Westminster Hall

Wednesday 22nd January 2014 Westminster Hall

Wednesday 22 January 2014

[Albert Owen in the Chair]

Money Transfer Accounts and Remittance Sector

Wednesday 22nd January 2014 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Claire Perry.)

09:30

[Kevin Brennan (Cardiff West) (Lab)]

Bore da, Mr Owen. For those who do not speak the language of heaven, that means good morning.

I am grateful for the opportunity to probe the Government on their steps to support money transfer accounts and the remittance sector. According to a recent blog from the Africa Research Institute, the Secretary of State for International Development has described this issue as

“one of the most important things I have dealt with in my political career”,

so is at least as important as HS2, and therefore the Government should devote at least as much effort to, and invest at least as much political capital in, trying to sort it out. At a recent meeting at Ealing town hall, she assured UK Somalis that the

“best experts on the planet are working on a solution”

and that the Prime Minister has recognised that a rapid solution is needed to a problem that he has described as “massively important”. I hope that the Minister will update us on the Government’s steps so far, clarify their position, answer frankly any questions from hon. Members and tell us about the action that will be taken to provide a rapid solution to what the Prime Minister has described as a “massively important” problem.

The problem came to a head in May 2013 when Barclays announced that it intended to close the accounts of most of its clients in the money transfer and remittance business. The decision was delayed, probably due in part to a debate in Westminster Hall in July 2013, which was ably led by my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali). She is in the Chamber today, and she has led a brilliant campaign on the matter, supported by other hon. Members in the room.

Although the decision on the closure of accounts was delayed, unfortunately that was of little use to the constituent I mentioned in the 2013 debate, Mr Anwar Ali, whose business, Trust Exchange UK Ltd, was ruined by Barclays’s decision. As I said during that debate, that business was a model of the sort of small businesses that many hon. Members on both sides of the House would like to see in their constituencies. It not only offered a service to constituents who needed to transfer money to relatives overseas, but engaged in such things as charitable work and aid projects, especially in Bangladesh.

[Paul Blomfield (Sheffield Central) (Lab)]

As my hon. Friend knows, Sheffield is fortunate in having one of the largest Somali communities outside London. That community has made strong representations to me about the issue. The specific point is that an inability to transfer money causes not just domestic and individual family distress. A survey of diaspora communities in Sheffield that I carried out showed the important contribution that remittance giving makes in supplementing aid, so the issue also involves international development. Does he agree that that makes it much more important that the Government take action?

[Kevin Brennan]

I thank my hon. Friend for giving me the opportunity to acknowledge everything he said, including the Somali community in Sheffield. His intervention also allows me to remind the Chamber that Cardiff—my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) is also in the room—has one of the oldest Somali communities in Britain, going back to the 19th century. The community plays a hugely important and positive role in the life of our great city. What my hon. Friend the Member for Sheffield Central (Paul Blomfield) said was right, and I shall say more about aid later.

[Kate Green (Stretford and Urmston) (Lab)]

I congratulate my hon. Friend on securing the debate, and I apologise that I will have to leave for a few minutes in the middle of it. Does he agree that for the Ogaden Somalis—around 500 are resident in my community—the ability to remit money back to families at home is particularly important because so many of them are suffering displacement and persecution? There is a particularly strong link with not only our moral but our economic responsibilities to those communities.

[Kevin Brennan]

My hon. Friend is absolutely right, and I am sure that that was why the International Development Secretary acknowledged, at least in words, the importance of the matter. Today we are seeking to poke the Government into quicker action than we have seen so far.

[Mike Gapes (Ilford South) (Lab/Co-op)]

In my constituency I have a large Somali community whose members send remittances to different parts of the world, as do other people. I want to supplement what my hon. Friend the Member for Sheffield Central (Paul Blomfield) said. Remittances do not just add to international development assistance because, globally, they are of greater value. If we cut them off, we will do serious damage to a number of countries and some of the poorest people in the world.

[Kevin Brennan]

If I keep taking interventions, I fear that my comments will become less fresh and novel to listeners because my hon. Friends, with their expertise on this matter, are anticipating many of my points. Nevertheless, I thank my hon. Friend for what he said.

Sadly, following the withdrawal of banking services by Barclays, my constituent, Mr Anwar Ali, had to run down his business severely, and I understand that if he is unable to find a solution to this banking problem, the business may have to close. It is one thing for large banks to refuse to lend to small businesses—we all know about that—but it is another to deny to legitimate, law-abiding small businesses the basic service of a bank account. The banks casually say that they are making a commercial decision, but to small businesses it is a commercial death sentence. Let me remind hon. Members of the importance of such remittances, especially to developing countries.

According to a United Nations Conference on Trade and Development report in 2012, in 48 of the least developed countries, remittance receipts climbed from £3.5 billion in 1990 to more than £27 billion in 2011—that figure might be much higher. In Somalia alone, the authorities said in 2012 that around one third of the country’s GDP—$2 billion—came through small money transfer agencies, and that 40% of people in Somalia depended on remittance flows.

A major multinational bank, which in recent years was heavily fined for wrongdoing, is operating in a market dominated by a small number of players of its kind and has withdrawn, mainly from small businesses, a service vital to their existence and crucial to some of the most vulnerable people in the world. It is difficult to get to the bottom of exactly why that has happened, because it has not made its reasons clear. Are they commercial reasons, as it blithely says, or are they fears about terrorism and money laundering? There is a lack of clarity about the reasons.

Anthony Jenkins, the chief executive officer of Barclays, said that it was stopping offering bank services to such business because they

“don't have the proper checks in place to spot criminal activity and could unwittingly be facilitating money laundering and finance terrorism”.

In a letter to Dahabshiil, which is one of the larger payment firms and is located, I believe, in the constituency of my hon. Friend the Member for Bethnal Green and Bow, Barclays said that the decision was

“not a negative reflection of your anti-money laundering standards, nor a belief that your business has unwittingly been a conduit for financial crime. It is, however, a commercial decision that we have taken due to the risks of the sector”.

Perhaps the Minister can explain—I know he talks to these big banks—what he thinks is behind the fact that every single major UK bank refuses to provide banking services to the sector, effectively financially excluding the firms, without considering each of them on its merits. Does he believe that that is purely commercial coincidence, or is it—[Interruption.] I wonder whether those in the civil service Box would stop talking while I am addressing the Chamber.

Does the Minister believe that that situation is a commercial coincidence, or is it another aspect of the overall lack of competition in the banking sector that the Government are failing to address? What can he tell us about the role of the National Crime Agency in this matter? In effect, the uncompetitive major banks have erected a complete barrier to the financial sector for some of its smallest members. Does the Minister think that is acceptable?

Dahabshiil was able to win an injunction against Barclays in the courts in October, so its account remains open for the time being, at least. Unfortunately, however, many other firms, including the one in my constituency, have not benefited from the development, because their accounts have already been closed by Barclays. Does the Minister believe that Barclays should offer to reopen the accounts that it closed before the court’s decision so that the account holders are able to carry on their business until the case is finally settled? Does he agree that that would be an entirely reasonable thing to do? It would allow businesses such as the one in my constituency to get on with the business that they were doing perfectly legitimately and legally beforehand so that money transfers could take place. Will he call on Barclays to reopen those accounts until the court decision is made? I understand that so far Barclays has refused to reopen those accounts, so I hope that the Minister will condemn that.

I pointed out in the 2013 debate that there seems to be a different set of rules for large banks and financial institutions, such as Barclays and Western Union, which stand to benefit from the situation. It has been proved that Western Union helped to facilitate money laundering in Mexico—it paid a fine to the Arizona state authorities in relation to that—yet it stands to inherit a lot of the business of small firms against which nothing has been proved. In recent years, almost all the large banks and institutions have been found guilty, in one way or another, of financial misdemeanours, and they have sometimes been fined—[Interruption.] I wonder whether I could ask you, Mr Owen, to appeal that those in the civil service Box do not interrupt the debate.

[Albert Owen (in the Chair)]

I am listening intently to the hon. Gentleman, who is making a very interesting contribution. Everybody is very quiet, so any noise that is heard is magnified. I ask that everyone in the room is courteous to the Member who is speaking.

[Kevin Brennan]

It is unfortunate that sound carries, Mr Owen, but it is distracting, so I am grateful for your assistance.

Those large banks and institutions not only have been fined, but have been bailed out by ordinary taxpayers to the tune of billions of pounds to stop them failing as a result of their greed. Their reward for that malfeasance has been a handout from Governments, yet these small businesses, against which much has been insinuated but nothing actually proved, have been squashed by the big banks’ refusal to allow them the facilities that they need to survive, effectively denying them the air that they need to breathe as businesses. That is an intolerable abuse, so the Government should be acting with the utmost urgency to fix it.

So far the Government have taken some steps, especially in relation to Somalia. In September they announced an action group on cross-border remittances, before announcing its terms of reference in December. However, four months after the action group was set up, why—to my knowledge, unless the Minister is going to make an announcement today—has no chair of the group been appointed and why have no meetings taken place? I understand that, as a direct result of today’s debate, a date has finally been set for the group’s first meeting, but the record so far smacks more of inaction than action. Will he tell us today who is to chair the group, and will he confirm when it will meet? We all recognise the danger of terrorism, but why has there not been more focus on helping such remittance businesses to avoid risks, rather than shutting them down when there is no evidence of wrongdoing?

[Sir Tony Baldry (Banbury) (Con)]

When the Secretary of State for International Development announced the setting up of the action group on cross-border remittances, she said, in reply to a written question from the hon. Member for Bethnal Green and Bow (Rushanara Ali), that part of its purpose would be to develop

“a safe corridor pilot to ensure the continued flow of remittances to Somalia through secure, legitimate and accessible channels.”—[Official Report, 27 November 2013; Vol. 571, c. 342W.]

The working group was given a one-year timetable. Does the hon. Member for Cardiff West (Kevin Brennan) agree that it is not unreasonable for the House to expect a complete solution to the problem and that Her Majesty’s Government should have found a way of ensuring that remittances from UK citizens can get to developing countries within, at the very latest, the one-year timetable set out by the Secretary of State?

[Kevin Brennan]

I agree with the right hon. Gentleman that it is important that we get on with it. My point is that, four months after the announcement that the action group would be set up, it has not yet met, and as far as I am aware we do not know who will chair it, unless the Minister can give us more information in his speech.

[John McDonnell (Hayes and Harlington) (Lab)]

I want to reflect the concern on both sides of the House about the lack of urgency on the matter. We expected a great deal more progress than has been achieved so far. The sense of urgency comes from our constituents whose families are dependent on remittances. In some instances, it literally is about people’s security as a family in the long term.

[Kevin Brennan]

My hon. Friend is absolutely right. We need firmer information from the Minister about when he expects that progress will be made, so we look forward to his speech.

For example, will the Minister guarantee that the action group will meet the target date—the deadline—of April 2014 to formulate new official guidance for money services businesses and banks, especially on agreeing how to deal with money laundering and terrorism risks? Does he anticipate that that will make it easier for banks to start providing bank accounts again? Is it his intention that that should happen by April, May, June, the summer, or within the one-year deadline? What estimate has he made of how many money transfer companies have been forced out of business so far, and how many will be forced out of business in the meantime due to the lack of a bank account?

I have paid tribute to my hon. Friend the Member for Bethnal Green and Bow for her leadership on the issue, even though that has not, unfortunately, been able to save the business in my constituency. The Government must get on with finding the solution to the problem. If they do not, many decent, law-abiding small businesses, which are often located in the poorer parts of our country, will be forced out of business by the indifference of the authorities to the actions of the big banks, meaning that the livelihoods and well-being of some of the world’s poorest people in developing countries will be placed in hazard.

09:49

[Sir Peter Bottomley (Worthing West) (Con)]

I apologise for not being here at the beginning of the debate and because a long-standing constituency commitment will prevent me from being here for the end. I shall therefore make a very brief contribution.

First, I hope that we will hear from my hon. Friend the Minister that there are international discussions, because this is not a problem just for Britain and for Barclays. Secondly, we must accept that people will get remittances to their families one way or another. The real question is whether the cost is excessive and whether there is an audit trail. Nearly everything that goes outside the ordinary banking system has a much higher cost and no audit trail. I hope that the Minister will be able to talk today, or will ensure that we hear soon, about an internationally acceptable way in which remittances can be passed to people’s families in their home countries at a reasonable cost and with some kind of audit trail.

09:50

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Owen. First, I pay tribute to my hon. Friend the Member for Cardiff West (Kevin Brennan) for securing the debate and for working with me and other colleagues on this very important subject and the Save Remittance Giving campaign, which had the support of 47 Labour MPs and, later, MPs from other parties. Notably, it has also had the support of nearly 130,000 members of the public. The campaign has been led particularly by the Somali community, but there are others involved, including communities throughout the country who have a direct interest in remittance giving; many non-governmental organisations, such as Oxfam; and constituents whose origins are not in developing countries but who understand how important it is that we support remittance giving.

Remittance giving plays a vital role in reinforcing and complementing our international aid efforts to developing countries such as Somalia, and particularly areas such as Somaliland, which provide a beacon of hope for that country, showing how remittances, along with development aid and a transition to peace and stability, are vital. If we need an example of a country that could make great strides through remittance contributions, that is the country to look at. I will focus on Somaliland and Somalia today, because of the unique situation that there is no banking system in that country.

There are many parallels. The Syria conference starts today, and when we debate how countries can move towards a peace settlement, the question of countries in conflict or coming out of conflict without banking systems becomes ever more important. Somalia and Somaliland are an example of the importance of banking and remittance that, if we can find a solution to the current problem, will pave the way for other countries coming out of conflict that do not have banking systems. In such circumstances, people need to be able to remit legally—through legitimate means—in a proper banking process.

[Sir Tony Baldry]

I think the whole House supports the work that the hon. Lady and others have been doing in campaigning on remittances. She is perfectly right to draw the attention of the House to the fact that Somaliland and Somalia have no banking system—in Hargeisa, one sees people literally pushing wheelbarrows around with Somali shillings. Does she agree that one thing that the Department for International Development and all of us should be trying to do is help both Somalia and Somaliland to develop a genuine banking system? There needs to be a clearing banking system in both Mogadishu and Hargeisa if those countries are to have any sustainable development.

[Rushanara Ali]

I could not agree more. There is a very important question for the Minister about the role that our finance Ministry, working with international Finance Ministers and with our International Development Secretary, can play in taking the lead on supporting countries that are making the transition, so that they can have an effective banking system. That has to happen simultaneously with efforts to find a solution on the issue of remittance. It is critical if we want to ensure that our security and our interests are also served.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Lady has referred several times to finding a solution. Does she agree with me and with an Oxfam spokesman who has said that what is really required is a long-term, sustainable fix to ensure that this problem does not occur?

[Rushanara Ali]

Yes, of course we need a long-term solution as well as an interim solution. My hon. Friend the Member for Cardiff West set out brilliantly the background—how we got here. Barclays made its decision, following on from decisions that other banks had made, which has led to virtually no opportunities for money transfer companies to use banking facilities to carry out their business, and as a result, many have gone out of business. At this rate, there will not be many left if we do not get our act together and find an interim solution, as well as a long-term solution that involves coming up with an international framework.

Britain has led on these issues in the past and I believe that it can do so again. That is my appeal today to the Minister—that he will work with the Secretary of State for International Development and the Chancellor of the Exchequer and put genuine effort in during the short window of time that we have managed to gain, thanks to the injunction achieved by the company based in my constituency, Dahabshiil, led by Mr Abdirashid Duale. As a result of that, although other companies have closed, it is still going. It is virtually the last one standing, but it is also the biggest company that supports remittance to developing countries.

We have until October, and if a solution—an interim solution as well as a long-term one—is not found, we may see devastation in Somalia, because there are almost no other routes to get money in apart from physically carrying cash, which I am sure no one wants people to be doing, because of the dangers of criminality, terrorism, extremism and many other things. We cannot have a situation in which people must physically transport cash and place themselves at risk of being criminalised, not to mention being the target of criminals, as they try to get money to their communities because of the desperate situation.

Let me remind hon. Members of the context particularly of Somalia, but also of many other countries—we have seen this in Pakistan, Bangladesh and many other countries. At times of crisis, people need to get money into remote places, so even countries with a banking system struggle to enable people to get support—to get remittances—in. That is where money transfer companies play a vital role. They have intimate—close—networks and trusted relationships in remote villages around the world, whereby people can get money to those who cannot travel easily because the infrastructure is not good enough in those countries or because they live in remote places.

Money transfer companies are also vital in times of disaster, as we saw during the humanitarian disaster in east Africa, which affected Somalia, the floods in Pakistan and Bangladesh, the cyclones, and disasters in many other countries. We need to ensure that there are ways in which remittances can be given, so that the pressure on humanitarian assistance does not increase further, which undoubtedly it would do if remittances were prevented from getting to people quickly and safely. Global remittance flows are greater in value than all the international aid budgets put together. We need safe and legal—legitimate—mechanisms whereby people can get help to their families.

In the previous debate, the Minister himself said that his elderly family members had received remittances in the past and continued to do so. I have a similar experience, because my family do the same. It is a critical way in which people support each other. The British Muslim community donate millions of pounds in zakat, which also takes the form of remittances. All those contributions build a vital lifeline for people in developing countries who might not qualify for development aid, but who none the less receive support for education, health care and other costs that enables them to live a decent life.

Remittances contribute greatly to economic development, as I have seen in my constituency, where communities have come together to raise money. I attended a recent event at which some 500 people from the British Somali community got together to raise money. It was organised by some of my constituents who are here today: Ayan Mahamoud, Abdi Rashid Gulaid and many others. They raised nearly £1 million in one evening by calling on the community to act to rebuild their country, to rebuild roads and to rebuild infrastructure.

That is a case in point of communities helping themselves to rebuild their country, rather than depending on aid. We have heard a lot from Ministers from the Department for International Development about the need for self-reliance. I passionately believe that that is what people want in their own countries, and the best way to encourage that is to build a system of remittance through which people can send money legitimately to help rebuild their countries and lift the inhabitants out of poverty. Such a system can work alongside the important international aid effort to which we contribute.

My hon. Friend the Member for Cardiff West set out the background and described the inconsistencies inherent in the decision by Barclays. The Government must act to provide a medium-term and a long-term solution to this serious problem. The fact that 130,000 people got behind the campaign and tens of thousands more signed petitions—teenage Somali girls even went around markets and visited people’s houses to get them to sign up to the campaign—shows how much people believe this matters because it affects their lives. People talk about communities feeling disfranchised, but that is an example of a community that led the way because the bank’s decision affected their families and friends so directly.

If we can find a solution to support a country and a community that historically have felt let down by politics—international politics as well as our politics—we will show that we care passionately, as the Prime Minister has said, about countries such as Somalia and support their transition towards peace, stability and economic development. The best way to do that is by supporting legitimate ways to help people help themselves and their families through remittance.

The most urgent of the challenges we face is time. Thanks to the campaign, the support of Members from across the House and the engagement—with some pressure—of Ministers in the Treasury and the Department for International Development, we now have a framework. As my hon. Friend the Member for Cardiff West said, the action group on cross-border remittances needs urgently to meet and identify a chair. I hope that the Minister will set out in detail what will happen. We have a window of opportunity that nobody would have believed possible last summer, thanks to the work of the campaign, MPs and the media, and not least the support of double Olympic champion Mo Farah. His foundation, which uses Dahabshiil, has been directly affected because it will find it difficult to send money back to Africa. He said:

“I just cannot see how cutting the remittance lifeline squares with British foreign policy in the Horn of Africa. It will undo all the good work the government has achieved in the region”.

I echo his comments.

The Government have done good work in championing the cause of Somalia and Somaliland, and the Opposition have supported that effort through the Somalia conference. Whether a solution to the problem is found in the coming months—both an interim solution, to ensure that people can continue to remit to countries such as Somalia and places such as Somaliland, and a long-term solution—will make a critical difference to whether Somalia can avoid further conflict and devastation.

I hope that the Minister will push for the action group to come up with a solution that addresses the decision made by Barclays and other banks. Such banks need to feel that the regulatory framework allows them to provide banking facilities to money transfer companies without fear of big fines. There must be consistency and transparency in the decisions made to remove banking facilities from certain companies. The Government must learn lessons from the past, and look at what was done in cases where concerns were raised about money laundering.

Most importantly, as several experts have highlighted, the decision not to provide legitimate banking facilities to money transfer companies will simply drive the whole industry underground. We will return to the bad old days of money flows going into countries without regulation and without their Governments knowing how much money is going in. Some of that money will absolutely end up in the wrong hands, which is dangerous for those countries and for our security. That issue must be confronted. We need a solution that addresses issues of security and counter-terrorism. The withdrawal of legitimate banking facilities will open the way for such forces and present bigger dangers for us, particularly in countries such as Somalia and the surrounding region where there are major concerns about extremism and terrorism.

