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Oral Answers to Questions
(10 years, 1 month ago)
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Graham Stringer (Blackley and Broughton) (Lab)
1. What recent reports he has received on the situation in Ukraine.
Mr Simon Burns (Chelmsford) (Con)
8. What recent assessment he has made of the political situation in Ukraine.
Kevin Brennan (Cardiff West) (Lab)
12. What recent assessment he has made of threats to the territorial integrity of Ukraine.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
We are gravely concerned about the situation in Crimea and in the east of Ukraine, where armed groups have seized Government buildings in Donetsk, Kharkiv and Lugansk. There can be no justification for this action, which bears all the hallmarks of a Russian strategy to destabilise Ukraine. Russia should be clear that the deliberate escalation of this crisis will bring serious political and economic consequences.
Graham Stringer
In February, the Chancellor of the Exchequer offered financial assistance to Ukraine. At the start of this month, Gazprom put up the price of gas to Ukraine. What safeguards has the Foreign Secretary put in place to stop any aid we give to Ukraine going straight to Russia via increased gas prices?
Mr Hague
As the hon. Gentleman knows, the aid that he is speaking of is the International Monetary Fund programme, and work continues on that programme. The Ukrainian Government have been discussing the first stage of that with the IMF. To obtain that aid, Ukraine must meet the conditions set by the IMF, including on how that money is used. Of course Ukraine would enjoy a more successful and prosperous future if Russia were to join the rest of the international community in supporting the economic future of Ukraine.
Mr Burns
Following the praise of the UK Independence party on Russian-controlled television yesterday, will my right hon. Friend remind the House of the guiding principles of British foreign policy towards Ukraine, namely that Ukraine has a democratic right to self-determination and that sending in the tanks and holding a sham referendum in the Crimea under the shadow of the Kalashnikov is not only aggression but illegal in international law and a threat to the security of the world?
Mr Hague
My right hon. Friend makes an important point. The guiding principles for us are that the development of democratic institutions in Ukraine and a rules-based international system are in the national interest of the United Kingdom. For any parties or leaders in Britain to feed a Russian propaganda machine after the invasion of a neighbouring country is not a responsible position to take, particularly for anyone who professes to believe in the independence and sovereignty of nations.
Kevin Brennan
The authorisation that President Putin obtained in February to use troops in Ukraine did not specify that it applied to Crimea only. What is our policy in the event of such a Sudeten-like land grab in eastern Ukraine?
Mr Hague
The hon. Gentleman is quite right, and that was of course one of the most alarming aspects of the authority that President Putin asked for in February—that it covered the use of armed force in Ukraine in general. As he knows, the European Union and the United States have imposed certain sanctions, but the European Commission has been asked by the European Council to draw up further far-reaching measures and economic and other sanctions to be implemented in the event of a further escalation and intensification of the crisis by Russia. Any invasion of eastern Ukraine of course falls into that category.
Sir Menzies Campbell (North East Fife) (LD)
I appreciate that this is not in my right hon. Friend’s gift, but in the event of the situation deteriorating materially, will he at least support the notion that Parliament may have to be recalled? When talking to other Foreign Ministers in the European Union, has he emphasised the importance of a concerted and determined approach to these issues and that any sign of disunity or lack of commitment would undoubtedly be exploited by Moscow?
Mr Hague
Yes, absolutely. On the first point, Parliament must always be able to deliberate urgently, although I have always taken the view that before Parliament has gone into recess is too early to call for it to be recalled. However, I take my right hon. and learned Friend’s point about that. I absolutely agree with his second point. At the meeting of EU Foreign Ministers in Athens over the weekend, I emphasised that the strength and unity of the European Union on this issue will be a vital determinant of the ultimate outcome.
Mr Jack Straw (Blackburn) (Lab)
Although I fully support the Foreign Secretary’s strategy, does he accept that the more the Ukrainian Government can reach out to the Russian speakers in eastern Ukraine, the less of an excuse President Putin will have for taking provocative action there?
Mr Hague
Yes. I think that is an extremely important point and it is one that I have emphasised over the past couple of weeks to both Prime Minister Yatsenyuk of Ukraine and Foreign Minister Deshchytsia. We say constantly to the Ukrainian authorities that it is important that the Government in Kiev show that they represent all the regions of the country. It is of course important to discuss decentralisation in Ukraine without necessarily accepting an agenda of paralysis by federalism, as proposed by Russia.
Sir Peter Tapsell (Louth and Horncastle) (Con)
Although all historical analogies tend to be misleading, can it be borne in mind that if we are looking back to the 1930s, as we are fully entitled to do, the occupation of the Crimea and Sevastopol bears more resemblance to the Anschluss than to the invasion of Sudetenland? If the Russians were actually to invade Ukraine, that of course would be an act of naked aggression.
Mr Hague
I think there was a good deal of naked aggression in what happened in Crimea. Of course, my right hon. Friend is right about the great seriousness of any further encroachment into Ukraine. That is something we should bear in mind, as well as his point that historical analogies can always be misleading.
Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)
As the Foreign Secretary’s earlier answers show, the protests across the east of Ukraine, in cities including Donetsk, highlight the continued risk of violent escalation and further bloodshed in Ukraine. In his first answer, the Foreign Secretary spoke of recent events bearing all the hallmarks of Russian involvement. Would he be willing to set out for the House in a little more detail his judgment of the form that the involvement of Russia has taken in recent days?
Mr Hague
Well, I said that it had the hallmarks of a Russian strategy to destabilise Ukraine and that is something we must expect in the run-up to the Ukrainian presidential elections on 25 May. It would be consistent with Russia’s strategy and behaviour over recent weeks to try to damage the credibility of those elections, to take actions that would make it appear less credible to hold the elections in eastern parts of Ukraine and to make it more difficult for Ukraine to operate as a democratic state. Those hallmarks are all present in what has happened in recent days.
Mr Alexander
I note and welcome the Foreign Secretary’s answer. The Prime Minister said in his statement to this House on Ukraine:
“The international community remains ready to intensify sanctions if Russia continues to escalate this situation”.—[Official Report, 26 March 2014; Vol. 578, c. 350.]
In the light of the Foreign Secretary’s answer, and if reports of Russian involvement in eastern Ukraine prove correct, does he believe that that would constitute grounds for widening the economic and diplomatic pressure on President Putin?
Mr Hague
That will depend on the course of events over the coming days and on the evidence of Russia’s involvement. The latest this morning is that the authorities in Kiev say that the situation is dangerous, as we have said in this House, but under control. Indeed, the administrative buildings in Kharkiv appear to be back under the control of the Ukrainian authorities. I think we will have to assess the situation over the coming days, but I say again that a deliberate escalation of the situation by Russia will bring serious political and economic consequences.
Dr Julian Lewis (New Forest East) (Con)
To what extent has the ability of our European allies to wage effective economic sanctions against Russia been undermined by their dependence on Russian gas sources and do we have a strategy for trying to persuade our allies to diversify their energy sources so that that dependence will be lessened in the future?
Mr Hague
I think the answer is that that has not affected what we have done so far, but we have to be very conscious of that point and the effect it could have. We are very active—I at meetings of Foreign Ministers and the Prime Minister at the European Council—in saying that it will be necessary to accelerate measures that reduce Europe’s dependence on Russian gas. The G7 leaders discussed that at some length at the meeting in The Hague two weeks ago and my hon. Friend will be aware that we are convening a meeting of Energy Ministers in the G7 precisely to discuss that ahead of the G7 Heads of Government meeting.
Ian Lavery (Wansbeck) (Lab)
2. What recent progress has been made on the transatlantic trade and investment partnership.
The Minister for Europe (Mr David Lidington)
TTIP is our top trade policy priority, worth up to £10 billion a year for the UK. The EU-US summit two weeks ago re-emphasised political support for that agreement, and our ambition remains to conclude the deal next year, with the fifth negotiating round due to take place next month.
Ian Lavery
Will the Government use the options open to member states to exclude public services, most importantly the NHS, from the scope of the TTIP agreement?
Mr Lidington
The Prime Minister has already made it clear that part of our negotiating objective will be to make sure that, when it comes to health services, any provisions included in TTIP are broadly in line with our existing obligations under GATT. We do not envisage any significant change from the current position.
Sir Richard Ottaway (Croydon South) (Con)
Does the Minister agree that there is a read-across between Ukraine and TTIP, with some seeing TTIP as an economic NATO? Binding the EU and the US together is bound to have political and geostrategic implications, and TTIP can become a symbol of Atlantic solidarity that may well check Russian imperialism.
Mr Lidington
I agree with my right hon. Friend about the symbolic as well as practical economic importance of the proposed deal. In practice, a successful transatlantic trade negotiation would establish global regulatory standards for business and trade on a transatlantic basis instead of the transatlantic powers having to copy others.
Helen Goodman (Bishop Auckland) (Lab)
3. If he will make it his policy to publish a list of all meetings between Ministers of his Department and officials since May 2010.
The Minister for Europe (Mr David Lidington)
We publish details of ministerial meetings with external organisations on a quarterly basis, but in line with the practice of previous Governments, we do not intend to publish a list of meetings between Ministers and their departmental officials.
Helen Goodman
Will the Minister tell the House whether at the meeting that the Foreign Office had on 24 February with Dmitry Firtash the question of asset freezes or sanctions was discussed?
Mr Lidington
I am obviously not going to go into details of what may or may not have been discussed at a meeting, particularly one at which I was not present, but it remains the case that Foreign Office officials and Ministers speak to people of all types from many different parts of the world with a single objective in mind, which is how best to enhance the United Kingdom’s understanding of global events and strengthen its interest in world affairs.
Ian Paisley (North Antrim) (DUP)
Given today’s visit, can the Minister confirm whether he has had any meetings with the Republic of Ireland’s Foreign Minister about its entering the British Commonwealth?
Mr Lidington
Not to my knowledge. We take the view that this is a matter for the Government of Ireland. Clearly, there are strong bonds of friendship and history between the two countries, but it has to be a matter for the Irish people and the Irish Government to decide about any relationship with the Commonwealth.
Ian Murray (Edinburgh South) (Lab)
4. What recent discussions he has had with his ministerial colleagues on repatriation of powers from the EU.
The Minister for Europe (Mr David Lidington)
The Foreign Secretary and I regularly speak to our European counterparts about all aspects of EU reform, including the powers and competences of institutions.
Ian Murray
Given that Lord Heseltine has now admitted that the Prime Minister’s approach to Europe is based on narrow party interest rather than the British national interest, will the Minister at last—this is the third time I have asked him at the Dispatch Box—tell us what his top policy priority is for repatriation from Europe and whether that would mean that the Government would then campaign to stay in the EU?
Mr Lidington
Our top policy priorities in European reform are to make the European Union more democratically accountable, more globally competitive and more flexible than it is today, that arrangements should be fair to eurozone members and non-members and to ensure that power can flow in both directions between Brussels and member states. I would have hoped that those were objectives that the Labour party would share, but it seems that I am to be disappointed.
Mr David Nuttall (Bury North) (Con)
Does my right hon. Friend agree that we should seek to repatriate control over social and employment legislation, which was handed over to Brussels by the previous Labour Government when they gave up our opt-out from the social chapter?
Mr Lidington
There are aspects of social and economic policy, such as the working time directive, the application of which have harmed the interests of the United Kingdom, and we do indeed need to seek changes to those policies where we think they make not just the United Kingdom, but the whole of Europe less competitive than we need to be.
Keith Vaz (Leicester East) (Lab)
No Foreign Office Ministers were present during yesterday’s debate on European matters, so will the Minister for Europe comment on the presidency text, which suggested that we would have to make a decision by June of this year as to what parts of the justice and home affairs opt-out we will opt into?
Mr Lidington
I read the comments in yesterday’s debate by my right hon. Friend the Home Secretary. As she told the House then, she is engaged, with my right hon. Friend the Justice Secretary, in negotiations with other member states and with the European Commission. Those talks are moving forward constructively. We hope for agreement at the earliest possible date, but there is no artificial deadline, save the one in the treaties, which is 1 December this year.
Mrs Caroline Spelman (Meriden) (Con)
Does my right hon. Friend agree that the repatriation of powers under the common fisheries policy has enabled important localisation of benefits for British fishermen, and will he condemn UKIP, which voted against the iniquitous practice of fish discards?
Mr Lidington
The ban on the obscene practice of discarding and the shift of fisheries management back to local and regional level is a real achievement for United Kingdom MEPs working with colleagues from other countries and with the European Commissioner concerned. It is disappointing if some UK MEPs felt that there were more important calls on their time than to defend British fishing interests in the way that our MEPs did.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
The Prime Minister promised us all that EU treaty change would happen by 2017 and that a major repatriation of powers would follow. Given that the French, the Germans and the Italians now, have all confirmed that this is not their priority, could that be why the right hon. Member for Haltemprice and Howden (Mr Davis) thinks that the Prime Minister has made such a mess of winning back powers from the European Union?
Mr Lidington
Oh dear, dear, dear. I am heartened by the strong support in Denmark and the Netherlands for our ideas on strengthening the role of national Parliaments in the European Union, by the words in the German coalition agreement about the need for treaty changes in the future, and by the practical achievements in repatriation of powers, whether through fisheries or the arrangements for double voting on the single supervisory mechanism. What the British people are waiting to hear is whether the Opposition are prepared to trust the British people with the final decision on our membership of the European Union.
Rushanara Ali (Bethnal Green and Bow) (Lab)
5. What recent assessment he has made of respect for freedom of religion or belief worldwide and how it can be improved.
The Minister of State, Foreign and Commonwealth Office (Hugh Robertson)
The Foreign Office addresses freedom of religion or belief across the world through our bilateral relationships, through multilateral organisations, such as the United Nations, and through the Foreign Secretary’s human rights advisory group.
Rushanara Ali
Rohingya Muslims in Rakhine state face discrimination and a protracted humanitarian crisis, compounded by the failure of the Burmese Government to recognise their right to citizenship. What action is the Minister taking to prevent the Burmese Government from using their census, which receives some £10 million of UK assistance, to discriminate against Rohingya Muslims by refusing to recognise their religious and ethnic identity?
Hugh Robertson
The hon. Lady’s point is well made. The Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for East Devon (Mr Swire), expressed our strong concerns about conditions there during his visit to Burma in January. He called the Minister, Khin Yi, on 26 March, and summoned the Burmese ambassador only yesterday to make these representations.
Mr Peter Bone (Wellingborough) (Con)
In the middle east, with the exception of Israel where there is a lot of freedom of religion and the Christian community has increased by 1,000% since the state of Israel came into being, there is a lack of freedom of religion. What are the Government attempting to do to resolve that?
Hugh Robertson
Not least in response to concerns expressed across the House through the Foreign Office’s mail bag and at Question Time, we have made a priority of visiting religious leaders throughout the middle east during visits. Recently, I have seen the Copts in Egypt and the Catholic community in Jordan, and called in at the Holy See when I was in Rome for the Libya conference, to speak to them about their concerns.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
18. I am sure the Minister is aware that the erosion of freedom of religious practice is an issue in a number of Commonwealth countries, including Malaysia, where the Malay word for God has effectively been banned, making the Bible illegal, and Brunei, where the introduction of sharia law has caused huge anxiety among the sizeable Filipino Catholic community there. Will the Minister ensure that these issues are raised not only in the forums to which he referred but through the Commonwealth forums, to ensure that there is real freedom of religion in Commonwealth countries?
Hugh Robertson
I can give the hon. Gentleman that assurance. The Minister of State responsible for the Commonwealth, my right hon. Friend the Member for East Devon (Mr Swire), has got that message clearly. When I mentioned the multilateral institutions, I could not list them all, but clearly the Commonwealth is key among them.
Bob Blackman (Harrow East) (Con)
Over the past 50 years the Jewish population in Arab countries has shrunk by 836,000 people, who are all refugees. At the same time there are some 836,000 Palestinian refugees. What is my right hon. Friend’s reaction to the fact that more than $2 billion has been spent supporting the Palestinian refugees, but zero on Israeli refugees?
Hugh Robertson
Our allocations in this area are driven by need. I thank my hon. Friend for the various pieces of literature that he has provided to me, which I will follow up separately. There is a straightforward assessment of need. The situation of refugees, not only Jewish, not only Palestinian, across the middle east, particularly in Jordan and Lebanon—it is worth reminding the House that we have these questions at a time when the millionth Syrian refugee has arrived in Beirut—is a matter that we are addressing as a priority.
Mr Douglas Alexander (Paisley and Renfrewshire South) (Lab)
As we approach Easter, we know that millions of Christians across the world will be prevented from celebrating or will risk persecution for doing so. New research by the Pew research centre suggests that persecution of people who practise their religion increased in almost every major region of the world in recent years. In the light of such concerning reports, what specific steps are the UK Government taking as a member of the United Nations Human Rights Council to ensure that tackling the persecution of Christians and promoting freedom of religion is a key priority?
Hugh Robertson
That is a good question. As I said in my original answer, the Foreign Office picks up the issue through bilateral relationships with the countries concerned, through the multilateral institutions and through the Foreign Secretary’s human rights advisory group. This is an issue that we will concentrate on over the period. The reaction that we have had across the House and from those with whom we have had contact indicates that this is a serious issue and it is one that we will take seriously.
Mr Dominic Raab (Esher and Walton) (Con)
6. What steps he is taking to address human rights abuses in North Korea.
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
The UN commission of inquiry report on human rights in the Democratic People’s Republic of Korea documented appalling human rights violations. The UK played a leading role in ensuring a strong UN Human Rights Council resolution on the issue, which made it clear that there can be no impunity for those responsible.
Mr Raab
The report documented a totalitarian state on a par with Nazi Germany, systematically starving, torturing and murdering its own people, and in reply North Korea, backed by China, told the international community to mind its own business. How do we tilt the balance of China’s perception of its national interest so that it stops protecting the war criminals in Pyongyang?
Mr Swire
My hon. Friend is right. The Human Rights Council resolution talked about state-sanctioned horrific violations, which it described as
“without parallel in the contemporary world”.
At the UK-China strategic dialogue my right hon. Friend the Foreign Secretary raised the commission of inquiry report with State Councillor Yang, and we continue to discuss human rights abuses in the DPRK with the Chinese and other parties.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
North Korea’s periodic review at the United Nations is due on 1 May. Will the Government take that chance to highlight the fact that 25% of Christians are incarcerated in North Korea, and to highlight the repatriation of people from China to North Korea, where they are treated very badly?
Mr Swire
It is right that in the run-up to Easter this House should be concerned about the freedom to practise Christianity. The stories included in the report of the persecution of Christians in the DPRK are truly shocking. Refoulement, which the hon. Gentleman referred to in the second part of his question, is something we have been discussing with the Chinese.
Jim Shannon (Strangford) (DUP)
The killing of parents in North Korea, many of whom are Christians, is leaving their children abandoned, confused, frightened, and left to starve to death. Has the Minister been able to have any discussions with the North Korean ambassador, or indeed with the Chinese authorities, who could add their influence, to see whether these people’s circumstances can be improved?
Mr Swire
The threat in North Korea is unfortunately not just to the Christian community but to the other people of that country; the threat comes from their own Government. As I said, we are extremely concerned about the persecution of Christians and other minorities. The world is watching DPRK. We need to assemble all the evidence, because I believe that one day this appalling regime will be held to account.
Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)
7. What his priorities are for tackling discrimination on the grounds of sexual orientation or gender identity internationally; and what steps the Government are taking to promote the rights of lesbian, gay, bisexual and transgender people worldwide.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
The UK is committed to combating violence and discrimination wherever it occurs. FCO Ministers have recently raised LGBT issues with the Governments of Nigeria, Russia, India and Uganda. We used our 2013 chairmanship of the Council of Europe to reform legislation in Europe, and at the UN we have raised concerns about several other countries.
Mrs Hodgson
There is great concern across the House that the Government’s response to Uganda’s Anti-Homosexuality Act has been too weak. This dreadful violation of human rights needs a strong international response to send a clear message not only to Uganda but to other countries contemplating similar legislation. Does the Secretary of State accept that quiet diplomacy is not enough and that it is now time for targeted travel bans and meaningful sanctions as a real statement that the UK will not tolerate such abuse?
Mr Hague
I have spent a good deal of time studying this issue, which I regard as very important. First, it is important for us to encourage a long-term change in attitudes. In Uganda, we support training, advocacy and legal cases related to the protection of LGBT rights. We fund a project by the Kaleidoscope Trust. I myself met the leading Ugandan LGBT human rights activist, Dr Frank Mugisha, to illustrate the importance we attach to this. However, I judge that were we to implement sanctions or other measures, it would penalise poor people who benefit from our development aid or could produce a counter-productive response in other African countries. It is a difficult judgment, but the approach I have outlined is what I consider to be the right one.
Naomi Long (Belfast East) (Alliance)
There is anecdotal evidence that since the passing of the law there has been an increase in persecution of and attacks on Ugandans who are homosexual. Has the Secretary of State had any discussions with the Home Office on what approach it will take to those who seek refuge from persecution?
Mr Hague
Of course, the Home Office applies strictly and properly the criteria for accepting people who are vulnerable to persecution as asylum seekers into this country. That can include people persecuted or at risk of discrimination or violence on grounds of LGBT activism, so that is an important criterion.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
9. What recent discussions he has had with his counterpart in Brazil on closer economic and political co-operation between that country and the UK.
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
My right hon. Friend the Chancellor, who is rapidly becoming one of the greatest Chancellors in modern times, is in Brazil this very week, as the fourteenth Government Minister to visit in the past 12 months. Yesterday he announced a further £4 million-worth of funding for UK Trade & Investment to support 3,000 exporters and to expand its operations to Latin America, as well as a special Bank of England facility to support lending.
Mr Sheerman
But we still lag behind Germany, France and Italy in terms of the strength of our trading partnership with Brazil. Although the Brazilian economy is going through a tough time, is there any update on the bilateral tax treaty that we were pursuing? Is that part of the discussions during the Chancellor’s visit? When will we redouble our efforts to export to this important destination?
Mr Swire
I am sure the Chancellor will be discussing all matters of interest to the UK economy and the City of London, double taxation being one of those. I have to say to the hon. Gentleman, who was part of a Government who, for 13 years, had responsibility for Britain’s exports and relations with Brazil, that in the past 13 months alone there have been 14 ministerial visits to Brazil. That level of commitment was not matched in virtually the entire period of Labour’s maladministration.
Mr Speaker
Let me say to the Minister of State that to be fair to the hon. Member for Huddersfield, he was not part of that Government but a proud Back-Bench supporter of them. That is an important distinction, as I think the Minister would readily concede.
Mr Philip Hollobone (Kettering) (Con)
Brazil is the leading economic and political power in south America. How successful are we being in persuading the Brazilians of the merits of the Falkland Islanders’ case that their sovereignty should be decided by the islanders themselves and not by their Argentine neighbours? [Interruption.]
Mr Swire
I hope that Opposition Members are laughing about something else—perhaps they are not—because this is a very serious matter. Whenever we go around Latin America and, indeed, central America, we are always absolutely certain to make the case that the Falkland Islanders had a referendum in which they expressed an overwhelming desire to maintain their current status. That should be recognised by countries right across the world, not just in Latin America, if they believe in self-determination and human rights. Unfortunately, one particular country in Latin America continues to bully and intimidate the Falkland Islands.
Damian Collins (Folkestone and Hythe) (Con)
10. What recent assessment he has made of the political and security situation in Bosnia and Herzegovina.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
Bosnians are deeply frustrated by the failure of political leaders to deliver on any of the issues that matter. During my visit to Bosnia 10 days ago, I urged Bosnia’s leaders to respond to protesters’ legitimate demands and to avoid ethnic and secessionist rhetoric. The redrawing of borders in the Balkans is finished.
Damian Collins
The challenge of Bosnia continues to be exacerbated by secessionist voices within the entity of Republika Srpska. Does the Foreign Secretary agree that Europe and the United States must address this threat to the stability of Bosnia and that the international community must be prepared to sanction those responsible for it?
Mr Hague
Certainly, the international community must address those issues. We will discuss them at the European Union Foreign Affairs Council in Luxembourg next Monday. It will be vital, after the elections take place in Bosnia and Herzegovina in October, for there to be a major international effort to ensure that a functioning state is created in Bosnia and Herzegovina. That is not happening at the moment.
Angus Robertson (Moray) (SNP)
This is the first opportunity I have had to put on the record my sadness at the passing of Margo MacDonald, the former SNP Member for Glasgow, Govan. I am sure that Members on both sides of the House would wish to pass on their condolences to Jim Sillars—himself a former Member for Glasgow, Govan—and the extended family.
On Bosnia, the Foreign Secretary is aware that Croatian Bosnians are able to access and have passports from the Republic of Croatia; that, soon, Bosnian Serbs will be able to have Serbian EU passports; and that the one group of citizens in Bosnia and Herzegovina who will not be able to have EU passports are the Bosniaks themselves. What can the Foreign Secretary do to ensure a European perspective for all citizens of Bosnia and Herzegovina?
Mr Hague
I join in the tribute to Margo MacDonald on her passing and to her strong record in this House in the past.
On the very important question of what happens to the whole population of Bosnia and Herzegovina, I spoke about it on Saturday with other EU Foreign Ministers, including those from EU candidate countries, and stressed the very point the hon. Gentleman has just made. An unstable Bosnia threatens the stability of the whole of the western Balkans. That is why we have to make sure there is a functioning state in that country in the coming years.
Ann McKechin (Glasgow North) (Lab)
11. What recent assessment he has made of progress in peace negotiations between Israel and Palestine.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
In the past few days, I have discussed progress with Secretary Kerry and President Abbas, and I will speak to my Israeli counterparts in the coming days. Secretary Kerry’s tireless efforts provide an unparalleled opportunity to achieve a two-state solution. I urge both parties to show the bold leadership needed to resolve this conflict once and for all.
Ann McKechin
I certainly welcome the information provided by the Foreign Secretary, but he will be aware of press stories that the latest report by the European heads of mission in East Jerusalem states that Israeli policies in Jerusalem are aimed at
“cementing its unilateral and illegal annexation of East Jerusalem”,
with an unprecedented surge in settlement activity. Does the Foreign Secretary concur with that view and, if so, what is he doing to ensure the future of Jerusalem as a shared capital as part of the negotiations?
Mr Hague
Jerusalem, as a shared capital, is part of what we believe is a characteristic of achieving a two-state solution, along with a solution based on 1967 borders, with agreed land swaps and with a just, fair and agreed settlement for refugees. It is vital that that possibility is kept open. That is why so many of us on all sides of the House have voiced such strong disapproval of settlements on occupied land, which are illegal. We make that point regularly to the Israelis—indeed, I will do so to an Israeli Minister this afternoon—and we urge them to take the opportunity of peace.
Dr Matthew Offord (Hendon) (Con)
Last December, the Foreign Secretary said that the British Government have been
“clear to the Palestinians that there is no alternative to negotiations”
and that “we oppose unilateral measures”. What representation has he made to the Palestinian Authority following its return to unilateral actions last week, in violation of its commitment to abstain for the duration of direct peace talks?
Mr Hague
I called President Abbas last Thursday to repeat our view that the only chance of achieving a viable and sovereign Palestinian state is through negotiations. President Abbas assured me that he remains committed to negotiations, so we will continue to encourage him and Israeli leaders to make a success—even at this stage—of this opportunity.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
It is essential that both sides return to negotiations and that they recognise that they will both have to make great compromises to secure a negotiated peace. Does the Foreign Secretary believe that the Palestinian leadership has been preparing the Palestinians for peace when terrorists freed by Israel have been welcomed in the Palestinian Authority as heroes? A broadcast by Palestinian Authority TV has honoured Dalal Mughrabi, who was responsible for a hijacking in which 37 Israeli citizens, including 12 children, were killed.
Mr Hague
Prisoner releases are always controversial in a peace process, as we know well in our own country, but I absolutely regard President Abbas, the leader of the Palestinians, as a man of peace, and I pay tribute to the bold leadership that he has shown on these issues in recent months. As the hon. Lady has just heard, I have urged him to continue with that, and we must focus on that point.
Ian Lucas (Wrexham) (Lab)
What is Government policy on Palestine applying as a state to be a member of international political or cultural organisations?
Mr Hague
Last week, President Abbas signed and submitted letters of accession to 15 conventions, including the fourth Geneva convention. No decision is imminent or necessary at the moment on these things, and given that our focus is on urging both Palestinians and Israelis to make a success of the negotiations, I do not believe that it would be wise for us or other countries to pass judgment on those applications now.
Mr Andrew Love (Edmonton) (Lab/Co-op)
13. What assessment he has made of the potential effect of the 25th session of the UN Human Rights Council on global efforts to uphold universal human rights.
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
The 25th session of the UN Human Rights Council took strong action to combat impunity by voting through resolutions on Syria, the Democratic People’s Republic of Korea and Sri Lanka in response to UN reporting on allegations of serious human rights violations.
Mr Love
I will focus on the international inquiry into the conflict in Sri Lanka. Given the Rajapaksa Government’s hostility, what mechanisms are available to the inquiry to enable it to carry out its investigation on the island and what protections can it give to the witnesses that come before it, both of which are absolutely critical if we are to get to the bottom of the events in 2009?
Mr Swire
The hon. Gentleman is absolutely right. We got through the resolution that we wanted. The Prime Minister showed tremendous leadership on this. We were completely vindicated in our decision to go to the Commonwealth Heads of Government meeting—my right hon. Friend the Foreign Secretary included—because had we not gone there, we would not be in the position that we are today. Now that the international community has spoken through the United Nations Human Rights Council, it is important that the Government in Colombo listen to what has been said and what is asked of them, and that we can conduct an investigation through the Office of the High Commissioner for Human Rights to make that country a better place for all.
Tim Loughton (East Worthing and Shoreham) (Con)
Will the Minister also maintain the robust approach to human rights abuses in Tibet with the UK-China human rights dialogue coming up, and will he press the Chinese for a date for the visit to Tibet and China by the UN High Commissioner for Human Rights, Navi Pillay, to which China has agreed?
Mr Swire
We are of course looking forward to the human rights dialogue with the Chinese, for which a date will be forthcoming shortly. It is worth saying that the new configuration of the Human Rights Council means that it is less prepared to support country mandates, because re-elected along with the United Kingdom were Russia, China and Cuba.
Valerie Vaz (Walsall South) (Lab)
Despite the release of Sakineh Ashtiani, many other women in Iran face the death penalty, in breach of their human rights. Will the Minister raise their case and uphold their human rights?
David Mowat (Warrington South) (Con)
14. What discussions he has had with the Libyan Government on reparations for people killed in attacks made using Libyan Semtex.
The Minister of State, Foreign and Commonwealth Office (Hugh Robertson)
Successive UK Governments have not routinely negotiated with foreign Governments over private compensation claims. However, the UK has raised with the Libyan authorities on a number of occasions the importance of engaging with UK victims seeking redress, including those seeking compensation through private campaigns, and with their legal representatives.
David Mowat
The Minister will be aware that the American victims of Semtex bombings have received more than £1 billion of compensation, while the 200 UK victims have so far received nothing. Can he assure the House that no deal was done in 2008 as part of the normalisation of relations with Gaddafi, to the detriment of my constituents?
Hugh Robertson
Yes, I can. I should probably say to my hon. Friend that the situation here is very different from that in the United States, because we have victims who have suffered by a wide range of means, not merely Semtex. However, I can absolutely assure him that the claim that Government officials took any action in the 2008 bilateral agreement between the US and Libya that denied UK victims compensation is wrong.
Mr Speaker
Order. The hon. Gentleman has already had one go. His appetite ought to have been satisfied for now. He seems to be a hungry caterpillar, but he will have to wait. Never mind.
Fiona Bruce (Congleton) (Con)
15. What contribution the UK is making to international provision for displaced Syrians.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
The UK is leading international efforts to help the estimated 4.1 million Syrian refugees in the region and 6.5 million internally displaced people. So far we have provided £241 million in life-saving support to civilians caught up in the conflict and allocated £292 million to help refugees and host communities in neighbouring countries.
Fiona Bruce
Is my right hon. Friend concerned by reports from Open Doors that 3,000 Christians have fled their homes in Kessab, in northern Syria, in the past few days owing to fighters of the al-Nusra Front and ISIS entering north-west Syria from Turkey? Ethnic conflict is increasing there and aid cannot get through. Has he made representations to the relevant authorities about Turkey’s porous borders?
Mr Hague
We are very concerned about reports of violence and of people being displaced in Kessab. It is difficult to establish accurate numbers, but we are working closely with the Turkish Government to restrict the ability of foreign fighters to cross into Syria. I have discussed that recently with the Foreign Minister of Turkey.
Ann Clwyd (Cynon Valley) (Lab)
It has been promised many times, but what progress has been made on gaining unimpeded humanitarian access in Syria?
Mr Hague
Very little progress has been made, despite the successful passing of UN Security Council resolution 2139, which included the authorisation of cross-border access. The Security Council is due to review the position every 30 days, and at the coming review we will press strongly for full use to be made of what is authorised in that resolution.
Mr Robert Buckland (South Swindon) (Con)
T2. If he will make a statement on his departmental responsibilities.
The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
Yesterday I attended the commemoration in Rwanda on the 20th anniversary of the genocide, and today I will join in welcoming the President of the Irish Republic on his historic state visit.
Mr Buckland
Does my right hon. Friend welcome robust political engagement with European politicians such as Martin Schulz, the socialist President of the European Parliament, or will he be on his knees begging him not to come to the UK during the European parliamentary campaign, like the Labour party?
Kerry McCarthy (Bristol East) (Lab)
I welcome the UN Human Rights Council resolution on Sri Lanka, but given that President Rajapaksa has failed to comply with previous resolutions and with the very generous last-chance offer that the Prime Minister gave him at the Commonwealth Heads of Government meeting, and has now rejected the current resolution outright, does the Foreign Secretary still think it is appropriate for President Rajapaksa to continue as chair-in-office of the Commonwealth? If this is referred to the Commonwealth ministerial action group, what position will the UK take?
Mr Hague
The UK is not on the Commonwealth ministerial action group, as the hon. Lady knows, nor is it in our gift to determine the chair of the Commonwealth ourselves, but it was within our gift to decide to go to Sri Lanka and to raise these issues. As the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for East Devon (Mr Swire) has just made clear, there would have been no chance of succeeding in the Human Rights Council, as we recently did, had it not been for the Prime Minister’s leadership, our presence in Sri Lanka and our willingness to show how passionate we are about what happened in the north of Sri Lanka. The Opposition’s attitude of not going to Sri Lanka would have been a terrible misjudgement.
Dr Phillip Lee (Bracknell) (Con)
T3. I was pleased to read in a recent report by the Select Committee on Foreign Affairs that the Government have been developing a strategy towards the Gulf. In view of the obvious complexities of the middle east, does the Foreign Secretary agree that there is now a very good case for opening up that approach to a broader regional strategy?
The Minister of State, Foreign and Commonwealth Office (Hugh Robertson)
Absolutely. The Gulf strategy has been developed over a number of years and is already paying benefits not only diplomatically but economically and commercially across a wide range of areas. Indeed, the strategy has been such a success that many other people are looking to establish such a relationship with us.
Naomi Long (Belfast East) (Alliance)
T4. Has the Secretary of State received any recent reports on the condition of the seven Baha’i leaders who are now approaching the sixth anniversary of their incarceration in Iran? Will he take this opportunity to call again for their release?
Hugh Robertson
Yes, we will. As the hon. Lady is aware, there is a gradual and staged process of unfreezing relationships with the Iranian Government. We have not directly addressed that issue personally at ministerial level, but it is one of the issues that we will take up as we move the relationship forward.
Mr Peter Bone (Wellingborough) (Con)
What is the Foreign Secretary’s view of the bizarre situation in which this country pays overseas aid to the Palestinian Authority, which uses it to pay salaries to the families of convicted terrorists in Israel?
Hugh Robertson
As the Foreign Secretary has made clear, at the moment the entire and sole focus of our policy on Israel and the Occupied Palestinian Territories has to be to get behind the peace process led by John Kerry. Once that process has been concluded—I hope successfully—there will be an opportunity to look at all these issues afresh.
Ann McKechin (Glasgow North) (Lab)
T5. In a recent report on Colombia, the UN High Commissioner for Human Rights again emphasised her concerns about human rights. Will the Minister confirm what recent discussions he has had with the Colombian Government on protecting the safety of human rights defenders and trade unionists?
The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
Human rights continue to be a very important part of our relationship with Colombia. We discussed human rights with President Santos and Defence Minister Pinzon during the visit of my right hon. Friend the Foreign Secretary to Colombia in February. He also met a range of non-governmental organisations that work in the human rights field and hosted a high-profile event on sexual violence in conflict. The hon. Member for Glasgow North (Ann McKechin) will want to be aware that we are also publishing our annual human rights report on Thursday.
Paul Maynard (Blackpool North and Cleveleys) (Con)
Since independence in 1991, Ukraine has held a number of elections in which the results have been called into question by the various participants, and it is crucial that that does not reoccur. What help and support are the UK giving to the Government of Ukraine to ensure that the forthcoming elections are truly free and fair?
Mr Hague
I have made that very point strongly to Ukrainian leaders that it is important that the elections on 25 May are well observed internationally and are accepted as fully free and fair, which includes accepting the recommendations made by observers of previous elections. I believe the Ukrainians have the resources to do that, so our efforts will be focused on ensuring good observation and trying to ensure good procedures.
Stella Creasy (Walthamstow) (Lab/Co-op)
T6. The Foreign Secretary has talked proudly of his preventing sexual violence in conflict initiative and the summit in June. Given the concerns that many hon. Members have about what is happening in Sri Lanka, does he believe that the Sri Lankan Government will attend, and what action will he take if they do not?
Mr Hague
Of course, I am not able to compel any Government to attend. I have invited the 143 nations that so far have endorsed the declaration that I launched on ending sexual violence to attend the summit in June, but I cannot force any of them to do so. However, given events in Sri Lanka in recent decades, it would be highly appropriate for the Sri Lankan Government to be there and to present their plans. I have encouraged them to do so.
Martin Horwood (Cheltenham) (LD)
As a unique financial hub, we have the power to inflict more painful sanctions not only on Russians who are involved in assisting intervention in the Ukraine, but on the wealthy friends and backers of Vladimir Putin. We also have a unique responsibility as the European guarantor of the Budapest memorandum, which should have protected Ukraine from Russian aggression. If Russia further violates Ukrainian sovereignty, should we not use that power to uphold that responsibility?
Mr Hague
The Budapest memorandum of 1994 does not give us a specific power other than to call for consultations with the other signatories. Although we, Ukraine and the United States have done that, Russia has refused to join those consultations. However, the European Commission has been asked to prepare more far-reaching measures which, as the Prime Minister has said, cover economic, financial and trade areas. It is doing that work. We will be in favour of such far-reaching measures if Russia deliberately continues and deliberately escalates the situation in Ukraine.
Diana Johnson (Kingston upon Hull North) (Lab)
T8. Greenpeace campaigns against Procter & Gamble’s use of palm oil, which reports say is being sourced from companies contributing to the deforestation in Indonesia, endangering the habitats of Sumatran tigers, elephants and orangutans. Given that the Minister is the Government’s strategic relations manager for Procter & Gamble, what discussions has he had with the company on the matter, and can he say whether this would be endorsed under the Government’s action plan on business and human rights?
Miss Anne McIntosh (Thirsk and Malton) (Con)
Following the successful renegotiation of fisheries policy back to regional control, will the Government use their good offices to ensure that they decide which greening measures to use rather than them being dictated by the EU?
The Minister for Europe (Mr David Lidington)
My right hon. and hon. Friends in the Department for Environment, Food and Rural Affairs always have in mind in the application of European rules how they can secure the best possible opportunities for this country’s agriculture. They will continue to do so.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
T9. Will the Minister give us an update on the political situation in Venezuela, and tell us what prospects he sees for dialogue and an end to violence? What action are the UK Government taking in relation to that?
Mr Swire
We are extremely concerned about the situation in Venezuela. In my statement of 26 March, I urged all sides to take steps to avoid confrontation, reduce tensions and create the right conditions for genuine dialogue. A commission of Foreign Ministers from the Union of South American Nations group of countries is on its second visit to Venezuela as we speak. They will support and advise on dialogue between the parties. We hope that that will play a positive role in helping to avoid violence and in promoting reconciliation in Venezuela.
Charles Hendry (Wealden) (Con)
What discussions has the Foreign Secretary had about the situation in Ukraine with his counterparts in other countries in the former Soviet Union but outside the European Union, such as Azerbaijan and Kazakhstan, to understand their perspectives and concerns as he develops his thinking on that area?
Mr Hague
We have had many discussions at many different levels with those countries. I think it was significant that, when it came to the vote at the UN General Assembly on what has happened in Crimea, only 11 countries in the world supported the Russian position. Even many of the countries of the Commonwealth of Independent States were not willing to support the Russian position. That is an illustration of Russia’s diplomatic isolation on the issue.
Stephen Pound (Ealing North) (Lab)
The long-suffering Christian communities of Kessab were mentioned earlier. The Foreign Secretary will be aware that this community is predominantly of Armenian origin, facing the 100th anniversary of the last Armenian genocide. Many of my Armenian constituents are convinced that Turkey is facilitating, or at least not preventing, the cross-border attacks and atrocities. Will he undertake to raise this matter with his opposite numbers?
Mr Hague
As I said earlier to my hon. Friend the Member for Congleton (Fiona Bruce), we are very concerned about what has happened, particularly in recent days, in that part of Syria. We do, in any case, raise with Turkey the importance of doing everything possible to stop the flow of foreign fighters into Syria. Given the concern in this House, it is a point we will raise again with the Turkish Government.
Mark Reckless (Rochester and Strood) (Con)
Following the Minister for Europe’s visit to Georgia last week, does he now discern a pattern of prosecutorial intimidation of Opposition politicians, and does he share my extreme concern that the highly respected Giga Bokeria was hauled in by prosecutors on Friday?
Mr Lidington
In my conversations with the Prime Minister and other Ministers when I was in Georgia last week, I repeated very clearly that it is in Georgia’s interests, as well as the expectation of the United Kingdom and Georgia’s other friends, that while no one should be exempt from due process, we should avoid any appearance or risk of selective justice of the kind we saw under the previous regime in Ukraine.
Meg Munn (Sheffield, Heeley) (Lab/Co-op)
Once again there has been very little discussion today of the situation in Syria, yet the conflict continues. Thousands are being killed and millions are being displaced. What are the Government and the international community doing to stop this dreadful conflict?
Mr Hague
The hon. Lady is quite right. This remains the most serious crisis in international affairs, even by comparison with all the others we have discussed. The international community has so far failed to resolve this conflict. We remain in favour of a third round of the Geneva talks, but that requires greater flexibility on the part of the regime with regard to what it will negotiate. In the absence of such progress, our focus is on humanitarian assistance to the millions of people displaced. On that, the United Kingdom plays a leading role in the world.
Duncan Hames (Chippenham) (LD)
The Foreign Secretary will have heard the findings of the latest Intergovernmental Panel on Climate Change report on the impact of climate change. What diplomatic initiatives are his Department taking to broker international agreement to cut global carbon emissions?
Mr Hague
The United Kingdom is one of the most active countries in the world diplomatically in promoting global, binding agreement to address climate change. The IPCC report underlines the extreme urgency of this issue. I discuss regularly with Secretary Kerry what we can do with the US Administration to push forward international agreement. We will remain very active on this issue.
Huw Irranca-Davies (Ogmore) (Lab)
Fifteen thousand UK jobs rely on employment in the Ford plants at both Dagenham and Bridgend, which is close to my constituency. What does the Minister make of the comments by Steve Odell, the chief executive of Ford’s European operations, who said:
“I don’t want to threaten the British government”—
but, and it is a big but—
“I would strongly advise against leaving the EU for business purposes, and for employment purposes in the UK”?
Mr Lidington
Mr Odell, like many other business leaders in this country, has been very clear about the economic risks that would be taken were the United Kingdom to leave the European Union. That, no doubt, will be one of the chief arguments in the referendum debate that my right hon. Friend the Prime Minister has promised. At the end of the day, it should be for the people to decide, having taken into account all arguments, both for and against membership.
Parliamentary Standards
(10 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
John Mann (Bassetlaw) (Lab)
(Urgent Question): Will the Leader of the House make a statement outlining in greater detail the possible changes, suggested by the Prime Minister on television, to the role of two Committees in regulating complaints about fellow MPs?
The Leader of the House of Commons (Mr Andrew Lansley)
The House will be aware that complaints concerning the conduct of hon. Members, including that they have breached the Members code of conduct, are subject to investigation by the Parliamentary Commissioner for Standards and then considered by the Standards Committee. Additionally, since May 2010 issues relating to Members’ pay and expenses from that date onwards, including consideration of complaints, are undertaken by the Independent Parliamentary Standards Authority.
So two bodies are engaged with the issue of regulating the conduct of Members. As of now and for the future, in relation to expenses, IPSA is a wholly independent authority. Any issue would be considered by its compliance officer. The officer has powers to order repayment and to impose fines. Appeals may be made to a lower tier tribunal. Of course, IPSA is not responsible for considering issues relating to the expenses system prior to the last general election, nor other matters of conduct.
In January 2013, the Standards Committee was reconstituted following the decision of this House of 12 March 2012, reflected in Standing Order No. 149. This brought in three lay members. They participate in all the deliberations of the Committee. The Chair of the Standards Committee, by convention, seeks consensus amongst all the members of the Committee. The lay members, additionally, have a specific right to submit an opinion on any report to the House, and to have it published, under Standing Order No. 149. It is the job of this House, where necessary, to enforce the decisions of the Standards Committee.
The regulation of the conduct of Members is the responsibility of this House. For a wholly external body to consider complaints relating to the conduct of Members in this House, for example, on participation in debates and the registration of financial interests, risks undermining parliamentary privilege. That is why the reports of the Parliamentary Commissioner and the role of lay members are incorporated within the work of a Select Committee of this House.
We have a relatively new system in place for the regulation both of parliamentary expenses and for independent input to the Standards Committee. Both should give the public greater confidence in the system. We must, however, seek to make these regulatory processes more widely understood and more transparent. If we can strengthen the independent input whilst respecting the exclusive cognisance of Parliament, we should do so. As the Prime Minister said, whilst these are matters for the House and not for the Government alone, we are open and willing to consider approaches which would further strengthen our regulatory system.
John Mann
I suspect that the Leader of the House has not had the opportunity to spend time on the doorstep in recent days. If he had, he would have found that there is virtual unanimity out there among the British people that Members of Parliament should not sit in judgment on Members of Parliament and that there should be no self-regulation by MPs of MPs. There are other issues about which the public are angry, but on this issue the Leader of the House has the power to initiate and to do something. Why will he not come forward with proposals immediately to end self-regulation in this House and in doing so, in the interests of transparency, ensure that the recordings of the Committee are made public so that people can see on what basis the Committee overturns the views of the independent Commissioner for Standards?
Mr Lansley
The hon. Gentleman underestimates me. From my conversations with members of the public, it is very clear that many members of the public are not aware—even now—that, from May 2010 onwards and for the future, the expenses of Members of this House, including any complaints relating to expenses, are considered wholly independently by IPSA, which would, in the event of there being any overpayment or incorrect claim, have the power both to require repayment and to levy fines. That is wholly independent.
We must be aware—it is also clear—that were we to seek, for example, to make the Standards Committee or the Commissioner wholly independent, we would end up with the Parliamentary Commissioner for Standards no longer having access to parliamentary privilege in relation to her investigations, which presently she does by virtue of her investigation being part of the proceedings of the Standards Committee of the House. It would be much more difficult for her to fulfil her role in the way in which she currently fulfils it.
As for the relationship between the Commissioner and the Committee, in my experience the Committee is wholly transparent about its decision-making process—about the arguments that it has examined and the decisions that it has reached—but that is a matter for the Committee, not for me.
Sir Gerald Howarth (Aldershot) (Con)
I agree with my right hon. Friend that there should be some parliamentary input, for the reasons that he has set out so clearly. Surely this is not so much a failure of the system as a complete and abject failure of the media to report these matters objectively. As a result of that, as the hon. Member for Bassetlaw (John Mann) observed, many of our constituents have failed to understand exactly what was stated in a recent report. Is it not time that the media paid proper attention to parliamentary reports rather than seeking to engage in witch hunts?
Mr Lansley
I do not think that I am seeking particularly to ascribe blame anywhere. If—as may be the case—there is a misunderstanding about the nature and effectiveness of the regulatory system relating to complaints against Members, and if that is not well understood by our constituents, I think that we should take it on our own shoulders to do all that we can to make it clear that a robust system is in place.
Ms Angela Eagle (Wallasey) (Lab)
Over the last few days, we have seen a recalcitrant Cabinet Minister unwilling to show remorse for obstructing an inquiry by the Standards Commissioner, and a growing public perception that a Committee of MPs has let her get away with it. That has thrown doubt on her conduct, and also on the judgment of the Prime Minister, who seems unwilling to act.
Does the Leader of the House agree that the present system does not command public support, and that we urgently need reform to restore public trust? I accept that we need time to develop a more radical reform, but will he consider, as a matter of urgency, removing the Government majority on the Standards Committee, and creating a more prominent role for its lay members? Will he also tell us what sanctions he considers appropriate for a Member who has breached the parliamentary code of conduct through his or her attitude to an inquiry?
In the foreword to the Ministerial Code, the Prime Minister wrote:
“Though the British people have been disappointed in their politicians, they still expect the highest standards of conduct. We must not let them down.”
Is the Leader of the House satisfied that the Prime Minister has kept his promise?
Mr Lansley
I am surprised that the shadow Leader of the House should consider this an opportunity to express criticism of an individual Member. I did not understand that it was proper to do that, Mr Speaker, but I am in your hands.
The decisions made by the Standards Committee are a matter for the Standards Committee. Let me at this point speak entirely personally, and not on behalf of the Government. I read the report that was published last Thursday very carefully, and, having done so, I felt that I understood and, as it happens—again, I am speaking entirely personally—agreed with the way in which the Standards Committee had gone about its task.
I am very surprised that the shadow Leader of the House should seek to obtrude a partisan element. The Standards Committee has never operated on a partisan basis, and I have no reason to believe that the party affiliation of its members has had any direct bearing on their views of the cases that they consider. On the contrary, they consider cases on their merits, and seek to reach a consensus.
The fact that the Committee has lay members—[Interruption.] Perhaps the shadow Leader of the House will listen to my answer, rather than simply interrupting from a sedentary position. She asked about the position of lay members. Regardless of the position taken by MPs who are members of the Standards Committee, if the lay members had expressed a dissenting view, that would have been more powerful than their having votes. Indeed, given that the Committee did not take any votes, the question of votes was really neither here nor there. The point is that the lay members have what is effectively a casting vote at the end—do they agree or do they not? If the lay members did not agree with MPs on the Standards Committee about what was published in the report and published a dissenting opinion, it would be a very serious matter. I think that that suggests that the power of the lay members is stronger than it would be if they simply had a vote, and I think that we should understand that and reflect it in our discussions.
Mr Speaker
Order. Before we proceed further, I simply remind the House of what I stated yesterday, namely that page 396 of “Erskine May” makes it clear that there cannot be debate on the conduct of an individual hon. or right hon. Member other than on a substantive motion. There is not a substantive motion on the Order Paper today and therefore I invite hon. and right hon. Members to conduct themselves accordingly.
Sir Nick Harvey (North Devon) (LD)
I serve on the Standards Committee and had not realised until the controversy of the last few days that the lay members did not have a vote. The reason for that is simply, as the Leader of the House has just said, that it is not the practice of the Committee to take votes. We talk about things at length—sometimes at inordinate length—to achieve a consensus and the lay members participate very fully and vocally. They bring to bear a great deal of experience gained in other walks of life in regulating other professions and they are listened to with great interest by the Members of this House who serve on the Committee. They have been a very useful addition and, as the Leader of the House just said, they are given the opportunity, if they wish to, to issue a dissenting note at any point in time. They have not chosen to do that either in the matter that has just been published or in any other matter. I think the system is working well. They have brought a great deal of extra expertise and we should continue with this and see how it goes.
Mr Lansley
I am grateful to my hon. Friend, who expresses that point very straightforwardly and well. I think the House will know that if at any point the lay members of the Standards Committee were to present an opinion to the House which had the effect of dissenting from the decisions of the Committee as a whole, the House would take that very seriously indeed.
Kevin Barron (Rother Valley) (Lab)
The Select Committee on Standards adjudicates on individual cases but also has a duty under Standing Order No. 149 to consider any matters relating to the conduct of Members. On 22 March, before any of the current controversy arose, the Committee received a thoughtful paper from lay members on their impressions of their first year on the Committee from January 2013 to January 2014, which was also sent to you, Mr Speaker, and was placed in the Committee’s programme for future discussion. The Committee has already decided to examine the current system for consideration of complaints about Members of Parliament, to consider improvements as required. We will be drawing up detailed terms of reference over the next few weeks, drawing on the lay members’ reflections. The lay members will continue to play a leading role in this work.
The Committee has reported the lay members’ paper to the House and it is available on our website. As the lay members say, it is a matter of regret that the Committee on Standards and Privileges’ recommendations on standards issues have not yet come before the House but the Committee is determined to lead on these issues in the interests of maintaining the integrity of this House.
The Committee does not think it is appropriate to keep a running commentary on its decisions in individual cases, but at our meeting today the Committee authorised me to say that it continues to believe that its individual adjudications are impartial, fair and non-partisan. It is extremely important that those who express opinions on these cases both within the House and outside it should have read closely the careful reasons and evidence-based conclusions set out in each report. The Committee will continue to work closely and co-operatively with the commissioner to reach objective, fair and non-partisan adjudications.
Mr Lansley
I am grateful to the right hon. Gentleman, the Chair of the Standards Committee. What he illustrates is, as I said at the conclusion of my response to the urgent question, that this is a matter for this House, and the House does look to the Standards Committee, not least to advise the House on how our system of regulation of Members’ conduct can be as robust as possible. I hope that, in consultation with the Standards Committee and in discussion among the parties, we can ensure that any views that come forward, not least from the lay members, are reflected in changes if necessary.
Sir Peter Bottomley (Worthing West) (Con)
May I first pay tribute to Andrew McDonald, who is retiring as the chief executive of IPSA? I send him my best wishes. I resigned from the Standards Committee when the House authorities and at least one party trashed Elizabeth Filkin, when she was the Commissioner for Standards. According to paragraph 156 of the recent report, the present Commissioner said that the Committee might not agree with one of her conclusions. That should not be a big surprise to anyone. Also, I hope that those who comment on the way in which we run our affairs will recognise that an hon. Member has, in two days, raised questions about what fellow MPs have done while saying that we should not have a running commentary on what we are doing, which is an odd thing for that hon. Member to do. Finally, it would be worth while for the media to read paragraph 14 of the recent report, which contains the accusation, along with paragraphs 28, 29, 32, 39, 49, 56 and 61, so that their reports can reflect what the Committee did, what Members of Parliament did and what the Commissioner actually said. That would help all our discussions.
Mr Lansley
My hon. Friend is quite right to draw the House’s attention to paragraph 156, in which, contrary to the impression that might have been received, the Parliamentary Commissioner for Standards said that the Committee might not reach the same view as her on what she described as a “finely balanced” issue. I encourage Members, the press and others more widely to read the whole report. Only by reading the Commissioner’s report, the appendices and the Committee’s report does one gain a balanced view.
Mr Peter Hain (Neath) (Lab)
As a former Leader of the House of Commons, I yield to no one in wanting to protect parliamentary privilege and the independence of the House from external interference, but the truth is that the public think there is one rule for them and another for us. That is an intolerable position for us to find ourselves in, and we have to do something about it. There must be a solution that protects parliamentary privilege and the continuing integrity of the work of the Standards Committee while allowing external regulation of this sort of complaint. Otherwise, frankly, we are not going to be in a credible position.
Mr Lansley
The right hon. Gentleman will understand that, while it is clear from past court cases that the expenses system does not constitute parliamentary proceedings, and that parliamentary privilege does not extend to them, other aspects of the regulation of Members’ conduct clearly do. An important practical consideration is that, if the Parliamentary Commissioner for Standards did not report to the Standards Committee as a Select Committee of the House and was instead established as an entirely separate and independent entity, parliamentary privilege would not extend to her investigations. That would make it much more difficult to proceed with those investigations and to get them completed, because they would be subject to legal and procedural challenge. The Commissioner has the power to undertake all the investigations required.
Jacob Rees-Mogg (North East Somerset) (Con)
It is enormously important that the House should maintain its right to regulate itself, because we do so on behalf of the British people, to whom we are democratically accountable in a way in which no bureaucrat can be. It is therefore for the British people that we maintain our rights. May we therefore do one of two things? Either we should have a proper, direct system of recall to allow the electorate to determine these matters, or we should use our powers, as set out on Page 855 of “Erskine May”, that would allow the whole House to come to a decision by returning a decision of the Standards Committee to that Committee and making our own recommendations, which might be more robust.
Mr Lansley
My hon. Friend is right to make that point. In a debate on 12 March 2012, the shadow Leader of the House, the hon. Member for Wallasey (Ms Eagle), agreed with the proposal for the appointment of lay members to the Standards Committee, which was happily approved by consensus. She recognised that the Committee would
“be a Committee of the House, and the Members of Parliament who serve on it will be able to do so first and foremost because they successfully stood for election. Therefore, they are ultimately accountable to their constituents for their actions”.—[Official Report, 12 March 2012; Vol. 542, c. 79.]
Indeed, it is an important aspect of this House that we are accountable in that way. It is from that that our fundamental authority here is derived. My hon. Friend has also raised the point about recall. I cannot anticipate the contents of the Queen’s Speech and the future legislative programme, but the House will know that, as indicated in the coalition programme, the Government remain committed to the implementation of a system of recall, and we continue to look forward to introducing proposals in that respect.
Mr David Winnick (Walsall North) (Lab)
No one is going to buy the idea that this was all got up by the media. We must recognise the mistakes that have occurred and we must be less complacent. I have noticed that the House of Commons has been far too complacent on previous occasions before putting reforms in place. Does the Leader of the House accept that we need a system of examining our conduct that will satisfy not only ourselves but the public? As my right hon. Friend the Member for Neath (Mr Hain) has pointed out, the public are not satisfied at the moment. They believe that there are double standards, and we should take that fact on board as soon as possible.
Mr Lansley
I do not think that I am in any way complacent about this. It is important for us to be clear—and, as a consequence, for the public to be clear—that any expenses cases that have arisen since May 2010 are dealt with under a wholly independent system. That should be understood, because I fear that the current public debate is relating to the expenses system that existed before that date, rather than taking into account the creation of the independent system that has been in place since then. On the conduct of Members, the Standards Committee has to deal with complaints on a case-by-case basis, and we have to continue to make a judgment as to whether the investigations are robust and the recommended sanctions are proportionate to the nature of the offence. We in this House have a collective responsibility for that. When it comes to the exercise of those sanctions, I find it difficult to contemplate how suspension from the service of the House, for example, could be the responsibility of an external body. It should be the responsibility of the House to impose such sanctions.
Sir Andrew Stunell (Hazel Grove) (LD)
The current episode is a product of the old expenses system and would not arise now. Nevertheless, it has increased public concern and there is no doubt that the House needs to respond to that. Does the Leader of the House agree that getting the recall Bill into the Queen’s Speech and pushed forward rapidly will form an important component of the solution?
Mr Lansley
My right hon. Friend will understand that I cannot anticipate the contents of the Queen’s Speech at this stage. I simply repeat that we are committed to the introduction of proposals for a recall Bill.
Mr Ben Bradshaw (Exeter) (Lab)
I thought that we had got rid of self-regulation after the expenses scandal, and not before time. Given the doubts about the strength of the recall proposals and in the light of the current saga, what can the Leader of the House say to reassure the public that the reform process, which must be a process without a full stop, has not stalled under this Government?
Mr Lansley
I would reassure the public by saying that, yes, there is a small number of legacy cases, but we now have a fully independent system that has all the powers it needs to take the necessary steps when anything goes wrong, now and in the future. Echoing the comments made by my hon. Friend the Member for Worthing West (Sir Peter Bottomley) about the retiring chief executive of IPSA, Andrew McDonald, objectively speaking, IPSA has come a long way in creating a situation that should command greater confidence about expenses.
So far as the regulation of Members’ other conduct is concerned, the public have to look at individual cases—for example, those relating to the Register of Members’ Financial Interests and conflicts of interest, or to a Member behaving in a way that brings the House into disrepute—and decide whether the independent Commissioner for Standards has pursued the matter robustly. It is certainly her job to do so, and I hope that Members and the public will agree that she does. When we read the reports following her investigations, they are often very detailed and thorough. The public also have to decide whether the decisions are proportionate. That is a matter of judgment, but I believe that the Standards Committee has put in place robust sanctions in recent cases involving that kind of poor behaviour.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
Two years ago, the Government introduced a Green Paper on parliamentary privilege, which was considered at length. It led to the introduction of lay members, and a lengthy discussion on whether or not voting rights should be granted to them. The Leader of the House has already explained the situation in that regard, but will he also recognise that it was the Standards Committee that reopened the investigation into a former Member, which led to that Member eventually being charged and sent to jail, therefore showing that the Standards Committee will, without fear or favour, continue to try to uphold the integrity of this House?
Mr Lansley
Yes, my hon. Friend is right on that latter point. The issue relating to the question of whether lay members should have voting rights on a Select Committee was recently considered and reported on by the Joint Committee on Parliamentary Privilege. We agreed with it when it said that to do that
“could have unintended consequences: principally that, by explicitly confirming that privilege extends to the Committee on Standards, it could be interpreted to mean that the same extension did not necessarily apply to other committees that include lay members.”
There is a risk that including lay members with voting rights on Select Committees could be held in the courts to have removed from that Committee its access to the exclusive cognisance and parliamentary privilege. That is a risk we do not need to run. The lay members on the Standards Committee have the power they need, but if they have any doubt about that, they should tell us and we should consider and perhaps strengthen their power. If, by offering a dissenting opinion, they have the power to act effectively as a veto on decisions made by the Standards Committee, then they have the power they require.
Paul Flynn (Newport West) (Lab)
The great screaming nightmare of the expenses scandal has been churned up again. The public will not read the appendices. They have a powerful impression of sleaze in this House, which is damaging, and it will continue until we get rid of this very wasteful, cumbersome and bureaucratic system of expenses and replace it with a simplified system of allowances. That would save £10 million a year, be popular with Members, save a great deal of time and virtually eliminate the chances of fraud. Is it not the case that the time for IPSA has already gone?
Mr Lansley
I think the hon. Gentleman illustrates the nature of the misunderstanding. There is nothing in recent reported cases that implies directly a criticism of IPSA, as they do not relate to expenses since May 2010. If there are issues relating to IPSA, we should look at them in that context, and not judge IPSA by reference to cases that occurred before May 2010.
Sir Menzies Campbell (North East Fife) (LD)
In considering an alternative system, does my right hon. Friend agree that it is necessary to take proper account of what parliamentary privilege amounts to? Essentially, it is to the effect that nothing said or done in this House can be relied on in any court outside this House. A report by a commissioner to a Committee is part of the proceedings of the House and is therefore covered by privilege. If, on the other hand, it is decided to establish an alternative form, which involves a statute and the creation of a statutory body, that body would be susceptible to any legal action and probably—we can imagine that many cases would be—subject to judicial review, thereby bringing an issue of this kind not only into the public domain but into the responsibility of the civil courts of this country.
Mr Lansley
I am not a lawyer and I bow to the knowledge of my right hon. and learned Friend. I think he is absolutely right about that. From my point of view, it is a very practical question. Let me repeat: if we were in a position in which the commissioner, constituted not as part of the role of the Select Committee and under the Standing Orders of this House but separately, were trying to effect investigations in a similar way while being open to legal and procedural challenges, as described by my right hon. and learned Friend, his job would be made much harder.
Chris Bryant (Rhondda) (Lab)
I have complained many times about the media and the way in which it has operated over the years in relation to Parliament, but I say to Members that there is no point in railing against it on this particular issue. The truth is that the parliamentary system of self-regulation and semi-self-regulation has been on trial in the court of public opinion for a considerable period, and for most of our constituents it has been found wanting. I do not want us suddenly to change all the rules and chase popularity—that would be as foolish as staying put—but surely we must keep under review the operation of the system not only in this House but in the other House, because this is about the whole political system, and, frankly, there is as much dodginess down the other end of the corridor as there might be down this one.
Mr Lansley
I am not sure whether I should pursue questions relating to the other House. That is a matter for the Lords rather than for us. The hon. Gentleman makes a point. I do not think I was seeking to blame the media. I think I was saying quite openly that we take it on our own shoulders. If we cannot communicate the facts to our constituents through the media and otherwise, we should take it on our own shoulders that we have failed in that respect. What I do say is that we should be frank and honest with ourselves. We are in transition between scrutiny of expenses as occurred before May 2010, where there are continuing legacy cases, and the new system from May 2010 onwards. The sooner we can resolve any remaining legacy cases, of which I hope there are very few, and move to a system that is based on the legislation brought into effect in May 2010, the better it will be.
Mr Peter Bone (Wellingborough) (Con)
I went doorstep canvassing on Thursday night, Friday night, Saturday morning and Saturday afternoon, and I was telephone canvassing last night. There was one issue of huge concern, which was immigration from the European Union. What we are talking about now did not come up once. May I ask the Leader of the House to give his personal opinion on whether recall would in fact end the matter that we are talking about today? Ultimately, if recall were in place, the British people would decide, and could it be pure recall?
Mr Lansley
As I have said, these are issues that are debated by the public, and understandably so. In my experience, the public often want to have a conversation, not least when their Member of Parliament is available, to understand what is going on and why something is happening. We need to explain more effectively the transition through which we are going and the nature of the systems that should give the public greater confidence. As far as a recall Bill is concerned, I fear the House will have to await the publication of the Government’s proposals on that.
Sheila Gilmore (Edinburgh East) (Lab)
When I was a member of a local council, we were always told, when dealing with issues of standards, that it was not what we thought or how we perceived our actions, but how our actions would be perceived by others. In this situation, is there not a danger that all the good work that has been done, particularly on the expenses issue since May 2010, is at risk of being undermined? Is the Leader of the House really not prepared to investigate and look at a different way of doing things?
Mr Lansley
On the contrary, as I said in my first response and indeed in response to the shadow Leader of the House and the Chair of the Standards Committee, I am perfectly willing to look at proposals. We must be clear about what the facts are and the situation we are in. When the hon. Member for Edinburgh East (Sheila Gilmore) says that these things risk undermining the system, she should reflect that the decisions that the Standards Committee has been required to make relate to a legacy case from before May 2010. It should not be interpreted as something that can be used to undermine the system of expenses, scrutiny and regulation that has applied since May 2010. To throw that into the argument and say that things must change would be misplaced. That should be judged in its own terms. If there are other ways in which we can further improve the regulation of Members’ conduct more generally, then of course I am willing to discuss it with Members.
