Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
I remind your Lordships that in the event of a Division in the Chamber, the Committee will adjourn for 10 minutes from the sound of the Division Bell.
Genuine Economic and Monetary Union (EUC Report)
(9 years, 10 months ago)
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Lord Harrison
That the Grand Committee takes note of the Report of the European Union Committee on Genuine Economic and Monetary Union and the implications for the UK (8th Report, Session 2013–14, HL Paper 134).
Lord Harrison (Lab)
My Lords, I am delighted to introduce this EU Committee report, ‘Genuine Economic and Monetary Union’ and the Implications for the UK. What is genuine economic and monetary union? In June 2012, the IMF revealed that there was a nearly €40-billion hole in the balance sheets of the Spanish banks and the spectre of contagion threatened to overwhelm the eurozone as a whole. European Union leaders recognised that urgent action was needed.
The result was a report written by the outstanding and now departing President of the European Council, Herman Van Rompuy, entitled Towards a Genuine Economic and Monetary Union. It envisaged a stable and prosperous EMU based on four essential building blocks. The first was an integrated financial framework, otherwise known as banking union. The second was an integrated budgetary framework. The third was an integrated economic policy framework. The final building block was ensuring democratic legitimacy and accountability. On the basis of this report, the Council invited the President of the Council, the Commission, the Eurogroup and the European Central Bank to prepare a specific and time-bound road map for the achievement of genuine economic and monetary union. The final report was published in December 2012, complementing the Commission’s own November 2012 blueprint for a deep and genuine economic and monetary union.
The Sub-Committee on Economic and Financial Affairs, which I chair, heard evidence on these proposals over several months, including on visits to Brussels, Berlin and Frankfurt, where we visited the European Central Bank and the Bundesbank. Our report was published in February. We are grateful to Professor Iain Begg of the London School of Economics, who acted as specialist adviser to the inquiry. I am also eternally grateful to Stuart Stoner, our outstanding clerk, and to Rose Crabtree, policy adviser for the report but a poacher turned gamekeeper who is now working for the PRA.
Our committee found that banking union was the most urgent of the four genuine economic and monetary union pillars. It was vital to tackling the effects of the financial crisis, securing the long-term stability of the eurozone and repairing the damage to the single market in financial services. For our December 2012 report on banking union, we consulted Michel Barnier, the appropriate commissioner, and Herman Van Rompuy. The report was with Chancellor George Osborne at the December Council.
Indeed, significant progress towards banking union has been made. A single supervisory mechanism has been agreed and will become operational under the European Central Bank this November. A single resolution mechanism has been agreed but, regrettably, only a partial banking union is in prospect. For the third leg of banking union, the single deposit insurance mechanism was quickly dropped because of political pressure. What is more, the final agreement on the single resolution mechanism that was reached shortly after our report was published remains sub-optimal.
Our concerns about the SRM focus on two issues in particular. First, the resolution mechanism itself—the process by which a failing bank would be dealt with—remains highly complex. Key players, including the Commission, the Council, the European Central Bank and national authorities, will all have a role to play. Indeed, it has been reported that more than 100 individuals and organisations might need to be involved in a resolution decision. Yet anyone with experience of these issues knows that bank resolution needs to be a quick and decisive process with the confidence of markets, investors and consumers. It is not to be undermined. I ask the Minister whether it is really credible to save a failing bank over a short weekend, before the markets open on a Monday morning, while consulting more than 100 other people or institutions.
Secondly, we were deeply concerned about the limited funds available to rescue failing institutions. The compromise agreement reached in the spring—by frontloading the mutualisation of funds and allowing the single resolution fund to borrow on the financial markets—was a step in the right direction. That is all helpful in avoiding the need for the taxpayer to pick up the bill. Yet even at its full strength of €55 billion, we fear that the resolution fund would be underpowered and ill equipped to deal with the scale of bank failures witnessed in recent years. In the committee’s view, direct recapitalisation of banks by the European stability mechanism was vital to break the vicious circle linking bank and sovereign debt. Again, perhaps the Minister can give us his view.
We also found that the second and third building blocks of genuine economic and monetary union—the proposals for an integrated budgetary and economic policy framework—were politically unrealistic at present. German concerns over moral hazard and the assumption of liability without effective controls mean that debt mutualisation remained highly contentious. That was not to say that these issues were not unimportant. A system of substantial fiscal transfers by a central budget is a characteristic of most currency unions and some degree of debt mutualisation may be inevitable if the single currency is to prosper. In the mean time, we warned that the imposition of so-called austerity policies could aggravate the problems facing weaker economies.
The fourth strand of genuine economic and monetary union—democratic accountability and legitimacy—is explored in the context of the recent report from the European Union Select Committee, chaired by the noble Lord, Lord Boswell of Aynho. On the role of national parliaments in the European Union, that report found that there was an asymmetry between the growing powers of institutions such as the Commission, the European Central Bank, the Eurogroup and the troika, and the ability of citizens to hold them to account for their actions. We found that a serious democratic deficit now exists, as the results of the recent European elections partly testify. While the European Parliament has a key role to play, we found that the principle of democratic accountability could be strengthened only if national parliaments also had an enhanced role and we were therefore extremely concerned at how little emphasis was placed on the role of national parliaments in the genuine and economic monetary union proposals. Incidentally, the ECB and the Eurogroup have clearly advanced as institutions within the European Union. I am pleased to say that our committee interviewed Dr Constâncio, vice-president of the ECB, in our investigation into the banking union report, and we recently visited the ECB and the Bundesbank.
Our report concluded by considering the implications of all this for the United Kingdom. The Government stressed that the United Kingdom’s role had not diminished and that it continued to play an integral role in the European Union, notwithstanding the fact that eurozone members are pursuing an increasingly integrationist agenda. However, the evidence to the committee heard in Brussels and Berlin tended to contradict that assertion. Responsibility for defending the UK interest lies not only, if principally, with the Government but with us as parliamentarians and, I might say, the City of London as the foremost European global financial centre. The European Union institutions have their own obligations to ensure that the United Kingdom’s concerns are not lightly dismissed, and noises off from Angela Merkel, Mark Rutte and Fredrik Reinfeldt hint that that might be recognised.
Our report concluded by observing that the eurozone remains on the road towards greater integration, and the implications of this for the United Kingdom are immense. A strong and prosperous eurozone is in the interests of all European Union members, as is a strong and engaged United Kingdom and a strong City of London. Achieving all those outcomes simultaneously will require close care and attention, together with good will, on all sides. When I talk of good will, the recent Juncker debacle did not help.
I point out that Mr Juncker was head of the Eurogroup—the group that together oversees the 18 members of the eurozone. One thing that I have tried to do as chair of this committee over the past four years is to support our Chancellor when he says that the welfare of the eurozone provides the opportunity for the United Kingdom’s economies to prosper. We have always been told by George Osborne that the European Union needs to integrate more closely and get on with the job of making sure that its members are working together. It is therefore incongruous to describe Mr Juncker as an integrationist when that is the very thing that we have asked the EU to do.
I also say to the Minister that, important though the position of the European Commission President is, others are important too. What plans do we have for the replacement of Herman Van Rompuy, who has played such a behind-the-scenes but effective role? What positions are we likely to get with Andrew Lansley, if he is indeed to be our United Kingdom Commissioner? Is there really any hope that we can get an economic role now that we are outside of the European Union? Cathy Ashton—my noble friend Lady Ashton—will possibly be replaced by Mr Sikorski, currently Foreign Minister of Poland. Although a former member of the Bullingdon Club at Oxford, he has said some choice things about the way that we, the British, have gone about these negotiations.
Sharon Bowles, whose praises must be sung as chair of the European Parliament committee on all these matters, is someone who we need here. She is coming before our committee on 22 July to give us help on, and her understanding of, the subject of our new report—financial structures within the European Union. However, we must be clear, too, about our reform of the European Union. That is unclear at the moment but so often is familiar to us. The single market was a creation of the European Union by a member of this House. Can we pursue that in financial regulation through the digital economy or services directive?
Finally, can we try a little harder to find friends other than “phoning a friend” with Angela Merkel? We need to spread much wider than that. We have already recognised the position of the United Kingdom, which is outside the euro, outside Schengen, outside the fiscal compact—I heard no one from the Government say that the Czech Republic is now a member of the fiscal compact, thereby isolating us even more—and, indeed, outside the very important European Semester.
The constant theme of my committee over the four years that I have had the honour of chairing it is that the best way of ensuring that the United Kingdom’s voice is heard within the European Union is to keep close to our partners and close friends in the European Union. We need man-to-man marking when we are engaging with the other 27 friends. We need to be friends on Facebook with the other 27 and not for ever threatening withdrawal as an instrument of European Union policy—a kind of foreign policy of coitus interruptus. We need to make the case for the European Union and the United Kingdom’s role within it with passion, persuasion and precision. We need to succeed in the European Union not secede from it.
Lord Lamont of Lerwick (Con)
My Lords, I am a bit of an interloper in this debate, not having been a member of the committee. I congratulate the committee on the report and congratulate the noble Lord, Lord Harrison, on having chaired the committee. The report is useful and interesting. For those of us who try to follow what is happening in the eurozone and the EU, it is a good volume to have telling us all about the things that are going on.
I do not wish to follow the noble Lord, Lord Harrison, in all the directions that he went down, least of all his remarks about the goings-on relating to the nomination of the President of the Commission. I said to him the other day that I had worked with Mr Juncker. Although I found Mr Juncker helpful during our negotiations, it was absolutely right to oppose his nomination because of the important principle of the power of the European Parliament, which was threatening to usurp the decision. Giving that power to the European Parliament was a significant transfer of sovereignty and for that reason I think that the Prime Minister’s tactics in handling the situation were 100% right.
The noble Lord has on various occasions bemoaned our loss of influence. I am always puzzled by the argument about the loss of influence. Of course, if you are not part of something, you do not have so much influence. We do not have a lot of influence on the Federal Reserve Board. If you are not part of something such as the ECB, you lose a bit of influence with it. Although nobody other than my noble friend Lord Dykes speaks in favour of joining the euro today, the implication is always that we ought to join the euro, which is a bad thing, in order to have a bit of influence. Influence is not by itself an objective of policy.
The substance of the report, genuine economic and monetary union, is a puzzling concept, as the noble Lord, Lord Harrison, said. At Maastricht, the aim was always, as the report notes on page 11, to have a centralised monetary union and a decentralised economic and fiscal policy—what the report calls an asymmetry. But during the Maastricht negotiations and talks relating to it, whenever this was raised and whenever one said that surely the logic of monetary union was that there ought to be fiscal transfers, one was told that this monetary union was different. It would work on an entirely different basis; it would be like the gold standard. The impartial discipline of gold and the impartial discipline of the modern version of gold—euro budget surpluses—would ensure that this monetary union would work.
The concept of debt mutualisation, which features a lot in the report, was explicitly ruled out. It was a cardinal principle at the time, very much on Germany’s understandable insistence, that there should be no bailout mechanism. Of course, when the euro got into trouble, we had a bailout of both Greece and Ireland, which Madame Lagarde pointed out was probably illegal under the treaty because the treaty specifically prevented bailouts.
As regards mutualisation, the committee refers to Germany having different priorities. That is one way of putting it, but it is perfectly understandable that Germany always was and always will be cautious about its own money being at risk to bail out other countries. Equally, it was always explicit that there should be no monetary financing of deficits.
The noble Lord, Lord Harrison, concentrated on banking union, which is fundamental to a currency union, the resolution mechanism, deposit insurance and supervision. He is right that the resolution mechanism is suboptimal. Perhaps it should be more centralised. On supervision, subsequent developments have moved more in the direction of the committee, with the ECB supervising more directly the larger banks and national supervisors supervising the smaller banks. Germany is described as reluctant on deposit insurance, but the reluctance is extremely understandable. On page 39 of the report, someone from Germany is quoted as asking why Germany should pay to bail out banks that Germany has not supervised. I regard that as a historical legacy, which is how the Germans regard it.
A key to the future of the euro will be the asset quality review and the stress tests of the banks, but we have been here before. When stress tests were carried out previously, we were told that the banks were all hunky-dory and financially sound. However, several banks that had passed the stress test, including in Spain and Italy, got into deep trouble. It is important that these stress tests should be much more rigorous and credible. The monetary transmission mechanism in the eurozone is not working well, particularly for small businesses.
A lot of the argument in the report is about breaking the link between sovereigns and the banks, but the two are bound to be linked, even with the nirvana of debt mutualisation. I think that “nirvana” is rather a good word to describe debt mutualisation. I looked up what it means. Hindus say that nirvana means blissful egolessness, which seems a good way to look at debt mutualisation.
You cannot abolish the financial danger just by mutualisation. The European stability mechanism has limited resources. It can gear itself up, but who are the guarantors? The second largest guarantor of the ESM after Germany is France, whose own finances are in difficulty. The third most important guarantor is Italy and the fourth is Spain. Therefore, countries in debt, with deep fiscal problems, are guaranteeing themselves. Of course, behind them stands the economic colossus of Germany, but not even Germany could bail out Spain and Italy if they got into trouble together.
We are told that all that has gone. Outright monetary transactions, which are described on page 30, have taken care of all that. I think that Enoch Powell once remarked that a politician’s words were his deeds. He might now say that a central banker’s words were his deeds, because by just uttering the magic words, “Whatever it takes”, Mr Draghi certainly calmed the markets. He did not actually buy any bonds, but the acute phase of the crisis happened and it calmed markets. But did it calm them too much? We are now in a situation where 10-year yields on Spanish and Irish debt are lower than those of the United States. Yet the report says that it is important that the markets should not misprice sovereign risk. It also raises the danger that calming the markets in this way means that the impetus has gone out of structural reform. As it says on page 13, the air has escaped the balloon.
Now we have had the new measures that Mr Draghi has announced, but I suggest that the words are again very important—not the measures but the words. The words that we ought to concentrate on are three particular series of words: “The decision is unanimous”; “We are not finished here”; and “within our mandate”. The impression was given that all the tensions with Germany over committing funds, over mutualisation and over monetary financing had been put aside and that the situation was solved.
The negative interest rate was the first measure. I doubt whether that will have a great effect on the eurozone. Banks hold only €120 billion at the central bank at the moment. A 10 basis point cut will give them a charge of €120 million. I doubt whether that will transform the situation. Then we were told that there would be purchases with asset-backed securities, but that market is not really developed in Europe at the moment. It will take a long time before such securities, in securitised form, are available for the central bank to buy.
Then there was the targeted long-term refinancing operation—the LTRO, €400 billion-worth. Again, the effectiveness of that, which is modelled on the Funding for Lending scheme, will depend very much on the health of the banks and the results of the stress tests. Italy, for example, has €160 billion-worth of non-performing loans, which is why it has to pay 1.2% more for deposits than Germany. I do not think that the LTRO will transform things by itself.
Perhaps the most significant thing was when Mr Draghi said that the bank would be ending the sterilisation of assets that were purchased in order to ease the monetary transmission mechanism. That is almost a little bit of QE. The road to Delhi begins with a single step. Perhaps that is the measure that the Germans should worry a little about, but it will take time before there is an assessment as to whether those asset purchases can take place. None of this will produce a transformation of monetary conditions; none of it will weaken the exchange rate.
What triggered all that was of course the very low inflation figures for the eurozone and for Germany in particular. Without the flexibility of the exchange rate, the lower Germany’s inflation rate is, the more other countries have to cut their costs, cut unit costs and cut price levels to become competitive. I agree that some remarkable changes have taken place, but that has to go on for a very long period. The level of total indebtedness is 133% of GDP in Italy, 175% in Greece and 130% in Portugal. With that constant pressure on the price level—some see it as deflation; the Germans just see it as the periphery becoming more competitive—the outlook for growth in the eurozone is dismal and looks likely to remain dismal for a very long time.
I have always been an opponent of the euro, but I have never, ever said that I thought that it would break up soon. I have always had great arguments with my noble friend Lord Hamilton of Epsom about that. Of course, surviving and working well in the interests of the citizens of Europe are completely different things. It may be that the euro is a bit like a shoe that does not fit a foot. You go on wearing the shoe. Gradually, your foot gets distorted and you suffer pain; eventually, it completely alters its shape and you can get the shoe on. Perhaps the euro is like that and perhaps it will work in 30 years’ time. However, even if it did work in 30 years’ time, that certainly would not mean that we were wrong not to join.
Lord Liddle (Lab)
My Lords, I congratulate my noble friend Lord Harrison on his committee’s excellent report. I have done that before but this is the first time that I am not doing so as Labour’s Europe spokesman. It is a great privilege to be able to address this body knowing that I am free to tell Labour what its policy ought to be rather than putting the best face on what its policy is, so I am looking forward to this speech. I should also say what a privilege it is to listen to the noble Lord, Lord Lamont. I do not agree with him on the euro but his reflections, as a former Chancellor, are extremely interesting and I would be the last person to argue that the euro does not still face difficult problems, which have to be resolved.
The euro’s future is of fundamental importance to Britain. In all the past arguments about whether we should join, the one where the pros have been conclusively proved right is that we in Britain cannot escape the consequences of the eurozone by being outside it. It has a material impact on our economy. We also have to be conscious of the fact that our circumstances might at some point in the future change. I am not arguing that there is any immediate prospect of our joining the single currency. I do not expect to see that for a very long time but Britain’s prospects could change, which might necessitate us joining the single currency.
The real danger for Britain is a repeat of what happened when we did not seize the initiative in Europe right at the start, in the 1950s. We have to be careful that a construction might be put in place that does not entirely suit our national interests. We saw that with the common agricultural policy, which led to the arguments about whether we should enter on the Tory terms in the 1970s and the renegotiation under Harold Wilson, which then led to Mrs Thatcher’s struggles for the British budget rebate, all of which poisoned our relations with our partners. We must try, as an insurance policy for Britain, to make sure that the development of the euro is one that suits us.
I want to stress the most important recommendation of this report and I am very disappointed by the Government’s reply. The recommendation is:
“The Government would be wise not to close the door on the possibility of participation in some elements of Banking Union in the future, and must stress the City of London’s strategic importance for the EU as a whole”.
I have no doubt that the Government will stress the City of London’s importance but if they want to influence the key ways in which the City’s future is determined, they must play a role in the banking union. Be in no doubt: the ECB will be the body that determines the rules by which financial markets work in Europe. It will be that body and the idea that, because we have some minority protections and a European Banking Authority we can sit back and relax, is for the birds.
What about the alliance of the euro-outs, which is supposed to protect our interests? Where are we with Mr Reinfeldt, after Mr Cameron’s ride in the boat with him? Is he not going down to defeat in the September election in Sweden anyway? As for the Poles, what are the prospects for Britain having any influence over Polish policy after what we now know of the expletive-laden remarks of their Foreign Secretary about his old Oxford friend, the Prime Minister? Can we really rely on Hungary and Mr Orbán when he is the man who plays footsie with Jobbik—the fascists in Hungary—who rigs the constitutional court in Hungary and who has passed laws that are offensive to press freedom in Hungary? Is that our only ally in Europe? Are we really proud of that? Do we think we can defend our interests on a crucial issue such as this simply by having an alliance with Hungary?
Lord Flight (Con)
Would the noble Lord not agree that the collaboration between the Bank of England and the ECB has been and remains substantial? Indeed, quite a lot of the ECB regulatory arrangements have been modelled on what has happened here. Whatever the constitutional position may be, the practical position is that the two work hand in hand.
Lord Liddle
I am very strongly in favour of practical co-operation between the Bank of England and the ECB but, fundamentally, it is politics that matters. It will not all be decided in an independent regulatory context. The politics will matter, and we are not well placed at the moment.
The banking union is a significant development. I am a bit more bullish about it than the committee. I think it is a glass half full, rather than a glass half empty. Some academics I greatly respect, who are experts in the field, such as the Peterson Institute’s Adam Posen and Nicolas Véron, believe that we should consider that to be a very significant development. That is why it is so important that we try, as far as we can, to get inside—beyond simply co-operation between the Bank of England and the ECB.
On the wider issue of genuine economic and monetary union, the British love playing this intellectual parlour game of what are the necessary conditions for monetary union to proceed. They never think about the United Kingdom itself: is it a satisfactory monetary union? Clearly, in the United Kingdom we have a London economy which is a tremendous success and something that we all admire, but an out-of-London economy that continues to struggle. We all know that if we imagine them as separate countries, the London pound would be far stronger than the out-of-London pound. The country functions only because of massive fiscal transfers from its richer parts to the poorer.
You can argue that those transfers are not there in the eurozone—of course, they are not, except for the structural funds—but one of the problems with our fiscal transfers in Britain is that they have been extremely opaque. They are about to become less opaque as we go for devo-max in Scotland. I forecast that we will have more political arguments about the functioning of the United Kingdom economy in the decades to come as we have arguments about whether the extent of the fiscal transfers from London and the south-east to the rest of England are sustainable in the long run.
I make that point because I think that the mistake in looking at EMU is to neglect the extent to which its survival has depended on political will. Eurosceptics in this country always underestimate the strength of that political will. An enormous number of things have been done, including the European stability mechanism, the six-pack and two-pack legislation, the fiscal treaty, the ECB supervisory powers and the banking union. A lot has been done; let us not underestimate it. At the moment, politics is making a big difference to the chances of the monetary union overcoming its problems. We are seeing less emphasis on austerity and more fiscal flexibility. In part, we saw that with Mr Juncker going around making sympathetic noises to the Italians and the Spaniards to get their support for his nomination as Commission President.
More fundamentally, there has been a shift in Germany as a result of the formation of the grand coalition, with the disappearance of the Free Democrats from the coalition and the presence of the Social Democrats. The German Vice-Chancellor, Sigmar Gabriel—a Social Democrat—has said that he believes that the south needs more fiscal space and more fiscal flexibility. What the Germans are trying to do, of course, is to link that flexibility to support for needed structural reform in the countries of the south. They are also doing something to rebalance the eurozone themselves, with policies such as the introduction of a minimum wage, which will boost spending power in Germany.
The one remarkable thing in the crisis is that, thankfully, unlike the 1930s—this is the huge historical difference from the 1930s—there has not been a political collapse and a reversion to dictatorship in any of the EU countries, despite the very brutal circumstances that they have had to face. Reforms have been made and democracy has just about survived.
We will need to see further developments before the euro is safe. German rebalancing will have to go further and they will have to be more flexible. We will have to see some debt forgiveness because as the noble Lord, Lord Lamont, said, it is difficult to see how those levels of debt are sustainable in the long run. We will have to see more of a European-led investment policy. That is one way of doing things in favour of growth but making them conditional on reform.
I see the eurozone rescue as an incomplete project but I think the politics are working in the right direction. The political will has been demonstrated. My fear is that as a Euro-out we are not really putting our minds to how we will retain influence over this construction in the years and decades ahead. This report has been an extremely valuable contribution to what is an extremely important issue for the future of the United Kingdom.
Lord Maclennan of Rogart (LD)
My Lords, I, too, begin by indicating the value of the report and the work of the committee chaired by the noble Lord, Lord Harrison. The report is a useful gathering together of evidence from experienced people. Its conclusions seem to me to merit our support.
A strong and prosperous Europe and a strong and prosperous eurozone are in the interests of all members of the European Union. It is necessary for the Government to indicate as clearly as they can how they would engage with the strengthening of the eurozone. The long-term goals of fiscal transfers and, possibly, debt mutualisation—they may be unrealisable in the short term—have been envisaged and mentioned in the report, but they are not seen as immediate solutions. However, there are ways in which we, as a country with an extraordinarily strong banking system in the City, could give further support to the recovery of the eurozone. To my mind, that would be to the benefit of the City and the country more generally.
One witness strikingly described the process as,
“the euro continuing as an injured patient with a massive sticking plaster in the form of bailouts”.
That was an entertaining image but there is a degree of truth in it. I hope that, in coming back into the discussions about the future of Europe, the Government will seek to engage with their partners in the eurozone and seek ways of assisting the process of banking union. I strongly agree with the report that supervision and becoming a lender of last resort are compatible. The structures of these different organisations are well set out in the report, which describes how they can be both separate and together in making their respective decisions.
The noble Lord, Lord Liddle, made an important remark about will. The will to sustain the eurozone probably was best expressed by the president of the bank, Mario Draghi. He said that the bank would do “whatever it takes” to save the euro. That certainly had an immediate effect of calming the markets. It also made other countries feel less excluded from the discussions and more able to put forward recommendations. The bank has acted wisely in a number of respects—for example, in purchasing sovereign bonds not directly from the sovereign states but on the open market. That has done quite a lot to stabilise the situation.
I hope that the Government will respond to the committee’s recommendation that it may be ill advised to assert that:
“Banking Union is the sole province of the single currency for all time”,
and that participation could mean,
“further promoting and shaping the Single Market in Financial Services and the UK’s position within it”.
At the beginning, a number of proposals were put forward on outright monetary transactions which do not seem to have yielded anything very noticeable as of yet. None the less, they are still an instrument that is perfectly sensible to use.
The single resolution mechanism, by which the predicaments of those who are extremely tested could be resolved, has not come forward sufficiently developed to be enlisted in the battle against the collapse of southern states. However, the UK Government should, I believe, shape their arguments in terms of ensuring the overall stability and efficiency of the EU markets. That practical reform would give the Government much more influence in the direction of the single market than the sort of postures taken over the past few weeks in respect of the nomination of the President of the Commission. Deposit insurance is another method of supporting the banking system that, as yet, has not come to fruition. None the less, it could be of assistance.
I hope that the Government will also do their best to assist the bank with its comprehensive assessments of the banking system, its supervisory risk assessment, its asset quality review and its stress tests. All of these seem sensible means of reassuring the banking system. We ourselves have not been immune from the troubles that have afflicted other countries.
Notice also has to be taken of the evidence that was given to the committee about the lack of sufficient fiscal backstops to plug any gaps in the bank balance sheets exposed by the review. I hope that that, again, will be something that we can open up and show that there is a will to help.
The report has been produced at a difficult time for the European Union. Although the process has not been completed, as outlined on different sides by the Commission, by the bank and by Governments, I none the less think that the report was very timely. It has given us guidance and indicators as to how to proceed. We want to hear from the Government about their willingness and commitment to strengthen the eurozone. Some of the Ministers who gave evidence recognised that that was necessary for British industry. When they talk about the objective of the single market, they are also speaking of the need for that. I hope that my noble friend Lord Newby will be able to give us some reassurances about the Government’s position and not simply cast discredit on the steps that have been taken.
Lord Jay of Ewelme (CB)
My Lords, I, too, congratulate the noble Lord, Lord Harrison, and the sub-committee on this report. As one would expect, it examines highly complex issues succinctly and clearly. I hope that, as another interloper in the debate, I shall be forgiven if I do not follow the noble Lord down all the burrows that he explored in his introduction.
I was British ambassador in Paris in the years leading up to the introduction of the euro in 1999. In those days, I had many conversations on EMU with some of the most acute monetary and financial minds around, some of whom, such as Jean-Claude Trichet, went on to play quite an important part in the evolution of the euro from its start. What was clear then—I was reminded of this recently when re-reading some of the notes that I had taken of those conversations—was that EMU was widely seen as an essentially political construct with real financial and economic risks, not least to France, which had managed its economy for the previous 10 years or so through, at least in part, a series of competitive devaluations. However, what was also clear was that there was an absolute determination to make EMU work and an absolute conviction that it would work. I entirely agree with the noble Lord, Lord Liddle, about the absolute political will that EMU, once started, would continue and would work.
One can argue that that approach to the formation of the euro was misguided, that it was risky and that it underestimated the difficulties that would come with a financial crisis. If the noble Lord, Lord Lawson, were still in his seat, I expect that he would be nodding at that. One can argue, too, that Britain was right not to take part, and I would argue that. However, particularly given the measures taken—for example, to shore up the Irish and Greek economies during the recent financial crisis—it would, in my view, be quite wrong to doubt the continuing political determination of the member states of the euro to make the euro work in the future.
I do not pretend for a moment that that would be easy, as the report makes clear. Sitting on various French company boards over the past few years, it has been brought home to me clearly the difficulty that France may have within the eurozone unless it takes the sorts of measures to raise its productivity—particularly vis-à-vis Germany—that its political tradition will make very hard to carry out. There will of course be difficulties for others, too—in particular, some of the newer European Union and euro members. However, as I say, it would be quite wrong to assume that because maintaining the eurozone will be difficult, it may fall apart. If that were to happen, it would be enormously damaging to our own economic interests and also, in my view, to the political cohesion of the European Union and of Europe, which is not a happy prospect in the centenary of 1914. So, again as the report makes clear, given the way in which our economy and financial system are so closely linked to the eurozone economies, our own interest must be for the eurozone to succeed and, crucially, to succeed within a European Union in which the single market remains intact and indeed is strengthened.
I have to say that some of us feared when the euro was introduced that one consequence of Britain’s non-participation—right though that was—would be a risk to the integrity of the single market as the inevitable integration within the eurozone happened over time. I think that time has probably borne that out. However, that merely strengthens the argument that the maintenance and strengthening of the single market, as well as a properly functioning eurozone, is a key British interest.
I am glad to see that Commissioner Barnier is reassuring about the importance of the single market in his letter responding to the committee’s report. However, that will require constant work and vigilance, and political nous. This will be, in part, a technical, a financial and a diplomatic negotiating task. It would be greatly helped if we made sure that we had in Brussels—in the Commission and elsewhere—more British people who really understood the British economic and financial system and the importance of a strong single market of all 28 member states. Will the Minister tell us what measures the Government are taking to strengthen the participation of British officials in the European institutions?
It will also, of course, depend on a strong, committed, influential British commissioner in Brussels. I was very glad to hear the noble Baroness, Lady Warsi, say in the Chamber earlier today that there was a strong list of candidates waiting in the wings. I look forward to them coming forward and one being chosen to fulfil those crucial functions.
The task is also, of course, a political one. As a Cross-Bencher, I wish to stay neutral on this point, so I would simply advise all Governments, before pursuing this rather delicate, difficult and sinuous task, to take advice from my noble friend Lord Kerr of Kinlochard.
As the report makes clear, the British interest requires a strong eurozone within a strengthened single market. That is in no way inconsistent with stronger British economic links with the emerging economies—with China, India, Brazil and Indonesia. It is perfectly possible, as Germany shows, to do both. There is no contradiction at all between those two. I believe it should be a fundamental British economic and foreign policy interest to work for a strong eurozone within a strong and strengthening single market. Could the Minister confirm that that is a goal, not just to be stated, but to be implemented?
The Earl of Caithness (Con)
My Lords, the fact that I am the sixth speaker yet only the first after the chairman to have served on the committee shows that, once again, the House of Lords produces high-quality, interesting reports, of which this is undoubtedly one. I pay tribute to the way in which the noble Lord, Lord Harrison, who introduced the debate so well, chaired our committee and to those who helped us to prepare the report, whom the noble Lord has also mentioned. We were extremely well served. It is one of the features of this House that we are well served and are able to provide reports that are read right across the EU.
What a joy to hear batsman number three, the noble Lord, Lord Liddle, coming in free from the shackles of the Opposition Front Bench. Perhaps he should never have gone there. It would have been much more interesting if he had not.
We have heard a little bit of criticism of the Government. We have heard it all before. I remember more than 20 years ago, when I was a Minister, being criticised because we were not participating enough in Europe. Nothing has changed. I think that behind the scenes we are probably participating as much as we ever did in Europe, although there is no need to be complacent. I agree with what the noble Lord, Lord Jay, says: the number of British people working in the important institutions and holding key jobs has declined. I hope that my noble friend will say something when he sums up on how that is going to be corrected.
Part of what we have achieved was revealed at the recent Council of Ministers meeting. Once you get away from the frothy headlines, which have already been discussed, you see that thanks to Britain the whole procedure of appointing the President is going to be reviewed for the first time ever. All 27 other Heads of Government have agreed expressly that they will address our concerns. It has been agreed that there are different paths of integration for different countries. Unless one takes a firm stand, one cannot shift the other Heads of Government in the way that Britain seems to have been able to in the recent past.
On the report, I agree with a lot of what has been said, but I want to focus on something that my noble friend Lord Lamont raised—the question of the single deposit insurance scheme. I was intrigued when it was first introduced by the Council President, Mr Van Rompuy, in June 2012. The banking union had three elements, one of which was the single deposit insurance scheme. That was included,
“to strengthen the credibility of the existing arrangements and serve as an important assurance that eligible deposits of all credit institutions are sufficiently insured”.
As we have heard, that was quickly watered down under political pressure—we set that out in paragraphs 104 to 113 of our report. In summary, that is because it is so contentious and requires all participating countries to pay into the system and to accept responsibility for any ensuing liabilities of the scheme, with the corollary that the fiscally stronger would be expected to shoulder some of the burden of the fiscally constrained.
As a result, the November 2012 Commission blueprint on deep and genuine economic and monetary union made no reference to a common scheme, instead stating that effective and solid national deposit guarantee schemes would put the banking sector back on a solid footing. The deposit guarantee schemes directive, which sought to strengthen these national schemes, was agreed in December last year.