[Simon Wright (Norwich South) (LD)]

Does the hon. Lady think that as part of the solution, more might be done to promote mobile money transfers? According to a survey by the Gates Foundation, the World Bank and Gallup, more than one in three adults already use mobile money in Somalia. Might that be an important part of the solution?

[Rushanara Ali]

There is no question but that mobile technology can help, and many have cited M-Pesa as a potential example. The reality is that such technology does not go far enough, however. Not everyone can afford a mobile phone. In countries where mobile phones are cheap and there are banking systems and proper infrastructure, it is much easier to create the possibility of mobile phone transfer, but Somalia is a long way from that and, in the short to medium term, such a solution would not be adequate. In the long term, it might be a complementary facility, and I know that the action group will want to look into that.

However, mobile transfer is no substitute, and anyone who thinks that it might be is, frankly, living on another planet. Somalia has no infrastructure, and it does not have the required banking system. There are major challenges to using mobile technology to get remittances into the country; if that were not true, we would not be having this debate.

[Kevin Brennan]

Further to that point, is my hon. Friend aware that the survey that made those claims about mobile technology was based on 1,000 people in Hargeisa? That is hardly representative of Somalia as a whole.

[Rushanara Ali]

My hon. Friend is right. The integrity of that survey has been questioned, particularly by the Somali community in Britain. The remitters felt that it did not address the seriousness of the issue and was a superficial exercise. Frankly, going only into Hargeisa is not good enough. The trusted networks that organisations such as Dahabshiil and other money transfer companies use to reach people in remote places are critical to support across the country. That is the major challenge that we must address.

Some in my constituency, and elsewhere, have pointed out that if they want to get remittance in without the proper facility, which has so far been provided by Barclays, they will have to do so via Kenya. Family members would have to leave and go to Kenya, or to Hargeisa. If they live at the other side of the country, they would have to travel many hundreds of miles to get there. It could cost hundreds of pounds to get somewhere to access the remittance.

Imagine doing such a thing even in our country, never mind in a country without roads, safety, electricity, air transport and the necessary support. Add in the cost and it makes it pointless to get the remittance that family members might be sending. Remittance amounts might be small, but they are significant in providing support. The cost of retrieving the money, however, is too high if there is no direct route via money transfer companies that can get to remote villages. If there is no proper facility, the cost of people travelling to the capital, or to another country, is too high. That is not a solution.

I know that my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) wants to speak, so I will start to conclude. I also want to hear from the Minister, and would like him to have as much time as possible to highlight the work he is doing on the issue. I know that he is working with colleagues across Departments on a solution to the problem. I hope he will have some good news.

Where do we go from here? We need strong international leadership from the UK Government. We have done that historically, so there is no reason why our Chancellor and the Secretary of State for International Development cannot lead the way. I welcome the fact that the working group involves the World Bank. If it was not for the campaign, and the pressure from the community and Members from all parties, that might not have happened. I am grateful to the Minister for rising to the challenge and recognising the significance of the issue, as well as the potential benefit for the UK if we lead the way to a solution.

There are economic benefits for us. If we can build a remittance framework to support economic development in countries in Africa, we can do more trade with such places in future. We need to be ahead of the curve. Other countries, such as China or India, are represented in Africa, while our banks are pulling people out, including the diaspora communities with strong links that could do more for our trading relationships in Africa. Remittance is the first route in for our businesses. I have seen that in countries such as India, Pakistan, Bangladesh and many others. There are potentially huge economic benefits if we create the climate within which the diaspora and minority communities can remit, trade and pave the way for our companies to follow, as has been the case in other countries.

There are longer-term benefits for the Treasury, and not only in engaging with the issue directly, coming up with an international solution and paving the way for our international partners. There are also benefits because for any country coming out of conflict without a proper banking system, or with one that has been devastated by conflict, the risks of money laundering and the financing of terrorism will be reduced if the security dimension is addressed and there are proper facilities. That is why Governments must step up. Companies such as Barclays, HSBC and others have said that they will be fined. Companies will have their motives, reasons and deep concerns about being clobbered with a big fine by US regulators. I have sympathy for that, but at that point the Government and the international community must step in to deal with the market failure. That is where I believe that our Government can play a vital role.

I am grateful to the Minister and the Chancellor for letting me know, informally, that they have had discussions on the issue. I would like to see more formal discussions at the G20 and other international summits where the issues of financial exclusion and remittance can be raised. I know that that has been done informally, but what plans does the Minister have to raise such issues more formally in the relevant forthcoming summits? On the role of other agencies, will the Minister explain how his Department is working with the Financial Conduct Authority, banks and other relevant agencies to come up with a solution? What role could the publicly owned banks play? Could we work with them to come up with an interim solution, as well as a long-term one?

I hope that the Minister will answer the questions that have already been asked, but I would also be grateful if he set out his plans for an interim solution, as well as a long-term one, before October. The time line has been set: if a negative decision is reached in October— the deadline set by the courts for Dahabshiil, the biggest provider to Somalia and Somaliland in my constituency—the vital remittance lifeline for Somalia will be removed. That is dangerous. Will the Minister be able to press on with a solution before then? If there is no long-term solution in that time frame, there must be an interim solution so that, beyond October, where there is a time lag, Dahabshiil does not face closure once again. That would be devastating to Somalia and Somaliland.

I thank colleagues from across the House for their contributions. I also thank the Save Remittance Giving campaign, of which I am very proud to be the chair, and the more than 100,000 people who supported it. I know that they will continue to campaign and to keep pressure on the Government. I hope that they continue to do so and work with their MPs, whichever party they belong to, to come up with a solution that will protect such a vital lifeline to millions of people in developing countries, especially Somalia and Somaliland.

[Several hon. Members]

rose—

[Albert Owen (in the Chair)]

Order. I remind Members that I will be calling the Opposition Front-Bench spokesperson at 10.40 am.

10:18

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

It is always a pleasure to serve under your chairmanship, Mr Owen. I will attempt to be as brief as I can because I would like to hear the Minister’s views, as well as those of my Front-Bench colleague, my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson).

I pay tribute to my hon. Friend and neighbour, the Member for Cardiff West (Kevin Brennan), for securing today’s debate, our second on this important issue. It is important that we have been able to debate it again so that we can get some answers and see what progress has been made. I pay tribute to my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) and, indeed, Members from across the House. It was good to see the right hon. Member for Banbury (Sir Tony Baldry) in the Chamber. I have worked with him in the all-party group on Somaliland and Somalia, and I know that he shares many of the concerns expressed by the Opposition.

I want to emphasise the strength of feeling out there in the local community. Just before the Christmas recess, I attended a packed meeting in Butetown in my constituency in Cardiff South and Penarth. It was filled with people predominantly from the Somali community—young and old, recent migrants to this country and people whose family had been here for generations. As my hon. Friend the Member for Cardiff West mentioned, Cardiff has a strong and long-standing Somali community, as well as Yemeni, Bengali and Indian communities. This issue reaches across people of many different backgrounds, countries and histories. That is a hallmark of the campaign and emphasises the strength of feeling.

One of the most respected imams in the local community, who does not normally attend political meetings, was there, which again emphasises the strength of feeling. My local councillor and colleague, Ali Ahmed, and many other members of the local community attended. They highlighted the issues raised in the debate today: the impact on development, jobs and prospects in countries such as Somaliland and Somalia and elsewhere, and also the impact on jobs and opportunities for small businesses here in the UK—my hon. Friend mentioned a specific case in his constituency. There were also concerns about zakat and the ability to fulfil the responsibilities that many in the Islamic community here in the UK perform so generously and so well. There were concerns about security and about how people could be forced underground if we do not find a solution. As my hon. Friend said, we could find ourselves in a far worse situation than that which Barclays appears to be suggesting has forced it into making its decision.

I pay tribute to the huge efforts of the campaign and the hundreds of thousands of people who have signed the petition and campaigned up and down the country. I thank the Government—there has been some effort and some meetings. My concern is the urgency, the detail and the process going forward, and I want assurances that the concerns raised by the campaign and by the individuals affected are being addressed.

It is important to emphasise the scale of the impact. The UK remits $23 billion annually to third countries. For Somaliland, the figure is estimated at £500 million annually. According to one estimate, Somalia receives 50% of its annual gross national income through remittances, and Oxfam estimates that 40% of the Somali population—some 3.8 million people—depend on remittances. We have heard how remittance figures often dwarf international aid flows, and I think we would see a similar situation if we looked at the detailed statistics for many of the other countries affected. We have heard about the implications for development and economic prospects, and for security and human rights. That is why we need to address the issue with urgency and care.

I have specific questions for the Minister, and I hope he can give some assurances. First, focusing on the way in which Government Departments work together on this issue, we have seen statements by the Treasury, DFID and others, but can the Minister assure us that the Treasury is playing a key co-ordinating role, given the nature of its relationships with the financial sector and the ability to achieve change on a global financial scale? Have the Foreign Office and other bodies for which the Foreign Office has responsibility been included, and have proper assessments been made? I am sure the Minister will not be able to share details, but can he assure us that, for example, the security services have assessed the implications? We have already seen worrying coverage in recent weeks about the activities of al-Shabaab in the horn of Africa, and we saw the terrible events at the mall in Kenya. Can the Minister assure us that full assessments are being made of the implications of not finding a solution to the problem?

I also want assurances on who is attending meetings. Campaigners have raised concerns that, although a couple of representatives from DFID and perhaps the Treasury have been at the meetings, there has not been cross-governmental participation, so I would like assurances that when discussions occur—internally and externally—there is full participation by all Departments, not just the Treasury and DFID, because the matter affects the Foreign Office, the Home Office and many others.

I want to know about discussions at the international level. Like my hon. Friend the Member for Bethnal Green and Bow, I want to know what discussions will take place at events such as the G20. The problem is being instigated largely by decisions taken by United States regulators. Until we can address the legitimate concerns that the regulators are raising, we will not be able to come to a long-term global solution. Like my hon. Friend, I want to know about the interim solution and when the action group is going to meet.

Can the Minister tell us about the discussions he has had recently with DFID about the clear time frame and action plan for the safe corridor? There is a lot of expectation and hope around that, but also a lot of unanswered questions that members of the community and campaigners have asked, so can the Minister reassure us?

There is a wider issue of engagement with the many stakeholders out there in the community, particularly in the diaspora community, and how feedback is being given at different stages of the process. Some members of the community rightly feel that they have not had the feedback and assurances that things are moving forward at the speed and with the seriousness that we would all like. Is the Minister able to share—perhaps in the Library—some of the reports into the wider implications that have been undertaken internally by the Government? There are concerns that some of the reports have not been made public, which adds to a sense of doubt about whether anything is happening or whether solutions will be found.

Finally, what is the Minister’s assessment of the legal situation and the injunction that has been granted? I appreciate that the Government cannot intervene in the judicial process, but it is a key factor in terms of the timing and that window of opportunity in which we have to find a solution. What is his assessment of what has been going on in that process? To what time scales are we working? Will we get into a situation in which we arrive at that process—or an earlier legal process if Barclays continues to challenge the injunction—and suddenly find that Dahabshiil or other money transfer operators have to close down, and the millions of people who to rely on such services are left high and dry?

I am reassured by a letter that was sent to the right hon. Member for Banbury from the Prime Minister. The letter states:

“Let me start by assuring you that I completely understand the importance of remittances and the crucial role they play...supporting economic growth while providing a vital safety net...we can work with them to come up with alternative solutions so that people in Somalia do not lose out.”

That is a welcome commitment in writing from the Prime Minister. I hope that the Minister can give us assurances that that commitment, and the commitment of his colleague in DFID, will be met.

10:27

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

We have had an interesting debate. I thank my hon. Friend the Member for Cardiff West (Kevin Brennan) for securing the debate. I thank all those who have participated, particularly my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali), who gave a comprehensive speech, and my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty).

I will be brief, because it is important that the Minister has the opportunity to outline fully the work that has been done since the previous debate, and I am sure my hon. Friends will want to intervene and ask him further questions. It is important to put on the record how much of an interest people have taken in this topic since the debate in July. Having read the transcripts of that debate and looked closely at the parliamentary questions and the responses since then, I suspect it is more with sorrow than with anger that people have called for this additional debate today, because, to be fair, there seemed to be a sense of hope after the previous debate that the Minister had taken on board the importance of the issue. During that debate he gave a personal account of how his own family had been affected and how he wanted to see progress made.

I am trying to be fair. All of us know that sometimes when things go into the machinery of Government, that machinery can grind somewhat more slowly than even Ministers would like. Hopefully, however, the continued voicing of concern even by the Prime Minister, the Secretary of State for International Development and so on, has shown the urgent need to tackle the problem, notwithstanding some of the other legal reasons for urgent action.

In his opening contribution, my hon. Friend the Member for Cardiff West outlined how important this issue is, not only for individuals and particular businesses but for the economy, both here and in Somalia and Somaliland. There is also the relationship between the moral issues and the economic issues, if you like: people are trying to provide assistance to individual families and to support businesses, and if that help is not provided there are dangers for the whole economy. We also heard some of the history, going back to the previous debate about the decision that Barclays took at that time and the pressure from campaigners to make Barclays change that decision.

There is an understanding on all sides that we want to do everything we can to ensure that when money is remitted or transferred it is done so legally and safely. I doubt that anyone in any part of the House does not want tough action to be taken on money laundering or any other illegality, or in situations where people are perhaps being unduly and inappropriately pressured over money. However, the point was well made in this debate, and indeed in the previous debate, that some of the smaller organisations and institutions that have been carrying out money transfers have not been found guilty of any misdemeanours or wrongdoing, unlike—as was fairly pointed out—some of our larger financial institutions, which have been involved in practices over the years that have now been brought into disrepute and, in some instances, resulted in serious fines. There are still serious questions to be asked about why there is a problem making progress on this issue. I would be interested to hear from the Minister what work has gone on in relation to the National Crime Agency and to ensure that those aspects are not inappropriately becoming barriers to progress.

I hope that the Minister can also answer the important questions put by my hon. Friends. Some months on from the original debate, during which the commitment was made to establish a working group to take work forward, I find it surprising that my hon. Friends still have to ask who is chairing that group. Has the group met? It has not met. There is now a date for a meeting, but when will it report? Will there be an interim report? What progress has been made? What discussions have taken place in an international context with, for example, the US Treasury and State Department? What discussions have taken place more widely? Are there more reports commissioned by the Government that have not been made public? What is the status of the promised discussions with the British Bankers Association? What can the Government say at this stage, notwithstanding the legal constraints on discussion of the particular issue with Barclays and the possibility of accounts being reopened?

I want the Minister to respond to those questions, although he already has a very long list of questions from my hon. Friends. One important question is about the role of the Financial Conduct Authority. Can he say a bit more about that role this morning?

Having given commitments in the previous debate, and because he obviously understands this subject from a personal perspective, I am sure that the Minister wants not only to listen today, so that he can give answers to the questions that have been put, but to ensure that a degree of urgency is injected into wherever it is in the system that the barriers to action are found. If that does not happen and if we do not have a system that is properly set up and regulated, the danger is that remittances will take place anyway, that the people involved will not be safe, and that there will be further problems down the line.

[Kevin Brennan]

My hon. Friend is talking about action by Government and Government agencies, and she mentioned the FCA. I understand from the UK Money Transmitters Association that the FCA has started contacting authorised payment institutions to confirm whether or not they have bank accounts that are suitable for safeguarding client funds, as required by the Payment Services Regulations 2009. So action is being taken, but it is action that will result in the closure of these businesses unless a solution is found.

[Cathy Jamieson]

Indeed, and I am grateful to both Oxfam, which has provided me with a briefing, and the UKMTA, which has also provided me with that information. Of course, one of the dangers is that when we begin to investigate these matters, people start to find that there are problems and rather than finding solutions to those problems, the response is, “Well, we will just make sure that it is closed down and doesn’t happen.”

[Jim Shannon (Strangford) (DUP)]

I apologise for not being here earlier in the debate; I wished to be here, but I had other commitments. The hon. Lady has outlined her concerns, which this House shares, about the £15 billion of remittances that happen each year. Does she agree that it is not only a matter of making the right, legitimate channels available for these transactions to take place but one of restoring confidence in the system? If there is no confidence in the system, people will feel vulnerable, whatever transactions take place.

[Cathy Jamieson]

The hon. Gentleman makes a valuable point. At a point in time where even some of the larger financial institutions have seen confidence erode, it is of course important that people can have confidence in the system, every step of the way, and that that confidence is rebuilt.

I would like the Minister to answer the questions that have been put to him, particularly the very pertinent questions about what specific action has been taken since July. Also, will he now give a commitment that he will personally press for and oversee some of the work, and drive it forward across the different Departments, to ensure that there is no more dragging of heels or things getting lost between the different parts of Government, simply because of the Departments’ inertia? I am sure that he will want to take the opportunity to respond to those points.

10:36

[The Financial Secretary to the Treasury (Sajid Javid)]

It is always a pleasure to serve under your chairmanship, Mr Owen.

I congratulate the hon. Member for Cardiff West (Kevin Brennan) on securing this important debate. I listened carefully to him and to all other hon. Members who spoke. They set out a well-argued case and made their points well.

Remittances play a vital role in supporting the people and economies of countries throughout the world. As we have heard, they are a financial lifeline for the families of Somalis, Pakistanis, Poles and other diaspora groups that are living here in the UK. A healthy and functioning remittance sector is crucial for thousands of our constituents up and down the country. We heard from the hon. Member for Bethnal Green and Bow (Rushanara Ali) about her personal experience, and she referred to comments that I have made about my own personal experience. My parents came to this country from Pakistan. They have many loved ones still living there who rely on remittances. I have seen what it is like if sometimes those remittances are missed or not received—it can make a real difference to day-to-day living standards—so I am grateful to Members who have shared personal stories, or told stories on behalf of their constituents, and their contributions show just how important a topic this is.

The UK is a global leader in the fight against money laundering and terrorist financing. Our banks and regulators have a vital responsibility to ensure that there is not inadvertent financing of criminal activities that could pose real risks to British citizens, as well as to national and international security. The Government are proud of our international role on this issue—we are setting the agenda. The Prime Minister received wide international recognition for his role in driving forward that agenda during our presidency of the G8 last year.

The right approach to tackling money laundering and terrorist financing should support a healthy and growing money transfer sector, rather than stifling legitimate money flows or financially excluding honest customers. I assure hon. Members again that the Government are committed to achieving that approach, and I shall set out the steps that we are continuing to take as we work closely with the private sector to facilitate a sustainable, market-based solution to what I accept is a real challenge.

The context for the debate is the trend in recent years for banks in many countries to withdraw accounts from money service businesses in response to perceived risks, and to reputational and regulatory concerns. That is important, because access to banking facilities makes remittances quick and transparent, and keeps costs low. We need to be clear that neither the Government nor regulators can compel banks to offer an account to any customer. Such a decision taken by a bank is private and commercial, and in accordance with their risk appetite and compliance with legal and regulatory requirements. The Government cannot intervene in banks’ day-to-day decisions. I was asked about the publicly owned banks in the UK, and the same applies to them: the Government cannot intervene in their commercial decisions or prevent—

[Rushanara Ali]

The question is about not the Government forcing banks to act in a certain way, but whether discussions have taken place to encourage banks to look at a solution so that they can play an active role. In the session that the Minister hosted last year, the chief executive of one bank was receptive to such dialogue. It is about working with them to find out whether there is a way forward, rather than telling them what to do. Some more enlightened individuals—board members—in the banking sector are worried about the impact of this situation and the damage it does to their banks’ reputations, and they are keen to explore this issue.

[Sajid Javid]

The hon. Lady makes a good point. Banks should be concerned about the reputational impact that could arise as a result of their decisions. I confirm that the Treasury, the British Bankers Association and other representatives of the banking industry have discussed the issue. We are engaged with all banks, including state-owned banks. I stress that what a bank does, or does not do, is ultimately a commercial decision for it to take.

[Stephen Doughty]

I say gently that the idea that the Government do not get involved in directly suggesting what banks do and do not offer is a little bit away from the point. For example, the Government work closely with banks, through Help to Buy and other schemes, on what commercial products they offer and how they provide them to serve the public. I wonder, perhaps philosophically, why this matter is being treated slightly differently.

[Sajid Javid]

The hon. Gentleman will know that the state-owned banks came about by accident rather than design, and the Government’s overriding purpose now is to return those banks to the private sector, with the best interests of shareholders paramount. With regard to Government involvement in the banking sector, he mentioned the Help to Buy scheme. That is a good example of a scheme that is designed to work through incentives. No bank is compelled to take part in that scheme or similar ones, such as the funding for lending scheme, which work through incentives. It is important to consider what the Government can do to make it easier for banks to stay in the MSB sector or to get more active in it. That is the right area to explore to help our constituents.

The Government cannot prevent UK banks from facing supervisory and enforcement action from other jurisdictions. Hon. Members know that this is not just about rules in the UK, because European Union rules, and especially rules in the US, affect many money transfer businesses, because most transfers typically have to be converted into US dollars and therefore touch US soil. What the US authorities think is therefore important.