Dr Matthew Offord (Hendon) (Con)
I entered this House on a platform for change. No doubt I was assisted by my predecessor’s outrageous expenses. I know that that was under a different system, but knocking on doors in my constituency this weekend, people did raise the expenses issue with me, and they believe that nothing has changed. May I ask the Leader of the House to take the mood not only in this place but in the wider country to make the change that we need?
Mr Lansley
I understand what my hon. Friend is saying but we all—not least my hon. Friend and the other Members who came to this House in May 2010—have a responsibility to explain to the public that things have changed. The system is independently regulated, and under the expenses system that we have had for the past four years and will have in the future there is no sense in which Members of this House are directly engaged in the process of judging other Members. The process is independent. We do not have any say in it; IPSA does.
Mr Dennis Skinner (Bolsover) (Lab)
Do the Leader of the House and the Government not realise that we are living in an austerity-riddled Britain where there have been more than 40% cuts in local government and where more than 1 million people have lost their benefits in the last few years? That is the climate for the people outside and Governments of all kinds should realise that set against that backcloth they cannot keep saying from that Dispatch Box, “We’re going to carry on regardless.” Listen to the tune and the noise outside.
Mr Lansley
I and other members of the Government are clear about the nature of the austerity required in public expenditure and across the country because the income of this country reduced by more than 7%, equivalent to £3,000 per household, under the previous Government, so yes, everything has changed. In this Parliament, in relation to the expenses system for Members of Parliament, things have changed. It is more rigorous; it is controlled; it is controlled independently; any complaints or failures are investigated independently; and any enforcement is done independently. This is not about Members of this House or me being complacent because for now and for the future the system has changed.
Bob Blackman (Harrow East) (Con)
Will my right hon. Friend update the House on how many legacy cases from before 2010 remain? The system has changed—I was one of those elected to see fundamental change—but we want the House to be cleaned up and cleared up and to know that those cases are at an end.
Mr Lansley
I wish that I could say that they are, but I cannot. The answer may well not be “None” and that such legacy cases remain. I do not know; new issues may be raised, but I hope that they are relatively few. Following the Legg inquiry and others, they ought to have been thoroughly considered and the public should have confidence that the issues that were brought out have been dealt with. I hope that that is the case, but I cannot say that there are no such cases. I think that might be over-optimistic.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Can the Leader of the House explain why the Prime Minister still believes in self-regulation of politicians when he has ended self-regulation of the press?
Mr Lansley
The Prime Minister believes in effective regulation. I hope that I have explained to the House that the issues relating to self-regulation are very straightforward. In the debate on 12 March 2012, my predecessor as Leader of the House and the shadow Leader of the House argued by analogy that we were creating something like the General Medical Council or the Bar Council by involving lay members to try to ensure that we did not have self-regulation in the way we had it in the past. We must bear in mind specific issues about the relationship between the regulatory system and the exercise of parliamentary privilege and, in particular, the question of how sanctions that were to be applied in this House can be applied by anybody other than the House itself.
Kellingley and Thoresby Collieries
Nigel Adams (Selby and Ainsty) (Con)
I rise to propose that the House should debate a specific and important matter that should have urgent consideration, namely UK Coal’s proposed closure of Kellingley and Thoresby collieries.
The House will be aware that following statements from UK Coal last week and a written statement made earlier today by my right hon. Friend the Member for Sevenoaks (Michael Fallon), who is Minister of State at the Departments for Business, Innovation and Skills and of Energy and Climate Change, UK Coal is seeking investment from various parties to fund a managed run-down of its two remaining deep mines, Kellingley colliery in my constituency and Thoresby colliery in the constituency of my hon. Friend the Member for Sherwood (Mr Spencer).
UK Coal is seeking taxpayers’ money effectively to shut down two deep mines that have provided fuel to keep our lights on and jobs for thousands of people over several decades. In fact, I understand that today about 40% of our country’s electricity generation is still powered by coal. Given the perilous financial situation in which UK Coal finds itself, the House should be granted an urgent debate so that the whole House can consider the avenues that might be open for the industry. On the line are 1,300 jobs, 700 of them at Kellingley colliery. The pain would be felt not only in my constituency and that of my hon. Friend the Member for Sherwood. It would potentially also be felt in the constituency of my hon. Friend the Member for Worcester (Mr Walker), as a business in that area in the material handling industry is dependent on Kellingley.
My constituency has previously seen the closure of the Selby coalfield in 2004. The Selby super-pit, as it was, captivated all who had the slightest connection with the coal industry. It began mining in 1983 but was closed in 2004.
I should declare an interest as several members of my family have been involved in coal mining. In fact, some of them worked at Kellingley colliery itself between the ’70s and ’90s. Coal mining has being going on at Kellingley since 1965 and Thoresby since 1925.
I have met UK Coal, the National Union of Mineworkers and, most importantly, workers and family members who would be devastated if the mines were to close. I received an e-mail yesterday from my constituent Samantha Higgins from Selby, who wants me to ensure that their voices are heard and everything is done to protect their livelihoods. Mrs Higgins’s husband is a coal miner at Kellingley, as are her father-in-law and brother-in-law. In fact, her brother-in-law was only taken on at the pit earlier this year. Between them, they have three children under the age of six and three mortgages. The devastation that could befall that family should the pits close is not an isolated example.
I can also quote, Mr Speaker, from a letter I received from the Bishop of Wakefield, who is concerned not only about the severe problems that would be faced by the workers and their families but about the long-term security of our energy needs as a nation—
Mr Speaker
I note the observation of the hon. Gentleman.
I have listened carefully to what the hon. Member for Selby and Ainsty (Nigel Adams) has said and I must give my decision without stating any reasons. I am afraid that I do not consider the matter that the hon. Gentleman has raised as appropriate for discussion under Standing Order No. 24 and I therefore cannot submit the application to the House.
National Health Service (Right to Treatment)
Hugh Bayley (York Central) (Lab)
I beg to move,
That leave be given to bring in a Bill to ensure that medical treatment prescribed as necessary by a doctor or other medical professional must be provided unless the type of treatment is not approved by the Secretary of State or the National Institute for Health and Care Excellence; to establish a national register of cases where such prescribed treatment is refused; to introduce a mechanism for appeal against decisions about provision of medical treatments; and for connected purposes.
It is widely recognised that the national health service has become a lottery in which access to treatment no longer depends solely on a patient’s clinical needs but on where they live and on the state of the local NHS budget. That problem is made worse because Ministers, who decide how much money NHS England and the 211 clinical commissioning groups receive, deny all responsibility for how that money is spent, and because of the lack of transparency and accountability of the decision makers who control the postcode lottery and decide which patients will get treatment and which will not.
My Bill addresses the postcode lottery in three ways. First, it will require the Government to set up a public register of all individual funding requests—or IFRs— made to NHS England and CCGs, together with the decision on whether the NHS will pay for treatment. That will improve transparency by allowing patients and clinicians to see whether a treatment banned by the NHS in their locality is available on the NHS elsewhere. It will lead clinicians and the Government to make more consistent decisions in future. After all, we are all liable for the same taxes, wherever we live, so we should all get equal access to treatment from a tax-funded public health service. Indeed, on 26 March the Minister of State for care and support, in a letter to me about a constituent’s lack of access to treatment, said:
“We are aware of variation across the country in prosthetic services, and we will be working with NHS England to determine what needs to be done to address this, in line with the key objective in the NHS Mandate 2013-15 to expose variation and unacceptable practice to help people learn from best practice.”
I cannot see how the Government can possibly turn down my proposal.
Secondly, my Bill seeks to introduce a presumption in favour of treatment where a treatment is recommended by a qualified NHS clinician, unless the procedure or medicine is not approved by the National Institute for Health and Care Excellence or is designated in a statutory instrument proposed by the Government and approved by Parliament as a treatment no longer available on the NHS. We as politicians at national level determine how much money to make available to the NHS, so we ought to take responsibility for decisions on access to treatment within the budget that is available.
The NHS has always rationed treatment, through waiting times and other opaque devices, but now equity of access to treatment—one of the founding principles of the NHS—is so compromised by postcode rationing, we need an open and transparent system for reviewing decisions. Transparency is not enough. The people who control the NHS purse strings need to be accountable for their decisions.
Thirdly, I propose that patients whose treatment is supported by their doctor but turned down by the NHS should have a right of appeal to an independent tribunal. This would be consistent with the Human Rights Act 1998; it already applies to people whose benefits or immigration application is turned down. So surely there should be a similar right to challenge a public sector decision maker when someone’s health and well-being is at stake.
Let me mention briefly a few examples of my constituents who have had to fight for treatment. Zoe Bounds is a woman in her 30s with two children. She had ovarian cancer in her teens and recently developed breast cancer. Her consultant recommended a double mastectomy to reduce the risk of the cancer spreading. The care commissioning group agreed to pay for one breast to be removed, but NHS England, which is responsible for funding preventive surgery, refused to pay for the other half of the operation. On appeal, however, the CCG agreed to the double mastectomy.
Rebecca Beattie was badly beaten by a former partner and suffered multiple fractures to her face and nose. She needed surgery to enable her to breathe properly, but initially funding was refused. It was only after appeal and exposure in local and national newspapers including The Sun that funding was made available.
Emma Willets needs a permanent catheter to empty her bladder. A temporary operation at Pinderfields hospital to stimulate her sacral nerve greatly improved her condition. Her individual funding request for a permanent operation to stimulate the nerve has been turned down by the CCG. Her consultant points out rightly that the cost of permanent catheterisation—including the cost of hospital admissions each time she gets a urinary tract infection—will be much greater than the cost of the operation to improve her condition. These cases illustrate the need for accountable decision making and for a patient’s right of appeal.
Two and a half years ago, I introduced a similar Bill. I predicted that the Government’s NHS reforms and the squeeze on NHS funding would make the postcode lottery worse. NHS expenditure per person is down in real terms from £2,043 in 2009-10, to £1,999 this year and is due to fall again next year to £1,986, according to figures prepared for me by the statisticians in the House of Commons Library.
I asked parliamentary questions in 2012 and again this month about the number of individual funding requests. I was told:
“The data requested is not collected centrally.—[Official Report, 3 April 2014; Vol. 578, c. 793W.]
I have, however, conducted my own survey of primary care trusts, 109 of which replied—a 72% response rate. The number of IFR approvals in 2009-10 was 51,661. The number of approvals in 2011-12 had fallen almost by half to 26,076. There is enormous variation in approval rates. In 2011-12, 10 out of 109 PCTs approved 75% or more of IFRs; seven approved 25% or fewer. This is simply unacceptable. The postcode lottery is unfair. It contradicts the founding principles of the NHS. Each time the NHS says no to a patient a little more public confidence in the NHS drains away. This needs to change, and quickly. I commend my Bill to the House.
Question put and agreed to.
Ordered,
That Hugh Bayley, Frank Dobson, Kevin Barron, Ms Gisela Stuart, Sir Bob Russell, Barbara Keeley and Grahame M. Morris present the Bill.
Mr Hugh Bayley accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 6 June, and to be printed (Bill 199).
Finance (No.2) Bill
(10 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
15:27 - The House divided: - Ayes: 0 / Noes: 0 - Question accordingly negatived.
17:28 - The Committee divided: - Ayes: 231 / Noes: 295 - Question accordingly negatived.
17:42 - The Committee divided: - Ayes: 231 / Noes: 296 - Question accordingly negatived.
19:28 - The Committee divided: - Ayes: 226 / Noes: 286 - Question accordingly negatived.
Shabana Mahmood (Birmingham, Ladywood) (Lab)
I beg to move amendment 2, page 3, line 28, at end insert—
‘( ) The Chancellor of the Exchequer shall undertake a review, within six months of the passing of this Act, on the impact of an additional cut of one per cent to the main rate of Corporation Tax for financial year 2015-16, with particular reference to—
(a) the impact on businesses with fewer than 50 employees;
(b) the impact on investment by businesses with fewer than 50 employees; and
(c) alternative tax measures, including non-domestic rates, which would have a greater benefit for businesses with fewer than 50 employees.
( ) The Chancellor of the Exchequer must publish the report of the review and lay the report before the House.’.
This amendment would require the Chancellor of the Exchequer to publish a report on the impact of a cut of one per cent to main rate Corporation Tax on businesses, including small and medium sized enterprises (SMEs).
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to consider:
Clauses 5 to 7 stand part.
That schedule 1 be the First schedule to the Bill.
Shabana Mahmood
Our amendment would require the Chancellor to publish a review of the impact of an additional cut of 1% to the main rate of corporation tax for 2015-16 with reference to the impact on businesses with fewer than 50 employees, their levels of investment and the impact of alternative tax measures such as a reduction in non-domestic rates—business rates—which we believe would have a greater impact on small and medium-sized enterprises, which tend to be businesses that have fewer employees and in the main occupy premises with a rateable value of less than £50,000.
Our amendment and our approach highlight the difference between us and the Government when it comes to business taxation. The Government have made a number of significant cuts to corporation tax. The main rate has been cut a number of times, and is due to be cut again from 21% to 20% next year. The main rate is paid by companies with profits of more than £1.5 million—about 40,000 or so businesses. The small profits rate is paid by companies with profits of under £300,000, and there is a marginal rate, which applies to companies with profits between £300,000 and £1.5 million.
The Government have announced cuts to the corporation tax rate in almost every fiscal event that we have had since 2010, with the rate falling from 28% in 2010 to 20% in 2015-16. This has brought the UK rate lower than most developed economies. As I said, the Government are planning another cut for April 2015 from 21% to 20%, at a cost of £400 million in 2015-16, rising to £785 million the following year, and £865 million the year after that. The cumulative corporation tax cut over this Parliament has been in the region of £10 billion. The Government’s central argument for cutting corporation tax is that a lower rate makes the UK more attractive as a destination for businesses to locate. They claim that a reduction in the main rate of corporation tax will reduce capital costs for businesses and promote higher levels of business investment.
Simon Kirby (Brighton, Kemptown) (Con)
Can the Opposition really be interested in business when not a single Back Bencher is present to listen to the hon. Lady speak to her amendment?
Shabana Mahmood
I assure the hon. Gentleman that Labour Members are passionate about business and our policy of a business rates cut for small and medium-sized businesses, which I will come to later.
The Government’s impact assessment says that the 1% cut in 2015 will lower the bills of 40,000 businesses that have profits of more than £1.5 million and pay the main rate of corporation tax. It will also benefit a further 41,000 businesses that have profits between £300,000 and £1.5 million and pay the main rate of corporation tax but receive marginal relief.
The Department for Business, Innovation and Skills estimates that the UK has 4.8 million private sector businesses, the majority of which, around 3.6 million, are sole proprietorships, and a further 1.02 million have fewer than 10 employees. That means that if 81,000 businesses benefit from cuts to the main rate of corporation tax, fewer than 2% of the total businesses in the UK are benefiting.
Mr John Redwood (Wokingham) (Con)
I would be grateful if the hon. Lady explained how the Treasury should go about making the calculations that she wants it to make. How would the Treasury know the consequence of that one particular tax change, and how would it know what it would be like without it?
Shabana Mahmood
I will come to the point about the different tax choices that we make and measuring their impact. Unlike the Minister, I do not have access to Treasury officials, so I am not versed in their methodology, but I do not deny that the Government’s corporation tax rate cuts in this Parliament, which we have supported, have benefited 2% of businesses. I will come later to the 98% of businesses that have not benefited from the cuts to the main rate of corporation tax, but which are struggling with the costs of running their business. The Opposition believe that the Government can and should go further in helping those businesses cope, in particular, with the business rates that they have seen increase.
Ian Swales (Redcar) (LD)
Will the hon. Lady acknowledge that the Government inherited plans to increase corporation tax for small businesses by 1%, but have cut it by 1%, so it is not true to say that the Government have done nothing for small businesses?
Shabana Mahmood
I will come to the Government’s record in helping small and medium-sized enterprises.
As I said, we have supported the reduction in the rate of corporation tax in this Parliament, except to raise concerns, which I am sure the Exchequer Secretary will remember, well before I was in my current post, about the financing of that change at the start of the Parliament by getting rid of investment allowances on which the Government have recently U-turned. But as the figures show, the change to the main rate of corporation tax, the central policy for business taxation, does not help 98% of business in this country. How are they faring under this Government?
Everyone agrees that SMEs are the engine of growth, a phrase that we hear regularly in the Chamber and the House, and it is also fair to say that they are part of our national life. High streets and corner shops are part of the very British way of life that we enjoy in this country. I have a personal affinity with these enterprises, as when I was younger, my parents had a corner shop. My first job was helping my parents by serving customers in our shop after school and at weekends, doing the stock-take and going with my dad to the cash-and-carry. Even if one did not grow up in such a business, they are easy to call to mind because there are so many of them. As I said, there are almost 5 million, and they are the heart and soul of our villages, towns and cities. They also provide about 47% of private sector jobs.
As for everyone—SMEs are no different—times have been tough, and SMEs have been struggling with a number of issues during this Parliament and I will come to the points raised by the hon. Gentleman. The first of those issues has been access to finance. Every time we discuss SMEs, access to finance is one of the key issues raised. It is fair to say that the Government have failed to get lending going to businesses. They are in their fourth year of office and their many schemes keep failing to have a significant and game-changing impact on the access to finance landscape. For example, business lending fell towards the end of last year as banks continued to squeeze funding for SMEs, despite attempts by the Bank of England to boost finance to the sector. Bank lending figures also show that businesses paid back £4.3 billion more than they had borrowed in the three months to the end of November. SMEs were the worst affected by that particular brake on lending, and that is despite the tweaks to the funding for lending scheme announced by the Bank that were designed to try to ensure that loans to smaller businesses would be favoured.
Although larger businesses can access the growing market for debt financing in the bond market, there is a problem for small businesses that are reliant on high street banks and specialist finance and lending businesses, which have become much more conservative in their lending practices since the global financial crash of 2008. SMEs have consistently reported that credit is either refused or offered at very high prices by the major lenders, as Members on both sides of the House must regularly hear from businesses in their constituencies. There has been much talk in this Parliament about the problems of access to finance for SMEs, but despite several different schemes being announced, the change in practices that is required if SMEs are to have the finance they need has not been seen.
That issue has also been considered by the Public Accounts Committee, which made a number of worrying findings in relation to the landscape for SMEs. It said:
“The departments’ schemes are managed as a series of ad hoc initiatives that are launched to address particular weaknesses in the market, rather than to act as a coherent programme.”
That is a real problem. The lack of a coherent programme from the Government, despite what I am sure are the best efforts of the Business Secretary and the Chancellor, has led to piecemeal action—a little bit here and a little bit there, but no overall drive to action, only some good rhetoric for set-piece debates in the Chamber, leading to not very much at all.
Steve Baker (Wycombe) (Con)
The hon. Lady seems to be arguing that banks should be less conservative, which implies a greater degree of risk, and says that she wants a more coherent, less piecemeal programme. I infer from that that she wants the banks to take a greater degree of risk, and the taxpayer to pick that up. Is that what she is saying?
Shabana Mahmood
As I set out, the issue is not just the risk taken by the banks, which have been very conservative in providing SMEs with access to finance. Members in all parts of the House accept that good businesses that have the capacity to grow, create more jobs and be successful are failing to get the finance they need. In my constituency, a number of successful, viable businesses are still failing to get finance from the banks. That is not a result of banks being a little bit conservative in their risk taking; they have significantly curtailed their lending, which is having a negative impact on SMEs and their capacity to grow and increase jobs.
The Public Accounts Committee also found that investment overall had declined and that Government Departments could not demonstrate whether their schemes had addressed the market failures that they had been set up to correct. There was no mechanism, the Committee said, for evaluation of the various schemes and no obvious goals were set for the schemes, making it easier for the Government to hide any failures. Goal setting of the kind envisaged by the Public Accounts Committee would make the failure of such schemes much starker, but would also lead to greater and quicker action to correct them and ensure that desperately needed finance reached SMEs.
An additional problem in the Government’s approach, according to the Public Accounts Committee—I think we can all agree on this—is the difficulty of raising awareness of the schemes available for SMEs, which are often small operations, one-man or one-woman bands. It is difficult to balance all the responsibilities of running a business, and often people do not have the time to engage with Government policy and how it affects them. They may hear about schemes randomly and it is not always easy to learn from Government websites what is available for small businesses. The Public Accounts Committee felt strongly that the Government lacked a clear strategy to ensure that SMEs were aware of the funding options available to them.
I noted at the weekend that the employment allowance introduced by the Government has been rolled out. Millions of letters have been written to businesses to make them aware of the £2,000 allowance that has come into effect. That goes to show the extent of the awareness raising that is required. I am sure that there was also a political advantage and motive to the writing of those letters. Writing to businesses telling them what change has occurred and how they might benefit is a good thing, but it shows the effort required to get the message out. Such effort was not necessarily apparent in the case of other Government schemes relating to access to finance.
Nick de Bois (Enfield North) (Con)
Perhaps the hon. Lady will understand my confusion and clarify this point for me. She has spent much of her speech suggesting that the Government were doing nothing for small business. Then, when they contact businesses and tell them how they can benefit from the Government’s policies, she seems a bit disappointed. Can she explain the contradiction?
Shabana Mahmood
I assure the hon. Gentleman that it is not a matter of my personal disappointment. The Government have announced a number of schemes, which everyone agrees have failed to get lending to the rate that is necessary to have a game-changing effect on the landscape for small and medium-sized enterprises. The employment allowance, which we supported—the hon. Gentleman served on the relevant Bill Committee—came after the national insurance contributions regional holiday, a scheme that was in place for three years and almost from day one failed to meet the ambitious targets that the Government set for themselves. Throughout the life of that scheme, we called on the Government to change course, which they did not do until the scheme came to the end of its three years, at which point they introduced the employment allowance.
Ian Swales
Will the shadow Minister enlighten us on how the calculation of a £5,000 saving is made, and on what she predicts about prices before and after such a freeze?
Shabana Mahmood
The hon. Gentleman is welcome to see our detailed calculations, which I can provide to him and are a matter of public record. If he really wants auditing of manifesto commitments, he should support our call for the Office for Budget Responsibility to be allowed to audit parties’ manifestos. We have nothing to hide on the policies that we have announced and the numbers behind them. We are very happy for the OBR to look at all that and to prepare a report for the benefit of the public so that they can see that what we are saying is based on good numbers and is deliverable. If the Government—both parts of the Government—have nothing to hide, they should fully support our proposal on the OBR audit, which is a good one. I am glad that the hon. Gentleman has given me a chance to remind the House that it is not Labour Members who are scared to have their numbers looked at.
Shabana Mahmood
I will not give way; I am going to make a little more progress.
As hon. Members will know, the level of business rates is set by the Treasury, although the revenues are collected locally. Business rates increase with inflation, and the rate of increase each April is set according to the rate of retail prices index inflation in the previous September. In September 2013, RPI was 3.2%, so business rates were due to rise by 3.2% this year. Of course, that was before the Government made their autumn statement announcement, which capped that increase at 2%. Business rates have risen rapidly during this Parliament because of high inflation. More than one in 10 small businesses now say that they spend the same or more on business rates as on rent. This April, businesses have been hit by a rise of £270, on average, at a total cost to business of £45 million.
Nick de Bois
The hon. Lady spoke very passionately, and rightly so, about her parents’ corner shop business, which she is right to be proud of. In citing these numbers, however, she overlooks the fact that because of the Government’s extension of small business rate relief, anyone with a rateable value of less than £6,000 is not paying anything at all, as I found out when I went down my local high street and heard how grateful people are for this support. We need to keep some context when talking about these numbers.
Shabana Mahmood
I hear the hon. Gentleman’s point, which I will come to later in my remarks. On the action that the Government have taken in the round, he will not be surprised to hear that my criticism is that it does not go far enough. By comparison, our alternative proposal, which is a Labour manifesto commitment, goes much further and would result in a cut in business rates and a freeze the following year.
The only choice for many shops, workshops, start-up businesses and others who pay business rates is to pass the increases on to their customers, primarily through higher prices, which of course makes things difficult for those customers. They also face a continuing squeeze, which many of them complain means that they can no longer afford to stay in business. This is having a real impact, as I know from my casework in my constituency surgery. I have met many constituents with family-owned businesses whose stories are not dissimilar to the story of my own family, whose elder relatives came to this country in the ’60s and ’70s and set up businesses that they have passed on to their children and, in some cases, grandchildren. They are now terrified that the squeeze from the exponential growth in business rates might put their family-owned businesses out of business. I have seen constituents break down because every time the business rates bill comes they fear that many years of hard work, which is tied absolutely to their conception of what it is to be British and to enjoy the freedoms offered by this country, might be going down the drain.
Given how much businesses are struggling and given the collection of issues that SMEs are facing, we have said that the next Labour Government would cut business rates in 2015 and then freeze them in 2016. In 2015, we would cut business rates on properties with an annual rental value of less than £50,000, taking the rates back to the level of the previous year, and then freeze them for such properties in 2016. As we have said, we would pay for that by reversing the additional cut in the main rate of corporation tax due to go ahead next year, when it will fall from 21% to 20%. The main rate is paid by companies with profits of over £1.5 million, while companies with profits between £300,000 and £1.5 million pay the rate on a sliding scale, and companies with profits of less than £300,000, which pay the lower rate, will be unaffected by the cut.
All the money raised from the corporation tax increase that we envisage—that is, a rise from 20% back up to 21%—would be spent solely and exclusively on paying for our policy on business rates. That is an important point given some of the debate that has taken place in the House in the past week or two, when we have been speaking about the Budget and attitudes towards business taxation. Even at 21%, our corporation tax rate would remain competitive, being second lowest in the G8 and second lowest in the G20. Government Members often say that any corporation tax rise will have a negative impact on our country’s capacity to do business, but I disagree, because, as I said, even at 21% it will be the second lowest in the G8 and the G20. The headline rate of corporation tax is not the sole reason that businesses choose to come to this country to invest and create jobs. It is an important factor—no one can deny that—but it is part of a picture of support for business that those wishing to come to this country look at, or are advised on, before they make their decisions. I do not believe that putting corporation tax back up from 20% to 21% would have too great an impact on our capacity to attract businesses to this country.
Simon Kirby
Is not the problem that a proposed tax increase sends a message that it is the thin end of the wedge—the tip of the iceberg—and that under a Labour Government, God forbid, we might see considerably more tax rises?
Shabana Mahmood
I do not think it does send that message. Business people are much more sophisticated than that: they do not simply look at announcements about the headline rate. They will receive advice from their advisers—their accountants and lawyers—when they are making their decisions about where to base themselves and where to go to invest and grow their companies. It will be explained to them, and known to them, that this policy is designed to support a different type of business that benefits all of us who are interested in the business landscape.
We have been very clear that this is the only change to corporation tax that we envisage during the next Parliament and that we are doing this not because we want to put people off coming to this country, or prevent them from doing so, but because we want to use all the money to pay for a cut and then a freeze in business rates. We have also said very clearly that any choices we make that differ from what the Government are doing will be fully costed and fully funded. As I said, we are happy for the OBR to look at our figures and audit our manifesto, and to do so for all political parties ahead of the next general election to make sure that the public are as well informed as possible about the different choices being made by parties that want to be in government.
Nick de Bois
Given the extreme volatility of corporation tax collections for decades, how would the hon. Lady deal with the unpredictable nature of the amounts collected? Will whatever is collected one year be applied as a discount on business rates the following year? If the revenues were below the expected amount, would the hon. Lady go back to businesses to ask for more in business rates? She should consider the unfortunate, difficult and unpredictable nature of the issue. Business needs certainty.
Shabana Mahmood
I agree that business needs certainty. All our figures are based on analysis from the House of Commons Library. That is the best we have to go on and it is, of course, a respected source for making projections on the likely cost of cutting the rate and how much will remain for business rates. As I have said, all the money raised will go towards our business rate policy, which applies to 2015-16 and 2016-17. We will, of course, consider the circumstances in the early part of the next Parliament when deciding what to do about business rates.
During the Budget debates, Government Members tried to argue that our proposal to increase corporation tax back up to 21% meant that Labour was all about increasing business taxes. It is interesting that that argument has not been repeated since those debates. It quickly fell apart when it was pointed out to Government Members that, given that all the revenue from our corporation tax policy would be spent on cutting and then freezing business rates for small businesses, their argument did not seem to consider small businesses to be real businesses. I am glad that Government Members appear to have dropped that particular line of attack and I would warn them against trying to run it again, because it was insulting to small and medium-sized enterprises.
James Morris (Halesowen and Rowley Regis) (Con)
Under this Government, local authorities will be able to retain an uplift in business rates as part of local government funding. Has the hon. Lady considered the impact of a business rate freeze on the ability of local governments to benefit from an uptake in business rates, and on local government finance in general?
Shabana Mahmood
Our policy is fully costed. We do not envisage any loss of revenue for local government. Our key priority is to give practical assistance to businesses as soon as possible, so that people such as those who visit my constituency surgery to say that they are fearful that they will have to close their business get some relief from what is becoming a very real business burden.
Last week the Secretary of State for Education suggested to the British Chambers of Commerce that our policy on corporation tax and business rates pits businesses against each other, which is complete nonsense. The idea is not to tell one business that it is going to suffer while another business does really well; it is to get a better balance with regard to the landscape of business taxation.
As I have set out in detail, corporation tax cuts over the life of this Parliament amount to some £10 billion and 2% of businesses in this country have done very well with their tax bill. It is fair and right to consider what is happening to the other 98%, understand the struggles they face and make choices that the 2% might not like, but that will offer support to smaller businesses and that will go some way to ensuring that they can remain in business and continue to grow and do good for the economy.
Even if the headline rate of corporation tax increases from 20% to 21%, it is important to remember that it will remain competitive. I do not believe that the change would be destructive or damaging to UK plc. In fact, I think that it and the moneys that will go to businesses as a result of a cut and then a freeze in business rates could do real good, not just for SMEs but for the economy as a whole.
Simon Kirby
It is all very well for Labour to bash big businesses, but does the hon. Lady not understand that many of their customers and suppliers are small businesses? The issue is not quite as simple as she would have us believe.
Shabana Mahmood
I am really disappointed that the hon. Gentleman has not been listening to my speech. At what point did I bash big businesses? It was not something I said, and nor was it suggested by my tone. I have made it very clear that we supported the cuts to corporation tax in this Parliament. We are simply suggesting a switch spend—it will be in our manifesto for the next general election—which amounts to making a different choice on corporation tax in order to get practical and immediate help to smaller businesses that will make a real difference to them.
Given that the 2% of businesses that are larger have benefited by about £10 billion over the life of this Parliament as a result of a number of changes to their taxation, it is fair to switch our attention to a part of the business market that has been rather ignored. Although the Government have a number of schemes to help smaller businesses, those schemes are not going far enough or achieving the Government’s aims.
Our suggested switch spend is fair. It is not about pitting one business against another or valuing one above another. It is a simple recognition of the fact that 98% of businesses in this country have not received the practical help they need. They are desperate for change on their business rates and we will deliver it. The policy will be in our next manifesto.
The Exchequer Secretary to the Treasury (Mr David Gauke)
On support for small businesses, does the hon. Lady regret the fact that when her party was in office, it planned to increase the corporation tax rate for small businesses from 21% to 22%? Does she also regret the previous Government’s plans to increase employers’ national insurance contributions and fuel duty, which would have affected small businesses?
Shabana Mahmood
What I primarily regret is that, as a result of the choices they made, this Government choked off the economic recovery that was under way when they came to office. That is the most regrettable thing: it led to three damaging years of flatlining, and it is ordinary people who are paying the price.
Following a vocal campaign by a number of business groups, ahead of the autumn statement the Government decided not to go ahead with the planned 3.2% increase in business rates and decided instead to cap them at 2%. The Government also announced in the autumn statement that they would provide additional help to retailers. That was action—it was relatively late in the day but it was action—but it does not go far enough, and the Government’s policy does not compare favourably with ours ahead of the next general election.
Ultimately, business rates are still set to rise this month by an average of £270. The Government’s autumn statement offer of £1,000 business rate relief was welcome for retailers, but it excluded workshops and offices used by high-tech start-ups. I particularly have in mind small jewellery makers in my constituency, which is famous for the jewellery quarter at its heart. Such businesses will not benefit from the Government’s announcements in the autumn statement and, as I have said, a significant rise in business rates is still envisaged for small businesses.
Our proposal for a switch spend from corporation tax to business rates is a much more comprehensive measure that would offer genuine and more far-reaching support to small and medium-sized enterprises. Given the scale of the problem, our policy seeks to offer practical help that would truly make a difference on the Witton road, the Coventry road and the Soho road in my constituency. The Exchequer Secretary will be pleased to know that it would also make a difference in his constituency. The Office for National Statistics report “UK business: Activity, Size and Location 2013”—a great read—tells us that more than 80% of the 5,750 VAT or PAYE-based enterprises in South West Hertfordshire employ no more than four people, while almost 75% of them have a turnover of less than £250,000. They are therefore not affected by the changes to the main rate of corporation tax, which he himself oversees; they are more likely to be in properties with a rental value of £50,000, and are therefore more likely to benefit from Labour’s proposal to cut and then freeze business rates in 2015-16.
In conclusion, we believe that our policy is the right one for helping small businesses. It meets the scale of the challenge that they face on business rates, and it makes the right choice about how to pay for the policy. We will want to vote on our amendment later this afternoon to highlight the impact of this Government’s decisions and the imbalances in their approach.
Mr Redwood
I remind the House that I offer advice for an industrial company and an investment company, although not on these subjects.
I thought that the hon. Member for Birmingham, Ladywood (Shabana Mahmood) started her speech very promisingly. I admire her background, and I can think of a former great Member of Parliament who came from a very similar background and who deduced some very sound principles about how economies and shops work. I thought that the hon. Lady was going to develop in that style. I was delighted when she said that she is now a convert to tax reduction. She said that she and the Labour party now think that taking corporation tax down from 28% to 21% was right. It is wonderful news that we seem to have cross-party accord on the fact that lower tax rates can bring businesses to Britain, keep more profit in Britain and, if we let such policies fructify for long enough, even lead to more revenues and help to promote the economic growth that we all want.
The hon. Lady went even further and thought up another tax reduction that she wants. I am not normally one to let a tax reduction opportunity go by, and she said that a reduction in business rates would be a very good idea. She said that it would be good to find a way to make a further reduction in business rates, because that would be very welcome after years of increases.
I was then disappointed, however, because the hon. Lady said, “Oh, you can’t have too much of a good thing. It might start to work. You’ve got to have a tax rise, as well as a tax reduction.” She did set one part of the business community against another, although she claims that she did not do so. I find that rather curious, because we are meant to be debating the Opposition’s amendment 2, which does not propose a reduction in business rates or an increase in the corporation tax rate, although she says that that is their policy. The amendment allows us to talk about that because it is very wide ranging. We can talk about any kind of tax because it invites us to look at alternatives to corporation tax in ways that she spoke about.
We have a contradiction: the Opposition say that they have a settled policy to put up the corporation tax rate for larger companies and to cut and then freeze business rates. However, we are asked to vote on a much weaker amendment, which just says that the Chancellor of the Exchequer should conduct a review of the impact of cutting the corporation tax rate from 21% to 20%, as well as of other options, presumably including the one that the hon. Lady has already adopted.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Does the right hon. Gentleman accept that the primary cause of that increase in revenue is income shifting from one year to the next? Many individuals held back income in the year when the rate was 50%, and brought it forward when the rate was reduced to 45%.
Mr Redwood
I do not accept that at all, because the revenue in the previous year was very similar to the figure for the year before that, which was before people knew that there might be a cut in the tax rate. I suspect that next year will also see good levels of revenue. I do not expect a sudden reduction of £9 billion in revenue in the financial year we are just starting. As always, the hon. Gentleman is peddling misery for no good reason. Labour Members should rejoice and accept the fact that if we cut a rate, we sometimes get more money. They always want to spend other people’s money, so surely they should listen to how we can maximise the amount we get out of people.
Sheila Gilmore (Edinburgh East) (Lab)
Will the right hon. Gentleman explain where, following the rate change, this money has suddenly come from if it is not re-phased income? Is he suggesting that people have somehow avoided tax or that people have suddenly come into this country to pay it? He must have some reason for the increase, if he does not accept the one given by my hon. Friend the Member for Edmonton (Mr Love).
Mr Redwood
We are talking about people who are a serious amount richer than any of us on MPs’ salaries, and if the hon. Lady meets such people occasionally she will discover that they have many more freedoms than other people on when and where they earn income, what they invest in and where they organise their affairs. Some of them were not in this country before and came here when the rate was lowered. Some have some money in one country and some in another, and they can quite legally shift their money around and decide where they are going to earn more income. That is what companies do, as she has discovered and sometimes complained about. Rich people have a lot of flexibility, which means that a country that sets sensible tax rates attracts and keeps more of them and gets them to do more things.
There is also a disincentive effect, because someone who is legally here and keeps all their money here might not do extra work—why should they, when they are going to be taxed at too high a rate? Or they might not take an extra risk with their investments—why should they? If it works they will get taxed, and if it does not work they will take 100% of the loss. We can therefore change the climate by setting a competitive rate to encourage more confidence and action.
Mr Love
I do, because I want to explore the Arthur Laffer effect. The right hon. Gentleman seems to be saying that if we reduce income tax, we increase the amount of money we take. How far would he take that? Would he make income tax 40p in the pound, or 35p? Would he abolish income tax entirely and raise even more money?
Mr Redwood
The hon. Gentleman is now being completely stupid, is he not? There are two rates of tax that will raise no money—0% and 100%—and there is a curve between the two, which, as he rightly said, was first drawn by Mr Laffer, I believe on a napkin. Most people, including the Treasury, accept that there is a Laffer curve, and that it is a question of judgment where the rate is that maximises revenue. It is quite clear from the evidence in this year’s Revenue and Customs figures that 50% was too high a rate to maximise revenue, and that 45% gets us more revenue than 50%. I believe that 40% would get us more revenue than 45%. I am pleased to hear today that a Liberal Democrat, of all people, is writing a book on the subject. I welcome that and look forward to more progress in coalition talks about the maximising rate of income tax. If it were taken down to 20%, we would clearly lose a lot of money, so somewhere between there and where we are now is the maximising rate, and getting it right is partly science and partly trial and error. We can be sure that we are now moving in the right direction, having gone in the wrong one previously.
It is interesting that the previous Prime Minister, during all his time as Chancellor of the Exchequer, never took the top rate above 40%. I do not think that was because he liked rich people or wanted to be unkind to the left wing of the Labour party. I believe it was his judgment that anything over 40% would have cost him revenue. As a modest man, I therefore accept that there was something about which he was absolutely right—he was correct in not raising the top rate of tax above 40%.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
The right hon. Gentleman has made a case about corporation tax and about the top rate of income tax being reduced from 50p to 45p. Would he apply the same logic of Laffer to indirect taxation? It would be interesting to hear his comments about the raising of VAT to 20%.
Mr Redwood
It is clear from the figures that the raising of the rate to 20% increased revenue. Yes, there is a Laffer effect in VAT, and 20% is clearly below the optimising point if our only interest is in increasing revenue. Going from 17.5% to 20% has not got us to the point where it costs us revenue. If it had, I would have been the first to tell Ministers that it was a ridiculous idea. I understand their need for more revenue, because they inherited such a huge deficit.
Tom Blenkinsop
Of course, companies often pay VAT before they even make a profit.
Mr Redwood
Indeed, there are timing issues with VAT, as the hon. Gentleman says, but I do not really see how that affects the argument about whether putting the rate up brings in more money. That is in the figures.
I fear that we are drifting a bit far even from the wide subject of the amendment, but I suppose the alternative options to help business could include cutting VAT. However, it is clear that if we cut the rate of VAT again, there would be a substantial loss of revenue, whereas we have just cut the income tax rate and there has been a colossal revenue gain. We should learn from those points.
I think the shadow Minister suggested that there would be no loss of revenue to local government from cutting and then freezing business rates. I do not know whether she wants to intervene, but that was my understanding of what she said. I think the Labour party has been converted to the Laffer effect. It now asserts—I do not know on what evidence—that if we cut and then froze business rates, we would collect the same amount of revenue. I would need persuading about that, because I am not sure that business rates are at that point yet, but if they were, it would be a sensible proposal for the coalition Government to take up. It would make it an even bigger pity that Labour has not bothered to table a proposal along those lines for us to vote on today, which might even have drawn me into the Lobby against my own party’s Front Benchers if the case had been well made and I felt that the Laffer effect of lower business rates was well established. I have profoundly shocked my Front-Bench colleagues now, having earned myself a brownie point through my earlier remarks. As they are well aware, they are quite safe, because there is no proposal on the amendment paper to cut business rates. [Interruption.] The Whip has just found that out—she needs to do a little more homework before coming to these debates. [Interruption.] Now she is complaining that she did not say that. As she will be in the record as having said nothing, who am I to disagree?
Before I get into any more trouble, I will conclude my remarks by saying that I will not support the amendment. I do not believe that a review would help, and I do not understand how it would be judged. Nor does it seem that it would have any impact on Labour policy. I am perplexed by the fact that when Labour has a clear policy for once, it has not tabled a proposal so that we can debate it fully and vote on it. I strongly support lower corporation tax rates, which will be very helpful.
Kelvin Hopkins (Luton North) (Lab)
It is a great pleasure to speak briefly in this debate. There is everything to be said for reviewing the effects of changes in tax rates, but to do that one must eliminate all other factors. A great surge in demand over a certain period, with unemployment going down and output going up, and all sorts of other factors can affect tax revenues. It is not just tax rates. As my hon. Friend the Member for Edmonton (Mr Love) said, if there was a direct relationship between lower tax rates and increased revenues, a zero tax rate would mean big revenues and a higher tax rate would mean lower revenues. It is just not like that.
I also suggest that marginal changes to tax rates will not make much difference. Everybody in business likes lower taxes, and no doubt most citizens do. It is in the nature of things, because they have more money in their pocket. At the same time, in a civilised society—I like to think that we still have some remnants of a civilised society—taxation is vital to pay for the things that make it civilised. I would personally like higher revenues, so that we could spend more on the things that make our society worth living in. Over the past few decades, there have been some regrettable cuts in tax revenues. Perhaps we should not go back to the 98% top rate of the 1970s, but when Nigel Lawson got rid of the 60% rate and brought in the 40% rate, it led to substantial income for better-off people.
Mr Redwood
Would the hon. Gentleman not accept that cutting the top rate from 83% to 40%, or from 98% to 40% for so-called investment income, meant a huge surge in revenue? Rich people not only paid more in cash terms and real terms but paid a bigger proportion of total income tax. What’s not to like?
Kelvin Hopkins
We can argue about particular cases, but when we measure the impact of tax changes, we have to ensure that we are not measuring other factors. I met some people in the City just after Nigel Lawson cut the tax rate, and a lot of them were aghast at the Budget, saying, “Why has he cut the taxes? We don’t need the money.” They were clearly not of the same mind as the right hon. Gentleman, but they were civilised, decent people who thought that good tax revenues and higher taxes were a good thing.
Mr Redwood
As they were civilised people who did not need the money, all they had to do was give it away. They could have given the money to the state or to charity.
Kelvin Hopkins
The problem with charity is that only nice people give to it. The great thing about tax is that it applies to everyone equally, which is the way things should be.
Simon Kirby
The hon. Gentleman’s argument, interesting though at first it may appear, is totally busted when we look at France. Hordes of rich French people are coming to pay tax in this country rather than in France. The net effect is worse than if the taxes had been lower in the first place.
Kelvin Hopkins
I am one of those who would like to see a little more insulation between countries on financial matters, rather than a free flow of finances across borders, but I am a traditional leftist and Keynesian. I am not of the same mind as those who believe in breaking barriers and people having complete freedom to do exactly what they like with their money anywhere in the world. I hope that one day we will return to a more sensible approach.
The problem with tax is not the tax rates but the collection. For a long time we have seen vast amounts of tax not just avoided but evaded. The thick end of avoidance is the thin end of evasion. The precise line between avoidance and evasion is ill-defined, and I would like stricter rules so that a lot of what is now called tax avoidance is defined as tax evasion. If we sent one or two of the big tax avoiders and tax evaders to prison, it might concentrate a few minds and bring in more tax. The research on behalf of the TUC by Richard Murphy shows that, in his view, the tax gap is in the order of £120 billion a year. If we collected a fraction of that sum, we could solve all our problems, including the famous deficit. I am very much in favour of reviewing the effect of tax changes.
Kelvin Hopkins
My hon. Friend is absolutely right. I have called many times in this Chamber, including in the past week or two, for more tax officers to be employed. Every tax officer collects many times their own salary. A VAT officer told me that, even for VAT on small businesses, tax officers collect some five times their own salary. When it comes to the big corporates, if we had a good chief tax officer, Vodafone might have paid a few more billions, as it should have done. We could then start to solve our problems. We have to focus on the big corporates, which are getting away with murder.
Ian Swales
I have a lot of sympathy with the hon. Gentleman’s comments on HMRC staff, which I raise frequently on the Public Accounts Committee, but surely he must regret the cut in 10,000 compliance staff when his party was in government and welcome the addition of 2,500 compliance staff under this Government.
Kelvin Hopkins
I made exactly the same speeches when my party was in government. I demanded that the previous Government employ many more tax officers. There has been a conspiracy between Front-Bench Members for some decades to get away from being too unpleasant to the corporates and to let them have their way. Well, I do not want to let them have their way; I want them to pay their taxes so that we can pay for the things that ordinary people need, particularly those who are less well off and those who are more vulnerable.
Kelvin Hopkins
That is very welcome, but I do not believe in the immutability of a certain level of tax revenue and that, whatever we do, we cannot change that level because somehow the world will not produce more than 38% of GDP in tax. It is just a question of collecting that tax and enforcing the tax rates to ensure that the big international corporates, in particular, pay their taxes. When we do that, we will see a substantial increase in revenue. Of course there are countries where overall tax revenues are substantially higher than ours, and they are not necessarily countries that are doing badly economically; they are countries that are doing well, but a higher proportion of their economy is in the public sector. Those countries have higher taxes and higher public spending, and they are civilised societies, too. The countries with the lowest levels of tax and public spending are often some of the poorest, where the gulf between rich and poor is much greater and, generally speaking, life is less pleasant, particularly for the poor and the less well off.
I look forward to more enforcement and a higher tax take by enforcing the existing tax rates and ensuring that people, particularly the corporates, pay their taxes. When it comes to taxation, the behaviour of the economy is crucial.
Mr Jim Cunningham (Coventry South) (Lab)
My hon. Friend has said that we should look at tax avoidance. There are negotiations between the Inland Revenue and multinational companies in which the Inland Revenue estimates what it thinks the tax should be, rather than collecting the real tax.
Kelvin Hopkins
My hon. Friend is absolutely right. The recent head of HMRC is now a tax adviser to corporate companies, but when he worked for HMRC he seemed to have had a cosy relationship with some of the biggest corporate companies and was doing deals over lunch on what those companies should pay. That was wholly inappropriate. He should have said, “You have to pay your taxes, and we are going to chase you until you do.” That is what I want to see—HMRC staff at the highest level who view their job first as being a public servant who collects taxes for the state, the public and the ordinary citizen, rather than letting the international corporates, and indeed the domestic corporates, get away with what is effectively appalling tax fiddling. I applaud my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) for saying that we should have a review of the effect of tax rates from time to time.
Steve Baker
This is not the first time that I have agreed with the hon. Gentleman. It is important that taxes are collected according to the law, not an individual’s opinion of what the figure ought to be, but does he concede that the situation is as it is because the tax code is far too complex?
Kelvin Hopkins
I am not an expert on tax codes, but taxation is too complex and could be made much simpler, although I think tax should remain progressive. The idea of a flat tax, which the UK Independence party is talking about, is complete nonsense. I fundamentally oppose UKIP not because of its views on the European Union, on which I might have some sympathy, but because of its views on everything else. UKIP is extremely right wing. It wants to get rid of rights at work, privatise the health service and introduce a flat tax. Frankly, UKIP is barking and I will oppose it at every turn.
My hon. Friend the Member for Birmingham, Ladywood talked about a review of the impact of tax changes, which is absolutely right and I support her.
Priti Patel (Witham) (Con)
I have thoroughly enjoyed the debate so far. I am astonished by the ground that we have covered, because we are solely here to address corporation tax, which has not been explored anywhere near enough in the light of the Labour party’s amendment.
As my hon. Friend the Member for Enfield North (Nick de Bois) said, the amendment would create uncertainty and put jobs and future investment at risk—there is no doubt about that. The Labour party wants to reverse the Government’s low business tax approach by putting up corporation tax, which would send out all the wrong messages to the business community. It is farcical that Labour Members are dressing up their so-called policy as a way to help small businesses with business rates. They are cynically trying to pitch big business against small business. The Government have clearly shown that we can help all businesses, both large and small, by cutting corporation tax and, importantly, easing the burden of business rates, which the Minister and the Chancellor of the Exchequer have done.
Angie Bray (Ealing Central and Acton) (Con)
Does my hon. Friend agree that it is often not an either/or situation? Small businesses often depend on larger businesses for work.
Priti Patel
My hon. Friend is absolutely right. She gets to the heart of the debate and shows why Labour has no credibility. Labour Members cannot claim to want to help small businesses when, as the Minister pointed out, at the last general election, when they were in government, they proposed to increase the small profits rate of corporation tax from 21% to 22%. We have also heard about the Labour party’s so-called interest in small business, but in government it presided over the closure of 6,000 small post offices. There is fuel duty and energy costs for small businesses, too. On many issues, Labour lacks credibility. We should put things into context and beyond doubt.
Priti Patel
No. We heard from the hon. Gentleman earlier.
The last Labour Government ignored the benefit of expanding trade. Exports came up in the discussion. This Government have gone out of their way to expand overseas trade. The Chancellor is in Brazil this week at the beginning of export week. We are doing everything right to sell Britain overseas, and to encourage overseas companies to come here and benefit from the low rate of corporation tax, which Labour wants to destroy.
Putting up corporation tax does nothing to help small business, contrary to what Labour says in its shallow and feeble amendment. That only goes to demonstrate that the Opposition have no plan to expand our economy or create more jobs, growth and prosperity—creating those things is exactly the right approach that the Government are taking.
Amendment 2, which I obviously do not support, is completely irrelevant to the wider national debate currently, which is about sustaining growth in our economy, and expanding our economy with jobs, growth, prosperity, inward investment and exports. On that point, I heard a terrible diatribe earlier—an hon. Member said we are not exporting enough. In my county of Essex, the Essex chamber of commerce has helped more than 1,000 local firms, including many small and medium-sized businesses, in processing export documents and giving practical assistance. The value of those exports is well over £300 million. That is the message we want to send out to business of all sizes in the UK. I have no intention of supporting the amendment and support what the Government are doing.
Mike Kane (Wythenshawe and Sale East) (Lab)
It is an honour to follow the hon. Member for Witham (Priti Patel). I concur that it is great news that the Chancellor is drumming up business for Britain in Brazil, but I wonder what first attracted him to the Copacabana beach.
I know debates in the House can sound like statistical conventions, but we have only to look at the statistics to realise that the debate is important. Some 99.9% of all private sector business in the UK is in SMEs, which also account for 59% of private sector employment and 48% of private sector turnover. As my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) said, SMEs account for 47% of all private sector employment. Labour Members will know that growing private sector trade unions such as the Union of Shop, Distributive and Allied Workers and Community the union are picking up on that growth.
I was intrigued by my hon. Friend’s story about starting out in a corner shop. I want to tell a story about a firm in my constituency. In 1985, a young woman—a housewife called Kamal Basran—was bringing up a young family and preparing food for them in her kitchen. She was fed up that she could not buy quality Indian cuisine from any of the major supermarkets. She took out a £5,000 bank loan and started supplying food to local restaurants and businesses. In the past nearly 30 years, she has grown that business and hopes to post a £50 million profit this year. It has grown year on year despite the recession. She now has 220 employees. As a new MP, I had the great honour of visiting that business in my constituency just a couple of weeks ago. The package I got as I left was superb. I do not declare an interest—I distributed the goods to parliamentary staff and constituents afterwards.
That success story is an example of why SMEs matter so much. In polling up to the last general election, people said that their work prospects were the most important things to them after health and crime—work prospects were always No. 3 or No. 4 on the list. That is why the debate is important.
Tom Blenkinsop
Does my hon. Friend agree that a review would be important? A corporation tax cut would be welcomed by the business community, but it is not the priority in certain sectors. For example, energy-intensive industries are more concerned about capital allowances—the Government have had to U-turn on getting rid of them—and the carbon price floor, which affects the chemical and steel industries.
Mike Kane
I agree with my hon. Friend. Government Members have said that amendment 2 would create uncertainty, but if the Committee agreed to it and to a review, businesses would welcome it, because a review would be part of the ongoing debate.
The amendment would require the Government to publish a report on the impact of the planned cut in corporation tax in the 2015-16 financial year from 21p to 20p. The amendment calls for the assessment of the impact specifically on SMEs.
Ian Swales
I welcome the hon. Gentleman to the Chamber—this is the first time I have heard him speak. The amendment mentions “fewer than 50 employees”. Can he help me to make sense of that? Mainstream corporation tax would apply only to firms making more than £1.5 million profit. Is he suggesting that the amendment includes small companies that make more than £1.5 million profit? That is how it reads to me.
Mike Kane
I thank the hon. Gentleman for his welcome. Most SMEs have fewer than 50 people working for them, and a medium-sized enterprise is usually defined as one with fewer than 250 employees.
I welcome the fact that Labour Members want to cut business rates on properties with an annual rental value of less than £50,000 back to the level of the previous year. We would then freeze business rates for those properties in 2016. That can be paid for by reversing the additional cut in the main rate of corporation tax from 21% to 20% in 2015.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to speak in the debate. If there is one attraction to the amendment, it is that it allows a broad-ranging debate on any tax measure one can think of. Perhaps I could talk about the impact that a carrier bag tax would have on small businesses, especially a tax on bags that would allow the biodegradable element to get into the recycling stream, which damages recycling businesses in the plastics industry. That would perhaps stretch the debate a little too far away from the main rate of corporation tax, even though hon. Members might agree on such a measure.
We are going in exactly the right direction in trying to get the main rate of corporation tax down to 20%. That has been the direction of travel for this Parliament and it is the right place to be. I suspect that, if we get it to 20%, that will be the end of the journey, for the very good reason that having a corporation tax rate lower than the basic rate of income tax creates lots of interesting tax planning opportunities, as the previous Government found out when they had a small companies rate of 10%. Lots of strange people incorporated themselves as businesses—they looked a lot like one-man bands who ought to have been self-employed and made interesting tax deferrals or savings when pretending to be companies.
If we get to 20%, that is the end. I suspect that that is why we can no longer have a small companies rate of corporation tax that is lower than the large companies rate. If we lower one rate, we encourage behaviour that we do not want to encourage. It is right that we get both rates down to 20% and to have one rate of corporation tax. We can then scrap the hugely complex marginal relief calculation and everyone will know what rate of tax they pay on their profits. That has to be the right situation. A small growing business, whose profit increases during the year and suddenly hits more than a quarter of a million pounds, will wonder what tax rate it will pay in that year, so losing that whole calculation completely is a huge advantage.
Mr Redwood
Does my hon. Friend agree that the review could very usefully come up with a 20% capital gains tax rate, too? I would settle for 20% capital gains tax, 20% corporation tax and 20% income tax. There would then be fewer tricks.
Nigel Mills
A symmetry of tax rates would make perfect sense. Whatever form of income one had, one would know what rate one was paying.
James Morris
One of the issues in Britain is that not enough companies are starting up and then growing. One of the reasons for that is that we do not have enough symmetry and the tax system is too complicated. Does my hon. Friend therefore think it would be a good idea to get some simplicity into the system?
Nigel Mills
My hon. Friend is exactly right. I think many Members, not least the Minister, know of my commitment to tax simplification. I was tempted, knowing that we were debating corporation tax, to table my amendment yet again on rewriting the whole corporation tax code to one that is more understandable and less complex.
Mr Love
The hon. Gentleman seems to be arguing that we might need a different policy mix for small businesses and for larger businesses. May I therefore invite him to reject the idea that the amendment somehow splits off small businesses from large businesses? We need a different policy mix.
Nigel Mills
I agree with the hon. Gentleman. There is eminent sense in having a lighter-touch tax regime for small businesses, with perhaps lower taxes in some areas for small business. We clearly do that: there is a separate regime for filing accounts. There is less expectation on small businesses, and, if only in the business rates field, there are exemptions for the very smallest businesses. I think we actually have that graduated system.
Mr Love
Notwithstanding small business rates relief, does the hon. Gentleman accept that for a significant minority of small businesses, business rates are now greater than the rental payments they have to meet, and that therefore there is some merit to the proposal being put forward?
Nigel Mills
I might be tempted to agree that there is some merit in looking at the level of business rate cost, but I am not sure there is much merit in the proposal we are debating here this afternoon for yet another review. I welcome the measures the Government have taken to reduce business rates, or least reducing the increase through the 2% cap and discount for high street businesses. I think we are all very keen to see how we can help our high streets grow. That reduction has to be the right way forward.
Returning to the earliest of the series of interventions, on a 20% capital gains tax rate, companies that realise a capital gain will be paying at 20%. It is only individuals who will end up paying the higher rate. There is sense in having symmetry restored to that situation. I wholeheartedly support getting the corporation tax rate down to 20%. We could trumpet it around the world that we have one of the lowest rates in the G8. That long-term direction of travel has to be one of the most powerful ways to encourage investment in this country by the large corporations we want to see operating here. It would perhaps stop them setting up their headquarters in Switzerland, Ireland or elsewhere. This is now a trend we can see: large corporations choosing to bring more jobs to, and paying tax in, the UK.
Ian Swales
My hon. Friend is making a very good speech, as he always does on these matters. Will he join me in welcoming the fact that Hitachi has decided to relocate its rail headquarters to the UK, in the north-east?
Nigel Mills
I am always a little nervous talking about Hitachi and rail, as I am from Derbyshire. I support Bombardier and want it to get rail contracts. I am sure that it is great news for the country and the north-east that Hitachi has chosen to do that. However, I clearly say that Bombardier is a far better make of trains and that it fully deserves the Crossrail contract it got in recent weeks. I look forward to healthy competition between the two. It would be great to have two well-regarded, highly skilled train makers in this country. Just to be clear: Bombardier clearly has the trump card on that.
It would be a terrible message to send out to the rest of the world, having seen us go so far in the right direction by reducing the rate of corporation tax from 28% down to the planned 20%, to suddenly start reversing that journey and saying, “Perhaps we’re not quite so sure that that was the right thing to do. Let’s have that extra revenue back and not support those businesses.” That would be the wrong thing to do.
Nick de Bois
Some people may be seduced by the idea that it is only 1%, going from 20% to 21%, but for corporations coming into a tax level of 20%, the Opposition are effectively saying that they would increase corporation tax by 5%. Let us make that clear.
Nigel Mills
I am sure my hon. Friend’s maths are absolutely right.
If we are to review taxes and rates, I am intrigued by the idea of having, as my right hon. Friend the Member for Wokingham (Mr Redwood) said, a wide-ranging dynamic assessment of tax rates. Let us have a look and work out exactly the right rates for various taxes. Are we in the right place, or are we throwing away revenue and destroying business activity by having certain rates in the wrong place? I would like to understand the impact on small businesses of the jobs tax or employees’ national insurance. I would be keen to know the impact of fuel duty rates and of the tax on energy bills. I suspect those measures are doing far more damage to our small businesses, and the number of jobs they can support, than other things. A wide-ranging study of the impact of tax on small business could be an interesting exercise and could direct the way forward for policy. I suspect that it would not go in the area the Opposition want. They seem to want an expensive hike in the indirect taxes on manufacturing that do so much damage.
We ought to welcome people moving in the right direction. In 13 years in government, Labour favoured property taxes via the council tax. They hiked it up thinking that people would not notice. It is intriguing that they have now realised that it is extremely unpopular for those taxes to get too high, and that perhaps it is easier to try to focus on direct tax rates.
In conclusion, the Opposition amendment is in many ways a complete waste of our time. It is absolutely right to get the corporation tax rate down to 20%. I suspect that that is the end of that journey and then we can look at various other measures to support small businesses. Reducing the main rate down to 20% will not stop our support for small businesses. Let us get on and do it: it is the right thing to do.
Sheila Gilmore
For those who have already made the decision that they want to reduce corporation tax in this way, it is easy to characterise the debate as one group of businesses being pitted against another. The debate has to be taken in context. On the basis of that argument, it would be very difficult to suggest any changes, because somebody would always be able to say, “Ah, but you are pitting one group against another.”
We hear a lot of warm words about small businesses in this House. We are told frequently that they will be the driver of the economy and that the economic recovery depends on them. It is therefore disappointing for this proposal to be so quickly dismissed as irrelevant or inappropriate. If the amendment asked for it to happen without further review, Government Members would no doubt be telling us that we should not make such suggestions without looking at the impact. If we ask for a review to look at the impact they will tell us, “Well, that’s no good; you should just be doing it if you really believe in it,” rather than engaging with the issue.
Small businesses find that business rates are a large element of their costs, particularly when setting up and trying to get their businesses off the ground. A constituent of mine, with a friend, was setting up a fitness business—a very competitive market—from scratch, with a particular appeal to women. They called themselves “Fitness Chicks”. I thought that that might perhaps put off older women, but nevertheless they had a real ambition to get the business off the ground. They said that rates were the biggest thing holding them back as they were setting the business up.
Charlie Elphicke (Dover) (Con)
Small businesses do not tend to pay so much in corporation tax. That is not the main burden they suffer—that is the burden of business rates and payroll taxes. Will the hon. Lady therefore join me in welcoming the action that the Government have taken on business rates and payroll taxes, which will really help small businesses?
Sheila Gilmore
I am glad that the hon. Gentleman is interested in business rates, the subject we are discussing. Our suggestion is that in order to make a real difference to those businesses, we can go far further in the way we deal with business rates.
Rather dramatic statements are made that a suggested change of 1% in the rate of corporation tax will result in companies—on the basis of that alone—changing their plans, leaving the country or not coming here. These statements are made but it is not clear whether there is evidence for them. The impact of the 21% to 20% change in corporation tax is not—or so it would appear in the initial period at least, according to the OBR report—to increase take from corporation tax, but to decrease it.
Angie Bray
Does the hon. Lady agree that there is some certainty on business rates because we have the cap of 2% and a reduction in costs for those with rateable values under £50,000? That is something of which businesses can be certain. In the meantime, we need to make sure that larger companies can be certain of the tax regime in this country. Having a review will only create uncertainty, which is the one thing that businesses looking to invest really do not like.
Sheila Gilmore
We must review constantly what we do to get it right. The suggestion is that a review in itself causes uncertainty, but there are many uncertainties in business. The constant discussion about the EU, Britain’s place in it and whether there should or should not be a referendum is an uncertainty. I am sure that many people who feel strongly about that nevertheless feel it is so important that they are willing to risk that level of uncertainty.
Mr Redwood
The Labour Front-Bench team made a great deal of the need for banks to lend more money to small businesses being crucial to their future. How would an increase in the corporation tax rate and a special bank levy on payroll help? Would not that mean that the banks had less money to lend?
Sheila Gilmore
We still see high levels of remuneration and bonuses at banks while small businesses are told that there is no money to lend. Sometimes, of course, we are told the opposite is the case: banks allege that it is not a lack of money, but that businesses are not coming forward and do not want to expand. For a lot of small businesses who want to borrow, it is galling to find that banks are still seemingly able—despite all the difficulties they allege they have—to pay out so much in bonus payments.
To review these matters and to make a genuine attempt to provide additional help for the small businesses we all say we want to help would be useful. The terms of the amendment would enable us to get details of the impact of the cut in corporation tax to see exactly what the impact has been and what the impact of the suggested minor and very small increase might be before a decision is made.
Tom Blenkinsop
Does my hon. Friend agree that it is interesting that Conservative Members are talking about a 20% rate of corporation tax, which is a direct tax on profit, but have no qualms about how a review might interplay with things such as value added tax, which many, if not all, small businesses pay and is paid prior to profit?
Sheila Gilmore
Value added tax has been a difficulty for a lot of individuals and for small businesses. The amendment is an opportunity for us to review these matters. If Conservative Members are right that such a change would be harmful, a review would show that. It has to be demonstrated to the small businesses of this country why a proposal of this kind is thought to be harmful to our economy.
Mr Gauke
It is a great pleasure to serve under your chairmanship, Ms Clark, and to respond to the first of what will no doubt be many detailed debates over the course of this year’s Finance Bill. It may be helpful if I set out a little context as to what the Government have done in terms of corporation tax.
When we came to office in 2010, the main rate of corporation tax was 28%, and the small profits rate was 21% but was due to rise, under the plans of the previous Government, to 22%. In 2010, we set out the corporate tax road map. We set out our ambition to give the UK the most competitive tax regime in the G20. We wanted a corporation tax system that would support, not hinder, growth and would boost investment to support the economic recovery, so we reversed the previous Government's planned increase in the small profits rate and cut it to 20%, and embarked on the biggest reduction in the main rate of corporation tax since the 1980s. Last week, the rate was cut to 21%. Next year it will fall to 20%— the joint lowest rate in the G20.
Mr Gauke
The cuts in corporation tax were a central plank of the Government's economic strategy, a strategy that is working. Jobs are up and business confidence is increasing.
It may be helpful if I inform the House of the news that we have heard from the IMF this afternoon. The IMF has revised the UK’s growth forecast for 2014 and 2015 to 2.9% and 2.5% respectively, an upward revision of 0.4 percentage points in 2014 and 0.3 percentage points in 2015. Those are the largest increases for both years among major advanced economies and among the BRIC countries—Brazil, Russia, India and China—for both years. The UK is also forecast to be the fastest-growing major advanced economy in 2014. I make the point to the hon. Gentleman that the plan is working. Business investment has grown for four consecutive quarters for the first time since 2007. The OBR has forecast that investment will grow very strongly over the next two years—by 8% in 2014 and 9.2% in 2015.
More and more businesses are moving operations here, a point made by my hon. Friend the Member for Amber Valley (Nigel Mills). Just in the past two weeks, we have seen Hitachi Rail—referred to by my hon. Friend the Member for Redcar (Ian Swales)—and Brit Insurance announcing moves to the UK. Siemens has announced a £160 million investment in the Humber. Business surveys reflect the positive impact of the corporation tax reforms. For the past two years, the UK has ranked highest in the KPMG survey of international tax competitiveness, with business leaders putting us ahead of countries such as the USA, the Netherlands and Switzerland.
Ian Swales
As a champion of manufacturing, I would like to see more capital investment, but does the Minister accept that investment in people has clearly been going on during this period?
Mr Gauke
Indeed it has. I will say more about some of the other measures we are taking to make our tax system more competitive, but overall it is clear that our tax system—in terms of being open for business—has moved in the right direction over the last four years. It is important that we maintain that momentum and do not put it at risk by trying to reverse some of the progress we have made.
Charlie Elphicke
According to a report in City A.M. this morning, the British Chambers of Commerce has said that we are seeing the strongest investment and export growth for nearly a century. Did my hon. Friend see that report?