Our witnesses were split as to the necessity of a common scheme. Some argued that it was necessary to prevent capital flight from troubled countries to those that were perceived to be safe. Others suggested that, while desirable, a common scheme was not necessary or could even add to the risk of moral hazard. The committee concluded unanimously that the common deposit guarantee scheme was necessary for banking union to succeed and for the eurozone to thrive. While recognising the extreme political reluctance to countenance such a significant move in the direction of debt mutualisation, the committee thought that it was an important step if the foundations of the single currency were to be reinforced.
Taken together with the flaws in the single resolution mechanism, which the noble Lord, Lord Harrison, mentioned, we concluded that notwithstanding the significant progress made so far—and it has been significant—only a partial banking union is in prospect. Consequently, the vicious circle linking bank and sovereign debt remains a threat. The whole purpose of the banking union proposal was to break that link, but it is still there.
In their response to the report, the Government agreed,
“that the common deposit insurance for those Member States participating in the Banking Union would lead to more effective and integrated financial regulation across the euro area. However, the Government will consider any formal proposals on this matter as they arise”.
I must say to my noble friend that I thought that that was a little parsimonious. Could he expand on that? Given its importance, it deserved a better response.
In its response, the Commission stated that,
“at this stage, it is not envisaged to set up a common European Deposit Guarantee Scheme (DGS) within the Banking Union. The funding of national DGSs should be improved by the Deposit Guarantee Schemes Directive that is about to be adopted by co-legislators”.
I referred to that. The Commission continued:
“Voluntary lending arrangements between adequately prefunded national schemes could strengthen the overall protection of depositors across the internal market, help tackle asymmetric banking shocks, and mitigate their cross-border spill-over effects. The Commission agrees with the need to take further steps to break the link between bank and sovereign debt, which includes the instrument of direct recapitalisation of banks by the European Stability Mechanism”.
It was also said that this was music for another day and some time into the future.
However, what remains is a problem. The question is whether the existing banking union will be robust enough in times of crisis. Time will tell, but it is at the very least a hostage to fortune. At the moment, we are in the lull before a storm that will be even greater and more destructive than the storm that we have just come out of.
Lord Desai (Lab)
My Lords, I, too, join all other speakers in congratulating my noble friend Lord Harrison and his committee on publishing an excellent report. I want to concentrate on an analysis of what has not happened and what has gone right in this economic and monetary union. Perhaps I should say that when a perfectly good phrase such as “economic and monetary union” acquires the adjective “genuine”, you really have to worry. What is that “genuine” going to do to me that did not happen before?
I recall that when we were discussing the Maastricht treaty in your Lordships’ House, it was quite clear—to me at least—that the single currency was a deflationary union. That became clear in the way that the duties of the central bank were described. Economists used to refer to inside and outside money and there was no outside money in this thing. The money could be generated only by private economic activity because Governments were not allowed to monetise debt. People who signed up to this were blinded by the reputation of the Bundesbank and the success of German economic policy, not realising that that was the result of lots and lots of hard work. They had a tough economic regime, which was never Keynesian. Germany never adopted a single Keynesian policy throughout its post-war development. Quite a lot of the rest of us have been relying on the state to print money here and there in one form or another, and bail us out.
Given that this was the difficulty, you almost have an economic and monetary union that is like the gold standard, but without any guarantee that gold will come in and out. Countries really have to deflate their internal domestic cost to keep pace with the most economically efficient country, which is Germany. Clearly, that has not happened and, as far as the eurozone is concerned, we will therefore be in a continuous deflationary position. I do not see any small way out from that. Where the problem with economic and monetary union arises is that the governance mechanism which is available is not adequate to the ambitious task that the programme has set itself. Again, economic and monetary union is probably feasible when you look at having an EU 12, or maybe an EU 15. With an EU 28, however, the governance mechanism is very slow moving and a lot of it requires consensus, which is difficult to establish within a system that has a great diversity of economic circumstances within its countries.
What we have therefore seen is that in a crisis such as we have just been through, the system has a certain ability to respond. Although we have had no agreement on Eurobonds being issued with debt mutualisation, we have a stability mechanism that has some ability to issue bonds. That came as a result of responding to a crisis and, after various acronyms such as EFSF, EFSM and so on, we finally have some small ability to issue bonds. Similarly, the European Central Bank—the one body in the economic and monetary union which does not have to rely on continuing negotiation and consensus— has been able to act quickly and innovatively. Indeed, the eurozone was saved solely by the ECB being able to act on its own without having to go to the Commission, the Parliament or the Council.
“Okay, whatever it takes”, are some of the most powerful words in the history of the economic and monetary union. As the noble Lord, Lord Lamont, said, once a banker has said that, he does not have to do anything. The fact that he gave a guarantee that he will do it calms the markets down and no one comes to borrow any money from him. In a sense, the European Central Bank has proved to be a pivotal institution to the economic and monetary union because it can speedily respond. I know that there are differences within the governing council of the ECB. The Germans, obviously, are constantly worried that the deflationary mechanism might be diluted. But it is remarkable that it has proved to be the most flexible and innovative institution.
However, we have a problem: the decision-making procedures between the Commission, the Council, the Parliament and so on are not fit for the purpose of achieving a harmonious economic and monetary union any time soon. We all know that we need a system of fiscal transfers but that will not be easy to achieve. It is not quite clear how one can aggregate the political will of the citizens apart from the political will of their Governments. One great problem of the system is that there is no direct involvement of the wider citizenry of Europe in the European political framework. They are engaged in their own national Parliaments and they elect European parliamentarians. I do not know who my MEPs are or how many there are. I consider myself a quite politically conscious person.
One thing that may have to be done in the long run is holding more direct elections of the more important positions, such as the European Commission President. We have just gone into battle about whether the Parliament or the Council has a right to elect. Obviously, the Parliament electing is a more democratic procedure than the European Heads of Government electing or negotiating over dinner. Again, it is not a transparent process. If, for example, the President has to compete in a Europe-wide election in which all the citizens vote, the whole process would have greater legitimacy than it has now.
We may not be able to construct a system of fiscal transfer yet but no one has proposed even a mild expansion of the budget. The European Union budget is one of the smallest budgets imaginable. I think it used to be 1.27% of European GDP but I think it has now gone down. Why does no one propose that it should be increased to 2%? That would allow a little fiscal room for transfer, which currently is not available. If we think of the United States and the full-blown federation, it took the US several decades, a civil war and a great depression before it became an integrated federal union with some fiscal transfers and so on.
It may be that the European Union is on the path, over the next 100 years, to achieving an economic and monetary union but it is not going about it in a fast way. For example, the conclusion of the four Presidents’ report in Box 1 says that the idea is to quickly implement the single market. In 1992, when I was young and innocent, I thought that the Cecchini report had told me that, if a single market was implemented, Europe would be richer by several million dollars. Here we are 22 years later, still talking about implementing the single market mechanism. So something is clearly wrong.
As and when we come to the next report of this brilliant committee, I think that we ought to find out whether we can learn anything from the history of the United States. It is the only comparable body where a federation was created from a diverse political union, albeit that it was a 13-member federation. I think that we have a lot to learn from the United States.
I want to make a final short comment on what my noble friend Lord Liddle said about the single currency that is the sterling area and why there are these problems of unevenness between the London pound and the other pound. If you think about it, the current dissatisfaction in Scotland is not about the currency; it is about fiscal transfers. The currency is all right; the disagreement is about whether the fiscal transfer system is adequate. We really ought to advise the European Union, “Whatever else you do, don’t devise a fiscal transfer system that eventually encourages people to leave the Union”.
Lord Dykes (LD)
My Lords, I share the gratitude expressed by previous speakers in the debate to the noble Lord, Lord Harrison, the chairman, and his colleagues on the economic sub-committee for a masterly report. I note in the second paragraph of the summary the very realistic description of the tensions within the eurozone, which have been referred to and which are still considerable.
Since the eurozone crisis of the three or four weakest members—it is basically a strong international currency with four or five weaker members struggling to get stronger—began to calm down in early 2010, I, like others, have noted that whenever disarray and nationalism have been replaced by the member states in the eurozone working closely together, the markets have usually reacted very positively, markedly, as we see nowadays, with resumed very moderate yields on 10-year and other bonds.
We need also to express admiration for the bravery of the authorities in the four or five weakest member states. I think of Ireland, Spain, Italy and, above all, Greece, where there were remarkable parliamentary votes, with big majorities, on the austerity programme and where the fascist party was kept at bay. I also include in that, in a different way, Cyprus, where there was an esoteric technical problem as well. The steadfast way in which these countries have gone about recovery, despite enormous social losses, has been very encouraging. They were treated in the British press—in the comics in Britain that masquerade as newspapers, with their anti-European outlook with the utmost scorn, at the very same time, ironically, that HMG were pursuing their own extremely rigid austerity programme.
Furthermore, was it not an extraordinary spectacle to witness the contrast between the US and the EU in their respective struggles for post-crisis control? In the US, the political crisis arose again because it could not increase its already massive and excessive federal debt of $17 trillion. In the eurozone, of course, the very reverse was the case, with attempts to reverse debt whenever possible. Although the liquidity increases achieved by the ECB programmes have unfortunately been modest in comparison with those of the US, and the ECB has not dealt with sovereign debt in the way that many had hoped, it has increased its resources to deal partly with future crises. However, it still has not secured enough power for the future for such operations. Mario Draghi, the quite remarkable former head of the Italian Treasury, has achieved a lot as ECB president with sheer will-power, as has been referred to by other speakers. His words of encouragement calmed the markets. The euro itself as an international currency is, as we see, physically forging ahead in the whole world—although less of course in Asia still.
However, we note that in a number of member states the role of lender of last resort is still denied psychologically to the ECB. Never, therefore, has the threat of continued and indeed worsening deflation been more evident. The old fears of historical inflation—mostly expressed in Germany—are in absolutely no danger of being realised again in the post-war period as far as anyone can ascertain with careful and meticulous analysis.
This fear towards countries that have been fighting hard to curb indebtedness, including France, where I live, goes even as far as rejecting the idea of communitarian sharing of debt burdens. This is surely yet again, alas, old-fashioned nationalism. If Europe wallows in nationalist struggles between member states—particularly the leading ones—the markets notice it at once and failure is almost guaranteed, just as when the global economy gives rise to protectionism and goes backwards in history.
Germany, after all, was responsible for some of the earlier problems when its own short-term public sector debts far exceeded the limits laid down in the pact. It was helped then by the rest of the Community, quite rightly, because of the enormous respect for the economic powerhouse that it had created and for its economic and financial leadership. What if, for example, in 10 years’ time that great country Germany were to suffer an unexpected sovereign debt crisis? I do not, of course, expect that, but I am convinced that, if so, the whole Union would back ECB intervention to save it. Presumably by then the ECB would have the necessary resources.
As time goes on and even the weakest eurozone members recover their strength—a remarkable exercise, particularly in Spain, for example—it is going to be necessary for the ECB to receive full powers of action as the authoritative central bank of the Union. This is very much what is already owed to the smaller and more recent member states, which joined in 2004 and afterwards. The Union cannot after all be run exclusively to appease the more traditional and backward members of the Bundesbank board, worthy though they may be. I am sure that Angela Merkel understands this, but of course she is surrounded by the Bild and the Axel Springer press and mainstream local public opinion in Germany. Therefore, I welcome, as I am sure others here today in this short debate will do, the exhortation in the fourth paragraph of the committee report summary that,
“some degree of debt mutualisation may be inevitable if the single currency is to prosper”.
I agree and perhaps it should be more than that.
If outsiders are able to perceive that the eurozone central banking authority is not plenipotentiary, including in debt management, the next crisis will not be fully resolved. The euro must be a long-term project to which all zone members are fully committed. The member states that have recently joined, such as Latvia and Slovenia, and the others waiting to join are owed nothing less. We must think about the smaller countries in the Union as well.
I commend particularly in this excellent report the warnings in paragraphs 197 and 198 on page 68 of the continuing and future dilemma that must eventually be resolved in what is a historic new control structure born out of a massive and greedy speculators’ crisis, which started in the USA. We need to remember that. The SSM and the SRM are still headachy problems that need full and extensive, not just partial, solutions.
In the final analysis, however, this is not just about the central banking architecture for a community or club of nations willing to show European solidarity, which the Prime Minister totally fails to comprehend. It is at the heart of the political union as well. This is a political project, too. The currency is as much international politics as it is just money and bonds. If ever the euro ceased to be, that would be the end of the most unique political project in world history—apart from perhaps the creation of the United Nations after the war. The monetary authorities of the People’s Republic of China were the first of the great third countries of the world to realise this twin characteristic, years ago. I remember being in Beijing when they started purchasing massive quantities of euros for their second stage reserves, when it first started.
All member states achieving the necessary fiscal discipline and restraint can benefit from the long-term plusses in the Germanic, strong currency system, which creates high currency strength and high savings and investment ratios and spreads worldwide confidence. Recent daily international interbank payment transaction figures are remarkable. They show the euro creeping towards the US dollar as the second reserve currency, with 32.5% of the world total of those daily transactions against 39.6% for the US dollar. The UK has just under 3% of the total and has of course devalued seven times since the war—three times by official action and four times in the marketplace.
Despite the crude nationalism here against the remarkable single currency, in a UK that is still fearful and traumatised after being driven out of the preliminary exchange rate mechanism in 1992—a very painful experience for my noble friend Lord Lamont—I still hope that, eventually, the UK will in the future find the courage to join. I do not expect my noble friend the Minister, when replying to this debate, to give a date for that yet, but I hope that it will not be too long in happening.
Lord Kerr of Kinlochard (CB)
My Lords, it was a pleasure to take part in the work that led to this report. It was very enjoyable, largely because of the exemplary patience displayed by our chairman, the noble Lord, Lord Harrison, which produced a unanimous report, and because of the diligence of our clerk, Mr Stoner, who is extremely good at marshalling our arguments with rigour and, sometimes, imagination.
I take two texts for my sermon—I have a Scottish Presbyterian background. My first text comes from the Book of Job—that is, the Treasury. The Government’s response to our report states that,
“the government is clear that we are not joining the Euro”.
Yes, I think we got that. It goes on:
“Therefore it is right that we have said from the outset that we will not take part in measures designed to support full economic and monetary union”.
Yes, we have got that. It goes on:
“The Government has been clear that it will not participate in the Banking Union”.
There is a false logic there. It is perfectly possible that the banking union—although the impetus for it arose from the crisis in the eurozone—could be a good thing, irrespective of whether one was a member of the eurozone. Indeed, I notice that, of all the non-eurozone member states who are negotiating the texts of banking union, only the British and the Swedes are negotiating not on the basis that they intend to join.
If I were to dare to part company with the noble Lord, Lord Lamont of Lerwick, I would say that there was a moment in his speech when I thought that he was slipping into the error of equating banking union with economic and monetary union. As he rightly pointed out, our report, although entitled Genuine Economic and Monetary Union, was largely about banking union, because that was the key subject on the agenda. I would argue that it is not necessarily the case that non-members of the eurozone should decide that they have no intention of becoming members of the banking union.
On that, I would say that the committee was in a state of intelligent schizophrenia. It is intelligent because it is an extremely intelligent committee; it is schizophrenic because we all agree—the Government are of the same view—that the creation of an effective banking union, reducing the risks of future crises and making them easier to manage when they arise, is a good thing. We all agree with that. We on the committee felt, however, that it was hard not to acknowledge that the UK’s non-participation in banking union could have a deleterious effect on the City of London’s position as the transaction capital of Europe and one of the great three global financial centres. We felt that it was possible, over time, that that position could be eroded by non-participation in the structures of banking union. That is the point brought out in the passage of the report cited by the noble Lord, Lord Liddle, where we state, at paragraph 227:
“The Government may be ill-advised to assert that Banking Union is the sole province of the single currency for all time. It would be wise not to close the door on the possibility of some level of participation in Banking Union in the future, in particular as a means of further promoting and shaping the Single Market in Financial Services and the UK’s position within it”.
That is my view. However, I recognise that I will not persuade Job in the Treasury of that today and, perhaps, not for some considerable time.
Lord Lamont of Lerwick
Does the noble Lord remember that the Book of Job says, I forget in which exact chapter:
“There is a path that no fowl knoweth, and which the eye of the vulture hath not seen”?
Lord Kerr of Kinlochard
I cannot say that I think of that every morning as I arrive, but I will bear the noble Lord’s words in mind.
I want to make five minor topical, practical points arising from the report. First, in strict logic, the position that the Government take up—that banking union is nothing to do with us but is a matter for eurozone countries—could mean that the Government do not object to the proposal, much discussed in Brussels at the moment, that the heavily overloaded Commission’s single market directorate-general should be split, with banking and financial legislation moving to the financial directorate-general, the primary concern of which is of course for the health of the euro, leaving the single market directorate-general handling the classic single market agenda. That would be disastrous, from a number of points of view, not least from the point of view of UK interests. The British Bankers’ Association states:
“It is of utmost importance to maintain the structure of the relevant Commission services dealing with financial services so that their work is permeated with the priority of preserving the single market focus. We suggest that the UK Government should proactively defend the unity of DG MARKT and oppose any plan to move financial services out of it. It would be a mistake to move the work e.g. to DG ECFIN which has quite different priorities”.
I strongly agree and I hope that the Minister will be able to reassure us that we shall—to the extent that our current influence allows—work to ensure that that does not happen.
In my view, it is highly desirable and important that the current head of the single market directorate-general, the most senior of that very small and dwindling band of British personnel in the Commission, should stay where he is. I strongly agree with what has been said already today about the need to reinforce that. Retaining the unicity of the director-general is much more important than who is the single market commissioner—the issue that dominates the headlines. What matters is that it is the director-general and that he covers all the work that is of interest to the City of London.
My second point is also quite topical. I hope that the Government will, to the extent that their current influence allows, seek to discourage a second suggestion much debated in Brussels now, which is that the next finance commissioner should also be the next president of the Eurogroup, replacing Mr Dijsselbloem, the Dutch Finance Minister, when his term ends next summer. Combining the two jobs would be a prescription for serious schizophrenia, with a real risk that eurozone concerns might override single market integrity. This is not a moot point in the US sense. In our report we use “moot point” in the British sense, which means it is a key issue. In America, a moot point is a point so boring and irrelevant that it is worth discussing only in a moot court—a fine example of the difference between the two languages, as is “tabled”. If we said that our report had been tabled, people in Congress would say, “Oh, bad luck”, because it means shelved in America.
The moot point is that we have seen two recent examples of just what I am worried about—eurozone concerns overriding single market integrity. In the Cyprus crisis, when the eurozone imposed capital controls, that was a fundamental strike—which may have been necessary in the crisis—against a fundamental principle of the single market. It affected non-eurozone citizens. A British citizen with money in Cyprus could not move his money because of capital controls introduced by the eurozone. The result was that the case was quite rightly taken by the British Government to the Court of Justice against the ECB for its attempt to argue that clearing systems trading euro-denominated paper must be within the eurozone. That, too, is a clear breach of the single market and I applaud the Government for contesting it. It would be dangerous to see the two jobs of presidency of the Eurogroup and finance commissioner in the Commission combined. That may be difficult to prevent, given diminished influence, but I urge the Government to have a go.
Lord Davies of Stamford (Lab)
Does the noble Lord agree that in a crisis—this is true whether supervision and regulation are done on a national basis or on the basis of the Union as a whole—the need to prevent the crisis and deal with it must override market rules? That has always been the case in this country and in the United States. It has always been the case in any country run by good governance rules.
Lord Kerr of Kinlochard
I hasten to add that I do not know the detail of what happened over that weekend when the capital controls were introduced. The noble Lord may be quite right. I merely say that there is a risk here: we see it in the case we are bringing in the court and saw it over the Cyprus capital controls.
The third point, about the European Parliament, is very topical. The committee was lucky enough to take evidence from Sharon Bowles, who chaired the relevant committee in the European Parliament. She did so extremely well and has now retired from the Parliament. There were two other senior British Members of the European Parliament on the committee. I do not know who will be on the reformed committee, but it is crucial in relation to financial legislation. The new chairman of the committee is a highly effective, intelligent Italian, but I do not know whether there will be British members. Presumably, we cannot look to UKIP to do any work and, given the sad fact that the Conservatives are not in the EPP family, I do not know whether there will be a Conservative on this committee. There were two Labour members on the outgoing committee—they were both extremely good but have retired. I hope that the parties will get together and, in the national interest and the interest of the City, will ensure that there are some people on that key committee who are aware of the importance of the City and the importance for the City’s health of good European legislation.
The fourth point is not quite so topical. I urge the Government to think very carefully about the implications of the change in Council voting weights which happens in four months’ time. The UK’s voting weight goes up from about 8% to about 12% but comparable increases for other large member states, such as Germany, France and Italy, mean that the eurozone will, for the first time, have a clear qualified majority. That is in the Council but also in the ESMA—the European Securities and Markets Authority—although not in the EBA because of the dual-majority system. That is rather fragile but, for as long as it lasts, this will not apply there.
The voting weight change in the Council reduces the viability of a purely defensive strategy of the kind that the United Kingdom has adopted on the banking union dossier. We have argued, as the Minister has, that our aim is to protect the interests of non-eurozone single market members, in particular the interests of the UK financial community. We have been doing that by objecting to various things and looking for support. We have often been able to obtain that support, but it will be more difficult in future. We will need to change our tone and our posture: we will need to be a little more proactive and a little more constructive. In particular, we should be trying to field City experts to advise our partners, in a non-polemical way, on how they can best, in their interests, keep their transactions capital—London—healthy and ensure that the EU remains in the big league, playing host to one of the big three global markets. The saga of our handling of the ludicrous financial transactions tax proposal shows that we are not very good at that. Recent events show us deliberately distancing ourselves and not being very good at adding up votes. That will prove even more unwise when the eurozone caucus has a qualified majority, as it will have from 1 November.
My last point is a more difficult one to put in the hard-edged way that I have tried to put the previous one. Networks of regulators and supervisors matter: informal contacts and knowing the guy at the other end of the telephone. In some ways, that matters a lot more than the formal. Informal contacts used to develop organically and naturally, but that is harder to do now. The Governor of the Bank of England naturally cannot be on a close terms with his fellow central bankers on the continent as were Gordon Richardson, Robin Leigh-Pemberton or Eddie George, who met them in meetings all the time, with so much of the central bank’s work being done on a eurozone basis. For example, the meeting this coming weekend sounds a very important one—but there will be no Brit in the room.
I agree with what the noble Lord, Lord Flight, said about the relationship between the Bank of England and the ECB being very good. I believe that it is, and that it is very important to go on ensuring that it is very good. As we staff new supervisory and regulatory structures in this country and they work out their modus operandi, we and they really should be aware, too, of the cardinal importance of informal co-operation and advice from and to concerned colleagues. Intelligent and well informed advice, privately conveyed but not in a hectoring tone or as if we knew better, will be well received. London’s expertise is still well recognised among the experts and such practical links will become even more important, the more we slide into self-isolation at the political level.
Lord Hamilton of Epsom (Con)
My Lords, I pay great tribute to our clerk, Stuart Stoner, who has been quite remarkable in the way that he has reconciled all our different views. I also pay great tribute to our chairman, the noble Lord, Lord Harrison, because while he and I do not really agree on Europe, he has managed to accommodate my views in the most agile way.
The noble Lord, Lord Liddle, raised the question of past Prime Ministers poisoning relations with Europe. I think he was referring mainly to Conservative ones and that my late friend Lady Thatcher was probably high in his mind. However, I remember that one of her great achievements was in the rebate of much of the money that we were sending to Europe. You could not have accused Prime Minister Blair of being anything other than a Euro-enthusiast. He did a deal where he gave back half of our rebate in return for the reform of the common agricultural policy. That policy spent 39% of the EU budget last year, so we got absolutely nothing in return. I found that this had slightly poisoned my view of the EU—not that it was not poisoned before—so this poison is going both ways. It is a bit paranoid to suggest that it is one-way traffic.
We have had economic and monetary union; we now have genuine economic and monetary union. I would argue that neither EMU nor GEMU are genuine. The problem with the single currency and the introduction of monetary union is that it was one part of a construct to lead Europe towards being federal. What was also critical within those building blocks would be to have a central elected Government, with the power to tax and transfer money from the rich to the poorer parts of the eurozone. You would also have to have a federal reserve bank as the bank of last resort, which would issue most of the debt for the eurozone. These were two drastic omissions in the construct of what was hoped to be a new European nation. If you leave those two bits out and merely have monetary union on its own, it is extremely vulnerable.
Let us face it: if the European Central Bank had been allowed—the noble Lord, Lord Desai, pointed out that it was the Germans who stopped this happening—the eurozone crisis would have been a fraction of what it actually was. Right from the beginning, the European Central Bank could have moved in to bail out banks and help nations, saving sovereign debt, rather than reaching this point where some of us wondered whether Greece was going to go completely bust and so forth. This crisis has been caused by the way that the whole thing was set up in the beginning.
Is anything going to change? Things are slightly changing in the European Central Bank but the democratic deficit is still there and will not get any better in the immediate future. There are in fact no plans to elect anybody; we have just appointed Mr Juncker and there was not an awful lot of democracy about that. So you have no democratic accountability and, to quote the noble Lord, Lord Desai, again, you have economic policies that may be leading towards deflation. We may be looking at a period of 10 years when there is no growth whatever, which is what the Japanese saw. If the eurozone does not grow, and we are starting with very high levels of unemployment, I do not think it is going to survive.
My noble friend Lord Lamont said that he has always had an argument with me about this. He thinks it is going to muddle its way through. Well, there are the economic problems and the stress tests coming up on the banks. Opinions differ on this. The noble Lord, Lord Davies, always says to me that the markets are buying banks all over Europe, so they do not think there is a liquidity problem with them. Well, the market has been wrong before. We will have to see.
Deflation and low growth are the real problems. I think that the next crisis for the eurozone is going to be not an economic crisis but a political crisis. We have just had the European elections which have demonstrated right across Europe, not just in the United Kingdom, growing Euroscepticism and disillusion about the way that Europe is operating. Just to show that they are completely unmoved by these results, they appoint Mr Juncker as President of the Commission, which demonstrates that this is business as usual, meaning, “We are not going to have our minds changed by electorates and people saying things. We are not going to change anything. We are going to carry on the way we always have”. Well, if it goes on like that, I can see growing political problems in the eurozone.
If it fails to grow and we do not see any economic growth, even if we do not see a period of deflation, all the economists agree with the noble Lord, Lord Desai, that we are going to see arthritic growth, but it is not going to be very great. We are starting with very high levels of unemployment, particularly youth unemployment, and that is not a position that you can sustain over a very long period. Let us face it; if it cannot deliver economically, what is the point of the eurozone? People will increasingly ask that question.
We have a referendum coming up in 2017. All my Eurofanatical friends in this House—I find I do not have many friends who really share my views—always say to me, “Don’t worry. The result of the referendum is going to be exactly the same as it was last time. Why should it be anything else? All the major parties will support staying in, trade unions will support staying in, and the CBI and everybody you can possibly think of”. Yes, but the last time we voted—indeed, I voted—to stay in the European Union, it was quite different. Britain was poverty stricken. We had appalling labour problems, and we looked across the channel at Europe which was prospering. The chances are that in 2017, those roles will be completely reversed. There will be a prospering United Kingdom and a strife-ridden, low growth, pretty appalling Europe exporting as many of its people as it possibly can. I gather that we are suffering from—or benefiting from, possibly—an enormous influx of Spaniards as we speak. More and more people are wanting to come to this country. Migration flows are causing an enormous problem. I think anybody who sits round and thinks that this eurozone is just going to float through all this without any problem has some very nasty shocks coming their way.
Lord Davies of Stamford
My Lords, I shall start with three introductory comments. First, like other noble Lords, I pay tribute to our excellent chairman who managed to guide us all, although we came from very different vantage points, to clear and decisive conclusions. There is not much point in having a parliamentary report that does not come to clear and decisive conclusions, but it is a very good thing to achieve. Secondly, I thank Stuart Stoner, our excellent clerk who has already rightly been paid tribute to by many noble Lords. Thirdly, I thank my colleagues on the committee, including the Eurosceptic Tories, with whom I always disagreed. We have had a very stimulating time and have all learnt a lot. It has certainly been great fun working with colleagues from all parties and perspectives in producing this report.
We have had some very interesting speeches from many noble Lords this afternoon. I thought my noble friend Lord Desai’s speech was particularly interesting. He raised a number of issues which I do not have time to go into now, but which need to be engaged with. I shall make one or two points on his comments on the need for stabilisation in the eurozone. I think he may be slightly overpessimistic because although I totally agree with him that it would very desirable if the European budget were increased to 2% of EU GDP—I will come on to that in a second—the European Union has found a way of getting much more stabilisation leverage out of the existing structural funds and cohesion budgets by the practice of front-end loading, which it has just adopted for the first time in this new seven-year framework period. It means that money allocated for seven years overall can be spent very largely and substantially in the next two or three years, when it is quite clear that there is going to be a lack of demand from other sources in the eurozone economy, so that is a very positive thing.
My noble friend Lord Desai might be slightly pessimistic in his comparison with the United States. The position is not entirely unfavourable to the EU. First, there is less scope in the United States for fiscal stabilisation at the level of individual states. All American states—possibly with the exception of one and therefore 49 American states—have a balanced budget law. Although the constraints in the Maastricht treaty for fiscal deficits by member states are considerable, you cannot go to more than 3% even in exceptional circumstances. That at least provides some scope.
Secondly, I think that I am right in saying that federal grants in aid in the United States, if you measure them in terms of the proportion of the percentage of per capita income of the beneficiary state, come out less. If I recall correctly, the greatest beneficiary in the United States of federal grants is Arkansas. The receipts are less on that basis than the receipts of structural funds and cohesion funds in the poorer member states in the EU. An element of automatic stability is already there. There should be more. I totally agree with my noble friend that it would be excellent to go to 2% of GDP.
I was very attracted by a suggestion that the committee came across—not just me—when we went to Berlin. A German economist suggested that an excellent way to increase the budget of the EU would be to transfer to the EU responsibility of unemployment funds. There would be an obvious element of automatic stabilisation which would be quite powerful. That suggestion, which is referred to in our report, needs to be taken further. I look forward to speaking to my noble friend about a number of those issues and I very much encourage him to continue to talk about them because he has set out an agenda which should be pursued very seriously.
I cannot resist responding to my old friends and sparring partners, the noble Lords, Lord Lamont and Lord Hamilton, who are particularly distinguished Eurosceptics. There are several blatant contradictions in what they are saying. They say that there is not enough democracy in the European Union and that the member states are not taking the recent European elections seriously enough. At the same time, almost in the same sentence, they say that it is quite wrong to take the European Parliament so seriously or to take democracy so seriously and that the European Parliament should not have anything to do with the choice of President of the Commission. You really cannot have it both ways. Either you think that the European Parliament is a legitimate, democratic voice, in which case it should be listened to and the changes in membership of that Parliament may be something that everyone should take on board. Alternatively, often you hear in other Eurosceptic rhetoric that it is not a democratic organisation at all and that its proceedings and membership should therefore be discarded from attention. You certainly cannot plead that it should be taken into account when you wish to do so.
I have exactly the same problem with the point made by the noble Lord, Lord Lamont, about fiscal integration. He complained that fiscal integration was not included with monetary integration at the time of the Maastricht treaty. I remember distinctly that at the time he opposed any suggestion that there should be any degree of fiscal integration. You cannot have it both ways. Either it is necessary or it is not necessary. You cannot logically complain at the absence of something and then complain a few moments later at its presence when it is delivered.
Lord Lamont of Lerwick
Of course you can. You can be against transferring fiscal authority out of the UK but say that the only way in which you can make a monetary union work is for you to transfer it out of your country to a central organisation. There is no contradiction in that whatever.
Lord Davies of Stamford
I am sorry, I take a different view. It seems very contradictory to me. Either you should not have fiscal integration or you should. It is very important that politicians are coherent about these things and I do not think that the Eurosceptics are coherent, not least on the matter of democracy in the EU.
Incidentally, my noble friend Lord Desai made the excellent suggestion that we should have an election for the President of the European Union. I have always been in favour of that, and I quite agree that the EU lacks democratic accountability. You hear all the time from Eurosceptics that the EU lacks democratic accountability, but the moment you suggest any measure at all, whatever it might be—changes at parliamentary level, say, or the direct election of the President—that would supply much greater accountability, they are always against it. Again, there is a blatant contradiction running through their views on the subject. I have to say that if you pursue politics on a contradictory basis like that, you do not do great credit either to your reputation for intellectual clarity or to the good faith of your arguments.
Lord Marlesford (Con)
Surely the noble Lord, Lord Davies, is wrong. The point that my noble friend Lord Lamont is making is that the eurozone requires integration. We did not join it because we were not prepared to take part in that integration. The European countries joined because they were prepared to integrate but then they did not actually do it. That is what all the problems were about.
Lord Davies of Stamford
I repeat that you cannot at the same time complain about something when it is absent and then complain when it is present; that does not make any sense to me at all. Equally, I do not think that I have heard any response to my points about democratic accountability. If there is a desire for more democratic accountability in the EU, which there is, and if it should be addressed, which in my view it should be, then you cannot turn down every possible proposal that is made in order to achieve that, which is what the Eurosceptics tend to do.
