Grand Committee
(9 years, 10 months ago)
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Arrangement of Business
(9 years, 10 months ago)
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The Deputy Chairman of Committees (Lord Skelmersdale) (Con)
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes on the television clock.
Consumer Rights Bill
(9 years, 10 months ago)
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Baroness Drake
Baroness Drake (Lab)
My Lords, in moving Amendment 63AB I shall also speak to Amendment 63AC. The Government seek to ensure that markets function well by increasing the range of measures available to enforcers under the civil law enforcement regime, which is an initiative to be welcomed. Of course, good business needs safeguards as to how these powers will be used, and Schedule 7 sets out the conditions that enforcement bodies have to meet. However, if those safeguards are so extensive that they act as a deterrent to private enforcement bodies to use the enhanced enforcement measures, much of the value of the new powers will be lost.
Subsections (9) and (10) of proposed new Section 219C, which my amendment would delete, in Schedule 7, set a requirement that a private enforcement body, taking enforcement action, must act consistently with any advice or guidance that the relevant trading standards primary authority has given. Of course private enforcers should consult public enforcement bodies and take into account their views—that is not disputed—but in practice the unintended consequences of proposed new subsections (9) and (10) could mean that a private enforcer would be prevented or deterred from taking civil action that is inconsistent with advice that had been received by the defendant company from its primary authority. This greatly increases the risks involved in taking civil action, particularly on exposure to costs, and makes it much less likely that private enforcers will use the enhanced consumer measures.
If the defendant can satisfy the court that the private enforcer is acting inconsistently with primary authority guidance, the enforcer will automatically lose the action and be liable to pay the defendant’s legal costs. It will be simply irrelevant that the action would otherwise be correct as a matter of law and/or have considerable merit. This exposure to costs in these circumstances will act as a deterrent. No doubt the Government will argue that private enforcers can mitigate that risk by consulting the primary authority in advance of any action. However, that is easier said than done. For example, the primary authority may not have accurate records of all the advice and guidance that it has provided. It may be formal advice, written, oral, or the records may not be reliable. This may be particularly true in respect of any so-called informal assistance or oral advice. When the primary authority has changed, when a company switches authorities or when a company merges or is acquired, the relevant records may be confusing, imprecise or not readily identify all relevant guidance. The private enforcer may proceed in good faith on the basis that there is no advice, but if then later during proceedings information about advice comes to light, the case may be thrown out, whatever its merits, and costs awarded.
The claim may not align precisely with the scope of the subject matter covered by the advice from the primary authority. That may lead to legal arguments as to whether the private enforcer’s case is inconsistent with the authority’s guidance or whether it is elaborating on that guidance, thereby making its action permissible under Schedule 7. Win or lose, the private enforcer’s costs will go up. The court may give a very broad interpretation to the advice that a defendant company receives from the primary authority. This may be particularly so if the records of the authority are imprecise or inadequate. In such a situation, the private enforcer would lose the action and be exposed to costs, even if its arguments on consumer detriment had considerable merit. If a private enforcer seeks to identify such potential inconsistencies in pre-action discussions, the uncertainties created by the proposed safeguard as drafted may still deter it and inhibit effective consumer protection, which these extended civil powers were intended to provide.
If private enforcers are prevented or deterred from taking action that is seen as inconsistent with the advice given to a defendant company by its primary authority, this places a huge burden on that authority to get its advice, and the record of its advice, right. Why? Because it creates what I term a double lock: locking private enforcers out of taking action against the company but locking them into the advice already given. Yet the primary authority may not fully appreciate the implications of a company’s commercial practice over time, and it may not be apparent how a trading standards official could have reasonably reached the view that informed the guidance given to a company. Given that companies can take comfort from and rely heavily on assurances received from trading standards, and given the absolute protection afforded companies by the proposed safeguard, they would have a very strong incentive to argue for the broadest application of any primary authority guidance in their favour, so ensuring that the primary authority advice acts as a deterrent to the private enforcers actually using their civil powers. In her reply, could the Minister explain a little more about how the trading standards bodies will operate in the new civil enforcement regime, particularly given my understanding that the primary authority will be largely focused on criminal activity?
I believe that the safeguards in proposed new Section 219C(9) and (10) are unnecessary. Under the Enterprise Act 2002, private enforcers are already required to consult the Competition and Markets Authority before taking enforcement action, to ensure that their proposed action is neither duplicative nor detrimental to action being taken by others. Furthermore, if the Regulators’ Code is applicable to private enforcement bodies, as is intended under the Bill, any enforcement policy that a private enforcer develops under the code will include a requirement for it to consult other enforcement bodies—most notably the relevant primary authority—prior to taking enforcement action. This amendment would not prevent a private enforcer’s action from failing if the court is persuaded that it is inconsistent with previous advice from trading standards, but it would remove an automatic ruling against the private enforcer on such grounds and the exposure to consequential costs.
As drafted, proposed new subsections (9) and (10) pose a real risk that private enforcement bodies will be deterred from using the extended range of civil measures available to them because of the level of exposure to the risk of costs that the drafting of the schedule on safeguards gives rise to. My amendments on private enforcers, and that of the noble Lord, Lord Best, on public enforcers, raise real issues as to whether these civil enforcement powers are usable, or will indeed be used in practice, because of the way in which they will operate. Given the long lead-in to these civil enforcement powers being implemented, it would be helpful if the Minister, in her reply, could elaborate on the timetable for extending these powers to both public and private enforcers.
Amendment 63AB is a probing amendment to try to clarify how appropriately the Regulators’ Code will be applied to private enforcement bodies. Schedule 7 would make any use of the enhanced consumer measures by a private enforcer a relevant regulatory activity covered by the code. I understand that any regulator or enforcer needs to have an enforcement policy governing its enforcement activities, and that policy must adhere to the principles of the code. However, I am also aware that under the Legislative and Regulatory Reform Act 2006, the duties on any person exercising a relevant function are pretty extensive.
The code was introduced to govern the relationship between business and full-time regulators. It will now apply to private enforcers such as Which?—for whom the majority of its activity is not of a regulated nature, but rather involves campaigning, researching, and all the other things that we are all aware that it does. The issue here is that there is a rationale for the application of the code as regards the exercise of a private enforcer’s statutory functions, but it would not be at all desirable if the application of that code was then extended to enable the wider activities of the private enforcer to be challenged. To use Which? again as an example, if it were to name a poor-performing company in its magazine research, how could the Government give reassurances that this Bill will not allow the code to be used to challenge the publication of the findings of such research?
The language of the code is not always appropriate for private enforcers, and some duties are not limited to regulatory activity—for example, the general duty to support economic growth. I cannot believe that the Government are arguing that one can give a private consumer campaigning body a general duty to support economic growth. If one did, how would one interpret it? If a private enforcer took action against a company, the consequence of which was to reduce the company’s business, would it have failed in its duty or would it have supported economic growth because it had contributed to securing more functional markets? It would be helpful if the Minister could give assurances on how the code will apply in practice to private enforcement bodies.
Baroness Hayter of Kentish Town (Lab)
My Lords, Amendment 63B in this group is in the name of the noble Lord, Lord Best, and of myself, and I will speak mostly to that amendment.
Amendment 63B is key to the implementation of many of the powers that we much welcome in the Bill. The problem is that without this amendment, trading standards will think twice—or three or four times—before using the Government’s suggested route of taking civil rather than criminal action following infringements. At present, where criminal action is taken—which of course does not allow for redress for consumers—trading standards does not risk having to pay defence costs. However, should it use the new civil enforcement measures, which we welcome, it would then risk expensive legal costs, which will automatically make local authorities very risk averse. Indeed, a large case could cost as much as £250,000, which is a massive chunk of the annual budget of many local authorities’ trading standards services.
Trading standards, of course, have always had the option of injunctions, but that only puts an end to whatever sharp practice was going on—it neither penalises the trader nor compensates the customer. We therefore support the advances in the Bill, because they take that further. However, without this amendment, we fear that the risk of cost—as it would be a civil action—will undermine the new, enhanced measures in the Bill. If the Government prefer these to the criminal route, which is what we understand, they will have to reduce the disincentive which this threat of civil costs poses.
We realise that it is possible to apply to the courts for a protective costs order to limit the exposure if the case has been brought forward by a trading standards officer in the public interest. However, that is a pretty rarefied procedure, and it is much more likely that, in those circumstances, the case will be taken through the criminal courts—of course at considerable expense to the taxpayer—or else it may not be pursued at all.
Which? has strongly supported Amendment 63B, as has the Trading Standards Institute. I know that Which? wrote to the Minister in August—I think that it was to the Minister in this House but it could have been to the Minister in the other place—saying that the Bill should be amended to limit significantly the risk that enforcers taking action under Part 8 of the Enterprise Act 2002 would be liable for the defendant’s legal costs in the event that the action was unsuccessful. It is felt by them and by us that they should be liable only where the enforcer has acted unreasonably. Therefore, Which? feels that this amendment will be key to ensuring that the enhanced consumer measures are used in the way that the Bill intends. It is particularly important for trading standards, which will have to get a lot of sign-off from many committees before it takes civil action, and those requirements will be much higher with that risk of paying the defendant company’s costs, which has not been before it when it has taken criminal action.
Baroness Crawley (Lab)
My Lords, I remind noble Lords of my trading standards entry in the register of interests. I support the amendment proposed by my noble friend Lady Drake and I shall speak in particular to Amendment 63B in the name of my noble friend Lady Hayter and the noble Lord, Lord Best.
This amendment would amend the Enterprise Act 2002 so that an enforcer would be the subject of an order to pay the costs of and incidental to enforcement proceedings only if they had acted improperly, unreasonably or negligently. In the criminal courts, trading standards officers or enforcers can be liable for the defendant’s costs only in limited circumstances. However, in the civil courts, under the Enterprise Act, the loser generally pays the winner’s costs. As my noble friend said, this could act as a disincentive for enforcers such as trading standards who are acting in the public interest.
Amendment 63B would ensure that protections for enforcers in civil courts were equal to those in criminal courts. Unless such protections are in place, there will be a significant disincentive for enforcers to use the new legislation. As we all know, local government has very little spare cash these days to pay out for court costs, and trading standards officers will be hesitant, as my noble friend said, to bring important cases to court under the Bill in case things go against them and their authority is left with a hefty bill to pay.
While trading standards very much supports the new provisions in the Bill to give consumers redress and to help them make better choices, there is genuine concern among the enforcement community that there will be little take-up of such provision due to the complexity of the process—as set out by my noble friend—the costs and the risks to the enforcer.
There is also concern that the legislation places the onus on the enforcer in proving that the costs of redress measures do not exceed the cost of the harm. This adds an area of potential challenge and uncertainty, and could encourage enforcers to use the more reliable criminal route instead of the Enterprise Act. Enforcers would prefer a more balanced approach whereby the businesses bringing the case propose a package of measures to the enforcer or to the court, with this being negotiated as necessary. I call on the Minister to look favourably on these amendments.
Baroness Jolly (LD)
My Lords, our debate on enhanced consumer measures has been really interesting. As noble Lords have said, the measures are limited to public enforcers only. The Government have included a power in the Bill to enable private enforcers such as Which?—which at the moment is the only private enforcer—to use the measures subject to certain safeguards. These safeguards are extremely important and it is two of them that the first two of these amendments seek to remove.
Amendment 63AB would remove the requirement for the Government to ensure that the private enforcer is subject to the Regulators’ Code. The code ensures targeted, transparent enforcement that is based on risk. It encourages regulators to carry out their activities in a way that supports business to comply and grow.
On Amendment 63AC, the primary authority scheme delivers assured advice to businesses, thereby delivering better regulation. Amendment 63AC would remove the requirement for the private enforcer to act consistently with advice or guidance given by a primary authority to a business. This safeguard ensures that we do not end up in a situation where a business is subject to the measures even though it has been advised by its primary authority that it is compliant with consumer law.
The Government’s Better Regulation Delivery Office administers both the Regulators’ Code and the primary authority scheme. The noble Baroness, Lady Hayter, asked what would happen if a private enforcer disagreed with advice issued by a primary authority but wished to enforce anyway. The scheme has been in operation since 2009 and the process has never been used. Disputes have been resolved informally through negotiation. But if a private enforcer wished to take enforcement action that was inconsistent with primary authority advice, they should discuss that with the primary authority. It will be a matter for the consultation as to whether a formal dispute resolution process would be suitable as a last resort measure in the event that a private enforcer disagreed with advice from a primary authority.
The Better Regulation Delivery Office has already opened a dialogue with Which? on these matters to reassure it that these safeguards will not prevent it from using the new measures. It has agreed to provide written reassurance to Which? that adherence to the Regulators’ Code will not impact on its non-statutory functions. In addition, it has agreed to provide practical support to Which? to enable it to access primary authority advice.
The noble Baroness, Lady Drake, asked when the use of the measures would be reviewed. The Government will review the use of the measures three to five years after they come into force. If we are presented with evidence that the measures are not being used or that consumers are not receiving redress, we will look at whether it is necessary to extend the use of the measures. In addition—to answer the query about advice received from the primary authority—before the power in the Bill is used, there will have to be a consultation. It will be during this consultation that the Government can ensure that there is a robust mechanism in place to enable the private enforcer to access primary authority advice.
Turning to the amendment in the name of the noble Lord, Lord Best, we want to encourage enforcers to take action where appropriate, but we do not believe that it is right to alter the costs rules in the way that is proposed in the amendment. As we have already heard in Committee, it is a fundamental principle of civil litigation that one side is generally at risk of having to pay the other side’s costs if they lose. This deters unmeritorious, weak and poorly prepared cases, and ensures that the winning party is not unfairly affected by the case.
Amendment 63B breaches that principle, shifting costs on to businesses even when they have been found to have done nothing wrong. Those legal costs can be significant. In some circumstances they could be thousands of pounds—enough to put a small firm out of business. The risk of not being able to recover its own costs could lead to a business choosing not to fight a case, even if it honestly believed that it had acted within the law.
Finally, it is important to note that the risk of adverse costs being awarded against an enforcer actually exists now. This has not stopped trading standards from using civil enforcement around 180 times every year. With these explanations, I hope the noble Baroness feels able to withdraw her amendment.
Baroness Hayter of Kentish Town
Perhaps I may ask the Minister a question on one bit of that—two now. I think she will accept that 180 is a very small number. She seemed to think that there was a risk to companies that are eventually found to have done nothing wrong, if they face civil action. But surely she must accept that they face that with criminal action. There can still be criminal action and they will face all of that and they will have to pay their own and the other side’s costs. Perhaps the Minister could explain why it is a greater problem for a company to have to face a trading standards officer taking civil action than to face the same trading standards officer taking criminal action.
Baroness Jolly
My Lords, on the number of cases per year, those which I quoted were actually civil cases, but there are around 1,800 criminal cases each year. Criminal costs are taken out of central funds, and it is civil costs that the loser pays.
Baroness Hayter of Kentish Town
My Lords, on the first question, the Minister has made my point: there are far more criminal cases than civil cases. However, they still have to pay their own costs. If they are defending a case in the criminal court, the company has to pay its own costs whether the case is a civil or a criminal one. As she quite rightly said, these costs can be high.
Baroness Jolly
I have been advised that the criminal system and the civil system are significantly different. Probably the easiest thing to do would be to write to noble Lords who have taken part in this debate.
Baroness Drake
My Lords, I thank my noble friend Lady Hayter for her remarks and the Minister for her responses. Perhaps I may deal first with some of the issues that have been raised in those responses. Reference was made to private enforcers having access to the primary authority’s advice, but the issue is that the Bill refers to all advice or guidance given by the primary authority. That is very broad and the parameters are not defined. I cannot ascertain from the Minister’s response the position as regards what happens when the advice is incomplete, what is the status of the advice in terms of whether it has to be formally documented, and the quality of the advice. It is a question of understanding. Will there be a definition of “primary authority advice” that is designed and designated to be fit for purpose as a consequence of the Bill? At the moment there is a great deal of ambiguity around what comes under the phrase “advice or guidance”, what will be “fit for purpose” and what will entail “records”, because these are pretty broad in the Bill and going against them would be pretty wide in its impact. There is still a lack of clarity around that point.
Given that extending these civil powers to private enforcers will not come about until the Government have satisfied themselves on how the civil powers for the public enforcers bed in, it would have been helpful to have been given greater clarity on the timetable. While something is desirable, if it is very far away, one must begin to question its desirability. It would be helpful if the noble Baroness felt able to elaborate a little more on this, at least in writing.
I turn to the amendment spoken to by the noble Lord, Lord Best, and the arguments deployed by my noble friend Lady Hayter. Of course they are reflective in some ways, although not in all, of the concern about the problems public enforcers will face, as well as private enforcers, in that exposure to costs under the terms of these safeguards will make them reluctant to use their civil powers. There is a question around whether the deterrent effect can be reinforced using the restricted resources that we know trading standards will face. Equally, private enforcement bodies have limited resources so they cannot willy-nilly avoid the consequences of what is in the Bill. Yet we all know that consumer bodies make a significant contribution to consumer protection by challenging dysfunctional markets. The Government must have accepted that because they put these provisions in the Bill in the first place. However, if the safeguards become such a disincentive, and the implementation of these powers is so far into the future, one begins to question the progress that the Bill offers in extending the civil powers measures.
Finally, on the point about exposure to costs, I conceded in speaking to my amendment that nothing in it would prevent a court from, as now, deciding that a private enforcer’s action should fail because it was inconsistent with previous advice and that exposure to costs would remain. My amendment would remove the automaticity of a case failing and exposure to costs existing because something, for whatever reason, was inconsistent with advice given when, as I said earlier, I have no sense of the nature of the primary advice as it will be defined for the purposes of the schedule in the Bill.
I have rehearsed my points. If the noble Baroness can elaborate further in writing, certainly on the timetable, it would be helpful. I beg leave to withdraw the amendment.
Baroness King of Bow
“(2) A year after the commencement of this section, the Secretary of State shall review the powers set out in Schedule 8 and report to Parliament on—
(a) the number of private actions commenced under this power,(b) the redress provided to consumers under these private actions, and(c) the scope and potential effect of expanding these private action powers to all areas of consumer protection law.”
Baroness King of Bow (Lab)
My Lords, Amendment 63C calls on the Government to review how the new powers for collective legal redress are functioning and whether these powers should be expanded to other consumer protection law. It asks the Secretary of State to set out how many private actions have taken place, what redress consumers received and the scope and potential effect of expanding private action powers to cover other areas of consumer protection law.
We welcome the Government’s move to provide new powers for collective legal redress. We do not agree with the scaremongering we have heard on this issue but we are concerned that we get things right. I should stress that the amendment does not call for collective legal redress to be expanded beyond competition law; it simply asks for this issue to be reviewed in the light of the evidence and the efficacy or otherwise of the new powers. This modest request will help identify whether the legislation works as intended. The intention is to make it easier for groups of consumers who have been subject to unfair and anti-competitive practices to put forward a collective claim. The review would also consider the level of redress achieved through joint action, which is often too low to motivate consumers to challenge unfair practices.
Amendment 74A is a probing amendment which seeks to improve scrutiny. At the moment we are being asked to pass into law CMA-approved voluntary redress schemes. These are no doubt a good idea in theory but, in practice, we have no detail in the Bill about how these schemes will work. However, we know that BIS has written a scoping paper which states that a specially constituted board will work out how the CMA alternative dispute resolution procedure will work and how complaints will be handled.
The Minister will no doubt be aware of the concerns raised by Which?, which is looking for answers, as are we all, to some key questions. For example: how will the board be resourced; who will pay for the board; and how will the board assess evidence? Is the board a gatekeeper or an adviser? What will happen if board members disagree? Will the board’s recommendations be determined by a majority vote or unanimity? Will the infringer get to vote on its own proposals? The answers to these questions will determine whether CMA-approved voluntary redress schemes are a success or a failure.
It is entirely reasonable for Parliament to review the SI that will answer these questions and many others. I beg to move.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, with this amendment we turn our attention to Schedule 8 to the Bill and focus on competition law. Schedule 8 provides easier access to redress to businesses and to consumers for breaches of competition law. We believe that effective competition is good for the consumer and this part of the Bill reforms the regime for private actions to give businesses and consumers redress where they have been harmed by anti-competitive practices. I am sure that we will discuss this further when we reach the amendments tabled by the noble Lord, Lord Hodgson.
This amendment would require the Government to report to Parliament on the number of private action cases taken, the level of redress paid to consumers and the impact of expanding these provisions to all areas of consumer protection law after a year. The Competition Appeal Tribunal already publishes as a public record an annual review containing details of cases taken forward in the previous 12 months and a summary of the judgments made with the case names. These judgments contain details of any redress awarded. The last annual report, for the year ending 31 March 2014, was published in June 2014. The report revealed that there were no collective actions on behalf of consumers, and this is one of the reasons we are legislating.
The last part of the amendment—which the noble Baroness, Lady King, spoke about in some detail—seeks, by gathering information, to encourage redress for consumers for breaches of consumer law in the future. However, the substantive underlying issue here is whether to provide consumers with the right to come together and fund their own collective actions for breaches of consumer law as opposed to competition law. Ed Mayo’s report for the Opposition highlights the obvious downsides that can be experienced with this proposal: consumers sometimes receive little or no benefit; consumers are sometimes then bound to a low settlement; and legal fees mean that lawyers can benefit as much as consumers. This would be a significant expansion in consumer law, might not benefit consumers and could be a significant burden on business. I am sure that they would think so, and, as Ed Mayo has said, the lawyers could be the main beneficiaries.
As a result, the Government do not consider collective actions for breaches of consumer law to be appropriate and have instead adopted enhanced consumer measures. Perhaps I may pick up a point from the preceding debate. The enhanced consumer measures come into operation with the Bill on 1 October 2015.
Under the Bill’s enhanced consumer measures, not only will more consumers get more redress, but traders who have broken the law could also or instead have to put in place other innovative measures. They might have to advertise their breach and what they have done to put it right on their website or in the press, or they might have to change their internal processes to ensure that there is no repeat of the breach. These can be good remedies and a more appropriate approach for something like petrol stations where pumps are providing inaccurate readings. Indeed, once the measures have bedded in, we expect additional redress of £12 million per year for consumers.
On Amendment 74A, paragraph 12 of Schedule 8 introduces a new power for the Competition and Markets Authority to be able to approve a voluntary redress scheme offered by business, and proposes the affirmative rather than the negative resolution procedure for the reasons that the noble Baroness explained. Having looked at this we are happy that the key features of this power, including CMA enforcement and costs, are set out in the Bill. The remaining regulations that will govern the CMA power concern procedural and technical matters.