We are committed to doing our utmost to ensure that remittances continue to flow through secure, legitimate channels. The market is adapting, and remittances are continuing to flow into and out of the UK. Particular concerns have been raised regarding Somalia, as we have heard today. That market, too, is adapting and remittance channels remain open. The supervisors and the Government have been monitoring the situation carefully. We know that all MSBs operating in the Somali corridor prior to the decision by Barclays continue to do so, with a number still having bank accounts. Although individual MSBs may be finding trading conditions more difficult, remitters can still service a wide range of customers in the UK and different areas in Somalia. Additionally, many MSBs across a range of corridors are becoming agents of other MSBs, and discussions have been held with various MSB communities on using cash couriers in a manner that is secure and compliant with legal requirements for the cross-border movement of cash.

We must ensure that our constituents are aware of the options available to help them to continue to make remittances. Since the previous debate on the matter in this Chamber, the Government have engaged directly with the Somali community on these options.

Since the previous time I addressed hon. Members on this issue, I have made a written ministerial statement setting out the cross-government effort to find solutions, which included an action plan to secure the continued flow of remittances. The plan includes steps to improve trust in the UK remittance market by the formal banking sector, for example, through building the capacity of money service businesses and providing guidance on the banking of such businesses. It also outlined the creation of an independent action group on cross-border remittances. Through this group, officials from across the Government are working closely with regulators and the private sector to facilitate a sustainable market-based solution. The first full meeting of the group is scheduled to take place next Friday—31 January. I am pleased to announce today that Sir Brian Pomeroy will chair the group. Sir Brian has extensive experience in this field, as the founding chairman of the Payments Council and the previous chair of the Treasury’s financial inclusion taskforce, and through his work with the Alliance for Financial Inclusion.

[John McDonnell]

Fauzia Adan, a former constituent of mine, is now Deputy Prime Minister and Foreign Affairs Minister of Somalia. I am not sure whether there has been full dialogue with the Somalia Government regarding their representation on this group. Has a representative been nominated?

[Sajid Javid]

I cannot tell the hon. Gentleman specifically whether a representative was nominated or if there will be one in the group, but I can certainly look into that and get back to him. I can confirm that we are working with the Somalia Government, through the Foreign and Commonwealth Office, on this issue overall.

The Somalia-focused working group may be of particular interest to many hon. Members in the Chamber. The group has been tasked with developing a safer corridor pilot to ensure secure remittance channels to Somalia. The group will work with the World Bank, which will provide technical expertise, and the pilot will aim to improve the security, transparency and oversight of this existing remittance channel. The Department for International Development has held consultations to identify appropriate representatives for the working group on the safe corridor. International partners, including the World Bank, the G20 and the international strategic alliance on law enforcement, are also supporting this work.

The group working on the pilot has agreed its final terms of reference, through consultation with stakeholders, and these will be presented to the action group next week. The Somalia-focused group, working with its partners, including the World Bank and others, believes that there is a one-year implementation for the pilot project.

Before I conclude, I want to make sure that I have answered questions raised by hon. Members, if I have not answered them already. The hon. Member for Cardiff West asked about international engagement. I hope that I have given him some insight into that, regarding our working with the G20, the World Bank and other international partners. We are also working through the EU. The hon. Gentleman knows that a payment services directive exists, but a second payment services directive is being negotiated with EU partners. We have taken a strong interest in that to ensure that whatever comes out of it does not make this situation any more difficult, but helps to improve it by encouraging the development of rules to deal with money laundering and our other natural concerns that are proportionate and do not make the situation difficult for banks throughout the EU. We have to keep in mind that Britain has, I think, more money service businesses than any other European country, so that is another important aspect of our international engagement.

Several hon. Members asked how well Government co-ordination is working. We have a steering group at Government level, of which the Treasury is part, which meets every single week. As well as the Treasury, the group involves the Cabinet Office, the Foreign and Commonwealth Office, the National Crime Agency, which provides information from our intelligence agencies that we think might help, Her Majesty’s Revenue and Customs, the Financial Conduct Authority and the Department for International Development. The Treasury is a core part of that group, which has proved important in ensuring that we stay on top of the issue and treat it with the urgency that it deserves.

[Rushanara Ali]

I thank the Minister for his answers, but I have a couple of further questions. First, are there likely to be any impact assessments on cash couriers? Will the group’s terms of reference include what it would mean if cash couriers were going into those countries? What should Somali and other remitters expect? Secondly, will the terms of reference be published? Will there be opportunities for people in the community and the various sectors, and for the NGO community and Opposition Members, to feed in their suggestions?

[Sajid Javid]

First, we believe that cash couriers, if structured properly, can play a sensible and legitimate role in expanding provision for MSBs. That can work if it is done in a certain way. The action group is working to produce more guidance on how we think that can work, with the aim of making the banks more comfortable. That is why it is important to discuss the matter around the table with regulators and NGOs, which are also part of the action group. That is important not just in the context of cash couriers, but more generally.

My understanding is that the terms of reference will be published, but I will look into that further and get back to the hon. Lady with a more specific answer. My only slight hesitation is that some aspects of the discussion will be confidential and sensitive, especially those relating to money laundering and the financing of terrorists. I hope that she understands that some information will not be put in the public domain because it would not be practical or sensible to do so. Although I am keen to ensure an ongoing flow of information from the action group so that our constituents may stay updated, I do not suggest that the action group will share all the information that is put before it, or all the work that is going on at a Government level.

[Kevin Brennan]

Although the Minister is not able to order anyone to do anything, I asked him whether he agreed that Barclays ought to consider reopening the bank accounts of businesses such as the one in my constituency that were closed following our debate in July 2013, so that while the court case is being considered, those businesses may get on with the business that they have carried out legally, lawfully and without problem for many years? It would be helpful if the Minister were able to say that he feels that Barclays ought at least to consider doing that, even though I completely accept that he is not in a position to order it to do so.

[Sajid Javid]

I thank the hon. Gentleman for reminding me of his question. I understand why he raises that matter, and there are two parts to my answer. First, there is a legal dispute, and I do not think it is sensible for any Minister to give an opinion on any matter that is before our courts, which would not be helpful to either party in the dispute. Secondly—this links to my earlier point—Barclays has to make its own decisions. Barclays is a commercial organisation. It has to assess the risks of doing business as well as, as the hon. Member for Bethnal Green and Bow pointed out, the potential impact of its commercial decisions on its own reputation. I will ensure that Barclays receives the report of our proceedings so that it may have an opportunity to reflect on the words of not just the hon. Gentleman, but all hon. Members who have participated in the debate.

[Stephen Doughty]

With your indulgence, Mr Owen, I have three brief points for the Minister to respond to. First, on the time scales and the window of opportunity that we have, will he assure us that there will be key milestones by which certain aspects of the process will have been concluded? Secondly, will the action group report back to the wider community that has an interest after the meeting on 31 January, because one concern is that there has not necessarily been as much feedback and information sharing as possible with the community? Finally, at what level is the weekly group meeting? Is it at the level of directors, heads of team or Ministers? Who is involved in that group?

[Sajid Javid]

First, we all share the sense of urgency on the time scales, which is apparent from all hon. Members who have spoken today and from the Prime Minister’s communication that the hon. Gentleman read out. Naturally, it is always helpful to set targets—I referred to the target that the Somali focus group pilot would be up and running within a year—but we also have to respect that there is no advantage in setting an artificial target and saying that something should be done in six months or a year. This complex issue requires a degree of international involvement and co-ordination, so the most important thing is to ensure that we do the work urgently, but in a way that brings a long-lasting solution. While I share his sense of urgency, I hope that he respects that answer.

In answer to the second question, we will share as much information as possible with all members of the public, although of course the matter is of particular interest to certain communities in the UK. I have had meetings, for example, with representatives of the Somali community, as have a number of officials in the Treasury, DFID, the FCO and other Departments, and we will continue to have those meetings and to share as much information as possible.

Broadly speaking, the weekly meetings involve officials from all Departments, but the hon. Gentleman’s question was more specifically about the level of those officials, and I will have to find that out because I am not sure whether it is always the same officials involved and always people at the same level. Clearly there will be some commonality when the meetings take place, but I can find out more detail and share it with him.

[Kevin Brennan]

I shall intervene to allow the Minister to receive his in-flight refuelling, because we would like to know what it says.

[Sajid Javid]

I have just had a moment of inspiration, so I can share with hon. Members that the weekly meetings are between the heads of the teams in each Department, which will hopefully reassure the hon. Member for Cardiff South and Penarth (Stephen Doughty).

I hope it is clear that the Government share the concern of all hon. Members who have spoken today, and I speak from my personal perspective of understanding the importance of the remittance sector, as well as in my role as Financial Secretary. We will stay on top of the issue, engage and share as much information as we can. I congratulate the hon. Member for Cardiff West on instigating the debate, which has been a welcome opportunity for us all to share more information.

Fixed Odds Betting Terminals (Lancashire)

Wednesday 22nd January 2014 Westminster Hall

10:58

[Graham Jones (Hyndburn) (Lab)]

It is a pleasure to serve under your chairmanship on a matter of growing concern to the UK public, Mr Owen.

Fixed odds betting terminals have transformed betting shops into high street digital casinos. My right hon. Friend the Leader of the Opposition is as concerned as I am about the machines, which he described as “mini casinos.” He proposes that action be taken to limit the effect of fixed odds betting terminals and to give powers to local people to decide on their suitability. Such gaming machines are capable of taking bets of up to £100 every 20 seconds on touch-screen games such as roulette.

Roulette is a casino game that has, over hundreds of years, been refined to be as addictive and engaging as possible. That is why it has always been restricted to a highly regulated casino environment, until the bookmakers put it on a machine in 2001, increased the speed of play and turned it into a solitary activity. The availability of that form of gambling on the high street has had disastrous consequences in Lancashire. In my constituency of Hyndburn, in just 13 betting shops, nearly £1.8 million was lost on FOBTs alone in 2012.

There are real concerns with FOBTs in Lancashire, particularly in east Lancashire, the poorer areas of the county and Blackpool. My regional newspaper, the Lancashire Telegraph, has published numerous articles on the problems of FOBTs in east Lancashire over the past 14 months. Early last year, its concern led to a front page article titled, “East Lancashire punters spent more than £270m on gambling machines in 2012”. That highlighted the scale of the problem in east Lancashire, so much so that many people were simply staggered by that figure. The paper also carried a story about one gambling addict who revealed how he squanders hundreds of pounds in benefits on the virtual roulette machines.

[Mr David Nuttall (Bury North) (Con)]

Does the hon. Gentleman accept that the evidence of the most recent health survey for England shows that the number of people addicted to gambling has fallen since the introduction of these machines? One in 200 people are now addicted to gambling.

[Graham Jones]

I appreciate the hon. Gentleman’s comments. We have to look at all the evidence, as well as adopting the precautionary principle. We also have to take into account all the other surveys that contrast with that figure and show that these machines are highly addictive. The gambling prevalence survey shows that and, as the hon. Gentleman well knows, it was ended by his Government; the last one was done in 2010, so the lack of information is partly down to the Government. I know that Government Members signed early-day motion 1030 last year, complaining about the Government’s withdrawal of the survey, which would have provided an evidential base. It is important that we look at all the evidence and at how we arrive at the evidence, as well as using intelligence. We have to look forward, not just backwards.

I return to my story about the gambling addict covered in the Lancashire Telegraph. He revealed how he squanders hundreds of pounds in benefits on virtual roulette machines. The paper reported:

“Nearly every penny of Michael Waring’s benefits—a total of £845 a month—is lost at betting shops.”

Mr Waring said:

“When the machines came out I didn’t even know what roulette was. After three months playing them I was hooked. I took my wages into the bookies. I was convinced I could win and put all my money into a machine. I lost. When I left, the fresh air hit me and my guts were wrenching.”

He resorted to attacking a FOBT during a spree in which he again lost all his money after several trips to a cash machine. He said:

“I punched the machine several times, threw it onto the floor and left.”

My other local newspaper, the Accrington Observer, has also covered the issue of FOBTs and was concerned at the £51 million staked in 2013 on the 48 FOBT machines in Hyndburn. That is almost £l million a machine, which is a considerable amount.

I am not anti-gambling. I occasionally bet on horses and football. There is an element of judgment to such gambling. Odds rise and fall, and there is a significant period between the placing of such a bet and the conclusion of the event. FOBTs, however, are not so much gambling as gaming. As the name implies, there are fixed odds and an algorithm in the game designed to ensure that the player loses. The laws in the UK are weak. When Newham council defended its decision to oppose the opening of a Paddy Power bookmakers on the basis that FOBTs are gaming and not gambling, and so require a separate licence, the judge found with the bookmaker. That is wrong and my right hon. Friend the Leader of the Opposition is right to call for a separate use class.

The Gambling Act 2005, which legitimised FOBTs, has three objectives: gambling must be fair and open, it must not be associated with crime or disorder and it must not harm young or vulnerable people. It is clear that FOBTs are in breach of all three. The speed of play is more than five times faster than in a casino, so players will lose their cash much quicker than if they were playing live roulette. FOBTs also increase the accessibility of hard gambling, at up to £100 a spin, to a demographic that cannot afford to play casino games.

Last year, the Campaign for Fairer Gambling commissioned 2CV to poll more than 500 betting shop customers. It found that the average bet per spin was £17, and the poorest and those unemployed were gambling £19 a spin. It also found that the average amount of cash going into the machines was £55, and one in five was putting in more than £100 a time. That poll was taken in Newham, one of the most economically deprived boroughs in London, and provides an insight into why bookmakers are targeting the poorest areas. The results of that survey are not dissimilar to those that would be found in Lancashire, particularly the poorer parts of the county. There are 48 FOBTs in Hyndburn, but in the affluent Ribble valley—an area with twice the average income and many times more wealthy people—there are just 18. In Blackburn, there are 73 FOBTs, while in affluent Wyre there are just 29. There are 157 FOBTs in Blackpool.

As a demographic, poorer people are more likely to start gambling than any other, but they are the demographic that can least afford to lose, and the bookmakers aggressively market the most addictive gambling product to them. Customers will often go into betting shops in Lancashire to bet on racing or sports, only to be offered £20 free credit or the opportunity to participate in a tournament on the FOBTs, designed to get them hooked. 2CV’s polling found that nearly nine out of 10 FOBT users described the machines as addictive, more than two thirds had chased their losses, more than three quarters had spent more than they had planned to and 62% had gambled until all their money was gone.

That illustrates a problem with this particular gambling product, and empirical evidence based on the two most recent British gambling prevalence surveys shows that FOBTs are the most addictive form of gambling. Secondary research based on the 2007 British gambling prevalence survey found FOBTs to have a stronger association with problem gambling than any other gambling activity. Professor Jim Orford’s research, based on the 2010 British gambling prevalence survey, found that nearly a quarter of the profits from FOBTs came from people with gambling problems—and that stretches to 40% if at-risk gamblers are included.

The Government want to wait for research commissioned by the Responsible Gambling Trust before they restrict FOBTs, but NatCen, which has been commissioned to carry out the research, has said that the data alone will not provide conclusions that are an adequate basis for policy. The data will tell us what but not why, and it is the why that the Government are interested in.

Although there is enough research to justify a precautionary reduction in the maximum stake on the machines, the research that the Government are waiting for will tell them nothing about player behaviour. That raises questions about why the bookmakers did not give NatCen access to their premises when it was carrying out observational research into gaming machines from 2011 until last year or why the bookmakers have refused to donate a live terminal, with live data, to Cambridge university for research into player interaction.

It is not just addiction that is caused by FOBTs. Landman Economics analysed the impact of FOBTs, and concluded, because the machines were a non-labour-intensive form of consumer spending, that more jobs would be created in the wider economy if the money spent on them was spent elsewhere. Based on historical growth, losses on FOBTs in Hyndburn are predicted by Landman Economics to reach £4 million by 2023, putting 280 jobs at risk. Staff face dangerous working conditions with shifts to single staffing and threats of violence. The Guardian reported:

“According to an internal memo seen by Guardian Money, William Hill instructs staff not to contact the police when customers not already known to staff damage the machines…‘to reduce the number of reports to police’.”

One staff member in my constituency contacted me worried for her safety in an industry that employs a considerable number of untrained female staff in isolation. She told me that every night she had, on her own, to carry thousands of pounds in cash to the bank. She was gravely concerned about her safety. Betfred is now linking staff pay to FOBT turnover in a take-it-or-resign deal.

There is also a negative impact in tourist areas such as Blackpool. Last year, £168 million was wagered on the machines in Blackpool, with the bookmakers making more than £5 million in profit. My hon. Friend the Member for York Central (Hugh Bayley) has said:

“I do not believe that the proliferation of high-street gambling in these tourist destinations is good for tourism.”

The effect has as much to do with the impact on other sectors as on the strong association with crime. The businesses involved are national chains with national profits, providing few jobs and draining tourist spending in those tourist destinations.

There is no requirement for age verification before people play on FOBTs, and no checks on where cash has come from, so the machines are used by criminals for money laundering. An investigation by The Guardian revealed that drug dealers will load cash into the machine, play with minimal risk—for example, they will put £48 on red, £48 on black and £4 on zero—and then cash out after a few spins. That “cleans” the money, as they can ask for a receipt and if they are stopped by the police they can say they won it at the bookies. Ladbrokes is now under investigation by the Gambling Commission with respect to its money laundering procedures, and Coral has recently been rebuked by the regulator for allowing £900,000 to be laundered through its machines by a drug dealer. It rewarded the perpetrator with a VIP trip to the races, as it saw him as a valued customer.

[Philip Davies (Shipley) (Con)]

I refer hon. Members to my entry in the Register of Members’ Financial Interests.

Surely the hon. Gentleman cannot have it both ways and say that the machines are so bad that people lose a lot of money in no time, but that they also give punters such a high return that they are used for money laundering. Which one is it? Do people lose money hand over fist on the machines, or do they get such a big rate of return that it is worth laundering money through them? It cannot be both.

[Graham Jones]

I am grateful for that intervention, because what I said is correct. There is a rate of return—a diminishing one. Those who want to launder money play for a short time and put as much in as they can, minimising the diminishing rate of return, but addicts, as I said earlier, play till all their money is gone. The diminishing return accumulates to the point where, as Michael in Blackburn said, there is nothing left. The diminishing rate of return is relevant when people are trying to clean money. Addicts will play to the end.

[Mr Nuttall]

Does the hon. Gentleman accept that addicts are much more likely to be spotted by staff in a shop? They are much more likely to get the help they need than addicts playing machines at home with no one watching their behaviour.

[Graham Jones]

In a word, no. I have not gone into staffing arrangements in great detail, but the changes to single staffing in most bookmakers, with young, vulnerable females behind a glass screen, do not lend themselves to identifying or helping problem gamblers—quite the reverse. People are drawn in, and the result is more gambling addicts. It is slightly more difficult to go online at home and register an account and become a gambler. As Michael said, someone can walk in off the high street not knowing anything about the machines. They might be in a bookmakers, perhaps betting on a horse or a football match, and suddenly they are addicted to a FOBT—so no, I do not agree with the hon. Gentleman. The reverse is true.

It is understood that more than 100 FOBT machines are smashed up in betting shops each week, and internal memos have revealed that shop managers have been instructed not to report those incidents to the police. Despite that, last year there were still an average of 165 incidents a week requiring police assistance in betting shops.

Has the Minister played one of the machines? The Government do not appear to be taking the problem seriously, and she does not seem to be aware of the machines. Councils in Lancashire are desperate for more powers to restrict FOBTs. Rossendale, Chorley, Preston and Hyndburn are all passing motions requesting the Government to act on the mounting evidence that high-speed casino gaming machines are a problem.

The plague of multi-mini casinos, with payday lenders and Cash Converters, has transformed UK high streets. Mary Portas, the Government’s high street tsar, said that

“the influx of betting shops, often in more deprived areas, is blighting our high streets”.

The 50 constituencies with the highest unemployment pump a staggering £5.6 billion into 4,454 FOBTs. We can compare those with the 50 constituencies with the lowest levels of unemployment, which spend £1.4 billion in 1,054 terminals. It is easy to see that the bookmakers target the poor. Hyndburn constituent Ben Smith wrote to me:

“I lost everything from family trust to my degree because of FOBT machines on Great Harwood high street. I know many others still in the clutches of them and I still get tempted to play them.”

If the Minister has met the bookmakers, why does she not meet the Campaign for Fairer Gambling? I believe she has not done so, but the organisation has for some time campaigned against FOBTs; it may provide some valuable insight into the betting industry. However, she seems unwilling to discuss the evidence it has found.