I think that our report makes three conclusions. The first is that the general direction of genuine monetary and economic union is probably right. We support it and think that it is a sensible thing for the eurozone to be engaged in. We feel that it should go further and be completed. We think that it is troubling that one or two elements of the agenda have not been implemented and will not be in the immediate future, notably the retail bank deposit insurance system that we have just referred to and which has been referred to several times today; we are broadly in favour of that and think that it is a very good scheme.
The second general conclusion is that this process is not without risks and costs for our country. That point is made very clearly in paragraphs 185 and 186 of our report, to which I draw the Committee’s attention. It is also made in another document, the British Bankers’ Association report, which we have obviously all been sent. I have been sent a copy, and it has already been referred to and quoted from. I shall quote from it in case some people here have not received it:
“EU, government and industry studies have shown that deepening the Single European Market offers a growth potential that is achievable without further increasing public debt … However, the understandable moves towards stronger Eurozone governance may make it more difficult for the UK financial sector to play a full role. For example, development of Eurozone caucusing, outside the EU-28 format, on matters that impact directly the Single Financial Market could, even unwittingly, damage its integrity”.
The document goes on to raise other risks, not just caucusing but the risk of the eurozone having a permanent president, the risk of the new configuration of the European Parliament being less likely to defend British interests—largely because the Conservative Party withdrew from the EPP, so that is entirely its fault—and other risks.
The fact is that the British public have been bamboozled, and this report goes some way towards redressing that and illuminating them, which is very necessary. They had been persuaded to believe that somehow we can have a half-in and half-out approach, with one foot on one side of the fence and one on the other in our relations with the EU at no cost, or that we can gain all the benefits from the EU without actually subscribing to all its programmes and disciplines. The sheer fact is that you can never do that in life, and you cannot do it in this case. Personally, I would prefer any measure of relationship with and access to the European single market and the EU than none. I am the sort of person who would always prefer half a loaf or even a quarter to no bread at all. However, I am very conscious that we are losing some portion of the loaf by the course that we are adopting. That comes out very clearly in the conclusions to the report, and we have fulfilled a useful function in writing it.
Lord Hamilton of Epsom
As the noble Lord, Lord Kerr, said, we are not part of the eurozone group, so are we not inevitably half in and half out, whether we want that or not?
Lord Davies of Stamford
As the noble Lord, Lord Kerr, said, as I shall say myself and, indeed, as the report states, we are not just out of EMU. We could not join EMU if we wanted to because we do not qualify under the fiscal provisions. Our fiscal deficit is excessively high—more than twice the level required the last time I looked at the figures. We cannot join anyway; we just have to face that.
Quite apart from that fact, it is true that the public in this country have been poisoned against the whole notion of EMU by a very effective press campaign, and it would be quite difficult to join EMU in the short term even if we qualified, which we do not. As we do not, it is a theoretical issue. Quite apart from that, we could, if we wished, join a banking union. We appear, for reasons which are unconvincing to me, to have decided not to join a banking union. As a result, we will find that we are not really, truly in the single market.
I put that the other day—this is a matter of public record because it was an open committee session—to the chairman of the Financial Reporting Council, Sir Win Bischoff. He agreed with me unequivocally that, as a result of what is happening, we will have a fragmented single market. We will have our own banking regulation based on our own bank regulation Bill. We have secured a derogation from the bank regulation directive, which I think is very undesirable. That means that, although there will be no fundamental differences in the way that banks are regulated in the eurozone and here, there will be small differences from time to time. There will be different responses because different people will be doing the regulating. There will be greater compliance costs. British banks such as HSBC and Barclays with major operations on the European continent will have to go through parallel procedures in different countries, whereas they could have just reported in one coherent way on a consolidated basis to one regulator, which would have been much more desirable.
More serious than that, there will be regulatory arbitrage, with distortions: people being tempted—no, being driven—to practise certain operations and activities in some markets merely because regulation there is slightly lighter than in other areas within the single market. That is not a single market at all. There will of course be a great lack of clarity and, therefore, investor and depositor confidence as a result of the confusion and complexity, which is, again, quite unnecessary.
It is a perfect example of how you can impose costs on yourself for no useful purpose. We all say that we want a single market. We are all in principle against regulatory arbitrage—all British Governments always have been—but we have deliberately created a fragmented structure which has higher costs and prevents a single market taking place. That really cannot make sense. It is about time that we realised that our policies—I say our policies; I mean the policies of the Government of the day, the coalition Government—contradict the national interest. Because we are not in the eurozone, we face the danger that problems may be created for us by the eurozone itself through its members caucusing for meetings of ECOFIN or other bodies due to the greater weight given to the eurozone organisations—a point made by the British Bankers’ Association. Not only may we be the victims of other people doing things that we do not like very much but we are creating problems for ourselves, which seems particularly irrational.
The report is a very useful piece of work and it deserves wide consideration. I hope that it may be the beginning of a reconsideration of the rationality of our policies in this area, because it is a great shame that for reasons of, I think, essentially party politics or emotion, we are often dysfunctional in our pursuit of the national interest.
Lord Davidson of Glen Clova (Lab)
My Lords, I join all noble Lords in congratulating my noble friend Lord Harrison on chairing the committee, which has produced a welcome assessment of this important and complex subject. The committee, composed of highly experienced and able members, offers views that no sensible Government can easily reject or ignore.
The UK’s engagement with the EU on this subject is of course important. It has potentially dramatic consequences for our globally significant financial sector. History teaches that financial regulation can have serious unforeseen consequences and effects on the sector and the economy. Therefore, this report’s contribution to understanding the implications for the UK of the EU institutions’ proposals is both useful and timely.
Today’s expert and sometimes lively debate, and the exchange that has proceeded, provides Her Majesty’s Government, I suggest, with quite a lot to think about. My noble friend Lord Liddle, unshackled, has also provided something substantial for Labour to consider in this area, paying due regard to his expertise and knowledge. No less, there is to consider the contribution of my noble friend Lord Desai and his view on EMU as a deflationary union, for the UK’s major trading partners are within the EMU. This obviously creates interesting and difficult questions for the future.
I also note the possibly critical view from the noble Lord, Lord Hamilton, of the future of the European Union, given its structure. These observations would be foolish to ignore. They are obviously not accepted by everybody but they should certainly not be treated lightly. My noble friend Lord Davies also made a very interesting point in relation to the warning that he offered between the UK’s regulation in banking and the European zone, and how government can impose costs in a dysfunctional way, as he put it. This is of course one of the problems that government in the UK have faced for quite some time.
We agree that banking union is vital to tackle the effects of the financial crisis, at least in the eurozone. We also agree with the committee that the current proposals fail to break the bank/sovereign debt nexus, as that was the principal rationale for the GEMU project. As the noble Earl, Lord Caithness, observed, that is quite significant. What the committee describes as “sub-optimal” about the SRM—leaving the fiscal backstop substantially in the hands of the individual member states, the resolution fund not being finalised until 2026 and, even then, with only limited, probably inadequate, funds, as my noble friend Lord Harrison observed—leaves the concern about the bank/sovereign debt nexus possibly reduced but certainly not removed. Certain member states in such circumstances will almost inevitably not resist the temptation to game the system, and that of course was the very behaviour that caused the problems of the last crisis.
One is therefore slightly surprised at Her Majesty’s Government’s somewhat reticent response to the report’s clear view that,
“what has been agreed is insufficient to break the vicious circle linking banking and sovereign debt”.
Are the Government of the view that this failing has been resolved or that it will be resolved in due course in negotiations on EMU, or is this simply an issue that HMG accept they cannot influence? Is the concern expressed to the committee by Mr Nigel Farage, MEP, and backed up by Professor Alexander, that certain ECB refinancing operations have perversely reinforced the bank/sovereign debt nexus a concern that HMG share, I assume, or are we simply to disregard what Mr Farage has identified?
The single supervisory mechanism agreement of 2013 is welcomed by the committee but with the caveat that the ECB being expected to supervise some 6,000 euro area banks is “unrealistic”. Even if the ECB is to be confined to larger banks only, as the noble Lord, Lord Lamont, points out, the Government’s assertion in response that the SSM,
“is critical to restoring market confidence”,
and that it,
“ensures that the Single Market of 28 countries is not harmed”,
may seem rather overoptimistic.
The Government expressly recognise that size is not important when it comes to monitoring risk. Economic historians might point out that the UK’s secondary banking crisis of 1973, which featured small banks, precipitated a major crisis. Do the Government not share the committee’s concern about the ECB’s capacity to supervise? Are they confident that the member states’ authorities will, throughout every member state of the eurozone, have the capacity to supervise themselves? Can an absence of ECB capacity to supervise really “ensure”, to use the Government’s word, that the single market is not harmed?
The whole project of the banking union seems to have the Government’s support, observing as they do,
“that the UK stands to benefit from greater financial and economic stability in the EU”,
that banking union provides. That recognition of the interlinked nature of banking is sound. Supranational structures for financial supervision and resolution are of course central to the project. It is correct to say that banking union is another step toward successful ever-closer union, one supposes. Is one nevertheless to assume that the Prime Minister’s oft-expressed but never really specified desire to reform some aspects of the EU would leave this area out of any of his proposed negotiations?
Is it correct that this step to ever closer union will proceed without the Government attempting to revisit the issue; without attempting to renegotiate? Some clarity from the Government on this important subject would be welcome. Perhaps answering the query of the noble Lord, Lord Kerr, as to the logic of keeping the UK out of the banking union, might also be interesting and informative.
Turning to the issue of integrated economic policy, I note that the committee expresses the view that debt utilisation,
“may be inevitable if the single currency is to prosper”,
and that it is “a logical development”. Do the Government agree? I ask because I confess that I was not able to detect the Government’s attitude from their response. I assume that they are not, as the noble Lord, Lord Dykes, put it, wallowing in nationalism on this particular point. It would be interesting if we could have clarity. This is particularly interesting given Germany’s resistance to implementing the concept. Do the Government share the German view? Are they simply unconcerned about the issue, or do they accept that any influence they might have on this issue is inevitably limited?
Influence has been the subject of one of two observations. The noble Lord, Lord Lamont, is sceptical about the utility of influence and there is something to be said for that. Per contra, however, my noble friend Lord Liddle, the noble Lord, Lord Maclennan, and the noble Lord, Lord Jay, from a different perspective, all stress that it is important. They were joined by the noble Earl, Lord Caithness. The noble Lord, Lord Kerr, pointed out the importance of influence and he should know. He also gave useful guidance as to where influence actually lies and how one can use that influence in a way that might possibly overcome the scepticism of the noble Lord, Lord Lamont, about the issue.
The noble Lord, Lord Hamilton, when he characterised the exchanges of poison, as it were, between the respective parties, made a useful point, possibly impliedly, that the diplomatic exchange between the UK and its EU partners could be improved substantially by toning down the rhetoric. Engagement, of course, is always helpful and positive engagement is even better.
As for the implications for the UK, the committee rightly recommends that HMG do not treat the banking union, as the noble Lord, Lord Kerr, quoted, as,
“the sole province of the single currency for all time”.
In trying to decipher the Government’s response, it is not entirely clear what position they now adopt. Clarification would be welcome.
Not unnaturally, the Government note the value of the City of London. Some of us might prefer that they also recognised the substantial contribution made to the UK’s financial sector by other parts of the United Kingdom—Leeds and Edinburgh spring to mind—but that is not my main point. The contribution of the City is substantial and is one of the truly global successful sectors of the UK economy. I am sure that the Minister will agree that government action or inaction can have significant effects on our global position. One notes that in the peroration to the government response they state that,
“a strong and engaged UK (and a strong City of London)”,
are in the interests of all EU members. We agree. It may be, however, that we differ over the meaning of an “engaged” UK. Again, positive engagement is what we would hope for. Where the Government state that the UK’s interests are,
“to be framed in terms of the overall stability and efficiency of EU markets”,
we are in accord. Where they state:
“The Government values the importance of the City of London in Europe”,
we again agree. Is one to assume that, from the point of view of maintaining the City’s global position, the Government are wholly convinced that the UK must remain in the EU? As one is sometimes unsure where they stand on this issue, might the Minister make it clear whether Her Majesty’s Government consider that the UK’s financial sector is strengthened by the UK’s membership of the EU?
I look forward to hearing the Minister’s replies to all these questions—or if not all, at least to some of them. In conclusion, I repeat our welcome of this careful and useful report. We trust that the Government will pay it due and proper attention.
Lord Newby (LD)
My Lords, I begin by thanking the committee for its work on this report and all noble Lords who have spoken in today’s debate. It has been like a high-level seminar on the subject rather than a usual parliamentary debate. Although I would love to think that students around the UK and Europe will read our debate today, I fear that it will not get the attention that it deserves. It is also quite a novelty when replying to a committee report to find that quite a lot of the speakers were not on the committee. Very often, one is faced with just the members of a committee, who have tendency to repeat what is in the report and basically say how clever they were in producing it in the first place, whereas in this case not only were they clever—naturally—but they managed to draw in star outside participants to the debate, which I for one have greatly enjoyed.
The Government have consistently said that they support closer integration in the euro area to make the single currency work. The Government agree that a stable euro area is in the interests of all EU members, not just those in the euro area but those outside it, including, of course, the UK.
The work towards creating a genuine economic and monetary union, which the European Council tasked Herman Van Rompuy to take forward in June 2012 at the height of the euro area crisis, is an important part of this process. As we have seen on banking union, the UK will fully engage in any and all discussions, as and when they are taken forward.
At the same time, the Government have been clear that we will not join the single currency and, as such, we will not be part of this closer integration. Our priority is therefore to ensure that the single market is fully protected and that measures remain voluntary for those outside the euro area. We agree with the report that this will require “continued vigilance” and we have been closely involved in the negotiations, particularly over banking union, to protect UK interests.
We also want to ensure that, as the euro area continues to integrate—
Lord Davies of Stamford
The Minister has said that the Government are opposed to our joining EMU or GEMU—we know about that—but will he explain why the Government appear to be against our joining the banking union alone?
Lord Newby
Yes, my Lords, I will come to that.
We also want to ensure that as the euro area continues to integrate, the EU continues to operate fairly for those who remain outside the euro area, whether by choice, like the UK, or because they have yet to meet the criteria to join, like some other euro-outs, although I take the point that we do not meet those criteria either at this point.
As the Chancellor and Germany’s Finance Minister Schäuble set out in their joint Financial Times op-ed piece in March, non-euro area countries must not be,
“at a systemic disadvantage in the EU”.
We must ensure that EU institutions continue to work in the interests of all member states and last week’s Council conclusions, agreed by heads of state and government, contain important text about the need to address UK concerns.
Lord Davies of Stamford
I apologise for interrupting the noble Lord a second time. He said that the Government feel it is important that non-euro area member states not be at any disadvantage in the single market as a result of not being part of the eurozone. Does he not accept that the burden of our report, and indeed of the BBA document which has been quoted extensively this afternoon, is that willy-nilly, whether we like it or not, we will be at some disadvantage—probably increasing disadvantage—by virtue of being outside the EMU or banking union entirely, and we cannot do anything about that if we are determined not to join those systems?
Lord Newby
I think that the noble Lord, Lord Lamont, explained at the start of his speech the trade-off between influence and being a member of the EMU. I will come to this later but, obviously, in certain respects, we are going to be outside the room by not being members of either the eurozone or the banking union. We have to work very hard to ensure that we maximise our influence in those areas, of which the single market is the most central, in which we have a common view with many, if not most, of our EU partners about the need to reform and the direction that reform should take.
I will attempt to deal with many of the questions that I was asked by individual noble Lords during the debate. The noble Lord, Lord Harrison, asked whether the single resolution mechanism was too complex and therefore would not be effective. By definition, all resolution processes are complicated but the role of the single resolution board is very strong. This may be a vain hope but, from our own experience, we hope that the plethora of legislation and new structures will reduce the likelihood of major crises of which we have been previously largely unaware emerging at great speed.
One of the problems in the UK when RBS had to be effectively nationalised over the weekend was that the storm arose with great speed. If you contrast that with the position of the Co-op Bank last autumn, when it faced major, potentially life-threatening problems, a resolution was undertaken, not formally using the legislative framework but largely using the mechanisms that were envisaged there, and with the Treasury and the Bank playing a major role over a number of months in getting the Co-operative Bank into a position where it was able to resolve its own problems.
The involvement of political bodies other than the single resolution board is inevitable because of the significance of the decisions that are taken and the fact that if major banks are in real difficulty—a weakness we have seen in the UK—there is a political component and you have to take that into account as you are taking decisions. We would hope that the scope of the decisions that have been left to the Council is very circumscribed and that most interventions, even involving the single resolution board, would not require going up to that level.
The second question that the noble Lord, Lord Harrison, raised was whether the resolution fund is too small. On its own, it demonstrably is, if there were a major simultaneous problem with a number of the largest eurozone banks. The key thing here is that it does not have to bear the whole brunt of the resolution process on its own. Arguably, it does not have to bear the main brunt of it. That is the whole point of the resolution recovery directive and the bail-in procedure. The fund is not capable on its own of solving a major crisis, but it is one of a number of tools and not necessarily the largest or most important.
The final question, I think, that the noble Lord, Lord Harrison, asked related to the replacement of senior positions in the EU. As he knows, over the coming weeks, the European Council President will be taking soundings on this and I am no more able to suggest whom we might put forward, than my noble friend was at Question Time today. The UK is fully engrossed in those negotiations with the aim of making sure that we have candidates who will be able to deliver on the priorities agreed by the heads of the European Council last week.
Among other things, the noble Lord, Lord Lamont, has introduced a definition of nirvana that means that I will never think of the concept in the same way again. He ended his speech by saying, I think, that his feet tended to have to accommodate themselves to the shape of the shoe. My experience and expectation is that my shoes will amend themselves slightly to take account of the shape of my foot. I think that that is a rather important distinction in the way that we view our involvement.
This brings me to one of the central points of discussion, which was the importance of political will in terms of the future of the euro. In certain respects, the euro has defied logic because of the strength of the political will supporting it. I strongly agreed with the noble Lords, Lord Liddle and Lord Jay, about that. Once the political elites of the major eurozone countries have made up their minds that this thing was going to continue, it was going to continue barring the most unforeseen disaster. Those who predicted its demise simply did not grasp a very straightforward political fact.
The noble Lords, Lord Liddle and Lord Maclennan, asked linked questions about how we could play as full a part as we can in both the banking union and the mechanics of the eurozone. Obviously, we have ruled out membership, so the question is the extent to which we can play a role. I thought that the point of the noble Lord, Lord Kerr, about the role of informed co-operation and advice was very important here. We have very good relations with the ECB at all technical levels and UK officials are playing, and will continue to play, a big role.
The noble Lord, Lord Kerr, developed the concept of playing a bigger role in the banking union by saying that there was no logical reason why we should not be in it while remaining out of the eurozone. I am sure that that is logically the case. Why has it not happened? There are a number of reasons. First, the banking union has flowed from the eurozone crisis. I think it is inconceivable that we would have had such a banking union if all had been well with the eurozone, so the two are inextricably linked. I would also be interested, as a newcomer to the theoretical concept, to know whether there has ever been a banking union with banks that had two different basic currencies, or several currencies, because presumably the Swedes and others might also join.
The noble Lord, Lord Jay, made an important point about having more British people involved—
Lord Kerr of Kinlochard
I do not quite follow the logic of the Minister’s answer to my point. Because something has emerged that is driven by a wish to support the eurozone, that does not necessarily mean that it is bad or something from which we should be determined to distance ourselves. I do not think that the point about currency is relevant to whether we should be in a single supervisory mechanism. The non-eurozone countries that are negotiating do not think it is, nor do I see why, logically, it should rule us out from being in a single resolution mechanism. I understand that a separate argument would apply in respect of resolution, which is that it means somebody pays. Resolution costs money. However, we are not into these kinds of arguments. I am not saying that we should join either the single supervision mechanism or the single resolution mechanism today; I am merely arguing that it annoys the foreigners when we take the blanket approach that this is nothing to do with us. That undercuts the role—which I am glad the Minister acknowledges is very important—of the City quietly advising the ECB, and on these new structures being developed on the continent, as to how the job is best done.
Lord Newby
I was simply trying to understand, partly for myself, why we have taken this view on the banking union. An element of it was a political view and an element of that was borne out of the way in which the banking union itself developed; namely from the eurozone, of which we are not a member. At some point, we may decide that we want to be a partial or full member of a banking union—although I suspect that point is some way away, whoever the Government are. While I am on the subject, the noble Lord, Lord Dykes, made a point about timescales. However, as he is not in his place, I will have to pass over it.
The noble Earl, Lord Caithness, asked about the common guarantee scheme. He said that the Government were being rather spartan in their response—which, indeed, we were. However, the reason for this is that any common deposit scheme would be for the eurozone rather than the UK. If the eurozone decides that it wants to go down that route, that is fine but we will not be playing any part in it.
The noble Lord, Lord Desai, pointed out that the eurozone operated on a sort of gold-standard basis by being a deflationary tool. The first example in recent times in Europe of real wages falling significantly was with the monetary union between West and East Germany. I would not say that Germany got a taste for it, but it got an understanding of how that could work. What has been surprising is the extent and speed to which Ireland, Spain, Italy and Greece have been able to adjust, in particular, real wages downwards in order to begin to make their economies more competitive within the eurozone. The noble Lord made another interesting point about how important the three words—“whatever it takes”—issued by the head of the ECB were. The fact that they were so effective says a lot for the credibility of the ECB because markets believed it, which is encouraging in terms of the strength of the ECB.
Along with other noble Lords, the noble Lord talked about the challenge of what used to be called—although I am not sure it has been today—the “democratic deficit”: the fact that there is a low engagement in European elections and a low understanding of many of the issues. A number of suggestions were made about how to deal with this, possibly by having more direct elections or voting for the President of the EU. I am possibly the only person in the Room who has gone on a demonstration carrying a placard in favour of direct elections for the European Parliament, which I did as a student. We had very high hopes for the European Parliament then, not just as a technical body in terms of scrutinising legislation, which, on balance, it does extremely well, but as a symbol of a uniting Europe, which I was all in favour of. We thought that having a Parliament elected by the peoples of Europe would bring that concept to life but it has not, so I am rather sceptical about whether we can solve that problem by more elections. I fear that we may have to rely more on the role of national Parliaments, which is the subject of another report by your Lordships’ committee.
The noble Lord, Lord Kerr, raised a number of extremely interesting points about the way that appointments might be made and how the directorates might change. I absolutely see the strength of his very important institutional points and will take them back to my colleagues in the Treasury, who are rather more closely involved in those negotiations than I am.
The noble Lord, Lord Davies, spoke about the threat to the single market in financial services of the banking union and about different legislative frameworks. In fact, what we have to a very large measure is that wherever you go across financial regulation, it is regulation under directives. Our own legislation is very much framed within the plethora of directives which I always think of Sharon Bowles presiding over. She has been the one person who has understood all this stuff. Although under a directive the way that we do something and the way that the European Central Bank does it may be slightly different, it is no more different in this area than in any other area of the single market, where we implement things by directive and the detail of the way it is done varies from country to country. I am not sure I share the noble Lord’s concern in that respect.
Lord Davies of Stamford
I am sorry to say I am not convinced by the Minister. We do, of course, have a derogation from the directive, as the Minister presumably knows.
Lord Newby
I remain of the view that the directive approach applies in financial services in the same way, broadly speaking, as it does in many other areas.
I am just about out of time but, briefly, the noble and learned Lord, Lord Davidson, made a point about whether the ECB had the ability to supervise. It has a big job on its hands and is taking on new responsibilities. As we have seen, getting the Bank of England fit for purpose has taken a lot of time and effort. Indeed, the only thing that will demonstrate whether it has succeeded is how it performs in a crisis. We hope it does not have to do that for some time but it is clearly taking on the job of supervising a very large number of banks, whether it is 250 or 6,000, or whatever it is. It is very big new job, and I wish it well in it.
I conclude by saying again how much I appreciate the work of the noble Lord, Lord Harrison, this committee and all speakers in today’s debate. It is clear that Europe will be at the centre of our political debate in the period ahead. That debate is often conducted in extremely depressing, ill informed and—to borrow a word from the noble Lord, Lord Hamilton—poisonous terms. During all this, I am sure that your Lordships’ European Union Committee will continue to be a voice of reason and common sense and that Governments of whatever persuasion will continue to value its reports. For my part, I look forward to participating in further debates upon them.
Lord Harrison
My Lords, with the passage of time all committee chairmen tend to fall into their anecdotage. However, before I tell my concluding anecdote, which I hope will sum up the tenor of the debate we have had, I will say that I will resist the opportunity to play footsie with the noble Lord, Lord Lamont, or indeed with the Minister who has replied. I will also resist the opportunity offered by the noble Lord, Lord Desai, to take some of my committee to the United States both for the purposes of literary examination and comparison with the regulatory structure there. To my noble friend Lord Liddle I say that despite all the quotations from the Book of Job I do not see myself as a man of constant sorrow; my job is to help the process of change with the committee that I have.
My anecdote is the following. Some 20 years ago I wrestled to the ground Pierre Moscovici, who was later to become the Finance Minister of the incoming French Government, for the purposes of leading the socialist group on the monetary sub-committee—I am very familiar with sub-committees. However, one dark afternoon in Brussels in the European Parliament we met Alexandre Lamfalussy, who was later to be president of the European Monetary Institute and the forerunner of Trichet, Duisenberg, Draghi and all the rest. I, in my pomp and circumstance, then wrote to the Wirral Globe, Cheshire Observer and Chester Chronicle that I had just elected Europe’s next bank manager. Some 20 years later, I think I was right, but no one was paying attention at the time other than my good local newspapers.
I tell that anecdote because the tenor of this debate has been that we have to be on our pins, toes and high heels to be able to speak with those who might be our friends and who might change things. I thought that view was best put by the noble Lord, Lord Kerr, when he talked about knowing the guy at the other end of the telephone. That is the job of UK Governments now and in the future for the purpose of defending UK interests. I say to the noble Lord, Lord Hamilton, that what united the committee across the political waves was the belief that that was and remains important, and that we will continue to pursue it in the future. I am happy to continue the seminar in the Peers’ guest room shortly afterwards, should any noble Lord need a glass of European wine, and I thank all noble Lords who have contributed.
Disabled Students
(9 years, 10 months ago)
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Lord Addington
To ask Her Majesty’s Government what plans they have to co-ordinate the assistance given to disabled students at school, in further and higher education, and in the world of work.
Lord Addington (LD)
My Lords, I thank those—we happy few—who have waited here. It is slightly later than normal. One should never underestimate the passions and the length of passion when it comes to Europe in this House.
This Question about the co-ordination given to disabled students throughout the educational process and into the world of work was inspired by changes to what, I think, had been a very comforting place to be in that process, for a disabled student—that is, in higher education. We had a system that seemed to provide just about everything needed and it was changed—or threatened with change—by a Written Ministerial Statement on 7 April. Everything is up for grabs. What particularly attracted my attention was that those with specific learning difficulties were mentioned twice. That was the only disability group that was.
As I have put on record before, specific learning difficulties is usually shorthand for dyslexia. I have been told by interventions from Ministers that it is now thought to include other groups as well, such as those with dyscalculia, dyspraxia and so on. It gets mentioned because it is thought to be an area where the amount of money spent is excessive, primarily because we are given a standard computer when going through the education process. I say “we”, though of course this system started in 1990 and I missed it, in my higher education experience, by a couple of years. The computer was something that was taken as an example of waste. I will come back to this, but that inspired me to look at the entire system.
The system had to be looked at as we had just been through the Children and Families Act. Both school education and further education are now covered under a unified system, up to the age of 25. However, because the disabled students’ allowance was in existence, we did not really look at that. There was an assurance given to us at the time, both informally and, I think, formally, that we did not need to look at it.
So what has happened when it comes to school and further education? For the first time, the education system has a duty to go out and identify those with special educational needs—to find them, not have them brought to you—and not have people struggling. The system is supposed to find them, find out what is the matter and give them the help required. This is a massive cultural shift—a far bigger cultural shift than, I think, many people realised at the time. It means that there is a duty not to say, “Oh, little Johnny”—or little Jane—“is not succeeding”. Rather, there is a duty to identify why. This would have been much easier if there was a duty for all teachers to be better trained to identify the more hidden disabilities. I try to get away from this cliché of my own, but special educational needs runs on something that I have always referred to as “reverse battlefield medicine”. The most severe cases are dealt with first, usually because they can be spotted. I hope those listening can identify the difference between a disability that leads to an educational need as opposed to a special educational need—that is somebody who has a need resulting from being in a wheelchair as opposed to someone who has autism, dyslexia or is deaf. Those conditions, if they are obvious, get dealt with pretty quickly. The legislation now says, “We should try to get these people to achieve”. So we now have a situation in which all this is going on, and we have established that this system does not change at further education.
My history in your Lordships’ House follows me throughout this debate. We managed to deal with apprenticeships. It had been decided, wrongly, by the Department for Business, Innovation and Skills, that they were not covered by the Equality Act. It became apparent, and it was confirmed that they were covered. Dyslexics had been prevented from taking the English requirements with any chance of succeeding, but the process was changed and now you have to give assistive technology. I have just heard from the British Dyslexia Association that that has been challenged by one or two of the exam boards because it is regarded as giving some form of unfair support. I do so hope that the noble Baroness will be shoving her thumb into that eye very quickly, because my fingers are getting a little bit too dirty from doing that. I hope that this will be done quickly.
Having had the situation where we are working towards taking exams and we are providing support, we go to the DSA. Did the DSA provide a lot of support? Yes. Did it provide some that I felt might have been wasteful in certain cases? Yes. Did it become slightly too bureaucratic? Yes. I have heard of cases of people with mental health problems who have been refused it because they did not have the documentation, despite the fact that they had documentation saying that they had mental health problems. Often you have to be assessed again to get this assistance, despite the fact that you are statemented, under the old system, or have a plan, under the new one, and have received support so far through the system because of your condition. These assessments are extremely expensive—they cost hundreds of pounds if not thousands—and put pressure on certain student categories. If we are to have reform in this area, I hope my noble friend will be able to say that this will be looked at, and that further unnecessary assessment on entrance will be dealt with.
If this is the system that we are working towards, do we have a working practice that will allow for the growth of independence throughout the system? If you start by being identified as having learning problems in the classroom, you expect to get a great deal of support as a small child starting this process. A standard part of the educational experience for many people is the enhancement of independent working and independent training—with guidance, but that decreases. One of the important things about the university system is that one works independently for oneself. Here we get to the nub of what I am trying to say. How are we ensuring that that growth of independence carries on? How are we making sure that we have a system that uses parts of all of this and combines them to ensure that the candidates can get through the process themselves?
I am a convert to, and a great advocate of, using assistive technology, particularly in the case of dyslexics. There are others outside here who will say that other disability groups will not benefit as much, but I suspect that all can benefit to a degree. I also know that no one person in any one of these spectrum organisations is identical to the next, so there must be a degree of working together. However, the idea that the assistive technology that allows me to send any notes that I have sent to any person in this room, by dictating into a microphone attached to my computer, which is running a bit of software, would not be beneficial to someone who is a recognised dyslexic and will be dyslexic throughout their life, and that they will not be supported when they are taking their GCSEs, is ridiculous. Later, they may have to take an exam using an amanuensis or a computer, so why can they not have access to it earlier? Why are we not encouraging them to maximise the benefits of this technology earlier?
We then come to the process that is identified and used within the independent sector quite frequently, a process that is now made available as standard to people who get on to the DSA. This point is twice picked out in the statement made on 7 April, which says, “We will not provide you with the standard computer, and the software will now be provided by the higher education institute”. This is a huge cultural shift. Why has this been decided? Because everyone has a computer. However, let us put it like this: everyone has access to computing technology at some level. Whether you have a computer that is powerful enough to run the software properly is another matter, and that is the vital point. Other forms of software for the blind or hearing impaired also require a basic level of capacity to run the software, to allow the user to have the independence that has been denied by a disability plus their social background. That disability will have been identified throughout the education system, and in future will be identified earlier and in greater numbers, so the user will have a background knowledge that can prepare them to work independently. Why is this decision not coming to the fore? Why are we not doing something about it? If you deny students this technology, you are making the problem greater.
Having heard that I have a lot of time, I have now taken too much time. I leave the Government with one question: if we can provide a computer for roughly £300, and the software might cost us the same again, why are we not concentrating on that? We are providing non-medical support in terms of hours provided. In 1990, dyslexics probably needed someone to dictate their essays to, but they do not now.
The figures I have for that range between £50 and £65 an hour. They are offering 30 hours a week. How many properly equipped computers can you get for a person in their third year—who has, presumably, already been trained in how to use it properly and given a skill that they will need in later life to be able to function in most office environments? Why are we not looking at that as a structure and a way forward?