I should comment on the point that the noble Baroness raised about how the board will be set up, how cases will be assessed and so on. There are a range of views, as she hints, on how the CMA power will work. As Which? is aware, the Government are engaging with a range of stakeholders to answer these questions. As I have already said, the key parts of the power are in the Bill, including the CMA considering the level of redress on offer.
The approach taken here is similar to that which we have taken in other parts of Schedule 8, which is to create a framework that allows the relevant bodies to make assessments on a case-by-case basis. In the Government’s response to the private actions consultation, we highlighted what components might be included in the regulations. They included: the role of an independent panel, which can consider in detail the contents of the scheme and then make a recommendation to the CMA; how consumers would be notified of the existence of the scheme; and a complaints scheme to resolve disputes with possible claimants. The regulations will be procedural and technical in nature and the Government consider that the negative procedure is suitable. We will of course consult.
The noble Baroness, Lady King, also asked about the number of private actions. Between 2005 and 2008, there were 41 competition cases. Between 2000 and 2005, there were only 43 out-of-court settlements. I hope that that answer gives the noble Baroness the figures that she needs, but I am sure that she will tell me if she wants information on some other aspect. In the circumstances, I ask her to withdraw the amendment.
Baroness King of Bow
I thank the Minister for her reply. Obviously, we all agree that effective competition is good for the consumer. We would like the Government to report on this to Parliament, because, if the legislation works, there will be collective redress whereas, as the Minister pointed out, that has been lacking until now. Given that we hope that the legislation will work, we believe that the details of how it works are worthy of Parliament’s attention.
As I mentioned, Amendment 74A is a probing amendment. It is simply about Parliament being able to scrutinise the proposals in any detail. Will the Minister let us know when the key questions that she outlined regarding the board and the mechanism for the scheme will be answered? Perhaps she could write to us on that unless she has the timetable to hand. What will happen if the level of redress is too low? This seems to be an issue that could effectively undermine all the legislation. I would appreciate a response on those two aspects. In the mean time—
Baroness Neville-Rolfe
Before the noble Baroness withdraws the amendment, I think that my noble friend Lady Jolly has already offered to write and will make sure that the letter also covers the question of timing, if that would be helpful.
Baroness King of Bow
I thank the Minister for those remarks. I beg leave to withdraw the amendment.
Baroness Noakes
Baroness Noakes (Con)
My Lords, at the request of my noble friend Lord Hodgson of Astley Abbotts and with the leave of the Committee, I shall move Amendment 64 and speak to the other amendments in this group. My noble friend Lord Hodgson had been hoping that the Committee would reach his amendments to Schedule 8 last week as unfortunately he is out of the country this week. I have to say, having agreed to be his understudy, that I shared his hopes. But it was not to be.
This is the first time that I have spoken on this Bill and I declare my interests as recorded in the register of interests. In particular, I am a non-executive director of the Royal Bank of Scotland, although I have absolutely no idea what the Royal Bank of Scotland’s view is on the Bill, and it has absolutely no idea that I am about to speak on it.
There are two distinct subgroups in this group of amendments. The first subgroup, led by Amendment 64 and including Amendments 67 and 68, deletes opt-out collective proceedings from Schedule 8. The second subgroup, comprising Amendments 65, 66, 69, 72 and 74, is more modest and seeks to ensure that some of the excesses of opt-out collective proceedings are avoided if the Government indeed wish to retain them in the Bill.
First, I will address why collective opt-out proceedings are an undesirable feature of the Bill and why I hope to persuade my noble friend the Minister to support Amendments 64, 67 and 68. The CBI does not support opt-out collective proceedings and gave evidence to that effect in Committee in another place. It believes that it is not the best way to deliver redress to consumers and that the overseas evidence is that most of the financial settlement gets absorbed in legal costs. BIS has itself recognised that these proposals create incentives for intermediaries and that a proliferation of cases could impose significant burdens on businesses. My noble friend the Minister has already referred to this in the previous group of amendments.
In practice, if there were a large number of collective opt-out proceedings, that could end up distracting businesses from what we need businesses to do—to focus on growth, jobs, profits and wealth creation. If we do not get businesses focused on those things, we lose our most secure route to escape from the deficit and debt that still overhang our economy and are still holding us back.
I expect that if we get collective opt-out proceedings, the first wave will be targeted at major corporates as they will have the deepest pockets. They may be reasonably well placed to deal with such actions without putting their businesses at risk. But I have genuine concerns that collective opt-out actions will then move on to mid-corporates and indeed smaller companies, which could well be flattened by the possibility of a collective opt-out action. This is where not only the defence costs but the sheer effort of defence will weigh most heavily and are most likely to distract those businesses from what they do best—wealth creation.
Either way, if collective opt-out actions are threatened, the implications for cost and effort for the business, large or small, may well weigh the scales in favour of settlement rather than defence. Whether collective opt-out actions are settled or defended, the costs that businesses bear will end up in prices. Therefore, consumers will pay for any additional redress—there is no net gain for consumers. If there are additional costs for businesses in dealing with the impact of collective actions, that will flow through into businesses’ costs and therefore prices.
So on one side of the equation we have burdens on businesses, which will undoubtedly come from a significant number of collective actions, with the costs, if there are any, passed on to consumers; but on the other side of the equation there is no evidence that consumers— as opposed to representative groups that claim to speak for consumers—think that this is a price worth paying.
The evidence from the US, which has, as we know, a highly litigious society and extensive use of class actions, is that opt-out class actions do not satisfy consumers. Only a minority report receiving meaningful value from such actions and consumers report that they want to retain control over whether or not they are included in such actions. But more importantly, as the Minister has already said, there is evidence that the real beneficiaries are not the consumers; they are the lawyers and the litigation funders who sometimes take hundreds of times more than the amount that was actually distributed to the consumers in the form of redress. So there are very real costs and somewhat illusory benefits at play here.
The European Commission is much more cautious about opt-out proceedings than our own Government. Commissioner Reding, who is not normally one of my favourite people, has described the Commission’s own proposals as a,
“balanced approach to improve access to justice for citizens while avoiding a US-style system of class actions and the risk of frivolous claims and abusive litigation”.
The Commission’s proposals include a general principle of opt-in rather than opt-out actions, and indeed stress the desirability of alternative dispute resolution mechanisms in preference to legal actions. This Bill could not be categorised as falling within Commissioner Reding’s balanced approach.
I am aware that the Government believe that sufficient safeguards have been set out in the Bill. The ban on exemplary damages and damages-based agreements, while welcome, will not remove the huge incentive for lawyers and litigation funders to make a handsome living out of exploiting these provisions. I expect that the Minister will also rely on the Competition Appeal Tribunal’s control over those who can act as representatives by virtue of subsection (8) of proposed new Section 47B, which will be inserted by paragraph 5 of Schedule 8. I have great admiration for the competence of the tribunal in competition matters, but I do have concerns that so much will depend on how the tribunal exercises its discretion in this area—territory with which it is unfamiliar. Whether we end up with a US-style litigation environment will not be determined by Parliament but by the tribunal. I hope that I am not alone in being uncomfortable about this. That is why my noble friend Lord Hodgson has tabled his amendments to remove the collective opt-out provisions from the Bill. They impose burdens on business and would seem to yield few benefits for consumers. They certainly seem to benefit litigation funders and lawyers, but not anyone else.
As I have already mentioned, my second set of amendments in this group is predicated on the Government remaining wedded to the opt-out principle. The amendments, including Amendment 65, are designed to mitigate dependence on the tribunal. Under subsection (8) of proposed new Section 47B, the tribunal must conclude that it is “just and reasonable” for a person to act as a representative in collective proceedings. The effect of Amendments 65, 66 and 69 would be to place quite specific restrictions on this so that lawyers, claims management organisations and others who gain from the litigation itself cannot themselves satisfy the just and reasonable test. In addition to the usual suspects of specialist legal firms, claims management companies and lookalikes, these amendments would rule out funds and other bodies which are established to promote collective proceedings and to gain from their pursuit.
Amendments 72 and 74 are variations on the same theme. Proposed new Section 47C of the Competition Act inserted by paragraph 6 of Schedule 8 makes damages-based agreements unenforceable in relation to opt-out proceedings. These amendments add third-party litigation funding agreements. Damages-based agreements are too narrow a concept. As I indicated earlier, the incentive may well not be damages and gaining access to those, but simply the ability to be able to siphon off legal and other fees related to the litigation.
My noble friend the Minister is aware that the Law Society has taken a keen interest in these proposals and I hope that, as a minimum, she will agree to meet it and interested members of your Lordships’ House, between Committee and Report, to discuss how best to deal with these very real concerns. I beg to move.
Viscount Eccles (Con)
My Lords, I too am speaking on this Bill for the first time. However, many years ago I tangled with—is it called Robinson-Patman?—and triple damages and all that. That has given me an abiding interest in consumer protection. It is clear from the back of the Bill, which says,
“to make provision about private actions in competition law”,
that this is a very important part of the Bill, consigned as it is to Schedule 8. As my noble friend Lady Noakes said, there are two issues. One is, what about opt-out per se? The second is, what about the safeguards? I would prefer that there were no opt-out arrangements in the Bill. However, I will concentrate on the safeguards.
None of us, I think, wants to see opt-out arrangements leading to excessive litigation—arguably we already have too much—and we do not want collective proceedings turned into a business, as opposed to the recognition and delivery of justice. There are dangers. As my noble friend said, the CBI has highlighted them. Others, too, have highlighted them. In the sixth report of 2013-14 from the House of Commons committee on the draft Consumer Rights Bill, paragraph 282 says:
“The Government has said that collective proceedings should not be brought by law firms, third party funders or special purpose vehicles. Under the draft Bill, any non-class member can be appointed as the representative in the collective proceedings, provided that the Tribunal considers it just and reasonable for that person to act as a representative. We conclude that this safeguard should be strengthened to reflect the Government’s stated intention”.
In paragraph 283 the committee goes a little further:
“We recommend that revised Tribunal Rules should clarify that collective proceedings cannot be brought by law firms, third party funders or special purpose vehicles”.
I ask the Minister: did it become the Government’s position, and is it still the position, that there should be a bar on law firms, third-party funders or special purpose vehicles? There is some reinforcement for thinking that this was, and I hope still is, the Government’s position: in the response to the private actions consultation, paragraph 2, headed “Introduce a limited opt-out collective actions regime, with safeguards”, reads:
“Recognising the concerns raised that this could lead to frivolous or unmeritorious litigation, the Government is introducing a set of strong safeguards, including: strict judicial certification of cases so that only meritorious cases are taken forward; no treble damages; no contingency fees for lawyers; maintaining the ‘loser-pays’ rule”—
which we have already heard about this afternoon—
“so that those who bring unsuccessful cases pay the full price. Claims will only be allowed to be brought by claimants or by genuine representatives of the claimants, such as trade associations or consumer associations, not by law firms, third party funders or special purpose vehicles”.
I may not be very good at interpreting draft Bills, but it does not seem to me—and certainly not to my noble friend Lord Hodgson—that the Bill meets that commitment, which was made by the Government in its response to the consultation.
Does the Bill, as drafted, fulfil that government response? If it does not, should we not have something on the face of the Bill—which is, after all, what my noble friend Lord Hodgson is really asking for in his extensive probing amendments? He is asking for something in the Bill as opposed to relying on the tribunal’s rules. As my noble friend said, the tribunal’s rules are absolutely key to the way that this regime will in fact work when it starts. The Bill is absolutely clear that the tribunal has a very great responsibility to draw up these rules, but of course the rules can only be drawn up in the light of the legislation. If the legislation is not complete, or is missing certain things, that of course makes the discretion granted to the tribunal very wide. I draw attention to one point in particular, which is about how the phrase “just and reasonable”, which appears in new Section 47B(8)(b), will be interpreted. I have two questions to ask my noble friend on the Front Bench. First, what does that actually mean, legally? Secondly, are there precedents for the use of “just and reasonable” and, if so, what are they?
Paragraphs 6 and 7 of the tribunal’s draft rules of March of this year look at the appointment of a representative. It is difficult to see that they go anywhere near meeting the points that were made by the Government’s response or by the House of Commons Select Committee. I do not find draft rules 6 and 7 very helpful, and I would welcome the Minister’s comments on the state of safeguards. I very much support my noble friend’s request for a meeting to discuss these matters, because the opt-out regime still looks very risky to me.
Lord Hunt of Wirral (Con)
My Lords, I start by declaring my interest as a partner for some time in the global commercial law firm DAC Beachcroft LLP. I welcome the important amendments in the name of my noble friend Lord Hodgson of Astley Abbotts, which were spoken to so eloquently by my noble friend Lady Noakes. I also follow my noble friend Lord Eccles in saying that we have to be very careful indeed about how we proceed with this particular aspect of the legislation.
I welcome in particular Amendment 66, which to my mind has the effect of making sure that it is the consumer’s rights that are being advanced and that we are not simply creating a fresh breeding ground for claims management companies. We have to heed the lessons learnt in the United States, where actions are brought for consumer remedies in the name of consumers who know little or nothing of them. However, as I understand it, not even the United States has rules permitting such actions to be brought by someone who does not have some sort of direct interest. I strongly believe that we should be very cautious indeed with that concept. The current systems of funding litigation are riddled with risks of conflicting interests, between, on the one hand, those seeking compensation and, on the other hand, those promoting litigation. In this latter group I would include claims farmers who want their cut, and litigation funders who essentially see litigation as an investment opportunity—a way of generating a return on their capital. That return comes out of the damages otherwise payable to the claimants.
I cannot see any reason why people in this category of backers should be able to stand as representative claimant. It flies in the face of common sense. Even if we are to be told that these problems will be ironed out in regulations or draft rules, I for one would expect to see such prohibition controlled by Parliament on the face of the statute. Likewise, lawyers who stand to gain from running cases should not be allowed to represent the claimant group and then act for themselves—if nothing else to avoid the maxim that a lawyer who acts for himself often has a fool for a client. I do not want to go too far down that road, except to stress that the risks of allowing lawyers to be the representative claimant are obvious.
That is graphically illustrated by a current piece of legislation. Thousands of Nigerians are suing Shell over an oil spill in the Niger delta and have found themselves embroiled in a dispute in the High Court as to which firm of solicitors is representing them. Without going into too much detail, I refer my noble friend the Minister to that case. Action is being taken by one law firm, Leigh Day, against CW Law Solicitors, based in London. It warns us about the dangers of going down this road. If I am allowed to add another example: Leigh Day is now facing legal action in the Kenyan courts over claims that a number of the torture victims it represented were fictitious. I do not begin to know on whose side justice lies, but it is a fact that the Law Society of Kenya is taking that firm to court. That demonstrates the dangers of allowing this sort of legislation to take hold.
I hope that my noble friend will be able to give us a lot of reassuring words either now, before we conclude this debate, or in a subsequent meeting. I strongly support the case put forward by my noble friend Lady Noakes.
Baroness Hayter of Kentish Town
My Lords, this has been an interesting part of the Bill. The heart would be taken out of the Bill were we to listen to the very eloquent pleas made. When it was still a draft Bill I was visited by someone who flew all the way from America on behalf of the US Chamber Institute for Legal Reform who told us that we Brits did not know how to do our own law and should listen to them. I think they have been back a second time since then.
I will say only a couple of things. I have also had a response from the CBI which, again, cleverly managed to get a letter in the Times today. I would point to what I have seen as a draft response to the letter in the Times, which I hope will be published tomorrow, and which makes a couple of pertinent points. Before coming to that, I have to ask whether the CBI really wants businesses that have been proved guilty of running a cartel. All this kicks in once they have been proved of running a cartel or some other equally anti-competitive business and concerns whether they are able to keep the fruits of their crime. That is what those people who do not want an opt-out have to consider. We will otherwise continue with the case that the people who have been affected by the cartel do not get any compensation.
More than that, companies would have to pay back only what they gained by that breach of law, unlike in America, where damages can be three times the compensation owed to consumers. Not only are we not America—because, luckily, we are not America—but this provision does not even have the same basis as the American situation. Our Competition Appeal Tribunal, in which I perhaps have a little more confidence—
The Deputy Chairman of Committees
My Lords, I hate to interrupt the noble Baroness in full flow, but I suspect that she might be going on for a few minutes longer, and therefore I must tell your Lordships that there is a Division in the Chamber and that we will not resume until 4.55 pm prompt.
Baroness Hayter of Kentish Town
My Lords, I think the point that I was making was partly that we did not live in America and partly that the claims about the opt-out provisions in the Bill leading to American-type action are derived from a misapprehension of the safeguards that have been built into this regime. In the States, law firms and litigation funders find collective actions particularly attractive because of factors over there which are not the same in our civil justice system. The ability of lawyers to claim contingency fees—a proportion of the damages pot before damages are distributed to consumers—is an obvious draw over there but not over here. As a result of an amendment introduced in the other place, any legal fees will be taken from the damages pot only after consumer claims have been satisfied.
Furthermore, law firms will be instructed by representatives that the tribunal has found to be properly placed to act on the consumers’ behalf. That filter is already in the hands of the Competition Appeal Tribunal. I therefore, perhaps, have a little more faith than the noble Baroness, Lady Noakes. The Competition Appeal Tribunal will have the final say on whether a case can progress, and claims can only be brought by individuals who have been directly affected or by genuinely representative associations, and not by law firms or companies with a vested interest. This means that only the strongest cases will proceed and that there is no financial incentive to bring speculative cases.
Although the CBI has indeed given evidence to us and to others, the Federation of Small Businesses welcomes the fact that, as a trade association, it will be able to use this procedure. In many cases, small businesses will be more affected by competition cases and the ability to bring an action than individual consumers. Many countries—including Canada, Australia, Spain, Poland, Portugal and Norway—have implemented similar systems of opt-out without the dangers that we see in America.
It is important to reiterate that these cases will arise only where a company has been found guilty of breaking competition law, and so good businesses will have nothing to fear from these proposals. However, they are good for consumers, particularly small companies that may be affected by a big company exploiting its monopolistic position. In our view, these measures are good for the economy, and a competitive economy is to the benefit of all. I trust the noble Baroness will not accept these amendments on behalf of the Government.
Baroness Neville-Rolfe
My Lords, I am delighted to welcome my noble friend Lady Noakes to the Committee and commend the clarity with which she took us through the amendments of the noble Lord, Lord Hodgson. I am sorry that he is not here because he sat patiently through many hours of our proceedings last week. I especially enjoyed my noble friend’s refreshing emphasis on growth and wealth creation. It was also good to hear from the noble Viscount, Lord Eccles, who rightly emphasised the importance of this part of the Bill, and from my noble friend Lord Hunt of Wirral, who urged caution and warned us, honestly and graphically, about the role of the lawyers in some climes in this sort of area, which we are seeking to avoid.
An effective competition regime is built on public enforcement and the ability for consumers and businesses to take private actions and claim redress. The current collective actions regime is opt-in, which requires consumers to opt in to a court action. A key feature of the revised regime is the introduction of an opt-out regime, where consumers are automatically part of a court action unless they opt out. This change is being made as there has been only one collective action case in more than 10 years, so we feel that the current law is not working.
My noble friend’s amendments would remove opt-out collective actions. Of course, a collective action is not a new concept; a regime has existed since 2002. Under this regime, consumers have to sign up to an action before it commences in the Competition Appeal Tribunal. As I said, since the regime was created in 2002, there has been only one collective action case, and that had only 130 claimants—less than 0.1% of those eligible. Furthermore, SMEs are not permitted to use the existing regime to bring claims; for example, if a dominant manufacturer were to withhold supplies to drive up prices.
The Government have always been clear that an opt-out collective actions regime would require stringent safeguards to prevent vexatious claims and the US-style class actions that have been described this afternoon. I would also highlight the different legal culture and practice in the US, where significant financial incentives to bring claims, such as treble damages and damages-based agreements, are the order of the day and have led to a large number of claims. We have learnt from that experience and introduced three key safeguards, as the noble Viscount, Lord Eccles, explained.
I will summarise the safeguards very briefly. The first is a requirement for the CAT to certify that the representative is suitable to bring the claim. Secondly, the Bill prohibits businesses paying too much redress by prohibiting exemplary damages. As the noble Baroness, Lady Hayter, explained, they would have to pay back only the overcharge to the consumer, not multiple damages. Thirdly, law firms are prohibited from taking a percentage of the damages as a success fee—so-called damages-based agreements. Further requirements that have to be met before a representative can be approved will be set out in the CAT rules. These will include a representative’s ability to pay costs, whether there is a conflict of interest with the underlying claimants, and whether a representative would adequately act in the interests of the underlying claimants.
To assist in understanding, the Government published draft CAT rules on collective actions in March, and they are available in the House Library. I have a copy if anyone would like one. In the draft rules, the CAT would have to scrutinise the nature and function of the representative body. This would include whether or not the body is suitable to be a representative body, including whether the body had a pecuniary interest; for example, whether an underlying claimant wishing to act as a representative had a conflict of interest because they had a financial interest in the outcome of the case.
Viscount Eccles
I have read the draft rules; I brought them with me. I do not think it is all that easy, if you have a pecuniary interest, to define whether or not it is a conflict. If it has been entered into freely as an agreement that in certain circumstances the people being represented will pay fees of a certain size and they have signed up to that, that is not a conflict of interest.
I emphasise that I do not think that the draft rules anywhere near meet the undertakings given by the Government in their response to the consultation and in respect of the advice received from the House of Commons Select Committee.
Perhaps I may just say that I made no reference to the United States in what I said; none at all. I think that the situation is completely non-comparable, so I agree entirely with the noble Baroness, Lady Hayter, about that. However, I do not think that the safeguard regime is anything like adequate in the Bill as it is drafted.
Baroness Neville-Rolfe
I thank my noble friend for his clarification. He is right to say that the draft rules were constructed by a specialist working group. They will be subject to full public consultation in order to ensure that they strike the right balance, and that will obviously be undertaken well before these provisions come into effect on 1 October next year. Perhaps I may also say at this point that I have talked to the CBI and corresponded with the Law Society, with which I am extremely happy to have a meeting, as I think my noble friend suggested, so that we can go through some of the points that I am making in more detail.
A key safeguard in the Bill is that the CAT must certify that a representative is suitable to bring a collective action. This means, as has been said, a law firm, a claims management firm or a special purpose vehicle. These will not automatically be able to bring a claim, and the draft CAT rules provide for even more scrutiny of a proposed representative. It is appropriate for these requirements to be in the CAT rules so that they can be modified more easily or be made even more stringent if that is necessary. This will ensure an effective regime which promotes the interests of consumers. The Government also believe that the CAT, a specialist competition court which I know from my own experience, has a strong track record in dealing with consumer detriment in competition law, and is well placed to scrutinise each and every body that seeks to act as a representative. I do not share my noble friend’s concern, given my knowledge of the court and its specialist nature.