I ask the Minister not to be so naive as to take everything that the betting industry says at face value and to make a critical assessment of the credibility of its approach. When so much of its profit is derived from people with gambling problems, any harm minimisation measures it introduces will surely affect that profit. What reduction in bookmakers’ profits would satisfy her that the harm minimisation measures are working? There is enough evidence to justify a precautionary reduction in the maximum stake on FOBTs, and while the Government attempt to kick this issue into the long grass, it will not go away.

11:16

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mrs Helen Grant)]

It is a pleasure to serve under your chairmanship, Mr Owen. I congratulate the hon. Member for Hyndburn (Graham Jones) on securing the debate, and I thank my hon. Friends the Members for Bury North (Mr Nuttall) and for Shipley (Philip Davies) for their interventions, which were, as ever, important and knowledgeable.

This debate on fixed odds betting terminals and their effect on communities has focused largely on Lancashire, but the Government recognise that many people throughout the country have concerns about the machines, and that some people have gone through considerable difficulties as a result of playing them. That is why the Government are working hard and rapidly to make them safer, especially to those at greatest risk. I have made the Government’s approach clear in various debates and answers to questions recently, but for the avoidance of doubt I shall set our position out again.

The Government conducted a review of gaming machine stakes and prize limits last year and as part of that we called for evidence that fixed odds betting terminals present an elevated risk of gambling-related harm. We received plenty of anecdotal evidence from people who have experienced problems similar to those outlined by the hon. Member for Hyndburn as a result of playing the machines. However, we also received formal advice from the Gambling Commission and the Responsible Gambling Strategy Board that a precautionary reduction in stake or prize limits was unsupported by evidence, and was unlikely to be effective in minimising harm, which is what the debate is all about. The Government concluded that the future of the machines is unresolved.

[Graham Jones]

The Minister makes a point about an evidence-based approach, but we must at some point adopt an intelligence-based approach that looks forward. Of course there is no evidence in the future; that is the basis of the precautionary principle. Does she accept that we need an approach that is not exclusively evidence-based, but also about intelligence in applying a precautionary principle?

[Mrs Grant]

Of course we must look at all the factors, and that is why I have had several meetings with various industry people. Someone from GamCare came to see me in my office yesterday, and I am prepared to consider everything relevant, to ensure that we do not just have a knee-jerk response and that if there is a need for regulation it will be proportionate and sensible, and will do the job of dealing with problem gambling.

[Graham Jones]

Has the Minister met representatives of the Campaign for Fairer Gambling?

[Mrs Grant]

No, I have not, but I believe that a round table meeting has been or is being arranged. If that organisation has not yet been invited, I am sure that it will be.

The Government fully acknowledge that fixed odds betting terminals cause problems for some people. That needs to be addressed—the Prime Minister was clear about that at Prime Minister’s questions on 8 January—but we have to be responsible and to take action likely to be effective. For that reason, the Government have demanded that the industry bring in precautionary player protection measures while we look at the evidence on how players can be protected most effectively in the longer term.

[Graham Jones]

Will the Minister give way?

[Mrs Grant]

I want to make a little headway, but I will then let the hon. Gentleman intervene.

More specifically, the industry will introduce strengthened player protection measures, which come into effect in just a few weeks’ time—from the end of next month. For the first time, all machines will introduce automatic pauses in play and the option for customers to set limits on both how long they play and how much money they spend. In addition, information on playing behaviour will be available to customers, and the industry will make it easier for players to self-exclude. Those measures are the most significant controls on gaming machines since the Gambling Act 2005. It has been made clear to the industry that if the measures are insufficient, a precautionary approach will be taken, which could include action on stakes and prizes, speed of play or any other appropriate measure.

However, I am not stopping there. I am meeting the chief executives of the five largest British bookmakers again next week when they will be presenting me with plans to link players with data in a way that allows us better to understand player behaviour and to assess the effectiveness of the harm mitigation measures being introduced. I have been clear that if I am not satisfied by the industry’s proposals, the case for prudential moves on stakes, prizes, availability of machines or anonymous play will be made significantly stronger.

In addition, the Responsible Gambling Trust is carrying out research that aims better to understand how people behave when playing gaming machines and what helps people to stay in control. I met the trust in December, pressed it to make progress with the research programme and emphasised the importance of obtaining tangible research outcomes by autumn 2014. I am absolutely clear that the industry must find a way to secure and examine data that links players with play, so that more effective player protection can be developed.

[Graham Jones]

The Minister has made some good points, and I accept that she is now beginning to move towards the precautionary principle, given her comments about the interventions on machines that will come in by the end of next month. Is that not a move from an evidence-based approach, under which nothing will be done until the evidence is gathered despite there being no evidence, to the acceptance that something should be done? We are now applying the precautionary principle and including splash screens on FOBTs to protect gamblers. Is that not a shift from an evidence-based approach to the precautionary principle? Is that not the right way forward?

[Mrs Grant]

No. I have been clear on the matter from the start, and I am quite surprised at what the hon. Gentleman says. The first time I stood up to discuss the issue at oral questions in the House, I said that the machines are a concern, that there is no green light for fixed odds betting machines and that their future is unresolved pending further work that has already begun. I have continued to send out that message.

Whether local authorities have sufficient powers is often raised in such debates, but I believe that their powers are sufficient to deal with concerns. Local authorities can reject an application for a gambling premises licence or grant one with additional conditions. They have the power to review a premises licence after it has been granted and can actually impose licence conditions after review. Many local authorities have already used those powers to good effect—I congratulate Newham, which used its powers in November—and the Government urge local authorities fully to utilise the powers at their disposal to tackle problem gambling in their communities.

[Graham Jones]

Will the Minister give way?

[Mrs Grant]

No, I want to make a little more progress.

Local authorities are also able to use article 4 directions to good effect. I am pleased to say that two authorities have brought forward directions in respect of betting shops. I congratulate the London boroughs of Barking and Dagenham and of Southwark for using powers when the amenity of their communities needs additional protection.

I want to pick up on three issues raised by the hon. Gentleman. First, he mentioned the scrapping of the annual prevalence survey, which was an expensive way of measuring problem gambling, with over £500,000 of taxpayer money being spent on each survey. The health surveys for England and Scotland now measure problem gambling rates, which is a much more cost-effective and efficient method of collecting data.

Secondly, the hon. Gentleman referred to a request made by the university of Cambridge for a FOBT for research purposes. I am willing to write to those concerned to assist in the resolution of that matter. Thirdly, the hon. Gentleman remarked on the link between the location of betting shops and deprivation, but I understand that such shops are located according to footfall. To back that up, no significant correlation exists between the indices of multiple deprivation and problem gambling rates. That was confirmed by the December 2013 health survey.

In conclusion, the Government are undertaking urgent work to ensure the safety of all users of fixed odds betting terminals. The industry will be reporting to me next week on its plans for targeted player protection measures for those at greatest risk. I do not rule out any action that may be necessary to make machines safer. If the player protection measures do not prove sufficient, or if the balance of evidence suggests that precautionary action on stakes and prizes or other measures is required, the Government will not hesitate to act.

11:28

Sitting suspended.

St John Ambulance

Wednesday 22nd January 2014 Westminster Hall

[Mr Andrew Turner in the Chair]

14:30

[Sir Roger Gale (North Thanet) (Con)]

I am grateful for the opportunity to have this debate, although it is not one for which my hon. Friend the Member for Canterbury (Mr Brazier) or I wished to call. My name came out of the hat, but I take no pleasure in the necessity of the debate taking place. I am—at least for the next hour and a half or so—the vice-president of the Canterbury and Coastal branch of St John. Before the restructuring of the organisation, I was proud to be the vice-president of the Herne Bay branch in my constituency.

The St John Ambulance service is an organisation that has been revered, honoured and respected in Herne Bay for generations. Its presence at the Queen Vic memorial hospital summer fête, the Lark in the Park, football matches, rugby matches and other sporting events, and many concerts and performances held in Kings Hall has been part of the fabric of the town, and the branded ambulances have provided succour for those injured, sick or in need of transfer from one medical facility to another. In my parliamentary lifetime, volunteers such as the late and much loved John Morriss and, currently, George Tunnadine and his partner have been mainstays of our community. They and many others around the county of Kent have accumulated years of dedicated service to society and the public, and have provided countless hours of hard work behind the scenes, learning and then passing on to others their first-aiding and medical skills.

That wonderful inheritance has been placed at risk through mismanagement and a failure to communicate by those charged with protecting it, preserving it and passing it on to their successors, which is why we are here this afternoon. My hon. Friend the Member for Canterbury—if he catches your eye, Mr Turner—will deal with specific issues illustrated by and arising from the situation at St John nursing home in Whitstable in his constituency. Others will also wish to have their say, and I am aware that the St John damage control machine has sought to brief individual Members and the Minister about the huge and unqualified success of what others regard as administrative vandalism.

[Mr James Gray (North Wiltshire) (Con)]

I strongly agree with my hon. Friend about the incredible service of local people to the St John Ambulance brigade over so many years. I pay particular tribute to my own friend and colleague, David Hempleman-Adams, who was the chairman of the Wiltshire organisation, until it was closed recently, and is now a trustee nationally. He would disagree about the structural points that my hon. Friend is about to make.

[Sir Roger Gale]

I am grateful to my hon. Friend, who is sitting on my right, but as those remarks have not yet been made, it might be polite, if nothing else, if he were to wait until I have said what I am going to say. I can say to him that I am sure that the St John briefing notes, which I have seen, will have been well and truly read into the record by the time that we are through.

I will not detain hon. Members for too long, but I need to illustrate with broad brush strokes what has gone wrong and then, as the subject of the debate is the regulation of St John Ambulance by the Charity Commission, set out why the commission has been unwilling, or unable, to intervene in a manner that might have been expected in the interests of those supportive members of the public who have so generously given many millions of pounds over the years to the St John Ambulance service. It is not my style to say under privilege anything that I would not be prepared to say outside Parliament on the record or in public. Nor do I propose—this might come as a relief to some—to name names or to besmirch individual reputations. There is, however, a collective responsibility at the very top of St John that has to be held to account. My understanding is that, in recent years, the St John accumulated reserves have suffered from a near catastrophic 30% loss. I am sure that that figure will be disputed and that “reasons beyond our control” will be offered for the failure to protect the charity’s funds properly.

[Mr Brooks Newmark (Braintree) (Con)]

My hon. Friend makes an important point. I do not want to pre-empt anything that he might say, as my hon. Friend the Member for North Wiltshire (Mr Gray) did, but will he recognise at least that these have been tough economic times for many charities? St John is no different from any other charity that has had to restructure itself to ensure that it can protect front-line services. The evidence that I have seen in my constituency, in Braintree and Halstead, and throughout Essex is that that is exactly what St John has been doing.

[Sir Roger Gale]

I get the sneaking feeling that my hon. Friends on either side of me are reading the next paragraphs of my speech.

[Natascha Engel (North East Derbyshire) (Lab)]

rose—

[Sir Roger Gale]

I shall now say—

[Natascha Engel]

Will the hon. Gentleman give way?

[Sir Roger Gale]

I am so sorry; yes, of course.

[Natascha Engel]

The hon. Gentleman is aware that I am supposed to be delivering an open lecture between half-past 2 and 4 o’clock—exactly when this important debate is taking place—so I am grateful to him for giving way.

I have had serious concerns for some time about that financial restructuring and about the reporting and accounting within St John Ambulance. I hope that the debate will make the Charity Commission look again at the organisation, the treatment of its members and, most of all, the governance of St John Ambulance, because the commission has not taken seriously enough what is going on within the organisation. I thank the hon. Gentleman very much for giving way, and I hope that he will forgive me for disappearing straight away.

[Sir Roger Gale]

I apologise that I did not see the hon. Lady come into the Chamber. I had said that I would give way to her the moment she walked in because, for reasons that everyone in the House will understand, she has to leave for a long-standing commitment elsewhere. She is, however, one of the three Members who pitched for the debate—my hon. Friend the Member for Canterbury and I were the others—and I thank her for her support.

I happen to be a supporter of a significant international charity with which I am fairly heavily involved, so I am aware that fundraising in times of austerity is not easy, that returns on investments may be low and that great care and caution have to be taken to protect assets, staff, and the aims and objectives of the charitable organisation. The reaction of St John Ambulance to the situation it faced—due, I believe, to mismanagement—appears to have been draconian and, to say the least, badly handled. It has cost the charity many members and loyal staff, as well as much support in the country.

Faced with severe losses, St John embarked on a national reorganisation in 2011. It said that that was undertaken following full consultation, but as one who was only remotely and peripherally involved, I am in a position to say that no one within the mantled ranks of the priory appears to have been listening and that such consultation as did take place was tardy, inadequate, unheeded and designed to promote and implement decisions that had already been taken. I believe—in fact, I know—that I am not alone in that experience.

On the lines of an experiment conducted by the UK branch of the Red Cross, the St John counties were abolished, with eight regional organisations put in their place. As my hon. Friend the Member for Braintree (Mr Newmark) indicated, any organisation faced with difficulties has the absolute right to restructure. St John, however, might have heeded the results of the Red Cross adventure, which showed that the loss of local ownership led to a loss of membership, support and local income. That process ended with a reversal of the decision.

[Mr Newmark]

I understand what my hon. Friend is saying and I will not contradict—

14:39

Sitting suspended for a Division in the House.

14:53

On resuming—

[Mr Newmark]

Mr Turner, I was in full flow before the Division, and I have almost lost my train of thought. I do not contradict the point my hon. Friend is making about Kent, but does he accept that there may be regional disparities? When I heard about this debate, I spoke to my local contact in Essex, our mutual friend, Janie Siggers, and tried to obtain an understanding of what is going on in Essex. The issues that my hon. Friend is raising are not reflected in Essex. Does he accept that there may be some regional disparities?

[Sir Roger Gale]

I accept that. I know the lady to whom my hon. Friend refers and she is extremely hard-working. I concede that there may well be regional variations, and I will come to that precise issue almost immediately, but I cannot help feeling that the fundamental malaise comes from the very top, and that while some organisers have chosen to interpret instructions in a particular way and successfully, others have been perhaps less successful or felt that they were put under pressure. I am not suggesting that the people doing the job are bad people, except perhaps at the very top, and even then I do not mean that they are bad people in that sense.

We now move into uncharted territory, and I will offer the House some observations that have been made to me, not only from Kent but from East Sussex, the midlands and Yorkshire, as examples of precisely this effect of top-down diktats. When events such as this debate reach the public airwaves, testimony also emerges. During the past week, I have taken phone calls and received written communications from people whose details I have but whom I propose to anonymise for the record.

From East Sussex, a volunteer with 35 years’ service under their belt speaks of a branch that in 2008 had a membership of nearly 86, but which has now declined to just three or four. They also tell me of some 13 units whose headquarters buildings are to be sold, and that is in just one district. Another volunteer tells me of training that has gone downhill, with sessions booked from a centralised HQ in Aylesbury that is out of touch with the rest of the new region. In the former area, there were 146 trained emergency ambulance crews; in the corresponding new administrative area, there are only 86. I was told of headquarters premises sold by St John for £80,000 to a developer, who cleared the site and sold it on for £220,000. St John’s justification for that seems to have been, “We’re not property developers.”

It has been suggested to me—of course, the accurate figures must be available within St John—that the result of reorganisation has been a loss in Kent alone of perhaps as much as 75% of the membership. That is all anecdotal, of course, but it is a matter of record that on Thursday 24 January 2013, a special resolution was tabled calling for a vote of no confidence in the priory and the priory council of St John. That resolution was defeated, but in circumstances that the record suggests were, at the very least, bizarre.

Instead of citing telephone calls, I will quote directly. From Kent:

“We learned of the reorganisation in 2011 and that the new structure would be in place by October 2012.

Kent became part of the South East Region on 1st October 2012 being administered from the Regional Office in Aylesbury.

Our County HQ at West Malling was closed and almost all of the loyal staff made redundant.

All funds that were held in County accounts were amalgamated into the Regional Pot.

The feeling among the membership is that the new Regional Directors are trying to run St John as a commercial company and that making a profit is their main aim.

A small number of local events that we covered for a small donation are now not able to run because St John wants to charge them a commercial price and they cannot afford it.

Each Division would raise funds to buy a new Ambulance; they took pride in their vehicle, kept it clean and well stocked and were proud to display their Divisional name on the side of the Ambulance. Those Ambulances have had the names removed and no longer belong to the Division but are moved around the Region with no-one taking ownership for their cleanliness and equipment.

Kent was one of the best-run Counties in the Country with a very strong membership providing thousands of hours of voluntary service to the public of Kent. Sadly, the membership is declining fast and it appears that what has taken over 1000 years to establish the new management have destroyed in just over a year.

I would be interested to know where the funds that we held in Kent have disappeared to.”

From the east Midlands, a long-standing and very faithful divisional superintendent gave the following reasons for his recent and unexpected resignation from St John. I am quoting from a minute:

“That the commercial side of St John was taking over and using the voluntary arm, for financial gain, neither of which is within the spirit of St. John.

To achieve this end there is no regard or concern for the volunteers. We have not been consulted about anything, decisions are made over our heads even when affecting our Units personally, even including the decision to close down a particular unit.

The Leaders of East Midlands Region say whatever is suitable for the occasion, even if it’s not the truth and even if they’d said the total opposite before.”

That is followed by something that is even more disparaging and I will not read it out. It continues:

“The need for change in St. John is understood but the harsh, inconsiderate manner, with few explanations and little consideration of the volunteers, is not an appropriate way to introduce these changes. A more humane, considerate approach could have produced a better outcome.”

Another volunteer from Kent said that

“having been a member for almost 38yrs I am totally confused with this ‘restructuring’. All I see is an excuse to take all Divisional funds away from the Divisions into one large pot… Divisions virtually have to beg for funds and they are a long time coming if they come at all.

We now have a District Manager in Kent telling us he wants us to work with local authorities and KCC and his vision is to cut out event cover completely! Our whole ethos…for the past 1000 years has been to give help to the sick and since we were reformed in 1877 in England we have always covered public events assisting the injured. Our Division has some events we have been covering over fifty years.

I am very sad that everything St. John stands for is being undermined.”

[Mr Gray]

I am listening carefully to my hon. Friend. I understand that local people are disturbed by these kinds of reorganisations; that is always the case. Will he explain why this is a matter for Her Majesty’s Government, or even why it is a matter worth raising in this Chamber? These might be worrying developments, but are they really a matter for Parliament?

[Sir Roger Gale]

I have already indicated the subject of the debate to my hon. Friend. The debate is about the Charity Commission’s involvement in the matter, which is a matter for Her Majesty’s Government. I will come on to that in a few moments, if he can possess his soul with a little patience.

A community first responder unit said:

“We would like to inform St John that after a unanimous vote by all CFR members we are going to close the Community First Responder Scheme… This will also mean that our St. John Membership will also cease. Some of the reasons that have caused us to take this decision are listed below…poor communication on behalf of St. John…poor record keeping on behalf of St John…lack of information on behalf of St John…forced to purchase through St John’s Services—not the best option…bad press coverage of St. John Ambulance”.

That final catalogue perhaps exemplifies the high-handed, arrogant and remote manner in which the Priory of England and the Islands of the Most Venerable Order of the Hospital of Saint John of Jerusalem and the St John Ambulance leadership seem to have severally and collectively treated their volunteers and erstwhile supporters—that and the selling of the family silver.

Local headquarters are, of course, ultimately the property of St John, but with the funds to purchase and maintain those properties raised locally, it is not surprising that a sense of local pride and ownership has prevailed. To see their premises flogged off to meet the costs of the failings and excesses of what they regard as a bureaucratic and elitist London headquarters has proved to be more than many formerly loyal supporters can bear. A cleric from Yorkshire writes that

“when Selby was sold, the property which had been bought by the county had its proceeds taken from them for HQ funds. When a new property was found, the county leased it on a rent and had to pay so much a month for its use out of their own funds. They were not able to use the monies from the old property in any way! The same also was true for the Scarborough Division when it changed properties. I always think that it is unfair when London swallows up what has been raised by hard work in the counties—don’t you agree?”

I have to say that I do agree.

Against that unhappy backdrop, the Chamber will, I hope, shortly hear of the concerns surrounding the future of funds donated for the support of the St John residential home in Whitstable. Members may also hear of the shift—denied by St John—away from its core and Christian services and values, morphing a fine institution into little more than a commercial health and safety training organisation.

To directly answer the question from my hon. Friend the Member for North Wiltshire (Mr Gray), I have a question for the Minister. When my hon. Friend the Member for Canterbury and I referred the conduct of St John to the Charity Commission, we were told that:

“It is important to emphasise that although the Commission’s functions include encouraging and facilitating the better administration of charities, and taking remedial action to tackle misconduct or mismanagement, the law prohibits the Commission from acting directly in the administration of the charity. Trustees are the managers of their charities and it is their job to make the administrative and strategic decisions necessary for their charities’ proper and effective management… The Commission cannot direct the trustees to take one particular course of action or another. Neither does the Commission have discretion to overrule the trustees’ validly taken decision on the grounds that others take a different view, however strongly held.”