Mr Gauke
Indeed I did, and I heard the head of the BCC make the same point in a radio interview this morning. We are moving in the right direction, and this afternoon’s figures from the IMF are extremely significant. I hope that Members in all parts of the House welcome the news that the United Kingdom is the fastest-growing major advanced economy this year.
Mr Love
The Office for Budget Responsibility has forecast that there will be no net increase in net trade, so the export-led recovery simply will not happen. It has also said that the recovery is too dependent on consumer expenditure, and that as long as real wages do not increase—and it predicts that they will not increase very fast—that simply cannot continue.
Mr Gauke
Again, we are seeing movement in the right direction. In the Budget, the Chancellor announced additional support for exports through the expansion of the direct lending scheme. Moreover, in 2012-13 British business received £4.3 billion of support from UK Export Finance, which was a 12-year high.
Tom Blenkinsop
I think I am right in saying that the UK current account deficit has not been as bad as it is now since 1955, when records began. The Minister may wish to correct me, but I am certain that that is the case.
Mr Gauke
The Government are taking steps to ensure that we can export more. We recognise that we need to export more, and that we need more business investment. However, the way in which to ensure that that happens is not to try to avoid a competitive tax system, or to turn our back on the progress that we have made. All that would put the recovery at risk, and I fear that it is what we would get from Labour.
Sheila Gilmore
I do not think that the Minister has yet addressed the lack of balance in the growth that is being shown, and the concern that has been expressed about that by the IMF and others. If policies such as the reduction in corporation tax were intended to boost manufacturing and exports, I should like to know why that still does not appear to be happening to the degree that would convince people that this is a balanced recovery.
Mr Gauke
As a result of our corporation tax reforms, businesses are moving their headquarters here. The north-east of England, for instance, has benefited from Hitachi’s investment. However, if the hon. Lady’s point is that the job has not yet been done and that further steps are needed to make our economy more productive and competitive, I entirely agree with her. That is why we must stick to the long-term economic plan.
Mr Redwood
Does the Minister agree that increases in investment require consumption growth? Does he agree that the whole point of investment is to satisfy future consumption increases, and that we need both for a balanced recovery?
Mr Gauke
Indeed I do. As ever, my right hon. Friend brings great expertise to the debate.
Clauses 5 to 7 provide further evidence that we are continuing to make progress towards the delivery of a simpler and more competitive tax regime. They charge corporation tax for the financial year 2015. They set the small profits rate and the ring-fence small profits rate for 2014 at 20% and 19% respectively. They fix the ring-fence rates so that we need not reconfirm them every year in the Finance Bill. That is consistent with the way in which we handle the supplementary charge, the 32% tax levied on profits from oil and gas production. They set the fractions that will be used for businesses to calculate their marginal relief: the standard fraction is set at one four-hundredth, and the ring-fence fraction at eleven four-hundredths.
Shabana Mahmood
The Exchequer Secretary speaks about a positive business environment. Business rates have increased by £1,500 on average since his Government have been in power. Does he think that that has led to a positive business environment for those businesses affected?
Mr Gauke
It is worth pointing out that business rates have increased in line with RPI, which is exactly what the previous Government planned to do, and, indeed, exactly what the previous Government did when they were in office. What we have done, however, is double small business rate relief for every year of this Parliament, saving small businesses over £1.5 billion on their business rates bills to date. In the autumn statement we introduced the biggest business rates cut in over 20 years. This package of measures was larger than that proposed by the Opposition. Their proposal would have been worth significantly less than the £1 billion our package cost. Of that £1 billion, over 90% is going to businesses occupying small premises and targeted support is going to help the retail sector on the high street and bring empty shops back into use. The combined effect of the measures is to freeze, or even reduce, business rates bills for 35% of the smallest rate payers. This Government’s business rates measures are both more generous and better targeted than those proposed by the Opposition and benefit all businesses.
Amendment 2, tabled by the shadow Chancellor and his colleagues, proposes a review of the impact of the additional cut in corporation tax with particular reference to businesses with fewer than 50 employees. I understand from the comments made by the shadow Chief Secretary in last week’s debate that what is driving this amendment is a concern about the business environment for small businesses. The Government have done far more for small businesses than the Opposition would have done, including making it easier for small businesses to create new jobs by introducing the £2,000 employment allowance, which will benefit up to 1.25 million businesses and charities in the UK. We are lifting 450,000 small businesses out of employer national insurance contributions altogether. We have made it easier for small firms to invest and grow. We have doubled the annual investment allowance to £500,000 per year so that 99.8% of businesses will receive relief on 100% of their investment in the first year, and we have increased the small business research and development tax credit to the maximum level available under EU law. We have cut costs for small businesses by delivering the longest fuel duty freeze for 20 years and through the £7.1 billion package announced in the Budget to reduce energy costs for businesses and households.
It is worth pointing out that the rate reduction for corporation tax will lead to large firms investing more, with huge benefits for SMEs in their supply chains. Economic modelling by HMRC has shown that the corporation tax cuts introduced in this Parliament will increase long-run business investment by 2.5% to 4.5%. In today’s prices that is an extra £3.6 billion to £6 billion every year, a boost for the whole business community. As John Longworth, director general of the British Chambers of Commerce, said last year:
“All companies will cheer the news that Corporation Tax will fall to 20% by 2015.”
This is just one element of what we have done. If Members look at what we have done on business rates, the employment allowance and energy costs, it is clear that this is a Government who are supporting business. I am afraid, however, that, as always, what we hear from the Opposition is policies that are anti-business and that will drive away investment and growth, and no realisation of how the world has changed. The UK needs to compete for jobs and investment. The best way of doing that is through a competitive tax system. I am afraid that the biggest risk to our achieving a competitive tax system and economic growth is the Labour party.
These clauses see us continue to make progress towards delivering a simpler and more competitive tax regime that supports investment, productivity and growth. I urge the House to support the clauses and to reject the Opposition amendment.
Shabana Mahmood
We have had a very good and interesting debate. I was a little horrified when the right hon. Member for Wokingham (Mr Redwood) began his remarks by making what sounded almost like positive comments about me, but he very quickly moved on to comments that better reflected both his politics and mine. He raised a point that I did not hear clearly, but I am sure it was a withering put-down about me not doing my homework. On his criticisms of both the amendment and what it seeks to achieve, I say to him as gently as possible that if he had done his homework, he would know that the Opposition are somewhat constrained in the amendments we can table to Finance Bills and the impact they could have on the Exchequer, so often the best way for us to get a good debate on what we seek to achieve is through asking for a review. I hope that that settles his mind as to the nature of our amendment.
There has been a great deal of discussion today about our proposals to increase the headline rate of corporation tax from 20% to 21%. We would use every penny of the revenue from that tax increase to cut business rates for small businesses in 2015 and to freeze them the year after. Nothing that Government Members have said today has shown that they understand the true impact that business rates are having on small businesses up and down the country. The Government are not prepared to make choices or spending switches to support those small businesses, but that is what the next Labour Government will do in 2015. We intend to press our amendment to a vote.
Question put, That the amendment be made.
The House divided: Ayes 219, Noes 289.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
I beg to move, That the clause be read a Second time.
The Temporary Chair (Katy Clark)
With this it will be convenient to discuss:
Amendment 4, in clause 1, page 2, line 11, at end insert—
‘( ) The Chancellor of the Exchequer shall, within three months of the passing of this Act, publish a report on the impact of setting the additional rate of income tax at 50 per cent.
( ) The report must estimate the impact of setting the additional rate for 2014-15 at 45 per cent and at 50 per cent on the amount of income tax currently paid by someone with a taxable income of—
(a) £150,000 per year; and
(b) £1,000,000 per year.’.
Clause 1 stand part.
I should inform the House that due to an administrative error some names in support of new clause 4 were omitted from the amendment paper. A revised version is available from the Vote Office with all names correctly reproduced.
Jonathan Edwards
I am grateful to you for that clarification, Ms Clark.
New clause 4, tabled in my name and those of my right hon. and hon. Friends in Plaid Cymru and the Scottish National party, would have the effect of requesting the Treasury to commission a report into reinstating the 50p tax rate for earnings above £150,000 a year, or £3,000 a week, as I prefer to explain the policy to my constituents. I look forward to pressing the new clause to a vote at the appropriate time.
This is an example of bad timing, as I understand that the President of the Republic of Ireland is about to address Members of the Commons and the Lords in the other place. I am disappointed to be missing that. However, there is little doubt that the decision in the 2012 Budget to scrap the 50p top rate and reduce it to 45p is the signature fiscal policy of the current Administration. However, I recognise that the 50p rate existed only for the dying weeks of the previous Labour UK Government, even though they were in power for more than 13 years with a top rate of only 40p. That of course leaves the impression that it was merely an election gimmick for the 2010 general election rather than a matter of deep principle.
Labour’s 13 years of the 40p rate reflected what Lord Mandelson said on behalf of the Blair Government about being
“intensely relaxed about people getting filthy rich”.
None the less, it was expected that the 50p rate, which existed for the first half of this coalition Government, would be set in stone while the UK Government maintained their plan A fiscal strategy of cutting the deficit. Despite disagreeing with the UK Government’s fiscal strategy since entering the House, I accept that the “We’re all in it together” slogan coined by the Chancellor was politically very successful. It was based on the notion that all parts of society were equal partners in a moral crusade to reduce the annual fiscal deficit of the state; that rich and poor, young and old would have to feel the pain as the only remedy for the excesses of the past—or so the story went.
The decision to cut the 50p rate was therefore a political miscalculation in my mind because, whatever way it is dressed up, the Chancellor offered a tax cut for those earning more than £3,000 a week. The notion of “We’re all in it together” was blown apart with one act. How can the Chancellor and the Treasury expect the most disadvantaged in society to stomach reductions in their social security support while the richest get a tax cut? It was an act that confirmed that we are not all in it together.
Let us not forget that in the 2012 Budget a further cut of £10 billion in the social protection budget was announced from 2013 onwards, on top of those announced in the 2010 emergency Budget. Those are the cuts that we are living with today, leaving the clear impression that the tax cut from 2013-14 onwards for the highest earners in society was being paid for by cuts in welfare provision for the poorest.
Jenny Chapman (Darlington) (Lab)
Does the hon. Gentleman agree that it is the scale of the tax cut that is most galling for our constituents, when on average it will be a £100,000 a year tax cut, which is something beyond the imaginations of most of our constituents?
Jonathan Edwards
I can certainly assure the hon. Lady that not many people in Carmarthen East and Dinefwr are enjoying that tax cut. That is why I am speaking in such fervent opposition to it.
Hywel Williams (Arfon) (PC)
It is not only the fact that income tax has been cut but that further cuts to social provision are envisaged. So into the future, people at the bottom of the pile and who face disability and sickness will be seeing cuts to their benefits while the very rich will be seeing cuts to their tax.
Jonathan Edwards
I am sure that my hon. Friend’s surgeries, like mine, are filled weekly with individuals who face problems with reductions in the support that they receive. With all that in mind, it is difficult to look them in the eye and support a tax cut for those on the highest incomes. It undermines the case for the moral crusade I alluded to earlier and public support for the fiscal policy of the current UK Government.
Huw Irranca-Davies (Ogmore) (Lab)
The hon. Gentleman is making some good points. Does he agree that, while there are technical issues in determining the exact point at which the Government will gain more or less from a tax, there is a significant signal from the 50p tax rate, which is that we are, at least to some extent, all in it together? His constituents are not far from mine, and the average median wage in the Ogmore valley is less than £21,000.
Jonathan Edwards
The hon. Gentleman always makes very intelligent points. I believe that he is talking about the Laffer curve. I will discuss the optimal rate of taxation later, but I agree wholeheartedly with his comments.
A report for the Office for National Statistics entitled “The Effects of Taxes and Benefits on Household Income, 2011/12”, which was released in July 2013, showed clearly that, while income tax is progressive, as it should be, the effect of indirect taxes such as VAT means that the bottom fifth of the income groups pay the most out as a percentage of their gross income at 36.6% in taxes, while the top fifth pay 35.5%. The overall tax system is therefore still heavily weighted in favour of the highest earners. Plaid Cymru believes in progressive taxation irrespective of the timing and state of the wider economy. We believe that those with the broadest shoulders should bear the burden of taxation. A Scandinavian model of progressive taxation is part of our DNA.
The House has voted on this measure only once, during the resolution votes following the 2012 Budget debate. I am delighted that it was Plaid Cymru and Scottish National party Members who called that vote. The shadow Chancellor must have been having an off-day, because the entire parliamentary Labour party abstained, apart from two honourable exceptions, the hon. Members for Bolsover (Mr Skinner) and for Newport West (Paul Flynn), if my memory serves me correctly. Although Labour Members voted against the Government’s 2012 Budget, which reduced the 50% rate to 45%, they missed the only vote that we have been able to have directly on the reduction of the top rate.
Pete Wishart (Perth and North Perthshire) (SNP)
I am sure my hon. Friend will agree that what happened to the Labour party that evening was cataclysmic. Does he have any explanation as to why the Labour party missed that vote that evening? Something from the Whips Office suggested headless chickens, but that would be showing disrespect to headless chickens. Does he have any idea why Labour abstained on what was one of the key policies at that point?
Jonathan Edwards
Unfortunately, I cannot enlighten my hon. Friend, other than to say that the Western Mail informed me that senior Labour staff described it as a “balls-up”.
To be slightly more serious, I was happy that, in response to an intervention from me last week on Second Reading, the shadow Chief Secretary, who is in his place, said that should Labour form the next UK Government, it would restore the 50p top rate for the duration of the next Parliament. I would certainly support that, and I look forward to doing so if there is a Labour Government. My understanding before his answer was that Labour was proposing a temporary increase in the top rate, so I welcome that development. I hope that during today’s debate, the Labour Front-Bench spokesman will confirm that that will be its policy at the next election and beyond.
Owing to the manner in which Finance Bills are processed, it is impossible to press to a vote amendments to alter tax band rates, which is why both new clause 4 and Labour’s amendment 4 call for a review from the Treasury of the impact of re-introducing the 50p rate. The 2011 Budget included the provision of a review to reduce the 50p rate. As I said, nobody foresaw the Treasury introducing such a policy within a year. In other words, the 2011 Budget provisions were a sop to Tory donors that their party was minded to reduce the top rate at some point in the future. The following Budget then introduced the policy.
Proponents argue that the reduction in the additional rate to 45p has led to a windfall for the Treasury because of reduced avoidance and evasion. I noticed in the lead-up to the Budget last month that some Tory Back Benchers were making the case for a reduction to 40p for this Budget based on higher than expected tax receipts—some £9 billion—following the top rate changes. In the newspapers this morning the hon. Member for Taunton Deane (Mr Browne) was making a similar call for his party to adopt the 40p top rate come the general election. He is not in his seat, so perhaps he has been told to go somewhere else. I find that argument difficult to swallow as individuals seeking to avoid tax at a 50p rate would surely be minded to do so with a 45p rate. The higher than forecasted tax receipts used to justify a further cut in the top rate was surely as a result of higher than projected economic performance, and therefore a 50p rate would have brought in even more receipts for the Treasury.
Hywel Williams
What credence does my hon. Friend give to the analysis that some high earners deferred declaring their income with a view to declaring it once the 45p rate was introduced, and that that led to higher receipts?
Jonathan Edwards
That is an important point about forestalling, which I will talk about in more detail later.
I note that the Office for Budget Responsibility’s March 2012 “Economic and fiscal outlook” states on page 110 that
“the revenue-maximising additional tax rate is around 48%.”
Again, that blows a hole in the Government’s argument that their reduction of the additional rate was based on sound economic and revenue-raising evidence. That is why they should now commit to carrying out a full report, as the new clause would compel them to do. I would argue that 48 is slightly closer to 50 than to 45.
The Chancellor told the House in 2012:
“The increase from 40p to 50p raised just a third of the £3 billion that we were told it would raise.”—[Official Report, 21 March 2012; Vol. 542, c. 805.]
I know my A-level maths is a little shaky, but that still makes £1 billion, a significant sum to the good people of Carmarthenshire and the good people of Wales and the rest of the UK. The Chancellor’s justification for the tax cut for the super-wealthy was that they would avoid the tax, they might leave the UK, it raised only £1 billion, and the reduction would lose the Government only £100 million. Having brought forward their income to avoid the 50p rate in the first year, the rich delayed it in the final year to benefit from the reduction to 45p. That forestalling and deferment will have cost the Treasury billions that could have been used to avoid some of the worst cuts to those on low incomes, such as those resulting from the bedroom tax.
Recent claims by some on the Government Benches that the tax cut for the richest has yielded more revenue conveniently gloss over the increased likelihood of those with an accountant being able to move their income into the following year, given the Government’s indication a year ahead of time that they were enacting the tax cut. My advice to the Government would be to enact the proper closing of loopholes to ensure that the super-wealthy pay their fair share, instead of the fig leaves of action that the Government have offered previously. They have still not introduced proper measures to make up the HMRC estimate of £35 billion lost each year through avoidance and evasion. Other estimates put the figure much higher. Claims that the rich were fleeing because of the 50% rate are also not very well grounded. Research by the TUC, using HMRC figures, indicated that 59% of those paying the 50% additional rate were employees, most working in banking and therefore unable to leave.
Huw Irranca-Davies
Does the hon. Gentleman understand the disconnect between those who are super-wealthy and the argument that he is making, when I, my constituents and my family, who rely on public services, the national health service and so on, see the sense in paying progressively higher rates of tax, myself included, to make sure that those services are available? Why is it that the super-wealthy do not see the sense in providing for public services? Is it, perhaps, because they do not rely on them?
Jonathan Edwards
That is certainly one argument, and I shall talk about how, with such an attitude, the super-wealthy are cutting off their own noses, and how a progressive taxation system would benefit them as well as people like the hon. Gentleman and me, who earn far less than those who get hit by the top rate.
As the 2012 HMRC paper that examined the effect of the 50% additional rate of income tax noted,
“there was a considerable behavioural response to the rate change, including a substantial amount of forestalling: around £16 billion to £18 billion of income is estimated to have been brought forward to 2009-10 to avoid the introduction of the additional rate of tax.”
This is a massive sum which would arguably have been included in taxation had the measure been announced with immediate effect.
The most recent figures from HMRC revised liabilities up by £2.8 billion in 2010-11, £3.3 billion in 2011-12 and £3.5 billion in 2012-13. This means that HMRC says it earned a total of £9.6 billion more than previously thought from the 50p tax rate. These are of course projections of taxable income, but that makes the case for the new clause which I am pushing.
Ian Swales
The hon. Gentleman makes the point about the £9.6 billion. Is he aware that HMRC says that the main part of that is due to higher income levels, not to changes in tax levels?
Jonathan Edwards
That is a fair point. We are making the case for a review. Let us have the figures divulged further. As I say, they are projections.
Sir James Paice (South East Cambridgeshire) (Con)
Does the hon. Gentleman want a review or does he want a higher tax rate? What would he do if that review demonstrated that 45p, 47p or 48p—anything less than 50p—was the point at which the Laffer curve tipped over? Is he interested in maximum receipts to the Treasury or in some sort of moral argument about equalising the distribution of income?
Jonathan Edwards
That is a very valid intervention. My political position would be to support a 50p rate, but let us have the evidence to make the decision. As I am outlining, the evidence suggests to me that 50p would be a better top rate than 45p, and certainly better than 40p.
Kelvin Hopkins
I agree with everything that the hon. Gentleman has said. If it were shown that an increased tax rate at that level brought in lower revenues, would not that simply be evidence of more tax evasion and insufficient enforcement?
Jonathan Edwards
That is the key point. If we have effective anti-evasion and avoidance measures, an increased rate of tax will inevitably lead to a higher yield.
We are living in very worrying times where wealth inequalities at geographical and individual levels are unprecedented. Parts of London have gross value added 12 times higher than parts of Wales. While London has the highest GVA per head of any area in the European Union, west Wales and the valleys has one of the lowest. The contemporary history of geographical and individual disparities has been truly depressing in this regard. Successive Governments do not have a good story to tell, with rebalancing promised but never delivered.
At the heart of the argument for a reduced top rate of tax is the trickle-down theory that underpins much of the now-discredited neo-liberal economics that the Thatcher and Reagan era ushered in. It was always sold to us that the newly re-empowered financial elites would spend their money and it would trickle down, and the people at the bottom would become wealthier as a result of this benevolent spending. But what has happened over the past 30 years? Inequality has, in fact, grown massively. Instead of the wealth of the super-rich flowing down, the rich, especially the super-rich, have got steadily even richer and hoarded their money. That money is not simply made out of the sweat and toil of their own good fortune, skill and brilliance, but often on the backs of those who work hard on the bottom rung but gain little financial reward for the true value of their efforts.
We often hear the super-rich whine that they have made their money, so why should they pay a lot of awful tax on it? Well, that tax goes towards paying for important services such as schools, to educate the work force of the next generation, and hospitals, to maintain the work force in good health. It also pays for a police force that keeps our communities safe, and a legal system that ensures that the law operates smoothly and in a trusted way to allow for a broadly prosperous economy and a society free from corruption. We erode these provisions at our peril. Taxes do not exist in a vacuum; they provide the services that create the whole that enables individuals to go on to enjoy the freedom of being able to make money and enjoy relative prosperity. That is what the proponents of the trickle-down effect have forgotten and wilfully ignored over the past 30 years, as the hon. Member for Ogmore (Huw Irranca-Davies) said.
My new clause would pave the way for the additional rate to be raised to 50%—a small rise of 5%—primarily because that would be symbolic of a move towards a more equal and just society. Only last month, the International Monetary Fund released a report that concluded that the more equal societies stand a better chance of long-term sustainable economic growth. Of course, the IMF is the high priest of austerity which, throughout the 1980s and ’90s, forced developing-world Governments to privatise their publicly owned industries wholesale and enact wildly free-market policies in exchange for international loans. The result was the plundering of those countries’ natural resources by global multinationals, with little benefit being felt by the poor local populations and the elites doing handsomely. It is therefore quite a turnaround for the IMF to conclude that income inequality impedes growth and that efforts to redistribute are positive.
This is the real political challenge that will face us over the next generation. That is why we should be ensuring that those with the broadest shoulders bear the burden in what will continue to be very hard times for those at the bottom of the income scale, given the massive cuts that this Government are still intent on inflicting. Let us remember that a vast tract of the austerity programme has yet to feed into the system. An additional rate of 50% would help to ensure that the super-wealthy bear the burden and pay their fair share. I urge the House to support the new clause.
Ian Swales
It is a privilege to serve under your chairmanship, Ms Clark.
I represent areas that, I am sure, are not dissimilar to those of Members who have already spoken and intervened and where there is a great deal of deprivation. Anybody who wants to learn about my constituency can look at the long article about it in the business section of last weekend’s edition of The Sunday Times.
The amendments tabled by Opposition Members forget some important things. The Labour party kept the top rate at 40% throughout its time in office, until its very last day in power. The only day the rate was 50% was 6 April 2010—the day Parliament was dissolved for the general election.
The right hon. Member for Wokingham (Mr Redwood) and the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) have both questioned how principled the former Prime Minister and the former Chancellor, the right hon. Members for Kirkcaldy and Cowdenbeath (Mr Brown) and for Edinburgh South West (Mr Darling), were in their commitment to raising the rate to 50%. One thing is for sure: a general election was approaching and they probably knew that the increase would be the gift that kept on giving in terms of headlines. They had levied taxes in any way they could and they knew that going up from 40% was a dubious move in terms of raising revenue; otherwise, they would have done it earlier. What it did do was lead to more headlines.
Millionaires are paying £381,000 more in income tax in this Parliament than they did in the previous Parliament. Having said that, cutting the rate was not the top priority for me or my party. Our priority was to cut taxes for ordinary working people and we are very proud of the large moves we have made in that direction.
We should also remember that taxing the rich is not only about the headline rate of income tax. Let us consider some of the other measures this Government have already taken. Withdrawal of the personal allowance on incomes of more than £100,000 means that there is already a 60% tax rate on incomes between £100,000 and £120,000. On capital gains tax, anybody lucky enough to make a capital gain of £1 million will pay £100,000 more tax under this Government than they did under the previous Government. The 18% rate of capital gains tax under Labour meant that City operators who made capital gains paid less tax on them than their office cleaners paid on their income, which was truly outrageous. People with a pension contribution of £250,000 are now paying £94,000 more tax on it. If anyone is lucky enough to have £1 million to spend after all those taxes, they will pay £25,000 more in VAT, if they spend it on standard rate items. Tax avoidance has also gone down; Her Majesty’s Revenue and Customs, with its extra resources, is clamping down on it. The idea that this Government are sitting around allowing the rich to do whatever they want is absolute nonsense.
Labour’s proposal to put the rate back up to 50% has already been thrown into doubt by the Institute for Fiscal Studies. I am the first to admit that £100 million is a lot of money, but that is all that would come out of it and the IFS has said that it is not a good way to narrow the deficit. HMRC has already said that what the rise to 50% would actually achieve is doubtful. If hon. Members want to review it, we already have real experience of rates of 40%, 50% and now 45%. The Treasury and HMRC conduct regular reviews and a similar review could be conducted on real, existing data. There was a 50% rate for a period, so a real review could be conducted. It is also worth remembering that national insurance is currently 2%, so the marginal rates that people are paying to the Government are not 45%, but 47%.
We have to be careful. The experience in France is fascinating. There has been a wholesale exodus, with the actor Gérard Depardieu taking the extreme step of moving to Russia to avoid what he regards as extreme tax rates. There is no doubt that people with such incomes and that kind of money can, largely, live wherever they like these days. We need to bear it in mind that the population is more fluid than it used to be.
The Red Book makes it very clear that the top decile pays far more tax than it did. That is right because, as the hon. Member for Carmarthen East and Dinefwr said, people with the broadest shoulders should bear the biggest burden; and they are doing so, because of all the changes that have been made. Despite the fact that the amendment suggests otherwise,
“income inequality is at its lowest level since 1986”,
as the Red Book states. I find the idea that income inequality widened under a Labour Government abhorrent, because such Governments should have narrowing it in their DNA. My four grandparents, who all helped to launch the Labour party, must have been spinning in their graves during the 13 years of the previous Government. I am deeply cynical about Labour’s commitment: they cut taxes for millionaires every year that they were in government.
I look forward to discussing this further in Committee. I do not have a particular argument with reviews, but they do not need to be specified in Bills.
Sheila Gilmore
We touched on this issue in the earlier debate. The right hon. Member for Wokingham (Mr Redwood), who is no longer in his place, told me that I probably did not mix with many very rich people, which I suspect is probably true. My whole life and the constituency I represent have not been chock-full of people living in millionaires’ row and having lots of money in their pockets. However, his points, which other hon. Members have mentioned, about whether the recent rate changes—from 40% to 50% and back to 45%—are a good test do not bear much weight. It is quite clear, in such a short space of time that people, could rearrange their affairs in various ways first to forestall the income and then to ensure that the tax due in previous years was paid last year.
The Office for Budget Responsibility has said the same—that there has been an increase in payments, but that it was largely due to the fact that people could arrange their income in such a way as also to arrange their tax. When my hon. Friend the Member for Edmonton (Mr Love) intervened on the right hon. Member for Wokingham to suggest that people had rearranged their finances to suit the current tax regime, he was told that that was not the case. However, the right hon. Gentleman then talked about how those with high incomes—the rich, in his words—have plenty of ability to rearrange their affairs, so he in fact made precisely our case.
The argument that because something was not done during a certain period, it is not a good idea does not bear scrutiny either. Such a line does not relate to the financial situation in which we found ourselves. We hear a lot about the need for deficit reduction, as we have throughout this Parliament, and we know that the rate of deficit reduction has been far lower than was originally promised and planned for. Many of the changes—to tax credits, to benefits, to local government funding—were justified as absolutely essential for reducing the deficit. Under the previous Government, the reason for introducing the 50p rate was largely about that as well. It was and it remains our belief that we need a better balance when we are trying to reduce the deficit.
We all accept that there is no great virtue in running a long-term deficit. The debate has been about not whether to do something about it but the pace and efficacy with which we do something about it. Within that, there are choices to be made. There is a balance to be struck between taxes and spending cuts, and the Government have chosen to place a lot of emphasis on spending cuts and far less on tax. The 50p tax rate could have been sustained throughout this Parliament as part of the process.
Ian Swales
I am following the hon. Lady’s argument about the tax changes, and I have two questions. First, does she object to the raising of the threshold to £10,000? Secondly, will she oppose her party’s policy of adding a 10p rate? She seems to feel that such things do not help the people she wants to help.
Sheila Gilmore
We have to be honest about the tax threshold. The primary driver behind the change is constantly presented as being concern for the low paid, but the major part of the benefit has accrued to those who are better off. The change also has a substantial cost, at a time when we are told that money is tight. It is worth considering what would help the less well-off in a more concrete way. When the threshold was raised, tax credit rules were changed, tax credit rates were lowered and child care help for people on tax credits was slashed. At some undefined point in the future, the threshold will again be increased, but that is not a lot of help for those who, for the past four years and for however long it takes to establish universal credit, have had their help with child care cut.
The threshold is not what it seems, and we have to be clear about that. If we genuinely want to help the low-paid, we have to consider the model that we use. Many commentators have suggested that, for example, we should consider child care costs and work allowances within universal credit. One change that the Government have made to universal credit since it was first proposed—not that many people are on universal credit yet—is to reduce the work allowances, which means that people lose universal credit faster as their earnings rise, so the low-paid will again suffer. It now turns out that the introduction of assistance covering 85% of child care costs for those on universal credit will have to be paid for from another part of universal credit, so people who, by definition, are not very well off will be paying for that child care assistance. That is rather strange because I do not believe that the tax relief for child care will necessarily be funded in quite the same way. If we really want to help the low-paid, it is worth considering other proposals and no longer simply arguing that raising the tax threshold is helping the lowest paid and will always be the best way to do so.
On the 50p tax rate, I contend that there has been a series of decisions that have heavily affected those who earn the least and are struggling the most, and no number of graphs showing that people at the high end are now paying more tax, or that the proportion of tax changes that affect their income is at least as high as the proportion affecting the low-paid, can show otherwise. The reality is that five percentage points off the tax rate for those on very high incomes is very different from five percentage points off the tax rate for those on very low incomes; it is the difference between parents being able to pay for their children to go on a school trip or being able to think about taking the bus into town because those things cost. A five percentage point difference for someone on a very high income might be the same numerically, but it does not have the same consequences for people’s lives.
Ian Swales
I am following the hon. Lady’s argument carefully, and she is straying from tax into welfare, which I understand is a real concern for her. She makes a good point on the effect of proportionate tax rates. The cut in tax through raising the threshold has actually reduced the tax and national insurance bills of people on the minimum wage by some 70%. If we are talking percentages, does she welcome that figure? Does she also accept that anyone working 30 hours a week or more on the minimum wage is earning £10,000? Finally, will she answer the question about the 10p tax rate? Will she oppose that policy?
Sheila Gilmore
The hon. Gentleman suggests that it is irrelevant to link welfare and tax, but I do not agree. Welfare and tax are intimately linked in a very practical way for someone who may have seen their tax bill go down but who has also seen their benefits go down substantially and so are either no better off or are actually worse off. That is a very real link, because raising the tax threshold has a substantial cost; it is not a pain-free, non-costed policy. At £10 billion, the policy costs a considerable amount of money that could have been spent in some other way. I am not convinced that the net effect for the lowest paid is such that they benefit. Given that so much of the benefit goes to people who are better off, I would have thought he would want to question that policy.
Mrs Mary Glindon (North Tyneside) (Lab)
My hon. Friend makes a good argument. How much more does the increase in VAT affect people on low pay than the very rich? An average family loses £1,350 a year because of the increase in VAT. How can they be helped by the Government’s measures given all the other cuts they have imposed?
Sheila Gilmore
VAT, like a lot of indirect taxation, is extremely regressive. Before 2010, the hon. Member for Redcar (Ian Swales) campaigned vigorously against an increase in VAT, calling it a tax bombshell. He thought that at one point and might continue to think it.
Those policies have an impact, one on the other. Tax is not isolated from spend. As I said at the beginning of my speech, in decisions on dealing with the deficit, we must look at both. The balance we strike is extremely important. Increasingly, the burden is falling on spending cuts, which include cuts on various benefits and tax credits. The cuts to local authorities have been extremely important for many people who rely on the services that councils provide. They have found either that services are withdrawn or that the charges levied for them—for example, charges for social care, whether for people at home or in residential care are rising—are a big burden, as they are for a lot of families. We cannot look at those things in isolation. The Opposition have made proposals, as the hon. Gentleman knows, but at this stage, new clause 4 proposes having a proper look at the 50p tax rate. Labour has made its position clear: we would reinstate the 50p rate.
The Temporary Chair (Katy Clark)
Order. I remind hon. Members that we are debating a possible 50p income tax rate. Could they try to focus their arguments and interventions on that?
Sammy Wilson (East Antrim) (DUP)
I will do my best to abide by your ruling, Ms Clark—you probably want me to do more than my best.
Reference has been made to the fact that an historic event is taking place elsewhere in Parliament. I am sure that my colleagues will represent the Democratic Unionist party very well, but I have to attend this important debate. As a Unionist, I would have loved to see the President of the Irish Republic giving a speech to both Houses of Parliament with King Billy looking over his shoulder—I understand that King Billy is somewhere behind him while he gives his speech. Even better, tomorrow a republican will sit down to dinner with the Queen.
Things have changed in Northern Ireland, but the debate on the 50p rate has not changed. It is again a political football between Labour and the Conservatives. I want to make something clear at the outset. I do not wish to engage in a debate with some kind of class motive, or from the point of view of bashing the rich by imposing taxation on them. My party and I believe in lower taxation. Our record in Northern Ireland, where we have very limited power over taxes, has been one of keeping tax low. My basic philosophy, which may differ from that of some on the Opposition Benches, is that we should allow people to keep as much of their income as possible and to spend it as they see fit. That is the first point I want to make.
Huw Irranca-Davies
I apologise for having left the Chamber. I had to address some young constituents.
The hon. Gentleman has made a number of good points. May I now ask him a question that I asked earlier? Why is there such a disconnect in the moral compass of the super-wealthy that they feel they would rather flee the country than pay a couple of extra pennies in income tax? Why do they imagine that they live in a different world, and that they do not need to sustain the public services on which everyone else relies?
Sammy Wilson
That is a very good question, but the fact is that we do not even know whether that is the way in which people behave. As has already been pointed out, many of those who pay the top rates of tax are employees, and many have their roots here. Their children are at schools here, they are involved in their communities here, and they have their families—their grannies, their mummies, their uncles and so forth. The assumption that people will suddenly cut all those ties when the marginal rate of tax is raised is extremely tenuous. I have not so far seen any figures that suggest that that happens. I can understand that if the marginal rate were raised from 45% to 90%, there might well be some incentive for people to leave, but when it is raised by only a few percentage points, is there really an incentive for people to avoid taxation by becoming exiles, given all the disruption that that may cause?
Ministers frequently refer to tax take predictions based on economic models, but it should be borne in mind that such predictions cannot specify the exact impact of tax changes with rapier-like incision. Their other argument is that, if the theory and the models cannot provide an exact picture, we should look at what has happened to tax revenue in practice over the past few years, because the proof of the pudding is in the eating. No doubt the Minister will give figures showing an increase in tax revenue from this particular income group, in which case we must ask whether it is possible to separate the various elements that have led to that increase.
I believe that the Government made a rather cynical attempt to ensure that they would achieve the result that they wanted by announcing the tax reduction a year in advance, knowing that that would give people an opportunity to defer the tax that they pay, thus enabling the Government to point to an increase in tax revenue in the first year of the new rate. Of course, if people are given advance notification and a chance to delay their payments, we will see the predicted outcome. I suppose it would be best to see whether the trend continues over a longer period, because we do not have any figures yet.
We know that while the incomes of certain groups have been frozen, incomes have been much more fluid at the top end of the income scale than at the bottom end, where there has been a blanket 1% increase. Indeed, there have been wage decreases in some parts of the private sector, especially at the lower end of the scale. How much of the increase is attributable to the fact not that there is more tax take from the same level of income, but that there is more tax take from increased incomes because there has been greater fluidity at that end of the income scale? Even after consideration, it cannot be said with absolute certainty that the reduction in the level of income tax has led to the increase in revenue.
The Temporary Chair (Katy Clark)
Order. I remind the hon. Gentleman that we are debating the 50p tax rate. A number of Members still wish to speak so perhaps he would address himself to the amendment before us.
Sammy Wilson
The point I was trying to make, perhaps at too great a length, was that the important thing was the headline rate when people were looking at places to locate their businesses. It is the same with income tax. While there may have been other tax changes that have affected the rich, when people make a judgment on the Government’s sincerity about austerity, they will look at the headline rate, and what they see when they look at the headline rate for those on middle incomes, for those on lower incomes—not in terms of the headline rate of income tax, but in terms of what has happened to their income—and for the most well-off in society is that there is a disparity, and that breeds cynicism. I believe an amendment such as this one will at least help to restore some confidence that when this House looks at what lies ahead, it is genuinely trying to make sure the burden is shared equally.
Huw Irranca-Davies
I apologise to the Committee for being absent earlier; I was with a group of young people from my constituency who are interested in politics and in what is being debated in the Chamber today. I am glad to have a few minutes now to say a few words.
The new clause and the amendment are innocuous and harmless proposals. They simply ask the Government to be transparent and to produce a review within a few months to show the effect of a 50p tax rate on those whose taxable income is between £150,000 and £1 million a year. I have struggled to find many such people in my constituency. I have tweeted about this on social media, asking people whether they think our amendment would be a bad idea, but, unsurprisingly, no one has come forward to say that they earn that much.
It is in the Government’s interest, as well as ours, to have this transparency. It is also in all our interests to tell people that we get the message about proportionality and contributing to public services. There is an emerging trend among the Conservatives to describe themselves as being the party of the working class and of working families. If that is the case they should support our proposals, because they would create full transparency and allow a debate to take place on whether we should set a tax rate of 50%, 49% or whatever. The proposals would also allow them to explain to working people—not the ones who earn between £150,000 and £1 million a year, but those who earn about £20,998, the median wage in Ogmore Vale—and to Conservative supporters why they think it is not a good idea to say to people, “Pay your share. We are genuinely all in this together.”
The hon. Members for Carmarthen East and Dinefwr (Jonathan Edwards) and for East Antrim (Sammy Wilson) have made good contributions to the debate, and I made a couple of mischievous interventions on them earlier. I have faith in the wealthy and the super-wealthy in this country. We will not have many Gérard Depardieus fleeing the country and heading off to Russia, or wherever the British, Welsh or Scottish equivalent might be. They will say, “We have respect for the communities that we work and employ people in, and it will not bankrupt us to stay here. We are not going to flee overnight to another country like some carpetbagger. We are not going to up sticks and relocate our premises.” That is not going to happen; it did not happen before, even when taxes were at much higher levels. It is a discredit to those people to suggest that it would happen.
In preparation for the debate, I looked into a few examples of people who had said that a return to the 50p tax rate would be a disaster. I was about to say that it would be wrong to name them, but one of them, the chief executive of Kingfisher, has been very outspoken in saying what a terrible detrimental effect such a measure would have. He has said that it would be a disaster for the country, and that entrepreneurs and businesses would flee. Well, okay, it might be just a coincidence that Ian Cheshire is an adviser to the Prime Minister as well as being the chief executive of Kingfisher. It might also be just a coincidence that he was knighted in the new year’s honours list. I am sure that that is pure coincidence. However, he clearly has a direct influence on the Government. When he says, “This is not good”, things happen. It is not only him, however.
It was fascinating to note the reaction of one other person, when this debate was raging about 18 months ago. I will not name this individual, but people can look him up in the Daily Mail. It is pretty obvious who I am talking about. He had said that he objected to a 50p tax rate on the basis that people like him would no longer be inspired to go out and earn money. He was reported in the Daily Mail as being about to sell his £3 million mock-Tudor home. He was explaining that he was now in a great place but when he had previously had trouble expanding the property, he had solved the problem by snapping up the property of his next-door neighbour. This was in an area inhabited by rock stars, football players and other highly paid celebrities. He had snapped up the house next door so that he could put in a swimming pool, a games room and a garage block for his Bentleys. We do not have many garage blocks in Ogmore. The properties were in a patrolled, gated community with private security.
My constituents who are on less than £21,000 a year think that that is another world. They think, “Why doesn’t that guy think he should be paying a couple of pennies more to keep the national health service going, because I can’t afford to have private health care or to send my children off to private school? I need what the state provides.” I know that this is like an old comedy sketch—“I look up to him because he is better than me.” But, that is not the case. The person I am talking about was one of those hardworking Tory supporters who some Government Members would like to appeal to now as the working Tory voter. Let us have a reality check. To those who say, “We feel really unhappy about this change, and it will drive us off”, I say, “Go.” They should subscribe to the values and ethos of this country—from each according to his ability to each according to his need. If they do not, they are not living in the country in which I was brought up. They should think twice about saying that they will go. Most people will sensibly recognise the skills and the quality of the work force, the good environment here for building up companies and our position in the European Union, and they will stay in the country and continue to work. All this amendment asks is that at a certain point in time, not too long in the future, we should be told what the impact is on those who are earning £150,000 or £1 million. Be transparent and tell us.
Ian Swales
I represent a constituency with similar income levels to that of the hon. Gentleman. However, does he regret the fact that a senior member of the Government he was in described himself as being “intensely relaxed” about the situation that he has just described?
Huw Irranca-Davies
I would never use that same phrase. I do not find myself intensely relaxed about this. Sorry, what I mean is that someone playing for the Ospreys rugby team might not earn as much as a premiership footballer, but good luck to them. Let them make a lot of money. Let them do well for their families. Let someone travel to France and play for Perpignan and earn four times the money. Good luck to them, but I want them paying their taxes. When they are back here, I want them to contribute the right amount. I want to encourage the people in my constituency, and say, “If you have the abilities and the skills, and if you are willing to put in the effort, don’t accept that job that you are doing now. Work your way up and do what you can do. The sky is your limit.” But I want them also to contribute. I do not want this ludicrous situation in which people can say, “I tell you what, at a certain point I will leave the country.” I do not believe that they will leave the country. It will not happen. I have much more faith in them than that.
One of the major hedge fund operators, again a Conservative donor, told the Financial Times:
“There probably aren’t many votes in cutting the 50p top rate of tax, but among those that give significant amounts to the party, it’s a big issue, and that’s probably why it’s a big issue for the party too.”
Four months after he said that to the Financial Times, the Budget happened and we had the cut in the tax rate. It is probably just a coincidence again.
Let us look at the impact of this policy and the Government’s current policies on the wider population—beyond the wealthy and the super-wealthy. The Institute for Fiscal Studies’ figures on net income changes by 2014-15 show that overall, households are £974 worse off; a working lone parent is £1,335 worse off; a working couple with no children is £438 worse off; a working couple with children is £2,073 worse off. What about the millionaires? They get this enormous tax cut so that they can go out and buy a couple more Porsches. The Minister might say, “No, it is so that they can reinvest it in this, that and the other.” What about reinvesting in public services? Why does the Minister think that they want to escape from that obligation that we all have to each other to contribute? It may be 47p, 48p or 49p, but there is a message—there is clarity—about us all being in it together that comes with saying that it is 50p. If that 2p seriously makes a wealthy individual say, “We are leaving this country because it is a disgrace that any Government should come after me”, I would say that it is a disgrace that they are even thinking in that way. I have more faith in those people who have made wealth in this country. I believe that they will want to stay here and genuinely help us climb out of this economic morass. They will want to build jobs, grow the economy, skill the economy and lift up the wages of some of my constituents.
Shabana Mahmood
I rise to support amendment 4, which stands in my name and those of my right hon. and hon. Friends. Our amendment seeks to require the Chancellor to publish a report on the impact of setting the additional rate—the top rate—of income tax at 50%, but unlike new clause 4, our amendment requires that the report must also estimate the impact of the top rate in 2014-15 if it is set at 45% and at 50% on the amount of income tax currently paid by someone with a taxable income of £150,000 a year and of £1 million a year. Our amendment therefore seeks to prescribe somewhat more than new clause 4 what the report that must be prepared by the Chancellor of the Exchequer should include. We intend to press our amendment to a vote at the end of the debate.
The Labour Government introduced the 50p rate, which came into effect in 2010-11. We have had a number of debates on the top rate of tax ever since, particularly since this Chancellor’s decision to reduce the top rate from 50p to 45p. That decision is an important indicator of both the Chancellor’s and his Government’s priorities. While ordinary people have been struggling with the cost of living crisis—based just on a measure of wages, they are £1,600 a year worse off, or, taking into account tax and benefits changes, they are £974 a year worse off—the Chancellor has seen fit to give a tax cut worth an average £100,000 to millionaires in our country.
When the Government came to power, they did not say anything in the coalition agreement about abolishing the 50p rate. In 2011, the Chancellor said that he was going to ask HMRC to look at the yields from the 50p rate. In 2012, with HMRC’s report, “The Exchequer effect of the 50% additional rate of income tax”, to back him up, he abolished the rate. The Chancellor knew that he needed cover for that deeply ideological decision and so was desperate, in my view, to claim that the 50p rate raised as little money as possible. Of course, if he could say that, he could justify with more of a straight face giving a tax cut to the richest in our country at the same time as knowing that on his watch ordinary people, those on middle and low incomes, have paid the price for his economic plan, which is failing on the terms he set himself when he came to power in 2010. This was a highly political decision driven by a desire to give a tax cut to the richest people in our country.
Reports at the time suggested that the Chancellor wanted to go further and cut the top rate back down to 40p, but was blocked from doing so by his coalition colleagues. As a compromise, 45p was settled on. Of course, we know that the Conservative party is chomping at the bit to see the rate lowered from 45p to 40p and it is a shame that the right hon. Member for Wokingham (Mr Redwood) has not been in the Chamber for this part of the debate, although we did cover some of his views in this regard in the earlier debate on corporation tax and business rates. As a result of his comments and use of figures, we have in the past week seen efforts to try to bolster the case for reducing the rate back to 40p. I note that the Government have not explicitly ruled out such a change.
We know from the Government’s own assessment that the cost of cutting the rate from 50p to 45p was more than £3 billion, excluding all behavioural changes. Given that the sum is so large, how does one justify the tax cut? The Government say that most of that potential £3 billion revenue would effectively be lost as a result of tax avoidance. Once they have assessed revenue lost as a result of tax avoidance and other behavioural change, the Government go on to say that the cost to the Exchequer is only £100 million. That implies that this is a neat and exact science, but nothing could be further from the truth.
Kelvin Hopkins
I think that my hon. Friend is suggesting that the Government have been soft on tax avoidance and tax evasion simply to make their figures work.
Shabana Mahmood
I will come on to the point about tax avoidance. One option open to the Government to protect revenue from the 50p rate was to do more on tax avoidance. This is a Government who like to trumpet their record on tax avoidance, but they certainly ducked the opportunity when it came to dealing with potential avoidance in relation to the 50p rate.
Shabana Mahmood
I will not, because of a lack of time.
The HMRC report says that all the analysis and estimation is highly uncertain, as does the Institute for Fiscal Studies. The scale of behavioural change is ultimately decided by Ministers, and it is primarily based on an assessment of taxable income elasticity—TIE. The IFS says that there is a huge margin for error. Staying within that margin, one could easily say that, depending on the TIE, cutting the rate could cost £700 million or could raise £600 million. That gives us an idea of the range of figures that we are talking about and how uncertain the projections are.
It might have fitted the Government narrative for them to imply that they knew for certain that the 50p rate would raise only £100 million, but even on their figures and HMRC’s report, there is a huge margin for error and this is all very uncertain. That is not the only thing that was wrong with the analysis. The HMRC report was based on only one year’s worth of data—the data related to 2010-11—which is a weakness in itself. It came too early. Given the history of the introduction of the rate and the Government’s decision to cut it, the reliance on year one is a further weakness in the Government’s argument, because we know that incomes were taken earlier to avoid the 50p rate and as a result incomes in 2010 and 2011 were artificially lower, suggesting a lower yield. Hence our request for a review.
The original HMRC analysis does not give a true picture, was done too soon after the rate had been introduced and was based on only one year’s worth of data. Income figures for that year were lower than otherwise might have been the case because people brought their income forward to 2009-10 before the rate came into effect. No one has redone the analysis so we are still going on the figures from the 2012 Budget. The Government should, at the very least, update the analysis based on the more recent data and prepare the report that our amendment and new clause 4 call for. A comparison of 45p and 50p rates for those on incomes over £150,000 and £1 million would be instructive to the public debate about the top rate, especially as some Members on the Government Back Benches want to reduce the rate to 40p.
Mr Gauke
The hon. Lady is generous in giving way. When her party announced that it would reintroduce the 50p rate in the next Parliament, she wrote in the New Statesman:
“latest figures from the HMRC show that people earning more than £150,000 a year paid almost £10 billion more in tax”
than was taken into account in the assessment that HMRC made. Is she happy to put on record the fact that the HMRC assessment took into account the numbers that she was talking about, and that the claims that she and her colleagues made at the time of the announcement of the 50p policy were in fact wrong about that?
Shabana Mahmood
Our analysis was based on projections that were available to us at that time, and on those projections that analysis was correct. The truth is that everyone accepts that all analysis in relation to the 50p rate—HMRC’s analysis and everyone else’s—is uncertain because we did not have the rate in place for long enough to make a full and thorough assessment. Now HMRC has available to it records for the following two years when the 50p rate was in place and it could update the report that was used for Budget 2012. That would give a much clearer picture to all of us who are relying on other figures and forecasts.
Just as people shifted income into 2009 and 2010 to avoid the 50p rate when it was introduced, once the Chancellor had said in his 2012 Budget that he would abolish it the following year in 2013, unsurprisingly people effectively decided to delay their bonuses and income until the new tax year 2013-14 began so that they could avoid paying 50p and pay 45p instead. That is what accounts for the revenue from 45p being higher, which in our earlier debates Government Members sought to rely on in support of cutting the rate further to 40p. The Government clearly reward tax avoidance at 50p with a tax cut to 45p, and their Back Benchers are now calling for 40p on the basis of revenue that they know is inflated owing to income shifting, which may well have cost the Treasury millions in lost revenue—warped priorities if ever there was a case of them.
The Chancellor is on record as saying that he considers tax avoidance to be “morally repugnant”, but as I have just said, he has rewarded a particular form of tax avoidance with a tax cut. I wonder if that has ever happened for people on middle and lower incomes. I think not. This is a Government who always tell us how proud they are of their record on tax avoidance, but I wonder how much effort they put into thinking of ways in which they could protect revenue from the 50p rate. The Government have introduced the general anti-abuse rule, the GAAR, which may have helped. They could have thought about a targeted rule. They could have looked to HMRC to do more. I understand that no specific measures are taken within HMRC to protect revenue from the 50p rate. Before rushing to abolish the rate, the Government could and should have looked at protecting revenue first. The truth is that there was no justification for giving a huge tax cut to the richest in our country. Bonuses, we now know, are up by 83% for those in the financial sector, while ordinary people are worse off now and will be worse off in 2015 compared with 2012. That certainly makes a mockery of the now not very often repeated phrase, “We are all in it together.”
I think the Government have been hoping that if they keep going on about the increase in the personal allowance, people will forget that they have made a political decision, a political choice and a political priority to cut taxes for the richest in our country. The truth is that the Government have given with one hand and taken away much more with the other. As I said, if one looks at wages, ordinary people are £1,600 a year worse off, and the combined effect of tax and benefit changes means that households will, on average, be £970 a year worse off.
This cut to the 50p rate cannot be justified at a time when the deficit is high and will not be eliminated towards the end of the next Parliament. Labour in government will increase the rate back to 50p to help us to get the deficit down in a fairer way. Just as we have said that we want the OBR to have powers to audit manifestos ahead of the next general election, because we believe that scrutiny will add to public understanding about the choices that are being made, so too we think that a review as envisaged in our amendment would help the public to understand the impact of the top rate of tax so that they can make up their own minds about who is standing up for them and other working people like them. Therefore, we will press amendment 4 to a vote.
Mr Gauke
It is a great pleasure, Mr Amess, to serve under your chairmanship. Before I deal with our annual debate at this stage in the Finance Bill on the 50p rate, I want to say a word or two about clause 1, which is included within the group, which ensures that income tax will be collected in 2014-15. Income tax is the Government’s biggest revenue source and the annual charge legislated in the Finance Bill is essential for its continued collection. There will be around 30 million income tax payers in the UK in 2014-15, and clause 1 states that these taxpayers will pay income tax this year at the same rates as in 2013-14. The basic and higher tax rates remain at 20% and 40% respectively, and the additional rate is 45%.
Clause 1 also means that the Government are meeting their commitment of raising the personal allowance to £10,000 one year ahead of schedule. The increase of the personal allowance to £10,000 reduces the income tax bills of another 255,000 low earners to zero and gives 25 million taxpayers an average gain of £50 in real terms. In other words, increasing the personal allowance by £560 will put an extra £112 of cash in the pockets of typical basic rate taxpayers in 2014-15.
Allow me to explain how these changes will help the Government to meet their objectives. When this Government came to office, the personal allowance was only £6,475. In 2010, everyone, including those working on the national minimum wage, had to pay income tax at the basic rate on incomes above this low threshold. Let me give an example of what this meant in practice. Someone working full-time on the October 2010 national minimum wage would have had to pay over £860 in income tax in 2010-11 alone. Thanks to this Government’s increases to the personal allowance, this year someone working full-time on the higher October 2014 national minimum wage will pay nearly £500 less than that.
Kelvin Hopkins
Ministers have talked a lot about low incomes, and that is all very well, but is not the reality that the better off people are and the higher the rate of tax they are on, the more they benefit, so in fact higher-rate taxpayers benefit more than lower-rate taxpayers?
Mr Gauke
That is not correct, because of the way we have done this. I will not spend a lot of time on the matter, but I can tell the hon. Gentleman that in preparation for this speech I have seen various responses from those raising concerns about higher-rate taxpayers not benefiting from the increases in the personal allowance in the way that basic-rate taxpayers have. Indeed, those earning more than £100,000 a year do not benefit from increases in the personal allowance because it starts to be taken away.
The reality is that basic-rate taxpayers have benefited most from the measures that we have taken in increasing the personal allowance. More than 26 million taxpayers will be up to £570 better off in real terms in 2015-16 as a result of this Government’s changes. In 2014-15, basic-rate taxpayers already pay up to £700 less income tax than they would have done four years ago. By 2015-16, the Government will have cut their income tax bills by over £800 per year. Together, all the personal allowance increases since 2010 mean that this Government have cut the number of income tax payers more in five years than any Government in a similar period since records began.
Huw Irranca-Davies
Will the Minister correct what may be a misunderstanding? Is it correct that 13,000 people who earned more than £1 million a year would have benefited to the tune of £100,000, on average, from the reduction in the top rate of tax?
Mr Gauke
Amendment 4 and new clause 4, tabled by Opposition parties, deal with familiar matters that we debate every year. They propose, once again, that within three months of passing the Finance Act, the Chancellor should publish a report reviewing the impact of setting the additional rate at 50%. In addition, amendment 4 asks for an assessment of the impact of setting the additional rate for 2014-15 at 45% and at 50% on the amount of income tax currently paid by those with taxable incomes of over £150,000 and over £1 million per year. Needless to say, such an analysis, in order to be credible, would need to take behavioural impacts into account, as did the HMRC report on the additional rate published at Budget 2012. When increasing taxes, it is not enough merely to look at theoretical income tax liabilities. Let me assure hon. Members, once more, that this Government already consider the impact of any policy decisions taken. The HMRC report on the additional rate concluded that the underlying yield from the introduction of the 50p rate was much lower than originally forecast due to large behavioural effects. It even said that it is possible that the 50p rate could have reduced income tax revenue instead of increasing it. It would be illogical and unfair to reintroduce a tax rate that is ineffective at raising revenue from high earners and that would end up making ordinary taxpayers pay more and risk damaging growth.
Huw Irranca-Davies
I genuinely thank the Minister for trying to explain that to me, but he has just described the top-end tax cut as a theoretical tax cut when my understanding is that it is a very real tax cut whereby 13,000 people who are millionaires or richer have each saved more than £100,000 per year. At this very moment, my constituency is digging deep as a result of cuts to school transport. Will the Minister confirm that the tax cut is not theoretical, but real, and that 13,000 people who are millionaires or richer have each saved to the tune of £100,000 as a result of it, when the median wage in my constituency is sub-£21,000?
Mr Gauke
Let me see if I can find a point of consensus with the hon. Gentleman. We want—and I suspect he wants—to ensure that the wealthiest make a fair contribution towards reducing the deficit, and the challenge for any Government is to work out the best way of doing that. Let us look at this Government’s record on raising money from the wealthiest. Budget 2010 increased the higher rate of capital gains tax and Budget 2011 tackled avoidance through disguised remuneration—a policy that was opposed by the Labour party, even though it addressed avoidance by high earners. Budget 2012 raised stamp duty on high-value homes and autumn statement 2012 took action to reduce the cost of pensions tax relief, while Budget 2013 and autumn statement 2013 announced further measures to tackle offshore evasion by high earners. In 2013-14, the richest 1% of taxpayers contributed a larger share of income tax receipts than in any other year, including every year under the Labour Government.
The point is how we raise money from the wealthiest. The 50p rate is not the most effective way of doing that, because the behavioural effects are so strong that it fails to raise money. Now that growth is finally picking up, the Government will not consider any actions that might put the UK’s recovery at risk. Despite reducing the additional rate, the richest now pay more income tax than they did in any year under Labour.
Chris Leslie (Nottingham East) (Lab/Co-op)
The Minister was generously trying to find a point of consensus and I want to build on that, following the question asked by my hon. Friend the Member for Ogmore (Huw Irranca-Davies). The Minister talked about what might be raised by closing avoidance loopholes for the very richest, but what about the 13,000 honest millionaires who my hon. Friend says have benefited from a tax cut of £100,000 each? Will the Minister address that specific point and confirm that those honest millionaires—this is not about avoidance and loopholes—will each benefit from a tax cut of £100,000?
Mr Gauke
I suppose we are talking about the people who for almost the entire time the Labour party was in power were paying a lower rate of income tax, a lower rate of capital gains tax and a lower rate of stamp duty. I hear the Labour party’s position. [Interruption.] If we are trying to build consensus, let us look at what some Labour politicians have said. The noble Lord Myners, a former Treasury Minister, has said:
“The economic logic behind Ed Balls’s thinking would not get him a pass at GCSE economics,”
and that
“Ed Balls takes us back to old Labour and the politics of envy.”
Lord Jones, the former trade Minister in a Labour Government, described the policy as “lousy economics”.
Huw Irranca-Davies
The hon. Gentleman gives us examples of people arguing that the policy is economically illiterate, but we are politicians, not economists. I will try to reach consensus with him by saying, although perhaps I should not, that the policy is in his party’s interests. The biggest segment of those who donate to the Conservative party—providing more than half its donations—are from financial services. To say to them, “We are all in it together. You will have to accept a little bit more pain”, would be a good political signal, let alone an economic one.
Mr Gauke
I am always grateful to the hon. Gentleman for his political advice. I cannot but notice that he talked about wanting to uphold the values of the British people and then quoted Karl Marx—but there we go. My point is that the wealthiest are making a bigger contribution in income tax, capital gains tax and stamp duty, and that this Government are taking further action to deal with avoidance and evasion more effectively than any previous Government have done.
Ian Swales
It is not for me to disagree with the mathematics of the hon. Member for Ogmore (Huw Irranca-Davies), but assuming that he is right, does his point not prove that 13,000 people were paying £100,000 less tax in the year up to April 2010?
Mr Gauke
I suspect that my hon. Friend may well be right, so I am grateful to him on that point.
Clause 1 will help the Government to achieve our aim of a tax system that is fair for everyone, while rewarding those who want to work hard and progress. We will achieve those goals by cutting income tax for the vast majority of income tax payers, including those in greatest need of support, while making sure that the tax system remains easy to understand. I again stress that the reports proposed in amendment 4 and new clause 4 are entirely unnecessary. The impact of reducing the additional rate of income tax has been examined in great detail. The 50p rate was ineffective and meant risking the recovery for which everyone in this country is working hard. I therefore commend clause 1 and urge the House to reject the amendment and the new clause.
Jonathan Edwards
We have had a very interesting debate. We heard excellent speeches from the hon. Members for Redcar (Ian Swales), for Edinburgh East (Sheila Gilmore) and for Ogmore (Huw Irranca-Davies), and my good friend the hon. Member for East Antrim (Sammy Wilson), as well as from both Front Benchers.
My new clause 4 is rather harmless, if I may say so. It calls for a review that might make the case for the Government’s policy—they might want the evidence to back it up—or the case for my party’s policy of a 50p top rate. With all three Westminster parties signed up to continuing austerity, whoever wins the next Westminster election, we need transparency to ensure that the wider public are confident that everybody is paying their fair share. I regret that because the Government have not accepted my new clause, I will have to divide the House.
Question put, That the clause be read a Second time.
The Temporary Chair (Mr David Amess)
I have to report to the Committee that the tellers for the Noes in the Division on amendment 2 have reported to the Chair that they wrongly reported the number as 289 and not 288. I will call for the record to be corrected accordingly, showing 288 Noes.
New Clause 1
Childcare provision
‘(1) The Chancellor of the Exchequer must undertake a review of ways in which changes to the tax and childcare systems could be used to increase the affordability of childcare before April 2015, with particular reference to—
(a) the cost of childcare for parents in work; and
(b) the cost of childcare, including the impact of changes in the tax and benefits system during this Parliament.
The Chancellor must publish the report of the review within six months of the passing of this Act and lay the report before the House.’.—(Catherine McKinnell.)
Brought up, and read the First time.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
I beg to move, That the clause be now read a Second time.
It is a pleasure to serve under your chairmanship, Mr Amess. New clause 1 draws attention to the rising costs of child care for working parents since 2010, and seeks to commit the Government to addressing their failure in that regard. It also seeks to establish ways in which the tax and benefit systems could be used to make child care more affordable before April 2015, so that hard-working families experiencing a cost of living crisis can have the help that they need now, especially in the light of the challenges that they face as a result of changes made by this coalition Government.
The new clause gives us a welcome opportunity to explore one of the most pressing issues that face millions of parents throughout the country, and to address the fact that millions of families are facing a child care crunch. It is important to set the issue in context by revealing just what has happened to child care costs on this Government’s watch. The average bill for a part-time nursery place providing 25 hours a week has risen to £107, the highest level in history. The cost of nursery places has risen by 30% since 2010, five times faster than pay, and the average weekly cost of a full-time place has risen to £200 or more. That means that parents working part time on average wages would have to work from Monday until Thursday before they had even paid their weekly child care costs.
Mr David Burrowes (Enfield, Southgate) (Con)
The hon. Lady has given statistics showing what has happened since 2010. Did child care costs increase before 2010, and if so, what did the last Government do about it?
Catherine McKinnell
The point of putting the issue in context is that the rise in child care costs since 2010 is astonishing, and has made child care unaffordable for many parents. I shall say more later about the number of parents, particularly mums, who feel that the cost of child care prohibits them from going to work. I think that rather than questioning the statistics, Government Members should get real and do something about that. Waiting until 2015 to make a promise for tomorrow is just not good enough, which is why we tabled our new clause.
According to alarming new research from the Family and Childcare Trust, families are paying more on average for part-time child care than they are spending on their mortgages. They are handing over a staggering £7,500 a year or more for child care for two children, which is about 4.7% more than the average mortgage bill. Rising prices have been matched by the fall in the number of child care places. The number of places provided by nurseries and childminders has fallen by more than 35,000 since 2010, at a time when the number of four-year-olds has actually increased. Most worrying of all, there are 576 fewer Sure Start children’s centres than there were in 2010, which means that an average of three are being lost each week. At least, that was what we were seeing before the Government took their database down.
Andrea Leadsom (South Northamptonshire) (Con)
The point about children’s centres is really important. Many of those centres have simply reorganised the way in which they work, and now have operational entities in different places and a single administrative centre. That is why the headline figure suggests that children’s centres are closing. In fact, very few have closed, and those closures have been due to rationalisation rather than cuts. I find it very upsetting that Labour Members insist on making an assertion that is not correct.
Catherine McKinnell
The figure that I gave is correct. It is from the Government’s own database, before they took it down. Goodness knows what the number is now, but we know from our local communities that even the Sure Starts that remain open are offering reduced services, and that a huge number of Sure Starts are under threat as local authorities struggle to meet their current budget requirements.
Barbara Keeley (Worsley and Eccles South) (Lab)
Government Members might like to know that Salford city council, owing to the budget cuts amounting to £100 million that have been forced on it, will have to cut eight Sure Start centres this year, leaving us with only four. Government Members must stop being in denial about this issue.
Catherine McKinnell
Yes, I agree that it is important that Government Members stop being in denial, because it will be a dreadful indictment of their being out of touch with reality if they fail to address this issue and instead stand by and watch our network of Sure Start centres disappear.
Jim Shannon (Strangford) (DUP)
Does the hon. Lady agree that for many people with children if they did not have their grandparents or their aunties, the cost of child care would be too great for them to return to work? Does she feel that while the Government have made some concessions on child care, they have not given enough of an incentive for those people not to need to depend on their grandparents and aunts in order to be able to continue to work?
Catherine McKinnell
The hon. Gentleman raises an important point. There is a heroic army of grandparents out there providing that much-needed support within families to ensure that those really struggling with the cost of living crisis can still be in work, but unfortunately some people do not have that luxury. There are an awful lot of people who cannot rely on that support and who find the current cost of child care too prohibitive to go to work or find that, despite working all hours, they cannot put food on the table.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
While it is right to recognise that families will decide on the best ways of making arrangements and that grandparents and other family carers have an important role, do not children from the most disadvantaged backgrounds benefit the most from having access to formal child care, whether in a nursery or with a childminder? That gives them the best start in life and we need to do more to target families from the most disadvantaged backgrounds so that they can access child care.
Catherine McKinnell
My hon. Friend raises an important point. There is a multitude of reasons why we should support parents and enable those who want to work to do so, one of which is the benefits for children of being in that child care setting. That is why Labour has made one of our key pledges—and we call on the Government to take it up in this Budget—to extend the free child care that is available for three to four-year-olds. We call on the Government not to wait until 2015, but to do it now and to pay for it through the increase in the bank levy that we have suggested and which the Government should take up—or at least they should certainly undertake the review we are calling for today to look at the viability of that in this year’s Budget.
Andrea Leadsom
Does the hon. Lady genuinely think it is realistic and practical to implement that policy right now bearing in mind that the Government are already rolling out their offer for two-year-olds and nurseries are already under pressure from the implications of the influx of two-year-olds?
Catherine McKinnell
The amendment is perfectly reasonable. I know the hon. Lady cares about this issue and I am sure she would want to see her Government doing everything they can to provide support and to help parents up and down the country who we know are struggling with this important issue. That is why the amendment we have tabled today calls on the Government to
“undertake a review of ways in which changes to the tax and childcare systems could be used to increase the affordability of childcare before April 2015”.
It is a perfectly reasonable amendment and I see no reason why Members on both sides of this House would not support it if it could bring about the changes that parents need today, not in 2015.
