Trade Union Bill (Third sitting)
(8 years, 6 months ago)
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The Chair
We start by considering the motion to make an amendment to the programme motion. I remind Members that the Standing Orders provide that the Minister may move such a motion and that if any member of the Committee signifies an objection, the proceedings on the motion will lapse.
Ordered,
That the Order of the Committee of 13 October 2015 be varied by the insertion of “; NASUWT” at the end of the third column of the 13th row (Thursday 15 October Until no later than 3.00 pm) of the Table in paragraph (2).—(Nick Boles.)
Examination of Witnesses
Deputy Chief Constable Charlie Hall and Steve White gave evidence.
The Chair
Our two witnesses are Steve White, who is chair of the Police Federation of England and Wales, and Deputy Chief Constable Charlie Hall of the National Police Chiefs Council. You are both very welcome.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Q 242242 Good morning and welcome to the witnesses. There is a serious number of provisions in this Bill, particularly in relation to picketing. One of the consultation documents contains proposals on supervising social media comments and potential criminalisation, although we are not clear on the Government’s position on those issues. Do you believe that there are problems with the way in which the Bill could be policed and the additional stresses and strains it would place on policing, which is obviously already subject to significant pressures?
Deputy Chief Constable Hall: In the majority of cases, there is no real need for the police to be involved with industrial disputes and picketing. Indeed, our stance is that we would wish to avoid it if we can. Many pickets and industrial disputes run without any contact or involvement with policing. Clearly, there are occasions when police have been, and need to be, involved to keep the peace and prevent disorder. There are provisions in the Bill for police to be notified of picket lines, and my reading of that is that, in pretty much every instance, we would be notified of industrial disputes and picketing. My position is that I do not see that as absolutely necessary, simply because we would expect those picket lines to be self-policing as far as possible. Involvement of police beyond that should be the exception, rather than the rule.
On social media, I have seen some detail in the Bill about that. I do not believe that there is a need for the police to be able to vet or censor social media posts. Clearly, there may be a role for policing at some point. If things are posted that commit criminal offences, we would investigate in the same way that we would investigate other social media posts.
Stephen Doughty
Q 243 Steve, do you share those views?
Steve White: Yes, broadly. There needs to be a recognition of what is practically possible in terms of the level of resource that we currently have, particularly on the social media aspect—goodness gracious me. I am on Twitter, and I sometimes wish that perhaps we did have the powers to deal with social media comments from time to time, but, goodness me, that would be massively complex. From a policing perspective, it would be a dangerous route to start going down if we say that the police should have a role to play in that.
Of course, the relationship between local police officers and employees of local firms is key and crucial to this. It would be a travesty if we ended up going back to the days of the 1970s and ’80s when, whether rightly or wrongly, the police service was seen as an arm of the state, which of course we absolutely are not. I certainly echo Charlie’s comments that these disputes should be largely self-policing.
The only other comment that I would like to make is about the requirement to inform police in relation to picket supervisors, for example. I question that. I mean, it is not for the Police Federation to say what laws there are in the country, of course. However, I personally question whether there would be more appropriate ways for that information to be recorded, so that the police absolutely do not have to be involved at all, apart from keeping the peace when necessary. Perhaps local authorities could play a part in that more appropriately. And of course, the sad fact of the matter is that we are now seeing increasing mission creep, whereby the police service has to step in where other services are providing gaps. So we do not want to design something that brings that about, when perhaps there are more appropriate agencies to do that work.
Stephen Doughty
Q 244 Given what you have said, do you both think that there is a risk that with some of the provisions—particularly those about being able to demand letters, anyone being able to demand a letter, the wearing of armbands and all sorts of stuff—that if things got out of hand, they could draw the police into situations where multiple people demand things? As you say, preferably, the police should stay out of these situations. Do you think that there is potentially a risk of a breakdown in order around protests that otherwise would have been conducted and self-policed, as you have described?
Steve White: The point is that if there is a requirement for a notification to be made to the police, what happens when that does not happen and how do you know if it has not happened? Presumably, the police will have to investigate that. That is the issue. Otherwise, there is no point in having that requirement; it is about enforcement.
I think that it is justified for us to have a view in relation to the practicalities of enforcement, because we are the ones who are charged with enforcing the laws. So I think it is right for us to be able to comment on that. My question is: what would the sanction be? Then, of course, immediately you will drag the police service into other aspects, which I am not convinced is the intention of the Bill. It is the mission creep element.
Deputy Chief Constable Hall: I think that my response to the question would be “possibly”, but I would not over-emphasise that it will cause problems. When police need to attend picket lines, there is some utility in being able to identify who is supervising or in charge of that picket line; certainly, that would be helpful. But I do not believe that it is necessary to have notification directly to the police in advance of every picket line being set up, and that is simply because, as I have already said, I do not see us needing to attend in the vast majority of cases anyway. However, a mechanism by which we can easily identify who to speak to when we arrive would be of assistance.
Stephen Doughty
Q 245 I have one last question. Would it be your opinion that, in a general sense, industrial relations and the involvement of the police have significantly improved over the last 10, 20 or 30 years, compared with some of the situations that we might have seen in the past, and that we do not want to jeopardise that type of relationship? I think it applies more broadly to the policing of protests, as well, that we have got to a very good situation and that we do not want to put that at risk.
Deputy Chief Constable Hall: Clearly, there is some history here, going back. The police role must be impartial in these industrial disputes, without doubt, and I would like to think that is the position that we have taken in recent years. I agree that that should be maintained. Our role there is to balance the lawful rights of all parties, and I would want to ensure that role continues.
Steve White: I would agree with that. In fact, before this session, I was reflecting—I have been a police officer for 27 years—and trying to remember the last time that we really had something of major significance. We were talking about the dispute involving petrol tanker drivers, and the amount of planning and the number of issues that we had to deal with then. That is probably the last time, but of course that was largely carried off in a very low-key and successful way, although there was a lot of resources and planning behind it, which I think shows how much things have improved.
The Chair
Okay. I am already getting a list of people to ask questions, and we only have half an hour. You do not both need to answer questions unless you really want to, and I ask members of the Committee to try to limit themselves to one supplementary question, unless they are really bursting to ask another. I know that the next questioner will be very brief and to the point.
John Howell (Henley) (Con)
Q 246 Thank you, Sir Edward. May I stay on the same subject? If a dispute gets out of hand, you are required to go and police it. Does the notice period in the Bill not give you advance warning, so you can tell whether policing is likely to be needed? I cannot see what the problem is with the notice period.
Deputy Chief Constable Hall: I think my experience is that in past situations in which we have been required to be involved, or in which we planned to be involved, notification has usually come forward fairly quickly, particularly through the employers, who say, “We believe that we may have issues when this picket line meets.” Those situations are relatively rare, in terms of when picket lines sit. Yes, of course notice helps us to plan, but my experience is that planning does not need to be done in the vast majority of cases, simply because of peaceful picketing. Steve talked about the planned fuel dispute. A lot of planning went into the ability to police picket lines at that time, and as you know, it never quite materialised into a dispute. Those are the sorts of circumstances where advance notice would be very helpful.
John Howell
Q 247 May I follow up with one question? I am still struggling to see what harm the notice period causes.
Deputy Chief Constable Hall: I do not believe it causes any harm, as such. The challenge for policing is whether it is necessary for us, how we then administer it within police forces across the country, and whether we could obtain that information in other ways, either through local authorities or directly with the employer. As I say, we do not see any direct harm in receiving it, but we feel it could be discharged in other ways.
Chris Stephens (Glasgow South West) (SNP)
Q 248 It may appear that I am shouting at you, but I am not; it is so the other members of the Committee can hear me. I apologise.
I have two quick questions. Do you both agree that the proposal to allow agency workers to come in and replace striking workers would result in increased tensions in the workplace and that the police would have to become more involved in those sorts of issues? What more resources would the police need to police some of the aspects in the Bill?
Deputy Chief Constable Hall: I do not think it is for the police service to determine the merits of whether agency workers should come in or not. We know from disputes we have policed in the past that the mention of agency workers tends to increase tension within picket lines. I think there is certainly the possibility that that could be the case if agency workers are brought in to cross picket lines. Clearly, within that we would need to judge each situation on its merits, and potentially we would need to increase police resourcing accordingly.
Steve White: It probably would not surprise you to hear me suggest that our current resource levels in policing would make it extremely—
The Chair
Mr White, you are talking to us.
Steve White: Sorry, let me try that again. You will not be surprised to hear that, from a federation perspective, we are saying that in terms of the resource requirement needed, we would find it very hard to cope with current resource levels should there be large-scale disputes. We are finding it extremely challenging to cope with day-to-day policing with the current resource levels, and the likelihood is that they are going to become squeezed even more. If there is an increased requirement for police involvement around the policing of industrial disputes, that would be more challenging.
Chris Stephens
Q 249 And on agency workers.
Steve White: I agree with Charlie’s view. It is not for us to give a view on that.
The Chair
As you are a main Opposition spokesman, Mr Stephens, if you want to have the same amount of time as Mr Doughty, I am very relaxed about it. Are you happy?
James Cartlidge (South Suffolk) (Con)
Q 250 Thank you for coming in today. I want to focus on the point about identification. Mr Hall, you said that it may be of benefit to be able to identify who to speak to and know who is the organiser. Is that not currently the case, in your experience of dealing with disputes?
Deputy Chief Constable Hall: I think it is generally the case that you can find out that detail, but I would not say it is always the case. Certainly, when we attend, our ability to find who is supervising the picket line and discuss and negotiate with them about the way the picket is conducted enables people to continue to cross the picket line if they wish to do so and enables those on the picket to approach vehicles or individuals trying to cross the picket line. It is always helpful if we can fairly quickly identify who that supervision is. Generally we can do it, but that is not always the case.
James Cartlidge
Q 251 To follow up, I am not trying to pass comment on whether the parts of the Bill that deal with social media are right or wrong, but you use social media for investigations at the moment. People can commit offences using social media. That is currently the case.
Deputy Chief Constable Hall: Yes, it is, and we certainly investigate, all across the country, offences that have allegedly been committed across social media. What we do not do is to censor or vet tweets and social media messages before they are sent out. Once things have gone out, however, we may investigate. Clearly, we could do that in an industrial dispute, as we could in any other area of business.
Ian Mearns (Gateshead) (Lab)
Q 252 On social media, I do not think that this appears in the Bill, but it was certainly referred to in the Department for Business, Innovation and Skills consultation document on the Bill. The consultation document referred to having to give notice of use of social media in support of a picket, and it referred to having to give notice of the content of social media used to support a picket. That concept is interesting, because if you have to give notice of content on Twitter, you potentially introduce the question of secondary and/or wildcat tweeting in support of picketing. Have you got any comments about that?
Steve White: Goodness gracious me. That fills me with dread and fear, I have to say, in terms of having to vet tweets in advance—crikey! I do not think that that is anything that we want to be getting involved with. I am sorry; I just find that quite bizarre.
Deputy Chief Constable Hall: I think I agree. I do not know how we would manage that. I do not know that it is appropriate for us to do that, because we do not do it in any other area. How we would manage that, I really do not know. I think our only role would be when things have been sent out. If people are potentially committing a criminal offence by sending those out, there is a role, potentially, for us to investigate those, as there is with any other use of social media.
Ian Mearns
Q 253 And there is law covering that sort of content anyway, is there not?
Deputy Chief Constable Hall: Yes.
Nusrat Ghani (Wealden) (Con)
Q 254 You have both mentioned limited resources. I just want to ask you whether you think it is right that your limited resources are used to get involved in large-scale strikes in the country. Looking at the tube strikes, for example, do you think that it is right that police resources are used to manage the strikes when only a minority of people have asked for them in the first place?
Deputy Chief Constable Hall: As Steve has already said, in policing we have got many priorities at the moment, and industrial disputes, if I am honest, are probably not at the top of the list of what we need to deploy resources against. What I would say is that we have a responsibility to keep the peace and uphold the law, and that can see us deployed into all sorts of different situations. Clearly, industrial dispute is one of those.
If there are industrial disputes where that role is necessary, then I would say that we will continue to need to deploy resources, but it does take resource away from other areas that I am sure all the police and crime commissioners around the country would consider to be our priorities, such as dealing with vulnerable people and reducing crime. This is not a natural area that falls into those priorities, but if we need to deploy resources to keep the peace, of course we will continue to do so.
Nusrat Ghani
Q 255 So you are being made to deploy resources from other incidents to manage strike action, when only a minority of people have asked for those strikes?
Deputy Chief Constable Hall: It is inevitably going to do that. When we have a limited and reducing resource base, large-scale deployment of police to industrial disputes is going to pull officers from other duties and responsibilities.
Steve White: The only comment I would make is that a distinction needs to be made between managing an industrial dispute—in terms of who is in charge, informing the police and managing it—and responding to an incident of disorder. We would respond to an incident of disorder whether it is in relation to an industrial dispute or a pub fight. Of course, we have a duty to respond to that, and we need to ensure that we have got the resources in place to do that. As Charlie has already said, the desire would be for these industrial disputes to be self-policing. If they are not, we are going to need resources and we do not have them.
Nusrat Ghani
Q 256 So you would have to deploy resources from elsewhere. You mentioned industrial disputes being self-policing, and you also mentioned, Chief Constable, that it would be easier if you were able to identify individuals who might be in charge if you came across a scenario. Wearing an armband would be one easy way to identify people, would it not?
Deputy Chief Constable Hall: Quite possibly.
Nusrat Ghani
Q 257 And you do not think that is detrimental to their human rights—having to wear an arm band?
Deputy Chief Constable Hall: I think that is probably for others to decide. I think what I have said is that when we attend being able to find out fairly quickly who is in charge and responsible for that picket is helpful to us. So there are many different ways I think that could be done.
Nusrat Ghani
Q 258 It saves money and saves time, does not it?
Deputy Chief Constable Hall: Well, we can quickly get in, negotiate and try to resolve whatever reason we have been called there for.
Steve White: We must not forget the use of good policing skills in this. Most of the time it is not rocket science. You can quickly establish who is in charge, whether they are wearing an arm band or not; but of course this is about the management of it, rather than responding to an incident. I suspect if there is major disorder breaking out you do not necessarily need to go and find who is in charge. You need to deal with the disorder. That is the only comment I would make.
Nusrat Ghani
Q 259 You also mentioned that it is very rare to get into a difficult situation. Most of the time these situations are self-policed and well managed; but have you come across scenarios where people wanting to cross the picket line have felt intimidated? Have you had to police that situation at all?
Deputy Chief Constable Hall: I think policing across the country will certainly have come across that. In my experience, and what I have had fed to me, sometimes at the mere presence of a picket line individuals can feel intimidated; but that is not necessarily, given that picket lines have protection within the law, something that the police are going to intervene about. I think there is a whole spectrum of intimidation, and some people who may wish to go into work will simply feel intimidated because of a presence there, and in my view that is not something that policing would then intervene with. We start to intervene where disorder is looking likely, or there are actual criminal offences that we have on the statute book that we need to deal with.
Steve White: Can I just come back on that? In terms of adding balance you can have the perception that a picket line could be threatening, and I am thinking about the footage from large industrial disputes of the past—the miners’ strike, for example. The last picket that I saw was local to me, in the south-west of England. It was in relation to a rail dispute, I think it was. I have to say that the atmosphere on the picket line was one of very light-hearted jolliness—people tooting their horns and shouting and waving, and so on and so forth. I only add that from a question of balance. Clearly we would not be involved in policing that picket line; but of course, as Charlie has said, if things overstep the mark and start to impress on the peace of it, then of course—
Nusrat Ghani
Then you have to move resources across.
Steve White: Yes, of course; but there is a balance to be had. As I say, everyone seemed to be enjoying themselves at that picket line.
The Chair
When I was practising as a criminal barrister we were not allowed to ask leading questions. There is nothing out of order about leading questions, but our witnesses are so skilled that one probably does not need to lead them, and I sure Mr Doughty, who has the next question, will not.
Stephen Doughty
Q 260 There has been some quite unhelpful rhetoric from Ministers about the Bill and industrial action in general. Although industrial action has been at significantly low levels for a generation, the Minister for the Cabinet Office has talked about setting up hit squads, and standing ready to use the Cobra system to deal with industrial action. What are your thoughts about those comments? Do you think it is appropriate that we are talking about using the Cobra system, which is a key national resilience mechanism, to deal with what are extremely low levels of industrial action?
Steve White: My reaction to that—I am not experienced at Cobra; I know that Charlie is—is that we have got to remember that policing in this country is wholly independent of the state. I think that is the important element to recall around that. There is not political control of the police service in this country, and I think it is important that that should continue. Policies and procedures that the Government want to put in place are a matter for the Government, but I will just make that point.
Deputy Chief Constable Hall: I would agree with that—that chief constables are independent in terms of how they deploy their resources, and we must remain impartial to the merits of whatever the dispute is around. I think I can perhaps understand why Cobra may, for some disputes, feel the need to meet to sustain services, but the police role within that will always remain impartial. If there is disorder to be dealt with, or there are criminal offences to be dealt with, we will do it, but our role will be as much to facilitate the lawful picketing as it will to facilitate the lawful carrying on of business activities. Our role is right in the middle of that.
Stephen Doughty
Q 261 Specifically on Cobra, in your view would it be a very small number of instances where it would ever be appropriate for that system to be brought into play?
Deputy Chief Constable Hall: That is ultimately for Government to determine, but I see that there are often local disputes where Cobra would never need to get involved and manage that. The Government will make decisions as to when they need to activate that machinery.
Rishi Sunak (Richmond (Yorks)) (Con)
Q 262 Thank you both for being here. I have a question for the deputy chief constable. I think you mentioned that your primary responsibilities are to keep the peace and uphold the law. Obviously there have been situations where that has not been the case on picket lines, and we heard evidence on Tuesday about that and talk of intimidation. I was looking around at how you deal with other organised protests, such as marches, and it says clearly on the Met police website:
“Organisers should try to give as much notice as possible”,
and provide the names and addresses of organisers. Given that, would it be a help or a hindrance for you to have the notice period in the Bill of two weeks and the identity of someone organising a protest? It seems pretty clear that it would be a help, rather than a hindrance, but I wanted to confirm which of those you think it would be.
Deputy Chief Constable Hall: Well, I think there are degrees of protest. If you look at protest across the country as a whole, there are some big, national-level protests, but almost on a day-to-day basis many smaller protests take place, too. We are certainly not notified of all of them, nor do I think it practical for police to be notified of them. Many protests are self-policed and are not ones that we would particularly need to get involved with.
Certainly for the bigger scale protests—the ones that are likely to involve some element of policing—some advance notice to plan around that is necessary. Very often, our intelligence structures provide that information to us anyway to enable plans to be put in place. Some of that comes through organisers notifying us, and some of it comes from information and intelligence that we receive into policing.
Rishi Sunak
Q 263 Am I right in thinking that it is helpful, then? The Metropolitan police ask for as much information as possible.
Deputy Chief Constable Hall: It is certainly helpful when plans need to be put in place, but I would say that not all protests are of that scale and not all protests on a day-to-day basis receive attention.
Rishi Sunak
Q 264 I have a quick follow-up for Steve. When you were describing the picket lines that you have been involved in, you were saying that people were thoroughly enjoying themselves and having a jolly. Part of why we are all here, and the Bill is here, is to tackle the issue of strikes being held on low turnouts and out-of-date ballots that then inconvenience millions of people across the country. We have been hearing from union representatives that, for the most part, they understand that strikes are a last resort and are taken very seriously. Do you also agree with that? The description that you gave just a minute ago about people having a bit of a jolly and thoroughly enjoying themselves, while inconveniencing millions of people, seemed a bit out of kilter with what we have been hearing from others.
Steve White: The context in which I answered that question was in relation to whether picket lines were threatening. I was just giving the balance that in my experience that picket line was probably not one of the threatening ones. In terms of whether a strike should be called and what the level of turnout should be, that is quite simply not a matter for the police service. That is a matter for others; our primary concern is that the peace is kept and that things happen within the law.
I just want to pick up on your previous point to Charlie in relation to notification. It would be great if the police service had more than two weeks’ notice for every single resource requirement that we ever have, but we do not. We have to have resources in place to deal with the unexpected. That includes whether or not we have been notified of something. As Charlie said, that does not necessarily mean that we will have to be used or deployed.
The Chair
Okay. We have two minutes and two more questions. Jo Stevens and Seema Kennedy, just a brisk question from each of you, please.
Jo Stevens (Cardiff Central) (Lab)
Q 265 I have a question for both witnesses, if I may. You have both talked about the pressures on operational resources at the moment. Given the additional workload for the police that will come in if the Bill becomes law, would you rather have that, or not?
Deputy Chief Constable Hall: Well, I think what we would rather be able to do is concentrate on the priorities set down to us by chief constables and police and crime commissioners. There is potentially some additional work for recording the notifications that come through, but I do not think I would want to over-emphasise how significant that is likely to be. That will vary, depending on where you are in the country and those mechanisms. Where we would be concerned is if there is an expectation that at every picket line there is a higher level of police presence. If that is the case, that will impact on other priorities.
Seema Kennedy (South Ribble) (Con)
Q 266 On Tuesday, we heard from one of the opposition witnesses, Dave Smith, who made very serious claims about police collusion in blacklisting. He said, among other things, that the police are going to keep a list of picket supervisors and pass it on to big businesses. How would you respond to those very serious allegations?
Deputy Chief Constable Hall: I would say that I cannot see us doing that.
Seema Kennedy
Q 267 So you would say that what he said was untrue.
Deputy Chief Constable Hall: I cannot see the police service doing that. That is not something I would expect to happen.
Steve White: I do not think we would, and certainly we should not.
The Chair
Good. Thank you very much, gentlemen, for your evidence, which is much appreciated. Thank you for taking the time to talk to us. We are very grateful.
Examination of Witnesses
David Palmer-Jones and Commissioner Ron Dobson gave evidence.
The Chair
Good afternoon. We are now joined by David Palmer-Jones, who is chief executive officer of SITA UK, and Commissioner Ron Dobson of the London fire brigade. You are both very welcome.
Stephen Doughty
Q 268 I have a question for each of you. First, Commissioner, could you outline your relationships with the Fire Brigades Union, how you feel they are at the moment and whether you think the Bill will help or hinder them?
Commissioner Dobson: Relationships with the FBU are, in my opinion, positive. We have some issues we need to deal with, both locally and nationally, in relation to Government challenges to the firefighters’ pension scheme, which is still unresolved. Generally, at a local level, our relationships are reasonable. The London fire brigade has had experience of industrial action—back in 2010 in relation to a local dispute, and in the past couple of years in relation to the national pensions dispute. I have to say that the conduct during those two disputes was very different. There is a stark comparison between the two. We are always trying to improve our relationship with the Fire Brigades Union. There are some difficulties at the moment, but we are working hard to resolve them.
Stephen Doughty
Q 269 David, I understand that there has been a series of disputes involving your company. Can you tell us a bit about one of the disputes that is going on in relation to Teesside and Merseyside at the moment? I understand that trade unions have recently met with the company and requested a full forensic audit of your workers’ terms and conditions, but apparently you have refused it on cost grounds. The trade unions involved have offered to pay for the audit, but it has been refused. Could you tell us a bit about the dispute and why that is the situation at the moment?
David Palmer-Jones: Okay, I can do that. I will be as quick as possible. We are in the process of building an energy-from-waste plant up in Teesside. We have been investing in Teesside for the past 15 years: we have probably spent £700 million and employed 500 people in that area, and we are continuing to do that. I am in the process of doing a piece of work—a PFI-type contract—for Merseyside Waste Disposal Authority, which is progressing very well. We are almost three years into the build now, so the build is almost complete. About a year ago, we were targeted by some local activists who are running a campaign around “pay the rate”, which is some form of national protest that is looking at pay on very specific types of national agreements. At the moment, we are a minority shareholder—a 40% shareholder—in that particular element, and I will take over the operation of that facility early next year.
Stephen Doughty
Q 270 I asked a very specific question, though. I understand that there has been a request for a forensic audit of your workers’ terms and conditions. Why have you refused the willingness to pay for it?
David Palmer-Jones: We have not refused. We have already done a forensic audit. As you can imagine, it is quite a complex audit to do. We have more than 60 different contractors involved in the project. We have a head contractor and 60 others, all of which bring specialist services to build the £220 million project. On behalf of Merseyside, we did that analysis. I met with the national union representatives recently, and I had the opportunity to show the officers and the elected members of Merseyside—our customer—that information, which satisfied them. I made a genuine offer. It was controlled by ACAS, and we asked for ACAS to come in. I was very happy to share and pay for a forensic audit of the wages on that site through ACAS. That was refused by the unions. Therefore, I am left in a rather difficult position with an ongoing dispute. Our company has now experienced 29 protests, at both the Wilton site and—
The Chair
May I interrupt? This is not a Select Committee, Mr Doughty; it is a Bill Committee, so your questions have to go laser-like to the Bill.
Stephen Doughty
Q 271 The reason I wanted to ask the question was to find out why you think you have been asked here to give evidence on the Bill. Is it so that your poor industrial relations with a whole series of unions can then be used as an example to be reflected in full-scale national policy making? Is that why you think you have been invited here today?
David Palmer-Jones: I hope I have been asked here today to look at some of the grey areas—not the black and white areas about intimidation or numbers of pickets and so on—and perhaps a changing tactic on protests and the disruption they cause my company in continuing to invest in Teesside. I think that is why I have been invited; I hope so.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
Q 272 The project at Wilton, of course, uses CNIM Clugston as the engineering, procurement and construction contractor. Are you aware of allegations that CNIM Clugston is paying certain members of staff—contractors who they employ and who are non-British workers—€6 an hour?
David Palmer-Jones: That is a complete fallacy. It is untrue. I have done the audit. I have seen the information myself and presented it to Merseyside council and the elected members. They are satisfied, as my customer. I have no obligation to show the unions. I offered, very genuinely, to involve ACAS, so that they could see it. They refused. They want to do their own audit.
Tom Blenkinsop
You are under no obligation, of course, to show a forensic audit to local MPs, but local MPs, of which I am one, have not been shown that information.
The Minister for Skills (Nick Boles)
Sir Edward, may I inquire about the relevance of this to the legislation that the Committee is charged with scrutinising?
The Chair
I have made the point that I have to trust Members, in a sense. They are in charge of their own questioning, and I am not going to draw people up, but they have to remember that there must be a focus on the Bill all the time. Our witnesses must be aware that we are talking about the Bill.
Nick Boles
I have not yet heard any question to this witness about any measure in the Bill.
The Chair
Mr Blenkinsop has heard you, Minister, and I am sure both he and the witnesses will focus on the Bill.
Tom Blenkinsop
Q 273 For other contracts in Wilton—there are other power stations being built that I am aware of—are blue book terms being adhered to on that site, and will you show local MPs that evidence?
