Wales. It specifies the provision of police air support as a function that must be carried out through a collaboration agreement applying to all police areas in England and Wales.
Sections 22A to 23I of the Police Act 1996 make provision for police collaboration in England and Wales. Section 22A provides for the making of collaboration agreements involving policing bodies and chief officers of police. Section 23FA enables the Secretary of State to specify police functions that must be the subject of collaboration. The order is to be made under Section 23FA. Orders made under this section must be approved by both Houses beforehand; this procedural requirement is imposed by Section 23FA(4). This is the first order made under Section 23FA.
The scope of the collaboration agreement to be made under the order will include the operation of aircraft, staffing, equipment, airbases, ground control facilities, and maintenance arrangements, facilities and other resources necessary for such air operations. The order establishes the required outcome—a national collaborative agreement for the provision of air support—but the detailed terms are a matter for policing bodies and forces to agree.
The background to the order is a review of police air support completed in 2009. The service-led review identified scope to save £15 million per year by reducing the number of police aircraft and bases while providing a more consistent service. Since 2010, proposals for a collaboratively organised national police air service— the NPAS—have been developed under the leadership of the chief constable of Hampshire. The principle of a national service has been endorsed by all chief constables.
Discussions between the NPAS project team, police forces and authorities have continued, but full agreement has not been achieved. In January 2012 my right honourable friend the Minister for Policing and Criminal Justice announced the Government’s intention to make the order. The Government consulted the Association of Chief Police Officers, the Association of Police Authorities, the Mayor’s Office for Policing and Crime and Her Majesty’s Inspectorate of Constabulary on the proposed order. Responses were also received from other police authorities and police organisations.
No responses directly opposed the order. Some suggested that it was premature and some expressed concerns about financial and operational aspects of the business case for the national police air service. The concerns expressed by respondents about the governance and management of the proposed NPAS and about precise costs and savings were important. The Government’s view is that the best way to resolve the concerns is through the detailed negotiation of a collaboration agreement by all forces and policing bodies. Therefore, it is timely and not at all premature to make the order. It will ensure that all forces and policing bodies will focus on reaching an agreed set of terms, conditions and governance arrangements for collaboration.
A feature of the proposals for collaborative delivery of a national police air service is that a single police force should take the lead. Several respondents to the consultation noted that any force, and its policing body, taking lead responsibility would require reassurance regarding the continuing commitment to collaboration by other forces and policing bodies. The order will provide that reassurance by ensuring that there is a collaboration agreement in place to which all forces and policing bodies must be party.
The order provides a basis for a more efficient, effective and economical provision of police air support that noble Lords will want, and I commend it to the Committee.
Baroness Doocey
I hope that noble Lords will forgive me; I am losing my voice. I have no problem in principle with the order. As a former chair of finance of the Metropolitan Police Authority, I am very much in favour of anything that can be done to make economies of scale and efficiencies. However, I have a number of concerns. Wearing the hat of somebody who sat for eight years on the Metropolitan Police Authority, I emphasise that my knowledge and experience is of the Met rather than of police forces nationwide. Therefore, with that caveat, I know that there are various concerns in the Met, and I wonder if the Minister can help to allay some of those concerns, particularly about the issues of governance and structure as set out in the draft agreement.
The strategy board has got quite a lot of power: it can approve annual capital budgets and determine the direction of the service. However, there is no representation on the board for PCCs—and in the case of London, for the MOPC—other than from the lead force. Can the Minister tell us how these people will be consulted, as the introduction of PCCs is clearly one of the key parts of the government legislation, and what proposals and process will there be for considering any concerns that emerge?
I appreciate that the Minister talked in his introduction about issues being resolved locally. However, I have a slight concern that if there is not quite a good steer from the Government on how these issues can be resolved, that might be a major problem down the line. I think that it would be helpful to address those issues now.
I have another concern. Although having an integrated strategy for the air service is clearly sensible, how will this affect the local accountability of local police forces? I wonder if the Minister could address that point as well.
Baroness Smith of Basildon
My Lords, I am grateful to the Minister for his explanation. Like the noble Baroness, Lady Doocey, I welcome the principle of what the Government are seeking to do here—I do not think that there can be any disagreement on it. However, like her, I have some concerns. I am sure that the Minister can help allay those concerns when he addresses the questions.
I was interested when the Minister spoke about the consultation that took place. He quoted the parts that were in the impact assessment, which was very helpful. As I mentioned to the noble Lord previously, I tried to access the Home Office website to get more information on the consultation responses. I hope that my complaints about the website do not become a familiar theme in these Committee sittings or when I discuss Home Office matters. However, I find it the most difficult website to access that I have ever used. It has crashed on me something like six times in the past week, which is as long as I have been in this post. I therefore felt at a disadvantage on this order by not being able to read the consultation responses. I take on board entirely, and accept the Minister’s explanation, that none of the responses was directly opposed.
However, the situation with the website makes this slightly more difficult. I would have liked to know the difficulties that have prevented voluntary implementation from taking place. The noble Baroness, Lady Doocey, has been very helpful in using her experience with the Metropolitan Police to outline some of the issues.
The Minister says that there have been discussions for some time, that no one is directly opposed to it and that everybody seems to think that it is a good idea—and yet it does not happen. So, what is the precise nature of the difficulties? One wonders whether those difficulties, depending on how practical they are, can be removed simply by implementing legislation. If they are practical difficulties which the police are trying to resolve, putting legislation in place will not make them go away. One question—if we can legislate to change things—is whether he thinks that the police are simply being difficult by not reaching a voluntary agreement on the issues of concern which have prevented voluntary collaboration to the degree that the Minister would like. As the police, presumably, will still have to agree the details of the arrangements being put in place, it would be helpful to have a little more information about the difficulties and how they will be overcome by legislation.
I appreciate that savings have to be made—I am not querying that. I would never deny the need to make savings. Indeed, I am one of those who look for genuine efficiencies to save money. However, when police forces are fully under the budgetary cosh in many ways, collaboration can become more difficult for them—understandably, it makes it that little bit harder to co-operate. If the Minister can say something more about the agreements that need to be put in place, and the discussions taking place to make that happen, that would be welcome.
Perhaps I may also say something briefly about savings versus efficiency. Where crime prevention and crime detection are concerned, efficiency savings are one thing, but cuts in service, or reduction in the quality of service, is another.
I am seeking assurances from the Minister, because the impact assessment is perhaps slightly woolly on this. It says that in some areas it is expected that the collaboration will be resolved by some increases in response times for air support. It goes on to state the positives, including that a 24-hour service will be available to all forces. Will the Minister quantify what those increases in response times will be? Will they be significant? Which areas will be affected the greatest? Assurances from the Minister on that would be most welcome. In principle, the direction of greater co-operation and collaboration between police forces is welcome. I should be grateful if the Minister will address the issues that I have raised.
Lord Henley
My Lords, first, I apologise to the noble Baroness, Lady Smith, for the failings of the Home Office website. We have to admit that it is not the most perfect website. No doubt it can be improved, and in due course we will look to improve it to make sure that the noble Baroness can access information as and when she would like. That is why my noble friend Lord McNally and I made it clear when we met yesterday to discuss other matters that we would provide hard copies of certain information, to ensure that she does not have to go through this problem again.
Baroness Smith of Basildon
My Lords, I appreciate the noble Lord’s offer. However, as I said to him yesterday, he might not appreciate a call on a Sunday afternoon when I am working at home. I appreciate his going back to the Home Office to try to resolve this matter.
Lord Henley
I certainly would not appreciate a call from the noble Baroness on a Sunday afternoon. I might not be available and I would not have access to the papers either. Obviously we have to improve this website, because we all want to use it on a Sunday afternoon. That is the point of having an efficient website. It is why all of us, in a whole range of departments, have been subject to such complaints. We take that on board and will look at the website to see what we can do.
As regards the noble Baroness’s request for access to the consultation responses, my understanding is that it was a very limited consultation and the responses were not published on our website. Therefore, that is probably one of the reasons why the noble Baroness could not get them. If they are available, I will make sure that she gets them.
I should have made clear in my opening remarks how much I welcome the noble Baroness to Home Office matters. I saw her dealing with that rather extraordinary debate we had on the Queen’s Speech, which covered a whole range of departments. On that occasion, I did not have the opportunity—
Baroness Smith of Basildon
Unfortunately, I was unable to speak during the Queen’s Speech debate, but we crossed swords across the Dispatch Box at Question Time.
Lord Henley
In whatever way, I am at fault in that I have not welcomed the noble Baroness to the Home Office brief. I do so with great warmness and I look forward to many debates. She also asked about having to look at the savings that are coming about and what we are trying to achieve. Perhaps I may remind her that the exercise goes back to 2009 when her own party was in government. It sensibly started because police forces—some 43 of them plus the British Transport Police—vary in size enormously from the Met to, say, in my own area, Cumbria, which is a very small police force. Therefore, it is very difficult for some police forces to provide the same coverage as others. That is why we are looking at much more working together of all police forces and rationalisation of the services provided, and into which individual forces could buy in as necessary.
As a result, quite obviously, one would be able to find appropriate savings and produce a better service for the different police authorities. In the process, I would be able to guarantee that even a force such as Cumbria, which obviously would not be able to afford such a thing on its own, could provide helicopter coverage 365 days a year, 24 hours a day, in a way that the Met, which obviously is a much bigger police force, would be able naturally to do on its own. That is what we hope we will be able to do. Obviously, it is very difficult for all of them to get together. That is one of the reasons why it was important to give a general shove to the forces, to try to deal with these matters. The noble Baroness particularly asked what exactly had impeded that agreement. I can say that there has been general agreement on the principle. The order provides the imperative since my noble friend announced his intention to make the order. It gives that extra shove from the centre, just to make sure that the things asked for will happen in due course.
Misuse of Drugs Act 1971 (Temporary Class Drug) Order 2012
(11 years, 11 months ago)
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Lord Henley
That the Grand Committee do report to the House that it has considered the Misuse of Drugs Act 1971 (Temporary Class Drug) Order 2012.
Relevant documents: 44th Report from the Joint Committee on Statutory Instruments
The Minister of State, Home Office (Lord Henley)
My Lords, this order was laid before Parliament on 3 April—that is, if it is to remain in force. The order was made on 29 March and came into force on 5 April 2012. It makes—I have to stress that this is one of those words that I find difficult to say—methoxetamine, and its simple derivatives, temporary class drugs under Section 2A(1) of the Misuse of Drugs Act 1971 for up to 12 months.
The Government identified and monitored methoxetamine, through our drugs early-warning system, in 2011. In light of the available evidence, I referred methoxetamine to the Advisory Council on the Misuse of Drugs for advice in relation to temporary control in March. I thank the advisory council profusely for the quality of its advice, which was provided within 15 working days, allowing a decision to be made within a matter of days rather than weeks as has previously been the case. It is the first time that the power to make such an order has been used since it became available to the Secretary of State on 15 November 2011. It was also the first time that we invoked our drugs early-warning system to this effect.
The Home Secretary was satisfied, in consideration of available evidence, that the ACMD’s initial advice that the conditions to make a temporary class drug order were met. Methoxetamine is a drug being misused, and much misuse is having sufficiently harmful effects to warrant temporary control. The ACMD likens the effects of methoxetamine toxicity to those of acute— class C—ketamine use, including hallucinations, catatonia and dissociative effects. It further indicates cardiovascular effects, agitation, hypertension and cerebellar features such as ataxia—unsteadiness on the feet—rarely seen with controlled drugs.
The order applies UK-wide to protect the public while the ACMD prepares full advice on methoxetamine. It enables enforcement action against traffickers and has already had an impact through self-regulation of the online trade. We know that at least 70 websites previously offering methoxetamine for sale—the number of which increased from 14 to 52 in early 2011—have ceased this activity.
The order also sends out a clear message to the public, especially young people, that methoxetamine is a harmful drug. Of course, we will continue to monitor data on the drug to measure the impact of the order through all available channels, and share this information with the ACMD.
I take this opportunity to bring to the Committee’s attention the recent publication of a cross-government action plan to tackle new psychoactive substances, as an annexe to the first review of our drugs strategy. We also published our response to the ACMD’s advice, which helped to inform the action plan, and the 2011 report of the Home Office’s forensic early-warning system, on the Home Office website, which I hope the noble Baroness will find easier to access in due course.
I commend the order to the Committee.
Baroness Doocey
My Lords, I will be very brief. This is clearly a sensible precaution. It is very necessary and I very much welcome it. In view of the very nasty and harmful effects of what is known of this drug—which I am not even going to try to pronounce—it is, if anything, overdue, and I think it is a splendid idea.
Baroness Smith of Basildon
My Lords, again I thank the noble Lord for his explanation. We welcome and support the order. The purpose and the benefits are quite clear. I will not follow in his footsteps and try to pronounce it. I am told the street name is “mexxy”—MXE—and I will stick with that because it is far easier to pronounce.
I have a couple of concerns, not around the specific action taken here but about the process and time it takes to get to this point. Both Switzerland and Russia have already banned MXE. I have a slight concern over whether the processes in place are quick enough to respond to the changes that are made. I know that the Minister is aware of the European Monitoring Centre for Drugs and Drug Addiction, which has a key role in detection and assessment of new drugs within the EU. There is a recognition that these “legal high” drugs require very rapid action across Europe.
Since the Government came to power, the EMCDDA has identified 90 new substances during 2010-11, but I am concerned that the Home Office early-warning system has only identified 11. I am not clear why there would be a discrepancy between the two. If the Minister was able to say something about that, it would be helpful. It may be that the processes that we employ here in the UK mean there are others in the pipeline—perhaps they are with the ACMD, I do not know.
It would also be useful to know when the Home Office became aware that MXE was a drug on which action should be taken. If the Minister can say anything about the work with the EMCDDA, that would be helpful. It seems quite clear that the EMCDDA is very much ahead of the game as to what is happening across Europe as a whole.
I was quite shocked when reading about this SI—and the Minister reiterated the point—by the easy availability of these drugs via the internet. That does not confine itself to national boundaries. Also, the number of internet stores selling MXE increased in a very short space of time. In January 2011 there were 14 online stores; by July, within six months, this had risen to 58 online stories selling MXE. Any delay in banning such drugs allows them to become established very quickly. How is it possible to monitor such internet sites? Is this the responsibility of SOCA, which is to become the National Crime Agency? How are these sites monitored to ensure that they do not take hold in the same way?
One of the things that the impact assessment said was that there was a risk that a minor chemical change in the drug could make a new drug that would then be legal and unaffected by the order being made today. Are the Government looking at this issue? If they are not, we could have a constant flow of temporary orders each time there is a minor chemical change in the drug.
Finally, the impact assessment and briefing notes from the Home Office highlighted the importance of education in drugs awareness. Young people hear about the drug, but think that it is a legal high and do not realise the quite devastating implications and consequences. At the moment, we have the Drug Education Forum, which brings together 30 high-profile, high-quality and knowledgeable organisations across the UK, including ACPO and the NSPCC. Unfortunately, the Department for Education has withdrawn the funding from this body. My colleague Diana Johnson, Member of Parliament and shadow Minister for the Home Office in the other place, has written to the noble Lord about this and I think that it would be helpful if the Government were able to look at this again. Clearly, by their own analysis, education is key to young people understanding the dangers of such drugs. It would be very sad to see good action in one part of the Government being undermined by action in another part that makes it more difficult to tackle this problem. We certainly support the order but would be grateful for responses to these questions.
Lord Henley
My Lords, I thank both my noble friend and the noble Baroness, Lady Smith. I reiterate that this is the first time that we have used this new order. The point behind it is to act much more quickly than we ever could in the past when we see new drugs being developed. That is why we created this system, which allowed me to refer this at a relatively early stage to the ACMD, get its advice and then bring in this temporary order, which will remain in effect for a year while the ACMD does further work on deciding whether this is right or proper.
As the noble Baroness, Lady Smith, will know from some of the questions that were put to my honourable friend in the debate in the Commons, there is this faint danger, particularly with the way these things are developing, that we are constantly chasing after new drugs as new things develop. That is particularly the case when, as she put it, you can have a very minor change in something that creates a new drug that is not covered. We therefore obviously have to consider whether some more generic approach might be more appropriate in the future.
Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012
(11 years, 11 months ago)
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Lord Freud
That the Grand Committee do report to the House that it has considered the Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2012.
Relevant documents: 44th Report from the Joint Committee on Statutory Instruments
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I am pleased to introduce this instrument, which was laid before the House on 26 March. I am satisfied that it is compatible with the European Convention on Human Rights.
The original qualifying earnings band was set out in the Pensions Act 2008. We amended the Act last year to insert the automatic enrolment earnings trigger but these figures are now up to six years old. It is essential to keep the automatic enrolment thresholds up to date and relevant.
The original figures are subject to a mandatory annual parliamentary review. This first review needs to catch up with six years’ worth of change. Our task is to consider the outcome of this year’s review—the revised rates that will apply when the largest companies start to implement automatic enrolment from July of this year. This is an important and much anticipated debate. I am glad to see that we have the benefit of having pensions experts and champions of automatic enrolment with us this afternoon. I have been grateful for their expertise in the past and I remain grateful now. I look forward to what I am sure will be a robust and thorough examination of these thresholds.
The power to revise the automatic enrolment threshold is a broad, flexible power. Flexibility is important. Rather than a lock-in to a set formula with a short shelf life, flexibility safeguards the interests of savers, employers and the public purse. Flexibility enables this and future Governments to react to the changing financial landscape, the number of people saving and the amount they are saving, all set against the backdrop of the shape of state pensions.
However, flexibility and the degree of discretion that Parliament has allowed makes the task of setting the automatic enrolment thresholds for private pension saving more challenging and perhaps more contentious than the state pensions uprating exercises that we are more familiar with. The amount of the automatic enrolment earnings trigger and the lower and upper limit of the qualifying earnings band are critical to deciding who should be auto-enrolled, when it makes sense to start saving and how much people should save. Targeting is critical. We must safeguard the interests of all workers who may be in scope for automatic enrolment including the lowest paid. If the trigger is too low the low paid may baulk at the costs and opt out.
Persistent low earners tend to find that state pensions provide them with an income in retirement similar to that in working life, without the need for additional saving. For these individuals, it will very often not be beneficial to direct income from working life into pension saving. If we are to meet the challenge of pension undersaving, we have to get the pension-saving message out into the workplace. We are about to see a revolution in workplace provision. We are asking employers, payroll providers and the pensions industry to take on significant additional responsibility.
Workers will need to understand how pension saving will work. They will need to know how automatic enrolment will affect them, when it will affect them and how much it will cost. We know people will see their employer as a first port of call. We have to make automatic enrolment simple for employers to understand, administer and explain. The automatic enrolment rates for this year need to balance complex interactions between targeting, simplicity, affordability, costs and savings, and take account of equality issues. The problem is that simplicity and pensions are not natural bedfellows. The Government felt that the best way forward was to have a full consultation on the proposals for the first year of live running. Up to now employers and the pensions industry have been working with figures that are unlikely to be the ones for live running. We wanted to share our thinking and the evidence we took into account as part of the review process.
We needed the views of employers who will have to make automatic enrolment work in practice; of the companies who will provide pension schemes; and of the representatives of people who will be brought into pension saving, possibly for the first time. The Government have now reviewed this evidence from the public consultation and weighed the costs, savings and low-earners issues carefully in arriving at the figures that I present to your Lordships today. Targeting is critical but the level of the trigger is a difficult judgment because everyone’s personal circumstances will differ and will change over their lifetime. When household finances are under pressure, we do not believe it is right to encourage low earners—whatever their gender—to save at a time when they may need to use all their income to meet their family’s present living costs.
We propose an automatic enrolment earnings trigger of £8,105, aligned with this year’s personal tax threshold. Tax relief is a core part of the automatic enrolment deal. We believe that automatic enrolment should target people once they earn enough to pay income tax and therefore qualify for tax relief, and should exclude the low paid who will have a high replacement rate from state pensions alone. This exclusion is from automatic enrolment, not from pension saving per se. People on low earnings in households with a higher earning partner may be in a position to put something into a pension. People on low earnings with an expectation of a rise may want to get a toehold on pension saving. That is why the right to opt in, with an employer contribution, is such an important feature of these reforms. Any rise in the trigger disproportionately affects women. I make it completely clear that we are not weighing equality against cost; gender is not the issue here. The outcome of this review is right for all people on very low incomes, regardless of gender.
The results of the consultation were powerful and persuasive. Simplicity is critical to the success of automatic enrolment. It is best supported by aligning the automatic enrolment thresholds with existing payroll thresholds to give employers and individuals figures that they are familiar with and can explain.
I turn now to the qualifying earnings band. The headline message from the public consultation was that the band should maximise pension saving. This suggested that the right direction was to set the lower limit fairly low—and nor should we set the cap so high that it significantly increased employers’ minimum costs.
I am acutely aware that your Lordships’ views were mixed about the point at which we should pitch the lower limit of the qualifying earnings band. There was some residual support for not having an earnings band at all. The previous Administration ruled this out on the grounds of cost, and we continue to do so.
There is a good case to be made that pensions saving should rise as earnings rise, and that the original thresholds in the Pensions Act 2008 should be revalued by the rise in average earnings. That proposition was put in place by the previous Administration. There is also a logical argument that the automatic enrolment thresholds that will drive minimum pension saving levels should rise in line with the consumer prices index, for consistency with the Government’s wider policy. Price inflation affects affordability. It has a very direct bearing on how much people can afford to pay into their pension, and a direct bearing on employer costs. However, neither price nor earnings inflation produces a figure that aligns with existing recognisable payroll thresholds, and the consultation rejected them.
The work on the development of automatic enrolment and the early legislation, led so ably in this House by the noble Lord, Lord McKenzie, gave us another solid canon to work with. Private pension saving should build on the foundation of state pension entitlement. The Johnson review gave us a solution to the de minimis level of pension contributions, via a gap between the automatic enrolment trigger and the earnings level from which contributions are collected. The lower limit of the qualifying earnings band must work hand in hand with the automatic enrolment earnings trigger to deliver the policy intentions.
The consultation rejected alignment of the lower limit of the band with the national insurance contributions primary threshold because it increased substantially this year to £7,605. We, too, rejected it. It would not deliver the policy intentions. It would be a logical point of alignment and is a recognisable payroll threshold, but it is too high a peg for automatic enrolment minimum contributions. It would reduce the gap between the trigger and the point from which minimum contributions are calculated to such an extent that we would lose the critical de minimis cushion, and then we would be back to the problem of penny-packet contributions.
We looked for a point of alignment for the lower limit of the qualifying earnings band that would deliver simplicity and maximise pensions saving. We looked for a threshold that worked in conjunction with the trigger to solve the problem of penny-packet contributions. This happens at the national insurance lower earnings limit. A worker will start to build up a basic state pension on earnings above the national insurance contributions lower earnings limit. This is £5,564 for this tax year. The national insurance lower earnings limit is a figure that will be familiar to employers. It is similar, in today’s price terms, to the original proposition of the Pensions Commission and to the original figure in the Pensions Act 2008.
Baroness Drake
My Lords, starting positively, it is most welcome that auto-enrolment will really commence in October 2012, and this order is obviously an essential part of getting to that position. The pay reference periods in the draft order and the corresponding earnings values in respect of the relevant sections of the Pensions Act 2008 are sensible. We can understand why, for example, a daily pay reference period could deliver results that were not the policy intent.
It is also pleasing that the Government have held to the definition of qualifying earnings that reflects the common pay components that make up the pay packet. Aligning auto-enrolment triggers and thresholds with tax and national insurance thresholds in the interests of simplicity for employers wherever possible would seem a sensible approach—but only to the point where the pursuit of simplicity does not undermine desirable outcomes, particularly for women.
Aligning the upper limit of the qualifying band of earnings with the NI upper earnings limit provides simplicity, complements the policy intention and, by extending the range of earnings, increases savings a little. Similarly, setting the lower limit for the qualifying earnings band to the NI lower earnings limit provides simplicity and maintains contribution levels when auto-enrolment is triggered. That is the positive.
However, our concern is that the level of earnings that triggers the automatic enrolment of a worker is set for 2012-13 at £8,105, the PAYE threshold. This further rise in the trigger excludes yet more women, and places simplicity above enabling millions of women to increase their savings pot. We remain concerned for the reasons we have rehearsed previously: raising the earnings trigger has a disproportionate impact on women and the Government are repeating the errors of the past in designing a second-tier pension system that does not work for the life pattern of many women. In 10 years’ time, the error will be obvious, particularly to women themselves. I have no doubt that action will be taken to amend it, but by then thousands of women will have lost out unnecessarily.
The Government’s response to the automatic enrolment earnings threshold consultation reports that the main focus of consumer organisations was on equality issues, particularly the impact of higher thresholds on low-paid workers, the majority of whom are women, but clearly their views are not a dominant influence in setting the trigger. Millions of women have a life pattern in which periods of full-time work are interspersed with significant periods of part-time work when their caring responsibilities are at their greatest.
On the Government’s figures, of the workers eligible for auto-enrolment, two in five—39%—are women. Raising the trigger from £5,035 to £7,475—the 2011-12 PAYE threshold—excluded 600,000 individuals, 78% of them women, most of them part-time, but that decision was made. However, raising it to £8,105 excludes another 75,000 women, on the grounds of simplicity. If, over time, that earnings trigger rises even further in real terms, tracking proposed increases in the tax threshold, the number of women excluded from the benefits of auto-enrolment will grow even more.
The effect of excluding these women is, first, that they may not start to save when the reforms are introduced. Secondly, when they transition from full to part-time jobs they may face increased charges on their pension pot accumulated as a result of becoming an inactive member. Thirdly, ceasing to be auto-enrolled when they become part-time workers could break the persistency of the savings habit they built up when working full-time.
The Government sympathise with the view that only those who benefit from tax relief should be auto-enrolled. This ignores the working of the tax credit system. For example, household income brought to account when calculating universal credit disregards 50% of that income paid in pension contributions. Of course, before the reforms it was 100%. To quote from the Johnson report commissioned by the Government:
“Many or most very low earners are women, who live in households with others with higher earnings and/or receiving working tax credits. These may well be exactly the people who should be automatically enrolled”.
Those excluded women also suffer a loss in lifetime pay, albeit deferred pay, because they do not have access to the employer’s 3%—and for some employers the figure is higher. However, they will still lose out from any lower wage growth that flows from the cost of automatic enrolment.
If policy is predicated on the belief that most people will not begin to save unless the power of inertia is harnessed through auto-enrolment then it cannot be the case that the right of those below the earnings trigger to “opt in” will seriously mitigate the risk that many women will face lower incomes in retirement as a result of the level at which the trigger is put. As to persistent low earners, the argument that they should not save because they get state pension and benefit means yet again that there will be no “asset accumulation strategy” for low earners. If 100% of pension contributions were disregarded for universal credit calculation, this would reduce the risk of a fall in people’s welfare prior to retirement.