Either my hon. Friend the Minister will tell me that the commission is wrong and does have the powers to instigate independent inquiries into the conduct and management of St John, or he will have to tell me that the commission is correct and has no powers to intervene. If the latter is the case, the House will need to address that by giving the Charity Commission the additional powers necessary to properly discharge its duties in the public interest.

15:05

[Mike Wood (Batley and Spen) (Lab)]

I rise to counter the damning speech we have just heard from the hon. Member for North Thanet (Sir Roger Gale). This is prompted not by any national part of St John, but by members of my local group, for whom I have always had enormous respect and whose service in my constituency has always been of the highest order. It is on that basis that I want to put their views on the suggestions made in the lead-up to this debate about the present management and direction of St John. None of the people I have spoken to within St John is in any way resistant to the idea that the Charity Commission has some responsibility for overseeing the charity, and they would welcome any investigation that might be thought necessary. This is not about thwarting the intention that I assume is behind the debate; I want to provide a wider, more rounded picture of the present state of affairs.

As we know, St John believes that too many people die—in my area as much as anywhere else—who do not need to, and who would not if first aid was available at their time of crisis. My group believes that, since the reorganisation, it is even more committed to St John’s mission, which is available on its website and seems close to the heart of every member of my local St John I have ever dealt with.

The mission is

“to provide an effective and efficient charitable first aid service to local communities”—

my group does that—and

“to provide training and products to satisfy first aid and related health and safety needs for all of society”,

which my group certainly does. The final aim is

“to encourage personal development for people of all ages, through training and by membership of our organisation”,

and my local group’s membership is growing.

I ask the hon. Members for North Thanet and for Canterbury (Mr Brazier) to understand that while they speak for communities in Kent, St John extends throughout the country. It was an important admission that local disparities in service might very well be part of the problem, and that could be an issue when forming a picture of the organisation and its recent management that is perhaps not as complete as it might be. We know that the organisation was, in essence, £9 million in deficit by 2011 and that that deficit was growing. Any organisation has to face the reality that if it is that much in the red and things are not getting better, change is needed. I understand that there might be some objections to how that deficit arose, but it is instructive that, by the end of 2014, this organisation that was recently £9 million in the red will be registering a small surplus. St John has quickly got on top of a financial situation that was unacceptable.

[Mr Newmark]

On that point, the hon. Gentleman might be interested to know that although my hon. Friend the Member for North Thanet (Sir Roger Gale) made points about the cuts and their impact, the delivery of services has improved, especially for young people—perhaps in the same way that the Government have made cuts yet improved productivity and delivery—and the training of young people has increased by 37% in the past year alone.

[Mike Wood]

I am grateful for that intervention because it makes my next point for me. In spite of what has happened, and against that background, my understanding is that the organisation nationally—this is certainly my experience locally—has improved its performance. It is training more people and functioning in a much more open fashion, and it has listened and taken note of the report it sought on its governance. As I understand it, the report was independent and said that the organisation was too bureaucratic and complex, that it lacked clear governance policies and lines of accountability and that, essentially, there were too many committees and too many roles. Perhaps that is inevitable in an organisation split over 41 semi-autonomous bodies but, none the less, St John sought to improve that state of affairs after hearing the view of the expert body asked to review it. Again, my group, which is based just over the border into Wakefield, at Ossett, has welcomed the improved situation in which it now functions.

It is also important to look at information from bodies such as the Care Quality Commission. It has continued to provide inspection reports that have shown, certainly in my area, that St John is providing a service of a very high standard. Obviously, if the two hon. Gentlemen from Kent—the hon. Members for North Thanet and for Canterbury—have misgivings about the organisation and management of a St John home in their area, it is their responsibility to make those concerns public. Nobody has any misgivings about that, or any opinion other than that that is exactly the right thing to do. I would have done the same about something in my constituency, but to extrapolate from that a wholesale belief that the organisation is far away from its objectives and delivery targets, as was suggested at the start of the debate, seems to be neither sensible nor safe.

May I make a rather partisan, north-south point? The two hon. Gentlemen from Kent who proposed the debate—they are supported by my hon. Friend the Member for North East Derbyshire (Natascha Engel), who came and went, who I understand was born in Kent—perhaps might just, in their more charitable moments, accept that the world extends beyond Kent. I think that they have to be told that there is life north of Watford.

[Sir Roger Gale]

I spoke for a long time, so I had not intended to intervene further, but I have been goaded into doing so. In response to my hon. Friend the Member for Braintree (Mr Newmark), I made it very clear that I accept that there might be regional variations. I am not sure whether the hon. Member for Batley and Spen (Mike Wood) was back from voting when I referred to not only Kent, but East Sussex, the east midlands and Yorkshire, and quoted people from those areas. Although I accept that the issue may be regionalised and that there may be variations in the nature of the problem, I have to ask him to accept that it is wider than just Kent.

[Mike Wood]

I accept that, although I think I was making a slightly wider point: on most indices, Kent is a rather well-heeled part of Britain, and I think—[Interruption.] I understand that that is not the case for all parts of Kent, but I am talking in the round. I think that part of the problem may be the inability of some in the organisation, and perhaps their representatives, to accept that when resources are under more pressure, especially, their distribution may need to be a little fairer than was previously the case. That would certainly benefit—it appears to have benefited—areas such as mine, which now feel that they are better served than before.

I understand that the intention of the debate is to bring the organisation and its management to the attention of the charity commissioners. Nobody that I have spoken to in St John, and certainly not within my local group, has any problem with that—in fact, they would welcome it in some ways. However, I wanted to put on record a slightly more positive picture of the function of St John around the country.

Finally, I again place on record my thanks to the members of my local group, which is based in Ossett. They have always done a first-rate job and are incredibly valued and welcomed in my locality.

[Several hon. Members]

rose—

[Mr Andrew Turner (in the Chair)]

Order. I suggest that Members stick to seven minutes each, if they can.

15:16

[Sir Tony Baldry (Banbury) (Con)]

When I was a child, my father, who was a consultant physician, regularly went off pro bono to train St John Ambulance volunteers in first aid, and in particular, as he was a consultant chest and heart physician, in first aid relating to cardiac arrest. I have therefore had a long-standing interest in the work of the Order of St John and St John Ambulance. As Chairman of the Select Committee on International Development, I was very interested in the work that they do and continue to do with the St John Eye Hospital in Palestine. For most Palestinians, Muslim or Christian, I understand that it is the only eye hospital to which they have access.

I hope that all of us will have seen the work of St John Ambulance in our constituencies. St John Ambulance clearly has a vision and an intention that everyone who needs first aid should receive it when they need it and that no one should suffer from the lack of trained first aiders. It is a real tragedy and, indeed, unacceptable that many people have died needlessly because no one was available to give them first aid when they needed it. St John Ambulance teaches people first aid—about 800,000 people last year alone—so that they can be the difference between a life lost and a life saved. St John Ambulance teaches young people in schools and through its activities for young people, including a special first aid programme for those not in education, employment or training.

St John Ambulance teaches people in the workplace and provides first aid products. One of the leading supporters of St John Ambulance in my constituency is Sir Frank Davies, who for many years was chief executive of the Health and Safety Executive. I know he was very supportive in that role of the work that St John Ambulance does in teaching people first aid in the workplace. St John teaches people who become volunteers for St John Ambulance, who offer their skills and time to be the difference right in the heart of their own communities, to be potential first responders at public events, and to provide back-up to local ambulance services. Across the country, St John Ambulance has just under 40,000 volunteers providing first aid services in communities. About half of St John adult volunteers are under 25. St John Ambulance covered just over 50,000 events in 2012 and treated and supported about 90,000 people at those events. That, I suggest, is big society in action, big time.

St John Ambulance is not the only large national charity that, in recent years, has found the need to restructure. The recent restructuring of St John Ambulance is almost identical to the restructuring undertaken a number of years ago by the British Red Cross, which also found that a structure of a number of semi-autonomous county and local headquarters was too bureaucratic and complex, and did not allow it to tackle situations as quickly and as efficiently as it wanted to. The changes introduced by St John were intended to save lives, rather than to preserve a former governance structure for its own sake. It is also important to recognise that as a modern health care charity, St John is registered with the Care Quality Commission, is registered in due course with Monitor and has a whole number of child protection responsibilities. I think the whole House would therefore understand that it is imperative that St John Ambulance has clear governance policies and lines of accountability.

I understand that St John went through an independent governance review, which concluded that St John previously had too many committees and too many roles. As a consequence, it decided to change its governance arrangements in discussion with St John volunteers, as, not surprisingly, everyone wanted St John to be much more joined-up and to have a structure that could move as quickly as possible to bring first aid to people who need it. I understand that, as a consequence, St John Ambulance has made it a priority to improve the training of front-line volunteers still further, and many of the St John volunteers have benefited from a wider range of training opportunities provided under the new governance structures.

In addition to governance and organisational concerns, one of the reasons why the British Red Cross restructured a number of years ago was that it too was concerned about the financial implications of the previous structure. It is clear from annual reports that the deficits of recent years at St John Ambulance arose partly because trustees decided to invest in new charitable programmes and partly because the difficult economic environment affected many charities’ fundraising. There was an overall net deficit of £8.9 million in 2011. However, I understand that St John Ambulance is budgeting for a small surplus this year, and the charity has cash and investments of about £20 million. It is therefore in a strong financial position, but—like all charities nowadays—it looks continually for ways to be more cost-effective in delivering its charitable objectives.

Some of its activities, such as first aid training in the workplace, or providing first aid at events where the organisers make a profit, are run to make a surplus, but that surplus is used to expand St John’s charitable work such as the teaching of first aid to young people, or providing first aid at not-for-profit community events. As the House may know, I am the Commons chair of the all-party group on carers. Often carers need training, but training for carers is at present somewhat haphazard. Given the national footprint of St John Ambulance, I hope that it may be possible to persuade it to consider undertaking training for carers.

It seems entirely reasonable to me that St John Ambulance wants to be a cost-effective, efficient and effective organisation, delivering and expanding the voluntary services that it provides to all our communities. I am fortunate to represent a constituency in Oxfordshire, which I suspect many would consider to be a more affluent part of the country. It is important that the work of St John Ambulance and the Order of St John should be available not only in affluent areas such as Oxfordshire or Kent, but in every part of the country—a point made very ably by the hon. Member for Batley and Spen (Mike Wood). I therefore hope that the work of the Order of St John and St John Ambulance will have the support of Members of the House, wherever they come from.

My hon. Friend the Member for North Thanet (Sir Roger Gale), who is also my brother knight, has perfectly properly raised issues relating to his constituency that have been causing him concern. Clearly the charity commissioners have to be accountable for how they deal with any specific complaint made to them, and Ministers have to be satisfied that the Charity Commission is carrying out its duties as Parliament intended.

I believe that my hon. Friend the Member for Canterbury (Mr Brazier), for whom I have enormous respect, will also discuss this issue, but I understand that St John Ambulance has made it clear that it will support the Kent care home that has been causing colleagues concern. Indeed, the chair of the board of trustees of St John Ambulance, Rodney Green, who also chairs the Order of St John, wrote to colleagues on 17 October last year, stating in terms:

“It is the Trustees’ key priority to secure the best interests of the residents. The Trustees of St. John Ambulance take extremely seriously their legal responsibility and accountability for the home and have made it absolutely clear that the residents and staff must be given all the support that they need. All necessary funding required by the home to meet the Charity’s reasonable obligations will therefore be made available.”

I understand that St John Ambulance has made it clear that it will ring-fence £750,000 specifically for the Kent care home—not an insignificant commitment for a charity with nationwide investments of only £20 million.

The Order of St John and St John Ambulance have a long history as a Christian- based charity, named after St John of Jerusalem. As one would any large charity with a national footprint involving some 40,000 volunteers, one would expect it to evolve continuously to deliver on its charitable aims and objectives and focus on its most important task of saving lives.

15:23

[Sir Bob Russell (Colchester) (LD)]

I am chairman of the all-party group on first aid, whose administrative support comes from St John Ambulance. So far 25 MPs and peers, from all parties, have obtained the certificate in essential first aid here in the House.

I am delighted to follow my right hon. Friend the Member for Banbury (Sir Tony Baldry) and the hon. Member for Batley and Spen (Mike Wood), in putting on the record both personal opinions and facts. I shall not venture into the Kent debate set out by my fellow knight, my hon. Friend the Member for North Thanet (Sir Roger Gale), because I believe that it needs to be dealt with as a constituency matter. St John Ambulance representatives will read Hansard tomorrow and see what he had to say. I hope that in some respects they will take on board his concerns about what he senses is a lack of localism in Kent, and the other points he made.

My first involvement with St John was more than 50 years ago, when I was a young scout and trained in first aid. I recognise and echo all that my right hon. Friend the Member for Banbury said about that. Notwithstanding the criticisms that have been made—one might have thought the organisation was dying on its feet—there is a remarkable expansion going on, with 30% more young people trained last year than the year before. That is a record of success and achievement. However, as my hon. Friend the Member for North Thanet said, there are concerns, and I hope that St John Ambulance at national level will consider how it can address them and encourage the localism that I see at the Colchester branch. I occasionally visit the branch—not just the adult training but the Badgers, which is the youngest group, aged five to 10, and the cadets who are aged 10 to 16. The organisation is remarkable and it has evolved.

[Mr Newmark]

Perhaps the hon. Gentleman will indulge me with one last intervention. As a fellow Essex MP, he will know the tremendous work that the new St John branch in Halstead does. I went on my very first training course in first aid, which was excellent, and I was surprised at the number of young people on the course with me. Will he join me in paying tribute to that work and does he agree that St John Ambulance does an excellent job training young people in basic first aid?

[Sir Bob Russell]

If the Halstead experience is like the Colchester one—and both towns are on the river Colne—the hon. Gentleman is fortunate to have an excellent St John Ambulance centre in his constituency.

My right hon. Friend the Member for Banbury gave some dramatic statistics, and I will add some more. Community first responders attended 31% more call-outs in 2012 than in 2011, supporting the NHS ambulance service. In addition to youngsters, unemployed young people are going through the training system. An initiative launched in the past year by St John called “In their community” enables youngsters between the ages of 14 and 17, including cadets, to use their skills to deliver first aid training to others—that is self-help among young people. In another programme, “Your first aid”, cadets are given a chance to volunteer at events.

We must accept that St John Ambulance, like many other organisations, needs to remain fresh and vibrant. The Scouts and Guides have already gone down that path, and so have political parties. St John Ambulance will evolve to keep in step in society and to meet changing challenges. St John, facing significant financial losses that could have brought the organisation crashing down, tried with the help of operational front-line volunteers and others to find a way not only to save the organisation but to give it a future. I suggest that that is what the restructuring has done, but I think—referring back to the comments of my hon. Friend the Member for North Thanet—it needs to find a way to retain the ethos of localism. After all, that is what all political parties want—localism is part of their agenda. One way of saving money is to acknowledge the fact that the semi-independent divisions were costing money. We all recognise that not everyone welcomes change, but new arrangements mean more team working and sharing resources.

This is a welcome debate. The circumstances are unfortunate, but we have on the record the good things about St John Ambulance, and I hope that St John will listen carefully to the criticisms and build on its strengths.

[Mr Andrew Turner (in the Chair)]

Hon. Members are doing very well. I call Mr James Gray.

15:29

[Mr James Gray (North Wiltshire) (Con)]

Thank you, Mr Turner. I will try to be brief because much of what needs to be said in the debate has already been said—I will certainly try to avoid repeating anything.

Let me start with what I believe to be three truths that will be welcomed by everyone in the Chamber. The first is that over many years St John Ambulance has done fantastic work for the people of this country. Every year it attends 52,000 events, many of which would not occur were St John Ambulance not there. An ambulance and first aid service have to be available at such events, and St John provides that at very modest cost to the organisers. I have been a beneficiary of that service.

The second universal truth is that the very many people who are members of St John Ambulance and have been trained by the organisation enjoy their participation greatly. It is a superb volunteer organisation. I pay huge tribute to the people of Wiltshire who are members of our extremely active branches throughout the county. Their great work is much appreciated.

The third universal truth, however, is that when any organisation—whether a voluntary organisation such as St John Ambulance, a business, a military organisation or a political organisation—is reorganised, many people in that organisation do not like it. Those who have been the chairmen or members of the committees of the 41 separate organisations that were previously St John Ambulance—or, indeed, members of the sub-units, or other committees and organisations—do not like the fact that they are no longer involved in the way in which they were previously. I understand that very human emotion.

Let me put the counter-argument for a moment, however. I have been briefed on the matter by my close friend, David Hempleman-Adams, who was the chairman of the Wiltshire branch of St John Ambulance. He assisted in the reorganisation and is now a trustee nationally. He is one of those who say, “We couldn’t go on the way we were. This was not the sustainable structure that we wanted to have for the time to come.”

Let us put aside for a moment the question of whether people in the organisation wanted it to be reorganised, although that is a key matter of great concern, and I am sure that St John Ambulance will be listening carefully to the concerns of many local people that are being raised in the debate. However, as I mentioned in an intervention on my hon. Friend the Member for North Thanet (Sir Roger Gale), that is not a matter for the Government. It would be wrong if the Government took an interest in the internal organisation of a voluntary body such as St John Ambulance, so the Minister is not qualified to respond to those particular criticisms.

The subject of the debate is the charity commissioners’ governance of St John Ambulance, and of course that, to some degree, is a matter for Parliament and Ministers—or at least it would be if the charity commissioners were not doing the job that the Government have asked them to do. The commissioners’ job is to look at the huge number of charities in the UK—I suspect that there may be hundreds of thousands if we include all the very small ones—and keep an eye on them to ensure that they are fulfilling the charitable functions that they are supposed to fulfil and that they are sustainable.

I think that I am right in saying that the charity commissioners would intervene only if a charity was not doing what it was set up to do, or if it was not sustainable. If a charity were, for example, losing large amounts of money every year and misusing the funds of volunteers or members of the organisation, that would indeed be a reason for the charity commissioners to step in and look that. I was not surprised in the slightest by the reaction that my hon. Friend the Member for North Thanet got from the charity commissioners—indeed, I strongly welcomed it. They said, “We’ve looked into this and actually these are not matters for us; they are matters for St John Ambulance internally.” I was very glad indeed that the charity commissioners did not choose to intervene in detail on the ground.

I suspect, however, that had the organisation continued to lose the £9 million a year that it was losing until the reorganisation, that would indeed have been a matter for the charity commissioners. I understand that St John Ambulance still has reserves of some £20 million. As it was losing £9 million a year, that would mean that it would have been insolvent after another two years, which would indeed have been a matter of grave concern to the charity commissioners, as well as the organisers of the 52,000 events that the body attends every year and the 300,000 people who take part in it. That would be an extraordinarily important matter, and I am glad that that situation will now not occur following the body’s reorganisation.

I fear that bodies that have existed for many tens or even hundreds of years often become a little sclerotic and very local. We in the Conservative party know that extremely well. Some of our branches and associations are not quite of the great strength and power that was the case were many years ago. We see such things nationally all the time, but I very much welcome the fact that St John Ambulance realised the problem that it was facing. It understood that it would be in difficulty with the Charity Commission if it did not do something about it, and it set about saying, “We provide a first-class service for local people, and local people love being part of it. We will therefore take difficult steps to reorganise the organisation so that it remains solvent for the years to come.”

15:35

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for North Thanet (Sir Roger Gale) on securing the debate. I should state at the outset of my speech that I served on the county management board of St John in Suffolk from 1991 to 2010. I am also a holder of the Most Venerable Order of the Hospital of St John of Jerusalem.

My observations are very much Suffolk-orientated. They are based on my direct experiences up to 2010 and feedback that I have subsequently received from former colleagues. It is important that we pause and reflect for a few moments to salute those front-line St John staff who turn out at all hours of the day and night, in all weathers, and give their time to help and support others.

I was with members of St John in Lowestoft on the night of the storm surge on 5 December at the rescue centre set up at the Water Lane sports centre. I saw and spoke to them in the evening and in the morning, although I have to confess that, unlike them, I went home to bed in between, and they were cheerful, committed and resolute. These volunteers are doing brilliant work, notwithstanding the restructuring of the governance arrangements of St John.

My direct experiences of St John in Suffolk took place between 1991 and 2010. I was on the management board and my role as county surveyor was to advise on its properties. With the benefit of hindsight, I look back on a well-run organisation. Yes, problems arose, but when they did, we held emergency meetings and addressed them head-on. We ran a balanced revenue budget each year. We had a successful fundraising programme that paid for capital improvements and equipment, and our fundraisers knew where the pockets were to be picked. We had notional reserves of more than £700,000. The number of cadets and recruits remained steady. We had high standards of clinical governance, as endorsed by the Care Quality Commission. We ran the most successful patient transport in the country. Our properties were in good order and well used. Our senior volunteers were at the top of their peer group, and St John was widely respected throughout the county.