Baroness Noakes
Perhaps I may intervene on my noble friend on that one point. As I understand it, the CAT does not normally carry out this function, so as I have said, while I have the greatest respect for the work of the CAT and what it does in relation to competition law, I do not think that it has experience of establishing whether or not particular claimants for the action are representative. We are going into uncharted territory here, and that is why it is so important to get this absolutely right.
Baroness Neville-Rolfe
I thank my noble friend. She is absolutely right to say that we need to get this right. We will reflect further on the point, and of course we do have a fair amount of time to ensure that the right mix of expertise is in place. However, the Government have decided, I think for the right reasons, that the CAT is the place to house this function. The rules and regulations surrounding that are clearly important and will be, as I have just said, subject to public consultation.
The point has been made that it would be better to put all the eligibility requirements into the primary legislation, but of course no two cases will be the same. We are concerned that companies might seek out loopholes to avoid the restrictions, and therefore it feels appropriate for the CAT to have the discretion to consider each representative on a case-by-case basis. But, again, we can discuss this further.
These amendments would also prohibit the use of third-party litigation in collective action cases. It is appropriate for the CAT to scrutinise any funding arrangements that exist in a case to ensure that the claimant has sufficient funds to meet the defendant’s costs.
My noble friend Lady Noakes talked about the approach of the European Union to this subject. I believe that it has issued a recommendation for opt-in in collective redress. The recommendation suggested the adoption of an opt-in regime, but it accepted that for reasons of sound administration of justice, member states might want to introduce a different regime. Following our consultation and the evidence that we gathered, the Government believe that the present opt-in regime is—as I have said a number of times—not delivering effective redress. We therefore propose in the Bill to introduce an opt-out regime with safeguards.
My noble friend raised many understandable concerns. We have thought carefully about this. The Bill already contains restrictions on the financing of claims as it prohibits damages-based agreements and does not provide for a claimant to be able to recover any uplift in a conditional fee agreement. Therefore there is a need for claimants to have the option of accessing third-party funding so as to allow those who do not have a large reserve of funds or those who cannot persuade a law firm to act pro bono to be able to bring a collective action case in order to ensure redress for consumers.
Blocking access to such funding would result in a collective actions regime that is less effective. This would bar many organisations, including reputable consumer organisations such as Which?, from bringing cases as Parliament hoped in 2002. Restricting finance could also create a regime which was only accessible to large businesses. This would weaken private enforcement in competition law, which is of course not the Government’s wish or intention.
To return to the point made by my noble friend Lady Noakes on the CAT, its staff obviously includes High Court judges, who are used to dealing with a range of representatives and complex case management. However, I take the points she made and look forward perhaps to discussing those with the Law Society or with any others who wish to be involved in a meeting between now and Report.
I hope that my noble friend is reassured that we are aware of the concerns around introducing an opt-out regime. I look forward to further discussions, but I also ask that my noble friend withdraw the amendment.
Baroness Noakes
My Lords, I thank all noble Lords who have taken part in this brief debate on these very important provisions in the Bill. I am thankful in particular for the support that I received from my noble friends Lord Eccles and Lord Hunt on the amendments that I moved.
I say in passing that I find it curious that having an opt-in provision which resulted in only one action should be grounds for more legislation. It seems to me that there is very little consumer demand for that, although there may well be demand from representative bodies. I worry about whether we get the right balance in the law when we make law for representative bodies rather than ultimate consumers.
The issue comes down to what should be in the Bill. I understand what the Minister is saying about needing to have flexibility in due course and to leave discretion. My noble friend Lord Hodgson’s amendments did not change that; they merely proscribed certain categories of people from being authorised as representatives. It would still leave discretion with the tribunal, but would say, “In these circumstances you cannot do it”—so if you are a law firm involved in it, you cannot do it—rather than leave it to the discretion of the tribunal to work its way through whatever rules exist at the time. The draft rules, as my noble friend Lord Eccles said, are not very clear on that. They have rules about conflict of interest, but they are not absolutely clear what they are directing themselves at. They may well end up with precisely the right answers, but, equally, they could build their own precedence system which will end up with the wrong answer. That is the concern: that unless we are quite clear about prohibiting what we have observed elsewhere and do not wish to come here, we may end up with what we do not want.
However, I will not take up more of the Committee’s time today. Obviously, I need to revert to my noble friend Lord Hodgson of Astley Abbotts, who will certainly be looking forward to reading Hansard when he returns from abroad. I thank the Minister in particular for agreeing to a meeting with the Law Society and others who might be interested. There are genuine concerns about the nature of the provisions that are being introduced under Schedule 8, and we owe it to all to get those right. With that, I beg leave to withdraw the amendment.
Lord Phillips of Sudbury
Lord Phillips of Sudbury (LD)
My Lords, I will speak also to Amendments 76 and 79 in this group. I declare an interest as president of the Solicitors Pro Bono Group, or LawWorks as it is more normally known. I am afraid that the noble Lord, Lord Pannick, is prevented from being here today because he is abroad, but we strongly support the collective action provisions in the Bill, which represent a big increase in access to justice for people in situations where, but for a collective action allowance, there would be no real prospect of them getting redress.
Amendments 70, 76 and 79 are relatively technical and, I am afraid, somewhat complex, but we believe that they would represent a significant improvement in the workings of the arrangements in the Bill for pro bono action, and that they are non-contentious. I am grateful to the Access to Justice Foundation, which has been extremely helpful in framing these amendments.
On 11 March, the Minister in the other place, when introducing the amendments to the Bill of which my amendments are a refinement, ended by saying:
“The amendments are integral to ensuring that consumer bodies and bodies for small and medium-sized enterprises will be able to fund collective action cases. Without them, it would be difficult for consumer bodies to bring a case”.—[Official Report, Commons, Consumer Rights Bill Committee, 11/3/14; col. 588.]
In brief, Amendment 70 provides for the charity that was created in the Legal Services Act to make representations in hearings by the Competition Appeal Tribunal. I will say a word or two more about that in a minute.
Amendment 76 seeks to bring these limited advances in the Bill under the regime established by Section 194 of the Legal Services Act 2007. The whole gist of these three amendments is to make the present arrangements more practical and more consistent. I will just give a little more detail on that, although I hope not to labour the point with the Committee. Section 194 of the Legal Services Act 2007—which, incidentally, comes under the headings, “Miscellaneous provisions about lawyers etc” and “Pro bono representation”—takes up two pages of that Act and, in our view, is eminently suitable to regulate the arrangements which should prevail with regard to this small but important extension of pro bono rights under the Bill.
Amendment 79 is very straightforward. It would include the Competition Appeal Tribunal under the Section 194 regime for reasons, as I say, of consistency, clarity and simplicity. Secondly, it would extend the benefits of this part of the Bill to Scotland and Northern Ireland.
I shall say a word or two more because I recognise that these are not simple matters. The Legal Services Act 2007 allowed pro bono costs to be recovered, not for the benefit of pro bono lawyers but to be paid to a charity. The law, not surprisingly, provides that if you are acting for nowt you cannot get costs because you are not charging. That was thought to be unreasonable, so the 2007 Act provided that the costs that would have been recoverable had the advocate not been acting pro bono but normally should be payable to a charity nominated by the Lord Chancellor. Indeed, the Lord Chancellor nominated the Access to Justice Foundation, the four members of which, it is worth repeating, are the Law Society, the Bar Council, the Advice Services Alliance and the Chartered Institute of Legal Executives. Those four bodies govern the foundation, which is a charity. The funds that it receives from the 2007 Act and other sources go towards the alleviation of legal advice needs, which are more intense than they used to be by dint of cutbacks in the legal aid scheme.
The Bill allows damages paid under collective actions, which are themselves confined to issues of competition law, that are not claimed by those for whom the collective action is brought to be paid to the charity—the Access to Justice Foundation. It may be surprising that anybody would not claim damages but by the nature of collective actions it is not always possible to tell exactly who is or is not within the circumference of the collectivity. It is commonplace—the United States has had this arrangement for a long time—for substantial damages to be left in the pot, so to speak. As I say, this part of the Bill will allow the unclaimed damages to be passed on to the charity.
Amendment 70 is an amendment to subsection (6) of new Section 47C, which is headed,
“Collective proceedings: damages and costs”.
That new subsection was added in the other place. It was a government amendment and there was no opposition to it. It fills out new subsection (5), which stipulates that,
“where the Tribunal makes an award of damages in opt-out collective proceedings, any damages not claimed by the represented persons within a specified period must be paid to the charity”,
which is the one I mentioned—the Access to Justice Foundation. In our view, new subsection (6) could be more clearly defined. At present it states:
“In a case within subsection (5) the Tribunal may order that all or part of any damages not claimed by the represented persons within a specified period is instead to be paid to the representative”—
that is, the lawyer—
“in respect of all or part of the costs or expenses incurred by the representative in connection with the proceedings”.
Amendment 70 inserts,
“after giving the charity referred to in subsection (5) an opportunity to make representations”.
The issue of damages in these actions can be contentious and highly sensitive. I hesitate to say that it would often be, and indeed any lawyer acting pro bono is ipso facto likely to be extremely public-spirited and so on, but situations can arise where certain expenses—I am thinking particularly of after-the-event costs insurance premiums—and success fees, where it is a success fee case, mean that the representatives of either or both parties could be, let us say, lax in pursuing the full remedies so as to recover the costs and expenses where they are recoverable from the losing party, the defendant, which is usually a large company that has perverted the competition laws to the disadvantage of often thousands of individual citizen small claimants. We believe that the sorts of conflicts that can arise, including the clash of personal interests with the public interest, could be overcome or at least countered effectively by giving the charity that is to be the recipient of any unclaimed net sums the power to make representations at the tribunal hearing in order to test the rigour with which matters have been pursued up to that point.
For example, no action may have been commenced to recover costs from the losing defendant if that action could long-winded, expensive and, conceivably, uncertain, although that is unlikely. Because of the interests of those concerned, the money would simply be taken out of the unclaimed damages, thus reducing the sum that will eventually go to the claimant consumers. There are a number of scenarios which one can paint that would make the need for this amendment obvious. It does not require the charity to make representations other than in circumstances where it thinks or it is told that such a conflict or difficulty could arise. That is Amendment 70.
Baroness King of Bow
My Lords, I support this group of amendments. I am pleased to follow the noble Lord, Lord Phillips of Sudbury, who I once spent a night with in a metal freight container in the jungle in the Congo. That, however, is most definitely another story.
I return to consumer rights in the UK. As we have seen, Amendment 70 allows money not claimed in opt-out collective proceedings to be paid to charity, and permits any money remaining after that to go to pro bono lawyers. That is also the substance of several of the amendments tabled by the noble Lords, Lord Pannick and Lord Phillips, which, as we have heard, would allow lawyers who have worked for free in successful cases on behalf of consumers to get paid.
I realise that politicians like to put lawyers into that select group of social pariahs that includes politicians, second-hand car dealers, bankers and estate agents. However, when lawyers are ready to shoulder all the risk on behalf of consumers facing anti-competitive practices and they succeed and increase consumer protection for all of us, the least they should expect is payment—where that is supported by some of the damages raised.
Therefore, we support these amendments, which will, we hope, increase the resources available for legal charities distributed by the Access to Justice Foundation. This in turn will enhance access to justice across the piece, and we support the principle of tribunals being able to direct payments towards lawyers providing pro bono services on behalf of consumers.
Baroness Neville-Rolfe
My Lords, I am grateful to my noble friend Lord Phillips for his support for this part of the Bill and for taking us so carefully through his various amendments. This is an unusual grouping in that it includes government amendments which meet some of the views expressed by noble Lords during the passage of the Bill.
In addressing my noble friend’s amendments, I emphasise that the Government recognise the important work undertaken by the Access to Justice Foundation. We are not against the Access to Justice Foundation receiving unclaimed damages for its good work. Indeed, pro bono costs are already awarded to the foundation in the Court of Appeal and the Supreme Court. Accordingly, the Bill makes provision for the CAT to award unclaimed damages to the Access to Justice Foundation.
However, we are trying to ensure that unclaimed funds are allocated in the most appropriate way and that certain contingencies are provided for. The Government want consumers to obtain redress for breaches of competition law, which, as my noble friend explained, is all that is at issue here. These cases may be costly. Accordingly, the Government consider that representative bodies which successfully represent consumers should have the opportunity of having some or all of their costs paid out of unclaimed damages so as to ensure that they bring actions on behalf of consumers. Therefore, the Bill grants the CAT discretion to award some or all of the unclaimed damages to the representative so that it may recoup some of its costs—on a case-by-case basis, obviously—and, at the same time, the CAT may also award unclaimed damages to the Access to Justice Foundation.
Similarly, with regard to Amendments 76 and 79, the Government wish to encourage consumers to seek redress for breaches of competition law. Consumers will require someone to represent them. Accordingly, the Government wish to encourage representatives—including, of course, those who act on a pro bono basis—and therefore the Bill provides that the CAT may sometimes award costs to a representative who acted on such a basis. The Government believe that if the opportunity for unclaimed damages to go to representatives who act on a pro bono basis is restricted, there could be negative consequences for the consumer. However, given this debate, I will look in Hansard at the detail that has been fully set out, and reflect on our discussions. I hope that my noble friend and the noble Baroness opposite will do the same.
I am moving five government amendments. Briefly, Amendment 71 commits that the body to receive unclaimed damages is a charity. We have accepted the Delegated Powers and Regulatory Reform Committee’s recommendation and so the exercising power will be amended to be affirmative. Our third amendment allows underlying claimants to incur costs if they make an application to have the representative removed and lose the application. This has two benefits: first, it aligns the costs with the wider “loser pays” principle that exists in domestic law; and, secondly, it should deter vexatious applications. The final amendment is minor and technical and follows an earlier government amendment.
I ask the noble Lord to withdraw Amendments 70, 76 and 79 and beg to move government Amendments 71, 73, 75, 77 and 78.
Lord Phillips of Sudbury
My Lords, I thank the noble Baroness, Lady Neville-Rolfe, for what she has said. I will willingly—indeed, avidly—take up her suggestion that we have a word about my three amendments outside this place because I do not think they in any way impinge upon the agreed objective of this part of the Bill of making access to justice better. I may be able to persuade her that there are matters that the Government should back and, on that basis, I am happy to withdraw the amendment.
Baroness Neville-Rolfe
Baroness Neville-Rolfe
(za) “charity” means a body, or the trustees of a trust, established for charitable purposes only;”
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“(ba) after sub-paragraph (2) insert—“(2A) Rules under sub-paragraph (1)(h) may provide for costs or expenses to be awarded to or against a person on whose behalf a claim is made or continued in proceedings under section 47B of the 1998 Act in respect of an application in the proceedings made by that person (where that application is not made by the representative in the proceedings on that person’s behalf).”;”
Baroness Neville-Rolfe
ScheduleDuty of letting agents to publicise fees: financial penaltiesNotice of intent1 (1) Before imposing a financial penalty on a letting agent for a breach of a duty imposed by or under section 81, a local weights and measures authority must serve a notice on the agent of its proposal to do so (a “notice of intent”).
(2) The notice of intent must be served before the end of the period of 6 months beginning with the first day on which the authority has sufficient evidence of the agent’s breach, subject to sub-paragraph (3).
(3) If the agent is in breach of the duty on that day, and the breach continues beyond the end of that day, the notice of intent may be served—
(a) at any time when the breach is continuing, or(b) within the period of 6 months beginning with the last day on which the breach occurs.(4) The notice of intent must set out—
(a) the amount of the proposed financial penalty,(b) the reasons for proposing to impose the penalty, and(c) information about the right to make representations under paragraph 2.Right to make representations2 The letting agent may, within the period of 28 days beginning with the day after that on which the notice of intent was sent, make written representations to the local weights and measures authority about the proposal to impose a financial penalty on the agent.
Final notice3 (1) After the end of the period mentioned in paragraph 2 the local weights and measures authority must—
(a) decide whether to impose a financial penalty on the letting agent, and(b) if it decides to do so, decide the amount of the penalty.(2) If the authority decides to impose a financial penalty on the agent, it must serve a notice on the agent (a “final notice”) imposing that penalty.
(3) The final notice must require the penalty to be paid within the period of 28 days beginning with the day after that on which the notice was sent.
(4) The final notice must set out—
(a) the amount of the financial penalty,(b) the reasons for imposing the penalty,(c) information about how to pay the penalty,(d) the period for payment of the penalty,(e) information about rights of appeal, and(f) the consequences of failure to comply with the notice.Withdrawal or amendment of notice4 (1) A local weights and measures authority may at any time—
(a) withdraw a notice of intent or final notice, or(b) reduce the amount specified in a notice of intent or final notice.(2) The power in sub-paragraph (1) is to be exercised by giving notice in writing to the letting agent on whom the notice was served.
Appeals5 (1) A letting agent on whom a final notice is served may appeal against that notice to—
(a) the First-tier Tribunal, in the case of a notice served by a local weights and measures authority in England, or(b) the residential property tribunal, in the case of a notice served by a local weights and measures authority in Wales.(2) The grounds for an appeal under this paragraph are that—
(a) the decision to impose a financial penalty was based on an error of fact,(b) the decision was wrong in law,(c) the amount of the financial penalty is unreasonable, or(d) the decision was unreasonable for any other reason.(3) An appeal under this paragraph to the residential property tribunal must be brought within the period of 28 days beginning with the day after that on which the final notice was sent.
(4) If a letting agent appeals under this paragraph, the final notice is suspended until the appeal is finally determined or withdrawn.
(5) On an appeal under this paragraph the First-tier Tribunal or (as the case may be) the residential property tribunal may quash, confirm or vary the final notice.
(6) The final notice may not be varied under sub-paragraph (5) so as to make it impose a financial penalty of more than £5,000.
Recovery of financial penalty6 (1) This paragraph applies if a letting agent does not pay the whole or any part of a financial penalty which, in accordance with this Schedule, the agent is liable to pay.
(2) The local weights and measures authority which imposed the financial penalty may recover the penalty or part on the order of the county court as if it were payable under an order of that court.
(3) In proceedings before the county court for the recovery of a financial penalty or part of a financial penalty, a certificate which is—
(a) signed by the chief finance officer of the local weights and measures authority which imposed the penalty, and(b) states that the amount due has not been received by a date specified in the certificate,is conclusive evidence of that fact.(4) A certificate to that effect and purporting to be so signed is to be treated as being so signed unless the contrary is proved.
(5) A local weights and measures authority may use the proceeds of a financial penalty for the purposes of any of its functions (whether or not the function is expressed to be a function of a local weights and measures authority).
(6) In this paragraph “chief finance officer” has the same meaning as in section 5 of the Local Government and Housing Act 1989.”
“Prohibition of fees in contracts for services: letting of residential accommodation
(1) The provisions in this section apply to a contract for a trader to supply a service in connection with the letting of residential premises.
(2) Subject to the provisions of this section, any person who demands or accepts payment of any sum of money from a person (“P”) for services in connection with a contract for the letting of residential premises shall be guilty of an offence.
(3) For the purposes of subsection (2), P is any person—
(a) who seeks to enter a contract to let residential accommodation, or(b) who has a tenancy of, or other right or permission to occupy, residential premises.(4) For the purposes of subsection (2)—
“letting” shall include any service provided in connection with the advertisement or marketing of residential accommodation or with the grant or renewal of a tenancy;
“services” shall—
(a) include, and are not limited to—(a) the registration of persons seeking accommodation,(b) the selection of prospective occupiers, and(c) any work associated with the production or completion of written agreements or other relevant documents,(b) not include credit checks of persons seeking accommodation.(5) Where a person unlawfully demands or accepts payment under this section in the course of his employment, the employer or principal of that person shall also be guilty of an offence.
(6) A person shall not be guilty of an offence under this section by reason of his demanding or accepting payment of rent or a tenancy deposit within the meaning of section 212(8) of the Housing Act 2004 (tenancy deposit schemes).
(7) A person shall not be guilty of an offence under this section by reason of his demanding or accepting a holding deposit.
(8) A “holding deposit” for the purposes of subsection (7) is—
(a) a sum of money demanded of or accepted from a person, in good faith for the purpose of giving priority to that person in relation to the letting of a specific property, which is to be credited towards the tenancy deposit or rent upon the grant of the tenancy of that property, and(b) not greater than two weeks rent for the accommodation in question.(9) Costs incurred by persons seeking accommodation for the undertaking of credit checks shall be reimbursed upon the signing of a tenancy agreement.
(10) In this section, any reference to the grant or renewal of a tenancy shall include the grant or renewal or continuance of a lease or licence of, or other right or permission to occupy, residential premises.
(11) In this section “rent” shall include any occupation charge under a licence.”
Baroness Hayter of Kentish Town
My Lords, it is good to rise today to move this amendment in what is National Consumer Week—as I am sure your Lordships know. I shall speak also to the other amendments in the group, which between them would help tenants and landlords in their relationships with the intermediaries who often bring the two parties together and often continue as the conduit for money and other services between them.
The amendments address four different issues, so I trust that the Committee will bear with me as I try to romp through them. First, Amendment 81B would ban letting agents from taking “finder’s fees” from tenants, which is a rather rotten new practice that has grown up. Letting agents are chosen by and work for landlords who are seeking tenants. The client is therefore the landlord, to whom by contract and, I think, by law, obligations and duties are owed. The letting agency is paid by the landlord to find a tenant, although he can then carry out other services for the landlord such as obtaining and securing the deposit, handing over keys, collecting rent and so forth. These tasks are done on behalf of the landlord, who pays for the service.
However, we are now seeing in parts of London, especially where young people are desperate to find somewhere to live, prospective tenants being charged by the letting agent to show them a flat. As Alex Hilton, director of Generation Rent, said in welcoming our amendment to end what he calls “the abusive practice” of charging fees to tenants, a ban is long overdue. He stated:
“Tenants are being milked by gluttonous agents taking advantage of a housing market that’s failing to provide enough homes”.
Scotland has led on this, with all letting agents’ charges to tenants other than rent and a refundable deposit being illegal since 2012. The practice that has grown up exploits the potential tenant, but it also means that letting agents are being paid twice for the same bit of work. Furthermore, when we are keen to encourage landlords to enter this market and to provide more accommodation, and where tenants effectively have a fixed amount of money to spend on their housing, this practice is leeching out of such available money a chunk which is neither going to the landlord nor being kept by the tenant, but is going off for a non-housing use. This is bad for tenants, as they have less to spend on rent, and it is bad for landlords, as there is less rental money around. Furthermore, it is bad business where one person has a duty of care to both sides of a contract. Whose interests, we may ask, are they representing? Traditionally, it has been clear that it is those of the landlord, but once they take money from a potential tenant, for whom then are they working? There is no written contractual relationship between the potential tenant and the agent, but I wonder whether there is not one by dint of the payment of money. The conflict of interest is obvious: it is non-professional and will lead to bad practice.