I finish by saying that when we say “complex”, a term mentioned in the statement, I always took that to refer to multiple needs, not severity. That language has already been challenged, but that led people into a spin. Unless the Government can start to address those questions in a way that the sector understands, they will get into more trouble here. There are savings to be made. We can modernise and bring the system up to date. Please, streamline it and make sure that people get the support that they need to function, not an idea taken from an imperfect understanding.
Baroness Uddin (Non-Afl)
My Lords, I begin by commending the noble Lord, Lord Addington, on his consistence and persistence in support of these matters, and apologise to him for not having made the list—I just missed the deadline, so I am very pleased that I am able to speak in the gap.
In the context of today’s debate, we must put individuals at the heart of reform. Indeed, the Government have themselves acknowledged the need to do better when it comes to disabled people. Only last March, legislation was passed to improve the co-ordination of services offered to those with special educational needs, via the Children and Families Act. Just two months later, the Care Act became law, seeking to personalise care and put recipients at the heart of the system within integrated care services.
The intention is noble; the reality is, too often, a disgrace. As with the reform of so many public services—to the NHS, to higher education, to the justice system—the Government have used much-needed public service reforms as an opportunity to withdraw funding entitlements to many who relied on them to live a life with dignity. In a growing number of instances, entitlements have been restricted to all but the most severe cases. Most recently, the Minister for Universities and Science announced what he described as the modernisation of the DSA. In this case, modernisation would appear to amount to the removal of allowances from all but those with “complex” learning difficulties— passing the buck to universities, whose assistance to students will be discretionary as long as they do not infringe the Equality Act.
I am not opposed to reform per se. Indeed, the fact that public expenditure on the DSA has risen in all but the past year suggests that there may be a case for reviewing the criteria for entitlement, but the hasty withdrawal of entitlement without consultation is dangerous, particularly when you are dealing with a category of people who already face hurdles to participating in education, employment and society as a whole.
Let us take those with autism spectrum disorder. According to government sources, more than half a million people in England have autism, but only 0.2% of undergraduates studying for their first degree are declared as autistic. Employment outcomes are almost as bad.
There is a suggestion that, henceforth, medical advice will be required to explain how a student’s disability will affect their ability to study on their chosen course. That risks becoming a classic case of clumsy guidance failing to take into account the spectrum of conditions and the nuances of humanity. Let us take the young man with autism who, even under the present system, was recently refused DSA on the ground that he had not provided recent medical evidence about how his condition would affect his chosen course. Despite providing copies of his original diagnosis, statement of special educational needs and individual education plan from his college, he was told that a medical report conducted after the age of 16 was required. Put aside the fact that that requirement would appear to run contrary to the 2014-15 guidance, which states that medical evidence need state only the nature of the disability and, ideally, explain its impact. As is the case with many disabilities, such as autism, there is no medical involvement following a diagnosis where the condition is developmental, not physical. Can the Minister clarify what forms of evidence will be required from individuals with autism when they come to apply for a disabled students allowance in September and who will undertake those applications? The cuts to DSA should not proceed until we are sure that they will not harm access to higher education and jobs for those thousands who have benefited and are likely to benefit.
Finally, in 1980, when my then five year-old was entering the special education system, I had the audacity to ask whether there was any special equipment which would help his learning disability. People were absolutely aghast that I would dare to ask such a question. Some of that experience remains for many parents. We are in an age when the medical and computer technologies are at the highest level and will get better. It just seems such a shame that we are not going to support all those who can benefit from them.
Baroness Jones of Whitchurch (Lab)
My Lords, I am very grateful to the noble Lord, Lord Addington, for tabling this Question for Short Debate and for raising a number of crucial issues about the lack of continuity as young disabled people progress through the education system and into the world of work. I am also grateful to him for prompting me to revisit some of the detailed work that we did on the Children and Families Bill and look again at its progress towards implementation. When I looked back at the Bill, I was reassured to see that it came out of our scrutiny process in much better shape, and with more clarity about rights and responsibilities, than when we started. In that case, it was a job well done. I agree with the noble Lord that if we get the implementation right, it will turn out to be a transformative Bill and make a big difference to the lives of many young people with disabilities and special educational needs for many years to come. The challenge for us at this stage is about implementation.
The theme quite rightly established in the Bill was the need to be proactive. There is the need to have joined-up provision and the need for agencies to talk to each other and take joint responsibility for services. This was encapsulated in the notion of the education, health and care plans. It would be interesting to have an update on the progress being made to establish these local joint mechanisms, which are needed to make the care plans a reality. Perhaps the Minister could update us about what is being put in place to monitor the rollout of the Act to ensure that it becomes a reality on the ground and, in particular, to look at what local authorities are doing to fulfil their obligations in this regard.
In the mean time, the noble Lord, Lord Addington, has identified some rather glaring gaps in our new model of information-sharing and joint working. It was interesting that in the initial response to the consultation on the code of practice, which we received a copy of and which was in the Library pack, the FE sector said that it was rather in the dark as to how the plans would affect it. I am not totally surprised about that because during the course of the Bill, I did not really get the sense that it was engaged in the debate or really understood what the implications for that sector would be. It is helpful that the code has now been redrafted to spell out the FE sector’s statutory duties more clearly. For example, there are the reciprocal duties to co-operate with local authorities on arrangements for all young people with SEN; to admit a young person if the institution is named in the education, health and care plan; and to provide the right support for students with SEN disabilities.
The list of types of support which should be provided and the access to funds are also spelt out. However, underpinning the code there is also an expectation that local authorities will provide top-up funding. It is clear that there is a potential pinch point for students caught in the middle of these funding negotiations. As all noble Lords will know, local authority funding is in a particular crisis at the moment. Can the Minister explain what rights young people have to be provided with that funding to ensure that they have the right facilities when they go into college and can make their college years a success?
The code also makes it clear that colleges should be involved in transition planning between school and college to ensure a successful transition into college life. However, underpinning that again, what guarantees do young people have that the assessments of their needs that were made during their school education will be carried automatically into their time at college? What is to stop an FE college asking for new assessments to be made—trying, if you like, to delay the inevitable or to put off its responsibilities? In addition, there is also all the extra bureaucracy and resources involved and, obviously, the extra upset that will be caused to young people, who feel that the original assessment that was made about them is now being challenged. Where, then, is that reassurance of continuity which was at the heart of the Act and can we be assured that that will follow through in the way the FE sector receives students?
Meanwhile, the noble Lord, Lord Addington, and the noble Baroness, Lady Uddin, quite rightly raised concerns around the changes to the disabled students’ allowance that were recently announced by the Universities Minister. That announcement goes completely against the spirit and intent of the Children and Families Act. By any measure, it is a blatant cost-cutting exercise because, as we know, it has been judged that it will result in potential cuts to DSA funding in the region of about 60%. One can see why it is attractive to the department at this stage. As a result, only those students with complex disabilities will receive support. Many students will lose access to vital equipment which helps with their day-to-day learning and will lose vital specialist support. I do not claim to understand completely all the technical challenges which the noble Lord raised this evening. They made sense when he was explaining it but I would not be able to repeat it all.
Lord Addington
If they made sense only when I was explaining them, I have failed.
Baroness Jones of Whitchurch
As I said, the noble Lord explained it very well and it made sense, but I obviously have a lot more to learn about the technical facilities that are out there and about how they can be embraced by people with disabilities. However, it is clear that unless the funding is there and the DSA takes account of those up-to-date technologies, we will have failed. The noble Lord made the point that students with dyslexia and dyspraxia, for example, are likely to be particularly badly affected. I also accept the point the noble Baroness raised about autism. Both of those areas are sometimes difficult to define.
One of the concerns about this is that students will undoubtedly be put off from applying to higher education, which of course used to be the case in the old days; they never went to higher education because they never felt that the support would be there. There is a danger that they will fall back on less appropriate post-school choices. The problem with that is that, if nothing else, it runs the risk of being even more expensive for the Government to support. We therefore have a challenge to ensure that every child gets the right to have the best education and the best outcomes that they will be able to succeed in.
Can the Minister explain what discussions took place between the Department of Education and BIS before the announcement was made? Does she accept that the cutbacks in DSA funding go against the whole principle of supportive and integrated progression in education for young people with SEN and disabilities? Are we sure that BIS understood all the good work that was done around the Children and Families Bill? Has it got the message and taken it on board in the way that it is beginning to review the DSA?
Finally, the support that young people receive from nought to 25 should mean a smooth transition into the world of work. We worked hard during the passage of the Children and Families Bill to put those mechanisms in place as well. Again, the noble Lord referred to better access to work placements and apprenticeships, on which we spent considerable time. However, since there are now worrying signs that Ministers in BIS have not bought into that agenda, can the Minister reassure us that that active liaison is taking place between the departments to make sure that, not just in the letter but in practice, funding and support will be made available to all young people so that they all have the best opportunities to make the best of their lives and to thrive and succeed at work? I look forward to her response.
Baroness Northover (LD)
My Lords, I start by thanking my noble friend Lord Addington for securing this important debate and for his, as ever, knowledgeable and passionate speech. I also thank the noble Baronesses, Lady Uddin and Lady Jones, for their contributions. I especially thank the noble Baroness, Lady Jones, for her kind words about the potentially transformative effect of the Children and Families Act, on which we both worked.
Our reforms for children and young people with SEN and disabilities are aimed to create a new system to support young people through school, further education and training and focus much more strongly on independent living and helping them to find paid employment. My noble friend Lord Addington is absolutely right to focus on that. The reforms are aimed to create a more streamlined and transparent system at school, which provides support tailored to individual needs and does not require endless reassessment—which noble Lords mentioned.
I am personally grateful to my noble friend Lord Addington, whose help with my own then teenage dyslexic son opened his eyes to what was possible through assistive technology. I have to say that I was a form of assistive technology, finding myself reading my son’s economics textbook to him. I would read a chunk; he explained it to me; and I trust that we both benefited—I certainly did. I did object that economists were taking for granted the way that people acted. I certainly identify with the noble Baroness, Lady Uddin, about the battles that one used to have—I hope, now, less so—to gain support for children with particular needs.
Lord Addington
I interrupt my noble friend merely to say that I had forgotten to declare my interests. I hope that my noble friend will forgive me if I do that now.
Baroness Northover
I am sure that those are taken as read.
I say to the noble Baroness, Lady Jones, that we agree that it is vital that education, health and care plans are based on a co-ordinated assessment process in which professionals from across agencies work closely together, so that families do not have to repeat their stories and support can be provided promptly. I hope that she will be reassured that the pathfinder programme has demonstrated strong progress and that the pathfinder champions are sharing what they have learnt about effective approaches in every region as all areas prepare for implementation of the reforms from 1 September. The noble Baroness is absolutely right: the key thing is how it is implemented, and we will keep a very close watch on that.
From year 9, annual reviews of education, health and care plans, EHC plans, must focus on preparing for adulthood, enabling that transition, setting out clear plans that enable young people to move into higher education and work. The draft code of practice also sets out the new legal duties of further education colleges, including how they identify SEN and provide support. We know that work can transform lives by giving people an income and, above all, a sense of purpose and value. It enables them to become as independent as possible, both economically and socially. For that reason, we have introduced supported internship and traineeship study programmes specifically designed to support young people into work.
I assure my noble friend Lord Addington that the Children and Families Act requires services to work together to support children and young people with disabilities. As I said, the pathfinder work is encouraging. The DWP’s access to work fund has been extended to support internships and traineeships, and its Disability Confident campaign encourages organisations to employ people with disabilities. More widely, the cross-government disability strategy, Fulfilling Potential, was developed jointly with people with disabilities so that they can better reflect what is important in their lives to enable them to live independently in accessible and inclusive communities.
During the passage of the Act, my noble friend Lord Addington raised important concerns about the availability of reasonable adjustments in apprenticeships. As a result, the skills funding statement now contains a clear reminder that the Equality Act requires training providers “to make reasonable adjustments”. The Act, which raises the bar on previous legislation by clearly setting out the rights and protections for groups risking discrimination, also applies to employers, requiring them to make reasonable adjustments for employees.
Encouraged by my noble friend, without actually poking people in the eye, the Government also made a commitment to support disabled apprentices who were unable to pass key skills in English and maths but completed all other aspects of their apprenticeship. These individuals can now take the relevant functional skills qualification and, if successful, can apply for their apprenticeship certificate. The National Institute of Adult Continuing Education has recently launched an online toolkit to help people with disabilities to access apprenticeships and to help employers gain access to skilled and dedicated workers.
Noble Lords have spoken about the need for young people in higher education to get the right support. Securing a place at university is a fantastic achievement for any young person, which improves their employment prospects. We are right to have high aspirations for young people with disabilities, as the noble Baroness, Lady Jones, made very clear. I assure my noble friends that, as the draft code of practice states, local authorities should plan a smooth transition to higher education before ceasing an EHC plan. Once a higher education institution place has been confirmed, the local authority must pass the EHC plan to the institution at the earliest opportunity.
My noble friend Lord Addington and the noble Baroness, Lady Jones, spoke about repeat assessments and transition. In the present system, a young person with a statement moving to college would need to have an entirely new and separate learning disability assessment, which carries none of the protections of a statement. As noble Lords know, that would change with our reforms and young people will be able to keep their EHC plan in college. Local authorities will be required to review an education, health and care plan at least annually. The year 9 review will look forward to the young person’s transition to adulthood, including further education, and each review thereafter will build on that. Our plan is that there will be much greater consistency and better transitions.
A college can ask for a reassessment but the local authority does not have to undertake one if one has been made in the past six months or it does not believe that it is necessary. I say to the noble Baroness, Lady Jones, that the local authority will set out what the colleges are expected to provide from their funds. Local authorities will top up funds for individual students who require them so that they get the support that they need. Decisions will be made on a case-by-case basis and we will keep a very close eye on how this is working.
Once a student with disabilities has joined a higher education institution, regardless of whether they previously had an EHC plan, they can seek support through the services provided by the higher education institution under its duties under the Equality Act, and through a DSA needs assessment. A comprehensive DSA needs report should include discussion with the student, the strategies that have been used in the past and the strategies that are being recommended for DSA funding. I assure my noble friend Lord Addington that although the student may provide evidence of the support that they received from their school, they are not required to as the needs of all people with disabilities can change, as he indicated, over time.
Disabled students’ allowances are being changed, as noble Lords have noted. Once a disabled student has joined an HEI, a range of support is available through the HEI’s duties to make reasonable adjustments under the Equality Act and DSAs. That will not change but the balance of support in future will. We must ensure that the HEIs fulfil their duties under the Equality Act, which, perhaps I may remind noble Lords, improved things for those with disabilities. We must make sure that all public institutions fulfil their responsibilities, which includes higher education institutions.
Baroness Northover (LD)
I would like to be able to answer but I am right up against time. If I have not answered adequately, I can write or we can discuss matters afterwards.
There are key changes proposed to the DSA. It will no longer be available to fund standard computers, but DSA funding will still be provided towards higher-cost computers required due to a disability. It is worth remembering that these days most students, if not all, will be buying their own computers. This is a change from when we were at university. The key thing here is to support students for whom a standard computer will not suffice, in the way that my noble friend Lord Addington indicated, and the difference in cost will be covered.
Where HEIs provide specialist accommodation for students with disabilities, that cost should not be passed on to the student. The DSA funding will no longer be available to these students because there should be no extra cost to the student.
Students with dyslexia will continue to be supported through HEIs’ reasonable adjustments and DSA. HEIs should consider how to support these students better to reduce reliance on DSA. HEIs should consider how they meet a variety of non-medical health needs—for example, note-taking and library support—to reduce reliance on DSA.
DSA will be available for more specialist support—for example, sign language interpreters—and we are consulting on the fine detail of the division of responsibilities. All institutions will now be expected to provide the same high level of support for students with disabilities. The detail of what support will be funded through DSA will be provided in guidance this autumn.
With regard to co-ordination between BIS and DSA, my honourable friend Matthew Hancock has a joint position between the two. However, as I say, it is surely right that all public institutions in the UK recognise their duties under the Equality Act, which raised the bar for how those with disabilities should be treated, and we need to ensure that they recognise that. My right honourable friend David Willetts is responding to a debate in the other place today on this very subject, and I know that he will mention the wide range of groups with which BIS has been in discussion, as it will be over the next few months before the guidance is issued.
The application process for DSA will remain the same. Students will continue to have a comprehensive DSA study needs assessment to explore the impact of their disability on their ability to access learning. That is the key thing.
In conclusion, the changes that we are making through the Children and Families Act, coupled with the practical measures that we are taking across government to improve support for young people with disabilities and those with SEN, should make a real difference to the life chances of some of our most vulnerable young people. We as a Government remain committed to removing barriers, thereby enabling people with disabilities to fulfil their potential and play a full role in society.
House of Lords
Sri Lanka
(9 years, 10 months ago)
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Lord Sheikh
To ask Her Majesty’s Government what assessment they have made of the current action to resolve the dispute between the government of Sri Lanka and the Tamil community.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)
My Lords, we consistently urge the Sri Lankan Government to make progress on reconciliation and a political settlement between communities. We note that the 2013 Northern Provincial Council elections established a new Chief Minister for the heavily populated Tamil region. The Sri Lankan Government must ensure that all provincial councils can carry out their roles effectively. We encourage Sri Lanka to engage with the UN internal investigation into alleged violations of international law as a contribution to reconciliation.
Lord Sheikh (Con)
My Lords, I thank my noble friend for that Answer. What is Her Majesty’s Government’s assessment of the positive actions taken by the Sri Lankan Government in implementing the recommendations of the Lessons Learnt and Reconciliation Commission, particularly in regard to demining, the resettlement and rehabilitation of Tamils, infrastructure development and steps taken to improve the education and health of people in Northern and Eastern Provinces? As Sri Lanka and the United Kingdom are founder members of the Commonwealth, will Her Majesty’s Government help in utilising the framework of the Commonwealth to establish a domestic truth and reconciliation commission to address the alleged human rights violations in the country?
Baroness Warsi
I thank my noble friend for his question. Of course, we have welcomed progress made, including on infrastructure development and demining, but we remain concerned that the Sri Lankan Government’s national plan of action to implement the recommendations only partially covered the full range of recommendations and that, in turn, action taken by the Sri Lankan Government only partially corresponds to some of those recommendations. We agree with the UN High Commissioner for Human Rights that the Sri Lankan Government have not established a credible independent domestic investigation into allegations of violations of international law on both sides of the military conflict, and that this is fundamentally a question of political will. This is despite the UK and others calling for such an investigation since 2009. As a result, the UN Human Rights Council has passed a resolution that establishes an international investigation, which we strongly support.
Lord Bach (Lab)
My Lords, the setting up of the United Nations investigative team is very good, if rather belated, news. However, there are reports that the Sri Lankan Government are refusing to co-operate with the investigation. Will the Minister comment on that? The recent deaths of three Sri Lankan Muslims and one Tamil at the hands of the Buddhist nationalist group Bodu Bala Sena is a worrying development. What representations are Her Majesty’s Government making to the Sri Lankan Government about this particular outrage?
Baroness Warsi
We have encouraged the Sri Lankan Government to co-operate with the UN human rights commissioner’s international investigation, and we have seen some of the statements that have come out of Sri Lanka which suggest that the position is otherwise. However, we believe that the UN’s independent investigation has a strong team. As the noble Lord will be aware, people such as Martti Ahtisaari, Silvia Cartwright and Asma Jahangir—the phenomenal human rights campaigner in Pakistan—have been appointed to this investigating committee. We hope that, despite the Sri Lankan Government’s not co-operating, the committee will produce a good and strong international investigation. As for the recent tensions, of course we are concerned about the actions of Bodu Bala Sena. Our representatives at the British High Commission in Sri Lanka met with the group last year to raise our concerns in relation to the anti-Muslim violence. But they have met also, in relation to other minorities, with the Sri Lankan Government.
Lord Hannay of Chiswick (CB)
Will the Minister, who has just brought the attention of the House to the very high-level names who have been put in charge of this inquiry, agree that our Government should make clear to the Sri Lankan Government that their refusal to deal with this inquiry is not acceptable; that the people who have now been appointed to it are very objective and very experienced people; and that we hope that they will reconsider their position? Is that point being made clear?
Baroness Warsi
We will continue to make that point throughout the investigation. It is in Sri Lanka’s interests to co-operate fully. The reason we find ourselves in this position is that the internal investigations did not do what they said they would do. This is an opportunity for Sri Lanka to truly meet its commitment to reconciliation.
Lord Wills (Lab)
My Lords, in justifying the Government’s attendance at the Commonwealth Heads of Government Meeting last November in Colombo, the noble Baroness said:
“We will deliver an incredibly tough message to the Sri Lankan Government that they need to make concrete progress on human rights, reconciliation and political settlement”.—[Official Report, 22/10/13; col. 888.]
In view of the lack of progress that has just been noted on all sides of the House, does the noble Baroness think that, with hindsight, an even tougher message might have been delivered if the Government had not turned up at that Commonwealth Heads of Government Meeting, and there might have been more progress?
Baroness Warsi
I have a lot of respect for the noble Lord, but I fundamentally disagree with everything he said. It was right for the Prime Minister to attend the Commonwealth Heads of Government Meeting. It was right to make those tough messages be heard in-country in Sri Lanka. It was right for the Prime Minister to visit regions in Sri Lanka and make his point. It was right that, because of that visit, we built the international momentum which resulted in the Human Rights Council resolution.
Baroness Brinton (LD)
My Lords, may I return to the violence in Aluthgama? I am very grateful for my noble friend’s earlier answer, but I wonder if there has been any progress on arrests for this particularly horrible violence—which resulted not just in three dead and 80 injured but in a mosque and virtually every property of Muslims in that town being torched. While it is good that President Rajapaksa has promised to rebuild damaged property with his support, I think that the community would much prefer to hear that the perpetrators have been caught and what the Government will do to prevent such violence in the future.
Baroness Warsi
I note what the noble Baroness says. The violence in Aluthgama and Beruwala was deeply concerning, and she is right: there were not only fatalities but a huge amount of further damage. Of course we welcome the Sri Lankan Government’s assurances that they will investigate the attacks and prosecute those responsible. I am not sure what the latest situation is, but if there is any up-to-date information, I will certainly write to her.
Lord Naseby (Con)
My Lords, I declare an interest as chairman of the All-Party Group on Sri Lanka. Does my noble friend recognise that the imposition by the United Nations of an inquiry on a sovereign state—an imposition engineered by the US and supported by the UK—would not be likely to be well received in any country, particularly a country which has a democratically elected Government across all the ethnic groups? The vast majority of Sri Lankans supported the defeat of the Tamil Tigers. I urge my noble friend to think again and to encourage her Government to push the Sri Lankans on a one-to-one basis and to set aside a forced inquiry from the UN.
Baroness Warsi
I hear what my noble friend says, but this conflict ended in May 2009, which is more than five years ago. The internal inquiry reported in March 2011. The Sri Lankans have had enough time to deal with this matter if they had showed the political will internally to do so. They have not dealt with it, which is why we have taken this matter to the international forum.
Benefit Cap
(9 years, 10 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
Jobcentre Plus worked with potentially capped claimants from April 2012. By November the next year, 19,000 claimants in potentially capped and capped households moved into work, although we do not know to what extent those were additional moves or normal claimant churn. Since the cap was live, more than 5,700 households—around 40% of those who were capped but are no longer capped—are now exempt from the cap due to moving into work and claiming working tax credits.
Lord Fink (Con)
My Lords, I thank my noble friend the Minister for that comprehensive Answer, but will he confirm—
Lord Freud
There are two ways in which the cap works to incentivise people to go to work. One is that people who qualify for working tax credit are exempt from it, but there is another way, in that anyone doing even small amounts of work will be capped by a lesser amount because it serves to reduce the level of the cap and effectively allows them to keep their earnings. Clearly, one always has to be very careful to distinguish causation from correlation, but in a survey conducted by MORI a quarter of capped claimants said that they had looked for work because of the cap and 45% said that they would look for work in the next 12 months because of it.
Lord German (LD)
My Lords, the dignity of work is probably the best way in which people can escape from the cap. However, the figures to which my noble friend has just referred indicate only a trend in the direction of travel. From the figures which the DWP is now collecting, will the Minister have formed a view by the end of this coming recess as to the whole period? Will he know many people have moved into work and whether the trend that we have seen in the initial figures has been carried through, so that we can say that this initiative has really borne fruit into work?
Lord Freud
The cap is doing quite a lot of things. It has an influence on the people who are capped but it also sends out a message. The total number of people who have been capped at one time or another stands at just over 42,000; the current number is just over 27,000. A substantial proportion of those who have moved out of the cap, which they might do for various reasons, have gone into work and taken working tax credit. Others will have taken advantage of the effect that I have just referred to, whereby doing even small amounts of work reduces their cap.
Lord Foulkes of Cumnock (Lab)
Would the Minister contemplate for a while how people struggling to survive on benefits will view an aggressive Question being asked by someone who donated £2.62 million to the Conservative Party?
Lord Freud
Well, my Lords, my job at the Dispatch Box is to answer questions from all Peers. I hope that I have established a track record in answering questions with as much properly sourced information as I possibly can.
Baroness Wheatcroft (Con)
Very often, those who are out of work are suffering from other problems as well, often drink or drug addiction or a very poor education. Can the Minister say what is being done to help with those issues?
Lord Freud
One of the things that we are doing is reforming the whole of the welfare system in order to find out the barriers to going to work that people have and helping to address them. In the particular case of the introduction of the benefit cap, we had an enormous initiative to work with those individuals through Jobcentre Plus. We wrote to them, talked to them and provided intensive employment support. We worked with local authorities to help them with budgeting, housing and childcare. In this particular case we worked hard, and that seems to be an effective set of interventions.
Baroness Sherlock (Lab)
My Lords, how much has been spent on discretionary housing payments to those affected by the benefit cap and what impact has that had on the planned savings from the policy? So, for 2013-14, how much was spent on discretionary payments, to what extent has that reduced the savings for central government and what impact has it had on local government?
Lord Freud
The department pays out a lump sum of discretionary housing payments that local authorities apply to the various policies that they are tackling. There is a specific amount, £110 million, that goes to this particular policy although actually, when you look at the analysis of how local authorities attribute the spend, it is rather less than the amount attributed to the benefit cap. The total AME savings set against that are £225 million. As I said, the importance of this policy is that it sends out a message about the direction of travel, which is that the way to get people out of poverty so that they have proper support is to get them into work.
Baroness Farrington of Ribbleton (Lab)
My Lords, the Minister complimented himself on always trying to answer the question. Of those people that he has referred to, how many of them have gone into full-time employment on a living wage? Will the Minister, who has refused to consider studying those people who go to food banks to survive, have a meeting with the right reverend Prelates, who know more than he does because of their involvement in food banks, about the very people that he is not counting?
Lord Freud
My Lords, we do not collect information on the living wage within the working tax credits. We have a policy in universal credit to ensure that people have enough to live on however much they work, which is a transformation. I am pleased to say that I am in regular dialogue with the Archbishop on this matter, particularly with regard to the initiative that he is running, and which we are talking to him about, of supporting the credit union movement.
Syria: Sexual Violence
(9 years, 10 months ago)
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Baroness Jenkin of Kennington
To ask Her Majesty’s Government what is their assessment of the alleged sexual violence crimes committed against Syrian civilians in Syria.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)
My Lords, as reported by the UN commission of inquiry and others, rape, sexual violence and sexual torture have been carried out by regime forces against men, women and children as part of a widespread and systematic attack on the civilian population. We are deeply and increasingly concerned about sexual exploitation of displaced people. The UK is committed to supporting victims of these crimes, as well as supporting efforts to document sexual violence and other atrocities.
Baroness Jenkin of Kennington (Con)
My Lords, I thank my noble friend for the Answer. Would she join me in congratulating the Foreign Office and particularly the Foreign Secretary—so ably assisted by Angelina Jolie—on the success of the recent global summit on sexual violence in conflict, which has done so much to raise the profile of these dreadful crimes? Would she also confirm that the Foreign Office, DfID and the international community will do what they can to collect evidence and testimony from the surviving victims of sexual violence in the conflict so that, when this terrible war finally ends, the perpetrators can be prosecuted and brought to justice?
Baroness Warsi
I will join her—and I am sure the whole House will join me—in congratulating the Foreign Secretary on an incredibly successful summit on ending sexual violence in conflict. Those taking part came from 155 countries and included 1,700 delegates, 79 Ministers, victims’ groups, NGOs and international organisations. On the documentation and collection of evidence of sexual violence, my noble friend will be pleased to note that some of the projects we are funding in Syria are around the documentation and collection of evidence, so that those who commit these crimes will one day be brought to justice.
Lord Sharkey (LD)
My Lords, all crimes of sexual violence in conflict need to be within reach of international law, but the recent global summit that has just been referred to notes that the exercise of universal jurisdiction for crimes currently applies only to international conflicts. What steps can the Government take to extend this universal jurisdiction to the type of conflict we now see in Syria, Iraq and far too many other places?
Baroness Warsi
My noble friend makes an important point and I will certainly take it back. He will accept that this is a journey; these challenges have been with us for many decades, if not longer. One of the main purposes of the summit was to agree an international protocol on the documentation of sexual violence in conflict, to build political momentum, to fund more groups dealing with survivors and to encourage individual countries to develop country plans so they can take responsibility for these crimes within their own states. However, I will certainly take back the further idea given by my noble friend.
Baroness Uddin (Non-Afl)
My Lords, what specific support is being provided by registered NGOs currently working in Syria? The Minister mentioned some general points about the recent summit. Would she agree that it was regrettable to just highlight the problem of sexual violence in conflict and not also put forward ideas about how to address and support the women who have been raped before, including the 300,000 women—I spoke about them on a previous occasion—who were raped in Bangladesh? When will they get justice?
Baroness Warsi
I can give the noble Baroness details of the specific projects she asks about. Two projects are being funded to improve the capacity to document crimes of sexual violence. We are also giving cash assistance to help female refugees in Jordan and providing livelihood support to women so they can earn for themselves and not be placed in vulnerable situations. We are providing reproductive health services and financial support to vulnerable Syrian women who are thought to be at risk of being coerced into marriage, to help reduce their risk of exploitation. We are taking a whole series of measures, but I go back to the point that the summit was also about giving survivors an opportunity to be heard and to deal with the culture of silence that has existed around the issue. That in itself was incredibly important. A range of work has been developed from the summit around making sure we have the action in place to stop this heinous crime.
The Lord Bishop of Oxford
My Lords, given that discussion of sexual violence is always a very sensitive subject in any culture, will the Minister give assurance that the Preventing Sexual Violence Initiative team that is working in Syria will draw in responsible, enlightened religious leaders to combat the stigma that is so often associated with these awful crimes? This can prevent the kind of recriminations and rejection by communities and families that can result from them.
Baroness Warsi
The right reverend Prelate makes an incredibly important point. Faith as part of the solution to dealing with sexual violence was an important element of the summit, and we hosted two very successful fringe events. One involved a coalition mainly of church leaders, called We Will Speak Out. The other was at ministerial level where we hosted Sheikh Bin Bayyah, the Archbishop of Canterbury and the Archbishop of Westminster, Cardinal Vincent Nichols, and discussed the way in which we can get faith communities to be the first point of support in both providing protection and changing the culture that perpetuates the culture of impunity.
Baroness Kinnock of Holyhead (Lab)
My Lords, what was the Government’s response to the call from the United Nations for a further 100,000 resettlement places for the victims of the terrible turmoil she described in Syria? When the UK has promised to prioritise help for survivors of torture and victims of violence, is the Minister satisfied with the fact that as of 24 June only 50 refugees have arrived in the UK?
Baroness Warsi
My Lords, the noble Baroness makes an incredibly important point. The instinct of any of us when we hear these individuals’ stories is to provide a place of shelter, but I think the noble Baroness will acknowledge that since 6.4 million people have been internally displaced and 2.8 million are now refugees in neighbouring countries, there is no way that we could resettle all of them. We must make sure that we work with the most vulnerable and provide a settlement opportunity for them. First and foremost, politicians must continue to work for a political solution, because it cannot be that these people remain displaced and it must be that one day they are allowed to return to their own homes.
European Commission: Portfolios
(9 years, 10 months ago)
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Baroness Morgan of Ely
To ask Her Majesty’s Government, following the nomination of Jean-Claude Juncker as President of the European Commission, which portfolio they are seeking to secure for their nominee as Commissioner.
The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi)
My Lords, Commission portfolios will be allocated by the Commission President designate to those persons nominated by member states and agreed by common accord in the Council. This will happen after the confirmation of the Commission President designate by the European Parliament. The Government are interested in an economic portfolio.
Baroness Morgan of Ely (Lab)
My Lords, after the Prime Minister’s abject failure in stopping Juncker becoming the European Commission President, will the Minister explain whether the Prime Minister has a better negotiating strategy in mind to secure a decent and substantial portfolio for the British nominee as commissioner? Will the Minister give an assurance that both Houses of Parliament will have the opportunity to question the nominee before the European Parliament has an opportunity to do so?
Baroness Warsi
I think the noble Baroness will have to accept that the UK took a principled stance on an incredibly important matter. It was the right of the European Council to nominate the President of the Commission. All three main political parties, including her party and, indeed, its leadership, supported the Prime Minister’s position, and it was right that the Prime Minister stood up for the principle of the European Council retaining its treaty-given role.