St John in Suffolk, although not without its challenges, was run well and was achieving its charitable goals. That said, I am aware that that was not the situation in all counties across the country and, by 2011, an £8.9 million deficit had emerged. Yes, there was a case for restructuring. There were 41 headquarters across the country. There were probably too many people involved in governance and there was a need for a flatter management structure. There was a need for more co-ordination between divisions with regard to fees and charges, equipment and training. One could argue that the fact that St John is budgeting for a small surplus in 2014 justifies its restructuring, although from the feedback that I have received, it is clear that something has been lost along the way.

The priory has failed to take a significant proportion of those previously involved in the governance of the counties along with it on what was always going to be a difficult journey. I do not know the circumstances, but is it right that at a meeting of the chairmen of the eastern region earlier this week, two of them could not attend as they were suspended?

The feedback from Suffolk is not quite as good as it was. Yes, all are working hard to ensure that the front line is not affected. The ambulance services themselves continue to run well. Equipment is provided efficiently, and patient transport is still being run from the former county headquarters, although the service now covers the whole eastern region. However, charges for attendance at events have gone up and, although I understand the need to maximise earnings, bookings as a whole are down. Although financial performance across the country as a whole is improving, in 2013 the eastern region had a deficit of more than £1 million—£825,000 worse than budget.

Fundraising has ceased, at least in the short term. That is probably the most serious effect of restructuring, as the county structure was well established and well suited to fundraising. Recruitment has been hit by the fact that cadets have to pay for their own uniforms, and the hardship fund—in Suffolk, at least—is not working as well as it should.

Some sort of restructuring was necessary, but the fact that Governments of all colours have received bloody noses when they have set about abolishing county councils should have sent a clear warning to the priory to think carefully before abolishing the county structure. As I said at the outset, we must air our concerns and it is important to be transparent. The restructuring of St John Ambulance must be seen as work in progress. The priory must accept that mistakes have been made along the way and it must not adopt a siege mentality against its critics. It must listen to criticism with an open mind and move on quickly from the agenda of suspensions and disciplinary proceedings.

The Order of St John has a proud and illustrious history that stretches back more than 900 years. It is vital for the United Kingdom that the order continues to carry out its good work. It has an important role to play in 21st century Britain. It works alongside the NHS to provide medical care and it gives volunteering opportunities to young people in areas that are often deprived and challenging. We need to move on, and I hope that this debate can be the beginning of the healing process.

15:41

[Mr Julian Brazier (Canterbury) (Con)]

I, too, congratulate my hon. Friend the Member for North Thanet (Sir Roger Gale) on securing the debate. I will make some local points about the St John home in my constituency, after which I will address several of the national issues that have been raised and debated by people who have had a longer involvement with the Order of St John than I have. I should perhaps say that my grandfather was the St John Ambulance county commissioner for Kent. At the time, he was the county’s largest employer, so I imagine that the many years of his time that he gave for free were of some value. That was a long time ago, but more recently a friend of mine has been involved with the St John eye clinics in Palestine, and I am constantly impressed when I see people on the St John operation.

I will focus specifically on the St John home in Tankerton in my constituency. That much-loved home was founded in 1947 and given to the Priory of England and the Islands in 1955. It was transferred to St John Ambulance in 1999, and it has always had a separate governance structure. The people who gave the home its £750,000 in assets did so, almost without exception, because they had a connection with the home. Had any of them realised that its separate governance structure had no legal basis and that those assets might one day be seized by the centre, I suspect that the fundraising would have taken a very different shape. The capital earns around £30,000 in interest, which bridges the gap between the cost of running the home and the income that it receives from residents and Kent county council. The home is small, with only 18 beds, and that money is essential for its financial viability.

I have huge respect for my right hon. Friend the Member for Banbury (Sir Tony Baldry), but I found some of his contribution surprising. I was surprised by his allusion to the restructuring of the Red Cross, and the fact that he did not pass on—perhaps because St John had not told him—what actually happened with the Red Cross reorganisation. When he referred to the St John home in my constituency, however, I was truly staggered to hear him quoting from the letter of 17 October from the prior, when the letter that we received only a fortnight later dated 5 November stressed that the moneys referred to in previous correspondence could not be regarded as legally restricted. As the separate governance structure of the home is being broken up, there is nothing to stop the priory taking those moneys at any notice.

I will turn to the national picture before saying a few words about the role of the Charity Commission, which is the core of the matter. My hon. Friend the Member for Waveney (Peter Aldous) mentioned concerns about how criticism of the changes in St John has been treated. Of course, wherever there is change, some people will be against it, but never in any charity— I have seen it occasionally in a political party—have I seen the kind of conduct that has reportedly occurred over the past two years.

I shall expand a little on what my hon. Friends have referred to. There was a no-confidence motion in January 2013, as a result of which 10 people were suspended. The hon. Member for Batley and Spen (Mike Wood) said that the leafy parts of Kent formed too large a part of the debate, so let me quote from my hon. Friend the Member for South East Cornwall (Sheryll Murray), who is unfortunately detained in the debate on the Floor of the House. She was contacted by a constituent who is an old friend and was one of those suspended. She wrote to me:

“I am very concerned to have heard from my constituent that 10 senior members of the chapter of St John were suspended last March on charges of gross misconduct”—

basically for saying that they did not agree with what was going on—

“on account of signing a motion of no confidence in the trustees and excluded from any further work or contact with St John for the best part of a year. A debate was held as a result of this properly constituted and well supported motion, and in the event the motion was only defeated on a 40/60 split.”

Many of those involved in the debate had served for more than 20 years. My hon. Friend continued:

“The process for deciding on the charges has been dysfunctional and frankly beyond parody”—

those are her words, not mine—

“resulting in each of them being found guilty of the charges and given ‘suspended sentences’ of exclusion from office.”

I have dug a little further into the matter, and I want to share one fact that illustrates the extent to which governance has broken down in the organisation. The case was heard by an individual who was, on paper, extremely well qualified. He had a long involvement with St John, he had legal training and he was a clergyman. Unfortunately, he breached the first principle of natural justice, because he had been an extremely partisan participant on the other side of the debate. He could not, by any possible standards, be said to be independent. Such a breach of administrative justice should not be allowed to occur in any well-founded organisation.

I move on to the role of the Charity Commission. My hon. Friend the Member for North Thanet asked the Minister, whom I am delighted to see in the Chamber—I know that, in the short time he has had available to prepare, he has taken a close interest in the case—a specific question, and I would like to ask another one. Is it right that the Charity Commission should confine itself to areas in which it has a specific legal duty to intervene? Might one reasonably expect any regulatory body—one thinks of the Bank of England, as a larger example—to take an informal interest when concerns are reported, and perhaps to do some informal prodding and make the odd telephone call?

I hope that hon. Members do not regard me as particularly pompous, but I find it extraordinary that after a group of MPs wrote to the Charity Commission, it would refuse to see us to discuss the matter. Whatever the merits of a case, if the Charity Commission is not even willing to discuss it with elected representatives, something has gone wrong in the organisation. It may well examine what is going on in the St John charity and conclude that the whole thing is a storm in a teacup, although I maintain that the administrative failings of the process at the centre, and the changing of mind on the various guarantees paid to the St John home in my constituency, need serious answers. The Charity Commission has been unwilling even to hold a meeting. Of course, since we secured the debate, the organisation has said that it will be happy to see us, but it was not able to fit us in before the debate.

[Mr Gray]

May I make a point on behalf of the charity commissioners? I understand that my hon. Friend may well be frustrated by the inability to hold such a meeting. However, does he agree that, if the charity commissioners were to start having meetings of that kind, with either one side or the other, about the many thousands of charities that might well be in similar disputes throughout the nation, they would be doing nothing else with their time—there are very few of them—and would become improperly involved in the internal politics of the charities? That would seem to be an absolutely wrong use of the commissioners’ time.

[Mr Brazier]

In its correspondence to us, the Charity Commission said that a charity’s trustees are legally responsible for all aspects of a charity’s management and administration, which I am sure we would all agree with. It went on to say that the commission would take action only if it believed that its regulatory powers were necessary or would be of use. In other words, an informal investigation is ruled out. That is very odd, however, because, to answer my hon. Friend’s question directly, the Charity Commission’s own description of its responsibilities and duties on its website states that it should be concerned with

“breaches of trust or abuses that otherwise impact significantly on public trust and confidence in the charity and charities generally”.

Given that three MPs representing different parties and areas—the hon. Member for North East Derbyshire (Natascha Engel) may have been born in Kent, but she represents a seat in Derbyshire—had already expressed concerns, and that, from memory a fourth, my hon. Friend the Member for South East Cornwall, came on board between the two letters, I would have thought that this was more than just a casual inquiry. I would have thought that the Charity Commission would have liked to have been involved.

I have detained Members for long enough, but would like to end with what I was about to say before the intervention by my hon. Friend the Member for North Wiltshire (James Gray), for whom I have huge respect. St John Ambulance is a very precious charity. Every single MP who has spoken in this debate believes passionately in it, and most have had a much greater involvement with it than I have. It seems that something has gone wrong, and that the Charity Commission should be looking at that.

15:51

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

I congratulate the hon. Member for North Thanet (Sir Roger Gale) on securing this important, if difficult, debate. It is important because of the critical work that St John Ambulance does throughout the country, and I would like to echo the words of Members from all parties who have praised that work. Its volunteers are often literally the difference between life and death.

In my constituency, St John Ambulance volunteers are at St James’s Park—for those not fortunate enough to be supporters of Newcastle United, that is the home of football—for every home game, and they were also there for the Olympics. They are out in Newcastle every weekend supporting the ambulance service’s mobile treatment centre, the “booze bus,” so that our young people can enjoy themselves in relative safety and security. They also do vital work, as we have already heard, in educating and training young people in schools across the city.

The hon. Member for North Thanet raised some specific points that I will address in time, but I want to start by raising a few broader points to which the Minister can respond. As we have heard, like many charities, St John Ambulance has recently restructured. The hon. Member for Braintree (Mr Newmark) emphasised the fact that the recession has hit the voluntary and charity sector hard. Last year, 58% of charities reported that Government measures had had a negative impact on levels of funding, and half had taken steps to reduce wages and salary costs.

A survey by The Guardian’s voluntary sector network found that nearly one in 10 charities fear that they will not exist in five years’ time. In its report on the impact of welfare reform in Newcastle, published in November, called “The Big Squeeze”—I have a copy here for the Minister—Newcastle council for voluntary service found that, in the north-east, 30% of charities, rather than one in 10, fear that they will not exist in five years’ time. Nevertheless, year on year, demand for services continues to rise. In Newcastle, 62% of charities experienced an increase in demand for services last year, and 52% were using their reserves simply to survive. Newcastle CVS said in its report that, as a result, charities and voluntary organisations are all having to think differently and change their organisational culture in an attempt to be more resilient. We have heard some of the consequences of that in the case of St John Ambulance.

Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, has said:

“The combination of increasing demand, rising costs and income levels that are often static or falling means that many charities are under unprecedented pressure at the moment.”

My hon. Friend the Member for Batley and Spen (Mike Wood) alluded to the fact that that pressure is being felt most in our most deprived communities, where charities are often most concentrated. The Civil Exchange think-tank has said:

“Millions of people, especially those who might need it most, are being excluded from the big society as cuts hit them hardest.”

That has put increasing demand on charities, and the issue is not just funding cuts. Welfare changes, such as the bedroom tax, and the reorganisation of the NHS, are putting more pressure on charities. At the beginning of the year it was reported that St John Ambulance is being sent to 999 calls as NHS paramedics are being driven to “breaking point”. It is not surprising, therefore, that charities are finding ways to adapt and survive in a climate of near permanent austerity.

The hon. Member for North Wiltshire (Mr Gray) emphasised that charities are not an arm of the state. We must regulate the sector to ensure that donors know that their money is not being spent fraudulently, but charities are not under the direct control of Parliament. Nevertheless, we must remember the pressures under which charities such as St John Ambulance operate when we criticise their response to those pressures.

While they are facing such serious and sustained financial challenges, charities also find themselves under attack from Ministers in the form of the Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Bill, which is being debated on the Floor of the House as we speak. Ministers seem keen to return to some Victorian vision of society where charities provide welfare and services but do not have a say in policy. I hope that the Minister will respond to that point.

It is in such a climate that we must understand the operation of the Charity Commission. It has recently been criticised by the Public Accounts Committee for its failure in tackling fraudulent charities. The Cabinet Office is currently consulting on whether to extend the commission’s powers to act where there is abuse of a charity or non-compliance with charity law. When the Minister responds, will he tell us whether he feels that the commission is able fully to discharge its duties, and the proposed new duties, given the 30% cut it is operating under? Given that its board is picked by Ministers, will the Minister clarify the independence of the commission, which we have debated, and its role in policy making?

We recently learned that the Charity Commission wrote to Lords ahead of their consideration of key amendments to the Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Bill, effectively “torpedoing” amendments to exempt charities from the Bill, as one charity head of policy put it. It is a strange situation wherein the charity regulator—a public sector organisation—is lobbying for a gag on charity campaigning. Will the Minister explain exactly what he sees the commission’s role as and how it can carry that out given its tight budget?

Finally, we have heard much about the concerns regarding the specifics of the St John Ambulance restructuring, particularly the impact in Kent, but also elsewhere. The restructuring of a shared service—on a shared ambulance basis—has apparently undermined local pride and support for the services on which so many depend. That seems to speak to a desire to ape what is all too often the private sector approach to public sector service delivery. However, the strength of charities is in their local communities, something emphasised by the Government’s talk of big society and localism.

Nevertheless, we all too often see priority given to big national players when it comes to public sector contracts. I hope the Minister will give his views on the importance specifically of local, social and community assets in carrying on the good work of so many in the third sector.

16:00

[The Minister of State, Cabinet Office (Mr Nick Hurd)]

It is a great pleasure to serve under your chairmanship, Mr Turner.

I have a great deal of personal respect for all three Members of Parliament who supported this debate—my hon. Friends the Members for North Thanet (Sir Roger Gale) and for Canterbury (Mr Brazier), and the hon. Member for North East Derbyshire (Natascha Engel)— and I congratulate my hon. Friend the Member for North Thanet on securing it. I know they would not have brought their concerns about the governance of St John Ambulance to this place in a cavalier way. My hon. Friend spoke in both sorrow and anger and I think regretted that he needed to come here to talk about the issue. We must take it seriously because the concerns are about a massively important institution in this country. The fact that this debate has been so well attended, even though it is arguably about something specific to a constituency, is testament to the importance of the institution described memorably by my right hon. Friend the Member for Banbury (Sir Tony Baldry) as making the difference between a life lost and a life saved.

My right hon. Friend the Member for Banbury, my hon. Friends the Members for North Wiltshire (Mr Gray), for Waveney (Peter Aldous) and for Braintree (Mr Newmark) and the hon. Members for Colchester (Sir Bob Russell) and for Batley and Spen (Mike Wood) all took time to come here and record their thanks and thoughts on this extraordinarily important institution.

I normally agree with everything that the hon. Member for Colchester says, but he was wrong about one thing. He said that the senior management of St John Ambulance would be reading Hansard carefully tomorrow. Well, they will not have to, because they are sitting right behind him, which is testimony—I thought he had eyes in the back of his head, but I was clearly wrong—to how seriously they take this debate and the concerns that have been raised in this place. The Charity Commission is represented here as well, so the debate has left its mark.

As many Members have said, the challenges facing St John Ambulance are well aired. As the hon. Member for Newcastle upon Tyne Central (Chi Onwurah) stated, such challenges are faced by a lot of voluntary organisations—big, small or medium-sized—around the country, because this is an extraordinarily difficult time to be running voluntary organisations. The response of the management of St John Ambulance and the trustees has clearly been radical and controversial. They are not unique in that. As many Members have said, it is not surprising that people have very different views about the rights and wrongs of the strategy. As my hon. Friend the Member for North Wiltshire made clear, it is not something on which the Government have a view, and as a Minister I do not have a view. That is for the trustees and the members and supporters of the organisation.

What is relevant to us—it was the laser-like focus of my hon. Friends the Members for Canterbury and for North Thanet—is the role of the Charity Commission. That role is extremely important and challenging. We ask the commissioners to be guardians of the integrity of one of the most important sectors of our society, the voluntary sector. That integrity and trust mobilises £14.6 billion-worth of our constituents’ money and millions of hours of volunteering each year, and such integrity and trust is hugely important. There is no doubt that the Charity Commission is operating under very challenging circumstances, given budgetary pressures and the high profile failings that have been identified in the past.

The Charity Commission is under new leadership. There is a new board, which we have confidence in. The leadership have made it clear that they think they can perform their role within the existing budget, but our message to them is that we want them to hunker down on their core regulatory role, because of its importance and because we think that in the past they have gone off-mission. We want them to tackle issues of serious abuse.

The powers of the Charity Commission’s leadership are clear. They do not have a power to intervene outside of a formal inquiry, which is appropriate only where there is serious mismanagement or abuse. They can intervene only where there is serious risk of significant harm to or abuse of a charity, its assets, beneficiaries or reputation, and where the Commission considers that its intervention is a necessary and proportionate response to protect those. Otherwise, the law specifically prohibits the Charity Commission from acting in the administration of a charity. The commissioners do not want to do that, because that is a matter for the trustees. Such interference would conflict with the independence of charities and their trustees being—this is important—one of the cornerstones of charity law in England and Wales, provided they act within the law and the terms of the charity’s governing documents.

The trustees of a charity are ultimately responsible for its management. They have broad discretion to exercise the powers open to them under charity law and the charity’s governing document as they consider the best interests of the charity and its beneficiaries. That is the framework under which the Charity Commission operates. I know the Kent Members of Parliament—my hon. Friends the Members for Canterbury and for North Thanet—do not agree with its position, but the commissioners feel they have not seen any evidence that funds have been wrongly classified or misappropriated by the trustees. In the absence of such evidence, they feel they have no regulatory remit, although they stress they have provided advice on resolving the dispute.

I have no grounds on which to challenge such a position. I welcome the fact that the commissioners have agreed to meet the Members. I would be disappointed if that was solely because of the noise around this debate, but I am assured that a meeting will take place. On the basis of this debate, and because of the importance of the underlying issue, I will write to the chair of the Charity Commission to seek his assurances that the charity commissioners have looked at the issue in a proper way and not in a dismissive way. I would like that assurance and I welcome the commitment to a meeting.

On the attitude of St John Ambulance—the seriousness with which it sees the debate is reflected by its presence here—I spoke to the chief executive this morning. She was adamant about the commitment of the trustees to support the St John home. That has been put in writing, but I had her personal assurance on that and her personal commitment to meet both Kent Members of Parliament in person for a discussion.

I was obviously concerned to hear about accusations of high-handed and remote bureaucracies in London, but the leadership are prepared to sit down with both MPs to discuss the concerns in person, which I welcome. I imagine there is a great deal of local unease underlying this, not least from the families of the residents of the home, where the uncertainty is unsettling. It would be good if that concern could be settled at a local level, but those who have concerns about the governance of the charity will have the opportunity to discuss them with the leadership of the charity. It is a magnificent national institution.

The Government recognise everything that Members have said about the importance of the charity. As Minister responsible for youth, I recognise the extraordinarily valuable role that it plays in training young people; as my hon. Friend the Member for Braintree said, the number of young people being trained grew significantly last year. So its work is enormously important, and it is critically important that we continue to take great pride in this institution and trust it.

This debate has secured an important objective in airing Members’ concerns and in ensuring that both the Charity Commission and the leadership of the charity itself respond to those concerns. I welcome that.

Flooding (Somerset Levels)

Wednesday 22nd January 2014 Westminster Hall

16:10

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

I am delighted to be under your chairmanship once again, Mr Turner. I am also delighted to see my hon. Friends the Members for Taunton Deane (Mr Browne), for Wells (Tessa Munt) and for Somerton and Frome (Mr Heath) in Westminster Hall to take part in this debate about the serious flooding in Somerset.

I have stood in this place and made many similar speeches before. I have criticised the Environment Agency annually because the flooding in our area has become an almost annual crisis—and here we are again, mopping up after the latest deluge, listening to the same lame excuses and hoping that there will finally be some sensible action. I have to tell this House that many of my constituents are not as restrained as I am, and who can blame them, or anyone else across Somerset, for feeling like that? In my constituency alone, 17,000 acres of land on the Somerset levels are now under water: homes are uninhabitable, farms are unworkable and jobs are being expensively destroyed. A huge area of Somerset is now drowning under water that should have been prevented from getting to where it is now.

What went wrong? Was it climate change or incompetence? Let me read an extract from a constituent’s e-mail:

“As I write, the village of Moorland is slowly flooding. Earlier today the Environment Agency brought in additional pumps at Northmoor. But local farmers begged for pumping to start in earnest ten days before Christmas. However, the response was just too slow”.