We have no problems with letting agents charging tenants for an individual service for the particular tenant; for example, obtaining the credit reference needed in order for the landlord to accept them. However, that is wholly different from showing flats only to those willing to pay the letting agent—I almost said “to bribe” the letting agent. That should be outlawed, along with letting agents charging two parties for the same bit of work.
The Deputy Chairman of Committees (Lord Brougham and Vaux)
We stand adjourned for 10 minutes. I am sorry about that.
Baroness Hayter of Kentish Town
My Lords, Amendment 81D would require letting agents to have appropriate client money protection in place, which in itself would mean that they would need to have established client account audits and proper procedures. About £2.7 billion is held by letting agents at any one time, so this would be a rather important consumer protection.
Finally, Amendment 81C would extend the existing consumer protection measures for estate agents to letting agents. Most importantly, it would empower the CMA to close letting or managing agents that have acted improperly. It would therefore stop the present, rather stupid situation in which an estate agent banned today can set up as a letting agent tomorrow. This was something that the CLG Select Committee recommended. It wanted letting and managing agents to be subject to the same regulation as estate agents, and that is what this amendment would do.
I know that Ministers have suggested that there is in effect a sort of back-door banning at the moment, in that now that every letting agent must be a member of a redress scheme and if a poorly performing letting agent was turned down by all three recognised schemes, that would effectively debar the letting agent from operating. However, this misses two important facts. One is that the three redress schemes, though they will co-operate by not taking on an agent debarred by another of the three, can only act on complaints brought to them by landlords or tenants. As we know, many people dissatisfied with the service never complain. So these redress schemes only see the tip of the iceberg, as both the two established ones acknowledge. The third one is really yet to get going. So the intelligence for their veto on a business is pretty minimal. They do not have access to information from the police, trading standards or insolvency practitioners, so they are working on a tiny aspect of the whole scene.
There is a second problem. The state is effectively contracting out this enforcement to three private companies with no requirement that they abide by the regulator’s code, are properly qualified for this role or have ever been authorised to be front-line enforcers. They have been authorised by the CLG simply as adjudicators, not as law enforcement officers. Yet without this amendment they are the only organisations able to stop a rogue letting agent from trading. I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, I will talk to Amendment 81D and in doing so I declare an interest as a director of the Property Redress Scheme Advisory Council. I support what the noble Baroness, Lady Hayter, said, and want to add briefly to her detailed comments.
The noble Baroness spoke about the £2.7 billion estimated to be held in clients’ funds. I might add that this was calculated by the industry as the amount that letting agents will be holding in tenants’ deposits and one month’s rent. That was how it was calculated; it seems a fairly sensible estimate. So, there is £2.7 billion in clients’ funds, some of which is at risk. There are already clients’ money protection schemes run by some of the organisations described by the noble Baroness. However, if the letting agent is not covered for client money protection both the landlords and the tenants stand to lose their money. If it is not one of the estate agents or one of these big organisation schemes, which are not compulsory other than for the members of that organisation, these tenants and landlords—it is both—would lose their money. The amendment is designed to protect both parties in the event that an agent goes bust or misappropriates the clients’ funds, as it covers any losses through the actions of the letting agent.
The consumer protection offered by this amendment would be financed by the industry itself and would not need the financial backing that the Government currently provide—I am not sure that the noble Baroness mentioned that point but I thought I should highlight it. At the moment it is a voluntary protection, and it works for a lot of the industry. There are forces in play which could protect the moneys owed to the landlord or tenant if something goes wrong with the letting agent. However, there are many letting agents which are not a part of such an organisation. There are two voluntary schemes that I know of, one of which was mentioned by the noble Baroness. All this amendment seeks to do is to protect the very people who are most at risk: a landlord or tenant using a letting agent which is not part of a larger organisation. This would turn a voluntary scheme into a compulsory scheme overseen in the way the noble Baroness described. If we ever got to a vote on this, I would support it.
Lord Harris of Haringey (Lab)
My Lords, I repeat my declaration of interests as chair of the National Trading Standards Board. Of particular relevance here is that we fund the National Trading Standards Estate Agency Team, which is responsible for issuing individual banning or warning orders under the Estate Agents Act 1979, maintaining a public register of such banning or warning orders, and approving and monitoring consumer redress schemes. Of course, those activities apply specifically to estate agents; they do not cover letting agents. As my noble friend Lady Hayter said when she introduced the amendment, it is noticeable that there are occasions when estate agents are banned under the Estate Agents Act and then reopen as letting agents. As far as many members of the public are concerned, there is not much difference between them.
The purpose of the amendments is extremely helpful. First, they address the problem that is becoming increasingly an issue for estate agents of trying to charge both the seller and the buyer for the same transaction. I have to say, I find this an extraordinary process because my understanding of the word “agent” is that you are acting on behalf of somebody. How can you act on behalf of both the seller and the purchaser? There is clearly a conflict of interest. It is not clear that anyone benefits from this arrangement, apart from those estate agents that claim fees from both sides of the transaction.
It is an anomaly that letting agents are treated differently from estate agents. I would have thought that that is something it would be sensible to address as part of this process. I know that the Government are keen to avoid duplication and so on, so why are they not moving towards treating estate agents and letting agents in the same way and by the same regulation process?
The point that has been made about the consumer protection of clients’ money by letting agencies is, again, unanswerable. I find it extraordinary that with this particular type of transaction there is not the sort of protection that you would expect in most other instances where a professional or so-called professional body is holding money on your behalf. I hope that the Minister will be positive about the themes in these amendments and try to ensure that we can incorporate those principles somewhere in the Bill before it goes much further.
Baroness Neville-Rolfe
My Lords, I remind the Committee that we have also tabled amendments to put the enforcement provisions on the face of the statute, which means that our provisions on lettings will take effect on the common commencement date of 6 April next year. I will try to address the noble Baroness’s points in turn, without talking at too great a length. I will say upfront that my colleagues in DCLG are frequently in discussions with the organisations that she mentioned. It was good to have the intervention of my noble friend Lord Palmer of Childs Hill on Amendment 81D, and to hear from the noble Lord, Lord Harris.
Turning to Amendment 81B and fees, most letting agents offer a good service, as I think has been acknowledged, so a blanket ban cannot be the answer to tackle a minority of irresponsible agents. We are not convinced that banning fees will make renting cheaper for tenants. An outright ban would mean that agents would either absorb the charges or pass them to landlords. Many small letting agencies have small profit margins and if they were unable to pass the charges on to landlords, they could struggle to remain in business. Given the high demand for rental properties, it is extremely likely that any increase in costs to landlords will simply get handed down to tenants through higher rents.
That is what has happened in Scotland, where fees to tenants are banned. The Office for National Statistics has confirmed that average rents have been rising faster in Scotland than in England. In fact, average monthly rents in Scotland before fees were banned in November 2012 were around £508 and had been stable since 2010. In July 2014, average monthly rents had risen to £534, which is 2.7% higher than in the previous July. This suggests that tenants in Scotland have been paying perhaps an extra £26 a month in rent on average than they paid before the legislation was introduced. That is £312 over a year.
We believe that the course we have adopted—transparency of fees—is a better answer than banning them. Forcing agents to publicise their fees will mean that while every business remains free to set its own fees, competition, which is strong in this area, will ensure that the fees are justified.
Lord Harris of Haringey
Before the noble Baroness leaves that point, I think she said that if you move towards a system of regulation of letting agencies it would be necessary to set up a new system for banning and warning orders. Why is it not possible to graft that on to the existing system for estate agents?
Baroness Neville-Rolfe
The noble Lord makes the fair point that a precedent exists. However, if you are going to introduce provisions into a new area, it is necessary to look at the detail, to consult and so on.
Lord Palmer of Childs Hill
When I took up a position in this industry on an advisory board, the question I asked immediately was: what happens if the letting agent goes bust or into liquidation? The three redress schemes mentioned by my noble friend, starting on 1 October, are jolly good but do not provide any monetary redress if anyone goes bust or is fraudulent. This Bill is about consumer protection and it seems that there is a need to protect consumers’ money as well as anything else. The redress schemes do not help any individual whose money has gone astray, be they landlord or tenant.
Baroness Neville-Rolfe
I thank my noble friend for his intervention, and perhaps I may return to the mandatory client money protection proposals.
Mandating insurance cover for money received or held by letting agencies in the course of business would introduce additional costs for the agencies, and these could simply be passed on to landlords and thus to tenants in the form of higher rents. I am sure that I do not need to remind the Committee that tenants’ deposits, which are an important aspect, are already protected as a result of separate legislation. I know this from a problem one of my children had, and I was able to offer him advice thanks to the debates we have had in this Room. That is a crucial element of tenant protection which is already in place, so we are not talking about deposits here, but other aspects. This amendment seeks to protect other funds but, I fear, at a potentially higher cost to tenants.
I can reassure noble Lords that the Government already encourage agents to join client money protection schemes via the Safe Agent kitemark, which denotes that the participating agent is a member of a client money protection scheme. Our How to Rent guide encourages landlords and tenants to choose agents with client money protection. Ensuring that tenants know their rights and landlords their responsibilities will empower consumers to make the right choices and, if things go wrong, to find appropriate redress. Yet further regulation could deter letting agents and make it difficult to encourage landlords to invest in properties. This investment is much needed to expand the overall supply of housing and help meet the country’s urgent housing needs. I am sure that that is an objective we all share. However, we have had an interesting debate and I will reflect on the detailed points that have been made by my noble friend Lord Palmer of Childs Hill, the noble Lord, Lord Harris, and the noble Baroness, Lady Hayter.
Turning to Amendment 105R, I share the concerns raised about the practice of “double charging” by estate agents. In the lettings sector I can understand that an agent is providing a service to both parties and therefore may in some cases charge both. I can see that there are some justifications in other consumer markets. However, in the case of estate agents, I share the concerns of noble Lords. Estate agents have to be transparent in their dealings. Under the existing legislation that this amendment would affect—the Consumer Protection from Unfair Trading Regulations 2008—as well as their own self-regulatory industry codes, estate agents must already make fees and charges clear for both buyers and sellers. This means that fees and charges must be transparent. While I have serious concerns about the practice, I believe there is a danger that if we were to rush into further legislative measures, we could impose unjustified new burdens and risk damaging this important industry.
We believe—and I think that we have said this elsewhere—that a better way of addressing the rise of double charging is through estate agent redress schemes. My predecessor, my noble friend Lord Younger of Leckie, and my colleague Jenny Willott met with the Property Ombudsman and Ombudsman Services: Property earlier this year to draw their attention to issues around double charging and sale by tender. They told us that while they had not yet received complaints about double charging, they shared our view that this was not a practice that should be encouraged. As a result, the Property Ombudsman committed to addressing the matter with the industry to ensure that its code of practice is properly adhered to and high standards of behaviour are followed. I can today confirm for the Committee that positive discussions with the industry have taken place and updated guidance is being finalised. The aim is to have updated guidance ready to come into effect early in December.
This guidance will ensure that agents recognise their obligations under the Property Ombudsman Code of Practice in respect of transparency, disclosure and avoidance of conflicts of interest. If the guidance is not complied with, agents will be in breach of that code. Breach of the code could result in removal from the redress scheme. This would effectively prevent them from operating as an estate agent, as membership of one of the redress schemes is a legal requirement for estate agencies.
Given this ongoing work, I do not believe that it is currently necessary to legislate against double charging by estate agents. However, I reassure the Committee that action is being taken to protect consumers from the worrying and emerging trend of double charging, and we will monitor developments. In the circumstances, I ask the noble Baroness to withdraw her amendment.
Baroness Hayter of Kentish Town
My Lords, I regret that answer, particularly on client money protection. The only case made against the amendment seems to be that it would cost the industry money. It is not clear which industry—the only industry that it would cost money is bad letting agents, because good letting agents do it. Landlords support compulsory client money protection, tenants’ groups support it, estate agents support it, the British Property Federation supports it; and I have not read out—because I was trying to save time earlier—a submission from SAFEagent, to which the Minister referred. It stated that it supported the amendment and that it was excellent to see so many organisations supporting what it has been campaigning for over several years; that is, protection of consumer money through a requirement for all letting agents to be part of a client money protection scheme. Therefore, even those who used to support the Minister’s case are now saying, “No, this needs to be written in law”.
I think that the Minister also said that the amendment would in some way discourage landlords from entering the market, but it is exactly the fear of letting agents walking off with their rent that may discourage them. The amendment is the security that a landlord needs, particularly if they are raising money to enter the market. Anyone who has tried to raise money to put into property knows that a bank will ask, “What is the security of your income?”. If you can say, “Well, I know it’s secure because it’ll be coming through a letting agent and that money has been secured by law and an insurance service”, you are more likely to get a bank loan to be able to become a landlord and a slightly cheaper rate of interest for it. This amendment is therefore good for the housing market and I hope that, before we come to Report—because it is an amendment that we will re-table—the Minister will think about this.
On banning letting agents from charging tenants fees other than for security checks, the Minister’s figures on Scotland and what has happened since it banned fees to agents are very different from those that I have seen. Two independent reports were done, one by Rettie & Co, the property specialists, and one by BDRC Continental, which is another independent specialist, looking at the impact of clarification of letting agent fees in Scotland. On the impact of the 2012 change in Scotland, they state:
“Any negative side-effects … have been minimal for letting agencies, landlords and renters, and the sector remains healthy … landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK … Renters in Scotland were no more likely to report a recent increase in their rent than those in other comparable parts of the UK … Less than one in five … letting agency managers said they had increased fees to landlords”.
They went on to say that 70% of landlords had not noticed any increase. Our figures from Scotland are therefore clearly rather different, and those were from independent reports.
One of the arguments advanced is that transparency of fees is very good for driving competition, but, in the case of estate agents, the people who pick agents are the sellers of houses and, in the case of letting agents, they are the landlords. In both cases, the buyer of the property cannot shop around for an estate agent, nor can a tenant shop around for a letting agent. They have to go to the one who is handling the property they need. Transparency does nothing to drive the market. If our amendments are refused, two lots of people will be affected: buyers who are being charged by somebody who is already charging the vendor; and tenants who are being charged by the landlord. Neither of those groups is in any position to argue about the fees because they are not the people going to the agencies.
I hope that the Government will look at this again. We are clearly going to bring it back. The client money protection is widely supported. As for taking fees from both sides, the Minister herself said that she has serious concerns. I hope that she does something to deal with this issue.
Baroness Neville-Rolfe
As I have said, I will reflect on the points that have been raised this afternoon, particularly on Amendment 81D. On the point about Scotland, there is not a lot to be achieved by having a war of facts, but my facts came from the Office for National Statistics, and showed what they showed. I do not think that I can leave the debate without saying that there is value to transparency in this sector. I honestly believe that having transparent fees helps the consumer and competition. The truth is that often houses are listed with more than one agency.
Baroness Hayter of Kentish Town
They are, because there is an agreement for a half-charge but the buyers still cannot choose between them. Having made the case and having forewarned the Government that we will return to it on Report, I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
Baroness Neville-Rolfe
“Enforcement of the duty
(1) It is the duty of every local weights and measures authority in England and Wales to enforce the provisions of this Chapter in its area.
(2) If a letting agent breaches the duty in section 81(3) (duty to publish list of fees on agent’s website), that breach is taken to have occurred in each area of a local weights and measures authority in England and Wales in which a dwelling-house to which the fees relate is located.
(3) Where a local weights and measures authority in England and Wales is satisfied on the balance of probabilities that a letting agent has breached a duty imposed by or under section 81, the authority may impose a financial penalty on the agent in respect of that breach.
(4) A local weights and measures authority in England and Wales may impose a penalty under this section in respect of a breach which occurs in England and Wales but outside that authority’s area (as well as in respect of a breach which occurs within that area).
(5) But a local weight and measures authority in England and Wales may impose a penalty in respect of a breach which occurs outside its area and in the area of a local weights and measures authority in Wales only if it has obtained the consent of that authority.
(6) Only one penalty under this section may be imposed on the same letting agent in respect of the same breach.
(7) The amount of a financial penalty imposed under this section—
(a) may be such as the authority imposing it determines, but(b) must not exceed £5,000.(8) Schedule (Duty of letting agents to publicise fees: financial penalties) (procedure for and appeals against financial penalties) has effect.
(9) A local weights and measures authority in England must have regard to any guidance issued by the Secretary of State about—
(a) compliance by letting agents with duties imposed by or under section 81;(b) the exercise of its functions under this section or Schedule (Duty of letting agents to publicise fees: financial penalties).(10) A local weights and measures authority in Wales must have regard to any guidance issued by the Welsh Ministers about—
(a) compliance by letting agents with duties imposed by or under section 81;(b) the exercise of its functions under this section or Schedule (Duty of letting agents to publicise fees: financial penalties).(11) The Secretary of State may by regulations made by statutory instrument—
(a) amend any of the provisions of this section or Schedule (Duty of letting agents to publicise fees: financial penalties) in their application in relation to local weights and measures authorities in England;(b) make consequential amendments to Schedule 5 in its application in relation to such authorities.(12) The Welsh Ministers may by regulations made by statutory instrument—
(a) amend any of the provisions of this section or Schedule (Duty of letting agents to publicise fees: financial penalties) in their application in relation to local weights and measures authorities in Wales;(b) make consequential amendments to Schedule 5 in its application in relation to such authorities.”
Baroness Neville-Rolfe
““the appropriate national authority” means—
(a) in relation to England, the Secretary of State, and(b) in relation to Wales, the Welsh Ministers;”
(i) ”
“(ii) a registered social landlord, or(iii) a fully mutual housing association,”
““fully mutual housing association” has the same meaning as in Part 1 of the Housing Associations Act 1985 (see section 1(1) and (2) of that Act);”
““registered social landlord” means a body registered as a social landlord under Chapter 1 of Part 1 of the Housing Act 1996;”
“(aa) a county borough council,”
“(6) A statutory instrument containing (whether alone or with other provision) regulations made by the Secretary of State under section (Enforcement of the duty)(11) is not to be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(6A) A statutory instrument containing (whether alone or with other provision) regulations made by the Welsh Ministers under section (Enforcement of the duty)(12) is not to be made unless a draft of the instrument has been laid before, and approved by a resolution of, the National Assembly for Wales.”
“(7A) A statutory instrument containing regulations made by the Welsh Ministers under this Chapter other than one to which subsection (6A) applies is subject to annulment in pursuance of a resolution of the National Assembly for Wales.”
Lord Alton of Liverpool
Promotional activities by sellers in the high cost consumer credit marketPromotional activities by sellers in the high cost consumer credit market
Where a lender in the high cost consumer credit market is selling a service which may only be purchased by a consumer aged 18 years or more, public communications about that service, including promotional material and any promotional activities, shall not be targeted at people below the age of 18.”
Lord Alton of Liverpool (CB)
My Lords, in moving Amendment 102 I am returning to an issue which I raised at Second Reading. I tabled this amendment just before the Summer Recess, which seems a long time ago, but it has lost none of its topicality or, I would argue, its importance.
Amendment 102 is designed to address promotional activities by sellers in the high cost consumer credit market, an issue that I know is of widespread concern in your Lordships’ House and outside it. My amendment complements those which follow in this group and which I also support. It requires anyone selling their services in the high cost consumer credit market to behave in a specific way: that is, they must ensure that if their service is only purchasable by a consumer aged 18 years or over, it must be communicated in a responsible way such that any promotional material or activity is not targeted at people below the age of 18. In simple terms, the aim of my amendment is to ensure that children are protected from advertising for high cost loans which is both ill suited for children and corrosive in the impact it has upon parents and families as a whole.
This amendment should be seen as part of a suite of measures, alongside Amendments 105B and 105C, to protect vulnerable consumers, although I find the term “consumer” sometimes makes it easier for us to forget that these consumers are families, many of whom are struggling already without the added pressure of intrusive and inappropriate advertising. Debt is an awful blight on families and communities that often are struggling to survive. Certainly in neighbourhoods in the city I once had the privilege to represent in another place—the City of Liverpool—I encountered this frequently over the years. Debt destroys relationships and it can trap large numbers of people.
Sad to say, we are not doing enough, or anything like enough, to educate the generations who will follow us about the management of money. When payday loans are increasingly seen as a normal means of money management then we have a serious problem. This is not scaremongering. In September, the Children’s Society published a report entitled Playday not Payday, which I commend to all noble Lords. Among the headline findings from the report, which I am sure many other noble Lords will refer to in supporting amendments, it states that 61% of parents surveyed believe that seeing payday loan advertisements makes children assume that these are a normal way to manage money. In addition, 72% of children aged 13 to 17 said that they had seen at least one payday loan advertisement in the preceding week; more than two-thirds—68%—said that they had seen at least one on television.
The Children’s Society and the StepChange Debt Charity have provided some very useful information for today’s debate. For instance, in a note circulated to noble Lords, they make the point that 80% of payday loan ads are shown before the watershed. Their research found that more than half of children said that they had seen payday loan ads often or all the time, with 21% saying their school taught them about debt and money management—but therefore that four out of five do not. Playday not Payday discovered that more than half of children aged 13 to 17 recognised at least three payday loan companies, with 93% recognising at least one such company. Some 74% of parents thought that payday loan ads should be banned from television and radio before the watershed, and one-third of children aged 13 to 17 described payday loan ads as fun, tempting or exciting; those children were considerably more likely to say that they would use a payday loan. The Children’s Society says:
“Far from being an inevitable knock-on effect of successful marketing to adults, there is evidence to suggest that children exposed to particularly suggestive loan adverts are then asking and pressuring their parents to take out a loan to pay for things which they have not been allowed”.
Its polling found that parents who had used a payday loan in the past were significantly more likely to say that their children had suggested that they take out a payday loan.
Another organisation, Christians Against Poverty—CAP—a national charity seeking to lift people out of debt and poverty by providing debt help and money management courses, found in a 2013 survey that 20% of its clients had taken out payday loans. When taking out the loan, 61% were asked nothing about their income, 85% nothing about expenditure and 63% nothing about their work status; 77% used their payday loan to buy food.
At Second Reading I referred to The Debt Trap: Exposing the Impact of Problem Debt on Children, another Children’s Society report, published in May this year. I want to remind noble Lords of some of the report’s findings. Families trapped in problem debt are more than twice as likely to argue about money problems, leading to stress on family relationships and causing emotional distress for children. Evidence suggests that problem debt can lead to children facing difficulty in school. Problem debt can also have a profound impact on children’s ability to engage in social activities.