In relation to appearances before the UK Parliament, of course parliamentary committees are free to invite whomsoever they choose to give evidence before them, including the UK Commissioner and other Commissioners. It would be for them to respond to those invitations.
Baroness Falkner of Margravine (LD)
Given what my noble friend said about the importance of an economic portfolio, does she agree that the important thing for the Prime Minister to do is to find someone who is a heavy-weight, has good judgment and substance, irrespective of whether he or she is from Parliament or from outside of Parliament, and that he must particularly put aside considerations about by-elections and other partisan matters because, if Britain needs a strong batter for the internal market or trade, this is the time that it needs it?
Baroness Warsi
Where there are so many issues at stake, it is important that we nominate a strong candidate. My noble friend will be delighted to know that the Prime Minister has a strong line-up of strong candidates.
Lord Kinnock (Lab)
Is the Minister aware that, while a member state Government may certainly express enthusiasm for the appointment of one their nationals to a particular Commission post, the reality is that each Commissioner has a treaty obligation to,
“solemnly undertake”—
Lord Kinnock
Yes, it is because I want to be accurate, which may be a virtue not universal on the other side of the House. The commissioner has a treaty obligation to,
“solemnly undertake … in the performance of my tasks, neither to seek nor to take instructions from any Government or from any other institution, body, office or entity … I formally note the undertaking of each Member State to respect this principle and not to seek to influence Members of the Commission in the performance of their tasks”.
Since it is clear that no partisan advantage can be gained or allowed from a particular Commission portfolio, will the Government stop trying to give the impression to the British public that there is such a means available to Her Majesty’s Government?
Baroness Warsi
The noble Lord gives important advice, and I am sure that he gave similar advice to Prime Ministers when Labour was in power, when it nominated Commissioners and made sure that they did not have any form of partisan interest when they went to the European Union. He can rest assured that whichever Commissioner goes on behalf of the coalition Government will act in the same incredibly impeccable manner that Commissioners have in the past.
Lord Tebbit (Con)
My Lords, will my noble friend remind the House of the oath which is taken by a privy counsellor, that he or she will always uphold the interests of Her Majesty against all foreign interests? Will she not agree that, unfortunately, it would be quite wrong to appoint a privy counsellor to a job where he would have to swear the exact opposite, as the noble Lord, Lord Kinnock, has just described?
Baroness Warsi
Because I am a privy counsellor and have sworn that oath, I have to be incredibly careful as to how I answer that question. Fundamentally, it is because of the great expertise in this House that I love being here.
Lord Low of Dalston (CB)
My Lords, can the noble Baroness say whether she thinks it would be useful for Prime Ministers to receive training in recruitment, diplomacy and negotiation skills?
Baroness Warsi
I understand the point that the noble Lord is trying to make. However, we all have to accept that the Prime Minister stood up for UK interests and was responsive to what we all heard—or should have heard—at the recent European elections, which is that the people of the European Union, across the European Union, want change.
Lord Clinton-Davis (Lab)
Would it not be appropriate for the Prime Minister to be rather less abrasive and rather more constructive as regards the EU institutions? Insults get us nowhere at all, particularly when significant jobs are being sought for incumbent or future Commissioners. Is that not the most important issue facing the Government at the moment?
Baroness Warsi
The Prime Minister has a good record of delivering for the United Kingdom, whether on the Budget, on Ukraine or on red tape. We can be confident that he is the right Prime Minister, delivering for Britain at the right time.
Banking Act 2009 (Banking Group Companies) Order 2014
(9 years, 10 months ago)
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Lord Newby
That the draft orders and regulations laid before the House on 5 and 9 June be approved.
Relevant document: 2nd Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.
Health Care and Associated Professions (Indemnity Arrangements) Order 2014
Baroness Jolly
That the draft order laid before the House on 6 May be approved.
Relevant document: 1st Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.
Anonymous Registration (Northern Ireland) (No. 2) Order 2014
(9 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Randerson
That the draft orders and regulations laid before the House on 4 June be approved.
Relevant document: 2nd Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on Monday 30 June.
Serious Crime Bill [HL]
(9 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Smith of Basildon (Lab)
I shall also speak to Clause 2 stand part and Amendment 8, which says that there should be a consultation on whether the court can require full disclosure from a suspect of his or her assets and liabilities. Amendment 13, to Clause 11, provides the court with the power when making a restraint order to require the defendant to provide specific information, particularly concerning his and any third-party interests in property. Amendment 14, also to Clause 11, has a similar intent.
As I said at Second Reading, we support many of the measures in the Bill because they address the issues that we agree should be addressed. The role of this Committee is now to examine whether the proposals brought forward in the Bill fully address the problems that have arisen and become evident, or if more can be done to tackle the specific problem of improving enforcement. As I said then, nothing brings the law into disrepute more than poor enforcement of a law. I know that the Minister agrees with me on that point.
It is relevant here to say something about the background and to set the clauses and amendments in context. In 2002, the then Labour Government introduced the Proceeds of Crime Act with new powers for the police, prosecutors and courts to freeze and confiscate the assets of criminals. It was innovative and ground-breaking, providing a wide range of civil and criminal recovery methods, but the use of the legislation and the changes over time have revealed its limitations. Improvements can be made.
The National Audit Office has issued a highly critical report on confiscation orders. It found that only 26p in every £100 of criminal profits was ever confiscated and that the total amount of outstanding debt on confiscation orders is £1.46 billion, a shocking level. In addition, the cost of recovering these ill gotten gains is very high. The estimate from the National Audit Office is that investigation, prosecution and enforcement costs 76p in every pound collected. The value to the Government is just £31 million and just 2% of offenders paid in full. The amount collected and the number of confiscation orders and restraint orders has fallen in recent years, as identified by the National Audit Office report. There is now a seriously worrying trend with the number of orders falling and the outstanding amount of debt increasing. It is clear that some criminals are running rings around the system and making a mockery of what we want to see, which is that crime does not pay.
Another factor in addressing the issue is the age of austerity, although I dislike the phrase. Police and prosecutors are finding it tough. They are having difficulties with resources and need to make greater use of the proceeds of crime as a source of income. We need to examine the reasons why the system has become so ineffective. The reasons are varied—there is no one particular reason—but it is clear that the evidential threshold for freezing a suspect’s assets is very high; criminals often move their money overseas; confiscation orders can be an afterthought; and the penalties for non-payments are not enough of a deterrent. It is also clear that there is a lack of leadership and a lack of strong incentives for the agencies involved in applying for and enforcing confiscation orders.
Are the measures proposed adequate and the best we can do to address this problem or can we be more effective? We have tabled a number of amendments to address these issues. The reason for tabling clause stand part debates—as the Minister knows, since I discussed this with him—is to allow for a slightly wider debate. We consider that there is room for improvement in the Bill and the Minister may be able to provide the reassurances we seek. This first group of amendments regards third-party claims. I stress that they are all probing amendments. As I say, although we have tabled clause stand part debates, we are clearly not opposed to Clauses 1 and 2. If the Bill goes far enough on third-party claims, will the Government go far enough to ensure early disclosure? There are three further amendments on the same theme, but slightly different. I hope that through these amendments we can probe the issue in debate and get a response from the Minister on the substance and ideas, rather than on the specific wording. We are not wedded to any particular form of words—it is the issues that we would like to discuss further.
Lord Phillips of Sudbury (LD)
My Lords, may I ask the noble Baroness whether subsection (2) of the proposed new clause will be adequate to force the person concerned to reveal assets owned by a company that they own? Today, the classic way of avoiding liabilities is to have a series of companies that own each other, and I am anxious in case the wording would not require the person who is required to give information to provide information on all the companies in a string of corporations.
Baroness Smith of Basildon
I am not sure which amendment the noble Lord is referring to.
Lord Phillips of Sudbury
I beg the noble Baroness’s pardon. I am referring to Amendment 8, which would insert the proposed new clause entitled, “Restraint order: determination of extent of defendant’s property”. I mentioned in particular proposed new subsection (2), which would require the suspect to disclose,
“the full extent and location of his or her assets and liabilities”.
I am concerned that that would require someone to disclose only the fact that they have, for example, a company in the Netherlands Antilles, but not the fact that that company is owned by another company, and so on.
Baroness Smith of Basildon
My understanding is that it would require that information, because it asks for,
“his or her assets and liabilities”.
However, if there is any deficiency in the wording I would be happy to see an amendment tabled to make that point even clearer.
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con)
My Lords, I was expecting that we might have a longer debate on this issue—but it is good to see that there is much agreement about the need to strengthen the effectiveness of the Proceeds of Crime Act. It is good that the noble Baroness, Lady Smith of Basildon, shares the Government’s views on that necessity, and I welcome her speech.
As we have heard, Clauses 1 and 2, and Amendments 8, 13 and 14, all deal with the determination by a court of the extent of a defendant’s interest in named property. By extension, the provisions also deal with any third-party interests in the relevant property. The Serious and Organised Crime Strategy sets out a number of proposals to strengthen the Proceeds of Crime Act by, among other things, ensuring that criminal assets cannot be hidden with spouses, associates or other third parties.
Confiscation orders are the principal method used by law enforcement agencies for the recovery of the proceeds of crime. It is open to the defendant to pay off the order from whatever assets he or she has available. A confiscation order specifies the amount to be paid; it does not itemise particular assets that are to be forfeited. Third parties making claims on assets that are part of the available amount can delay satisfaction of confiscation orders. These claims also reduce the amount of money available for recovery, as the noble Baroness said. Of course, some of these claims may be perfectly legitimate but others will be spurious, designed simply to frustrate the confiscation process.
To tackle such abuses, which were clearly described by the noble Baroness, Lady Smith, and to help speed up the confiscation process, Clause 1 confers on the court a power to make a determination as to the extent of the defendant’s interest in particular property at the confiscation hearing. Currently, any claims on property are dealt with at the enforcement stage, which can complicate, lengthen and impede the confiscation process. Clause 2 augments the provisions in Clause 1 by introducing a requirement, as part of the confiscation process, for the prosecutor and defendant to detail any known third-party interest in property associated with the defendant in their statement of information and provision of information respectively.
Amendments 8, 13 and 14, tabled by the noble Baroness, seek to bring the determination of third-party interests forward in time even further to the commencement of a criminal investigation or to the point at which a restraint order is made. The amendments also seek to impose on the defendant the obligation to disclose the extent and location of their assets and any third-party interests in those assets. Under Amendment 8, a failure fully to comply would be a criminal offence.
To protect legitimate third-party interests, the provisions in the Bill afford third parties who have, or may have, an interest in the property the right to make representations to the court about the extent of their interest. The right to make representations also extends to the defendant. This will allow the court to consider the evidence presented, assess its credibility and come to a decision.
There are currently no express provisions for the court to deal with any third-party interests in any of the property that the court takes into account when determining the amount of a confiscation order. The legislation does, however, make provision for third parties to make representations where they have been affected by a restraint order. Third parties also have the right to make representations when an enforcement receiver is appointed by the court. Enabling a court to make a determination on a defendant’s interest in property at the earlier confiscation stage will strengthen the operation of the asset recovery process by closing loopholes in the Act that allow third parties to delay the confiscation process.
We do not consider that it is appropriate to bring the determination of third-party interests back to the restraint stage or, indeed, earlier, as is proposed in the noble Baroness’s amendments. Not all defendants will be made subject to a restraint order. For example, where a defendant owns only a house in the UK, it may not be cost-effective to apply for a restraint order when it can take time to sell a house. The relevant law enforcement agency would be made aware of any attempt to sell the property without the need for a restraint order.
Moreover, not all restraint orders lead to confiscation orders. If the subject of a restraint order is not convicted, the restraint order will be discharged. In such cases, it would be a wasteful use of limited judicial and prosecutorial resources to require the court to make a determination as to third-party interests in restrained property. It is for these reasons that the Bill provides for third-party claims to be considered at the confiscation hearing stage.
None the less, third parties may have an interest in restrained assets, and in such cases it would be appropriate for the court to be able to assess such claims—for example, if a third party contests a restraint order on the grounds that it is freezing property wholly owned by that person rather than by the defendant. Therefore, on the face of it Amendment 13 might be beneficial, in that it would confer a power for the court to order the defendant to provide information at any time under a restraint order.
Specifically, the court would be able to require the defendant to provide details of any third-party interests in property. However, this power is already available to the court under the existing restraint order provisions. The court can make any order it believes is appropriate to ensure that a restraint order is effective. This would include a power to order the defendant to provide information, including information concerning his or her and any third-party interest in property. It can be done at restraint order stage. Where a restraint order is not in place, a defendant can be made subject to the provisions of a disclosure order under the investigation powers that are in Part 8 of POCA. Such an order can be made at the start of a confiscation investigation and compel a defendant to answer questions or disclose information specified in the notice.
Baroness Smith of Basildon
My Lords, I am grateful to the Minister for his explanation. However, I will also say that I am disappointed. I have sat in his place, albeit in the other place, and I know that he will have a folder that contains my amendments with bold print at the bottom that says “Resist”. We have all been there. However I had hoped that with this Bill, where there is such a large amount of agreement between us on the objectives that we seek, there might be a little chink that would allow the Minister to open the door a little and say that this is something that we can look at and discuss. These amendments are not proposed in order to oppose what the Minister has said, as I have made clear. I do not doubt that the proposals before us in the Bill are better than the current situation; they improve on it. But are they the best that we can do?
I will withdraw my amendments today, but I ask the Minister to reflect further. His impact assessment refers to the delay in the process of identifying third-party claims as one of the reasons that some criminals are able to maximise, shall we say, the assets that they can hold onto. I hope that between now and Report the Minister and his officials will reflect further on the points that I have made today and understand why I proposed them, which was merely and only to seek to do things, not just better, but as best we can.
Baroness Hamwee (LD)
My Lords, I am opposing the Question that this clause stand part of the Bill simply to probe. I hope that nothing I say will take the Minister by surprise. I would like to use this opportunity to thank him and his officials for the factsheets that we have had and, in particular, for the Keeling schedules. I discovered that in my pile of copies of statutes, I had a copy of the Proceeds of Crime Act 2002. I then rapidly discovered how out of date that print was, so the material that we have been sent is very useful indeed.
This debate is closely tied to the previous one—still on third parties’ interests. Clause 4 is about receivers, and proposes an addition to the Proceeds of Crime Act involving proposed new Section 10A of that Act, which is inserted by Clause 1 on determining the extent of an interest in property. Essentially, the purpose of this stand part debate is to ask who deals with what, and when. How would all this operate? Who determines whether and when there has been no,
“reasonable opportunity to make representations”,
or whether there would be,
“a serious risk of injustice”?
I am of course quoting from proposed new Section 51(8B) —whereas proposed new Section 10A(1) in Clause 1 provides that the court, not the receiver, determines the extend of a defendant’s interest,
“if it thinks it appropriate to do so”.
My request, therefore, to the Minister is simply for him to explain the procedure.
Lord Taylor of Holbeach
My Lords, it was kind of my noble friend Lady Hamwee to thank those who are supporting me at official level in the Bill; I am supported by a very fine team, and I am grateful. I am also grateful for the fact that a number of noble Lords have taken time to talk to me about the Bill. That has helped us all to get an understanding of a complex measure. Those Keeling measures are needed in order to have the faintest idea about what is going on. Noble Lords will therefore understand the complexity of the matter and why the excellence of my officials is important to me.
Clause 4 deals with the circumstances in which an individual affected by a determination of interest may make representations to the court appointing an enforcement receiver. A court can confer certain powers on an enforcement receiver, including the power to realise property. This power is accompanied by a requirement to allow persons with an interest in the property a reasonable opportunity to make representations to the court.
As we discussed in the previous debate, the basic principle is that an appeal against a Section 10A determination as to the extent of the defendant’s interest in a property will be permitted only where the person was not given an opportunity to make representation to the judge who made the determination, or there is a serious risk of injustice. In cases where there is no receiver, the Court of Appeal will hear the appeal in the normal way. In cases where the court appoints a receiver, however, it is not bound by the determination and can hear representations. It is in effect hearing an appeal.
As interested third parties will generally have had an opportunity to make representations to the court prior to it making a determination of interest in property, the changes made by Clause 4 limit to certain circumstances the right of such parties to make further representations to the court appointing the receiver. As I have explained, it is not a right of appeal at large and does not allow representations to be made that are inconsistent with a determination, except under the two circumstances I described: first, when the affected party was not given a reasonable opportunity to make representations to the Crown Court before it made its determination; and, secondly, where the court considers that the determination would result in a serious risk of injustice to the person. These two circumstances mirror those in Clause 3, which set out the grounds under which the Court of Appeal may hear an appeal against a Section 10A determination.
So that we are in no doubt as to what it means, the “serious risk of injustice” will include an instance where an innocent third party with no links to criminality has an interest in a house that is to be sold to satisfy a confiscation order against a defendant. The innocent third party may have been out of the country when the determination was made and, consequently, had not received notification of the hearing. By contrast, it would not include instances where there has been an inconvenience to a third party—for example, if they had to move out of rented accommodation that was to be sold to satisfy a confiscation order. A serious injustice is not anticipated to be such a rare instance that it would be considered to be an exceptional circumstance. It will be a matter for judicial discretion, based on the facts of the individual case.
The clause enables an interested third party to make representations where their interest in the property came to light only after the Crown Court had made its original determination. Subject to the court’s consideration of any such representations, and to the outcome of any appeal, a determination made by the court is binding on the receiver. As I have said, in cases where there is no receiver appointed, any appeal will be dealt with by the Court of Appeal. This represents an equitable balance between the effective enforcement of confiscation orders and the important rights of third parties. On that basis, I beg to move that Clause 4 stand part of the Bill.
Baroness Hamwee
My Lords, that is very helpful. I commented to my noble friend when we discussed Part 1 that flow-charts might be quite useful. As he has described the sequence of events, it occurs to me that flow charts or some sort of fairly straightforward step-by-step explanation would be particularly helpful to third parties who get caught up in these proceedings. A defendant will be likely to have legal representation and advisers who can assist with what happens at what stage. A third party may suddenly find that he or she is affected and they ought to be able to find out what steps are available to make representations and how they should be made, without necessarily having to go to the expense of instructing lawyers themselves.
The right thing to do would be to make this user-friendly to people, about whom we should not assume any degree of guilt or their being reprehensible at all. I just use this opportunity to air that thought and of course I am not going to resist Clause 4.
Baroness Hamwee
Baroness Hamwee
My Lords, the first amendment is an amendment to Clause 5, which will introduce a new Section 11 to POCA. The proposed new Section 11(8) provides for the prosecutor to have an opportunity to make representations regarding the time for payment. Clearly, the defendant must have an opportunity as well. I tabled the amendment simply to ask my noble friend whether he can explain when that opportunity would be, and whether he can say whether proposed new Section 11(8) concerns the prosecutor’s response to the defendant’s representations, which are covered elsewhere—in existing legislation if not in the Bill. I beg to move.
Baroness Williams of Trafford (Con)
My Lords, Clause 5 includes provisions designed to minimise delays in the confiscation process. This is achieved by amending Section 11 of POCA to make it crystal clear that the full amount that is ordered to be paid by the court must be paid on the day on which the order is made, unless the court is satisfied that the defendant is unable to do so, for example, because they need time to realise their property.
The maximum additional time allowed for a defendant to pay their confiscation orders has been reduced from 12 months to six. There will also be a further restriction on the length of an extension of the time to pay limiting it to more than is necessary, for example, to realise funds from a specific asset.
My noble friend has indicated that this amendment is designed to tease out whether the defendant has a right to make representations to the court about the time for payment. She has rightly pointed out the fact that the proposed new Section 11(8) expressly confers on the prosecutor the right to make representations, but no such express right is conferred on the defendant.
I can assure my noble friend that the defendant will indeed be able to make representations to the court. However, in view of the way in which the process will operate, it is not necessary to provide for this in the legislation. As I have explained, the default position is that a confiscation order will be payable on the day that it is made. This is the current position. We do not believe that it is impractical. Certainly, for lower value orders, there is no reason why the defendant cannot visit the fines officer and discharge the confiscation order before leaving the court.
The court will not be expected to allow additional time for payment on its own motion. In practice, the court will only be in the position to consider making an order under proposed new Section 11(2) of POCA to extend the time given to the defendant to pay their order if the defendant has made representations to the effect that they need more time to pay their order or part of it. This will be done as part of the confiscation hearing.
Similarly, under proposed new Section 11(4) of POCA, it will be for the defendant to make an application to the court to extend the period allowed for payment. It is implicit in making such an application that the defendant will set out his or her arguments for being afforded more time to pay the confiscation order. New Section 11(8) is intended to ensure that the prosecutor has the right to respond to the case made by the defendant. Having heard the explanation, I trust that my noble friend will agree that the amendment is unnecessary.
Baroness Hamwee
My Lords, the noble Baroness will know that I was concerned about the very tight provisions of new Section 11. She has explained that the defendant will have an opportunity to make representations at the time. That is reassuring, because it is almost never possible to realise an asset on the day that an order is made and it is often not even possible to transfer money immediately. What she has said about the processes is helpful and I am grateful to her for her explanation of proposed new Section 11(8). I beg leave to withdraw the amendment.
Lord Rosser
“(4A) In considering whether to make a compliance order the court must, in particular, consider whether any restriction or prohibition on the selling of property subject to the confiscation order and located overseas ought to be imposed for the purpose mentioned in subsection (2).
(4B) The court may attach penalties to a failure to comply with provisions made pursuant to subsection (4A).”
Lord Rosser (Lab)
The three amendments in this group are concerned with recovering money from overseas or in response to such requests from overseas jurisdictions. Many investigations into stolen assets parked in this country do not get off the ground because the Home Office routinely fails to respond, or is unable to respond, to requests for help from other countries. The Home Office has shown in Parliamentary Answers that, despite UK courts freezing more than £200 million at the request of overseas jurisdictions, not a single penny of this has been repatriated to the country asking for the money. Since 2010, it seems that only two bilateral agreements have been signed with overseas jurisdictions to ensure co-operation on mutual legal assistance.
Last year, the former head of the UK financial intelligence unit—part of the National Crime Agency—indicated that when an investigation was initiated from the victim country, and moneys were suspected to be in the UK, the request went out through all the proper channels but there was no great keenness to comply, as there was a mindset that we could just be giving ourselves a headache. Assuming that is a fair analysis, such an approach does not help foster greater reciprocity at international level and cannot help us in securing co-operation when we want it from overseas jurisdictions. The Minister may well contest this analysis, since it suggests there are somewhat different reasons for the problem from those given in the Government’s impact assessment.
It would be helpful if the Minister could provide information on the number of asset recovery requests received from foreign authorities over the past three years, how many have been referred to investigative bodies and how many cases are pending. The World Bank estimates that, each year, developing nations lose between $20 billion and $40 billion through corruption. Between 1994 and 2009 only $5 billion of stolen assets were recovered globally—which is apparently less than 2% of the lowest estimate of the amount stolen, according to an analysis by the World Bank and the United Nations Office on Drugs and Crime.
Amendment 22 in this group requires the Secretary of State to set up,
“an independent review of the effectiveness”,
of our mutual legal assistance arrangements,
“with overseas jurisdictions in cases concerning the proceeds of crime”,
since the figures that are available, the comments made by people who have been on the inside and, indeed, the rather different causes of the problem that are set out in the Government’s impact assessment all strongly suggest that everything is not well. Criminals here also seek to hide their ill gotten gains overseas, and a significant proportion of unpaid Serious Fraud Office confiscation orders are thought to relate to funds located overseas. Criminals put their assets where the UK authorities find it hardest to recover them, which usually means a jurisdiction with which we have no standing mutual co-operation arrangements. Even where this is not the case, without mutual recognition of confiscation orders in the jurisdiction where the assets have been hidden, those charged with enforcing the orders effectively have to relitigate the issue abroad, which can be hard, slow and not very effective.
In Clause 7, proposed new Section 13A provides that in every confiscation case the court will be required to consider making an order to ensure that a confiscation order is paid. In particular, it will have to consider placing a “restriction or prohibition” on the defendant’s overseas travel to prevent that defendant travelling abroad to dispose of his or her assets. Perhaps we ought to consider going further. At the moment, there is nothing the courts can do about people who sell overseas property funded through proceeds of crime because it is in another jurisdiction. We consider that a court should be in a position to fine or jail someone, possibly by making it a contempt of court, if he disposes of property based overseas that is subject to a freezing or confiscation order. Amendment 2 provides for Clause 7, on compliance orders, to be amended to that effect.
We also consider that there should be a consultation on introducing a legal obligation to repatriate liquid assets that are subject to a restraining or confiscation order and which appear to have been moved overseas. Amendment 21 in this group provides for a consultation along these lines. I hope the Minister will be able to give a helpful response to the amendments in this group, since we are at one in seeking to make sure that crime does not pay.
Lord Taylor of Holbeach
My Lords, Amendment 2 relates to compliance orders. Under the provisions in Clause 7, the court will be required to consider making, in every confiscation case, any order it considers appropriate to ensure that a confiscation order is paid. Under the new order, the court will be able to impose any restrictions, prohibitions or requirements it believes appropriate to ensure that a defendant pays a confiscation order and that the order is effective. A compliance order will normally be made at the time that a confiscation order is granted. If the court determines that a compliance order is not necessary at that confiscation hearing, the prosecutor will be able to apply for an order any time afterwards as long as the confiscation order remains unpaid. This type of order is not new to the Proceeds of Crime Act 2002, as the Act already confers on the Crown Court the power to make any,
“such order as it believes is appropriate for the purpose of ensuring that the restraint order is effective”.
Amendment 2 would require the court to consider attaching to a compliance order a restriction on selling overseas property that is the subject of a confiscation order. It is, however, already possible to impose such a restriction as part of a restraint order, as the noble Lord will understand from what I have just said. A restraint order can be obtained at a significantly earlier stage in an investigation—for example, before the defendant has been charged. Such a restriction may also be added to a compliance order where there is no restraint order in place. As such, it is not necessary to make express provision for the court to consider such restrictions or prohibitions. The court already has that discretion. It is worth adding that, once a confiscation order has been made, it may be necessary to sell property to enable the order to be paid off. In high-value cases, this may fall to a court-appointed receiver. In addition, not all defendants will have assets overseas so it would not be necessary to require the court to consider imposing such a restriction in every case.
Amendment 21 seeks to confer on the court, when making a restraint or confiscation order, a power to require the defendant to repatriate liquid assets held abroad back to the UK. The Proceeds of Crime Act already allows the court to make any order that,
“it believes is appropriate for the purpose of ensuring that the restraint order is effective”,
as I have already said. That could include, for example, a requirement for liquid assets to be returned to the UK. Breach of the terms of a restraint order, including selling property that is frozen under the terms of the order, will be a contempt of court and, as such, punishable by a term of imprisonment of up to two years.
Finally, Amendment 22 calls for a review of mutual legal assistance. The movement of money and assets quickly across borders means that it is essential that the UK seeks the assistance of its international counterparts so that it can quickly freeze and recover the proceeds of crime, and it can likewise assist jurisdictions that ask the UK for assistance. Historically, international co-operation on asset recovery has been poor, as the noble Lord, Lord Rosser, said. We depend on other countries to enforce our orders on our behalf, but these orders may not be given priority. Some countries are witting or unwitting safe havens for criminal assets.
Lord Rosser
I thank the Minister for his reply on this group of amendments. As I understand it, the Minister was saying that, as far as Amendments 2 and 21 are concerned, the current legislation already gives the power to do what is set out in those amendments—at least, I think that was the thrust of the Minister’s reply. Obviously, at least if I have understood the essence of his reply, I just wish to leave the matter in the context that clearly I will wish to read in Hansard the details of the Minister’s response.
On his response to the last issue, on mutual legal assistance, I am sure that the Minister will understand if I say that I will want to read it, since he gave some statistics and information on the current situation. I shall read that with interest when Hansard appears.
Lord Taylor of Holbeach
The noble Lord asked me some questions about numbers, which I did not have to hand in my papers. I am willing to see whether I can find further information which I can give him, because I agree that it is an area where a modest improvement in performance could lead to considerable improvement in the amount of money that we recover.
Lord Rosser
I am grateful to the Minister for those comments. I suppose that part of the reason for my saying that I would want to see the detail of the figures that he gave was to see whether he had in fact responded to the questions that I asked, but if he, too, is going to look at that, and if there are parts to which he did not respond on which he will write to me, I will be grateful. In view of that, I beg leave to withdraw the amendment.
Lord Harris of Haringey
“13C Application of assets arising from the proceeds of crime to investigating, prosecuting or enforcement authorities
Any proceeds of crime in the form of assets arising from the operation of Part 1 of this Act shall be applied equally to the investigating, prosecuting and enforcement authorities for reinvestment in the communities and neighbourhoods affected by the relevant criminal act.”
Lord Harris of Haringey (Lab)
My Lords, aren’t we doing well? When was the last time that we got through the first seven clauses of a Home Office Bill within an hour of starting Committee stage? The Minister must be doing something right on this occasion.
However, I will try to improve our batting average now. At Second Reading, I declared my interest as chair of the National Trading Standards Board. In that capacity, I was invited four months ago by Yeading Junior School to attend an assembly that was based around lesson plans which had been funded by the Proceeds of Crime Act. The lesson plans were produced by the Illegal Money Lending Team for England, based in Birmingham, which my board funds. They were designed to teach junior school children how to use their money, how to save, how they should avoid debt and, above all, how they and their families should avoid loan sharks.
The Minister’s right honourable friend the Secretary of State for Education, with whom I know his department has a continuing feud, would no doubt be delighted to discover that those nine and 10 year-olds put on a play that included a section on avoiding loan sharks conducted entirely in Latin—which is not something that I thought many children in the London Borough of Hillingdon were used to speaking. None the less, it was an interesting performance; it was not, I hasten to add, a core part of the lesson plans produced by the Illegal Money Lending Team.
The point about the initiative was that it inspired young children to learn about the dangers of them and their families being ensnared by loan sharks. The funding for it had been provided by POCA moneys taken from loan sharks who had been convicted in the courts. It is an example of some of the community work that the Illegal Money Lending Team supports through funds confiscated from loan sharks, but it also demonstrates the value that can be gained from the Proceeds of Crime Act 2002.
It is clearly a valuable and important mechanism, and I think that all noble Lords who have spoken in Committee today share a desire to see it strengthened. It is good, because it hits criminals where it hurts most: in their pocket. They are often less concerned about the formal penalties that they might incur than the fact that their ill gotten gains will be taken from them.
The Minister has told us how the Bill will make it more difficult for criminals to evade confiscation. That is all to the good and welcome—although, as we have heard, there are possibilities for making the provisions stronger and no doubt we will continue to pursue them as the Bill proceeds. This amendment would ensure that a greater share of the assets recovered from offenders was reinvested in the communities and neighbourhoods affected by their criminal activities and that those funds should be put towards preventing crime and addressing its consequences.
At Second Reading the Minister said that there would be a review of ARIS, which on this occasion is the asset recovery incentive scheme rather than a foreign terrorist organisation with a similar name,
“to ensure that it works to support front-line agencies”.—[Official Report, 16/6/14; col. 697.]
When the Minister responds, I hope that we will have some clarification from the Government about the terms of the review and whether they will consider placing ARIS on a formal legislative basis and allow local authorities in particular—although the same arguments apply to the police—in their role both as investigating authorities but also as prosecuting authorities to receive a greater share of the proceeds of crime. The most likely use of these funds is that they would be applied within local government to funding accredited financial investigators in trading standards and community crime prevention projects. They could also support community crime prevention projects that had proved very successful.
The amendment would place ARIS on a formal legislative basis and would allow local authorities in their roles as both investigating and often prosecuting authorities to receive potentially more than 50% in the division of the proceeds of crime, which could then be applied to crime prevention. The most common use of the incentive payments that local authorities receive is to fund the posts of accredited financial investigators. The reason that these are important is that they make a very significant contribution to the work of trading standards. They enhance investigations by providing intelligence support. They undertake the money-laundering investigations and ensure that the proceeds of crime are recovered through confiscation and cash forfeiture.
There are a number of examples of the positive work that accredited financial investigators do. This includes dealing with landlords who have illegally converted properties into houses of multiple occupancy and then rented them to vulnerable members of the community. I believe that the London Borough of Hounslow prosecuted a case such as this in 2010, which resulted in a confiscation order of £180,000. There are also examples where one of these accredited financial investigators has had an essential role in identifying the victims, resulting in them being compensated. What often happens in these cases is that a lot of material is seized but it requires detailed financial investigation to track down where the moneys have come from and who has actually been defrauded by the fraudsters concerned. A major case was undertaken by Cambridgeshire County Council involving rogue traders, which resulted in the successful prosecution of 15 defendants, who between them received combined prison sentences of 40 years and were served with a £250,000 compensation order—all of which was then paid to the victims who had been defrauded of their life savings.