David Palmer-Jones: We have said that we will share that evidence with ACAS. We continue to pay national rates or above national rates, and we are happy to do a forensic audit for ACAS.
Tom Blenkinsop
Q 274 And will you show local MPs that forensic audit?
David Palmer-Jones: In that instance, I do not feel obliged to do so. I will show ACAS.
Seema Kennedy
Q 275 Mr Palmer-Jones, in relation to the code of practice on picketing, could you elaborate on how social media is used to intimidate workers at Wilton?
David Palmer-Jones: There is a large social media presence in Wilton, orchestrated by the head of this activity—this protest. They use extensively Facebook in order to call to arms their local protesters, and they use it also to spread particularly damaging comments about not only my staff but other members associated with this particular construction.
Seema Kennedy
Q 276 Could you describe some of the effects that has had on the workers?
David Palmer-Jones: Clearly, people feel very intimidated. They have now moved from Wilton to our other sites within the north-east, where we have a number of energy-from-waste plants. They attended yesterday another protest—the 29th protest—so they seem to be changing tactics. They disrupt local people. They stop the traffic. They cause an undue amount of disruption, and it is not nice for people to have to go through picket lines, with people only yesterday saying, “We know where you live. We’re going to visit you.” It is not at all something I can condone. We have to protect my staff. I have come here to protect my staff. It is really important that you understand the normal situation. I am not an employment lawyer at all, as you can hear; I just see the effects on our business and on my feelings about whether I continue to invest in Teesside in the future.
Chris Stephens
Q 277 I have some questions for Commissioner Dobson. Could you confirm whether you believe that the evidence collected in the Department for Business, Innovation and Skills consultation on intimidation in the fire and rescue services is pretty thin? Could you also confirm that according to the Carr review, the decline in allegations of intimidation between the two disputes you referred to was down to better contingency planning? Given that you have intimated that industrial relations are more positive, would that not demonstrate that the Bill is unnecessary?
Commissioner Dobson: In relation to the evidence submitted to the Carr review, the majority of that is in relation to the London fire brigade during the 2010 local dispute. The evidence there is not thin; it is quite substantial in terms of the intimidation and bullying that some non-striking workers and people who were providing our contingency plan experienced. I would not say the evidence was thin. I do not have any particular basis on which to compare it with other industries, so the evidence is as it is.
My view is that the relationships with the Fire Brigades Union are difficult at times, but they are being managed well and are improving. We are working very hard to improve relationships, and I do not see anything in the Bill that would particularly make relationships between management in the London fire brigade and the Fire Brigades Union worse. There are potentially some safeguards within the Bill that would help both the London fire brigade and the Fire Brigades Union in respect of our relationships.
Chris Stephens
Q 278 Okay. The Carr review said that allegations of intimidation decreased between those two disputes because of contingency planning. Do you agree with that?
Commissioner Dobson: There are a number of reasons why bullying and intimidation decreased in the national dispute. There are differences between a local dispute and a national dispute, and the feelings they generate among the people going on strike and the unions. We learnt some lessons in terms of the management of the strikes during the 2010 dispute. It is true to say that, managerially, we have put some things in place to try to prevent intimidation of non-striking workers and the blockade of workplaces. We learnt some things and we think we did well.
During the 2010 dispute, because of some of the behaviours in relation to picket lines and striking workers elsewhere in London following around our contingency crews and trying to intimidate them at the incident ground, we sought to go to court to have the code of conduct on picketing enforced. We did not actually need to get the court order in the end, because we managed to reach agreement with the Fire Brigades Union prior to getting to court. Since that agreement was made and the code of conduct was adhered to, we have seen much lower levels of intimidation and bullying. The conduct of the picket lines and the strike generally in the past two years has been in line with how we would expect people to behave.
Chris Stephens
Q 279 I have one last question. My understanding is that you gave evidence to the Carr review.
Commissioner Dobson: No, I did not.
Chris Stephens
Q 280 Okay. Did you have any private meetings with Mr Carr?
Commissioner Dobson: I did. I had a private meeting with Mr Carr.
Chris Stephens
Q 281 Was that in a professional or personal capacity?
Commissioner Dobson: It was professional, because I was commissioner for London, but it was in my personal opinion, rather than that of my fire authority.
Victoria Prentis (Banbury) (Con)
Q 282 Mr Palmer-Jones, you were just touching on intimidation and the picket line you saw yesterday. Could you tell us a bit more?
David Palmer-Jones: I was not actually there yesterday, but we had reports back from my staff. Again, there is a movement from the Wilton construction site to our own sites and threats of other, secondary protesting. That was why I was very keen to come today, to explain the grey area that could expand.
Victoria Prentis
Q 283 It would be very helpful to hear more about that.
David Palmer-Jones: This is something that is very much condoned by the unions. When I meet with Merseyside and those unions, I am meeting the senior national levels of the union, which in some way tacitly approve of the tactics being deployed up in Teesside at the moment. We have a situation where council employees who are delivering household waste vehicles to the site feel quite intimidated to go across a picket line and a protest that is very much dressed in the union colours and waving union flags. They do not want to cross what is not an industrial action. This is very important to understand: there is no industrial action on any of our sites, yet I am still facing the difficulty of a sponsored, wider protest that is of a more national scale.
Stephen Doughty
Q 284 I just have a specific question, given what the commissioner has been saying. Can you confirm whether during the 2010 dispute any FBU members were actually arrested or prosecuted for their behaviour in picketing; and, secondly, can you confirm whether any agency staff brought in were arrested or prosecuted for their behaviour?
Commissioner Dobson: No, nobody was actually prosecuted.
Stephen Doughty
Q 285 Was anybody arrested?
Commissioner Dobson: I am trying to think; I cannot recall anybody being arrested, but they may have been—but certainly nobody was prosecuted, and the police did investigate a number of things that occurred on some of the picket lines and elsewhere.
Stephen Doughty
Q 286 But no FBU members, to your knowledge, were arrested or prosecuted.
Commissioner Dobson: No.
Stephen Doughty
Q 287 Given that you are not aware of the wider circumstances, could you perhaps write to us and tell us what happened during that dispute, given that it has been referred to a number of times, with agency workers who were brought in? I think that is directly relevant to the Bill, because there are obviously proposals that the Government are putting forward on the use of agency workers. I think it is important to understand the sort of tensions that are created. Do you think there is potential for tensions being created more widely in industrial disputes by agency workers being brought in, particularly in professions such as yours where there are specific sets of health and safety concerns and specialities?
Commissioner Dobson: I think there are tensions when agency workers are used. Our emergency fire crew contract, which provides our contingency arrangements, is provided by an external company. We contract it out in order to meet the requirements of the current employment legislation. That obviously does increase tensions, because striking workers see somebody else doing their job; I think it does increase tension.
The difficulty is, in an industry such as mine where we are providing a critical emergency service, we do need arrangements in place to cover public safety if the fire brigade is on strike. Therefore, we did not really have much choice. Other fire brigades outside London use other arrangements; but they have the opportunity to use people who maybe were retained fire fighters. We do not have that opportunity in London and we needed to make sure we had a robust contingency plan in place. That does create tensions, inevitably, but I do not think we have any option on that at the moment.
Edward Argar (Charnwood) (Con)
Q 288 You have both referenced how keen you are to ensure good industrial relations in the work you do and the duty you have to your staff, to protect and look after them. We have heard a number of references from both sides, and from both of you, about intimidation. Can you give us a flavour of specific examples that have stuck in your mind of the form that intimidation has taken—what was said, what was done and how that played out?
Commissioner Dobson: In terms of physical intimidation, during the 2010 dispute—and I have to be clear that this did not take place in the recent disputes—we saw the emergency fire crew operatives being refused access to fire stations and being intimidated: followed to incidents when they were actually attending emergency calls. They were followed there by striking workers and intimidated at the incident ground.
We have seen photographs being taken and posted on social media of people who were working during the strike, with comments such as, “We know who you are; we know where you live.” We have seen intimidation of some of the emergency fire crew by taking photographs of them and trying to find out what their names were, and by comments such as, “Don’t come back to London because we know who you are.” So there is a range of intimidation using social media.
All those instances where these things have happened have been reported to the police, but I refer back to the previous people giving evidence about how difficult it is to investigate and bring to a conclusion any offences over social media. So while it was investigated, unfortunately, there was not any result to the investigations; but they certainly took place and the evidence exists and actually has been shown to the Committee before.
David Palmer-Jones: I think from my side it is really the fact that it can occur away from the site itself. That is the bit that concerns us the most. We have had instances where cars have been damaged, threats of violence to our supervisor, and threats to other members of staff, who are not members of the union, who continue to work. That causes a lot of disruption and disharmony in the workforce; and we do not have many strikes, I can assure you—perhaps one in the last 10 years. When it does happen, there needs to be some form of control, very much specifically around secondary action outside the local area where the picket would happen. That is the most worrying for me.
Edward Argar
Q 289 I have a quick follow-up for the commissioner, and answer this as you wish. Did you have any reason to believe, or any evidence, notwithstanding that there were no arrests, that those who were either officials in or members of the FBU were those taking the photographs and carrying out that action?
Commissioner Dobson: I have no evidence to suggest that, I am afraid.
Julie Elliott (Sunderland Central) (Lab)
Q 290 I have a couple of very quick follow-ups to what you were saying, Mr Palmer-Jones. On the incidents you have been talking about in relation to Teesside, can you confirm that that is not industrial action?
David Palmer-Jones: It is not industrial action.
Julie Elliott
Q 291 Therefore, can you confirm that the Bill does not apply to those instances, because they are not pickets?
David Palmer-Jones: The worry, looking at paragraph 37 —again, I am not a lawyer—is that it is the unions that are really supporting the action. Therefore, they are—
Julie Elliott
Q 292 They are not pickets if it is not industrial action.
David Palmer-Jones: They are not pickets; they are protesters.
Julie Elliott
Q 293 Thank you. Can I clarify one other thing you said? You said that officials of trade unions were tacitly approving the tactics deployed. Can you tell me which trade unions were doing that? We have the general secretaries of the big trade unions involved in your company here later today giving evidence, and we would like to put that to them.
David Palmer-Jones: The ones that I met, together with Merseyside—the customer—were Unite, GMB and UCATT.
James Cartlidge
Q 294 Commissioner Dobson, in your earlier remarks you said that nothing in the Bill will worsen relationships in your view, but there are safeguards in it that will be of benefit. Do you welcome the threshold for action, which is one of the most important parts of the Bill?
Commissioner Dobson: I do welcome it, but it is important for the Committee to recognise that I cannot think of an industrial dispute with the Fire Brigades Union in recent years where that threshold would not have been met, so I do not think it would have had any practical impact on previous disputes.
James Cartlidge
Q 295 It is just adding extra safeguards.
Commissioner Dobson: Yes.
James Cartlidge
Q 296 Just on what you said to my colleague Mr Argar about examples of intimidation, you said that in 2010 access was stopped to a fire station in an emergency.
Commissioner Dobson: Access was stopped for our emergency fire crews—our contingency service. They were stopped from getting on to our fire station. In 2010, our plan was to deploy emergency fire crews from fire stations, but we had such difficulty in getting the emergency fire crews on to the fire stations because of the picket lines and striking workers who were barricading themselves on to fire stations. In one instance, they took a dog on to the fire station to stop emergency crews getting in.
James Cartlidge
Q 297 This was while there was a fire?
Commissioner Dobson: No, this was during the strike. During the fires, we had some instances where the striking workers followed emergency crews to incidents, damaged fire engines en route and tried to intimidate the emergency workers, while they were trying to deal with an incident. In some cases, they were trying to deal with actual fires and they were being obstructed by striking workers.
Jo Stevens
Q 298 I have a question for Mr Dobson. You have talked a lot about examples of intimidation during the 2010 dispute, and you also said that you had a private meeting with Mr Carr. You will be aware that the impact assessment for this Bill drew on the Carr review to justify what is in the Bill. I am sure you are also aware that Mr Carr was unable to make any evidence-based proposals or recommendations for change because of the lack of a significant body of evidence to support any recommendations for change. In your meeting with him, did you give him the examples of intimidation that you have described?
Commissioner Dobson: I did, yes.
Jo Stevens
Q 299 And you did that in a personal capacity, not a professional one.
Commissioner Dobson: Yes.
Jo Stevens
Q 300 Was it because a majority in the Greater London Authority had decided that you should not give evidence to Mr Carr?
Commissioner Dobson: There was no decision about whether or not I should give evidence, because it was never presented to elected members in that way.
Jo Stevens
Q 301 At its meeting on 29 January this year, the GLA indicated that your evidence appeared in the Carr report in contravention of the wishes of a majority of assembly members. Do you deny that?
Commissioner Dobson: My giving evidence to the Carr review was never presented to the London Assembly for their view on it. The fact that I had spoken to Mr Carr was discussed when the Carr review was published, but it was not discussed beforehand.
Jo Stevens
Q 302 Are you aware that the Regulatory Policy Committee has described the impact assessment for the Bill as “not fit for purpose”?
Commissioner Dobson: Yes.
Jo Stevens
Q 303 Following on—a very brief question, if I may—in relation to the same dispute, can you tell the Committee what you believe led to the dispute happening in the first instance and what action you took to try to prevent it from occurring? I am aware that you attempted to de-escalate the dispute by docking the pay of 368 staff; that was later found unlawful by an employment tribunal. Can you tell us a little about that?
Commissioner Dobson: There was a dispute over the start and finish times of shifts. We sought to change the start and finish times of shifts in order to increase productivity. We negotiated fully with the Fire Brigades Union on that but were unable to reach an agreement, which led to a strike ballot and that led to strikes. During the industrial action that took place, via either action short of a strike or a strike, some members of staff took actions that were against their contracts and were not covered by the ballot, so some workers’ pay was deducted. The employment tribunal has found only in the cases of three staff at the moment; the remainder of cases are still subject to discussion with the Fire Brigades Union. Let us be absolutely clear—the Committee needs to be aware of this—that the employment tribunal has listened to the cases of only three workers, not the others.
Jo Stevens
Q 304 But it found against you: what you did was unlawful.
Commissioner Dobson: In those three instances, yes.
Nick Boles
Q 305 The hon. Member for Cardiff Central seemed to suggest that it was appropriate for the Greater London Assembly to have gagged you and prevented you from giving evidence on any matter that falls within your professional responsibility. You said very clearly that the assembly did not and that there was never any consideration of that. Nevertheless, had they tried to do so, do you think that that would have been appropriate?
Commissioner Dobson: No, I do not. My contract is with the London Fire and Emergency Planning Authority, so it would be appropriate for it to take a view on whether or not I, as one of its employees, should give evidence, but not necessarily the London assembly.
Nick Boles
Q 306 And even if that authority had taken that view, would you, nevertheless, have felt it was right to prevent you from talking to an independent inquiry?
Commissioner Dobson: My personal view would be that it would be wrong to prevent me from talking to an independent inquiry, but, as a matter of fact, no decision of that nature was ever taken.
The Chair
John Howell is champing at the bit, but he is such a gentleman that I know he will want Nusrat Ghani to go first.
Nusrat Ghani
Q 307 Thank you, Chair.
Commissioner Dobson, I want to ask about something you mentioned to Mr Cartlidge earlier. Is it correct that in the 2010 dispute the non-striking workers found it difficult to get into the fire station?
Commissioner Dobson: Yes.
Nusrat Ghani
Q 308 You also mentioned that fire engines were approached, deterred or attacked when leaving the station.
Commissioner Dobson: Yes.
Nusrat Ghani
Q 309 Were any firefighters’ lives at risk at that time, when they were trying to carry out their duty?
Commissioner Dobson: No, I do not think that their lives were at risk. It was the emergency fire crew workers—the contingency force—who were followed and intimidated. I do not think that their lives were put at risk, but they certainly felt intimidated.
Nusrat Ghani
Q 310 They could have been hurt though.
Commissioner Dobson: Yes.
Nusrat Ghani
Q 311 And the victims of fire—could their lives have been put at risk if fire engines were unable to get out to them in a decent time?
Commissioner Dobson: That is a possibility, yes.
Nusrat Ghani
Q 312 So it was dangerous for both the firefighters and the victims of fire who were asking for help.
Commissioner Dobson: Yes, I believe it was.
John Howell
Q 313 Mr Palmer-Jones, earlier you threw away a line about the intimidation you had been facing being likely to affect your ability to invest. Would you like to explain that?
David Palmer-Jones: As I said, together with others, I have invested probably around £700 million and I employ more than 500 people in that area. I have the ability to invest more, but when faced with the sort of intimidation and protest that we have been suffering, I have to think twice about where I spend my money. I am currently in the process of employing people from SSI: I have taken on 20 people and am looking for others to help me to run that plant, and we are taking on apprentices. But you can see why, when faced with an uncontrolled set of continual protests—the 29th—we would think twice about whether we bother to invest in that area. It is an area that we have supported for the past 15 or 20 years.
John Howell
Q 314 So you would welcome putting the existing code of conduct into a statutory form?
David Palmer-Jones: We would have to. Again, it is important that you widen and capture this particular grey area. You really need to look at the fact that the unions should be held responsible if they are actively supporting these types of protest.
Chris Stephens
Q 315 Just a quick question to Commissioner Dobson. In an answer to Mr Cartlidge, you indicated that you agree with the thresholds in the Bill. Is that your private opinion or were you speaking for you organisation?
Commissioner Dobson: That is my opinion.
The Chair
Thank you very much for your evidence, gentlemen.
Examination of Witness
Byron Taylor gave evidence.
The Chair
Our last witness this morning is Byron Taylor of the national office of the Trade Union and Labour Party Liaison Organisation.
Stephen Doughty
Q 316 For the avoidance of doubt, I have already declared an interest, but obviously, I am a member of the Labour party and of the GMB, which is a member of TULO. Byron, could you tell us why you believe the provisions in the Bill break the established conventions on arrangements for political party funding?
Byron Taylor: The Bill is a fairly partisan attack on Her Majesty’s Opposition. It does significant damage to the funding of the Labour party, and I think that is in breach of existing parliamentary convention.
There is a long history here. Back in 1948, Winston Churchill said:
“It has become a well-established custom that matters affecting the interests of rival parties should not be settled by the imposition of the will of one side over the other, but by an agreement reached either between the leaders of the main parties or by conferences under the impartial guidance of Mr. Speaker.”—[Official Report, 16 February 1948; Vol. 447, c. 859.]
That was reinforced by Margaret Thatcher in a Cabinet meeting on 9 February 1984, when she said:
“legislation on this subject, which would affect the funding of the Labour party, would create great unease and should not be entered into lightly.”
There is a fairly well-established history of parliamentary convention that says parties should not interfere in matters affecting the Opposition. Even as recently as 1998, the Conservative party’s submission to the Committee on Standards in Public Life stated:
“The Conservative Party does not believe that it is illegitimate for the trade union movement to provide support for political parties.”
The Bill, in its current format, is designed to do exactly that and to stop the trade union movement being involved in political parties. That is a really important concern, because there is not only an established parliamentary convention.
There are very solid grounds about the freedom of association: article 11 of the Human Rights Act 1998, the European charter of fundamental rights and, dating right back to 1948, the universal declaration of human rights, to which this country is a signatory, which says:
“Everyone has the right to freedom of peaceful assembly and to freedom of association with others, including the right to form and to join trade unions for the protection of his interests. No restrictions shall be placed on the exercise of these rights other than such as are prescribed by law and are necessary in a democratic society”.
Stephen Doughty
Q 317 May I ask a specific question? There is an important point here about the distinction being made between the rules governing company donations and corporate donations to political parties and trade union donations to political parties. Could you say a little bit about the difference between the conditions that will be brought about by this Bill and what applies to, for example, companies making political donations—for example, the ability of shareholders to opt out of those decisions?
Byron Taylor: Indeed. There is no right for shareholders to opt out of political donations. A company is required to make a political resolution once every four years. A private company can do it by simple resolution. A public company does it at the annual general meeting, but the reality is that a single political resolution is made every four years.
If you contrast that with the requirements upon a trade union, there are significant differences. The trade union membership here in the UK already enjoys fairly substantial protection. We call it the triple lock. In the first instance, a trade union member can opt in or opt out of the political fund at any time, and that has been the case here in the UK since the 1940s. In addition, they can participate in the representative democracy of their trade union if they are unhappy with how a trade union is operating their political activity. They can participate in the structures of the union and seek to change how that activity is conducted. Finally, there are political fund review ballots, which operate once every 10 years. That is a simple one member, one vote ballot on the membership. The membership, should it so wish, can choose to disestablish any existing political funds, so there are several safeguards for trade union members in the operation of political funds that are not comparable with those upon companies.
This is a critical point. If you look at some of the donations that come in from companies—the one I draw reference to is Bearwood Corporate Services, which made 177 donations to the Conservative party, totalling £5.3 million. If you look at the ownership structure, it goes back to two faceless companies in the British Virgin Islands. We have no idea who is behind those donations.
Stephen Doughty
Q 318 Can you give us some practical examples of how trade unions are transparent about their funding—the amounts that are given and so on—at the moment, and why the provisions in the Bill simply are not required?
Byron Taylor: Trade unions are already required to publish any donations to a political party under the auspices of the Political Parties, Elections and Referendums Act 2000. In addition, they are already required to provide significant information to the certification officer about the number of members in the fund and the amounts paid into the fund and so on. There are already significant reporting requirements on the trade union movement about how political funds are expended. That is an important and clear point. What is proposed in the Bill represents a serious change to the way in which trade unions operate without any basis in evidence to do so.
Stephen Doughty
Q 319 The Bill’s provisions would have to be adhered to within three months of Royal Assent and its commencement. Do you think that is a fair amount of time for any organisation to comply with such significant changes to law?
Byron Taylor: No, I really do not. Three months is an extremely short timescale. Let us bear in mind that trade unions are, primarily, industrial organisations; politics is very much a secondary function for them. If the Bill is passed unamended, we will be asking 4.9 million people to opt back into the political fund in a three-month period. To set that against a couple of other examples, the recent changes relating to plastic bags supplied by retailers were enacted in Ireland in 2002, in Wales in 2011 and in Scotland in 2012. The coalition Government initiated the change in the UK in 2013 when they conducted the regulatory impact assessment and the Deputy Prime Minister announced the policy in October 2013. Companies have had a significant time to be aware that the changes are likely to happen, and as of 2013 they had two years to prepare for that.
Another example is self-assessment; everyone who completes a self-assessment is required to submit their returns by the end of January each year. They have a clear 12-month notice period that they must effect that change, and a significant Government-sponsored media campaign is run to inform people that they need to get their returns in by 31 January. If they fail to do so, a fine of £100 is imposed. Despite all those safeguards, this year alone, 890,000 people failed to fill in their self-assessments. We are asking 4.9 million trade unionists to opt into the political fund in a three-month period dated from Royal Assent, and I think that is unacceptable. There is also the issue of retrospection. Those people joined a collective organisation and opted, as part of their decision to join a trade union, to become part of the political fund. I see no clear public interest test that requires trade unionists to opt in to the political fund of their trade union when they have already joined that trade union in the past, and I fail to see what reference the Government are making to human rights on this matter. In 2002, the Solicitor General referred to the public interest and human rights when he spoke of retrospective legislation, and I believe that the Bill is such legislation.
Nick Boles
We do not intend to intrude upon the conversation among members of the Labour party, who seem to be having a very good time.
Chris Stephens
Q 320 Just a couple of questions, Mr Taylor. Can you confirm that, in many cases, the workplace will be multi-union and that some unions will be affiliated to the Labour party, and some will not? Therefore, many people already have the choice, because they can choose which trade union to join depending on whether they want to fund the Labour party or not. I should have congratulated you on the fact that you separated Scotland from the UK when you referred to plastic bags, and I welcome that.
I must emphasise to you, as someone who is a trade union activist, that if trade union members are uncomfortable with the trade unions’ relationship with the Labour party, it is up to them to raise that, and there are plenty of democratic opportunities for them to do so. It is also up to the Labour party to justify to the trade unions why it should be funded. The political funds are not just about the Labour party; there are many organisations that receive money from political funds, such as HOPE not hate, so what impact would there be on them?
Byron Taylor: Multi-union representation in the workplace is a reality. I used to organise British Bakeries down in Avonmouth docks, where we had seven trade unions on site. There are a clear number of trade unions, and members can join the appropriate one as they see fit. As for the political fund and its use, it is important to recognise that trade unions do not simply use the political fund for the purposes of the Labour party. There are 52 trade unions here in the UK, 13 of which are affiliated to the Labour party. In the other trade unions, there are a good couple of million people out there paying the political levy to allow their union to conduct political activity. That is what the political fund is for; it is for the conducting of political activity.
There is a proud history for the trade union movement of political activity: the campaign for the eight-hour day, the minimum wage, universal suffrage, campaigns for the NHS, campaigns for housing, peace movements after the second world war—all those things have been supported out of the political fund, and they are appropriate uses for it. What is being proposed is to strip trade unions of that political voice to a great extent. My real fear about this Bill is that it is designed to reduce participation in political activity. Such activity is well established. The European Court ruled just eight years ago that it is perfectly legitimate for trade unions to conduct political activity. The Court said:
“They are not bodies solely devoted to politically-neutral aspects of the wellbeing of their members, but are often ideological, with strongly held views on social and political issues.”
That is a legitimate role for trade unions.
Jo Stevens
Q 321 Can I ask you a question about clause 10? Some people are arguing—wrongly, in my view—that clause 10 equalises the arrangements, mirroring the situation in Northern Ireland. Do you agree that the provisions in the Bill go well beyond the current practices in Northern Ireland, which require trade union members on one occasion to contract into paying into the political fund—I repeat, on one occasion—and they are not required to renew their opt-in?
Byron Taylor: Sorry, can you just repeat the last bit?
Jo Stevens
There is a suggestion that clause 10 mirrors the arrangements currently in place in Northern Ireland about opting in. The question I am asking is: do you agree that the provisions in this Bill go well beyond what is currently in operation in Northern Ireland? Trade union members there only have to opt in on one occasion.
Byron Taylor: Indeed. The Northern Ireland situation is a leftover from the 1920 provision that moved towards an opt-in. Given the unique historical and political circumstances of the Province of Ulster and Northern Ireland, I think there are particular reasons why that exists in the current format.
The Bill, as it is currently proposing to change the law here in the UK, is significant. When people join a trade union, they will have to opt in. If they are already members of a trade union and already paying the political levy, they will have to re-opt back in. We will find ourselves in a situation where people have to renew that every five years. I fail to see why that is required in a fund where you can opt in or opt out at any time, where you have the representative democracy of the union and where you have a 10-yearly political fund review ballot. It seems to be another over-extension. We are going to be in a situation where you can opt in or opt out when you first join the union, you can opt in or opt out at any time, you have to renew every five years, and you have to renew through a political fund ballot every 10 years.