Furthermore, if the Government accelerate the move to a single flat-rate pension, depending how that is done, together with the more generous crediting arrangements for carers introduced by the Labour Government, then the incentive to save can increase for significant numbers. As the Johnson review again observes:
“earnings are highly dynamic and there are relatively few people who have low earnings throughout their lives”.
A make-weight argument for the higher earnings trigger is that it reduces the number of small pots of pension saving, which are disproportionately expensive for the insurance industry to administer. But of course that argument is totally contrary to the policy intention. The answer to that problem is the public service obligation of NEST not to increase the numbers of workers excluded from auto-enrolment.
Much is made by large employers—though having read the review, one sees that not many of them directly make submissions—of certainty and business planning from linking the earnings trigger to the PAYE threshold, so setting the direction of travel. In 2012-13 the Government are rolling out to the large employers and are raising the earnings trigger in order to simplify the process. However, these are large firms well versed in dealing with complexity. Surely we should not be trading fairness for women, which they need, for an alleged simplicity which these companies do not require.
Many large employers have already been given the simplifying benefit of an alternative certification test. Many use salary substitution, managing the complexity of employees opting both in and out of salary substitution. They are experienced in deploying often complex measures to manage their pay and tax liabilities and frequently changing tax rules. Do 75,000 more women need to lose the benefit of auto-enrolment to give them the alleged simplicity they seek?
To return to the positive: while we welcome the commencement of the new employer duty, and recognising some of the positives in this order, we remain concerned about the position of many women that is created by raising the earnings trigger.
Lord German
My Lords, I recognise in the consultation document and in the response from the Government that three-quarters of the respondents supported the trigger that is now being set by the Government in this legislation. Of course, this is not an exact science; one cannot say that a specific figure is the level at which people will benefit from coming in to automatic enrolment. However, we should recognise that for many low earners, investment in pensions is potentially unsuitable, and that it is not suitable for persistent low earners. I will come back to that point in a moment.
When the Pensions Commission did its initial work, it stated that low earners might aim for a gross replacement rate of 80% or more of their income when they retired. The Johnson review—which I, like the noble Baroness, will quote from—stated:
“This disproportionate impact on women is something we would wish to avoid if we believed that these people would benefit from saving”.
Individuals who are low earners throughout their lifetime will receive a relatively high income—I stress “relatively”—in retirement, without private pension saving. Paul Johnson quotes the example of an individual earning £10,000 a year from the age of 22, who would see a replacement rate of around 97% from the state alone. Therefore, the question is where the target trigger should be set. Surely the objective must be to maximise pensions saving where that saving is valuable and minimise it for people for whom it will not be worth while.
There is no doubt that this will have a disproportionate effect on women, but the question is whether potentially it would not be worth their while to invest in this manner. Would they benefit from the savings? The question that is being asked here is about what the threshold should be and whether it should be somewhere in the region of the figures that Paul Johnson quoted in his review for the Government. Individuals who are low earners throughout their lifetime will receive a relatively similar income without private pension saving. The question is: does the trigger enable people to come back in when their earnings level rises above the tax threshold? The question that the Minister might like to answer is: what will be the procedure for people who have been low earners, who are underneath the trigger, who have not chosen to opt in but who reach that figure to be automatically enrolled? If they are in the category of persons who will occasionally fall back below and then rise above the trigger level, how will their re-enrolment occur? Will there be encouragement, and will they be tracked so that the re-enrolment will occur seamlessly, without them losing out?
The other way in which people’s choices could be made is through opting in. I note that the consultation response from the Government states that people will be encouraged and that employers will be required to pass on information to their workforce. However, there is a difference between passing on information and encouraging people. The difficulty that many employers will have with low earners is in determining whether this is potentially good for them. It is a very difficult judgment to make, given that it may not be the right choice for a person who is a low earner throughout their life but might be for someone who is a low earner now but who has the potential to move back and forth across the trigger line.
Lord McKenzie of Luton
My Lords, I begin by thanking the Minister for the manner in which he introduced the order—and I think I spotted a few kind words as well.
My noble friend Lady Drake set out our position with her usual precision and focus, so I will be brief. Auto-enrolment goes live in a few months and we should take this opportunity to reflect on the tremendous efforts that have been brought to bear, not least by my noble friend, to make it a reality. Although we do not have an identity of view with the Government on all aspects of its implementation, we acknowledge their role in taking this forward in challenging times. The introduction of auto-enrolment may not be preceded by a torch relay but its effect and indeed its legacy have the potential to outshine the other exciting event that we expect to experience later in the year.
Appendix A to the Explanatory Note sets out the impact of changing the earnings trigger and the upper and lower limits of the qualifying earnings band. My noble friend Lady Drake focused on our major concern: the impact of the raised earnings trigger. As she explained, far and away the biggest number of losers are women. There seems to be an implicit assumption—which was in a sense reiterated by the noble Lord, Lord German—that these would be persistent low earners. I would be interested to know what evidence there is for that. If we wanted to align it with something that had a PAYE component, what about the primary threshold, for example?
I looked at the Government’s response to the consultation. The reason given for excluding the primary threshold was that there was no tax relief at the lower end. How much work have the Government done on this? I went to the HMRC website to remind myself of the rules on tax relief for pensions. It states:
“Usually, your employer takes the pension contributions from your pay before deducting tax (but not National Insurance contributions). You only pay tax on what’s left. So whether you pay tax at basic, higher or additional rate you get the full relief straightaway. However, some employers use the same method of paying pension contributions that personal pension scheme payers use—read more in the section on 'Personal pensions'”.
That section states:
“You pay Income Tax on your earnings before any pension contribution, but the pension provider”—
this is for personal pensions—
“claims tax back from the government at the basic rate of 20 per cent. In practice, this means that for every £80 you pay into your pension, you end up with £100 in your pension pot. If you pay tax at higher rate, you can claim the difference through your tax return”.
What happens if you do not pay tax?
“If you don't pay tax you can still pay into a personal pension scheme and benefit from basic rate tax relief … on the first £2,880 a year you put in. In practice this means that if you pay £2,880 the government will top up your contribution to make it £3,600. There is no tax relief for contributions above this amount”.
So the assertion that there is no tax component available simply because you are below the tax threshold is not true. I recall that the proposition was that NEST would adopt that alternative means of generating tax relief for people who went into the NEST scheme. Will the Minister outline in some detail the extent to which that issue was factored into the considerations; and confirm what the position of NEST is intended to be in relation to the routes by which people may get tax relief when it is introduced?
It is a great pity that the issue of the trigger has left us apart. The noble Lord, Lord German, instanced the fact that the tax threshold may rise to £10,000—part of a wider deal, I understand. We will see whether and when that comes to fruition, but it will simply exacerbate the problem that my noble friend Lady Drake outlined in such detail. I hope the Minister can deal with that point.
Lord Freud
My Lords, I said I was expecting a robust debate. It has been short but typically robust. What has clearly come through is that the figures around the earnings band seemed to get general acceptance in this Committee, and the real issue we are discussing is the trigger level. It is common ground that it would be pretty hard to find an earnings trigger that would target auto-enrolment perfectly. Our aim is to maximise pension saving for those for whom it is valuable, and minimise the number captured of those for whom it is not. Clearly this is not a perfect science.
The rise in the value of the trigger takes us to the impact on the low paid. As noble Lords pointed out, on balance many more women are in this category—in particular years, though it may not be a continuous position. I should put on the record that the rise from the £7,475 threshold to £8,105 excludes does not exclude 75,000 women; the figure I have is 100,000. We might as well get that on the record. Of those affected, my information is that 82% are women. We recognise that women are more likely to work part time or work less than men, and that they will be disproportionately represented in the group excluded from automatic enrolment by the increase in the trigger.
With the trigger, and automatic enrolment generally, we are talking about soft compulsion. We have developed a system that aims to capitalise on inertia—the default is saving, but we have left people who are new to pension saving to opt out if they consider that they really cannot afford it. Automatic enrolment with an employer contribution is an incentive to save. For the first year, certainly, we do not want to encourage people who do not earn enough to pay tax to divert wages into a pension pot unless their circumstances mean that it makes financial sense.
A question was asked based on reading three pages of the HMRC site, which was very assiduous. Tax relief was one of the factors considered, but not the only one. Maintaining an adequate gap between the trigger and the bottom of the earnings band was also relevant. We also needed to make sure that the right people—those who could afford to save—were enrolled.
There are two ways for a pension scheme to access tax relief for individuals. As the noble Lord, Lord McKenzie, said, schemes using relief at source can get tax relief at the basic rate even if the individual is not a taxpayer. However, where a scheme uses a net-pay arrangement, individuals can get tax relief only if they have taxable earnings. To answer the specific question, NEST will use the former, so that all members can get that tax relief.
Lord McKenzie of Luton
Does that mean that the tabulation in the Government’s response—which says that if the trigger is set at the primary threshold, it is not tax relievable at the lower end—would only run in some circumstances and would not run for many scheme members, particularly if they were members of NEST?
Lord Freud
Yes, on the basis of what I have just said, that is quite clear. For those saving in NEST, the figures would not work, while those saving in some other way, as the legislation currently stands, would not get the relief. NEST: yes; others: no. I think the silence behind me suggests a good spot there and I suspect we may look at that particular issue or anomaly —we may.
With the gently-gently approach of phased contributions starting at a modest level, we hope that we will not trigger a rush to the exit, but we do not know. We know what people tell researchers when they are asked. We can look at the opt-out rates in those countries that have similar systems. However, in the end, the evidence shows that if people feel they cannot afford it they are more likely to walk away, and the whole issue of pensions stays in the “too difficult to think about” pile. We are feeling our way here and there will be chances to make adjustments.
Baroness Drake
I appreciate that the Government are looking at the whole issue of the transfer of small pots. The point that I sought to concentrate on was that it is very likely that the market will apply a differential charging structure to inactive members and to active contributing members. Even though the Government have taken powers to control that, those powers will not stop differential charging. If a woman is full-time, then takes on a part-time job with another employer and is not auto-enrolled—and so becomes an inactive member—one of the consequences is that the charges on her remaining pot start to rise, because inertia is not turned into a positive. It is that narrow point. I appreciate that the wider review of pension pot transfers is coming up.
Lord Freud
I will stand my ground a little bit on this, because these are some of the issues that really come into consideration when we look at the broader issue of pension pots. My colleague Steve Webb has said a few things about this in public, and I know that he is looking in private at this differential charging issue, so it is something that he is considering.
My noble friend Lord German asked a related question about the opt-in/opt-out rates. Those will be monitored on an ongoing basis. He also asked about people coming in and going out as their earnings change, perhaps going from full-time to part-time. These people will continue to make and receive contributions according to the rules of the scheme that they end up going into when they go in, but if earnings dip to the extent that no contributions are due in a particular period, they will restart immediately when their earnings are high enough, so there is no waiting period.
I will now return to two issues to deal with them precisely. I only touched on the differential charging that the noble Baroness was concerned about. We have powers under the 2008 Act to set a cap should charges become inappropriately high. We recently extended those powers to cover deferred members. Therefore, we have all the necessary powers, and my colleague is aware of the issue. We are monitoring the charges with rolling research and will continue to do that as enrolment is brought in.
I will close my answers by doing justice to the point about tax relief made by the noble Lord, Lord McKenzie. We will continue to take that into account. The matter is not entirely straightforward, as we established. At this stage we do not know how many people will get relief at source as opposed to making net pay arrangements. We will keep that matter, too, under review.
This is our first review. It took a major consultation effort to decide on the trigger and the earnings band. We would have preferred to come out with this earlier, and I will try to do better on timing next year because early certainty is important, for employers in particular. It was right to consult this time, and to gather the views of people who will need to make automatic enrolment work in practice: those who will have to administer pension schemes, employers who will have to deal with all the questions from their workers, and people who represent those workers. The one message that we got from all of them was that we should keep this simple. I shall take that to heart for the future. Of course, it chimes with the Government’s Red Tape Challenge.
As I said, we will come back to this in a little less than a year. I know that I look forward to it as much as other noble Lords in the Room. I commend the order to the Committee.
Criminal Justice and Police Act 2001 (Amendment) Order 2012
(11 years, 11 months ago)
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Baroness Northover
That the Grand Committee do report to the House that it has considered the Criminal Justice and Police Act 2001 (Amendment) Order 2012.
Relevant document: 44th Report from the Joint Committee on Statutory Instruments
Baroness Northover
My Lords, the order seeks to add the following offences listed in the Royal Parks and Other Open Spaces Regulations 1997 to the penalty notice for disorder—PND—scheme. Regulation 3(3) covers the dropping or leaving of litter or refuse; regulation 3(4) covers illegal cycling; and regulation 3(6) covers dog fouling. If Parliament agrees the order, the penalty levels for the new offences will be made by a separate statutory instrument.
Currently the three offences in question may be dealt with only by a magistrates’ court, so much offending in Royal Parks goes unenforced as prosecution is costly and disproportionate for what are relatively trivial offences. Offenders therefore tend to be formally reported or verbally warned. The police advised us that each report takes approximately two hours to complete. Therefore, in most cases there is no effective deterrent for those dropping litter, for irresponsible dog owners and for illegal cyclists, and there is increasing concern from many Royal Parks users about the lack of enforcement action. For a number of years, the Department for Culture, Media and Sport, Friends of the Royal Parks and a number of MPs have expressed support for these Royal Parks offences to be added to the PND scheme.
It is right that the Royal Parks should no longer be outside the ambit of the law. Adding the offences to the PND scheme is the most efficient way to address the lack of enforcement. It will enable the police to deal with offending in an effective and proportionate way, in order to maintain the safety and enjoyment of the Royal Parks. This will be valuable all year round, and particularly ahead of and during the Olympic and Paralympic Games when the parks expect many more visitors.
The purpose of the PND scheme is to provide the police with a swift financial punishment to deal with low-level misbehaviour on the spot. The PND is a type of fixed penalty notice established by the Criminal Justice and Police Act 2001, and may currently be issued for a specified range of 26 minor offences, such as being drunk and disorderly in a public place.
By adding the offences to the PND scheme, offenders against whom little or no action is taken will be sent a clear message that offending will not be tolerated and they will receive a financial punishment for their behaviour. The offenders who are currently prosecuted for these offences will no longer be clogging up the magistrates’ courts and will instead be dealt with in a proportionate way out of court. It will also significantly free up police time for additional patrols and provide a more effective deterrent to persistent offenders. Issuing a PND takes an officer approximately 30 minutes, whereas a formal report takes approximately two hours to complete. The police have advised that following the investment of two hours in completing the report, the majority do not result in a summons.
In addition, adding the offences to the PND scheme will correct the current anomaly whereby the police have the option to issue an environmental or road traffic fixed penalty notice for similar offending outside the Royal Parks but not within them. It was not practical to amend the legislation governing those other fixed penalty notice schemes in the near future, so adding the offences to the PND scheme was considered the best option for correcting the anomaly.
We have consulted on this proposal with interested parties, including DCMS, the Home Office, the Metropolitan Police, MPs, councillors and cycling groups. The majority of respondents were in favour of adding the offences to the scheme. Some concerns were raised regarding the offence of illegal cycling. Let me be clear: we are not targeting cyclists; we are tackling illegal cycling, which can be dangerous and intimidating. Illegal cycling outside the Royal Parks can already be dealt with by a road traffic FPN and we think it is right that a similar disposal is available inside the Royal Parks.
With regard to music events held in the parks, where people may be more likely to drop litter, whether to issue a PND will remain an operational decision for the police. They will use their professional judgment and discretion to determine what is the most appropriate and proportionate response to offending based on the circumstances of the case. Ample bins and recycling facilities are provided at events.
It may be helpful for me briefly to set out how PNDs will be issued for the new offences. A fixed penalty of £50 will be issued where a police officer has reason to believe that a person has committed any of the three new penalty offences while inside the Royal Parks. Once issued with a PND, the recipient has 21 days to either pay the penalty or request a court hearing. If the recipient fails to take any action, a fine of one and half times the penalty amount—that is, £75—is automatically registered against them by the magistrates’ court.
Visitors to the Royal Parks will be made aware of the new penalty offences through effective signage and markings. We will be working with the Royal Parks Agency and Metropolitan Police to ensure that these are clear and unambiguous. The Government are supportive of adding these offences and see the benefits to the public as well as to the Royal Parks Agency and Metropolitan Police of having an effective means of tackling this kind of offending in the Royal Parks.
I hope that noble Lords will support the order.
Baroness Doocey
My Lords, I support this order and I am very pleased that cycling is included. On more than one occasion, I have seen people cycling in the park in a very irresponsible manner, which can have devastating effects. However, I should like to mention parks and dogs. I love both and am in the wonderful position of living in an area where I can use Bushy Park and Richmond Park.
It never ceases to amaze me how people who are completely and utterly responsible about their dogs and would not dream of not cleaning up after them in the street will take a very different view in a park. They also take different views between different parks. Bushy Park is a wild park which does not have manicured lawns in most places. It always surprises me that totally responsible people will say, “Oh, it doesn’t matter here because the deer are all over the park and what is the difference?”. But children play in parks and I am particularly concerned about the spreading of the parasitic disease toxocariasis. I know someone who suffered as a result of this disease, but its effects are not widely known.
I believe that everyone should be able to use our parks. We are very lucky to have such wonderful Royal Parks and open spaces. But enjoyment for children, animals and adults should not be ruined by the very small minority of people who just cannot be bothered to clean up after their animals. It is not the fault of the animals. It is the fault of the owners. Therefore, these orders are particularly welcome and I am very pleased that this behaviour will be subject to PNDs in the future.
Lord Beecham
My Lords, it is a privilege to be involved in such a momentous change to the country’s criminal law. I support entirely the Government’s objectives, particularly the observations made by the noble Baroness, Lady Doocey. She has referred to a matter which is of considerable risk to health and clearly cannot be tolerated. The Explanatory Notes refer to the fact that the impact of the order will be reviewed in 12 months. I assure the Minister that the Opposition will not press for such a review, unless Cabinet Ministers are seen to be depositing papers otherwise than in the litter bins in the Royal Parks, which would make a welcome change. It is hardly necessary to go to those bureaucratic lengths for such modest matters as these.
However, I wonder whether at some point the Government propose to review the general issue of fixed penalty notices outside the Royal Parks. There may well be other matters concerning the Royal Parks that might be raised. But there might be other issues that would be worth discussing with, for example, the Local Government Association, the national parks authorities and organisations of that kind to see whether there needs to be general updating of the system. As the Minister has made clear, this is a cost-effective way in which to deal with relatively low-level matters that nevertheless cause offence and inconvenience, and occasionally create risks to public health and safety. Having said that, we certainly support the order.
Baroness Northover
My Lords, I thank my noble friend Lady Doocey and the noble Lord, Lord Beecham, for their support. I agree absolutely with what my noble friend said about dogs fouling parks. From many years’ experience of small boys in particular playing in the parks where I lived, not just the foulness but also the important health risks involved in dogs fouling was of great concern. I welcome this support and note what the noble Lord, Lord Beecham, asked about whether this might be reviewed and applied to other areas. I will take that back, given that I have no pointer at the moment on what we might be thinking of doing.
Now, fortunately, I have some inspiration. We are currently developing a new framework for the use of out-of-court disposals, including PNDs, and revising the guidance for officers. That deals with reviewing the PND scheme more generally. The noble Lord pointed to other areas where it might be applied that were analogous to the situation of the Royal Parks. I will take back that question and let him know what we conclude. I hope that I have addressed the concerns of noble Lords, and that they will support the order.
Greater London Authority Act 1999 (Amendment) Order 2012
(11 years, 11 months ago)
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The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the order before the Committee gives the Greater London Authority the ability to spend money on activities that protect or promote improvements in public health in London.
The Health and Social Care Act 2012 confers important new public health duties on upper-tier and unitary local authorities in England. They include London borough councils and the City of London but not the GLA. From April 2013, those authorities must take appropriate steps to improve the health of their populations. The Act also confers on the Secretary of State for Health the new duty of taking steps to protect public health, and allows him to delegate his functions to local authorities either by prescribing them in regulations or by entering into other arrangements. Local authorities will be supported in their duties by a new grant, based on the current NHS spend on the equivalent activity, ring-fenced exclusively for public health. They will employ directors of public health and other specialist staff who will act as local champions for health improvement both within their authorities and beyond.
It is fair to say that the Act’s provisions pave the way for the most fundamental reform of public health services for some decades. They were broadly welcomed by both local government and the public health community. There is widespread recognition that in many ways local authorities are the natural home for action on public health, given their closeness to their local communities, their direct democratic accountability and the responsibility they share already for a wide range of services that have an impact on health, such as social care, leisure and education among many others.
The public health challenges in Greater London are exceptional. London has a complex population that is ethnically diverse, relatively young, mobile and transient, with pockets of high levels of poverty, crime and social exclusion cheek by jowl with great wealth. London rates below the national average on 18 key health indicators, including mental illness and deaths from heart attacks and strokes, while childhood immunisation rates are lower than in other large cities.
Individually, the 33 boroughs are ready and able to address these challenges. There is, however, currently no agency with the power to plan and act across borough boundaries, and to take an overview of what can be done most effectively and efficiently for London as a whole. We believe that such an agency would have considerable potential. For example, it could be asked to commission pan-London services for smaller minority groups which may otherwise be at risk of slipping beneath the radar in some boroughs. We have consulted organisations representing minority groups in London, which agree that this would be a significant benefit.
A cross-London agency could reduce administrative costs and obtain economies of scale, freeing up more resources for public health services. If, for example, the boroughs agreed that it would be appropriate for them to run cancer awareness campaigns, it would be far more effective, and less costly, to commission one campaign for London than 33 separate campaigns each confined to a single borough.
The Government propose to fill this gap. In the gracious Speech on 9 May, Her Majesty announced that we will publish a draft Bill to modernise adult care and support in England. Subject to parliamentary approval, we also intend to use this Bill to require the Greater London Authority to establish a London health improvement board, bringing together the GLA, the mayor and the boroughs to produce and implement an annual plan for public health in London, funded by the boroughs from their ring-fenced grants.
I am delighted to say that the idea for this proposal came from the boroughs and the GLA themselves, in response to an invitation from the Secretary of State, which I think sends us a very positive message about their commitment and enthusiasm. In fact, the board is already up and running, albeit in a limited and non-statutory way.
This brings us directly to the matter of today’s debate. The boroughs will acquire new duties and the related funding from April 2013. The NHS in London is keen to work with the London health improvement board on public health right now. However, it will not be possible to establish the board on a statutory basis before 2014 at the earliest.
Eager as the Board is to make its full contribution as soon as possible, it faces one particularly severe constraint during this intervening period. The GLA is currently prevented by Section 31(3)(d) of the Greater London Authority Act 1999 from spending money on providing any health services that can be provided by a local authority or other public body, such as a primary care trust.
This means that even if funds are contributed voluntarily by the boroughs or the NHS, the GLA and therefore the board cannot currently use them to commission public health services or campaigns. It is easy to understand the rationale for that constraint—it is the need to prevent wasteful duplication of activity. We have no intention, either now or in the future, of giving the GLA a standing statutory duty for public health that would overlap with the duties that the boroughs have for their populations.
The objective we want to achieve now, ahead of more comprehensive primary legislation, is simply to allow London boroughs to work in partnership with the board from the outset as one way of effectively fulfilling their duties. This order removes the obstacle that the 1999 Act presents. It is made under Section 31(9) of that Act, which provides that the Secretary of State may make an order to remove or restrict any prohibitions or limitations imposed by Section 31.
The order inserts a new Section 31(5A) into the Act, which from July will allow the GLA to spend money on providing services or facilities that protect or promote improvements in public health. This new power will be exercised consistently with the GLA’s principal purposes as set out in Section 30(2) of the Act.
With this new power, the GLA will also be able to spend funds on public health activities that it raises from external sponsors other than the borough councils and, until April 2013, allow it to work with primary care trusts and the strategic health authority in London if they commission the GLA to deliver public health services on their behalf.
Lord Hunt of Kings Heath
My Lords, I thank the noble Earl, Lord Howe, for explaining the intention of the order to the Committee. I declare an interest as chairman of an NHS foundation trust and as a consultant and trainer in NHS and health issues. As the noble Earl explained, this will enable the GLA to spend money on improving or protecting public health in Greater London. It has a specific relevance to the London Health Improvement Board, and is consistent with the enhanced role to be given to local authorities in the rest of England and in the London boroughs. We believe that local authorities can make a major contribution to public health and support the general thrust of the order.
The case the noble Earl put forward for a pan-London approach to public health is persuasive. My understanding is that—as he said—it will tackle the major health problems in the capital, including cancer, childhood obesity and alcohol abuse. I particularly note the comments of Dr Simon Tanner, NHS London regional director of public health, who explained that:
“Health issues in London are both complicated and specific to the city. The capital’s biggest health problems such as obesity, cancer and alcohol abuse are often interrelated and cannot be tackled in isolation”.
On behalf of the NHS, he said,
“we want to draw on the diverse skills and experience we have to tackle these areas through the London Health Improvement Board”.
This clearly receives support from the NHS, as well as the London boroughs and the GLA.
I listened carefully to the noble Earl’s explanation of the relationship between the London boroughs, the GLA and the improvement board. He was careful to make clear that the London boroughs are the principal public health bodies for London. In essence, the LHIB will depend on the support of the London boroughs to be able to take the necessary action. I entirely understand that, but I will ask the Minister a question. He mentioned the issue of campaigns. He said that it would be much better to co-ordinate a public health campaign across London, and that the board could have an important role to play, which is self-evident. However, I imagine that it would depend on all the London boroughs signing up to a particular programme and committing a budget to it.
What will happen if the board is not able to get all the London boroughs to join a campaign? When statutory legislation is brought to Parliament, will it enable the board to take account of that in some way? Presumably, one would not want one borough to be able to veto an action that all the others had agreed to. I would be grateful if the noble Earl would also indicate when he thinks legislation will be brought forward to put the board on a statutory basis. I do not know whether it will be primary or secondary legislation. It would be helpful if he could explain that, too.
My final question is slightly outwith the issue, but I hope that the noble Earl will not mind me asking it. We are all agreed that local authorities, whether inside or outside London, should have a stronger role in public health. The appointment of a director of public health by first-tier local authorities, and the establishment of public health departments in those local authorities, is clearly very important. Noble Lords will be aware that there has been concern in the public health community about the extent to which the ring-fencing of budgets will actually hold. If the noble Earl is not able to explain this, perhaps he might write to me in due course.
I am also picking up some concerns that local authorities are being less than sensitive to the debates that we had on the Health and Social Care Bill about the status of the director of public health and the right of direct access to the local authority chief executive. I realise that local government structures have changed since 1974 and that direct access for the DPH could present some problems to local authorities, but it is widely accepted within government that the Chief Medical Officer must have direct access to the Prime Minister and senior Ministers—for obvious reasons in view of the importance of that office. Surely the same applies at local level.