I am not trying to browbeat the Committee but to drive home how important it is that we do something about the current situation. Children—who certainly consume what they see even if they are not able to purchase the service—are not an acceptable market for payday loan advertising. Additionally, these children will one day be consumers in the sense that they will be able to purchase the services they have been exposed to, once they reach the age of 18. The recent Children’s Society report to which I referred earlier would seem to indicate that the normalisation of payday loans as a means of borrowing is already beginning to happen, with 30% of parents aged 18 to 24 describing them as an acceptable means of managing day-to-day expenses—significantly more than older parents.
Developing responsible attitudes towards money must begin at an early age but this becomes much more difficult when a rising generation of younger parents are already influenced by the lure of high-cost credit. My amendment aims to begin the process of nullifying that problem by requiring a greater degree of responsibility from high-cost credit lenders to advertise conscientiously, ensuring that their service is not targeted at those aged 18 or under.
The Lord Bishop of Norwich
My Lords, I rise to support the noble Lord, Lord Alton, and to speak to Amendment 105B, in the name of my colleague the right reverend Prelate the Bishop of Truro, on the advertising of payday loans. He cannot be here today but has been working very closely with the Children’s Society on this issue. Amendment 105B seeks to make provisions to restrict the times at which payday loan advertisements are shown, most specifically in relation to the watershed.
It surprised me to discover that, according to Ofcom, no less than 80% of all payday loan advertisements are shown before the watershed. It is therefore no surprise—to pick up on some of the statistics that the noble Lord, Lord Alton, mentioned—that the Children’s Society found in its survey that over half of all children aged 10 to 17 reckon that they see payday loan advertisements either “often” or “all the time”. It is the sheer quantity of these advertisements that normalises payday loans for children and young people. The research shows that one-third of all teenagers think that the payday loan adverts themselves are tempting and exciting—they are very well designed. Those teenagers are much more likely than their counterparts to say that they would consider taking out a payday loan in the future.
It is sometimes argued that these advertisements are not aimed at young people. However, we can see from the surveys how much they have affected the way that young parents in particular manage their money. The report, Playday Not Payday, showed that 40% of parents aged 18 to 24 polled by the Children’s Society said that they had used a payday loan—no less than four in 10. It is interesting that the number halves for those in the next 10-year age category and halves again for those aged 35 to 44. So the younger an adult is, the more likely they are to have taken out a payday loan. That makes me think that these loans are not being taken seriously by young people, serious though they are. We have allowed them to take over our televisions and radios, normalising them to the point where their use is seen as casual. Just this morning I was told the story of a young woman who took out a payday loan to pay for a Domino’s pizza. That could prove to be a very expensive pizza indeed. Of course it is a small amount used for an everyday purchase that becomes ever larger in terms of the debt that you incur. So I ask the Minister what steps we can take to ensure that payday loans are always portrayed as a serious form of credit with very high risks. The current advertisements do not present them as a serious form of credit with high risks.
Action is being taken: the noble Lord, Lord Alton, mentioned the Broadcast Committee of Advertising Practice and its consultation. However, it is disappointing that that only relates to the content of these adverts and not to their scheduling. So it will not help the 72% of teenagers who see a payday loan advert more than once a week. I hope, therefore, that the Minister will understand that this amendment seeks specifically to reduce the frequency and volume of payday loan adverts on television and radio.
In that regard, it would do something to counter the rather poor money management education that most children say they receive. Only one in five children aged between 10 and 17 feels that their school teaches them anything about money management. Not many more feel that their parents have taught them much about management, and yet half of them are seeing adverts often or all the time.
This year, 2014, marks the 50th anniversary of the watershed. It was put in place to assure parents that their children were watching only television that was appropriate. That is why we should use the watershed to cover payday loan advertisements. We have an opportunity here, and I look forward to the Minister’s response.
Baroness Howe of Idlicote (CB)
My Lords, I welcome and support the amendment in the name of my noble friend Lord Alton of Liverpool, and particularly the point he made, echoed so eloquently by the right reverend Prelate the Bishop of Norwich, about the importance of the pre-watershed period. There needs to be a time when all the things that we have heard about are not available to be seen by children. It is hugely important that we all stress this, and I am certain the Government will be firmly behind it all.
The frequency and volume of adverts for payday loan companies and things like that concern me—I cannot remember the last time I turned on the radio or the TV without seeing a dancing puppet or a singing satsuma offering me a quick and easy loan. It must be tackled any way that we can. The pre-watershed period is vital. The Government must take and act on the serious point being made about this, and I hope that all colleagues here, including the Government, will support the amendment.
Lord Mitchell (Lab)
My Lords, I have not previously spoken on this Bill. I support Amendment 105B. If I never do anything else in your Lordships’ House, I must do that, because this payday loan issue has been quite beyond my comprehension. Starting three years ago, when nobody was paying any attention to it, and the Government, frankly, were quite indifferent, we have moved the debate on. I give the Government credit for changing their mind on this and being highly supportive, enabling us to get to the point that we have reached today.
I never expected the FCA to be so strong and definitive, and to introduce controls which have had the effect they have. Frankly, I thought that the authority would roll over, and I am really pleased that it has been successful. It is saying that within a year or so perhaps 95% of these payday lending companies will be withdrawing their services.
But the outstanding issue is the one of advertising. When I talk to people about payday lending, I will sometimes say something to them that they do not quite understand. It is that I have more regard for people who go into the pub to borrow 50 quid from some really nasty characters, knowing that if they do not pay it back, they are going to lose a kneecap or something like that. At least they know the name of the game. I am not backing it, but I am saying that that is how it was. What has happened is that today this kind of lending has become cool and sophisticated. You can have an app on your iPhone and suddenly it is part of the way of living for many people. There is no shame associated with it; it is just something that can easily be done, and the advertising element of it is quite important.
We have to understand that companies like Wonga have phenomenal sums of money to spend and they use the most sophisticated advertising they can to get to the people out there. I remember being told in correspondence I had with the trade association—and indeed I have heard Wonga say this—that the industry does not target children. It makes sure that there are no advertisements around children’s programmes. That is a typical approach on the part of Wonga, but it is a total lie. It is a lie because many families in this country have the television on all the time. I believe that the average family watches television for six hours a day. The TV is on when the kids come home from school and it is on in the holidays. They do not really pay attention to every programme, whether it is a children’s programme or not. If it is not a children’s programme, that is when the advertisements are aired, and children can see them. They see the puppets, as the noble Baroness, Lady Howe, mentioned, and they can sing the ditties. They think that it is tremendous fun. What children then do is put huge pressure on their parents, so that when a parent says, “You can’t have a new pair of trainers”, the answer is, “Wonga will give you the money for them”. That is the sort of pressure which continues to be exerted and it is why it is easy for people to get into this loan situation.
I have a Private Member’s Bill before your Lordships’ House. It is two pages long. This particular amendment is summarised in five lines. I think that it is probably as good as we can get—I think that it is really good in fact. I am very keen to support it and I encourage noble Lords to do the same.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I rise to speak in favour of Amendment 105B and the other amendments in this group. I spoke about this issue at Second Reading and I have not changed my mind about it, but I will try not to repeat the arguments and the statistics that other noble Lords have cited.
The quality of childhood is under attack from all sides: the sexualisation of childhood through scantily clad pop stars deliberately targeting the younger generation; the fear of paedophiles making parents reluctant to allow children the freedom that I enjoyed as a child when roaming over nearby fields with my friends; the intrusion of digital games and equipment, forcing out healthier childhood pursuits; and, unfortunately, cyberbullying via smartphones. All these conspire to put pressure on children so that what should be a carefree childhood is often turned into a race and a competition for the latest gadget or fashion garment.
During my children’s younger years, one of the more enjoyable activities during a busy day was to sit down with them and watch the children’s programmes that were on at lunchtime and again at their tea time. Many of these, especially the lunchtime ones, were cartoons and puppets. I am sure that many of us can remember the delights of “Postman Pat”, “Camberwick Green” or “Pigeon Street”—but I fear I show my age. While watching their favourite television programme, children should not be subjected to propaganda from high-cost consumer short-term credit companies or, as they are known, payday loan companies. As has been said, these adverts give the impression that applying for such a loan is commonplace, and that it will solve all your problems and be easy to repay. Alcohol and gambling are not advertised during children’s prime-time TV, so why are payday loans?
Baroness Crawley
My Lords, I, too, support the amendments in this group. This is a vital issue for us all. The language of children’s protection has to be modernised. We rightly rail against pornography and violence and the abusive exposure of young children to those things, but the insidious manipulation of children when it comes to the payday lending industry can no longer be overlooked or seen as a lesser evil. Those puppets are built like children’s grandmothers and grandfathers. They are authority figures that kids look up to—certainly the ones I have seen. We all know that the misuse of money, as the noble Baroness has said, can lead to terrible family misery, and we harm children—often for the rest of their lives, as noble Lords have said—if we make popular for them the notion that money can be procured cheaply, and dress it up to sound like fun or a solution to their family’s pain.
The Advertising Standards Authority, speaking about advertising rules on this subject, states that:
“The protection of young people is at the heart of the rules”.
It goes on to say that advertising “must be socially responsible”. I fail to see what could be socially responsible when it comes to payday loan advertising at usurious rates, as the most reverend Primate the Archbishop of Canterbury put it. Member states of the European Community—which I believe we still are at present—are urged by Article 27 of the audiovisual media services directive to,
“take appropriate measures to ensure that television broadcasts by broadcasters under their jurisdiction do not include any programmes which might seriously impair the physical, mental or moral development of minors”.
I suggest to the Minister that the Bill’s inclusion of this group of amendments would be an appropriate measure.
In conclusion, I read recently that the world’s top 10 PR companies, including UK companies, have said that they will not represent clients that deny climate change. What a powerful signal it would be if those PR firms and their advertisers took a similar course of action when it came to their industry being approached to procure payday loan advertisements. I urge the noble Baroness to use the opportunity of the Bill to stop this practice.
Lord Harris of Haringey
My Lords, I rise briefly to support Amendment 105B, and perhaps I may tender some advice to the Minister. I suspect that this is one of those issues that, were it to be put to a vote in the House at Report stage, it would not be a happy moment for the Government, who would oppose it. However, I am sure that the Minister supports the objectives here.
We are all clear about how wrong it is for companies to be targeting advertising material at children and to rely on pester power to deliver what they want. My reason for speaking is because I agree with everything that has been said in this debate bar about two sentences. Those two sentences were spoken by my noble friend Lord Mitchell. Although he did not mean it, he gave the impression that somehow the cuddly illegal money lender, the loan shark operating in the pub who threatens to kneecap you if you do not pay up, is somehow preferable. I do not regard the payday loans companies as necessarily preferable, but we have to be conscious that one of the consequences of tightening up on the payday loan market will be that more people will seek recourse to illegal money lenders.
I chair the National Trading Standards Board, and one of the things we fund is the Illegal Money Lending Team for England and the Illegal Money Lending Team for Wales. Those teams are only scratching the surface of the problems that exist around illegal money lenders. They are very nasty individuals who are quite happy to squeeze money out of individuals in perhaps the same way as these corporate entities do—except that they do so using violence and all sorts of intimidation. Some of the cases that have been pursued by the illegal money lending teams are horrifying. Illegal money lenders use their power and strength to intimidate vulnerable people and families, including rape of the women concerned, beatings and other attacks. These are organised criminals who sometimes operate in small groups and sometimes as part of bigger networks. We have to be extremely cautious. When the Government accept these amendments or something similar to them either now or at the Report stage, I hope that they will look at what else needs to be done to protect the public from illegal operators as opposed to the legal ones we are talking about in this group of amendments.
Baroness Drake
My Lords, I support all of the amendments in the group, but I want particularly to speak to Amendment 105P. The mere existence of the payday loans, high-cost consumer credit market is to me a consumer detriment, particularly for vulnerable consumers who access it, but of course that is not an issue which is up for debate under these amendments. The FCA remit is to regulate markets, not to outlaw or to ban these companies. Only the Government can drive the policy needed to secure for not-for-profit affordable lenders sufficient capital liquidity to provide an alternative source of credit. Amendment 105P seeks to address the issue, because notwithstanding the regulation of payday lenders, the need for affordable credit still remains for a particularly vulnerable group of people. As I say, only the Government can drive the policy to address this issue. In the mean time, given that the payday loan market exists, the demand side has certain key characteristics with which we are all familiar. A high proportion of borrowers experience financial distress. Many will come from less well-off socioeconomic groups and will have few assets. A significant number of borrowers will have two or more loans, exposing them to unsustainable and spiralling debt.
Many borrowers get payday loans to cover basic needs, including the needs of their children, yet many are in acute repayment difficulties. According to the CMA, more than one-third of loans were not repaid on time or at all, often bringing considerable consumer harm relative to the amounts that were borrowed in the first instance. That is a demographic crying out for intrusion by the Government to create a sustainable market for affordable credit, as these people will still be vulnerable to the need for that credit. Amendment 105P turns its attention to the fact that the standing need for affordable credit for this vulnerable demographic has to be addressed by the Government.
Amendment 105P also captures the argument that the introduction of a broader levy funding base should not be a lost opportunity to significantly expand the availability of a free debt advice service. That is a compelling argument. By comparison, the new pension freedoms and choice agenda due in April 2015 comes with a guaranteed guidance service on the assumption—quite rightly—that the position of pension savers and consumers in the marketplace will be more vulnerable to poor decision-making without such guaranteed guidance. A levy is being raised from among the relevant providers of financial services which is to be dedicated to funding that guaranteed guidance.
No doubt the argument will be made that significant numbers who would benefit do not seek debt advice and that the allocation of funding to a debt advice service has to be proportionate to the demand for such guidance. My response to that is to say that the Government should take the lead in stimulating or creating the demand and the take-up for that debt advice service. I am sure that the proposed pension guarantee guidance would not be deemed a great policy success if few people took advantage of it—even more so with vulnerable people exposed to unsustainable debt and high-cost consumer credit, missing the opportunity to expand the availability and the take-up of a free debt advice service would not be a policy success. Amendment 105 in particular says that we are dealing with a particular manifestation of the need for credit. However, even in addressing the payday loan companies, the systemic problem will still need to be solved: how people can get access to affordable credit and how they can get access to and use a free debt advice service.
I should perhaps declare an interest in that I am a member of the TPAS board which is currently involved in delivering the pension guidance guarantee. Hopefully, that will not detract from the merits of my argument.
Lord Stevenson of Balmacara (Lab)
My Lords, I declare my interest as the retiring chair of StepChange, the leading debt advice and solutions charity, which has already been mentioned this evening.
This has become a rather wide group of rather disparate amendments, and I worry that some of the important points that need to be made in this area might get lost. As well as dealing with the very important issues about the impact on children of payday loan advertising, the amendments in my name and that of my noble friend Lady Hayter propose measures, as we have just heard from my noble friend Lady Drake, to ensure a further clearing up of the payday lending sector as a whole. There are other amendments still to come which deal with elements that go together as part of this overall policy.
This is rather a dense set of amendments, and I apologise in advance for spending some time on the two amendments to which my name is attached, Amendments 105P and 105Q, but I think they are important. However, I do not want to lose the very good speeches that we have already heard. Somebody asked what the state of play is now in childhood. My noble friend Lady Crawley said that we have to think quite inventively about how the language of children’s protection needs to be modernised when we are dealing with issues such as advertising more generally. Even to talk about restricting adverts in a system which is 50 years old—the watershed—is to ignore the complete change in viewing habits that we are currently living through, with people watching individual programmes in a variety of different information-gathering machines, such as tablets and iPads.
Baroness Jolly
My Lords, I am truly grateful to noble Lords for raising the thorny issue of payday lenders and for the informed debate that ensued. I will first discuss the amendments in the names of the noble Lord, Lord Alton, and the right reverend Prelate the Bishop of Truro. I am grateful to the right reverend Prelate the Bishop of Norwich for speaking in his stead.
The Government share the concerns of noble Lords that this market has caused serious problems for consumers, with unscrupulous lenders taking advantage of vulnerable consumers. The Government have acted decisively to fundamentally reform regulation of the payday market. The Financial Conduct Authority’s new, more robust regulatory system is already tackling sources of consumer detriment in this market. The Government have legislated to require the FCA to introduce a cap on the cost of payday loans to protect consumers from unfair costs, which will be in place by 2 January.
We are committed to tackling abuse in the payday market wherever it occurs, including in the marketing of these loans. The Government strongly agree with noble Lords that it is unacceptable for payday lenders deliberately to target vulnerable consumers with their advertising material. However, it is clear that a robust set of measures are now in place to protect the vulnerable from such practices. Payday loan adverts are subject to the Advertising Standards Authority’s strict content rules. The ASA enforces the rules set out by the UK Code of Broadcast Advertising, or the BCAP Code. The BCAP Code requires that all adverts are socially responsible and that young people are protected from harm.
These rules specifically prohibit payday loan adverts from encouraging under-18s either to take out a loan or pester others to do so for them, and the social responsibility requirement of the rules prohibits lenders from deliberately targeting vulnerable people such as problem gamblers. The ASA has powers to ban adverts which do not meet its rules and has a strong track record of doing so: since May of this year the ASA has banned 11 payday loan adverts, including action against adverts which the ASA adjudged to trivialise payday loans. In addition to this, the FCA has introduced tough new rules for payday adverts, including the introduction of mandatory risk warnings and a requirement to signpost free debt advice. The FCA also has powers to ban misleading adverts which breach its rules.
It is important to understand the scale of this issue, and that any action is informed by evidence. Ofcom research found that payday adverts comprise a relatively small 0.6% of TV adverts seen by children aged four to 15—around one a week. As the noble Lord, Lord Alton, mentioned, the Broadcast Committee of Advertising Practice is currently reviewing how its advertising rules relating to the protection of children are applied to payday loan advertising on TV. The Government look forward to the findings of the review, which we expect to be published before the end of the year.
Lord Stevenson of Balmacara
My Lords, I hope the noble Baroness is not falling into a mode of argument which suggests that since you cannot stop children watching programmes all the time, it is not worth the candle to try to prevent these things happening.
Baroness Jolly
Nobody wants young children to grow up thinking that payday loans are the right way to go but we believe that currently there is a tough package of measures in place to ensure that vulnerable consumers are protected from inappropriate practices. I hope that the noble Lord will see fit to withdraw the amendment.
Lord Mitchell
I just want to make the point again that there is a difference between advertising that is directed at children and advertising that they just happen to see, but that really they are the same thing none the less. Children see them.
Baroness Jolly
Indeed. However, advertising of payday loans is less targeted towards children currently than it may have been in times past. There is also a larger issue here around parents helping children to understand. These adverts are shown in all houses, whether or not the parents have a problem with payday loans. There is an issue for parents to teach their children that this is not the way to go, even though for the majority of parents, that is not the case. However, the Government believe that regulation rather than statutory legislation is the way to move forward in these particular cases.
Lord Alton of Liverpool
My Lords, I am grateful to the noble Baroness, Lady Jolly, for her response to what has been, as she rightly said, a really excellent debate and one which I think has united opinion on many sides of the Committee. The noble Lord, Lord Harris of Haringey, was right when he said earlier on that if this matter could not be successfully resolved in Committee today, it would undoubtedly be returned to on Report. I get the sense, having just heard the concluding remarks from the Minister, that we will want to bring these amendments back on Report, because many of us do not think that regulation will be sufficient to deal with something that needs to be put on a firm statutory basis.
The thing that I will take away from the debate this afternoon is that, as the right reverend Prelate the Bishop of Norwich said earlier, four out of five children are not receiving money management education. I was particularly struck by the graphic example that he gave of people taking out a loan in order to pay for a pizza. That underlines where we are and why we have to do something about this situation.
Positive points have come out of the debate as well. The noble Baroness, Lady Jolly, touched on the issue of credit unions. I intended to do precisely that. The noble Lord, Lord Harris, is right to say that once we dispose of the usurious rates of interest that are being charged by payday loan sharks, that will be replaced by the sort of people described by the noble Lord, Lord Mitchell, offering all sorts of forms of violence. Organised crime may well move into this slot if we do not take preventive measures. We need a fundamental decision on how to give additional support to the welcome support given by the noble Baroness to credit unions, as well as dealing with pester power, dancing puppets and the watershed issue—all the sorts of things raised by the noble Baroness, Lady Crawley, my noble friend Lady Howe, and the noble Baroness, Lady Drake, who, rightly with the noble Lord, Lord Stevenson, reminded us of the importance of free debt advice services.
I was also struck by what the noble Baroness, Lady Bakewell, said, about the destruction of the age of innocence, and what was said elsewhere about the importance of updating the language of children’s protection. I made the point in my opening remarks that if we can do these things on a statutory basis for alcohol and gambling, there is no reason why we cannot do it for payday loan advertising targeted at children as well. I hope that in the period now elapsing between Committee and Report the Government will think again about this and perhaps have discussions across the Chamber to see what can be done to reach consensus. I get the sense that we all want to reach the same conclusion. I beg leave to withdraw the amendment.
House of Lords
Death of a Member: Lord Barnett
The Lord Speaker (Baroness D'Souza)
My Lords, I regret to inform the House of the death of the noble Lord, Lord Barnett, on 1 November. On behalf of the House, I extend our deepest condolences to the noble Lord’s family and friends.
Air Pollution
(9 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Whitty
To ask Her Majesty’s Government what steps they are taking to reduce air pollution.
Lord Whitty (Lab)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare a non-pecuniary interest as vice-president of Environmental Protection UK, which is campaigning on this issue.
Baroness Northover (LD)
My Lords, the Government have invested billions of pounds in measures to reduce air pollution, including incentives for low-emission vehicles and sustainable transport. Local authorities are also required to review and assess air quality under the local air quality management system. We support them in seeking to deliver local measures to meet national air quality objectives. We also work with the devolved Administrations to improve air quality across the United Kingdom.
Lord Whitty
My Lords, I thank the Minister for her reply, but does she recognise that there are still 29,000 people whose deaths are attributable to air pollution, mainly induced by traffic? Does she also recognise that the UK is in clear breach of EU limits in large parts of the country, particularly urban areas; that the WHO found a lot of the assessed areas were at dangerous levels, particularly for nitrogen dioxide; and that the Government’s own forecasts suggest we will not reach EU limits for London, Yorkshire and the West Midlands until 2030, 15 years after the deadline?
Does the Minister accept that the Government have virtually abandoned previous local and national air quality strategies and the development of low-emission zones, and have ignored the Environmental Audit Committee’s recommendations? When are we going to see a proper government strategy on air quality?
Baroness Northover
My Lords, I assure the noble Lord that we take this extremely seriously and I would refute the latter part of his question. He will know that we have managed to limit most pollutants and these are now below the legally binding EU limit values. The outstanding one is nitrogen dioxide, which has been a challenge not only for the United Kingdom but for 17 of the 27 EU states. We are working very hard to combat this.