What level of regulation is required on trade union political funds, because they clearly are the most highly regulated political funds in the western world? If you compare them to some of the transparency arrangements that apply to companies, I think they are overbearing. For example, there are unincorporated associations that donate to the Conservative party—one that springs to mind is the Carlton Club, which has donated £1 million to the Conservative party in the last five years—and there is no clarity over who those people are who are paying those moneys and raising those kinds of sums. That is just one example.
Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)
Q 322 From your comments earlier, it sounded to me—I do not want to put words in your mouth—as though you were basically saying that the opt-in system that has been proposed within the time period is effectively unworkable. I would be interested in your comments on that.
Byron Taylor: I think it would be very difficult for the trade union movement to conduct those kinds of operations in a three-month time scale.
Dr Cameron
Q 323 What would be the impact of that if it were implemented?
Byron Taylor: There are questions about what is actually being proposed and the format. For example, on the face of it, the Bill requires written communication, but I am not sure if that is what the Bill actually means. One of the things I would particularly like clarity on in the coming weeks is what is the requirement. If it is implemented in the format that is suggested in the Bill, I think you are going to see a significant drop in political fund payers in the trade union movement. The net effect of that will be to remove a whole series of people from the political process in the UK. At a time when we are talking about declining engagement and how we can encourage people to be more engaged in the political process, what we are doing is reducing the number of people who actively engage in politics in some format. That is very bad for democracy in terms of participation and in terms of the funding gap it will create in British politics.
Returning to the Churchill convention, which requires parties not to interfere in matters of other parties without consent, we are going to find ourselves in a situation where the Labour party struggles to compete in electoral terms with the Conservative party.
Stephen Doughty
Q 324 I am intrigued that the Government Minister and the Whip have been going round gagging their Members from asking questions about what is a significant part of the Bill. Mr Taylor, why do you think Government Members are unwilling to ask questions about a significant part of their own Bill?
Stephen Barclay (North East Cambridgeshire) (Con)
On a point of order, Sir Edward. It would be completely unparliamentary for any Member to seek to gag another Member. I assure the Chair that no such attempt to gag Members has taken place. I request the hon. Gentleman to withdraw that suggestion.
Stephen Doughty
Q 325 May I finish my question? Mr Taylor, are you surprised that there appears to be very little Government interest in what is a significant part of their own legislation? What do you think the reasons for that might possibly be?
Byron Taylor: That is a very interesting question. As I said at the start of my evidence, as far as I am concerned, this is a partisan attack on Her Majesty’s Opposition and forms part of a broader attack on civil society. If you look at the concerns being raised about charities’ political campaigning or what is being said about the BBC—it is a deeply partisan attack. It is deeply damaging to our society, and I have real concerns.
I return to the Committee on Standards in Public Life hearings in 2011. Those of you who have read the transcripts will know I gave evidence to that Committee. The argument put forward by the Conservative party and the Liberal Democrat party at that point was that there should be individualisation of political fund payments. The Committee took the majority view that
“such a condition would be a disproportionate intrusion into the constitution of the relevant trade unions”.
That is a really important principle to me—freedom of association and the right of trade union members to come together, form a trade union and determine their own rules and constitution. The Bill is interfering directly in that human right, which I think Amnesty and Liberty made reference to yesterday.
James Cartlidge
Q 326 I want to raise a specific technical point. Mr Taylor, you said this is an attack on funding and that funding will go down. Surely, if people have to opt in, funding will only go down if they had not wanted to opt in in the first place.
Byron Taylor: Funding will go down because people have busy lives and the trade union movement is then required to contact every single member to require an opt-in, when many people already believe they are opted in.
James Cartlidge
Q 327 But if they have been happy with that donation, your donation levels will not be affected.
Byron Taylor: Many people are happy to contribute to the political work of their trade union. It is a fairly well-established principle among trade union members that they pay to the union, and in return they expect good advice and representation.
James Cartlidge
Q 328 But you seem to be saying, “If we actually ask people whether they want to contribute, we’re worried we’re going to find out some of them didn’t want to.” You are admitting that.
Byron Taylor: No, I am absolutely not, because we have not put it to the test yet.
James Cartlidge
Q 329 Then funding will not go down, on that basis. If they are all happy punters and happy to contribute to the Labour party, your funding will not go down.
Byron Taylor: You are saying this is not about the Labour party, and that is your immediate problem, because what we are talking about is the opt-in to the political fund of the trade union movement. What is going to happen is that trade unions are going to have to spend an excessive amount of time and resources re-contacting all of their members to ask them to sign back into the political fund in written form. This is a really important point: it is being proposed that everybody will have to do this in writing. In an electronic age when people should be allowed to communicate via telephone, internet or other forms of communication, this Bill is proposing that everybody has to sign a piece of paper. That will drive down participation; we know that for a fact.
James Cartlidge
Q 330 Forgive me. You talk about people’s rights. You are suggesting that your funds are going to go down. That must mean that some people who are currently contributing would not want to be contributing. In other words, by defending that, you are defending the fact that someone should involuntarily be contributing to a political party against their rights. You are talking about rights; you should surely accept that point.
Byron Taylor: When people join a trade union, there are things that go with being a member of a trade union, including its political work. Let us go back to the history of the opt-out, and 1913, and the legislation and why it was primarily introduced. The opt-out was introduced in 1913 to ensure that those workers who were working in closed-shop arrangements, who did not want to participate in the political activity of the union, had a chance not to do so. In a closed-shop arrangement, union membership was part of the contract of employment, and therefore, they had to join the union, so it was always seen as a way of protecting a very small minority of people who did not want to participate in the political activity of their trade union. We are now in a situation where the Government are trying to change that and say that everyone has to opt in. When people join a trade union, they join the collective and they participate by the rules of the collective. I am unaware of any other membership organisation that an individual can join where they can opt out of a portion of the rules of the organisation they are joining. This is really strange.
James Cartlidge
Q 331 For my last point, I will simply repeat the point that I made, because it is fundamental. If they are all happy donating, you will not be losing any funds when they are asked whether they wish to opt in to making a donation.
Byron Taylor: Do you mean a donation or a contribution to political funds?
James Cartlidge
Q 332 We all know what we are talking about.
Byron Taylor: I am not sure I do, but I would like to come back to what happened in 2008 with the Office of Fair Trading. The Conservative party lodged a complaint on this very matter with the OFT through Jonathan Djanogly MP. The OFT ruled:
“In the present case, we do not consider that trade union members are obviously vulnerable to deceit resulting from the way in which unions collect contributions to the levy. The levy has featured prominently in political discourse and news reporting for a very long time. We would expect to take action if we had evidence that large numbers of consumers are unknowingly entering into an unwanted financial commitment from which they are subsequently unable to extricate themselves. We do not at present possess evidence to this effect in relation to the political levy on trade union members.”
This has been a feature of political debate since the late 1940s. There was the Donovan commission in the 1960s. Look at the reviews of party funding that occurred in the 1990s and in 2004, or the Hayden Phillips review in 2006, or the Committee on Standards in Public Life in 2011. The question that comes back is always, “Where is the evidence that some kind of deceit is being practised?”, because it simply is not there.
If we are going to question the purpose of the legislation, may I draw reference to the Conservative Minister of Labour from 1924?
James Cartlidge
I was minus 50 then.
Byron Taylor: You may have been minus 50, but this legislation was produced in 1913, so it is totally relevant. He said, in a private memorandum, that the
“major part of the outcry against the political levy is not motivated by a burning indignation for the trade unionist, who is forced to subscribe to the furtherance of political principles which he abhors. It is based on a desire to hit the Socialist party through their pocket…we should not delude ourselves as to our intent.”
My question is: what has changed for the Conservative party?
Julie Elliott
Q 333 I have referred to my entry in the Register of Members’ Financial Interests as a member of the GMB and the Labour party, but, in the interests of complete clarity, I was also an officer of the TULO organisation in the northern region for many years before becoming a Member of Parliament.
Byron, can I take us back to the practical impact of this proposed legislation on trade unions and, indeed, the Labour party? Logistically, can you outline how you think this proposed legislation will impact on trade unions, in terms of getting repeated sign-up and collections of moneys, and particularly on the smaller trade unions, which often have very few members of staff? Can you outline what you think the implications of the Bill will be for those people?
Byron Taylor: The implications of the Bill are significant. It is going to impose a great burden of bureaucracy and red tape on the trade union movement. As I have alluded to, trade unions are primarily industrial organisations and focus the majority of their work on industrial activity and dealing with industrial complaints. As for the idea that trade unions will have to divert massive resources—and it will be massive resources—to try to conduct the operations in the way that the Bill envisages, in writing, that is going to be a substantial drain on trade union resources and activities. That will impact heavily and introduce inefficiencies into wider industry, because trade unions are the bodies that are there to negotiate and to ensure that the industry works properly. To introduce this will divert union resources substantially.
If you look at the smaller affiliates of the Labour party or of any small trade union that is now forced to operate in this fashion, they will find themselves caught up in an endless cycle of bureaucracy, seeking people to opt into the political fund, renewing the opt-in and then conducting the political fund ballot. Looking back at the Better Regulation Task Force in 2002, it ruled that trade unions were already over-regulated in the field of political fund activity.
Julie Elliott
Q 334 May I just follow that up with one quick, straightforward question? In the legislation that trade unions operate under, in particular employment law legislation, “reasonableness” is applied everywhere. Would you regard this proposed legislation as reasonable?
Byron Taylor: Would I regard it as reasonable? I come back to the point made by Mr Stephens, and my question would be, is it proportionate, is it reasonable? No, it is not. If there is really some concern about how political funds are being operated in the UK—although there is no evidence to show that there is any concern—is it a proportionate response to ask 4.9 million people to re-opt back into the political fund of their trade union? The answer is no, this is not a proportionate or reasonable response. On that basis, it is clearly a partisan attack on Her Majesty’s Opposition, designed to reduce funding and participation. I fail to see how the Bill increases participation at any level, both in the industrial elements, which I do not intend to speak about, and in the political elements—this Bill seems determined to drive down participation. Where are the means of communication that allow trade unions to talk to their members electronically or via telephone? What we are doing is enforcing a 19th-century form of communication on a 21st-century industry, which is bad for business and bad for the trade union movement.
Ian Mearns
Q 335 Mr Taylor, have you ever made a contribution to the Conservative party by means of buying a good or service from a company whose profits from that transaction were then used to make a donation to the Conservative party?
Byron Taylor: I have, and I had no opt-out from that.
Chris Stephens
Q 336 Just one quick question, Mr Taylor. When it comes to legislation affecting elections, party political administration and funding, or trade union political funding, do you agree with me that it should have the agreement of either all the political parties represented in the House of Commons or a majority of the political parties represented in the House of Commons?
Byron Taylor: Yes. This comes back to my initial point about the Churchill convention, which has existed in UK law for the best part of 80 years, and I will say it again:
“It is a well-established custom that matters affecting the interests of rival parties should not be settled by the imposition of the will of one side over another, but an agreement reached either between the leaders of the main parties or by conferences under the impartial guidance of Mr Speaker.”—[Official Report, 16 February 1948; Vol. 447, c. 859.]
Even Margaret Thatcher realised the danger of interfering in the affairs of other parties. What is being created here is a circumstance in which the party of government is seeking to undermine the party of opposition. That is a very dangerous place to go in our democracy. It is deeply concerning that we find ourselves here, discussing a matter of this kind, when there is no clear agreement between the main parties.
The Chair
I think that is it. Thank you very much, Mr Taylor, for your evidence.
Ordered, That further consideration be now adjourned. —(Stephen Barclay.)
Trade Union Bill (Fourth sitting)
(8 years, 6 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
We will now hear oral evidence from Professor Keith Ewing, professor of public law at King’s College London. This session will run until 2.30 pm. Professor Ewing, could I just outline how we are going to play this? I will ask you to introduce yourself and outline why you are here. It will then become a hearing, with Members from alternate sides asking you questions. Could you be as succinct as possible? I would urge my colleagues to do the same, but it does not always work that way. Remember that the time you are using is the only time you have, so use it well, if you can. Would you care to introduce yourself?
Professor Ewing: My name is Keith Ewing. I am a professor of public law at King’s College London.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
Q 337337 Professor Ewing, could you set out in a little more detail your experience working on issues around trade union law at a domestic and international level?
Professor Ewing: In terms of my experience?
Stephen Doughty
Yes. Your experience, background and qualifications.
Professor Ewing: I have been professor of public law at King’s College since 1989. Before that, I taught at the University of Edinburgh and at Cambridge. I have taught overseas in many countries. I have worked as an adviser to a number of trade unions, both in this country and overseas. I have worked as an adviser to the International Trade Union Confederation. I do a lot of work with the International Labour Organisation in terms of evidence that I prepare and cases that I help to submit. I work very, very closely, I suppose, with the trade union movement.
Stephen Doughty
Q 338 Thank you. That is very helpful. Given that level of experience, and looking at the Bill as a whole, where do you feel it falls down or potentially conflicts with both international and domestic conventions and law?
Professor Ewing: I have two concerns with the Bill. The first is the extent to which it is compatible with our treaty obligations. The second, because of my other interest, is the extent to which it is compatible with the constitutional principles, conventions and practices that operate in this country.
As far as the first of those is concerned—international labour treaty obligations—there are a large number of treaty obligations binding this country that relate directly to the provisions of the Bill. I will start with the International Labour Organisation. There are three treaties that are particularly relevant and are binding on this country: conventions 87, 98 and 151. I can go into some detail, if you would like.
Stephen Doughty
Q 339 Can you expand a little on where you feel the Bill conflicts with those?
Professor Ewing: Convention 87 is relevant because it deals with the right to strike. The right to strike is not expressly referred to in convention 87, but it has been read into convention 87 by the supervisory bodies over a number of years. One issue that I think arises in relation to the right to strike is the additional requirement of two weeks’ strike notice. There are lights flashing in my head about that. The second issue relates to the thresholds for industrial action, and in particular the 40% threshold for support for industrial action in some sectors. That, too, is beginning to make lights flash in my head about the compatibility with ILO convention 87.
There are two other conventions: 98 and 151, which deal with the question of collective bargaining. Convention 98 applies to collective bargaining generally, and 151 deals specifically with collective bargaining in the public sector. One reason I think there might be problems here relates to the Minister’s announcement after the Bill was published about abolishing check-off in the public sector. I think that will cut across collective agreements and raise questions in relation to 98 and 151.
Another point relates to trade union facility time and the provisions in the Bill, which will give a Minister the right to rewrite collective agreements. That cuts across the idea of collective agreements being voluntary and runs into problems with 98 and 151.
Before I finish, there is the good question of why we should take the conventions seriously. There are two reasons. First, although people were quite indifferent to ILO obligations in the past, the European Court of Human Rights has, since 2008 in particular, begun to pay particular attention to the importance of the conventions in determining the scope and boundaries of the European convention on human rights itself. There was a very important case to that effect in 2008.
Secondly, we are reaffirming our vows to the conventions in the free trade treaties that we are now signing. We signed such an agreement with Korea in 2010, and we are about to sign a free trade agreement with Canada. In these treaties, we commit ourselves not only through the European Union, but as a member state to complying with the international labour obligations to which we have subscribed. The conventions are very important.
Stephen Doughty
Q 340 May I ask a specific question about the certification officer? The Bill’s proposals amount to an extensive expansion of the role. We have heard from other witnesses that there is potentially a serious blurring here between the investigating, adjudicating and enforcing of complaints. Does that breach international conventions or domestic principles about natural justice and not blurring such roles in a quasi-judicial position?
Professor Ewing: The certification officer provisions are extremely serious. I say that partly because we have to bear in mind who appoints the certification officer. Under the 1992 Act, the appointment of the certification officer is in the gift of the Minister, so the Secretary of State effectively appoints the certification officer. You referred to powers of investigation, which are deeply troubling because, in a sense, they give the certification officer this extraordinary power where he thinks there is good reason to do so. That is the test. It is where the certification officer thinks there is good reason to do so. They can then embark upon this extraordinary power of investigation to demand documents, to require individuals to co-operate and to require the attendance of individuals at a particular location. The certification officer then has the power to demand that—[Interruption.]
The Chair
Professor Ewing, I apologise for that interruption. Sometimes technology is to blame. One of the first things people do when they get downstairs and outside is light up a cigarette and that can be a bit of a problem. Mr Doughty, would you like to continue?
Stephen Doughty
Thank you, Sir Alan. I also apologise for the disruption. Sir Alan, I hope with your agreement it will be okay if we need to go on a few minutes longer.
The Chair
I have had a word with Professor Ewing and he says he might be able to finish in the timescale set, but if we cannot, we will continue.
Stephen Doughty
Q 341 Thank you, Sir Alan. Professor Ewing, we were talking about the certification officer. Recalling what you were saying, essentially you are worried that a Minister—a member of the Executive—will appoint an individual who is effectively police, judge, jury and executioner with some fairly wide-ranging powers.
Professor Ewing: Let me say, I hope it was not anything I said that led to the disturbance.
My concern with the Bill is, first, these very extensive powers of investigation, which could eventually lead to someone to being imprisoned for non-compliance. What would worry me is what would trigger that process. What triggers the process is the suggestion that the certification officer can take these steps where he thinks there is good reason to do so. Given the nature of the power that has been given to the certification officer, you would be looking for much a higher threshold before powers of that kind could be triggered.
That is the power of investigation, but there is also the power of adjudication, which has been greatly expanded under, I think, what is now schedule 2. The issue is that the certification officer can initiate a complaint, so in a sense he is the complainant. The certification officer as a complainant will bring his or her own witnesses, cross-examine his or her own witnesses and then make a decision in his or her own cause. They will then have a new power to impose a financial penalty.
That seems to me to be a violation of fundamental principles of natural justice, which apply in this case and I refer to in my written submission: fundamental principles of justice rehearsed by Lord Chief Justices as far back as the 1920s. It would certainly contravene the well-established principle of English and Scots law that no one should be a judge in his or her own cause. I think that provision needs to be looked at very carefully again.
Rishi Sunak (Richmond (Yorks)) (Con)
Q 342 Thank you, Professor, for being here. I want to ask you about thresholds and that part of the Bill. I am obviously not a legal expert on rights, but I think what the threshold provision is trying to do is balance the right to strike—which certainly no one is saying should not exist—with the right of people to go about their ordinary business, send their kids to school, use the trains and tubes, gain access to hospitals and so on. That balancing seems moderate and reasonable. Do you think any weight should be given to the rights of people to go about their ordinary business? Do you agree with the general secretary of the Unite union who, you may have read, has said in principle that he can agree with the idea of thresholds and time-limiting ballots?
Professor Ewing: I do not want to intrude into these very sensitive debates. Whether or not it is moderate or reasonable, I would ask whether it is lawful. That would take me back to the ILO conventions that I referred to earlier—in particular, ILO convention 87—and there to the jurisprudence of the supervisory bodies that emphasise two points.
One is that we should be counting the votes of only those people who vote in strike ballots. If you do not vote, in a sense, you do not count for these purposes. Secondly, when we get to questions of thresholds, the ILO supervisory bodies have said, in a long line and expanding group of cases, that any threshold has to be reasonable. On the question of what is reasonable, what they have said so far is that a threshold of 50% of those eligible to vote is not reasonable. The Bill pitches that at a bit less—at 40%—and the question is, is 40% reasonable?
In determining whether 40% is reasonable or not, I think you have got to take into account the voting methods. The problem with the 40% threshold in the context of the legal framework within which it will be dropped is that it will be dropped into a very rigid system of voting. And if you are going to make an argument for thresholds, I think you have got to be a bit more relaxed about the way in which people go about voting. To have mandatory postal balloting is, I think, probably excessive, too rigid and does not apply elsewhere.
Rishi Sunak
Q 343 Thank you for that. Just so that we are clear, I understand your concerns about the details on how voting works, but in principle you think that the idea of a threshold is fine.
Professor Ewing: No, no, you are putting words into my mouth. My starting point would be the principle of freedom of association. My starting point as a result is that it must be ultimately for trade unions to decide their own internal methods of governance and their own relationships with their members.
If we are going to intrude into that principle of freedom of association that we have subscribed to as a nation, there has to be some compelling reason to do so. That compelling reason has to be compatible with our international legal obligations, and I think there are serious doubts about whether the threshold we are about to introduce will be compatible with the requirements of ILO convention 87.
Rishi Sunak
Q 344 In your opinion, but the ILO convention does accept the principle of a threshold.
Professor Ewing: Well, the ILO supervisory bodies have said that if you introduce a threshold, it has to be reasonable. What I am saying to you is that a 40% threshold in my view is too high in the context of the very rigid voting system we have in this country.
Rishi Sunak
Q 345 I understand, but there is no opposition to the threshold in principle under the convention.
Professor Ewing: Well, the ILO bodies are very unclear. In a sense, they say, “If you have a threshold, it’s got to be reasonable,” but they also say, “You should only be counting people who vote.”
Chris Stephens (Glasgow South West) (SNP)
Q 346 Professor Ewing, in relation to the devolved Administrations, what impact will the Bill have on both their policies and criminal or civil law?
Professor Ewing: This is going to be a really difficult question in the months ahead. The issue here particularly for Scotland is the proposals on the check-off and the powers in relation to facility time—the duty on public bodies to publish facility time arrangements. I think there are two problems here. One is a question of whether these provisions fall within the reserved powers of the Westminster Parliament.
I am sure that a lot of people are taking advice—legal or otherwise—about this at the moment, but I am not sure if the check-off provisions would satisfy the requirement that they fall within the reserved powers of the Westminster legislature and there are lots of reasons why that might be the case. I would hope that the Scottish Parliament will have an opportunity to think about and comment on this question. But, at the end of the day, this is a sovereign legislature and you can push through whatever legislation you think appropriate, whether or not it is incompatible with the devolution settlement. I have doubts about whether all of this package will be compatible with the devolution settlement, but I have no doubt that you have the right to push it through, despite the incompatibility.
The problem that I think will come will not necessarily be a legal one. The problem will be a very severe political problem in the future. The problem will be if a Scottish public body decides, “We are not going to comply with this ban on the check-off,” or “We are not going to publish the facility time arrangements that we give to trade union representatives.” What will happen at that point? We are looking at the question of who will enforce those obligations against Scottish public bodies. Are we really saying that the Secretary of State for Scotland will bring a case against a major Scottish public authority to enforce those obligations? The Government are walking, almost blindfolded, into a major constitutional crisis around the Bill. That constitutional crisis could be as explosive for this Government as the poll tax was for the Thatcher Government in the late 1980s and early 1990s. This is a big, big problem, and I am not sure that people have really thought through the consequences.
Chris Stephens
Q 347 One last question on the thresholds. Do you think that there are also gender equality issues, where in workplaces a majority of women workers might not be able to go on strike because a shift change would impact on them more than it would on male workers?
Professor Ewing: That is a good point, which I had not thought of, and it is something that I would like to think about before coming back to you. I am happy to address the Committee on that point, but I would like to think about it first.
Victoria Prentis (Banbury) (Con)
Q 348 You talked about the ILO conventions. A great deal of your report is concerned with ECHR conventions, and I accept you cannot mention everything in your brief summary today, but would you accept that as recently as last year, the European Court acknowledged that it was legitimate for the Government to legislate to impose some constraints on article 11? Would you accept that there is a wide margin of appreciation for the Government in the way that this can be handled?
Professor Ewing: Are we talking about the RMT case?
Victoria Prentis
Yes.
Professor Ewing: Yes, the British Government won in that case, but what I would say to you is that that case was really quite eccentric. There have been five or six decisions on article 11, specifically in relation to the right to strike, since April 2009, and the only case in which the Court has held in favour of the Government is the RMT case involving the United Kingdom. If I were the Government here, I would not be feeling very complacent or comfortable about that decision, because we have got cases from Croatia, Ukraine, Turkey and Russia in which the Court has said that the right to strike is protected and restrictions have to be justified. That case on its facts accepted that the restrictions could be justified, but you cannot conclude from that that all restrictions will be justified.
Victoria Prentis
Q 349 No, no, and I do not think that anybody on the Government side would disagree that the right to strike should be protected and that restrictions should be justified. That is absolutely the Government’s position. Let me turn it around. Are there any cases that support your view that it is not legitimate for the Government to make proportionate restrictions under article 11?
Professor Ewing: It is quite difficult to answer that question directly, because every case is different. In this case, whatever the challenge is under the convention to this legislation, first, it is not clear yet what the challenge will be, and it will be a strategic question for trade unions to consider which will be the best way in to attack the legislation, I imagine; and, secondly, when the challenge takes place it will also be informed by the influence of other treaty obligations. The European convention is not an island that sits on its own. We have regard to the decisions of the Social Rights Committee of the Council of Europe, which has also expressed criticism about our existing law. We will have regard to ILO supervisory bodies and their views on it. That will help to construct the case, so at this stage, it is hard to know what the case will be. We have got pointers as to what it might be, but the case will have to be built. I guess a very careful case will be built in order to learn from the lessons of the RMT case.
Victoria Prentis
Q 350 Okay. Can we move on to certification officers? I am thinking about the type of person who is a certification officer. It tends to be an Employment Appeal Tribunal judge or people of that type. Do you really feel it is unreasonable for others with a legitimate cause for complaint, because of the results of industrial action, to encourage the beginning of an investigatory process?
Professor Ewing: The certification officer is not a judge. The existing officer is a solicitor or partner in a law firm. Previous officers, I think, were former civil servants who did not have legal qualifications. You are telling me something I did not know, in the sense that the certification officer’s powers are going to be triggered by complaints made to him.
Victoria Prentis
Q 351 No, I am just suggesting that is one type of person who might feel—
Professor Ewing: Are you thinking about employers who might use the certification officer as a kind of surrogate rather than going directly to court?
Victoria Prentis
Q 352 More someone with a legitimate cause for complaint—someone who is affected by strike action.
Professor Ewing: Looking at the powers in schedule 2, we are talking about provisions relating to trade union elections, trade union expenditure and trade union amalgamations. This is about the internal affairs of the union, principally. If employers or whoever have a problem with strike ballots or whatever, they already have a remedy by way of complaint to the ordinary courts, which would be much quicker.
Victoria Prentis
Q 353 I do not want to go on too long, but I was not thinking of employers; I was thinking more of those who are affected by the results of strike action.
Professor Ewing: I am not sure how they would have access to the CO.
Victoria Prentis
Q 354 The certification officer himself might be able to take a view that it was appropriate to investigate non-compliance.
Professor Ewing: Non-compliance with what, in the case of a strike?
Victoria Prentis
Q 355 His job is to investigate non-compliance.