There are some signs that local authorities have not taken that message on board. It would be a great pity if local authorities, almost at the starting gate of assuming greater responsibility, did not recognise the need to ensure that public health has a very strong voice at the top table. Frankly, local authorities are on trial. There is no guarantee that the arrangement will stay for ever if they are not able to accept the responsibility that is placed on them. I realise that this matter goes slightly wider than the order, but any words of comfort would be much appreciated.
Earl Howe
My Lords, I am very grateful to the noble Lord, Lord Hunt, for his support for the order. He asked me a number of questions. First, he asked whether, if the London borough councils cannot unanimously agree on a plan, that would affect their ability to commission services from the GLA or through the board. The board can and will be able to deal with the boroughs individually if necessary. The draft Bill that we are bringing forward will make clear in primary legislation how the board will agree plans on a statutory basis. For example, if a group of boroughs wished to get together, excluding other boroughs, there is no reason why they should not do so and commission the GLA to deliver services solely on their behalf.
As I said, the establishment of the board as an NDPB will require primary legislation. Unfortunately, I cannot tell the noble Lord when that will be brought forward, but the draft legislation will be published soon. We published baseline allocations based on the NHS spend for public health, and our intention is to move gradually to a more needs-based formula over a period of years. To move more suddenly would prove destabilising, as I am sure the noble Lord appreciates. That addresses his point about the ring-fencing of budgets, and whether they will hold. I was not aware of concern about that. Of course, some boroughs wish that they had more money than they do, but it is necessary to start from a logical place, and we believe that the baseline allocations reflect current reality.
I was concerned to hear what the noble Lord said about the status of directors of public health and the extent to which they will or will not have access to their respective chief operating officers within a local authority. I will take that concern away with me, and I am grateful to him for flagging it up. If there is anything I can say to him in writing, I will be very happy to do so.
Health and Social Care Act 2008 (Regulated Activities) (Amendment) Regulations 2012
(11 years, 11 months ago)
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The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the regulations that are before us today make a number of changes to the registration system for providers of health and adult social care services operated by the Care Quality Commission.
The changes that we are proposing fall into three broad categories. First, they make some changes to the extent of registration, removing some providers from registration where the risk to service users does not justify regulation by the commission, or there is little or no potential for regulation by the commission to mitigate these risks. Secondly, they make some slight technical amendments to the regulations; and thirdly, they make some clarifications to the regulations. I shall say more about the purpose of the instrument a little later, but I would like to reflect on the progress that the commission has made since it was set up three years ago.
As the independent regulator of health and adult social care services in England, the commission plays a key role in providing assurance that patients and service users receive the standards of care that they have a right to expect. All providers of “regulated activities” in England, regardless of whether they are public, private or voluntary sector organisations, are required to register with the commission. Providing a regulated activity without being registered is an offence.
In order to be registered, providers have to comply with a set of registration requirements that set the essential levels of quality and safety. Where providers do not meet these essential levels, the commission has a range of enforcement powers that it can use to protect patients and service users from unsafe care. This includes, in the most extreme cases of poor care, closing down services. The commission has registered around 22,000 providers in a number of waves. The final round will be the registration of 8,000 providers of NHS primary medical services in April 2013.
During the passage of the Health and Social Care Act 2012, we made it clear that we would strengthen the role of the commission. As our reforms to health and social care services are implemented, the commission’s focus will remain on its core function of registering providers against the essential levels of safety and quality, and taking action against those providers that do not meet these standards.
The commission has taken on a challenging workload in bringing a large number of new providers into a new registration system in a short period of time, and in merging the work of three former regulators. I believe that it should be commended on the progress that it has made. The early years of the commission’s operation have been comprehensively reviewed over the last year. This has included reviews by the Public Accounts Committee, the Health Select Committee and the performance and capability review undertaken by my own department.
The regulations before us now were consulted on and drafted before the findings of those reviews were available. I assure the Committee that my department will consider whether further changes to the regulations that underpin the registration system are required in the light of these several reports. We are now commencing a further review of the regulations and aim to consult on any further changes, if they are needed, at the end of the year.
Lord Hunt of Kings Heath
My Lords, I start by declaring an interest as chairman of an NHS foundation trust and as a consultant trainer on NHS and health issues.
I thank the noble Earl, Lord Howe, for his very extensive explanation of the regulations. Although the instrument is mainly technical in respect of the scope and definition of regulated activities, I do not think that it can be divorced from more general issues facing the CQC and its turbulent history over the past few years.
It is clear that the CQC faces some fundamental challenges over leadership, sense of direction and the confidence that both the public and the sector it seeks to regulate have in it. The noble Earl, Lord Howe, mentioned the Public Accounts Committee report of 12 March, which stated that the commission had more responsibilities but less money than its predecessor organisations. It pointed out that, none the less,
“it has consistently failed to spend its budget because of delays in filling staff vacancies. It is overseen by the Department of Health … which underestimated the scale of the task it had set in requiring the Commission to merge three bodies at the same time as taking on an expanded role. The Commission did not act quickly on vital issues such as information from whistleblowers. Neither did it deal with problems effectively, and the Department is only now taking action”.
The PAC concludes:
“We have serious concerns about the Commission’s governance, leadership and culture. A Board member, Commission staff, and representatives of the health and adult social care sectors have all been critical of how the Commission is run”.
I also noted with interest what the noble Earl said about his department’s own performance and capability review. I do not disagree with the summation in the review that:
“CQC’s achievements are considerable and should not be underestimated”.
The review points out that since 2009 it has not only brought together three different organisations and developed a new regulatory model but has brought 21,000 providers into the new regulatory regime and carried out more than 14,000 compliance inspections and reviews. I also understand from the capability review that:
“CQC has now set the essential platform from which tougher regulatory action can be taken when needed, if and where standards fall below acceptable levels”.
However, it points out that, alongside those achievements,
“CQC has faced operational and strategic difficulties, as previously documented. Delays to provider registration, shortcomings in compliance activity and, at times, a negative public profile have seriously challenged public confidence in its role. With hindsight, both the Department and CQC underestimated the scale of the task of establishing a new regulator ... Even so, CQC could have done more to manage operational risks”.
Looking forward, the review states that there are important issues that need to be addressed. First, the CQC should become more strategic; and, secondly—this is very telling in view of my later comments—accountabilities are unclear. The review says that there is a blurring of the boundary between the board and the executive team, with the board only recently moving to take on a stronger role to constructively challenge the executive team. Finally, the review says that the underlying regulatory model is new and that so far there is limited practical evidence of its effectiveness.
I have now had the opportunity to read the Treasury minute responding to the PAC report, in which the Government agreed with the PAC’s recommendation on the need for an action plan to secure the changes that are required. I also note from the Treasury minute that, on governance, the Government promise that a new board structure will be in place by October 2012. When the noble Earl responds, perhaps he will say a little more about this governance structure. Can I take it that there will be a process of reappointing non-executives? It would be helpful to know whether that is intended.
On the role of the commission, the Treasury minute refers to the comment made by the PAC, which stated that there was at least uncertainty about the core role of the commission. My understanding from the Treasury minute is that the Government accept the challenge of setting this out with measurements of quality and impact to assess the CQC’s effectiveness.
Having seen the reports from the PAC and the Health Select Committee, and the department’s own review, we now have an understanding of some of the actions that will be taken. Does the noble Earl consider that they will be sufficient to ensure confidence among the public? I invite the noble Earl to reflect on that because, however worthy many of the CQC’s actions were, one should not underestimate the knock to public confidence that has occurred in these turbulent years.
Perhaps I can tempt the noble Earl to gaze into the future and say a little about how the CQC might fit into the new NHS architecture. In our debates on the Health and Social Care Act we considered the relationship between CQC, the NHS Commissioning Board and Monitor. There is some built-in tension there, and I am interested to know how the noble Earl thinks the whole thing will fit together.
We also await the second Francis report, which I gather is now due in the autumn. Inevitably, this will have something to say about the CQC and, I suspect, the regulatory architecture. Again, I cannot anticipate what the inquiry will say, but will the noble Earl say a little about what process the Government intend to adopt following receipt of the report? Clearly it could have an immediate impact on some of the changes that the Government are making as a result of legislation.
On the burden on the CQC, it was a mammoth task bringing three organisations together and, essentially, increasing the responsibility but reducing the resources. One should not underestimate the task that was placed on the CQC, which was expected to take on new responsibilities. The noble Earl mentioned the responsibility of embracing the registration of providers of NHS primary medical services. This has now been delayed until April 2013 but, none the less, is a major additional responsibility. The Public Accounts Committee commented on this and said that in the past the commission’s inspection work suffered when it had to register large groups of providers. The committee said that it shifted its focus to registration and carried out far fewer inspections than planned. What guarantees can the noble Earl, Lord Howe, give me that moving to take on primary care providers will not impact on the other essential responsibilities of the CQC?
Earl Howe
My Lords, I am grateful to the noble Lord for his comments. I begin by thanking him for the expressions of support that he gave to Dame Jo Williams and Cynthia Bower. I am sure that they will read those with gratitude.
The noble Lord made a number of points around the capability of the CQC to undertake the duties placed on it. The performance and capability review found that in its early stages the CQC was understandably focused on operational priorities. However, the achievements of the CQC should not be underestimated, and I was glad to hear the noble Lord acknowledge that. The review also acknowledges that the CQC leadership could have done more to manage operational risks and provide better strategic direction. We are clear that the CQC leadership is now demonstrating greater confidence and challenge. The recommendations are aimed at building on performance over the last 12 months, which I think has been noticeable, to further strengthen capability and improve accountability, including within the department.
We were very frank in our assessment of our own role—that is to say, the role of the department—in this. The capability review recognised that the department and the CQC underestimated the scale of the task of combining three regulators into one organisation while developing and implementing the new regulatory model. Even so, the review found that the CQC could have done more to manage the difficulties that it faced in its first few years.
We need to address those points but, at the same time, to look ahead. The department is committed to supporting and strengthening the CQC. We are clear that the CQC should continue in the future to focus on its core role of assessing whether providers meet the essential levels of safety and quality through its registration function. We have every confidence in the CQC’s ability to provide effective regulation of providers of healthcare and adult social care in England. The performance and capability review found that the CQC has made significant progress in the last nine months and is clearly focused on its core tasks.
The review has already made recommendations to strengthen the board and the board’s structures, which was a matter raised by the noble Lord, including changing the board so that, instead of comprising only non-executives, it becomes a unitary board of majority non-executives, with senior executives on the board where they can be better held to account. It also recommended that the CQC reviews and reinstates the board’s support and development programme and strengthens capability at executive team level with greater strategic capability and more and wider sector-specific expertise. The department will oversee the implementation of those recommendations.
Lord Hunt of Kings Heath
I am grateful to the noble Earl, Lord Howe. Perhaps I may make just a couple of points. On the consultation on the HFEA, all I should like to say to him is that it might be useful if there were some time for parliamentary discussion in your Lordships’ House around the consultation—not to second-guess the consultation process but, I should have thought, in view of our previous debates, to allow for some discussion among parliamentarians about the consultation document.
Secondly, as regards Kay Sheldon, I fully understand that the noble Earl is not prepared to comment on any individual case. He went on to make the point that the department was concerned to ensure that the board of the CQC was well functioning and effective. One could take that both ways. I understand, in a sense, the ambiguity of the noble Earl’s expressions in relation to that. All I would say to him is that I would ask the department to walk very carefully in this area. I know that he has debated the issue of whistleblowing many times in the past few years, and he has always upheld the rights of whistleblowers. Although it might be argued that a board member is a little different from a member of staff, there will sometimes be circumstances when board members themselves can become frustrated that they have raised concerns that are not then dealt with. Taking action against a board member who has actually given evidence to a public inquiry will send unfortunate signals to the NHS about how strong collectively we are in supporting whistleblowers. I do not expect the noble Earl to respond to that but hope that it will at least encourage the department to think very carefully about their actions in this case.
Earl Howe
My Lords, on the noble Lord’s first point, I would be very willing to take part in a debate on the issue involved in our proposals to transfer the functions of the HFEA and the HTA to the CQC. I can only say that I will ensure that the noble Lord’s suggestion is fed into the usual channels.
On the second issue that he raised, I appreciate his understanding that it would not be appropriate for me to comment on the position of individual members of the board. I am sorry if my remarks appeared ambiguous; that was certainly not my intention. All I intended to say was that the CQC will be facing significant challenges over the coming months, as we have been discussing, and the department is committed to ensuring that its board has the skills and capabilities it will need to meet those challenges.
House of Lords
Disability: Black and Minority-ethnic Disabled People
Baroness Thornton
To ask Her Majesty’s Government what they are doing to address access to and use of disability services by black and minority-ethnic disabled people, as outlined in the recently published Scope report Over-looked Communities, Over-due Change.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
The Government recognise the issues around access to and use of disability services by people from black and minority-ethnic backgrounds. Our forthcoming cross-government disability strategy will reflect the input of disabled people, including those from black and minority-ethnic backgrounds, and will set out our priorities for ensuring that we can develop ways of tackling those issues.
Baroness Thornton
I thank the Minister for that Answer and the recognition of the particular issues that black and minority-ethnic disabled people face, which require a cross-government approach. The impact assessments of the effect of government policies on welfare reform, for example, are so important because this group is disadvantaged. I therefore seek a commitment from the Minister that the cross-government implementation plan will ensure that there is a strong working relationship between the Office for Disability Issues, the Government Equalities Office and her own department. When might that plan be available for us to look at?
Baroness Hanham
My Lords, as I am sure the noble Baroness knows, the Government are developing the cross-government disability strategy at the moment. It is cross-government, so the answer to her question about whether all departments will be involved is clearly yes. As to when the disability action strategy will be available, there is no date for publication yet as consultations are still going on. They include people from black and minority-ethnic groups.
Baroness Gardner of Parkes
Do other factors come into this? Admittedly, the culture of black and ethnic minorities often means that people care for their own, perhaps better than we do and perhaps putting us to shame in that respect. Apart from that, does the Minister think that there is a lack of awareness? Are these people applying for help, or are they not aware that they need to or could apply for help?
Baroness Hanham
My Lords, the report identifies that quite often they do not apply for help. In part, that is because they are not known to the authorities. A large way of getting around that is for local government or health authorities to ensure that people are aware of the local groups that reflect black and minority-ethnic requirements, and can thereby find out what their needs are. However, I accept what my noble friend says: that in many of these groups there is a family commitment to look after their own and not to seek statutory help.
Baroness King of Bow
My Lords, I congratulate Scope and the Equalities National Council on the report, which draws to our attention the fact that nearly half of all black and minority-ethnic disabled people live in poverty, which is staggering. Given this extraordinary statistic, will the Minister agree to meet Scope and the Equalities National Council to discuss this point and look at how impact assessments can be improved in the future so that black disabled children in Britain do not have a 50% chance of growing up in poverty?
Baroness Hanham
My Lords, I thank the noble Baroness for that. I cannot give an absolute commitment myself because this goes further than the Department for Communities and Local Government, but I will see who the right person would be and I am sure that I will be able to give a commitment on their behalf that that meeting will take place.
The Lord Bishop of St Edmundsbury and Ipswich
The Scope report highlights certain difficulties that migrants have in accessing services, with that of language among them. Are there any plans for the Government to review the provision of translation services through social services?
Baroness Hanham
My Lords, each local authority can decide what translation facilities it needs for its communities. Some require material to be published in their own language, but very many others just need to ensure that that material is available. It is, of course, necessary now for local authorities and health authorities to ensure that they have access to interpreting services as and when they need them.
Baroness Hussein-Ece
My Lords, I also welcome this very important report, which has shone a light on the desperate need of nearly 1 million people from black and ethnic-minority communities—a growing community. I want to press my noble friend the Minister a bit more. Given that demographics mean that this cohort of people is growing fast, will she consider developing a national race equality strategy, which would create a joint implementation plan for these two strategies, to be led by the Office for Disability Issues and the Government Equalities Office, to ensure that these people do not fall between the cracks and can access services?
Baroness Hanham
My Lords, I have already mentioned the disability plan, which is in the process of being put forward, and where that strategy has advice from black and minority-ethnic groups. The Government do not think that a race equality strategy would add very much to the current position, with its focus on the barriers faced by disabled people. There are duties under the equality strategy, which I think is now 90% introduced. This is not a question entirely of race and disability but of ensuring that individuals have access to the services that they need and are known to the authorities when they need to be so that their requirements are met. That goes across the board. In short answer to the noble Baroness, we do not think at the moment that a race equality strategy would add anything to the Government’s position.
Baroness Whitaker
My Lords, will the noble Baroness seek to remedy the omission in the Scope report? It took no account of the needs of people with disabilities from the Gypsy and Traveller community. I remind the House that Gypsies and Travellers are a recognised minority-ethnic community.
Baroness Hanham
My Lords, they are indeed recognised as a community, and I am aware that it is a community on which people concentrate. There should be access to information from them about their needs.
Lord Wigley
My Lords, the noble Baroness will be aware that the report has suggested very strongly that there is a danger of the needs of black and minority-ethnic disabled people falling between the remits of various departments, including the Government Equalities Office, the Office for Disability Issues and the Department for Communities and Local Government. Why is that happening? If there is to be an implementation plan, will she give particular attention to finding a way to ensure that that aspect is addressed?
Baroness Hanham
My Lords, I think that aspect will be addressed by the disability strategy. We already have advice from the black and minority-ethnic groups. The strategy very much takes account of their needs and it then will be a requirement under it that local government, the health service—the people who are commissioning services—know where the people are who need them and can identify what they require individually. The short answer, again, is that that will be taken into account across government in the disability strategy.
Schools: Careers Advisers
(11 years, 11 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Hughes of Stretford
To ask Her Majesty’s Government why their guidance to schools on implementing the new duty to provide careers advice has not required schools to employ qualified advisers and provide face-to-face advice for pupils who need it.
The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford)
My Lords, the recent publication of statutory guidance on careers marks an important step, as schools prepare for the introduction of the new duty to secure independent careers guidance from September. Schools will be expected to work in partnership with expert careers guidance providers as appropriate to ensure that pupils receive impartial advice. The statutory guidance is clear; face-to-face careers guidance can help pupils, particularly those from disadvantaged backgrounds, to make informed choices and successful transitions.
Baroness Hughes of Stretford
I thank the Minister for his Answer. The Government have commendably continued the work of the previous Labour Government to establish a national careers service for adults, and the Business Secretary has specified the qualifications that advisers must have and that face-to-face advice must be provided to target groups of adults. Why, then, has the Education Secretary allowed schools complete discretion—because that is what the guidance does; there is nothing required of schools—in the quality of service provided to young people? Has not therefore the Secretary of State for Education really failed in his duty to young people by not setting even a minimum standard of service that every school must meet?
Lord Hill of Oareford
My Lords, we had these debates at length during the passage of the Education Act. As the noble Baroness will know, it is the Government’s view, and our starting point—and it is what we are trying to do across the piece—to trust schools and heads and people running schools to make the best judgments in the interests of their children. That is something that we are seeking to do across the board. It is not the case that the guidance does not provide any framework at all in terms of what schools should take into account. It is clear, for instance, that they should secure access to independent face-to-face careers advice when they judge that it is appropriate, particularly for children who are disadvantaged and with special educational needs. I agree with her about the importance of careers guidance and advice, and there are a range of ways in which we are seeking to do that and to increase employer involvement in schools, whether through studio schools and UTCs or through getting 100,000 employers to come into schools to explain how children can prepare themselves for the world of work.
Baroness Sharp of Guildford
My Lords, I believe that there has been some discussion of examples of best practice in careers guidance being published to supplement the guidance that has already been issued. Is that likely to be the case? Such best guidance would, I believe, bring out the necessity of face-to-face guidance when it is appropriate.
Lord Hill of Oareford
My Lords, it is the case in terms of producing statutory guidance. The department’s view, which I think is the right view, is that statutory guidance should always as short, focused and clear as possible. But it is the case, as my noble friend mentions, that there could be benefits in having some practical information and additional support to schools to help them to understand what their duties are. It is the case that my honourable friend John Hayes, who is the responsible Minister, would be very happy to have that discussion with my noble friend Lady Sharp and to see how that practical information could best be provided.
Baroness Howe of Idlicote
My Lords, the Minister will know that there are many industries and careers in which girls are under-represented. Within the Government’s plans, do they have specific arrangements for seeing that girls are enlightened about some of the better paid and more needed careers within the communities that they live in?
Lord Hill of Oareford
The general point to which the noble Baroness refers would be well illustrated in the kind of work that we want to do with university technical colleges, trying to make sure that girls, for example, have the opportunity to study and get those technical qualifications that will lead to well paid jobs. In terms specifically of the guidance, consistent with my earlier answer, our overall approach is to say that we would trust schools to take the best judgment as to what is in the interests of their pupils, whether that is boys or girls. But I agree with her that careers guidance is important for children of both sexes.
Lord Brooke of Sutton Mandeville
My Lords, I realise that most of your Lordships’ House will have received qualified careers advice for, otherwise, they would not be here. However, can my noble friend tell me what qualifications are needed in order to give qualified advice?
Lord Hill of Oareford
My Lords, if I had received good careers advice, I would not be here. In terms of what qualifications we look for in good careers advisers, the accredited providers of careers advice will have to meet a quality standard set by the national careers service. However, generally, we can all benefit from advice from a whole range of people. We have all had it in different ways, which is why we are where we are.
Lord Roberts of Llandudno
My Lords, does the Minister really think that one short interview will be sufficient? Should there not be ongoing mentoring and guidance? Some children develop late; others change their minds—as we all have at one time or another. However, they should be ongoing, well-resourced and thorough.
Lord Hill of Oareford
My Lords, my basic view is that it is horses for courses. Different children need different things. There will be some who will need intensive support of the sort to which my noble friend refers. There will be others who know exactly what they want to do and will need less.
Baroness Knight of Collingtree
My Lords, will my noble friend continue to bear in mind that, however good the careers advice may be, if the student cannot get an apprenticeship it is often very difficult to follow such advice that they may have received? The link is very important.
Lord Hill of Oareford
My Lords, I agree with my noble friend. That is why we have rapidly been increasing the number of apprenticeships for under-18s and over-18s. The best support that one can give to children to prepare for a career is a decent education. That is why our focus is on what goes on in schools before they are 16 because careers advice, however good it is, cannot compensate if there is a basic deficiency in the education that has been provided.
Lord Sutherland of Houndwood
My Lords, in agreeing with the Minister’s last remark—
Olympic Games: British Companies
Lord Haskel
To ask Her Majesty’s Government why British companies which have supplied innovative products to the London Olympic Games and Paralympics Games are unable to publicise those products in order to gain further business.
Baroness Garden of Frognal
My Lords, as suppliers are paid the full commercial rate for their goods and services and are bound by the no-marketing rights clauses in their contracts, sponsors who have collectively raised in excess of £1 billion towards staging the Games are granted exclusivity for marketing rights. As the Written Ministerial Statement that I made on 1 May clarified, businesses can state their contribution to the Games in various contexts, including client lists, pitch documents and informal business contexts.
Lord Haskel
My Lords, I apologise for raising this matter with your Lordships again today but the matter is urgent. Does the Minister recall that the companies that I spoke about yesterday have no wish to use the logo or the Olympic rings or to do anything that contravenes the branding guidelines? All they want to do is use the Olympics as a shop window for the products and materials that they have supplied to go out and get further orders from other countries—orders that Ministers are urging them to get. Will the Government now persuade LOCOG to lift its ban immediately so that they can get on with it—yes or no?
Baroness Garden of Frognal
My Lords, it is not for the Government to persuade LOCOG to lift the ban because these firms will have signed a contractual arrangement when they made the contract with LOCOG in the first place. Of course they can promote their wares as long as they are within the context of the terms of the contract. As the noble Lord says, we have to ensure that they cannot promote their involvement in the Games in a way that undermines the exclusive marketing rights of the London 2012 sponsors. However, there are many other occasions and ways in which the Games will provide a focus for the very businesses that he wishes to support.
Lord Moynihan
My Lords, while my noble friend the Minister has responded on behalf of LOCOG, would she support the decision of the British Olympic Association which, following the return of the Olympic rights from LOCOG to the BOA on 31 December this year, will seek to ensure that all contractors and subcontractors can seek recognition of their superb contribution to the London Olympic and Paralympic Games to help them win national and international contracts in the delivery of sports facilities in years to come?
Baroness Garden of Frognal
Indeed, my Lords, the Government wholeheartedly support all the work that is going on to ensure that after the Games the contractors have a showcase for the outstanding work that they have done. Meanwhile, the Government in conjunction with UKTI and a number of other bodies are setting up visits, activities and promotional ways in which British business can be highlighted during the Games.
Lord Anderson of Swansea
My Lords, the Minister will be aware that in spite of brave promises at the outset of a regional spread of these contracts, the amount of contracts going to the regions has been miniscule but the amount going to London and the south-east has been massive. What lessons has she learnt from the way in which public money has been used to buttress only those firms in areas which are already relatively prosperous?
Baroness Garden of Frognal
My Lords, a number of regional contracts have been awarded as well. They may be small in comparison with some of the London-based ones but some very significant contracts have gone to the regions. We certainly hope that in the course of the Games when the highlight is on the UK generally, we will be able to promote those areas which are showing innovation and creativity in their business.
Lord Addington
My Lords, does my noble friend agree that although there are some restrictions on the use of the Olympic symbol they are there for very good reasons, primarily to allow the Olympic movement, and those sports attached to it, to raise financing and protect their marketing? Will we ensure that that is not damaged? These Games will come and go but the Olympic movement supporting the athletes will go on.
Baroness Garden of Frognal
My noble friend is absolutely right: the Olympic branding is a vital asset to the whole Olympic movement. We have to play our part in ensuring that that branding does not get misused while the Games are in London.
Lord Tomlinson
Does the Minister agree that, welcome as the statement of the noble Lord, Lord Moynihan, was, it is a case of better late than never? A number of companies have made substantial contributions to the infrastructure of the Games and have paid high levels of taxation towards the promotion of them. Should they not get some of the benefits, particularly as we are encouraged to believe that the answer to some of our economic problems is that free competition will sort everything out in the end?
Baroness Garden of Frognal
My Lords, as I set out in my original Answer, they are able to publicise what they are doing in connection with the Olympics as long as it is within the context of the contract which they have signed with LOCOG. They will also be the beneficiaries of the initiatives going on during the Games to ensure that our businesses are highlighted when the international focus is on London during the Games.
Lord Wade of Chorlton
My Lords, if one of the benefits of the Olympic Games is to encourage people to get more involved in sport, why not keep the site open next year and have an industrial exhibition to encourage people to be wealth creators?
Baroness Garden of Frognal
As was explained in the debate yesterday, the Olympic site will be closed in order to be redeveloped for its legacy purposes into the future. It will be used for sport in the future. The athletics stadium will host the 2017 world athletics, for instance, and other events will be going on. However, there is a need to close parts of the site down immediately after the Games so that it can be redeveloped for its long-term future.
Lord Moynihan
My Lords, I apologise to the House as I should have declared my interest as chairman of the British Olympic Association.