Returning to the issue of maternal employment rates, for mothers whose youngest child is aged between three and five that rate is currently 64% across the developed world, yet the rate in Britain is six percentage points lower at 58%, which is the equivalent of about 150,000 mothers not being employed. The rate in Sweden is 80%.
As the interventions today have demonstrated, it seems that Government Members prefer to gloss over the uncomfortable facts and figures that do not fit with their messages when they boast about the record numbers of people in employment, much as they do when they ignore the fact that almost 1 million 16 to 24-year-olds are out of work, a quarter of them for 12 months or more.
The child care crunch, like youth unemployment, is bad not only for families but for the country and the economy. Parents who want to work should be able, and supported, to do so. There have been consultations and numerous announcements—and, indeed, re-announcements —about the Government’s new flagship child care scheme, but we see absolutely nothing in the Finance Bill that will address the spiralling costs that families face now, rather than in 18 months’ time.
Lorely Burt (Solihull) (LD)
Does the hon. Lady acknowledge that the Government announced in the Budget that the tax-free child care cost cap will be raised to £10,000, which will be worth up to £2,000 per child? I know that 6,000 families in Solihull will be grateful for that.
Catherine McKinnell
I appreciate the hon. Lady’s point, but that help for families will not arrive until 2015 and beyond, after the next election. Many families could do with some support over the next 18 months, not just beyond 2015. There are also serious concerns about whether parents will actually be better off when the Government’s policy is introduced. I will say more about that later.
I shall turn now to the second part of new clause 1, which focuses on the impact of the tax and benefit changes introduced in this Parliament. Just last week, the Opposition published an analysis of figures produced by the independent Institute for Fiscal Studies, along with analysis by the House of Commons Library, which showed that working families with children, and one-earner families in particular, had been the hardest hit by the changes introduced since 2010. Those changes, which were voted through by Government Members, mean that on average, households will be a staggering £974 a year worse off by the next general election. It is worth listing what those tax and benefit changes will mean for families with children. The constituents of Government Members will no doubt be paying close attention to their household budgets when it comes to casting their vote in May 2015.
Dr Thérèse Coffey (Suffolk Coastal) (Con)
Will the hon. Lady tell us whether that analysis includes fuel duty? Does she agree that if this Government had kept the Labour fuel duty escalator going, petrol would cost 90p a gallon more today, the equivalent of £450 a year for the average family?
Catherine McKinnell
On average, by the time of the next general election, a family in which both parents are working will be £2,073 a year worse off. A family in which one parent works will be a staggering £3,720 a year worse off, and a family in which no parents work will be £2,114 a year worse off. A lone parent in work will be £1,335 a year worse off, and a lone parent who is not working will be £1,901 a year worse off. These changes are in addition to the impact of wages falling in real terms, which has left working people an average of £1,600 a year worse off since 2010. Households have faced 24 Tory tax rises over the same period. However, while millions of families have seen their real household incomes go down since 2010, millionaires have been given a huge tax cut by this Government. The top 1% of earners—85% of whom just happen to be men, by the way—have been given a £3 billion tax cut worth an average of £100,000 for those earning more than £1 million a year.
Catherine McKinnell
I will give way to the hon. Lady, who I am sure is as disappointed as I am by that policy.
Andrea Leadsom
Will the hon. Lady confirm what the top rate of tax was during the last 10 years of the Labour Government? Will she also confirm that it changed only a couple of days before the last general election?
Catherine McKinnell
The hon. Lady is well aware that we have a budget deficit that needs to be addressed. This Government promised to balance the books by 2015, but look set to be way off that target. Of course the increase to the 50p rate was part of a balanced deficit reduction programme that Labour would have put in place. Instead, this Government came in and made cuts that slowed growth and resulted in three years of a flatlining economy. The only people who seem to have benefited are the top-rate earners who have been given a tax cut by this Government.
Going back to the subject under debate, the same tax cut came from a Conservative-led Government who, in their 2010 manifesto, promised to make Britain
“the most family-friendly country in Europe.”
They claimed:
“We will help families with all the pressures they face: the lack of time, money worries, the impact of work, concerns about schools and crime, preventing unhealthy influences, poor housing.”
Of course—[Interruption.] The hon. Member for Solihull (Lorely Burt) groans from the Liberal Democrat Front Bench. The Liberal Democrats claimed in their party’s 2010 manifesto:
“Liberal Democrats believe every family should get the support it needs to thrive, from help with childcare through to better support for carers and elderly parents. Liberal Democrats will improve life for your family.”
Oh, how they disappointed!
Andrea Leadsom
The hon. Lady is being very generous in giving way. Will she welcome the fact that one of the major newspapers today reports that wages are growing faster now than they have been in the past seven years, and that there are 1.6 million workers in private sector employment since 2010, which means that many more families are now able to afford their weekly household bill?
Catherine McKinnell
Any good news on the economy will always be welcomed, not just by Members of this House but by those out there who are struggling with the cost of living. No matter what good news we see in the coming months, it will not outweigh the fact that we have had three years of a flatlining economy in which wages have been squeezed and prices have risen much faster than wages, particularly in this area of child care costs. People will be worse off in 2015 than they were in 2010. We know that a family in which both parents work will be £2,073 worse off by the next election. Perhaps the electorate will just have to add that to the ever-increasing list of Liberal Democrat broken promises.
The Prime Minister is currently touring the country, boasting about the rise in the personal allowance—I am surprised that Government Members have not raised that yet. Incidentally, the Deputy Prime Minister claims that the Conservatives were dragged kicking and screaming to every meeting on the personal allowance. The simple truth is that working families are thousands of pounds worse off now than they were in 2010 thanks to tax and benefit changes, falling living standards and rising child care costs, all of which this out-of-touch Government have continually failed to get a grip of, and all of which contribute to the fact that child poverty is set to increase rapidly under this Government. After an unprecedented reduction in child poverty under Labour, the IFS now predicts that an extra 400,000 children will be in relative poverty by the end of this Parliament and it is clear why that is. It says:
“Tax and benefit reforms introduced since April 2010 can account for almost all of the increase in child poverty projected over the next few years.”
As we know that families will be significantly worse off by the next general election, let me turn to the Government’s proposals for tax-free child care, which were lauded in the Budget but which are missing from this year’s Finance Bill. Parents would be forgiven for thinking that they are in for a £2,000 subsidy of their child care costs, based on what Ministers have been claiming in interviews and articles in recent weeks. Let us be absolutely clear about this. Although any new money to help families facing soaring child care costs is undoubtedly welcome, this coalition will not fool mums and dads. When we scratch beneath the surface and go beyond the headline figures of £2,000 and 1.9 million families, we find that the facts very quickly come to light.
Only one in five families will receive help through tax-free child care, yet that one family in five would have to incur child care costs of £10,000 per child to get the maximum £2,000 that Government Members have been boasting about. Ten thousands pounds per child per year! How many families in Britain could possibly afford to spend the £8,000 required to receive the maximum support from the Government? Well, the latest annual child care costs survey by the Family and Childcare Trust suggests that over a year a British family spends an average of £5,487 for a nursery place for a child of two and above, which, incidentally, is £1,298 more than it cost in 2010, so in reality most families will receive at best just half the support being parroted by Government Members—[Interruption.] I am pleased that the hon. Member for Nuneaton (Mr Jones) has been enlightened by that, as he was so horrified when I enlightened him about the reality of this Government’s policy.
Lorely Burt
On the one hand, the hon. Lady seems to be bemoaning the soaring costs of child care, but on the other she is bemoaning the fact that parents do not have to pay the full £10,000 to get the maximum child care support.
Catherine McKinnell
A family’s child care requirements are a family’s child care requirements. If somebody has to go to work and they need child care, they need to invest in child care for however many hours they need it for. The Government’s child care proposal does nothing to address the supply side issues, which is why Labour proposes to increase the number of free hours available for three to four-year-olds to help increase the supply of child care, which we have seen diminish under this Government.
Dr Thérèse Coffey
We have had this debate before in Westminster Hall. Does the hon. Lady not recognise that the number of childminders fell under the previous Government? I realise that the point about quality has been made before; nevertheless, there were fewer childminders at the end of that Labour Government than at the start.
Catherine McKinnell
There are 3,000 fewer childminder places under this Government so I caution Government Members about trumpeting their success in this area, because it is far from a success for mums and dads who are struggling with soaring costs.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
The hon. Member for Suffolk Coastal (Dr Coffey) is right: we have discussed these matters at length before. Quality is important, and although the number of childminders has fallen in the past, if we want children to be properly looked after in a child care setting, we must ensure that setting is of the highest possible quality. Unfortunately, some childminders were not able to provide that high-quality care and did not want to continue. We are talking about the most vulnerable children who need high-quality care. Childminders who felt that they were not able to offer that any more and did not want to go through the Ofsted registration process might have been one reason behind that fall in numbers.
Catherine McKinnell
My hon. Friend makes a powerful and heartfelt point and she touches on an important issue. We are talking about the quantity of child care that is available and the cost of that child care, but we must always factor in quality too.
Andrea Leadsom
I know that this is not an issue of party politics but a straightforward issue of quality, but I want to point out that over-regulation led many childminders to want to pull out of providing that care. I have spoken to many childminders who pulled out because of the complex box-ticking—the questions about what sort of doors they had, or what sort of facilities. The important thing for our society is that very young children should be cared for by people who genuinely love them and who will take good care of them. We risk the perfect being the enemy of the good if we go down the avenue of over-regulation.
Catherine McKinnell
I think we risk going down the road of debating the quality of child care and issues to do with Ofsted registration, but I would question some of the hon. Lady’s assertions about the requirements for regulation and the absolutely fundamental importance of ensuring the quality of all child care places, including those with childminders.
Let me return to the issue of child care costs, which is what our new clause 1 seeks to get the Government to address. Gavin Kelly, chief executive of the Resolution Foundation, has pointed out in relation to the Government’s recent increase in the cap from £6,000 to £10,000 for tax free child care:
“About 80 per cent. of the gains from this will flow upwards to those in the top half of the income distribution. It’s also the case that it’s low- and middle- income parents who find the costs of childcare the biggest obstacle to taking on more work—so targeting support at them would make sense.”
I should be interested to hear the Minister explain how effective the scheme will be in supporting the very parents who need help the most. I should also be grateful if she could clarify the Treasury sums on tax-free child care because, welcome though any extra support is for families struggling with child care costs, it is curious that the Government have managed to tweak their sums so that an almost doubling of Government support per child has not cost even a penny extra.
I am sure that the IFS would also be interested to hear the Minister’s answer to that question, as it has queried the matter. It said:
“Surprisingly, today’s announcements come with no new money. Extending the new Tax Free Childcare scheme to all children under 12 within its first year will cost money compared with a world where it was limited to children under 5, but the Treasury can make this announcement without altering its public spending plans because it has significantly revised down its estimate of how many families are likely to be eligible for the scheme (from 2.5 million to 1.9 million).”
It is not clear what has led to this dramatic change, so we cannot judge whether the new estimates are any more plausible than the initial ones, but the fact that the change is so large suggests that the Treasury would benefit from being more open about the way it costs new policies. Perhaps the Minister will elaborate on these figures and how her Department arrived at them.
Ultimately, the simple truth is that, even if people spend enough to receive the full support, this help will not come until after the general election. That means no help with child care in five years from the Conservatives or the Liberal Democrats. Instead, Ministers have presided over soaring costs and cuts to tax credits for thousands of families, meaning that, even when this help comes, most families will still be worse off than in 2010.
Dr Thérèse Coffey
I recognise the hon. Lady’s genuine concern about working parents and her ambition that the Government get on with increasing child care, but she must recognise that the number of hours of child care has increased under this Government. She should be gracious enough to accept that.
Catherine McKinnell
It is interesting that the hon. Lady mentions that, because I will quote directly on this issue a little further on in my submission.
We know that the Government are good at con tricks, giving with one hand but taking much, much more with the other. For example, they made a U-turn last month when they decided to support 85% of child care costs for all universal credit claimants. That was a welcome reversal after the coalition decided in 2011 to cut the support for child care through the working tax credit from 80% to 70%—a decision that led to an average loss of £570 a year for low-paid working parents. It is just another example of this Government taking with one hand and giving with the other.
As Alan Milburn, chairman of the Social Mobility and Child Poverty Commission, has said, low-income families will still lose out, despite this increase in support for those most in need. He told The Independent on Sunday:
“The Government has taken half a step forward. The announcement that 85% of childcare costs will be met under universal credit from 2016 will help work pay for low-income families. This is very welcome. The sting in the tail is that this £200 million expansion in childcare support will come from within the universal credit programme…That risks robbing Peter to pay Paul.”
Perhaps the Minister could also give a bit more detail on how she intends to pay for the increase in support. While she is at it, perhaps she could provide some clarity on when low-income families eligible for universal credit can expect to receive this support with their child care costs.
Under the original plans of the Secretary of State for Work and Pensions, most would have expected to receive the increased support when the tax free child care is introduced in 2015, but clearly that is not going to happen. Will the Minister clarify when the Government expect to introduce this support and whether it will be in the near future? Ultimately, as Opposition Members have made absolutely clear, parents facing a cost of living crisis will see through any child care con, because it does not make up for how much the families are now paying for child care under this coalition Government.
I come now to the first part of new clause 1 and the Opposition’s proposals for improving child care support, which we know will make a real difference to working parents. New clause 1 proposes that the Chancellor should undertake a review of the ways in which child care could be made more affordable before April 2015. We have done much of the work for him with our clear suggestions for supporting families on this pressing issue. We want to extend free child care for three to four-year-olds from 15 to 25 hours a week for working parents, which can be fully funded by increasing the bank levy. As with the 15-hour early-years entitlement, the new 25 hours would be for 38 weeks of the year, which would mean more than £1,500 of extra support per child each year. Perhaps most important, Labour’s plans will not demand that working parents spend £10,000 on child care in order to get the maximum promised help.
We also know that for school-age children, child care can become a logistical nightmare, with many parents increasingly struggling to find before and after-school child care, while the Government stick their fingers in their ears and hum. On the Government’s own record, 62% of parents of school-age children say that they need some form of before and after-school or holiday care in order to combine family life with work, but of those nearly three in 10 are unable to find it. To give parents of primary-age children peace of mind, the Opposition would set in law the guarantee that they could access wraparound child care from 8 am to 6 pm through their local school if they wanted it. This primary child care guarantee will benefit parents of primary-age children most, because those parents most need support. Of course, these plans will be in addition to all the support that parents will already receive, and they will not be contingent on spending thousands of pounds on child care in order to qualify.
At Prime Minister’s questions recently, following a Budget empty of any measures to address the problem now, I asked the Prime Minister to explain why his Government had failed to take the action to help parents with child care costs before the next general election. He answered:
“We are helping families with child care, not least by giving 15 hours…That is happening before the election; it has happened under this Government in this Parliament—15 hours of free nursery care for three-year-olds and four-year-olds…Opposition Members say it is not enough; it is more than Labour ever provided.”—[Official Report, 26 March 2014; Vol. 578, c. 344.]
That was not only a very complacent response but, unintentionally I am sure, misleading, and goes to show just how out of touch this Government are on this issue of child care.
The previous Labour Government introduced 12.5 hours of free nursery education for three to four-year-olds a decade ago, back in 2004, with the clear intention that that would be extended to 15 hours by 2010. Far from this being a coalition policy, the plan was inherited by the coalition from the previous Labour Government. As I set out, the future Labour Government will continue to build on this legacy, extend it to 25 hours a week for working parents, funded by an increase in the bank levy, and guarantee wraparound child care.
This was the Chancellor’s final opportunity to introduce policies that will really benefit parents before the general election, to give much needed support to working parents now, not in 18 months’ time. Parents have already seen their child care costs rise five times faster than their pay. They are already spending more on child care than on their mortgage. They have already seen the number of nursery places fall by thousands. They have already seen hundreds of Sure Start centres close, despite the Prime Minister’s promises to the contrary. Of course, most stay-at-home mums, as well as working parents, already see child care costs as one of the biggest barriers to their going back to work or increasing their working hours. A review of the issue is both due and urgent, and I commend new clause 1 to the Committee.
Mr Burrowes
It is a pleasure to take part in this debate. It is always interesting to hear the hon. Member for Newcastle upon Tyne North (Catherine McKinnell). Essentially, she seeks to press a reset button in relation to a new Labour history—is it new Labour any more?—of child care. It seems that for Labour life started—or, it might say, ended—in 2010.
We did get to an element of truth at the end of the hon. Lady’s remarks when we heard reference to the previous Labour Government’s policies. When I came into Parliament in 2005, the Labour Government announced a new tax relief for child care benefits, which, as we heard, then went through various stages. In September 2009, the then Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), fronted the extension of free child care for two-year-olds. We inherited those two policies. In the coalition Government’s first Budget, we confirmed that the previous Government’s measures were being taken forward. Therefore, any reference to the costs in 2010 must be a reference to the legacy of the previous Labour Government. By any logic, this coalition Government merely extended the previous Government’s policy on tax relief and free child care for two-year-olds. It is inappropriate, and a partial view of history, not to refer to the legacy inherited from the previous Government.
Bridget Phillipson
I should point out to the hon. Gentleman that it would be wrong not to acknowledge the great strides forward that were made in child care in the 13 years of the Labour Government. For the first time, child care was taken seriously as a matter for Government. In the past, it had been regarded as a private family matter, but it is not; it allows women to play a full role in the economy. Perhaps he could acknowledge that in those 13 years many good things happened that supported women back into work and allowed children to take up these places.
Mr Burrowes
I am a generous person, I hope, and I recognise that there were benefits, but we have to look at the history. Let us go back to 1990, when the then Chancellor, John Major, introduced the policy that meant employees would not be taxed on the benefits they received from using a nursery or play scheme provided by an employer. Perhaps the hon. Lady would like to intervene to recognise the benefits of his proposal. He set in train a process to allow more affordable child care by ensuring that the tax system recognised the need to give benefits, in particular, to women who need to be out and working and to have affordable, accessible child care.
Andrea Leadsom
I certainly recall the efforts of Labour Members to try to sort out child care. I had two young boys at the time. I put my two little boys into a nursery and claimed the child tax credit vouchers, but then needed to get a nanny for them because my hours changed and the situation became impossible. It is rather like so many of the Opposition’s ideas: they might be all right in principle, but in practice they are absolute rubbish and do not meet the needs of our society.
Mr Burrowes
I am grateful for that robust intervention. There is obviously cross-party support for recognising that child care is a central and significant issue in dealing with parents’ ability to manage their budgets and go out to work.
The lack of affordable child care is one of the reasons for the increasing numbers of relatives looking after children, especially grandparents. Two thirds of grandparents—well over 5 million—regularly look after their grandchildren. It is important to recognise the wide variety of child care. As we properly extend formal child care, I encourage the Committee, and the Minister, to recognise the role and value of informal child care for the millions of parents and grandparents who are out there saving a lot of money—thousands of pounds a year—for working families. Yes, the cost of child care is one of the reasons for the increasing number of grandparents taking on this role, and it is an important factor in parents’ decisions, but the significance of grandparental child care cuts across many areas. One in three families relies on it; one in two single-parent families particularly relies on it. It is relied on especially by families with disabled children. Often they may be living nearby, perhaps on the margins of poverty. Grandparents play a very significant role in providing emotional, financial and practical support, often through short-term care in times of crisis which then extends into long-term care.
Black and minority ethnic households are more likely than other households to have a grandparent living under the same roof as the parents and the child, taking on caring responsibilities. As we extend formal child care, it is important to acknowledge the calls from vulnerable families in particular for more flexibility in terms of tax-free relief and, as has been said in other debates, unpaid leave for grandparents who are in work.
It is important to talk not just about pounds and pence, but about child care and development. A review on child development conducted by the Institute for Fiscal Studies and the Nuffield Foundation asked parents to rank the factors that motivated them to ask grandparents to care for their children. The top-ranking factor was trust and just below it was love. We have to recognise that. Yes, more affordable child care is needed to relieve the strain on grandparents and other family members, but at the same time what parents want is for the person looking after their child, particularly in their early years, to have a trusting, loving relationship with them. The report was published in 2012, but it still holds good. It provided evidence that care from grandparents often results in high vocabulary and socio-emotional development.
It is obvious to parents and, indeed, those relatives and friends who know their children best, that the love and general interest shown by grandparent carers is invaluable. It is hard to quantify in financial terms, but it is certainly valuable. Relatives put themselves out on a personal level and that is what we want for all our children. We want them to have that type of care, whether it be in a nursery, from a childminder or, more often than not, from a grandparent or relative. We want them to receive that extra support on a personal level, which is of immense value to the child’s development and care.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I am not knocking grandparents, who obviously play a valuable role in many cases, but there are studies that clearly show that grandparent care does not necessarily mean a higher level of early-years education for children, and that care in a formalised or trained setting can be better for child development.
Mr Burrowes
I appreciate that and I have looked at various parts of that evidence, but it is important to recognise that the Nuffield Foundation and IFS report noted that, while being in formal child care appeared to make children initially more school ready,
“being cared for by grandparents did not significantly put children at a disadvantage in school readiness compared to children not in formal childcare”.
Andrea Leadsom
I challenge the concept suggested by Opposition Members with regard to formal versus informal child care. It is incontrovertible neuroscience that a baby’s brain develops through being stimulated by the love of an adult carer, and that is what gives a baby its lifelong potential. Of course early-years education has its place, but in those very early, vulnerable periods in the first couple of years of a baby’s life, there is no doubt that the love of an adult carer—a primary or secondary attachment figure—is far more important than whether they are in a formal or informal child-care setting.
Mr Burrowes
I pay tribute to my hon. Friend for her work on “The 1001 Critical Days”, which highlights the importance of attachment, care and attention. Parents seek to find such care in a formal as well as informal child-care setting, but the reality is that families, particularly disadvantaged families, rely on the help of grandparents and relatives who are close at hand.
Undoubtedly, the Government are right to take important steps to make child care affordable, because obviously one of the key routes out of poverty is work, which we all support, but we should also support quality child care in all its forms.
There is also a need for flexibility. I have been seeking to make the point that we must have a wider understanding of child care. It involves more than grandparents, because at least 300,000 children are cared for full time by relatives, friends or other people. That often starts in a crisis or an emergency, when friends and family members step in, particularly those in the extended family—perhaps an older sibling, an uncle or aunt. Those people may have their own challenges. They may be in work, but have to stop work to care for a friend’s or relative’s child. They may be on a pension giving a fixed income, and there may be a significant impact on them. We must therefore recognise that there is a considerable impact on carers. A significant number of children are cared for by that group of people.
It is therefore right for the Government to focus on encouraging more people into work and to ensure that it does pay to work. We must recognise the impact on families on different earnings. Reference has been made to poverty. Statistics from the Joseph Rowntree Foundation show that 52% of children living in poverty are in single-earner families. One answer to that is the straightforward one of providing the single earner’s spouse, through the opportunity of affordable child care, with the choice of going into work.
We must recognise the Government’s statistics. The “Childcare and early years survey of parents 2012-2013”, which was released this January, had some interesting findings on parents. It is important to recognise that 71% of parents at home were there by choice, while only 13% of them cited cost as a problem. [Interruption.] The hon. Member for Manchester Central (Lucy Powell) speaks from a sedentary position. If she wants to intervene, she may do so. I am simply citing a Department for Education survey from January 2014. Some 37% of working mothers said that they would prefer to stay at home and look after the children if they could afford it, while 57% said that they would like to work fewer hours and spend more time looking after their children if they could afford it.
According to the Netmums survey on “The Great Work Debate”, which had some 4,000 respondents, 33% of part-time working mums said that they would prefer to be at home. I am not here simply to bang the drum, but it is interesting that when one raises the issue of stay-at-home mums, there is immediately an artificial dividing line between yummy mummies exercising a lifestyle choice and those unfortunate mothers and others who want to work. I know that hon. Members will not want to make such a distinction, but it does happen and it can be paraded in that way in the media.
As a Conservative, I believe in freedom and aspiration. Freedom must include freedom of choice. People should be free to work, and we must ensure that affordable child care is available for them. However, we must also recognise that a considerable number of parents want to be able to choose to be at home. That involves income strands, and income is particularly relevant, as I have highlighted. Households on lower income levels, which are on the margins of poverty or indeed in poverty, often want to call on relatives and friends or their own family structures to support them. It is important to allow them the choice and flexibility to do that, and to recognise the impact on such family members in the tax system.
We can all agree that we must support aspiration as well as freedom. Aspiration includes the aspiration to work, and the aspiration of mothers or indeed fathers who want to give up their career or take a cut in their income to care for their family at home. The question is about how we can provide support. We will have a similar debate tomorrow on the transferable married couple’s allowance, which would provide some recognition of that.
We can also all agree that raising children needs time. It needs time to cultivate relationships, and that can happen in a variety of forms. Such time is what many parents are striving for. Many parents look back on the fact that, because of all their other commitments, they did not have enough time to spend with their children. As Members of Parliament, we are probably the last people who should talk about that. We have our own concerns about that, and we can certainly declare an interest about our lack of time. I have six children, so I can understand that.
We also have to recognise that many parents—from looking at some surveys I would say most parents—want more choice and more opportunities to have time with their children. They also want to be sure that if they do not have the opportunity to care for their children at home because of the choices that they have to make, or if they prefer not to, there is a guarantee that they will be able to entrust their children’s care to others who will be able to give them the time and commitment that they need.
I welcome the Bill’s provisions, which will make massive strides in providing support for affordable child care. However, let us ensure that we do not lose sight of the need for greater flexibility, freedom and aspirations for families, so that we can support good-quality child care whether it takes place in a formal setting or through grandparents, parents or other relatives.
Meg Hillier
This is such an important issue that I hope we do not end up with a false party political divide. The new clause is a sensible and proportionate measure that we should all support, because it would not tie anyone to anything much. It simply suggests that we should assess the impact of changes to the tax and tax credits system, to ensure that we all work together to make the system fairer, simpler and more cost-effective for parents and better for children.
The issue of child care is about both supporting supply and ensuring that it is affordable for the user, and both parts of that need to be simple. We have seen problems in the system, because without subsidy at the supply end there is a disincentive to provide supply. I have suggestions about how we might address that through the tax system, which I will come on to later.
Governments of all parties often talk about the difference between child care and early years education, and we have heard a little of that divide in this debate. However, I am sure that all of us who have had experience of the matter would like to see the two combined in most cases. When Governments talk about early years education, which is inevitably expensive, they mean providing 15 or 25 hours a week, not the number of hours that would be needed for somebody to work full time. I recognise that that is unaffordable at the moment, although I have ambitions on the matter—I do not speak for my Front-Bench colleagues, but I have aspirations for what they will achieve in time.
Child care needs to be different for different children. I will come to the issue of older children, but whether it is after-school care or pre-school care, flexibility is the key. I concur with the hon. Member for South Northamptonshire (Andrea Leadsom), although not completely—she decided to rubbish the Labour Government’s achievements, and I will make no apology for what Labour achieved through Sure Start, with a massive increase in the quality and availability of child care and reductions in cost in many places. As she, I and other Members recognise, flexibility is vital, because people, particularly in London, do not work nine-to-five as much as is often believed.
Andrea Leadsom
I am moved to intervene as the chair of the all-party group on Sure Start children’s centres. I once wore a hat in the Chamber so that I could take my hat off to the Opposition for having created Sure Start. However, I hold to the fact that, brilliant as the idea was, there is still a huge amount to be improved on. I urge the hon. Lady to agree that we do not do nearly enough to focus on the developmental needs of the very young.
Meg Hillier
There is cross-party support for all of that, because I agree that Sure Start was a revolution in early years support. I felt that it should continue so that there was Sure Start at the ages of five and 11. We would stray off the debate if I got into that territory, but my constituency still has 37% of children living in poverty and it is a young constituency. Families of all backgrounds have used Sure Start, learned from each other and got support. Whatever their background, people have challenges with their children at an early stage, and children really have got a sure start. Titles of Government initiatives often become glib, but Sure Start meant something to me and to many of my constituents.
The London assembly Labour group carried out a study on the London cost of living, and it found that flexibility in child care was particularly important in London, where there are long commute times and variable hours. One of the benefits of the child care voucher system, which is not universal, is that where it has been taken up it has provided a good deal of flexibility for parents to buy into properly qualified, registered child care. Again, the study proposed by the new clause could investigate how to support quality through a tax voucher system. Of course, we have seen a reduction in tax credits, although I welcome and support what my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) said about the U-turn on universal credit paying 85% of child care costs. The key point is that we can have Government initiative after Government initiative, but parents want the system to be kept simple. They want to know what money they have to play with and where they can spend it, which means that both the supplier and the purchaser of a service, in this case the parent, can understand the system.
We need cross-party agreement so that we have a system that sticks and is not tinkered with time after time so that people do not have to work out, “Does that apply to me? My child is going to be that age on that date, so does it apply to them? Oh, they have missed that cut off by one day, so that whole term will be more expensive than it will be for the neighbouring child, who got in by one day.” There are all sorts of silly little bits of the system that make it complicated for people to understand. Such things can be disincentives for accessing child care and ensuring that people get the right support, particularly mothers who are going back to work.
I am a London Member, and the new clause would particularly benefit people in London, because child care costs in London are inevitably higher. The costs of premises are higher. Although there is a minimum wage, child carers are rightly paid more, and in London their wages will be higher than in other parts of the country. Research by child care site Findababysitter.com found that a quarter of parents in London who were not in work were prevented from getting a job because of high child care costs. The Resolution Foundation found that one in five mothers who were already employed would like to take on an extra 10 hours’ work a week on average but could not do so because they would need the commensurate extra child care—not just 10 hours extra but enough child care to allow them to travel to and from work.
A parent in London buying 50 hours of child care a week for a child under two would face an average annual bill of nearly £14,000, if they can find a child care setting that opens during the hours that they need to work. In the current climate, in which people are expected to work longer and harder for their money, 50 hours of child care is the bare minimum. Anyone who is not working regular hours, as the hon. Member for South Northamptonshire said, would need the flexibility of having someone come to their home, or a very flexible childminder. That might be manageable for a child under two, but things get much more complicated with children above that age who are looked after outside the home.
Just over a year ago, I called for child care to become a top priority, and it is heartening that we are having more debates on the issue, but talking about it does not mean that the Government are getting it right with the offer of so-called tax-free child care. I will not repeat the arguments made by my hon. Friend the Member for Newcastle upon Tyne North, but the Government’s offer depends on how much people spend, and it is complicated for people to understand. I know a number of people on low incomes who have a simple approach to the tax system and who will find the proposal complicated. They will not benefit to the same extent because of the amount of child care that many of them will access because of their working hours.
I represent one of the youngest parliamentary seats in the UK. More than a fifth of residents are under 16 and more than a third, about 34%, are under 24, so child care is a big concern. I am stopped on the streets of Hackney South and Shoreditch by mums, childminders and others who want to raise that concern. When I ask any working parent what the toughest part is, they say that it is sorting out the child care, which is a logistical challenge as well as a financial challenge. I know that, because I am a working mother of three, and I am lucky to be well paid enough to buy in that flexibility. For anyone who does not have a salary as generous as mine, buying in that flexibility is very difficult.
Nationally, we know that 70% of working parents do not work nine-to-five Monday to Friday, and in London, because of the journey times, doing a full day’s work means long and expensive child care, if parents can get it. We have the most expensive system in the world. The review proposed in new clause 1 could consider examples from around the world. In Denmark, a day care Act means that local councils provide child care for all between 8 am to 5 pm, with parents and the Government—this is where new clause 1 would come in—contributing to the cost. Child care is free for families on the lowest incomes. The subsidy is tapered, depending on the family income—in this country, it would need to be done sensibly through the tax and tax credit systems—which means that three quarters, 76%, of Danish women are working. That is a huge improvement on the number of women working in the UK. I will touch on the points made by the hon. Member for Enfield, Southgate (Mr Burrowes) on women wanting to stay at home, but we need women to be economically active. This is not just about child care, but about giving women their rightful place in the work force. Hearteningly, women outnumber men in the Chamber at the moment. I applaud my male colleagues of all parties for being here, because this is not just a women’s issue. Women who play their equal role in society and in the work force are more satisfied, better role models and better parents as a result, if we make things as stress free as possible, which is about providing flexibility.
Andrea Leadsom
That is such a sweeping statement. It completely undermines those women who choose to do the utterly groundbreaking and profoundly valuable job of staying home to raise their children. The hon. Lady is not being fair to those people.
Meg Hillier
I will come to that point in a moment. I am saying not that women who want to stay at home and who can afford to do so should not make that choice, but that it is important that women have the choice to work and to be economically active and play their full role in society in that way. Even women who stay at home to look after their children for a period of their child’s early years may well need or want to work at a later stage. That choice is therefore important whatever stage we are talking about. We should not conflate being at home with a very young child under five with being at home all the time. Under the hon. Lady’s Government’s benefits system, parents have to work or they will seriously lose money, and their children will be pushed into greater poverty.
In Hackney South and Shoreditch, women’s average earnings are higher than men’s, which shows what could be achieved if that was applied across the workplace. A decent universal system of child care will pay for itself in the long run. More parents working and paying taxes, and not claiming tax credits and benefits, more than pay for the state’s investment. I do not speak for my party on this, but I hope that those who do take that mantle and look towards the overall goal of a universal free child care system that will pay for itself. That is an aim we need to work towards. If the Government agree to new clause 1, we will be set on a cross-party basis along that route. It would not solve the problem overnight or mean that things will be easy, but it would mean that we can look closely at the options.
As I have said, child care costs in London are higher than in the rest of the country. I will not go into the details but, for instance, a nursery place for an under two is £140 a week typically in London compared with a UK average of £109. I know many people who pay a lot more than that. There is an idea that people have choice, but it is not often the case. Many parents take the option of what is available at the time, which is why we need to provide incentives at the supply end.
I have a couple of suggestions that the study proposed in new clause 1 could consider. It could examine the idea of a London weighting in universal credit for the provision of child care. It could also consider more family-friendly approaches by employers. Practices such as working from home arrangements and on-site nurseries could be fuelled by tax breaks. Speaking as a member of the Public Accounts Committee, we would clearly need to monitor that to ensure that it was not abused, but the brilliant brains in the Treasury, including the Minister’s, could probably work through such a system.
We need to push private and public sector providers to extend the hours available to parents, particularly late in the evening and weekends. That could happen through a tax incentive or a tax break system. There are an awful lot of opportunities. The Minister is nodding. I am sure that she, as a working mum, will recognise the challenges and needs.
I commend to colleagues the London cost of living report by the London assembly Labour group. Although it is a Labour report, it can be read by other parties. I read it as a cross-party report. The Institute for Public Policy Research has done a big bit of work on child care. It has found that directly funding child care facilities, which happens in other European countries, can function better for parents and be more cost-effective, because there is a guarantee of a place. We have to monitor and ensure that the money is not wasted, but it would mean certainty for the supplier, which means certainty for the parent trying to buy.
I want to pick up on some of the comments made by other hon. Members. The hon. Member for Enfield, Southgate talked about the importance of informal child care and I think we would all agree with that. Any parent will use informal child care at some point, whether for an evening out or as part of a longer-term arrangement with grandparents. Let us be honest, though. Not every grandparent wants to take on child care. I meet grandparents, and those whose own parents are caring for their children, who say that they do not necessarily want to take on child care but feel they should to support their child. Many of those grandparents are young and give up work to look after their grandchildren. That is fine if it is a matter of choice, but it is a real issue if they feel they have to step in because of the lack of availability and options. There is a danger of creating generational issues. For every individual who wants to work but cannot, we reduce the tax take. We need to bear that in mind.
Andrea Leadsom
It is a great pleasure to follow the hon. Member for Hackney South and Shoreditch (Meg Hillier), with whom I agree on many aspects of early years.
The first thing I want to say is that children are everything to those of us who have them, and to those of us who have young nieces, nephews and grandchildren. Children are at the centre and heart of our world. They make incredibly selfish human beings become extraordinarily unselfish. It is when a child is about to get run over that a parent gets superhuman strength to push them out of the way. People are capable of the most enormous sacrifices for the sake of their children. It is clear to us all that top quality child care is vital.
In my case, with three kids of my own—aged 18, almost 16 and 10—I have had just about every form of child care that can be imagined. I was fortunate to start off with my stepfather acting as my nanny until my second son was five years old. Therefore, I thoroughly recommend informal child care. There are not many childminders who will take two little boys out—one in a backpack, one in a frontpack—and explain to them for hours what a worm cast is, build little toy forts and play with toy cars. Even today, I cannot get to Parliament until I have dropped one off at a friend’s, sorted out another with some A-level revision and got the third out of his bed, basically. For us, particularly mums, our children and the child care at whatever age they are—I talk to people with older children who are still looking for food, money or a taxi service—are at the centre of our lives. We all spend a lot of time thinking about the safe and happy lives of our children. Child care is a vital part of whatever we can offer to support those at work in our society.
We also need to support thoroughly the choices that families want to make. They may want an au pair and to deal with someone who is living in and who, perhaps, does not speak very good English. I asked one au pair I had to make a salad. She peeled some parsnips and gave us the peel, nicely dressed, as a salad. That was an interesting one. There are also childminders although, sadly, not nearly enough of them. There is also the formal child care setting; some truly superb, others truly awful. Unfortunately it was the formal child care setting—the nurseries—that led to the old joke about “hair or care”; in other words, someone not smart enough to be a hairdresser could try to become a nursery nurse. That was the reality 10 years ago where some young girls—themselves barely out of their teens—would become the carers looking after our very young children in nurseries. Care for our children comes in all shapes and sizes.
I also want to say a word on behalf of those heroic mums—I would have loved to have been one—who have stayed home and looked after their children themselves, giving up potentially lucrative, satisfying and successful careers. They might feel very depressed about their lack of self-worth, certainly in the eyes of too many politicians. I want to pay tribute to those women who decide to stay home and raise their own children.
Meg Hillier
I just want to go back to the point about au pairs and others. Will the hon. Lady acknowledge that with the cost of housing and the overcrowding in many cases in London, the idea of someone living in your home is not an option, which is why the formal setting is particularly important in a city such as London?
Andrea Leadsom
Yes of course I agree. My point was merely that child care comes in all shapes and sizes. My real point is that we should support the choices that families want to make, which are the best choices for them. That is particularly why I am so delighted that the Government have introduced shared parental leave. What more choice could there be for a woman who perhaps is earning more than her husband than to be able to decide to go back to work in the knowledge that he will be doing that critical early part of the child care? That is a huge tribute to the Government and many families will be delighted. It will be life changing for them.
Another area for which the Government deserve a lot of credit is the introduction of the early years professional status, particularly to deal with the quality of child care. I have been told by the Under-Secretary of State for Education, my hon. Friend the Member for Crewe and Nantwich (Mr Timpson)—who is Minister for children—that early years professional status will require a great deal of training. It will involve learning about the importance of secure attachment, about how the brain of a baby develops, and about how vital it is for the baby to receive loving, attentive care, whether that care is provided by parents or in a formal setting. As the hon. Member for Hackney South and Shoreditch (Meg Hillier) pointed out, when life at home is devastatingly awful because of domestic violence, bereavement or drug or alcohol misuse, the attachment needs of a baby may be far better met in a formal child care setting than at home. What is really important is choice and good quality.
Another enormous tribute should be paid to the Government for the creation of childminder agencies. I know that that has been a contentious issue, but I believe that children’s centres that adopt childminder agency status can serve as signposts for all families who seek child care. They can provide ongoing professional development for childminders, many of whom have felt unloved and uncared-for over the last few decades—which, along with over-regulation, has been their reason for leaving the business. The agencies can help childminders to understand regulation, to become established, and to provide the top-quality care that they so want to provide.
Meg Hillier
I thank the hon. Lady for being so generous with her time. Childminders have told me that their main fear is that childminder agencies could replicate the private sector company model for older people’s domiciliary care, creaming off a profit from childminders’ salaries and not delivering a good service. The hon. Lady has described an entirely different model. Does she have any inside information about what will be announced?
Andrea Leadsom
I do not, but I can tell the hon. Lady that I have been lobbying the Minister, and telling him that children’s centres could play a fantastic and very appropriate role if they became childminder agencies. I think that the support, encouragement, training and quality control that they could offer would be good for childminders, and it would certainly be good for families.
What else have the Government done for families? They have done an enormous amount. Child care tax credit has been given a huge boost: a contribution of up to £2,000 per child will greatly help families to make the right child care choices. Even more significant is the increase in the tax-free personal allowance, which has put an enormous amount of money back into the hands of taxpayers, and which will benefit working families of all shapes and sizes. As was pointed out by my hon. Friend the Member for Suffolk Coastal (Dr Coffey), the fuel duty freeze has made the cost of living for families lower than it would have been under the Opposition.
But what have we really, fundamentally done for our children—the children who are at the heart of everything that we do? We have paid down the deficit by a third, which is no inconsiderable feat. Why is that so important? As a result of the financial crisis and the Labour Government’s overspending, we put ourselves in a position in which we stole not just from our children, but from our grandchildren. We mortgaged their future. This Government have paid down the deficit significantly, with the intention of clearing it altogether so that we can start to reduce the debts that our children and grandchildren would otherwise be paying. We have been able to keep the cost of borrowing down, because we had a credible plan for returning strength to our economy. That has enabled all families with mortgages to keep down their borrowing costs, and has been a huge boost to families that is never talked about.
What is the payback? Our economy is the fastest-growing in the developed world. Wages are rising faster than they have done for seven years—that was announced today—and the private sector has created 1.6 million new jobs. That means that well over 1.5 million new families are finding work, and are able to meet the needs of their household budgets.
Bridget Phillipson
I will make a brief contribution and put on record just how much progress was made under the previous Labour Government. Child care was previously regarded as something for families to deal with on their own. When Labour came to power in 1997, there was no guarantee that children had access to a nursery place. In many areas, nursery school provision was such that there simply were not the places available even when children wanted them. We should also remember the Sure Start children centres and all the work that went into them. It is important to acknowledge that a major transition was made. The fact that we are debating child care here today shows just how much progress we have made.
I recognise that Government Members want to deal with this issue. It is just unfortunate that the measures they are talking about will not come into force until after the general election, if they were to be re-elected. That is disappointing because families in my constituency need help now.
Families across the country are facing a reduction in the number of places at the same time as costs are rising. Those of us with children know just how difficult it can be to find child care that meets the needs of families now. As has been pointed out, we in this House are very fortunate in having the luxury of being in well-paid jobs that allow us to make choices, but for many of my constituents who work shifts or who are on zero-hours contracts or have insecure employment those choices simply are not available.
We have had an interesting discussion about the role of informal child care, with some useful points being made on both sides. Many families, mine included, rely on grandparents and other friends and family to help out, and they provide invaluable support and play a very useful role. I do not in any way denigrate that support, but children from the most disadvantaged backgrounds benefit the most from having access to high-quality formal child care.
When I visit nurseries and primary schools in my constituency, it becomes clear just how important for their development it is that children are given the best start in life and have access to early years child care. That enables their vocabulary to develop and gives them access to a whole range of different experiences that sometimes are not available in the home for one reason or another, whether it be poverty, domestic violence or mental health.
We have a long way to go on this issue. Labour’s policies are on the right lines. This is a sensible new clause, and I hope the Government will take action now to help families, rather than waiting until later. Families need action now.
The Economic Secretary to the Treasury (Nicky Morgan)
It is a pleasure to serve under your chairmanship, Mr Amess, and I thank all Members who have spoken in this debate. After a rather partisan opening speech, the debate improved and we had a genuine discussion of views, which will no doubt carry on throughout the Committee stage of the Finance Bill. We will also be able to discuss child care measures in greater detail later in the year.
I take on board the comment of the hon. Member for Hackney South and Shoreditch (Meg Hillier) that there is a certain irony in the fact that all of us in the Chamber debating this matter today have children yet we are discussing this rather than spending time with them. If my son were here at the Dispatch Box, he would be very opinionated and have plenty to say on the subject of what I get up to, and I suspect that applies to the children of other Members.
New clause 1 asks the Government to conduct a review of the affordability of child care, but while Opposition Members are proposing yet another review, this Government are taking action, and have taken action, to address the rising costs of child care faced by families.
Before I address the Opposition new clause, let me briefly set out this Government’s approach to supporting parents with their child care costs. As the hon. Member for Hackney South and Shoreditch said, we on this side of the House believe in the importance of flexibility. We do not want to prescribe any further the number of hours that families should have. We want there to be full flexibility, and that is one of the advantages of the tax-free child care provisions this Government are suggesting. Parents and families will be able to build up credits in accounts and will then be able to spend them in the way that suits them best.
Meg Hillier
The flexibility of provision is as important as the flexibility of payment. It is no good talking about flexibility if the child care provider does not provide it or does not provide the number of hours and length of day needed, whether long or short. What are the Government planning to do about that?
Nicky Morgan
I take that point on board. I shall come on to talk about the number of child care places, but the hon. Lady is right: flexibility in all sorts of different ways is what is important. Having the money in an account that the family can decide how to spend is an important part of the policies we have introduced.
My hon. Friend the Member for Enfield, Southgate (Mr Burrowes) was absolutely right to say that this was all about choice. The hon. Member for Houghton and Sunderland South (Bridget Phillipson) talked about maternal employment. That is a debate that we need to have in this country. We know from various surveys conducted by the Department for Education that some mothers want to work, and some need to work. Many of those who need to work find child care costs a barrier to going to work. That is why it is so important to have this discussion.
Child care costs are a major part of most working families’ budgets. Figures from the Family and Childcare Trust show that, between 2002 and 2010, child care costs increased by around 50%. The Government have therefore taken action to tackle those rising costs. We have funded 15 hours a week of free child care for all three and four-year-olds, and extended that offer to the 20% most disadvantaged two-year-olds. We are now extending it further so that, from September 2014, about 40% of two-year-olds will be eligible. As my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) pointed out, the Government have also increased child tax credit to £3,265 a year, which is £420 a year more than it was at the last election, representing a rise significantly above inflation. We have also introduced shared parental leave.
The Government are also taking action to drive up the supply of high-quality child care provision—for example, by legislating for childminder agencies, which will make it easier to set up a childminding business; making it easier for schools to change their school day and encouraging primary schools to open for longer; and reducing bureaucracy and red tape for providers. Encouragingly, the most recent information shows that costs in England have stabilised. The National Day Nurseries Association has reported that the average fee increase across all nurseries was 1.5%, which was well below inflation. The latest survey from the Family and Childcare Trust shows that the cost of after-school clubs in 2013 was £49.71 per week, and that in 2014 it is £48.40. Also, the cost of childminders’ after-school pick-up was £72.79 in 2013 and it is now £64.75—a 12.8% reduction in real terms. Opposition Members have talked about the availability of child care places, but it is worth noting that the number of child care settings rose from 87,900 in 2010 to 90,000 in 2011. This equates to 2 million early-years places, or a 5% increase on 2009.
My hon. Friend the Member for Enfield, Southgate talked about informal child care, and he was right to suggest that that is an important subject. A number of families rely on grandparents and other family members to provide child care, and it is important that we recognise that. However, I also have sympathy with the view that formal child care settings are important. We need to know that our young children are ready and able to go to school. I am not saying that that cannot happen in an informal child care setting, however. As I have said, it is a question of choice and flexibility.
Let me now turn to new clause 1, which asks the Chancellor to publish a review of the affordability of child care costs. We believe that such a review is unnecessary, because in addition to the actions I have already outlined, the Government announced a new scheme in Budget 2013 to help working parents with their child care costs. I do not know whether the hon. Member for Hackney South and Shoreditch really meant it, but she said that the review would “not tie anyone to anything much”. Actually, that is part of the problem with the proposal. We want to get on and bring in our provisions as soon as possible.
Meg Hillier
What I meant was that the review would not require the Government to act on its findings. However, it would give us all a basis on which to argue about what was best for local people and, I hope, reach consensus. It would not stop the Government doing what they were already doing, but it could open up other opportunities.
Nicky Morgan
I believe that some of those policy issues will come out in the debates that we are going to have on tax-free child care. Rather than postponing our activities while we have yet another review, I want to get on and make progress. I want families to know that we are serious about listening and helping them with child care costs and the availability of places.
We have consulted widely on the detail of the scheme. More than 35,000 responses were received to last year’s consultation, and we have listened to that feedback. On 18 March this year, we published our response to the consultation on tax-free child care. This was welcomed by families and child care providers around the country, and as a result of the consultation, we are rolling out tax-free child care more quickly than had previously been announced. It will be launched in autumn 2015 and rolled out to all eligible families with children under 12 within the first year of the scheme’s operation. That is significantly faster than previously announced, as children under 12 would have gradually qualified for the scheme over a seven-year period.
The Government will also now provide 20% support on child care costs up to £10,000 per year for each child via a new simple online system. The cap had previously been set at £6,000. That means that families could receive up to £2,000 child care support per child—two-thirds more than originally planned.
We expect that tax-free child care will be open to at least twice as many families as the current employer-supported child care scheme. At the same time, we announced that all families eligible for universal credit will benefit from additional support at 85%, rather than just taxpayers as previously consulted on. We have also announced £50 million for an early-years pupil premium to help improve outcomes for the most disadvantaged three and four-year-olds in Government-funded early education. Taken together, the Government’s child care offer will provide flexible support for all eligible working families while maintaining free, universal early education support.
The Government are also taking wider steps to support hard-working families. The income tax personal allowance will rise to £10,000 in 2014-15, and in the Budget we announced a further increase to £10,500 in 2015-16. That is a tax cut for 25 million people. Since 2010, this Government will have taken 3.2 million people on low incomes out of paying income tax altogether. It is worth noting that of that 3.2 million, 56% are women, which is something to be recognised and welcomed.
The Government have also helped local authorities freeze council tax in every year of this Parliament, and we have taken action on fuel duty, saving a typical motorist £680 by 2015-16. The shadow Chief Secretary to the Treasury talked about the fuel duty cut being a theoretical cut. Perhaps he would like to chat to the shadow Economic Secretary who quoted from the Asda Index, which showed that families now have slightly more discretionary income to spend per week, and it attributed that to a fall in motoring costs—[Interruption.] I suggest that the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) read the press release, as it made encouraging reading.
The changes suggested in new clause 1 are unnecessary and would not help hard-working families with the cost of child care. The Government have already reviewed how best to improve child care through the Childcare Commission, which was launched in June 2012. We do not need another review. We need to take action now to support hard-working families, which is why we are supporting parents through tax-free child care and universal credit. More people than ever before will be eligible for that support. We have consulted widely on these changes, and our proposals have been welcomed by families and providers around the country. I therefore request that new clause 1, which was tabled by Opposition Members, be withdrawn.
Catherine McKinnell
This has been a well-considered and well-argued debate, but the essential facts remain. This Government have presided over soaring child care costs and have cut tax credits for thousands of families, meaning that even when their proposed long-grass support is eventually introduced, most families will still be worse off than they were in 2010. Parents and working families need help now, not in 18 months’ time, so I urge hon. Members on both sides of the Committee to back new clause 1, which would secure a review of action that the Government can take to provide the support that hard-pressed families up and down the country so desperately need today.
Question put, That the clause be read a Second time.
Charlotte Leslie (Bristol North West) (Con)
On a point of order, Madam Deputy Speaker. I would like to apologise for failing to inform the Register of Members’ Financial Interests of financial donations to my local Conservative party in a timely fashion. I discovered this in August last year, and immediately acted to register these donations, which were already registered with the Electoral Commission. I have today been alerted to the fact that because of this I have asked three written questions, made my maiden speech and one intervention and asked a Select Committee witness a question, all without declaring a potentially relevant interest. I can confirm, however, that I have in no way personally financially benefited.
Although I am registered dyslexic and sought to put in place additional administrative support as a result, I take complete responsibility for this. I am unspeakably sorry that despite all the efforts that I made as a new MP to get things right, I have nevertheless made this very serious error, and I want to reiterate my heartfelt apologies to the House and have sought the earliest possible opportunity to do so.
Madam Deputy Speaker (Dawn Primarolo)
I thank the hon. Lady for that point of order. It is not a matter for the Chair, but I am sure that the House has heard, and the record will show her comments.
Business without Debate
Madam Deputy Speaker (Dawn Primarolo)
With the leave of the House, we shall take motions 3 to 7 together.
Motion made, and Question put forthwith (Standing Order No. 118 (6)),
Dangerous Drugs
That the draft Misuse of Drugs Act 1971 (Ketamine etc.) (Amendment) Order 2014, which was laid before this House on 5 March, be approved.
County Court
That the draft County Court Remedies Regulations 2014, which were laid before this House on 10 March, be approved.
Local Government
That the draft Durham, Gateshead, Newcastle upon Tyne, North Tyneside, Northumberland, South Tyneside and Sunderland Combined Authority Order 2014, which was laid before this House on 13 March, be approved.
Financial Assistance to Industry
Motion made, and Question put forthwith (Standing Order No. 118 (6), and Order, 31 March),
That this House authorises the Secretary of State to undertake to pay, and to pay by way of financial assistance under section 8 of the Industrial Development Act 1982, in respect of certain British Business Bank programmes, sums exceeding £10 million and up to a cumulative total of £100 million in respect of the Business Angel Co-investment Fund; and sums exceeding £10 million and up to a cumulative £380 million in respect of the Start-Up Loans programme.
Energy
Motion made, and Question put forthwith (Standing Order No. 118 (6)),
That the draft Domestic Renewable Heat Incentive Scheme Regulations 2014, which were laid before this House on 10 March, be approved.—(Mark Lancaster.)
Question agreed to.
European Union Documents
Transparency and Public Trust in Business
(10 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lisa Nandy (Wigan) (Lab)
Six years after the peak of the global financial crisis there should surely no longer be disagreement among any of us that businesses are bound by the same ethical and social responsibilities that bind us all. As the financial crash showed, business transparency is absolutely essential to society. The lack of it in the financial sector in recent years continues to have huge repercussions for people in my town of Wigan, in the UK, and across the world.
We saw in the recent horsemeat scandal that lack of transparency can have major implications for consumers in the UK, but it can have even greater implications for the lives of people across the world, as in the horrific loss of life in Bangladesh with the collapse of the Rana Plaza complex. As business has become increasingly complex, it is very hard for consumers to know, first, whether they can trust the product they are buying, and secondly, whether the business they are supporting is operating ethically. Little wonder, then, that there is increasing public appetite for action. I was surprised to hear recently that the Edelman Trust Barometer found that the public want greater regulation of business by a margin of 4:1.
But it is not just the public who want action; companies and business leaders are also behind the call for higher business standards. The Minister will be aware of the B Team, an alliance of thinkers and business leaders, including Richard Branson and Paul Polman, the chief executive of Unilever, who are calling for a plan B that, in their words, puts
“people and planet alongside profit”.
At the World Economic Forum in Davos, they called for companies to implement the highest standards in their core operations and across their supply chains, including greater transparency as a matter of course and as good business practice.
There is good reason for this. Business needs to command the support of the public, of investors and of shareholders in order to survive and to grow. However, public trust is low. Last year, an Ipsos MORI poll found that only 34% of the people questioned trusted business leaders to tell the truth. We need to see this in context; I would hate to think what they had to say about politicians. Research by Goldman Sachs and KPMG has shown that companies that have implemented responsible business practices such as transparency throughout their operations often lead on stock market performance and attract a wider and more loyal investor base from investors who are increasingly looking at these issues and want to invest in companies that have a long-term, not a short-term, outlook.
There are many examples of business leading the way in this field. As chairperson of the all-party parliamentary group on corporate responsibility, I have been pleased to meet and work with many such business leaders over the past four years. However, the Government need to play their part too, because, as many of these business leaders have told me, operating transparently is not always easy. They do so in the glare of public attention, they sometimes get it wrong, and it is incredibly complicated. Companies are often involved in extremely complex supply chains. That was brought home to me and to the wider public after the Rana Plaza disaster, where some of the multinational companies involved did not even realise at first that they had been contracting from suppliers who were based in the complex. It was only after campaigners and the media got involved that they realised they had been doing so.
Some companies are making efforts to operate to the highest ethical standards in terms of human rights and the environment—and to be open about it—but their problem is that they are in competition with businesses that do not do that. Many such businesses are based in the UK and listed on the London stock exchange, but they face no penalties whatsoever for breaching the standards the Government say they want them to meet. Like so many others, I believe it is time that the playing field was tilted in favour of those that are operating to high ethical standards, not against them.
Jim Shannon (Strangford) (DUP)
I asked the hon. Lady beforehand for permission to intervene on her. Does she agree that greater transparency of who owns and controls companies is necessary and that, in addition to addressing the issues she has mentioned, any new measures must address tax evasion, money laundering and the financing of terror?
Lisa Nandy
That is absolutely right. This goes to the heart of public trust in business, which is about transparency and a commitment to tackling such issues.
The business and human rights action plan was published jointly last September by the Foreign Office and the Department for Business, Innovation and Skills. The UK was one of the first countries to breathe life into the United Nations’ guiding principles on business and human rights. I am proud of that and congratulate Ministers for taking a lead on it. “Good Business” sets out the standards it expects companies to uphold, but so far it does nothing to demand those standards of them. We have had a decade of voluntary corporate social responsibility. Given the experience of the past year and previously—when John Ruggie set out the guiding principles, which were unanimously endorsed by the UN—it is time for the Government to take a more proactive approach.
First, I have been deeply concerned by reports from non-governmental organisations and others that companies have been given conflicting messages by different parts of Government. Although the Foreign Office has consistently warned about the dangers for UK-based companies in knowingly or unknowingly breaching human rights overseas, it appears from anecdotal evidence that BIS has been acting in direct conflict with the commitments made in the action plan.
I want to draw the Minister’s attention to one concrete example where there is evidence of that happening. The Kiobel case was brought by a group of Nigerian activists who claimed that Shell had helped the Nigerian military to systematically torture and kill environmentalists in the 1990s. The cases against Shell were filed under the US alien tort statute, which applies extraterritorially, so it enables non-US plaintiffs to bring claims against foreign companies in the US courts for acts that occur in a third country. Shell challenged that use of the alien tort statute and the UK Government intervened to support the company’s position. The court then ruled in Shell’s favour, which limits the ability of communities in developing countries to challenge corporate malpractice in the US courts in future. The Government’s intervention ran contrary to the commitment made by the Prime Minister to implement the UN guiding principles on business and human rights, which were unanimously endorsed by Governments in 2011.
Will the Minister give an assurance that her Department is completely committed to upholding the principles in the action plan, without qualification, and that it will commit to the same openness in its dealings with business as the Government say they want to see from business itself? In particular, will she ensure that businesses receiving export credit support or development partnership funding have to show that they are meeting the standards of the UN guiding principles?
Secondly, the entire action plan is predicated on the principle of transparency—none of it can be monitored or enforced without it. Nowhere is that more true than in one of the central pillars of John Ruggie’s principles, namely the access to remedy. Without transparency, people whose lives and communities have been destroyed have no effective way of getting justice. As we saw with the South African miners who took a case against Cape plc, companies will often seek to cover the impact of their actions, creating enormous difficulties for communities and their lawyers in gaining the evidence they need to put before the courts.
I must tell the Minister that without transparency requirements, there is no way to prevent such injustices. I recently met representatives of the Afro-Colombian Community Council of Opoca in Colombia. After an 11-year struggle to acquire a collective land title, it was finally granted the right to 73,000 hectares of collective land titles in September 2011, which affected about 17,500 people. They had an 11-year struggle only to discover that a mining concession, covering approximately 55,000 hectares of their ancestral territory, had been granted to AngloGold Ashanti, which is a company registered on the British stock exchange. A proactive duty on companies to disclose information would prevent such harm, while a greater commitment to transparency and—crucially—penalties for those who do not comply is the only way to enable people to access justice.
Finally, I want to tell the Minister:
“To no one will we sell, to no one deny or delay right or justice.”
That principle in Magna Carta has formed the basis of law, liberty and rights in this country for centuries. In this area at least, we are falling well short. Will the Minister commit to improving transparency and access to justice for communities harmed by the actions of British businesses abroad? At present, I and many other hon. Members in the Chamber are approached by so many people who have such a different story to tell. This is an issue of morality, good business and consumer confidence, but above all of national reputation. We should promote not the worst but the best of British business to the world. I look forward to the Minister’s response.
The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott)
I congratulate the hon. Member for Wigan (Lisa Nandy) on securing this very important debate. I completely agree with her about the importance of getting this issue right. As she said, it has very wide repercussions not just in the UK, but in communities across the world. British companies work in so many countries. It is critical to get it right here, because it may have such broad repercussions on thousands, ten of thousands or hundreds of thousands of people. This important subject is not debated enough in the House, so I congratulate her on securing the debate today.
Business should be, and often is, a force for good in society. However, as the hon. Lady highlighted, the financial crisis a few years ago revealed severe shortcomings in corporate governance and caused widespread and understandable loss of trust for many people in relation to not only the financial sector, but business more generally, and we need to tackle that. At the same time, there was a realisation that companies had grown so powerful that their activities could have an impact on even the largest economies. The development of such a situation was a real wake-up call to many Governments.
Among the lessons that we have learned from the financial crisis, I want to highlight three areas on which the Government are taking action, and which relate to the points emphasised by the hon. Lady—greater transparency, accountability to both shareholders and wider society, and businesses and shareholders taking responsibility for the impact of their actions.
Mandatory reporting requirements are the key lever that the Government use to increase transparency. At its best, the narrative section of a company’s annual report allows investors to make informed choices through a proper understanding of the company’s strategy, the risks that it faces and its long-term sustainability. There is also the wider public interest to consider. As I have said, companies can have a significant impact on communities and the natural environment in which they operate. Requiring businesses to report fully and openly is therefore the first essential step towards social responsibility and accountability.
As the hon. Lady highlighted, shareholders have responsibilities as well as rights. As owners of a company, they have a duty to understand its operations and hold the board accountable, which is a very important role for them to play in our economy. That is especially the case for investment companies that place funds on behalf of savers and pensioners who are not in a position to exercise their ownership rights directly. They can be incredibly powerful in their role in influencing the direction of the company and how it operates.
The Government are not just talking about transparency but have taken action to ensure that we see greater transparency. Last October, the Government’s new reporting reforms came into force, increasing the transparency and quality of disclosure by both listed and private companies. The new reporting framework requires companies to set out clearly in their new strategic report how they operate, where they are heading and how they are managing risk.
In addition, we introduced important new reporting requirements in three areas related to the issues that the hon. Lady highlighted. On the environment, companies are now required to report on their greenhouse gas emissions and other environmental impacts. On gender balance, they now need to state the number of men and women on their board, in their senior management team and in the work force as a whole. I know that she has an interest in that issue. Finally, they need to report on human rights issues, which were at the heart of some of the examples that she gave.
Martin Horwood (Cheltenham) (LD)
I commend my hon. Friend on the work that she and her team are doing in the Department. One point that the hon. Member for Wigan (Lisa Nandy) rightly made was that there are still voluntary arrangements in place on human rights and the environment in the supply chain. As the hon. Lady said, the risk of voluntary arrangements is that the best companies comply but those that we want to do better are allowed to get away with competing unfairly with those pursuing best practice.
Jenny Willott
I reassure my hon. Friend that the UK’s requirements already go beyond a lot of the voluntary principles that have been in place. We have agreed in the EU stronger mandatory reporting requirements for large companies to disclose their policies in a number of areas, including in their supply chain, which my hon. Friend highlighted and in which I know the hon. Member for Wigan is interested. That is a huge step in enhancing transparency, and for many member states of the EU it is the first time that they have had such broad requirements. The UK has traditionally been further ahead in mandatory requirements on businesses. I personally feel strongly about the issue, and it was one of the first that I raised in the Department when I took on my role. I will come in a minute, if my hon. Friend the Member for Cheltenham (Martin Horwood) will bear with me, to some of the reasons why I believe there is a driver in the UK economy for businesses to act voluntarily.
The requirement to report on human rights issues is in line with the Government’s implementation of the UN guiding principles on business and human rights, which the hon. Lady highlighted. The first annual reports under the new requirements are just being published, and early signs are encouraging. I am proud that, as I have just said, the UK is leading the way in high-quality company reporting, which will really make a difference. For example, the clothes retailer H&M now not only publishes a list of all its suppliers but sets out the standards and codes of practice that it expects them to meet. Marks and Spencer uses a social enterprise technology provider, Good World Solutions, to gather feedback directly from 22,500 workers in its clothing supply chain in India, Sri Lanka and Bangladesh, ensuring that they can raise concerns without fear of reprisals or discrimination. There are companies in the UK that are doing a significant amount to tackle some of the problems that exist.
As I highlighted to my hon. Friend, we have been negotiating with our EU partners on a related proposal to improve companies’ reporting in general. The EU non-financial reporting proposals have now largely been negotiated and broadly mirror our own regulations, and I hope that they will be adopted before the European parliamentary elections in May. They will start to drive behaviour change in the EU more generally, which will provide more of a common platform for companies operating in the EU. British domestic regulations led the way and have given our companies and shareholders a head start.
Lisa Nandy
As the hon. Member for Cheltenham (Martin Horwood) said, the problem is that although some companies are leading the way, there are also companies that, frankly, are not paying this the blindest bit of notice. Will the Department commit to monitoring the impact of those tougher regulations to see whether they produce the results that we seek, not for those companies that are already doing it but for those that are not?
Jenny Willott
Absolutely. We have the firm basis of mandatory requirements because it is important that companies provide such information. I have mentioned the measures that impose compulsory requirements and, as the hon. Lady said, it is extremely important that those measures are enforced and monitored. However, we cannot change business culture through legislation alone, which is one reason why I actively encourage businesses to go beyond the regulatory requirements and consider what more they can and should be doing.
The hon. Lady highlighted that there is real consumer demand for this approach. There is increasing awareness of the power of the money that we spend in shops and on services, and of the broader impact that that spending can have across the world. Consumers have the power to influence company behaviour. People choose not to purchase clothes that they believe to have been made in a sweatshop and instead spend a bit more money somewhere else, which drives company behaviour too.
The voluntary approach is also important. Last year, we carried out a consultation to assess what Government, business and others should and could do to realise the full benefits of good corporate responsibility. One of the key findings from that consultation was that businesses increasingly see corporate responsibility as a source of competitive advantage because consumers are driving that behaviour. Businesses see corporate responsibility as essential to managing long-term success, which is positive.
Initial reporting of performance was limited, being produced by just a few pioneering companies, but that has now been replaced by more substantial reports with clearer business relevance. There has been huge growth in the number of organisations that are reporting and taking responsibility for the impact of their activities. There is a balance to be struck between ensuring that we have a solid baseline of mandatory reporting with which all companies must comply and encouraging businesses that want to go further. It is good that businesses see reporting as a competitive advantage and that there is a strong business case for reporting because it encourages more businesses to act in that way. Progress has also been driven by the work of international organisations such as the OECD and its guidance for multinational enterprises.