Professor Ewing: Yes, but only with specific obligations. If you look at page 16, the obligations to which the investigatory powers apply are listed in paragraph 1(a) to (h). They do not seem to apply to industrial action. The powers in schedule 2 are to make complaints against a union that he himself will adjudicate. These are powers that relate to the internal affairs and government of the union, so I do not know where the power you refer to arises. This was a power we used to have from the last regime, but I thought it had gone.
The Chair
Professor Ewing, thank you very much. You have been very helpful indeed. We will now move on to the next panel.
Examination of Witnesses
Janet Davies, Jon Skewes, Matt Wrack, Mark Serwotka and Dr Patrick Roach gave evidence.
The Chair
Q 356 We will now hear oral evidence from the Royal College of Nursing, the Royal College of Midwives, the Public and Commercial Services Union, the Fire Brigades Union and, of course, the NASUWT. Ladies and gentlemen, we have until 3.5 pm at the absolute latest because of the difficulties we experienced earlier. We will allow you to introduce yourselves briefly, and the Committee will then put questions to you either collectively or individually. The Government are on the right-hand side, and the Opposition are on the left. The three main political parties in Parliament are present, and all evidence gathered will be available for other Members to browse, if they so wish.
Jon Skewes: I am Jon Skewes, director of policy, employment relations and communications at the Royal College of Midwives. The RCM is a professional body and trade union, representing about 45,000 midwives and support workers in the United Kingdom. We have no affiliation to any political party and we work with all in Government and outside Government. At the end of last year and the start of this year, we took our first industrial action in 134 years in England. That was closely followed by similar action in Northern Ireland; it was essentially on the same dispute. In England, it has been amicably settled with the Secretary of State following discussions. We are particularly concerned about the issues of agency staff, picketing restrictions and good industrial relations in the NHS.
Janet Davies: I am Janet Davies, the chief executive and general secretary of the Royal College of Nursing. We are also a professional organisation and trade union, with approximately 420,000 members across both the public and the private sectors. The majority of our members are registered nurses and health visitors, but we also have healthcare assistants as members. We have never taken strike action in our nearly 100-year history, but we are exceptionally concerned about the Bill, particularly in terms of facility time—clauses 12 and 13—and placing added bureaucracy and added cost on a health service that is already struggling with finances and bureaucracy.
Dr Roach: My name is Patrick Roach. I am the deputy general secretary of the NASUWT, the teachers’ union. We are the largest teachers’ union that organises right across the United Kingdom. We represent about 300,000 teachers. We have fundamental concerns about the provisions in the Bill, including the definition of “important public services”, the use of agency workers and the powers of the certification officer, which we are happy to discuss.
Matt Wrack: I am Matt Wrack, the general secretary of the Fire Brigades Union. We represent some 85% of the uniformed fire service workforce and over 90% of whole-time firefighters across the UK. We have had, which you heard some evidence on this morning, a number of industrial disputes. However, much of our time is spent, through our well established industrial relations procedures in the National Joint Council, resolving disputes at local level before they arise. We have concerns about the impact of the Bill on the rights of firefighters to organise, to protect their safety, which is of particular importance to us, their terms and conditions and the impact that will have on industrial relations in the fire service.
Mark Serwotka: I am Mark Serwotka, the general secretary of the Public and Commercial Services Union. We have a quarter of a million members—overwhelmingly, civil servants and public sector workers working on public contracts and in non-departmental public bodies—and a significant membership in the private sector as a result of outsourcing where people have remained members of PCS.
We have lots of concerns about the Bill, but I know that you are hearing lots of evidence, so I will just draw particularly to your attention at this point the effect of the Bill on people’s right to take lawful industrial action. We are particularly representing public sector workers, who in our case have had 11 years of pay restraint. Secondly, we think much of what is in the Bill was trialled in the civil service by the last Government. Therefore, we have direct experience of the withdrawal of check-off, the withdrawal of facility time and the attempt to openly undermine trade unions by public servants working at the Government’s behest. Thirdly, as a non-affiliated public sector union that spends over £1 million a year on campaigning, much of which is political but not party-political campaigning, we have very clear concerns about the effect of the changes to the political fund rules.
The Chair
Thank you. Before we proceed to hon. Members asking questions, can I just tell you that we have only until five minutes past 3? Our time is very brief, so please be aware of all the time you are using in the replies to the questions put to you. Try to make them succinct, because you are using each other’s time up. I am just giving you a bit of advice. If you could be helpful to both Members and yourselves, that would be much appreciated by Members.
Stephen Doughty
Q 357 I have a few short questions that I would like to put to different groups if that is okay. First, to Jon and Janet, given what we have heard about the relatively small incidence of industrial action in the history of the health sector, particularly in relation to your two bodies, fundamentally do you think that this Bill is needed?
Jon Skewes: Not at all. I do not think we have plans to repeat that industrial action over and over again by any means. I think we think it is disproportionate, absolutely; and also it could be quite dangerous in terms of safety in the NHS.
Janet Davies: We do not think it is necessary at all. In fact, we think it will damage relationships, which are very good in the health service. We know that productivity is increased with the facilities time and with having trade union representatives in the workplace. We know it affects patient safety. We think it will be expensive. We think it will introduce extra bureaucracy and could be quite damaging for the good relationships we have got, which could have an effect counter to what is required.
Stephen Doughty
Q 358 Janet, we had a Government witness yesterday, from an organisation called 2020 Health who, you may have heard, had a whole half hour to explain that they did not appear to know anything about the Bill. Nor did they know what facilities time was. Unfortunately, you have not got very much time, but could you briefly give us an example of how facilities time benefits employees and patients?
Janet Davies: Yes. We know that facilities time has benefits; we have looked at the evidence and the University of Warwick has done some studies for us and we know that productivity is increased. Certainly, in terms of staff leaving and recruiting, it is much better in a place where there is trade union facilities time, and where there are trade union representatives. Actually, we have worked out that that difference in turnover would save an average teaching hospital £1 million a year. It is a really positive effect that the time gives.
What happens is that our trade union representatives work in partnership with employers, often introducing change, introducing new clinical practice, and investigating things and stopping problems before they start. The proposal could be counterproductive for the good relationships that we have at the moment. Importantly for us as a nursing organisation it could have a detrimental effect on patient care, as it would seriously affect the positive practice environment that we try to create.
Stephen Doughty
Q 359 Thank you for that. Matt, we heard some evidence from the London Fire Brigade this morning and you have referred to it. I wondered whether you wanted to respond to any of the comments and whether you could also tell us about the different approaches to industrial relations in the fire sector across the UK. Some quite important contrasts were drawn between what has happened in Wales and what happened in some disputes in London.
Matt Wrack: Yes, I do want to correct the impression that was given this morning. I have known Ron Dobson a long time and was surprised to hear some of the things he said. He mentioned that he was unaware of any arrests. There were two arrests in that dispute. They were not of FBU members. One was of a non-union middle manager and one was of an agency driver—in both cases for driving into members of the Fire Brigades Union. Two of our members were injured, one of whom is sitting in this room, behind us. Ron Dobson was also unaware of the outcome, which is again surprising because his own authority paid compensation to the two FBU members who were injured as a result of those two incidents.
Stephen Doughty
Q 360 So you were surprised that he did not appear to be aware of that fact.
Matt Wrack: I am surprised that the senior executive of that organisation did not know that his organisation had paid compensation to two members of mine who had been injured by agents of his during an industrial dispute.
He also used the word “barricades”, which gives the impression of watching “Les Mis”, or something. There were no barricades on London fire stations in 2010. It is utterly misleading to claim that. He also was asked a question, by Jo Stevens, I believe, about the unlawful docking of pay. He said that three cases had been settled. Most people will know that actually in many such cases you run test cases. We ran three test cases of 368 individuals who had had pay stopped. We won those test cases. The London Fire Brigade has decided not to appeal, and the London fire authority has set aside several tens of thousands of pounds to pay compensation for the 368 Fire Brigades Union members who had pay unlawfully stopped. Those are the facts of the situation.
Stephen Doughty
Q 361 It is very concerning to hear that, and the commissioner made it clear that he would write to the Committee with some of the information that he did not appear to have at his fingertips. I hope that he will correct some of what he said in the light of what you have said to us just now.
I want to ask about devolution and perhaps this could be touched on broadly across the panel. Clearly, you all operate in public services that are, to a large extent, wholly or partially devolved across the UK. We have just heard from Professor Ewing that the Bill could lead to a fairly serious constitutional crisis in terms of cutting across the devolution settlement. How would you respond to that? Do you think that there are serious risks for relationships across Wales, Scotland and local government across England, of which the Bill shows no awareness, and does not address? I am happy to take a couple of comments, though I am sure we do not have time to hear from everyone.
Mark Serwotka: I share Professor Ewing’s concerns, and I will illustrate that with these examples. We have very good industrial relations currently, for example, in Scotland and Wales with the devolved Administrations, who have sat down and agreed with us the need for positive industrial relations, and made it clear that they do not wish to see the withdrawal of check-off or facility time. What we are in danger of seeing is those bodies that have entered into agreements with their workforce for the smooth running of public services being compelled to act against what they think is in the best interests of themselves as an employer and public service users.
That is particularly concerning because if we look at the civil service when this was done, the last Government effectively compelled all Government Departments to do the same thing, under the guise of this activity being a waste of taxpayers’ money. The Committee needs to know that in the civil service our union offered to pay every penny of every cost that was required to take check-off, so there would be no cost to the taxpayer. Not only was that rejected, but we saw the absurd situation in the Department for Communities and Local Government, where Eric Pickles, as the Secretary of State, withdrew check-off. We took him to the High Court; he lost the case and we won it, on a contractual right to check-off. He cost the taxpayer £100,000 to save £320 a year in the entire Department’s administration.
Stephen Doughty
Q 362 Given what you have just said and given the evidence from the Welsh Government and others, do you think that there is a serious risk here that we will end with significant legal disputes about contractual provisions that have already been entered into, particularly with regard to check-off?
Mark Serwotka: Absolutely inevitably and it will be very, very costly, as the example I have just given proves. We can furnish you with the evidence of that case.
Stephen Barclay (North East Cambridgeshire) (Con)
Sir Alan, I will just point out that Opposition Members have used up pretty much half the sitting so far, before there has been any question from Government Members.
The Chair
We have sittings such as this one to try to get the message across. I have got a little bit of leeway to gain back time; I am aware of that. But I would like to move on, because the next questioner is Edward Argar.
Edward Argar (Charnwood) (Con)
Q 363 Mr Wrack, thank you very much for your clarification there, particularly of that court case, and thanks to my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) for his comment. Going back to the evidence from the commissioner this morning, in the course of that dispute in 2010, was access in any way to any fire station being used by contingency crews impeded by any FBU members at any point?
Matt Wrack: Again, I found it somewhat surprising that Mr Dobson presented it in that way. We had pickets on fire stations, as we are perfectly entitled to do, and there were no such barricades. There was a police presence on some occasions. We co-operated, and we had interesting evidence from the police earlier today. We co-operated with the police on every occasion that there were discussions. It is utterly misleading, as again was suggested, to say that there were any delays to emergency calls as a result of the actions of FBU pickets during that dispute.
Edward Argar
Q 364 That is not quite what I asked; I am grateful for that, but it is not quite what I asked. Did those pickets in any way impede any ingress or egress to and from those stations?
Matt Wrack: They were picketing their place of work. What happened in general is that the replacement agency staff drove up to the fire station and drove off.
Edward Argar
Q 365 So you say that they were picketing their place of work. What happened in general? Were there any occasions when access was physically blocked?
Matt Wrack: I think I have explained that. Firefighters were picketing their place of work. Replacement agency staff drove up and drove off. That is what happened. There was no pushing and shoving; if you have got images of 1970s TV programmes, that is not what happened in any of these situations.
Edward Argar
Q 366 Would you agree or disagree with the view—I suspect that I know the answer, but I will ask the question—that what you have just said, if we accept it, that some people drove up and drove off again, shows that those people felt intimidated by the presence of those pickets and the behaviour, which caused them to drive away again?
Matt Wrack: Let us be clear about the right to picket. The right to picket is being interpreted by some people as an attempt to intimidate. The right to picket is about trying to persuade other workers to comply with the call to take action. In this case—again, Ron Dobson seemed to forget the cause of the dispute. The cause of the dispute was that he had issued a sacking notice to 5,000 London firefighters; the entire workforce were being sacked. So you can imagine that some of them were quite irate about that. However, where we had the opportunity to speak to those agency replacement staff, we did so, and in a number of cases the police assisted us in doing that. We put our case to those agency staff; unfortunately, they carried on with the work they were undertaking.
Edward Argar
Q 367 I have a couple of very quick follow-ups. You will be familiar with the Carr report. Paragraph 4.66 refers to evidence provided by Assistant Commissioner Dave Brown on behalf of the London fire brigade, in which he made a number of allegations. I would be grateful for your reaction to them, either collectively or individually. He said that,
“tactics included…Stations left open or barricaded and fire alarms activated…Security codes at fire stations changed…Station gates padlocked and crews cars blocking forecourts preventing access for stand-in crews.”
Those are just a few of the number of things he suggested. Do you have any reaction to the assertions in that report, Mr Wrack?
Matt Wrack: Again, I have known Dave Brown a long time. I worked on the same watch as him at one point. His report has not been backed up by any evidence. The interesting point in all this is the question: what did the police do? If there were concerns about this and implications of serious breaches of public order, the police would have intervened. The police did not intervene. We had good relations and good co-ordination with the police throughout all the protests that took place during that dispute. None of our members were arrested. The only two arrests were of two people who decided to work through that dispute and ran over two people who were protesting. I reject those suggestions from Mr Brown, but we are happy to look at any evidence that he actually has with any detail on that.
The Chair
May I point out to people giving evidence and answering questions and to Members that we are approaching having used two thirds of our time? We should make it more succinct if you want to get the answers in. I call Chris Stephens.
Chris Stephens
Q 368 Thank you, Sir Alan. First, I ask the panel for their thoughts on whether they regard the threshold proposal to have any impact on women who wish to pursue industrial action. Secondly, can they give examples in relation to their political funds? I believe that they are all at the moment not affiliated to a political party. How will the Bill affect those political funds, and what organisations will it affect?
Mark Serwotka: Very briefly, the changes to political funds will have an enormous effect. People should not confuse it with affiliation to the Labour party in our case, because we are non-party politically affiliated. It is timely that we have been asked that question, because I am here on the very day that the Government announced that they were essentially backing down on the privatisation of criminal fines enforcement in the Ministry of Justice. My union has waged a five-year political campaign pointing out that that privatisation is wrong, and the Government have accepted that argument today.
A year and a half ago, we made a political argument not to privatise the Land Registry, which was also successful. Those campaigns are funded by political funds, which would be devastated by the opt-in, rather than opt-out method. It would massively curtail things. Directly, there is evidence that had we not run those campaigns, the Government would probably have made the wrong decision on two occasions.
On the right to strike—I will keep this short so other people can speak—all I would say is that in my union, it is predominantly the women membership who are suffering from 11 years of low pay and freezes to tax credits. Some 40% of PCS members claim tax credits. It is quite clear that there is a disproportionate effect on them if their ability to strike is undermined.
All I would ask the Committee is to consider this: do the Government really care about thresholds? Over the past 10 years, during the last Labour Government, the coalition Government and now, I am on record as saying that we would love to sit down and talk about changes in ballot methods to allow secure, online workplace balloting. In my union, we have done pilots. Where the law allows ballots in the workplace, the turnout is treble what it is when you have a statutory ballot by post. There is irrefutable proof that in comparable elections, three times the number of people vote in work. We have the technology to do it securely. That is what the Government should be talking about, because that would have a massive upwards effect on turnout.
Matt Wrack: Very quickly on the political fund, we were affiliated to the Labour party. We are not currently affiliated to the Labour party, but we have a political fund. Our members have the right to opt out of that political fund. In our union, they also have the right to make clear that they would not want any political fund going to a political affiliation, even if we were affiliated. They have a number of choices on the political fund. As Mark said, our political fund is primarily used for key political campaigns around the terms, conditions and safety of firefighters. In our view, were the Bill to proceed, it would seriously undermine our ability to function in that regard.
On the point about balloting, we note that both major political parties have recently used modern forms of balloting—for example, electronic balloting has been used by the Tories for the appointment of the candidate for London Mayor—so it seems bizarre to us that trade unions are being told that we cannot use such balloting methods going forward.
The Chair
May I pause you for a second? We have 10 minutes remaining and four Members want to ask questions, so we need to speed up the replies and the questions.
Seema Kennedy (South Ribble) (Con)
Q 369 Dr Roach, when your members go on strike, the people affected will all have to arrange alternative childcare because of the nature of your members’ profession. In relation to clause 7, which is on the notice period, do you not recognise that giving parents 14 days, rather than seven, would give them more scope to organise alternative arrangements?
Dr Roach: We do not agree with the proposed measure to increase the notification period for industrial action. It has to be borne in mind that, as a trade union, we are engaged in industrial action that does not always include strike action. In fact, by and large, our industrial action is pupil and parent-friendly. It includes action short of strike action, which is to say working to an idea about what the teacher’s contract should be in order to raise educational standards, so that children’s education is not disrupted.
Seema Kennedy
Q 370 But when there is strike action and there is disruption to children’s education and their parents’ ability to go to work, would you not recognise that giving them 14 days’ notice would give them more ample opportunity to re-arrange their lives, so that they can contribute to the economy by going to work?
Dr Roach: I am not going to challenge the logic of what you are saying. What I would argue is—
Seema Kennedy
Q 371 So you accept it then.
Dr Roach: I am not going to challenge the logic of the argument you have put forward. The best way to minimise disruption to parents up and down the country is through sensible dialogue, genuine negotiation and a will to resolve industrial disputes before disruption becomes necessary. I would take you back to a point I made at the outset: by and large, our industrial action features action short of strike action, which does not disrupt the rights and ability of parents one jot. At the moment, we have in the Bill a blanket or universal provision affecting all forms of industrial action. That seems to us to be unnecessary and disproportionate.
Jo Stevens (Cardiff Central) (Lab)
Q 372 I have a question for Mr Skewes. Earlier this week, we heard from a Government witness from 2020 Health who seemed unaware that trade unions already have life and limb cover in hospitals when industrial action is taken. Do you believe that the Government’s wider proposals on the use of agency workers during strike action are required?
Jon Skewes: No, not at all. The last thing the English NHS in particular needs is more agency workers, the cost of which has gone up by a factor of 11 over the past two years. If there were proposals to bring in agency workers instead of, for example, midwives, first of all, someone attending a woman giving birth has to be, by law, a midwife or a doctor. We think it would undermine quality and safety. Frankly, in our last industrial action, we ensured that every women in this country had the service that would normally be available to them. Most of our members were not on strike—I would say that 90% of our members were providing that cover and 10% were on what were essentially protests. I think that that was hugely supported by the British public.
There are a number of other things. First, there are not that many of those people. If we look at the figures—I think this is in our written evidence—most agency workers are already working in the NHS at the moment. They are probably also our members, so the agency workers themselves would be on strike.
Secondly, I think it would have a really bad effect on team morale and the way in which safety is underpinned. Those people do not have the knowledge of trust safety protocols, quality protocols and so on. We resent the fact that, given the way we absolutely went out of our way with trusts and NHS England to underpin safety during that dispute, we would be faced with a dilemma in the future. Do we allow them to just replace our members with agency workers, which would be much more costly but we know would not be as safe? I do not think we would do that. It is a dilemma that we resent.
The Chair
Two Members want to ask questions. I am going to take them both together. If for any reason you wish to come back in the short period we have got left, I will allow that.
Rishi Sunak
Q 373 I have a quick question for Mr Serwotka. I understood your points about online balloting. Just so I understand, do you support the principle of a threshold for strike action, so that when there is disruption to the public services that people depend on, they know it has been backed by a reasonable number of members involved?
Mark Serwotka: No, I do not. Unless the Government were to say that thresholds should apply to all referendums and all other comparable ballots, it singles out the trade unions. It means that people who do not vote are counted as no votes, which to my mind is completely unacceptable.
Ian Mearns (Gateshead) (Lab)
This is a question for Dr Roach. The NASUWT organises across England, Wales, Scotland and Northern Ireland. Could you let Members know whether there is any significant difference in levels of industrial action in the four areas, where the governance is different?
Dr Roach: Yes, we do indeed organise right across the United Kingdom. There are very real differences in the industrial relations contexts in each of those jurisdictions. Our ability to engage in genuine dialogue with the Administrations in Northern Ireland, Scotland and Wales is, frankly, far superior to our ability to engage in genuine dialogue, with the view to resolving teachers’ very real concerns about their pay, pensions, working conditions and job security, in England. There are acute differences, but I would come back to the issue of the importance of the trade unions’ ability to represent the interests of their members. They ensure that their members’ working conditions are adequately protected through the use not only of strike action but of other means, including the intelligent use of action short of strike action. That has been an important mainstay of our strategy for protecting the interests of our members right across the UK.
The Chair
Thank you very much. That brings us to the end of the time allotted to your panel. Thank you very much for attending. If we have any queries arising from the evidence you have given, we will be in touch to ask you to reply.
Examination of Witnesses
Len McCluskey, Sir Paul Kenny, Frances O’Grady and Dave Prentis gave evidence.
The Chair
Q 374 First, may I welcome you all to the Committee? It is an illustrious bunch we have in front of us who represent an awfully large body of members. It is very rare that Parliament has the opportunity to get such a group together and ask them questions. You will very quickly introduce yourselves to the Committee. We will then move on to queries and questions from Members, which will alternate between the Government and Opposition sides. We will go to Members who wish to raise questions relating to the Bill.
Dave Prentis: Good afternoon, everybody. My name is Dave Prentis. I am general secretary of Unison—the public service union of 1.3 million paying members who provide our public services. We recruit everybody in public services, except doctors and teachers. We do compete for members with other unions—probably 10 in local government and maybe 15 in the health service.
My view is very strongly that the Bill as worded at the moment is a major attack on workers’ rights in this country, and it will make industrial relations, especially in public services, far more difficult. We have partnership working throughout all of our public services. We have agreements that bring in many of the issues that are going to be made illegal and we think that it will lead to far worse industrial relations.
Frances O'Grady: My name is Frances O’Grady. I am the general secretary of the TUC, representing 52 unions who organise around 6 million workers UK-wide. The TUC opposes this Bill and the associated proposals. We believe it threatens fundamentally the right to strike and other critical civil liberties in this country. We note that the Regulatory Policy Committee said that the Bill was not fit for purpose, and we believe that it would fundamentally shift the balance of power from ordinary working people towards employers and make it harder for unions to defend jobs, pay and fairness at work.
Can I add that I am conscious that a good deal of the debate has focused on thresholds, even though that contravenes the ILO’s clear standards on this issue? It is important to note that, even if all those tests and thresholds were met, the Government also propose that employers should be able to replace striking workers with inexperienced and possibly untrained agency workers, therefore completely pulling the rug from beneath the right to strike. We know that if this was about improving turnout in ballots, the best way to do that would be through allowing unions to use electronic and workplace balloting.
I end by saying I think it is important to be clear from the start that we believe that the real aim of this Bill and the proposals that go with it is to give employers new ways to take unions to court and thereby impose penalties and seek damages and injunctions against unions. I would suggest that the approach of this Bill is straight out of Norman Tebbit’s textbook from the 1980s.
Sir Paul Kenny: Paul Kenny, general secretary of the GMB—not a failing business, as some people might have you believe. We have actually, as a union, grown every year for the last 10 years, so we must be something right about appealing to people. We are opposed to the Bill. We had 625,000 members all above ground as at the end of 2014. That figure is now at 635,000.
I will not take a long time. We have agreements with global players, as well as household names that you would know, from energy companies to Asda-Walmart—the only collective bargaining agreement they have anywhere in the world is with us in this country, and they do not see, as I understand it, a need to support this Bill, either. I would describe my view personally and that of my colleagues by saying that, if this Bill was on the pudding menu at the Carlton Club, it would be called an ideological Eton mess.
Len McCluskey: Len McCluskey, general secretary of Unite, Britain’s largest union, with 1.4 million members, covering all sectors of the economy—manufacturing, transport, financial services and public services, as well as private services. I obviously agree with all the comments my colleagues have made. The Bill is a threat to democracy; I think you have been told that by a whole range of different organisations from across the spectrum of our society. It is also a threat to the cohesive nature of the communities in which we work. I am hoping that this Committee will record our views as clearly and sincerely as possible, and that the Prime Minister and the Government might rethink elements of the Bill.
The Chair
Thank you. Although you have chosen not to send along national officials of various sectors in your union, which is a very large group of organisations, the same rules apply. We will have a series of questions asked, with replies and opinions given back. We only have until 4.15 pm to do that, so we need to do it quite succinctly. If not, you are using your own time. Members might ask you to go on and on, but what you want to do is get as many replies across as possible.
Len McCluskey: Sir Alan, I have brought some additional written information that I can present either now or at the end of the session.
The Chair
Len, if you hand it to the Clerk, we will distribute it to all Members in due course.
Stephen Doughty
Q 375 Frances, can I turn to you first? Correct me if I am wrong, but I think you said that the TUC represents 6 million workers—one tenth of the UK population. That is a huge number. Given the severe implications of the Bill for a whole range of issues and its potential impact on those individual members and, indeed, the member unions of the TUC, are you satisfied with the level of consultation and how the Government have gone about the consultation in drafting and presenting the Bill?
Frances O'Grady: Absolutely not, nor was the Regulatory Policy Committee. I am afraid that bad laws are made in haste. We were given an eight-week period over the summer holidays for the consultation period, and of course that has left huge holes and uncertainty in the proposals, which I am very happy to list separately. Very big and important questions appear not to have been considered and thrown in belatedly—for example, the proposals on removal of check-off in the public sector. Critically, this has meant that unions, employers and those with practical experience of industrial relations have not had the chance to influence the nature of the Bill in the way we should. I think it contravenes the Government’s own standards in that respect.
I have been pleased to belatedly have contact with Department for Business, Innovation and Skills Ministers and officials, but I wrote to the Prime Minister on 15 May, following the election of the Conservative Government, asking to meet to discuss precisely this issue, and I have not yet received a reply. Frankly, I think my members would see that as discourteous to working people.
Stephen Doughty
Q 376 So the Prime Minister is not willing to meet an organisation that represents a tenth of our population—that is quite surprising. Are you also surprised that we are discussing the Bill, in both this format and the line-by-line sessions, without having seen the responses to the consultation process from the Government or much of the secondary legislation that the Bill gives them very wide powers to implement?
Frances O'Grady: Absolutely. Perhaps there will be a question later on this, but it is not just unions that are worried about it; employers are, too, because we believe it poisons industrial relations in this country.