The reason why the incentivisation scheme is so important—here I am talking about local authorities but exactly the same arguments apply to the police—is that it enables them to fund the specialist resource to pursue some of the financial aspects. It means that the financial investigation can be integrated into the rest of the investigation right at the beginning. That is much more cost-effective than pursuing it at the end of the investigation to see whether assets can be saved. It also means that there is much more depth in the investigation that takes place. It is important to see if the provisions can be strengthened in that way.
The London Borough of Enfield has used the money that it has obtained from the Prevention of Crime Act scheme since 2011 to fund a specific post. That has had a series of impacts: it has allowed it to undertake the first prosecution nationally for money laundering against an illegal poker den, where the defendant was sentenced to 15 months, and to provide financial evidence in a case against a trader convicted of operating a fraudulent HGV training school, resulting in a 44-month conviction following a month-long trial. There is a series of examples of where the presence right at the beginning of an accredited financial investigator has enabled the local authority to pursue the case in much more depth and enable it to go forward.
Lord Deben (Con)
My Lords, I will insert a single sentence here, although it may be rather a long one. I am afraid that my noble friend may have great difficulty in doing what the noble Lord suggests because he will come into conflict with a deep and entirely erroneous Treasury view about hypothecation. For all my political life, I have fought the battle for hypothecation, which is the only way we will get people to accept a whole range of things in future.
It was extremely successfully done on the landfill tax, but the money was then stolen by the incoming Government, who did not understand. The Treasury had hated it in the first place; it had been forced through by the then Chancellor of the Exchequer, my right honourable friend Kenneth Clarke. Immediately after he went, the Treasury mandarins got the money back again because they do not like someone else deciding how the money shall be spent. I beg my noble friend to stand firm against that wholly unacceptable attitude.
The Pope was right, in the 1920s, when he talked about subsidiarity being the basis of democracy. He was, of course, attacking fascism and communism. I am afraid that bureaucratism is just as damaging in always trying to concentrate decisions about how money shall be spent in the hands of the Treasury. I think that the more people who make decisions about how it shall be spent, the more we will be able to make democracy work. Obviously, there have to be restrictions and some overall view, but I hope that my noble friend will take this opportunity to fight like a tiger for an essential part of any sensible democracy: hypothecation. Hypothecation should be a tick rather than a cross when something such as this is put forward.
Baroness Hamwee
My Lords, I wonder whether Hansard will be able to resist its usual refusal to let us put lots of “ands” and “buts” in very long sentences.
I have been trying to think of something to say in Latin to the noble Lord, but my A-level Latin is too long ago for me to be able to do it. However, he is probably asking your Lordships the sort of question to which we should answer yes. I remember that from the very early days of my Latin education.
I am certainly on the yes part of the spectrum of answers to this, in principle. I think a large part of the problem is what I unkindly call “turf wars” between the MoJ and the Home Office about who should have the money when the proceeds are recovered. I realise it is more complicated than that.
On the wording of the amendment, I wonder whether it is possible to identify the communities and neighbourhoods affected in an effective and straightforward manner, if at all. For instance, on the proceeds of crime of someone high up in an organised crime organisation dealing with drugs, can you pin down the communities and neighbourhoods affected in the way suggested? I am very attracted to money going towards crime prevention and assisting those who are affected by crime, but I am just not quite sure about this provision. However, the questions the noble Lord asked the Minister about ARIS and the wider questions about how the proceeds of crime when recovered are applied are very important.
Lord Phillips of Sudbury
My Lords, on the face of it, this is a beguiling amendment, not least because of the way the noble Lord, Lord Harris of Haringey, moved it by giving an example of helping a primary school understand a bit more about the way our complicated world works. There is no one in this House who defers more than me to the need for this country and this Parliament to help our citizens have a better idea of what it is to be a citizen in our barbarically complicated society.
I concur with my noble friend Lady Hamwee, and I think there is perhaps another problem with the wording of the amendment in that it simply talks about,
“reinvestment in the communities and neighbourhoods affected”,
which seems as wide as the Atlantic Ocean and gives no reinvestment guidance about what, why or wherefore.
I have a deeper problem with the amendment. We heard the noble Lord, Lord Rosser, give the example of $20 billion to $40 billion that should be recovered from frauds in developing countries and is not. We heard other examples from my noble friend Lord Taylor of Holbeach of the abject failure of our current laws to achieve their purpose. I am not in favour of doing anything to diminish the resources available to the prosecutorial authorities for seeking to make more as regards compliance with the manifold laws we already have. It is a sort of scandal that we go on passing law after law with the most perfect of purposes, but then fail utterly to give those charged with implementing those laws the wherewithal to do that.
My noble friend Lord Taylor of Holbeach talked with some satisfaction of six advisers. I have to tell him that when you are up against the big, bad guys, a team of six will look rather small, and he is talking about six to cover the whole landscape. Therefore my reservation about the amendment is simply that if its effect is to reduce at all the current grotesquely inadequate resources that go toward compliance, I am afraid that I am not for it.
Lord Bourne of Aberystwyth (Con)
My Lords, I, too, will speak, albeit briefly, with some words of caution about this amendment. I do not think anybody could resist the seductive arguments put forward by the noble Lord, Lord Harris of Haringey, on the need to fund programmes. However, at present the asset recovery incentivisation scheme allows agencies to get back 50% of what they recover from the Home Office. That scheme is flexible in its application, and allows the money to be spent to drive up asset recovery and, where appropriate—those words are important—to fund local crime-fighting priorities for the benefit of the community. I know that the intention of the noble Lord was entirely benevolent and helpful; his example of Latin-teaching in Hillingdon as a sort of cheerleader for the Secretary of State for Education demonstrated that. However, the words “where appropriate” are extremely important.
If one looks at the wording of the noble Lord’s amendment, it is prescriptive. It provides for a three-way split of the proceeds for reinvestment in the communities and neighbourhoods affected by the relevant criminal action. There are no ifs, no buts, and no discretion. Sometimes that would work, and sometimes not. My noble friend Lady Hamwee referred to a situation relating to drugs where it would not. However, that is also true, in spades, of something like insider dealing. That is and should be a crime, but there is no classic victim in the personal sense. The victim, if anything, is the Stock Exchange or the City of London. Under this amendment, we might find that the noble Lord is funding the livery companies or Mansion House. I am sure that he does not intend that, but there is a danger with the way in which the amendment is phrased.
Therefore I have great sympathy with what he seeks to do. However, given that a review is being conducted at the moment, the appropriate thing is to wait to see what that review throws up. I also look forward to hearing what the Minister says about that review. Then would be the time to look at this to see how we can get more money used in crime-fighting rather than by means of something as prescriptive as is the wording of this amendment, which has no discretion at all.
Baroness Smith of Basildon
My Lords, I have noticed, in debates on Home Office legislation, that my noble friend Lord Harris of Haringey seems to attract adjectives. In the previous Bill we looked at he was described by the Minister as being “mischievous”, and today the noble Lord, Lord Phillips, described him as “beguiling” and the noble Lord, Lord Bourne, described him as “seductive”. I dread to think where we will go as the debate continues.
The issues the noble Lord raises are interesting and go to the heart of transparency on this issue, which is about how we want to engage the public and for them to understand what happens to money brought in by the Government. The noble Lord, Lord Deben, made an interesting point on hypothecation, which comes down to trust. The public want to know not just where their taxes go but what happens to money that is brought into the Government.
I was struck by my noble friend Lord Harris’s examples from the education sector. I was not aware of those examples; I do not know whether the Minister was aware before taking the Bill forward. If neither he nor I were aware, were his officials aware? Who does know what happens? This amendment does us a great service, serving to remind us that we have a duty to make this clear to the public. If we are trying to engage them in support of legislation that involves confiscation, fines, et cetera, there is an obligation on Governments and on Parliament to ensure that the public are aware of where that money goes. I hope that the Minister will take some of those comments on board and that it is something that we can return to, in terms of a wider public understanding of what happens to the money and how it is used for the public benefit. That comes to the heart of the points made by the noble Lord, Lord Deben, and by the amendment of my noble friend Lord Harris of Haringey.
Lord Taylor of Holbeach
I have been trying to think of a nice adjective to describe the noble Lord, Lord Harris of Haringey. I know that he did not really like me calling him mischievous. However, this amendment has been very worth while because it has enabled the House to discuss this matter. The noble Baroness is absolutely right; along with other noble Lords, I was not particularly aware of the working of this mechanism, so it has been useful to have this debate. The description the noble Lord, Lord Harris, gave of how the system works is absolutely right; it is dealt with under the asset recovery incentivisation scheme, ARIS, which was introduced in 2006 to replace the previous police incentivisation scheme.
The objective of the scheme is to provide law enforcement agencies with incentives to boost asset recovery as a contribution to reducing crime and delivering justice by giving them a direct stake in the proceeds they generate from that work. The speech by the noble Lord, Lord Deben, was very useful; I do not care whether his sentences are short or long, they are of high value. It was an extremely interesting contribution, as were the contributions of all noble Lords, including that of my noble friend Lord Phillips of Sudbury. They were very much to the point, because making the most of the potential of this money is really important. The scheme is a non-statutory mechanism which has advantages for returning to law enforcement, prosecution agencies and the courts a proportion of the assets they recover. Public bodies with the functions of an investigator, a prosecutor or an enforcement authority can use the powers within POCA to recover criminal assets and can become part of the scheme thereby.
It is also important to remember that the scheme does not just apply to money recovered under confiscation orders but also, as the noble Lord demonstrated, to assets recovered through the other routes to recover assets provided for in the Proceeds of Crime Act, such as the seizure and forfeiture of cash, the civil recovery scheme and the taxation of criminal proceeds. Under the existing scheme, for assets recovered by means of a confiscation order, the Home Office retains 50% of the recovery receipts and returns the remainder to investigation agencies, which receive an 18.75% share of the receipts, prosecution agencies, which also receive an 18.75% share of the receipts, and enforcement agencies—in most cases this is the Courts Service—which receive a 12.5% share of the receipts. For cases where cash has been forfeited under the cash seizure powers in the Proceeds of Crime Act, the Home Office retains 50% of the receipts and the investigative agency—in the majority of cases this is the police, but it is not always so—retains the other 50%.
The use to which each agency decides to put the money received under the scheme is a matter for that agency. Because amounts received through asset recovery are unpredictable, and given that it depends on the nature of the cases dealt with by each agency each year, we have not laid down any specific guidance on the use of such money. However, we have previously expressed a desire that the money should be reinvested in asset recovery work to drive up performance. I sense that noble Lords would feel that that is the right thing to do. The noble Baroness, Lady Smith, made clear her support for the needs for resources to drive up performance. My noble friend Lord Phillips of Sudbury felt that that was a primary objective for this money. But also, when appropriate, it can fund local crime-fighting priorities on behalf of the benefit of the community.
The Home Office has monitored the scheme annually since its inception. The results of that monitoring show that more than 90% of money distributed through the scheme is reinvested in asset recovery work, such as the recruitment of financial investigators. If we get more money, we will be able to have more investigators—and I think that everybody can see that this vicious circle could be a virtuous circle, if we implement it correctly. As the noble Lord, Lord Harris, said, these investigators carry out the recovery work, and there is a balance that can be spent on police operations and community projects. Some examples of the community work that has been paid for include alcohol awareness and crime reduction projects, mentoring programmes and assistance for elderly and vulnerable people. The noble Lord, Lord Harris, gave a classic example of community work in the confiscation of money. His own field case, which he also mentioned, is a very good example.
Over the past three years, more than £238 million has been returned to front-line agencies. However, we believe that the proposed changes that are being made in the Bill will ensure that agencies are able to apply for and enforce more orders more successfully. This in turn should lead to more funds being received by front-line agencies through the scheme. The share of the money that is retained by the Home Office forms part of the department’s core budget line and, as such, is put towards the delivery of front-line services through mechanisms such as police grant.
One key objective of the Government’s criminal finances improvement plan, which was published on 19 June, is to ensure that the Asset Recovery Incentivisation Scheme works effectively for front-line agencies. It is with that in mind that the review has been set up, and we intend to complete it by the end of the year. I hope that it will please noble Lords to note that the emerging findings from the review will be presented to the board in September, so if this Bill takes its normal course we should be able to update the House on Report on how that review is going.
The noble Lord asked about the terms of the review. The whole purpose is to investigate the process and see how we can make it better. It is being developed with the aim of ensuring that the scheme works effectively for all agencies charged with asset recovery responsibilities. All will be involved. For example, the Local Government Association will be a consultee within the process, with anyone else who is currently involved in the asset recovery process.
I was asked—or rather, challenged, “Is it appropriate to leave an organisation for distributing money on this non-statutory basis, or should we consider a statutory alternative?.” I think that the debate has shown that there are ways of making the process work well without a statutory basis. But of course, that is the sort of thing that any review should properly consider.
I hope that the noble Lord, Lord Harris, will be generous and withdraw his amendment. We in our turn are grateful to him for giving us the opportunity of describing the working of ARIS, and the review that we have in mind.
Lord Harris of Haringey
I am grateful to the Minister for that response. I am also grateful to the other noble Lords who have contributed to this short debate, especially the noble Lord, Lord Deben, for his comments on hypothecation. I have always appreciated—although this may be a difficult thing for someone with his religious commitment to hear—that he is something of a heretic in such matters. His is a heresy that I share, in terms of making things happen, and in the belief that a bit of hypothecation can sometimes mean that we achieve results all over the place.
Some of the points that have been made require a moment’s clarification. I do not think that the identification of neighbourhoods, which the noble Baroness, Lady Hamwee, mentioned, is necessarily a problem. As the Minister has made clear, 90% of the money distributed through the incentivisation scheme is ploughed back into financial investigators; the noble Lord, Lord Phillips, also made that point. Only a small proportion goes beyond there, and the authorities concerned, whether they are local authorities or the police, make good use of it. I was involved with the board of the Safer London Foundation, which made very good use of the Proceeds of Crime Act moneys that the police received, in connection with local community projects around London. The authorities concerned spend a great deal of time in deciding what is and is not an appropriate use of those resources.
The important point behind the amendment is the need to think carefully about how we maximise the money recovered, and I hope the review will do that. I know that the Minister is part of a wing of the Government that is committed to the reduction of taxes, but in this context there is, essentially, a 50% tax, because the money goes into either the Home Office or the Treasury, depending on the precise route—although I rather suspect that the Home Office does not “feel” the money that comes back to it, because it all disappears into the Treasury and goes through into the main funding of the Home Office.
If 50% of the money is retained by the Home Office or the Treasury, there may be little incentive for the agencies concerned to pursue complicated financial investigations that are not essential to achieving a conviction but are additional to achieving a conviction. If the proportion distributed through the incentivisation scheme were higher, substantially more money might be recovered, because people would be incentivised, and would say, “This really is worth investing those resources in”. The Home Office and the Treasury might then find that they got more resources rather than less. I hope that the review will consider these issues, and I look forward to hearing—perhaps by Report—about its developing findings. On that basis I am happy to beg leave to withdraw the amendment.
“Confiscation orders: consultation
(1) The Secretary of State must consult on ways to strengthen and improve the effectiveness of confiscation orders.
(2) A consultation under subsection (1) must, in particular, seek views on the following matters—
(a) whether the court, when making a confiscation order, should be able to compel a suspect to return to the United Kingdom any realisable liquid assets overseas;(b) whether to provide the court with the power to fine or imprison a defendant who sells property subject to a confiscation;(c) whether to provide the court with the power, when making an order, to require the defendant to disclose any interests, including third party interests, in realisable property.(3) The Secretary of State must report to both Houses of Parliament on the outcome of the consultation under subsection (1) no later than 31 December 2014.”
Baroness Smith of Basildon
My Lords, in moving Amendment 4, I wish to speak also to Amendments 9, 11 and 12. Amendments 4 and 9 are similar: both require a consultation on ways to strengthen confiscation orders and restraint orders respectively. Amendment 11 addresses the disposal of assets. At present, one of the conditions of obtaining a restraint order is for the prosecution to show that there is a real risk that the defendant will dissipate his or her assets. These amendments would remove this requirement. As regards Amendment 12, although restraint orders are ex parte, many defendants then appeal against the orders and incur significant defence costs. If they win the appeal, their costs are reimbursed by the state. However, these can be high and can act as a disincentive for prosecutors to get a restraint order in the first place. Our amendments propose that any costs recoverable by the defendant would have to be capped at legal aid rates. These amendments seek to strengthen the confiscation and restraint orders. All these issues are linked. Indeed, I think that all the issues we are debating today around the proceeds of crime are linked, but this matter is at the very core of the process.
In its report, the National Audit Office said that the confiscation of criminal assets is “just not working at the moment”. Amyas Morse, the head of the National Audit Office, also said that,
“The use of confiscation orders to deny criminals the proceeds of their crimes is not proving to be value for money … nor … a credible deterrent to crime”.
That is a pretty sorry state of affairs and one which this Bill and the debates we are having in your Lordships’ House should seek to address. Whatever the reasons for that situation, those criticisms place a duty on your Lordships’ House to address the problem, to see whether legislative changes are needed and to question whether the law as it stands is being effectively and properly enforced, as the noble Lord, Lord Phillips, who is no longer in his place, said a moment ago. When criminals get to keep £99.74 in every £100, there is clearly a significant problem and it is right that this should be addressed and we support the Government on that.
In 2012-13, 6,392 confiscation orders were made, seeking the return of £318 million from a total pot, as it were, of £1.6 billion that had been illegally acquired. Eventually, only about £133 million was recovered and, although there are still some outstanding debts, the amount recovered will not rise significantly above that figure. I am curious and concerned about that issue. I hope that the Minister will comment on that and give an assurance that this issue has not been deprioritised by the Government. I hope that the Minister will also comment on the reasons why we have seen a slight reduction in the number of confiscation orders, which compounds the problem of getting money off the criminals once the orders have been issued. As I said, in 2012-13, only 6,392 orders were made, down slightly from 6,431, whereas we might have expected to see an increase in that figure.
However, this is not about just the number of orders; the most crucial point is compliance with the orders. I welcome the fact that there are now moves afoot to remedy this situation, close some of the loopholes and strengthen compliance with confiscation orders. However, I made a similar point in the earlier debate on third-party claims—namely, given the scale of the problem we are facing, can we not think bigger about this and try to do better? In our previous debate, the Minister said that the situation had improved. However, I put it to him that, if we are looking to improve matters, we should do the best we can, seek to be as strong as we can and close any loopholes.
I wish to address a number of issues. The first is the time limits for payments. The Proceeds of Crime Act currently provides that a confiscation order is payable immediately upon the making of the order unless a defendant can show that there are exceptional circumstances why this should not be the case, in which case they are given up to 12 months to pay, as we heard earlier. We recently highlighted the problems with this blanket approach. Some assets—this was referred to in an earlier debate and the Minister reaffirmed this—for example, money in bank accounts, are much easier to realise than other assets, which simply increases the likelihood of the defendant distributing or hiding their assets.
We are grateful to the Government for taking those points on board and for proposing action on this matter. Clause 5 now makes it clear that the full amount ordered to be paid must be paid on the day on which the order is made unless the court is satisfied that the defendant is unable to do so and includes a restriction on the circumstances under which an extension can be granted. That is welcome and there was a helpful explanation on that earlier. We also welcome the fact that Clause 7 requires the court to consider making an order that it considers appropriate to ensure that the confiscation order is paid. As discussed earlier, this includes placing a ban on overseas travel.
However, we want to probe other ways in which confiscation orders can be strengthened. Our amendment calls for a consultation on this. I hope that the noble Lord will be more sympathetic towards our proposals, given that we are proposing consultation. The areas that we would like to look at concern whether the court should be able to compel a suspect to return to the UK any realisable asset that is located overseas, to jail or fine someone who sells property that is subject to a confiscation order or to require a defendant to disclose any interests in property. Of course some of this touches on issues that have already been discussed. We would also welcome discussions on other ways to improve the orders; the noble Lord, Lord Phillips, earlier raised the issue of an individual’s assets being owned by a company that owns a company that owns a company, so that they are hidden in a labyrinth of financial dealings.
One way of strengthening the system generally is to strengthen restraint orders. The effect of a restraint or freezing order is to freeze the assets of a defendant, so preventing them from dissipating all or some of their assets before a confiscation order is made. Investigators and prosecutors agree that this is the most critical stage of the process. Early freezing of assets, at the outset of an investigation, minimises the risk that assets will be dissipated or disposed of. However, according to the National Audit Office, the number of restraint orders secured by prosecutors is falling sharply. I quote from the NAO report:
“Only 1,368 restraint orders were imposed in 2012-13, down 27 per cent from 1,878 in 2010-11. Many stakeholders believe opportunities for successful restraints are being missed and that the Crown Prosecution Service is too cautious in applying for restraint orders”.
The report also outlines that:
“Throughout the criminal justice system there is insufficient awareness of proceeds of crime and its potential impact. Within law enforcement and prosecution agencies, few officers and staff have good understanding about proceeds of crime legislation. In many cases effective powers, such as restraint orders, are applied late or not used at all, and specialist financial investigators are introduced to cases when audit trails have already run cold”.
Given that such orders can be applied for as soon as a criminal investigation is started, that would seem to address the problem. However, the current test is too high, because it must be shown that there is reasonable cause to believe that a defendant has benefited from his or her criminal conduct and that there is a risk that assets may be dissipated. Earlier this year, we called for the threshold needed to gain a restraint order to be lowered, with the onus to be placed on the suspect to show why assets should not be restrained, rather than on the investigating agency.
We therefore welcome the fact that Clause 11 reduces the test from “reasonable cause to believe” to “reasonable grounds to suspect” that a defendant has benefited from their criminality, which aligns it with the test for an arrest under the Police and Criminal Evidence Act 1984. The Bill also provides that a restraint order can be kept in place against a defendant for a reasonable period between the quashing of a conviction and the start of the proceedings for a retrial, and it closes the loophole that the restraint order is removed while the retrial proceedings are commenced, during which time the defendant’s assets are at risk of being dissipated.
However, the amendment that we have tabled today goes further than this, as we think that it should be up to the defendant, not the prosecution, to establish that there is no risk of dissipation. Alison Saunders from the CPS referred to this in her evidence to the Public Accounts Committee, saying that it was,
“quite a high test to look at”.
Another issue, of course, is the cost to the CPS. One of the key things raised to us by practitioners is that when an application is unsuccessful—particularly on appeal, as the original is often ex parte—the prosecution is liable for the legal costs of the defendant. Given that the CPS is undergoing cuts of 27% to its budget during the course of this Parliament, prosecutors understandably want to minimise the risk of expensive failure. Alison Saunders alluded to this also in her evidence. We have therefore tabled other amendments that do the same thing. Because they are probing amendments, we are not wedded to the wording but the intent is to try to tackle the disincentive. We are suggesting that a defendant should be able to recover costs only at a legal aid rate. It may be that that is covered by the LASPO Act but we wanted to raise this issue because it has often been raised with us. We are aware that there is a problem, and there is a way of dealing with this. Of course, there is unfairness in requiring an individual who has succeeded in setting aside a restraint order to pay his or her costs, but the alternative is to put all the cost risk on to the prosecutor. Capping costs at legal aid levels, as happens in other cases, could help lessen the disincentive to tackling large-scale restraint orders.
It would be helpful if the Minister could give a view on that. I hope that he will not just refer to his notes and resist the amendments because the whole purpose of Committee—I hope he understands the tone with which we have approached this—is not just to do better but to do the best we can. If he cannot accept these amendments, I hope that he will take them away and perhaps discuss this issue further with us, so we do not continue a situation in which we are unable to get at assets because they have been taken out of the country or removed and defendants do not come forward to say what their assets are. There is a way to deal with this and I hope the Minister can respond positively to these amendments. I beg to move.
Lord Dear (CB)
My Lords, I rise to re-emphasise the wording of subsection (1) of the amendment:
“The Secretary of State must consult on ways to strengthen and improve the effectiveness of confiscation orders”.
For many years, and bearing in mind my previous service in the police and my contact with it since, I have been concerned that the prosecution authorities generally do not pursue property that is the subject of crime nearly as rigorously as they should. That has gone on for years, although all the agencies concerned will deny it. It is a fact, however. I could produce evidence from recent personal experience but will not weary the Committee with that, other than to say that the police have always been, and still are, judged on reducing crime and gaining convictions. The CPS is also judged on its ability to gain convictions. It is not judged, by and large, on its ability to chase back money and other property.
I simply endorse the main thrust of subsection (1) of the amendment. There must be ways in which the efficiency of those two organisations can be enhanced, not by rewarding them—although rewards are involved, I suppose, particularly in the reapplication of assets that we have been discussing—but simply by recognising that efficiency is not just detecting crime or getting convictions but also recovering property and money. When all is said and done, in the upper echelons of crime, in particular, the criminals are in it for the money. If the money is not chased, it is eventually there for them to use later when they come out of prison, or when they have paid off the fine or whatever else. This is a plea to underline the wording of subsection (1) of the amendment, which I endorse.
Lord Taylor of Holbeach
My Lords, this has been a short but very useful debate. I am pleased that the noble Baroness has reiterated that her objective in tabling these amendments has been to seek ways in which we can improve the effectiveness of recovery and confiscation of money. The noble Lord, Lord Dear, graphically described how important that is. It is perhaps true that there has been little focus by those who should be undertaking this task. There are two reasons why this mission is important: first, because money has frequently been taken from society and should be returned to it; and, secondly, if this money remains in the hands of criminals they will have every incentive to carry on with criminality as a way of life, and all the costs that it brings. That lies behind where we are on this. All these amendments are concerned with improving effectiveness, and I think that the whole Committee would support that notion. In dealing with these amendments I hope to show that the measures proposed in the Bill will address the issues that the noble Baroness raised. I am grateful to her for bringing them forward. Indeed, it is quite proper that we should consider their effectiveness.
Baroness Smith of Basildon
My Lords, I am grateful to the Minister for taking the time to address, in order, the points I made—and perhaps some that I did not make. I think I was very clear that the initial restraint order hearing is ex parte. That is not what I was suggesting in terms of costs; it was the appeal, which can involve significant costs. Again, with regard to the test for restraint orders—“reasonable grounds to suspect” rather than “reasonable cause to believe”—I suggested that we were quite happy and supportive of the Minister in that. That is a later amendment, in the name of the noble Baroness, Lady Hamwee.
I will read Hansard carefully and look again at what the Minister said. I am disappointed that he seemed to be saying that he will not consider our amendments, other than the final one on capping, not because they are not worthwhile and not worth pursuing but because the Government are making improvements to the legislation. As the noble Lord, Lord Dear, said—I hope he will forgive me for saying that he speaks from experience on these matters; from the right end of the law, not the wrong end of the law, I hasten to add—there are cases where the law has not been enforced as effectively as we would like. The consultation the Minister spoke of—he rejected our suggestion of having further consultation on this issue—would help draw out some of the issues that the noble Lord, Lord Dear, and I addressed.
I repeat that we are not suggesting for one second that what the Government are proposing in the Bill does not improve the position. We are just saying that we think consideration should be given to improving it further—we could do better. We should do the best we can, not just aim for an improvement. It would be disappointing if the Minister was to leave this debate without thinking that he could reflect on the points we had made, to make the Bill as tight as it can be and ensure that those who gain from criminal activities are not allowed to keep as much of their ill gotten gains as they are at present.
I listened carefully to what the Minister said. I did not quite understand how some of it addressed the points I had raised. I will read Hansard carefully and make a decision on whether or not we wish to bring some of these matters back on Report for further consideration by your Lordships’ House. For now, I beg leave to withdraw the amendment.
Baroness Hamwee
Baroness Hamwee
My Lords, this is a short point because it is just a short question. Amendment 5 is to Clause 8 and Amendment 26 is to Clause 28—the equivalent Northern Ireland provision. Amendment 5 seeks to leave out new Section 25A(2)(a) of POCA, which allows the court to discharge an order in the case of a deceased defendant where,
“it is not possible to recover anything from the estate”.
My question is: is this not covered by new Section 25A(2)(b), which says that a discharge could be made where it is not,
“reasonable to make any attempt … to recover anything”?
It seems to me that if it is not possible to make an attempt, it certainly would not be reasonable. That is my question. I beg to move.
Baroness Williams of Trafford
My Lords, Clause 8 deals with the discharge of certain unpaid confiscation orders and applications to vary unpaid orders down in value. Despite the best efforts of law enforcement agencies, some confiscation orders are uncollectable and sit on the books of Her Majesty’s Courts and Tribunals Service, accruing interest at 8% a year.
Clause 8 provides that the court will be able to write off unpaid confiscation orders where the defendant has died and it is not possible or reasonable to seek payment of the order from the defendant’s estate: where, for example, there are no assets remaining in the estate. Clause 28 makes the same provision for Northern Ireland.
In Clauses 8 and 28 there are two cases where orders may be written off: first, where it is impossible to get any money out of the estate; and, secondly, where it is not reasonable to make any attempt or further attempt to get money out of the estate.
These amendments suggest removing the case for discharging orders where it is impossible to get any money at all out of the estate. My noble friend has indicated these amendments are essentially designed to probe what would be covered by a first set of circumstances for discharging an order that is not covered by a second set of circumstances.
My noble friend is correct to say that there is certainly a significant degree of overlap between the two. If there are no assets of any note in the estate, it would not be reasonable to make an attempt to recover moneys owing to discharge a confiscation order. Equally, it would not be possible to recover anything from the estate.
That said, I believe it is helpful to retain both cases. The first case where it is impossible to get any money at all out of the estate could be said to be a subset of the second case, where it is not reasonable to make any attempt or further attempt. However, there may be circumstances not covered by the second case. It is important that this clause should encompass all possible scenarios to ensure uncollectible orders may be discharged.
I hope that, in light of that explanation, my noble friend will be content to withdraw her amendment.
Baroness Hamwee
My Lords, I am not sure that I do understand that it would ever be reasonable to make an attempt to recover something where it is not possible to recover it. I am not going to make a fuss about it. However, when I hear about 8% a year, I think I need to review my investment strategy. I beg leave to withdraw the amendment.
Lord Rosser
Lord Rosser
Under the Proceeds of Crime Act 2002, a default sentence of imprisonment can be imposed against a defendant if a confiscation order remains unpaid past its due date. Of course, as we know, this Bill increases the maximum default sentences where the confiscation order is for more than £500,000. Those increases are from five years to seven years for orders of more than £500,000 but no more than £1 million, and from 10 years to 14 years for orders of more than £1 million. The Bill also ends the automatic release at the halfway point of a default sentence for confiscation orders of more than £10 million.
These changes are being put forward by the Government because of the significant number of higher-value confiscation orders that go unpaid. Some would say that that is putting it far too mildly, because the amount collected by the police and the volume of the confiscation orders have fallen, yet there are still some £1.5 billion of outstanding orders because assets have been hidden. They have been moved away overseas, or they have been reduced by third-party claims. Only 18% of confiscation orders worth more than £1 million are recovered. A National Audit Office report has indicated that just 26p of every £100 of profit a criminal makes is confiscated. On top of this, the costs of recovering proceeds of crime are high, since investigation, prosecution and enforcement costs come to 76p out of every £1 collected.
In light of this, it is not clear why the Government are proposing only that automatic release at the halfway point of a default sentence should cease in respect of confiscation orders of more than £10 million. The Government’s own fact sheet on the Bill says that it is the higher-value orders that go unpaid. It is the Government who are proposing that orders in excess of £1 million should potentially attract the new maximum default sentence of 14 years. Having said that, since 1987 confiscation orders of £1 million or more have constituted well under 1% of such orders imposed by the courts.
The Government clearly believe that more time in prison for non-payment of a confiscation order is justified and will have some impact, since it is proposing, as I said, that the default sentences should be increased from five years to seven years for orders of more than £500,000 and up to £1 million and from 10 years to 14 years for orders of more than £1 million.
The current maximum default sentence is 10 years, which in practice means release on a tag at three years and without a tag at five years. Increasing the maximum for orders of more than £1 million from 10 years to 14 years will probably have some impact. It seems unlikely, however, that less than another 18 months at maximum in prison before being released on a tag will produce a significant shift in the attitude toward payment of a confiscation order of criminals with just under £10 million hidden away.
The National Audit Office found that in 2012 only 2% of offenders paid in full once the default sentence was imposed. The NAO also found that there are currently 11 criminals who still have not paid their confiscation orders, which remain due to the Serious Fraud Office after they have served their default sentence. Criminals should not be able to gain by not paying back money obtained through their criminal activities by choosing to go to prison in the knowledge that the time they spend in prison will be cut short.
The National Audit Office report pointed out that the current system does not work when it said:
“The main sanctions for not paying orders, default prison sentences of up to 10 years and additional 8% interest on the amount owed, do not work”.
The Bill itself suggests a degree of uncertainty over the £10 million threshold for the ending of automatic release at the halfway point of a default sentence, since there is provision for a power to lower this £10 million threshold through secondary legislation. A further order-making power also allows for minimum default sentences to be introduced in the future—a point on which I will comment later.
So what is the Government’s argument for saying that £10 million is the right figure rather than either of the figures of £1 million or £500,000 in our two amendments—or, indeed, any other figure? The £1 million is in effect the figure at which the Government are proposing that a maximum default sentence of 14 years rather than 10 years should apply.