These floods were predictable and predicted—the Met Office knew that it was going to rain, and anyone in Somerset with half an ounce of common sense or a bit of seaweed would also have realised it—but the Environment Agency apparently failed to cotton on. In spite of its highly paid bosses and a huge team of experts it missed that fact.

The Environment Agency is one of the most expensive quangos in this country. It employs more people than the Canadian environment agency, and the number of people employed by the environment agencies of Denmark, France, Germany, Sweden and Austria put together do not match the number of people that our agency employs. Many of those countries have far longer coastlines and in some cases far bigger populations than we do, but their environment agencies cost a great deal less and do a better job than ours. Why are we spending £1 billion a year on the Environment Agency? Are we seriously getting value for that money?

On the Somerset levels, people are scared and angry—very angry. My local council in Sedgemoor is angry, and I am sure the same is true in Taunton Deane and Mendip. These floods shut off our major roads; the resulting detours add many miles to our journeys, which consequently cost us more. The roads that have flooded have sunk 12% in Sedgmoor. That is not a freak act of nature; it is unforgiveable negligence. Nineteen years ago, the two main rivers that run through Sedgmoor were regularly dredged by the old river boards. Dredging was expensive, dirty and repetitive, but it was a job that everybody realised had to done, because rivers on low-lying land silt up if they are not dredged. That is common sense.

Once upon a time, Sedgmoor was probably part of the Bristol channel, until the Romans arrived and dug ditches. It took Dutch engineers to tame the levels in the 17th century. They understood the consequences of doing nothing, as much of their own country is below sea level. It is well worth dwelling on that fact: over Christmas and in the ghastly wet days that followed, almost the same amount of rain that flooded my constituency fell in the Netherlands, but there were no floods in the Netherlands, because in Holland they dredge, they prepare and they protect. They plan for the worst and rarely suffer a problem.

One of the benefits of regular dredging is that the riverbanks are built up at the same time. It is a double whammy—ask any Dutch hydrologist. However, 18 years ago the Environment Agency was created and it made a policy U-turn that took everybody completely by surprise, and we have all been suffering from it ever since. Regular dredging of the Parrett and the Tone came to an abrupt end, and the agency decided that the future lay in managing any floods that might result. The agency bears huge responsibility for all the problems that have happened. The Parrett and the Tone are now so silted up that in some places they no longer act as rivers at all.

[Mr Jeremy Browne (Taunton Deane) (LD)]

I congratulate my hon. Friend on securing this important debate today. In my conversations with residents, business people and farmers on the levels, they raise three points with me. One is about whole-river catchment and additional house building in Taunton, and whether that is having an effect on flooding, including making it more rapid. Another issue is pumping, and my hon. Friend has already touched on that, but I would be grateful if he expanded even further on the main issue—the No. 1 priority for people on the levels—which is dredging. I am told that the Tone and the Parrett are operating at only about 60% of their capacity, due to their silting up. Everybody who I speak to on the levels is convinced that dredging is the No. 1 action that needs to be taken to try to prevent this terrible flooding problem in the future.

[Mr Liddell-Grainger]

rose—

[Tessa Munt (Wells) (LD)]

Will my hon. Friend give way?

[Mr Liddell-Grainger]

Of course I give way to my hon. Friend.

[Tessa Munt]

I would like to add a plea for the Axe and the Brue to be dredged, because they are also in need of dredging, and the level of flooding caused by those rivers is extremely worrying for my constituents. So it is not only the Tone and the Parrett that need dredging but the Axe and the Brue.

[Mr Liddell-Grainger]

My hon. Friends are both absolutely right. This is a ridiculous situation. All our rivers need to be dredged, and I know that my hon. Friend the Member for Wells has done an enormous amount for the Brue and the Axe, as indeed my hon. Friend the Member for Taunton Deane has for the rivers in his area. He is absolutely right that we are 40% below capacity. If we took an empty Coke bottle and filled 40% of it with sand, we would not get the Coke in the bottle. It is ridiculous to be told otherwise. I see on the BBC website that the Environment Agency says our comments are “too simplistic”. Is the agency now insulting the people of Somerset? I think it is.

The dramatic effect became visible in summer floods two years ago. The rivers could not drain water away because of the volume of water pumped into them, which happened precisely because, as my hon. Friend the Member for Taunton Deane says, the capacity of both the Tone and the Parrett is so greatly reduced. The Environment Agency was attempting to push water into an outlet that was already completely full. The agency was also having great difficulty pushing water because many of the pumps being used were more than 40 years old and—as we have now discovered—they had not been properly maintained. In case anyone was wondering, the responsibility for maintaining pumps is the Environment Agency’s, nobody else’s.

I am afraid that the people at the agency are what we call serial offenders. They stick to an agenda that seems to allow them to do exactly what they want. The agency’s own literature is full of vague phrases and get-out clauses. No. 1 is:

“We will continue to maintain defences where there is an economic case to reduce the risk from flooding to people and property.”

What do they mean by the words:

“where there is an economic case”?

Who decides that? No. 2 is:

“We will continue to maintain defences that are required to protect internationally designated environmental features from the damaging effect of flooding, for example Sites of Special Scientific Interest.”

That is a big clue. The agency will go out of its way to protect “internationally designated environmental features”, but not our farms or our people. No. 3 is:

“We will consider maintaining defences that do not fit categories 1 and 2 above”—

this is absolutely true—

“but where work is justified due to legal commitments or where stopping maintenance would cause an unacceptable flood risk.”

Note that the agency will only “consider” maintaining defences; it does not promise to do anything at all. No. 4 is:

“We will, following consultation, consider stopping maintenance of defences that do not fit the above three categories. We will work supportively with interested parties to explore options in such circumstances.”

So the agency admits that it may stop maintaining some defences altogether, which is precisely what it did in 1995, as soon as it was established. We have been struggling with those daft decisions ever since.

The Environment Agency believes that the levels should be allowed to return to the swampy wilderness that they were in the middle ages, and all in the name of “managed flood risk”. The most it is prepared to do is to dig out teeny-weeny bits of two rivers—“pinch points”, as it calls them. One of them, at Burrowbridge in the constituency of my hon. Friend the Member for Taunton Deane, is not capable of being dug out. The agency promised to do the work last year. It started—guess what?—in October and it is not even halfway through the work. The price of this unfinished business alone is put at roughly £4 million. Obviously, that is a great deal of money. I have no idea whether or not the agency is telling the truth about the figures; we are taking the best guesstimate we can.

The Environment Agency’s argument throughout the past 19 years is that dredging is uneconomic—tell that to the locals—but when Northmoor and Currymoor were allowed to sink beneath the flood waters last year, I can tell this House that the real cost to the local economy was in the region of £10 million.

[Mr Jeremy Browne]

I support my hon. Friend’s last point on the economic analysis of the cost of flooding. I have first-hand experience of speaking to people who live on the levels in my constituency. They are unable to get their children to school, they are unable to get to work, and local businesses such as pubs lose a large amount of their custom during the busy new year period. That is hugely detrimental to people living in that part of Somerset, and it needs to be factored in to any cost-benefit analysis of dredging.

[Mr Liddell-Grainger]

I thank my hon. Friend. He puts the situation in a beautiful nutshell. That is delightfully put.

We are suffering because of inadequacy and absolute ineptitude. Why should people not get to work? People in the constituency of my hon. Friend the Member for Somerton and Frome are carrying out their bins in boats, which is farcical in the 21st century. I know you would not put up with that on the Isle of Wight, Mr Turner, and neither should we. You have a bigger island than we have.

The previous chief executive of the Environment Agency, Barbara Young, or Baroness Young of Old Scone as she is now, once admitted that she would like to place limpet mines on all the old pumping stations just to get rid of them. She preached the gospel of sustainability, and she said that the only long-term solution would be to open the flood banks and let the waters spill over the flood plains wherever the rain or tides dictate. What has changed? Lady Young has gone, but her director of operations, Paul Leinster, adopted most of her dotty ideas and took her £200,000 a year job—nice if you can get it.

Today on the levels, the Environment Agency spends far more money creating floods than averting them. Right now the agency is pioneering an extravagant, ridiculous scheme to flood the Steart peninsula near the Hinkley Point nuclear power station, which we in Somerset know about, in order to create a “wonderful” habitat for wildlife. The agency will also prove to the nosey parkers in Brussels that we are doing all we can to meet EU objectives to make life more comfortable for reed warblers. That is of course a load of nonsense, absolute rubbish and a waste of money. The agency is spending £31 million digging holes on Steart. I am all in favour of our feathered friends—I should be—but I have missed something. Is a new European directive likely to put birds before people? I am beginning to wonder.

Poor people are being baled out of their homes in Northmoor, Moorland and across Somerset, and my hon. Friend the Member for Somerton and Frome will say a few words about that in a minute. The Environment Agency has a woeful track record of being led by wets, do-gooders and twitchers. Lady Young with her limpet mines was once chairman of English Nature and chief executive of the Royal Society for the Protection of Birds. Tweet, tweet.

The noble Lord Smith of Finsbury, Chris Smith as he was when he was Labour, remains chairman of the Environment Agency until July 2014. He is a typically wishy-washy man and a townie. He is a man who described last year’s flooding as being caused by the “wrong type of rain” when he stood in the constituency of my hon. Friend the Member for Taunton Deane. The Environment Agency wants us to believe that it is far too expensive to dredge rivers, which is rubbish. If those people really cared about the environment, they would know that failure to dredge completely upsets the ecology of the whole area and the very wildlife that they religiously want to protect.

So what are we going to do in Somerset? Wait until Lord Smith pulls his finger out of the dyke, metaphorically speaking? I am afraid that we have had enough. We are not going to put up with it, year in and year out. Flooding is not a once-in-100-years event now; it is happening every year. The Royal Bath and West show and Michael Eavis of Glastonbury festival fame have started rattling tins to try to raise £2 million towards dredging. That money is gratefully received, and they are doing a good job, as my colleagues in Somerset know. Perhaps Her Majesty’s Government would care to give as generously, or at least lean or sit heavily on the Environment Agency to give seriously. Perhaps the Secretary of State for Communities and Local Government could sit on the Environment Agency.

It is always being said that the Environment Agency is broken, but it is still the biggest quango on the planet as far as I am concerned. The fundraisers are already talking to the Dutch. There is a wonderful machine used in East Anglia which has been brilliant, and I am going to go to see it in action—I am arranging to see Dutch engineers to support the task, and I will speak to my Somerset colleagues about it. The task is not difficult or impossible. We can do it on a much bigger scale in different areas. I am meeting members of the Dutch Parliament in Strasbourg next week at the Council of Europe to talk about what they can do to help us to get the Environment Agency to change its mind.

The Environment Agency has failed us once again, and I am absolutely sure that the Minister and the whole Government want the organisation to be slimmed down and to make it work better and more efficiently. Now is the time for action. Will the Minister please tell us what we want to hear? The people of Somerset not only deserve this; they need it. Get the rivers dredged and give us hope.

16:24

[Mr David Heath (Somerton and Frome) (LD)]

I am grateful for the opportunity to say a few words and to congratulate the hon. Member for Bridgwater and West Somerset (Mr Liddell-Grainger) on securing this debate. The Minister must have wondered what on earth he has wandered into at this Somerset festival of complaint. He can pass on the comments that are more apposite for another Department.

I just want to say on behalf of my constituents that yet again we are facing what are described as once-in-100-years events, which now seem to happen every year. Villages and communities in my constituency are cut off. Muchelney—the clue is in the name, which means “big island”—has reverted to being an island for the past several weeks, and it will continue to be so for weeks to come. Individual constituents have also been cut off. I have just been on the phone to a constituent who has a relatively new house built over the past couple of years to the requirements of the Environment Agency to be above the flood line; nevertheless, she has found herself cut off.

We want to get across the message that, first, the floods this year are worse than ever. We are used to flooding on the levels, but these floods are worse than ever. Places in my constituency have flooded that have never previously been flooded. The road at Pibsbury, one of the main roads into Langport, is closed. Aller drove is flooded, which may be a result of the Environment Agency tinkering with the spillway there. Nevertheless, houses there are flooded.

There is a strong feeling that we now have to do something about the flooding. I am grateful to the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson), who has responsibility for flooding, for taking the trouble to come down to my constituency last Wednesday. I took him around the road closures and the flooding, so far as I could, to see the affected areas. He was both fascinated and appalled to see the situation. He kindly joined me at a meeting in Somerton with what nowadays we call stakeholders—people who know about flooding. There was unanimity on the Somerset end that we want exactly what the hon. Member for Bridgwater and West Somerset set out.

What we need to do is increase the capacity of our watercourses, which means the Parrett and the Tone; it also means the local clearing of our watercourses and rhynes to provide capacity so that we can run the pumps and get water away. That is what people find most offensive—that we cannot get water away. The pumps are not even on at the moment. We have a forecast for heavy rain at the end of this week, and right at this moment the local authority is considering whether it needs to declare a major incident for this weekend.

Dredging, dredging, dredging is our first request to increase capacity. Secondly, how on earth is it that a main road, which is mainly in the constituency of my hon. Friend the Member for Taunton Deane (Mr Browne), the A361, can be closed for weeks? It is the main road from our part of the world to Taunton. The Minister’s Department can help communities to help themselves by providing support for the mitigation work that is needed and for the cost to the local authority of road maintenance. When such causeway roads are flooded, they literally fall apart and we as council tax payers have to pay.

Will the Minister please take those messages back? I am confident that this is the year we will do something about the flooding on the Somerset levels, not to prevent it ever flooding again—we understand that flooding happens—but to stop water getting into people’s houses, to stop communities being cut off and to stop the water sitting for week after week with nothing apparently happening.

16:28

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

It is a pleasure to serve under your chairmanship, Mr Turner. I begin by congratulating my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger) on securing this debate. Before I answer some of the points that have been raised and comment on the issues, particularly those affecting local authorities, I acknowledge the comments of the hon. Member for Somerton and Frome (Mr Heath) on my position in responding to some points that probably sit better with the Department for Environment, Food and Rural Affairs. We will ensure that that Department receives a note of what has been said today. However, I will address his comment on the possibility of a major incident being called at the weekend.

As we have been sitting here during this afternoon’s debate a major incident has been called in Somerset at the request of the council. A meeting of the strategic co-ordination group has just concluded, and for the moment the situation will be managed in the county to ensure assistance is provided as required. The Government liaison officer from my Department will be in attendance. Indeed, the chief fire and rescue adviser is sitting in the room at this very moment.

I am pleased that we are having this debate, not least because it provides an opportunity to put on the record, while we talk about local authorities, the Government’s and my appreciation for the effective way in which emergency responders, local authorities and the emergency services, in particular the fire service, managed the flooding events witnessed across England throughout December into January, and for the continued support that local authorities and the wider community are providing during the ongoing flooding of villages on the Somerset levels. My hon. Friend the Member for Bridgwater and West Somerset commented on the role played by local authorities, which have worked hard to ensure that people have what they need and should be congratulated.

I also want to say how sorry we are for those people who have had their homes or businesses flooded, some of whom have experienced re-flooding. I represent a constituency that has recently experienced tidal surges and flooding, and the effects are felt not just in the loss of personal possessions but in the wait for a home or business to dry out and be fit to live or work in again—flooding is equally devastating for business owners. It is horrible time for all those affected and our thoughts obviously go out to them.

We cannot prevent flooding completely, as hon. Members have acknowledged. When the weather deteriorates, there are well practised approaches to warning and informing emergency responders and the general public of what is likely to happen. That is why we have local resilience forums, one for each police force area, identifying the risks faced at the local level and drawing up plans to ensure a response if such risks materialise. If local responders are overwhelmed or if an emergency affects multiple areas, the Government can support the response.

For all emergencies, the lead Government Department —in this case the Department for Environment, Food and Rural Affairs—is responsible for monitoring the situation on the ground, assessing what, if any, Government support is needed in the immediate aftermath, and ensuring that the Government as a whole respond as necessary. Throughout this entire period of severe weather that England has experienced, the Department did exactly that, including convening daily, often twice-daily, teleconferences of officials, and the Secretary of State for Environment, Food and Rural Affairs chaired daily meetings of Cobra.

I want to be clear about what the Government have done to help communities to recover from these most recent floods. We have been there in the aftermath: not only have we activated the Bellwin scheme for emergency financial assistance, but on 17 January I announced a further severe weather recovery support package that local authorities can call on over and above Bellwin. We have continued to work with local authorities in their transition from response to recovery, and our officials have called the chief executive of every local authority affected by the flooding so that we are clear about the local impacts. We are already inviting every local authority leader from affected communities, along with representatives from the voluntary sector, to meet me to discuss any further support that may be necessary and to look at the lessons learned exercise, which some Members have commented on today.

[Tessa Munt]

I wonder whether I might draw the Minister into looking forward. I appreciate everything that has been done and absolutely endorse his comments about those who act in emergencies. The reality, however, is that if the money paid by internal drainage boards to the Environment Agency is given back to the IDBs, such as the Axe Brue IDB in my area, along with some responsibility, then contractors with expertise and knowledge of the local area can actually carry out work to prevent flooding in future.

We really have to address this. I spoke with my hon. Friend the Member for Newbury (Richard Benyon), then the Minister with responsibility for flooding, when he visited farmers in my constituency in April last year. Promises have been made, but we need to take action and stop the poor farmers and landowners, who are paying rates to the drainage boards, having to pay twice. Every time they are asked to respond by taking action to help themselves, they have already paid for that response in the money that goes to the Environment Agency. We have to do something.

[Brandon Lewis]

All hon. Members have made strong, passionate cases for ensuring that progress is made and that they get the right response, including, in particular, forward work by the Environment Agency across Somerset. My colleagues in the Department for Environment, Food and Rural Affairs will want to look at the information and will be speaking to Members. The Prime Minister has already announced that the Secretary of State will be coming back to the House in the next couple of weeks to discuss where we are going and what the Environment Agency’s next steps will be. Members will then have the chance to quiz him further.

[Tessa Munt]

I have to say that the Environment Agency has been pretty clear locally that it cannot cope with the situation, so much more radical action is needed. The expertise sits in the internal drainage boards. They have the people with all the knowledge and they should be allowed to do the work. They can do it. Somebody needs to take some action about removing that responsibility from the Environment Agency.

[Brandon Lewis]

I am sure that my hon. Friend will be putting that point to the Secretary of State for Environment, Food and Rural Affairs.

I want to say a little bit about the Bellwin scheme, which has been supporting affected areas since we activated it in December. As most local authorities are fully aware, it is a means by which the Government can reimburse a local authority for its immediate and uninsurable costs associated with responding to an emergency or disaster in its area. Bellwin is a well recognised and respected funding scheme. Local authorities have one month from the end of an incident to notify the Department that they intend to apply for activation of the Bellwin scheme. So far, 37 authorities have given us notification. The colleagues of my hon. Friend the Member for Bridgwater and West Somerset at Somerset county council have already registered an interest to apply for Bellwin support in respect of the current flooding.

Due to the way the Somerset levels and moors are managed, they are designed to flood, which results in the entire area effectively still remaining a response phase to the recent flooding—as I said, a major incident has been declared today—and will remain so for some weeks. I recognise, however, that the recent flooding in some villages is worse than that seen in 2012. The full extent of the flooding may not be realised until the levels and moors are fully pumped out. My chief fire and rescue advisor has offered additional pumping capability and the use of local fire and rescue services’ high-volume pumps to support the local Environment Agency efforts in returning the levels to a safer capacity for this time of year. They have further supported Somerset county council by providing a fire boat and crew, to be used as ferry service for the residents of the cut-off villages to enable them safely to obtain necessary supplies, and this will remain in place.

I have been advised that the local Environment Agency took action to mobilise pumping appliances in advance along the River Parrett. This was following the numerous contingency plans that have been put in place since the 2012 floods. In recognition of the serious impact that the flooding is having in Somerset, the Environment Agency is mobilising an additional 20 temporary pumps, increasing its pumping capacity by 150% and making it probably the single biggest pump mobilisation in the country. The agency has also brought in extra manpower from around the country to support what has been a 24/7 incident response for some weeks.

Since the summer flooding of 2012, the Environment Agency has been working with several local organisations and communities to consider how best to manage future flood risk in the levels area. Members have made their views clear on that today, and I will ensure that comments are fed back to the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for North Cornwall (Dan Rogerson). A local task force, comprising locals, partners and communities, has been established to develop a clear, long-term vision for the future of the Somerset levels and moors. The task force will be funded by the Department for Environment, Food and Rural Affairs, local authorities and local environmental groups with expert support from both the Environment Agency and Natural England.

On dredging, which was mentioned by my hon. Friend the Member for Bridgwater and West Somerset in particular, the Environment Agency is working closely with local partners to develop options to improve the situation on the levels.

[Mr Liddell-Grainger]

I am sorry to intervene here, but I never hesitate to correct a Minister. I know that he is working from what material he has, but that is absolute rubbish. The Environment Agency is not working with locals and certainly has not been in touch with Members from Somerset, and I am not aware that my right hon. Friend the Member for Yeovil (Mr Laws) has had any more success than us. That is absolutely not the case at all. I am sorry to have to correct the Minister.