The hon. Lady talked about the business and human rights action plan, and the importance of business impacts on human rights is increasingly recognised, not least through the action plan. As she said, the UK is the first country to publish an implementation plan for the UN guiding principles in this area. The Foreign and Commonwealth Office and the Department for Business, Innovation and Skills are working together to deliver that implementation plan, and I reassure her that BIS is completely committed to the plan and is working closely with the FCO to ensure that we deliver. The implementation plan is important to me and to the Department, and in it we encourage UK companies to adopt due diligence policies to identify, prevent and mitigate risks to human rights, to understand the full extent of their supply chains in the UK and overseas, and to emphasise to businesses the importance of behaviour in their supply chains that is in line with the guiding principles to ensure that we see progress throughout the supply chain.
Supply chain relationships are just one example of where businesses can take positive action that will have a greater impact than UK or even EU regulations. The hon. Lady highlighted how badly things can go wrong with the absolutely shocking example of the Rana Plaza fire. The British public’s awareness of the importance of such action has increased. The business and human rights action plan provides a framework for businesses to engage with their supply chains overseas, and it equips UK companies to give their suppliers both the information they need and the commercial incentive to act in accordance with UN guiding principles, which is important for driving behaviour.
I am proud of the Government’s record on transparency. The UK company reporting framework is proving to be an example to others. When the EU non-financial reporting proposal is finally adopted, we will implement it to improve company reporting still further. Those reforms will need time to prove their worth. We will continue to engage with businesses and civil society in the debate on transparency and reporting, so that we continue to anticipate events rather than react to them. At the same time, we will continue to work with businesses that choose to go beyond regulatory requirements in taking responsibility for the wider impact of their actions, including the activities of their supply chains.
Lisa Nandy
Before the Minister finishes, will she commit to look at export credits? If she cannot answer now, I will be more than happy if she writes to me later.
Jenny Willott
I am happy to write to the hon. Lady on export credits.
I agree with the hon. Lady on access to justice. That is a key plank of the Foreign and Commonwealth Office and Department for Business, Innovation and Skills action plan on human rights. We support access to an effective remedy for victims of human rights abuses involving business enterprises within UK jurisdiction—that is the wording. We are working with the FCO and will report on progress by the autumn. That is an important element of the action plan.
I have asked businesses, business organisations such as the CBI and the British Retail Consortium, and Which?, Business in the Community and other non-governmental organisations and consumer groups to work with BIS to make it easier for businesses to do more and go further, as the hon. Lady highlighted. Together, we will consider what further steps will enable UK businesses to engage with their global supply chains, act on human rights issues and report on the action they are taking to make it more transparent.
The Government remain fully engaged—I hope the hon. Lady is reassured by my commitments this evening—and will continue to take action. I look forward to updating the House on progress later this year.
Question put and agreed to.
Westminster Hall
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Broadband (North of England)
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Andrew Jones (Harrogate and Knaresborough) (Con)
It is a pleasure to serve under your chairmanship this morning, Mr Sanders. As a west country man, you may not fully agree, but I believe that the quality of life that we enjoy in the north of England is higher than that of the south. I recognise, however, that big differences remain between our economies; the north’s lags quite a way behind the south’s. There are many reasons for that, and one of the main ones is our relative lack of infrastructure. We have, historically, described infrastructure in terms of power generation or transport links, but that is an old definition. Broadband is one of the key infrastructures that we need to take advantage of the opportunities of the digital age.
The Government have been right to recognise that broadband matters; they have put significant investment behind it quickly and extended it widely, and brought in private sector capital. They recognised early that the opportunities are so wide that they have an impact on, and improve, many aspects of life. Some of those influences are critical for the future, such as helping with education, telehealth and keeping the economy competitive. There are opportunities to enhance the quality of our lives significantly by keeping in touch with family and friends, and there are things that are simply fun, such as streaming films or gaming. I will highlight a couple of important things relevant to my area: telehealth and business.
Telehealth or telemedicine is a means of using technology for access to expertise whenever it is needed, and for the provision of care. It helps in tackling the challenges of an ageing population and helps people to stay in their own homes. It brings health care into people’s homes or communities, however remote those are. Telehealth is a simple idea, on which we have leadership in the north of England. I have seen an impressive demonstration of telemedicine by doctors from Airedale general hospital, and have seen it in use in the stroke unit at Harrogate district hospital, where the clinicians can access the best stroke care remotely. A good, fast internet connection is needed for that, which means superfast broadband. Telemedicine is part of the future, and it is fantastic.
In the world of business, which was my background before I became a Member of Parliament, people must be accessible to their customers, and that now includes web access. Different parts of the north have strengths in different sectors, and I am sure that other hon. Members will focus on the ones relevant to their areas. Two with scale in North Yorkshire are the visitor economy and agriculture.
Last week was English tourism week, and as part of that I visited several tourism facilities in my constituency, including the Bijou Boutique bed and breakfast in Harrogate. The proprietors, Stephen and Jill Watson, talked to me about the large proportion of their customers who find out about them online and book online. Managing their online presence is critical so that more customers will be able to learn what their business has to offer. That is particularly true for our area, where so much of the economy is driven by visitors.
A highlight this year will be when we host the grand départ of the Tour de France. It is only 90 or so days away, and Yorkshire will become a huge visitor and media attraction. Superfast North Yorkshire has responded by enabling communities along the route to get broadband. The roll-out may not be completed before the tour arrives, but at least it has listened, responded and made progress.
Superfast broadband is not just about reaching customers, and enabling them to reach businesses in turn. It drives business efficiency, helps with access to purchasing deals and takes cost and bureaucracy out of the business. We can see that in the agricultural sector, where some regulatory matters require an online presence. For example, the online cattle tracing system and dealing with the Rural Payments Agency require connectivity. Government is going online. Businesses with a turnover of more than £100,000 must fill in their VAT returns online; there is no choice. That catches many farmers and rural businesses, and it is not easy to do that through a slow dial-up facility.
Kate Green (Stretford and Urmston) (Lab)
I congratulate the hon. Gentleman on securing a debate on a subject of great importance both to his constituents, who live in a rural setting, and to businesses on the largest industrial estate in Europe—Trafford Park, in my constituency. Does he agree that although those businesses may have very different characteristics, they all share an urgent need for superfast broadband connection, to maximise business potential?
Andrew Jones
Yes, I strongly agree with that argument. I do not think that the scale or sector of a business, or the geography, really matter. The point about broadband is the ability to get access to customers all over the world. We need it, and quickly. The hon. Lady’s point is absolutely correct. For a rural business, dialling up on a slow landline that other family members might also use is incredibly slow going. Businesses without connectivity are being left behind, which is why good, reliable superfast broadband matters.
I want to share with the House one of the successful lessons of the North Yorkshire roll-out. North Yorkshire will shortly become the best connected county in the country, because our delivery vehicle was already in place as the Government launched their broadband strategy. That vehicle was a company started previously by North Yorkshire county council, called NYnet. NYnet has done extremely well, and deserves congratulations and praise from across the county. Being in a position to start promptly and knowing where some of the challenges would lie made a difference. North Yorkshire was the first county in the country to award its roll-out contract. The roll-out has been going at the rate of about 6,000 to 7,000 properties per month, which is a good rate. I checked the latest data and at the end of last week 102,402 properties had been enabled to receive superfast broadband of at least 25 megabits per second.
Just having the capacity, however, is not enough. People have to choose it. Take-up is running at 16.2 %, and rising sharply. Superfast North Yorkshire expects to reach 20% take-up by summer, and 30% by the middle of next year. That is significant as those rates of take-up also trigger clawback elements in the contract, so the roll-out provider—in this case, British Telecom—will have to pay money back to NYnet. It will be able to use that for reinvestment to roll out broadband to remaining properties, perhaps as match funding for Government schemes. The lesson from the roll-out is that the importance really lies in demand stimulation for both residential and business customers.
In North Yorkshire, significant business support and training have been on offer. There have been local conferences at Ripon racecourse and Fountains abbey, ably organised by my hon. Friend the Member for Skipton and Ripon (Julian Smith); my hon. Friend the Member for York Outer (Julian Sturdy) came to speak. We encouraged business and communities to get involved. There has been good business follow-up and more than 900 businesses have been helped.
I saw for myself how Superfast North Yorkshire has been operating when I attended the launch of the service in Boroughbridge in my constituency. I thought that it was good marketing, and I come from a marketing background. It was 6 December last year. We had a roadshow, involving the local school, the local mayor, local businesses, Father Christmas, of course, and some Christmas carols, Christmas punch and Christmas cake. It was a very Christmas-themed event. We also had a giant mouse, which I used for a ceremonial switching on of the service, and, to communicate that the service was available, a fibre-optic Christmas tree lit up to symbolise it. Basically, everything added up to show that something had happened—something new, fun and for everyone. I have been informed by the local community that the take-up in Boroughbridge has been high.
Julian Sturdy (York Outer) (Con)
I congratulate my hon. Friend on securing this important debate. He is absolutely right to praise the work of Superfast North Yorkshire and what it has done so far in the roll-out of superfast broadband across North Yorkshire and York. I am pleased to hear about the success in Boroughbridge, but does he not agree that the key stage to reach now is that next 10%? There are not-spot communities throughout my constituency and North Yorkshire, and Askham Bryan, Askham Richard, Hessay and Acaster Malbis, all in my patch, are part of the not-spot area. Is it not right to help those communities in the last 10% to bridge the digital divide, which means looking at how we can enhance new technologies to reach them? That is the key point—getting to those communities—and it will not always be done through fibre to the cabinet.
Andrew Jones
My hon. Friend is as wise as ever, and I strongly agree with him. I am about to deal with those points so, if he will forgive me, I will not address them now.
The question now is about looking ahead. I want to share a couple of points with my hon. Friend the Minister. We need to be vigilant so that one provider does not develop any kind of monopoly abuse—although we are not there yet, and I have seen no evidence of such abuse in my county. As a Conservative, I believe in the merits of competition to bring choice, value and innovation, and I know that the issue is already on the Minister’s radar.
I want to focus on the point made by my hon. Friend the Member for York Outer: how to give the opportunity of broadband to all homes, taking the figure from 90% to 100%. This year, my home county of North Yorkshire has roll-out phase 2 to take us to 93%. Phase 3 is planned for 2015, which will take us further. In that phase, the quest and challenge will probably move from being financial to being about decisions on the delivery method, which may have to change for the isolated homes and hamlets that are a feature of our rural areas. Satellite, wireless or other new technologies are likely to be used away from the cabling roll-out that we have seen thus far. That is urgent and important. I want people in the villages of Lower Dunsforth or Nidd in my constituency and those throughout the north who are missing out on the opportunities of broadband to be connected, so that they have opportunities to drive their businesses and to get all the benefits that broadband brings.
Superfast North Yorkshire has told me that it expects to hit 100% by 2017, which would be extremely positive, so I want to say two things to the Minister. First, and perhaps most importantly, is simply that we should press on, and quickly. Those doing the roll-out must be held accountable for the speed of progress. It is not great that some counties seem to be only just starting the sprint when North Yorkshire is approaching the finish line. That is a competitive advantage for North Yorkshire—not something I worry about normally, but from the perspective of UK plc, we need everyone to be there. Whatever the blockages, constraints or capacity problems might be, they need to be removed.
Secondly, will the Minister work with colleagues to promote business training? I have read that the benefits of the UK’s becoming a world-leading digital economy are measured in tens of billions of pounds, but only half of small and medium-sized enterprises have a website. That presents a huge opportunity, but training will be required for people to take up or even recognise it, because I have also read that many companies do not think that it is relevant to their business.
Finally, I thank the Department for Culture, Media and Sport team for putting North Yorkshire at the heart of the first phase of the roll-out. As a team of North Yorkshire MPs, we pitched for our county’s inclusion in the roll-out. It was one of the first things we did as a team after arriving in Parliament, and we were delighted to be successful. The reason why we were included was our ability to have a delivery vehicle, in the form of NYnet. That proved to be a wise decision, as we are now leading the country in this area.
The North Yorkshire team grasped the opportunity and many lives in our county are better for it. Broadband roll-out is a key part of dealing with the north-south economic divide that I mentioned at the start of my speech. We are still fighting the battle for more infrastructure in the north as a whole, and I think we are winning that battle, but for broadband it has been well and truly won.
Eric Ollerenshaw (Lancaster and Fleetwood) (Con)
It is a pleasure to serve under your chairmanship, Mr Sanders, and to be able to speak in this debate to balance the Yorkshire impact from Lancashire. I congratulate my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones). Even though he comes from Yorkshire, he makes a good case.
First, I put on record my belief that the Government’s roll-out of superfast broadband has the potential to transform the rural economy and in particular the nature and future of our rural villages. In simple terms, villages in my area of the north-west, as in many parts of the country, have suffered the loss of shops and businesses to more urban areas, to the extent that many have now in effect become dormitory housing for the nearest big towns, retirement villages, or a combination of both. I will not rub it in, but in the last year of the previous Government, we lost six rural post offices, which were virtually the last shops in the villages concerned. My village schools, however, have gone from strength to strength, simply because of the high quality of the education, and they are now attracting pupils back from the urban areas. I am grateful to the Government, which only recently introduced funding protections for those small schools. As my hon. Friend laid out, the broadband programme has the potential to reverse that rural decline and to bring back what I call “live” villages, where businesses operate and activity returns in the daytime. Where villages have been hooked up, there is clear evidence of businesses wanting to get back into and operate in them.
It is great that the Government have now decided to add to the pot of money to achieve even wider superfast broadband coverage—we hope to 97% of such areas. It is so transformational that it will have an impact on regional imbalance and the so-called north-south divide, giving a chance for regional and rural business to compete with the best down south without relocating. That is a key plus. Originally in my area, it was clear that the contracts would cover only 93%, and it seemed unlikely that coverage would get up into the villages in the hills above Lancaster, in the trough of Bowland and the Lune valley. There would therefore be a problem about what was happening in the low land and what was happening in the high land. It also seemed likely, given what we have seen throughout the country, that BT would yet again win the contract, and BT could not guarantee either that it would cover every property in an area or the speed—it was only in terms of average speeds.
As a result, a local community group got going in my area, led by Professor Barry Forde, formerly a professor at Lancaster university, and ably supported by some keen enthusiasts such as Chris Condor and Martyn Dews. They put together a social enterprise company to reach the areas that could not be reached. It offered to lay fibre to every single household in the areas for which it got responsibility, leaving no one out. On top of that, it guaranteed 1 gigabit of speed to every single household, which BT could not do. There were various negotiations with the county, but the company was allowed to experiment. I have to put it on the record that at the beginning even I was wondering whether it could manage all that. The whole purpose of the social enterprise was that the costs would not be the same as for BT because farmers would lay cables across their land without the need to obtain wayleaves and in return would receive superfast speed without having to pay the same rental charge because they had allowed their land to be dug to lay the fibre.
There were questions about whether there would be problems in certain areas and whether people would be involved and buy shares in the social enterprise. Interestingly, three or four years down the line, the enterprise has happened. It is called broadband for the rural north—B4RN—and the indication was that the outline plan could cover 3,500 households in the hills above Lancaster, although there was some dispute about that. It applied to the rural communities broadband fund, but unfortunately Lancaster district council had already applied with Lancashire county council, and the contract for most of the county went to BT. The county council and district council wanted to cover the largest possible part of Lancashire so it is understandable that most of the grant went into the big pot.
BT obtained the major contract, and B4RN dug its way across the hills, but BT then refused to say which 3% of the region would not be covered by its network. That forced B4RN to lodge a complaint with the European Commission about Lancashire county council’s use of state aid, and delayed matters even further. B4RN agreed to drop its complaint if the county council would protect B4RN’s postcode areas from BT’s rival scheme. It then seemed that B4RN could get moving, and Arkholme, Quernmore, Abbeystead and the hamlets of Littledale and Roeburndale are now wired up with 1 gigabit to every house and farm and no one is left out.
That is a demonstration of the big society, but there were frustrations along the way. For example, it was necessary to take a cable across one of Network Rail’s bridges, which carried an average of six trains a day. We got Network Rail down to show it that the fibre cable would lie on the bank, which was nearly 12 feet—I still use imperial measurements—from the railway line. Would Network Rail agree to that? Unfortunately it would not, because it might set a precedent and there would have to be rental to the community project. Failure to obtain Network Rail’s agreement added to costs because B4RN had to drill under the ground. That community group was strong and just kept going when such obstacles arose.
I, the local MP, B4RN, the community group, and most people in that part of Lancashire still do not have a map of which areas BT will or will not cover. B4RN put Abbeystead and Quernmore villages, which are on my patch, on to cable, but in between is another village, Dolphinholme, which has 181 inhabitants. B4RN had to take cable through it because it is between Abbeystead and Quernmore. However, out of the blue, BT suddenly started to fibre up Dolphinholme, a tiny village in the hills. However, it decided that one of my biggest villages in the lowland, Glasson Dock, will not be fibred up to receive superfast broadband, yet it can provide it to a tiny village in the hills, miles away from anywhere, which just happens to be next to the community group’s project.
I found out only this week that on the other side of the community group’s project at Wennington in the hills, BT is offering to pay farmers £4.50 or £5.50 a metre to lay its fibre cable across their land. B4RN, of course, cannot offer money. It can only offer a return to the community group. B4RN tried to obtain a map from BT, but I am now being contacted by constituents in my biggest urban area, the city of Lancaster, asking when they will have superfast broadband. The hon. Member for Stretford and Urmston (Kate Green) referred to a business park. I have a business park in my constituency, the White Cross estate. It is supposed to be a start-up area for new businesses, but BT has not provided it with superfast broadband, yet it has taken it up into the hills next to a community group.
What is going on? I am a Conservative and I believe in competition. BT is receiving Government grant, but B4RN receives no grant and is a community effort with community money. It seems to everyone in B4RN’s area that BT is using its strength to surround and hem in the only existing tiny piece of competition in the great county of Lancashire. There are serious questions about what is going on. The community group is struggling. It does not have the time to go to law because it is digging to put in fibre and running it into people’s homes, and it is training people to use superfast broadband’s potential. Businesses ask me where B4RN is going with 1 gigabit speed because they want to relocate into that area. High-tech companies want to relocate to the highest and most rural part of my constituency to have access to speed that is not available in any major town in this country, but BT seems determined to hem in that little bit of competition.
The remaining roll-out is critical to the north and my rural areas. Will the Minister ask his Department to take a serious look at BT’s behaviour in north-west Lancashire and provide what help it can to the big society and community groups that are doing their best to provide 1 gigabit speed to every household, which BT cannot even dream of doing? I have recently had meetings with BT, which has promised to provide maps of where its network will be, but I have still not received them. Even when it covers an area, it will not guarantee that every household there will be linked up to its boxes and receive high speed.
BT is taking the edge off a fundamentally successful Government project and it should be straightforward to sort it out. It involves 2,500 households that BT may not be able to link into, but it seems to have won the contract in every part of the country. My request to the Minister is that he has a serious look at what is going on before someone takes what is happening in north-west Lancashire—the matter went to the European Commission—to the new competition authority and asks what is going on with Government funding.
Helen Goodman (Bishop Auckland) (Lab)
It is a pleasure to serve under your chairmanship this morning, Mr Sanders. I congratulate the hon. Member for Harrogate and Knaresborough (Andrew Jones) on securing this important debate. He made an excellent speech, and I want to pick up some of his points and perhaps embroider them a bit.
I know from my constituency in rural County Durham how true the hon. Gentleman’s comments are. Furthermore, it is right that he raised the issue of broadband roll-out for the whole of the north of England. I do not hold out much hope that the Government will pay significant attention to the north of England or to building infrastructure there. We have seen a repeated pattern of capital projects that are very significantly well funded in the south but not in the north. That is borne out by the map that Ofcom produced, which shows the overall performance in different counties of the broadband roll-out. There is a central belt of London, the south and the west midlands, where things are looking quite healthy, but in your area of the south-west, Mr Sanders, things are not good, and things are certainly not looking at all good in the north of England. I am grateful to the hon. Gentleman for drawing that to my attention.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr Edward Vaizey)
Cornwall is widely regarded as having the best superfast broadband in Europe. As my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) pointed out, North Yorkshire was the first place to start the rural broadband roll-out.
Helen Goodman
All I can say to the Minister is that he should look at the map produced by Ofcom. I am sure that he will quote Ofcom’s report back to the Chamber in a minute, but he should look at that map, because it also shows significantly worse performance of the broadband roll-out.
The points that the hon. Member for Harrogate and Knaresborough made about the rural economy were absolutely spot on. Indeed, I would say that roll-out of broadband is even more important in rural areas than in urban areas, because for businesses in rural areas, transport accounts for a very high proportion of their costs and without broadband connectivity, they can do little to bring down those costs, so securing effective roll-out in rural areas is particularly important.
I agree entirely with the hon. Gentleman’s complaints about the treatment of farmers and other small businesses by the public sector under this Government. It is completely disgraceful that farmers are expected to record their cattle movements online, that they have to deal with the Rural Payments Agency online, and that they have to upload their tax returns—their VAT returns—online, when they simply cannot do it. I find it astonishing that the Government think that is an appropriate way to treat farmers and rural businesses.
Andrew Jones
I thank the hon. Lady for her warm comments, but I do not think the Government are saying that it is acceptable. I think they are saying, “We know this matters and we are trying to roll it out.” The points I was making were a bit on the more positive side than she is suggesting. The problems did not just start in 2010; this has been a gradual growth of the digital economy and the opportunities it presents. The point I am trying to make is that we need to grab it. The Government have done well to grab it and we just need more of it.
Just as a further point—
Helen Goodman
I have two criticisms: one is of the way in which broadband has been rolled out; the other is of the behaviour of the Department for Environment, Food and Rural Affairs and Her Majesty’s Revenue and Customs, because they are now demanding that people deal with them solely online. That is a new development under this Government. The Government are encouraging them—in fact, instructing them—to deal solely with the citizen online. In the first-tier tribunal, for example, the tribunal judge ruled that the requirement to submit VAT returns online and the failure to take into account a person’s ability to comply on grounds of computer literacy, age, or the remoteness of location was a breach of the European convention on human rights. We need to see a change in the Government’s attitude on that.
There is an overall problem and it is twofold. The Government prioritised speed over access. When we left office, we had laid out a plan for securing universal broadband roll-out by 2012. The Government abandoned it and set out twin objectives in 2011. They were the provision of a superfast broadband network to 90% of the population by 2015 and the ability of every household to receive at least 2 megabytes download speed by 2015. Both those targets will be missed by the Government and the target is now to reach 95% of the population by 2017.
What the Government did was invest a large amount of money, for example, in the super-connected cities programme, instead of prioritising the roll-out to the rural areas. The super-connected cities programme produced a legal challenge. What the Government did was highly controversial.
Julian Sturdy
Does the hon. Lady not agree that the UK has the highest uptake of superfast broadband across the whole of the EU? Superfast North Yorkshire is a prime example of a beacon of success, showing how to deliver superfast broadband across the north and in rural areas. The issue with rural areas, of course, is their rurality, which makes it hard to bridge that last bit. That is why we need the investment in new technologies, which is what the Government are doing.
Helen Goodman
I am sorry to tell the hon. Gentleman that the Government have put a large amount of money into the super-connected cities programme—it ran into a rural challenge in Europe—instead of putting money into and prioritising rural areas such as his constituency and mine. I wish that what he is saying was true, but it is not. Will the Minister tell us in his winding-up speech what the spend in the super-connected cities programme is? It had a mammoth underspend a year ago and we have not had an update from him on the precise profile of what is going on with that programme, which I think is an extremely important point.
Twice the Government have been criticised by the Public Accounts Committee for their roll-out of broadband. All hon. Members and all Departments should take seriously criticisms that come from that Committee. Last July, it pointed out that the broadband delivery programme will be 22 months late and that the programme, because of the way in which the contracts have been set up and the geographical areas have been designed, was not promoting market competition.
As the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) pointed out, British Telecom now has even greater dominance in this area than it had previously. It is expected to win all 44 contracts being put out to tender by local authorities. The Public Accounts Committee also cast doubt on the transparency of the costs in BT’s bids and said that because there was a lack of transparency in the process and in the bids, it was impossible to tell whether we have achieved value for money. That is before we move on to the questions that have been raised not only by the hon. Gentleman, but by other hon. Members in the House about the behaviour in specific small locations.
This is not a success story; it is a story of promise and disappointment. The Minister admits that contracts are now being signed with late delivery dates. He has moved the goalposts on several occasions.
Helen Goodman
Perhaps the Minister is going to move the goalposts again now.
Helen Goodman
Well, at the time when the objective was to reach universal access by 2015, the Minister said that he was signing contracts with delivery dates of 2016. He then shifted the goalposts and announced a target of 95% roll-out by 2017 and 99% roll-out by 2018.
Furthermore, the Chief Secretary to the Treasury announced last summer a £250 million spend on rural broadband. We have asked—we have not been given an answer—why this was cut from the £300 million that the Government are top-slicing from the BBC licence fee to put into rural broadband. Where is this £50 million going? Why is it not being used to prioritise the needs of rural areas and, in particular, the north of England, to which Government Members have referred?
There was a second report from the Public Accounts Committee in March 2014. It was not satisfied with the initial response from the Department and made further criticisms and further recommendations to the Department. I hope very much that the Minister will be able to tell us what the Government are doing about those recommendations.
First, the Committee raised the issue of a lack of information about not spots—precisely the point raised by the hon. Member for Lancaster and Fleetwood—and a lack of information about areas to which the rural broadband programme would not reach. The Committee said:
“The Department should work urgently with all local authorities to publish detailed mapping of their implementation plans, enabling searches down to full (7-digit) postcode level. The information should include speed of service, as soon as that is available.”
I hope that we will hear from the Minister on that.
Secondly, the Committee found that the Department had failed to act on its recommendation to secure a higher standard of cost transparency before the remaining contracts were signed. It had recommended that the Department
“collect, analyse and publish costs data on deployment costs in the current programme, to inform its consideration of bids from suppliers under the next round of funding.”
I hope that the Minister will tell us what he is doing about that.
Thirdly, the Committee reiterated its previous conclusion that the Department’s procurement approach failed to deliver meaningful competition. This was the recommendation:
“Before the next round of funding is released, the Department should work with local authorities to identify opportunities to promote competition and value for money; including considering alternative solutions, joint working and fair capital contributions from suppliers.”
I hope that we are going to hear from the Minister about that as well.
Helen Goodman
The Minister can say that in his winding-up speech, so that it is fully audible and on the record for Hansard and the great British public.
The Department has committed another £250 million to spend beyond 2015 and it is working on the assumption that, as in the first round, when it was spending £530 million of central Government money, that will be matched by local authorities, but I want to ask the Minister how realistic he thinks that is, following the very tight squeeze that has been put on local authority spending by his colleagues in the Department for Communities and Local Government, whether he thinks that it is still a realistic expectation, and what he will do if the local authorities find that they are not all as well resourced as North Yorkshire, which has clearly done a very good job for its local businesses, its farmers and its citizens.
The plain fact is that the north of England is particularly badly served. For example, in North Lincolnshire, superfast broadband availability is only 54%. In Lincolnshire, it is 49%. In the East Riding of Yorkshire, it is only 21%. In Cumbria, it is only 26%. These are serious problems. They are raised by our constituents and by the Country Land and Business Association and they are absolutely clear to everyone who is not sitting in the Whitehall Department, the Department for Culture, Media and Sport.
The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr Edward Vaizey)
It is a great pleasure to serve under your chairmanship, Mr Sanders, and to respond to this important debate, called by my hon. Friend the Member for Harrogate and Knaresborough. I am delighted that he is happy with our programme. It is always a great pleasure when one of the asks from someone introducing a debate is for us to keep on doing what we are already doing so successfully, but that is not to say that I will not take into account the other serious points that he made. I also thank my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) for his contribution, which was perhaps more of a critique than that of my hon. Friend the Member for Harrogate and Knaresborough.
Let me begin by giving an overview of the national programme. I have to say, without wishing to attract too much opprobrium, that as far as our programme is concerned, my glass is very much half full, as opposed to half empty. The Government came into office in 2010 determined to do something about the digital divide—determined to bring broadband to millions of homes that were not going to get it under a commercial deal. Let me explain that BT itself has delivered superfast broadband to something like two thirds of British homes commercially, without a penny of taxpayers’ money. In addition, its main competitor, Virgin Media, delivers very fast broadband to millions of homes—it covers about 50% of the country—without a penny of taxpayers’ money.
However, we are talking today about delivering broadband to areas where commercial companies simply will not go, because they would not get a return on their investment. That applies not just to BT, but to Virgin and any other competitors. We therefore put £530 million on the table. That is not an insubstantial sum and it has been matched by local authorities. It has also been contributed to by BT, which is putting its own money into this programme; it is not simply taking all the taxpayers’ money and spending it without any contribution of its own.
BT expects a return on its investment in about 14 or 15 years. This is not a get-rich-quick scheme from BT. It is true that it has won every contract. We went into partnership with local authorities, because we thought that local authorities were best placed to help to co-deliver this programme with us. They would know the best places to go and be able to do the joining up on the ground, particularly in relation to planning.
On the commercial roll-out, we have had numerous cases in which BT and others have wanted to go where local authorities simply were not prepared to give planning permission for the cabinets, so to have the planning, the power and the local co-ordination on board was going to make a difference. I think that it does make a difference.
When we put together the original framework contract, we had nine potential competitors lining up against BT, but most of them dropped out. At the end, when the first contracts were being let, there was a significant competitor—a consortium led by Fujitsu—but it did not beat BT on those contracts and it has now fallen away, although it provided useful competition.
Why did those people drop away? If Virgin Media, for example, already has 50% of the market, in terms of footprint, why did it not compete? The reason is state aid rules. State aid rules require that if people accept public money, they have to accept certain obligations, and the obligation that lies on BT as it rolls out this network is that it must provide access to any other retail telecoms provider. In shorthand, that is, for most consumers, TalkTalk or Sky, which are the most well known providers, but obviously there are numerous others as well. If people compare our market with any similar market in Europe or elsewhere, they will see that BT, as the incumbent operator, the former nationalised state monopoly, has the lowest market share of any incumbent operator. People can compare with Deutsche Telekom, France Télécom and so on—BT has the lowest market share.
We recently overtook Germany in broadband roll-out. We now have more availability and take-up of superfast broadband than Germany—and, in fact, all the other major European economies. The reason is that we have competition as well; we have not only the infrastructure, but competition, which keeps prices down. People can look across at America. There, they will pay twice as much as they will here to get the same broadband. That is because BT is regulated by Ofcom. Retail providers’ access to BT’s network is, and will continue to be, regulated. When BT builds out under the rural broadband programme, the customer will not be obliged to take a BT service. They can take a service from TalkTalk, Sky or any other retail provider that uses the network.
I happen to think that the rural broadband programme is going very well, and the Chancellor agrees with me, because he put in an extra £250 million. We are accused of moving the goalposts, but that is not the case at all. We have a £530 million programme, which is actually some £1.2 billion when local authority and BT money is taken into account, to bring superfast broadband, by which we mean about 24 megabits a second, to 90% of British homes. We want to go further, so we have found another £250 million. With match funding, which we expect most councils to be able to provide, we expect that 95% of British homes should get superfast broadband by the end of 2017.
Finally, there are the remaining 5% of homes, such as the isolated farmhouse or the house in the middle of a moor, which could cost thousands and thousands of pounds to connect up to superfast broadband. We could do a rough, back-of-the-envelope calculation of that cost, and we might end up with a figure of £1 billion or even £2 billion. We do not want to do such a calculation; we want to try out different technologies and see what will be effective. We have set up a £10 million fund, for which we have asked people to bid, to trial the latest and newest technologies that might bring down the cost of reaching the final 5% in the hardest-to-reach areas.
Jason McCartney (Colne Valley) (Con)
I think the Minister is describing my constituency. Milnsbridge and Slaithwaite have already benefited from the BT fibre broadband roll-out, which is fantastic. Villages such as Hade Edge, Marsden and Holme, which have been isolated by heavy snowfalls in recent years, are, we hope, on track to get the broadband that they need. The Minister’s statistics are absolutely right. We have a broadband take-up of 83%—one of the highest in Europe. I believe that we are on the right track, and it is great to hear his plans for our rural communities.
Mr Vaizey
I thank my hon. Friend for that intervention. Although some of us may disagree about the detail of the Government’s plans, we are all united in understanding the importance of broadband, and we are doing our very best. Believe me, if I could wave a magic wand tomorrow and deliver superfast broadband to every home in the country, I would, but it is an engineering project and cannot be done overnight.
We are hitting our targets. Let me explain that we measure superfast broadband homes passed on the basis of those who actually receive it. So it is not about simply putting up a cabinet and saying, “That is delivering superfast broadband to 2,000 homes,” because some of the homes in that cabinet area might be 1 km away and not get such speeds. We audit every quarter, and we estimate that by the end of February we had passed 370,000 homes with superfast broadband. We are well on track to get into seven figures some time this year. We were passing 10,000 homes a week and we are now on track to pass 40,000 homes a week, so the programme is accelerating all the time.
North Yorkshire is a brilliant example of how well a programme can be run when there is a go-ahead local council with a real appetite for it and it works very well. As I understand it, there are now 118 live cabinets in the constituency of my hon. Friend the Member for Harrogate and Knaresborough, which serve almost 34,000 premises. In North Yorkshire, we have met all seven of our time and deployment target milestones. We have deployed 462 cabinets out of an overall programme of 673, and more than 120,000 premises have been passed, 100,000 of which receive superfast broadband. We also have significant take-up. My understanding is that the average take-up is some 20%, with two cabinets exceeding 30% take- up. In the next phase, we expect to reach another 17,000 premises under the superfast extension programme. Those programmes are going well.
Another area that has been mentioned is Lancashire, which is receiving £10 million under the broadband delivery UK programme. We are aiming for 95% superfast coverage under the existing programme. In North and North-East Lincolnshire, we are aiming for 90% coverage and targeting almost 40,000 premises. It would be a travesty to say that we have forgotten the north of England; nothing could be further from the truth.
The hon. Member for Bishop Auckland (Helen Goodman) mentioned the super-connected cities programme, which is separate from our rural broadband programme. It is perfectly possible for the Government to run two programmes at the same time. We set aside £150 million for the super-connected cities programme, which is designed to help our small and medium-sized enterprises to connect to superfast broadband. At the most recent party conference in Manchester, I was lucky enough to visit a local business that had received superfast broadband through the scheme, and to visit a business broadband provider that had benefited from selling connection vouchers to businesses and developing an ongoing relationship with them. We estimate that up to 30,000 small businesses will benefit from the programme, and it is well on track. Another important aspect of the programme is the support it provides for public and community wi-fi, which we are installing in 21 areas and which will benefit, for example, libraries, museums and art galleries.
Helen Goodman
Before the Minister moves on, would he care to tell us how much of the £150 million set aside for the super-connected cities programme he expects to have been spent by this time next year?
Mr Vaizey
We expect to spend a substantial proportion of it. We want cities and councils to work with local businesses and encourage them to take up the money. I am not one to oppose underspend in a Government programme, but the money is available if businesses want to use it. We will not spend money for the sake of it, however.
My hon. Friend the Member for Lancaster and Fleetwood raised B4RN and asked whether he could get a map of Lancashire. We strongly support rural community broadband schemes. At the outset of the programme, we put aside £10 million from the BDUK money and £10 million from the Department for Environment, Food and Rural Affairs to create a £20 million fund to support community broadband schemes. There is a reason why it can be difficult to get such schemes off the ground, because we are dealing with state aid and a complicated process for accessing public money in compliance with Commission guidelines. I am confident that we are ready to help when problems arise, however.
My understanding is that Superfast Lancashire, which is responsible for delivering the programme, is in discussions with B4RN about the footprint where it wants to bring its community network. Superfast Lancashire is also in discussions with BT about how BT can accommodate B4RN’s commercial desires. Nobody is trying to stop B4RN doing what it is doing. My understanding—my hon. Friend may correct me if I am wrong—is that Dolphinholme, the village that he mentioned, was part of the contract with Lancashire when it was signed, and Lancashire county council decided where that broadband should go.
Mr Vaizey
Before my hon. Friend responds to that point, if that is what he wants to do, it is important to stress as a matter of principle that the broadband roll-out is dictated by the county council. Obviously, it is done in association with BT, because BT will make recommendations to the county council about where it is cheapest to go and where it will get more effective spend for its money, but the county council is in charge. It is also in charge of the map, and there is one on the Superfast Lancashire site that shows, broadly speaking, where broadband is due to be delivered.
Eric Ollerenshaw
I thank my hon. Friend for giving way. He is right to say “broadly speaking”, because the map does not tell me which villages are in or out. I said that there was some confusion right at the beginning, on both sides, about Dolphinholme’s position in the original agreements, but it has only 181 inhabitants. It is right in the hills between the villages that B4RN is covering.
Does the Minister agree that it seems remarkably odd that a company as large as BT should suddenly move into that village in the hills, when it is saying that other villages—Glasson Dock, for example—and other parts of the Lancaster urban area are still waiting for connectivity? Why should BT suddenly concentrate on that particular area? That is what questions are being asked about. I will repeat myself: I would prefer a much more detailed map.
Mr Vaizey
I must say to my hon. Friend that my understanding was that Lancashire county council decided that Dolphinholme should get superfast broadband, so that is a matter for Lancashire county council. If I am wrong about that, I will apologise. I will double-check that with the county council and get back to my hon. Friend, but that is my understanding.
As far as the map is concerned, we are dealing with expectation management, if I can put it that way. I do not think that BT has made any attempt to stay under the radar to ambush local community providers. The local authority is in charge of the map, and there is nothing to stop it publishing a map, however detailed. It is also in charge of expectation management. When on the ground delivering broadband, circumstances can change. When the van and tools arrive in a particular area, it might turn out that it is going to be three times more expensive than expected. Another area might turn out to be twice as easy as expected.
If someone told a Mr Ollerenshaw, for example, that he was going to get superfast broadband in September 2014, but they then discovered either that that was not going to be economical and they were going to go somewhere else or that he was not going to get it until March 2015, they would have to manage his expectations. It is true that the Superfast Lancashire map gives some details, saying, “We are currently mapping this area and looking to come here”, but it does not give every single address, and it allows people to know when they are going to get superfast broadband only once the roll-out has been started in a particular area. I understand that people can type in their postcode or telephone number.
Helen Goodman
Is the Minister saying that he is going to ignore the Public Accounts Committee’s recommendation in its March 2014 report and just hand responsibility for maps over to local authorities?
Mr Vaizey
It is not a question of handing over responsibility for the maps to local authorities; they are our partners in delivery and we respect their right to manage their local broadband roll-out plans. We provided the framework contract, which means that local authorities do not have to reinvent the wheel when negotiating a contract with a broadband provider. We provide the money, which they use in partnership with us, and they are the ones on the ground delivering broadband. Although I would like to take a lot of the credit for the success of the broadband programme, it is important that North Yorkshire, Lancashire and other county councils across the north of England also take credit for the excellent job that they have done on delivery.
The hon. Member for Bishop Auckland keeps saying that the north is forgotten, but I well remember my recent visit to Durham, where Digital Durham is showing that that is a fantastic local authority with a huge hunger to deliver superfast broadband to its residents.
Eric Ollerenshaw
I thank my hon. Friend for giving way a second time. No one is questioning BT having won all these contracts, but I do not think that there is another historical example in local government of one company winning every single contract in every single local authority. Does that not suggest that we might need a new mechanism for comparing BT’s performance in one area with its performance in another? It is currently impossible to make such a comparison. The Minister says that the maps are the responsibility of the local authority, but the local authority has a contract with BT, as does the neighbouring local authority and the one after that. Who is going to manage BT’s performance? It seems to be becoming a sole provider.
Mr Vaizey
We are managing BT’s performance in the sense that BDUK audits what it is doing. It is important to stress that, for example, BT has already effectively delivered a Government-enabled programme in both Northern Ireland and Cornwall. I cannot swear to the exact figures because they are not in my briefing, but from memory BT was originally planning to reach about 80% of homes in Cornwall. However, because of the success of the programme—the costs on the ground were lower and take-up was higher than expected—my understanding is that BT will now probably reach about 90%, if not 95%, of homes in Cornwall under the same programme with the same money.
We audit everything that BT does, and local authorities do not pay the company until they get a receipt for work done. BT has already spent money, up-front, for which it has not yet been remunerated. The National Audit Office said that our plans were good value for taxpayers and reduced risk. I went on the record and did the media rounds with the Chair of the Public Accounts Committee, the right hon. Member for Barking (Margaret Hodge), when her original report was published. I challenged every finding of the Public Accounts Committee and continue to do so. I did not appear in the media the most recent time around because the BBC did not invite me to challenge the right hon. Lady’s views and she was given a free ride to put across her point of view about our broadband programme. I will go on any television or radio programme with her, at any time, to debate the issue, because I am utterly confident that our programme is complete value for money.
This ill behoves the Labour party, given that we had to write off £50 million from the programme put in place in South Yorkshire under the previous Government. We had to write off that money because they built an infrastructure but did not get any customers. Under the current programme, we have passed almost 400,000 homes and will soon pass 40,000 homes every single week.
I do not resile from praising BT as a great British company doing a great job for Britain. I do not think that we praise our home-grown companies enough. By the way, it is interesting that the BT trade unions did not agree with the Public Accounts Committee report—that is worth noting. I have been told about BT engineers, up to their shoulders in water over the winter, still trying to get the job done as the floods were coming in. It is testament to the BT engineers delivering the programme on the ground that although the floods have had an impact—you will know about that from your local knowledge, Mr Sanders—they have not knocked the programme off course.
Everyone in the House agrees about the importance of broadband and superfast broadband. The figures speak for themselves: the programme is well under way, all the contracts are signed and the issue is now about delivery. There will always be concerns about value for money, about where broadband is going and about community programmes, which deserve their opportunity to deliver broadband. We continue to address all such concerns, but no one can deny that we are now delivering one of the best broadband programmes in the developed world. In the weeks when we have overtaken Germany in availability of broadband, we should, as I said at the beginning, be looking at a glass that is very much half full, rather than half empty.
Antisocial Behaviour (Stag and Hen Parties)
(10 years, 1 month ago)
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Mr Robert Syms (Poole) (Con)
It is a pleasure to have this debate on a matter that concerns my constituents and causes great anger and distress. I know that the Minister, who has been delayed, will be here in a moment. I have already had a conversation with him, so he is aware of these real concerns and will have no trouble responding to the debate.
I represent Poole, which is a great constituency. It is mixed: it has areas of poverty and deprivation, but also some exclusive areas with quite high-status housing. It has posh blocks of flats and some big houses. Branksome Park, Canford Cliffs, Sandbanks and Penn Hill are strong residential areas lived in, generally, by professional people who have worked hard all their lives. There are few pubs. Indeed, it is difficult to get a drink; there are one or two wine bars and two or three hotels, but by and large it is not historically an area where someone would go to have a pub crawl or a night out drinking—they would either go to the quay in Poole or the centre of Bournemouth. Excitement for the area is normally a car alarm going off or a fox getting into the dustbins of a home and making a noise. It is not a high-crime area, generally. It is a very peaceful area, in which people enjoy living. Constituents sometimes have to work very hard to buy a place there.
In recent years, however, we have seen residential property being used inappropriately as party houses for stag parties, hen parties, raves and family parties. There are seven or eight homes in the area that are rented out for several hundred pounds a night over a weekend through the websites of a number of businesses. Some of those properties are at the smaller end, with three or four bedrooms converted internally to take 14 or 15 revellers, and others are slightly larger and can take 40 or 50 revellers, who turn up on a Friday to have a good time.
I do not particularly blame the people who want to have a good time. They see the houses on the web and clearly want to enjoy themselves. The economics are that renting a private house and buying all the booze at a supermarket is rather cheaper than staying in a hotel, but the reality is that that spills over into causing trouble in a residential area. Apart from car doors slamming and noise, people play football in the garden and there is music at all hours of the day. There have been stories of people playing football at 3 o’clock in the morning in the gardens of some of these homes. Bottles have been chucked over fences. Constituents next door to some of the properties find that people, having had quite a lot to drink, jump into their garden and start trying to climb their trees. These parties are causing a real problem.
An agency that lets out some of these homes provides other services, such as shuttling the people to clubs in Bournemouth. It goes quiet for an hour or two and then they come back at 2 or 3 in the morning and continue to cause a nuisance. Those who rent these places out get the people to sign a document saying that they will be peaceful in a residential area, but the reality is that there is no real policing. If 15, 20 or 30 people want to have a good time and drink to excess, that leads to a spill-over of antisocial behaviour. It upsets constituents, who fear the onset of a weekend when people will come into the area.
I had a meeting on Saturday where 20 to 30 people turned up to represent various houses in the area and to set out their concerns. The reality is that we have to do something about the issue, because it is making people’s lives a misery. Constituents are fearful to look at these homes on Friday afternoon and see the number of cars that have come in. They pray for rain because people will stay inside. They know that there will be antisocial behaviour. Some of the websites letting homes have associated services. If it is a hen party, a naked butler can be rented, which is a cause of concern if they are serving drinks on a hot afternoon in the garden and are visible to neighbours. The issue impacts on many families. A constituent told me on Saturday that he arrived home with his young daughter of seven or eight to find that the house next door had blow-up dolls bought from a sex shop all the way around the veranda. He had to tiptoe over and ask them to take the dolls down, which they did.
Most of what goes on is high spirits and youngsters wanting to have fun. We were all young once—even me—but the reality is that what is happening is inappropriate in a residential area, and it spills over into very inappropriate activities. One of my constituents wrote in an e-mail to me:
“There is so much I could write about the screaming, shouting, prostitutes being delivered well into the night, loud bass music thumping day and night, car doors banging through the night, taxis coming and going at all hours, bottles thrown into our garden. I truly don’t know where to begin and we are exhausted already.”
I hear stories of elderly people barricading themselves into their homes because of the noise. A retired solicitor and his wife have bought a caravan so that they can get out at weekends and get a night’s sleep. The issue is causing real distress. The environmental health people in Poole have been doing their best with noise, but with several homes, shift systems and a limited number of machines for measuring disturbance, it is difficult, because the target is moving. They are doing their best and have been serving some notices.
One issue is whether what happens represents a change of use. I understand that there is some case law in Sussex under which people can apply for a change of use, but there are a variety of properties. One or two have been bought to be party homes, because they are a good investment that can generate £2,000 or £3,000 for a weekend. I know of at least one case where a constituent lives in his home Monday to Thursday, then moves out to a caravan and lets out the home for parties for £1,000 or £2,000 a weekend, and that would not qualify as a change of use.
The police put most of their focus on central Bournemouth. They try to stay out of the residential areas, but occasionally they get called and have warned people to be a bit quieter. I am glad to say that the police commissioner has been alerted and the police now have a designated officer to keep an eye on the issue. They have difficulty, because the parties are in private residential dwellings.
As a Government, we have moved a whole raft of antisocial behaviour legislation to a slightly lower threshold point, and that should be a more efficient way of controlling the situation. I will fire a number of questions at the Minister on that. This is a real problem for my constituents and it is ruining people’s lives. They are fearful when the weekend comes that they might face further disruption.
Legislation on the statute book makes the matter a legal thing in London. Section 25(1) of the Greater London Council (General Powers) Act 1973 concerns temporary sleeping accommodation and outlaws it. This issue could not happen in Bromley, Harrow or Westminster. Indeed, with the Olympics, most local authorities were keen to uphold that legislation to stop people letting out their homes for weekend parties. It does happen, however, in Poole. I understand that it is a bigger problem in Brighton, but that city is more used to parties at weekends. It is becoming a problem in Bournemouth and Poole because the homes are available.
If someone is trying to sell a home and it is on the market for five or six months, they can benefit by generating another £15,000 or £20,000 through weekend parties, but that is at the expense of upsetting their neighbours’ lives. I have been aware of the issue for a little time, because I have exchanged e-mails with my constituents on the growing problem, but it is only in the past few weeks that I have really become aware of how difficult it is for constituents and of the number of homes involved. It is changing the nature of the area.
There are appropriate areas that would welcome stag dos and hen parties to generate money and get young people in. However, in residential areas such as Canford Cliffs or Sandbanks, such things are inappropriate. Also, people cause antisocial behaviour when they have drunk a lot, and that is of great concern to my constituents. The situation needs to be acted on; otherwise it will get worse, and I fear that the anger of my constituents is such that some of them will take the law into their own hands, because they have spent all their life working for a home and they find that it is being disturbed weekend after weekend after weekend. The situation is running people down and they are very angry indeed, which is why I have secured this debate today.
I want to find something out from the Minister. We have got rid of the antisocial behaviour orders, mainly because most of them were ignored and they had become discredited. We now have a raft of new antisocial behaviour legislation. Clearly, the behaviour of some of the partygoers is inappropriate, but they bought a proposition. I do not particularly blame them; they are coming down to have a party. However, I blame the people who are promoting these sorts of parties.
Michele King runs Deluxe Holiday Homes—I think she has had a chequered past—and she is renting out these properties. The owners of the properties are making a lot of money out of this situation. I would have no problem with these people running these events in an appropriate area, and I know that sometimes there are places in rural areas where there are fields and noise is not such a factor. However, in a residential area, in a tree-lined area such as Poole, in a quiet residential neighbourhood, this is the most inappropriate activity and we need to take some action. By taking action either against the agents or the owners—some of whom are also my constituents, I am sorry to say—we need to nip this activity in the bud, because it is having a very detrimental effect on my constituents in Poole.
When I began representing Poole—I have represented it since 1997—I did not expect, after a few years, to be having a debate on this particular topic, because I did not think that this would be the sort of thing that would come up locally. Several homes being used for this inappropriate activity could easily become 10, 12, 14 or 15 homes, and the reason is, of course, that there is an awful lot of money in this sort of weekend activity. A constituent sent me some information from the net the other day, which showed that these homes are hired for about £700 a night and sometimes in the summer some can go for £1,200 a night. Well, two or three nights is a nice earner for somebody; there are big incentives for people to do this. However, they are sailing very close to the law and we have to find a way, either by using antisocial behaviour legislation, change-of-use legislation or the environmental health people, to crack down on this activity and give my constituents a break, which they so rightly deserve after working so hard to retire in what they hoped was a peaceful neighbourhood, rather than living next door to stag dos, hen parties, raves and sometimes the most outrageous behaviour.
The Minister for Crime Prevention (Norman Baker)
Mr Sanders, may I first apologise both to you and to my hon. Friend the Member for Poole (Mr Syms) for being a minute or two adrift at the beginning of the debate?
It is very helpful that my hon. Friend has raised this particular matter, and I congratulate him on doing so. It is a relatively new phenomenon but it can affect people and communities in quite profound ways, as he has indicated. Consequently, as well as listening to his informed contribution today, I have seen his letter to the Home Secretary on behalf of Councillor May Haines of Poole borough council, in which he highlighted the issue of houses being rented out for hen and stag parties, and their effect on the community in the Canford Cliffs ward.
Current noise regulation is complex and can be difficult for councils to deploy, but the new powers in the Anti-social Behaviour, Crime and Policing Act 2014 will help councils to prevent and stop noise nuisance quickly and simply. I will expand on that shortly.
By way of giving some background, it is worth saying that the coalition Government has, of course, overseen a fall in crime of more than 10% since 2010, according to the independent crime survey, and that fall is mirrored by and large by the fall in the police’s recorded crime figures. Alongside that reduction, there has been a significant drop in the number of antisocial behaviour incidents reported to the police, from 3.2 million in 2010-11 to 2.2 million last year. However, that figure is still far too high, and is probably only the tip of the iceberg. My hon. Friend has drawn attention to one particular manifestation in his speech.
We know that the police, councils and others are there to help, but it is also clear from the hundreds of responses to our consultation on antisocial behaviour in 2011 that those agencies can feel constrained by the tools currently available to them. Many of those tools are overly bureaucratic and costly to apply for, and others are so behaviour-specific that they are inappropriate in all but the most straightforward cases. Nowhere is that starker than in the example raised in this debate, which is one reason why we have moved away from behaviour-specific offences to more general offences that give councils, the police and others more flexibility.
Tackling noise nuisance can be challenging and time-consuming, but some powers are available to local authorities. The Noise Act 1996 gives councils powers specifically to tackle noise from houses at night. If noise exceeds a certain level between 11 pm and 7 am, an officer can serve a warning notice on the person responsible for the noise. The notice requires them to reduce the noise within a specified time. If that does not happen, the officer can issue an on-the-spot fine of up to £100, seize any equipment used to make the offending noise, such as music systems or televisions, or choose to prosecute the person. If convicted, the person can be fined up to £1,000 by a magistrate.
Local authorities also have power to tackle noise nuisance under the Environmental Protection Act 1990. If the noise is emitted from premises, is unreasonably loud and substantially interferes with neighbours’ enjoyment of their property, it can be classed as a statutory nuisance and local authorities can serve an abatement notice requiring those making the noise to stop. In fact, local authorities have a duty to serve an abatement notice where they find a statutory nuisance. The abatement notice is served on the person responsible for the nuisance, but if the person responsible cannot be found—for example, because they have left the premises—it can be served on the owner of the premises. The notice relates to noise emitted from the premises. Environmental health officers have wide discretion about what they include in the notice to ensure that the noise nuisance stops and does not recur. The notice remains in place on the property until the council decides to withdraw it. Breaching an abatement notice can lead to prosecution and large fines.
Too often, though, police and councils are prevented from taking swift and effective action by the limitations of the powers. In particular, in the case of so-called party houses, it can be difficult to apply the noise nuisance legislation in every situation. For example, noise from people inside a premises might not exceed the specified level in the Noise Act 1996. Serious noise nuisance from people in the street who are causing harm to others—in other words, outside a premises—is not covered by current noise legislation. In addition, the notices can impose only requirements that are reasonable, and ultimately, breaching an abatement notice is subject to a defence of reasonable excuse, so an owner may argue successfully that it is not reasonable to expect them to control the behaviour of everyone in the property, particularly when they are staying for only one or two nights.
My hon. Friend and I had a brief conversation yesterday in which I promised to look into planning matters for him to see whether there were any planning controls. I am advised that where landlords allow such behaviour to occur, it can be difficult to hold them to account. Some areas look to planning rules to address the issue, but except in a few specific areas, planning cannot control the short-term letting of a property because that does not amount to development as defined in planning legislation. I am advised that the only trigger for planning legislation is if the use of the house falls within the “different use” class, for example if it is used as a house in multiple occupation or a bed and breakfast. However, I have asked my officials further to investigate whether, if a house is used regularly over a period of weeks so that that it becomes a standard feature for that house to be used, that might qualify for a change of use. Effectively, it is being used as a business, particularly if the person renting out the property receives a financial reward for doing so. That is a matter on which we have not yet had an answer from my colleagues at the Department for Communities and Local Government, but I have asked officials to take it further, and I will write to my hon. Friend about it specifically.
It is clear that the current system is fragmented, complex and sometimes inadequate, and is not working for communities in Poole and many other places, not because agencies do not want to help but because it is difficult for them to find a way to do so. Obviously, we want that to change. The impact of antisocial behaviour on victims and communities must become central to their response. My hon. Friend referred to fields—although I caution him that raves in fields sometimes generate opposition—as an example that what might be considered antisocial in one situation might be perfectly acceptable in another, and that location is therefore important in such matters.
We must give professionals tools that are flexible enough to adapt to each situation where antisocial behaviour is being committed. That is what we have done in the Anti-social Behaviour, Crime and Policing Act 2014, and I hope to make some comments that are helpful to my hon. Friend in that regard. As a member of the Public Bill Committee, he will be more aware than most of the reforms introduced by the coalition Government in the Act. The specific form of antisocial behaviour that he has raised today was not discussed in Committee, but I assure him and the House that there is, in my view, sufficient flexibility in the new powers to allow the council to deal quickly with the situation he described. In fact, such is the flexibility that not just one but two powers might be used, so the council and the police would be able to design their response to any situation on reasonable grounds.
First, there is a new closure power, which is the one that is likely to bring victims swift respite and to be most effective. The current closure powers can be effective in some cases, but they have never made it possible to close non-licensed premises quickly out of court, acting preventively on the likelihood of antisocial behaviour. Police and councils have been limited in what they could do. The new closure power will deal with that loophole. If a police or council officer has reason to believe that the use of premises has resulted in nuisance to members of the public, or that that could happen if a notice is not issued—an important distinction—or that there has been disorder near the premises, or could be if a notice is not issued, the premises can be closed immediately.
Those who habitually reside in the premises cannot be excluded for the first 48 hours, but members of the stag or hen party would not fall within that definition and so could be excluded completely from the property. Because the power can be used preventively, it means that the local community need not suffer while waiting for action, so the harm caused by the party could be prevented altogether. Moreover, where the issue persists, the council or police force could apply to the local magistrates court to have the closure extended for up to a maximum of six months, ensuring that the local community would be properly protected from serious nuisance and disorderly, offensive or criminal behaviour.
I mentioned another power that might be used: the community protection notice. That out-of-court notice is available to councils, the police, and in some instances social landlords to deal with persistent, unreasonable behaviour that has a detrimental effect on the quality of life of those in the locality. The kind of behaviour that has been discussed today, from noise to drunkenness, could fall within the definition in the test. What is more, the definition of “persistent” is open to the interpretation of the council or police officer. For instance, if the issue is loud music accompanying a barbeque in the garden, it would be perfectly reasonable, if the officer had asked people to turn it down and they had not done so, to consider that persistent. First, a written warning has to be issued to someone who can reasonably be expected to control or affect the behaviour, explaining what the issue is. Once they have been given sufficient time to change the behaviour, which could be minutes in the case of turning down loud music, a community protection notice can be issued forcing them to comply with the request. If they do not, they commit an offence and can be arrested.
Successful prosecution involves not only a criminal record but also the potential for a £2,500 fine. Furthermore, the community protection notice could be used against the home owner who was allowing the people attending a stag or hen do to act antisocially. My hon. Friend has rightly drawn attention to the people who facilitate the holding of such parties, as well as those who turn up for them, and I agree that that is an important distinction. The community protection notice could involve any requirements that the council or police thought appropriate to prevent the antisocial behaviour, such as passing on to local agencies the details of those attending, so that the situation could be monitored, or requiring the home owner to warn those attending the party that acting antisocially could result in the premises being closed.
Currently, councils are the lead force in dealing with such cases, even though victims regularly turn to the police. That is why the new powers will be not just for council officers, but also for the police and, in the case of the community protection notice, even police community support officers, so that the right person can act every time without needing to refer victims from one agency to the next, which is inefficient and time-consuming. Councils and police forces have the same objective—to ensure that the communities they serve are protected and safe—and by working effectively together they can achieve that. The new powers that we are introducing encourage agencies to solve problems together to ensure that victims and communities get the best results.
I believe that the new powers being introduced later this year will allow councils and the police to deal with the kinds of situations that my hon. Friend described this morning. However, I want to make it clear that the kind of short-term renting arrangements we have been considering do not always result in antisocial behaviour. The additional tourism boost to the local economy from holidaymakers looking for short-term lets can be positive for areas and communities and should be encouraged. That is why the powers are flexible and enable people to make a judgment based on what happens.
Norman Baker
I am very grateful to my hon. Friend; I am glad that he feels that way. I will be interested to see how the situation develops, particularly when the new powers are in force.
In conclusion, I make it clear that when people’s behaviour goes beyond what is acceptable and the result is harm, misery and discomfort to innocent parties, local agencies should be able to act and act fast. I believe that the new powers that the coalition Government will introduce later this year under the Anti-social Behaviour, Crime and Policing Act 2014 will encourage those agencies and deliver on our promise to simplify the existing powers available to front-line professionals by putting victims at the heart of the response to antisocial behaviour.
Military Credit Union
(10 years, 1 month ago)
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Mr Gareth Thomas (Harrow West) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mrs Riordan, for what I think is the first time. Given your past and present, you seem to be a particularly good choice of Chair for this debate, although I recognise that that will not save me if I deviate from the usual rules and conventions. In that spirit, I should say that I am one of 8 million ordinary members of the Co-op Group; I have accounts with Nationwide; I belong to the M for Money credit union in Harrow and the Rainbow Saver credit union; and I am privileged to chair the Co-op party and to be one of its MPs in the House.
This month marks the 50th anniversary of the first two credit unions in the UK. Now would be a good time for the Government to facilitate the establishment of a new credit union for our soldiers, sailors, Air Force personnel and their families. Hornsey Co-operative credit union was one of those first two 50 years ago; it is now part of the London Capital credit union, which is directly taking on payday lenders throughout the capital, charging only £12 interest a month on a £400 loan, compared with the £120 charged by a typical payday lender for the same loan over the same period. That is one of many examples of how credit unions can offer a powerful alternative to payday lenders.
I am grateful to Mr Speaker for the opportunity to press the case for the Government and the senior ranks of our armed forces to do more to facilitate access to a military credit union or to credit unions more generally, which can serve the needs of our armed forces personnel. Those personnel often face particular challenges in accessing financial services and sometimes have limited opportunity to develop financial management skills. In addition, as Lord Ashcroft has pointed out, transitions from military to civilian life are often hard and there is the potential for worry about debt to be a life-threatening distraction.
I hope that the Minister will commit to a feasibility study to establish a military credit union, to report by the end of the Parliament, and that he will say what he will do in the meantime to facilitate and encourage access to credit unions by members of our armed forces. I recognise and welcome the interest that a number of Ministers have shown in the idea of such a union, but I hope that this Minister will be able to do more than merely repeat interest and that he will demonstrate a more tangible commitment.
A credit union is a financial co-operative, which provides savings, loans and a range of other services to its members. It is owned and controlled by the members, and each member has one vote. Volunteer directors are elected from the membership of the credit union, by the membership. Credit unions are owned by their own users and not by external shareholders or investors, so the emphasis is always on providing the best service to members, rather than on maximising profits from their customers.
Such financial co-operatives exist throughout the world, as well as in the UK, and there are some 200 million members in 56,000 credit unions in more than 100 countries. Indeed, in the USA, Canada, Australia and Ireland, more than a quarter of the population are credit union members. Such a target is achievable over time in the UK and, if 25% of the British population were members of a credit union, I suspect that payday loan firms would have fewer customers. More than 90% of the British population can join a credit union because of where they live, which is in no small part thanks to investment by the previous Labour Government, which, to be fair, is continued by the current Department for Work and Pensions credit union expansion plan.
I pay tribute to the many hundreds of volunteer board members and to the staff helping to drive a slow expansion in credit union members in the UK. I hope that the House will indulge me if I take the opportunity to praise Graham Tomlin of M for Money, which serves my constituency, and the board of the excellent Rainbow Saver credit union. I hope that the Government will do more to increase awareness of credit unions generally, but in particular among the military, because Whitehall, local government and housing associations could do much to make military personnel and others aware of the benefits of credit union membership. Crucially, credit unions, including any new military credit union that might be set up, are authorised and regulated by the Prudential Regulation Authority and the Financial Conduct Authority.
As I set out in my ten-minute rule Bill on the same subject last year, my inspiration is the success of Navy Federal in the United States, which since 1933 and its first seven members has grown to have almost 4,700,000 members, with $44.5 billion in assets. Based in Vienna in Virginia, it is the world’s largest credit union, with 220 branches and almost 9,000 employees. It offers savings accounts, car loans, credit cards, 24/7 telephone access, internet and mobile banking, budget counselling and more than 45,000 ATMs, among other services, to people as diverse as navy SEALs and army cooks.
Ian Paisley (North Antrim) (DUP)
Does the hon. Gentleman agree that one of the other services under that regime in the United States is insurance? That is incredibly attractive to service personnel, who recognise that they will get a very good insurance package if something terrible happens to them or their loved ones.
Mr Thomas
The hon. Gentleman makes a good point. If I remember rightly, through a subsidiary Navy Federal offers specialist insurance services as well. In short, it offers highly competitive services to those who put themselves in harm’s way for the United States. It provides tailored services to military personnel, supporting their specific needs, including the commitment to cover pay during the threatened US Government shutdown last year. The president or chief executive of Navy Federal is not perhaps the most obvious missionary for co-operation. Cutler Dawson is a graduate of the US Naval academy and served for 35 years in the US navy. He ended up as a vice-admiral, commanding four ships—the Enterprise battle group—and was the commander of the US second fleet.
Other significant military credit unions in the US include the Air Force Federal credit union, which charges no fees on its regular savings and cheque accounts. It requires a minimum deposit of only $5 and, for example, offers 60-month car loans with an annual percentage rate, or APR, of only 1.6%. The Pentagon Federal credit union has 1.2 million members and $1.7 billion in assets. Australia, too, has a credit union for its service personnel; the Australian Defence credit union has been providing banking services to defence personnel and contractors, and their families, since as long ago as 1959. It now has 34 branches, assets approaching 1 billion Australian dollars and more than 47,000 members. Again, each member of that credit union has an equal say in how it operates.
Credit unions provide a responsible alternative for savings and loans and an inclusive service for all people, as well as being a crucial alternative to high-interest lenders. They are owned by their members and, because they have no external shareholders, they can offer competitive borrowing and savings rates.
I realise that establishing a new credit union dedicated to the military could take some time. It would involve some cost and, crucially, would not immediately be able to offer the lowest alternatives to payday loans that better capitalised and more well established credit unions are providing. I hope that, as well as committing to the specific feasibility study for a dedicated military credit union, the Minister will consider working with existing credit unions that may be able to offer our armed forces personnel access to the best credit union products and services straight away.
One such credit union, the Plane Saver credit union, has approached me directly and I believe it has written to the Secretary of State for Defence offering its services to do just what I have suggested. I am sure that other credit unions—and, indeed, the Association of British Credit Unions Ltd, the excellent trade body for the credit union movement—could help the MOD to think through how to provide more immediate access to the benefits of a credit union while cracking on with a feasibility study for a dedicated military credit union.
One crucial requirement if credit union services are to be accessible to our soldiers, airmen and women, and naval personnel, is for the Ministry of Defence to be able to put in place payroll deduction, just as payments are made directly from wages for all sorts of reasons already. It should surely be an employee’s right to be able to make payments from wages into their local credit union account. Many employers in other public services already allow that simple process, which in turn strengthens credit unions and helps to build their sustainability, enabling them to pass on to their members benefits in the form of better loan rates and dividends. ABCUL has said:
“Payroll deduction is an easy and convenient way for employees to get a savings habit and access affordable credit.”
There would be some additional work and, therefore, costs for the Ministry of Defence in running such a payroll deduction service. For example, regular payments and information and details of leavers, as well as of those joining the credit union, would need to be provided to the relevant credit union or unions in a timely manner, but payroll deductions are not a new concept and the MOD should be more than able to take that in its stride. Will the Minister set out whether he and the Secretary of State are willing in principle to allow payroll deduction for credit union membership? If not, will he say why?
Some of the many credit unions that already exist in Britain and internationally have strong links to particular groups of employees, as a new military credit union clearly would. That enables them to provide services to a range of employees, highly paid and lower paid, earlier or later in their careers, and allows the credit union to build a balanced portfolio for all. Such credit unions can offer extremely competitive terms. For example, the Police credit union serves a similar uniformed service and offers savings returns of 2.5% on instant access cash ISA accounts alongside small short-term loans at 25% APR or larger, longer-term loans from 4.3% APR. ABCUL tells me that similar examples exist in the passenger transport, airline, NHS and local government sectors.