Lord Stevenson of Balmacara
My Lords, just to get a flavour of what we are actually talking about, when the Olympic torch started out from Plymouth, LOCOG officials confiscated leaflets advertising an Olympic breakfast at a local café. The officials said that flaming torch bacon and egg baguettes were on the menu, which contradicted their guidelines. According to the Office for Budget Responsibility, GDP is set to grow by 0.1% because of the Olympics. Presumably, that figure would have been much higher if the enterprise of the supplier companies had not been so grievously shackled in their marketing and advertising operations that we have heard about. Is the conclusion that we have to draw from this sorry episode that the Government have missed a golden opportunity here by caving in to LOCOG and to the IOC, to the detriment of our supplier companies?
Baroness Garden of Frognal
My Lords, I do not think that there is any question of the Government caving in to LOCOG. We reached agreement with LOCOG and the IOC on the way in which we would frame the Games. I remind the noble Lord that it was his Government who set up all these criteria in the first place. However, I agree that the case of the flaming torch sandwich will live on in the memory.
Housing
(11 years, 11 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McKenzie of Luton
To ask Her Majesty’s Government what action they propose to take in the light of the housebuilding data for the quarter to March 2012.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, the Government are already taking action. The housing strategy launched in November last year announced an ambitious measure to boost house- building substantially, including a £1.3 billion investment to get Britain building and plans to deliver up to 170,000 affordable homes. We are releasing public sector land for up to 100,000 new homes and helping buyers through the NewBuy scheme.
Lord McKenzie of Luton
My Lords, I thank the Minister for that reply, which I suggest is massively complacent but surpassed by Grant Shapps, the Housing Minister, who is on record as saying that “Building more homes” in this country,
“is the gold standard upon which we shall be judged”.
Yet there were just 109,000 completions in England in 2011—the second lowest total of any year since 1946. Seasonally adjusted housing starts to March 2012 were 11% below the December quarter and, for the year to March 2012, 6% below the previous year. Things are getting worse not better while homelessness and rough sleeping are increasing—even without further housing benefit cuts coming down the track—and private sector rents are rising. At a time when the construction sector needs work, people need jobs and families need homes, what are the Government going to do to step up to the challenge?
Baroness Hanham
My Lords, the housing strategy steps up precisely to the challenge. Some of the completions depend, of course, on when the start was and not all the starts were since 2010, so the previous programme had some effect on the programme now. However, the Government are determined that there will be a big boost to housing starts, to affordable housing and to private housing. There will be support for that in the programmes that we have outlined. By the time the spending review is completed there will be, as I said, 170,000 new affordable homes built.
Lord Vinson
My Lords, I hope the Minister is aware that the land value of a house in the 1960s was about 25%. The land value of a house today is over 50%. That means that the present generation are paying 25% more for their mortgages than most of us here today did. Most people who have analysed the situation believe that this is due to excessive land rationing through the planning system. I applaud what the Government are trying to do in freeing up the planning system but we really have to get to the heart of this, release more land and bring supply and demand into balance.
Baroness Hanham
My Lords, I agree very much with my noble friend. The Government are doing just that. Public sector land is being freed up as we speak. As I am sure the noble Lord knows, there is a plan across all departments to free up any spare land, including Ministry of Defence land. There are also now policies to ensure that, where planning permission has already been given but the plans have not been implemented, there will be greater encouragement to those people to ensure that the land is developed. We all recognise that there is a great demand for housing. We very much appreciate the problems that first-time buyers are suffering, and the delivery of more houses—on which we are determined—should help.
Baroness Hollis of Heigham
My Lords, is the Minister aware of the effect of housing supply on jobs? As my noble friend Lord McKenzie rightly said, each new house built generates two and a half years-worth of job—one year for the construction and one and a half years for the supply of materials, the furnishings, the carpets and the rest. Not only will an enhanced housing programme meet desperate housing need, it will also meet desperate unemployment, particularly among young people who wish to be apprentices.
Baroness Hanham
My Lords, I do not think that anybody will disagree with what the noble Baroness said. There is no doubt that the construction industry provides jobs and training for young people and, as she has said, it has many offshoots as a result. It is therefore in everybody’s interests that we manage to ensure that the housing market is boosted, and the Government are firmly behind that.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, we have not heard from the Cross Benches during this Question.
Lord Alton of Liverpool
My Lords, I am grateful. Will the Minister share with the House the number of people who are currently on housing waiting lists in the United Kingdom? Can she also share with us the number of underoccupied properties and the number of empty properties in the UK?
Baroness Hanham
My Lords, I do not have the figures with me, although I appreciate that they are available. Perhaps I may write to the noble Lord and give them to him.
Lord Shipley
My Lords, we have recently seen the establishment of a green investment bank, and some commentators think that consideration ought now to be given to a housing investment bank. Will that be seriously considered by the Government?
Baroness Hanham
My Lords, the noble Lord has made a point, which I am sure will be noted—and I will make sure that it is.
Electric Personal Vehicles (Use on Highways) Bill [HL]
House Committee
The Chairman of Committees
That a Select Committee be appointed to set the policy framework for the administration of the House and to provide non-executive guidance to the Management Board; to approve the House’s strategic, business and financial plans; to agree the annual Estimates and Supplementary Estimates; to supervise the arrangements relating to financial support for Members; and to approve the House of Lords Annual Report;
That, as proposed by the Committee of Selection, the following members be appointed to the Committee:
L Alderdice, L Campbell-Savours, L Craig of Radley, B D’Souza (Chairman), B Hollis of Heigham, L Laming, L McNally, B Royall of Blaisdon, L Sewel, L Strathclyde, L True, L Wakeham;
That the Committee have power to send for persons, papers and records;
That the Committee have leave to report from time to time;
That the Reports of the Committee shall be printed, regardless of any adjournment of the House.
Lord Trefgarne
My Lords, perhaps I may put just one question to the Lord Chairman. In line 2 of his Motion, he refers to the Select Committee being able to offer “non-executive guidance” to the Management Board. Are there not occasions when some plain speaking might be required, as far as the Management Board is concerned? Would not the words in his Motion preclude that?
The Chairman of Committees (Lord Sewel)
My Lords, I am all in favour of plain speaking but, in my experience, that often takes the form of non-executive advice.
Groceries Code Adjudicator Bill [HL]
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the Bill received its First Reading on 10 May, the day after the Queen’s Speech. This reflects the high degree of importance that the Government place on this measure and our desire to establish the adjudicator as soon as possible.
The purpose of the Bill is to establish a groceries code adjudicator to enforce the groceries code and ensure that large supermarket retailers treat their suppliers fairly and lawfully. As a competition measure, this is not a devolved matter and will affect the entire United Kingdom. However, the Bill has been discussed with the devolved Administrations, who support the adjudicator’s establishment.
Before I turn to the detail of the Bill itself, I wish to explain why we must now take action. In its 2008 report on the supply of groceries, the Competition Commission found that in certain circumstances the buying power of large supermarkets was potentially a cause for concern. The commission found that at times retailers transferred excessive risks or unexpected costs to their suppliers. This in turn was likely to lessen suppliers’ incentives to invest and innovate, which could act to the long-term detriment of consumers.
As a result, the Competition Commission made an order that required large supermarket retailers—those with a turnover of more than £1 billion pounds a year—to incorporate the Groceries Supply Code of Practice into their contracts with suppliers. The code requires large retailers to treat their suppliers fairly and lawfully, and places limits on a number of practices, such as the retroactive alteration of contracts. It applies equally to British and overseas suppliers.
However, the Competition Commission recognised that, by itself, such a code would not achieve the desired change. Very few suppliers would be willing to take a retailer to arbitration or to court, due to the buying power of the retailers and the fact that the supplier will be dependent on them for future business. In consequence, the Competition Commission recommended that an independent groceries code adjudicator be established to enforce the code and ensure that it was effective.
I know that noble Lords on both sides of this House are eager to see the adjudicator introduced. As a former supplier to supermarkets myself, I am very aware of the concerns that the code and the adjudicator will address. However, I also know that in most cases large supermarkets act well, that they contribute to jobs and prosperity and that the groceries market overall is a highly competitive one, which has been very effective in delivering low prices and wide choice to consumers. The adjudicator’s powers must therefore be both adequate and proportionate, ensuring that he or she can uphold the groceries code while avoiding excessive burdens on retailers.
The adjudicator will investigate large retailers and hold them to account if they have broken the groceries code. There will be no restrictions on who can complain to the adjudicator, and all complaints will be kept in strict confidence. This means that the adjudicator can receive information from any source, potentially including direct and indirect suppliers, including farmers, whistleblowers within the large retailers and trade associations representing their members. If retailers do break the code, the adjudicator will have tough sanctions, including so-called “name and shame”, instructing retailers to publish information about a breach. We think that these sanctions are powerful enough to uphold the code. However, if this proves not to be the case, the Bill allows the Secretary of State to grant the adjudicator a power to impose financial penalties.
Aside from this investigatory role, the adjudicator will have a number of other functions. These are: to publish guidance on when and how investigations will proceed and how enforcement powers will be used; to advise large retailers and suppliers on the groceries code; to recommend changes to the groceries code to the Office of Fair Trading; to arbitrate individual disputes between large retailers and their direct suppliers, or appoint another person to do so; and to report annually on his or her work.
I emphasise that the adjudicator’s direct responsibility is restricted to enforcing the code, which concerns the relationship between retailers and their direct suppliers. By preventing retailers from passing on excessive risk and unexpected costs, the adjudicator will increase the stability of the supply chain as a whole, unlocking investment and innovation.
I recognise that in some sectors, some suppliers have concerns around the activities of intermediaries in the supply chain. However, any extension of the code or of the adjudicator’s role in this way would need to be based on proper evidence and due consultation. Extending the code down the supply chain would be likely to lead to over-regulation, restricting practices which are not problematic and placing an undue burden on business.
I will now discuss further two areas that I know are of particular interest to those who support the Bill: how the adjudicator will carry out investigations and what powers he or she will have to hold to account retailers who have broken the code. There will be no restrictions on who can complain to the adjudicator. In order to begin an investigation, the adjudicator must have reasonable grounds to suspect that the retailer has either broken the code or failed to follow a previous recommendation by the adjudicator. Investigations are central to the adjudicator’s role in enforcing the groceries code. That is why we have thought long and hard about what sources of information the adjudicator should be able to consider and have listened carefully to the views of the BIS Select Committee on this.
When the draft Bill was published last year, it provided that the adjudicator not only had to have reasonable grounds to suspect a breach of the code to begin an investigation, but that this had to be part-based on information either from suppliers or in the public domain. At pre-legislative scrutiny, this proved to be one of the most contentious points, with many who gave evidence arguing that the restriction on sources of information should be removed. A few also said that the adjudicator should be able to begin investigations “proactively”—in other words, whenever he or she wanted, based on no evidence at all.
The BIS committee in the Commons advocated a middle way: that the sources of evidence should be extended but that proactive investigations should not be allowed. After careful consideration, the Government have decided not to restrict the information that the adjudicator can consider. We agree that it is possible that sources other than suppliers, such as trade associations or whistleblowers, may have information that would be of value to the adjudicator, and we have therefore decided that the adjudicator should be able to consider any information that he or she has available. The requirement for “reasonable grounds to suspect” a breach or failure will continue to provide a necessary check to prevent investigations being launched without cause.
We have some concerns that, if trade associations do not act responsibly, the adjudicator could be burdened with dealing with larger numbers of less direct and lower-quality complaints. The Government have therefore provided in the Bill that at each triennial review the Secretary of State must assess whether the involvement of third parties is helping or hindering the adjudicator. If the latter applies, he will be able to restrict the sources of information which the adjudicator can consider in deciding whether to commence an investigation. This will ensure that trade associations have a clear incentive to act responsibly, while still allowing them to play a full role.
The Government welcome the way in which pre-legislative scrutiny of the Bill has made the provisions on investigations stronger and better. The version now before your Lordships’ House strikes the right balance between preventing proactive investigations or fishing trips that could be burdensome to retailers and providing the adjudicator with the necessary freedom to begin investigations in response to genuine complaints, from whatever source.
The other major area worthy of discussion is what remedies the adjudicator will have to hold retailers to account. It is clearly critical that if the adjudicator finds that a large retailer has broken the groceries code, he or she has adequate enforcement powers that can be used against the large retailer in question. The Bill provides that the adjudicator will be able to take one or more of three possible enforcement measures: to make recommendations; to require the large retailer to publish information—so-called “name and shame”; or to impose financial penalties. I ask noble Lords to note that financial penalties may be used only if the Secretary of State makes an order allowing this, and an order would grant this power generally, not case by case.
The range of enforcement measures available will allow the adjudicator to tailor his or her action to the nature of the breach in order to enforce the groceries code most effectively. It will also allow the adjudicator to take more than one measure if appropriate. In some cases, it may be most appropriate, for example, both to make a recommendation and to require information to be published to inform the wider industry.
Some noble Lords may ask why imposing financial penalties is a reserve power only. The reason is that the Government believe that in a highly competitive market retailers will not risk reputational damage from unacceptable behaviour towards suppliers and that therefore the powers to make recommendations and to require information to be published will be sufficient to have a significant effect on behaviour. However, if they prove not to be sufficient, the Bill contains a reserve power for the adjudicator to impose financial penalties, subject to an order made by the Secretary of State for Business. This order would need to be made under the affirmative resolution procedure, ensuring a suitable degree of scrutiny by Parliament.
That last point raises a final very important issue: how will the adjudicator be accountable? I would like to assure the House that the Bill provides for a strong level of accountability. Every year the adjudicator will be required to publish an annual report setting out any arbitrations and investigations that he or she has carried out, any use of enforcement powers and, if recommendations have been made to large retailers, whether those have been followed. The adjudicator must also publish a report after each investigation. Two years after appointment and then every three years, the Secretary of State will be required to carry out a thorough review of the adjudicator. He or she will be required to consult interested parties, publish a report of the findings and lay that report before Parliament.
Finally, the Secretary of State may abolish the adjudicator if he or she considers that the adjudicator has not been sufficiently effective in enforcing the groceries code or that there is no longer a need for the adjudicator. The Secretary of State may also transfer the adjudicator’s powers to another public body. All these powers are subject to the appropriate degree of oversight by Parliament. The adjudicator’s work to uphold the code will support investment and innovation in the supply chain by stopping supermarkets passing on excessive risk and costs to suppliers. It is a proportionate, targeted and pro-growth measure that will act in the long-term interests of the consumer. I therefore commend it to the House. I beg to move.
Lord Grantchester
My Lords, today brings a major step forward in the implementation of a more honest and transparent regime in the relationship between the major retailers and their suppliers. The measure before your Lordships’ House today has Labour’s fingerprints all over it. It has been a thorough process since the initial referral by the Office of Fair Trading of the supermarkets in their grocery supplies business to the Competition Commission back in 1999. There have been extensive consultations, reviews and recommendations since the second inquiry in 2008, and this strengthened the supply code recommending the establishment of an ombudsman to oversee supermarket practices.
In August 2009, the Competition Commission recommended that this be put on to a statutory basis as no satisfactory voluntary agreement could be reached. In February 2010, our Labour Government brought in the new Groceries Supply Code of Practice to replace the Supermarkets Code of Practice, with the intention of putting the adjudicator on to a statutory basis.
In May 2011, the Conservative-led coalition introduced a draft Bill that has received widespread comment and scrutiny by both the Environment, Food and Rural Affairs Committee and the Business, Innovation and Skills Select Committee in the other place. The Government’s response is before your Lordships’ House today.
There is little doubt that this legislation is necessary. Each step along the way has been tested and found wanting. Suppliers in the groceries market have constantly challenged the practices of supermarkets. I declare my past experiences in the supply chain both as a member of the various trade associations in the farming sector and as chairman of a farmer-controlled co-operative supplying milk largely to the retailer the Co-op, as well as other dairy products to other major retailers.
The reasons for the code and the adjudicator to monitor and receive representations are as valid today as they have always been. While it is true that the largest 10 retailers receive supplies for some major brand suppliers such as Coca-Cola and Kellogg’s, the market is mostly characterised by many much smaller category suppliers to dominant retailers that are dominant across all retail food sectors. This brings features into play that require a strong code of practice to safeguard the confidence and investments necessary for suppliers if there are to be benefits to consumers in the long term.
The Bill not only delivers on the 2008 recommendations by the Competition Commission; it upholds the will of Parliament, as expressed in the Enterprise Act. The adjudicator must actively monitor and enforce the code of practice and provide suppliers with the confidence to come forward with information on possible breaches of the code.
Having said that, we are assessing the Bill before us today against several tests. Does it have the right measures to work in practice and deliver on its promises? Will it bring about change? Does it promote enterprise and growth, leading to sustainable jobs? Will it stimulate innovation in the supply chain? Will the suppliers risk using it? Will it regulate better and in a proportionate manner at an affordable cost? Will it help consumers enjoy better products at affordable prices that translate into sustainable returns for supplying businesses? Will it create a positive, forward-looking structure that is informative, constructive and transparent to all stakeholders, including Parliament, and that will be responsive and timely in its actions?
I am sure that many noble Lords in the debate today will pick up and examine these points in detail. While it is unfortunate that some noble contributors are unavoidably absent, I know that many have expressed an interest in joining us in coming forward with amendments to improve these aspects of the Bill in Committee.
The two main issues that came out of the draft Bill concerned, first, information provided by third parties such as trade associations, in addition to direct suppliers, and secondly, whether enforcement powers should include the fact that the adjudicator may levy financial penalties. With regard to third parties, we are very pleased that the Government have accepted this recommendation and included it in the Bill. It is very necessary to build confidence in suppliers to provide information anonymously without fear of recrimination. This measure also provides a forum for trade to assess the alleged practice at arm’s length and endorse the fact that any alleged malpractice is serious. It should help to deter overzealous complaints.
For that reason, we are alarmed by Clause 15(10), which allows the Secretary of State to delete this provision and revert to the position where evidence may come only from the supplier. Furthermore, this provision is subject only to the negative resolution procedure. Could the Minister indicate in her response to the debate why the Government would wish to signal this intention?
The second area of contention in the draft Bill concerned the adjudicator’s ability to levy fines. The adjudicator may impose financial penalties under Clause 6 but only after a rather clunky drawn-out process under Schedule 3. Why did the Government lose their nerve when it came to introducing the most effective deterrent in the Bill? This is contrary to the recommendations of the BIS Select Committee, which stated that,
“powers to fine should be on the face of the bill, and that the Adjudicator should also be given the power to escalate from a lower to a higher-level penalty if Code breaches continue”.
Under the Bill, a persistently offending retailer can be fined only after extensive warnings, after the adjudicator has published guidance, after the Secretary of State’s consultations across a long list of organisations, including the Competition Commission and the Office of Fair Trading, and after Parliament has agreed to a statutory instrument. This is regulation at its most bureaucratic. Surely we need something more agile. Will the Minister explain why the Government are so averse to giving the adjudicator the ability to enforce through meaningful penalties?
Under Clause 9(6), any fine must be paid into the Consolidated Fund. In Committee, we will explore whether there should be a more meaningful use for any such funds, for example to promote more innovation in the supply chain. Similarly, complying retailers may wish to see this fund used to reduce their contribution to fund the adjudicator.
The retailers, through the British Retail Consortium, have argued that the Bill will increase prices to consumers. From retailers with over £1 billion of turnover, with many multimillion pound profits, this seems rather disingenuous. The cost of the adjudicator will amount to less than one-tenth of 1% of turnover. Perhaps the BRC could consider whether the levy to fund the adjudicator could be shared on a basis proportionate to each retailer’s turnover. I am sure that it is valid to consider in Committee whether there should be some budgetary ceiling or control on this levy.
It is important to recognise that progress has been made since the code was introduced in 2010. Under Labour, we are heading in the right direction. A lot of excellent work has been undertaken by retailers in setting up compliance units, training their buying teams, reforming practices and sending annual compliance reports to the OFT. Asda has published a summary of its report on its website. However, there is still a long way to go with transparency. Retailers could publish more information and publish their reports to Parliament, to the adjudicator and to trade associations, and could make their customers aware that fair trade starts at home. The OFT could also be more responsive. I understand that retailers liken the OFT to a black hole into which they submit their reports, never to hear back.
The important element in all this is that the code must be kept alive, relevant and responsive to changing circumstances. The adjudicator must be more active than is envisaged under Clause 13. His reports should be forward looking, seek improvements and be sent wider than merely the Secretary of State and the OFT, as outlined under Clause 14(5).
The Groceries Supply Code of Practice applies only to the relationship between retailers and their suppliers. When the Competition Commission published its report in 2008, it indicated that there was a case for extending the code down the supply chain to intermediaries, consolidators and their suppliers. It held back from making any specific recommendations on this as it was considered beyond the scope of its remit.
There is much evidence to support the contention that processors, under supermarket pressure, merely pass on that pressure down to their suppliers. Indeed, only last week the dairy supply chain was braced with reports of big alterations on pricing without as much as one month’s notice, each following the lead taken by Dairy Crest.
The Government must not be complacent on this. The introduction of the adjudicator is not the end of the process; it is the beginning. What will success look like? Under Clause 16, the “Transfer of Adjudicator functions and abolition etc” is extremely worrisome to the supply chain because of any possible effect that it may have on the code and its future direction. The code must be a living document that is open for continual improvement in order to ensure that the framework is responsive and aggressive and ultimately works in the best interests of all businesses as well as consumers.
Lord Razzall
My Lords, notwithstanding the fact that there are 19 speakers in this debate, I am quite certain that the Bill has overwhelming support in your Lordships’ House. Indeed, having listened to the words of the noble Baroness and the noble Lord, Lord Grantchester, it rather reminds me of the scene in “Spartacus”. I think most people in your Lordships’ House are old enough to remember “Spartacus” and that wonderful scene when Kirk Douglas, playing the slave, was about to be arrested by the Romans and every one of the slaves stood up and said, “I’m Spartacus”. The debate reminds me that all three political parties will claim to be Spartacus and that this was their idea. However, I am sure that that will nevertheless produce significant support for the Bill.
The noble Lord, Lord Grantchester, made a number of valid points, many of which I share his view on, and I shall touch briefly on some of them. Clearly the significant change that the coalition has made is to widen the groups of people from whom the adjudicator can take evidence, particularly the trade associations. As the noble Lord, Lord Grantchester, pointed out, there has been concern that people can go on fishing expeditions. However, the remedy proposed in the Bill is fairly blunt because, were it to be found that that had been the case, we would revert to the provision in the previous Bill under which those powers are removed. In responding, the Government ought to indicate whether there should be more flexibility here. I am not entirely sure why a trade association which has not been involved in fishing expeditions, and has not been proved to be defective in the way it has approached this matter, should be excluded under the all-or-nothing nature of Clause 15(10).
The second point that the noble Lord, Lord Grantchester, made, which I entirely agree with, is on the penalties. The procedure for introducing penalties seems to be extremely cumbersome. Perhaps the Government, when we get to Committee or Report, could look at whether that process should be streamlined to make the ability to introduce penalties more effective and speedy?
I am not sure whether the noble Lord referred to the question of anonymity, which is a concern here. Clearly, with the power of the 10 leading supermarkets, people complaining to the adjudicator must have anonymity, but there are circumstances under Clause 18(3) under which disclosure of information by the adjudicator may be authorised. The Government need to look at this to explain to farmers, suppliers and the trade association under exactly what circumstances they envisage that those anonymity rules would be breached.
I entirely agree with the noble Lord’s point that the Government should perhaps look at where the fines should go, notwithstanding the current economic difficulties. At the moment all fines, if there are any, will go into the Consolidated Fund. As the noble Lord has indicated, it would be worth while seeing if we can be a little more creative about the use to which those fines are put.
Then, of course, there is the question of the abolition of the adjudicator. It seems surprising that the adjudicator under Clause 16(2) can be abolished with a fairly simple procedure, and I wonder if the Government could look again at whether there should be a right for more serious consultation.
We have all been lobbied by the leading supermarkets, and nine of them think that the fee proposals will make a serious dent in their profits. I am delighted to say, as a regular shopper there, that Waitrose does not take that view, and it has a structure that the rest of the corporate world should emulate. Waitrose makes the point that there is likely to be an average cost per retailer of £200,000 a year, which for most of the major retailers is equivalent to 0.02% of their profits, so I do not think that the complaints made by the major supermarkets really stand up. However, I agree with the point made by the noble Lord, Lord Grantchester, which is a Waitrose point, when he asked whether it was fair that everybody should pay the same flat fee, and would it not be possible to have an annual review after which the people against whom there had been the largest number of complaints should pay more and the good boys could pay less? I very much support this Spartacus Bill.
The Earl of Sandwich
My Lords, I am another supporter. I should declare an indirect interest as the life tenant of agricultural land in West Dorset and a member of the NFU, but my real interest comes from my experience of the voluntary sector and fair trade organisations such as Traidcraft and the Fair Trade Foundation, many of which have links with the churches, which I know will have a close interest in the Bill, as we shall hear in a moment.
From small beginnings, these organisations have made tremendous inroads into our supermarkets in recent years. I also know it has been an uphill struggle for some of them, just as it has for small farmers and milk producers, who often operate just the wrong side of the price margins. It means everything to them to get this sort of guarantee. The noble Lord, Lord Plumb, knows about this, as does the noble Lord, Lord Knight of Weymouth, as he comes from the West Country. I see that the BIS leaflet on the adjudicator has a dairy producer on its front cover, which is always encouraging.
Dairy farmers have simply gone out of business all around us and they still blame the supermarkets. They hark back to the time of the Milk Marketing Board, when they received a fairer and more stable price and there was much more certainty in forecasting and budgeting. Anyone who has worked with small businesses must be relieved to see this legislation come forward at last. Although it is imperfect, we must not hold it up for long, because of its importance. Although it is essentially a Labour measure, this is not a bargaining chip for the coalition. It is long agreed by all the parties and, while capable of being improved, it must be allowed to pass into law—perhaps in time for the adjudicator to start work in the new year. In the Minister’s words, retailers act well on the whole, and breaches of the code have, thankfully, been rare.
The major bone of contention is of course the extent of powers given to the adjudicator who, in the Bill, still appears to be the dog that growls but has only one or two teeth. The supermarkets—even the good ones such as Waitrose, which was just mentioned—that are nominally behind the code are nervous about the Bill. Not surprisingly, they resent any interference with the market. They think that the code is working; they distrust the influence of trade associations; they do not like flat levies—or fines, for that matter—and they would like any powers that enforce the code to remain at the naming and shaming level. Clause 9 says that financial penalties on retailers can be enforced only via the Secretary of State and,
“only if … other powers are inadequate”,
as stated in Schedule 3. It is easy to see that this process could be cumbersome. Clause 19 also stops short of requiring retailers to pay levies towards the adjudicator’s expenses, again leaving it to the Secretary of State. The reserve powers in both these clauses surely need to be strengthened if the adjudicator’s office is to have credibility.