Stephen Doughty
Q 377 Thank you. I wonder if I could turn briefly to Dave. I understand Unison has significant concerns about the aspects of the Bill that address facility time, check-off and so on. Could you briefly outline your key headline points of concern?
Dave Prentis: I will try to be as quick as I can. To deal with check-off, these are voluntary arrangements made with employers. No employer is forced into the arrangement. We have 9,334 check-off arrangements with separate employers, 7,242 of which are in the public sector. It is a means by which we organise our partnership work and it is based on three contracts. There is the contract involving the member agreeing the payroll arrangement. It is voluntary, and they are given the option of other means of paying. There is a collective agreement with the trade union, part of which includes training arrangements, facility time and check-off. Obviously, there is also a contract between the union and the member. The systems work incredibly well. From an employer point of view, they know who is in a union.
You can have deductions at source for 14 or 15 different things, including buying a bicycle, paying crèche charges or for season tickets. Why would an employee’s contribution to their trade union be the only thing excluded? Why are the Government pushing auto-enrolment for pensions, which we think is right, while denying trade unions the ability to collect money? It singles out trade unions and will have a major effect on partnership working in health, schools and local government, because the arrangements are part of our participation arrangements.
If we have to spend all our time seeking to transfer people over, that means changing 800,000 people from check-off to direct debit. It will be a massive undertaking, using all the union’s resources. We represent 1 million women members, most of whom are low paid, and we do not see the need to disrupt arrangements that employers have been willing to enter into. It about localism. It is about the employer having the right, at the local level, to decide what agreements they want to reach with their trade union, without having authoritarian legislation preventing them from doing so. There is no logic to singling out the public sector and not the whole economy. It is based on prejudice, and it will badly affect our working relationships with the employers that recognise us.
Connected to this is time off for trade union duties. I will be as brief as I can. Our relationship with employers is based on our local reps having partnership working with them, sitting in the committees that deal with major issues, and representing people in the workplace, which the employers need for their disciplinary or grievance procedures. This is all done by activists under the time-off arrangements. If those arrangements are taken away from our people, it will mean that the joint working that has been fostered in public services since 1948 will become far more aggressive. There will be far more industrial action, and we will have major problems.
We have union learning reps who are involved in getting people to train not just as stewards, but professionally. We do dementia, mental health awareness, lesbian and gay rights and service user training. We provide training for the employers when they sign the agreement. Many thousands of low-paid public service workers benefit from this. They actually get on in life through this and get promotions as a result. All of that will end if these draconian attacks on check-off and facility time take place. They are part of the fabric of the work that we do as a union across all our public services.
Stephen Doughty
Q 378 That is very helpful. Turning to another section of the Bill and the provisions that deal with picketing, we have heard the police’s serious concerns, shared by many witnesses, about the workability of a number of the proposals, in particular the proposals in the consultation relating to policing Facebook and Twitter. What has your experience of picketing been? Do you think that these proposals would simply not work?
Sir Paul Kenny: The reality is that the police are looked at in picket line situations almost exclusively as the middle people. They are independent and the co-operation with the police, which is vital for the police to do their job, comes about as a result of being seen in that light. With these proposed regulations, effectively, it is a whole new ballgame.
Please, do not anybody tell me about intimidation on picket lines. I have seen lots of it. I have seen people blacklisted from work for 20 years because they stood on a picket line. I have seen people intimidated about going back to their job by managers, but there is nothing in this Bill is about any of that, is there? I hear—it is illusionary, almost—these stories about intimidation on picket lines. My experience is that the police are effective at dealing with that, and they do it by consent and they do it clearly. It is not what trade unions condone or seek and the police operate very much on a consensus basis.
The side wagons to the main Bill—if you will forgive me for putting it that way—are issues such as the notice-posting and the rest of it. This is just beyond belief. It would be uncontrollable by us anyway—that we would be able to predict what is going to be put on Twitter or Facebook by other people, who may not be particularly connected with the union at all—but we would effectively find ourselves involved. You are criminalising what is effectively a civil right. That is why I described it earlier as just a mess. This is clearly a mess.
Stephen Doughty
Q 379 Can I ask a separate question on participation? Perhaps some of the others will want to answer; I know that Len has concerns about that. As union representatives, I am sure that you all want to increase participation in ballots and to see the maximum turnout in those. We have heard a lot about the fact that the Government do not seem to be willing to consider e-balloting, secure workplace balloting and other methods. Could you briefly comment on that, Sir Paul, and then Len? I looked closely at your evidence, Len, and you speak about Central Arbitration Committee ballots, for example, where secure workplace balloting is already used. What are your views on why the Government will not accept methods that would boost the participation that they say they want to see?
Sir Paul Kenny: I will briefly answer, then pass the question to Len. In a sense, this gets to the heart of what this Bill is all about. This is a dishonest approach, because if it was really about getting more people to participate and more people to engage, you would modernise a balloting process that is actually a third of a century old. That is how old it is, but the truth of the matter is that you do not want to. The Government are not seeking to help people to participate or seeking to get conflict resolution. If you think frustrating people through a ballot will mean that the problem will go away, it will not. It will get bigger and then it may erupt in a way that is not controllable by the selected agreements. This is absolutely a dishonest approach.
Stephen Doughty
Q 380 So facilitating better participation would benefit industrial relations more.
Sir Paul Kenny: Of course. I forget how many countries use this now, but a whole host of countries do. There was a quote from the Speaker’s Commission saying this was unfair, or unreliable, but I am not sure that that is actually what they did say. I went back and had a look at it and I do not think that is right. Clearly, people are talking about maybe modernising our general election participation by moving to electronic balloting. You clearly want the vast majority of people to participate. That is what you want, and it is why the thresholds issue is not one that I am particularly—I would like to see every person participate, but this Bill does not even attempt to deal with the issue of encouraging people to participate, thereby encouraging dispute resolution. What it seeks to do is to suppress it and therefore foster it.
Len McCluskey: Obviously, Paul has made the point that this is the nub of the Bill. In fact, the Prime Minister himself on 4 October, in an interview with Andrew Marr, made it clear that lots of things in the Bill can be debated and discussed. The inference was that they could be changed and amended, but he said that this was the most important element of the Bill. Everyone in this room will know that I have written to the Prime Minister suggesting that if he is genuine about wanting to increase the turnout, given that he has expressed his concerns about low turnout, which all of us have concerns about, then he should move towards, and get involved in a proper debate about, modern methods of balloting—the same balloting that the Conservative party has just elected their London mayoral candidate with—and most importantly, secure workplace balloting. All of that is feasible. The Electoral Reform Society has said that that is easily achievable with independent assessors.
You asked me, Stephen, why it is not being supported, but you need to ask that question of your colleagues opposite in the Conservative party. When you are considering the whole nature of the situation, you have to ask yourself what is wrong with secure, independent workplace balloting. The point that Paul makes about where this may lead us is something that members of this Committee, and indeed the Government in general, will need to consider seriously. We may well find that our members—ordinary, individual, decent trade unionists, who contribute massively to the wealth of our nation—are pushed outside the law. What this Bill will do, if it is not changed, is to require general secretaries such as myself to repudiate, or distance themselves from, those workers. Unite will not do that. We will not repudiate and we will not distance ourselves from people who are engaged in legitimate action.
I have said to the Prime Minister, extending the hand of pragmatism, “Please sit down with us. There is no reason why you cannot concede the principle of independent, secure workplace balloting. If you did so, the issue of thresholds would become an irrelevance. Workplace balloting would consistently produce high turnouts.” I am puzzled as to why there has not been a positive response to that offer. I am confused about why that was not snatched at immediately, unless the Prime Minister is being disingenuous. With the greatest respect, I have to say that it did not fill me with confidence when he said yesterday in Prime Minister’s questions:
“I notice that Len McCluskey now supports our position.”—[Official Report, 14 October 2015; Vol. 600, c. 314.]
That is wrong and disingenuous, and he knows that. My appeal to him, to the Government and to the Conservative members of the Committee, is: please, stop playing games and tell us why you believe secure workplace balloting is not acceptable. Nobody is giving a reason. If that was grasped in the manner in which it has been offered, a huge element of the controversy surrounding the Bill would be removed.
Frances O'Grady: Chair, I wonder if I can add very briefly to that. I know that this issue of safety and security has been raised a number of times, including by the Minister in a meeting I held with him—although I think, Nick, you actually quoted the lack of security of a postal ballot in a local authority election, perhaps in error.
The real issue here is: is electronic balloting any less safe than postal balloting? The Electoral Reform Society report confirms that it is no less safe, given the risk run in postal balloting. Of course, a number of employers, such as the Royal Bank of Scotland, use electronic balloting already to elect worker representatives to their consultative committee. We see it used across a whole range of organisations, including political ones. Frankly, if it was not safe, that selection ballot for the Conservative Mayor of London candidate should be rerun as a postal ballot.
The Chair
May I just say that we have got a very short period of time left? The purpose of the session is to get in touch with you. You got in touch with us and said that you wanted to say things, and we said that we would like to ask questions of you. I have got about seven or eight Members of Parliament, on both sides, who want to do so. If you can be more succinct—that goes for Members too—we will try to get as many answers out as possible, and that may help both sides.
James Cartlidge (South Suffolk) (Con)
Q 381 I thank all four of you for coming. I am pleased that we have focused on the thresholds issue, and I agree that it is by far the most important point. In evidence on Tuesday, we heard a large number of examples of serious disruption caused to ordinary members of the public on relatively low turnouts. For example, David Martin, who is a director of Arriva buses, which operates in London, referred to the London strike in 2012. He said:
“The fact that 17% of my staff voted and 50% of the buses did not run in London over that period of time shows us that we need a failsafe, and this Bill delivers that failsafe.”––[Official Report, Trade Union Public Bill Committee, 13 October 2015; c. 7, Q4.]
My question is for Frances O’Grady. At the beginning, you mentioned thresholds in relation to the ILO, and we are now talking about thresholds in relation to e-voting. Are you saying that you oppose the threshold change in principle or that you would accept it if it came with electronic voting?
Frances O'Grady: The TUC’s position is very clear. The labour arm of the UN is very clear that you cannot count abstentions as no votes. We are arguing for a positive, 21st-century solution to boosting ballot turnouts by using modern means, including electronic balloting, in a way that is safe and secure and independently supervised. If that is what this is really about, give us the right to do it, as many of the organisations represented around this table—
James Cartlidge
Q 382 When you say “what this is really about”, this is not a conspiracy. We are extremely concerned about ordinary members of the public whose lives are disrupted when schools close, when buses and trains are not available and when London comes to a standstill on the basis of a ballot that has a low turnout. If it has a high turnout, we accept that. We accept the right to strike, and we accept many of the principles upon which your organisations are based. I have a question for Sir Paul—
Sir Paul Kenny: Paul is fine.
James Cartlidge
Okay. That is what it says.
In relation to the police, we heard this morning from a senior police officer who was referring to the ability to identify someone when a strike happens and how useful it would be for them if it were easier to identify the lead—the person co-ordinating it. I would be interested in your comments on that.
Sir Paul Kenny: I do not know how many picket lines you have been on—
James Cartlidge
Not one as an MP, I must admit.
Sir Paul Kenny: I would be happy to take you.
Look, I have been on a few, for obvious reasons—it is the nature of the job. Before I was a union official, I exercised my right to go on strike. My experience is that where picket lines are correctly policed, they are policed by consent. That normally always means that the officers strike up a relationship over a long period of time. They will introduce themselves and ask exactly who the union official is and who the steward is. The union officials normally wear some identification, but there is a fairly limited number of people. It is not 500 people in the road—the police would deal with that.
The idea that you need to supply lists of names and addresses is a real problem for us, and I will tell you again why. We know, thanks to the Scottish Affairs Committee, that thousands of working people were blacklisted—some for little more than attending a union meeting. There is nothing in the Bill about that. I see nothing that says there are protections and penalties. It is not unnatural for us to say that you have the police, who police by consent, and we support them in that. They strike up relationships with people almost every day—you might hear about the odd occasion here or there. I think that relationship is a good, professional one. Moving that on, so the police take names, keep registers and identify individuals who have attended, leads it into another area that we have incredible mistrust about.
I do not know what the police’s official reaction is, but I would have thought that this is not something they particularly like. I know what you said about one bit of evidence, but I am not certain that that is the view of all policemen.
Dave Prentis: Could I just take up the point about thresholds? We are not just talking about simple thresholds; we are talking about a second threshold in public services. We have no knowledge of which areas will be covered—it is very, very vague. The second threshold means a negation of democracy. If you reach a 50% threshold in, say, a health ballot, 80% of the members have got to vote for action, not a simple majority. It will be impossible to achieve. You are denying the right of public service workers under national agreements to use industrial action as a very final resort. That is how far it is going. You have to realise the unintended consequences of the double threshold—it is not one, it is two. It will bring to an end the right of millions of workers in public services to take action. It will never be achieved. You should be aware of that.
It is a very difficult area for us. We want to increase participation—we know that we have strength the more people participate—but you do not do it in that draconian way, because it will just lead to unofficial action and a breakdown in industrial relations in our public services. You will regret it.
Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)
Q 383 What are your opinions on the use of agency workers? What effect could that have on public safety and, where you represent healthcare workers, patient safety?
Frances O'Grady: We have very good relations and agreements with agencies and the federation representing agencies in this country. We have always worked very closely on the fair principles of employers needing flexibility to cover peaks and troughs in production, or staff absences, and doing that on the basis of equal treatment within the framework of the union agreement. This proposal is obviously quite different. We are potentially talking about employers having the right to replace wholesale workers who have democratically voted to go on strike with, potentially, untrained and inexperienced agency workers.
As we know, labour providers source from all over Europe, so is the idea that workers would be bussed in, perhaps from another country, perhaps not knowing what they are being bussed in to do, and be put in the invidious position of being asked to cross a picket line? Many employers, including the industry federation, have said publicly, very clearly, that it is absolutely wrong-headed to put agency workers in the middle of difficult disputes. It is not something we have seen in this country for 40 years or more, and frankly it is either naive or positively dangerous to deliberately seek to undermine legitimately decided and democratically voted on strikes by the use of agency labour.
Dave Prentis: It is a very final resort when a public service worker or a health worker takes industrial action. Last year was the first time in 34 years that our members have taken action over pay, and it was to achieve the Government’s 1% pay award, which the Secretary of State had denied the workers, but we reached written agreements to provide cover. We provided written agreements—we signed them with the other unions involved—on ambulance workers to make sure that ambulances were there, all ready to go in an emergency. We reached written agreements for cover on wards. Sometimes, they have better cover than they do at times when they have staff absences because they want to ensure that the critical wards are covered. There is no need for agencies to be brought in.
With the change in the thresholds and the idea of agency workers—even Margaret Thatcher did not propose this. The idea of using agency workers, combined with all the other restrictions on industrial action, is punitive. Somebody wants to attack trade unions, but they are basing it on 1980s values, and we have moved on. The Bill will not in any way affect the productivity of the country, which we should be looking at—whether competition in Britain is good enough to take on the rest of the world. We are just going to end up fighting with each other, when we should be working together to ensure that workers benefit, the organisations they work for benefit and, in our case, patients benefit.
Nusrat Ghani (Wealden) (Con)
Q 384 To continue on agency workers, we took evidence earlier from Mr Jon Skewes from the Royal College of Midwives. He mentioned how potentially disruptive it could be if midwives were to go on strike. There are two issues: the fact that it costs so much to bring in agency staff, and the need to ensure that staff have the right skills to support mums and babies. If midwives were to go on strike, it would put at risk pregnant mums and their babies. Are you saying you would not want any agency staff available at that unit if a mum was going into labour? Would you not then allow agency staff to come in to work, to help those mums and babies?
Dave Prentis: I heard Jon’s evidence, and he said very clearly to you that they put in far more workers—midwives—than they have brought out in demonstrations.
Nusrat Ghani
Q 385 I am just asking as a point of principle, because Ms O’Grady said she did not want to see any agency staff. In this sector, would you not want to see any agency staff covering the shifts of striking midwives?
Frances O'Grady: You are being completely disingenuous. As you may well be aware—perhaps you are not—unions have long-standing voluntary agreements with employers in emergency services to ensure that life and limb are not put in danger during a strike.
Nusrat Ghani
Q 386 So agency staff will be brought in.
Frances O'Grady: The agreements are between the employers and the unions. I refer you to the NHS employers that have written to Ministers saying they are concerned that this Bill, its tone and the aggressive approach taken by it are jeopardising the good, long-standing social partnership arrangements we have in health and many other public services.
Nusrat Ghani
Q 387 I just want to establish whether agency staff would be acceptable in this situation, if nobody else was available.
Dave Prentis: I have never known a time when we have taken action in health and an agency would be needed, because we provide the full-time staff to stay in. We give them a dispensation, and we reach agreements with management on the levels of staffing they think they need to run those services. On many occasions, we have more staff in than are in on a normal Saturday or Sunday.
Sir Paul Kenny: Do you honestly think that a midwife looking after a mother would walk out—
Nusrat Ghani
Q 388 No, I do not. I was just asking because there was a huge discussion about agency staff. I want to know where the principle would stop and start.
Sir Paul Kenny: Yes, but you use the most emotive issue.
Frances O'Grady: I was speaking to a midwife called Natalie who went on strike because of the rejection of the 1% offer. They made sure that no mother or baby lost out. [Interruption.]
The Chair
Order. When the Chair calls for order, you will please desist. Members are asking questions. We want replies, and we do not do it as a collective; we do it individually, through the Chair. That is normal behaviour in this place.
Nusrat Ghani
Q 389 You represent a large proportion of the working people in our communities and our constituencies. We heard some damning evidence this morning about what happens to people who choose not to go on strike. We heard from the London fire brigade about how difficult it is for people who choose not to go on strike to get into their fire stations and carry on with their duties, and how they are possibly putting themselves at risk by continuing to go into work.
We also heard evidence from SITA. In its written evidence, it told us that non-striking workers during a strike in Doncaster in 2011 had been subject to “sabotage of private property”. Its evidence goes on to say that
“strikers visited the homes of workers, slashing car tyres and throwing paint stripper over a car. The Working Men’s Club used by a non-striker was contacted by a striker…who threatened the steward of the club that if they allowed him to use the bar, the club would be vandalised. The club barred the non-striker.”
How are you able to represent your non-striking union members and other workers? Who is supporting them?
Len McCluskey: That is an extraordinary thing for you to put forward.
Nusrat Ghani
It is not for me to put forward; it was evidence given by witnesses.
Len McCluskey: Fine, and I am going to answer it. There are current laws to deal with any action of that nature, which is criminal. You have put forward a specific incident that suggests striking workers are engaged in criminal activity. The police will deal with that when it is brought to their attention. If you asking whether I support that type of criminal behaviour, no, I do not. The police have sufficient laws to deal with those issues. There is certainly no need to introduce more laws, and I will not repeat the comments that my colleagues have made about the nature of those laws. I will just remind you of what I said right at the beginning: a threat to the cohesive nature of the communities we live in is something you need to take on board. Laws already exist to deal with all of that type—
Nusrat Ghani
Q 390 The 2010 dispute was discussed earlier on. This evidence from 2011 is that there are people who wish to go to work but feel intimidated.
Len McCluskey: What has that got to do with the Bill? If they feel intimidated and there are incidents of vandalism, I assume they bring that to the attention of the authorities, who will deal with it. It is certainly nothing to do with trade unionism or the right to strike: the right to exercise our democratic views to an employer. It has really got nothing to do with us and nothing to do with the Bill.
Sir Paul Kenny: I am not privy to that particular evidence that was given to you—I would love to see it—but it seems to be four or five years old and I would have thought in those four or five years that the criminal acts that you seem to be describing here would have been reported to the police. I wonder what action the police took, because it sounds like individuals were known. Forgive me; I am not trying to be difficult here, but I am wondering where this fits in with our discussion.
Nusrat Ghani
Q 391 Who represents the workers who want to continue going to work, especially if only a minority of union workers are calling for the strike in the first place?
Sir Paul Kenny: If that is the question, that is dead easy to answer. I do not know why it had to be prefaced with stuff from four or five years ago. If you say what happens to people in the union who decide, even if they voted in a ballot, to go to work, they go to work. There are already adequate laws covering no victimisation for those individuals. There is nothing in the Bill that adds to that. Sorry, that already exists. Truthfully, I wonder how much knowledge there is in existence about the rules governing trade union bodies. That is already covered. They have a right. If they go to work, they go to work.
Nusrat Ghani
Q 392 They are obviously finding it difficult to go to work in these circumstances.
Len McCluskey: It is not a question about it being difficult to go to work. The current legislation allows people to go in and out of work. It allows contractors to deliver in and out of work. It allows the striking workers to exercise their right to explain why they are on strike.
If you are talking about evidence-based, I know that my own union was accused of thuggery and intimidation in the INEOS dispute. That complaint was brought by a Conservative MP—a woman whose name I forget at the moment. The result of that was that Police Scotland and the Hampshire police force said there was no case to answer. There was no criminal activity whatever. There was nothing abusive or intimidatory. If you read the headlines in the daily newspapers, you would think the complete opposite, so I ask you to understand the nature of a dispute and the manner in which trade unions try to organise in a disciplined way, because the one thing that we want when our members are out on strike is to get them back into work. We want a negotiated settlement. And trust me, this Bill will make it more difficult to achieve those types of aims.
Ian Mearns
Q 393 Professor Keith Ewing talked of his concerns about the potential future role and appointment of certification officers. Do you have any particular concerns about that?
Len McCluskey: I can answer that question, because we have huge concerns. Again, I am addressing Conservative colleagues on this. The first question I would ask is: what problems are supposed to be addressed by this element on the certification officer? What current problems exist? The certification officer is currently seen as an independent individual, and the current person there is highly respected by both sides of industry. It will no longer be independent.
There are no criteria about who can be the certification officer, and the most damning issue here is that anyone can complain. Any member of the public can complain to the certification officer, who would have the power to go into a union, disrupt its business and crawl all over its business in relation to how it operates. That is in stark contrast to what happens with individuals who are seeking redress at an industrial tribunal. They have to pay £1,200 up front and can be accused of vexatious behaviour. The measure would cause unnecessary upheaval in trade unions.
The slap in the face on top of it is that our members have to pay for it. Can you imagine the number of people who want to complain about Unite or any other union? We would have the certification officer, or whoever they determine, constantly working in our building, clawing over issues, with our members’ money paying for it. The big question that needs to be answered is, “What are the problems?” Why is this bit about the certification officer in the Bill? I have never heard any criticism of the certification officer’s current methods.
Frances O’Grady: With the Chair’s agreement, I am happy to add to that. As Len has pointed out, I suspect that these are some of the aspects of the Bill that David Davis was suggesting were more appropriate to Franco’s Spain than a modern democracy such as Britain. Many people are extremely worried about the idea that a certification officer can respond to complaints by employers, have the power to seize documents from union offices, impose fines and so on. The idea that the CO could, in real time, send inspectors down to picket lines does not feel like a good use of our money, given that we are also expected to pay for the privilege. It is taking industrial relations into territory that would be poisonous for both employers and unions.
Perhaps we also need to make it clear for the record that the total number of disputes that took place in Britain last year was just over 150, with a tiny proportion of days lost as a result. You have to come back to asking, “What is the problem that we are trying to crack here?” As a Financial Times leader pointed out, it smacks of the Government crossing a road to pick a fight.
Dave Prentis: Can I supplement that? There were 160 disputes and only 640 ballots—four times the number of disputes—because we negotiated settlements before announcing a ballot. The ballots are not the important thing. It is about the settlements that we reached that then led to less industrial action.
There are three major Acts of Parliament covering what we do. We are the most regulated sector within the economy, if not the western world. This merely adds to that over-regulation. It is an over-burden for which there is no need. It shows the views of the people who are putting the Bill forward. There is absolutely no need for the certification officer to have additional roles. We are well policed by them already, if not too well.
Sir Paul Kenny: I am yet to have any understanding of the justification for the certification officer’s additional powers. The powers are already wide-ranging, and I do not understand the justification, other than to shackle or restrict the ability of unions to do their job. I thought that this Government were about deregulation, but it appears that they are until it comes to unions, which they want to regulate through the teeth.
The Chair
Mr McCluskey, when Nusrat Ghani asked you a question a bit earlier on, you referred to a case that she raised and you alluded to evidence of the case and that there was no action by the police, who noted that no action was needed. Could you send the Committee a note about that? It would be quite useful to Members on both sides when they come to judge the evidence that has been given.
Len McCluskey: Yes.
Seema Kennedy
Q 394 I think it was you, Mr Prentis, who mentioned productivity earlier on. I accept that your organisations often prevent strikes, but they do happen. Do you accept that when millions of people are out of the workplace because of a strike or when a strike is threatened—we have heard a lot about the threat of strikes being disruptive to lives and businesses—it will inevitably have an impact on productivity?
Dave Prentis: It will inevitably have an impact, otherwise why would the workers be doing it? The issue is when you take the action. You take it as a final resort. We represent low-paid women, nearly 1 million of them, and they cannot afford to miss a day’s pay. It must take something drastically wrong and unfair. They are not motivated by aggrandisement. Something happening to them that is unfair will motivate a low-paid woman public service worker to vote for industrial action.
We cannot just talk about the effect on the public and ignore the effect on the individual striker, because they are doing it for a real reason: they feel very aggrieved about how they have been treated. They have to have the ability to seek a settlement. If we cannot get settlements, the right for workers to withdraw their labour is obviously a final resort that is allowed in the ILO conventions, which Frances has been talking about. It is impossible to take industrial action that does not have some effect on people, otherwise why take it?
If you are talking about productivity, productivity is everything that happens during the course of a year. For our members, on average, a member will take action every 15 years, yet we are obsessing over productivity. The issue with productivity is getting more skilled, higher-paid workers within our environments and ensuring that people are well treated and can contribute. It is about having the investment to increase productivity—that is not necessarily coming through—and having a fairer society where people want to contribute. You cannot connect productivity with the small number of days that are lost.
Seema Kennedy
Q 395 Can I just bring it back to women? You say that you represent a lot of women who are low-paid.
Dave Prentis: A million.
Seema Kennedy
Q 396 Many of whom will be mothers or have other caring responsibilities, perhaps for other family members. In the TUC submission, where you are talking about the notice period, you say that it will needlessly delay the start of industrial action. Do you not recognise that for those women, they might need those 14 days to arrange extra care for their dependants? Extending the period from seven days to 14 days might be useful for them, because of the disruption.
Frances O'Grady: I am not aware that the Bill is only targeting the 14-day notice period in areas where mothers will be affected by the strike. It is a false prospectus. Let us be clear about this: the extension of the notice period is designed to reduce momentum and participation in the strike and weaken the union’s hand.