Sadly, colleagues on both sides of the House will be aware of the many shocking statistics on the increasing use of payday loans in the UK. The Money Advice Service reported that some 1.2 million people took out payday loans to get through Christmas last year. The Debt Advice Foundation found that one in four people who took out payday loans did so to buy food or other essentials. Particularly worrying, perhaps, is that some 44% of people used payday loans to pay off other debts, thus sinking even further into the quicksand-like trap of ever-increasing debt.
Research from the Office of Fair Trading found that 50% of the industry’s profits come from refinancing, with those who take loans out repeatedly creating the largest return for the industry’s big boys. Some 19% of the industry’s profits came from just 5% of loans that were rolled over four times or more. That is a growing problem. Research from Citizens Advice shows that in just two years there has been a fourfold rise in the number of people seeking its advice with debt problems as a result of taking out payday loans.
Last year, I spoke to the chief executives of several Citizens Advice branches located close to military bases, and they said a pattern was clear. Soldiers and sailors were facing real financial difficulties because they had taken out one payday loan for a small sum and soon found themselves in ever deeper problems as one loan became two, two became three, and the interest mounted up and up.
The problem is clearly not limited to armed forces personnel—far from it. R3, the Association of Business Recovery Professionals, is the body representing insolvency practitioners, and published data in December 2013 showing that some 47% of British adults are worried about their debt levels, with 44% struggling to make it to pay day. Interestingly, R3’s research found that 71% of British adults blame the rising cost of living for their struggle to make it to pay day, but I digress.
Payday loans are a real and growing problem for our armed forces. The Royal British Legion published research warning that one third of all of the debt problems it deals with relate to people struggling with payday-style unsecured loans. In 2011, its money and benefit advice service was helping 11,000 servicemen and ex-servicemen with debt problems. That is a huge increase from when the service started back in 2007, when it helped just over 2,000 people. ABF, the soldiers’ charity—formerly the Army Benevolent Fund—does important work in many of our constituencies and has said that it gives half the money it raises directly to individuals to help in areas such as debt relief. That figure is remarkable by any definition.
There is a real problem. Payday lenders should have to signpost those taking out payday loans to debt management services, a little like cigarette packets having to carry health warnings. My right hon. Friend the Leader of the Opposition has set out some steps we should take to tackle the damage done by payday loans. Some lenders make as much as £1 million a week in profit, and he has called for a levy on the profits of payday loan companies to raise capital for alternative and affordable sources of credit such as credit unions. That could raise an additional £13 million, allowing credit unions to offer more financial support to people in need of credit. Perhaps a little of that sum could be used to help to develop a credit union for military personnel if the Government were so minded.
My right hon. Friend made clear his support for the banning of payday loan adverts during children’s TV programmes, which would be a very sensible step forward. Just as importantly, he set out how he would take steps to allow local councils to decide whether they want to place some premises in a separate planning category, giving communities more control over payday loan outlets in their high streets. Sadly, many local authorities and communities feel increasingly powerless to shape their town centres or do anything to halt the tide of payday loan firms. We want to change that.
I understand that there is cross-party support for a payday loan charter setting out what effective regulation of payday lenders and high-cost credit might look like. Such a charter could call for better affordability checks, a crackdown on advertising, and real-time data sharing within the industry so that lenders can check whether a borrower already has other plans. A military credit union could support such initiatives.
I welcome the written answer from the Under-Secretary of State for Defence, the hon. Member for South West Wiltshire (Dr Murrison):
“Although commanding officers retain discretion to decide which advertisements are appropriate for their bases, guidance has been issued to each of the services that advertisements from payday loan companies should not be carried in their internal publications.”—[Official Report, 24 February 2014; Vol. 124, c. 63W.]
That guidance was given once it was brought to the MOD’s attention that payday loan companies were seeking to entice people to their products; soldiers and sailors in particular were being targeted rigorously using military publications. Payday loan companies that were particularly targeting our soldiers, sailors and Air Force personnel include Forces Loans, which claims to be the No. 1 lender to the military. Its loans are currently being advertised with an APR of 3,351%. Another company, QuickQuid, regularly advertises on the apparently popular militaryforums.co.uk with a rate of 1,362% APR.
A quick search online will find other examples of companies that have sponsored links to forces sites or to information that forces personnel can easily get access to: 1st Stop charges nearly 2,000% APR; Quids Today charges more than 2,000% APR; and The Money Shop charges nearly 3,000% APR—I could go on. A quick check of payday loans widely available online shows loans available at APRs ranging from nearly 900% to more than 7,000%. A military credit union could, over the medium to long term, provide a powerful competitive financial services offer to those who put their lives on the line for us, in ways that best meet their particular needs.
Let me underline the questions that I hope the Minister will answer today. Will he undertake a feasibility study into the establishment of a dedicated military credit union? Will he ensure that that feasibility study reports by the end of this Parliament? In the short term, other credit unions could help to offer such services now, with positive support from the Ministry of Defence. Will the Minister commit to meet ABCUL, credit unions such as Plane Saver and possibly me to discuss how that might happen?
Will the Minister commit now to the principle of payroll deduction to help any member of the armed forces or supporting staff to join a credit union more easily if they want to? Will he encourage military publications to carry adverts for credit unions that armed forces personnel can join? Will he support an explicit ban on payday lenders advertising in military bases? Will he consider discussing with other ministerial colleagues a requirement on high-cost lenders, such as payday lenders, to signpost their borrowers towards free debt management advice services?
Credit unions have a long history. They are increasingly building capacity and membership. They are a powerful demonstration of the values of co-operation: working with others to help oneself; giving equal voting rights and an equal say in the running of a business; and being committed to a fair distribution of any profits or surplus in the form of better, cheaper services. Sadly, no such clear, distinct service exists for our armed forces, and I gently encourage the Minister to back our campaign for a military credit union.
Jim Shannon (Strangford) (DUP)
I had anticipated that a large number of other Members would be here to speak about this issue, because of its importance. I congratulate the hon. Member for Harrow West (Mr Thomas) on bringing the matter to the House. The Minister is in his place and has heard a lot of what he said, and I will be adding to those comments. Other Members might have contributions to make and the shadow Minister will be making a valuable contribution, too.
I am very pleased to come along today and give my wholehearted support to the hon. Gentleman for bringing the issue to the Chamber for our consideration. We are aware of such issues not only as elected representatives, but because of previous service. I served in the Ulster Defence Regiment for three years and in the Territorial Army for 11-and-a-half years in the Royal Artillery: in the UDR, in a terrorism role—or an anti-terrorism role, I should say—and in the Royal Artillery in a role that had a more global and European impact. That is where my interest in the issue comes from.
I represent Strangford, which is renowned for service in Her Majesty’s armed forces. The largest town in my constituency, Newtownards, is to host the Armed Forces day in Northern Ireland this year. I have no doubt that the streets will be thronged to capacity with people coming along to express the high esteem in which they hold service personnel and veterans. As I meet each of those veterans and personnel, I will do so with the knowledge that I support them in every way that I can. This debate is a way of doing just that. It reflects some constituency issues that I have had over the past four years as a Member of Parliament, and before that, as a Member of the Northern Ireland Assembly. I seek to help the personnel’s families at home while they are serving and when they return home from their service. Some return home with not only physical and emotional but financial issues, as the hon. Gentleman highlighted.
What the hon. Gentleman presented was about support for service personnel and their families. I completely agree that the fluctuation of pay of those serving due to the different rates depending on where they are serving means that some payday lenders can take advantage of our armed forces personnel. Serving personnel get an allowance on active duty, but some find it hard to get by without the top-up cash. Sometimes, there is a change of financial circumstances. Will the Minister indicate what help is given to service personnel when it comes to managing money and their wages better? I believe that there is some, but sometimes it takes more than a bit of paper; it takes a one-to-one, and if that is possible, has it been done?
A regular soldier’s wage is £17,767, and when they become used to the uplift in cash, it takes time to go back to a smaller budget. I am privileged to be in the armed forces parliamentary scheme, which has given me a chance to visit army camps. Catterick is one that sticks in my mind because it offers accommodation to soldiers who are single and have no families or dependants. The officers told me that many of those young men in uniform perhaps have a level of cash that they did not have before, and they very quickly spend it and frequently run into debt. Will the Minister say what help is given directly to service personnel to ensure that they manage their money and wages much better?
I have spoken in this place numerous times about the difficulties with payday loans, as have others. We are all aware of the story in the press in the past week or two about the lady who borrowed £500 and suddenly found, before it was all finished, that she owed £120,000. That is an extreme example, but none the less, it indicates the serious problems that people can have when they get into borrowing from payday companies. I have spoken about the number of people who come into my office seeking help to get themselves back on an even keel due to the high interest of these loans. We are fortunate to have debt advice organisations such as Citizens Advice, Debt Action, and Christians Against Poverty, just to think of three in my constituency that deliver specific help to those who need it most. Increasing numbers of ex-Army personnel come with their families to seek help for their circumstances. They are real issues and they show why today’s debate is so important.
Many people are seeking to get themselves back on an even keel, due to the high interest of the loans, as they try to manage their money in relation to their wives and children and to their new circumstances perhaps of not being in the Army. It is a vicious circle that is so difficult to get out of. Citizens Advice has said that it is dealing with an increasing number of cases where military personnel and their families had run into financial problems after taking out high-cost payday loans. Research by the Royal British Legion has found that about a third of veterans experience financial difficulties, including almost half of those who are recently injured. That is, again, a pointer to how important the issue is. We all greatly respect those soldiers who serve and those who come back injured, either emotionally or physically. It is a terrible tragedy when half of the recently injured and a third of veterans, as the Royal British Legion found, experience financial difficulties and need help, which lead many of them into very high levels of debt.
I place on record my thanks to the organisations that work in my area. Obviously, I thank the Royal British Legion first, but I also thank the Army Benevolent Fund, to which the hon. Member for Harrow West referred, and the Soldiers, Sailors, Airmen and Families Association, which does great work with serving personnel or ex-personnel and their families. I hold a coffee morning once a year for SSAFA—it is basically coffee, tea and sticky buns—and last year we were very pleased because people from the town gave £4,500. That immense contribution was an example of the good that people can do and of their generosity. We never fail to be overwhelmed by people’s generosity. That contribution was an indication of the good that the people of Newtownards and district can do.
Last year, the Royal British Legion’s benefits and money advice service—this information is from the Royal British Legion—helped 11,000 Army personnel. That was in its second year. It was an increase of 8,600 on its first year. That clearly shows the magnitude of this issue and the need to respond. It is clear that there is an issue. It is equally clear that we have a role to play in providing the solution. The proposals were outlined by the hon. Gentleman. I am sure that the Minister, in his response, will be able to give us some indication of the importance of that and how he will address the issue.
At home, I always encourage people to use their local credit union, which allows money to be borrowed only when money has been saved. That has helped many people to get loans at an affordable rate of interest. The fact that the American military run a successful version in Navy Federal shows that such a service would be of use to our personnel.
I want to touch on the options or solutions that are available. Like other MPs, I would say that when people come to see me with their problems, it is about solutions. It is not about the problem; it is about how we make the situation better, how we can help the people. I believe that we have a solution here today if the Minister is minded to give us the response that we seek.
Navy Federal is the largest credit union in America, with more than 4 million members. It has branches on every military base in the country. My hon. Friend the Member for North Antrim (Ian Paisley) spoke to me last year when he had the chance to be in America and speak to some navy personnel. He was aware of the good work that they do. Army personnel and navy personnel were depending on payday loans and creditors, so Navy Federal moved in and ensured that there was a branch on every military base in the country. The payday loaners used to target the military bases to hook American sailors and soldiers with their high-cost financial services. However, legislation and the low-cost financial products that credit unions offer have led to the Navy Federal credit union having branches on every military base in the United States of America and offering a very direct and personal service to its members. It is greatly utilised by service personnel.
According to the Library debate pack, a meeting took place of the all-party group on credit unions last October. The Minister for the Armed Forces used that meeting to express the Government’s interest in exploring the idea of a service personnel credit union further, so perhaps the Minister today could tell us where we have advanced since October, whether we are any closer to having this type of scheme in place—I hope that we are—and, if not, whether we have a programme that will lead to that happening. Like the hon. Member for Harrow West and other hon. Members present, I genuinely believe that this proposal could be the catalyst for a scheme that can change things round and help our soldiers, sailors and Air Force personnel to manage their money better.
Abbie Shelton, policy and communications manager at ABCUL, said:
“Payroll deduction is an easy and convenient way for employees to get a savings habit and access affordable credit and we welcome any support for new partnerships which will help more people access credit unions in this way.”
I will not express a preference for any one building society. None the less, getting into the habit of saving is a good thing to do. If we do get into the habit of saving early and start to save regularly, that becomes a discipline in itself. Again, perhaps the Minister could comment on this issue in his response. The hon. Member for Harrow West focused greatly on payroll deduction, and I think that it is a tremendous idea, because it enables people to save directly. It is important that we all try to manage our money as best we can.
Ian Paisley
Does my hon. Friend agree that if such a scheme were introduced, the Government could make a forward calculation as to how much money could reasonably be expected and therefore underwrite the establishment of a military credit union for a period of five to 10 years to allow it to get established and thereby really give it the support that it needs to get off the ground?
Jim Shannon
I thank my hon. Friend for that very constructive intervention. Yes, I do believe that what he describes could be done. Again, perhaps the Minister can give us some idea of how he sees that particular scheme working. If we have a prediction, if we have an idea of what we will have coming in over five to 10 years, we can start such a scheme. When I visited Catterick camp in September two years ago, that was one of the things that the officers told me they wanted to see happening. I fed that back to the MOD in questions and I would like to know whether it has been activated and where it is going.
The example of the Navy Federal credit union in the United States is powerful. It shows what can be done. Where there is a will, there is a way, or, in this case, where there is a will, there must be a way. It can be delivered. We have a duty of care to our service personnel to help to support their families and to ensure that their sacrifices in service are acknowledged at home, and this is one way of doing just that. I wholeheartedly support the proposal and offer my help in any way possible to see this legislation being made in the House. It is critical, it is important and it is needed urgently. Everyone here is of that opinion. I know that the pledge that I have made is something that the rest of my party, the Democratic Unionist party, at Westminster will also support.
We have talked about the issue. Now it is time for action to be taken, for our serving personnel to become saving personnel and for them and veterans to see yet another tangible sign of our appreciation of and support for those who put their safety, mental health and lives on the line in service to the Queen and this tremendous country of the United Kingdom of Great Britain and Northern Ireland.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mrs Riordan. It is also a pleasure to follow the hon. Member for Strangford (Jim Shannon), who made a welcome and constructive contribution to the debate. I congratulate my hon. Friend the Member for Harrow West (Mr Thomas) on securing the debate. I am delighted to be able to follow him by speaking in support of the establishment of an armed forces credit union.
I pay tribute to the commitment and service of our armed forces, our veterans and their families. Without them, our country would not be as successful or as safe as it is. It is therefore my utmost belief that we have a duty to ensure that our servicemen and women and their families are treated fairly, protected from discrimination and supported in all aspects of their civilian life where necessary. That includes in their finances.
It is already hard enough for an individual or a family to save money and build up a strong credit history. For armed forces personnel, the struggle to become financially secure can sometimes be even more difficult. Military families face specific circumstances that can make it difficult to access financial services via the traditional routes, such as high street banks or building societies. Long periods spent outside the UK mean that some kinds of financial benefits, such as no-claims bonuses, are not easily acknowledged. It becomes harder to build up a credit history if someone’s address changes every two years as they move around. Fluctuations between an individual’s regular pay and deployment pay can mean that income is hard to predict. That is not just detrimental to the individual, who may be unable to develop a long-term budget but also influences things such as mortgage and credit card applications. Frequent relocations have a knock-on effect for partners, spouses and children, whose employment opportunities may be reduced, resulting in a drop in household income.
It can be hard for servicemen and women to save during deployment, but on leaving the military, the situation may become harder. More than 20,000 people leave the armed forces every year, and that number is rising as the Government reduce personnel numbers. Because of the institutional way in which the armed forces work, some of those people will have had little experience of budgeting, costing, saving or spending. Many people struggle with those things, and those in the armed forces are no different. That added burden can leave them at risk of financial difficulty. The 2012 issue of Homeport, a magazine distributed by the Navy and the Marines to naval families, said:
“The inability to manage personal finances is one of the single greatest welfare challenges facing members of the Armed Forces.”
Every one of those things makes our military personnel and their families more likely to search out alternative options for financing. When circumstances mean that they are refused assistance from high street banks or building societies, they become more susceptible to payday lenders offering sums of cash on the spot, as we have heard. Citizens Advice has reported dealing with an increased number of cases of British armed services personnel and their families being targeted by payday lending companies. A couple of payday lenders—I am struggling over whether to name the companies that I have in mind; on this occasion I do not think I will—have specialist sites aimed at the armed forces, and one of them has an interest rate of 1,734%. My hon. Friend the Member for Harrow West has outlined the interest rates of a number of other companies. In targeting armed forces families in such a way, they are exploiting for their own gain service personnel who have poor credit histories or difficulty accessing credit. Of course, payday lenders do not just target military families, and we have heard a good deal about that already. Which?, Citizens Advice, the Office of Fair Trading and the Business, Innovation and Skills Committee have all criticised payday loan companies for offering exploitative loans to people who are at their lowest ebb and charging extortionate fees that simply push those people into further financial difficulty.
According to the Debt Advice Foundation, one in four people who take out payday loans need the money to buy food or essentials, and 44% use them to pay off other debts. Some in the forces may turn to payday loan companies because they see them as a quick and easy solution to a lack of finance. Initially, they are a quick way of getting money, but unfortunately it does not turn out to be easy in the long run.
Establishing a military credit union would not only shield our military families from exploitation but help them to become more financially stable and financially literate, and to live a more secure and stable life outside the armed forces when they leave. That would reduce the need for intervention further down the line. I appreciate that the Ministry of Defence has already recognised that something needs to be done, which is why it introduced the MoneyForce programme last year to provide service personnel with advice and training on finances. Although the scheme is a good step in the right direction, it does not offer our armed forces an alternative to the arrangements on offer.
As we have heard, the Royal British Legion operates its own money advice service, which gives service personnel, veterans and their families impartial and non-judgmental financial advice. I believe that it has helped more than 35,000 people; worryingly, about 11,000 of them in 2012 alone, so the numbers appear to be going up. About 70% of those people are ex-service rather than currently serving, which shows that there is a problem here that we must look at. In addition, research by the Royal British Legion in 2011 showed that almost a third of the debt problems it deals with involve unsecured loans from payday lenders and other providers. That is yet another reason why we should be providing servicemen and women with another option.
Given the facts, and given that is not difficult to see where and how the problems arise, I hope that Ministers will take the opportunity to do something positive about the matter. In February 2013, the Minister with responsibility for international strategy, the hon. Member for South West Wiltshire (Dr Murrison), said that the concept of a credit union had been considered but that the MOD believed that it was
“likely to be too restrictive in how it might operate and what it can provide.”—[Official Report, 4 February 2013; Vol. 558, c. 440W.]
Earlier this year, however, he updated the position, saying that the MOD was considering the option of an armed forces credit union but a decision had not yet been made. I hope that the Minister can tell us where the Department stands and whether he has been convinced that a military credit union would offer a financial lifeline to thousands of serving personnel, veterans and their families. I back my hon. Friend the Member for Harrow West in calling for a feasibility study into the matter and into deductions at source from salaries.
As we have heard, the Department for Work and Pensions has supported the expansion of credit unions across the UK. The Department’s feasibility study found that some 7 million people fall into the trap of high-cost credit. As a result, a significant amount of money has been set aside to invest in credit unions, and I hope that that might be one way of moving forward. Tackling high-interest consumer credit is a priority for the Opposition, as is supporting our armed forces and their families. Unfortunately, too many people in the UK have been forced into using food banks and relying on welfare payments to try to deal with the cost of living crisis. The armed forces and their families are facing their own cost of living crisis, because they have had reductions in their allowances and their pensions.
Considering all the evidence, I cannot see a single reason why we should not move ahead with the policy. The armed forces covenant states that, where possible, disadvantages should be removed so that military personnel can enjoy the same opportunities and outcomes as the civilian community. When it comes to personal finance, there is clearly a problem that we want to address. Credit unions provide a fair and affordable alternative to payday lenders. They are an option for those who are otherwise unable to access mainstream sources of high street credit from traditional banks or building societies. They are also a way forward for people who want to take an ethical approach to personal finance. They are trusted by more than 200 million people across the world, who use them to manage more than £700 billion in assets. In West Dunbartonshire, we have three community-based credit unions, not to mention some hugely successful workplace schemes, which help more than 12,000 people to manage their money in the best possible way. I want that service to be available to our armed forces community as well. I cannot think of a reason why they, too, should not have access to a workplace credit union.
We have heard about Navy Federal, which is the biggest credit union in the United States with 4 million members, so it cannot be that our armed forces are too big to establish such a scheme. One of the unique selling points of a credit union is that it can offer specialised financial products and services that are designed to meet the specific needs of the community it serves. The hon. Member for North Antrim (Ian Paisley), who has left, spoke about insurance products, which I think Navy Federal offers. The specific circumstances and situations that military personnel face, such as families living apart, or moving house several times, could be factored into decision making.
The Co-operative party has launched the “Give Me Credit” campaign for a military credit union, with the simple expression: “Because service personnel and their families deserve better.” I could not have put it better. Like my hon. Friend the Member for Harrow West, I am proud to be a member of the Co-operative party and one of its Members of Parliament, because those are the sort of policies that make people’s lives better. I hope that the Minister and the MOD will commit to giving our service community what it deserves—an opportunity and an outlet by which they can become financially stable, through the establishment of a military credit union.
The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)
It is a great pleasure to serve under your chairmanship today, Mrs Riordan. For me, as for the hon. Member for Harrow West (Mr Thomas), this is the first opportunity to do so. I congratulate him on securing the debate. He has been a persistent advocate of an armed forces credit union—I think he presented a ten-minute rule Bill earlier in the year—and I am pleased that he has managed to secure a full 90-minute debate today. It is good to see colleagues from Northern Ireland supporting it.
There is no fundamental disagreement between us on the proposal. The Government have actively supported credit unions since we came to office and we have been working energetically to increase access to affordable credit by modernising and expanding the sector. That is why we are investing up to £38 million in the credit union expansion project, providing an increased range of financial services for up to 1 million more customers, which we anticipate will save them up to £1 billion in loan interest repayments over the period to March 2019. We also believe that credit unions have a role to play in supporting our armed services.
Financial pressures exist within service households just as they do in the wider community, as all those hon. Members who spoke explained. Indeed, many hon. Members may have received letters from members of the armed forces or their families who have been denied credit, have struggled with obtaining a mortgage or have been refused the opportunity to purchase a financial product as simple as a product warranty. Often that has nothing to do with their creditworthiness per se, but is due to the nature of a peripatetic career that can prevent some in the armed forces community from developing a consistent credit history in the area where they live; that is often used by credit referencing companies to determine credit credentials. We recognise that that is a problem within the structure of employment in the armed forces, and have been actively taking steps to ease the problems for service personnel, as an important component of the armed forces covenant, which the hon. Member for West Dunbartonshire (Gemma Doyle) mentioned.
Two years ago, in April 2012, working with credit reference agencies and the Royal Mail, we introduced “shadow” postcodes against British forces postal addresses, to try to establish consistency of address. That helps armed forces personnel serving overseas to maintain a UK credit history that is recognised by financial service providers and allows improved access to financial products. The MOD has also secured an important pledge from, among others, the UK Cards Association, the British Bankers Association, and the Council of Mortgage Lenders to treat
“applications for credit and mortgages...fairly and consistently with civilian counterparts”.
Last year, as other hon. Members have mentioned, we launched MoneyForce in partnership with the Royal British Legion and the Standard Life Charitable Trust. That has been providing training, briefings, resources and online support, helping the armed forces community to manage its money and financial affairs better.
Despite that support, there are still those in the forces, as there are among the public at large, who end up requiring a loan just to make ends meet. I am sure that the hon. Member for West Dunbartonshire was not suggesting, in her remarks, that armed forces personnel have increasingly become users of food banks, because I am aware of no evidence of that. If she has any I should be interested.
Mr Dunne
I think she is indicating that she did not mean that, and I am pleased to hear that, because there is no reason for it.
Citizens Advice has said that it is dealing with a significant number of cases of service personnel and their families who get into difficulty with debts at high interest rates owed to payday lenders. Those lenders appear to be specifically targeting the armed forces because some personnel have problems with credit ratings. The hon. Members for Harrow West and for West Dunbartonshire both mentioned some of those payday lender adverts, and the extortionate rates of interest that they charge. I searched the internet to see what claims those companies make. Entering “armed forces loans” into the search engine generates a list of companies promising no credit checks, rapid payment and 100% satisfaction. One website even depicts a smiling soldier in uniform giving a thumbs-up in front of the Union flag, with the claim that it is the
“Number One lender to the military”.
Mr Thomas
The Minister accused me of persistence, so as he is five minutes into what is, to be fair, a very interesting speech, will he tell me whether he will support a feasibility study on payroll deduction, and meet me to discuss how we might get quicker access to credit union products for armed forces personnel?
Mr Dunne
I am sorry that the hon. Gentleman seems to want to bring the debate to a premature conclusion. We have plenty of time left, and I am sure, given that he called the debate, he would like to use as much of it as possible. He already asked that question in his remarks, and I hope to deal comprehensively with all his questions before the debate finishes.
I referred to the website because of the impression that may advertently or inadvertently be given that websites directed at the armed forces carry some endorsement from the armed forces. That could not be further from the truth, but it highlights the risks for the Ministry and the service branches in any involvement in the provision of financial products, should personnel or their families get the impression that the military was endorsing a particular product. Such a financial product would carry the same kinds of risk as any other regulated entity, and we take that seriously.
Jim Shannon
The hon. Member for Harrow West and I cited the Navy Federal credit union in the United States as an example of something that is clearly personnel-oriented but is acceptable and does what it should: it does what it says on the tin, as we say. That is an example of what could be done.
Mr Dunne
I completely accept that there are examples elsewhere, as the hon. Member for Harrow West said—not just in the United States but also in Australia—of credit unions receiving support from the armed forces. I shall come on to that but I was just highlighting the level of associated risk.
Mr Dunne
Before the Division, I was explaining how credit unions must be properly regulated, and the fact that we need to be confident that any credit union established with military branding has some financial security. Credit unions offer access to good-value savings and loan products for a customer base that has historically found it hard to access such services. They are registered as industrial and provident societies and are regulated by both the Financial Conduct Authority and the Prudential Regulation Authority.
Unlike payday loan companies, credit unions are, in my view, a positive force for the community around them, benefiting members and local economies alike. Their role in developing alternative financial services for member groups has been well championed in this House, not only by the hon. Member for Harrow West but particularly by the all-party group on credit unions, which my hon. Friend the Member for East Hampshire (Damian Hinds) has chaired so admirably since he was elected, among his many other duties, including his support for me today, for which I am extremely grateful.
Of course, provided that they meet the common bond for membership, members of the armed forces and their families can already apply to join an existing credit union local to them in order to access the range of financial services on offer. However, coverage is not national and the services vary. As the hon. Member for Harrow West pointed out, the Navy Federal credit union in the US is a model of what can be achieved. It has around 5 million members and some £50 billion in assets. I agree with the hon. Gentleman that a well-managed credit union for our soldiers, sailors, airmen and women, as well as their families and veterans, could be of considerable benefit if established for United Kingdom armed forces.
However, there is a “but”. What makes credit unions unique and makes them work is their independent spirit. They are created by the people for the people, offering products that their customers want because their customers are also their members. Typically, credit unions grow steadily and organically from small beginnings, normally taking many years to cultivate their membership. To give one example, the Glasgow Credit Union was founded by two members in 1989 as the Glasgow District Employees Credit Union. In the following 25 years, it grew to a membership of 32,000 and now has some £100 million in assets. Although this is an excellent example of localism in action, it demonstrates the time that it can take a credit union to develop proper traction and critical mass. Also, it would not be in the interests of anyone—the taxpayer, UK financial services or credit union members themselves—to try to shoehorn an institution of this kind into a Whitehall Department. The organisation of credit unions has always been, and must continue to be, the remit of the private and voluntary sector. It is no small undertaking to establish one.
Gemma Doyle
Could the Minister explain, therefore, why the Department for Work and Pensions has put aside £38 million to support credit unions, because that does not seem to sit with the point he has just made, namely that supporting credit unions is not the business of Government?
Mr Dunne
The Government are keen to support the development of credit unions but we are not keen to be the operator. The funding is available to provide support. I am not familiar with all the detail about what the DWP funding has provided, but I can certainly look into that matter and write to the hon. Lady if she would like clarification. Nevertheless, as far as I am aware, it is not the business of the DWP to establish credit unions. I think that it is providing support for existing or start-up unions being established around the country on an initial basis, effectively like providing start-up funding for a business.
Mr Thomas
Of course the Minister is right that one would not want a military credit union to be run by the Secretary of State for Defence, or even by a talented junior Minister such as himself; one would want it to be run by its members. However, what the Ministry of Defence could do is help to facilitate the establishment of such a credit union and a feasibility study that was specifically focused on what role the MOD might play to help to achieve that objective.
Mr Dunne
Indeed, and not for the first time the hon. Gentleman is pre-empting just what I am coming to in my remarks; he is very prescient.
It is important that any organisation that undertakes the establishment of a credit union does so with its eyes wide open and is aware of the risks that might be involved. From our perspective, in the event that we were to provide support for an organisation, we have some responsibility for the savings of service personnel, to ensure that those savings are in an environment where they will be properly stewarded, managed and regulated. That said, we are minded to support any suitable organisation with the wherewithal to put in place a credit union to support the men and women who serve in our armed forces.
To that end, I will update the House on where the Department has got to in the discussions that were identified by the hon. Gentleman in his remarks. The Department has already brought together relevant parties to form a working group to look at precisely this issue. It includes the DWP, the Treasury and the Association of British Credit Unions Limited, as well as service charities such as the Royal British Legion and the three service benevolent funds. A number of those stakeholders were present at meetings hosted in January and February by the MOD. There was broad support for the credit union concept and a number of parties expressed their willingness to become involved, but unfortunately at that time none of the individual charities stepped forward to take the lead. Subsequent to those meetings, however, we have had further approaches from some of those organisations that attended them. ABCUL, which was referred to earlier, has been in touch and it has indicated that it is keen to take these discussions forward. We, too, stand absolutely ready to do so.
The hon. Gentleman has asked repeatedly about the prospect of the MOD funding a feasibility study into a military credit union. We are of a mind to support one or more organisations that wish to take the lead in investigating the feasibility of a credit union, but we do not think that it would be appropriate for us to take the lead. As and when an organisation steps forward, we are willing to work with it on how we can best support the establishment of a credit union, but we think that actually establishing a credit union would be best done by an organisation that is already one of those we have been talking to and that is already embedded with relationships with service personnel and their families.
Mr Thomas
I want to understand exactly the Minister’s point. If a charity or a credit union were to come forward saying that it believes it has the capacity or interest to provide such a dedicated military credit union and to get it up and running, would there potentially be the prospect of support in financial terms as well as in the crucial area of payroll deduction for a military credit union?
Mr Dunne
I am not in a position to commit the Ministry’s budget here and now. What I am willing to do, as I think I have already indicated, is to offer further support to explore the possibility of establishing a military credit union. If an existing credit union felt that it had the resources and the experience to bring to bear, that would be a very positive development; equally, if an existing service charity felt that this was an area that it wished to explore, that would also be very welcome. I am not closing the door to providing assistance for a feasibility study, but I will not commit at this point to conduct one without knowing to whom I might be making such a commitment.
Jim Shannon
Further to the point made by the hon. Member for Harrow West, I have a question. My hon. Friend the Member for North Antrim and I suggested that, by making payroll deductions during a five or 10-year period, we could build in the moneys that would be needed, while being ever mindful that it is a credit union that is being established. Would such a scheme be part of the feasibility study?
Mr Dunne
The subject of payroll deduction has been raised by a number of hon. Members. We make payroll deductions in certain areas. Insurance services were specifically mentioned as possible services for a credit union to provide and it was said that a payroll deduction might be a way of helping to fund insurance premiums. We already make such deductions for armed forces personnel. We have a payroll deduction scheme that is financially supported by the Government, over and above our merely facilitating contribution payments. That is to ensure that life insurance is available to armed forces personnel who are on operations, irrespective of their role. That is a specific product that is funded through payroll deduction.
Mr Thomas
I am grateful to the Minister for what he just said on that subject. However, may I specifically ask him whether the MOD now accepts that if there were a credit union that it had confidence in regarding the ability to provide financial services to armed forces personnel, it would be willing to facilitate payroll deduction for members of the armed forces to join, contribute to and pay into such a specific military credit union?
Mr Dunne
Again, we are talking about quite a number of hypothetical steps here. I am certainly willing to say that if we get into discussions with a serious, credible entity that is willing to establish a credit union, we can consider the possibility of payroll deductions as one means of providing either interest payments or investment through the union’s savings products. However, in the absence of knowing which party we would be dealing with and the suitable structures that would be placed around it, I cannot commit to do that.
The hon. Gentleman will appreciate that military payrolls are not a uniform or simple thing. The issue strays rather beyond my departmental responsibilities, so for me to commit other Ministers and other elements of the Department to things about which I am not expert would be career-inhibiting. I will not do that, but I certainly undertake that, if we pursue discussions with the credit union, the issue can be on the agenda.
Mr Thomas
I would not want to limit the Minister’s career in any way, given how helpful he has been in this debate. On payroll deduction, I gently suggest to him that the NHS has some equally complex systems, and many parts of the NHS are able to do it. My last specific question is whether he is willing to commit to asking the relevant Minister—I appreciate that he is filling in today—to meet ABCUL, Plane Saver and me. Those organisations think they might be in a position to offer a credit union service now, before a dedicated military credit union is established.
Mr Dunne
The hon. Gentleman referred to Plane Saver before, and I am not aware that it has directly approached us. We have clearly had an approach from ABCUL. It participated in meetings earlier this year and wrote again last week, perhaps prompted by sight of this debate. I am confident that the Under-Secretary of State for Defence, my hon. Friend the Member for Broxtowe (Anna Soubry), who has responsibility for defence personnel, welfare and veterans, would be willing to meet the hon. Gentleman and ABCUL. If he wanted to bring Plane Saver along, it would be welcome, too.
The hon. Gentleman asked some specific questions about the promotion of credit unions within military publications. Were the credit union to be established with support from the military, it would be more than welcome to take space in the military publications. I cannot, however, commit to the charging basis on which that space would be available; that would be a matter for the normal procedures for each publication. He asked whether we could institute a ban on payday lenders advertising in military publications. This Government are not in the business of prohibiting freedom of speech. Payday lenders might be unethical, but they are not unlawful, so we should not ban their adverts. We should, however, look to support the credit union going forward.
The hon. Member for Strangford (Jim Shannon) asked whether we could underwrite a scheme, but I have to disappoint him. The Ministry of Defence budget might appear to be large, but it appears from the inside to be somewhat constrained. We have to devote our budget to our front-line duty, which is protecting the nation. We are willing to provide opportunities to access military publications and that kind of thing, but we are not in a position to underwrite a financial offering to our personnel.
Jim Shannon
I also asked the Minister about giving advice to soldiers and serving personnel on how best to manage their money. I said that, often, those who did not have the level of income they currently have found managing their money overawing. Has offering that advice been considered?
Mr Dunne
Indeed. The hon. Gentleman raised the role of the Money Advice Service, which we established two years ago, and I am grateful that he gave it a positive endorsement. The advice is proving effective and, as the hon. Member for West Dunbartonshire said, the number of people taking advantage of the service in its first two years demonstrates that there was a need for it. We think that it is being delivered in the right way. I also thank the hon. Member for Strangford for the advert he gave to Armed Forces day this summer and the celebrations that will take place in his constituency. I wish them well.[Official Report, 28 April 2014, Vol. 579, c. 7MC.]
I conclude by confirming that the Government support the notion of establishing a military credit union. We are in active discussions with the credit union trade body and the service charities. I have indicated that we are willing to commit the Minister to meet them again, with the hon. Member for Harrow West, who takes such an interest in this matter. In closing, I encourage all parties with an interest in developing this kind of financial service for our armed forces personnel to get together, to pool resources and to try to find a way of making it happen.
Fairness in Pension Provision
(10 years, 1 month ago)
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Mr Brian H. Donohoe (Central Ayrshire) (Lab)
It is good to see you in your place, Mrs Riordan. You, too, have a great interest in pensions, in the fairness of the system and in applying that fairness.
Since I was a very young person, I have always accepted that pension provision is part of deferred income and should be treated by employers and Government as such. All my life, I have believed that fairness should be applied to the whole question of pensions. At the bottom of this debate in many respects, however, is the unfairness in the application of the state pension scheme over a great number of years. I commend the Government for some of the changes to the scheme, making it much simpler than it was, but there is still a long way to go in terms of how we see the future for some elements of the situation. I will cover that later.
I come before the Chamber mainly because of the many constituents who came to see me to complain about the system. None of the three I will mention is after anything for themselves. They all accept that they are at an age when nothing further can be done for them, but by making themselves available to public scrutiny they want to help and protect those who follow to have a more level playing field.
I want to talk first about Ann Aitken, a constituent of mine for some time. She, as well as the other two, has worked since she was 15. She worked for ICI locally in various jobs, and then went to a knitwear company. She took five years off employment to bring up her first child and afterwards worked in shops and factories, before going to a local computer company, Fullerton Fabrication. Since then, she has worked in Crown Paints for some 22 years. She retires this Thursday, so I congratulate her.
Ann wants to bring to the attention of the House what she sees as an anomaly. Over that whole period, she never put her hand out for any form of Government assistance, other than the credits available for the times off she took. That would be in connection with the additional state pension. She is a friendly person and, from talking to her friends, has discovered that her additional state pension is less than that of someone who has never worked. She receives something like £16.22 for the additional state pension, while others she knows receive £21. Although she took five years off, she got no tax credits, because no such thing existed, yet she is now facing the penalty. She has a simple question: what reward was there for her working? What reward has she had for all the years that she has given? She hopes that her situation will not be repeated in future. That is what Ann is concerned about and why she has raised the issue with me.
The second person I want to talk about is Jean Dickson, another constituent who has come to me about her position. She worked from the age of 15, for all her days. Sadly, she lost her husband in 1998, and was grateful for the widow’s pension she received as a consequence, but she has worked all her days, even taking five years out to improve her educational standards. Latterly, she was employed as a nurse in an acute surgical area of the hospital. She, too, says, “Look, I have a state pension, and I am very grateful for it”, and it will be £566 per month. In addition, because of the occupational pension, she is receiving £240 per month before tax. As a result of her husband having a pension, she receives another £300 per year. As a consequence of the unfairness that I will cover in the latter stages of my presentation, she receives £166 per annum for the state earnings-related pension scheme, SERPS. In her last job, she paid 6.5% of her pay towards superannuation, so she still feels that there is injustice in her situation. She retired in October 2012, but is being penalised for working all her days, compared with those who perhaps were not.
The third case is that of Lawrence Clark, who came to see me and whose case particularly caught my imagination. He started working at the age of 15, similarly to people such as myself and my colleagues—he is of our age group. He started as a trainee accountant at Hyster, a local company, and went on to work for various companies, including Simpson Turner as a toolmaker. He moved on to Wilson Sporting Goods, another local company, where he worked for 25-odd years. He then worked for Digital, a local company that went bust, and for Scottish Golf Cast, which again lasted a few months. He ended up at the charity Quarriers for 15 years.
After that working life, he has managed to accrue £97 a month from his Wilson Sporting Goods occupational pension and £223 as a consequence of his work at Quarriers. In addition to that, on the basis of advice he received—another point I want to address in my conclusion—he paid towards a private pension that gives him something like £14 a month. From November 2015 he is going to receive a state pension of £123 a week. He is saying that, after 47 years, as a consequence of all that, as well as of being unemployed—if that is the right terminology for him—up until that point next November, he gets £60 a week for his pension credit guarantee, whereas others are apparently receiving £140. If he had not paid something like £30,000 into a superannuation scheme, he believes that he would currently be better off per week until he retires. That seems very unfair, and it should be looked at. He thinks that, had he not taken out a private pension or been involved in superannuation, he would have been better off. That is the unfairness that those three constituents believe they face.
I have outlined three cases in which there are problems with the pension provision directly, but we can also compare other aspects of the life they have lived with those of other people. Others have had free dentistry, free prescriptions for glasses, and housing benefit has been part of their scheme. The situation may have changed in Scotland now, but some people had to pay for their prescriptions all their lives. I am not saying for a minute that it is wrong that unemployed individuals are receiving these elements, but those three constituents say that perhaps more concern should be given to how they deal with the situation and how the Government deal with their problems.
On that basis, I want to broaden the argument. That is the difficulty for each of those individuals, but the position is more general too. The problem is that the great mass of people in this country do not have a clue, when they are aged 25, 35 or 55, about what provision they are making. They do not know what the result of their contributions will be for their pension. This issue has plagued me over the years, and it still does. Even here in the House, there are hundreds of Members of Parliament who do not have a clue what their pension provision is, and I say that as someone responsible for trying to educate them about that. It is clear that there must be a fundamental shift—information must be provided to every individual in this country to make them aware of the provision and advice available.
I commend the Government, because at the very least, and on the basis of all-party agreement, we now have financial advisers who are independent—in every sense of the word—in the advice they are giving. It used to be that financial advisers worked for companies on commission. The same individuals now charge for their services. That, at the very least, is a bit fairer, or gives the impression of being fairer.
Mr Jim Cunningham (Coventry South) (Lab)
I certainly remember the early ’80s when people were encouraged to take out a private pension, but unless they worked for a reputable company it was not explained how a private pension could sometimes affect the state pension. There must be thousands of people in that situation in this country. Whatever my views about the Government’s pension proposals, at least they will explain them to people. When I worked at Rolls-Royce, it spent a lot of money trying to persuade us away from the state pension to a private pension scheme and to some extent we got reasonable advice, but I can think of other car companies in the Coventry area where even today there are still problems with pensions.
Mr Donohoe
My hon. Friend has focused on an issue that was dear to my heart and about which I argued forcefully when a previous Administration allowed people to contract out of their company’s superannuation scheme. I was a joint secretary of the Scottish Transport Group when, for the first time in about 1982, people were given the opportunity of opting out of its pension fund and going private. I argued forcefully with everyone and anyone that that was a big mistake, that they were leaving themselves open and that when they eventually retired they would find themselves in a different situation. We had what was recognised at the time to be the best pension scheme—perhaps not as good as that for MPs, but certainly a very good pension scheme. Some people are now in a worse position because they were pounced on by supposedly independent financial advisers who told them that they would be far better off in a private scheme, when the truth was the exact opposite.
Many years ago, I was a convener and shop steward in a shipyard where the blue-collar workers were not in a pension scheme. I argued with the employer and succeeded in persuading them to introduce a scheme. That company is still in my constituency and I still have people telling me, some 40 years later, that it was the best thing that was ever done and that they have never been better off after taking advice and voting overwhelmingly to join that scheme. I do not know whether I am an anorak in terms of pensions, but I believe that making provision for a pension is more important than anything else in life. People should understand that, and do so earlier.
I seek clarification on one or two points, but I want to make a plea to the Minister. How widely defined are “employees” and “new arrangements”? Are the self- employed, carers and the unemployed included? They exclude zero-hours contracts and people who may have two part-time jobs. That is unfair and should be looked at.
I have grave reservations about the new scheme because people will be able to take out money and go on a world cruise or buy a Ferrari. That worries me. It will send the signal to many people who do not understand pensions that they can draw on that money, but at the end of the day they will be a lot worse off. I want an assurance that they will be protected. Financial advice is important, and that must be stated clearly.
A business man came to me and said that every business man in the UK received a letter from No. 10 Downing street telling them about the advantages of the latest Budget proposals on national insurance from 6 April. Will the Minister have a word with No. 10 Downing street to see to it that every single person in the country is sent a letter telling them how fundamental it is for them to look after their old age, and telling them that if they were to die in service, that would be looked at as far as their families are concerned? If I get that assurance, I will go back to my constituents and tell them that the debate has been worth while. I look forward to hearing what the Minister has to say.
The Minister of State, Department for Work and Pensions (Steve Webb)
I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing the debate. We have a common interest in quality pension provision, fairness and making things simpler for people. I entirely accept the premise that we have allowed the pension system to become bafflingly complicated. I entirely accept his point—not only do not all of our colleagues understand the pension system, but why should a member of the public understand contracting out, guaranteed minimum pensions and all the rest of it? A central drive of the state pension reform—I am grateful to him for his positive comments on that—is to sweep a great deal of that away and to have a single, simple, decent state pension set at a rate that people know. They will get that pension for 35 years in the system, contributions or credits, with no contracting out and no differences if they have been in a company scheme. That is the world that we are moving to.
Clearly, the hon. Gentleman’s constituents have spent their working life in a very different world. I want to say a word about one of the reasons why some of them—without full details it is difficult to comment on individual cases—might be getting less state pension than their neighbour. They might think that that is unfair, but it may not be unfair, because there is something else going on that they are not really aware of, namely the whole business of contracting out, which is about to be abolished. A number of his constituents, whom he mentioned by name, worked for firms that had a workplace pension scheme.
Under the principle of contracting out, the operators of the scheme, not the individual, decided that the scheme would be contracted out of the state earnings-related pension scheme. As a result, the scheme would pay less national insurance and, crucially, the hon. Gentleman’s constituents would pay less national insurance than their neighbours who worked at a factory that was not contracted out. Imagine there are two factories side by side, one of which has a company pension scheme and the other of which does not. At the factory with the company pension scheme that chooses to contract out of SERPS, all the employees in the scheme pay less national insurance than the employees at the factory that does not have a workplace pension scheme.
Mr Donohoe
I am not talking about the person who is in another scheme; I am talking about the person who is in those schemes and who has everything coming their way, but who has never contributed anything to it. It is important to stress that I am not saying that we have to reduce the amount that they live on. I would not live on £130 a week, and I doubt whether the Minister would. The fact is that the situation is seen as unfair. If the new scheme will overcome that problem, it is a great idea.
Steve Webb
It will to some extent, for reasons that I will explain. When an individual is contracted out, they will receive a smaller state pension than they would have done, because they are building up only a basic state pension, not SERPS. However, they will not get a smaller pension than they would have done, because the company promises to match the SERPS pension that they would otherwise have received. When somebody retires and says, “I am only getting 16 quid of SERPS”, what matters is not the SERPS figure—in a sense, they might be getting zero SERPS—but the SERPS figure plus the occupational pension promise together.
Steve Webb
They have paid for it, but they have also saved by paying less national insurance. I take the hon. Gentleman’s point about people who have not worked, and I will come on to them. In a world of contracting out, if person A pays less national insurance but still gets the same pension as their neighbour who was not contracted out, that would not be fair either. Fairness has a number of dimensions. The fact that someone has a £16 SERPS pension does not tell us anything in isolation; it depends on whether they paid less national insurance than their neighbour for years and years, which is why they have got a lower SERPS pension, but they have got something else instead. That is part of the system.
The hon. Gentleman asked about the position of people who have done nothing, and I often hear from pensioners who say, “Why did I bother saving? If I had done nothing, I would have got everything.” Part of the point of the single-tier pension is to set the value of the state pension above the basic means test, not 30-odd quid below, where it is now. Automatic enrolment then takes people further above that figure. As a result, because they have saved, they are clear of the means test and they are better off than someone who has done nothing. That is a new feature of the new system, because we are trying to address that point.
The hon. Gentleman has said that people who do nothing get stuff for free. He is not saying that poor people should not get stuff for free, but we cannot have it both ways. If we think we have to look after people who have got nothing, and they get free prescriptions because they have no money to pay for them, we cannot then say, “But that is not fair to people who work, because they do not get them for free.”
Steve Webb
Well, temporarily they do. Unless we give everybody everything free, we must recognise that we sometimes do things for poor people because it is right to. Inevitably there will be an element of people who work and think, “It is not fair; I do not get that free.” However, as part of a civilised society I do not want people who have no income to be unable to afford medicines. That is just the way it is. If we give everyone free prescriptions and free everything, we will just tax everyone to the hilt. I understand what the hon. Gentleman says, and the new state pension system will start to address that point by setting levels of pension above the basic means test.
Automatic enrolment will be a huge step towards pensions for the millions of people who may never understand them, because the firm chooses it for people, puts them in for it, and puts money in. We put tax relief in, and people are free to opt out. Nine out of 10 are staying in, which is fantastic. Just as the hon. Gentleman got the pension scheme extended to shipyard workers, as I think he said, we are extending pensions to 10 million people, many of whom are low paid or part-time—many will be women or people on the edge of the labour market, and they are just the sort of people who would not otherwise have had a pension. That is a huge step forward in the spirit of what the hon. Gentleman achieved for his constituents all those years ago, and it will bring millions more in.
The hon. Gentleman asked about the scope of auto-enrolment. It is about employment and an employment relationship. There must be an employer to pay the employer contribution. The self-employed are not in auto-enrolment, but they do well out of the new state pension scheme, because at the moment the self-employed class 2 national insurance builds up only the basic pension, not the SERPS bit. In our new world, there is no distinction—there is just the pension; so every year in which a self-employed person puts in, in future, will be more valuable than now. That person will be building up 35ths of the whole pension, not 30ths of the basic state pension. So the self-employed will get better provision.
Carers, unless they are in a contract of employment, will not be auto-enrolled, because there will be no employer to put them in a scheme. However, they will be credited into the 35 years of full single-tier pension, so a carer will build up, every year, a 35th of the £144 pension—or whatever it will end up as. There is provision for carers in the new system.
Most people on zero-hours contracts work 20-odd hours a week, and as long as, at some point, they trigger auto-enrolment—as long as they earn above the threshold, ever—they will be put in. If I am on a zero-hours contract and work zero, zero, zero, zero, and then 20 hours over a pay period and go above the trigger, my employer has a legal duty to put me in. There are complexities about waiting periods and the rest, but the basic principle is that I must be put in once I am over the trigger. Once I am in, if there is a week when I have no earnings, of course no money goes in; but if there is a week when I do have earnings, money goes in. I do not fall out of the pension. Once I am in, I am in. Auto-enrolment happens once. It is triggered by earning above the threshold once in a pay period.
Mr Jim Cunningham
My problem with what the Minister has said about zero-hours contracts is that surely a situation is possible in which someone falls below the threshold because there is not continuity of employment. That is a “suck it and see” situation. How would the Minister deal with that, 40 years down the road?
Steve Webb
A zero-hours contract is a contract. If someone has a contract of employment, in the weeks or months—whatever the period is—when they are above the earnings threshold, money goes into the pension. We will not insist on pension contributions being made in weeks when people do not earn any money. How would they put money in?
I think the zero-hours contract argument is greatly overdone, in the sense that the typical person on a zero-hours contract does 20 hours a week, on average. It may vary—when they earn a lot in a good week, they will put a lot into the pension; when they earn less, in a bad week, less will go in. As long as they get work through the contract they will be in a pension, possibly for the first time. I think that many people on zero-hours contracts will do better, because employers would not generally have put them in a pension at all. We are making that happen.
As to people with multiple jobs, a small number of people have jobs that, taken together, would put them into the system, but, taken separately, do not. Sometimes they will have children, and if they do they are credited in the state system anyway. Only 35 years of contributions are needed for a full pension, so someone might not make contributions for a number of years and still get a full pension.
The House of Lords, in about half an hour, I think, is going to talk about the issue in the debate on the Pensions Bill. We will gather more data on it. We think the issue is small, but clearly we need to ensure that we know what is going on. The number of women, for example, doing multiple part-time jobs went down in the past 12 months, so we do not think that the assumption that the numbers are all going up and that it will all get worse is borne out by the data. However, it is a serious point and we will look into it.
The hon. Gentleman is right that people often do not have a clue. It would be lovely to think that one letter from Downing street would fix things. I have two views on the matter. We need to make sure that pensions work for people who do not get it and never will, because with the best will in the world, expecting tens of millions of people to understand all this stuff is a heck of an ask. For me, we have to make sure that the system works for people who do not understand it and do not make active choices. That is where the state pension reforms come in.
Steve Webb
We look at lots of different ways of communicating with people. The thing that we know most of all is that if we opt people in to pensions and they have to opt out, they stay in. We could have hand-printed 1 million booklets—I could have delivered them and sat down for half an hour with each person, and I would not have persuaded them. We have used the power of inertia and what we know about how people behave to get them in as 1 million Government advertising campaigns would never have done.
We are going to include financial education in the national curriculum. That is a good thing. Under the Budget measures that the hon. Gentleman referred to, people will have a guidance guarantee, so before they make their choices, they will have the right to a face-to-face conversation with somebody who is not trying to sell them anything, as he said. It is not independent financial advice—they can pay for that separately if they want; it is just a conversation that they have never had a right to before that will enable them to make informed choices. If they want to spend some of their pension money up-front, it is their money to spend, but we are making sure that there is a state pension system in place, so that even if they underestimate how long they will live—blow the lot, or whatever—they will have that floor of the state pension above the means test that they do not currently have.
I want to mention something else that may be of interest to the hon. Gentleman’s constituents who reach state pension age under the current system. We are allowing people to top up their state pension if they want to. If someone has a bit of savings and they want to pay voluntary national insurance, under a new category of national insurance for people who have already retired, or who will do shortly—we are calling it class 3A or the additional state pension top-up—they can pay national insurance and get an extra pension for the rest of their life. That will be index-linked. There will be survivors’ benefits if they die. We think that will appeal to a set of people who perhaps have very low interest on their savings currently and are getting nothing in the bank. From October 2015—there are helplines, websites and all the rest of it—they can make additional contributions and enhance their pension if they wish. That is another option that we have created for today’s pensioners.
The hon. Gentleman mentioned the guarantee credit. The constituent that he mentioned, if I understood him correctly, is above women’s state pension age, so qualifies for pension credit, but has not reached men’s state pension age. Clearly, in that period, we are saying to people who have no other income, “Here is an income that we think you need to live on, but if all you have is half of it, we will top you up to the full amount.” In theory, people could have nothing at all and get the full amount, which I think was the point that he made.
However, bear in mind conditionality on benefits. We do not allow people just to get jobseeker’s allowance for doing nothing all day. In a different debate, his colleagues might be saying to me, “We are far too strict with these folk. We are sanctioning them when we should not be”—and all the rest of it. The rules are pretty tight, so the option of sitting at home all day and doing nothing, and getting credits for a state pension, is one that we are essentially eliminating. People get credits for their state pension and so on only if they are actively seeking work, applying for jobs and doing the things we expect them to do. We do not have the system whereby people can just do nothing and then cash in. There are an awful lot of conditions and requirements on people receiving benefits.
We have tried to recognise that the system has been fiendishly complicated in the past—we accept that—and to simplify it so that it is simpler and fairer, particularly to older women, many of whom have done very badly out of the system. We have tried to ensure that everyone is in a workplace pension as far as possible and that that is good quality and good value, and to put new freedoms and guidance alongside that. I hope that, as a result, we will have a much fairer system in the future than we have had in the past.
Business Lending
(10 years, 1 month ago)
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Andrew George (St Ives) (LD)
It is a great pleasure to have secured this important debate, Mrs Riordan. The issue has been pressing for many businesses in my constituency, and it has been raised on a number of occasions by me and by others in the House because of concern about the change of relationship between businesses and what used to be trusted advisers and supporters in banks. Now that relationship has changed—I hope not irrevocably, but many people fear that it is irrevocable—because of the way in which banks have treated small businesses in recent years.
Banks should be business-friendly, but the evidence is that they have behaved like parasites and engaged in sharp practice by mis-selling complex interest rate hedging products or hidden swaps that they will have known were massively to the detriment of the small businesses that they flogged them to. Instead of doing what small businesses do well and what the Government, those on the Government Benches and others who support the Government want businesses to do, which is to grow the economy and create jobs, thousands of small businesses have been held back and others put out of business altogether. But their being put out of business suits the banks in these circumstances, because every company that they lend to and that they can drive into administration has assets that they can sell and becomes a company that, conveniently, cannot seek redress from the bank, particularly in the current climate.
Mr Mark Williams (Ceredigion) (LD)
I congratulate my hon. Friend on securing the debate. In his analysis of this problem, is he of the view that the banks were clearly targeting specific businesses—asset-rich businesses? I ask that because my experience in my constituency is that the hotel sector, people owning property, property management companies and, above all else, the farming sector were really hard hit, particularly in the sales of unregulated tailored business loans.
Andrew George
My hon. Friend makes a very acute point. It does seem to me that in the many cases that I have taken up—no doubt he has done the same in his constituency—there were these rather dodgy business loans and, of course, the swap agreements embedded in them. That is the critical thing. There do appear to be very significant assets within the businesses themselves, and no doubt that will have guided the banks as to which businesses to offer the loans to.
I gave my hon. Friend the Minister at least some notice of the areas that I would be covering. In particular, I would like to ask her how the Financial Conduct Authority can justify the exclusion of at least one third of the companies that were being looked at and that were mis-sold these products because they are deemed by the FCA to be “sophisticated”. What was the basis for that—in my view, it was an arbitrary basis—and how can it be challenged?
What view do the Government take of the reasonable claim, in my view, by companies to which the mis-selling of these products has caused detriment that they could seek redress for “consequential loss”? It is suggested that some banks are seeking to reinterpret the law in this area, so that it is difficult for those companies to pursue consequential loss.
What happens to those businesses that were in effect forced into administration or liquidation by the mis-selling? At present, they appear to have no redress at all. Surely that cannot be right. I hope that the Government will encourage the FCA at least to have that matter looked at again.
Does the FCA review and redress process take into account or exclude the matter of “ongoing facilities” provided by the banks—the ongoing facilities that are made available through the banks?
Will the Government now authorise an inquiry into the sale of all hidden swaps—the tailored business loans, the embedded swaps and so on—sold to small and medium-sized enterprises by the banks since about 2001? That is when this pattern of activity was identified.
This is a separate but no doubt related point. What assistance is there for entrepreneurs who are trying to secure a mortgage, or even complete a rent check, for a home now that the self-certification system has been scrapped? Many small businesses and, in particular, new businesses that are starting up—we want to encourage people in those businesses—cannot secure a loan to advance their business.
I fully appreciate that the Government have made significant strides in recent years with the establishment of the business bank, the enterprise finance guarantee scheme, the enterprise capital fund, funding for lending, the growth accelerator and many other initiatives, which have been significant and helpful to the business sector. I certainly hope that those will prove to be a success in the months and years ahead. My primary focus today, however, is that we still have a legacy of a problem, which ought to be erased from the business lending environment. I hope that when the FCA completes its review process, it will ensure that the banks engaged in such shoddy practices are brought to book as quickly as possible, so that the companies that have suffered detriment may resolve their redress equally quickly.
Inevitably, I come at the problem from the perspective of my constituency, so I probably need to paint a picture of the west Cornwall and Isles of Scilly constituency of St Ives. Not only is it the most attractive constituency in the country, but it has a large number of very small businesses. There are no major companies—no car plants, refineries, major manufacturers or head offices of multinational companies, as there are in many other constituencies—and there are instead about 7,000 enterprises. That figure depends on how we define a small business, but certainly includes sole traders and medium-sized enterprises. They are multifaceted and many-talented businesses; they not only throw pots and manage satellites, but engage in basket weaving and international website design, and they include hoteliers, caterers, bakers, farmers, fishermen and fishmongers.
In order to be successful, as well as having to work extremely hard, the people in those businesses often have to have many other talents, such as in marketing, customer care, bookkeeping, or IT and other skills. Few of them, however, are financially sophisticated. Most of them used to assume that they could trust the bank of which they had loyally been a customer, in many cases for decades, before they were mis-sold those products. Surely banks are there to help. Do banks not have a shared interest in businesses succeeding? Surely banks would not engage in sharp practice or sell a small business something that they knew it would regret. I am afraid to say, however, that I and many other Members have seen that that is simply not the case.
The banking sector seriously let down small businesses and completely demolished any of the trust that used to be fundamental to the relationship between them and their banks. Would the banks do the same to Tesco, BP or Unilever? Of course they would not, and we know that they would not; they are simply taking advantage of small businesses. The banks know that small businesses do not have the sophistication, and that they can run rings around them, bullying them into the kind of agreements that put some of the businesses out of business and left many of them struggling to survive. I have taken up many cases, as other MPs have done, and my eyes have been opened to the shady dealing.
Colin Phillips of the Coasters tea shop in St Ives, for example, was recently put out of business by that bank practice. He saw his business sold from underneath him, without any consultation, after he was mis-sold a loan by Clydesdale bank more than five years ago. There are many other examples, which I could name, as well as some I cannot name. They have been devastated and damaged by the banks in that way. One company, Seasalt Ltd, was started in Penzance in my constituency in 1981 by Don Chadwick and is now run by his three sons, Leigh, David and Neil. It is a successful UK company. It is the first business ever to have its clothing certified by the Soil Association and it has won the Queen’s award for sustainable development, making it the first fashion company to do so. It has been very successful, it has won many awards and it is growing.
However, Seasalt could have grown a great deal more. It entered into a five-year interest rate swap agreement for £805,000 in April 2008 with HSBC. I am told by Leigh Chadwick that the company did not have a choice about the swap; it was a condition of the loan that it took the “interest rate protection.” The bank failed to make proper inquiries to ascertain the company’s level of knowledge and understanding of the risk inherent in the IRSA. The company was led to believe that interest rates were going to rise. Although the company had never previously taken a fixed-rate loan, the owners wrongly thought that HSBC, its trusted banking partner for 17 years, was acting in their mutual interest; otherwise, the owners thought, why would it be making a swap agreement a condition of a loan?
At the time, there was significant equity in the business—that relates to the point that my hon. Friend the Member for Ceredigion (Mr Williams) made—and the company also had access to additional external funding. The swap agreement was unnecessary and the bank’s motive for making it a condition of the loan was profit, not risk mitigation. The cost of breaking the swap was never explained or illustrated. The bank knew that there was a possibility that the loan could be repaid early, and yet it of course made it difficult for the company’s owners to do so. It confirmed in writing that there would not be any early prepayment or early termination costs, which was wrong. The bank failed to disclose that the IRSA created a contingent liability that would affect the company’s credit line. The IRSA had a detrimental effect on the company.
The company complained in 2012, but HSBC has done its utmost to fight its claim, despite the strength of the company’s case. While the company is preoccupied with trying to get proper and just redress, it is of course not focusing on growing its business and creating jobs. It is an appalling waste of money for UK business, given that the Financial Services Authority found that 90% of the swaps had been mis-sold.
Mr Mark Williams
My hon. Friend gets to the nub of the issue affecting businesses that are within the Government’s redress scheme. The Financial Conduct Authority’s redress scheme is very welcome and it has led to resolution of some cases. However, I have constituents who have been waiting for more than a year now to have resolution. As he says, that puts a huge amount of pressure on their businesses, let alone the tailored business loans—the embedded swap products—that are not being considered yet.
Andrew George
I am sure that the Minister heard my hon. Friend’s comment and will take it into account in her response.
The fact is that Seasalt is still waiting for its interest swap issue to be resolved, more than 21 months since it lodged a complaint about it. HSBC has done its best, first, to resist the redress process and then to slow it down, although the company’s owners have been told that the matter will be reviewed by the end of next month.
This issue has unquestionably cost thousands of jobs. In the case of Seasalt alone, it has estimated that the cost to it is 20 jobs, which it could have created if it were not for the impact that this swap has had on a company of its size; we are not talking about a very large company. Not unreasonably, Leigh Chadwick asked me:
“When will criminal proceedings be brought…?”
The Tomlinson inquiry suggested that in some cases this matter should be a criminal matter. As Leigh asks:
“When will criminal proceedings be brought against the bankers who have perpetrated this fraud?”
Equally reasonably, Leigh makes the point that this issue needs to be related to the issue of bankers’ bonuses. He fails to understand how a business—particularly one that is, after all, taxpayer-funded—can continue to pay huge bonuses when it is making losses. He says that he is sure that the bank would baulk at renewing Seasalt’s facilities if it made a loss but started paying its owners huge bonuses in the process.
I fear that the process of establishing a decent relationship between businesses and banks may have changed irrevocably. Seasalt has said that instead of banks being trusted advisers to SMEs, their relationship is like that with an untrustworthy supplier. The Government, the FCA and other regulating authorities should look at whether the regulations need to be significantly stepped up. What are the Government doing to stop banks side-stepping the EU bonus caps? What steps are the Government taking to increase the FCA’s power and to ensure that it acts in the best interests of SMEs and customers, and not the service providers?
I could describe many other cases, but the Minister needs time to respond. I mentioned the difficulty that many small businesses in my constituency, particularly new businesses, face because of removal of the self-certification scheme for those seeking a mortgage. It seems wrong that businesses that are employing people cannot get a mortgage when their employees can. I hope that the Minister will look at that.
The relationship has clearly broken down. The banks have behaved very irresponsibly with sharp practices like parasites on small businesses. I hope that the Government will take the bull by the horns and ensure that the FCA drives the review process and that we get satisfaction for our small businesses.
The Economic Secretary to the Treasury (Nicky Morgan)
It is a pleasure to serve under your chairmanship this afternoon, Mrs Riordan. I thank the hon. Member for St Ives (Andrew George) for securing this debate. I am grateful for the opportunity to discuss this important issue. I know from previous debates that it is of great concern to hon. Members of all parties.
Towards the end of his speech, the hon. Gentleman mentioned the wider issue of the relationship between banks and customers. I hope he will understand that, if I do not tackle that broader subject, it is because I have only 12 minutes to deal with the matters he has raised. I am sure he will be able to apply for a further debate in this Chamber to explore those themes, but I have taken note of what he said.
The hon. Gentleman made a strong case on behalf of all the businesses in his constituency and others that have suffered from mis-selling. He referred to 7,000 small enterprises in his constituency, and I would like to start by assuring him that from the very beginning this Government have been clear that the mis-selling of financial products is unacceptable. We take extremely seriously the abuse that has taken place, and we are determined that any wrongs that have been inflicted on businesses should be righted.
Hon. Members will know that the Financial Conduct Authority’s review process was the subject of a Back-Bench debate on 24 October 2013 and focused on the speed of the review. The hon. Gentleman mentioned that in relation to a particular company in his constituency. My colleague, the Financial Secretary, noted that although the Government shared the disappointment at the progress that had been made then, we were confident that the review process would provide the correct level of redress for affected businesses.
I am pleased to say that considerable progress has been made during the intervening five months. All cases are now under review and almost half a billion pounds has now been paid to more than 3,400 small and medium-sized enterprises. I hope hon. Members agree that that is positive news and shows that the review is working.
It is worth noting that the majority of banks in the review will also now make an initial redress payment to businesses and then discuss consequential losses separately. I will return to consequential loss, which the hon. Gentleman mentioned. That will help those small businesses that have been at the wrong end of mis-selling to get back the money they badly need. I know from companies in my constituency that have approached me that cash and cash flow are tremendously important.