The Government’s impact assessment indicates that no longer having release at the halfway point of a default sentence for confiscation orders of more than £10 million would result in an increase in the prison population that would be minimal. I think the figure is 20, but it is minimal. What the impact assessment does not tell us is the projected increase in the size of the prison population if the figure were £1 million or £500,000 rather than the £10 million provided for in these two amendments. Indeed, it does not give us the figures for any other amount or what the impact would be on the prison population if early release in this situation were ended altogether.
No doubt the Minister will provide this figure in his reply or subsequently, particularly if a reason for the Government not wanting to see the figure lowered to £1 million or less is the impact this might have on the size of the prison population. I make two points on that issue. First, the Government have told us that their reforms of probation and the probation service will result in a reduction in reoffending, particularly among those serving sentences of 12 months or less, and thus a reduction in the prison population. Will the Minister say if this Government’s anticipated reduction would offset any increase arising from ending automatic release at the halfway point of a default sentence for confiscation orders of £500,000 or more, or £1 million or more?
Secondly, I ask the Minister if he believes that the prospect, with no automatic release at the halfway point, of having to serve up to 14 years in prison for not paying more than £500,000 or more than £1 million ordered by a court under a confiscation order of ill gotten criminal gains secured at someone else’s expense or at the expense of large numbers of people would in fact greatly enhance the likelihood of co-operation being forthcoming to secure the necessary assets. If he believes that, would that not only reduce the number of criminals preferring to serve their prison sentence rather than hand over their ill gotten gains but provide some additional income from which the cost of any resultant increase in the size of the prison population could be paid if that should prove to be the outcome?
Our view is that criminals who do not meet the requirements of a default sentence for not paying the terms of a confiscation order by the due date should not be allowed out of prison early. In these two probing amendments, however, we suggest only the lowering of the threshold to £1 million or £500,000, because we want to find out at this stage why the Government believe that a threshold of £10 million is appropriate for the ending of automatic release at the halfway point of a default sentence.
Lord Taylor of Holbeach
My Lords, as we have already said today, under this Government around £746 million of criminal assets have been seized under POCA, which is more than ever before. Around 60% of confiscation orders for sums up to £500,000 are discharged within six months, but it is clear that we need to do more to ensure that confiscation orders, particularly the higher-value orders, are robustly enforced. That is what lies behind the measure that the amendments seek to address.
A key mechanism in POCA for incentivising prompt payment of confiscation orders is the availability of default prison sentences where somebody fails to pay. It is clear that for lower-value orders default sentences have the desired effect, with nearly 90% of orders under £1,000 being discharged. But at the other end of the spectrum, just over 18% of orders over £1 million are settled in full. There is anecdotal evidence that serious and organised criminals would rather spend a few extra years in prison in the knowledge that they can enjoy the fruits of their crimes when they come out. It is clear that we need to provide further incentives to persuade these hardened offenders to pay up. It is with that in mind that we are legislating. Clause 10 accordingly increases the length of default sentences for higher-value orders. For orders between £500,000 and £1 million, the maximum sentence is increased from five to seven years, while for orders over £1 million the maximum sentence will increase from 10 to 14 years.
In addition to increasing the maximum default sentences for higher-value orders, we have looked again at the early release arrangements. Current provisions allow for automatic release at the halfway point of a default sentence. Early release reinforces the view of certain offenders that a default sentence is worth serving in order to retain criminally acquired assets—I think that the noble Lord, Lord Rosser, made the same assessment when introducing his amendments. Unconditionally releasing offenders at the halfway point of their default sentence seriously impairs the intended deterrent effect of the default sentence, particularly for the highest-value orders. So this clause will also end automatic early release for those serving a default sentence for failing to pay an order valued at over £10 million. The combined effect of these changes will mean that, in such a case, an offender will serve up to 14 years in prison rather than five years, as now. This is a significant increase which will make offenders think long and hard about serving the time rather than paying their confiscation order.
The noble Lord quite rightly asked why we set the threshold for ending early release at £10 million and not, let us say, at £1 million or £500,000, as Amendments 6 and 7 propose, or indeed at any other level. What is the rationale behind the Government’s decision? As I have said, evidence suggests—I have given figures earlier—that the existing default sentences do not have sufficient deterrent effect for the highest-value orders. We have therefore focused the changes made by Clause 10 on the upper end of the scale.
As a responsible Government, and as the noble Lord will know, we are committed to eradicating the deficit which we inherited from the previous Administration. We naturally took into account the potential cost of changes to the default sentencing arrangements. As we have set out in the financial effects section of the Explanatory Notes, the combined cost of the changes made by Clause 10, all other things being equal, is £1.78 million, or 60 prison places, by 2033. Ten of those extra prison places are attributable to the ending of early release for default sentences for confiscation orders of more than £10 million. The cost of these provisions should not be viewed in isolation. Elsewhere in the Bill, the new participation offence will cost some £6.6 million, including some 45 additional prison places.
I was intrigued by the arguments put forward by the noble Lord, Lord Rosser. He seems to have reined in the Opposition’s ambitions, because the proposals put forward by the shadow Home Secretary and shadow Attorney-General as recently as May stated:
“Labour would end early release for criminals serving default sentences who refuse to pay”.
I wonder whether the noble Lord can tell us what the cost of such a proposal would be. If not, I can tell him. Again, if there was no change in offender behaviour, such a policy would require an additional 900 prison places, at a cost of some £25 million per annum by 2033, although the great majority of those costs would kick in by 2020. This of course assumes that the capacity will be available within current prison facilities. However, given the impact of this proposal, it is likely that further facilities will need to be provided, which will result in a considerably higher total cost. It is therefore reasonable to ask the noble Lord where the money would be found to fund the proposals as set down in his amendments.
We have made a judgment. Our view is that the changes made by Clause 10 represent a well judged package. It is our expectation that the increases in default sentences and the ending of early release will lead to a change in offender behaviour. Faced with 14 years in prison, rather than five as now, we believe that an offender with a confiscation order of more than £10 million will not be so ready to serve the time rather than pay up. Fourteen years is a long time in prison.
However, it would be prudent to test that proposition before we go further. That is why the clause contains two order-making powers. The first will enable us to change the structure of default sentences, including by further increasing maximum sentences and introducing minimum sentences. The second delegated power will enable us to lower the £10 million threshold for ending early release. We will keep the changes made by Clause 10 under close review, and if they are having the desired effect then we will not hesitate to exercise these order-making powers.
The noble Lord, Lord Rosser, asked whether the Government had considered alternatives to the £10 million threshold. The answer to that is yes. I do not propose to get into a debate about whether we considered this threshold or that. Suffice it to say that Ministers considered a range of options and came down in favour of the proposition in Clause 10. I can tell the noble Lord that we estimate that the cost of ending early release for orders of £500,000 and over would be approximately 180 prison places, costing an estimated £5 million per annum by 2033. Ending early release for orders worth £1 million and over would lead to an increase in the prison population of approximately 70 places by 2033, costing an estimated £2 million.
The Government have considered this carefully and concluded that it would not be appropriate to lower the threshold for ending automatic early release until it was proven that it resulted in improved payment and was an effective deterrent, and that it was affordable to do so. We therefore believe that the provisions in Clause 10 are the appropriate way forward, while building in flexibility for the future.
The noble Lord, Lord Rosser, asked about the Government’s attitude to the conclusion of the Delegated Powers Committee that it would be inappropriate to introduce minimum default sentences through secondary legislation. We are considering carefully the points made by the committee about this order-making power, and in doing so we will want to take into account the points that the noble Lord made in today’s debate. Accordingly, I cannot take up the noble Lord’s suggestion that I respond to the report today, but I can undertake to reply to the Delegated Powers Committee report in advance of the Bill’s Report stage in the autumn.
In view of that commitment and the fact that I have valued the opportunity to explain the way in which the Government arrived at our judgment to introduce the measures in Clause 10, I hope that the noble Lord will withdraw his amendment.
Lord Rosser
I thank the Minister for his reply and for giving the information about the projected increase in the size of the prison population if the figure were £1 million or £500,000, and indeed what the increase would be if there were no threshold figure at all.
If the Minister thinks there has been a change in our policy, I shall put his mind at rest. I shall requote to him what I said in my contribution: our view is that criminals who do not meet the requirements of the default sentence for not paying the terms of a confiscation order by the due date should not be allowed out of prison early. That is our approach. I said it in my contribution. I also made it clear that our two amendments are probing amendments to find out why the Government believe that the threshold of £10 million is appropriate.
We shall consider what the Minister has said, but I think that with regard to the £1 million threshold he said that the figure was 70 additional places at a cost of £2 million; I think he said that for the £500,000 threshold the figure was 180 additional places at a cost of £5 million; and for no threshold the figure was 900 prison places at, I think he said, the cost of £25 million. I just want to ensure that I have understood correctly what he said.
Lord Taylor of Holbeach
I would like to reassure the noble Lord. I emphasise that I said that 10 of these extra places would be attributable to the ending of early release from default sentences for confiscation orders over £10 million. I actually said that as part of my presentation to the noble Lord.
Lord Rosser
But I think I am right in saying that the impact assessment assumes no change in the behaviour of the criminals concerned. I think, and perhaps the Minister will confirm this, that the figures he has given of an increase of, respectively, 70, 180 or 900 places and increased costs as a result also assume no change in criminal behaviour, and therefore no more money coming back in as a result of the ending of automatic release at the halfway point of a default sentence. A lot of people would find that an extremely unlikely assumption on which to base the impact assessment and the Minister’s figures.
However, I will leave it at that. I thank the Minister for the information and for his comment that we will have the Government’s response to the Delegated Powers Committee before Report. I beg leave to withdraw the amendment.
Baroness Hamwee
Baroness Hamwee
My Lords, this amendment is to Clause 11, while Amendment 27 is an equivalent amendment to the equivalent Northern Ireland provision, Clause 13(1). The Minister has already referred to the change from “reasonable cause to believe” to “reasonable grounds to suspect” in the context of the exercise of restraint order powers. The question, obviously, is designed to explore why there is a lower hurdle when we are talking about investigation only, not proceedings.
I appreciate that the later part of Clause 11 requires reporting by the court, although the court can decide not to require it, and that proceedings have to be started within a reasonable time. I am assuming, but perhaps the Minister can confirm this, that a defendant can apply for the restraint to be lifted on the basis that reasonable time has passed and there are no proceedings, and that “reasonable time” is assessed on a case-by-case basis and is not a fixed period. However, it occurs to me that the provision might be giving rise to additional litigation because there are uncertainties around this.
Temporary asset freezing—which is what this is, essentially—could be for quite a long time. We are talking about someone who is not a convicted criminal and may not yet even be a defendant. There could be an impact on that person’s dependants and their business. It is, therefore, a serious matter and I look forward to an explanation of why the Government have chosen to lower the hurdle and the protections that will be in place. I beg to move.
Lord Taylor of Holbeach
My Lords, I am pleased that my noble friend Lady Hamwee has raised these issues. We do not take the impact of restraint orders lightly and we fully understand her points. However, these orders effectively freeze property to prevent it being dissipated before a confiscation order is made. This is important in effective use of the Proceeds of Crime Act. The property is then available to sell, which helps to satisfy a confiscation order which may subsequently be made.
The intention of the Proceeds of Crime Act was to introduce the ability to obtain a restraint order as early as possible in the investigation to remove any possibility that a criminal will become aware, as a result of the investigation, that their assets are at risk and so move or hide them. We have been discussing this for much of the afternoon. Restraint orders are, therefore, available from the earliest stages of a criminal investigation. As I have already said, and as my noble friend is aware, the current test for obtaining a restraint order in all circumstances is that there is a “reasonable cause to believe” that the alleged offender has benefited from his criminal conduct. This is a proportionate test in circumstances where a defendant has been charged and is being prosecuted. In this case there will be available evidence to meet the test of “belief”.
However, the operational experience of our criminal justice colleagues in relation to this issue has shown that, at the early stage of an investigation, it is very hard to prove belief. The reality is that at that stage of an investigation there may be limited evidence, simply because the investigation has not yet had time to gather it. It is notable—as the noble Baroness, Lady Smith, has said—that the number of restraint orders has fallen since 2010-11, despite the Government’s push for more asset recovery action. The number of restraint orders obtained had been increasing and reached a peak of nearly 2,000 in 2010-11 but has dropped every year since then, with fewer than 1,400 restraint orders being made last year.
Delaying the obtaining of a restraint order until there is sufficient evidence to meet the “reasonable cause to believe” test can provide suspected offenders with an opportunity to dissipate or hide their assets to protect them from seizure. The amendment we are making to POCA in the Bill therefore revises the test for restraint in the earliest stages to “reasonable grounds to suspect”—I emphasise “suspect”—that the alleged offender has benefited from his criminal conduct. It is also of note that the amendments include a requirement for the judge making the restraint order to set a date for the matter to be returned to the court so that it can consider whether sufficient progress has been made with the investigation or give reasons for not arranging such a hearing. This reflects current practice of the court when it makes a restraint order in the absence of the person who will be the subject of the order. Making the practice mandatory will ensure appropriate judicial oversight of restraint orders made during a criminal investigation.
It is important that the Committee understands that Clauses 11 and 31 are not breaking new legal ground. “Suspicion”, as opposed to ‘belief’, is a test in other similar matters. Within POCA itself, a judge has to be satisfied that there are reasonable grounds for suspecting that a defendant has benefited from their criminality in order to issue a production order. Also, under the Police and Criminal Evidence Act 1984, a police officer may arrest without a warrant anyone whom he or she has “reasonable grounds for suspecting” has committed an offence. So, at the early stages of a criminal investigation, it is appropriate that the court uses the threshold of suspicion, rather than belief. We think that this is a direct parallel supporting the amendment we are seeking to make in Clause 11.
This was one of the issues considered by the Joint Committee which undertook pre-legislative scrutiny of the Modern Slavery Bill. In its report, the Joint Committee made the following comment:
“It is imperative that law enforcement authorities should be able to freeze relevant assets at the earliest possible stage in an investigation, and rarely, if ever, more than 24 hours after arrest. We therefore strongly recommend that the test for obtaining a restraint order be amended to make it less stringent. We note that the Government has already committed to reducing the test from ‘reasonable cause to believe’ to ‘reasonable suspicion’. We approve of this formulation.”
I hope the Committee will do so too.
My noble friend Lady Hamwee asked what would happen if a defendant were able to make an application to a court to lift a restraint order. A court may discharge a restraint order, on application, where the investigation has not progressed to its satisfaction. That freedom is available to a defendant, who may also apply to the court to vary a restraint order. It must do so if the investigation has not progressed satisfactorily. I hope that noble Lords will be happy with my explanation and that my noble friend will be content to withdraw her amendment, in the light of my comments.
Baroness Hamwee
My Lords, I am glad to hear about the judicial discretion which might be applied. I would like to think that the reduction in the number of restraint orders or applications for them is because of a problem with the legislation and not something inherent in the new arrangements with, for instance, those concerned not directing their minds to the lower test. That can always be an issue and changing the test does not change it. I am, of course, happy to beg leave to withdraw the amendment.
“( ) In section 47B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.”
Baroness Williams of Trafford
My Lords, Clause 13 deals with the search and seizure powers available to appropriate officers under Sections 47A to 47S of the Proceeds of Crime Act. Sections 47A to 47S, which were inserted into POCA by the Policing and Crime Act 2009, provide for search and seizure powers, in England and Wales, to prevent the dissipation of realisable property that may be used to satisfy a confiscation order. These powers will, once commenced later this year, be available to law enforcement officers, such as the police and National Crime Agency officers. The power to seize property is currently subject to the same test as for the making of a restraint order. The existing test is that there is reasonable cause to believe that the person has benefited from conduct constituting the offence.
As we have already debated, Clause 11 is designed to enable assets to be restrained more quickly and earlier in investigations. It does this by lowering the test for the grant of a restraint order from the court having “reasonable cause to believe” that the alleged offender has benefited from his criminal conduct to the court having “reasonable grounds to suspect” that the alleged offender has benefited from his criminal conduct.
To exercise certain powers and investigative tools at the early stages of an investigation, the officer and the court have to be satisfied only to the threshold of suspicion, rather than of belief. For example, in order to obtain a production order under POCA, reasonable grounds for suspecting have to be shown, and under the Police and Criminal Evidence Act 1984, a police officer may arrest without a warrant anyone whom he has reasonable grounds for suspecting of committing an offence.
It therefore follows that the legal test for exercising search and seizure powers, which will enable law enforcement agencies to identify and protect assets through search and seizure for a future confiscation order, should complement that of a restraint order. Indeed, it is already the case that the reasonable grounds for suspecting test applies to certain of the powers in Sections 47A to 47S. For example, this lower test already applies to the power to search premises in Section 47D of POCA.
Amendment 17 therefore brings the test for the seizure of property in Section 47B into line with the change we are making in relation to restraint orders; namely, reducing the legal test to “reasonable grounds to suspect”. Amendments 25 and 28 insert a new clause into Chapters 2 and 3 of Part 1. These new clauses simply replicate for Scotland and Northern Ireland the provisions in Clause 13, as amended by Amendment 16. I beg to move.
“(5B) In the case of money held in an account not maintained by the person against whom the confiscation order is made, a magistrates’ court—
(a) may make an order under subsection (5) only if the extent of the person’s interest in the money has been determined under section 10A, and(b) must have regard to that determination in deciding what is the appropriate order to make.””
Baroness Williams of Trafford
My Lords, as we have debated, Clauses 1 to 4 include provisions designed to ensure that criminal assets cannot be hidden with spouses, associates or other third parties. This is achieved under Clause 1 by enabling a court to make a determination as to the extent of the defendant’s interest in property. Any such determination will be made by the court at a confiscation hearing. This determination may include money held in a bank or building society account.
Section 67 of POCA currently enables a magistrates’ court to order a bank or building society to pay over money to satisfy a confiscation order. This provision needs to be able to work in conjunction with Clauses 1 to 4 when the court makes a determination that the defendant has an interest in a bank account that is, for example, held by a third party, such as a company owned by the defendant.
Amendment 18 accordingly amends Section 67 of POCA so as to reflect the court’s new power to make a determination as to a defendant’s interest in property. The amendment provides for a magistrates’ court to order payment of funds held in a bank account that is not in the name of the defendant towards the satisfaction of the defendant’s confiscation order, in accordance with the court’s determination of the defendant’s interest in that account. This will enable funds held in a bank account to be confiscated rapidly where the account is not held in the name of the defendant. Any third parties affected would have the opportunity to make representations before such a determination was made. Only accounts subject to a determination by the court at the confiscation hearing will be affected by this amendment.
Amendment 29 makes a similar change to the Northern Ireland provision in Clause 33. I aim to bring forward on Report a new clause which will replicate for Scotland Clause 14 in its amended form. I beg to move.
Baroness Hamwee
Baroness Hamwee
Amendment 19 would remove paragraph (b) of new subsection (7A) in Section 67 of POCA. Amendment 20 would make an order under this new subsection (7B) an affirmative order. Having had the benefit of a discussion with the Minister, I know what is meant by the phrases,
“money that is represented by”,
and “may be obtained from” as distinct from money actually obtained from. It was an interesting discussion, but it would useful to have the information on the record.
On the order which is required, what is proposed by the Government is quite significant, and it seems to me that an affirmative order would be more appropriate in this case. I beg to move.
Lord Taylor of Holbeach
My Lords, Clause 14 amends Section 67 of the Proceeds of Crime Act with a view to speeding up the confiscation of funds held in bank accounts. In addition, the clause enables, through secondary legislation, the powers in Section 67 to be updated to include other realisable cash-like financial products, such as share accounts and pension accounts that may be held by banks or other financial institutions.
Currently, seizure powers under Section 67 of POCA apply only to money in its traditional form held in an account with a bank or building society. Money can also take the form of, or be represented by, innovative financial products. This includes digital currencies whereby the user obtains goods or services by virtual means rather than a physical or electronic exchange of funds.
Currently, it is not possible to realise such instruments for the purposes of seizure under Section 67 of POCA. The extension of powers to encompass other financial products may require modifications to Section 67 to provide for such financial instruments or products to be converted into cash. The new subsection (7B) of Section 67, inserted by Clause 14(3), provides the power to make such modifications.
Clause 14(3) also applies to money that may be obtained from a financial product that is something other than a standard current or savings account. I shall give examples of this, and I am grateful to my noble friend for giving us the chance to put this on the record. An example of such a product would be a pension plan that has yet to mature but will pay an annuity and a lump sum on retirement. Other examples could include a share account or a virtual currency such as Bitcoin. Essentially, therefore, the clause provides for the capture and realisation of instruments with an economic value. I hope that that explains to my noble friend the use of the term “represented by” a financial instrument or product in Clause 14(3).
By virtue of Clause 14(5) an order made under new Section 67(7A) of POCA will be subject to the affirmative procedure. New Section 67(7B) simply amplifies the scope of the order-making power in new Section 67(7A)—it is not a second free-standing order-making power. I hope that I have made that clear. Accordingly, it is not necessary to refer to new Section 67(7B) in Clause 14(5). That being the case, I hope that my noble friend will agree that her amendment is, strictly speaking, unnecessary. However, it has served a useful purpose in that I have been able to explain the purpose of the provisions in Clause 14. In the light of that explanation, I hope that my noble friend will be content to withdraw her amendment.
Baroness Hamwee
My Lords, I am afraid that it occurred to me only while I listened to my noble friend’s explanation that I have not pursued the issue, where it is digital currency or an annuity under a pension plan, of how that will be assessed in cash terms at the point when the cash needs to be calculated. I assume that that must be somewhere else in the legislation—probably in existing legislation. However, that is an issue. We heard recently about how bitcoins are fluctuating in value. Therefore the point at which the calculation is made is very important. Also, we all know that there are issues around the value of an annuity. Therefore I realise, listening to my noble friend, that there is a lot more to this to be thought about than I am afraid I had thought about. Of course, I will beg leave to withdraw the amendment at this point, but—
Lord Taylor of Holbeach
I will willingly write to my noble friend. I am not in a position to be able to tell her the process of valuation of those things from the Dispatch Box today, but I am sure that it would be of interest to the House to know how those valuations occur. I do not suppose that that is the only circumstance in which those things have to be valued.
Baroness Hamwee
My Lords, I am grateful for that; I did not seek to put my noble friend on the spot today. However, as I said, there is a lot more to that than might appear in the Bill. I beg leave to withdraw the amendment.
“Restitution order and victim surcharge
(1) In section 97 of the Proceeds of Crime Act 2002 (effect of order on court’s other powers), in subsection (3)(a), at the end insert “, a restitution order or a victim surcharge under section 253F(2) of the Procedure Act”.
(2) After that section insert—
“97A Application of receipts: restitution order and victim surcharge
(1) Subsection (2) applies if—
(a) a court makes a confiscation order and a relevant order against the same person in the same proceedings, and(b) the court believes that the person will not have sufficient means to satisfy both orders in full.(2) In such a case the court must direct that so much of the amount payable under the relevant order as it specifies is to be paid out of any sums recovered under the confiscation order.
(3) Subsection (4) applies if—
(a) a court makes a confiscation order, a compensation order under section 249 of the Procedure Act and a relevant order against the same person in the same proceedings, and(b) the court believes that the person will not have sufficient means to satisfy all the orders in full. (4) In such a case the court must direct that so much of the compensation, and so much of the amount payable under the relevant order, as it specifies is to be paid out of any sums recovered under the confiscation order.
(5) The amount a court specifies under subsection (2) or (4) must be the amount the court believes will not be recoverable because of the insufficiency of the person’s means.
(6) Where the amount a court specifies in a direction under subsection (4) is sufficient to satisfy in full the compensation, the direction must provide for the compensation to be so satisfied before payment of the amount payable under the relevant order.
(7) Where the amount a court specifies in a direction under subsection (4) is not sufficient to satisfy in full the compensation, the direction must provide for the compensation to be satisfied to the extent of the amount specified in the direction.
(8) In this section, “relevant order” means—
(a) a restitution order, or(b) a victim surcharge under section 253F(2) of the Procedure Act.(9) In this Part, “restitution order” is to be construed in accordance with section 253A(2) of the Procedure Act.””
Baroness Williams of Trafford
My Lords, the new clause proposed by Amendment 23 makes equivalent provision for Scotland to that contained in Clause 6 as regards England and Wales. It provides for the money collected under a confiscation order to be diverted to pay other financial penalties imposed by the court where the accused has insufficient means to meet all the financial penalties imposed on him or her.
The proposed new clause ensures that where the court imposes a confiscation order alongside a compensatory financial penalty, those compensatory penalties can be paid from money collected under the confiscation order where the accused does not have sufficient means to satisfy all the orders in full. The new clause caters for the situation where the court has imposed a confiscation order alongside either the victim surcharge or a restitution order. It also caters for the situation where a confiscation order is imposed alongside a compensation order and either the victim surcharge or a restitution order. The victim surcharge and restitution orders are financial penalties which can be imposed by the court under the Criminal Procedure (Scotland) Act 1995.
Baroness Williams of Trafford
My Lords, the intention behind Clause 15 is to provide that the serving of a default sentence in Scotland for failure to pay a confiscation order does not discharge the outstanding debt. In making such provision, the clause brings the position in Scotland into line with that in England and Wales. Paragraph (a) of the clause achieves this intended outcome by amending Section 118 of POCA to disapply the relevant provision in the Criminal Procedure (Scotland) Act 1995, which relates to fine enforcement.
Paragraph (b) of Clause 15 makes a consequential amendment to POCA to modify the application of Section 224 of the Criminal Procedure (Scotland) Act 1995. That section requires warrants of imprisonment for non-payment of a fine to specify the date for the discharge of the liability to pay the fine—in practice once the default sentence has been served—notwithstanding the fact that it has not been paid. The effect of paragraph (b) is that that requirement will no longer operate where an administrator is appointed in relation to the confiscation order in respect of which the default sentence was served.
However, on further examination, the Scottish Government have concluded that Section 224 should be disapplied entirely. As currently drafted, the clause would result in some individuals still having their confiscation order discharged once they have served a default sentence, which is not the outcome the Scottish Government are seeking to achieve. I beg to move.
Lord Taylor of Holbeach
“Conditions for exercise of search and seizure powers
(1) In section 127B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.
(2) In section 127G of that Act (“appropriate approval”), before paragraph (b) of subsection (3) insert—
“(ab) in relation to the exercise of a power by a National Crime Agency officer, the Director General of the National Crime Agency or any other National Crime Agency officer authorised by the Director General (whether generally or specifically) for this purpose,”.”
Lord Taylor of Holbeach
“Conditions for exercise of search and seizure powers
(1) In section 195B of the Proceeds of Crime Act 2002 (conditions for exercise of powers), in subsection (2)(d), for “is reasonable cause to believe” substitute “are reasonable grounds to suspect”.
(2) In section 195G of that Act (“appropriate approval”), before paragraph (b) of subsection (3) insert—
“(ab) in relation to the exercise of a power by a National Crime Agency officer, the Director General of the National Crime Agency or any other National Crime Agency officer authorised by the Director General (whether generally or specifically) for this purpose,”.”
Lord Taylor of Holbeach
“(5B) In the case of money held in an account not maintained by the person against whom the confiscation order is made, a magistrates’ court—
(a) may make an order under subsection (5) only if the extent of the person’s interest in the money has been determined under section 160A, and(b) must have regard to that determination in deciding what is the appropriate order to make.”
Arrangement of Business
Baroness Anelay of St Johns (Con)
My Lords, we have reached an unusual moment, as those taking part in the Bill proceedings this afternoon have been so succinct in their presentations and their responses that we have already reached the Question for Short Debate. Participants would normally expect that we would not begin this business until 7.30 pm. We have made strenuous efforts to contact those involved, and I see that the shadow Minister is in his place very promptly, and that the Minister is here as well. However, I regret to say that my latest understanding is that the owner of the Question for Short Debate, my noble friend Lord Ribeiro, is stuck on an Underground train. Despite my looking round rather nervously to either side, I still do not see any sign of him.
It is a most unusual circumstance but I cannot adjourn the House pending an arrival, simply because we cannot predict when that might be. If we had information about an arrival we might do so, with the agreement of the House, but I am not in a position to ask the House to do that. Therefore, with great apologies to those who are expecting to take part in the Question for Short Debate, it will not take place today. It will have to be—ah, my noble friend arrives. Phew and double phew! My noble friend Lord Ribeiro is clearly a Peer who is going to go far. The Question for Short Debate will now go ahead. As it is last business, it will have an hour and a half, not just an hour. This has no impact for the Minister, whose time remains at 12 minutes. The time limit for all other participants becomes 10 minutes.
World Health Organisation
Lord Ribeiro
To ask Her Majesty’s Government whether they will support the strengthening of emergency and essential surgical care and anaesthesia by the World Health Organisation to reduce the global burden of disease.
Lord Ribeiro (Con)
My Lords, I thank the Leader for making the allowance for me to get in and start this debate. I shall open by quoting from a paper in Lancet Global Health in 2014 from the surgical departments of Massachusetts General Hospital, Boston Children’s Hospital and Stanford University, California. It states:
“Global health efforts, guided in part by the Millennium Development Goals (MDGs) have focused mainly on the prevention and treatment of malnutrition, obstetric disorders, and communicable diseases. With the exception of a few surgical procedures—eg, caesarean delivery and male circumcision”—
the latter because it reduces the transmission of communicable diseases—
“surgical interventions have been largely ignored”.
The purpose of this debate is to raise awareness of the value of surgery as a means of delivering effective public health.
In 2010, road traffic accidents accounted for 75.5 million disability-adjusted life years, or DALYs, up by 20 million since 1990. Cancer is on the increase, as are other non-communicable diseases, as life expectancies in developing countries increase with the reduction of HIV/AIDS and deaths from malaria and other infectious diseases. The perception of surgery as an expensive intervention may itself be a barrier to its acceptance as a means of reducing the global burden of disease. There is good evidence from Professor Haile Debas and others that surgical conditions, especially trauma and injury, obstructed labour and congenital anomalies such as club feet and cleft palate are all public health problems. Yet attitudes to surgery—that it is only affordable for the rich in developing countries and lower-income countries—mean that it does not appear on the public health radar for the poor.
Let me give some facts. I thank the Library for its excellent briefing documents, which I hope all noble Lords have received. There are 234 million surgical operations performed globally every year, but the poorest one-third of the world population receive 3.5% of all surgical operations. Approximately 2 billion people have no access to surgical facilities, and this is a global crisis. In high-volume countries—the haves—we have more than 14 operating rooms or theatres per 100,000 of population. In sub-Saharan Africa there are fewer than two operating rooms per 100,000 of population. Globally, 77,000 operating theatres have no pulse oximeters to diagnose hypoxia, or low oxygen levels, during surgery. Here I declare an interest as the patron of Lifebox, a charity which delivers pulse oximeters globally. In all, this amounts to more than 30 million operations worldwide without basic safe monitoring. It takes us back to the old days, when one felt the pulse and estimated the condition of the patient purely on feel.
In 2012 the noble Lord, Lord McColl, and I hosted a meeting of surgeons determined to bring these concerns to a wider audience. We and others cofounded an organisation called the International Collaboration for Essential Surgery, or ICES. The concept is not new and it has been debated for more than 40 years, but the problem is becoming acute in developing countries as more of them suffer a brain drain of their doctors and highly qualified nurses. The definition of essential surgery is the provision of basic intervention which will prevent premature death and long-term disability. Evidence suggests that there are 15 basic surgical interventions which will deal with approximately 80% of basic surgical need and the commonest urgent pathology in a community, particularly in rural areas where doctors are scarce.
Because of the loss of traditionally trained surgeons, who migrate to the private sector in cities, work for NGOs or emigrate to other countries, we need to train up a new cadre of non-physician clinicians, or NPCs. In 1963 Tanzania started to train NPCs, commonly known then as barefoot doctors, as the idea came from China. Malawi’s first medical school began by training clinical officers to carry out general surgery, obstetrical procedures and others in 1980. Similar programmes have developed in Niger, Zaire, Burkina Faso, Ethiopia, Senegal, Somalia and South Sudan. I believe that this paradigm shift is happening right across most of sub-Saharan Africa; it is just that the rest of the world needs to recognise it and catch up with what is happening. There are currently some 47 sub-Saharan countries using non-physician clinicians or clinical officers.
As chairman and vice-chairman of the All-Party Parliamentary Group on Global Health, the noble Lord, Lord Crisp, and I wrote to DfID, pointing out the benefits of surgery in the public health arena. We posed two simple questions. How will DfID raise the profile of essential surgery as a public health priority, and how will the department help to frame surgery as a crucial and affordable public health intervention? The response was both disappointing and bland and suggested to me that the department’s focus remained on communicable diseases and the well-being of mothers and children. I am not saying that that is not an important priority, but that appeared to be its continuing stance. However, let us contrast that with the way in which the Department of Health and the then Chief Medical Officer, Sir Liam Donaldson, promoted the surgical checklist as part of the patient safety agenda in developing countries. This is now a must-do exercise in all NHS hospitals in the UK, and is gaining traction in sub-Saharan African countries.