With your agreement, I will make a very small point on productivity, on which I can give you some hard evidence. The number of days lost through industrial action during the past year adds up to just one half of one ten-thousandth of a percent of all working days. To put that in perspective, the number of days lost through issues around health, safety and wellbeing is 450 times that—
Seema Kennedy
I would not dispute that, but we want to increase productivity in everything.
The Chair
Order.
Frances O'Grady: I just wanted to make the point that our union representatives play an absolutely critical role in delivering higher productivity in the workplace, including through health and safety. A number of those strikes are directly relevant to issues, such as health and safety, that in the long run are important for business and the economy, as well as for working people. Again, I think you have to understand that trade union activity and strength actually improves Britain’s productivity by creating safer, healthier and better trained workforces.
The Chair
I wonder, Ms O’Grady, whether you can send us the stats you have been referring to. If you can send it to the members of the Committee, we will distribute it on either side.
Chris Stephens
Q 397 I think all four of you have an interest in public services. Obviously, you will be aware, as was alluded to at the start, that not all UK employers, including the devolved Administrations, support the Bill and the impacts it will have. Can I ask each of you whether you believe that all public sector employers in the UK should either provide their consent to parts or all of the Bill or get opt-outs to parts or all of the Bill?
Len McCluskey: First, it is a serious issue that, again, I have raised publicly and Conservative members of this Committee will want to take it on board. At the general election, the Conservative party ran part of its campaign on English votes for English laws. The reality that we find with this Bill currently is that the Scottish Parliament has indicated that it will not implement the Bill; Stormont has indicated that it will not implement the Bill; and the Welsh Assembly voted yesterday not to implement this Bill. There is a real danger that English workers will be the worst treated workers not only in the whole of Europe, but indeed in the British Isles themselves. That is what is deeply divisive. The direct answer to your question is, yes, we know that there are local authorities and employers right throughout the British Isles who are indicating that they will not implement this measure, and certainly the devolved powers should have that view.
I will finish on a quick point, which is again for colleagues on the Conservative side. I deal with every single major manufacturing company within our nations—blue chip companies. Not a single CEO of any of those companies is in favour of this Bill, and I ask that that is taken seriously on board. So, yes, I am in favour of an independent approach to this.
Sir Paul Kenny: I will be quick. I think the consent issue is quite clear.
Just dealing with the issue about check-off, as it is commonly called, effectively it will still remain lawful. If the wagons roll on for a deduction to be made to just about any organisation—to the bowling club, to Uncle Ben’s shop, to any appeal whatsoever—despite all the arguments about how difficult it is and costly, it seems the only organisations that will not be allowed to use that facility are trade unions. I am sort of getting the drift that someone has got it in for me, you know? Basically, when you look at it like that, you cannot justify that argument.
Also, in terms of facilities, there are statistics coming out of the walls about the job that people do in saving so much in employers’ time: stopping stuff going through to litigation, dealing with health and safety issues and dealing with grievances. You know, kettles have spouts for a reason and you are trying to put a sock in it, and that will not do. That is not the way to deal with genuine grievances and disputes. So it is one of those occasions when I am beginning to think that devolution is a pretty good idea.
Dave Prentis: I will concentrate on check-off and sign-off, as I did at the beginning, and I will remind you that we have 7,242 employers who operate check-off systems and with whom we have agreements on time off. Not a single one of those employers has said anything in relation to this Bill that would lead you to believe that they want this blanket ending of check-off arrangements. In fact, nobody was asked before the Bill was put together. The NHS employers were not asked; the local government employers were not asked; individual employers were not asked. It takes away all these ideas of localism and the idea that employers should have a right to talk to trade unions or not, as they feel, and reach agreements that they wish to have.
The Bill brings in draconian central planning, and all the discussion has been not just about devolution within the nations of Britain—Scotland, Wales and Northern Ireland—but also in English regions and the combined authorities. Combined authorities will be allowed to do everything, but what will be taken away from them is the right to talk to their staff trade unions about the arrangements that they want in place, either for check-off or not for check-off.
At the moment, any employer can withdraw check-off; it is in their gift. There is nothing in law that prevents them from doing that, and it would be virtually impossible to take industrial action to stop them doing it. And some employers do take us off check-off. Wandsworth did; one of the new private probation companies has just done it; and we deal with it as a local issue, because it is an issue between us and that employer, and maybe we will reach compromises. But the thing I will say, which seems to have been forgotten completely, is that we pay for these check-off arrangements. They are not the gift of the employer; it is not costing the taxpayer money.
I will give you examples: Fife Council and East Lancashire Hospitals NHS Trust. Both of them cost us at 5% for collecting it, and it does not cost them anything like 5%. Bradford City Council charges £38,000—that is the cost of running our social workers. You end check-off and you are talking away one and a half social workers in Bradford. Derbyshire County Council charges around £5,000 a quarter. Others will hold on to the money for three months, put it in the bank account, get interest on it—it is small at the moment, but it is usually fairly big—and then give us the money and they make arrangements from it.
What I will say is I do not believe that any taxpayer should pay for this arrangement. Where we do have agreements, we are more than willing to pay a commercial amount of money to have these arrangements stay in place. Taxpayers should not pay, but neither should central Government issue a diktat saying that employers are doing something unlawful in reaching an agreement with their local union reps about the collection from source of union dues when there are so many different areas where the member of staff can have deductions from salary, including MPs and councillors, which are denied to our members for reasons that we do not understand.
The Chair
Mr Prentis, can you also get the detail of that and send it to the Committee? We will distribute it. It has been a very useful piece of information and I think both sides would welcome it.
Dave Prentis: I am saying categorically here that we believe that taxpayers should not fund this arrangement. If that is the issue, we will make sure that we have stronger commercial arrangements.
The Chair
I well understand that. It is not your view; it is the evidence that you have come up with that we need the detail of for consideration. We have got eight minutes left and we have still got four questioners to ask their questions and get a reply, so could we be more succinct on both sides—the interviewees and the Members?
Victoria Prentis
Q 398 I was a public sector worker myself for 17 years, and although you may feel that we have got it in for you on this side of the Committee, I learnt a certain amount about industrial relations in that time and I am fully aware that we are very lucky to have giants of negotiation strategy in front of us, helping us with this Bill.
Mr McCluskey, in a way that does not surprise me at all, has put forward his position in writing and he has given his position is on thresholds: 50% if he gets e-balloting—[Interruption.] Sorry, workplace balloting. Do the other three of you share that position?
Dave Prentis: I do not believe that there is a need for thresholds. If the aim is to increase participation—that was the pretence behind it—I believe in moving to e-balloting, but, more than that, workplace balloting. Do not make the assumption that all of our members have got access to computers. Our refuse collectors do not sit at a computer all day; they are out on the streets, collecting our rubbish, as so many other public service workers are.
We do want to bring in e-balloting. We do want a safe computer in the workplace, but we also want workplace balloting. You may have been a member of my union in the past, but I come from a union that, before our merger in ’93, we always had secret postal ballots that went to the workplace and the turnout was 70%. As soon as Thatcher’s law came in that said that they had got to go to home addresses, it dropped to 22%.
Victoria Prentis
I will take that as a no.
Frances O'Grady: The TUC is clear, as I said before, that it is actually the ILO that the Government need to answer to. The real issue here that all good democrats should be focused on is how we improve participation in ballots across the board.
Victoria Prentis
I will take that as a no, too.
Frances O'Grady: It is a yes to modernising methods of balloting.
Victoria Prentis
But no to thresholds. Sir Paul?
Sir Paul Kenny: I am a negotiator.
Victoria Prentis
I thought you might be.
Sir Paul Kenny: My position is that no vote should not count, but that is a principled position I can hold. What Len McCluskey has done is put down a challenge: if people are serious about improving participation, come and talk. That may mean people have to move their principled positions, but I always understood that the end result was to find something workable and real. I do not know where you are going to put me down.
Victoria Prentis
I am going to put you with Mr McCluskey in my head.
Dave Prentis: It is a no to the two thresholds.
Jessica Morden (Newport East) (Lab)
Q 399 The ILO definition of public services talks about “essential”. The Bill talks about “important”. Are you clear from the Government so far how important public services will be defined and, crucially, which workers will be covered?
Frances O'Grady: No, and I do not think the Government are clear either. In particular, the proposal that so-called ancillary roles could be included is extremely interesting but has yet to be defined. It makes it very difficult to have an intelligent discussion about this aspect of the Bill when we do not even know what jobs and functions could be covered.
To give a practical example, if a call centre is providing public services as part of its work and for parts of those call centre workers’ jobs, but it is based in the private sector, does it fall under the 50% threshold or the 40% threshold? Quite genuinely, how are unions supposed to run a lawful ballot when it is simply not clear how that would work in the real world? So far, we have not had an answer to those questions. It could be cleaners, call centre workers, ancillary staff—all sorts of job could be covered—but I am not sure how the Government’s proposals are supposed to work in the private sector that is providing public services.
Dave Prentis: It will be a nightmare, and it will be a goldmine for solicitors because for every work group we try to define, it will be fought out in the courts. None of us want that, surely. It is so ambiguous and so badly worded that it is difficult to find out how essential these people who are caught are. At the moment, it catches teaching assistants, who work in our schools at different levels, may only work at term time and, in many cases, are abused in the way they are treated, yet they may find themselves caught by this idea of important public services. It is ill defined and will lead to litigation going on for many, many months around disputes. Instead of trying to solve the disputes, we will be involved in fighting out in the courts whether or not we should be balloting, or whether we need an 80% majority or half of the members actually voting. It is going to be an absolute nightmare for industrial relations in public services.
Frances O'Grady: What is clear is that the Government are going way beyond any international definition of an essential service. International bodies are very clear that it is not enough to say you are further restricting strike action purely because of—however bad it is, however inconvenient and however disruptive to other businesses, that in itself cannot constitute a reason for further restrictions on the right to strike in certain sectors. In any case, the Government’s definition—carefully worded, I think—of important services goes way beyond any international definition of “essential”.
The Chair
We are moving into an area that we should be wrapping up. We should finish in about one minute, but I have leeway of up to five minutes. I will call Julie Elliott as the final speaker, but before I do, we may have a brief response from Stephen Doughty.
Stephen Doughty
Q 400 Frances, you talked about the international context. We heard factual comparisons from Amnesty and Liberty. Obviously, it was David Davis who compared parts of the Bill to Franco’s Spain. If the Bill was enacted as it stands, how would we compare internationally? Which countries would we find ourselves alongside?
Frances O'Grady: I always avoid naming particular countries because I am hopeful of persuading the Government that we should not be in that league. We already have what is widely recognised as one of the most restrictive legal frameworks on unions in developed western industrial democracies.
Stephen Doughty
Q 401 But it would put us somewhere near the bottom.
Frances O'Grady: This would take us further down that very unsavoury league.
The Chair
I am sure that you can write to us on that subject, Ms O’Grady. It would be helpful.
Julie Elliott (Sunderland Central) (Lab)
Q 402 Paul and Len, we took verbal evidence this morning from David Palmer-Jones, the chief executive of SITA UK. He made what I regard as very serious allegations about officers from GMB, Unite and UCATT. Obviously, the latter are not present, so I cannot put the allegations to them. He was talking about intimidation at what he said was picketing, but, upon further questioning, turned out to be demonstrations in Teesside relating to issues with SITA. He said that officials of your unions tacitly approved of the tactics deployed—that is, intimidation—and were actively supporting them. I wanted to give you the opportunity to share your thoughts on that.
Sir Paul Kenny: I do not know what he said to you, but if he wants to write to me, I am happy to look into those concerns. I can tell you that Teesside is a bit of a flashpoint because it involves a company that is importing labour and paying them below the market rate, denying jobs to local people. That is always a difficult situation and there are protests about that. They come from a wide variety of people, including us. I checked yesterday what the situation was—I try to stay in touch with what I think are difficult areas—and I was told that there had been absolutely no arrests and that relations with the police were okay, because I ask those questions. I was told that if ever there is an issue, the inspector talks to whoever the group are, exactly as I described earlier, and if there are any concerns, they are relayed and then dealt with by the people on the ground.
I realise that that has been said to you and I appreciate the fact that you have put it to me. I have absolutely no knowledge of it. I would love to see some substantive evidence of it, and if there was some, we would deal with it. My latest check—presumably, the police can confirm this—is that there has not been any evidence. If there was any sort of behaviour like this, I expect the police would step in. They are there when they are needed, but relationships are pretty good, as I understand it. The dispute has been on for a while now, and to my knowledge not a single person has been charged with any sort of behaviour like this at all.
Forgive me if I am a bit sceptical of people coming along and saying, “At the bottom of the garden there’s lots of fairies.” There may be, but I have not seen them. I would like to see them before I start to legislate against them.
Len McCluskey: Like Paul, I try to keep abreast of sensitive issues, and this is a really sensitive one. It cuts to the very cohesion I was talking about in our society, because people are being brought in—migrant workers—and being asked to work at way below the national rates negotiated with employers. The company itself has a lot to answer for.
I checked recently on the newsreels, and, talking about this dispute, a spokesman for the police said that
“officers then spoke with members of the group and facilitated a peaceful protest while working to minimise disruption to residents and businesses in the area.”
That sums up the way we would expect to conduct our business.
The Chair
Thank you. That brings us to the end of the evidence session. We are grateful for your attendance. You are obviously very busy people, representing an awful lot of people, so we are grateful that you did not send anyone else but came yourself.
Sir Paul Kenny: I beg your pardon, but if I could make one last point, this is it. We spent about three years of parliamentary time discussing whether we were going to charge for plastic bags; we have spent weeks talking about these major changes. None of us knows the implications of many of the questions you have asked. It seems that carrier bags are more important than the future of industrial relations and rights of workers in this country.
The Chair
Thank you very much.
Examination of Witnesses
Nick Boles MP and Matthew Hancock MP gave evidence.
The Chair
Order. We now come to our final session for today, in which we will hear oral evidence from the Department for Business, Innovation and Skills and the Cabinet Office. This session will last until about 5 o’clock. I know that you both know the drill very well because you have done Bills before. Minister, you have been here throughout, which is not usual for some Ministers. We are going to try to get through this as best we can, and the best way to do that is to be as succinct as possible. We recognise that you want to put on record various stuff that you have got from the Department, but please leave us enough time, because the whole purpose of this is to try to get evidence from you and ask you questions. Without further ado, Mr Boles, would you like to start?
Nick Boles
Thank you, Sir Alan. It is a pleasure to be in the hot seat now, rather than in the stands. I am going to give a brief opening statement, if that is okay—I will try to be very brief—on the main measures in the Bill, and then my colleague and friend Mr Hancock will address the facility time and check-off proposals.
We had what I thought was an absolutely gripping evidence session earlier with the four giants of the trade union movement, and we heard some pretty lurid language. The Bill was described as an ideological Eton mess, and as something straight out of the Norman Tebbit playbook. I think we are all aware of, and quite enjoying, the Labour party’s embrace of 1980s retro, which seems to have gripped them since the election. I would love to be able to live up to the caricature that has been painted, and I would love to have my name put, if only in very small type, at the bottom of a Bill that people were talking about in 100 years’ time as one of the most radical and dramatic Bills to change the laws of our country, but I am afraid that I have bad news for the Committee. The bloodcurdling rhetoric, although enjoyable and entertaining, is entirely out of place. The boring reality is that the proposals are modest. They are marginal adjustments to the rules governing strikes and members’ financial contributions. In two years’ time, I fear, this Bill and my role in it will be almost entirely forgotten, except in the privacy of my own bedroom.
I will quickly go through the main measures in the Bill, and then I am happy to take questions. I understand that the strike threshold proposal causes a lot of upset and argument, but the fundamental truth is that most strikes over the past few years would have met the threshold. Members of the Committee made reference to the fact that we did not get an absolutely glowing review from the Regulatory Policy Committee for the impact assessments on the first consultation. I regret that they were done in haste, but it is entirely my responsibility. The main mistake that we made, as the committee pointed out to us, was to make a crude assumption about the effect of the thresholds on the number of future strikes, because in that assessment, rather stupidly, we said that we thought that any strike that would not have passed the threshold in the past clearly would not pass it in future. Well, of course that is not going to happen. What will happen is that unions, as you have heard, will make great efforts to ensure that the thresholds are met. In most cases, they are already met. I predict to the Committee that the thresholds will produce a small decrease in the number of strikes. Critically, however, there will be a large increase in the perceived legitimacy and validity of strikes among the public affected by them, which is entirely desirable.
We had a discussion on notice periods, and members of the Committee made a good argument for why it is surely not unreasonable to give people two weeks’ notice, rather than a week, of something that could cause them to have to take a day off work or make alternative childcare arrangements.
There has not been much discussion on time limits for ballots, but it is an important measure. Currently, and in the recent past, strikes have taken place in the public sector on ballots that were passed two or three years previously. Frankly, many of the people who voted may no longer be working in the institutions where the strikes are taking place and the issues are surely not at the front of people’s minds. The four-month time limit is therefore reasonable.
There has been much discussion on agency workers, so I simply point out to the Committee that withdrawing, as we propose, the prohibition on the use of agency workers in a strike does not require any agency worker to take up an offer of employment and does not require any employer to seek agency workers in the first place. We heard good arguments about levels of training and tensions with permanent staff. We also heard good arguments as to why, both for individual workers and for employers, it was unlikely to be something that would solve any problems. We simply believe that the option should exist.
Finally, on the much-debated rules regarding the political fund, we take a simple position, which is that if someone wants to support a political party, it is not too much to ask them to tick a box every five years that says, “Yes, I want to support political activity and a political party.” If the political party believes in its arguments as passionately as members of this Committee do, I have absolutely no doubt that it will be able to persuade everyone currently contributing to political funds to carry on doing so.
Matthew Hancock: I am not sure that I can match my colleague for rhetoric, but I want briefly to set out the principles behind the two changes that are the Cabinet Office’s responsibility for policy purposes and therefore mine. First, on facility time, clause 12 simply makes the change that public sector employers need to publish information on the amount of facility time, which is similar to a change that we made in the civil service that saved £52 million in the last Parliament. The first step before making any savings, however, was to publish the information, because we currently do not know how much taxpayer money is spent on facility time. Clause 13 contains a reserved power to be able to limit the facility time taken by union representatives to a percentage of working time, which is similar to the reasonable changes made in the civil service. A legal entitlement to facility time exists at the moment and we do not propose to change that in this Bill.
Secondly, check-off is a name for the relationship in which a trade union member, instead of paying their dues direct to the trade union, pays their dues through the employer taking the payment from the pay cheque before paying it to the trade union. I think it is reasonable that the trade union relationship, which is valuable in many cases, is one that is between an individual and their trade union. Often, one of the primary purposes of trade unions is to mediate on behalf of their members. It is old-fashioned to think that the payment from one to the other needs to be intermediated by the very employer with whom the trade union is often the interlocutor, on behalf of the member.
These are reasonable changes. We have made them in the civil service, and the Bill simply proposes to broaden the principles and apply them to the public sector as a whole.
The Chair
Thanks very much. It is true that when every Member of Parliament is elected, then takes the oath and signs the book, they become seasoned politicians. I ask Members on both sides of the Committee to direct their questions to the appropriate Minister, rather than the collective, otherwise we will get very few answers done.
Stephen Doughty
Q 403 We have heard some pretty interesting evidence during the course of these two sittings, and of course, on Second Reading and outside this House as well. We are in a situation where many Government witnesses could not appear to find reasons for the Bill, did not appear to have read or to understand parts of it, and certainly could not justify it. There have been passenger bodies who were not willing to comment on it; the police, who think parts of it are unworkable; the unions, who obviously do not want it; civil liberties organisations, who do not want it; legal experts, who do not want it and think it violates various conventions; and devolved Governments, who do not think they are going to give their legislative consent for significant parts of the Bill to go forward. So where was this dreamt up? Was it done by Minister Hancock? Was it in Minister Boles’s bedroom? Or was it the Chancellor? We seem to have a Bill without a purpose and without a need that appears to be largely unworkable. How was this dreamt up?
Nick Boles: Well, Mr Doughty, I am sure you remember—you were paying as close attention as I was—the evidence that was given by the Confederation of British Industry. The director general or secretary general—whatever he is called—John Cridland made it clear that it was a policy that the CBI had adopted five years ago and had been campaigning on for five years. We in the Conservative party think that the business community is important and should be listened to. You will also be aware that in the last five years, in which we were in government in coalition, there were a number of strikes—I must always emphasise that these are the great exception to strikes in general—that caused huge disruption to members of the public who have no alternative means of securing the service that the organisations offer.
Stephen Doughty
I—
Nick Boles: I am just going to finish, Mr Doughty. Those strikes cause great disruption to members of the public, and they did take place either on very old ballots, or on very old ballots that were also secured by a very low turnout. Therefore, we have put together these proposals, which we think the public support.
Stephen Doughty
Q 404 We have heard the myth of mass industrial action that the Government are presenting, when the facts simply do not bear that out. It is important that we use the latest evidence—
Nick Boles: Did you hear me say “mass industrial action”? I do not think I said that. I said it was very much a minority of industrial action.
Stephen Doughty
Q 405 Yes, but that is not the impression created by Ministers. In the media, we had Minister Hancock going out over the summer talking about—[Interruption.] I have here what Minister Hancock said over the summer. He was talking about having “hit squads” to deal with strikes. He said:
“We are ready to use the Cobra system if there are strikes. We are ready to respond”—
to a wave of industrial action. Talk about 1980s rhetoric—that is exactly what we are getting from Minister Hancock. Let me return to the facts. The Ministers should be familiar—
Matthew Hancock: Hold on.
Stephen Doughty
Q 406 Did you say those things, Minister?
Matthew Hancock: You are confusing the difference between headlines and what I said in that case.
Stephen Doughty
I have your exact quotes here, Minister.
Matthew Hancock: Hold on, because you have just accepted that you had moved away from the facts and are now having to return to them, and I look forward to that. There is one further thing that motivates some of the changes in this Bill, and I know it is not something that the Labour party cares much about.
Stephen Doughty
Q 407 Minister, did you say the things that were reported in the summer?
The Chair
Order.
Matthew Hancock: In the last Parliament, in the civil service, which is about a tenth of the public sector by headcount, the changes proposed in this Bill, which would be enabled as reserve powers in this Bill, saved over £50 million. I know that saving and looking after taxpayers’ money is something that different MPs care about more or less, but I think it is important—and I know it is important to the general public—that we run public services as effectively and efficiently as possible. Saving taxpayers’ money is important, and at the moment we do not know how much taxpayers’ money is spent.
Stephen Doughty
Q 408 Minister, we will come to the potential costs of the Bill in due course. Given that you are speaking about the public sector and that you wanted to return to facts, could you tell me how many working days were lost due to industrial action in the past six months, based on the latest figures from the Office for National Statistics? What proportion is that of the overall number of working days in the public sector?
Nick Boles: Sir Alan, you may remember, though of course you have not been chairing all the sessions, and other Committee members will certainly remember that, on the first day of evidence, we had a lively debate about the difference between direct impacts of days lost—we have always accepted and been very clear that the number of days lost is low, historically; that is very welcome—and the indirect impacts on people who have to completely reorganise their lives because the bus they use to get to work is not running or the school to which their children normally go of a morning is closed.
That is what we are focusing on, and we have been explicit: this is not trying to dramatically reduce the number of days lost to strikes. We have never said it is. We have acknowledged that the number of those days is low. We have said that we are trying to reduce the impact of strikes with low support on members of the public. Their days lost and their disruption is not measured by the ONS. I would love it to be measured by the ONS, though I suspect it might be quite challenging to capture those data. It is a real thing. You just have to ask the public what they think of our proposals, and they clearly support them.
Stephen Doughty
Q 409 So we are making a Bill based on evidence that the Minister admits does not exist. The British Chambers of Commerce and the Confederation of British Industry could not provide that evidence either. I have the facts: for the public administration, defence and social security sector, 145,400 working days were lost to strikes in the six months before August 2015, according to the latest ONS statistics. The total number of working days in a year is 393,580,000. The days lost to strikes are less than 1%; it is a tiny proportion.
Nick Boles: It will not come as a surprise to any member of the Committee that the Labour party is not interested in what the public think about the situations with which they are faced. This idea that everything important in life is captured in an ONS statistic is, frankly, perhaps what has led the Labour party to its current position. We take the view that when the public say they do not like being disrupted, they do not like having to miss work and they do not like having to look after their children mid-week because a strike that took place on 37% turnout closes the school their child goes to, we should pay attention. These proposals have been supported by a great majority of the public when tested in opinion polls, and we are doing the public’s bidding on this.
Stephen Doughty
Q 410 With respect, Minister, nobody likes being disrupted. We have heard repeatedly from witnesses that industrial action is always a last resort. We have also heard extensively about how unions put in extensive measures, particularly when there are health and safety issues and life and limb are at risk, to deal with that and ensure the public are not adversely affected. Whether you look at the TfL figures for the underground or the health and safety figures that Frances O’Grady mentioned, we know that the days lost or disrupted for citizens and customers in this country are vastly outnumbered by those lost due to causes other than industrial action. This is a huge sledgehammer to crack a relatively small nut.
I want to ask a few specific legal questions of Mr Boles and of Mr Hancock, given the impact on the areas he covers. We have heard clearly about the Bill’s potential conflict with the devolution settlement. We heard very clear evidence from both the Welsh and Scottish Governments that they would consider withholding legislative consent and that they believe this could lead to significant challenges. We have also heard about potential breaches of international conventions, let alone breaching principles of natural justice.
We talked about costs to the taxpayer. Given the cost to the taxpayer of, for example, the Supreme Court case that the Welsh Government were involved in with the UK Government over the Agricultural Wages Board, what estimate have the Law Officers made of the potential legal cost to the Government as a result of this legislation being challenged in its current form?
Nick Boles: I am glad to say the Law Officers have advised us that all the proposals in the Bill are entirely compatible with both devolution law and the European convention, so we are not anticipating legal costs to fight. If, of course, trade unions or others want to challenge, we will defend robustly our proposals, but we are absolutely satisfied that they abide by all the conventions that apply.
Stephen Doughty
Q 411 Do you plan to go back to them, given some of the evidence that has been presented and the very public positions of the Scottish and Welsh Governments?
Nick Boles: No, because, as I think you will remember, the representatives of the two Governments did accept, although grudgingly, that employment is currently a matter that is reserved to the UK Parliament, so it is entirely proper for us to make changes to employment rules and apply them across the United Kingdom. They might prefer it was otherwise, but they accepted that that is the current legal position.
The Chair
Ms O’Grady spoke on this matter and promised to provide written evidence to all Committee members, so I suspect it will come up again when line-by-line scrutiny gets under way.