The FCA has published each bank’s projections for when it expects to finish the review process. All banks are expected to finish the review by June 2014, which is the month after next, with a number likely to finish before that date. I can assure the hon. Gentleman that Treasury Ministers and officials will continue to track progress closely against those projections.
The hon. Gentleman voiced concerns about the large number of businesses that have been assessed as “sophisticated” and therefore fall outside the scheme. The Government have been absolutely clear that businesses that lacked the necessary skills and knowledge to fully understand the risks of these products should receive appropriate redress. However, as the Financial Secretary made clear last year, we do not agree that all businesses should have access to the review. There needs to be a defined cut-off point where more sophisticated businesses take responsibility for understanding the products they purchase. There will have been organisations that took one of these products with a full understanding of the risks involved if interest rates fell. It is not for the Government to perform due diligence for such large sophisticated businesses. Any such action would weaken incentives for businesses to act sensibly when purchasing financial instruments, and I would be concerned that we could open the floodgates to any businesses that lost out from a financial transaction.
Andrew George
I am grateful for the Minister’s comments on that, but will there be an opportunity for appeal for those businesses? There will be circumstances in which businesses can show that this unregulated financial product was mis-sold and that they were misled through how the banks sold the product to them.
Nicky Morgan
As I understand it, the FCA has amended the sophistication test in the past few months. It started off with a broad test under the Companies Acts, and that has been refined. From a constituency case, I know that it is possible to ask the FCA to reconsider whether a business should be deemed to be “sophisticated”, but the FCA will ultimately make the judgment. Some push-back is possible, and there needs to be a defined cut-off point so that the right businesses are within the scope of the review.
I reiterate that the Government take extremely seriously the abuse that has taken place in many cases, and we are determined that any wrongs inflicted on businesses should be put right. I want a quick solution to the mis-selling of interest rate hedging products to allow the businesses to continue to operate and to contribute to the ongoing recovery of the UK economy.
The hon. Gentleman asked some specific questions. If I do not get to the end of them, the Financial Secretary or I will write to him on them. The hon. Gentleman asked about consequential loss and some banks, as he mentioned, seeking to reinterpret the law on it. Banks are required, where there is mis-selling, to provide fair and reasonable redress, and that means putting the customer back in the position they would have been in had the regulatory failings not occurred. That includes any consequential loss. The FCA has published guidance on consequential loss.
The hon. Gentleman asked what happens to businesses that are effectively forced into administration or liquidation by mis-selling. My understanding is that the FCA has confirmed that in those cases the administrator will take part in the review on behalf of the business. The business directors will be given plenty of opportunity to put their case on the sale of the hedging product. He asked about ongoing facilities, and I will have to write to him on that matter, because we have to check. I will return at the end to the self-certification regime, because it is slightly outside the scope of the debate.
Andrew George
I am grateful to the Minister for giving way once again. With those companies that go into administration, the administrator is in many cases acting on behalf of the creditors, including the bank. I cannot see how the administrator can in any sense represent the interests of the company seeking redress.
Nicky Morgan
The hon. Gentleman has raised an interesting point. At the end of the day, the administrator is there to get a fair deal for everybody. The directors of the business are given an opportunity to put their case on the sale of the hedging product to the FCA. The directors of the business, even if the business has gone into administration, will be able to put their case. In my business experience, in most cases, the administrator acts to get as much back for the business and the creditors as they can.
I turn briefly to embedded loans and hidden swaps, which the hon. Gentleman and the hon. Member for Ceredigion (Mr Williams) raised. The hon. Member for St Ives mentioned the difficulty faced by his constituent Mr Phillips and the Coasters company in relation to a fixed-rate loan, and I am sorry to hear about the problems that that caused. As the hon. Member for Ceredigion said, the FCA does not have regulatory powers over business loans, so its supervised review can cover only interest rate hedging products that were agreed separately from a business loan. The Treasury has secured a voluntary agreement through the British Bankers Association that banks will provide the same level of disclosure for features of fixed-rate loans, such as break costs, as for regulated interest rate hedging products. Most importantly, the banks will now ensure that break costs are fully explained and that worked examples are provided.
On self-certification, the hon. Member for St Ives asked about assistance for entrepreneurs who are trying to secure a mortgage. The Financial Services Authority conducted a wholesale review of mortgage regulation in the UK, the “Mortgage Market Review”, which was published in October 2012. The rules are to be implemented by the FCA before the end of this month, and as a result, lenders will not be able to offer self-certified or fast-track mortgages from 26 April. However, the FCA recognises that lenders should have flexibility to decide what evidence of income they can accept from self-employed customers, so it will be for individual lenders to decide what evidence they require as proof of income. I am sure that the hon. Gentleman appreciates that the new rules are being introduced in the context of wanting to ensure that we have stronger mortgage lending practices to avoid the problems that we have encountered in the past, which were caused by people borrowing more than perhaps they should have done.
On lending to small businesses, as the hon. Gentleman mentioned, the Government are determined to support small businesses and improve access to finance. The funding for lending scheme has provided incentives to banks and building societies to boost their lending to the real economy. Since the introduction of that scheme, bank funding costs have fallen to historic lows. As the hon. Gentleman said, there has to be confidence between businesses and their banks. That is why the major high street banks have put in place an independent appeals process that allows any business with a turnover of up to £25 million that is declined any form of lending to appeal against that decision, for any reason, to the participating bank concerned. Results show that, in the two years for which the appeals process has been running, in 40% of cases in which a decline was appealed against, a lending agreement with which both parties were satisfied was subsequently reached.
The Government announced in the Budget that the first results of a major new survey into how banks perform for small businesses will be published by the Federation of Small Businesses and the British Chambers of Commerce next month. Banks will be able to use the results to measure their progress towards becoming better banks for small businesses everywhere. The Government are very focused on that. We welcome that review, because we want to provide UK small businesses with a clear and credible way to judge how their bank compares with its competitors. We want Britain’s banks to do more to put Britain’s small businesses at the top of their priority list.
Hon. Members may know that the Government announced a package of measures designed to improve competition in the SME lending market, which included consultation on proposals to require banks to share more information on their SME customers with other lenders through credit reference agencies, levelling the playing field for challenger and non-bank lenders. Finally, the Government announced in the Budget that we would consult on whether to legislate to require SME lenders to release details of businesses that they reject for loans, so that alternative providers can discuss other options with them.
I am aware of the time, so I will conclude. I thank the hon. Member for St Ives for bringing this important issue to the House. I assure him that the matter continues to receive the highest level of attention from the Treasury and from Ministers more widely.
Question put and agreed to.
Written Statements
(10 years, 1 month ago)
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UK Coal
(10 years, 1 month ago)
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The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)
UK Coal is seeking investment, from various parties including the Government, to fund a managed run-down of its two remaining operational deep mines.
The future of UK Coal is primarily a commercial matter for the company. The Government are considering whether they can contribute to the private sector-led proposals, which aim to deliver a managed closure of the Thoresby and Kellingley deep mines.
I hope to be in a position to update the House on the outcome of these negotiations within the next 48 hours.
Returning Officers Indemnity Arrangements (European Parliamentary Elections)
(10 years, 1 month ago)
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The Minister of State, Cabinet Office (Greg Clark)
It is normal practice, when a Government Department proposes to undertake a contingent liability in excess of £300,000 for which there is no specific statutory authority, for the Minister concerned to present a departmental minute to Parliament giving particulars of the liability created and explain the circumstances; and to refrain from incurring the liability until 14 parliamentary sitting days after the issue of the minute, except in cases of special urgency.
This minute sets out the Cabinet Office proposal to indemnify returning officers and local returning officers in the forthcoming European parliamentary elections against uninsured claims that arise out of the conduct of their duties. We will also provide a certificate confirming that we will bear any employee liabilities of the returning officer or local returning officer which would otherwise be covered by insurance procured under the Employers’ Liability (Compulsory Insurance) Act 1969. Indemnities were previously provided by the Home Office in 2012 at the police and crime commissioners elections and—in more limited form—by the Ministry of Justice for the 2010 UK parliamentary general election and the 2009 European parliamentary elections.
European parliamentary elections will be held on 22 May 2014.
Returning officers and local returning officers are independent officers appointed by statute—see section 6 of the European Parliamentary Elections Act 2002, the European Parliamentary Elections (Returning Officers) Order 2013 and the European Parliamentary Elections Regulations 2004—and are separate from both central and local government. As such, they are personally liable for the conduct of the European parliamentary elections. They are therefore exposed, as a result, to a variety of legal risks and potential challenges. Existing insurance that covers returning officers and local returning officers in taking forward their statutory duties at local elections will not, in most cases, cover them in these elections.
In the light of this, Cabinet Office proposes to provide returning officers and local returning officers with a specific indemnity, where existing insurance coverage will not apply. We will also certificate returning officers and local returning officers under the Employers’ Liability (Compulsory Insurance) Regulations 1998 in respect of any liability to their employees.
Besides the elections on 22 May 2014, we also wish to cover liabilities incurred in any subsequent European parliamentary by-elections. Therefore this indemnity is expected to run until the day before the poll at the next European parliamentary elections for all Members of the European Parliament in 2019.
The precise level of the legal risk covered by this indemnity and likelihood of it arising are difficult to quantify. However, the level and value of claims arising in recent UK parliamentary general and European parliamentary elections has been very low. In the last 10 years the largest claim met under previous insurance and top-up indemnity arrangements for a national election was £24,035.75 at the 2009 European parliamentary election. Minor injury and damage claims met at national elections have amounted to less than £10,000 over the last decade.
However, it is not possible to rule out a more significant claim in future. If an election petition involving a returning officer or local returning officer went to full trial and ran for several days it is conceivable that the bill for legal costs could run into many £100,000s or more. It is also conceivable that there could be more than one occurrence associated with an election. This has, however, not happened in the recent past with other elections and is considered an extremely remote possibility.
The indemnity is therefore unlimited save for particular exclusions. It will provide returning officers and local returning officers with cover for:
Amounts excluded by the excess or that exceed the upper limits on any existing insurance policies held by returning officers or local returning officers, or local authorities on their behalf, that will provide coverage;
Any reasonable costs resulting from their liabilities to the public, as an employer and in their professional role.
The indemnity will have the following exclusions:
It will not cover any costs which arise in whole or in part from any deliberate or wilful negligence by a returning officer or local returning officer;
It will not cover situations where an existing insurance policy offers an alternative means of cover;
It will not cover any claim relating to the acts or omissions of a returning or local returning officer in carrying out registration duties;
It will not cover any claim relating to the use of a motor vehicle where such use does not relate to the conduct of the elections and/or should have been covered by a valid insurance policy but was not.
If the liability is called, provision for any payment will be sought from the Consolidated Fund. The Treasury has approved the proposal in principle.
I am aware that departmental minutes normally allow 14 parliamentary sitting days after the minute is laid for Members to scrutinise and object to the proposal if they wish. However, in this case there is special urgency as the elections will take place in less than two months. As returning officers are already preparing for these elections and need to continue to do so confident that they are covered in respect of those actions, the indemnity needs to commence immediately and cover retrospective claims, such as those arising from advice they may have already given.
Although in this case Members have not had the normal scrutiny period, given the urgency of the situation, I trust Members will understand that it was necessary to provide this indemnity to returning officers simultaneously with notifying Parliament.
This indemnity does not apply to the returning officer for Northern Ireland or the local returning officer for Gibraltar, who are indemnified or insured through separate arrangements.
Burma
(10 years, 1 month ago)
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The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)
I am making a joint statement with my right hon. Friend the Minister of State for International Development. Together we wish to inform the House that the Government are today publishing a summary of the UK’s activities in Burma.
The last three years in Burma have seen remarkable change. Burma is undertaking a complex transition: from an authoritarian military regime to democratic Government; from a centrally directed to a market oriented economy; and from decades of conflict to peace in the border areas.
British engagement has grown rapidly since Burma embarked on its path of reform. The Foreign and Commonwealth Office, the Department for International Development (DFID), UK Trade and Investment (UKTI), the Ministry of Defence (MOD) and the British Council are all now established and active in Rangoon. We work closely with the Burmese authorities, Aung San Suu Kyi and the opposition, civil society, businesses and communities to encourage a stable, democratic and prosperous Burma and to urge Burma to play a constructive role in the international community.
My visit to Burma from 28 to 30 January 2014 was an opportunity to see the positive developments since my first trip in 2012, and to urge progress on the many challenges which remain. In meetings with Government Ministers, the military, Aung San Suu Kyi, ethnic and community leaders, I underlined the UK’s commitment to supporting further reform, not least to address the many outstanding human rights concerns. As I made it clear in a speech at the British Council in Rangoon, 2014 will be a critical year for Burma—particularly for the prospects of constitutional reform and the peace process, both of which will be vital to Burma’s future. I also emphasised that Burma must take concerted action to tackle the humanitarian situation and the continuing inter-communal tensions, including those affecting the Rohingya community in Rakhine state in particular.
DFED has recently allocated an additional £5.8 million of humanitarian funding to help meet the emergency needs of both communities in Rakhine state, bringing the UK’s total allocation for emergency humanitarian work there to £12 million since 2012. In 2014, DFID has also allocated a further £8 million of assistance to Burma’s peace process.
We know there is considerable parliamentary interest and expertise in Burma, given the deep and historic links between our two countries. Today, therefore, the Government publish a summary of the UK’s activities in Burma, to set out as clearly as possible our main activities there. I will place a copy of this document in the Library of the House. It is also available on the gov.uk website.
Our main activities in Burma focus on democracy and human rights, tackling inter-communal tensions, peace-building, development, trade and investment, and wider international co-operation. They are carefully calibrated to ensure transparency, value for money and a balanced approach: our aim is to support reformers in Burma, while pressing for further progress on issues of continuing concern. The summary makes clear the strength and breadth of our commitment to this. The UK remains determined to play its part in Burma’s transition, to the benefit of all Burma’s people, its neighbours, and the wider international community.
Guardianship of Property and Affairs of Missing Persons
(10 years, 1 month ago)
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The Parliamentary Under-Secretary of State for Justice (Mr Shailesh Vara)
My right hon. Friend, the Minister for Justice, Lord Faulks, has made the following statement:
On 17 December 2013 the Under-Secretary of State for Justice, my hon. Friend the Member for North West Cambridgeshire (Mr Vara), issued a written ministerial statement—Official Report, column 92WS—announcing that work was progressing on a consultation paper on the possible creation of a status of guardian of the property and affairs of missing persons and that he would make a further statement in relation to the publication of the paper before the Easter recess.
The Government are committed to helping people who are put into the awful position of losing a loved one who has gone missing. I am today confirming that my Department is continuing to work with the charity Missing People and its pro bono lawyers Clifford Chance LLP to prepare the consultation paper and intend to publish it as soon as possible and in any event by the end of August.
State Opening of Parliament
(10 years, 1 month ago)
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The Leader of the House of Commons (Mr Andrew Lansley)
Her Majesty the Queen has been pleased to agree to open a new Session of Parliament on Wednesday 4 June instead of on Tuesday 3 June. The date will better facilitate arrangements for the ceremony and other events that week including the now planned G7 summit in Brussels, Belgium.
Interception of Communications Commissioner (Annual Report)
(10 years, 1 month ago)
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The Prime Minister (Mr David Cameron)
I have today laid before both Houses copies of the 2013 annual report from the Interception of Communications Commissioner who is appointed by me to keep under review the compliance by public authorities with part 1 of the regulation of Investigatory Powers Act (RIPA) 2000.
The report provides an authoritative and clear explanation of the Commissioner’s responsibilities, the legislation and public authorities’ compliance with the law. The report makes clear the Commissioner’s view that RIPA is fit for purpose, despite advances in technology. He also finds that interception agencies undertake their roles conscientiously and effectively, and that public authorities do not engage in indiscriminate random mass intrusion.
The report also publishes, for the first time, a detailed breakdown by public authority of the number of communications data authorisations and notices issued. I welcome the greater degree of transparency that this report brings, without harming national security, and look forward to the Commissioner’s further work on the volume of requests.
While giving strong support to the legal framework and the intercepting agencies’ conduct. Sir Anthony’s report also makes a number of important recommendations relating to the lawful interception and communications data regimes. The Government are actively considering the report’s recommendations and we will respond in due course.
In the light of concerns about the activities of the intelligence agencies, the quality of oversight, and a number of public concerns and myths that have developed in the light of media allegations linked to Edward Snowden, I believe his report provides an authoritative, expert and reassuring assessment of the lawfulness, necessity and proportionality of the intelligence agencies’ work. I thank Sir Anthony for the rigour of his scrutiny.
House of Lords
Northern Ireland: On-the-runs
(10 years, 1 month ago)
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Lord Lexden
To ask Her Majesty’s Government whether fresh evidence is being sought by the police on any of the persons on the list of “on the runs” submitted by Sinn Fein to the Northern Ireland Office who have been sent letters informing them that they are not currently wanted for questioning, arrest or prosecution.
The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD)
My Lords, responsibility for the investigation and prosecution of individuals rests with the police and prosecuting authorities. The right honourable Lady Justice Hallett DBE has been appointed to conduct an independent review of the administrative scheme to deal with so-called on-the-runs. This inquiry will provide a full public account of the operation and extent of the scheme. I expect the report to be completed by the end of June 2014 for the purpose of its full publication.
Lord Lexden (Con)
I know that my noble friend fully understands the sense of shock and outrage which now exists as a result of the revelation a few weeks ago that the previous Government arranged for secret letters to be sent to more than 150 terrorist suspects at the behest of Sinn Fein. Mr Gerry Adams said that,
“it would be better if there was an invisible process”—
words quoted at the recent Downey trial before its collapse. Why on earth did this Government continue the shameful collusion with Sinn Fein by allowing more letters to be sent out by officials at the Northern Ireland Office until the end of 2012? The Government have made it clear that the letters confer no permanent immunity from prosecution. Will my noble friend give us an absolute assurance that the police in all parts of our country are fully aware that we want them to gather evidence and bring terrorists to justice for their shameful crimes?
Baroness Randerson
My Lords, if at any time we had been presented with a scheme that amounted to immunity, exemption or amnesty, we would have stopped it, consistent with the opposition of both coalition parties to the previous Government’s Northern Ireland (Offences) Bill in 2005, which proposed an amnesty. The current Government continued the scheme on the basis of continuing with existing cases to the overwhelming part until 2012, and continued work on it until the early part of 2013. Noble Lords must wait for the outcome of the review to know the full details.
Lord Shutt of Greetland (LD)
My Lords, the noble Baroness has given two sets of Answers to Written Questions recently and made clear that the inquiry to be conducted by Lady Justice Hallett has no power of compulsion. Why is that? Why is Lady Justice Hallett constrained and not holding an inquiry under the Inquiries Act 2005?
Baroness Randerson
My Lords, it is an administrative review and will not be conducted according to the 2005 Act. This Government have always been clear that we have reservations about the use of public inquiries to deal with the past. There is an issue about the length of time that many of them take and there is in this case a clear public interest in early publication of the report.
Lord Trimble (Con)
My Lords, I wonder whether the Government intend that the inquiry—or review, as it is now termed—will go ahead without having heard from the people who designed the process, the then Secretary of State and Mr Gerard Adams. Is it satisfactory to try to operate without having the power to compel Mr Adams to come to give evidence?
Baroness Randerson
My Lords, government officials will of course appear before the inquiry and will give evidence. Others will be invited to do so. It is entirely up to Lady Justice Hallett how she reads her remit in that regard, from whom she will request evidence and how far she takes the scope of her inquiry, but, for the reasons to which I have already referred, she is asked to report by the end of June at the latest.
Lord Elystan-Morgan (CB)
My Lords, I raise a matter which does not seek to touch on the merits or the demerits of the scheme: a purely technical, legal matter. Is any person who has received a letter as described in the Question in any way protected from the law of citizen’s arrest, or would it in fact need legislation to produce such a result?
Baroness Randerson
The intention of the letters was to present a statement of fact at a point in time. As such, they did not grant immunity, exemption or amnesty. To do that would have required legislation.
Lord McAvoy (Lab)
My Lords, we should never forget those members of our Armed Forces who lost their lives in the Hyde Park bombing, their families and all victims of the other atrocities associated with the Troubles in Northern Ireland.
As part of a complex process that made peace and stability in Northern Ireland possible, the previous Labour Government issued on-the-run letters to people who had reason to believe that they might be under investigation. As stated by both the Opposition and the Government, that was not an amnesty and letters made clear to recipients that, should evidence come to light in future, they could be prosecuted. However, the scheme once again draws attention to the need for long-term solutions on issues of the past. Can the Minister reassure the House that she still believes that a positive outcome will be reached from the ongoing all-party talks, and are the Government fully engaged in trying to make that happen?
Baroness Randerson
I share the noble Lord’s sentiments in relation to sympathies towards the families of victims—indeed, towards victims throughout the Troubles. I understand entirely the considerable anger that the events of the past few weeks have stirred among them and among others in the community in Northern Ireland. I am sure that those who were in government during the early years of the on-the-runs scheme will welcome the opportunity in due course to give evidence. There are five inquiries of various sorts being undertaken into this process and I am sure that they will welcome that opportunity. I can confirm that the Government are committed to ensuring that there is a long-term solution to the problems of the past in Northern Ireland.
Lord Tebbit (Con)
My Lords, will my noble friend consider extending the terms of this inquiry so that we can know whether there were any letters or similar inducements given to assist the progress of the ceasefire talks which led eventually to the Good Friday agreement? It is my understanding that certain proceedings were held up to assist that process. It would be interesting to know whether that is indeed true.
Baroness Randerson
The terms of reference of Lady Justice Hallett’s inquiry have been set out. Indeed, work has started on it. However, I am sure that if she were to come upon evidence that led her to be concerned about issues of the nature that my noble friend has referred to, it would be within her remit for her to make recommendations on that for the future.
Education: Black British Students
(10 years, 1 month ago)
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Baroness Benjamin
To ask Her Majesty’s Government what steps they are taking to raise the academic attainment levels of black British students, and especially those of Caribbean descent.
The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con)
My Lords, the Government aim to improve education for all and our policies to achieve this are working. Attainment for black pupils is increasing strongly while performance gaps have closed and are narrowing substantially. In the past five years, we have seen a 17% increase in black Caribbean pupils attaining five GCSEs, including English and maths; it has gone up from 36% to 53%. For black African pupils the achievement rate now stands at 61.2%, which is above the national average of 60.6%.
Baroness Benjamin (LD)
My Lords, students of Caribbean heritage are at the very bottom of the attainment league table. Chinese and Indian students are at the top yet they are always lumped together as if they are one group, giving the impression that ethnic minority students are outperforming white students. Can my noble friend the Minister tell the House what is being done to ensure that Caribbean-heritage students are attaining the Government’s GCSE benchmark and going on to further and higher education? How is the Education Endowment Foundation being encouraged to use its substantial government funds to address this problem?
Lord Nash
I assure my noble friend that we publish detailed attainment data by specific ethnic category and that schools and Ofsted study their internal data on this carefully to ensure that all pupils are making good progress. Sponsored academies have substantially higher intakes of black pupils than the rest of the state sector, and those pupils are significantly outperforming pupils from similar backgrounds in maintained schools. Sponsored secondary academies have 79% more black Caribbean pupils and are increasing their performance at double that of other state schools, while sponsored primary academies have 38% more black Caribbean pupils and are increasing their performance at three times that of other state schools. Disadvantaged black Caribbean pupils are also outperforming the disadvantaged group as a whole: 45% are achieving the GCSE measure compared to the national average of 41%, while it is 33% for white disadvantaged pupils. Through the pupil premium we are providing £2.5 billion this year, which will benefit more than half of black pupils, while the EEF is funding a number of projects including an increasing pupil motivation project to help black pupils.
Baroness Massey of Darwen (Lab)
My Lords, does the Minister agree that teacher expectation is one of the things that has the greatest impact on pupil achievement? Apart from what is going on in schools, does he also agree that mentoring schemes such as those of the Amos Bursary or ASCL can have a huge impact on the achievement of pupils through their one-to-one programmes?
Lord Nash
I agree entirely with the noble Baroness on both points. I like to think that low teacher expectations, particularly for black pupils, are a thing of the past; that is certainly proven in sponsored academies. I agree entirely with her about mentoring schemes. My own school participates in the mayor’s mentoring programme, which provides mentoring relationships for 1,000 black boys across the capital. Chance UK is an excellent charity providing mentoring, while Think Forward, which was founded by the Private Equity Foundation and funded by the EEF, provides highly trained coaches to work with disadvantaged 14 year-olds in schools in east London.
The Lord Bishop of St Albans
My Lords, what assessment have Her Majesty’s Government made of the impact on educational attainment of the absorption of the Ethnic Minority Achievement Awards into the dedicated schools grant, which was done some months ago?
Baroness Lawrence of Clarendon
My Lords, what happens after school and university is equally important. The latest figures show that 45% of young black people in the UK are unemployed. What steps are the Government taking to stop the overrepresentation of young black African and Caribbean people among the unemployed?
Lord Nash
Our apprenticeships programme is very much aimed at this. We have also reformed vocational qualifications. In the past, too many of these qualifications had no real job value but were overpromoted in equivalence tables. Alison Wolf did a study on this, and we have dramatically reduced the number of equivalent vocational qualifications that count, which will be of much more value to all pupils and I think will particularly help black pupils.
Baroness Hussein-Ece (LD)
My Lords, is the Minister aware that a recent study by the Institute of Education found that one of the major concerns of black parents was that teachers generally predetermined the kind of pupils—
Baroness Hussein-Ece
—who were capable of academic success, that some teachers had lower expectations of black and minority ethnic students and that black pupils were more likely to be entered for lower-tier exams, meaning that these students were able to achieve only a C or D grade as a maximum?
Lord Nash
One could say that was a fair cop, but I think I am entitled to. The Teach First programme, which we have quadrupled, the Teaching Leaders scheme and the Future Leaders scheme, along with the Talented Leaders programme that we are shortly to introduce, should all ensure that we raise the standard of teaching and that any prejudice in this regard is a thing of the past.
Israel and Palestine
(10 years, 1 month ago)
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Lord Hylton
To ask Her Majesty’s Government what discussions they have had with Israel and Palestine about the consequences of the failure of the current negotiations to make substantial progress by the end of April.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)
My Lords, we have made clear to both parties that the current negotiations represent a unique opportunity to achieve a just and lasting solution to the conflict. As the Prime Minister said during his recent visit to the region, we need to keep our eyes firmly fixed on the prize of peace: a secure Israel safe inside her borders and a state of Palestine living alongside, with all the benefits that that would bring.
Lord Hylton (CB)
Is it not shameful that, 40 years after the last international war in the region and 20 years after the Oslo agreements, there is still no final status agreement? Will the Government insist that the Government of Israel make their own proposals for ending the blockade of Gaza and the military and colonial occupation of the West Bank, otherwise world opinion will insist on boycott, disinvestment and sanctions? Will Europe and the Middle East use their economic power to counterbalance the huge strength of Israel? Will Her Majesty’s Government discuss this urgently?
Baroness Warsi
I know the noble Lord has written to me on a number of occasions in relation to this matter. Like him and all Members of this House, I would like the Middle East peace process resolved. We would like to see a secure Israel living alongside a secure and viable Palestinian state. We continue to urge that negotiations are the best route to achieve a solution that ends the conflict once and for all. Secretary Kerry’s tireless efforts provide a real opportunity to achieve that goal. Therefore, we are urging both parties to show the leadership that is needed to seize this moment.
Lord Phillips of Sudbury (LD)
Does my noble friend accept that the negotiations are doomed, and that Mr Netanyahu and his Cabinet know that they are doomed, so long as Israel goes on colonising the West Bank illegally and relentlessly? Is that not the reality, and what are we going to do about it?
Baroness Warsi
My Lords, the situation on the ground continues to change. That is why I have stood at this Dispatch Box on a number of occasions over the past 12 months and said that this provides a unique opportunity to try to make progress. We support the discussions that Secretary Kerry is leading, and we urge both sides, who have said that they are still prepared to talk, to get back to the table to try to achieve a resolution.
Lord Wood of Anfield (Lab)
What explanation have Her Majesty’s Government received from the Israeli Government about why they did not release the fourth group of Palestinian prisoners last week?
Baroness Warsi
The noble Lord will be aware that this was the fourth tranche of the prisoner releases that were agreed last year. The first three have taken place; the fourth has been delayed. The noble Lord will be aware that there is a difference of opinion about how these matters are seen. Israel felt that these prisoner releases were directly linked to the peace talks. The Palestinians believed that they were directly linked to no further action at the UN. Clearly, the discussions that took place at that stage were vague. I take comfort from both parties having indicated that they are prepared to come back to the negotiating table because that is where progress will be made.
Lord Leigh of Hurley (Con)
My Lords, does the Minister agree that unilateral Palestinian action at the UN and other international organisations has been very counterproductive? Does she agree that it is surprising that the EU has not used further efforts to bring Mr Abbas back to the table, given the €5.6 billion in aid that has gone to the Palestinian Authority in the past 10 years?
Baroness Warsi
It is not the Government’s decision to be taking sides in this matter. There have been counterproductive actions on both sides. There are things that both sides agreed to that have not been delivered. That is why we are stressing, once again, that they need to get back to the negotiating table because that is the only place where a long, true settlement will be made.
Lord Wright of Richmond (CB)
My Lords, I thank the Minister for her written response to a question I asked in a recent debate about demolitions and settlements in the Occupied Palestinian Territories. Did the Prime Minister raise these questions with Mr Netanyahu when he visited Israel? If he did, what was Mr Netanyahu’s justification for continuing these illegal breaches of Palestinian human rights?
Baroness Warsi
The issue of human rights was raised by my right honourable friend the Prime Minister on his visit to Israel and the Occupied Territories in mid-March. I do not know what the response was. If I get it, I will write to the noble Lord.
Lord Turnberg (Lab)
My Lords, it is extremely unfortunate, if unsurprising, that the talks seem to be breaking down. Instead of the blame game that will undoubtedly follow, with the Palestinians blaming the Israelis for not releasing prisoners and continuing to build on the West Bank, and Israel accusing the Palestinians of going to the UN before they have agreed to go and not agreeing that the Jewish state exists, should we not be thinking of a plan B? Are the Government thinking of any advice they can give to both parties to bring them to some sort of agreement, at least in the interim?
Baroness Warsi
My right honourable friend the Foreign Secretary spoke to President Abbas last week, and is hoping to speak to the Israelis later this week. There has been an unprecedented EU package, in which we have played a part, which is on the table—socially, economically, politically and developmentally—if this peace deal were to be reached. That is why we keep stressing to both parties that this is not about the blame game; I agree with the noble Lord. This is about continuing to support a process which, at this stage, is still on the table.
Lord Hussain (LD)
Since the resumption of talks between the Palestinians and Israelis last year, how many times have the Government of Israel announced new settlements in the occupied areas? How is that helping the negotiations?
Baroness Warsi
There have been further settlement announcements since negotiations resumed last year: first, on 8 August last year, secondly on 30 October, thirdly on 3 November and then on 6 January this year. As I said, this is not an issue of playing the blame game. Both sides are doing things that were not agreed to, which is why we want them to get back to the negotiating table and do what was agreed.
Muslim Brotherhood
(10 years, 1 month ago)
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Baroness Falkner of Margravine
To ask Her Majesty’s Government on what basis they have established an investigation into the Muslim Brotherhood’s activities in the United Kingdom.
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con)
My Lords, the Prime Minister’s decision to commission a review was taken on the grounds of national interest against a backdrop of substantial recent change, particularly in the Middle East and north Africa. The review will make sure that we have a thorough understanding of the Muslim Brotherhood, its impact and influence on our national security and interests, and on stability and prosperity in the Middle East.
Baroness Falkner of Margravine (LD)
My noble friend will be aware that the Muslim Brotherhood is a pan-Islamic organisation which takes very different forms in different countries. If the Government believe that the brotherhood might be involved in violent extremism, why do they not use existing counterterrorism laws to prosecute it in the courts? If, on the other hand, this inquiry is being driven at the behest of Saudi Arabia to discredit the brotherhood, I respectfully suggest to my noble friend that it is the United Kingdom’s Government and its foreign policy which risk being discredited, by portraying the brotherhood in the eyes of its many Muslim supporters around the world as victims of a politically motivated Government acting at the behest of an authoritarian foreign power: Saudi Arabia. Can the Minister tell the House whether the results of the inquiry will be made public?
Lord Taylor of Holbeach
My Lords, my Answer made it quite clear that this is about the UK’s national interest and the UK Government forming their own view. The review will make sure that we have a thorough understanding of the Muslim Brotherhood, its impact and influence on our national security and other national interests, and on stability and prosperity in the Middle East. We are not talking about the view of another Government; we are talking about this Government. The review will consult widely with experts, regional Governments, the EU and US partners. The UK Government will make up their own mind.
Lord Wright of Richmond (CB)
My Lords, if press reports are correct, this review is being headed by Her Britannic Majesty’s ambassador to Saudi Arabia. Does this not put Sir John Jenkins in an extremely invidious position, given that the Government to whom he is accredited take every possible step, as the noble Baroness has said, to discredit and to destroy the Muslim Brotherhood?
Lord Taylor of Holbeach
I cannot agree with the noble Lord, although he speaks with a great deal of authority. He will know that Sir John Jenkins has been asked to lead the review because he is one of our most senior diplomats, with extensive knowledge of the Arab world, and his role is to serve Her Majesty’s Government. He was not chosen because of his current role as ambassador to Saudi Arabia. He is not working alone, and will draw on independent advice from other places.
Baroness Smith of Basildon (Lab)
My Lords, the Minister referred to a review, but the Prime Minister used the words “an investigation” or “an inquiry”, and there may be some difference. It would be helpful if we could have some information on that. Has he taken the opportunity to talk about this to the noble Baroness, Lady Warsi, who always impresses your Lordships’ House with her knowledge of such issues? A report in the Financial Times says that a senior government figure reported on “tensions” between the Foreign and Commonwealth Office and the Prime Minister’s Office on this, saying:
“This cuts against what the FCO has already been doing in this area, both domestically and in the Middle East. It risks turning supporters of a moderate, non-violent organisation that campaigns for democracy into radicals”.
Is there a tension at the heart of the Government, and is this a review or an investigation?
Lord Taylor of Holbeach
Not at all, my Lords. My noble friend and I are at one on the issue.
Lord Elton (Con)
My Lords, can my noble friend tell me and the House whether the ambassador will go on being an ambassador while he is also leading the inquiry, and if so, is there not a conflict of interest?
Lord Taylor of Holbeach
I am sure that ways will be found whereby his duties as ambassador can be delegated where necessary. However, he has been appointed to that role as an ambassador, and will continue to undertake that role. I see no conflict of interest. As the noble Lord, Lord Wright, recognised, the diplomatic skills that Sir John Jenkins has are essential for a proper understanding of the situation.
Lord West of Spithead (Lab)
My Lords, can the Minister tell us how many other reviews or investigations have been conducted in this manner into groups we have been concerned about? I cannot remember that we undertook any reviews or investigations in this manner of the groups that we were worried about during the three years that I was a Minister.
Lord Taylor of Holbeach
That was a decision for the previous Government. This Government have made up their own mind that they want to know more about the Muslim Brotherhood and its influence on politics and groups in this country. I hope that noble Lords will understand that this is a British review conducted by the British Government. I was asked earlier and did not give an answer—this is obviously an internal review for the Government themselves. However, it is expected that Sir John Jenkins and the group will want to make some of their findings public.
Lord Dykes (LD)
As this is manifestly a sordid plot from Saudi Arabia, would it not be more interesting if HMG had conversations with the Saudi Government about allowing women to drive cars in that country?
Lord Taylor of Holbeach
That question is not worthy of my noble friend. The noble Lord, Lord Wright, was trying to get in, as I had named him.
Lord Wright of Richmond
With the permission of the House I wish to make a very brief remark. As a former ambassador to Saudi Arabia, I would find it extremely difficult if anyone were to ask me to head this review.
Lord Taylor of Holbeach
In answer to that, I can say only that I am very pleased that Sir John Jenkins has not found it so. I am sure that he will do an excellent job in the national interest.
Arrangement of Business
Lord Gardiner of Kimble (Con)
My Lords, our first business this afternoon is consideration of the Commons Reason on the Pensions Bill. After useful discussions in the usual channels, I hope that that business can be concluded by 4 pm. If not, I will at that point move that the House do adjourn until 5 pm to enable Members of this House with tickets to attend the address by the President of Ireland in the Royal Gallery. If we manage to finish the Pensions Bill before 4 pm, we will return at 5 pm for the Third Reading of the Water Bill.
Pensions Bill
(10 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.
“( ) Regulations may provide for circumstances in which a person may opt to have a year treated as a qualifying year if by aggregating income from two or more jobs, that person’s earnings are equal to or greater than the lower earnings level for that year.”
Commons Disagreement and Reason
The Commons disagree to Lords Amendment No. 1 for the following Reason—
1A: Because it would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, this amendment is the one outstanding issue of a Pensions Bill that will radically reform the state pension system, providing a clear, simple platform on which to save for retirement. This Government want people to build up a full entitlement to this new pension, to give them this platform and then to take them above the level of the basic means test. This is why we have a comprehensive and recently reformed crediting system, which covers those looking after children or elderly relatives and people claiming JSA and ESA. Those in universal credit households will also get credits so that, in time, at least a further 800,000 people will gain a qualifying year. It is why during this Parliament we have introduced a credit for adult carers of children, commonly known as the “grandparents’ credit” and, with thanks to Members of this House, we will now be extending credits for partners of members of the Armed Forces on overseas postings to have retrospective effect.
On Report, we had a good debate about whether the national insurance system is failing those who have more than one job and are earning enough to pay national insurance or be credited into the system but do not reach the required thresholds in any one of their employments. This is an area that the noble Baroness, Lady Hollis, has been campaigning on for some time and I pay tribute to her tenacity. It is clear to us that people are in that situation. Our own evidence suggests that around 50,000 people in 2012-13 had more than one job with combined earnings above the lower earnings limit and yet did not get a qualifying year for the purposes of the state pension. What is less clear is whether that will affect their state pension. The system allows people to have gaps in their records over their working lives. For those with a typical working life, they might be able to have gaps for 10 or 15 years and still get the 35 qualifying years that they need for a full single-tier state pension. For those in this situation for a short period of time, there is no reason to expect an impact on their pension.
What we heard from the noble Baroness on Report was that having more than one job was not a temporary situation for some people and that there is evidence to suggest that this is a growing phenomenon. While the current evidence that we have does not suggest a growing problem, the Minister for Pensions and I would like to acquire a greater understanding of the scale of the issue, who is being affected and at what point in their lifetime. For this reason, as the Minister for Pensions announced last month, the department will be updating and doing more detailed analysis and will be working with stakeholders to build its evidence base in this area. As the noble Baroness, Lady Hollis, herself said, the implications for individuals’ state pension entitlement have perhaps been neglected in recent debates about the labour market, so I am pleased that we now have the opportunity to shine some light on this area.
The department will update its analysis based on the latest data and will look to identify the characteristics of those affected. We are keen to bring other interested parties on board. As well collating the relevant findings from think tanks and research organisations, we will be convening a forum to discuss this evidence base before the Summer Recess. We are hoping that, among others, the Pensions Policy Institute, the Chartered Institute of Personnel and Development, the Resolution Foundation and, of course, the noble Baroness, will attend this forum. I am pleased to say that the Institute for Fiscal Studies has agreed in principle to chair it. This event will allow the department and interested parties to consider the available evidence in order to answer three main questions. First, what is the current evidence base? Secondly, is the number of individuals in this situation likely to change? Thirdly, what is the impact on their state pension outcomes? I believe that this work will get us to a place where we will understand whether there is a problem and, if there is an issue, will provide some pointers as to how it might be addressed.
I turn briefly to why this Government do not believe that we should insert a power in the Bill ahead of the conclusion of this work. Put simply, we already have the powers we need. The Social Security Contributions and Benefits Act contains broad powers to create new national insurance credits and to adjust the way voluntary national insurance contributions work—two possible options suggested by the noble Baroness on Report. There could, of course, be other options that we do not have the powers for, but I am sure noble Lords will understand that we cannot simply give ourselves a sweeping power to make regulations both to introduce any possible solution and to amend existing primary legislation where necessary.
I hope that I have made my position clear. I again thank the noble Baroness for her work on this issue. She has highlighted the need for us to dig deeper and that is what we shall do. Building the evidence base will give us a clearer sense of whether people working in multiple jobs are at risk of losing out on state pension and who these people are. I look forward to reporting back to the House on the results of this work and, in the mean time, I beg to move.
Baroness Hollis of Heigham (Lab)
My Lords, first, I thank the Minister and his honourable friend in the other place, Steve Webb, for briefing me on their position before our amendment went to the Commons to be overturned. I appreciated their courtesy then in the same way that I appreciate the Minister’s generosity today. I also appreciate above all—that is what matters—their recognition—sort of, at any rate—that this issue is not going to go away. Obviously, my regret is that the Minister did not feel able to come back with an appropriate amendment in lieu, but of course I welcome the detailed review announced today.
What was the point of the original amendment? The state pension has been a national insurance pension built on men’s full-time working lives, where wives and widows largely derived their state pension entitlement through him. However, as family structures have changed, as motherhood has become divorced from marriage, as disabled people have lived into retirement, as mothers have joined the labour force, as grandparents in their 50s have become carers of even frailer parents in their 80s, so governments over the years have credited those in unwaged work—mainly women—into the NI system. Noble Lords—many of whom are here today—have helped enormously to make all that possible.
However, though the state pension has responded flexibly and appropriately to the changes in our demography, in my view it has failed to respond flexibly and appropriately to similarly profound changes in the labour market, such as the growth in self-employment, part-time work, agency work, zero-hours contracts, the 24/7 working world and the fact that nearly 40% of all people in the labour force no longer work a standard labour contract, on which our pensions are still largely based.
We have, alongside the US, probably the most flexible and deregulated labour market in the developed world—for good and for bad—but our pension structures have not caught up. Therefore, along with insecurity, uncertain income and hours, issues of sick pay, holiday pay and childcare needs—the dark side of the flexible labour market—almost always overlooked is, for some, the lack of pension entitlement. We who benefit from the labour market, including me, should ensure that appropriate safety nets are in place.
After all, if you are unemployed and on JSA, you are in the national insurance system and build a pension; if you are on disability benefit, you are in NI; if you are a carer of children or frail elderly relatives, you are in NI; if in future you are self-employed, you are in NI; and if you work 20 hours a week on the minimum wage in a single job, you are in NI and you build a pension. That is good. However, if you are in a non-standard work pattern, working 30 hours a week on the minimum wage but with two 15-hour jobs or three 10-hour jobs, you are excluded from national insurance.
If your earnings fluctuate across the year, when you can be sent home 10 minutes before your shift starts, you may not even know whether at year’s end you have crossed the LEL line and built your pension. If you strive to come off JSA, as we would wish, by patching together mini-jobs, which may be all that is available and with all the effort, travel costs and risk that that requires, you may get punished for it by losing the state pension that you would have got by simply staying on JSA. That is perverse. We are punishing people for doing what is right—those who are taking risks to do what is right—and public policy which does that must be wrong.
A woman may be cleaning offices early in the morning and late at night, as well as other offices late in the day, and doing domestic cleaning, travelling for hours by bus and building her working week. She may be working at a department store late on a Thursday evening and all day Saturday, alongside working in a laundrette during the week. A man may be doing three hours each weekday in a sandwich shop alongside some delivery work or part-time security work in Tesco. Multiple jobs are hard work.
Steve Webb in the other place was puzzled as to why such workers do not find jobs with longer hours. Disappointingly, he cannot have read the research. Students and pensioners may want those limited hours, but nearly half the workers in the MASS1 survey wanted longer hours and could not get them, sometimes because, I am afraid, employers want to dodge paying NI. Such workers need a second or even a third mini-job to make ends meet. They work 30 or 40 hours a week, fractured between several jobs. They may earn £11,000 or £12,000 a year and they may pay tax. We are quite happy to amalgamate their earnings for tax, through which they contribute to other people’s pensions, but we refuse to allow them to do it for NI, which would build their own state pension. This is so wrong.
We do not know precisely how many people are in this situation but my own best estimate—and it is only that—is that the figure is some 250,000 and growing. The obstacles over the decade in which we have been arguing this have basically been two. First, it is fiddly getting fractions of employers’ contributions from different companies. Secondly, there is an assumption, which I know the Minister does not share and which I am sure his right honourable friend does not share, that those with a couple of part-time jobs are mostly older women who can rely on their husbands and work for pin money; for them, the situation is short term and they do not matter. Well, they do. The changing world of work has made this a real issue.
Real-time information allows HMRC to track them—that is now straightforward. The new state pension—and I am so pleased about this—brings 4 million self-employed people into national insurance without an employer’s contribution, so that is not necessary. In addition, there are in any case millions of unemployed people on benefits or earning above the LEL of £5,700 but below the point at which they pay NI at £7,500 and who are credited into NI for free, yet because someone is earning £12,000 from three £4,000 jobs, they are outlawed and get nothing. We should be supporting their work effort and applauding their effort to patch together a wage under difficult circumstances, not undermining it.
Neither is this some short-lived rite of passage. What little survey material we have suggests that 40% of people in zero-hour contracts have been with the same employer for five years or more and 20% for 10 years or more, to the detriment perhaps of their future state pension. We know, for example, that many low-paid people cycle between employment, self-employment and no employment, but we do not fail to support the self-employed because their self-employment may last only a few years and theoretically there is time to build a full NI record. These non-standard work patterns are not some temporary phenomena but a fundamental shift in the nature of employment where demand for labour and services will ebb and flow by the hour, the day, the week, the season. With a Pensions Bill before us, we could do something about it and bring the state pension into line with this new working world.
The House agreed. On 24 February it supported this entirely permissive amendment. The Minister in the Commons who overturned it made three points: it was technically defective; we did not know the real stats—the Minister used that argument today—and universal credit would sort it; and, therefore, it was premature to act. I agree with the Minister on most of that, but not on the last point. The amendment is probably technically deficient. I have had many technically deficient amendments run against me. If the House and Government agreed, it was my responsibility, with consent, to bring back an amendment that in the words of the honourable Steve Webb could “normally be tidied up”. He simply chose not to.
Secondly, I agree with the Minister that we do not know what the facts or stats are. We have no definitive figures. Research on the topic is limited and they use different data bases. Of the primary pieces of research, one samples employers and one samples employees. One looks at only zero-hour contracts and the other at short-term contracts as well. They have different wage bands and different hour bands. The reason is that they were researching the work conditions behind zero-hour contracts, not the question of pension entitlement to NI. I am afraid that those questions did not arise. We can only make informed assumptions about the number of those at risk who will be covered by UC.
I am delighted that today the Minister has committed himself to decent research on the subject over and beyond what we already know. A full review of the existing literature, as I am sure the Minister knows, will take him precisely 10 hours. What I do not know, and what the chartered institute or MASS1 could tell us, is whether their data can be cut in different ways to answer some of the unknowns or whether we need fresh survey material that focuses specifically on the NI and pension entitlement issue. If we do need fresh survey research material, is the Minister in a position today to give us the guarantee that he will use departmental resources to find out what else we may need to know?
However, none of these considerations need stop the Government following through on the amendment, in my view. Why? How? We could, for example, treat such workers in pension terms like the 4 million self-employed, coming into NI for the first time, leaving open the status of their employment. Or we could encourage voluntary NICs, but the employee will not know until retirement how many years she has missed, and by then voluntary NIC rules do not allow her to make good the missing years from 25 years earlier. Aren’t we clever? We could treat her like those on JSA, in that by working more than 20 or 30 hours a week, she was indeed meeting work conditionality and was credited in. We could reconsider the LEL—lowering it perhaps, as Steve Webb suggested, to bring in more mini-jobs or, as the IFS has proposed, raising the primary threshold, perhaps to the tax threshold with which it was previously bracketed. That comes at a cost.
We need departmental resources to determine how best to proceed, but it is not rocket science. We could do it quite easily with political will. We need to do it because the new state pension—this is also different—is financially more generous but it has scrapped the married woman’s pension and scrapped the widow’s derived pension. The widow or the wife can have absolutely nothing. Universal credit is a household test and the husband’s income may float them off it. If she were doing too many jobs that took her above the LEL, and was not allowed to bring them together, she could fail to get a pension through her own work; she could fail to get a pension through her husband’s national insurance; and she could fail to get a pension through UC. Unless we tackle this issue she will get no pension at all for those years in which she ran together many jobs. No state pension at all—none.
Let me make one final point. Of course I welcome the review and I am delighted that the Minister has spelled it out today. However, we are perhaps making heavy weather of what might be quite a modest change in crediting rules. Yet—I hope the House will forgive me for saying this—we have just had a Budget where, as far as I know, without any research, consultation, briefing or preparation but simply by fiat of the Chancellor, we have turned the annuity market upside down, affecting up to 400,000 people a year, with unknown, possibly disastrous, effects on retirement income, housing and social care.
Why are we bothered? Why is this House bothered with the private sector parts of the Pensions Bill? I really do not know. We have all, including the Minister, wasted countless hours on it. I do not in the least accuse him of bad faith on this because he may well have been in the position—I do not know—that the rest of us were in. However, we have certainly had enough departmental time to have this issue sorted. None the less, I welcome the review and the Minister’s generosity in outlining it today.
Lord Forsyth of Drumlean (Con)
My Lords, I say to my noble friend that the noble Baroness makes a devastating case in favour of those people who take advantage of flexible labour markets. All my political life we have been trying to create more flexibility in the labour market and more opportunities for women. As at an earlier stage, the noble Baroness, with her characteristic incisive, forensic approach and her considerable knowledge of social security and other matters, this afternoon has made an overwhelming case. It all goes to show that the Whips’ advice of never listen to the arguments before you vote is well founded for those people who only want to win the votes.
The noble Baroness has won the argument on this and so I have a question for my noble friend. He is going to carry out a survey: what are the criteria by which he will decide what to do on the basis of that survey? Is this a numbers game? Does it depend on a certain number of people being affected by it? If it does, what is the number? To my mind, if it is one, that is one too many. The Prime Minister constantly talks about supporting strivers and people who do the right thing. In my book, someone who does not sit on benefit but goes out and does the kind of jobs to which the noble Baroness has referred has exactly that character. Such people have considerable difficulty in doing the right thing and yet find themselves penalised when they are at their most vulnerable in old age.
I understand the Government’s position. My noble friend said that the amendments were unnecessary because the Government already have the power to deal with this matter. I have two questions for him: first, what will the criteria be by which they decide whether to do something; and, secondly, what is the timetable for this? Can we have a commitment from my noble friend? If as a result of the survey the noble Baroness is proved right and it is 250,000, is that not a quarter of a million too many? If it is 10,000, is that not too many? What are the criteria?
What is the timescale? My noble friend will carry out his survey and we will have the results by the summer. Can we have an assurance that if he finds there is a problem he will do something this side of Christmas and that he will not use it as a delaying tactic? Certainly when I used to stand at the Dispatch Box there were certain techniques that one could apply when one had run out of arguments and could no longer win the debate. One was to set up a commission and the other was to commission a survey and hope that by the time the survey had been reported the matter would have gone away. One thing we can be sure of is that the noble Baroness will not go away.
Baroness Dean of Thornton-le-Fylde (Lab)
My Lords, I support the two previous speakers, particularly my noble friend Lady Hollis. This issue was well aired in Committee and at later stages. At the moment it predominantly affects women. I welcome the Minister’s statement, but I am aware that we are not too far away from a general election and that things may change. The work that is to be carried out will obviously be done only after this Bill becomes an Act of Parliament, so what specific assurances can the Minister give to disabuse me of the notion that in reality this is being kicked into the long grass because it is rather inconvenient?
Lord German (LD)
My Lords, I am slightly confused by the remarks of my noble friend Lord Forsyth because he referred to a survey. When my noble friend the Minister spoke, I could have sworn that he was talking about a review, and there is more than a slight difference between a survey and a review. A review means that you look at the evidence and take action as a result. I noted the words used by my noble friend, that the matter will be addressed. Given that, can we have an assurance that if any review turns up evidence that this is a matter which affects a large number of people, action will be taken to address it? That is the difference between a survey and a review; a review implies action at the end of it.
I also wonder if my noble friend can reassure me that this review will look at the differences in zero-hours contracts, on which an enormous emphasis has been placed. They are seen as being at the heart of the problem. The ONS labour market survey shows that although there has been an increase in the number of people on zero-hours contracts, the number of women in part-time and multiple jobs has not been increasing over time. I think that a distinction needs to be made because the issue is not necessarily about zero-hours contracts, so I would be grateful if my noble friend could reassure us that that is not the emphasis. The emphasis here is on people who have mini-jobs or who fall below the lower earnings limit. They are not able to get the stamp which would qualify them for building up their pension. Given the number of years that the new pension requires—35 years—can my noble friend also say whether the review will take into account a lifetime of work? That is because if you have earned up to the limit or you have got your 35 years, whatever you do on top of that is not going to make a difference to the £149 or so that we are expecting to be the figure for the new state pension for a single person. That will have effects elsewhere on people’s personal economic trail.
I welcome the announcement made today by my noble friend, and I hope that he can reassure the House that these caveats will be taken into account when taking action.
Lord Turnbull (CB)
My Lords, when I heard mention of the Minister in the other place, two words came to mind: “kitchen” and “sink”. Indeed, the Minister claimed that there were 17 logical flaws in the case the Lords had put forward. However, it was not clear to me which were the objections of substance and which were the makeweight arguments. Of course, the problem is that there are not that many people in this category. Is it a problem that is going to be solved by universal credit, or is it not a problem because people have time to catch up later on? That is a very poor argument because you never know whether you are going to have time to catch up. Is it a problem of information? Is it a problem that in the fixing of it would create other problems? Lastly, there were arguments about drafting. For good measure some bad statistics were thrown in that referred to average numbers of people on average hours and average earnings, when you really need to look at the median if you are trying to calculate the numbers.
However, I welcome the statement from the Minister today because he appears to have conceded that there is an issue to address. As a matter of principle, I think it is not acceptable that someone earning £120 in one job can get credit, while someone earning two times £60 a week cannot. We have a duty to address this issue if it turns out that significant numbers of people fall into that category. I also welcome the review, and like other noble Lords I hope that it will be addressed with some urgency.
I think that one further assurance is needed. If it turns out that the Government do not have the powers, they should be introduced quickly. Opportunities to do that in social security legislation seem to arise every few weeks, so I do not think that it will be a problem.
Baroness Sherlock (Lab)
My Lords, as the opposition winder, I have rarely felt more redundant. If the Minister had seen the nodding of heads going on from all Benches, including those behind him, he might begin to think that accepting the amendment would have been the easier path in the long run. I was quite disappointed to find the amendment returning to this House, as it had a number of things to commend it. First, it identified a problem which clearly needed attention. If there were any doubts about that, my noble friend Lady Hollis has cleared them up today. The case is compelling.
When we debated this amendment on Report, Ministers seemed sceptical that there was a problem at all. However, since then, we have had some new figures from the Office for National Statistics, specifically on the prevalence of zero-hours contracts. The figure that was used on Report was 183,000 in 2010. The new ONS report, based on the Labour Force Survey, shows that there are 583,000 people currently employed on zero-hours contracts. I fully accept that some of those people will of course be earning enough to bring them into the system, but the point made by the noble Lord, Lord Turnbull, about the use of average figures when this was debated in the other place is very well made. If some people are earning very high salaries, for example as IT contractors, a mean figure is never going to be any help at all in working out the impact of this.
In addition to those on zero-hours contracts, there is the broader issue of those doing more than one mini-job, as described so effectively by my noble friend. Concern has been expressed across the House throughout the passage of the Bill about the asymmetry of the system crediting-in those who earn all that money in one job or those who are unemployed, including those who are unpaid carers, but not crediting-in people working hard in more than one job.
The other thing the amendment had to commend it was that it was wholly permissive: it simply enabled the Government to take action if and when they were ready but mandated them to do nothing. The amendment also had no financial implications, and I was surprised as well as disappointed to see financial privilege being cited for such a permissive amendment. Frankly, I really find that incomprehensible.
However, the Government still seemed unpersuaded. Ministers, both in the other place and here, have posted a series of objections to the amendment. Some are minor, such as complaints about the drafting, but, as my noble friend Lady Hollis pointed out, those could have been easily resolved by the Government bringing forward their own differently worded amendment at Third Reading, so we have to assume the problem is bigger than that. When we sweep away some of the flannel in the debate in the other place, the options are these: they do not believe there is a problem; they believe there is a problem but do not know the scale; there is a problem but universal credit will solve it; or there is a problem but the Government do not know how best they want to address it.
Both in debates in another place and, indeed, today, we have had smatterings of all of those. The Government seem unpersuaded that there is a problem, or at least not one of a size to merit intervention to tackle it. They want to do research—lots of really thorough and careful research. I am a great believer in research but want to understand what it is the Government think they could learn that would make a difference to the decisions they would take. There are many noble Lords in this House who may not be biologists but who, as mentioned by my noble friend Lady Dean, can spot long grass when they see it. Frankly, I can smell it from here.
As for the universal credit defence, my noble friend Lady Hollis has taken that apart at different stages of the Bill. The Minister said again today that 800,000 people will be credited-in as a result of universal credit. The new pension system is due to come in in under two years, and I am personally not willing to bet the house that UC will be fully rolled out by the time it does. Even if it is, that leaves out all kinds of people. Single people on even very modest incomes will not be covered by universal credit. A married woman affected by this problem could find that her husband’s earnings float her off universal credit but she can no longer, as a result of this Bill, get a pension based on his contributions, so she is cut out both ways.
Finally, it may be that the Government are eventually persuaded that there is a problem, but they want to address it in a different way from that favoured by my noble friend Lady Hollis. Of course, the amendment allowed them to do that. In addition, the Government could have brought back their own amendment, had that been what they wanted to do. But this must leave the House nervous that the Government are not really supportive in the way that they sound at the outset, however warm their words of welcome. The Minister has a job to do to reassure people on all sides of the House.
First, do the Government accept that there is a problem that needs addressing? Secondly—and this was the killer question posed by the noble Lord, Lord Forsyth—are the Government satisfied for any worker to be excluded from the new single-tier pension just because his or her hours are spread across more than one employer? Is it a question of principle? Is it a question of scale? If so, what is the magic number? Thirdly, as the noble Lord, Lord German, said, if the Government do accept that there is a problem, will the Minister confirm that they are committed to taking action to address it? The only outstanding question, therefore, is how best to do that.
Finally, many noble Lords asked about the timescale and the process. If the forum is to be held by the summer, when can the House expect a report back, and what form will the action take? My noble friend Lady Hollis pointed out that even though this Bill has not yet completed its passage through the House, the entire pension system is to be revolutionised still further. If that means further primary legislation, do the Government intend to take advantage of that legislation to enact whatever decisions they take as a result of the review? If not, what other mechanisms will they choose and how will the Minister report back to the House?
Lord Freud
My Lords, again, I record my thanks to those who have contributed to the discussions on this issue, in particular, of course, the noble Baroness, Lady Hollis, who has shone a spotlight on this group of people.
I will pick up a few of the points that have been made today. The first was raised by my noble friend Lord German and the noble Baroness, Lady Sherlock, and concerned zero hours. There has been quite a lot of conflation between this issue and zero hours, which is probably, on balance, unhelpful, because people on zero-hours contracts do not necessarily have more than one job. Indeed, they can be working quite a large number of hours. I think the title “zero-hour contracts” does not do justice to what should perhaps be called “flexible-hour contracts”. The mean in the Labour Force Survey of people on these contracts is 21 hours and the median—I know that people like both—is 18. When you look at the average usual hours, it is a higher figure: 25 mean and 23 median. There is quite high satisfaction with that.
On the point about the labour market, the percentage of women in two or more jobs has hardly changed in the past 10 years. It is approximately 10%. The number of women who work part-time because they cannot find a full-time job is currently standing at 13.3%.
The noble Baroness, Lady Hollis, asked about the forum. We do not want to prejudge the outcome of the forum. I am sorry; the question was about the commitment to further research, if necessary. We will consider further research if it can fill the gaps in the evidence and we need it to aid our policy. If we need to take more evidence, we will need to take the time to do it properly. The rough timing is that from the initiation of qualitative research to carry out and publish takes roughly six months.
My noble friend Lord Forsyth asked about timing. We will hold the forum in July, we hope. Our analysis of existing data should be published roughly at that time, before the break. My noble friend also asked what the criteria are. The criteria are that we want to ensure that people with multiple short-hour jobs are not disadvantaged, and we would need to consider the most appropriate and proportionate means to ensure this. We need to ensure that any remedy does not place an undue burden on the business.
Perhaps I may correct something I said earlier. When I said “10% of women in two jobs”, I should have said “5%”. I apologise for that.
On the criteria and on the question of whether we would have the answers this side of Christmas—the noble Baroness, Lady Dean, was rather rude in referring to “long grass”—we are taking this issue seriously. We are making an enormous number of changes in this department. We are rebuilding the welfare system and the pensions system. We want to make sure that we incentivise flexible work. I do not think that your Lordships see before you a Minister or a department shy of taking action where it is required. I think that that is the best assurance about lawnmowers that I can give.
Lord Forsyth of Drumlean
I shall read my noble friend’s words carefully in Hansard, but they sounded to me like a commitment that he would address this problem one way or the other. Is that what he was saying?
Lord Freud
I was saying that we now have a base on which to look at this problem, see what it is and, on that basis, decide how to deal with it.
Lord Forsyth of Drumlean
When my noble friend has decided how to deal with it, will he then deal with it?
Lord Freud
I would be pretty surprised if, when one had reached a decision on how to deal with something, one did not get on with trying to deal with it.
On the timetable, we have the power to introduce credits anyway—that is a point that I have already made—but it would take time, working with HMRC, to get it right. We need to work through the impacts to ensure that there are not any significant burdens on business. However, I give the assurance that this is not a numbers game and we will look at the most appropriate action.
I think that I have dealt with most of the issues raised. I am glad that we can conclude the scrutiny of this important Bill with another example of how, through well informed discussions, this House can move a debate forward, in this case by ensuring that we have a robust evidence base on which to consider the issue of multi-jobs. On that basis, I ask that the House do not insist on Amendment 1.
Water Bill
(10 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Anelay of St Johns (Con)
My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Water Bill, has consented to place Her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Amendment 1
Lord De Mauley
“Chapter 3ARetail exit: non-household premisesRetail exit: non-household premises
(1) The Secretary of State may by regulations (“exit regulations”)—
(a) make provision for a relevant undertaker whose area is wholly or mainly in England to apply to withdraw from the non-household retail market in relation to that area;(b) make provision about the determination of an application under paragraph (a) (an “exit application”),(c) make provision for and in connection with the transfer of so much of a relevant undertaker’s undertaking as relates to the non-household retail market to an eligible licensee or licensees, and(d) make provision about the operation of the water industry in relation to an area in respect of which an exit application has been granted (a “retail exit area”).(2) Provision under subsection (1)(a) may require a company that is a water undertaker and a sewerage undertaker to make an exit application that relates both to its functions as a water undertaker and to its functions as a sewerage undertaker, subject to such exceptions as exit regulations may specify.
(3) Exit regulations may include provision for protecting customers affected by a relevant undertaker’s withdrawal from the non-household retail market.
(4) For the purposes of this Chapter—
(a) a reference to a water undertaker withdrawing from the non-household retail market in relation to an area is a reference to a water undertaker ceasing, in relation to that area, to exercise such functions relating to the supply of water to non-household premises as are specified in exit regulations, and(b) a reference to a sewerage undertaker withdrawing from the non-household retail market in relation to an area is a reference to a sewerage undertaker ceasing, in relation to that area, to exercise such functions relating to the provision of sewerage services in respect of non-household premises (including trade effluent functions) as are specified in exit regulations;and a reference to the non-household retail market is to be construed accordingly.(5) Exit regulations may—
(a) prohibit a water undertaker from exercising, in relation to a retail exit area, such functions relating to the supply of water to non-household premises as are specified in the regulations;(b) prohibit a sewerage undertaker from exercising, in relation to a retail exit area, such functions relating to the provision of sewerage services in respect of non-household premises (including trade effluent functions) as are specified in the regulations.”
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)
My Lords, government Amendments 1 to 12 and 18 address the subject of retail exits. The question of whether an incumbent water company should be able to exit the market for retail services to non-household customers has been discussed at all stages of the passage of the Bill through your Lordships’ House and another place. Most recently, it was raised in debate on amendments tabled by my noble friend Lord Moynihan and the noble Lords, Lord Whitty and Lord Grantchester, at Report.
Having listened extremely carefully to the thoughtful and well informed contributions to the debate on retail exits, I undertook to consider the matter further, with the aim of bringing back government amendments to respond to the views of the House. The proposed new clauses are intended to do just that.
The attached provisions reflect the key policy objectives of the previous amendments on this subject. They offer incumbent water companies the option to exit voluntarily from the non-household retail market, subject to the consent of the Secretary of State. I said before that this was not a simple matter, and indeed it is not. Enabling exit will require a number of changes to the Water Industry Act 1991—for example, to address issues around the incumbent’s duties to supply and other statutory obligations to customers.
In making this commitment, I put on the record that the only practical way of delivering this objective would be to take wide-ranging powers, and that is what the amendments seek to deliver. Although the enabling powers are, of necessity, broad, we have sought to provide as much detail of the nature of the changes to be made as possible. I recognise that your Lordships have limited time in which to undertake detailed scrutiny of these clauses. However, as I said, the broad policy has been widely discussed throughout the passage of this Bill.
Further work will be needed to consider the practical implications of exits and to develop the detailed policies that will underpin the use of these powers. Broad consultation will, therefore, be essential. Following these detailed discussions with all interested parties, there will be a further opportunity for parliamentary scrutiny under the affirmative procedure.
Several key policy issues about how an exit policy should be shaped and delivered are still to be resolved. For example, discussions in your Lordships’ House and elsewhere have mooted a number of different models for the transfer of customers from the exiting incumbent to a retail licensee. One model suggested is the transfer of customers to an associate licensee within the wider structure of a parent company. Others have suggested that incumbent companies which no longer wish to provide retail services may just want a simple route out of the retail market. Some have identified customers as an asset to be sold for profit, while others see them as a liability to be transferred. Ongoing dialogue with the industry, customers and others will be essential to inform the decisions about how exit will operate in practice. Our guiding principle must be to ensure that customers are protected and that they are no worse off as a result of the exit.
These provisions are therefore intended to provide government with the flexibility necessary to respond to the views of industry and its customers about the best way to deliver the new regulatory framework for the sector. They provide the Secretary of State with powers to put in place, through regulations, a framework which enables exits. This will entail a restructuring of the key provisions in the Water Industry Act 1991, the regulation of the industry and suppliers’ relationships with their customers.
The purpose of these provisions is to permit incumbent water or sewerage companies, with the consent of the Secretary of State, to stop providing any retail services to current or future non-household customers in their areas of appointment. The services will then be provided by one or more retail licensees. This is likely to lead to a consolidation of retail businesses. Exit will be irreversible and result in the incumbent divesting itself of some of its statutory supply duties in relation to non-household premises. However, incumbents will retain all their current responsibilities for household customers.