Then there is the vexed question of third parties, which was mentioned by the noble Lord, Lord Razzall, and the previous speaker. Sainsbury’s says that obtaining evidence from trade bodies and charities is impractical and would add an unnecessary layer of bureaucracy. On the other hand, the CLA argues that third parties must be included and the NFU says that the GCA must have,
“the power to take credible evidence from reputable sources, and to use its judgment to assess its worth, before launching an investigation”.
Those points seem very reasonable. The Government have listened to them and the BIS Select Committee has spoken on this. As a result, the draft Bill has been altered to include third parties and, on the whole, to ensure anonymity. However, under Clause 15(10) there could still be restrictions on sources of information. I know that the Minister will cover that in her reply.
I appreciate that there is a risk of overregulation and I look forward greatly to the noble Viscount, Lord Eccles, who will expand on that. The adjudicator cannot be expected to investigate every complaint and the Government’s concessions will not satisfy everyone. Problems are bound to occur when retailers hide behind larger suppliers and middlemen. The British Retail Consortium claims that very few farmers supply directly to retailers and that most grocery supplies now come from large manufacturers such as Kraft and Nestlé, some of whom may have greater market power than the food retailers that they supply. We must keep a close eye on how legislation affects these other suppliers. Under the Bill, their business should be covered by the adjudicator.
I do not intend to play a major part in Committee because others have so much more experience, but I wanted to offer those few words and I shall be watching to see how far the Minister will have to bend in the face of some of the strong arguments that I know will be deployed.
The Lord Bishop of St Edmundsbury and Ipswich
My Lords, my colleague the right reverend Prelate the Bishop of Wakefield was very much hoping to speak in this debate but is unavoidably detained elsewhere. I know he will hope to speak at later stages. However, as I come from a rural diocese I found only too familiar the stories that he told me about the situation in the part of Yorkshire covered by his diocese and his concerns, which go back to 2004 when, on a very cold January night, he picketed the Arla dairy complex near Wakefield. Since then other noble Lords, particular the noble Earl, Lord Sandwich, have raised this matter in this House on a number of occasions.
As we have already heard, the impact of unfair prices has been particularly severe in the dairy industry. Before I went to East Anglia, I had seven years in Cheshire, a part of the country that had been noted for its dairy produce, and saw the effect of unfair prices. I am sure noble Lords are all too familiar with all the disturbing stories about retailers and suppliers.
The Church of England is delighted with the speed with which this Bill has been brought to this House following the gracious Speech. Detailed work within the Church of England on this issue began following a question to the 2005 General Synod; that sounds as if I am claiming that the Church of England had a Spartacus moment about seven years ago. The ethical investment advisory group conducted a detailed study into the practices of supermarkets in relation to their farmer suppliers. The ecumenical network of locally based agricultural chaplains and rural officers interviewed farmers in Yorkshire and the south-west and north-west of England. Such was the fear of some farmers that they would recount their experiences only to the church because they trusted it not to betray their confidence or reveal their identities. Such levels of fear should not be part of ethical or efficient business practice.
Fairtrade Begins at Home, which was published in 2007, was submitted as evidence to the Competition Commission inquiry in 2008. It identified practices such as: flexible payment terms, which seldom work to the advantage of the farmer; contracts subject to arbitrary change; retrospective variations to supply agreements; deductions from invoices without clear reason; and evidence that facilitation payments were required from suppliers—one such demand was £500,000.
There have been many positive developments in the relationships between farmers and supermarkets in the intervening years. However, sufficient problems remain for a groceries code adjudicator to be necessary, despite the introduction of the groceries supply code of practice two years ago. It is therefore important that the powers outlined here are implemented rapidly.
An important and valuable component of the Bill is the proposal to allow complaints from direct and indirect suppliers, as well as from whistleblowers within retailers and third parties. This is an essential part of addressing the climate of fear pervading business with some of the large retailers. It protects the anonymity of complainants and adds credibility to the office of the adjudicator. In the current financial climate, co-operatives and collaborative producer groups remain essential for the development of farming businesses, especially for livestock farmers. As indirect suppliers, it is important that co-operatives and producer groups operating on behalf of individual farmers will be able to make a complaint where the groceries code has been broken.
The decision to include enforcement through recommendations on how a retailer applies the groceries code and the requirement to publish information on breaches are positive. The adjudicator must be able to guide and encourage as well as have the means to take action. Nevertheless, like others who have spoken, the Church of England is extremely disappointed that financial penalties as currently proposed will not accompany the Bill when it comes into force. Provisions for the imposition of financial penalties are contained in the Bill, as we have heard, but they seem to create unnecessary delay. This will result in limitations in the immediate effective working of the adjudicator. As we have heard, large retailers have deployed the argument that financial penalties will lead to an increase in food prices but, as their turnover is several billion pounds, the Church of England does not believe that that argument stacks up. The British Institute of International and Comparative Law reiterated the importance of teeth—financial penalties—for effective enforcement of fair commercial relationships in food supply chains.
Given that only two years have elapsed since the introduction of the groceries code and that a full report on its functioning is yet to be forthcoming, we urge that the adjudicator role be given three years, if not longer, rather than the two years that it has been given, to establish itself before it is reviewed. Regular review of any function of governance is important, but only after a proper period of time has elapsed can an accurate assessment be made.
The first annual report of the Groceries Supply Code of Practice, when it comes, should contain information which will be useful guidance as to how the adjudicator will work and how long it might be wise to wait before a review is conducted. I welcome the Minister’s implication that a wider view of the information that can be considered has been taken by the Government and we certainly support the widest possible access to sources of information for the adjudicator.
It is, of course, to be hoped that where disputes arise, they will be primarily resolved through the existing Groceries Supply Code of Practice, but inevitably circumstances will arise when an anonymous direct complaint to the adjudicator is the only suitable avenue of recourse open. After years of hard work by many people, organisations and others, it would be unfortunate if we were to fail at the final hurdle by not providing the groceries code adjudicator with the budget, staff and financial enforcement mechanism needed to do the job properly.
Lord Plumb
My Lords, I declare my interest as a farmer and a member of several producer organisations. It is good to follow the right reverend Prelate and to know that the church is as keen to see fair play in the market as any one of us who is actually involved in it.
I congratulate the Minister on her opening statement. She led us well and answered many of the questions that we have in mind, but undoubtedly, as amendments are put before us, we shall debate some of these issues more fully. The noble Lord, Lord Grantchester, raised a number of points that obviously qualify for amendment and will therefore be interesting to discuss and to debate.
At a time when we are pressing for the removal of red tape and market regulations, it may seem rather strange to be calling for a groceries code adjudicator and possibly more controls, but as the Minister has said, the road towards the appointment of someone has proved for more than a decade to be essential. Yes, the fingerprints of the party opposite have been all over it, but now we need to put our footprint on it and clear it for some considerable time, one hopes.
The supply of groceries was referred to the Competition Commission in 1999. The supermarket code of practice was established in 2006 and the Office of Fair Trading referred the supply of groceries back to the Competition Commission. All, of course, moving round, backwards and forwards, and getting nowhere. It recommended an independent ombudsman then to police a new, strengthened Groceries Supply Code of Practice, having failed to get any voluntary agreement.
We now, therefore, have the opportunity, which I hope we will take advantage of, to create a supply code with teeth—teeth that can control some of these issues. The dairy industry has been referred to several times as one in need of recognition, in order to make sure that there is real fair play between the producer price and what the consumer has to pay. It will, we hope, take over from the supply code which has been in force for the past few years and which, as the president of the NFU, Peter Kendall, has said, is,
“essentially a rule book without a referee”.
It is surprising that many retailers have raised objections to the introduction of an adjudicator, since many have been taking steps to build stronger relationships through contracts with suppliers, but short-term financial performance can lead to abuse in the market power at the expense of the farmer and the grower. If supermarkets are operating fairly, surely they have nothing to fear from an adjudicator.
Let us not forget that there are something like 80,000 suppliers and 10 buyers. That speaks volumes, because it means that the farmers and growers have to co-operate and be stronger themselves in order to determine a fair return for their investment.
I hope the Minister will answer some of the questions that will be put. She has already answered some but I should like confirmation in particular on the adjudicator’s initiative investigations, which will be based on evidence from third parties. It is a crucial point that needs finally to be clarified. Will retailers be fined—and fined immediately—if they breach the code? Without these powers, the effectiveness and efficiency of the service will be seriously hindered.
Of course, we do not want an appointment that leads to all talk and no substance, and another year of bureaucracy without action. I like to think that the correct action can lead to fair market practice and the stimulation of longer-term collaborative relationships in the whole of the food chain. It was interesting that the editor of Farmers Weekly observed:
“As gatekeepers of the food system, supermarkets are in a powerful position to create a greener”,
and fairer way forward for all. That may be so but, sadly, too many ride roughshod over guarantees of supply and prefer to take decisions driven by short-term commercial goals.
As we all know only too well, food production is, by its very nature, a long-term and risky business. In this House, we talked of the drought not long ago; a week later we witnessed floods. Disease and uncertainty are always with us. Therefore, producers cannot rely on the adjudicator alone. We need strengthening among co-operatives and co-operation between farmers to improve their bargaining power. I have to say that that has been a theme of mine for the past 50 years. There have been improvements but there is a lot of room for greater collaboration.
Therefore, I congratulate the Minister on many of the issues that she has put forward, including amending the Government’s initial proposals in last year’s Bill. The current Bill states in Clause 4 that the adjudicator can launch an investigation where there are “reasonable grounds to suspect” a breach of the code. The trade should welcome the crucial element in safeguarding the adjudicator’s duty to protect the identity of complainants.
As we develop the debate on this extremely important issue, we shall hear many of the myths that come forward. For instance, it is already said by retailers that a supermarket adjudicator will just add to retailers’ costs and push up shop prices for customers. It is estimated that the cost will be around £200,000 a year. The cost of the adjudicator to retailers will be a minuscule proportion of the turnover of the 10 largest supermarkets involved. Only those supermarkets with a turnover in excess of £1 billion are covered by the adjudicator, meaning that the cost will represent 0.02% of turnover at most and usually much less.
Another myth is that both famers and the Government argue for less regulation, whereas an adjudicator simply adds red tape to business—the point that I made in my opening remarks. However, some regulation is necessary. Indeed, some is desirable to ensure that markets function fairly. It is worth remembering that the Competition Commission recommended the establishment of a statutory adjudicator only when it became clear that no voluntary solution was forthcoming. The retail sector was given the opportunity to provide its own solution to monitoring and enforcing the code of practice but was unable to do so. Regulation is being brought forward now because we see it as the only solution after all other avenues have failed.
I support the legislation coming forward. It is a unique situation, since all parties agree in principle. Therefore, I hope that we will not spend too much time in Committee arguing between ourselves. Let us have some action and get on with the job.
Lord Haskel
My Lords, I thank the Minister for explaining this Bill because, for once, I am able to say that I welcome a government Bill—with some scepticism, I might add. Nevertheless, it is a big day when I can say that. As my experience is not in food, I am hesitant to speak about the food business, especially after someone as experienced as the noble Lord, Lord Plumb. Like him, I am in favour of codes in business because, like him, I think markets need rules.
When I first started in business—many, many years ago—one of my first tasks was to go and sell our new flame-retardant fabric to the contracts department of John Lewis. It has a big business in furnishing theatres, hotels and restaurants. I went to its buying offices in New Cavendish Street, did my presentation and they were quite interested. On the way out there was a sign telling you who to contact if you did not think you had had a square deal. “That is a company I would like to do business with”, I thought, and I did for 30 years. Waitrose is part of John Lewis and I imagine the adjudicator operated there too; so it has been doing this for a long time. I entirely agree with the point in its briefing—a point my noble friend Lord Grantchester made—that the costs should be allocated according to the number of complaints, instead of a flat levy. In this way you reward compliance.
We were a tiny company then dealing with a large one, and the fact that there was a dispute adjudicator encouraged us to bring all our new products to John Lewis. It benefited and so did we. This is why I welcomed the grocery code Labour introduced in 2009. This Bill enforces that code because presumably it needs new powers of enforcement. This is fine but my concern is that if you go too far enforcing a code it ceases to be a shared interest—the noble Lord, Lord Plumb, implied this. It will then deliver more hope than reality. If you have a serious argument and want compensation you want an arbitrator, not just an adjudicator. From what the Minister said, I think the Bill leaves suppliers and supermarkets to get their own compensation from each other unless the Secretary of State intervenes, and that is a big step.
Another difficulty is that modern business can become so complicated, it is hard for an adjudicator to apportion blame. As my noble friend Lord Grantchester explained, there are now numerous intermediaries creating grey areas all along the supply chain who will be outside the code. It is also very difficult to assess competition up and down the value chain. It is easier to assess between firms selling similar products.
As ever, the devil is in the detail. Does the Minister recall the regulation about extended warranties? Everybody thought it was a wonderful idea that the cost should be clearly displayed to the consumer on the shop counter—simple. The arguments that ensued about where the notice should be put, the wording, the print size and the type face were such that a simple idea became ineffective. Looking through this Bill, to me it looks too complicated and could benefit from simplification.
The noble Lord, Lord Razzall, used the word cumbersome, and I think he is probably right. I imagine that the Bill steers clear of arbitrating claims because of the difficulties of establishing costs. Again, there are so many complications: intangible costs, allocating overheads, hidden commissions, intermediaries, grants, hidden marketing and financial costs, and all the other surprises that we learn about through experience. As I said, to be effective it has to be kept simple.
At the end of the day the adjudicator will settle the dispute by interpreting the contract within the code. In practice, that is probably as much as one can expect. The Secretary of State will be very cautious about imposing a financial penalty, because researching all these details and costs makes it difficult and time-consuming to establish a loss. The noble Lord, Lord Plumb, said that this will make for less red tape, but the Minister will be aware of the calls from the Benches behind her for less regulation and freer markets to make British business more efficient and more competitive. With this Bill, their Government are introducing more red tape and a new quango. The noble Earl, Lord Sandwich, mentioned this. What is the Minister’s response to their concerns?
I am less troubled, so I welcome the Bill. Sorting out grievances between retailer and supplier will eventually benefit the consumer. It will also benefit the supplier and their communities. But it has to be kept simple. My scepticism concerns the value of this Bill in assisting to arbitrate financial compensation. At the end of the day, if the matter is serious, that is what most disputing parties seek. This reminds me of the Bill that the Labour Government introduced regarding prompt payment. It did not solve the problem, but it made things better, and there is nothing wrong with that. That is what this Bill will do, and that is why in general I wish it a fair passage.
Baroness Parminter
My Lords, in the 1940s it was typical for people to spend between one-fifth and one-third of their income on food. Now it is only about one-tenth, but much of what we spend on food, in retail shops such as supermarkets, does not make it back to the producer. Companies and growers chase greater and greater volume to cover the overheads imposed by the all-powerful customers. Commercial unethical practices are commonplace in the food chain, but with the level of dominance achieved by the supermarket it is an invidious process and prospect for a supplier to complain. Moreover, as margins become thinner, there is a worrying resulting underinvestment in creating sustainable and resilient farm businesses. For these reasons, I welcome the announcement in the Queen’s Speech of an independent adjudicator to act as an ombudsman with authority and confidentiality to investigate and hold large retailers to account, as has been promised.
The Competition Commission has highlighted widespread examples of abuse, but this is not just limited to the usual suspects, with cases being reported of even the most socially responsible supermarkets demanding hundreds of thousands of pounds from suppliers. Take just one sector: horticulture. Vegetable and fruit growing is intensely competitive and the market is dominated by the oligopoly supermarkets. These major customers have been very successful in passing overhead costs back up the chain to suppliers, and margins are dangerously thin—with 1% on turnover being typical. This is contributing to a major and worrying underinvestment in horticultural research. With the rising tide of obesity and health problems, we want more people to eat more fruit and vegetables, but if we are to make fresh produce more comparable in cost to calorific and less healthy food we must have good research funding.
We know that more people want to buy British fruit, which is convenient and affordable. Indeed, one major retailer is looking to source 50% of its fruit from the UK by 2020, when presently it sources only 10%. We know that rising temperatures in the UK, as identified in the UK 2012 climate change risk assessment, could be an opportunity for growing more blueberries, apricot, grapes and peaches here.
However, how can you invest for the future when margins are that tight? It is to be hoped that the groceries code adjudicator can play some part in overcoming some of the abuses in the system and thus help deliver some of the necessary research and investment to secure resilient farm businesses. To do that the groceries code adjudicator needs strong powers. I find it disappointing that the Government have decided against putting the powers to impose fines into the Bill. To do so would have echoed the views of the 2011 report by the House of Commons Business, Innovation and Skills Select Committee. I am sure that we will debate during the passage of the Bill the holding back of automatic powers to fine, although I accept that the Bill gives the adjudicator the power to impose fines if Ministers agree that other remedies are not working.
In the absence of such an automatic power to fine, the ability to name and shame is the most potent stick that the adjudicator has. It must be used well. The adjudicator’s annual report needs to be transparent about which businesses it has found wanting, and to do so in a way that allows for meaningful public scrutiny. The Explanatory Notes to the Bill make it clear that the annual report should contain information that is useful to the Office of Fair Trading in monitoring the groceries supply order and to the Secretary of State in reviewing the adjudicator and the users of the groceries code generally. I would like to see added clear information of the use to consumers and to the groups that champion their rights so that consumers can make informed choices about where they choose to shop.
I welcome the Bill and the proposals that the Government will regularly review the performance and effectiveness of the adjudicator in undertaking its role. This is a complex industry with a non-binary food chain in many cases, and the Government are right to keep the door open to amending the scope, power and function of the adjudicator in future.
One area that I hope might be looked at in such a review is more incentives to reward compliance with the code. This issue has been echoed across the House by the noble Lords, Lord Grantchester, Lord Razzall and Lord Haskel. Forcing supermarkets that burden the office of the adjudicator with a large number of complaints to play a larger proportion of the adjudicator’s fixed costs could be a very valuable way to incentivise supermarkets to adhere to the code and minimise the number of complaints made. This is surely what everyone on all sides of the House wants.
Lord Palmer
My Lords, in principle, I do not think that we need more quangos. However, I, too, welcome the Bill and congratulate the noble Baroness on her fluent and succinct introduction, which was done with her usual charm and flair.
From my earliest memories I have been involved in the food chain, initially as a prime producer and then as a biscuit manufacturer. I have now done a full circle; I farm in one of the most beautiful parts of the country, the Scottish Borders. I am delighted to see that the Bill applies to Scotland. I also own a shop, mainly selling souvenirs and biscuits, with a tiny turnover of approximately £4,000 per annum. I also declare an interest as a member of the National Farmers’ Union of Scotland.
It is important to realise how incredibly cheap food is today. The noble Baroness, Lady Parminter, made this point: 45 years ago, 40% of the national wage went on food; today, it is just under 8%, which is a huge difference. Twenty years ago, as a farmer I was selling malting barley for £160 per tonne, the same as I got two years ago, despite the price of fertiliser tripling from 20 years ago and the price of fuel nearly quadrupling. These are grim statistics that emphasise the huge powers that the supermarkets have. Perhaps more importantly, however, prime producers are being squeezed, and hopefully this is where the Bill will make a difference.
While not wishing to throw a spanner in the works, I would be interested to know why the noble Baroness thinks that “groceries code adjudicator” is the correct term. Some influential organisations have said that perhaps a better and more understandable title would be “supermarket ombudsman”. I am sure that that would make more sense to those who shop in supermarkets and to those who supply them. When the noble Baroness winds up the debate, will she inform the House of the exact logistics of how this very important person will be appointed?
As other noble Lords have mentioned, the adjudicator must have real teeth. He, or she, must be able to levy realistic financial penalties from its very inception. As other noble Lords have also mentioned, in that all the main political parties believe in its conception I wish the Bill all speed and hope that it can become law before the end of the year rather than, as rumour has it, not until next year.
Baroness Byford
My Lords, I am happy to follow other noble Lords in saying how much I welcome the Bill. I remind the House of my family’s farming interest. Indeed, we used to supply pigs to Waitrose but we no longer have them. Many suppliers have good working relationships with supermarkets. I would hate anybody reading this debate to think that that was not true. However, there are circumstances in which those relationships break down and are abused. Therefore, it is right that the Government have quickly brought forward this Bill.
The Bill has been eagerly awaited for months by many hardworking and dedicated food producers. They feel, rightly or wrongly, that large retailers make a significant portion of their considerable profits by browbeating smaller suppliers into paying for a variety of selling techniques used in the stores, by failing to honour orders they have placed and by altering purchase prices downwards without notice.
As others have said, the groceries code was established by the 2009 groceries supply order, which itself arose from work carried out by the Competition Commission between 2001 and 2008, so the measure has been a long time in gestation. That at least tells us that the allegations made by producers have some validity and that the issue has been “live” for a long time.
I am hopeful that the role of the adjudicator will be self-limiting and that eventually he or she will not be needed. Either it will be found that the large retailers have reorganised and trained their staff to observe the code so that there is no longer a problem or the adjudicator and his staff will rapidly ensure that such reorganisation, training and observance will become the established way of working.
The EFRA Select Committee sent seven recommendations to the BIS committee, four of which I have highlighted as the Government have listened and taken them on board. First, the ability of suppliers to make anonymous complaints is fundamental to the success of the groceries code adjudicator. Secondly, the adjudicator should have the power to launch proactive investigations. Thirdly, third parties such as trade organisations should be able to make complaints to the adjudicator on behalf of suppliers, but appropriate restrictions would need to be included in these provisions so that they are not abused. Fourthly, the adjudicator should have the power to levy financial penalties without the need for an order from the Secretary of State. I am grateful that the Government have taken on board some of these recommendations but we shall return to these issues in Committee.
I wonder whether it is just me but I was struck by the rather “folksy” way in which the contents of the Bill are set out. That worries me. Why are the headings between each clause in the form of questions? For example, the question: “How does the Adjudicator arbitrate disputes?” appears before Clauses 2 to 13. The question: “What are the Adjudicator’s reporting requirements?” appears before Clause 14. Other questions follow in the same vein. For example, “Will this law mean other changes to the law?” appears before Clause 21. I hope that when she responds, my noble friend will say that this approach will not give the impression that the Bill, as law, is open to doubt or dispute. It is unusual. Having dealt with many Bills over the years, I found it slightly strange.
I must reinforce what other noble Lords have said on the need for the Bill. Over the years there has been a real climate of fear among some suppliers. I am very grateful that the Government have recognised this and are enabling third parties to bring forward evidence. It is impossible for suppliers to do this themselves because they feel cut off at the knees and there is nowhere else to go. They run the risk of losing a contract—even one that has been reduced—and probably not getting it again in the future.
There have been few changes from the draft Bill and most of my detailed questions will come up in Committee. However, I feel that there are—or may be—issues of principle involved in the significance of some of the alterations as well as in the basic content. The Minister may therefore wish to comment on the following points. In the draft Bill there was a clause titled “Investigations: information” which introduced Schedule 2—then titled “Investigation Powers”. In this Bill, the clause has gone and Schedule 2—now titled “Information Powers”—is first introduced through Clause 4, “Investigations”. These are significant changes in terms of the detail of the work the adjudicator will be empowered to do. I would be grateful for some clarification.
The nature of the adjudicator’s staff is vague, with a reference in Schedule 1 to,
“staff working for the Adjudicator”.
Schedule 1 also states that the Office of Fair Trading,
“may provide staff, premises, facilities or other assistance … (with or without charge)”.
There is also reference to a “Deputy Adjudicator” and “acting Deputy Adjudicators”. All of this seems to indicate a very small establishment and yet the adjudicator is charged, under paragraph 15 of Schedule 1, with keeping proper accounts, with preparing an annual report, under Clause 14, and with receiving both financial penalties and costs. Will the Minister supply more detail on the adjudicator’s establishment?
Clause 15 held my attention for some time. There is a potential imbalance between the large retailers, all of which have to be consulted by the Secretary of State, and those representing the interests of the suppliers, where he is required to consult only one. How does the Secretary of State intend to proceed with such consultations? Will the Minister also expand on the reasons for and the intention of the introduction of a new Section 4A, to which other noble Lords have referred, by Clause 15(10) of the Bill?
Clause 18 allows for the disclosure of confidential information,
“for the purpose of an EU obligation”.
I am not the only one to have referred to this. Who will decide what is obligatory and how and when will this decision be communicated to the adjudicator?
I do not wish to go into any greater detail at this stage, but there are some basic questions to which responses from the Minister would be enormously helpful. All of us welcome the Bill. We want to see fair trade for UK producers and overseas producers. We also want to make sure that financial penalties do have an effect on the way in which those who do not currently honour the code will in future honour it.
Lord Borrie
My Lords, I must declare an interest as a former director of the Office of Fair Trading. Unusually, I am able to thank the noble Baroness, Lady Williams of Crosby, who is in her place today, because she appointed me to that post when she was Secretary of State for Prices and Consumer Protection back in 1976.
Lord Borrie
I ceased to be director in 1992, and I need not therefore disclose my current interest—I do not have one.
I generally welcome the Bill because it is designed to deal with a real problem, many of the details of which have been mentioned by previous speakers, and provides a remedy to limit the market power of the top 10 major supermarkets—a power that they have over the supplier, whether the supplier is a farmer or a food producer of some other kind, who normally has, or often has, much less bargaining strength at their elbow. A groceries code was promoted by the Competition Commission and agreed to some years ago by supermarkets, requiring them to deal lawfully and fairly with their suppliers. However, it was not until 2008 that the commission proposed an adjudicator to enforce the code.
The Bill is the Government’s welcome and positive response to the commission’s proposal. It is intended that the adjudicator will be appointed by the Secretary of State and operate from within the Office of Fair Trading, sharing premises and back-office facilities. Under another Bill that is imminent and will come before us soon, the Office of Fair Trading is to be merged with the Competition Commission. No doubt, it will be then that the adjudicator will be housed within the new combined Competition and Markets Authority.
Perhaps it is too late to raise the following point, but I do so in part because my noble friend Lord Haskel spoke of the cumbersome nature of some of the provisions in the Bill. I am not at all sure why there was a need at all to go to the lengths of creating an adjudicator under a special statute as a separate so-called “corporation sole”, plus a deputy adjudicator, as the noble Baroness, Lady Byford, mentioned, instead of simply giving the power and responsibility under the Bill to the Office of Fair Trading or its successor organisation. Why have a completely separate organisation with apparently separate back-up facilities? I certainly see no case for adding further to this special statutory creation by providing for a right of appeal, as some organisations, such as the British Retail Consortium, have been arguing.
Under the Bill, the supplier will be enabled to make a confidential complaint to the adjudicator and, more controversially, third parties such as trade associations— be it the National Farmers’ Union or the British Retail Consortium—may also make complaints. If the adjudicator finds on investigation that a breach of the code has occurred, he may make recommendations. As we have heard several times, he may name and shame as appropriate, but he may not impose fines unless the Minister agrees that other remedies are not working. If that is the case, the Minister then has to introduce secondary legislation afresh, which requires the affirmative resolution of both Houses of Parliament before the financial penalties can be exercised by the adjudicator. I do not think that I am the only person who feels that such a power is, unfortunately, not provided in the Bill. Why not? If it was provided for in the Bill, why should not the adjudicator, who surely we are meant to trust from the outset—it would surely be a good appointment, and all the rest of it—be able to decide from day one of his statutory existence whether a fine is justified in a particular case?