Stephen Doughty
Q 412 On balloting, the Minister and other witnesses have referred extensively to the Speaker’s Commission on Digital Democracy in advancing an argument against the use of e-balloting that I think most members of the public would find absolutely nonsensical, given that if we want to increase participation, we should increase the methods by which people can participate. The evidence to the commission from the Open Rights Group, which I think influenced what the Minister has been saying, made it clear that it was based on a comparison between general election voting in polling stations and online voting. The evidence did not consider the current union context of postal ballots under the Trade Union and Labour Relations (Consolidation) Act 1992, so it is not relevant to the discussion of the Bill. Why does the Minister keep citing the Speaker’s Commission on Digital Democracy as evidence to stand in the way of e-balloting?
Nick Boles
I do not know why voting in a strike ballot is essentially different from voting in other elections. We have been very clear about our position and the Prime Minister has replied to Mr McCluskey’s letter to make it clear that, as I have said several times—I certainly said it in the wind-up on Second Reading—we do not have an in-principle objection to the exploration of alternative methods of voting, including e-balloting, but we have some practical concerns that were set out very well in the evidence from the Open Rights Group and also in other discussions about various forms of voter identity protection, voter fraud and the like. If those practical objections can be overcome, this question might well be revisited in future, but we are not currently satisfied that voting can be done safely online in these elections. That may well change.
Stephen Doughty
Q 413 Have you taken advice from the Electoral Reform Society? It advises that, in 2014 and 2015, the Nationwide building society, Yorkshire building society, the Co-operative Group, the British Medical Association, the Chartered Institute of Marketing, the Federation of Small Businesses and the Institute of Chartered Accountants in England and Wales—the list goes on and on—have all used these methods. Most members of the public listening to this debate will struggle to understand why the Government are not willing to come forward, have a sensible discussion about e-balloting and secure workplace balloting, to which I can see no objections whatever, and get to a solution.
Nick Boles
The hon. Gentleman has started that debate, Sir Alan, and I am sure that this is not the end of it. We will debate the different forms of voting and the practical objections, or otherwise, to them. All we are saying are that our concerns, which we have not just made up—they are shared by others, independent of Government, and were elaborated upon in the Speaker’s commission, which met only last year—have to be overcome. Frankly, internal elections in organisations to choose office-holders have to meet a much lower test than elections that involve the withdrawal of labour, the closure of services and great disruption to the public, so we are right to attach a higher level of demand—
Stephen Doughty
But it is fine for the annual general meetings of major financial organisations.
The Chair
I think we have tested this enough. We will move on, because we have very little time remaining and there are Members on both sides who want to ask questions. These issues will be tested in Committee when we reach that part of the Bill and more evidence is presented.
John Howell (Henley) (Con)
Q 414 It is clear from the evidence we have heard that a charge is being made that your proposals go against the International Labour Organisation. Would you like to deal with that now?
Nick Boles
There is no question but that representations have been made to the ILO, and within ILO discussions, that some of the restrictions that we propose could conflict with ILO provisions. What is clear is that the governing body of the ILO has never accepted those arguments. Having looked at all the governing body’s comments and decisions, we are entirely satisfied that nothing that we propose would conflict with them. Reference has been made to the European Economic and Social Committee; the truth is that we do not entirely accept its actions and status. It often says things that we and the governing body of the ILO do not agree with.
John Howell
Q 415 Like you, I listened intently to John Cridland’s evidence on Tuesday, but the intention of the questions we have been asking has not been to show that the Bill is a pro-business measure. What we have tried to show is the impact of that on parents, patients, carers and commuters. I think we have actually demonstrated that quite effectively. Would you like to comment on how that fits into the purpose of the Bill?
Nick Boles: That is absolutely right. We were always thinking, when drafting the Bill, about what to tell the public when a strike has happened to reassure them. The public support unions’ and individuals’ ability to strike, and they often would like to feel that they have the ability to avail themselves of that right in an extreme situation. There is absolutely no question about it; the public do not support something that withdraws people’s legitimate right to withdraw their labour in a case where they are being badly treated or a dispute that cannot be resolved otherwise. The public are frankly not very impressed when a strike happens that closes schools or bus services on an incredibly low turnout or a ballot that is several years old, and we are responding to that concern.
Chris Stephens
Q 416 Mr Boles, in relation to political funds, I want to outline my discomfort with dealing with this issue via the Trade Union Bill and not through other mechanisms in Parliament. Political funding should be dealt with across the board. I also point out to you that it is not just about those trade unions that fund the Labour party—those unions are in the minority, actually—but a trade union’s ability to campaign to change Government policies. The general secretary of the PCS made that point. Do you not think that it is inappropriate to deal with political funds only through this Bill and not to look at political funding arrangements across the board?
Nick Boles: I do not, and perhaps I could explain why. We have heard about the contributions that the political funds made to HOPE not hate. We certainly heard that on Second Reading. We have heard of other very worthwhile causes that are supported by unions’ political funds, but we live in a society, thank God, where there is an amazing proliferation of charities and campaign groups that are successfully and endlessly raising money from members of the public. They are lobbying for all sorts of changes in laws and practices here and around the world. It does not seem to me to be an unfair restriction or to be likely in any way to undermine the support for fantastic organisations, such as HOPE not hate, to say that if an individual wants to contribute part of their income towards an organisation, they should make an active choice to do so. That will not choke off any worthwhile campaigning activity in this country, where there is a huge array of it happening already.
Chris Stephens
Q 417 That breaches the Churchill convention, do you not agree? What you propose in the Bill breaches what has been referred to as the Churchill convention.
Nick Boles: Yes, there was a gentleman, a member of the Labour party, who gave extensive and fluent evidence earlier this morning, which we were all gripped by. He referred to a Churchill convention. Winston Churchill was a great man who said many great things, but not everything he said necessarily becomes a constitutional convention.
Chris Stephens
Q 418 Professor Ewing also referred to the Churchill convention.
Nick Boles: Yes, he would, wouldn’t he?
Chris Stephens
Q 419 Surely employers, when they are given notice of the ballot—currently, it is a seven-day period—at that point they know that there is a potential for industrial action, usually 45 days down the line. Why would you want to change the strike action period from seven days to 14?
Nick Boles: Again, this is a very revealing question and, I hope, a revealing answer. This is less about the employers than it is about the public. The public are not going to know, necessarily, because frankly we do not all read the papers or listen to the radio every day, when notice of a ballot has been given. What they will know is when a union that effectively controls a service on which they rely will have a strike. That is when the public, as colleagues of mine have adequately described, will know. Frankly, it could make a huge difference to the public if they had two weeks’ warning, rather than a week’s warning, to have to arrange emergency childcare because their school is going to close.
The Chair
I appeal to Members that we have 10 minutes or so left and five speakers. Could both Members and Ministers please be a bit more succinct?
Chris Stephens
Q 420 I will just ask Mr Hancock one question. Why have the devolved Administrations not been consulted or contacted by you in relation to facility time or check-off? Surely, they should have the right to maintain good industrial relations by keeping those things in place.
Matthew Hancock: The reason is that this area of policy is reserved, as confirmed by the Smith commission.
Chris Stephens
Q 421 Industrial relations is not reserved. That is the point. Surely, the Scottish and Welsh Governments have the right to make a policy decision on industrial relations in terms of check-off and facility time.
Matthew Hancock: This is a question of labour market policy. Labour market policy is reserved, as confirmed by Smith.
Chris Stephens
Q 422 So it is okay for a staff association to use check-off, but not a trade union?
Matthew Hancock: It is very different. There is a difference between deducting something from source when it is paid to an external and outside body compared with when it is part of a wider set of non-pecuniary remuneration such as a staff association or, indeed, a pension. These are two completely separate matters.
Chris Stephens
Q 423 Charities, credit unions—these all come off employees’ salaries. I am aware of many organisations that are external bodies that get check-off arrangements. Are you looking at them as well?
Matthew Hancock: No. It is perfectly reasonable. For instance, your pension, which is often deducted at source, is completely different. It is part of your non-cash benefits of being in work. If you look at each item on its merits, in a modern trade union system and a modern labour market—this is an area of labour market policy—it is perfectly reasonable and sensible that the relationship between a union and its members is just that and not one that is intermediated by the employer.
Chris Stephens
Q 424 I think the Minister needs to do more research on this.
The Chair
Let me appeal once more, finally, to Members. You only have a few minutes left and five Members want to ask questions. To be fair to each other, make it short and make the replies short, too.
Nusrat Ghani
Q 425 The Bill aims to modernise trade unions in just the way that work is modernised. Very few people now get a pay packet; the salary goes into your bank account. Surely, in that way, any worker should be able to choose whether they want to subscribe to a union or which union they want to subscribe to. That is why there needs to be a change in check-off.
Matthew Hancock: I agree with that and I will add something to it. It improves public protection because it ensures that it is an active choice of the member to be a member of the union, rather than getting the form in a pile of paperwork on day one, signing it off and the money always going out of your pay cheque before you receive it.
On check-off, I reassure Members about how sensible this change is by quoting the PCS union, which is the biggest union in the civil service. As of this morning, its website said:
“It’s quick and easy to sign up for direct debit—you can do it online in a couple of minutes… We are asking all members to do something very simple but very important—get ready to switch payment of your subs to direct debit. It only takes a few minutes”.
That demonstrates that this is not something that people should overreact to. Rather, it is a perfectly sensible change that has taken place largely already within the civil service. The PCS, which is the union that is mostly affected, confirms on its website that it is very simple and only takes a few minutes.
Jessica Morden
Q 426 In the previous session, we discussed the definition of important public services. From talking with Frances O’Grady, it seems that trade unions obviously are not clear who is going to be affected. Dave Prentis said he thought it was a “nightmare”, “ill defined” and would “lead to litigation”. Will we have a chance to debate these regulations and why have they had no consultation with you about what this will mean to them in practice?
Nick Boles: To correct you, we have had consultation, which is why it is not yet clear. The consultation only closed as the other consultations did. It is one of those funny things in government: you either get into trouble for not being specific, or you get into trouble for not having consulted. We wanted to say that we are clear about the sectors that this should apply to—health, education, transport, fire, nuclear decommissioning and border control. Then the question is, is it right that it should apply to anybody and everybody working within those sectors, whether in the private sectors, ancillary jobs or core jobs? Is there a practical way of narrowing down? We consulted on this point. We have had a lot of responses to the consultation. We will bring forward specific proposals before the legislation has received Royal Assent.
Jessica Morden
Q 427 It is just me, then. Why, then, have we not seen the draft regulations before now?
Nick Boles: Because we were waiting to analyse the very, very substantial response to the consultation that finished, I think, only at the beginning of September.
Edward Argar
Q 428 I have two very brief questions, the first of which is for the Minister for Skills. Minister, you have been very clear that you respect the right to strike, as we all do, and that this Bill does not, despite some alarmist suggestions, remove that right. The NASUWT actually acknowledged in its evidence that strikes would continue. Would it be a fair characterisation to say that it ensures that all the people and families currently at risk of having their daily and working lives significantly disrupted by strike action on a very low turnout will have a slightly more balanced set of protections to ensure that strikes have genuine support?
Nick Boles: Yes, exactly. The NASUWT should know well, because there have been strikes in the teaching profession on a very low turnout and on ancient ballots. Ultimately, that just really irritates people. They accept that they are going to be disrupted in a legitimate strike; they just want to know that it is at least recent and that enough people supported it.
Edward Argar
Q 429 I also have a quick question to the Minister for the Cabinet Office, reflecting on the comments that were attributed to him over the summer. My recollection—I hope he will correct me and clarify this—is that he was saying, quite rightly, that if there were a major strike that would significantly impact people’s daily and working lives, the Government would do what we would expect them to do and ensure that they put the British public first and do what they could to minimise the disruptions. Is that a fair characterisation of what you actually said, Minister?
Matthew Hancock: That is a fair characterisation. It is a remarkable position for the Labour party to come to and a point of political point scoring if they think it is wrong for a Government Minister to say that we will do all we can to protect the public from the disruption of major strikes. This was in the context of Len McCluskey calling for a general strike and a series of unions making a lot of noise about that. It is perfectly reasonable for the Government to use their co-ordinating facilities to ensure that the response to a strike—especially a generalised and widespread strike—is as well co-ordinated and reasonable as possible. The idea that a Government should not use such facilities is, frankly, ludicrous.
On the same point, I would add one other thing. This is an evidence session, so it is important to bring a few facts to bear. When Mr Doughty talked about the number of working days lost, it struck me that there was something odd about saying “over the last six months”, because that is a very unusual way of using statistics. It rankled because it did not quite ring true, and yesterday I read the labour market statistics that the Office for National Statistics published. In 2011, 1.39 million working days were lost from labour disputes. In 2014, 788,000 working days were lost. When there is further debate on this, which no doubt there will be in Committee, people should probably use the ONS statistics, rather than the odd attribution made by Mr Doughty.
The Chair
If both sides are not being helpful, I am going to be. I want to ensure that the Members who are left to ask questions can ask questions. If they are not replied to in this Committee, I will ask the two Ministers to go away and reply to them in writing. I am going to ask Members to be very succinct in what they are asking for.
Ian Mearns
Q 430 We are clearly in the throes of going through the Bill. Do you not think it is a bit odd, given that this is an evidence session, that we are going through the Committee stage of an important Bill without seeing the evidence that has been thrown up by the consultations that are clearly related to the enactment of the Bill? Is that not a bit perverse?
Nick Boles: No, because the consultations that we have been conducting have been about either the proposals that are not in the Bill—the thing that has got everyone very excited about restrictions on online campaigning was a question in a consultation about whether current offences sufficiently captured any criminality that might take place online. We have asked that question; the responses have come back; and we will be concluding and bringing that forward to the Committee. It has not been about evidence.
On the important services sectors, we have been very clear which sectors we think should be in the Bill—that was in our manifesto in most part. The only question has been: should it be all workers or some? That is a classic matter to settle through regulations, but we will be bringing forward our proposals before Royal Assent, so that everyone can discuss the detail of the regulations as well as the main measures in the Bill.
The Chair
Minister, I do not want you to reply orally to the following questions; I want you to reply in writing, if you can. That is the only way that we will get the questions in.
Ian Mearns
Q 431 You mentioned non-cash benefits of work. Would you not accept that being a member of a trade union brings non-cash benefits such as legal protection?
James Cartlidge
Q 432 I was merely going to quote Roy Rickhuss, the general secretary of Community, which includes a lot of steelworkers, who said on Tuesday to the Committee:
“I do believe a threshold of 50% plus one is fair and reasonable”.––[Official Report, Trade Union Public Bill Committee, 13 October 2015; c. 27, Q66.]
We heard today from Paul Kenny that his position was that he would negotiate and we heard from Mr McCluskey that he is willing—[Interruption.]
James Cartlidge
You get the point. There seems to be growing support for the proposal from some moderate voices.
Nick Boles: I think that is the first time that Len McCluskey has ever been described as a moderate—he might shoot you, Mr Cartlidge.
Jo Stevens
Q 433 I have a question and I would be very grateful for an answer in writing from the Minister for the Cabinet Office. The Bill will give powers to extend the facilities time cap to the private sector. Which private sector businesses do you intend to apply that facilities time cap to? Bear in mind that we heard evidence from John Cridland on Tuesday that private sector employers have no strong views or attach any importance to that.
Julie Elliott
Q 434 My question is to Minister Hancock. We heard evidence this afternoon that check-off actually makes a profit for employers in the public sector and figures were quoted about the numbers of workers who were employed as a result of the profit the public sector makes out of that. Will he answer in writing why he thinks it is correct to put people out of work as a result of removing the check-off facility, the obvious consequence of removing funding from the public sector?
Matthew Hancock: I dispute the premise of the question, but I will answer in writing.
Stephen Doughty
Q 435 Given what the Minister said, it would be very helpful for the Committee—perhaps you can arrange this, Sir Alan—to have a full compendium of the ONS labour market statistics, including all of the forms of industrial action and how those compare with days lost for other reasons. I think that the Minister is selectively quoting.
The Chair
Members, that is the end of today’s session. We are very grateful to everyone who participated and the final Ministers in particular.
Ordered, That further consideration be now adjourned.—(Stephen Barclay.)
Finance Bill (Fifth sitting)
(8 years, 6 months ago)
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The Committee divided: - Ayes: 14 / Noes: 10 - Question accordingly agreed to.
The Financial Secretary to the Treasury (Mr David Gauke)
On a point of order, Sir Roger. You will recall that in our proceedings on Tuesday, the hon. Member for Wolverhampton South West asked whether clause 28, relating to councillors’ expenses, would apply to bicycles. I wish to amend my answer as, contrary to what I said then, the exemption will apply where qualifying payments are made to a councillor for travel on their own bicycle, provided that the qualifying payments are below the statutory approved mileage rates. For bicycles the approved rate is currently 20p per mile. I said on Tuesday that I could see the issue would become a big campaign for the hon. Gentleman, so I congratulate him on meeting the objectives of that campaign before he even began it. I fear this may be an auspicious beginning to his Front-Bench career. I apologise to the Committee, and hope that the correction is helpful.
Clause 37
Changes in trading stock not made in course of trade
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider:
Clause 38 stand part.
Clause 39 stand part.
Mr Gauke
Clause 37 makes changes to ensure that the correct amount is used when calculating taxable profits when trading stock is transferred between related or connected parties. Clauses 38 and 39 are concerned with the same issue. Clause 38 makes similar changes to those in clause 37 but for cases where a trade ceases; clause 39 does likewise for cases where intangible fixed assets are transferred to a related party.
A number of situations can arise when trading stock is sold or transferred outside the course of trade. The stock can be transferred to a separate business run by the same person, or sold to a business run by a family member. The intention of the tax system is that the stock should always be brought into account at its market value when calculating the taxable profits from the trade—a well established principle that originated in a court judgment many years ago and was subsequently brought into legislation.
Some situations have been identified, however, in which the full market value of stock may not be brought into account. This can occur when transfer pricing rules take precedent over market value rules. Transfer pricing rules aim to identify and bring into account an arm’s length price for the stock. In many situations that will be the same as the market value, but that is not always the case. Where the transfer pricing rules apply, the market value rules are turned off; as a result, there is a risk that the transfer pricing rules will give an amount below market value when calculating profits for taxation, which was not the intention of the legislation. Similar issues have been identified where stock is valued when a trade ceases, and also where intangible fixed assets are transferred between related or connected parties.
Clause 37 is fairly simple. It removes the rule that states that if the transfer pricing rules apply the market value rules cannot also apply, so that where the transfer pricing rules apply in a way that does not give the full market value, the market value rules can be applied, adding the extra amount needed to bring the total up to market value. The true market value will therefore be brought into account when calculating taxable profits. Similar changes are made by clause 38 for cases where a trade ceases, and by clause 39 for cases where intangible fixed assets are transferred to a related or connected party.
Clause 37 removes an unintended consequence whereby two pieces of tax legislation do not, on occasion, work together properly. The changes will ensure that the correct amount is brought into account for tax, as intended by the legislation.
Rob Marris (Wolverhampton South West) (Lab)
As I understand it, all three clauses are anti-avoidance measures designed to clear up conflicting legislation on market price and transfer pricing. Transfer pricing has occasionally been used by companies immorally—not illegally, but immorally—to pay less tax, effectively, by not using the market price. As the three clauses are anti-avoidance measures, I invite my hon. Friends to support them.
Question put and agreed to.
Clause 37 accordingly ordered to stand part of the Bill.
Clauses 38 and 39 ordered to stand part of the Bill.
Clause 40
Carried interest
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 41 stand part.
New clause 2—Tax treatment of private equity fund managers’ pay—
‘(1) The Chancellor of the Exchequer shall, within six months of the passing of this Act, publish and lay before the House of Commons a report setting out proposals for amending the law to ensure that no element of the remuneration paid to an investment fund manager may be treated as a capital gain, and that such remuneration shall be treated for tax purposes wholly as income.
(2) For the purposes of this section, an “investment fund manager” is a person who performs investment management services directly or indirectly.’
Mr Gauke
Sir Roger, I will speak on clauses 40 and 41 and may remark on new clause 2 in anticipation of remarks we are likely to hear from the hon. Member for Kirkcaldy and Cowdenbeath.
Clause 40 makes changes to ensure that investment managers will pay at least 28% tax on the economic value of the carried interest they receive. Clause 41 makes a change to a definition of disguised management fees rules and supports the legislation in clause 40.
Investment fund managers are rewarded in a range of ways for their work in managing funds. One element of reward is straightforward income in the form of a fee. Hon. Members will recall that we took action in the spring 2015 Finance Act to ensure that fund managers could not disguise management fees as something else in order to pay less tax.
Another key element of the reward involves what is known as carried interest. Carried interest is the portion of the fund’s value that is allocated to the manager in return for their long-term services to the fund. The manager’s reward is therefore dependent on the performance of the fund. Aspects of the UK tax code meant it was possible for asset managers to reduce the effective tax rate payable by them on their carried interest awards; in particular, it was possible for fund managers to pay tax on amounts much lower than their actual economic gains.
The changes made by clause 40 mean that the full amount of carried interest will be charged to tax. Where the carried interest represents capital receipts, it will be taxed at 28% for higher rate and additional rate taxpayers. There will be no extra deduction on account of what is known as base cost shift, which would reduce the amount taxed in the hands of the manager. That will move the basis of the tax charge so that it is the economic gain that is subject to tax. Previously, the carried interest gain was calculated in accordance with the rules on capital gains tax for members of partnerships, but those rules could be interpreted and manipulated in such a way as to reduce significantly the amount of tax payable.
As part of their contract with a fund, an investment manager may be required to invest their own money on similar terms to those that apply to an external investor. To ensure that returns on those co-investments will not be impacted by the change, clause 41 redefines whether an amount is reasonably comparable to the return to external investors. The clause ensures that true arm’s length investments made by the fund manager will not be caught by the new rules.
The clause removes a quirk in the UK tax system that was being exploited in such a way that investment managers were not being taxed on their full economic gain. The changes ensure that capital gains tax will be payable at 28% on the capital element of carried interest received. I therefore hope that clauses 40 and 41 stand part of the Bill.
I would like to make one or two remarks about new clause 2 now, although I will of course respond to what the hon. Member for Kirkcaldy and Cowdenbeath says. New clause 2 proposes two measures: subsection (1) recommends a review after six months of what performance returns should be charged to income, and subsection (2) would define an investment fund manager for the purpose of the new clause.
I am sorry to disappoint Opposition Members, but we will not accept the new clause. It is not necessary to legislate for a review in six months, because the Government have already consulted in this area to ensure that awards will be charged to income tax when it is correct that they are, according to the activity of the fund. The consultation closed on 30 September and we will publish our response, along with any resulting draft legislation, in due course. I dare say that I will have more to say on new clause 2 later this morning, but I look forward to the debate on this group.
The Chair
Before I call Mr Mullin, let me explain for the edification of not only new Members but some who are longer in the tooth that the lead amendment—the one that is first on the selection list—is always called first and moved after its introduction. No other amendment is moved at that time. It is not a question of saying, “I would like to move this.”
New clauses are always taken at the end of a Bill, so while they are debated in the context of the subject matter of the Bill, they are moved—if moved at all—at the end of the Bill. So there will be no occasion yet, as Mr Mullin will wish to know, to move the new clause. However, he is absolutely entitled to speak to it, as I am about to invite him to do.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
Thank you very much, Sir Roger, for that clarification, which I am sure we all enjoyed. I wish I had fully understood it. [Laughter.]
“I was shocked to see that some of the very wealthiest people in the country have organised their tax affairs, and to be fair it’s within the tax laws, so that they were regularly paying virtually no income tax. And I don’t think that’s right.”
Those were the words of the Chancellor of the Exchequer in April 2012. He was right then, but he needs to do more about it now. We still find such loopholes continuing for the highest remunerated investment fund managers in the country. It may be a mere coincidence that some of them are significant donors to the Conservative party.
I recognise that the Government have moved a little way, but as is attested by page after page of technical explanation notes relating to these matters, we wait to see whether these modest proposals close or create further loopholes. I note the telling sentence in the explanatory notes, which says:
“HMRC will monitor the impact of these provisions”.
That is good. To ensure that we as legislators are fully informed, I am sure that our new clause, which calls for appropriate reporting, will be considered, notwithstanding the Minister’s recent comments.
The few thousand people who work in private equity firms are remarkably well remunerated. In the words of Stephen Feinberg, the head of PE firm Cerberus Capital in 2011:
“In general, I think that all of us are way overpaid in this business. It is almost embarrassing.”
The average European firm’s managing directors can expect to receive about £8 million in total personal compensation and the largest firms pay out even more. Even more junior directors and principals can expect to receive just over £1 million. Those figures will be relatively conservative for London, which has some of the highest paid private equity executives in London.
In some cases, executives have been able to bring tax rates on their carry-down even further by claiming entrepreneurs’ relief. As has been indicated already, private equity fund managers currently shrink their tax bills by arranging to pay 28% capital gains tax, rather than 45% income tax on their carried interest. Carried interest is in effect their remuneration for managing other people’s money and should therefore be taxed as income tax. The fund managers’ ability to pay capital gains tax instead of income tax also allows them to avoid paying national insurance contributions on a major part of their income.
Support for our measure comes from many quarters. Of particular interest to me is the fact that in May 2014 the OECD—not renowned for radical tax positions—released a raft of recommendations to tackle rising income inequality. Those include:
“Taxing as ordinary income all remuneration, including fringe benefits, carried interest arrangements, and stock options”.
The injustice in all this can be seen through a simple comparison. A senior matron in a local hospital or a middle manager in a local further education college on £47,000 a year will have an effective tax rate of about 32.2%, yet a senior private equity executive receiving about £8 million will pay, at most, 29.4%.
Christian Matheson (City of Chester) (Lab)
Does the hon. Gentleman agree that this is an excellent early opportunity for the Conservative party to put words into action by showing that it is, as it claims, the party of ordinary working people, as opposed to, for example, the political wing of the City of London?
Roger Mullin
I fully agree; indeed, I look forward to the Minister’s response in that regard. This may have been a missed opportunity that the Government now recognise and will want to correct.
Let me make another comparison. In my own constituency, my wonderful constituency manager, Lynda Holton, pays about the same effective tax rate as many fund managers who earn 100 to 200 times more than her. [Hon. Members: “Pay her more!”] When I was on the phone to her this morning, she did want me to say “my underpaid constituency manager”. And she is underpaid, but of course I am a devotee to the rules of the Independent Parliamentary Standards Authority in this regard. Surely it cannot be right that people on much more modest incomes have effective tax rates that are higher than those for some of the highest paid people in our society. I am prejudiced in favour of the simplification of tax as well as justice in tax. For both those reasons, I hope that the Government will respond positively to our new clause.
Rob Marris
Sir Roger, I did understand your explanation. As you know, I am new and old—a retread—and I found it very helpful; thank you.