Baroness Parminter (LD)
My Lords, many local authorities are starting to introduce low emission zones to tackle air pollution. If they are led locally, these will have different criteria and be introduced at different times. What are the Government doing to ensure an effective network of low-emission zones, right around the country?
Baroness Northover
We work very closely with local authorities to provide support when they seek to introduce low-emission zones. One factor here is that there may be different reasons for air pollution in different areas, and it is therefore important that decisions on how to identify and then tackle it are taken on a local basis. However, we are working very hard to support local areas in introducing appropriate measures.
The Earl of Clancarty (CB)
My Lords, how much thought has been given to democratising our understanding of air quality by developing a “citizen science” approach, whereby ordinary people might be encouraged to monitor their own air quality using measuring kits in their home and back garden? Air quality is about many things, including chemical fertilisers, natural allergens and so on, which will affect individual people’s day-to-day quality of life.
Baroness Northover
The more we involve and educate people of every age the better as far as tackling this is concerned. As the noble Earl will know, local authorities monitor locally. We have 273 sites, but if his suggestion brings many more sites on stream, maybe it is a very good idea.
Lord Framlingham (Con)
My Lords, bearing in mind that trees take in carbon dioxide and give out oxygen, will the Government do all they possibly can to encourage the planting of trees, particularly in inner-city areas?
Baroness Northover
My noble friend makes a very good proposal. I am sure that he will have seen the report today which, in terms of tackling climate change, puts a great deal of emphasis on planting trees.
Lord Brooke of Alverthorpe (Lab)
My Lords, the Mayor of London abandoned plans to introduce congestion charging in west London. Did that help to reduce air pollution or cause more trouble?
Baroness Northover
The noble Lord had better refer his question directly to the mayor. He will know that the mayor has introduced a wide range of measures and is consulting on a number that are in the pipeline. We are also constantly reviewing the effects of the various proposals, and I am sure that the point that the noble Lord has made will be looked at as well.
Lord Borwick (Con)
My Lords, I declare my interest as a trustee of the British Lung Foundation. Does the Minister agree that there is a regrettable lack of research into the detailed effects of air pollution on the lungs of Londoners?
Baroness Northover
My noble friend makes a good point, and this is something that Public Health England is taking up. We work very closely with the Department of Health and Public Health England. It is extremely important that we encourage research into the effect of pollutants.
Lord Hunt of Chesterton (Lab)
My Lords, what is the Government’s policy on diesel engines? Defra has now realised that they are in fact a dangerous source of pollution, as does the Mayor of London. Japan has for many years discouraged diesel engines. What is the Government’s policy in this direction?
Baroness Northover
We are looking very closely at this. The noble Lord will know that, in the past, it was thought that diesel engines would be less polluting and that studies of diesel engines in factories indicated that that was so. However, it did not prove to be the case when the engines were used out on the road, and that has serious implications.
Baroness Worthington (Lab)
My Lords, the noble Baroness may have sought to refute my noble friend’s Question but the truth is that, because the Government’s strategy for tackling air quality involved reducing the number of monitoring stations, they have been forced to go back to the drawing board. There is no strategy. Given the great interest in this issue on all sides of the House, perhaps we should have a debate on it so that we can help them form a strategy.
Baroness Northover
Again, I refute what the noble Baroness says. It is extremely important that local authorities work out in their own areas where the key spots are. They are best placed to monitor and identify them, and it is their responsibility. Defra takes an overarching responsibility, working with the local authorities.
Baroness Jones of Moulsecoomb (GP)
My Lords, I am concerned that the Minister does not understand the concept of an overall plan for the whole of Britain. The problem is Britain-wide. The Mayor of London is planning an ultra-low emission zone, which is fantastic, but it is still too small and too limited, and that will be the problem every time if the Government do not take the lead.
Baroness Northover
As I have just answered, it is important that Defra takes an overall strategic approach —which it is doing—and that the local authorities look at the situation—it may be a road junction—in their area. It is important to work on a local, national, European and international scale.
Health: Pneumococcal Disease
(9 years, 10 months ago)
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Lord Avebury
To ask Her Majesty’s Government what assessment they have made of the progress of the Joint Committee on Vaccination and Immunisation in its review of the adult pneumococcal disease programme.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)
The Joint Committee on Vaccination and Immunisation concluded a review of the adult pneumococcal vaccination programme in 2012. The committee will begin the next review in early 2015, taking into account the latest information on the epidemiology, cost effectiveness and impact of adult pneumococcal vaccination. It is anticipated that the review will take six months to complete, subject to the availability of the necessary evidence.
Lord Avebury (LD)
My Lords, the JCVI looked at the situation in its June meeting and said that it would like to see the results of recent trials on the effectiveness of PPV in adults, but the subject was not on the agenda for the October meeting. Why are those trials not in the public domain? Since it is likely that the vaccination would be effective against the 5,000 cases diagnosed in adults every year in England, with some savings to the National Health Service, what steps are being taken to accelerate the introduction of the PPV vaccine?
Earl Howe
My noble friend is right to highlight the burden of disease caused by pneumonia in particular in the elderly. As I said in my Answer, what happened at the October meeting of the JVCI was an agreement that a pneumococcal sub-committee should be formed to fully consider the latest evidence on adult pneumococcal vaccination, including the evolving epidemiology of pneumococcal disease in the UK following the introduction of the conjugate vaccine into the childhood vaccination programme. In addition, the review will consider the latest data on the use of the conjugate vaccine in adults. This was discussed at the October meeting, the minutes of which are due to be published next week.
Lord Walton of Detchant (CB)
My Lords, as a young doctor, I saw many cases of pneumococcal meningitis in childhood. This disease caused about a 15% mortality, and 25% of those who recovered were left with serious disabilities such as blindness, deafness and other forms of abnormality. The disease in adults is much less devastating. Vaccination in children has been enormously successful in almost completely eradicating pneumococcal meningitis. Pneumonia in elderly adults, caused by the pneumococcus, is a very serious disease. May we express the hope that the committee will come up with very positive recommendations for a wider vaccination programme with a different group of vaccines for adults?
Earl Howe
My Lords, the noble Lord summarised the position extremely well. I share his hope that we will see an outcome from the sub-committee’s work in which everyone can take satisfaction. He is right that rates of pneumococcal disease in children have fallen dramatically, but it is interesting that the knock-on effect of that has been to reduce the rate in adults as well.
Baroness Wall of New Barnet (Lab)
My Lords, I am sure that the noble Earl would agree that, not only for this disease, effective vaccination and immunisation lead to fewer people being in hospital and rates of infection being reduced. It also means that we have a much better patient flow coming through. Surely, to be successful, immunisation and vaccination need to be encouraged.
Earl Howe
The noble Baroness is of course quite right. It is important to emphasise that part of the benefit of the seasonal flu vaccination campaign is to reduce the risk in adults and children of pneumococcal disease. That is another good reason to get the flu vaccination.
Chilcot Inquiry
(9 years, 10 months ago)
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Lord Dykes
To ask Her Majesty’s Government what steps they are taking to expedite the publication of the report by the Chilcot Inquiry.
Lord Wallace of Saltaire (LD)
My Lords, the inquiry is completely independent of government. However, Sir John Chilcot has said that it is the inquiry’s intention to submit its report to the Prime Minister as soon as possible. I very much hope that its conclusions will shortly be available for all to read.
Lord Dykes (LD)
I express sympathy to my noble friend that HMG appear to be at the mercy of pressures from outside to connive in a delay in this report possibly to help Mr Bush and Mr Blair. Will he please come back to the Prime Minister’s exhortation in May that the report should be published by the end of this year at the latest and say when the date will be?
Lord Wallace of Saltaire
My Lords, I refute that there is in any sense a conspiracy connected to the former Prime Minister or the former American president. It has taken a good deal longer than was anticipated to clear the many thousands of documents that have been examined and which will be published on the website with a number of redactions. That process is now virtually complete. The Maxwellisation letters, which were sent out as a warning last year, should now be going out and we hope that that process will be completed. As soon as those who are to be criticised in the report have responded, the report will be ready for submission to the Prime Minister.
Lord Morgan (Lab)
My Lords, is this not a scandal following on a scandal? Is it not a public disgrace? In other countries—for example, the Netherlands—there were far more competent professional inquiries, full of lawyers who could comment on international law, which replied very swiftly. We have had this endless delay. Does it not indicate that perhaps the Government as well as the Civil Service have ceased to believe in open government?
Lord Wallace of Saltaire
No, my Lords, I do not think that it does. It has taken longer than we had hoped or expected. This is an entirely new sort of inquiry. I suppose it is comparable to the Savile inquiry, which also took a great deal longer than we had anticipated. We underestimated the complexity before we started, but we are encouraging the committee as rapidly as possible to complete and we are anxious to have the report published.
The Lord Bishop of Norwich
My Lords, does the Minister accept that repeated press reports of rows between the Cabinet Office and the inquiry over the declassification of documents are deeply hurtful to the families most affected by the Iraq conflict? Does he agree that until the inquiry is completed, many bereaved and grieving families will not be able to move on?
Lord Wallace of Saltaire
My Lords, I appreciate that many have been affected by the issues studied by this inquiry. I am not aware of any rows between the Cabinet Office and the inquiry. I am aware of a long series of complex discussions within the British Government, between the British Government and our allies and with the inquiry about the exact nature of what should be published. I am conscious that what will be published includes notes from more than 200 Cabinet meetings, for example, including some extracts from Cabinet minutes.
Lord Dobbs (Con)
My Lords, does my noble friend remember that, before the war broke out, 1 million ordinary people marched in the streets of London telling us not to go to war, yet we politicians did a pretty miserable job in waving that war on willy-nilly? While no one underestimates the difficulties that Sir John Chilcot faces, does my noble friend not accept that any further delay, after all this time, can only increase the sense of injustice that so many people feel about that war?
Lord Wallace of Saltaire
My Lords, I remember that march very well: I was one of the marchers. We are very conscious that we now need to bring this to a close. I deeply regret that it has taken three years since the end of the interview phase of the inquiry to get as far as we have. We are all anxious to complete the next stage which, as I stress, is showing to those who will be criticised in the report what it says about them and giving them a chance to reply. As soon as that is completed—so we are a little dependent on them, I am afraid to say, and on their lawyers—the report will be submitted to the Prime Minister and published.
Baroness McIntosh of Hudnall (Lab)
My Lords, does the Minister regard “as soon as possible” as nearer or further off than “in due course”?
Lord Wallace of Saltaire
My Lords, I very much hope nearer. In the debate in the House of Commons last week, my colleague the Minister for Civil Society commented that they very much hoped to have this published before the end of February. We are all conscious that we do not want to have this published in the middle of an election campaign.
Lord Stoddart of Swindon (Ind Lab)
My Lords, could we have the report as a Christmas present?
Lord Wallace of Saltaire
There are many things that the noble Lord might like as a Christmas present. I am not sure that I would prefer to read this report, with all its appendices, rather than the novels that I hope my wife will give me for Christmas.
Baroness Nicholson of Winterbourne (LD)
Does the Minister agree that sometimes in these enormous investigations it might be wise to set a time limit with an understanding that there are some things that simply can never be found out?
Lord Wallace of Saltaire
My Lords, I think one of the lessons we will have learnt from this inquiry is that time limits are highly desirable. I stress again that the review of thousands of documents, which were at high levels of classification, was unprecedented and did unavoidably take a great deal of time.
Lord West of Spithead (Lab)
My Lords, how much has the Chilcot inquiry cost so far? Is it rather like building work in one’s own house that “as soon as possible” ends up costing an awful lot more?
Lord Wallace of Saltaire
My Lords, the inquiry has cost £9 million so far. We estimate that by the time it is completed it will have cost £10 million. By comparison, the Savile inquiry cost £100 million.
Lord Avebury (LD)
My Lords, how far will the extra £1 million take us? Can my noble friend give an assurance that it will not be within the pre-election period before the next general election when silence is observed?
Lord Wallace of Saltaire
My Lords, that is the assurance that the Minister for Civil Society gave last week. We are all anxious that if it is not published by the end of February it would be inappropriate to publish it during the campaign period.
Lord Mawhinney (Con)
My Lords, I declare an interest as I had the privilege of working very closely with Sir John Chilcot when he was the Permanent Secretary in Northern Ireland. Is my noble friend concerned that the backstage manoeuvring and perhaps even bickering going on as people allegedly seek to protect their reputations could over time start to have a damaging effect on the reputation of Sir John Chilcot? It would be a disgrace were that to be allowed to happen.
Lord Wallace of Saltaire
My Lords, I am not sure about backstairs manoeuvring. I would say that the members of the Chilcot inquiry would not pass the necessary test as all being members of the establishment. Indeed, one of the members of the Chilcot inquiry disrupted the first lecture I gave as a university teacher when he was himself a rebellious student. The inquiry does have to consult those whom it will criticise and allow them to provide a defence. That is the process that now remains to be completed before we publish. We all have to accept that in natural justice that has to be allowed to go ahead even if there are lawyers involved.
Lord Richard (Lab)
My Lords, the process referred to by the noble Lord could take months. It could take a very long time. If criticisms are made in the report they then have to go to the people who have been criticised. They have the right to comment. It then comes back to Sir John Chilcot. He has to consider those representations and then, if necessary, reflect them by amending the report. That is a recipe for a delay that will go on and on and on.
Lord Wallace of Saltaire
My Lords, I hope that will not be the case, but I am sure the noble Lord will accept that this is a necessary part of the process. There will be criticisms of people who served in the previous Labour Government and they are entitled to see them before publication.
Lord Woolf (CB)
My Lords, the question of what happens in the course of inquiries was reported on by the committee, of which I have the privilege to be a member, headed by the noble Lord, Lord Shutt. One of its recommendations was that we should look again at the process of writing to those who may be affected. Many of those who have conducted inquiries said that it led to additional expense and waste of time. The Government were not sympathetic to what we recommended. Does the noble Lord think that the Government should look at the matter again?
Lord Wallace of Saltaire
My Lords, when the inquiry is complete and published, it might well be appropriate for some body of government or House of Parliament to look at that question again.
Barnett Formula
(9 years, 10 months ago)
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Lord Wigley
To ask Her Majesty’s Government what representations they have received from the Welsh Government in relation to the replacement of the Barnett formula as far as its application to Wales is concerned.
Lord Newby (LD)
My Lords, I begin by expressing my personal condolences to the family and friends of the noble Lord, Lord Barnett. Lord Barnett was a delight to have as a sparring partner, and I will certainly miss his presence in your Lordships’ Chamber very much.
The Government are aware of the Welsh Government’s views on continuing the Barnett formula. Although there are no changes to Barnett in prospect, we have agreed with the Welsh Government to revisit the arrangements for jointly considering relative funding in advance of each spending review. The Prime Minister has been clear that Wales will be at the heart of the debate on how to make the United Kingdom work for all its constituent parts.
Lord Wigley (PC)
My Lords, I, too, pay tribute to Lord Barnett: a lovely, gentle, intelligent colleague who was among the first to recognise that the funding formula bearing his name by now needs radical reform. Does the Minister accept that if Wales were to receive the same level of funding as does Scotland, relative to population and the portfolios devolved, Wales would now get a staggering £1.2 billion a year more than is currently the case? On what possible basis of equity can Wales be denied parity with Scotland in regard to such funding? Would it not now be a fitting tribute to Lord Barnett if the Government today pledged to revise the formula to deliver for Wales parity with Scotland in funding matters?
Lord Newby
My Lords, as the noble Lord knows, a very significant review of funding in Wales was undertaken by Gerry Holtham, which suggested that Wales would be getting a fair degree of funding if it was approximately 114% of that in England or more—I believe that that is the right figure. I believe that, certainly this year and next year, that figure will be met.
Lord Peston (Lab)
My Lords, I thank my noble friend for his Question, with which I know for a fact that my noble friend Lord Barnett was in total agreement. I also thank the Minister for his kind remarks, because he might be forgiven for thinking that one of Lord Barnett’s missions in life was to make his life a total misery. Lord Barnett will be remembered for his formula, but those of us in this House will surely remember that he contributed to a vast number of other topics and therefore deserves to be remembered for all that as well. I think we all agree that he will be missed much more than, perhaps, some of us when our time comes.
Lord Newby
My Lords, I absolutely agree with the noble Lord that Lord Barnett was a formidable parliamentarian across a range of subjects.
Lord Forsyth of Drumlean (Con)
My Lords, I associate myself with the remarks about Lord Barnett, who was a good friend and a great person in this House.
Can my noble friend explain to me how the vow made by all three party leaders in the concluding days of the Scottish referendum, which states that they are committed to,
“sharing our resources equitably across all four nations”,
is consistent with keeping the Barnett formula?
Lord Newby
My Lords, the noble Lord will be aware that the system for funding across the nations will change as we move to a greater degree of devolution in Scotland and that, when a greater degree of taxation powers is devolved to Scotland, the importance of the Barnett formula will be proportionately diminished. Therefore, it is not as though we are standing still on this; we are making a move in a direction that I hope the noble Lord will support.
Lord Thomas of Gresford (LD)
My Lords, I would like to associate these Benches with the tributes that have been paid to Lord Barnett. I used occasionally to share a taxi with him from Euston and he was a delightful person.
Do the Government agree that the cost of providing services to people in Wales on an equal basis is greater than that in England, having regard to relative levels of ill health, poverty and sparsity of population? If so, is not the basic premise of the Barnett formula utterly and fatally flawed?
Lord Newby
My Lords, I think that we need to remember that Wales receives greater per capita expenditure support than England; in 2012-13, while in England as a whole the level was just over £6,000, in Wales it was just shy of £7,000.
Baroness Royall of Blaisdon (Lab)
My Lords, my noble friend Lord Barnett was an extraordinary man, as an MP, a Minister, a colleague and a friend to all Benches in this House. He diligently held the Government to account and did his utmost to ensure the best for the people of this country until just a few weeks ago. He believed, as we all do, that government should be a force for making life better for the people of this country. I have just been joined by my noble friend Lord Davies of Oldham, who used to be a PPS for my noble friend Lord Barnett.
Can the Minister confirm that the Government will agree to the all-party request from the Welsh Assembly for bilateral talks between the UK and Welsh Governments on fair funding, and to rapid implementation of a funding floor, which the Welsh Government suggest should be completed by January 2015?
Lord Newby
My Lords, as I said in my initial Answer, we have agreed that we will revisit the arrangements for funding in Wales in advance of each spending review. We will do the next review next year in conjunction with the Welsh Government.
Lord Elystan-Morgan (CB)
Does the Minister recollect that our late splendid friend Lord Barnett often said that his formula was intended to be of only very short duration, and that he accepted, particularly in relation to Wales, that it was wholly inequitable for it to be perpetuated from year to year?
Lord Newby
Yes, my Lords, but the Barnett formula is the opposite of most government policies, which do not survive very long. His has survived a lot longer than anybody ever envisaged.
Lord Anderson of Swansea (Lab)
My Lords, I join the tributes to my noble friend Lord Barnett.
Does the Minister agree that the problem is not in the formula itself? The grievance, as seen in Wales, is the lack of fair funding. When the Government look at the totality of relations with Wales, perhaps avoiding the straitjacket of the formula, would they consider a multitude of matters, including for example helping Wales by abolishing the tolls on the Severn bridges, which amount now to a tax on the people of Wales?
Lord Newby
My Lords, the Barnett formula is a bit like the Schleswig-Holstein problem. Virtually nobody understands how we got to where we are today. The key question is how much money makes its way to Wales. As I said earlier, for the period ahead Wales will receive a figure in line with most definitions, I believe, of what people think is fair.
Infrastructure Bill [HL]
(9 years, 10 months ago)
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16:44 - Division on Amendment 2A - Ayes: 192 / Noes: 229 - Amendment 2A disagreed.
17:53 - Division on Amendment 15 - Ayes: 165 / Noes: 235 - Amendment 15 disagreed.
Lord Whitty
“Duties of the Secretary of State
Duties of the Secretary of State shall include—(a) drawing up and granting of a licence to a strategic highways company as provided for in section 1, but this duty may be delegated to the Office of Rail Regulation,(b) drawing up and presenting from time to time, and at least every five years, to Parliament for approval a Roads Investment Strategy as provided for in section 3,(c) issuing from time to time directions and guidance under section 4 both to the Office of Rail Regulation and to the licensed strategic highways company,(d) reporting periodically to Parliament on the performance of the strategic highways network.”
Lord Whitty (Lab)
My Lords, In moving Amendment 1, I will also speak to the other amendments in my name in this group and comment on some of the others too.
I had hoped that after a lengthy discussion in Committee the Government would have come up with their own draft to address the deficiencies of this part of the Bill, and to clarify the relationship between and responsibilities of the Secretary of State and the various bodies covered by it. Regrettably they have failed to do so. However, they have produced a lot of new documents, many of which are very informative. I thank the Minister for that and for the various briefing sessions that she and her officials have held since that date. However, I have to tell her that, in relation to the issues I am about to raise they have, if anything, confused the situation.
For the benefit of newcomers to this debate, this part of the Bill is intended to place roads investment in a new context by creating a road investment strategy for England and by hiving off the Highways Agency into rather more arm’s-length companies—the strategic highways companies. I very much approve of the first aim but I am not at all sure that the second aim concerning the companies is right.
Noble Lords who are long in the tooth will remember that, going back a bit, I was a roads Minister. It is a pretty dreadful job and is always subject to representations by Members of Parliament and others on which roads should take priority, how much more should be spent and so forth. I would welcome a consistent road investment plan with a strategic direction sustained over a number of years as part of a wider sustainable transport policy. The key point for the Government appears to be that the road investment strategy in the Bill will be somehow free from short-term changes, albeit that some of the documentation that the Minister has provided us with, including the draft licence to which I shall return, says that the Secretary of State can vary the strategy at any time, and, of course, the Treasury still decides the funding—so good luck with that.
In principle, I support the road investment strategy but am unclear why it is absolutely necessary for it to be delivered by new strategic highways companies, and why a corporatised Highways Agency would do the job so much better than the present system of delivery, especially since the Government seem to have denied themselves ways of making a company more effective than the Highways Agency. I do not particularly support all these issues but the Government have clearly said that this is not a stage towards privatisation. Indeed, the Bill makes that clear, and I agree. However, they have also said that the company cannot raise its own capital, with which I disagree as that could smooth out any predations by the Chancellor. The Government also say that it is not allowed to engage in anything approaching road charging, although I note that that part is not yet included in the draft licence to which I referred, so watch that space.