One limitation on the adjudicator’s powers made me wonder. The noble Lord, Lord Palmer, who is not in his place at present, thought that “ombudsman” was a suitable alternative word for the adjudicator. That is not at all appropriate on the basis of what is in the Bill. The serious limitation on the adjudicator’s powers is that if on investigation he finds that a large retailer has broken the code, and the breach affects a particular supplier, the finding will not constitute a determination of liability of the retailer to that supplier. That is specified in the Explanatory Notes and seems to be perfectly clear. It therefore seems odd to refer to the adjudicator as an ombudsman because ombudsmen decide complaints between two businesses, or between one individual and one business. Under the Bill, if the supplier wants a civil remedy—if he wants damages or compensation for some behaviour of the supermarket—he must make his own claim in the courts or by way of arbitration. As I read it, although I would be happy to be corrected, the person who cannot do the arbitration is the adjudicator; he would be regarded as having a conflict of interest, having previously done the investigation.
I am assuming that, under the Bill, the price the supplier has to pay for being able to make his complaint anonymously is that he cannot bring a civil claim. There would be a serious disadvantage in the whole system envisaged in the Bill if the complaining supplier had to identify himself in the complaint right at the start. That would seriously jeopardise his ongoing relationship with the supermarket, as others have said. However, if the identity becomes known in the course of the adjudicator’s investigation, would not the basis of disallowing the adjudicator from determining the supermarket’s civil liability to the supplier disappear? Certainly, there are some disadvantages in having not only the adjudicator but some civil court or third-party arbitrator going over the same ground, the same evidence, all over again, preventing the adjudicator from dealing with the civil claim and, indeed, behaving like an ombudsman. That would be unfortunate.
Finally, I add a point which has been referred to by others. Under Clause 19 the adjudicator may request a levy on all large retailers to cover the expenses of the new office. Would it be more appropriate to make such a levy mandatory?
Baroness Randerson
My Lords, I join with other speakers in supporting the principle of this Bill and the vast majority of its content as well. Indeed, the cross-party support here has been exceptional. The processes that the draft Bill went through have definitely assisted that support.
It is a rare cause that unites both trade unions and small business organisations in its support. It is important to remember that this Bill is not just about the small suppliers, which are most obviously immediately affected; it is also about consumers. The excessive risk and costs that have been forced on occasions on suppliers by some supermarket chains have deterred investment and innovation. It is innovation that helps consumers in the long run.
Seventy-five per cent of the groceries market is in the hands of the top five retailers. That market is just about the most reliable and stable market imaginable. It has all the conditions of monopoly power, and that monopoly power has increased dramatically over the years. The Competition Commission statistics show that the major chains account for 98% of grocery sales. Tesco is the giant of them all, accounting for 30%. The spider’s web of street-corner shops, as well as the large supermarkets, has of course increased and reinforced that power. Possibly most astonishing is that, despite the recession, there are still 44 million square feet of projected new supermarket developments in the pipeline, so the expansion has not stopped.
The Competition Commission has identified the adverse effect on competition of grocery retailers passing unexpected costs and excessive risks down the supply chain. Ultimately, the extra costs of this are imposed on producers, whether or not they deal directly with the retailers, and that is an important point in this debate. As many noble Lords have pointed out, this is not a new issue; it has been debated thoroughly over the past 15 years. I was a Member of the Welsh Assembly for 12 years, and the NFU and the FUW were very vocal in their support for the need for a supermarket ombudsman, as they called it.
The impact of the dominance of large retailers has been phenomenal—on the way we live, on what we eat and on the shape of our towns and villages. The large retailers have given us cheap food but they have also created out-of-town shopping, with its impact on the number of cars on the roads and the distance we have to drive, as well as its social impact on those who have no car. In many places, it has led to empty shops in our town centres, which can be desolate in some poorer parts of the country. Very importantly, it has led to the delocalisation of our food shopping and, hence, of our diet. This is all part of a very fundamental movement in the way we live our lives, and the adjudicator is an important part of that picture.
In the Explanatory Notes, several references are made to the small scale of the adjudicator’s office and the low budget that it will have. I greatly support and appreciate the need to save money and I am not trying to argue with that principle. However, given that there are more than 300,000 farmers in the UK and more than 6,000 food and drink manufacturers, I would welcome some information from the Minister about the basis for this calculation and the assumption that the budget will be low. Because the costs will be covered by a levy on the retailers—and several noble Lords have pointed out how small that levy is proportionately—it seems that the total budget for this office will be some £2 million a year. However, because the climate of fear will be removed, we can confidently expect a big increase in the number of complaints as a result of the Bill becoming law, and I wonder whether the office will have the capacity to deal with them.
I share the concerns of many others that fines will be introduced only as a second step and even then by a rather cumbersome process. I will listen carefully to what the Minister has to say on this point, as at the moment I feel that it would be better to have fines from the start as one of a range of actions—not necessarily the only action—that the adjudicator can take. I share the concerns about a flat-rate levy. Although a mechanism is built into the Bill to enable the adjudicator to order culpable retailers, or indeed vexatious complainants, to pay costs, I believe it is unlikely to create a truly fair system that would financially encourage retailers to avoid breaches of the code.
Like other noble Lords, I have received briefings from a variety of organisations. I have to say that they are mainly unusual in their fulsome praise for the Government in the action they are taking in this Bill. Not surprisingly, the British Retail Consortium argues that this Bill is not necessary and that everything now works well. In fact, I believe that once the adjudicator is in place we will see a big increase in complaints, so the British Retail Consortium should see the writing on the wall and, instead of arguing with the principle of the Bill, it should do what Waitrose has done in its briefing to many noble Lords—attempt to raise issues that may help to create a fairer and more effective system.
In conclusion, I believe that this is a very sound Bill. I have concerns about some small details but its principle is definitely right.
Lord Howard of Rising
My Lords, I must declare two interests: I am a farmer. Even more relevant to this debate, I am landlord to a tenant who is a direct supplier to supermarkets. I therefore have first-hand knowledge and experience of what we are discussing today. I shall deal with the general points rather than the detail, which will probably be more appropriate in Committee.
Generally speaking, I find it difficult to understand why there should be a code at all, let alone an adjudicator to police it. There is no obligation on anyone to supply a supermarket. People and businesses do so because it is a commercial decision that benefits them. In my own case I delay the rent due from my supermarket-supplier tenant to tie in with when he is paid by his customer. It is an agreement freely entered into; if I did not like it, I would not have to do it. I could let the land to someone else and be paid more promptly.
Leaving aside the pointlessness of trying to interfere in markets, with all the unintended consequences that inevitably crop up, there are other faults in this Bill. There is no doubt that, as drafted, the Bill will impose substantial costs on the supermarkets, which in turn will be paid for by their customers. There is no cap on what the adjudicator may spend for which the supermarkets and their customers will then have to pay. Complaints are not limited to parties to a contract. Anyone—even someone with no involvement in a transaction—can complain to the adjudicator. It is almost incredible that someone with no connection to either side of an agreement can complain about that agreement. As no one knows what the adjudicator will regard as reasonable grounds for a complaint, it opens the door to more costs with the possibility of complaint upon complaint, with the supermarkets and ultimately their customers, again having to pick up the bill.
Major supermarkets already employ departments to deal with the Groceries Supply Code of Practice. On top of that they are being asked to pay for the adjudicator and his staff. If the adjudicator resembles any other office of a similar type it will grow exponentially. Can your Lordships imagine the self-discipline required to control costs and limit activities when all that is required to pay for expansion is to say, “Hey you—a bit more this year please”? What is it all for? The guidance notes tell us of “potential improvements” in quality and price. Do not the Government know that there is a cut-throat business out there where any supermarket not offering the best quality and choice soon suffers? We need only to look at how quickly the results of the large supermarkets can deteriorate to see that. How did the supermarkets get to where they are today? Guess what? They offered choice and quality at attractive prices with no government interference.
Lord Vinson
Would the noble Lord be kind enough to give way? If supermarkets sell milk for less than the price of water, does not that indicate that the price structure is not exactly working properly?
Lord Howard of Rising
It indicates that people are buying milk very cheaply. Lucky them.
Ultimately, there is only one person who will pay for all this expense, and that is the supermarket customer. I look forward to hearing from the Minister why the poor shopper should be clobbered in this way so that I can get paid earlier, and possibly increase the rent I receive.
Baroness Sherlock
My Lords, I add my voice to those who, unlike the noble Lord, Lord Howard of Rising, want to see this Bill go further, rather than backwards. I listened to his contribution with interest.
I am grateful for briefings from various sources including Traidcraft and the Grocery Market Action Group, as well as various retail bodies, including more supermarkets than I knew existed hitherto. Like many—indeed, almost all the noble Lords in this debate—I am delighted that we are where we are. I am thrilled that the previous Labour Government brought in the code. I am very pleased that the Government are introducing the adjudicator, and I commend them on that. However, I encourage them to think hard on this question. If it is worth doing, it is worth doing properly. I suspect that the critics of the Bill—and there are some even in this Chamber—would not be satisfied even if this were done in half stages. Therefore, if the Government are going to do it, they may as well take a step out and do it with some gusto.
I would like to make a few specific suggestions. First, I am delighted that the adjudicator will consider evidence from all sources, but will the Minister say what signal she intends to send by the ease with which that power could be revoked? What is that intended to say to the world outside?
Secondly, will the Minister tell us why there is not in the Bill a clear description of the purpose of the adjudicator? I assume, having reread recently the 2008 Competition Commission report, which the Minister cited earlier, that this is addressed directly to the second of the problems it found—the transfer of excessive risk and unexpected costs by groceries retailers to their suppliers. If that is the aim, would it not be helpful for that to be specified in the Bill? I know the Minister said that the only purpose of the adjudicator is to enforce and oversee the groceries code in the ways described in the Bill, but she may remember that she also said in her opening remarks that the adjudicator would be tasked with recommending changes to the code. If he or she is to do that, on what basis will that be done if they have not got a statutory objective for the organisation in the first place?
Thirdly, I am another person who believes that the GCA should have the immediate power to fine people who are in breach of the code. This makes it almost all of us, now, who believe this—a full house. I have heard no convincing argument against this at all. If the power is never needed, it need not be used, but the fact that the adjudicator has the power must surely concentrate the minds of those who are tempted to sidestep the provisions of the code. Like the right reverend Prelate the Bishop of St Edmundsbury and Ipswich, I read the report from the British Institute of International and Comparative Law, and very interesting reading it made. I commend it to the Minister, if she has not had the opportunity to read it. It would be very good bedtime reading, and I encourage her to look at it. Very usefully, it went through all the types of mechanisms used by different countries, and what was effective, and it produced a category of characteristics of favourable means, of which financial penalties—in other words, teeth—were firmly up there.
I also agree with noble Lords who have mentioned how important it is that the adjudicator should function well from the outset. That will be essential to give it credibility from the beginning. I suggest that it needs to flex and to respond to the scale of the task. We simply do not yet know what that will be. I hope the Minister will consider that quite carefully.
How did the Minister reach her decision about the nature of the financing? I, too, read the brief from Waitrose which expressed concern with the generalised nature of financing. I declare an interest as the senior independent director of the Financial Ombudsman Service. While I am not in any way suggesting a comparison, that and other adjudicators of various kinds often have a two-part fee. There may be a general levy of some sort on all those within the jurisdiction, and then either a case fee or a specific fee which is related in some way to the degree to which the firm is engaged in or is triggering the work of the adjudicator. Will the noble Baroness look at the fee systems employed by others making similar decisions in making a final decision on this?
Finally, I am concerned about whether the Government are being too hesitant in doing this. They have decided to set up an adjudicator but are retaining the power to shut it down by negative resolution. They are open to the idea of fines—but not yet—and it will take a rather complicated Heath Robinson mechanism to enable that to happen at all. They want to allow the power to take evidence from third parties but, again, want to threaten to withdraw it. Is the Minister concerned that she is taking the right step but that, in hedging it around so much, she risks undermining the good work that I know she is trying to do?
Lord Teverson
My Lords, I declare an interest in that I chair a modest company that supplies supermarket retailers who will not be affected by the Bill.
I enjoyed the speech of the noble Baroness, Lady Sherlock. She asked why we need an adjudicator. Clause 1 says, in a completely Book of Genesis style:
“There is to be a Groceries Code Adjudicator”.
What more do we need? It then carries on with a rather less biblical “(see Schedule 1)”, but that does not help us much.
I agree in many ways with the noble Lord, Lord Howard of Rising, on his philosophy about the market. However, this is the one area in the UK economy where there is a huge concentration of buyers and a fragmented base of suppliers. The purist answer would be that the supermarket chains should not only be further referred to the Competition Commission but have their market dominance broken up. I do not suggest or advocate that, but it may be the alternative to this. As my noble friend Lady Randerson said, 75% of the groceries market is controlled by five suppliers. That is indeed some market concentration and it is why we need supplier protection in this sector rather than the consumer protection that we have in most others.
As many other noble Lords have said, there has been a gradualism over the past decade. In 2001 the groceries code was invented, if you like; it was written and then put into contracts between suppliers and supermarkets; and now we are moving towards an adjudicator. That is why I, too, think that after 11 years of experimentation we should surely do the deal and go ahead with the fining side as well. For example—again this is not directly applicable—the Financial Services Authority, which is to do with customer protection, is perhaps a mirror image of what we are doing, and one of its great strengths is that it can fine the large organisations with which it deals.
There are many hurdles at the end of the Bill, which states:
“Before making an order, the Secretary of State must consult … the Adjudicator … the Competition Commission … the Office of Fair Trading … the large retailers … one or more persons appearing to the Secretary of State to represent the interests of suppliers … one or more persons appearing to the Secretary of State to represent the interests of consumers; and … any other person the Secretary of State thinks appropriate”.
So we are up to 9 billion at that point. The Government are really saying, “Guys, we are not interested in this at all. We are going to put it in there because we want to give ourselves a backstop, but it is not very applicable”. The Government should be courageous here, move ahead and do it now. That would be a good thing. Having said that, I welcome the fact that the adjudicator can impose costs on both supermarkets and vexatious complainants. That is very good.
I particularly welcome the fact that—although it is not in the Bill, this is a part of what business has been saying—this applies not only to UK suppliers but to world-wide suppliers. That is important, not because I am championing French farmers but because it will stop supermarkets avoiding this obligation by importing even more food. It stops, if you like, regulatory hedging beyond the United Kingdom.
I congratulate the Government on getting on with this. However, it is very important that this is not a supermarket-bashing Bill. I am often surprised to read that supermarkets and multiple retailers have restricted choice to consumers. Frankly, it is because of our retail organisation, our retail management and efficiency in this country that we are able to go out and buy tens of thousands of products, normally within only a few miles of where we live. Having said that, yes, I shop in supermarkets and I am pleased to do so, but I also get a local food box from the Cornish Food Box Company, and I think that is a good balance. I am sure that organisations such as that one will be championing competition with supermarkets as well.
Viscount Eccles
My Lords, I have no current interests to declare, but for 49 years I was a supplier of goods to businesses larger than my own—in particular, for a long time, to Marks & Spencer. I was also, for a time, on the Monopolies and Mergers Commission, the predecessor of the Competition Commission, and the noble Lord, Lord Borrie, used to receive reports that I had signed. Fortunately he never sent any of them back.
I have doubts about the Bill, quite complicated doubts, and I hope that the House will indulge me as I go through them. Before I start on the doubts, I would like to talk about anonymity. When someone is accused of something, under our system—whether it is codes of practice or law—we would assume that they had a right of reply. I simply do not understand how a serious complaint, which might lead to some enforcement, can be handled without the retailer knowing who made it. I would also say, just as a practical matter, if there had been a complaint about something, for example a line of clothing, that Courtaulds had supplied to Marks & Spencer and Courtaulds had wanted to remain anonymous, we would never have been able to do so. There is far too much knowledge within the buying organisations about whose product is being talked about. If we try to pursue anonymity, there will be endless bickering. I thought that we lived in an open and transparent society.
I am not at all clear that the Bill is in the public interest or what the public reaction will be. The public are largely disengaged from the Westminster village and its lobbyists, and this is a Westminster village and lobbyists’ Bill. I think many people who shop in supermarkets would conclude that the theory of how you deal with difficulties in competitive markets precludes the exercise of common sense. I have been struck by the way in which several noble Lords have dismissed £200,000 as a sum of no importance. Well, I do not know how your Lordships have lived, but to me £200,000 remains quite an important sum of money.
It has been a habit of many people to hate supermarket power. That has gone on for a long time and indeed 30 years ago, when I was a member of the group in the MMC, we did a very long report on differential discounts to retailers and we studied supermarket power. Exactly as the 2008 Competition Commission report concluded, we found that they were not abusing their market power per se. That has been the conclusion of all the inquiries into supermarkets: they do not make monopoly profits. They do not charge prices that are higher than they should be, which is the classic way of making monopoly profits.
Now we have to look at what happened in 2008 in some detail. My noble friend on the Front Bench referred to the finding that is the base of the pyramid of what we are talking about. It is worth quoting again what the commission said:
“we found that the transfer of”,
economic risk,
“and unexpected costs by grocery retailers to their suppliers through various supply chain practices if unchecked will have an adverse effect on investment and innovation in the supply chain, and ultimately on consumers.”.
That was not a conventional Competition Commission adverse finding. It was quite a complicated one, being conditional and about the future—there will be an adverse effect but it has not happened yet. The commission concluded that there was no declining trend in innovation and, at the same time, no shrinking of suppliers’ margins. Could my noble friend on the Front Bench provide us with any precedent for a finding of this type about an adverse effect on competition that would enable us to think about what happened previously?
It is worth noting that one member of the commission dissented from the remedy that came up. The commission of 2008 was not unanimous but it decided to beef up the code of practice. I see no objection to that; it seems an entirely sensible thing to do. The commission drew up a rather humdrum list of things that should be remembered when—as I think has not been said this afternoon, although my noble friend Lord Howard came close to it—the terms and conditions of purchase and sale were being freely agreed between the supermarkets and their suppliers, and would become legally enforceable. Of course, a code of practice is not legally enforceable.
I will refer to just two of the humdrum things. One is shrinkage. A supply agreement must not include provisions under which a supplier makes payments to a retailer as compensation for shrinkage. However, the question of shrinkage would turn on when, for example, the property passed. If the shrinkage happened while the goods were still in the possession of the supplier, that would be one thing. If the goods are in the possession of the retailer, that would be another. All that the code of practice does is, quite properly, to remind the supermarkets and their suppliers that they must have a proper clause about shrinkage in their legally enforceable contracts. It is exactly the same with payments for wastage. You might have some yogurt on the shelf that, for some reason, goes off two days before the sell-by date. That cannot be unambiguously set out in a legal document, because it would probably depend on who left it out on the pavement when the temperature was 26 degrees, on what day, and so forth. As the noble Lord, Lord Haskel, said, these matters can become very complicated when you are dealing with detailed disagreements under terms and conditions of purchase and sale.
From February 2010, the beefed-up code of practice has been the subject of self-regulation. I am sorry that there is such a unanimous opinion that we should give up on self-regulation. I have read the compliance reports of several of the big supermarkets—the first ones that they wrote, as they were required to, in their annual report and accounts. Marks & Spencer recorded that it has had two; one it has settled and one it has not. Sainsbury’s reported that it had a small number; they were all settled and none of them had to go to the compliance officer. Morrisons reported much the same and Lidl very much the same. Close attention should be paid to how this self-regulation has so far worked. What is the evidence that tells us that it is not working and that the adverse effects predicted by the Competition Commission about innovation and investment are actually taking place? I do not think that they are. I have asked a lot of the representative bodies to give any evidence that innovation and investment are being damaged, as predicted. I have had none back at all.
We seem to depend on this climate of fear. Because suppliers might lose a contract if they put their heads above the parapet, they are prevented from providing evidence. Several people have been quite complimentary about Waitrose. Do your Lordships really believe that a supplier would not be brave enough to raise a complaint about the code of practice with Waitrose? It is supposed that if we appoint an adjudicator and let anybody talk to it—that seems fine, as we have freedom of speech—in some way this climate of fear will disappear and we shall get to know all sorts of things that we do not know now. I seriously doubt it. This is a highly competitive industry. There are 10 big retailers. If you have a row with one, there are nine others. Innovation and investment interests are held in common. The supermarkets have progressed in what they offer because of what their suppliers have done to enable them to offer it. There is no shortage of investment or innovation that I can detect.
As the noble Lord, Lord Borrie, said, the Office of Fair Trading is already there, monitoring such things as the code of practice. What is the purpose of setting up another cost centre? I do not think the public will understand why we need another one. Do we want to exacerbate the disengagement of the public from the political system? If we believe that common sense, shared interests and fair dealing under the law are not enough, I do not know what the public will conclude. I have not heard a case made for the Bill today. If there is one thing that it needs, it is a sunset clause.
Lord Myners
My Lords, I declare an interest as a former chairman of Marks & Spencer. Unlike many other Members of the House, I have not been lobbied on this Bill. That may well be because I never open my parliamentary e-mail box and therefore do not read the e-mails that other noble Lords have been receiving. Perhaps I am in error in doing that.
As my noble friend Lord Grantchester said, the Bill has the fingers of the previous Labour Government all over it, although the right reverend Prelate the Bishop of St Edmundsbury and Ipswich also claimed some credit for the General Synod. The Bill was promised in the manifestos of the three main parties, but I am not persuaded of the need for it. I am certainly unpersuaded that the Bill as presently constructed will deliver the outcomes that the Government promise. In short, I believe that the Government are strong on assertion and light on evidence. The Bill shows a profound distrust of markets to produce good outcomes, which is extraordinary coming from a Minister who is a Member of the Conservative Party. The Government’s hesitancy in putting this Bill forward is evident in the fact that it has taken two years for it to appear. Its most effective sanctions are in reserve powers that are initially not going to be actioned. The Bill is quite explicit in creating an ease of repeal that suggests a half-hearted adoption of its central intention by the Government.
I propose to make half a dozen or so points. I think the voters of this country might reasonably ask whether this is a priority. The challenges facing our economy now are those of inadequate demand, a lack of available credit, both in amount and in cost and terms, and a loose monetary policy and consequent financial repression that is clearly not working.
There is no overarching coherence to the Bill as presented to your Lordships’ House today by the Minister. Grocers have delivered on customer expectation. We have a choice of goods now of a quality that would simply have been beyond the belief of the parents of most Members of this House. I remember when salmon was a luxury in our home, and my father was a fisherman. It came in a John West tin. Salmon and exotic fruits from hot climates are now available at incredibly attractive prices to the consumers of this nation. There is no evidence that voters or consumers have any sense that they are not getting choice, quality and value for money from a highly competitive retail industry and a highly efficient market as well.
I have a number of questions for the Minister. Perhaps the noble Baroness will answer the questions now. If she does not, I hope that she will answer them by writing to all Members of the House who speak in this debate and that we will receive that answer before the Bill goes to Committee.
I start by asking why we are focusing on groceries. Why, for instance, are we not asking the questions that the Bill asks about banking? This would surely be what voters would like us to do. They would like us to ask questions and to introduce an adjudicator to an industry that by any definition is highly concentrated, operates with cartel-like pricing and is generally typified by poor service and an absence of differentiation and a dearth of innovation. Surely these are the prima facie symptoms of poor competition, on which voters would expect the Government to be taking action. However, as we know, this Government have been supine in the face of the banks, with the failed Project Merlin now being followed by a policy known as credit easing, which does not actually benefit the end borrower at all; it benefits the banks by reducing their cost of borrowing.
I ask your Lordships’ House whether, if there is a case for a grocery industry adjudicator, there is not an even stronger case for a banking industry adjudicator. Is there not an equally strong case for an adjudicator of the energy industry, where people of this country again feel themselves at the wrong end of abusive industry practices by a very concentrated industry that is expert at absence of transparency in pricing and product differentiation?
The Minister, in her opening address, said that the need for financial penalties was unlikely because grocers would recognise the reputational risk of being found at fault by the adjudicator. This is a woefully optimistic assessment of how business operates, and it is certainly not borne out by the way in which the banking industry has responded to regular and constant criticism by various regulators and consumer bodies of its own behaviour. Indeed, if the House is invited to focus on an area in which there is a potential abuse of the weak by the strong—the supermarket suppliers by the supermarkets—how does the Minister reconcile that with Mr Adrian Beecroft’s proposals to allow employers to dismiss at will? On one hand we are reducing the legislative and regulatory protection for the weaker party in a market-based transaction. On the other, we are seeking to introduce even greater regulation.
The Bill cites no evidence that a regulator or adjudicator of the sort proposed has been successful or necessary in other countries. Nor are any arguments cited to suggest that there is something about the grocery trade in the United Kingdom, such as excessive concentration, that means that we need an adjudicator where other geographies do not. In comparison with most markets, we have a relatively fragmented grocery market, with very intense competition among the top 10 or so firms in the business. As the noble Viscount, Lord Eccles, said, if a supplier is not happy with one of the 10 firms to be covered by the adjudicator, there are nine other potential customers to whom they can turn for business.
The Minister also asserts that supermarket behaviour at the moment reduces the incentives and abilities of suppliers to innovate in new product lines and production processes. Where is the evidence for that assertion? How has the Minister concluded that markets do not lead to appropriate innovation and investment? The impact assessment says that the proposal “could ultimately”—in brackets, I would add, “Civil Service: most unlikely”—
“lead to improvements in quality and choice for consumers, as well as lower prices in the long run”.
No evidence is cited to support that conclusion. However, the impact assessment says that the Government will monitor improvements in investment and innovation. Am I correct to say that we will see civil servants opining on whether a competitive market has led to improvements in investment in innovation? If so, will the Minister tell us how civil servants will form that view and what experience they will bring to that task?
Next, there are some very woolly words in the detail of the proposed Bill. Setting aside for the moment the fact that the term “grocery” is not defined, there are terms such as “deal fairly” and,
“pay suppliers within a reasonable time”.
Will the Minister tell us how a market process does not lead to fair outcomes? Can she explain why reasonable times are not part of the agreement reached between the supplier and the supermarket, which is entered into openly and willingly by both parties? Which civil servants will agree on fairness as a judgment on market outcomes, or on the reasonableness of terms of payment?
On reasonable behaviour, am I not correct in my recollection that Sir Philip Green recommended, in his report on government procurement, that the Government should do many of the things that the supermarkets are being accused of doing here by applying pressure to suppliers? Sir Philip Green’s report was for the Department for Business, Innovation and Skills, so no doubt the Minister will be fully informed and able to explain how Sir Philip Green’s recommendations lead to acceptable behaviour while the behaviour of the supermarkets is not acceptable.