In summary therefore, these proposed new clauses enable the Secretary of State to make exit regulations, which would allow any incumbent water company whose area is wholly or mainly in England to apply to exit the non-household retail market for that area. The regulations may include grounds for refusing an exit application and provide for the transfer of customers to an eligible licensee. The regulations may also make provision for what happens in the area from which the company has exited after the exit has taken place. The powers make provision for the protection of both household and non-household customers affected by the exit.
Throughout the debates on this matter in both Houses, there has been a clear consensus that exit must be undertaken voluntarily. We have stated on a number of occasions that any suggestion that a provision could be used to force exit and drive legal separation of an incumbent’s retail and wholesale business risks undermining investor confidence in the sector. Amendments 7 and 9 ensure that the regulations can provide for important checks and balances as regards the conditions under which divestment and exit may, or may not, be required by the competition authorities.
We all agree that we must ensure that customers are protected. The regulations must ensure the protection of both those non-household customers that are subject to a transfer and the household customers who would remain with the incumbent. There is currently a range of statutory protections for customers in place. These are being reinforced by protections for the reformed competitive market in the Bill. For example, we are reforming the interim supply duty, or supplier of last resort, in Clauses 31 and 32. The statutory protections in the current retail market generally rest on the duties of the incumbent. These new provisions on retail exits are therefore required to enable regulations to rework the relevant statutory duties and obligations, in the event of a transfer of customers to a licensee. For example, we have provided for price regulation to be introduced for licensees, as well as regulation over the terms and conditions that they can offer to customers. We have provided for incumbent companies to be relieved of the interim supply duty, which currently requires them to serve customers when their previous supplier defaults. This role would then have to be taken up by the licensed market.
In addition, Amendments 1 to 12 and Amendment 18 enable the Secretary of State to make regulations which put in place safeguards requiring the exiting incumbent to take certain steps prior to making an application, such as, importantly, consulting its customers. The regulations may also set out the grounds on which such an application may be refused: for example, if the company could not demonstrate that exit was in the best interests of its customers. These provisions will enable us to put in place a stable and transparent framework within which exits can take place. I beg to move.
Lord Moynihan (Con)
My Lords, I am grateful to the Minister for providing a comprehensive solution to the issue of exit, for tabling these amendments and for his clear explanation of the Government’s intent. While the legislative drafting is more extensive than some of us had anticipated, these amendments achieve the desired effect of facilitating a clearer framework for competition. Additionally, the greater transparency on cost allocation that such a voluntary transfer mechanism brings will help to ensure that the incumbent companies are less able to adjust their cost allocations to the detriment of household customers.
This transparency is fundamental to effective economic regulation and the policing of effective markets. It will allow companies to organise their businesses in the way that they consider to be in the best interests of their shareholders and indeed their customers. Allowing exit to occur voluntarily, as confirmed by the Minister, will allow transfer mechanisms to enable more competitive third parties to enter the non-household water and sewerage retail market to the benefit of business customers, as has proved to be the case in Scotland. Above all, as demonstrated by both Oxera and Macquarie, exit will save customers unnecessary cost.
I am very grateful to the Government for confirming today that they will now consult fully on safeguards, consulting particularly with those who represent the interests of the customers, given that the powers granted through these amendments confirm the opportunity, not the obligation, for incumbent water and sewerage companies to propose transfer schemes to the Secretary of State for his consideration.
As tabled, the amendments place a considerable degree of power in the hands of Ministers, notably to adjust the powers and duties of key industry stakeholders, including Ofwat. While this could be problematic were the powers to be used to their full extent, I am confident from what the Minister has said that there is absolutely no intention to undermine the freedom of manoeuvre of the regulator.
With the clauses soon to be in the Bill, I hope, it will be important to enter into constructive discussion and engagement in order to consult widely and urgently to meet what I hope will be the reasonable deadline of market opening in 2017. I also agree with noble Lords who emphasised at an earlier stage that it is also very important to secure customer protection on retail exit.
I hope that the amendments will be welcomed on all sides of the House and by all those who have taken part in the debates over exit, with the request that the Government will give a firm and unequivocal commitment to using their new powers to facilitate efficient and orderly market entry and exit. If so, the benefits will be considerable for business customers. Once this House, in future legislation, has the opportunity to review the working of the market for business customers, I hope that it will not subsequently hesitate to move forward to deliver competition to the household sector as well.
Lord Haskel (Lab)
My Lords, has the Minister seen the report from the Delegated Powers and Regulatory Reform Committee? It is quite critical of these amendments. The committee found that the amendments were prepared in a hurry, and was particularly concerned that the procedure should have a strengthened affirmative procedure. I was not sure from the Minister’s introduction whether he was giving an undertaking that this would be so, or indeed whether he accepts this recommendation from the committee. The committee also found that the powers are conferred in rather permissive terms and, where regulations must make provision, the committee suggested that the regulations should be required to make provision. Again, I did not quite gather from the Minister’s introductory words whether he had taken these recommendations on board.
Baroness Parminter (LD)
I rise to speak to Amendment 13, which is in this group. It is tabled in my name and that of my noble friends Lady Bakewell of Hardington Mandeville and Lord Marks of Henley-on-Thames.
I think my views on retail exit are well known in this House. I am not in principle against it, but I have concerns that it is a complex issue and therefore one should not legislate in haste. The amendments the Government have introduced today, at this late stage, give broad-ranging powers to the Secretary of State to implement changes to allow voluntary retail exit from the non-household market. Given the nature of these powers and the need to get the details of retail exit right, I believe the fullest consultation and parliamentary scrutiny are required. Only this will ensure that retail exit is introduced in a way which delivers improvements in services to all customers.
The Delegated Powers and Regulatory Reform Committee argued yesterday that,
“the opportunity for discussion in Parliament of the extent of the powers and the manner in which they are likely to be exercised has been seriously curtailed”.
It went on to argue that,
“the powers to make exit regulations should require a strengthened affirmative procedure on their first exercise”,
and outlined what procedure it had in mind for that. I agree with the committee. My amendment does what it called for yesterday, which the Government sadly chose not to table.
Why is this important? It is because we need wide stakeholder engagement and strong parliamentary scrutiny to ensure that the real concerns about retail exit can be addressed and taken into account. It is because we need to make sure that retail exit proposals protect the rights of customers, both affected non-household customers and household customers who remain with incumbent providers who cannot divest them. Given that the retail exit is for business customers only, householders could be left with a water company that has signalled a lack of interest in providing customer services. We must ensure a good level of service for effectively stranded customers. As it stands, water companies take ownership of the provision of clean drinking water from source to tap and plan with their customers to deliver that efficiently and safely. Aggregating water retail apart from water provision means we will not necessarily have water providers working with retailers to help customers manage water efficiently. Major water-saving initiatives have been driven by robust planning by water companies which know the supply constraints and want to work with customers through their retail operation to manage that supply for the long term. We need to ensure retail exit is not done in such a way as to hinder that incredibly valuable objective.
Let us also not forget that there is no consensus in the water industry that retail exit is the best way forward, as Water UK makes clear. Indeed, the only vocal advocate among water companies is Thames Water, or more precisely Macquarie, which is one of Thames Water’s major investors. The paper it produced is about selling off customers to extract maximum value for its investors. That blatant self-interest is in stark contrast to the needs of those investing in the industry for the long term. They want stability in the sense of predictability, no surprises and carefully thought-through, outcome-based, long-term logic. We need to ensure that retail exit is done in such a way as not to unsettle the wider investment community whose investment we need to deliver long-term water resilience.
The Government’s amendments show that they are alive to these concerns. For example, they propose a requirement to consult customers prior to an application to exit, and an application can be refused on the grounds that it is not in the interest of household or non-household customers. Equally, the Government are proposing further dialogue with the industry, regulators, customers and others in advance of laying a proposed regulatory framework before Parliament, and a consultation is proposed later this year. This is all welcome, but it does not go far enough. We need a process with full consultation and then the opportunity for Parliament to scrutinise any draft proposals before regulations are put to the House, at which point they cannot be amended.
My amendment would deliver what the Delegated Powers Committee asked for and ensure that any proposed framework for non-household retail exit receives the widest consultation and full parliamentary scrutiny. That way we can be sure that retail exit improves customer service, gives investors confidence and delivers the long-term water resilience we need.
Lord Marks of Henley-on-Thames (LD)
My Lords, I support Amendment 13, which was spoken to by my noble friend Lady Parminter and to which I have added my name. I do so as a member of the Delegated Powers and Regulatory Reform Committee of which the noble Lord, Lord Haskel, who has already spoken, is also a member—other members are in their places today—to explain why that committee takes the strong view that a strengthened procedure, often called the super-affirmative resolution procedure, is important, at least on first exercise in the case of these regulations.
The context in which these amendments fall to be considered is that they are a wide-ranging set of amendments which represent a radical change of direction in the Bill. The Bill itself introduces considerable change in the way that the water industry operates, that industry being of great importance to the UK economy as a whole and to individuals. Although these amendments on retail exit are concerned with non-household supplies, as my noble friend has already stated, they are nevertheless of wide public importance.
The noble Lords, Lord De Mauley and Lord Moynihan, and my noble friend Lady Parminter have all explained the political context and impact of these amendments. I will confine what I say to the three reasons why a strengthened procedure is so important. First, there has been very limited time for the consideration of this scheme as a whole, as the noble Lord, Lord De Mauley, frankly recognised. The amendments are introduced in this House at Third Reading in response to amendments introduced earlier, notably by the noble Lords, Lord Moynihan, Lord Whitty and Lord Grantchester. However, in legislative terms, the amendments come, in this House at least, not even at the 11th hour: it is a minute to midnight. It is not, I suggest, satisfactory, and it is certainly not desirable, for nearly 11 pages of amendments to be introduced at such a late stage in the passage of the Bill without the time for lengthy and informed scrutiny of the detail of the proposed scheme. The amendments are complex and demand detailed scrutiny after all interested parties have had ample opportunity to consider them and to comment on them. The timing of their introduction has simply not permitted this to happen and the use of a simple affirmative procedure, as is proposed, would be likely to lead to a draft set of exit regulations being laid before Parliament for approval in unamendable form.
Secondly, quite regardless of the issue of timing, this is, I suggest, a case for a super-affirmative procedure in any event. The amendments would introduce into the Bill the power to make regulations which would effectively amount to an entire new legal framework to enable relevant undertakers to withdraw from the new market arrangements. If those provisions become part of the Bill without a super-affirmative procedure, then Parliament will have, as your Lordships well know, no opportunity to consider and report on the individual details of the proposed regulations and, in practical terms, no opportunity to invite detailed revision of their provisions. With the super-affirmative procedure set out in our amendment, there will be an opportunity for a committee of either House to consider the draft regulations in detail and to recommend changes to the draft for the Secretary of State to consider. The procedure proposed is similar to that in Section 102 of the Local Transport Act 2008, which the Delegated Powers and Regulatory Reform Committee recommended as a model. There is no rush to introduce these exit regulations, particularly not when they are potentially of such importance. They should not be the subject of delegated legislation without a full opportunity for Parliament to consider their detail.
Thirdly—this was touched on by the noble Lord, Lord Haskel—our committee was extremely concerned by the degree to which the amendments establish, not a list of requirements to which the Secretary of State must adhere in presenting the regulations, but a menu from which he can largely pick and choose at will. I have no objection to the fact that the power to make regulations in the first place, in subsection (1)(a) of the new clause proposed in Amendment 1, is permissive and not mandatory. It may be that the Secretary of State decides against exercising the power to make such regulations at all, although that is of course unlikely. However, if he makes such regulations, it is surely right that he should be required to incorporate all the safeguards of which the noble Lord, Lord De Mauley, spoke, which are essential to protect customers, to ensure proper consultation with interested parties, to safeguard the public interest and to secure appropriate parliamentary scrutiny. Yet the amendments as drafted are almost entirely permissive in respect of such matters.
I will trespass on your Lordships’ time for a moment or two to look at a couple of examples. Amendment 1 provides that exit regulations,
“may include provision for protecting customers”,
affected by a relevant undertaker’s withdrawal. Amendment 2 provides that:
“Provision under subsection (1)(a) may require a relevant undertaker … to consult”.
Amendment 4 states that:
“Exit regulations about the transfer of a part of a relevant undertaker’s undertaking may include provision for the making of a scheme to transfer property”.
These are all matters on which this House would wish to be given the opportunity for detailed consideration.
General directions are of general application. I will address two points on Amendment 9. Subsection (1) states:
“Exit regulations may make provision for the Secretary of State to publish … a statement setting out general directions for the”,
regulators. Subsection (4) states:
“Exit regulations may make provision for the Secretary of State, before publishing a statement under the regulations, to consult”.
These are all matters which I would expect, and I suggest your Lordships would expect, to be requirements. They are matters which concerned the Delegated Powers and Regulatory Reform Committee. The list goes on. The central point is that it is vital for Parliament to have the opportunity to consider the proposed exit regulations individually and to recommend changes to particular regulations before they become law without being restricted by the limitation inherent in a simple affirmative resolution procedure.
Lord Whitty (Lab)
My Lords, first, I apologise to the Minister that, due to a misreading of the Order Paper, I was not here to hear his first couple of minutes.
The Minister gave us a fulsome presentation of the changed position of the Government, which explained in considerable detail how these new powers would work. Those of us who sat through Committee and Report will know that the Government were faced with a pretty widespread view across the House that they needed to change their mind on retail exit. The noble Lord, Lord Moynihan, headed a series of debates which eventually brought the Government to change their mind and present these new clauses that are before us today.
It is of course a pity in many senses that this comes so late. Given this stage of the Bill, which has gone through both Houses of Parliament, it is difficult to deal with such a complex set of amendments. I am sure that when the noble Lord, Lord Moynihan, put amendments in this direction on the Order Paper at an earlier stage, and certainly when I did so, we did not expect to create quite such a substantial job-creation scheme for parliamentary counsel, but the Government have done a major job here and it would be churlish to quibble too much about it. However, there are problems with it. We all welcome deathbed conversions, but the central problem here is the lateness of the conversion. I wish that we were a stage earlier in the proceedings, when we could have tried to make minor amendments to the proposed clauses.
I echo the points made by the noble Lord, Lord Marks, in particular that there are several points in this, from the first new clause onwards, particularly in the very first line and the reference to protecting consumers, where “must” really ought to be substituted for “may”. With a bit more time, the Government might have come to that conclusion themselves in the instructions that they gave to counsel. However, we are where we are, and this is a major concession by the Government to the House. In a sense, the whole process has been a vindication of the way in which the House considers complex legislation and minds are changed—and we have the result here before us.
Baroness Neville-Rolfe (Con)
My Lords, I would briefly like to intervene, first to thank the Minister for the efforts that he has made to address concerns and to make these amendments this afternoon. The Bill is hugely complex and the amendments are extensive, as my noble friend Lord Moynihan put it so succinctly. However, I feel that these provisions will add more complexity. So it is all the more important that the Minister confirms the plans that I know that Open Water has to summarise all the many regulatory provisions on water in the Bill and elsewhere, in order that customers, entrants, companies and investors can understand the complex web of rules and subordinate legislation that is planned, providing a force for simplicity. I believe that the good sense of our administrators is the key thing here and that is actually more important than to bring in a special new procedure. I support the amendments that the Government have made.
Lord De Mauley
My Lords, I thank all noble Lords for their contribution to this debate. I have listened to them extremely carefully. I thank my noble friend Lord Moynihan for welcoming the changes that we are making to the Bill to enable incumbent water companies to exit the non-household market for retail services. I thank the noble Lord, Lord Whitty, as well, for his comments in that regard.
I thank, too, the noble Lord, Lord Haskel, for his intervention, and I hope that he understands that I thought it best to allow my noble friend Lady Parminter to explain her amendment before I addressed the question that he raised. Before I get into that question, I address the question raised by my noble friend Lady Neville-Rolfe. She raised a very valid point about the additional levels of complexity added by the retail exit provisions. The noble Baroness also raised the issue of bureaucracy. Indeed, she has done so throughout the course of the Bill and has worked tirelessly on the subject. I strongly agree with her on that matter. In that regard, I highlight the work that Open Water is doing in presenting water regulation in guidance and online. It is presenting the information in a way that helps customers, entrance companies and investors to understand the sector, and which meets their particular information requirements.
These proposed new clauses set out, in as much detail as possible, the basis on which we will establish regulations to enable exits. We will now need to move from the high-level, in-principle statements regarding the case for exits to tackle the detailed, practical implications for companies and their customers. In doing this, we will need to consult widely. We will also provide further opportunity for parliamentary scrutiny through the draft affirmative procedure.
I think that all noble Lords who have spoken in this short debate have commented on the breadth of these powers. On Report, I put on record our view that the only practical way of responding to the will of the House on this matter would be to take a very wide-ranging power.
The question of whether to allow exits has been discussed at all stages during the passage of the Bill in both Houses. The overall policy of retail exits has been discussed at length. Powerful speeches from my noble friends Lord Moynihan and Lord Selborne, the noble Lord, Lord Whitty, and others demonstrated the strength of feeling in this House about the matter. I have tabled the amendments before us today in response to that pressure.
Throughout our debates on this subject there has been a broad consensus that we should allow for retail exits in such a way as to meet three important criteria: they must be for non-household customers; they must be undertaken voluntarily; and they must ensure the ongoing protection of customers. This is what the amendments do. The breadth of these powers is, unfortunately, unavoidable in this case. The debates in your Lordships’ House have ably set out the high-level principles in support of the case for retail exit. Nevertheless, further detailed work is required to address the practical implications of this change.
A number of changes will be required to the Water Industry Act 1991 and the detailed thinking has yet to be done by any of the interested parties on what these might be, what would be involved, how the implications for customers would be managed and the type of safeguards that would be required to avoid any risk of forced exit or separation. None of these is an inconsequential issue and it is clear that substantial further consultation and engagement will be required. We will consult widely on these matters. Following this there will be a further opportunity for parliamentary scrutiny under the draft affirmative procedure.
Noble Lords have highlighted that the Delegated Powers and Regulatory Reform Committee met yesterday to consider the new retail exit powers. I apologise to the committee for the inconvenience caused to it. We are very grateful to the committee for its report. I particularly appreciate its meeting at such short notice and I welcome the important contribution that it has made to this debate. I welcome the fact that the committee does not consider the powers conferred by the proposed new clauses to be inappropriate. The focus of the committee’s concerns has been on the relatively late stage in the passage of the Bill at which these proposed new clauses have been tabled rather than on their content. The committee did, however, recommend a strengthened affirmative resolution procedure for the exit regulations on their first use.
I fully understand and sympathise with concerns that the new provisions have not received detailed scrutiny as they have been tabled at this late stage. I agree with the committee’s view that, given the permissive nature of these powers and the need for further work on the detail, extensive further engagement is required with both parliamentarians and other interested parties. Our amendments already include a consultation requirement before any regulations may be made.
I can confirm that before tabling the first exit regulations we will consult widely and that we will ensure that there are many further opportunities for all interested parties to comment, and I can be clear that the Government’s use of the powers will take account of issues raised during that consultation. I believe that this extensive and wide-ranging approach to consultation will provide the level of engagement envisaged by the committee. Consultation of this nature with industry experts is an important part of the policy development process and it reflects that used in Section 102 of the Local Transport Act 2008—the procedure to which the committee refers.
I fully accept that we need to ensure that parliamentarians are given adequate time to scrutinise the precise wording of the proposed regulations before the final draft is laid before Parliament. We will therefore commit to publishing a draft of the regulations well in advance of laying the final regulations before Parliament so that there is a real opportunity for changes to be made to address any concerns that parliamentarians may have. We will also send a copy of these indicative regulations to the Environment, Food and Rural Affairs Select Committee in the other place so that it has an opportunity to comment on our intentions.
I believe that these measures fulfil the spirit and practical implications of the enhanced affirmative processes detailed in Section 102 of the Local Transport Act. In addition to the detailed consultation, these powers will be subject to the draft affirmative resolution procedure, which means that there will be further opportunities for parliamentary scrutiny.
The use of strengthened affirmative procedures for delegated legislation is unusual, and rightly so. There must be a very strong case for the use of such a procedure. The Government have brought forward these retail exit amendments in response to the level of pressure across your Lordships’ House. The amendments seek to provide clarity as to what matters are to be within the scope of the regulations, while delivering precisely what your Lordships asked for. Exit regulations would be the subject of extensive consultation and of debate in both this House and the other place.
I agree with the committee that further scrutiny and debate on these matters are required and I am very grateful for its work in raising these important matters. Given the history of these changes and the recommendations that the committee has made with regard to future scrutiny and engagement, I should like to place on the record that my department will continue to keep all interested parties up to date with progress on this area. I have no doubt that the relevant Minister will be very happy to make themselves available to parliamentarians from both Houses for further discussions as we develop the detailed plans for use of the regulation-making powers.
As I said, I am very grateful for the work of the Delegated Powers and Regulatory Reform Committee. I will reflect on its other comments and will reply formally in due course. In particular, paragraph 6 of the committee’s most recent report, to which the noble Lord, Lord Marks, referred, focuses on the importance of protections for customers. I confirm that ensuring that the interests of all customers are fully protected will be the guiding principle that underpins this work. These protections will embrace both the household customers who will stay with the incumbent water company and the non-household customers who, in the event of an exit, will be transferred to a retail licensee.
Concern was expressed that some companies may be seeking exit as a route to short-term financial gain. During Committee, my noble friend Lord Moynihan highlighted a report published by Macquarie, a major investor in the water sector, arguing for exit. This report identifies long-term benefits for customers from greater consolidation and efficiency in the retail market. It also identifies potential financial benefits for those companies that transfer or “sell” their customers to a licensee.
The enabling powers that we have been discussing today would allow the Secretary of State to put in place a framework governing the process of transferring customers and to place appropriate boundaries on the value that may be extracted by the exiting companies and on the costs that may be passed on to customers. For example, these provisions will enable the Secretary of State to place conditions on consent to an exit application, such as profit sharing with affected customers and compliance with charging rules to ensure that transferred customers are no worse off.
Lord De Mauley
“Application for retail exit
(1) Exit regulations about exit applications must make provision requiring a relevant undertaker to apply to the Secretary of State, and may include—
(a) provision requiring a relevant undertaker to take such steps as the regulations may specify before making an application;(b) provision as to the form and manner in which an application is to be made and as to the contents of an application;(c) provision about payment to the Secretary of State of a fee of an amount specified in or determined under the regulations;(d) provision about the information that is to accompany an application;(e) provision for the Secretary of State to require a relevant undertaker to provide such further information as the Secretary of State may require in order to make a determination;(f) provision as to the grounds on which an application may be refused;(g) provision for the Secretary of State to grant an application subject to conditions.(2) Provision under subsection (1)(a) may require a relevant undertaker—
(a) to consult—(i) its non-household customers and its other customers,(ii) the WSRA,(iii) the Chief Inspector of Drinking Water,(iv) the Consumer Council for Water, and(v) any other person specified in the regulations;(b) to prepare and publish a report assessing the effect on non-household customers and other customers if the undertaker withdraws from the non-household retail market; (c) to publish notice of its proposed exit application in such manner as the regulations may specify.(3) The grounds that may be specified under subsection (1)(f) include—
(a) grounds relating to the public interest or to the interests of a section of the public;(b) grounds relating to the interests of non-household customers or other customers; (c) grounds relating to costs associated with a transfer of part of the relevant undertaker’s undertaking;(d) grounds relating to the eligible licensee or licensees to which a transfer of part of the relevant undertaker’s undertaking is proposed to be made.(4) The conditions that may be imposed under subsection (1)(g) include—
(a) conditions as to the persons who are to pay the costs associated with a transfer of a part of the relevant undertaker’s undertaking;(b) conditions as to the application of money received by the relevant undertaker in connection with a transfer of a part of its undertaking;(c) conditions about the relevant undertaker giving consent to modifications of the undertaker’s conditions of appointment;(d) conditions about an eligible licensee to which a transfer of part of the relevant undertaker’s undertaking is proposed to be made giving consent to modifications of the conditions of its water supply licence or sewerage licence;(e) conditions about the treatment of non-household customers affected by the transfer of part of the relevant undertaker’s undertaking.(5) Exit regulations may make provision about how particular descriptions of customers and premises are affected by a relevant undertaker’s withdrawal from the non-household retail market, including in particular any of the following—
(a) premises to which the supply of water has been disconnected,(b) premises that are to be demolished,(c) premises that are temporarily unoccupied,(d) premises in relation to which the owner or occupier has served notice under section 63AA of the Water Industry Act 1991 (supply by water supply licensee: domestic supply),(e) premises in relation to which the owner or occupier has served notice under section 63AB of the Water Industry Act 1991 (supply by water supply licensee: non-domestic supply), and(f) premises in relation to which the owner or occupier has served notice under section 110K of the Water Industry Act 1991 (provision by sewerage licensee).(6) Provision under subsection (5) may include provision about how exit applications deal with particular descriptions of customers and premises.
(7) Exit regulations may make provision about the disclosure by a relevant undertaker of such information as the regulations may specify about—
(a) its non-household customers, and(b) the charges payable by them (whether payable under a charges scheme under section 143 of the Water Industry Act 1991 or under an agreement).(8) Exit regulations may specify—
(a) the persons to whom the information may be disclosed;(b) the purposes for which it may be disclosed.”
“Eligible licensees
(1) Exit regulations may—
(a) make provision for a relevant undertaker to specify in its exit application the eligible licensee or licensees to which it proposes to transfer a part of its undertaking;(b) make provision for the WSRA to direct one or more eligible licensees to accept the transfer of a part of the relevant undertaker’s undertaking.(2) In this Chapter “an eligible licensee” is a company—
(a) that has a water supply licence with a retail authorisation or a sewerage licence with a retail authorisation, or both, and (b) that has elected to be an eligible licensee for the purposes of this Chapter.(3) Exit regulations may—
(a) provide for an eligible licensee to be specified in an exit application only if the licensee agrees to be so specified;(b) provide for the WSRA to give notice before giving a direction under subsection (1)(b);(c) provide for an eligible licensee to temporarily suspend an election under subsection (2)(b) so that it may not be given a direction under subsection (1)(b).(4) Exit regulations may make provision about electing to be an eligible licensee, and may in particular—
(a) provide for a company to satisfy such criteria as are set out in a code published by the WSRA before the company may elect to be an eligible licensee;(b) provide for the WSRA to assess whether a company satisfies those criteria;(c) provide for the WSRA to publish a code setting out—(i) the criteria mentioned in paragraph (a), and(ii) how it conducts such assessments, and(d) provide for the WSRA to comply with the code in making such assessments.(5) Exit regulations may—
(a) allow an eligible licensee, to which a transfer of a part of a relevant undertaker’s undertaking is proposed to be made, to be a company associated with the undertaker,(b) require the eligible licensee to which such a transfer is made to be such a company, or(c) prohibit such a transfer being made to such a company.(6) For the purposes of this section, a relevant undertaker is associated with an eligible licensee if one of them is a subsidiary of the other or both are subsidiaries of the same body corporate.”
“Transfer of undertaking
(1) Exit regulations about the transfer of a part of a relevant undertaker’s undertaking may include provision for the making of a scheme to transfer property, rights and liabilities where an exit application has been granted.
(2) Exit regulations about the transfer of a part of a relevant undertaker’s undertaking may include provision about arrangements under Chapter 1 of Part 5 of the Water Industry Act 1991 for fixing, demanding and recovering charges.
(3) Provision under subsection (2) may include—
(a) provision for and in connection with treating such arrangements as if they were agreements between the undertaker and the person liable to pay such charges;(b) provision about the terms and conditions of such agreements.(4) Exit regulations may make provision for a scheme under subsection (1) to contain—
(a) provision identifying the property, rights and liabilities to be transferred (which may include property, rights and liabilities that would not otherwise be capable of being transferred);(b) provision for the division of property, rights and liabilities, including— (i) provision creating an interest in or right over property;(ii) provision creating new rights and liabilities;(iii) incidental provision as to the property, rights and liabilities of other persons;(c) provision about the consideration to be provided (and about the enforcement of such provision).(5) Subsection (4) is not exhaustive of what a scheme may contain.”
“Operation of retail market
(1) Exit regulations about the operation of the water industry in relation to a retail exit area may include such provision as is described in the following subsections.
(2) Exit regulations may make provision for and in connection with requiring a relevant undertaker to impose on an eligible licensee only such charges under a section 66D agreement or a section 117E agreement as would enable the licensee to fulfil its obligations under agreements (including deemed agreements) transferred to the licensee from the undertaker under the regulations.
(3) Exit regulations may make provision for and in connection with requiring a water supply or sewerage licensee, where the licensee is providing services under the licensee’s licence in relation to a retail exit area, to provide such services under its licence in relation to that area as the regulations may specify.
(4) Exit regulations may make provision for and in connection with such arrangements between a water supply or sewerage licensee and a relevant undertaker as would enable the licensee to comply with requirements imposed on it under subsection (3).
(5) Exit regulations may make provision as to the functions of a relevant undertaker in relation to a retail exit area and may, in particular, modify or disapply a duty imposed on a relevant undertaker by—
(a) section 63AC(2) (interim duty to supply water), or(b) section 110L(2) (interim duty to provide sewerage services).(6) Exit regulations may provide for a water supply or sewerage licensee that—
(a) is a company,(b) is providing services under its licence in relation to a retail exit area, and(c) satisfies such criteria as may be specified by the regulations (which may include criteria as to market share),to be subject to provision for special administration (see section 23 of, and Schedule 2 to, the Water Industry Act 1991) in such circumstances as the regulations may specify.(7) Exit regulations may include provision—
(a) requiring relevant undertakers, water supply licensees and sewerage licensees to provide such information as the regulations may specify to customers;(b) requiring relevant undertakers, water supply licensees and sewerage licensees to provide such information as the regulations may specify to the WSRA or the Secretary of State;(c) requiring the WSRA to record such information as the regulations may specify in the register it maintains under section 195 of the Water Industry Act 1991.(8) Provision under subsection (7)(b) may in particular specify information about customers and the arrangements under which they receive services.”
“Operation of retail market: charges etc
(1) Exit regulations may make provision for water supply licensees and sewerage licensees, that are providing or proposing to provide services under their water supply or sewerage licences in relation to a retail exit area, to make, and from time to time revise, a scheme containing the terms and conditions which, in the absence of agreed terms and conditions, are to apply to such services.
(2) Provision under subsection (1) may include—
(a) provision for a scheme to make different provision for different purposes, or different areas;(b) provision about the publication of a scheme or revised scheme;(c) provision about sending a copy of a scheme or revised scheme to the WSRA;(d) provision enabling the WSRA to direct that terms or conditions be modified generally or in a particular case; (e) provision requiring a licensee to comply with a direction under paragraph (d), including provision for enforcing such a duty under section 18 of the Water Industry Act 1991.(3) Provision under subsection (1) may also include—
(a) provision requiring the WSRA to issue a code about providing services to which a scheme under subsection (1) relates;(b) provision for the code to include, in particular, provision about—(i) the terms and conditions contained in such schemes;(ii) licensees informing owners or occupiers of premises about their schemes before agreeing any terms and conditions for the provision of services;(c) provision for the WSRA, if it considers that a licensee is not acting as required by such provision as is described in paragraph (b), to give the licensee a direction to do, or not to do, a particular thing specified in the direction;(d) provision requiring a licensee to comply with a direction under paragraph (c), including provision for enforcing such a duty under section 18 of the Water Industry Act 1991;(e) provision requiring the WSRA from time to time to review the code and, if appropriate, to issue a revised code.(4) Exit regulations may make provision for the WSRA to issue and enforce—
(a) rules about charges for services that may be imposed by water supply or sewerage licensees in relation to a retail exit area;(b) if exit regulations make provision for licensees to make schemes about such charges, rules about such schemes.(5) Provision under subsection (4) may include—
(a) provision for the rules to make different provision for different cases;(b) provision for the WSRA to direct a licensee to comply with the rules;(c) provision for such directions to be enforceable by the WSRA under section 18;(d) provision for the Secretary of State to issue guidance as to the content of the rules;(e) provision for the Secretary of State to prevent rules being issued.”
“Exit applications: further provision
(1) Exit regulations may make provision about the provision relating to exit applications that may be included in a relevant undertaker’s conditions of appointment.
(2) Exit regulations may in particular prohibit the inclusion of provision requiring a relevant undertaker to make an exit application.
(3) Exit regulations may make provision for requiring the WSRA or the CMA to obtain the consent of the Secretary of State—
(a) before exercising a function so as to require a relevant undertaker to make an exit application, or(b) before exercising a function in a way that is likely to result in a relevant undertaker making an exit application.”
“Modification of appointment and licence conditions
(1) Exit regulations may provide for the WSRA to modify the conditions of appointment of a relevant undertaker where it considers it necessary or expedient to do so in consequence of the transfer of part of the relevant undertaker’s undertaking under the regulations.
(2) Exit regulations may provide for the WSRA to modify the conditions of a licence under Chapter 1A of Part 2 of the Water Industry Act 1991 where it considers it necessary or expedient to do so in consequence of the transfer to the holder of that licence of part of a relevant undertaker’s undertaking under the regulations.
(3) Exit regulations may provide for the WSRA, where it modifies conditions under subsection (1) or (2), to make such incidental or consequential modifications of other conditions of the appointment or, as the case may be, other conditions of the licence as it considers necessary or expedient.
(4) Provision made by exit regulations as regards the modification of conditions under this section may include—
(a) provision for the Secretary of State to give consent to a modification proposed by the WSRA;(b) provision as to the period during which a modification may be made.(5) Provision under subsection (4)(b) may not allow a modification to be made after the end of the period of one year beginning with the day on which the transfer in question takes place.”
“General directions
(1) Exit regulations may make provision for the Secretary of State to publish, from time to time, a statement setting out general directions for the WSRA and the CMA as regards the carrying out of their relevant functions in circumstances where the WSRA or the CMA, in carrying out those functions, might be able—
(a) to require or bring about an exit application, or(b) to have an effect as regards the making of an exit application.(2) Exit regulations may require the WSRA and the CMA to carry out their relevant functions in accordance with any statement published under the regulations.
(3) Exit regulations may make provision about formulating a statement to be published under the regulations, and may in particular—
(a) require the Secretary of State to have regard to—(i) the duties of the WSRA mentioned in section 2(1)(b) of the Water Industry Act 1991,(ii) the duties of the CMA under the Competition Act 1998 or the Enterprise Act 2002, and(iii) the protection of the interests of consumers (within the meaning of section 2 of the Water Industry Act 1991), and(b) enable the Secretary of State to have regard to such other matters as the Secretary of State thinks fit.(4) Exit regulations may make provision for the Secretary of State, before publishing a statement under the regulations, to consult—
(a) the WSRA,(b) the CMA,(c) the Consumer Council for Water,(d) relevant undertakers,(e) water supply licensees and sewerage licensees,(f) the Welsh Ministers, and (g) anyone else the Secretary of State thinks appropriate.(5) Exit regulations may—
(a) require the Secretary of State to lay a draft of a statement before Parliament before publishing it;(b) require the Secretary of State to wait for a period specified in or determined under the regulations after laying the draft statement under paragraph (a);(c) prohibit the Secretary of State from publishing it if, within that period, either House of Parliament resolves not to approve it.(6) In this section “relevant function” means—
(a) in relation to the WSRA, a function mentioned in section 2(1)(b) of the Water Industry Act 1991;(b) in relation to the CMA, a function of the CMA under the Competition Act 1998 or the Enterprise Act 2002.”
“Exit regulations: general
(1) Exit regulations may make such provision as the Secretary of State considers appropriate—
(a) for modifying a person’s duties and powers, and(b) for imposing new duties and conferring new powers on a person.(2) The persons in relation to whom provision under subsection (1) may be made include—
(a) the Secretary of State;(b) the Chief Inspector of Drinking Water;(c) the Welsh Ministers;(d) the Chief Inspector of Drinking Water for Wales, if there is one, or the Chief Inspector of Drinking Water if section 86(1B)(b) of the Water Industry Act 1991 applies;(e) the WSRA;(f) the CMA;(g) the Environment Agency;(h) the NRBW;(i) the Consumer Council for Water;(j) relevant undertakers;(k) water supply licensees and sewerage licensees.(3) Exit regulations may—
(a) apply enactments, with or without such modifications as the Secretary of State thinks fit;(b) amend, repeal or revoke enactments.(4) The provision that may be made by exit regulations includes provision conferring power to make subordinate legislation.
(5) Exit regulations may—
(a) contain such consequential, incidental, supplementary, transitional or saving provisions (including provisions amending, repealing or revoking enactments) as the Secretary of State considers appropriate, and(b) make different provision for different cases, including different provision in relation to different persons, circumstances or areas.(6) In this section “enactment”—
(a) includes an Act or Measure of the National Assembly for Wales;(b) includes an enactment contained in this Act, other than this Chapter.”
“Interpretation
(1) In this Chapter—
“the CMA” means the Competition and Markets Authority;
“eligible licensee” has the meaning given by section (Eligible licensees);
“exit application” means an application under section (Retail exit: non-household premises)(1)(a);
“the NRBW” means the Natural Resources Body for Wales;
“non-household customer” means a person who is the customer as regards a service provided in respect of non-household premises;
“non-household premises” means premises other than household premises as defined in section 17C of the Water Industry Act 1991;
“retail exit area” has the meaning given by section (Retail exit: non-household premises);
“the WSRA” means the Water Services Regulation Authority.
(2) Except in so far as the context otherwise requires, terms used in this Chapter have the same meaning as in the Water Industry Act 1991.”
Lord De Mauley
“Procedure
(1) Before making exit regulations, the Secretary of State is to consult—
(a) the Welsh Ministers;(b) the WSRA;(c) the CMA;(d) the Consumer Council for Water;(e) relevant undertakers whose areas are wholly or mainly in England;(f) water supply licensees and sewerage licensees;(g) persons whom the Secretary of State considers to represent the interests of investors in the water industry.(2) The power to make exit regulations is to be exercised by statutory instrument.
(3) A statutory instrument containing exit regulations made by the Secretary of State may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
Baroness Parminter
Baroness Parminter
My Lords, the noble Lord, Lord Krebs, and I return again to the issue of the use of any surplus reserves for Flood Re. I will not repeat the arguments we advanced in Committee and on Report. I feel that the House is clear that our aim is to ensure that any significant surplus funds can be used by Flood Re to encourage householders to adapt to the impacts of climate change and flooding, and so manage down risk.
I am grateful to the Minister for meeting the noble Lord, Lords Krebs, and me last week to discuss the matter again. We accept that decisions cannot be made now—pinning down in legislation what level of reserves should be built up and what should happen to them. However, we need clarity about the decision-making process that will condition what happens to surplus funds. Will the Minister confirm that Flood Re will have to draw up a strategy to manage surplus funds and that it will be published? Equally, we seek confirmation that the approach of “invest to save” is not ruled out if significant surpluses are built up. By this I mean spending on property-level protection where the economics of that approach show that it delivers the best value for money in managing down risk. Given that it has been shown that such an approach delivers a benefit of at least £5 for each £1 invested, it is too important an approach to discount. It could make a decisive difference to individual householders and their protection. It will also benefit the insurance industry by reducing the level of overall claims. It is, therefore, in the interests of a smooth transition at the end of the process of Flood Re. To that end, I beg to move.
Lord Krebs (CB)
My Lords, I, too, thank the Minister for meeting the noble Baroness, Lady Parminter, and me to discuss this amendment. I do not wish to say anything at length but I shall make a couple of simple points. If we accept that Flood Re, according to the Government’s own figures, will build up a reserve, we can ask what this surplus might be used for. It could be used for future discounting of policy charges; it could be saved up for—excuse the pun—a rainy day when the call on insurance may be greater than anticipated; or, as our amendment suggests, it could be used to manage down future risk. As the noble Baroness, Lady Parminter, said, this is in effect a proposal that Flood Re should invest to save, to reduce both its own future costs by encouraging household-level protection measures and to help those householders to exit at the end of the period of operation of Flood Re.
According to the work of the Adaptation Sub-Committee of the Committee on Climate Change, which I chair, about 190,000 properties could benefit from property-level protection. It would seem reasonable that some of the money that accrues as a surplus in Flood Re should, given the returns on investment to which the noble Baroness has already alluded, be used to help some or, I hope, eventually, all of these 190,000 properties to become more resilient.
Lord Curry of Kirkharle (CB)
My Lords, I have some concerns about the amendment. If I can describe the noble Baroness, Lady Parminter, and the noble Lord, Lord Krebs, as friends, I hesitate to object to their amendment, but I have concerns. I declare an interest in that I was, until two years ago, a chair of an insurance company.
My concerns are around the following issues. First, as a policyholder contributing to the funds that will be accumulated to create Flood Re, I am concerned that some of my contributions will be used to create resilience measures—which are, I assume, measures to reduce the risk of flooding—for a select group of properties. That is not why we will contribute the funds.
Lord Campbell-Savours (Lab)
Does the noble Lord not accept that in the long term the insurance company will benefit because it will save money?
Lord Curry of Kirkharle
Perhaps I may respond to that as I work through my argument.
Secondly, identifying the properties that will be subject to this special treatment will require the wisdom of Solomon and might create division and resentment among other property owners who are not able to benefit from the resilience measures used.
Thirdly—here I have some sympathy with the comments made by the noble Baroness, Lady Parminter—Flood Re needs a strategy for the amount of reserves that will be appropriate and need to be built up to cover flood risk. A strategic approach to the amount of surplus required is important. It will be very difficult to determine what the reserve should be to cover flood risk over a period of years, but it is essential that a reserve is established to maintain adequate funds to cover significant flood risk.
Finally, my most important point—I respond here to the comments made by the noble Lord, Lord Campbell-Savours—is that, as a policyholder, I do not want to continue contributing to a fund that has established a significant surplus. Once the surplus has been determined and achieved, I would hope that the Government and the ABI would have a mature discussion about reducing the contributions to the fund so that they do not establish an ever-increasing fund which may never be used. It would benefit the insurance companies if they did not need to continue collecting funds to contribute to this reserve. Resilience measures are essential and should be taken as properties are restored after flooding, but it is not the role of the fund to provide the resources to do that.
Lord Whitty
My Lords, I can see the immediate attractiveness of the amendment but I share some of the reservations of the noble Lord, Lord Curry. If we are going to do this, we have to be more precise than the provisions in the amendment. The noble Lord rightly said that Flood Re will need a strategy for its surpluses and the limitations on the degree of cross-subsidy it can require from policyholders more generally. There will be a limit as to what is acceptable in that regard. It will also need a strategy to ensure that resilience and mitigation measures are adopted by those at the highest risk. If this amendment means that, and if it is a relatively small part of such surpluses—by which I mean a very small part—I can probably go along with it. If, however, it is as open-ended as it appears—and we know what the demands for flood mitigation as climate change and population pressures increase are likely to be—the temptation for insurance companies outside the system, the Government and the population to try to raid the Flood Re surplus for those purposes will begin to increase as well.
Despite the initial attractions, I do not think I can support the rather open-ended nature of the amendment as it stands. However, as we move forward and review the scheme, I hope that the Government and the administrators of Flood Re, along with other stakeholders, will find ways of ensuring a maximal take-up of resilience measures by those who own properties at risk and their insurance companies.
Lord De Mauley
My Lords, I thank my noble friend Lady Parminter and the noble Lord, Lord Krebs, for Amendment 14. I am glad to be able to return to your Lordships, having considered the proposals in more detail. As I have said previously, reserves that build up during the lifetime of Flood Re will be used primarily to pay flood claims in the bad years. It will not be easy to identify surplus funds and any decision about Flood Re’s reserves will require a judgment about the level of cover needed for the unpredictable risks it bears. Any commitment by Flood Re to spend a proportion of its reserves in a certain way, such as on betterment or resilience, would potentially increase the amount of capital it needs to hold on an ongoing basis, thereby having an impact on the cost of the scheme and ultimately the levy.
However, it is entirely right that there should be clarity on the principles regarding how surplus reserves would be dealt with, should that situation arise. This is not about small reserves that could provide one or two years’ comfort for Flood Re, but significant additional capital implying that Flood Re is excessively capitalised. It is important to recognise that this is not a situation that we anticipate occurring in the first few years of Flood Re’s life, as reserves will build up only gradually, if at all.
We have previously set out that during Flood Re’s life, we would expect the levy and eligibility thresholds to be set in such a way as to manage down excess reserves. I agree with my noble friend Lady Parminter that it should be open to Flood Re to spend some surplus money on resilience measures if it is appropriate to do so as part of its commitment to support households to prepare for risk-reflective pricing. Flood Re will have a duty to deliver value for money. One of the benefits for both households and insurers of installing property-level resilience measures is that, properly fitted, they can reduce the cost of future claims. Research suggests that for some homes, installing resilience measures can reduce the cost of subsequent flood claims by more than 70%. While we recognise that there is still work to be done to improve the evidence base, a point that the insurance industry raised in the Public Bill Committee on the Bill in the other place, I strongly agree that investment in resilience measures from whatever source could have a role to play in reducing the overall cost of claims over the lifetime of the scheme.
I recognise, too, that it would be helpful to provide greater clarity about how Flood Re will support policy- holders to prepare for transition to risk-reflective prices. We therefore propose that the secondary legislation, which will itself be subject to the affirmative procedure, will set out in more detail the points that Flood Re’s transition plan should cover, including that Flood Re could encourage and incentivise policyholders to make their properties more resilient to flooding. We will also expect Flood Re to consider in broad terms the process for managing any surplus during the lifetime of the scheme, either as part of the transition plan or in its wider governance framework. Parliament will have an important role to play in holding Flood Re to account for its use of resources and the delivery of its purpose, and its directors will be directly accountable to Parliament for that.
In relation to any reserves at the end of Flood Re’s life, as I have previously explained, Clause 71 allows the Government to require Flood Re to transfer a sum of the reserves to government, following consultation with Flood Re. It will ultimately be for the Government of the day, in consultation with Flood Re and Parliament, through affirmative resolution, to decide on the treatment of any reserves. I reassure your Lordships that there is no presumption about how reserves might be disbursed.
Baroness Parminter
I thank all noble Lords who have joined in this short but important debate as we seek to ensure that Flood Re achieves what we all want it to achieve, which is to help individual households move towards risk-reflective pricing and make them more able to cope with the challenges of climate change, as most clearly reflected in the flooding situations that we have seen. I listened carefully to what the Minister had to say and was pleased to see that he again articulated that “spend to save” is not ruled out in the administration of Flood Re and, secondly, that any secondary legislation will set out that it is open to Flood Re to spend any surplus helping households invest in more resilience measures. Those are both important steps which needed putting on the record. I think both I and the noble Lord, Lord Krebs, will be very grateful and thankful for that comment.
On that basis, we have probably pushed this issue as far as we can. We have sought throughout the process to be helpful to the Government in their ongoing discussions with the ABI, and I hope they feel that we have achieved that. We look forward, once the Bill has completed its parliamentary stages and secured state aid clearance, to looking at the secondary legislation, where I am sure this matter will be touched on again. Finally, as this will probably be the last time I speak on this matter in the House, I would very much like to put on record my thanks to the Minister and the Bill team for all the constructive discussions and dialogues they have had with me and my colleagues on these Benches. It has been an extremely technical and complex Bill and we are grateful to them for the time that they have given to help us in our job of making sure that the Bill leaves this House in better shape than that in which it came to us.
Lord Campbell-Savours
“(e) the need to review annually the operation of the Scheme”
Lord Campbell-Savours
My Lords, in moving this amendment, which calls for an annual review of Flood Re to deal with business which I do not believe has been concluded, I need to declare an interest. I have a leasehold interest with my wife, which I have declared on previous occasions on the Bill, in a band G home on the Thames. Although it is built on the flood plain, my flat is not threatened by flooding. It has never been flooded and can never flood because it is on the second floor. Nevertheless, I have to report that the car park area that serves our block of flats was recently subjected to some flooding, and it is with that in mind that I feel I should restrict my comments today and limit again what I have to say.
The problem with this whole debate on Flood Re is that it was never fully considered in the House of Commons. Some of the worst flooding—certainly this century and for a greater part of the previous century—actually took place after consideration in the Commons and during consideration in the Lords. I believe that many Members of Parliament in the other place would have been drawn into the debate as a result of pressure from their constituents in the event that they had experienced what many people experienced in January and February.
Before I make my wider comments, I thank the Minister for generously offering to arrange a meeting through his office, and I thank Mr Leckie, one of his staff, who has been excellent in his dealings with me. I hope at that meeting to have a representative of the ABI; Miss Anne McIntosh, the Member of Parliament for the constituency to which I referred on another occasion; and one of her constituents, whose statements I drew upon in the previous debate.
I have tabled this amendment because for many people in the country these proceedings are the most important part of the Bill, and they are watching what is happening in this debate on the internet. Many thousands of people in the country are following this debate because they feel that they have been excluded from Flood Re. While we all want Flood Re to go through, I believe that it remains unfinished business. I want to refer specifically to a group of properties, which would not include my own, that fall under the lower council tax bands A to D—mine is G, so I would not be affected by my own amendment or by what I am advocating. I choose those council tax bands because they involve, generally speaking, a group of lower- income people who can ill afford the arrangements that are being made.
I want to call on some correspondence that I received by e-mail, which a number of Members have received, from a man called Mr Junco Cochrane. He has been expressing concern in desperate e-mails to Members of this place in his best e-mail English. He says:
“I wrote to the ABI Director and have had quite a bullying type of reply. Leaseholders”—
he is one; they are excluded from Flood Re—
“have very little say and are virtually told what to do and how high to pay”.
He then points out the need to,
“prevent discrimination and distress for leaseholders”—
I believe he is speaking for leaseholders all over the country—
“who often are the poorer and older persons at the end of the property market, and with rip-off charges in various areas, often for nothing of any or little value”.
This is how he has phrased his e-mail. He goes on to say:
“Many leaseholders are pensioners and are not comfortably off ones. May I say respectfully, not like you in your fortunate situation”—
he is talking about me and my band G—
“as many of us just have the one small leasehold and struggle to keep that”.
I repeat: this man is excluded from the arrangements that are being made. He goes on to say:
“Many of us are the poorer category of households, old people in retirement flats, sheltered housing and social leaseholders, who are generally older people, of which there are millions in these types of flats”.
He is exaggerating but he obviously believes that there is a great number. He goes on:
“They are not in the ‘three’ conversions such as those referred to by DEFRA”.
We know what the three conversions are: they are where you have three flats in one block and there has been a compromise in Flood Re whereby they are now included. His e-mails to me and to others are desperate. This is the desperate voice of someone who is really upset about the way in which the legislation is being handled.
In response to people like him—and to Beverley Morris, who wrote to me on a previous occasion—the ABI maintains that insurance at reasonable rates will be made available. In a letter which the Minister kindly arranged to be sent to me, Otto Thoresen, the director-general of the ABI, gives assurances to government that it can deliver on reasonably priced insurance. He states:
“While there are a range of customers seeking insurance in the leasehold market, on the whole freeholders of leasehold property are commercial enterprises that buy their buildings insurance in a different way from ordinary homeowners. There is no failure in this market, and we expect affordable cover to remain available for such properties in an open market. For this reason, they do not need to be included in Flood Re … We fully expect the competitive market that currently allows leasehold managers to buy affordable cover to remain in place, and there remains no evidence to suggest it will not. It may be helpful to stress that Flood Re will be available for contents cover bought by individual residents in leasehold properties”—
which is true—
“and that leaseholders who insure their building in their own name will be able to access buildings and contents insurance through Flood Re if needed”.
That statement is simply inaccurate. He must know what the truth is. He must have seen the evidence that we presented on Report, wherein a lady writes to tell us that her insurance is to go five times higher than what it is at the moment. It is to go up from £5,000 to £23,000, yet Mr Thoresen gives those assurances.
That is the case with Mr Cochrane and people all over the country—very often low-income families—who live in properties many of which at the end of the day will not even be insured because people will not be able to find insurance. If a lower-income family living in a block of flats in an affected area finds that they cannot afford the insurance at the higher prices, they will still have to buy it, because those who have taken out a mortgage are under pressure from their mortgage company to insure their flats. Therefore, they are locked into high reinsurance premiums and there is no way out.
I understand that Mr Ian Fletcher of the British Property Federation, while expressing his concerns about the comments of people such as Mr Thoresen on Flood Re in general, told the Daily Telegraph—and this is his explanation as to why the insurance companies have taken the position that they have:
“We think the problem stems from the fact that insurers’ systems can’t cope with leasehold as a residential form of ownership. They are viewed as commercial properties from insurers’ viewpoints”.
Well, the fact is that they are not necessarily commercial properties. Anyhow, surely they could have changed their systems when they were devising Flood Re somehow to incorporate such people, particularly those in lower-income groups, who are going to find themselves in a pretty difficult position. That matter must inevitably become the subject of Flood Re at some stage in the future.
I move on to another group of people who feel very aggrieved. I have a note, which has just come down the line to me, from Lynne Jones, the chair of the Keswick Flood Action Group. She is speaking on another group who are excluded and who should be of equal concern to us. She states:
“I am … Chair of Keswick Flood Action Group”—
Keswick Flood Action Group is an action group in my former constituency of Workington in Cumbria—
“I am frequently asked about how to get insurance and within my duties as Chair I would also like to point out some local issues with Flood Re working against others in my community”.
She then goes on to comment on the issue of rented property and how that is affected:
“To not give guarantees to rented properties would affect some of the least well off in our town. Most of these are not covered by the Statement of Principles. Landlords’ insurance is currently commercial. The interesting issue will be whether the introduction of Flood Re will affect this market. One of the things I have been arguing for is that it should be mandatory for landlords to hold insurance and that this should cover flooding. That would be a significant improvement on the current situation. Housing associations tend to build on cheap land—flood plains. Thus here as, I suspect, in towns and cities throughout the UK, there are quite a few local occupancy and housing association homes in flood risk areas. But these are typically covered by commercial insurance”—
all excluded.
“Houses are expensive here and many locals can’t buy homes so they can ill afford high premiums—or no flood cover. Tenants will be covered by Flood Re for contents insurance, but my real concern is landlords not taking out insurance at all”.
That is because they are not included. We are not talking about vast commercial landlords, but the chap who buys the house next door or someone who buys something in the town which they may rent out.
“In addition we have a significant amount of housing stock taken over to self-catering. This is a good point and needs thinking about. What proportion of that is covered by residential insurance rather than commercial? How much is currently covered by the Statement of Principles? How much of this would be at significant flood risk? Keswick relies on tourism and the surrounding area relies upon Keswick for the wealth visitors (national and international) bring. Are these also to be denied the chance of flood insurance?
I hope that you will take this information on board when you look at the future of flood insurance”.
Again, that is a group of people concerned about the absence of Flood Re cover.
The Earl of Lytton (CB)
My Lords, I had not intended to intervene on this amendment but what the noble Lord, Lord Campbell-Savours, has said compels me to do so. That is because of the point that I made during earlier stages of the Bill: the question of insurance cover, or the lack of it, is not a lone entity as it also concerns the other financial structures that occur around property purchase and finance. I refer, of course, to mortgage lending because the existential risk of damage that might be covered by insurance is also an existential risk that affects mortgage lenders, as I explained previously. Because of the risks of default, mortgage lenders themselves wish to refinance or reinsure through the markets and the entire process becomes, to a degree, self-censoring.
The Minister has allowed me to belabour him fairly mercilessly with this principle and I realise that it lies, to a large degree, outside the scope of the Bill. However, it just so happens that it is also in consequence of what inclusion or exclusion from a construct such as Flood Re happens to expose. I come to this from the background of my profession as a chartered surveyor. I suppose that I ought also to declare that although I do not think that I have a property that has either suffered from flooding or is necessarily likely to be included in Flood Re in the first place, like other noble Lords, I of course have policies of insurance on properties, so I declare that interest.
The Minister was sympathetic during the last meeting I had with him, and I am very grateful for that meeting and for the listening ear that I encountered there from the Minister and his officials. To some extent, all one can do on that is wait and see. However, as it stands, the amendment from the noble Lord, Lord Campbell-Savours, highlights the very significant potential increases in insurance premiums that might need to be paid because of properties falling outside Flood Re but none the less being at some material risk. I am afraid to say that that material risk is a bit like the length of a piece of string. I think we debated this in Committee and the discussion then, which involved the noble Baroness, Lady Parminter, the noble Lord, Lord Krebs, who is no longer in his place, and the noble Lord, Lord Campbell-Savours, was very much about the mapping of the risk areas and just what you could or could not deduce from that process.
A more individual risk assessment is itself a slightly dangerous construct; when you consider that the whole purpose of insurance is to have a pool that spreads the risk, you might ask how far you want to move to an individual risk assessment. As we move towards that, though, the danger is that you are then forced to look in more and more detail at the geophysical and hydrological factors that affect individual properties. We supposed in Committee that there might be rather a postcode lottery; I drew attention to the fact that I had been sent a piece of an Ordnance Survey sheet that showed Environment Agency blue ink cutting right through the middle of a linear-shaped postcode area, which was effectively one half of an urban street. That just goes to show that all sorts of properties that might not be at particular risk themselves will be caught by this.
My worry is that this unravels the other aspects in respect of the views of mortgage lenders. If insurance premiums go up fivefold, clearly that will affect ability to pay. That ability to pay is not so much the generality of repayment on a mortgage, and it certainly is not so much the generality of what happens in the leafy south-east, particularly within the M25; rather, the problem is the static and relatively constrained values in other parts of the country where the year-on-year increase in value does not provide that cushion to fund not only the possibility that there will be a default on the mortgage but also the damage that might be caused in the event of a flood, so you have a double-whammy situation. My fear is that it will impact most severely on those areas that are already in challenging, relatively flat and not particularly growth-rich areas of the country, and I think we all know that there are plenty of such areas.
It is therefore right that there should be a constant review, and I believe that the Minister intends that there should be a regular monitoring of what goes on and what the fallout might be from these various factors. I am hopeful that he will be able to say that constant attention will be paid to this issue. I am less clear about whether it requires the doctrinal imposition of some formal review, but the thrust of the noble Lord, Lord Campbell-Savours, is certainly important, for the very reasons that he gave and for the other unintended consequences that would potentially flow from the uninsurability of particular properties.
Lord Whitty
My Lords, I am grateful to my noble friend Lord Campbell-Savours for tabling the amendment and, more particularly, for reminding the House and the Government that at the end of Report there was still considerable confusion over inclusions and exclusions in Flood Re and, as the poignant examples that my noble friend has alluded to make clear, a considerable amount of alarm out there about the potential exclusion from insurance of leaseholders in particular but also of other groups of people who are not clear whether they are included or excluded. As the noble Earl, Lord Lytton, has just said, it is a question not just of insurance but of current and future mortgage and other loans that one can raise on the property, and it therefore has very profound effects.
As the noble Earl said, whether we need a review every year is one matter, but it is incumbent on the Government to say that we need this continually under review, and the only formal reference to review is every five years. This confusion and alarm need to be cleared up a lot sooner than in five years’ time. I hope the Minister can at least give some reassuring words to my noble friend that that will indeed be done.
Lord De Mauley
I thank the noble Lord, Lord Campbell-Savours, for his amendment and I thank him even more for reminding me that, in my excitement over my earlier amendments, I have so far omitted to declare my interests, and I should do so. I own a farm, through which a tributary of the River Thames runs, I have an extraction licence, a bore hole, a house which was flooded in 2007 and a minority stake in a lake. I am glad to put that on the record.
As I explained in previous debates, Flood Re will be subject to regular review. We expect these formal reviews will take place at least every five years. These formal reviews will need to consider the effectiveness of Flood Re in discharging its purpose and functions. Importantly, the reviews will also need to consider the levy and premium thresholds, particularly in relation to its capital model, which we debated in detail earlier in relation to the amendment from my noble friend.
The reviews will also need to consider Flood Re’s effectiveness in managing the transition to risk-reflective pricing over the operation of the scheme. As I said earlier, the secondary legislation will set out in more detail the points that Flood Re’s transition plan should cover. Flood Re will have to lay its accounts in Parliament on an annual basis, and its responsible officer will be directly accountable to Parliament. The Comptroller and Auditor-General will examine Flood Re’s economy, efficiency and effectiveness as well as its propriety and regularity.
It is also important to note that there is nothing to preclude the formal reviews taking place more frequently, which the noble Lord, Lord Whitty, asked me to confirm, should concerns be raised; for example, if it is seen that excessive surpluses are being built up.
I hope that it is clear that Flood Re is going to be regularly reviewed and closely scrutinised, but we need to strike a balance and, in particular, I am concerned about significant risks to the certainty and stability of Flood Re income if it is under constant review. Flood Re, the insurance industry and policyholders need to have some degree of certainty about its operation and Flood Re must be allowed to plan for transition accordingly. Insurance is a long-term business. An annual review of the scheme would be resource intensive and I am not clear what added value it would bring in addition to the current arrangements for parliamentary scrutiny.
In addition to the formal review process which will be carried out at least every five years, as I have described, both the Government and the Association of British Insurers have committed to monitoring the market for flood insurance and will publish the results of that monitoring.
Lord Campbell-Savours
Will the Minister ask his officials to contact the ABI and ask it, prior to our meeting, how it responds to the cases that I have brought forward of people who say that they cannot find insurance or that their insurance premiums rise five times over, or whatever? I would like to hear its response prior to the meeting.
Lord De Mauley
I will certainly do that. I, too, would like to hear the answer.
This ongoing monitoring will enable us to identify trends and any potential issues in the market, including in the leasehold sector, to which the noble Lord referred. We have discussed the rationale for the scope of Flood Re at length and in detail in your Lordships’ House. The design of Flood Re was guided by three principles: affordability, progressivity and fairness. We have been clear that Flood Re should not increase the cost of insurance for those at low or no flood risk so it is fair to all households. To achieve this, Flood Re will replicate the cross-subsidy that currently operates in the domestic market. The benefits of Flood Re will be targeted at lower council tax bands, where affordability is more likely to be an issue.
In previous debates, I have gone into some detail on the thought process behind the leasehold sector; if the noble Lord will forgive me, I will not reiterate those arguments. I am, as he knows, sorry to hear about the specific examples he cites. As I have said, I would be happy to speak to the ABI about the initial case to which he referred. It would be helpful to me to have some more details; perhaps we could discuss that.
The noble Lord also asked about the letter from Otto Thoresen. I am sorry that he feels that the assurances from the ABI are inadequate. We have previously asked for evidence of problems and, to date, have had nothing but anecdotal evidence. Again, however, if the noble Lord would like to share the details with me, that would be helpful and I would be happy to take the matter forward.
I have a number of notes here which deal with matters that we have dealt with at some length in earlier debates; I hope that noble Lords will forgive me if I do not simply reiterate old arguments. It might be helpful if I deal with the issue of maps, which some noble Lords have raised. It was probably the noble Lord, Lord Campbell-Savours, who asked what happens if a property is not proven to be at risk. If a home owner has evidence that the maps do not accurately reflect their level of risk, they can provide it to their lead local flood authority or the Environment Agency for review.
There was a complaint that it takes too long for the Environment Agency to update maps and then share them with insurers. The Environment Agency—and I see the chairman in his place—revises the rivers and sea flood risk maps on a quarterly basis. It is possible that some insurers do not choose to receive updates as regularly as that, which could explain the time lag that some people have experienced. It almost always pays to shop around or to contact a specialist broker to explore ways of reducing premiums. This is important: there is a competitive market in the United Kingdom which will and does help to keep prices low. From personal experience, I know that different insurers take different approaches to pricing risk, which is, as I say, why people should be encouraged to shop around. One of the benefits of Flood Re is that it enables the provision of claims data from the insurance industry to the Environment Agency to help improve risk mapping in the future.
Under the statement of principles, people had to stay with their existing insurer to benefit. Therefore, they were prevented from shopping around for the best price—something I have been going on about at some length. Once Flood Re is up and running, people will be able to shop around, with those in scope knowing the maximum they should expect to pay for the flood risk part of their premium. Insurers have estimated that only 1% to 2% of the market would expect to pay prices higher than the proposed premium thresholds which were set out in the impact assessment. These are the people who will need Flood Re. The majority of the market is expected to be covered by prices lower than those offered through Flood Re. I hope that that is helpful and that, on that basis, the noble Lord will feel able to withdraw his amendment.
Lord Campbell-Savours
I thank the noble Lord for his response. I do not want to detain the House. As I say, we will have to come back to these matters in the future. I hope that, in light of what the Minister said, he will be looking for further information. Those who are watching this debate on the internet might well send me their concerns about it, and I will forward them to the Minister. On that basis, I beg leave to withdraw the amendment.
Lord De Mauley
Lord De Mauley
My Lords, I have tabled four minor changes to strengthen and correct the Bill. I will run through them quickly.
Amendment 16 to Clause 55 provides certainty to the National Audit Office that, when auditing Flood Re, it is able to consider the economy, efficiency and effectiveness with which the scheme administrator has used its resources and the propriety and regularity of the scheme together and at the same time. Amendment 17 is intended to ensure that, in the unlikely event of the transfer of the scheme, employment contracts will be transferrable where they might otherwise not be. This reflects, in Clause 56, powers which are present in Clause 71(4)(a) in relation to the winding up of Flood Re at the end of its lifetime. Amendments 19 and 20 correct a numbering error in the Water Industry Act 1991. Section 12(3D) was inserted by the Enterprise and Regulatory Reform Act 2013 and unfortunately included the incorrect reference to Section 16B. Amendment 20 changes this reference to read “14B”. I will be happy to provide any further clarification if any noble Lord wishes me to do so.
I believe it is customary at this juncture to say a few words to place on record my thanks to all noble Lords who contributed to the debates on the Bill and to the hardworking officials who have laboured long over it as well. I extend special thanks to my noble friend Lady Northover for ably supporting me at the Dispatch Box and in many ways throughout the course of the Bill. I am very grateful for the detailed scrutiny the Water Bill has received from your Lordships. It leaves this House genuinely in better shape than when it arrived. I beg to move.
Lord Mackay of Clashfern (Con)
My Lords, Amendment 17 refers to the “pension liabilities of staff”. Does that mean the pension liabilities incurred in respect of pensions to be paid to the staff?
Lord Whitty
My Lords, I thank the Minister for these amendments and for his explanation. I will not oppose any of these amendments, as he is no doubt gratified to hear. I will make two points, one of disappointment and the other of praise.
The disappointment is that among amendments brought forward by the Government at this stage are not those that relate to clarifying the position on abstraction reform and on providing some greater assurance on affordability of water bills. Whoever is in government in the next couple of years must address those two issues with some degree of urgency. It is a pity that we did not manage that in the Bill.
My praise, like the Minister’s, goes to his officials, who undoubtedly gave us a lot of information at the beginning of the Bill and put up with all our idiot child questions throughout the Bill. We made considerable progress, even today. I thank the Minister and the noble Baroness, Lady Northover, for their patience.
Lord De Mauley
Lord De Mauley
( ) ”
“( ) in subsection (3D), for “16B” there is substituted “14B”.”