Therefore, the benefits of having a separate company are a little unclear. Nevertheless, I recognise that there could be significant advantages in establishing a company, such as coherence of approach, an ability to engage in contractual innovations and possibly less direct pressure from MPs and other vested interests, although I am sure that the Minister will not be entirely free of that. Such a company could develop a long-term strategy on road safety, to which I will return on later amendments, and on issues such as telemetrics in traffic control, traffic management, road design and meeting environmental standards. However, it will deliver only if that company is itself set in a coherent institutional framework, which is normally the case for any large state-owned company. We need clarity of accountability, including the accountability of Parliament. Regrettably, the Bill does not provide for that.
The Bill refers to the possible appointment of a number of companies as strategic highways companies. The Government have made it clear that they are in reality talking about only one company. However, the Bill talks about the possibility of more than one. When questioned, the Minister and officials rather darkly referred to legal advice from counsel, even though it is clearly contrary to the policy and intention of the Government to have more than one company involved. Amendments 3 to 7 in this group, the first of which is mine, seek to ensure that the Bill makes the intention absolutely clear, and therefore we will be able to judge the Government against that.
More profoundly in the long term, the operation of a new set-up has a lack of clarity about the relationship between the Secretary of State, the company and the monitor or regulator. There is going to be an enhanced Office of Rail Regulation, in which presumably some changes will be made, and there is the matter of accountability to Parliament. The Bill refers to appointment of a company, but during the proceedings in Committee, the Minister, on many occasions, when questioned about the relationship between the Secretary of State and the company, referred us to the licence, which was then already in its sixth draft, and is now a lot longer at 35 pages.
Lord Berkeley (Lab)
My Lords, I support my noble friend and will briefly speak to some of the amendments in this group, namely Amendments 2, 2B, 5, 6, 6A, 7 and 7A. I will not repeat all that my noble friend has said, because the various amendments that we have tabled between us provide the basis for the proper link between primary legislation and the licence, which, as my noble friend said, is so lacking in the Bill.
I started off by looking at the relevant clauses of the Railways Act 1993 and the Railways Act 2005, which we discussed in Committee and in some helpful meetings with the Minister and officials, for which I am grateful. It was remarkably easy, at this comparatively high level, to cross out “rail” and put in “road”; they are very similar. If, as my noble friend said, we are to have a company that looks after the strategic roads in a way that is similar to what Network Rail became in September by becoming fully government-owned, it would seem logical that the legislation under which this happens would be similar.
I will not go through all the amendments in detail; my noble friend has done that very well. However, I have two questions for the Minister when she comes to reply. First, under the Bill, will it still be possible for Members of Parliament and of this House to table Written Questions and ask questions of Ministers, as we currently can with the Highways Agency? Noble Lords will know that we cannot do that for Network Rail, because if you table a question about it the answer comes back, “Write to the chief executive”. I am sure one gets good answers from the chief executive, but one does not see the answers that other noble Lords get to the questions that they ask the chief executive. I hope that the same thing will not happen with the strategic highways company and that we will still be able to table questions about its operations and the company generally, and to get a proper Written Answer or be able to have an Oral Question or debate on it as the circumstances demand.
I also hope that when Network Rail becomes subject to the Freedom of Information Act on 1 April next year, that situation will apply to it. Clearly, we would not want to ask whether a motorway sign or signal had been moved; that would be a ridiculous waste of ministerial time. On the other hand, there are many things that it would be useful to ask such questions about for the purposes of parliamentary scrutiny.
My second question for the Minister concerns my Amendment 7A which relates to Section 48 of the Health and Safety at Work etc. Act 1974. This exempts Crown-owned companies, or officers or companies of the Crown, from being taken to court by the Health and Safety Executive if it believes that they have contravened the Act. I know that the Highways Agency itself is exempt, being a Crown agency. It would be nice to know whether any change was planned in this relationship, and therefore the exemption, when the strategic highways company comes into existence. I believe that Network Rail does not have an exemption, because the Health and Safety Executive, through the Office of Rail Regulation, has taken action against it on several occasions. There should be a balance between the two and as much transparency as possible. I am very much looking forward to what the Minister has to say in response and fully support the amendments of my noble friend.
Lord Bradshaw (LD)
I shall say just three things. The Government are mistaken. The Office of Rail Regulation should, under that title, oversee roads as well. In spite of all the arguments, if it were signalled, it could change its name at some future date. It could be planned for and there would not be a lot of expense. It would be much more understandable to motorists and everybody else who the regulator was, whether it was a railway regulator or a transport regulator.
I also endorse the points made by the noble Lord, Lord Berkeley, about safety. One thing that the Office of Rail Regulation has done is to drive up safety standards on the railways. Although the Government keep saying the safety standards on the roads are the best in Europe, these are really quite deplorable, as we see with the continued deaths of cyclists in London, for example.
Lastly—I know I am reaching for the moon here—would it not be better to be honest and say that we have to adopt road pricing some time and, to make it acceptable, to say that the money raised from it would be used for roads and motoring purposes? If you explain what the money is for, people are much more likely to embrace the idea. A recent opinion poll in one of the national papers showed that people were against raising taxes, but if they were specifically asked whether they would pay more tax to improve the health service, they said yes. The same applies to road pricing.
Lord Jenkin of Roding (Con)
My Lords, I yield entirely to the noble Lords, Lord Whitty and Lord Berkeley, for their huge expertise in this field. I have not attempted to master all the details. However, there was one point made by the noble Lord, Lord Whitty, which I am not sure I correctly understood. It was about the licence. My attention was drawn to the Written Statement that was issued by the Government. Indeed, my noble friend on the Front Bench repeated a Statement made by her colleague, the right honourable John Hayes. He was talking about the draft licence, which is a new document that was issued six days ago. I shall come back to that point in a moment. It states that the licence,
“indicates the manner in which the Secretary of State proposes to issue binding statutory directions and guidance to the new company, setting objectives and conditions around how the company must act”.—[Official Report, Commons, 28/10/14; col. 18WS.]
I do not think that there is anything obscure about that; it is perfectly clear that the licence is issued by the Secretary of State. In those circumstances, the Secretary of State can clearly be held responsible if it does not work properly. But it may be that I misunderstood the noble Lord, Lord Whitty.
The Statement from which I quoted was issued less than a week ago and announces the publication of several substantial new documents which bear on Part 1 of the Infrastructure Bill. I fear that the Government have got themselves into rather a bad habit of publishing documents very shortly before Parliament has to consider them, leaving those of us who perhaps do not have the resources behind us that some may have to find it very difficult to catch up with it all. The most recent example—I do not hold my noble friend Lady Kramer responsible for this—is something that we will debate on Wednesday: the community electricity scheme. A task force looking at exactly that issue has been sitting for a year, but its report was made available only this morning. When I first came into the House, it was not even available in the Printed Paper Office, so I am afraid that I rang up the department concerned and expressed my displeasure, if I may put it in neutral language.
I have to say to my noble friend on the Front Bench that that is no way to treat Parliament. If the Government get into difficulties on some of these issues, it is because officials have been allowed to drag their feet to the point when things are issued only a matter of days before they have to be debated. I leave my noble friend with that thought.
Finally, I should say how much I agree with the noble Lord, Lord Bradshaw. I am sure that we have to come to some form of road pricing in future, if we are to make sense of this. There has been a huge increase in road traffic and no sign of it declining. The fact of the matter is that, while people of course pay the petrol duty, the licence and other taxes, that is in no way related to the amount of use that they make of the roads. I am quite sure that we will have to come back to that at some stage, and it may be something that emerges from the revised structure being set up in this Bill. As I said at Second Reading, I totally support it, and think it a very good move, but the revised structure may well bring these questions of how it is to be paid for much more to the fore. Then we may have the sort of reform that my noble friend Lord Bradshaw advocated.
Lord Davies of Oldham (Lab)
My Lords, I can keep my own contribution relatively brief because my noble friends Lord Whitty and Lord Berkeley have presented the case with great clarity. I am also grateful to the noble Lord, Lord Jenkin, for pointing out that we are dealing today with a position that is only six days old—the latest change from the Government to this crucial part of the proposals in the Bill. That is to say nothing of the fact that the fracking aspect of the Bill came months after we had considered it in Committee, which was then held up until the Government had concluded their consultation in the summer. So this is not a Bill distinguished by forward planning from the Government, or by a clear rationale of what they are about. However, I suppose I should thank them for having another shot at improving the Bill.
We are pleased to see changes reflective of the representations made in Committee from this side of the House, but we are no clearer on why delivering long-term certainty for roads investment requires a top-down reorganisation of the Highways Agency. The Cook report told us that it is stop-start funding problems that are leading to inefficiencies of between 15% and 20%. Is there any real evidence proving that changing the legal structure of the Highways Agency will, in itself, improve efficiency? Perhaps top-down reorganisation is the metier of this Government in challenging areas. The Minister will be aware of the strength of the concern on our side that this looks like the first step to privatisation. We continue to have that anxiety. Why is the section on the company’s licence for commercial activity and charging for services still unfinished?
We are concerned about the cost implications. There is still no clarity on whether the SHC will be able to reclaim VAT in the same way that the Highways Agency does at present. In Committee, the Minister said that the SHC would not be required to pay VAT, which is exactly the case with the Highways Agency now. That soon cleared up the issue. However, it did not clear up the issue at the other end, because the Minister in the Treasury, David Gauke, in answer to a Question from my honourable friend in the other place, Richard Burden MP, said:
“New bodies are not automatically covered by the … provisions. However, the Department for Transport and HM Treasury are considering this issue”.
HMT is quite important, here, with regard to revenue and dispensations to other departments. It does not seem to be as clear on the matter as the Department for Transport is maintaining that it is. If the new strategic highways authority is no longer able to recover VAT in the same way, that could lead to losses of a considerable amount—as much as £400 million annually. That would be £4 billion over 10 years, which would dwarf the figure of efficiency gains of £2.6 billion that it is proposed will come from the legislation. If the VAT issue is not resolved, therefore, the justification for this reorganisation is even less substantiated.
Turning to Amendment 4, which is in my name, the Minister used two arguments in Committee to reject our attempts to clarify whether the Government envision having more than one company. One argument was that this is only standard legal drafting and there should be no cause for concern. The Minister went on to say that it might be necessary if one wanted a more regional structure for the equivalent of the strategic highways company. Can she not confirm that the Highways Agency is already structured regionally? There appears to be confused thinking within the Government about how many companies there will be, which is why many are concerned that the Government are not being entirely open about their plans for the future.
It is clear that our main reservations about the major government proposal in the Bill have not been assuaged. As my noble friends have indicated, there are other questions, too, to which the Minister needs to respond to convince us that this proposal is acceptable.
The Minister of State, Department for Transport (Baroness Kramer)
My Lords, this is obviously a very wide and long group of amendments, which cover quite a range of issues. I do not want to put words in noble Lords’ mouths. but I think that we have progressed to the point at which at least we have a common goal in terms of setting up a structure that will ensure certainty of funding for highways in the way that we have managed to enjoy, and benefited from, with the railways.
Clause 1 allows the Secretary of State to appoint a strategic highways company, thereby conferring duties and functions on it to operate as a highway authority. If we were to drop this clause—there is a stand part debate in this group of amendments—it would be a fundamental change to the model and we would lose many of the key benefits of certainty over funding and plans which, as we have heard today, has been widely supported.
Our aim is to create a different model to deliver road infrastructure. Crucial to this is having a legal body separate from government responsible for our strategic road network and delivering a road investment strategy in the most cost-effective way. We consider the most effective model is a company created under the Companies Act 2006. Let me explain the rationale. We have decades of experience of the fact that the current arrangements—I point this out to the noble Lord, Lord Davies, who will remember the history of the department—have not encouraged a long-term approach to planning infrastructure or provided secure funding. Stop-start has indeed been a definition of a large part of their history and has come with high costs in terms of the efficiency and quality of our infrastructure. For long-term funding certainty and planning, it is crucial for the Secretary of State to be able to have a transparent and binding relationship with a separate legal entity. If the delivery body were to remain the Highways Agency and remain within the DfT, inevitably it would be easy to change funding and plans.
Setting up a strategic highways company as a new company operating under company law with a well established governance and financial framework will reinforce the clarity and robustness of the relationship. We have seen from international experience, for example in the Netherlands and Sweden, that where road delivery bodies have been given long-term funding certainty and a more independent relationship setting out requirements, large efficiency savings have been possible. A company would be constrained to one that is limited by shares and wholly owned by the Secretary of State, ensuring that any company is 100% owned by the Government and remains in the public sector. We have not only no intent but no interest in turning this into a privatisation. That is not part of our agenda and does not achieve the goals that we want.
Let me again take this opportunity to explain that we have no plans to appoint more than one company. We have already made clear that the Highways Agency, in its new legal status as a Government-owned company, will be the only company appointed. The use of plural “companies” in legislation was to allow flexibility for further companies in the future, including how companies would work together: and that is what Amendment 11 seeks to remove. Subsequent provisions in the Bill which refer to a company could therefore refer only to the strategic highways company or to each such company.
We are doing this in part because we recognise that future Governments may want flexibility to create more companies: for example, to give more accountability, to allow a company to look after a specific cluster of roads or area of roads or to promote comparisons and efficiency. Those are not our goals, but they might be those of a future Government. Reference to more than one company would prevent future Governments making change as needed. However, it is not something that we are seeking, so if noble Lords feel strongly on this issue and do not want to give that flexibility to future Governments—even though it is standard in virtually every piece of legislation that this House has seen referring to “companies” and “company” because, as I explained, in law the singular is the plural and the plural is the singular—I could offer a compromise that might reassure noble Lords.
I would be very happy to return at Third Reading with an amendment that would require any Government to seek parliamentary approval to establish additional companies beyond the initial one. I wonder whether this would satisfy noble Lords. It would certainly meet our intent. We see no future Government related to us who would wish to run this in a different way, and this would allow Parliament to have the voice that perhaps noble Lords are seeking.
Turning to the requirement for a licensing regime, we have been and are clear that we do not want to privatise the strategic highway network. Therefore, given that licensing regimes in the traditional sense, which is reflected in quite a number of these amendments, apply to commercial operators, we have been trying to avoid precisely that kind of licence. I find it strange that your Lordships are now pressing for amendments that follow that commercial model. Since we do not intend to privatise, the commercial model is not relevant to our proposals for this company.
In sectors such as rail, aviation, energy and water, the licence is a means of access to an economic activity where there are potentially multiple operators in a commercial market that may seek to apply. Our strategic highways company is funded by government, with no option for a separate revenue income. All its powers and duties to operate as a highways authority already exist in legislation and it is by virtue of their appointment that these powers are switched on.
Lord Whitty
My Lords, I thank the Minister very much for dealing with these issues so comprehensively. We all share the frustration of the noble Lord, Lord Jenkin, but we recognise the efforts which the Minister and her officials have put in to keeping us informed. The problem is that so much relies on what is in the draft licence and it is confusing for many of us if that document is constantly changing as we are going through this Bill. If the noble Lord, Lord Jenkin, has expressed displeasure, the powers that be should be trembling in their shoes and take notice.
The first bit of good news is that the Minister very clearly indicated that the Government have no plans to appoint more than one company and that, whatever it says in the Bill, she was prepared to come forward—I think she said at Third Reading—on the issue of a separate vote of Parliament being required if more than one company were to be appointed in the future. That would go some way to clarifying the position. I still do not totally understand why it is expressed in this way, given the Government’s clear intention in any case. However, I thank the Minister as it partly deals with an issue which is troubling a number of people. The present view is that a single English road network company would be the most effective way of delivering improved roads and transport systems. If a subsequent Government decided that it should be regionalised, a whole lot of other issues then arise. A parliamentary brake on them doing that at least goes some way to meeting that point and I thank the Minister for that.
I am partially reassured by what the Minister said on parliamentary accountability, but I am still not clear whether that means that the Secretary of State can be asked in Parliament about the same range of things that he or she can currently be asked about. In other words, is there any change? That important issue will undoubtedly be raised by MPs of all parties when the Bill reaches the Commons.
The central issue of why my noble friends and I felt we had to raise the whole context in which the company was being set up, and the relationship between it and the Secretary of State, is the use of the term “licence” and the use of the content of the licence to explain everything about how the Government intend to conduct the new structure. I think that the Minister came as close as she dared in saying, “Well maybe we should never have called it a licence in the first place”. I think that if she took that further step, we could all sit down and applaud. However, it is very confusing because the Bill refers to “appointment”, which in some cases is the granting of a licence. Therefore, although it is a single state company and not a commercial company in the normal sense, and although there are examples of licences being given to state-owned companies, I think that using the term “licence” in one place and “appointment” in another without describing the process through which the Minister has to go or how the regulator is to enforce the terms of that licence is wrong.
Lord Davies of Oldham
“Public sector rail operators
Within 6 months of the passing of this Act the Secretary of State shall publish a report on allowing a public sector rail operator to take on lines and challenge the train operators in the public interest.”
Lord Davies of Oldham
My Lords, this amendment requires the Secretary of State to publish a report on allowing a public sector rail operator to take on lines and challenge the train operators on a genuinely level playing field in the public interest, securing value for money for passengers and taxpayers.
Many noble Lords will no doubt recall the exchanges that we had at Question Time last week on the future of east coast rail. I congratulate the Minister on her performance then in defending the Government’s position, which I regarded then, and still do regard, as indefensible, but I hope that today her response will be somewhat different. We should learn the lessons of east coast rail, where we have seen the benefits of a not-for-dividend operator running a rail line.
East coast rail was brought back into public ownership in 2009 after the private operator reneged on its commitments. It is efficient, it has returned more than £600 million to the taxpayer and it invests every penny of that profit back into the company. It provides a quality service, achieving record levels of passenger satisfaction and punctuality. The new timetable that it introduced in 2011 allows it to operate 7,000 more trains each year, and it now has 500,000 more passengers. It has also delivered for passengers. This year’s fare rise was in fact a real-terms cut—something that no private franchise was able to do. In fact, elsewhere, season tickets have risen in price by 30% since 2010—a stark contrast.
Despite that, the Government appear intent on pressing ahead with the privatisation of intercity east coast services. Will the Minister confirm that the cost to the taxpayer of reprivatising the east coast could run to £6 million? It is important that the Minister responds to this question and says what steps the Government are otherwise taking to improve the functioning of the railways. It is unacceptable that our rail lines are, according to the 2011 McNulty review, up to 40% less efficient than the best-performing European networks.
We know that the Conservative Party is unwilling to take a pragmatic approach on this issue. Its Railways Act 1993 effectively prohibits a public sector operator, except in the most restrictive circumstances. But the public do not feel this way. Only 28% of those polled support the sell-off of east coast. Can the Minister say on which side of this divide her own party finds itself? Many will recall her party’s support for a public sector operator while it was in opposition. It is time to put an end to this rigid ideological approach, which also sees the Government trying to rush through a sell-off of the 40% public stake in Eurostar before we have even seen the conclusion of my noble friend Lord Myners’s inquiry into the Royal Mail privatisation.
This amendment would give the Government the opportunity to reflect and to alter their stance. It is time to learn the lessons of east coast and legislate to allow a public sector operator to take on lines. It should be able to challenge the train operators in the public interest on a level playing field. That is the way to secure the best deal for passengers and for taxpayers. I hope that the Minister will accept this amendment so that we can move in that direction. I beg to move.
Lord Berkeley
My Lords, it is worth reminding the House that we already have public sector operators in this country; we have lines owned by Dutch railways, French railways and German railways. They are not called that in this country—they have different names—but they are owned by those countries. On the continent, some of them operate effective, positive and well liked services; some of them are pretty awful. When you hear that Eurostar, which is still 40% owned by the British Government—although it is for sale—is allowed to bid for the east coast, but a company that is perhaps 100% owned by the British Government would not be allowed, it does seem a bit odd. I am sure that the Minister has an answer to that, but it seems to me that we are selling off our crown jewels in the shape of a piece of Eurostar and allowing the companies that buy them—perhaps from the continent, perhaps from elsewhere—to come back and provide a good service on certain occasions, but to compete a little unfairly against what our own companies might do if they existed.
Lord Snape (Lab)
My Lords, I have followed this debate over the years with some interest and have a number of questions arising from this amendment that I would like to put to the Minister; perhaps my noble friend on the Opposition Front Bench would also like to consider them. I have no interest to declare in this debate other than the fact that I worked for the railway industry, as did my father. The romantic view, perhaps, of British Rail that some of my colleagues occasionally expressed was one that neither my father nor I shared.
Working for a nationalised railway industry, as I did before being elected to the other place and before being appointed to this House, was a massively depressing experience. Year after year, the amount of finance available to the railway industry was the subject of debate. It was quite often cut back. Short-termism was the only way to describe the finances of BR. Although I am no great supporter of the form of privatisation that the Government have inflicted on us, at least it has provided some degree of long-term continuity so far as railway finances are concerned—a continuity that did not exist when the railways were nationalised. Indeed, some of those in my own party used to mock what they called the concept of Morrisonian nationalisation. They said that it was not nationalisation at all and that the railways were being run by the civil servants. That view was widely shared by many of us who worked in the industry at the time.
I speak to this amendment not from any romantic attachment to a nationalised railway but as a confused supporter of the railway industry who wonders how we got into this particular mess in the first place as far as franchising is concerned. I have said in previous debates that what we have at the present is neither one thing nor the other. It is certainly not franchising. If we look at the new trains that are in the process of being ordered and built, it appears that they were designed by civil servants. The Government or civil servants set the fares as far as companies are concerned. The Japanese build the trains and the rest of us ride around the country in what remains of the whole industry. It is a confused picture, to say the least, but I do not feel that the amendment would help to clarify matters particularly.
I have one or two questions I want to put specifically to the Minister about the current process, before we look at whether or not directly operated railways should be allowed to bid for franchises. How are these decisions actually taken? The whole thing is shrouded in mystery. Various companies, we understand, put forward bids for the franchises, and a process of evaluation takes place behind the scenes. Perhaps the Minister can tell us how this process is conducted and who is involved in it.
If this amendment were to be accepted, would it mean that one desk in the Department for Transport would put together a bid and its merits or otherwise would then be decided by another desk in the Department for Transport? I hope that I am second to none in my admiration of the legal profession, which does not go unrepresented in your Lordships’ House, but if the answer is yes, one can imagine a bonanza for lawyers in the event of an appeal. Indeed, the taxpayer has just paid heavily for the mess that was the west coast main line franchise. Perhaps the Minister could tell us in passing exactly how much that cost.
If the amendment were accepted, how much does she envisage it would cost the taxpayer to fund legal inquiries or complaints if DOR’s bid—an internal departmental bid in some ways—were accepted over and above a private sector bid: or, as my noble friend Lord Berkeley rightly reminded us, a bid from a nationalised railway industry in Germany, France or Holland, to name but three? I hesitate to sound critical, but one can imagine the legal profession rubbing its hands at the prospect of such a financial fracas taking place behind the scenes.