I do not expect the Minister to speak on defence matters, but I note that last week the right honourable Philip Hammond, the Secretary of State for Defence, also suggested that the Government would seek retrospectively to amend agreements with suppliers. My point is that there is a complete absence of consistency in the Government’s thinking. Why do the Government not have confidence in the market to produce the right outcomes?
The Bill also evidences a very poor understanding of the supply chain, particularly the activities and presence of intermediaries within it. This will need a lot of attention in Committee. I agree with the noble Viscount, Lord Eccles, that anonymity is almost certainly one issue about which we deceive ourselves. As for major suppliers, the specificity of the terms of a contract is such that, when an issue is raised with the adjudicator, the identity of the supplier will almost certainly become evident in a very short period, so it is hogwash for the Government to suggest that anonymity in some way gives this Bill some superior attraction.
There are many other areas that the Committee is going to need to spend a lot of time examining. The Bill as proposed suggests an adjudicator who definitely will not be independent of government. It is quite clear and is in the explanatory document that the intention is that the adjudicator’s department should be staffed by people from the Department for Business, Innovation and Skills and should be collocated with the OFT. As the noble Lord, Lord Razzall, said in his contribution, the process as described is inordinately cumbersome.
I also fail to understand, and perhaps the Minister can explain, why the penalties imposed by the adjudicator, if penalties are to be activated, should be paid to the consolidated funds while the penalties paid to the Financial Services Authority are paid to the FSA. Can the Minister explain why the Government appear not to have consistency?
Finally, the Explanatory Note to Clause 15 says:
“The Secretary of State”,
may,
“restrict the information the Adjudicator may consider to four specific classes of information, which are those that might be expected to be most useful in determining whether or not a breach of the Groceries Code had occurred”.
To be clear, the Minister will be setting the criteria and will set the criteria to four. Again, no reason or explanation is given as to why it should be four and how those would be narrowed or broadened; nor is any understanding given of the basis of expectation or the criteria of utility. What one can clearly see here, tucked away towards the end of the Bill, is that this adjudicator will have very little independence at all.
When we get to Committee we are going to have to look very closely at this Bill, because I do not think it is going to achieve the purpose that has been set out. If we have done our work in Committee and conclude that the Bill will never deliver the purposes intended, it should be withdrawn, otherwise we have a recipe for further bureaucracy and red tape, which is the last thing the country needs at the moment.
Lord Razzall
The noble Lord quite properly disclosed his interest in Marks & Spencer at the beginning of his remarks. Bearing in mind his attack on the coalition Government’s policy on the banks, would it not have been appropriate to disclose that he was a senior Minister between 2008 and 2010, with responsibility for banks?
Lord Myners
My Lords, I think the House is aware of that. The noble Lord, Lord Razzall, has often impressed me with his skill on the Floor of this House —his debating approach and his wit. Today he has fallen well short of the House’s expectation.
Lord Knight of Weymouth
My Lords, we have had a largely good-natured debate until just now about this important issue for consumers, producers and retailers. As my noble friend Lord Grantchester said, we have a sense of ownership of this Bill since we first advocated it and since the adjudicator refereeing the code was brought in by us in 2009. On that basis we are keen now, as the Opposition, to work with the Government as the Bill goes through Parliament to make sure that the adjudicator has the best possible chance of success and perhaps prove my noble friend Lord Myners wrong in respect of its chances. As has been said, we brought in the code following the 2008 report by the Competition Commission which talked about the “climate of fear” among suppliers in relation to disputes using the code in force at the time. The commission recommended using a new code and an adjudicator to give it teeth.
I was delighted when I met representatives of the large retailers through the British Retail Consortium last week. They told me that they were not opposing the principle of establishing the adjudicator in this Bill. Given that it was in all three party manifestos, they are bowing to the inevitable. This was reinforced by the e-mail from Waitrose, which claims to have supported this move from this outset. This attitude from the large retailers is positive and constructive and reflects what will I am sure be helpful engagement from all stakeholders as the Bill goes through its legislative journey.
On that constructive basis, I hope that we can get this Bill on the statute book as soon as possible so that the adjudicator can get on with this important job and offer suppliers the comfort that not only is the playing field a little more level, thanks to the code, but—to borrow the phrase that the noble Lord, Lord Plumb, attributed to Peter Kendall—there is now a referee to ensure that the game is played according to the rules. However, my noble friend Lady Sherlock is right to look for a statutory purpose. I was amused by the noble Lord, Lord Teverson, raising the possibility of schedules to the Bible. I bet Michael Gove is volunteering to write them.
Before I move to a more wholly constructive mode, I make one criticism of the Government in this regard. Why has it taken them two years? Back at the beginning of 2010, the shadow Environment Minister Nick Herbert went to the Oxford farming conference and said:
“While the government dithers the Conservatives are clear: we will introduce an ombudsman to curb abuses of power which undermine our farmers and act against the long-term interest of consumers”.
At the same time, Labour MP Albert Owen introduced a Private Member’s Bill on the same issue in the other place. Clearly, the policy was worked out and work was going on in legislation. In Opposition, the Minister’s party was ready to go with this measure. So why did we have to wait for two years? Is it the fault of their coalition partners being lukewarm? From what we have heard, that is not the case. Was it her Secretary of State not managing to make the case for the Bill in the legislative timetable? Or was it that Defra, the real policy lead, was not being listened to by anyone and farmers were being taken for granted by the coalition? We shall see—but I am glad to get that off my chest, and I can now be more positive.
The Bill has enjoyed support across the House, with the notable exceptions of the noble Lord, Lord Howard of Rising, the noble Viscount, Lord Eccles, and the noble Lord, Lord Myners. I very much respect their purity of free-market thinking, but I disagree, as there are times when markets need regulating when agreements are not entered into as freely as some think. The noble Viscount, Lord Eccles, and to some extent the noble Lord, Lord Myners, asked what the public would think. I do not know if noble Lords tweet, but I do, and when I have asked Twitter and Facebook about this, the overwhelming response is, “about time”. Even though they are like me all customers in supermarkets, they believe that at times they overuse their power.
My noble friend Lord Grantchester set out the tests that we will use in opposition as to whether the adjudicator will be effective. First, is it good for growth? I was delighted to go to the briefing for parliamentarians last Monday, which the Minister and her ministerial colleague Norman Lamb MP kindly offered. I was even more delighted when Norman described the Bill as a growth measure. My delight knows no bounds when the Minister in her peroration confirmed that this Bill to establish a quango and a regulator is good for growth. This feels somewhat discordant with the rhetoric we hear from the Prime Minister about deregulation being the key driver for growth. But maybe on this, as on Beecroft, the Minister’s Secretary of State has won the argument. Perhaps she could pass on our regards to Vince Cable, because of course there are times when a market needs intervention to make competition work well, if players in that market become overmighty. I note that my noble friend Lord Myners wanted a similar arrangement in this Bill to apply to banks. I am sure that he is making the same point to our friend Ed Balls—and I wonder whether Vince agrees.
Agriculture and food processing, worth more than £80 billion to our economy, are our largest manufacturing sector. Some 3.6 million people are employed in food production in this country, and to make competition in that market function more fairly is ultimately good for growth and for those jobs in the food sector. Then it can also be good for consumers if it is working well. As the noble Baroness, Lady Randerson, told us, a healthy market will allow new entrants in and innovation in the supply chain; it will offer choice and competition and will thereby push up quality and push down prices.
This takes us to another of our tests. Will the adjudicator be able to act on the right things? The question is about updating the code. Much of what we have heard today concerns issues for the code and not always issues for the adjudication of the code. My noble friend Lord Grantchester and the noble Earl, Lord Sandwich, talked about recent worries in the dairy industry. The noble Baroness, Lady Parminter, talked about the fruit industry. Some of the remedies for these problems depend on renewing the code and potentially extending its reach. While the code is out of scope for the Bill, the role of the adjudicator in reviewing the operation of the code is not. We think that it is in the interest of all stakeholders that the code is kept a living document and that it should be reviewed regularly and updated by Parliament accordingly. We will therefore explore in Committee whether the adjudicator should include in the annual report any recommendations on improving the code so that it is an act of consideration rather than—as the Bill stands—a passive one.
I will also be seeking a commitment from the Government to commission a serious look at the whole supply chain to the large retailers. It is worth noting that when the Competition Commission reported in 2008, it had only been asked to look at the immediate suppliers to supermarkets. Some of these, such as Kraft and Coca-Cola, are bigger businesses than some of the supermarkets they supply. We need to look at their suppliers and the whole chain to see if this process will create a fair deal for small producers. In winding up, will the Minister give an indication of what consideration the Government are giving to looking at this so that a better code can be developed? I note that, in her opening speech, she hinted that she might view it as overregulation. Is she willing to ask the Competition Commission to research and test that view?
Our next test is whether suppliers will risk using the adjudicator. I applaud the Government for listening to stakeholders and the two Select Committees who did some excellent work in pre-legislative scrutiny of the Bill. It is much improved around anonymity, which we support. It also allows third parties to make complaints, as we have heard, which is also welcome. I will, however, want to explore whether the Bill needs a halfway house if third parties do not work consistently when the operation of this system is reviewed.
Finally, is this measure strong enough to force change where needed and will it be seen to be fair on all parties? This leads to the three key issues to debate as the Bill progresses: appeal, independence and fining. Before talking about these, it would have been helpful to have an impact assessment. Is there one beyond that for the draft Bill? If not, why not? Is it not a requirement these days to have one? Currently, there is no appeal for retailers. If financial penalties are subsequently brought in, the Bill specifies the courts as the means of appeal. In the interests of fairness, we may want to debate whether the potential damage of naming and shaming is serious enough for retailers to have a straightforward appeals process. Although the informed opposition to this from my noble friend Lord Borrie has probably persuaded me, we may need a quick debate to be sure.
We will also explore the independence of the adjudicator, an issue raised by my noble friend Lord Myners. The adjudicator will be appointed by and accountable to the Secretary of State. We will explore whether it is better to have the independence and transparency of accountability to Parliament. I know from contact with Members from the other place who serve on the BIS Select Committee that they would like a say in the appointment of the adjudicator. Equally, there is merit in an annual report to Parliament, including reporting on the operation of the code and the operating costs of the adjudicator. The latter would provide some comfort to retailers who will be funding the operation through the levy which they regard as something of a blank cheque.
Then there is the biggest issue of them all, mentioned by most of the speakers in this debate today—that of fining. Within this, there are two issues to debate. There is the principle of whether the adjudicator should have this power from day one and, if not, whether the process for introducing fining is, as the noble Lord, Lord Razzall, described it, cumbersome. I will certainly draw on the experience of my noble friend Lord Haskel when bringing forward amendments in Committee to Schedule 3 to deal with the latter. However, first, I will try to win the argument on the principle of fining. Like the right reverend Prelate the Bishop of St Edmundsbury and Ipswich, I think that the adjudicator should have teeth from day one. His comments were echoed by many other speakers. The referee should have the red card to help enforce the rules. I hope that there will never be sufficiently serious breaches to invoke the use of these powers, but just having the powers there and ready to go may prevent such serious breaches.
This raises the question of what success for the adjudicator looks like. I hope that the Minister will not abolish the measure by order in a few years’ time if it has been used to instigate not much more than low-level arbitration and investigation. As a football fan, I do not like it if the ref keeps stopping play, but I would always want one there to enforce the rules of the game. I also think that the power to abolish this new quango should replicate the new processes that we are starting to get used to in the Public Bodies Act and not follow the simple negative procedure in the Bill. Like others, I am keen for the proceeds of fines to be used in an imaginative way, ideally in investing in innovation in the supply chain. Unlike the noble Baroness, Lady Byford, I like the clarity conferred by questions punctuating the Bill’s wording, however homely it may seem to her. Unlike the noble Lord, Lord Palmer, I like the name of the adjudicator. I understand why the Minister might not want to call it the regulator given the sensitivities around that issue.
This is broadly a good Bill and has been warmly welcomed by most speakers this afternoon. My promise to noble Lords is to engage openly and constructively across the House to improve the Bill as it goes through its journey. I am sure that the Minister will do the same. We look forward to helping her get an effective adjudicator up and running as soon as possible.
Baroness Wilcox
My Lords, today’s debate has cast a great deal of light on the important issues addressed in the Bill. I thank all noble Lords for their contributions. I recognise the strength of feeling and depth of experience that we have heard in the debate. I have been asked far more questions than I thought I would on a Bill on which we all seem to agree, with two or three exceptions. I will do my best to answer as many questions as I can.
The noble Lord, Lord Myners, seemed to ask me 100 questions. I am grateful to him for telling me that I can reply to him in writing as long as I copy the response to everyone else. As I said in my opening remarks, the Bill has undergone substantial consultation and pre-legislative scrutiny. Wherever possible, the Government have attempted to find approaches that ensure that the adjudicator’s powers will be adequate while also keeping them proportionate. We intend to keep the costs to business minimal while ensuring that the adjudicator is fully equipped to fulfil his or her role. However, I will, of course, reflect on the comments of the noble Baroness, Lady Randerson, the noble Lord, Lord Teverson, and others, who have expressed their concerns about both those statements. We think that we have allowed tough powers to name and shame from the outset. We have kept back the last resort of financial penalties as a reserve power. I note that many, including the noble Lord, Lord Knight, have questioned this. I have no doubt that we will debate these questions further in Committee.
The noble Lord, Lord Knight, commented on the impact assessment of the draft Bill. That remains valid; hence there is no requirement for an updated impact assessment. The noble Baroness, Lady Byford, did not approve of the Bill’s “folksy” drafting and noted that the style of writing was unusual. I reassure the House that this is not a mistake. The Bill is one of the pilot plain English Bills that are intended to be easier for everyone to understand. That is what it is intended to be. However, I am happy to write to the noble Baroness on her question about the changes in clause headings and on the consultation.
My noble friends Lord Howard of Rising and Lord Eccles, and the noble Lord, Lord Myners, said that the supermarkets are currently bound by the Groceries Supply Code of Practice and questioned whether an adjudicator was needed as well. The Competition Commission has found clear evidence that the excessive use of buyer power could lead to adverse effects on consumers. The code has the commission’s recommendation, when it first introduced the code, that an adjudicator be set up to uphold it. At pre-legislative scrutiny, the BIS Select Committees in the Commons also concluded that a groceries code adjudicator was necessary. The code allows only individual cases to be resolved and only if a supplier is prepared to raise the issue with the large retailer involved. The adjudicator will be able to investigate suspected breaches involving many suppliers, not just adjudicate individual cases.
The noble Lord, Lord Myners, wishes to intervene. He did make a promise, and I have a lot of questions to answer.
Lord Myners
Is it the Minister’s belief that the supermarket sector is securing monopoly profits? If so, on what basis do the Government derive that conclusion?
Baroness Wilcox
I am sure I did not say that they were securing monopoly profits.
Lord Myners
My Lords, I did not say that the Minister said that, but the assertion that there is excessive use of buyer power over a diffuse supplier community would be evidence of monopoly profits. Do the Government believe that our grocers are evidencing monopolistic behaviour through excessive returns on equity or sales?
Baroness Wilcox
We are basing this on the Competition Commission’s evidence.
A concern was raised about the creation of a new regulatory body and I mention in particular the noble Lords, Lord Haskel and Lord Plumb. The Government are committed to reducing the overall burden of regulation on business. We are not creating a new bureaucracy but appointing an individual to be the adjudicator. I hope I can reassure the right reverend Prelate the Bishop of St Edmundsbury and Ipswich and my noble friend Lady Byford that the small, agile staff will be effective. We will, however, be watching all the way through—this also relates to the point made by the noble Baroness, Lady Randerson—to see that the office has the capacity to work with such large supermarket chains.
The noble Lord, Lord Haskel, thought that arbitration was more vital than the adjudicator’s investigations. I can reassure him that the adjudicator will be able to arbitrate disputes concerning individual suppliers as well as investigate complaints.
In response to the concern of the noble Lord, Lord Borrie, it is correct that the adjudicator probably would not arbitrate himself or herself where he or she had previously carried out an investigation into a similar issue, due to the risk of a conflict of interest. However, in that case the adjudicator would simply appoint a different arbitrator, and the Bill provides for this in Clause 2.
My noble friend Lord Eccles suggested that the Competition Commission was lukewarm in its support for the adjudicator. The commission said clearly in paragraph 11.375 that all but one member of the investigation panel considered the adjudicator to be essential for the monitoring and enforcement of the code, but all six members of the Competition Commission group who investigated groceries agreed that,
“the transfer of excessive risks or unexpected costs by grocery retailers to their suppliers is likely to lessen suppliers’ incentive to invest in new capacity, products and production processes … if unchecked, these practices would ultimately have a detrimental effect on consumers”.
Viscount Eccles
I nearly accept the Minister’s description of what I said, but this Competition Commission finding was made in 2008. It is now 2012. I asked, and will ask again, whether there is any evidence that the adverse effect which they predicted in 2008 is in fact coming about.
Baroness Wilcox
I do not have the answer before me, but I will most certainly write to my noble friend.
The noble Lord, Lord Palmer, suggested that the adjudicator should more accurately be called an ombudsman. Such a description is not to be used in this case because it would be contrary to the guidance of the ombudsmen’s society, because ombudsmen deal with business-to-consumer disputes.
The noble Lord, Lord Knight, asked whether there should be a further investigation into the practices of intermediaries. A decision to refer a market to the Competition Commission for investigation is a matter for the Office of Fair Trading, and any concerns would be raised with it. However, the question of keeping the code a living document is a matter that I should like to continue to explore in Committee, if the noble Lord is happy with that.
We heard complaints, including from the noble Lord, Lord Knight, that the Bill has been delayed. I know that it has been keenly anticipated and I recognise noble Lords’ eagerness for it to have been introduced. However, we have not delayed in this. The 2008 report did not lead to an immediate Bill, but I would not criticise the previous Government for that because they were attempting to get the retailers themselves to create the adjudicator. That is why there seems to have been a delay—it was not in our time. Since the election, we prioritised this measure for pre-legislative scrutiny during the first Session, and introduced it on the first day possible of this new Session. I hope that noble Lords will work with us on the Bill and that we will see an adjudicator in place next year.
The noble Lord, Lord Grantchester, and my noble friend Lord Razzall suggested that the way in which the levy to fund the adjudicator is divided between retailers should be reconsidered by annual review. The Secretary of State will be able to assess, as the evidence unfolds, how the levy should be divided to ensure that those who create most trouble pay more.
Concern was raised by my noble friends Lord Razzall and Lady Byford about the few instances where confidentiality might not be completely guaranteed. We believe that confidentiality will be vital to the adjudicator’s investigations. The circumstances in which the identity of a complainant might be revealed without their consent are strictly limited by Clause 18. We believe that this would happen in exceptional circumstances. That will perhaps become more apparent when we go through the Bill in Committee. The Government will be engaging with suppliers to ensure that they understand the rules on confidentiality. We are confident about their ability to complain.
The noble Lord, Lord Grantchester, expressed concern over the Secretary of State’s power to restrict the sources that can complain to the adjudicator. We believe that it is important that trade associations are incentivised to act responsibly for the sake of both suppliers and retailers. I will be happy to discuss this further in Committee.
Noble Lords, including my noble friend Lord Plumb and the noble Lords, Lord Palmer and Lord Grantchester, demonstrated a close interest in the question of sanctions. I agree that getting right the sanctions available to the adjudicator is critical. I know that we will continue to explore this issue.
The noble Lord, Lord Grantchester, the noble Earl, Lord Sandwich, my noble friends Lord Razzall and Lady Randerson, and the right reverend Prelate the Bishop of St Edmundsbury and Ipswich suggested that the process of consultation on fines could be streamlined. Our intention is for the fining power to be introduced promptly, if necessary, but also to ensure that its introduction is based on proper consideration of the evidence. I shall be very happy to discuss with noble Lords how the details of the Bill can ensure that such a power is delivered.
I seem to be answering a lot of questions from the noble Lord, Lord Grantchester, and my noble friend Lord Razzall. Perhaps it is because they asked them early on. I have a lot of answers here. I shall try not to respond to them too much again because I am not responding to some other noble Lords.
An important question was asked about what consumers think of the adjudicator, I think by my noble friend Lord Eccles. A poll by War on Want last year found that 84% of consumers support the establishment of the adjudicator. The general public have a keen sense of fair play and do not like to see farmers and suppliers being exploited in any way by anyone. At the same time, they, too, wish to see fairness in our dealings. Consumers are, of course, the ultimate beneficiaries from a stronger and more competitive groceries market.
Many thoughtful and incisive points were raised today, and I hope that I have been able to address some of them. Obviously, I will write to noble Lords on any of the questions that I have not been able to answer. I am sure that we will continue to explore these and other issues in Committee and on Report.
I have in my time supplied supermarkets with chilled food, before any code or the prospect of an adjudicator. In those days, the 1980s and 1990s, there was no written contract for chilled food, and I had no written contract to go to the banks to raise money. It was not easy to get them to say that they would buy something for you at that time, so I would have loved to have had a code and an adjudicator. Yet it was very exciting to supply to a large supermarket group. We were only a small to medium-sized company. At that time the supermarket groups were very worried about having very few suppliers, and they did the best they could to make sure they had a large range of suppliers and to help us to overcome the barriers to supplying so much.
However, I also remember the dreaded special offers. When they arrived, it was extremely difficult for us to fulfil them without having to work through the night and putting on extra shifts. Any profits that we made in those two weeks went out of the door with all the staff we had to engage. That was the price of having contracts, not even written ones, with very large supermarket groups. If I had to give any advice to a company starting to deal with them, I would say that the excitement of a contract should be resisted until you fully recognise the terms and conditions and the implications of what they mean to you, because they are very big contracts that you are taking on and they happen regularly every week.
This Bill appeared in three major parties’ manifestos. I hope that those of all parties and noble Lords on the Cross Benches will wish to ensure that the adjudicator protects suppliers, including farmers, from any unfair dealing, and does so without needless disruption to commercial arrangements. I look forward to my noble friends Lord Howard and Lord Eccles and the noble Lord, Lord Myners, taking part in Committee so that together we can ensure that this Bill delivers on our aims and achieves the best possible outcome for the grocery supply chain as a whole. Fair market practice from the supplier through the retailer to the consumer is exactly what we want from the biggest industry in this country.
Bill read a second time and committed to a Committee of the Whole House.
Local Government Finance Bill
Proceeds of Crime: EUC Report
(11 years, 11 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Hannay of Chiswick
To move that this House agrees the recommendation of the European Union Committee that Her Majesty’s Government should exercise their right, in accordance with the protocol on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice, to take part in the adoption and application of the proposal for a directive of the European Parliament and of the Council on the freezing and confiscation of the proceeds of crime in the European Union (document 7641/12) (32nd Report, Session 2010–12, HL Paper 295).
Lord Hannay of Chiswick
My Lords, I beg to move the Motion standing in my name on the Order Paper. It is in my name because I have the honour to chair the European Union Committee’s Sub-Committee on Home Affairs, which at the end of the last Session prepared the report now before your Lordships’ House.
As your Lordships know, when the House considers reports of the European Union Committee, this is almost invariably on the Motion that the House should take note of the report. In the case of this report, the Motion invites the House to agree the committee’s recommendation. The reason for this is that the report deals with draft legislation falling within the area of freedom, security and justice, and the legislation will apply to this country only if the Government exercise their right under the protocols to the treaties to take part in the legislation—in other words, if they opt into it. They have to do this within three months of the proposal being presented to the Council, which, in the case of the directive we are considering tonight, means before 15 June. The committee believes that the Government should do so, and the Motion invites the House to agree with the committee.
Last year, this Government repeated an undertaking given by the previous Government—usually known as the Ashton undertaking—that time would be found to debate opt-in reports well before the expiry of the three-month period. I am grateful that, despite Prorogation, the Government have made time available for this debate early enough for them to be able to take the views of the House into account before they formally reach a decision on whether to opt in.
Freezing and confiscation of the proceeds of crime is one of the most effective ways of fighting crime. Since criminals are much more mobile and much more ingenious about hiding these proceeds, it clearly strengthens this aspect of the fight against organised crime if such freezing and confiscation can be enforced across the whole of the European Union and not just within one country’s borders. There is current EU legislation on the subject in a series of framework decisions stretching from 2001 to 2006. Two of these establish minimum rules on freezing and confiscation of proceeds of crime. There is, however, nothing to prevent member states enacting more stringent legislation, as this country has done in the Proceeds of Crime Act 2002. The new draft directive that we are debating this evening would supersede these two framework decisions and add to them fresh powers—in particular, the power to confiscate the proceeds, despite there having been no criminal conviction because, for example, of the death or flight of the suspected person. This is a power already available to the courts of this country. My committee supports the proposal that the courts of all member states should be required to have this power.
The confiscation of the proceeds of a crime is of course an integral part of the penalty—the criminal should not be allowed to profit from their ill gotten gains—but even more important is the deterrent effect. Criminals who know that the proceeds of their crimes are likely to be confiscated may think twice before embarking on criminal activities. It is therefore a weakness in our law enforcement system that, as things are, the proceeds are not all that likely to be confiscated. The figures available are, unfortunately, very speculative, as estimates of the proceeds of crime vary wildly. In the United Kingdom one estimate is that, of the £15 billion annually criminally acquired, in 2009-10 only £154 million was recovered to the state. That is net of assets recovered for the victims and of management expenses but, even so, the proportion of the proceeds recovered cannot on any measure exceed 3%. The position in other member states is no better. The deterrent effect is thus currently small but not negligible.
The Costa del Sol has been the haven of choice for criminals to retire to and enjoy the fruits of their labours. The statistics from Eurojust show that in 2010 one case in Spain resulted in the confiscation of €112 million, with many other cases netting smaller amounts and, in addition, a number of properties, boats and luxury cars. This demonstrates the importance of all member states having these powers.
The Government have stated on many occasions their determination to pursue the fight against serious organised crime. In my view, this entails not just having adequate domestic law in the United Kingdom but bringing pressure to bear on other member states to have provisions in their own laws on freezing and confiscation which at least meet the minimum requirements laid down in this directive. The committee therefore believes that it is important that the Government should opt in to the proposal and play a constructive part in negotiating a strong directive, and support other member states which may have weaker law enforcement systems thereafter to implement the system effectively. That is where there have been doubts in the past and I hope that this new legislation will provide a basis for much more effective work in the future.
There is one aspect of the draft which has caused the committee real concern. It is a regular feature of serious crime that the criminal will launder the proceeds internationally and put them into assets in many countries. A conviction in one country will therefore be fully effective only if a confiscation order made by one court is automatically recognised and enforced in other member states. There are two framework decisions dealing with mutual recognition of freezing and confiscation orders, but the directive being discussed tonight does not deal with that topic. We hoped that the directive would repeal, replace and strengthen the provisions of all four framework decisions. Instead, it repeals, replaces and strengthens the two dealing with the making of freezing and confiscation orders, but leaves in place those dealing with mutual recognition of orders made in other countries’ courts. The committee fears that that may be an unintended consequence of the arbitrary and illogical division of the former Commission directorate of freedom, security and justice into two separate directorates, dealing respectively with justice and home affairs. I would like to hear the Minister’s views on this; perhaps he could in any case tell the House whether the Government will argue in the negotiations for the new directive to be extended to include mutual recognition provisions as well.