The World Health Organisation initiative is making a difference not only in this context in terms of patient safety but in other areas as well. The WHO pulse oximetry project, to which I referred earlier, run by Lifebox, is a case in point. Similarly, the WHO global initiative for emergency essential surgical care and guidance for essential trauma care is also something that is developing apace. I noticed the criticism of DfID by the House of Commons International Development Committee in March, when it accused DfID of,
“raiding bilateral development programmes in low income countries”,
to,
“support disasters in middle income countries”.
It noted that,
“expenditure on low-income countries is … significantly lower than in 2010-11”,
and suggested that,
“DFID staff spend less time writing the perfect business case and more”,
time on the ground.
The International Collaboration for Essential Surgery, or ICES, has produced a powerful film entitled “The Right to Heal”, which was shown here in Parliament. This film identifies seven conditions which cause the vast majority of preventable surgical deaths and disability. They are quite simple; they are hernia, club foot, cleft palate, injury, cataracts, appendicitis and obstructed labour—which inevitably, in very young girls with underdeveloped pelvises, can go on to cause urethral fistulae. Surgery can relieve the suffering from many of these common conditions and return people to normal lives.
Will the Government support the resolution on emergency care, agreed by the 67th World Health Assembly, attended by 42 countries, including the United Kingdom, to be submitted at the 2015 assembly meeting? Secondly, the post-2015 sustainable development goals present an opportunity for the Government and DfID to support the role of surgery as a public health measure. Will they commit to doing so? Thirdly, will DfID examine the extent to which global surgery represents a component of its programme and expertise? What assurances can DfID give that it will review the development goals in respect of surgery and anaesthesia post-2015, when the millennium development goals end? Finally, I hope that the Government will make strong representation after this debate at the 13th working group of the UN sustainable development goals on 14 to 18 July, as this is a member state.
Baroness Brinton (LD)
My Lords, I declare an interest as a past trustee of CBM UK, of which I am a current patron. I thank the noble Lord, Lord Ribeiro, for initiating this debate, which will cover a very great area of experience and expertise. Having listened to the noble Lord, I am even more aware of my extensive ignorance in this area, so I hope that he will allow me to focus on just one thing that he mentioned. I want to talk about a multi-partner club-foot initiative which started in Africa, and in which CBM has been involved over the past decade. It acts as a model for surgeons and aid agencies working together in the future.
CBM is an overseas disability charity, founded more than 100 years ago, which has worked in Malawi for many years. For some reason, Malawi has the highest incidence of club-foot in the world, and CBM has worked for a long time with local hospitals, the Global Clubfoot Initiative and, more recently, the Royal College of Surgeons on supporting young patients born with this disability. This work typifies the hope that my noble friend expresses in the title of this debate.
Steve Mannion, a consultant surgeon in the NHS and senior lecturer on surgery, is the orthopaedic adviser to CBM. All orthopods know that treatment for club-foot should be started early; diagnosis at birth is ideal, rather than later in life, especially for cases that require surgery. He used the Ponseti treatment, which is a physiotherapy technique not well known but which has become the gold standard in the last decade, mainly because of this innovative work. It can be provided effectively and economically. The club-foot medical community also wanted to manage the care of others who had not been treated as young children, and for whom the damage to their feet, legs and ligaments would take longer to treat. The noble Lord, Lord Winston, who cannot be in his place this evening, filmed this project in Malawi in 2008.
The Ponseti method uses corrective manipulation and then keeping the patient in a plaster case. In most cases, this will avoid surgery. The surgeons have also found a cost-effective method of producing the Steenbeck foot abduction brace, which young patients have to wear full time for two to three months, and then at night for two to four years, to ensure that the foot grows into the correct position. The NHS version of this brace is a bit like Ford motor cars—you can get them in one colour only. It is effective, expensive and dull. This surgeon, working with local craftsmen in Malawi, developed a brighter and much cheaper arrangement, which he brought back with him to the UK and which, if my memory serves me right, cost around one-fifth of the UK equivalent. Suddenly, UK parents were asking for it in preference to the NHS version. So here is an assistive technology product from the developing world, saving the NHS money—good news. For £12 million, the cost of one advanced surgical robot in the UK, one-quarter of a million children can be treated and taught to walk.
The work in Malawi progressed well. Diagnoses were made early, but Steve Mannion told me four or five years ago that Malawi Ministers had expressed real concern to him that there were more Malawian doctors in Manchester than there were in Malawi and, helpful as medical aid and support was, there was a serious brain-drain problem. This is where the Royal College of Surgeons comes in. It has developed a local project training surgeons in-country under their own auspices, so there is no need to leave their home to learn the leading techniques. It has worked well. The Royal College of Surgeons developed this further and hosted an international conference on global surgical frontiers in January 2012, bringing together surgeons and aid organisations. The editorial in the Lancet on 21 January 2012 says:
“The greatest burden of surgically treatable diseases falls on people in developing countries, but the poorest third of people receive only 35% of operations and have the lowest numbers of surgeons per head of population. These statistics, combined with the emphasis on reducing global deaths from infectious diseases, make surgery feel like a neglected specialty in the current global health arena. But, as the conference showed, reducing the disparities in surgery between developed and developing countries will take a massive, coordinated, worldwide effort”.
Some 30 months on from that conference, orthopaedic surgeons such as Steve Mannion and the Royal College of Surgeons are training large numbers of local surgeons and physiotherapists in club-foot and other techniques, with the College of Surgeons of East, Central and Southern Africa, and now elsewhere in the world. As the Lancet says:
“The move away from the paternalistic approach of parachuting in Western surgeons on brief missions and towards teaching skills to local surgeons needs to continue, although the need for skilled surgeons to take part in sustainable programmes is still great. Coordination needs to exist between surgical institutions in developing and developed countries so that skills taught are appropriate to requirements. In addition, coordination between and within countries needs to increase to ensure that qualifications have no borders … It is also essential that efforts continue to plug the brain-drain from developing countries”.
The treatment of club-foot is life-changing for patients. Disabled children are often at the back of the queue for medical support and education, and as they grow up they are the last to get employment opportunities in their communities. This simple surgical and non-surgical intervention and treatment is not only benefiting thousands of children across Africa, in Laos, in Papua New Guinea and in other countries; it is providing local craftsmen with work—and local surgeons are being trained in world-leading surgical and physiotherapy techniques. Perhaps most importantly, it is changing the centuries-old view of the West parachuting experts in to solve problems. The surgeons from the UK say that they are learning as much from their colleagues in-country as they are teaching them.
To conclude, I have one simple question to ask my noble friend the Minister. What can the Government, both in DfID and in the Department of Health, do to ensure the dissemination of successful projects like this, and to encourage more in the future?
Baroness Chalker of Wallasey (Con)
My Lords, I begin by apologising—particularly to my noble friend Lord Ribeiro—for my lateness, which was caused by inattention to the annunciator screen. I also make the declaration that I am president of the Chalker Foundation for Africa, and we assist in the training of basic medical workers in Africa for Africa. That is often assisted, as my noble friend Lady Brinton said, by teaching skills in Africa. That may be done by people from other countries, but increasingly Africans are teaching Africans, which is a very worthwhile advance.
I wish to concentrate on two aspects of the need for surgery across the developing world. I support all the comments that I heard my noble friend Lord Ribeiro make, and thank him for initiating this debate. The two aspects that I am most concerned with are fistula repair—which is essential for maternal health, under millennium development goal 5—and cleft palate and lip surgery.
We all know that fistula is an abnormal channel or passageway in females, usually caused by the lack of prenatal and obstetric care, as well as by poverty, malnutrition, early marriage and childbirth, harmful sexual practices and violence, and a lack of quality and accessible maternal care and healthcare. There are also traditional practices like encouraging women to drink water to aid a baby’s birth. That does not help: it increases the risk of fistula, because a full bladder during childbirth is a bad thing. As was said earlier, obstructed labour and obstetric fistula cause 8% of maternal deaths worldwide, but a much higher percentage in the developing world—and it is clear from the statistics on very hard and prolonged labour that about 80% of the problems result from that cause.
I have mentioned many times in this House the fact that the problems are also caused by poverty: the distance that people must travel and the uncomfortable travelling conditions; the lack of nutritious food and the cost of care; and the lack of access to healthcare, particularly in rural areas, which are most deprived in terms of transport. Above all, there is the lack of trained midwives and doctors. We also know that, as my noble friend said, malnutrition causes stunted growth in mothers, which makes giving birth much more difficult.
About 63% of those on a Nigerian fistula programme needed surgery. About 37% had, fortunately, had access to a catheterisation programme within 75 days of the birth—but that can be implemented only where people have been trained to do it, and in rural areas that is just not going to happen.
There are also cases in which a caesarean operation is critical, when a surgeon can see that there is likely to be a real problem. But how can we possibly take that on board when we are not preventing the problems in the first place? That, too, needs the sort of surgery that my noble friend spoke about. The advantage of a caesarean section, if it can be done, is that it can prevent fistulas recurring in later births. But the cost is somewhere around $300, and the aftercare may be as much as $150. It is vital that that surgery be available, and I commend the work of the Addis fistula hospital, and the surgery carried out by Marion Sims, and by Reg and Catherine Hamlin. That is the largest fistula repair centre in the world. We now also have the Niger Danja centre, operated by the Worldwide Fistula Fund.
I now turn to the need for surgery for cleft lip and palate. In the developed world, although the causes are mainly unknown, a cleft lip is usually detected between the fourth and seventh week of pregnancy, and a cleft palate between the sixth and ninth week. It is highly unlikely that that will be diagnosed in developing countries, and so the surgery needs to be done in the first few months of the life of the child. I have been much impressed by the fundraising done by the Smile Foundation, which, through its donations to hospitals and its support of doctors, is carrying out a large number of operations every year, which can prevent children being disfigured for the rest of their lives.
That is why I wanted to speak in support of my noble friend in this debate. I believe that it would be right for DfID to support the role of surgery as a public health measure. There are some occasions when it actually happens, but it happens by default, not because we have made it happen by our policy decision. I also believe that, as my noble friend said, we need to find a way to review the development goals in respect of surgery post-2015. I am pleased to have been able to contribute a little in this debate. These areas of work are absolutely vital, alongside treatment for club foot and the many other surgical procedures that can make all the difference between a mere existence for somebody, and a real life.
Lord Crisp (CB)
I, too, congratulate the noble Lord on securing this debate, on his excellent speech, which laid out the issues extremely well, and on continuing to keep this issue live. He is right to choose this moment to seek to use the United Kingdom’s enormous prestige and influence in the world of international development to press the point home even further.
The noble Lord described the problem well, and I shall pick up some of his points. First, there are just 15 interventions that will, between them, cater for about 80% of surgical need. That relates to the other point that he and the noble Baroness, Lady Brinton, made: the fact that those interventions need not be carried out by surgeons who are physicians. They can be done by non-physician surgeons—and we now have the evidence about where that can work and where it cannot work. I declare an interest as chair of Sightsavers, which works on avoidable blindness and in preventing blindness. In Africa almost all cataract surgery is done by nurses with additional training, and it is done to the same standards and with the same outcomes. As has already been said, we have seen that pattern in other disciplines too.
I also totally agree with both the noble Lord and the noble Baroness that this is a two-way street. We can learn, and some of the things that are happening in Africa can be imported back to the UK; indeed, the Ponseti technique can be reimported back to the UK. The noble Lord made the further point that seven conditions which can be prevented by surgical intervention amount to almost all the medical conditions that need to be tackled to prevent disability and death. We know what to do—that is the simple point here.
This problem is becoming more visible. The noble Lord and his noble friend Lord McColl have pressed for measures to resolve it, as have others around the world, and the issue is now on the agenda of the World Health Organisation. It has been picked up by the Lancet Commission on Global Surgery, and there is a real opportunity here for the UK to take a lead on this issue on a practical level and in policy. Sometimes just pushing the policy is fine but offering practical support is also important. Indeed, the UK is already doing that but it could do more. Noble Lords may not be surprised to hear me talk specifically about partnerships in this regard—that is, partnerships between UK organisations and African organisations or, indeed, Asian organisations. The All-Party Parliamentary Group on Global Health, which I co-chair, recently produced a report entitled Improving Health at Home and Abroad, which argued strongly that if our doctors, nurses, managers and others spent some time working in Africa they would learn new skills, abilities and flexibility which they could reimport to this country, thus providing scope to improve health at home and abroad at the same time, which would be fantastic.
I wish to reinforce that concept with some related points. It has been stressed that the brain drain is very important, but even more important is the need to offer people education and training. The UK has a fantastic tradition of education and training in health which we can offer to others and thus put it to more effective use. Put simply, if every African who acquired some medical or nursing training before they emigrated went home, it would deal with about 10% of the problem. Therefore, a big increase in training is needed.
I congratulate DfID on extending the partnership scheme and hope that it will continue to extend that scheme, as one would expect. However, it is not just a question of our people working and training in Africa and people from Africa coming here; British surgeons have been innovative in this field. I think of people the noble Lord, Lord Ribeiro, will know such as Bob Lane, a retired surgeon, who has developed a programme to enable doctors to deal safely with a few general surgical procedures—I hope the doctors present will forgive me for describing those procedures in non-technical terms—and one can train trainers to deliver that programme in a relatively short time. This is a real gift to the world. I also think of people such as Professor Chris Lavy, professor of trauma at Oxford University, who has trained orthopaedic clinical officers in Malawi. Therefore, we have a lot to offer in terms of training.
Getting from where Africa is today to where it needs to be cannot be achieved in the short term by training alone. A lot of young doctors take a year out of their training but many of them go to Australia and other places where they are not necessarily needed. I hope that we can find a way to encourage more of them to work in rural African hospitals when they have received enough training in the UK to enable them to provide general medical services and undertake general surgery. There is an organisation based in South Africa called Africa Health Placements and, if a doctor wants to work in Africa, that organisation will find him or her a placement. It is a not-for-profit job agency, as it were. The young doctor from the UK—it could, of course, be an older doctor—will receive a wage paid by the South African Government, which is enough to live on while they are there, and return to the UK at a later stage.
I think that Africa Health Placements is on the verge of persuading the Americans that if a young doctor takes up a placement in Africa for a year at the end of their training in America, they should get some money taken off their student loan. I ask the Government to consider that initiative. That is a very neat, interesting and relatively cheap way to incentivise people to work as surgeons or doctors in rural hospitals which lack such personnel. As I say, they are paid by the South African Government, the Zambian Government, or whichever Government are involved.
That measure is significant but not as significant as some of our other development initiatives. I merely ask the Government to consider that, in the short term at least, by which I mean 10 or 15 years, there will be a need for more non-African doctors in Africa. There is also a need for some doctors from other countries to come to this country to acquire more specialist training. There is a programme, which I believe is called the international medical training scheme, and I hope that the Minister will comment on it, or write to me on the numbers that are involved. Therefore, we can offer practical measures and we should make the most of them because they are impressive. Indeed, the UK is already doing a great deal in this regard, but it could do more.
However, we also need to introduce measures at the policy level. I echo what the noble Lord, Lord Ribeiro, said about the Government’s commitment to the resolution that he mentioned. I congratulate the Government on their disability-inclusive programme in international development. What better way is there for the Government to signal that they have such a programme than to do something which prevents disability? It is very much of a piece with the great announcement the Government made on that last week.
What are the Government doing to promote partnerships? Given that I suspect that the noble Baroness who will reply to the debate will speak from a Department of Health perspective as well as from a government perspective, what is being done to encourage the NHS to be more active in this field, as this issue is about improving health at home as well as abroad? Will the Government allow me to bring personnel from Africa Health Placements to meet government officials to consider ways in which we can persuade more of our young doctors to work in Africa? Will the noble Baroness write to me or let me know how many people are involved in the international medical training placement scheme?
Lord McColl of Dulwich (Con)
My Lords, I thank the noble Lord, Lord Ribeiro, for initiating this debate on a subject which I have always thought is of great importance. I ought to declare an interest because over the past 40 years I have worked in about 14 African countries doing operations, teaching various surgical techniques and helping to enhance surgical care and anaesthesia in realistic ways that they wanted and which were within their financial means.
I always tried to emphasise that organisations should be sustainable, especially in the sense that those they trained would not promptly emigrate to more lucrative climes. Some while ago, I was asked to devise the curricula for two medical schools in Libya, one in Tripoli and the other in Benghazi. I inquired whether they would like a system tailor-made for Libya or whether they just wanted to copy the West. Of course, they said that they wanted something tailor-made for Libya, which was very welcome. I took a team from Guy’s Hospital—there were about five or six of us—to help them to devise suitable curricula. When we presented it to the deans, the first question they asked was, “Will this be recognised by London University?”, and, of course, it would not, so it was rejected and they reverted to the usual western pattern. Needless to say, on graduation many of the students from those medical schools promptly emigrated.
People were very suspicious of me going to such a place as Libya. Indeed, the then Prime Minister, Margaret Thatcher, asked me, “Where have you been recently?”. When I replied that I had been to Libya, she retorted, “You what”?, so it was not a very popular thing to do. People became even more suspicious when I had to operate on Gaddafi’s father. It was the middle of the night. He was 103; I know that they are all 103 out there, but this chap looked much older than that to me, like a dried-up old prune out of the desert. At the end of the operation, we were standing around the old man’s bed, watching the pulse meter; it would go fairly regularly and then stop so that there would be a gap, and then another gap. I thought that this would be the moment where the pulse stops and the dictator takes his gun out and shoots the doctor—although I thought he would probably shoot the anaesthetist first. Gaddafi asked me, “How is my father?”. I said, “I have good news for you; your father is indestructible”. He laughed, and everyone relaxed. In any case, I have always liked to live dangerously.
Our next project was for people dying of AIDS in Uganda. We went out to set up a hospice at the invitation of President Museveni, because he had been impressed with the one that we had set up in Hackney for people dying of AIDS. The wonderful Minister for Overseas Development, Lynda Chalker as she was then, gave us enormous support to do this. We set up this hospice six miles outside Kampala on the road to Entebbe. As you all know, my noble friend Lady Chalker is much admired and respected in Africa; they always take her advice. She advised us not to have any in-patient beds. I think she must have known that the word “clinician” is derived from a Greek word meaning “bed”—that is why doctors are so obsessed with beds; clinicians are bed people. She advised us instead to concentrate on out-patient treatment. She said we ought to become a teaching centre for the whole of Africa, teaching people how to look after those who are dying at home. How wise she was. I returned to this hospice in Uganda recently and I was delighted to find that it was running extremely well, and run entirely by Ugandans, apart from one lady who was a Scot; she was the finance adviser. By the way, the word “economy” is from the Greek and implies housewifery, which is why ladies are the ones who understand finance.
The next project that I got involved with was a charity called Bridge2Aid in Tanzania. This is an amazing charity that has trained more than 300 emergency dental technicians. They are trained in two weeks to take teeth out; you may think that that is not adequate, but when we were medical students we only had three lectures on how to take teeth out, so in Tanzania they go a bit further. They become expert at taking out teeth and therefore relieve a great deal of dental pain and dental sepsis, which can kill. We give them a pressure cooker and a paraffin lamp to sterilise the instruments. Of course their skills are not recognised abroad so they do not emigrate. This is rather reminiscent of President Nyerere’s barefoot doctor scheme, mentioned by the noble Lord, Lord Ribeiro.
Of course I have been associated with Mercy Ships for many years. We concentrate on teaching the local people various operations and anaesthetic techniques. It has been very encouraging to see how they flourish. On board we had an American eye surgeon, Glenn Strauss, a wonderful trainer who trained a Togolese surgeon to do cataracts. Within a week or two, the surgeon had done 30 cataracts beautifully. That surgeon then taught the next Togolese surgeon, who happened to be his professor. The professor became expert in that, and in turn taught the next one. So we ended up with three competent eye surgeons doing cataract operations in Togo, one in the north, one in the south and one in between. They come back for a refresher course every so often.
I want to tell your Lordships about Gary Parker, an American who trained in north Wales at a very good maxillofacial hospital for about five years. He came to work on Mercy Ships for two months, just to see what it was like, and he liked it so much that he decided to stay a bit longer—24 years longer. He must be the most experienced maxillofacial surgeon in the world and he has trained so many Africans in these techniques.
I ought to mention a most outstanding president in Africa, Ellen Johnson Sirleaf in Liberia. She is one of the best presidents out there and the first lady president. She is an economist, she is tough, and she is doing an extremely good job.
For seven years one of our anaesthetists on board has been doing a great job running courses for anaesthetic providers. In the past two years we have been very fortunate in having on board the consultant anaesthetist Dr Michelle White, who gave up a hard-won consultant post in Bristol to work on the ship for three years. She has been invaluable not only in looking after patients and children but also in teaching. She has made an amazing sacrifice. It is so heartening to see such dedication to help developing countries to improve their healthcare and produce something that will last.
Lord Hunt of Kings Heath (Lab)
My Lords, it is a great pleasure to take part in this debate. The noble Lord, Lord Ribeiro, has raised some very interesting questions on health in a global context, on which I hope that we will get some helpful responses from the Government tonight.
His argument essentially is that surgical interventions —focused, as the noble Lord, Lord Crisp, reminded us, on 15 common interventions—can play a very positive role in improving global public health. I thought that the argument was very persuasive and, as I said, I hope that the Government will respond. The comparison of access to surgery in the richest and poorest nations was striking. When we come to the core question of whether surgery is perceived by DfID as a public health measure, we must bear in mind this obvious inequality between the richest and poorest nations.
I would like to ask the Minister whether she accepts that surgery can relieve many of the most important health conditions that millions of people suffer from globally. It is very important that we get an affirmative response on that.
The comment made by the noble Baroness, Lady Brinton, using club foot as an example, was very striking. The example that she gave from Malawi seemed to be absolutely life-changing and very persuasive.
Of course the noble Baroness, Lady Chalker, speaks from great experience and is much admired in your Lordships’ House as well as internationally. She spoke of some of the major challenges in Africa regarding childbirth, including, as she clearly said, the need for surgery, and in particular of the problems in rural areas. She also mentioned issues arising with cleft palate: the challenge of early diagnosis and the problem of the availability of surgery. Again, it would be interesting to know whether that is a point that is recognised in DfID’s development plans for the future.
As ever, it is a great pleasure to hear the noble Lord, Lord McColl, whose personal contribution is remarkable. Politically correct perhaps he is not, but we are always entertained by his contributions. He mentioned the example of helping with the curriculum in a developing country, which, because it would not then be recognised by western universities and health systems, did not prove to be acceptable to the country itself.
It brings us to the difficult problems of both the emigration of doctors from developing countries and the fact that many students from other countries who come to the UK and other developed countries do not want to return. This brain drain is very worrying indeed. Can the Minister confirm whether it is government policy firmly to discourage such a brain drain? I would also like to ask her, given the example of the programmes training surgeons in the home country, whether the Government support that and will endeavour to give further support to bodies such as the Royal College of Surgeons in future.
The noble Lord, Lord Ribeiro, also raised questions about DfID’s priorities for low-income countries. He suggested that in terms of budgetary expenditure, middle-income countries—if I can call them that—were gaining at the expense of the poorest countries because of natural disasters. It would be good if the noble Baroness could confirm that.
The noble Lord, Lord Crisp, said that the issue was becoming more visible internationally, and mentioned the Lancet Commission on Global Surgery. I thought that one of his most telling comments was on the advantage of partnerships in which the NHS is a full partner but where it is acknowledged that enabling NHS staff to go abroad for a certain time and then come back to the UK can be a real advantage to the NHS. I am sure that that is right. My question to the noble Baroness is the one that the noble Lord raised. Inevitably at the moment, the NHS is under great pressure—and I know from my experience that when an NHS trust is under pressure, it worries about losing staff abroad. That applies to the services as well. Is there work to be done to help the NHS to recognise that there could be great benefits from encouraging young staff in particular to take advantage of these programmes? I doubt whether the noble Lord will get an answer to the question on whether student loans can be discounted, but it would be interesting to know whether the Government were at least prepared to talk to the noble Lord, as he suggested.
We come now to the crunch question. Do the Government accept that surgery has a key role to play in improving health globally, and, as the noble Lord, Lord Ribeiro, said, will they support surgery as a public health matter? That is a very important question. I yield to nobody in my admiration for public health doctors—indeed, I stand here as president of the Royal Society for Public Health—but beloved though public health doctors are, I sometimes think that the only interventions that they are concerned with are those that have absolutely nothing to do with medicine. This is because in the developing world inevitably they think about sanitation, access to water and all those sorts of things, which is entirely understandable. However, it is a question of global equality, too; and the evidence is that medical intervention, medicines and surgery can have a huge, positive impact on individuals. For that reason—the noble Lord’s point was persuasive—these should be regarded as public health measures and are as deserving of DfID’s support as what might be considered as the more traditional public health approach.
Baroness Jolly (LD)
My Lords, I am grateful to my noble friend Lord Ribeiro for raising this important issue and for his thoughtful and incisive comments based on years of commitment and experience. He and I went to Zambia two years ago in the summer, so I have seen him in an area in which he is hugely expert asking extremely pertinent questions of the Minister for Health, on the one hand, and the sister in charge of a hospital in the bush, on the other. I also pay tribute to the work of the noble Lord, Lord Crisp, and the All-Party Parliamentary Group on Global Health. We have heard the personal and local experience of my noble friends Lady Chalker and Lord McColl. As the noble Lord, Lord Hunt, said, this debate has been totally fascinating, and I hope that I can get through my speech and answer all noble Lords’ questions.
The noble Lord, Lord Crisp, and my noble friend Lord Ribeiro, through their work, have highlighted the importance of surgery across the whole world, and indeed it is a key part of disease prevention and treatment, and a public health good. We welcome the All-Party Parliamentary Group on Global Health’s recent activity to highlight this issue, including the film “The Right to Heal”.
We very much support the strengthening of emergency and essential surgical care and anaesthesia in developing countries as a component of universal health coverage, and see it as an issue of great importance. To answer a question of the noble Lord, Lord Hunt, on whether surgery can relieve many of those conditions, yes, indeed—we heard many examples in this debate, including treatment of cataracts, cleft palate and fistula.
The UK supports further consideration by the WHO executive board in January—I say that in response to my noble friend Lord Ribeiro’s first question. Action must be taken to help prevent avoidable death and disability as a result of surgery. Indeed, surgically treatable diseases are among the top 15 causes of disability worldwide. Speakers today have highlighted different examples of the appalling statistics and human suffering resulting from poor training and procedures. This position can be changed by working together. The WHO process is an important part of this work and will help commit the international community to making greater progress in raising awareness, improving data and monitoring, and increasing global collaboration on this issue.
The Government aim to improve the provision of basic health services for the poorest by strengthening health systems. Surgery is a key aspect of health service provision and is addressed in this context: the UK is supporting efforts in developing countries to increase the skills and availability of health workers, and to expand access to essential medicines and equipment. Increasing coverage, access and quality will strengthen health services in addressing all health problems, including those requiring surgical treatment.
In answer to my noble friend Lord Ribeiro’s question on DfID raising the profile of surgery, and the question of the noble Lord, Lord Crisp, on partnerships, we have a number of programmes that specifically improve access to surgical services. The UK is supporting partnerships between the UK and developing countries to improve health services in those countries through sharing skills and capacity development, and bringing benefits back to the UK through volunteer NHS staff returning with stronger skills—I underline the point made by the noble Lord, Lord Hunt—that can be useful when they come home. The health partnership scheme is supporting a range of programmes to achieve better outcomes following anaesthesia and surgery, such as supporting training for healthcare workers in surgical and theatre nursing skills in eight countries in Africa. By June 2014, the scheme had trained 26,600 overseas healthcare workers, and UK health professionals had spent 31,000 days volunteering overseas.
The noble Lord, Lord Crisp, inquired whether the Government would consider welcoming Africa Health Placements. The Government’s “Health is Global” strategy includes work on health system strengthening. Officials work with many organisations and will be happy to meet Africa Health Placements. Other work being undertaken includes the provision of and training in obstetric services, including the availability and quality of caesarean sections and episiotomy, where necessary, and eye surgery. In humanitarian contexts, we also support the UK International Emergency Trauma Register of deployable specialist staff—primarily from the NHS—and a deployable surgical field hospital.
I want to pay tribute to the royal colleges and others for the work they undertake in this area, and the Association of Surgeons of Great Britain and Ireland, which is a member organisation of the International Collaboration for Essential Surgery. Governments, health professionals and the voluntary sector all have a role to play. An organisation that is trying to tackle the basic issues around lack of anaesthetist skills in many countries is Lifebox, mentioned by my noble friend Lord Ribeiro. Its purpose is to provide equipment and support services in low resource and lower-middle-income countries at no or reduced costs. UK hospitals, universities, health and international development third-sector organisations have well established and expanding relationships with healthcare institutions in lower and middle-income countries. These range from: training and capacity building for staff; providing practical skills; continuing professional development; supporting improvements within developing-country organisations; facilitating research; and, indeed, curriculum development. Those are all in line with points raised by many noble Lords.
In response to my noble friend Lord McColl, regarding the funding of Mercy Ships, I can say that DfID has indeed funded mercy ships in the past but currently is not so doing. The noble Lord, Lord Hunt, inquired about the brain drain. The Government are committed to the World Health Organisation code on ethical recruitment of health workers, which is designed to prevent brain drain from countries with a shortage of healthcare professionals.
British health volunteers have a key role to play in improving health in other countries, as highlighted by the all-party group last July in its report Improving Health at Home and Abroad. The noble Lord, Lord Crisp, will be interested to know that the Department of Health and the Department for International Development will shortly publish an updated framework for voluntary engagement in global health by the UK health sector, which will seek to bring greater clarity as to how these activities can contribute, in a sustainable way, to building capacity in low and middle-income countries. It also outlines the benefits and opportunities for UK employers, professional associations and, indeed, individual health workers in the UK.
The medical training initiative accommodates overseas postgraduate medical specialists to train in the UK for up to two years. Participants can return to their home country and apply the skills and knowledge developed during their time in the UK. I think the noble Lord, Lord Crisp, inquired about this; I am happy to give noble Lords figures in a letter.
I would finally like to focus on some priorities for the Government that are linked to this topic. First, as part of any progress in surgical interventions, if basic surgery is to have any chance of widespread continued success, I stress the importance of the need for access to and rational use of antibiotics. This has not been mentioned this evening, but it really is critical. It links to the work that the UK, along with international partners, is leading on tackling antimicrobial resistance, which is one of the biggest global health challenges facing us today. The World Health Assembly recently committed to developing a global action plan. As part of this wider effort, the Prime Minister has today launched an international commission to identify what action may be taken by the global community.
Secondly, we recognise that the rates of maternal and newborn mortality remain unacceptably high and further action is needed. The UK Government have made commitments to save the lives of 50,000 women in pregnancy and childbirth and 250,000 newborn lives. They also support the WHO and UNICEF global action plan, Every Newborn: An Action Plan to End Preventable Deaths, which was launched in Johannesburg this week. The links between newborn and maternal survival and access to quality surgery are clear. It is estimated that one in three pregnant women needs some intervention during birth and between 5% and 15% require a caesarean section. Improving the quality of maternal and newborn care is one of the strategic objectives of the action plan.
Finally, another area where the UK is working, both at home and abroad, is in eliminating female genital mutilation and supporting women and girls affected by this practice. The recent adoption of a WHO resolution on violence against women is a welcome development. Through our work on FGM and reproductive and maternal health, we are also working to prevent and manage obstetric fistula—a hole in the birth canal—which WHO estimates affects between 50,000 to 100,000 women worldwide each year.
All this links to our work towards a health goal in the post-2015 framework. The UK wants to ensure it includes commitments on key areas such as: newborn and maternal health; ensuring access to essential medicines; and universal health coverage—all issues identified in the course of the debate, and all linked to access to quality surgery and anaesthesia. We have been involved in these discussions through the High-level Panel of Eminent Persons on the Post-2015 Development Agenda, which was co-chaired by our Prime Minister, and remain involved through the deliberations of the open working group.
I am grateful for the opportunity to focus on these issues through the debate and will keep noble Lords updated on further discussions by WHO’s executive board. By taking action now at a global level, and by all sectors working together, we can truly make a difference to lives and tackle avoidable mortality and disability.
I will take what time I have left to pick up on a few points that came towards the end of the speech. My noble friend Lady Brinton asked about DfID and the Department of Health supporting successful projects, such as the one she outlined. Working with NGOs and civil society forms an integral part of the Government’s approach to reducing poverty. We will be happy to provide information on funding for NGOs and civil society organisations in a written reply.
My noble friend Lord Ribeiro asked about a stand-alone target on surgery. I hate to disappoint him, but the Government are not in favour of a stand-alone target on surgery in a post-2015 framework. Rather, we think it is more helpful to measure health outcomes, such as reductions in mortality. Surgery may be required in some cases to achieve those, but we also support the inclusion of a target on universal health coverage, which will help to expand the availability of essential health services.
I will write to all noble Lords who have taken part in the debate to answer unanswered questions, but I will also try to arrange a meeting with the relevant Minister to take up these points further.