Allowing DOR to bid is not particularly revolutionary. In the debate on privatising the railway industry in 1993, your Lordships’ House accepted an amendment moved by that well known left-winger Lord Peyton of Yeovil to allow the British Railways Board, as it then was, to bid for franchises. That amendment was struck out in the other place and we have the system of privatisation, franchising or whatever you like to call it that we have now. I do not wish to add to the difficulties of the Minister if, as I suspect, she rejects this amendment, but some clarification is long overdue before she does so as to exactly how this process works at present and how it would be affected if the amendment were accepted.
Lord Palmer (CB)
My Lords, I fully support this amendment. The happiest moments of my week are when I get a kiss from all the onboard staff on the east coast line on Thursday lunchtime. It is incredibly important to realise that we have had two failed privatisations on the east coast line. Even at this last stage, very late in the day, I hope and pray the Government will not denationalise the east coast line. In my view—and I spend an enormous amount of my life on the east coast line—it would be absolutely mad, especially bearing in mind the two failed franchise bids.
Lord Judd (Lab)
My Lords, I spend a great deal of my time on the west coast line. All I can say is that when for one reason or other I use the east coast, I look at it with some envy. It is a very successful operation. I cannot believe that this is happening for any reason other than ideological commitment. That is a daft way to run an essential national public service. Pragmatism is the order of the day.
My noble friend Lord Berkeley referred to what is happening with Eurostar. I find it extraordinarily irresponsible that a railway system of that kind, which is so basic to the strength of our economy and well-being—the European market, whether we are in the Common Market or not, is so crucial to our economic success—should be handed away from public accountability and control. That is a basic lifeline. Of course this is happening in other industries as well. When I read of the Chinese coming in on certain strategic areas, I begin to wonder where on earth our economic policies tie up with our strategic analysis of the world in which we live.
The great thing to remember—my noble friend Lord Berkeley referred to this too—is that when public companies on the European mainland take the opportunity to provide public services in this country, they do so in a context in which in their own countries this is not seen as an ideological test of purity but a matter of pragmatism: what makes sense to be practically and pragmatically in the public sector and what makes sense in the private sector. In that context, they have been highly successful.
I personally favour—and I find myself cheered to realise that the majority of public opinion seems to be in that direction—a completely publicly owned rail system within this country because it is so crucial to our economy and every other matter. I also think it has a good deal to do with the morale of those working on it. If they feel they are actually providing a public service, and get a professional pride from providing a public service rather that simply providing profits, that has an impact and some significance.
If we are not to have that in the Bill—I hope we may have it at some stage—then it seems that this is a very effective damage limitation exercise. Nobody could accuse it of being doctrinaire politics because it accepts that the private sector will be there; it just says, is it not sensible? If the opportunity occurs, it makes pragmatic good sense and there is a rational way to undertake it, the public sector should be running part of the railway system. It would be a very good test of the comparative merits of both. I find the present situation ridiculous and I am alarmed that this kind of oversimplified thinking can dictate policy on something as vital to our economy as this.
Lord Bradshaw
My Lords, I ask the Minister to consider what will happen if the bids received under the franchise competition actually give less money—or are worth less to the taxpayer—than the present east coast trains. If the bids are lower than that being achieved by the present operator, that really does sound like the economics of the madhouse. Those who are bidding have the sword of Damocles hanging over them, because open access operators are allowed access to the track at a much lower price than the franchised operator. It appears that the open access operators are massing for an attack on the east coast line.
Lastly, I recommend to the Minister an article in Passenger Transport, a rather specialist magazine. There is a good two-page article about customer service and its effect on staff morale and how the present franchising system does not allow operators to go strong on customer service. If they do so, they risk losing the next bid because customer service, among other things, cannot be put into a financial evaluation.
Lord Adonis (Lab)
Does the noble Lord agree that it is the height of nonsense to allow the state operators of France, the Netherlands and Germany to bid for franchises in this country, but not the existing public operator of the east coast line?
Lord Bradshaw
It amazes me that we as a country permit so many foreigners to run our water industry, our gas industry and our electricity industry. They are vital basic services and I think it is rather foolish to leave them in the hands of foreign operators. We have seen what has happened with prices for water, for example, which have gone through the roof. I am sure that in the public sector, such increases would not have been allowed.
Lord Stoddart of Swindon (Ind Lab)
My Lords, I have intervened on this Bill only once, and I probably will not do so again, but I support the amendment. I do so as someone who, first, has worked on the railways—a very long time ago, I have to say: in the late 1940s, when I worked for the Southern Railway. I became not expert but knowledgeable about lock and block signalling, which has now of course been overtaken by electronic signalling.
I also represented Swindon, which was a great railway town. In those days, I spent most of my time trying to save the railway workshops, which were highly efficient and had a good history, from being closed by British Rail. When we talk about public ownership, people appear to believe that we want to go back to British Rail. There are all sorts of ways in which you can introduce public ownership, which have been mentioned. As the noble Lord, Lord Bradshaw, and others have pointed out, we allow foreign nationalised industries to take over our industries, but we will not allow our public services to take them over.
I was very interested to listen to the Chancellor of the Exchequer talking about city regions. There is every reason why, if we are to have city regions, we should allow them, or conglomerates of city regions, to be able to bid for a rail franchise. After all, they are there to serve their electors and probably know better than any railway company what their electors want. Local government has a great history of providing public services. Our water services would not be what they are but for local government and the power given to it under the Local Government Act 1888.
That applies to transport as well. So many local authorities have a background in and knowledge of transport. Up and down the country they are providing high-quality local transport. These things really ought to be considered by the Government: there is room for public enterprise within the railways. The railways should be allowed to bid for franchises; it is not a question of undercutting but of providing decent services at reasonable cost and perhaps more cheaply than is provided by the private companies.
I was pleased to see this amendment on the Marshalled List. I well remember opposing, from those Benches—I do not know whether I was doing so from the Front Bench at the time—the privatisation of the railways as a result, of course, of a European directive, which said that the infrastructure should be separated from the operation of the services themselves. If this simple and easy amendment is put to the vote, I hope that the Minister will accept it. It does not commit the Government to anything other than considering giving public authorities the opportunity to think about franchises in what, after all, are our railway services.
Baroness Kramer
My Lords, the temptation is to get into a major discussion about nationalisation of industries, but I shall try to resist and focus on railways and this amendment.
I spend a lot of my time out on the road, talking with the industry at rail conferences and also with users. Our railway is a great success. Virtually every event to which I go now deals with the challenge of a successful railway. Your Lordships will know many of the figures. We have doubled the number of passengers since privatisation. Even outside London over the past few months we have seen passenger numbers going up by something between 9% and 11%. People really want to use the railways. I talk with my continental colleagues who say that they do not have any idea how we do it. They ask how we manage to run so many trains, with such frequency, and engage with so many passengers and build the kind of ridership that we have. They certainly are not finding the same kind of thing where they are. There is a deep admiration of how we run our trains.
There is much more to do. We are catching up with at least of couple of generations of serious underinvestment in the railways, and not just in new lines anywhere north of London—that has been a major absence—as well as with upgrading the railways. We are dealing with a huge challenge at the same time that we have passengers coming on to the lines. To ignore the fact that the privatisation process and the franchises that have come out of that have played a huge part is frankly to fail to recognise what this has contributed.
In terms of the number of people who are being carried on the quantity of trains that we are running, and the range of services that we are offering, we have a model that has been delivering what our ancestors would only have dreamt of. But there is so much more ambition now to go way beyond that. We have done a lot of it by tapping into private sector know-how. We need even more of that as we go forward, because the challenges are increasing dramatically.
I would like to comment on the east coast line. I have great respect for all the people who have run the Directly Operated Railway. Their job is to come in and take over where there has been failure and to stabilise and deliver. They have done a fantastic job. However, I say to the noble Lord, Lord Bradshaw, that everyone must be conscious that part of the reason they have turned to the taxpayer is because we have not invested in the new equipment that is desperately needed on that line. New trains are coming and, as we are negotiating that, I do not want to say anything that could compromise that franchise. However, does the noble Lord think for one moment that we would come up with the figures that we have for that franchise if the franchising company had to pay for the new trains that are desperately needed on the east coast line?
The west coast line is in a different situation. One of the things about franchising is that franchises are not identical: every franchise is customised. If one looks at frequency of service, the newness of equipment and the whole series of features that shape each franchise, one will see that one franchise is in a position to return premiums whereas another will require subsidy. As I say, a franchise will vary depending on the relevant market conditions and whether its equipment and track have been upgraded. Franchises are not identical “cookie cutters”, as the Americans would say; they are customised. I say to the noble Lord, Lord Bradshaw, that I would be shocked if we were to run the east coast line at a standstill. The customers of that line need an increased service and far better trains. That has to be part of the future.
Lord Adonis
The noble Baroness has to address the fundamental issue: why will she not allow a public operator even to bid against the private sector?
Baroness Kramer
I will address that point. However, I want to set the context for the discussion because sometimes there is a great deal of confusion around it.
Lord Bradshaw
I am sorry to interrupt the noble Baroness but the new rolling stock that is to be included in the east coast franchise is something that every bidder will have to take into account in the bid that they make. If passengers do not think that the rolling stock, which has been virtually designed in Marsham Street, is set at a reasonable price, that will indicate that a bad decision was made over here. There is no doubt whatever that if the present east coast line company runs the franchise with the new trains its returns will go up, but perhaps by only as much as the extra trains will cost. The extra trains are a burden. It is a fallacy to say that the present east coast operator would be worse than any other because the £600 million has not been invested in the track and many other operators have not invested in new rolling stock. They wait for the rolling stock companies to do it and consider that investment in the track and stations is a matter for Network Rail. Therefore, I think that the Minister’s argument is a bit faulty.
Baroness Kramer
I am sorry but, as the noble Lord, Lord Bradshaw, will know, these things will be built into the charges. Of course, the addition of new equipment completely changes the profile as it has to be paid for and that money comes from only two places—the fare box or the taxpayer. As I say, that completely changes the profile and I think that many noble Lords will be aware of that reality.
As regards franchising, I agree that the demands we are placing on franchisees to upgrade equipment are far more significant than has been the case in the past. I think the noble Lord, Lord Bradshaw, said that customer service was not rolled into the franchise. I can tell him that it is now and that a significant number of issues concern customer service. We are building on that because the customer absolutely has to be at the centre of the railway industry. It is true that this has not been done historically and that franchises have been engineering-driven, but that is changing dramatically. The noble Lord will start to see the impact of that coming through with the new franchises.
We are also undertaking a complete technical upgrade as we move from an early 20th century railway to a fully 21st century railway. A digital electronic railway will make huge demands on franchise providers in all kinds of ways. This is a very exciting time. There was a question about British companies’ engagement in the railway. We have some of the most innovative companies now—I speak regularly to the supply chains—who are engaged in this cutting-edge research and cutting-edge supply, which will completely change the nature of the trains running on the track. We are coming much closer to engaging with aerospace technology and other areas. Do not think of the railways as an old, staid industry any more. It is a driving, cutting-edge industry, and that change has to come through for us to meet passengers’ demands. I could go on a great deal longer, but I will come back, because you can tell I am an enthusiast about getting these changes driven all the way through.
One of the questions is, “Why don’t we set up a company and let it bid against the others?”. Let us think about that process. If we are to have any other bidders, they have to know that there is a level playing field and that absolutely no advantage is given to the public bidder. This point was, I think, raised earlier. You may be able to set up enough Chinese walls for us to say that we believe this is being done with integrity, but we would have to convince every other bidder. Think about how the railways are financed. That makes it extremely difficult. Would we be providing government-sourced money to our own public company? Obviously, the private companies go out into the capital markets. Or would it be going out into the capital markets and therefore, in a sense, be as far distant from us as virtually any company that we already describe as being a franchisee?
We would have to be absolutely certain that our assumptions on profit, tax, cost and capital in no way advantaged the public body, or we would lose every other bidder on every bid. If we go back and think carefully about what we would have to set up, we would have to set up the company in order to do this. The salaries alone would, I think, be eye-watering.
Lord Adonis
I hate to point this out to the noble Baroness, but the company already exists. It is called East Coast.
Baroness Kramer
That company, as the noble Lord probably knows, will presumably be TUPE-ed—or not TUPE-ed, because it is a share sale. Essentially, that company will be absorbed into whatever is the new bidder on the east coast. Also, we have people running the company who can run it under its current circumstances. But take a look, if you are putting together a bidding group. The noble Lord will know how expensive it is to put together an effective bid team, particularly with those kinds of salaries. Let us, however, not just look at the salaries for putting together the kind of senior management you would need for an effective bid team, which are probably way beyond anything that we would consider paying. If we did, however, each bid would be a minimum of—what?—£10 million. That is probably about right for each individual bid. Fourteen franchises would be £140 million, without even the assurance of winning a single franchise. I simply point out that there are a lot of complexities in this matter that are not reasonably obvious. We had a system that was broken, we had two bids that did not work and we brought in a company that restored it. We are now going out with an effective franchise and we expect a very good bid. Two of the bidders are essentially British and one is not; we have a wide range.
I say to the noble Lord, Lord Snape, that it seems that there is still a romance with the old British Rail, without recognising many of its underlying problems and the limited advantages that could be available under another scenario.
There is one other issue that is often raised. It is said that if we ran one company, we would have a comparator against which to look at the others. That takes us back my original point, which is that every franchise is so different that you cannot carry over from one into the other. If you doubt me on that, look at the pattern of bidders: specific companies that feel they can specialise in the needs of particular franchises bid on those. We do not find every bidder coming in on every franchise. They pick and choose the areas where they have particular knowledge and skills that apply to that franchise. Franchises are not generic and should not be viewed that way, so the comparators essentially do not work.
Lord Snape
I apologise for interrupting the Minister. Can she name any bidders for any franchises that are not British-owned bus companies or foreign-owned railways?
Baroness Kramer
I will just pick up on a point about “foreign-owned”. There is obviously scope for any country to decide that it is going to own an industry. We have certainly done that in the past: we have owned airports, steel companies and railways; you can go on through the list. We made a decision, as a country, that that could be done better by the private sector, but it is still entirely open to any country that it wants to own a series of businesses.
We have made a decision that that is not where we need to put our money. I have plenty of other places where I would much rather put the £140 million that I have just described than on the franchise bids alone, never mind all the overhead costs that would go with them. As I have said, this business, even when it is done well, is also a high-risk, thinly margined business. If one were to decide to go in for buying shares or into commercial ventures with taxpayers’ money, I suggest that one could choose many other businesses with higher returns, or other ways to spend the money. I would put money into services for the public rather than into owning shares in a company that would go out and compete with the private sector. That is the argument that I am making in all this.
We have a successful railway. It is delivering for the British people. We intend to place more and more demands on it. We have private sector companies that can deliver what we need, provided that we negotiate effectively and hard. It seems to me that that is where our energy has to go: delivering for the British people rather than being caught up in an idea of who owns what.
Lord Davies of Oldham
My Lords, I am grateful to the Minister for her considered and lengthy reply. She will have noticed that she was acting alone in the House, as there was not a supporting voice anywhere—expect that my noble friend Lord Snape, with his considerable knowledge of railways, asked a few questions and expressed anxieties about not returning to the days of nationalised railways, when losses were made and low investment was the order of the day. There is nothing in the amendment or in any proposal conceivable to the Opposition which suggests that.
We have had the illustration of two private companies failing on the east coast main line, and one successful directly operated railway under public auspices producing considerable degrees of success which match the achievements of any on other lines. All we seek is for the Government to think about the possibility of that continuing. That is all that the amendment involves: recognition of ready and conspicuous success under the formula and an eagerness to see that it should persist. It is only dogma on the other side that leads them to indicate that there are so many complexities about running a private railway that one could not anticipate the expertise existing anywhere in any state-operated organisation—except, perhaps, in the German, French and Dutch states, which make successful bids and operate.
I merely ask the House to recognise that this is a modest amendment to keep the ball in play for the huge success in recent events on the railway. The Minister has addressed herself to every issue except that success, which we want to confer. Accordingly, I beg leave to test the opinion of the House.
Lord Berkeley
“Strategic highways company licences
(1) A licence under section 1 may include—
(a) such conditions (whether or not relating to the licence holder’s being responsible for assets under the authorisation of the licence) as appear to the grantor to be requisite or expedient having regard to the duties imposed by section 4; and(b) conditions requiring the rendering to—of a payment on the grant of the licence, or payments during the currency of the licence, or both, of such amounts or amounts as may be determined by or under the licence.(i) the Secretary of State,(ii) the Office of Rail Regulation, or(iii) any other person, or any other person of a class or description, specified in the licence, except a Minister of the Crown or Government department,of a payment on the grant of the licence, or payments during the currency of the licence, or both, of such amounts or amounts as may be determined by or under the licence.(2) Conditions included in a licence under subsection (1)(a)—
(a) may require the licence holder to enter into any agreement with any person for such purposes as may be specified in the conditions; and(b) may include provision for determining the terms on which such agreements are to be entered into. (3) Conditions included in a licence under subsection (1)(a) may require the licence holder—
(a) to comply with any requirements from time to time imposed by a qualified person with respect to such matters as are specified in the licence or are of a description so specified;(b) except in so far as a qualified person consents to his doing or not doing them, not to do or to do such things as are specified in the licence or are of a description so specified;(c) to refer for determination by a qualified person such questions arising under the licence as are specified in the licence or are of a description so specified;(d) to refer for approval by a qualified person such things falling to be done under the licence as are specified in the licence or are of a description so specified;(e) to furnish to a qualified person such documents or other information as he may require for the purpose of exercising any functions conferred or imposed on him under or by virtue of the licence;(f) to furnish to the Secretary of State or the Office of Rail Regulation such documents or other information as he may require for the purpose of exercising the functions assigned or transferred to him or it under or by virtue of this Act.(4) Conditions included in a licence may contain provision for the conditions to cease to have effect or be modified at such times, in such manner and in such circumstances as may be specified in or determined by or under the conditions; and any provision included by virtue of this subsection in a licence shall have effect in addition to the provision made by this Part with respect to the modification of the conditions of a licence.
(5) Subsections (2) and (4) are without prejudice to the generality of subsection (1)(a).
(6) Any reference in subsection (3) to a “qualified person” is a reference to—
(a) a person specified in the licence in question for the purpose in question, or(b) a person of a description so specified,and includes a reference to a person nominated for that purpose by such a person pursuant to the licence.(7) Any sums received by the Secretary of State or the Office of Rail Regulation in consequence of the provisions of any condition of a licence shall be paid into the Consolidated Fund.
Lord Berkeley
I shall be brief in speaking to this group of amendments because we have discussed at some length the licence for the strategic highways company. My Amendment 9 is a provision similar to what Network Rail now has. I was interested in the Minister’s comment that it is a licence for a commercial model and that the strategic highways company is not going to be commercial. I do not know whether Network Rail was ever commercial in her definition of the word, but it certainly is not now and I notice that the Government have not tried to change the licence to reflect any alteration. Perhaps she has a quick view on that. The draft licence that we received on 3 November was certainly an improvement on the previous version, for which I am very grateful.
The only other thing I wish to comment on in this group is my Amendment 17, which is to do with the duties of the strategic highways company. Whether they should go in a licence or in some other document, I do not know, but the draft licence from the Department for Transport is a licence to build roads, to take into account environmental concerns and to do it reasonably efficiently. Given experience of legislation over the years, there is a need to have in the Bill, for preference, or in a licence, if it must be that way, a wider role and wider responsibilities for this company to go cross-modal. That includes looking at road and rail—I declare an interest as chairman of the Rail Freight Group—passenger as well as freight, efficiencies, travel choices, developments in sustainable locations, as sustainability is very important in all this, and different modes to secure the economic, social and environmental gains jointly and severally. I do not think that these are in the draft licence at the moment. If the Minister would look at this again and see whether some—preferably all—these issues could go into a licence, I would be much happier that the strategic highways company was going to be part of a wider transport and environmental structure, taking into account the needs of customers, the environmental needs, roads, railways and developments in local transport. With that short introduction, I beg to move.
Lord Whitty
My Lords, I have Amendment 10 in this group. Again, as in the previous debate, my noble friend Lord Berkeley has put his finger on another lacuna in the Bill. Nowhere does the Bill spell out the functions and duties of the proposed strategic highways company. There is a whole schedule, 26 pages long, which largely consists of adding,
“or a strategic highways company”,
but does not actually say what that company should do. I find this extraordinary and not consistent with earlier circumstances in which we have set up public bodies or corporations to do a particular job, some of which are still doing it, where there was clarity in the legislation as to those functions. Those functions have to be economic, social and environmental these days. The Government should at least consider making sure, at later stages, that the Bill spells out the central duties of the companies. I hope that the Minister will take that away.
Baroness Kramer
My Lords, again we have a wide range of amendments in this group. I shall focus on the issues that have been raised by the noble Lords, Lord Berkeley and Lord Whitty. We derive from these amendments that they see advantage in the company being issued with a licence: we covered that discussion a few minutes ago. I want to be clear that safety and other duties are being transferred to the company by virtue of its appointment as the highways authority for the strategic road network. These, together with essential environmental duties in existing legislation, will apply to the company. I also make it clear that the new company will be bound by the network management duty in the Traffic Management Act 2004, a duty which would be difficult to perform without co-operating with other local highways authorities.
Sustainable travel, though, is a different kettle of fish. It is an issue of wider transport strategy and policy, which is a matter for the Secretary of State to determine. However, many issues raised in these amendments that may not currently be covered in legislation to the extent proposed—for example, sustainable development, engaging communities or conducting research and development—will be the subject of binding statutory directions and guidance, which is the long title that we have given the licence issued to the company by the Secretary of State. I am sure that noble Lords will have looked at the recently published drafts.
I have the advantage of a marked-up copy, so I can see how extensively all those issues have now been written into the licence, in very significant detail. For example, on the environment the licence holder must:
“Seek to minimise carbon emissions and other greenhouse gases from its operations; adapt to operate its network in a changing climate; and, where relevant, assist the Government in meeting its wider greenhouse gas emission reduction targets and climate change commitments”.
We can see, in each area, that there is very substantial language. On safety, there is language focusing in great detail on these issues, so that they are deeply embedded, as there is, in other places, on collaboration. So it is there in the licence, or, as we are calling it now, the statutory directions and guidance. To me, it is crucial that they are in that document because, of all the documents, it would be the living document that most impacted the company on a regular basis. We want to make sure that those issues are to the fore and centre, right in the eyeline of the new strategic highways company. Directions issued by the Governmen