This is only one of a number of aspects of the directive that we would like to see raised in the negotiations. Others are detailed in our report. Some are technical, but there is one to which I should draw attention. If the Government were not to opt in, the United Kingdom would remain bound by the current provisions of the earlier framework decisions, which will thus be included in the list of those measures on which the Government have to decide—by May 2014 at the latest—whether all or none of them should continue to apply to the United Kingdom. That arises under Protocol 36 to the treaties. I am not wishing to raise that extremely interesting and sensitive issue tonight, but merely say that it is one about which your Lordships will hear more in the period ahead of us, not least from the European Union Committee, which will be carrying out an inquiry into the background to the 2014 decision in due course, and nearer that time.
We are continuing to keep the directive under scrutiny, so at this stage one matter only comes formally for decision to the House: whether or not the Government should exercise the United Kingdom’s opt-in. For the reasons I have given, the committee is firmly of the opinion that the Government should do so. I hope very much that we will hear from the Minister at the conclusion of the debate that this is their intention.
Lord Hodgson of Astley Abbotts
My Lords, I am no longer a member of Sub-Committee F; I have been transferred for a period of rest and recreation to Sub-Committee G under the chairmanship of my noble friend Lord Bowness. These are probably my valedictory remarks in connection with a report of the sub-committee that I was on when it was prepared. I enjoyed my time on the sub-committee, first under the chairmanship of my noble friend Lord Jopling and more recently under the chairmanship of the noble Lord, Lord Hannay, who, with his impeccable style, has given us a clear exposition of the issues before us. We were splendidly looked after and impeccably marshalled by our clerk, Michael Collon. His deputy was originally Michael Torrance, who has now ascended to higher and greater things to the clerk of the committee. I am only sorry that I shall not be there to see him in action.
It is a truism that the past 40 to 50 years have seen the trends of globalisation and interdependence of nations burgeoning. It is hard for me to remember that when I first finished university and went to work in New York, one could not make an international telephone call; one had to book it. At weekends and holidays, one might have to book it several days ahead. In the investment bank in which I worked, because I had a decent English accent, my first job was to chat up the operators at the New York international exchange so that the lines could be kept open until my bosses were ready to make the telephone calls that they wished to.
In those days, when you went abroad it was demonstrably a foreign country, in a way that is inconceivable today. With Ryanair and easyJet, people pop all over Europe and indeed over the wider world in a way that in my youth was considered impossible. The emergence of global brands of clothing has meant that some of the physical appearances of us all have become much more similar. I think, by the way, that there is a PhD thesis to be written on the role of jeans in creating a global culture, but that is for another day.
All this is no doubt a good thing—increasing international understanding and so on—but there is of course a seamier side, which is the subject of our debate today. It used to be said that if the Governor of the Bank of England raised his eyebrows in the City of London, whatever was being complained of would stop, and no doubt the news that Scotland Yard was on your tail had a similar calming effect. These threats no longer have the same power or influence, because of globalisation. My first reason for encouraging the Government to opt in to this proposal is that crime has gone global. As our report on the EU’s international security strategy said,
“the nature of the international threat in this area was clearer and that therefore international cooperation was”—
as one of the witnesses put it—“utterly indispensable”.
The second reason, which was referred to by the noble Lord, Lord Hannay, is that to date our efforts at recovery have only scratched the surface, and there is a serious need to up our game. This means that work to establish effective asset recovery offices across the continent of Europe is a very high priority. To see how high, I suggest that the Minister ask his officials to look at Annex 2 to the Commission Staff Working Paper. Only eight countries are listed out of the total in the EU. Every set of statistics is on a different basis, no headings are the same and you have no way of telling what the level of effort is or how effective it is, or of comparing one country’s performance with another.
Even turning to the United Kingdom, which has a commendable record in this, and looking at the Serious and Organised Crime Agency’s report, which the noble Lord, Lord Hannay referred to—he gave the net figure for recovery, but the gross figure is £350 million recovered—in the same year when the Government said that cybercrime was costing the UK £27 billion, we were recovering £350 million gross. That is the second reason for urging the Government to opt in.
The third reason is that we need to establish some centralised mechanism to share information, establish best practice and spread it across Europe. Of the reports that we have had in Sub-Committee F, one of the most depressing sets of evidence was from Europol, which said that all too often police forces in individual European countries have bilateral arrangements and do not send information through Europol itself. If we are not able to create a central approach to this, then for certain the cops will never catch up with the robbers. We need to make sure that within this proposal the ability of Europol to set standards, find out what is going on and make sure that a proper level of collaboration and co-operation takes place, is critical.
What are the downsides? One answer perhaps lies in Annex 4 of the Staff Working Paper. Pages 58-71, headed “Asset recovery in the UK”, show what a lot of good work is being done in the UK. However, this is of absolutely no value unless other countries in the EU are upping their game at the same time. Page 6 of the Explanatory Memorandum states:
“In order to address the lack of data, the main economic analysis is … based on a model which uses proxy indicators to extrapolate from a detailed analysis of income and cost in the UK (the only Member State for which income and costs for all elements of the asset confiscation system can be estimated and which has a confiscation system that is a reasonable approximation of the maximal legislative sub- option)”.
So we are ahead of the game and, judging from that statement, most other countries are far behind us. The same report states that:
“EU Member States will progressively sign and ratify the 2005 Council of Europe Convention”—
which is on laundering, search, seizure and confiscation of the proceeds of crime.
“While this Convention is based on a relatively good consensus, seven EU Member States have not even signed it yet”.
So we have some justification in this country in being a trifle cynical. The UK is leading the way—we are taking on the associated costs and bureaucratic impediments—but who is following us?
My second reason for being concerned is that the trans-European experience on judicial co-operation has not always been an unqualified success. I refer in particular to the European arrest warrant. I declare an interest as a trustee of Fair Trials International. It is a mixed experience on access to interpreters, on access to the proper level of legal advice and on common bail conditions. Some noble Lords may say that we are talking about something completely different here, but in the Explanatory Memorandum there are some serious questions about levels of proof in different European countries, particularly a criminal standard of proof in countries such as Germany, while others, such as this country, use a civil standard of proof to facilitate confiscation. There is a lot of work to be done at the nitty-gritty end to make this decision meaningful.
My reasons for supporting opting in clearly outweigh those for standing aside, for the reasons that the noble Lord, Lord Hannay, gave. However, there is a lot to be done by the Government to ensure that the detailed work that will make this effective is given real impetus. If it is left in a half-formed state, not only will it be ineffective in tackling the problem, which we all agree is serious, but it will add another burden to this country which our competitor and fellow European states are not undertaking.
Lord Judd
My Lords, like the noble Lord, Lord Hodgson of Astley Abbotts, I have had the privilege of serving on the committee and putting my name to the report. It is very important at the outset to place on record how the members of the committee appreciate the leadership and chairmanship of our chair, the noble Lord, Lord Hannay—it is good to work under him—and the effective and professional work of the clerk and his colleagues. They made a very strong combination and we should put that on record.
In a debate last night we paid tribute to the noble Lord, Lord Roper. We should today take the opportunity to say that it is very good that his successor is with us in these deliberations and to wish him well. He has got a difficult act to follow but, having known him over many years now, I think he has all the talents and skills that will enable him to fulfil the role very effectively. Therefore, as I say, we wish him well.
We know that there are some very big issues before the European Union at present on which there are profound matters of difference. We also know that both the Government and the Opposition frequently take the opportunity to restate that they are in no way questioning our membership of the Union and that they are deeply committed to its success. That is why, when we come to specific matters such as this, it is all the more important to be positive, to engage and to do all we can to make a success of what is being recommended. Like the noble Lord, Lord Hannay, I believe very strongly that we should get on with ratifying and implementing this proposal.
Obviously, crime has become very sophisticated and the rather disappointing figures on how much of the proceeds of crime is actually recovered is in no way any criticism of the dedicated people who are doing the police and other work involved. It is, however, an indication of the complexity and size of the challenge. It is not an issue that we can possibly solve on our own; we simply have to work with others. Therefore, this proposal has great merit in enabling that to happen. In making that point I would like to emphasise one other issue, about which frankly I get rather anxious. Due to the complexity of the kind of crime we are dealing with in these proposals, it is very difficult—in fact it may be impossible—to establish a dividing line between what is legitimate, legal business and what is very significant crime. There is not a clear-cut dividing line all the time; there can be overlaps. Of course, in our newspapers we read about the more sensational evidence of this every day. That is another reason for making sure that we have the strongest possible international collaboration in making a success of the arrangements that exist.
I hope that we will not delay any longer in ratification. I hope also that by showing our commitment at a time when we are differing from the Community on so many other issues, we will take the opportunity to demonstrate how strongly we believe in the Community where it really is relevant and can help us all in meeting the challenges that face us. If we are always hanging about on everything, it rather undermines the strength of the commitment, as it is expressed, to belonging. We really should get on with it.
Having said all that, I want strongly to endorse what the noble Lord, Lord Hodgson of Astley Abbotts, said. One of the characteristics of the European Union and its activities—although it is not only the European Union—is that everything can become terribly complex and, in a sense, abstract and intellectual. It becomes about legislation, but legislation does not solve the problem. It is the monitoring the detail—what is actually done—that achieves this. There are quite a number of areas in which it has become clear to me since I have been on the committee that there is a great deal to be done, together with our colleagues in the European Union, to strengthen the monitoring and scrutiny not only of the legislation and its intentions, but how the activity is going; what is strong, what is weak, what needs to be put right, and what this demands of us all. I think the noble Lord was absolutely right to make that point and it is one with which I totally concur.
I strongly support the chairman’s recommendation and I am very glad to be associated with the words of the report. I do hope we are going to hear a very positive response from the Government and the Minister on how quickly and firmly they intend to proceed.
Baroness Hamwee
My Lords, the whole House will be grateful to the noble Lord, Lord Hannay, and to his sub-committee. Even for a Europhobe, which I am emphatically not, it seemed to be a no-brainer. However, as I read the report, I realised that issues arise which make one consider the differences in approach between our law and procedures and those of other European states, and the overall principle of how far one should go in willing the means as well as the end. As has been said, we are talking about big crime, which is big business. The Explanatory Memorandum to the directive referred to it in what was very much a financial take on the situation, and to the position weakening,
“our ability to fight cross-border … crime”—
yes—and affecting,
“the functioning of the Internal Market by distorting competition with legitimate businesses”.
It also referred to depriving,
“national governments and the EU budget of tax revenues”.
I do not quarrel with that, but there is another dimension to this. There are real, human victims of serious, organised international crime and therefore the deterrence of confiscation is of great importance.
As we have heard, it is very hard to stay ahead on these matters. Criminals seem to manage to be ahead of agencies and I wonder whether harmonisation in the EU will drive the transfer of funds outside the EU. You do not have to go as far as somewhere such as Belize to get outside the EU. Following the money is rarely straightforward. People who have headed for bankruptcy on a rather smaller, more personal scale know well about trying to transfer assets so that they are not, they hope, liable to be seized. Again, the Explanatory Memorandum deals with this. Obviously, the directive does as well but I am afraid that I cannot claim to have read that.
Third-party confiscation raises some quite important issues. I was interested to see that the provision,
“requires third party confiscation to be available for the proceeds of crime or other property … received for a price lower than market value and that a reasonable person in the position of the third party would suspect to be derived from crime”,
which clarifies the “reasonable person” test. Given the sophistication of much organised crime, evasion is likely to be very sophisticated and there will be innocent third parties, so that gave me a little cause for concern. I was also worried about confiscation in the absence of conviction—something that we in this country, with our own legal traditions, would be particularly aware of. I was reassured by the explanation that this would be in very limited circumstances, where the court finds,
“that a person … is in possession of assets which are substantially more probable to be derived from other similar criminal activities than from other”,
non-criminal “activities”; and, importantly, that:
“The convicted person is given an effective possibility of rebutting … specific facts”,
and that there are rights of appeal. “Substantially more probable” is an interesting phrase and not one that we are that familiar with here. I do not know how it works with our recognised standards of proof but, reading it in a common-sense way, it seems to me to be somewhere between the balance of probabilities and beyond reasonable doubt.
The report makes the point, which has been made in the debate, that if we do not opt in it sends the wrong message to our partners about the Government’s attitude to international co-operation and that there are impacts beyond the subject matter. The report states:
“We have no doubt that the Government should opt in”.
Neither have I.
Lord Rosser
My Lords, I thank the noble Lord, Lord Hannay of Chiswick, for his very helpful opening speech, for the work that he and his committee have done on the draft directive that we are discussing and which we broadly welcome, and for the report that has been presented to us.
We await the Government’s response with interest, but I understand that a decision has now been taken to put back the scheduled debate upon the draft directive in the other place. It was scheduled to take place tomorrow. No doubt the Minister will confirm whether that is the case and, if so, will tell us why and, unless the reason is a lack of time in the other place tomorrow, why the Government considered it appropriate to proceed with our debate today.
The treaty of Amsterdam gave the Council the power to legislate in this field of police and judicial co-operation, since when four framework decisions and one decision have been adopted covering the area that we are considering today. The framework decisions require member states to enable confiscation, harmonise confiscation laws and provide for mutual recognition of freezing orders and confiscation orders. The Commission’s view is that member states have been slow in transposing the framework decisions on harmonising confiscation laws and providing mutual recognition of freezing orders and confiscation orders, and that the relevant provisions have often been implemented in an incomplete or incorrect way. The noble Lord’s committee has made it clear that it finds this most unsatisfactory, and it would be helpful to know if that is also the Government’s view.
The new draft directive appeared at one stage to have been expected by the Commission to strengthen the EU legal framework on confiscation through allowing more third-party confiscation and extended confiscation, and to facilitate the mutual recognition of non-conviction- based confiscation orders between member states. As the committee’s report states, though, in actual fact the draft directive is silent about mutual recognition, and the committee expressed its concern at the failure of the draft directive to deal adequately with the mutual recognition of extended confiscation orders and to deal at all with the mutual recognition of civil recovery orders. Once again, it would be helpful if the Minister said whether that concern is shared by the Government.
The principal issue considered in the report from the noble Lord’s committee is whether the Government should opt in to the proposed directive, and it is in no doubt that they should. The noble Lord’s committee has drawn attention to the very small proportion of the proceeds of serious organised crime that is currently recovered, has observed that confiscation would be a more effective weapon if there were better co-operation at international level and has stated that a failure by the Government to opt into a measure setting out minimum provisions to be adopted by member states would be against our national interest, since it would be in our national interest for all member states to introduce tougher measures on the confiscation of criminal assets. The committee also expressed the view that not opting in would send entirely the wrong message to our partners about the Government’s attitude to international co-operation. What is the Government’s response to this case for opting in that the committee has made in its report?
The Government have stated in their Explanatory Memorandum that they take a case-by-case approach to the application of the opt-in protocol and that, in this instance, the issues that they will need to consider in particular are: the ability to support or develop our asset recovery programme; wider domestic developments in tackling organised crime; the burden on the legislative programme; cost; and association with other international developments. The committee was clearly underwhelmed by the strength of the issue of,
“burden on the legislative programme”,
describing it as “lacking in merit”, bearing in mind that member states will have two years from the date of adoption of the draft directive in which to transpose it into national law, and bearing in mind that the Government consider that United Kingdom law already complies with most of the substantive provisions of the directive. In the light of the comment in the committee’s report, will the Minister say if,
“burden on the legislative programme”
is still seriously being advanced as an issue that needs considering when determining whether or not to opt in?
A decision on whether or not to opt in needs to be taken, as I understand it, by the middle of June, since the directive will apply to the United Kingdom only if by 15 June the Government notify the President of the Council that we wish to take part in the adoption and application of the directive—in other words, to opt in.
In the later paragraphs of their Explanatory Memorandum, the Government make a number of points that, frankly, could be construed as the basis of developing a case for not opting in. While the committee has made an argument in its report for opting in, and indeed strongly supports taking that course of action, the Explanatory Memorandum appears to lack any particularly positive statements about the draft directive. I hope that the Minister will give us an indication of the Government’s current thinking on the draft directive, although maybe, if it is true that there has been a hiccup that has led to the debate in the other place being put back, we shall find that the Minister is no longer in a position to say anything very much.
It would be helpful, though, if he could say what further developments there have been since the Explanatory Memorandum of 26 March that update any of the issues or points referred to in that memorandum. It would also be helpful if he spelt out in more detail, if they have not yet made a decision, the specific points being considered and why they are crucial under the five issues that the Government are considering before deciding whether or not to opt in, which I referred to earlier and which are set out in paragraph 26 of the Explanatory Memorandum. Included in those five issues is the issue of cost. What conclusions have the Government reached on this score, and why?
The report of the committee of the noble Lord, Lord Hannay, sets out, in paragraphs 14 and 15, certain legal questions. What is the Government’s response to those questions and points? The committee also says in paragraph 20 of its report that the joint action and certain provisions of the two framework decisions are to be repealed and replaced, but only,
“in relation to Member States participating in the adoption of this Directive”.
The report goes on to say on this point that if the United Kingdom does not opt in, it will continue to be bound by the existing measures and that this would be an unfortunate situation and an unnecessary complication. Do the Government share the committee’s view on this point?
The House of Commons European Scrutiny Committee said in its report last month that,
“the draft Directive nevertheless represents a significant extension of EU competence on such matters as third party and non-conviction based confiscation and on the freezing of property, in some cases without first obtaining a court order”.
Is that the Government’s view as well? If so, is it this point that is the Government’s principal concern over opting in?
We share the committee’s view about the importance of co-operation at the international level on the freezing and confiscation of the proceeds of cross-border organised crime. I hope that today the Minister will be able to tell us more about the Government’s stance on the draft directive, including issues that are still of concern to them or are unresolved and which may still be precluding a final decision on whether or not to go down the road recommended by the noble Lord’s committee—namely, that we should opt in to this draft directive.
The Minister of State, Home Office (Lord Henley)
My Lords, as always, I welcome the opportunity to debate the draft directive. I offer my thanks to the noble Lord, Lord Hannay, for his introduction, particularly for his explanation of the process, for his explanation of the Ashton undertaking and how we are supposed to take these things forward. It is obviously right that the Government should listen to the expertise that we have in this House and on the European Union Committee. On that basis, I welcome the presence of the noble Lord, Lord Roper, the former chairman of that committee; the noble Lord, Lord Boswell, whom I can no longer call my noble friend now that he has taken over that job; and all those who offer their expertise, particularly the noble Lord, Lord Hannay. The Government will certainly bear all that in mind before making their decision on whether to opt in or out.
At this point I must offer an apology to the House as, at this stage, the Government have not made a decision as to which way we should go. As the noble Lord, Lord Hannay, made clear, if we want to opt in at an early stage, we must do so before 15 June. A decision will certainly be made before then. However, it is always possible that we could opt in after final decisions have been taken and the whole adoption stage has been completed, when we have seen what has been agreed. There are very difficult decisions to be made. I hope I will be able to explain exactly why we have not yet made a decision and give some thought to our reasoning behind the different options before us.
Before I do so, I will say a little about the timing of this debate and the debate in another place, which was raised by the noble Lord, Lord Rosser. I know that the noble Lord is immensely experienced and has been in this House for a number of years. However, he obviously does not realise that things operate on a very different basis between the two Houses in this particular matter. In line with the Ashton undertaking, the appropriate time for this debate to take place was a matter for the noble Lord, Lord Hannay, as chairman of the sub-committee, to negotiate with the usual channels. It was agreed some weeks ago—before we prorogued, I think—that it would take place around now. Quite rightly, it went ahead. Even though the Government have not come to their final decision, it would not have been right for me or anyone else to go to the noble Lord, Lord Hannay, to suggest that it should be put off to a later date, purely because we had not made a decision.
The debate in another place is on a government Motion, which is completely different. It would not be right for the Government to table a Motion before they have made up their mind. However, as the noble Lord is probably aware, the Government will make up their mind before 15 June. We will have that debate and another place will have a debate—I give that assurance—before 15 June.
Lord Rosser
I think I understand the procedures. Will the Minister just confirm whether it is true that the debate in the other place was scheduled to take place tomorrow and that it has been put back?
Lord Henley
My Lords, my understanding is that a debate was to take place tomorrow. It was put back because the Government have not come to a final decision. There is nothing wrong with that. The Government want to make the right decision. All that I make clear to the noble Lord, who obviously does not understand these procedures, is that we will have done so before 15 June. That is our timeline. I give the noble Lord that assurance. The noble Lord seems to imply that there is some sort of conspiracy here. The Government want to get it right and must put down a Motion for the debate. Procedures in this House are different, which is why we do things differently. The noble Lord should have understood that.
I want to explain relatively briefly what our thinking is and not which way we are going—as I have said, a decision has not yet been made—but the pros and cons of the different options before us. I want to make it quite clear to the House that we believe that asset recovery is a very important weapon in our efforts to tackle organised crime. We believe that the proceeds of crime are not only a central motivation for organised criminals but that they also fund further criminality. Freezing and confiscating criminal finances hurts organised criminals and protects the public.
The United Kingdom has advanced legislation in this area, as other noble Lords have alluded to, and we have had real operational success. In 2010-11, United Kingdom law enforcement agencies froze or recovered more than £1 billion worth of criminal assets. The amount of assets recovered has increased year-on-year since the Proceeds of Crime Act 2002 was passed. As my noble friend Lord Hodgson made clear, the United Kingdom is recognised as a leader in this field. We still want to do more, particularly on international asset recovery, as we made clear in our organised crime strategy in July 2011. In 2008, it was estimated that some £560 million of UK criminal assets was held abroad. Improved international co-operation is a necessary step towards recovering that money. That is why we welcome the aims of this directive. It is right that we seek, as leaders in this field, to drive up standards throughout the European Union and to find better ways of working together with our EU partners. To this end the directive covers confiscation following a criminal conviction, extended confiscation, third-party confiscation, non-conviction-based confiscation, and powers to freeze assets.
We must, of course, consider carefully the contents of the draft directive. The Government’s analysis is in progress. Our recommendation on the opt-in decision will be communicated to the parliamentary scrutiny committees at the first opportunity. The United Kingdom already has all of the powers envisaged by the directive in our Proceeds of Crime Act 2002. In almost all areas we exceed the minimum standards established by the directive. There are, however, areas where changes to domestic legislation might be necessary were the final version of the directive to include the same provisions as this draft.
Some aspects of the directive’s provisions on non-conviction-based confiscation, extended confiscation, and freezing without a court order do not sit easily with our domestic regime. Without prejudice to the Government’s final position, it should be noted that the directive as drafted appears to pose a risk to our domestic non-conviction-based confiscation regime. Our non-conviction-based confiscation powers are civil law measures—they allow prosecution agencies to take action against property that they think has been acquired through unlawful activity. The action is not taken against an individual and no criminal conviction is necessary. It is a particularly useful tool for tackling the high-level, organised criminals against whom it is difficult to achieve a criminal conviction. In 2011-12, some £20 million worth of criminal assets were recovered using non-conviction-based confiscation powers.
Due to its criminal law basis, the directive risks placing non-conviction-based confiscation measures in the UK onto a criminal law footing, opening new avenues of legal challenge to our powers. If criminal law procedural protections and a criminal law standard of proof were introduced, our domestic regime could be severely weakened and our law enforcement agencies would find it harder to disrupt the workings of some of the most dangerous organised criminals.
The Government are considering whether the best approach is to opt in to the directive and attempt to negotiate out those aspects that conflict with our domestic regime; or whether the conflict in some areas is sufficiently serious that not opting in at this stage is the better approach. While the directive does not offer direct benefit to the United Kingdom’s domestic regime, tougher legislation and more effective action elsewhere in the EU will help tackle those cross-border criminals who cause harm in the UK, as the European Union Committee said in its report, and for that we are grateful. We believe that it is vital that we get the detail right and we must consider the effect of the directive on our domestic regime and its likely operational impact.
The noble Lord, Lord Hannay, wanted to know whether we would press for mutual recognition to be included in the directive from both conviction and non-conviction-based confiscation. We would like to see effective mutual recognition arrangements for both conviction and non conviction-based confiscation. This aim would be better achieved through separate instruments. The directive is a minimum standards directive; obviously, we will continue to work with our partners to seek further new mutual recognition instruments from the Commission.
None the less, it is certainly our intention to play an active part in the negotiations on this directive, irrespective of whether we opt in or not at the outset: that is, before 15 June, the date to which the noble Lord, Lord Hannay, referred. The United Kingdom’s internationally recognised experience and expertise in asset recovery will help us to achieve an influential position in negotiations. The directive offers us a valuable opportunity to raise the standard of asset recovery legislation in the EU, enhance our co-operation with member states, and increase our powers to recover criminal assets held overseas. I repeat the fact that the expert views of the EU sub-committee will play a very important part in the Government’s thinking as they decide whether to opt into this directive. For that I am very grateful, and again we will take note of everything that has been said.
Lord Hannay of Chiswick
My Lords, first, I thank all those who participated in this short debate and have made very valuable contributions. Perhaps I may be permitted to thank in particular the noble Lord, Lord Hodgson of Astley Abbotts, whose departure from the sub-committee that drafted this report is a cause of regret to all its members, because he has made a remarkable and constructive contribution to our work over the past three years. He will be sorely missed.
I join those who spoke about Michael Collon, our clerk, who has guided this committee for so long and has now moved on to greater things. He will also be missed.
As to the points raised in the debate, I followed carefully what the Minister said. I understand the procedural complexities of the matter and the need for the Government to handle their relationship in the other place in a way that is consistent with reaching a decision on this. I admit to a scintilla of regret that the Minister could not rise to his feet this evening and say that the Government had decided to opt in, but patience is sometimes rewarded. I can see why they are in the position that they are in.
The only point that I make is that from my own experience, and I think from the experience of much of the legislation in this area, it is a better way to influence this sort of legislation effectively if one opts in and negotiates as a full negotiating partner than to have to try to do it from the outside with the use of the potential opt-in at a later stage when other people have shaped the legislation. I am sure that the Government would in those circumstances still try to exercise their influence, but in my view they would have less influence than if they opted in before 14 June. So I very much hope that that is a decision that they will come to. This may be a triumph of hope over experience, but I even hope that the scrutiny committee in the other place may take a somewhat less negative view than it has on many matters, particularly given the importance to this country of Europe-wide legislation to deal with the confiscation and recovery of assets. I do not find it believable that they should feel that it is not a reasonable objective of our national policy and in our national interests to see tougher provisions Europe-wide, not just in this country.
I hope that this debate and its outcome, which I suggest will be the House’s approval of the Motion on the Order Paper, will be factored into the Government’s consideration and will be given due weight.