[Brandon Lewis]

It is a point well made. If my hon. Friend’s understanding is that the Environment Agency is not meeting locals, I will certainly feed that through to DEFRA Ministers to ensure that they instruct the Environment Agency to talk to locals about what they are doing and how they are doing it in order to get things moving in a way that is satisfactory for everyone. Ultimately, we want to ensure that residents, on whose behalf hon. Members have spoken so passionately today, are properly protected.

[Mr Heath]

What the Minister may not realise, because his Department is not leading on this, is that the issue is the policy that the Environment Agency is required to follow. In cost-benefit analysis, we will always lose out to city and urban areas. What we are saying today is that we have simply run out of patience. A political decision and a governmental decision are needed, and I am confident that my former colleagues in DEFRA will make that political decision.

[Brandon Lewis]

The hon. Gentleman makes a fair point. He read my mind because I was going to say that the matter will depend on the economic case according to existing policy. I will ensure that the Secretary of State knows hon. Members’ views on the criteria. The Department will look at the matter, and I expect hon. Members to continue to quiz us and to make the case for Somerset.

As I said, I was pleased to be able to announce on Friday the extra support we are giving to local authorities on top of the Bellwin scheme. There will be a clear expectation for results to be achieved with the extra funds. Local authorities will have a key role in identifying priorities for assistance, working closely with communities and businesses to enable that to happen, using the re-prioritisation of existing budgets that we announced. My officials are working to finalise arrangements for allocating the money and will be writing to chief executives very shortly to outline exactly what the application process will be.

In closing, I turn specifically to the role of local authorities, which are often subject to a tough line from hon. Members and residents about what they do not do. This afternoon, hon. Members have recognised that local authorities have worked really hard and have provided superb support for the communities, pressing the case to make sure that people have the right support in the tragic situations in which they find themselves. The Bellwin scheme is there to provide extra support, as will the money we announced on Friday. Flooding is devastating for those affected, and I am grateful to have had the opportunity to set out what the Government are doing and to support the work of the emergency services, local authorities and voluntary groups.

[Mr Liddell-Grainger]

Many council leaders are watching our debate, and information has been sent through to us. Could the Minister convene a meeting of the leaders of the affected councils—Taunton Deane, Sedgmoor, Mendip, South Somerset and West Somerset—to talk about the matter in greater detail? Perhaps he will think about that.

[Brandon Lewis]

I would be happy to do that. This week, we are writing to every local authority in the country that has been affected by flooding to invite them to send representatives in relevant and logical groups to talk to me about the issues. Those letters may already be on their way to chief executive and leaders. I will ensure that the Department for Environment, Food and Rural Affairs takes note of what has been said today that is relevant to that Department.

I again congratulate my hon. Friend on securing this important debate that makes clear the case for the people of Somerset.

16:43

Sitting suspended for Divisions in the House.

Rothschild Bank and Mortgage Equity Release (Spain)

Wednesday 22nd January 2014 Westminster Hall

17:08

[Huw Irranca-Davies (Ogmore) (Lab)]

It is a delight, Mr Turner, to serve under your capable stewardship again this afternoon. I am delighted to have secured this debate about an issue of direct concern to not only my affected constituents but, as I have become aware, several hundred other UK citizens. I am seeking justice for them. I urge financial institutions such as Rothschild to come clean on their involvement and to discharge their moral responsibility towards people, many of whom are elderly and retired, who risk being left destitute. That has happened primarily because they had good reason to believe that Rothschild was the reputable and trusted brand behind a financial product that now looks more and more like a property scam and mis-selling. Will the Government and the Minister investigate the matter fully to assess whether victims have been scammed and there is a case for compensation? Will the Minister speak to Rothschild to make a moral case about what the bank may end up defending in courts in Spain, the UK and elsewhere on the flimsy pretext of, “Not me, guv”?

The matter resembles nothing more or less than an equity release scam, and it is not only Rothschild that is linked to it. Other banks, including Scandinavian and British ones, lured pensioners into gambling away their lifetime savings and homes on two enticing but ultimately flawed pretexts: first, that by investing in a loan secured against a mortgage on a property in Spain, they would obtain a small income additional to their often limited pension in retirement; and, secondly, that by registering a mortgage on that property, they could be helped in eliminating inheritance taxes for their children. Imagine an elderly couple who have worked hard all their lives, paid their taxes and contributed to society and the community—a professional couple who have planned for their retirement carefully, one of whom has suffered significant health problems in later life. They have invested all their wealth and savings in one retirement property in Spain. They do not have other assets or sources of wealth, and they are offered an enticing double bonus of releasing equity and gaining inheritance tax advantages regarding their retirement property in Spain.

Such an enticing offer perhaps sounds too good to be true, and it certainly was for my constituents, a retired couple whose lives I have just described in summary. When that offer is packaged and presented as being backed by such an eminent and reputable financial institution as Rothschild, that is the icing on the cake. They might have thought twice if they were dealing with some fly-by-night operator, but Rothschild? Even someone unfamiliar with the financial world would recognise that name and see it as conferring some prestige and status on any product being offered.

Rothschild is, as its website and company information proudly proclaim, one of the world’s largest independent financial advisory groups, employing around 2,800 people in 40 countries around the world. This worldwide brand proudly states that its 200-year-old reputation is based on clear values of excellence, teamwork, focus on the client, the long-term interest of the client and—at the top of the list—putting the client first. Rothschild explains:

“We provide outstanding client service, with the highest standards of professional integrity to build enduring relationships of trust and confidence.”

I say to Rothschild: “You have badly deviated from your core values, badly served your brand and reputation, and badly served people who regarded themselves as your clients and not the clients of some intermediaries, as you claim. They are now facing penury after investing in products in which your name—Rothschild—your integrity and your values were used as a key selling point.” To walk away from those hundreds of citizens and to deny not only liability, but any assistance, and to force them through costly court actions in Spain or elsewhere, is a stain on Rothschild’s history. The Rothschild family motto “Concordia, Integritas, Industria”—harmony, integrity, industry—seems somewhat absurd when my constituents and others face personal ruin.

As I mentioned earlier, Rothschild is not alone in the firing line. Danske Bank, Sydbank, Nykredit and others are not only in the firing line over this, but in the dock, with some people in custody. A warrant was issued in Spain by the general directorate of police and the Guardia Civil in Madrid on 26 November for two Rothschild employees, Mark Coutanche and Stephen Dewsnip, who are directors, to appear in court to face criminal charges. The warrant relates to accusations that N. M. Rothschild & Sons sold mortgages to Spanish-based pensioners as a tool, albeit a legal one, to defraud the Spanish tax office and deliberately concealed crucial data that would prove that its equity release product was impractical as an investment.

Let us look at the evidence for the case against Rothschild and others. They completely, unarguably and incontrovertibly provided support, training, the terms of business for intermediaries selling the inappropriate products, supportive promotion through glossy brochures and websites, and much more. For Rothschild to say that it was not directly involved and that the product was sold through intermediaries, which distances it from the situation, is akin to a parent saying to their child, “It’s not my fault that the Christmas presents are broken or cruddy, it’s Santa’s—sue him!”, or to a retailer blaming its supply chain for worker exploitation in Bangladesh when it is selling T-shirts for £2, or for horse meat in its beef lasagne. It is not good enough. We all know who should take responsibility.

[Heather Wheeler (South Derbyshire) (Con)]

I apologise for not being present at the start of the debate, Mr Turner; we had a little vote at the 1922 committee. When we look at the terrible tragedy that has happened, does the hon. Gentleman agree that the only safe way for people to take forward equity release is to use firms that are part of the Equity Release Council, which holds them to a high standard? In saying that I should declare an interest, because I hold an unremunerated position on the advisory board of the UK Equity Release Council.

[Huw Irranca-Davies]

The hon. Lady is absolutely right to guide people towards good and assured equity release products. Not all such products are bad and nor are all sellers. It is a question of how the products are used and at whom they are targeted—I will come to that in a moment.

How can companies such as Rothschild choose to distance themselves from this matter when the people affected are UK citizens who were sold to by a Rothschild subsidiary based in Guernsey—Rothschild, of course, was established in England two or more centuries ago? It is not good enough for Rothschild to say that the situation is nothing to do with it and that people should take the matter up in the Spanish courts. The hon. Lady’s advice, however, is very good.

We all know who should take responsibility. As we say at home, “Man up.” Rothschild backed these products to the hilt, resourcing and designing them. It lent its name and support to the selling of them. It was party to the flogging of unfit products to unsuitable clients who did not suspect that they were on the back-end of a dodgy scam that was fit for Trotters Independent Traders. At least we could laugh along with Del Boy and Rodney; there is no laughter when my constituents and many others face poverty and hardship in their retirement.

Rothschild and its compliance and legal teams have been robust in disputing the allegations and, indeed, have threatened legal sanctions against those who repeat them. The allegations are very sensitive. When I first raised the matter on the Floor of the House, I received a letter offering a meeting and suggesting that the facts, as explained to me, were “both incomplete and inaccurate”. The letter went on:

“Your statement that Rothschild gave advice and support is factually incorrect.”

I dispute that, as evidenced by my earlier comments and the further remarks to follow.

This debate has obviously caused Rothschild some consternation, as it contacted me yet again to stress that there were “serious factual inaccuracies”. It wrote:

“We trust you understand the importance to us that the position is fairly and accurately portrayed in Parliament.”

Here then is the truth, put fairly and accurately.

Although Rothschild has not provided me with wholly precise figures, it has advised me that just short of 130 loans were provided, of which fewer than 50 were loans to Spanish non-tax resident individuals, some of whom live in the UK. Parliament will note that the reason why Rothschild has those statistics is because a Rothschild product underpins the scam. Let us remember that it disputes that the situation has anything to do with it—it is those pesky intermediaries and savings people. As the now infamous CreditSelect series 4 product is a Rothschild product, I am sure that after this debate Rothschild will be able to provide me and Parliament with the precise figures on the number of loans and the number of people affected who are in this country, along with what the total and the average level of loan debt are for UK citizens, as well as the age profile of those UK citizens. It is a Rothschild product, after all—it is not delivered by Santa or anybody else.

I am fortunate to have seen—indeed, I have it with me—a copy of the presentation pack used back in 2006 to support the sale of these Rothschild products and to train and inform the intermediaries who went on to sell them to unsuspecting victims. It is prominently marked as

“not for circulation to the public”.

Its title is “Rothschild Channel Islands: CreditSelect Series 4 presentation”, and it is by none other than “Stephen Dewsnip, Director”, who as I mentioned earlier has been served a warrant to face charges in Spain.

The first slide—this is not for public consumption, remember—tells aspiring intermediaries and salesmen who want to flog this dodgy deal that Rothschild Channel Islands is the

“premier choice for offshore private banking services”.

That would have been reassuring for the intermediaries, who no doubt repeated the bold claim to future victims.

After detailing the design and extensive back-up for the CreditSelect series 4 product, the presentation lists by name, with phone numbers and e-mail addresses, five Rothschild contacts, including Dewsnip and Coutanche —he was also mentioned in connection with warrants in Spain—who were the guys behind the package. “Contact them,” it says. “You won’t be on your own as intermediaries. Look at this back-up provided directly by N.M. Rothschild and their senior people. They are, after all, the premier choice for offshore banking services.”

The presentation goes on to explain how the initial launch of the product in Spain will be followed by its roll-out in Portugal, France, the UK and so on—how exciting! It explains how Rothschild will instruct the valuer, check the application pack, clarify the details with an independent financial adviser and prepare the credit papers for the Rothschild credit committee, and how the lawyers would be instructed to prepare the legal documents. It goes on to explain the benefits, saying that there is no upper age limit, which is very handy for retired folk, and that no proof of income is required. Of course not; it is the property as collateral, stupid. There is no need to worry if those people are retired pensioners and the property is the only thing they have—if it is their life savings and entire worldly wealth invested in bricks and mortar.

A slide labelled “Key Features” explains that these products are

“Well-structured loan and investment products from excellent brand names”,

and that clients are

“not exposed to unnecessary risks due to Rothschild’s conservative approach”—

there is that Rothschild name being used again as back-up.

Do we really think that the salesmen—the intermediaries —did not go big on the Rothschild name when they were flogging the product? Every single victim says that Rothschild was central to the sales pitch. It was made clear that Rothschild was behind the scheme and was backing the scheme—that it was the scheme. “No worries,” said the intermediaries whom Rothschild were training and supporting to sell CreditSelect series 4.

The main client benefits are listed in the document as an initial cash-back facility, liquidity providing a loan for investment, the prospect of long-term capital growth and tax planning opportunities. That is irresistible for the sales guys and for vulnerable victims, too.

In case anyone was in any doubt about how good the product was and who was backing it, the presentation told us that it was:

“A responsible, competitively priced asset-backed lending facility from a prestigious bank available to Spanish residential property owning clients.”

A “prestigious bank”: Rothschild Channel Islands, established in 1967 in Guernsey; a subsidiary of the Rothschild Group, established in England in 1798 and owned by the Rothschild family, whose motto is “Concordia, Integritas, Industria”, or harmony, integrity, industry. How incongruous that word “integrity” seems in the family motto in light of the action towards my constituents and others.

In case the role of Rothschild in this debacle is not yet clearly established, let me again go back to 2006 when Rothschild was saying this to promote the scheme:

“Our innovative product CreditSelect is available throughout a network of financial advisers around the world, thus giving clients straightforward access to credit”

for a wide “range of purposes”. It also said:

“To help support those professional financial advisory firms with whom we have agreed terms of business for the availability of CreditSelect, we have a website dedicated to assisting the promotion and delivery of the service...This website is regularly updated to ensure that our introducers have round the clock access to all facility documents for downloading and printing…clients brochures, the latest Funds List”.

Fast-forward to 2012 and Rothschild, faced by potential actions in Spain and elsewhere, has changed its tune. It is now saying to complainants:

“Hamiltons”—

that is one of the independent advisers, but you can insert any number of other financial advisers at your discretion, Mr Turner—

“were your financial adviser and acted as your agent in relation to your application for a CreditSelect loan facility, we are not able to accept responsibility for any advice that may have been given to you by Hamiltons”,

or any other assorted intermediaries. That is dissembling and distancing worthy of Pontius Pilate, and it is just as distasteful.

There are all sorts of scams and mis-selling, big and small: from the cowboy builder who sells someone roof repairs that they do not need, to payment protection insurance and mortgage mis-selling. There are real issues of mis-selling, but there are also fundamental issues of trust and integrity. We have seen a practice that can be described as predatory lending. Intermediaries might have laid a trap, but the trap was built by Rothschild. Unless Rothschild and others that are implicated in the scandal step up to the mark and accept their responsibility, this will become the latest chapter of banks and financial houses despoiling the very beds they lie in.

Rothschild’s family empire is estimated to be worth $300 billion to $400 billion. My elderly retired constituents’ net worth was tied up in the property in Spain that the Rothschild group ended up taking. Will the Minister examine the scandal and force Rothschild and the other banks involved to face their responsibility for impoverishing pensioners and to make good their losses? Rothschild can afford to do so; its reputation cannot afford not to. Rothschild has offered to meet me. I will be happy to do so on the clear understanding that I am looking for justice for my constituents and others, not excuses and legal defence.

17:26

[The Financial Secretary to the Treasury (Sajid Javid)]

I welcome you to the Chair, Mr Turner. It is always a pleasure to serve under your chairmanship. I thank the hon. Member for Ogmore (Huw Irranca-Davies) for making a powerful case on behalf of his constituents. I assure him that I have listened very carefully.

Some of us will have constituents affected by these products who now face an uncertain financial future instead of the comfortable retirement they thought they had earned. As the hon. Gentleman said, the equity release products in question were sold to some UK pensioners resident in Spain. It seems that they were sold by independent financial advisers operating in Spain who suggested that they release equity from their houses and invest the loan in a fund, often claiming that that would have inheritance tax benefits. The products were then provided by a variety of banks, mainly based in Scandinavia, but including Rothschild bank.

With the onset of the financial crisis, those investments did not perform, so many of the investors breached the terms of the loan they were given. That has left many expats in Spain, including those from the UK, with significant financial losses. Some of the banks involved, many of which were facing their own financial difficulties, have sought to repossess the properties on which the loans were secured. That has left some pensioners facing not only large losses, but the threat of repossession, which is a stark contrast with the comfortable retirement they had planned.

Of course, I am sympathetic to the difficulties that these people are facing. Many of them have lost a great deal, but I am afraid that the Government’s ability to act in this case is limited. The products were not sold in the UK or by UK companies and the loans were not secured against properties located in this country, so the UK authorities do not have any jurisdiction over that activity.

What I have said will be frustrating for the individuals involved, but the same rules allow our own regulators to protect our domestic consumers from foreign banks operating here in the UK. I realise that some banks in Europe were involved in providing the products sold by independent financial advisers in Spain. The hon. Gentleman highlighted Rothschild bank specifically. It has strong historic connections with the UK.

I have looked into the matter further, and I understand that Rothschild sold around 130 of the products between 2005 and 2008. However, that activity was carried out by its Guernsey-based entity and, as the hon. Gentleman knows, the Channel Islands do not come under the jurisdiction of the UK Government or UK regulators. The Guernsey regulator may have some jurisdiction over the design and distribution of the product, but that is not for the UK authorities to establish. I understand that some of those who have lost out have taken the case up with the Spanish authorities, and that may be an appropriate option for them.

I am sorry to report that the UK Government have limited influence over this case. I understand that Rothschild has provided affected customers with some flexibility. For example, it is my understanding that it is not repossessing the properties of those that have been affected. That, of course, is welcome. As I said, the UK authorities do not have any jurisdiction over this activity. However, I appreciate that Rothschild has major operations in the UK, so I am happy to write to it to pass on some of the concerns that the hon. Gentleman has raised. I will also raise the matter with my counterparts in Spain and Guernsey to bring it to their attention. I will be more than happy to meet the hon. Gentleman and his constituents if he would find that useful.

The hon. Gentleman may be interested to know that the UK ambassador to Spain wrote to the Spanish regulator about this issue in 2012. Following that exchange, the Foreign Office published advice for people considering taking out equity release products in Spain. It highlighted the importance of checking that the company offering the mortgage is registered with the Spanish financial regulator, known as the CNMV. The publication explains that consumers unhappy with the product should first complain to the company responsible and that, if they are still dissatisfied, they can complain to the Spanish financial regulator.

In a broader context, my hon. Friend the Member for South Derbyshire (Heather Wheeler) gave sensible advice for people who are thinking of taking out similar equity release products in the UK.

In summary, I fully understand and support the hon. Gentleman’s concerns for his constituents affected by these products.

[Huw Irranca-Davies]

I thank the Minister for a very positive, full and helpful response. He may not be able to answer this question now, but does he think that there is any scope within European legislation or elsewhere to avoid this situation happening in the future? In this situation, a UK-based company that has a subsidiary in Guernsey operates in Spain, and people assume that it is applying the same ethical and moral standards elsewhere. Let us lift the debate above Rothschild for a moment. Any company doing what has been described could, within the European Union, be brought to book in one way or the other. Does the Minister think that there is something there that we should be exploring?

[Sajid Javid]

When I first looked into the issue, I thought about that. Unfortunately, I do not think that there is such an avenue through European Union institutions. I am happy to explore the matter further; perhaps when we meet, I can give the hon. Gentleman more information. He may be interested to know that there is currently a mortgage market directive. It is in its final stages in the European Union, but I think that I am right in saying that it does not include equity release products. Obviously, it would not have helped the hon. Gentleman’s constituents anyway; it is for the future.

I am happy to raise the issue with people in the way I have explained to the hon. Gentleman and I thank him again for bringing up this case. I will be happy to report back to him.

[Huw Irranca-Davies]

The few minutes remaining provide an opportunity to get more issues on the record. The Minister may be interested in responding to some other people who have written to me subsequently, when they learned of the debate. One of them wrote:

“When my wife and I met Mr Dewsnip”—

who came up earlier in the debate—

“at one of his public presentations and had a private chat with him after the main event, he most certainly did advise us as to the suitability of the investment fund and assured us that Rothschild would be working on a daily basis with the fund managers to ensure that it was meeting expectations and performing as expected.”

I could cite other examples that imply an intimate, daily, minute-by-minute relationship, but I have yet to discover whether that also means that Rothschild or anyone who worked for Rothschild was financially benefiting from it. That would be interesting and it may figure in a subsequent meeting that I have with Rothschild.

[Sajid Javid]

The hon. Gentleman is right to ask such questions and to raise them in any meeting that he may have with Rothschild and with the relevant regulators for the entities that we have discussed today. I will report back to the hon. Gentleman in due course. I thank him again for raising this important issue.

Question put and agreed to.

17:34

Sitting adjourned.