Clauses 40 and 41 are essentially anti-avoidance measures, so hon. Members on the Opposition Benches welcome them. I welcome the fact that there will be no base cost shifting—something that is discussed in the pubs and clubs of Wolverhampton every night of the week; we are very keen on that. However—there is on occasion a “however”—we do not think that clauses 40 and 41 go far enough, because the carried interest is still treated as capital gains. It seems to us that treating carried interest as capital gains is a bad idea and the Government should not permit it. It certainly appears to be a tax loophole—again, not illegal, but immoral—and we think that it should be closed. I have considerable sympathy with the spirit and wording of new clause 2, which was spoken to very eloquently by the hon. Member for Kirkcaldy and Cowdenbeath.
Chris Philp (Croydon South) (Con)
Will the hon. Gentleman join me in welcoming the fact that the current Government have increased the tax rate on these kinds of capital gains from the 18% that it was at under the last Labour Government to 28% today? Would he also like to explain why, during its 13 years in office, the Labour party took no action in this area?
Rob Marris
Looking round the room, I think that one hon. Member, the Minister, will remember that I was not a member of the last Labour Government when I was previously in the House—[Interruption.] I was “supportive” says an hon. Member from a sedentary position; we will get on to that—[Hon. Members: “Ah!”]. The Minister is well aware of this. I am aware that Alistair Darling, when Chancellor of the Exchequer, cut the capital gains tax rate to 18%. I said at the time that I thought that that was wrong and I have to say now that I think that it was wrong. Furthermore, I have to say, bearing in mind the time at which it took place, that it is shocking that I do not recall in the debate on that change any debate about how it would affect positively many right hon. and hon. Members who at that time, within the rules, owned second properties in London, on which they would accrue a capital gain, and on that capital gain, they would pay a lower rate of 18%. The hon. Member for Croydon South is absolutely right to say that it was the wrong thing to do. Putting it up to 28% is a step in the right direction, but on these measures and these activities of investment fund managers, they should pay income tax on what most people, including me, would regard as income.
As I have said, I have considerable sympathy with new clause 2. I shall listen with great interest when the Minister speaks at greater length about the new clause—he said he would and it would be helpful. Having heard his side, I and my hon. Friends will make up our own minds. We are not only swayed by the arguments for equity, equality and justice; we also bear in mind, as the hon. Member for Kirkcaldy and Cowdenbeath mentioned in speaking to new clause 2, the OECD’s recommendation that such incomes should be treated as incomes and be subject to income tax, not treated as capital gain and subject to capital gain tax. To those of us who are not taxation experts, it appears that calling it a chargeable gain is a manoeuvre to lessen the tax paid by those who benefit from that form of remuneration.
Mr Gauke
I will respond to the remarks, not necessarily at length. The comments from the hon. Members for Kirkcaldy and Cowdenbeath and for Wolverhampton South West were pithy.
I shall deal straight away with the question of carried interest. Carried interest is a reward for a manager that is linked to the long-term performance and growth of the funds they manage. It is therefore capital in nature and should continue to be charged against capital gains tax. That has been the approach followed by Governments of both major parties for many years, and it is consistent with what happens in many other jurisdictions.
My hon. Friend the Member for Croydon South was right to say that capital gains tax was 18% when the Labour Government left office. If I remember correctly, it was possible for private equity managers to benefit from taper relief, so there was often an effective rate of 10% for many years under the Labour Government. There at least seems to be a consensus in the Committee that that was not the right approach. We believe we were right to take steps to change the capital gains tax rate, as we did at the beginning of the previous Parliament, but I would still argue that, as is the case in many jurisdictions, it is perfectly reasonable to treat carried interest as essentially a capital gain issue rather than an income issue. Of course, if any part of a manager’s rewards payments are properly regarded as income rather than capital, they should be charged to income tax. That is what drives the Government’s approach. We have launched a consultation to ensure that rewards that should be charged to income tax are always taxed in that way.
I will just pick up a couple of points made by the hon. Member for Kirkcaldy and Cowdenbeath. He is correct that national insurance is not chargeable on capital gains; it is payable only on earned income. However, it is not the case that entrepreneur’s relief can be accessed by investment managers, as the activity of the underlying fund is investing, not trading. Entrepreneur’s relief therefore does not apply in those circumstances.
If I were so inclined, I could quote extensive comments from the likes of Ed Balls, when he was a Treasury Minister, in support of the capital gains treatment of carried interest, and that was a period when the gap between income tax and capital gains tax was much greater, but I will spare the Committee that this morning. I am not sure that Ed Balls is a particular hero of the hon. Member for Wolverhampton South West, but our approach on carried interest is consistent with that of other countries and previous Governments.
We are determined to ensure that the rate at which private equity managers pay tax is never lower than their cleaners pay. That was the case under previous Governments, but it is not the case any more. Nor is it acceptable that what should be charged as income is in fact charged as capital gains. The Government have taken action on those points. I hope that provides reassurance to the Committee and I urge the hon. Member for Kirkcaldy and Cowdenbeath not to press new clause 2.
Chris Philp
May I add a further consideration? Given that, as the Minister said, most other countries treat carried interest as capital gain, if we adopted new clause 2 and started taxing it as income, there would be a significant risk that the population of fund managers in London would simply relocate elsewhere and the UK Exchequer would end up receiving less cash instead of more, thus increasing the tax burden on the rest of us.
Mr Gauke
My hon. Friend makes a good and important point. In thinking through the impact of the policy advocated by some Opposition Members, we need to understand the international implications and the implications for the UK’s competitiveness. Clearly, any assessment of the revenue effects would have to take account of what are likely to be significant behavioural responses. Claims of large revenue sums may be based on a static analysis, without an understanding that there is also a competitiveness point.
Rob Marris
The Minister mentioned Ed Balls. I think the Minister was on a Committee in the position that I am now in when Ed Balls was trumpeting the fact that London had become the financial centre of the world and had surpassed New York because of light-touch regulation. Some of us on the Labour Back Benches pointed out to him that that was a bad move that might end in tears. Sadly, our warnings were more than fulfilled in 2008, with the Lehman Brothers meltdown and what happened in this country. I caution the Minister not to go along with the argument made by the hon. Member for Croydon South that people will go offshore and so on. We should not have had light-touch regulation and we should be careful about regulation now.
Mr Gauke
Again, I think we can find some consensus. I will not dwell on this, Sir Roger, because we will depart from the business before us if we start to discuss the failures of the regulatory system in the run-up to the financial crash in 2008. However, that is why we have undertaken substantial reform of financial regulation in the UK.
We should want a competitive and thriving financial sector in this country, but we must ensure that it does not pose systemic risks for the UK economy as a whole. That is the challenge that the Chancellor has referred to as the British dilemma in having a major financial centre, with many benefits to us. It is important that the City thrives. Some of my ministerial colleagues and I have visited the City—I do not know whether everyone can say that. However, we must ensure that we have a regulatory system that does not impose greater risks on the overall taxpayer. There is a question of judgment here, and ensuring that we have a thriving private equity industry is something we should welcome.
Roger Mullin
To clarify, we do not intend to press the new clause or any of our earlier measures to a vote at this stage, but we will return to them on Report, when we will also take account of the remarks the Minister just made, which I will want to challenge.
Mr Gauke
I very much look forward to debating this matter in future. I have said what I wanted to say. The Government are determined to ensure that income is taxed as income, and we have narrowed the gap between the rates of income tax and capital gains tax. I think that we are getting the balance right and we see that in the clauses we are considering today.
Question put and agreed to.
Clause 40 accordingly ordered to stand part of the Bill.
Clause 41 ordered to stand part of the Bill.
The Chair
New clause 2 would have been taken at the end of the Bill, but Mr Mullin has indicated that he does not wish to move it, so that is now academic.
Clause 42
Vehicle excise duty
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 5—VED rate: impact on carbon dioxide emissions—
‘(1) The Chancellor of the Exchequer must, within two years of the passing of this Act, undertake a review of the impact of introducing a flat rate of Vehicle Excise Duty for all cars regardless of carbon dioxide emissions, except those with zero-emissions.
(2) The review must address (but need not be confined to):
(a) the impact on the UK car manufacturing industry, and ancillary industries, of introducing such a flat rate;
(b) the impact (including the environmental impact) of such a flat rate on sales of low-emissions vehicles; and
(c) the impact of such a flat rate on Exchequer revenue.
(3) For the purposes of this section, a “low-emissions vehicle” is a light passenger vehicle the carbon dioxide emissions of which exceed 0 g/km but do not exceed 100 g/km.
(4) The Chancellor of the Exchequer must promptly lay a report of the review before both Houses of Parliament.’
Mr Gauke
The clause reforms vehicle excise duty to support uptake of the cleanest cars. It also addresses the current system’s unfairness and sustainability challenges. The reformed VED will apply to cars first registered from 1 April 2017 onwards. The reformed tax will raise the same revenue as today, but the changes will ensure that revenues are sustainable in the long term. It supports creation of a new roads fund, so that from 2010 all revenue raised from VED in England will go into the fund, which will be invested directly back into the English strategic road network.
I will set out why the Government believe the current system needs changing. VED for post-2001 cars is currently banded according to carbon dioxide emissions for both first-year rates and annual standard rates. The current CO2 bands are out of date. They were introduced in 2008, when average new car emissions were 158 grams of CO2 per kilometre. Today they are 125 grams of CO2 per kilometre, so owners of many ordinary new family cars such as the Ford Fiesta now pay nothing or next to no VED, and by 2017 owners of nearly three quarters of new cars will pay only £30 a year or less. That has weakened the incentives for people to purchase the cleanest cars.
Clearly that level of revenue is unsustainable. It also creates unfairness. The average VED across all UK motorists is £166, whereas the average VED on a brand-new car is only £85, which will fall to £62 by 2017. Therefore, families who can only afford older cars are increasingly shouldering more of the tax burden than those who can afford to buy a new model every few years. Evidence from studying car purchase decisions across Europe suggests that the first-year rates of VED are the most effective in influencing people’s choices to buy efficient cars. VED annual standard rates are less effective, as people place little weight on future costs, so basing VED annual standard rates on CO2, as the current system does, has little impact on environmental outcomes, causes significant unfairness and makes revenues unsustainable.
Changes made by the clause maintain first-year VED rates based on CO2, but five new VED bands in the nought to 100 grams of CO2 per kilometre range will be created. The new bands will distinguish between zero-emission cars, plug-in and hybrid vehicles and efficient, conventionally fuelled cars. The very cleanest zero-emission cars that produce no air pollutants will pay nothing; rates on the most polluting cars will be increased. The changes strengthen the incentive to purchase the cleanest cars and incentivise continued improvement by manufacturers. For all subsequent years, the new VED system moves to a flat standard rate of £140 for all cars except zero-emission cars, which pay nothing. There will be a standard rate supplement of £310 for cars worth more than £40,000 to apply for the first five years on which the standard rate is paid.
These changes improve fairness for all motorists, strengthen environmental signals and sustain revenues in the long term. No one will pay more in tax than they do today for the car they already own. For cars in the new system, around 95% of motorists will pay less than the average £166 they pay today. The change will put revenues on a sustainable path, but the total car VED burden will not increase. The change updates and strengthens incentives to purchase the cleanest cars and particularly incentivises the uptake of fully zero-emission cars. Their uptake will drive the greatest reduction in carbon emissions reductions as well as air pollutants.
I would like to say a few words about new clause 5 before the hon. Member for Wolverhampton South West has a chance to speak on it. New clause 5 would require the Chancellor of the Exchequer, within two years of enactment, to undertake a review of the impact of introducing a flat rate of VED on the automotive sector, on emissions and on revenue. The new clause calls for such a review within two years of Royal Assent, but hon. Members should note that that would be only approximately eight months after the reforms actually came into effect.
The new clause is not necessary. The Chancellor already announced in the summer Budget that we will do precisely that kind of review as necessary, to assess how the arrangement works in practice and to ensure that the reforms continue to incentivise the cleanest cars. Adopting a flat annual rate of VED while strengthening support for the cleanest cars ensures the change is a fair, simple and sustainable solution able to provide long-term certainty for the UK car market.
Clause 42 strengthens incentives to purchase low-emission cars over efficient conventionally fuelled cars. It sustains VED revenues, allowing for the creation of the roads fund, and it will improve fairness for UK motorists. I stress that the proposed new clause is entirely unnecessary.
In conclusion, clause 42 reforms VED for cars first registered from 1 April 2017. It ensures the tax keeps pace with technological change, is fairer, simpler and sustainable in the long term, and it allows for the creation of a new roads fund, which will ensure our national road network gets the multibillion pound programme of investment it needs. I therefore urge that the clause stands part of the Bill, and hope to persuade the hon. Member for Wolverhampton South West not to press new clause 5.
Rob Marris
With your permission, Sir Roger, I will start by addressing clause 44 in the group, lest I forget it. Have I understood that correctly?
The Chair
No, this is clause 42. I had my rented teeth in when I read it out. I fully understand the hon. Gentleman’s confusion. Clause 42 and new clause 5 are to be debated now. The next batch includes clauses 43 and 44.
Rob Marris
Thank you for that clarification; I did not want that clause to be overlooked. I was doing quite well on the bicycles, and I thank the Minister for his clarification at the start of this session. I hope we can now make similar progress. I will be really motoring on clause 42. I think VED goes back to 1889. I want to thank my researcher Imogen Watson, who has done a sterling job in assisting me with the Bill, particularly clause 42.
I find the Minister’s explanation somewhat unconvincing. The first part of his explanation about equality and the fact that, if left unchanged, by 2017 75% of vehicles would be paying £30 or less VED a year, and that the average for vehicles is £166, but the average for new cars is £85. He seemed to jump from that to a suggestion that, because the banding based on CO2 introduced by the previous Labour Government was successful, we should now abandon it.
I fully understand the revenue arguments for that. That scheme was predicated on giving a tax break to car purchasers, whether individuals or companies, for buying a car that is less polluting—no vehicle is environmentally friendly. The scheme has been successful, as the Minister’s figures attest, but the Government now propose to abandon it.
I can see an argument for looking again at the vehicle excise duty scheme to protect Government revenue, and I can see an argument, particularly in the light of the admitted outrageous behaviour of the Volkswagen Group, for reconsidering whether CO2 should be the sole gas used in the metric for setting the vehicle excise duty that takes into account the pollution produced by a light passenger vehicle when in use. We could, for example, look at nitrogen oxides, commonly called NOx, as another component of pollution in a tax regime to dissuade purchasers of light passenger vehicles from buying vehicles that, through the tailpipe emissions of noxious gases other than CO2, cause hundreds of deaths in this city every year and thousands around the country. Clause 42 does not do that. It sticks to carbon dioxide, which, of course, is a key greenhouse gas, is bad for our climate and is produced in great quantities by light passenger vehicles around the world.
Where I differ significantly from the Minister—I will invite my hon. Friends to vote against clause 42 in a Division on this—is that he said today, unless I misheard, that the rates on the most polluting cars will be increased under the new regime, but that depends on the calculation. I remember what the Minister said about some research indicating that it is the first year of vehicle excise duty that has a particular impact on the purchasing decision. However, it may surprise the Committee to hear that I am an avid reader of The Daily Telegraph on Saturdays.
Rob Marris
The motoring column in the Morning Star is not quite as good as that in The Daily Telegraph, but then it is a big capitalist publication with lots of assets.
Few, if any, Opposition Members will be aware of this, but all Government Members who are avid readers of The Daily Telegraph on Saturdays will be aware—[Interruption.] It appears that Opposition Members are avid readers of all newspapers; my colleagues are so well informed. In the motoring section is Honest John, who answers queries from members of the public. He is so successful that he has a team of three others to help him. He responds to queries on car purchases, what tyres to use, and certain technical stuff that, frankly, I do not really understand.
Rob Marris
Handbrake turns if not U-turns. I suspect that Honest John has considerably more expertise than anybody in this room, and he is always clear that manufacturers aim to produce a car that will last at least seven years. Certain models last longer, and we all know that Jaguar Land Rover engines will last a lot longer than seven years because they are made in Wolverhampton and because they are a high-quality product. But the fact is that from 2017, assuming clause 42 is agreed to, the vehicle excise duty payable over seven years will not increase for the most polluting cars. It will decrease.
Rob Marris
It may be nice for the hon. Gentleman, but it will not be so nice for his great-grandchildren when they reap the havoc from climate change. That Audi emits 181 grams of CO2 per kilometre. Under the new scheme, assuming it is still on sale in March 2017, the car will move up from band I to band J, yet those emissions will receive a discount, as it were, of £60; the current seven-year cumulative duty would be £1,700 but under the new scheme it will be £1,640. The change is not huge, but it is a 3.5% change in the wrong direction.
A petrol Infiniti Crossover, of the Nissan luxury brand, which as far as I know is not made in this country, produces an antisocial 265 grams of CO2 per kilometre. It is currently in band M and liable for a seven-year duty of £4,130. Under the new regime, the charge will be £1,290 less, at £2,840—a 31% drop because of the interaction between the new vehicle excise duty regime and the £40,000 cost threshold, above which a different regime applies. That is a 31% drop in vehicle excise duty over a seven-year period for one of the most polluting light passenger vehicles currently on sale in the United Kingdom.
Now let us look at a Jaguar XF, which currently costs just under £50,000. It is now in band F because its CO2 emissions are 144 grams per kilometre, and costs £1,015 over seven years in vehicle excise duty. Under the new regime, if a car costs less than £40,000, it will move up—up being less polluting—to band H and cost £1,040 over seven years, an increase of £25, or £3.57 a year, as my wonderful researcher, Imogen Watson, tells me. But as for the Jaguar XF, fine vehicle as it is, no doubt with an engine made in Wolverhampton, because its price tag is over £40,000—and remember: its CO2 emissions are 144 grams per kilometre, which is still high, but nothing like the Infiniti’s 265 grams per kilometre—it will cost an extra £310 per year for the first five years, meaning that over seven years the duty will go up to a total of £2,730, an increase of £1,715 or 169%.
Now, I have nothing against the Infiniti—as far as I know I have never been in one—and Nissan is a fine manufacturer, but its luxury model emits 265 grams of CO2 per kilometre, and yet there will be a 31% drop in duty for it over the seven-year cumulative period, whereas the Jaguar is much less polluting, at 144 grams per kilometre, but its duty will increase by just under 169%. That cannot be right.
I urge the Government to think again. They should think about the pulmonary diseases from which thousands of people are dying already. Much—not all, but much—of that illness is arising because of vehicles, including light passenger vehicles. The Government also need to think again about the mixture of bad gases, to put it in lay terms, used as the metric for calculating vehicle excise duty. I also urge them to think again about the CO2 based regime they are proposing from 2017 onwards, because it cannot be that the successor to the greenest Government ever, which is a phrase that hon. Members have no doubt been waiting for me to utter, are moving in the wrong direction by jettisoning what has been—I will try to be dispassionate, although it was my Government who introduced it—a vehicle excise duty regime that has been extremely successful in lessening considerably the CO2 emissions from the fleet of light passenger vehicles in the United Kingdom.
I take the Minister’s point that the way in which new clause 5 is worded means that the review would happen eight months after the new clause would come into effect if the Government do not withdraw clause 42, as I hope they will. If he were to say a little more about the Chancellor’s remarks regarding a review of the impact and effect of clause 42, something to which he adverted in his remarks, I might be reassured and so not wish to press new clause 5 to a Division at the appropriate time. I therefore hope for some reassurance from the Minister; although, capable as he is, he can only rely on what the Chancellor of the Exchequer has said in that regard. I urge Members to vote against clause 42 if the Government do not withdraw it, as it will be bad for the economy, bad for the environment and bad for our children.
Christian Matheson
I feel I ought to add my congratulations to my hon. Friend on his research. He seems to be doing an impressive job. I was also impressed by the recommendation he gave about Honest John in The Daily Telegraph—I might cancel my Saturday subscription to the Morning Star and take the Telegraph instead.
My hon. Friend makes an important point. It is entirely legitimate to build environmental considerations into the taxation system if we want to change people’s habits in order to protect the environment, and the clause gives the impression that the Government are once again rolling back from their pledge to be the greenest Government ever and falling into bad old ways.
There is a way out. Perhaps the Minister should take a pause on the clause, as my hon. Friend suggested, because so much of it is predicated on emissions standards that have been thrown into turmoil by one company, which was not a British company—I do not believe that a British company would partake in such skulduggery. We cannot be absolutely sure that emissions standards across the industry are as they should be, because manufacturers in certain areas have been telling us, shall we say, statements that lack 100% veracity.
It is not only that motorists have been hoodwinked. The Government have potentially lost revenue as a result of emissions figures being massaged, with lower figures given. What are the Minister’s intentions, either through the Bill or perhaps more appropriately through another mechanism, on claiming back any revenue lost as a result of the Volkswagen scandal? The state has lost revenue as a result, so taxpayers have been hoodwinked as well as individual motorists, and although the Bill might not be the right mechanism for this, there must be a role for the Government in chasing down such manufacturers. Perhaps the Minister should not push through new measures linked to emissions standards until he and his colleagues in the Department for Transport are sure that a fair taxation system can be based on those standards. The Minister may wish to heed my hon. Friend’s good advice.
Mr Gauke
Let me try to respond to the points made. On the environmental incentives, consumer research suggests that VED is not an important factor in purchase decisions. Where VED has been shown to play a supportive role is in the highly visible first-year rates. In those we have retained, and indeed strengthened, the environmental signal: for example, first-year rates will double for the most polluting cars.
To drive real emissions reductions in transport, we need to incentivise the uptake of fully zero-emission cars such as pure electric cars. Owners of such cars will pay nothing in the VED system, while highly polluting cars will see a doubling of their rate. As more expensive cars are generally more polluting, it is the case that owners of such cars will continue to pay more than those of smaller, efficient cars through the standard rate supplement.
The point made by the hon. Member for Wolverhampton South West about the number of cars in the lowest band was correct. We are deliberately tightening the incentives at the bottom end. The current structure provides little incentive to buy a car much cleaner than 100 grams of CO2 per kilometre and we believe that such an incentive should be there. It is also worth making the point that nobody’s VED on their existing cars will go up. I made that point earlier, but I want to reiterate it.
Rob Marris
I take the Minister’s point about retrospection, which I referred to in my remarks. He may remember—although others will not—that at one point Alistair Darling, the Labour Chancellor of the Exchequer, did suggest a retrospective VED regime, and I led the Back-Bench rebellion among the Labour ranks and got him to drop it because it was unfair. I tried unsuccessfully in years gone by, under a Labour Government, to get swingeing increases in VED for the most polluting cars. In those days nine of the 10 most polluting light passenger vehicles were not 4x4s, as is commonly thought, but luxury brands such as Maserati. There was only one 4x4 in the top 10.
The Minister understandably referred to the deficit, which remains enormous under this Government, as it did under the previous, coalition Government. My hon. Friend the Member for City of Chester gave the Government a way out, because they do not propose to introduce this measure for another 18 months.
The Government should not be lowering the seven-year total vehicle excise duty on the most polluting cars and raising it considerably on the least polluting cars. I take the Minister’s point about the research to which he is privy regarding the effects of VED being most keenly felt, and therefore the biggest lever revenue-wise for the Government, on the year of purchase rather than in subsequent years. However, the two are not contradictory. It is not an either/or, particularly as the Government have, transparently and helpfully, put forward proposals for a change in regime in 18 months’ time. That is helpful for our debate and that helps prospective car purchasers take into account the change in regime. The clause could be changed on Report if the House so wants.
The Government could introduce a revised regime that protects Government revenue and which would address point about the deficit, to which the Minister reasonably adverted, and the Opposition’s concerns about the seven-year cumulative total dropping markedly—a 31% drop. That could be done by having a high first-year VED that influences purchasing decisions, as the Minister assures us is the case—I have no reason to doubt that; I do not know one way or the other—and dropping the crazy notion of a £140 flat rate thereafter, except for very expensive vehicles that cost more than £40,000, or those on the protected rate of £130.
The Minister and our society, but not purchasers of certain types of vehicles, can have our cake and eat it. We can have the first-year high vehicle excise duty to dissuade purchasers from wrecking the environment even more by buying a very polluting vehicle and we can have a continuing non-flat rate with progressively higher vehicle excise duty each year for more polluting vehicles. We can have both. That would protect revenue and help to lessen the damage to our environment. Again, I urge the Government to rethink, if not the whole scheme, then at least the £140 flat rate and the £130 protected rate for year two onwards. That would square the circle as the Minister seeks on revenue protection and pollution.
Question put, That the clause stand part of the Bill.
The Chair
The hon. Member for Wolverhampton South West will let us know what he wants to do about new clause 5 when we reach the appropriate moment.
Clause 44
Aggregates levy: restoration of exemptions
Question proposed, That the clause stand part of the Bill.
Mr Gauke
Clause 44 makes changes to ensure that the aggregates levy will no longer be due on less environmentally damaging sources of aggregate, including waste from slate, and ball and china clay production. It ensures that exemptions found lawful by the European Commission are reinstated, with retrospective effect from 1 April 2014. Finally, it changes the former shale aggregate exemption to reflect the European Commission’s decision that part of the exemption provided unlawful state aid.
The Government believe it is right that the aggregates levy is used to encourage more efficient quarrying by shifting demand towards less environmentally damaging sources of aggregate. The levy was therefore designed with exemptions for recycled aggregates and by-products of other industrial processes, such as slate or ball and china clay waste. However, following legal action from a UK trade association, the European Commission launched an investigation into several of the aggregates levy exemptions on state aid grounds. During the investigation, the Government were required to suspend the aggregates levy exemptions, which were removed by the Finance Act 2014. The Commission announced on 27 March 2015 that it had found all the exemptions lawful except for part of the shale exemption, namely for shale aggregate that is not produced as a by-product of untaxed materials.
Clause 44 will restore in full the exemptions that were suspended on 1 April 2014, except for the shale exemption. It repeals the removal of the levy exemptions in the 2014 Act, so that they are reinstated with effect from 1 April 2014, the date from which they were originally suspended. Businesses were able to stop paying the aggregates levy on materials covered by the reintroduced exemptions from 1 August 2015. They can also reclaim levies that they have paid on such materials since the exemptions were suspended. To provide clarity to businesses, details of the repayment process have been published by HMRC in a Revenue and Customs brief, ending the uncertainty that businesses such as slate quarries in Wales and ball and china clay quarries in south-west England have faced since the start of the Commission investigation. We estimate that some 120 businesses will be able to claim repayment of the levy for reinstated exemptions.
Clause 44 will also change the former shale exemption, with only the part of the exemption found lawful by the Commission being reinstated. A new exemption process for shale will be introduced so that only shale used for construction purposes, which includes shale aggregate, and shale produced as a by-product of other taxed materials will be taxable under the aggregates levy.
To conclude, clause 44 will reinstate the aggregates levy exemptions found lawful by the European Commission with retrospective effect from 1 April 2014 and change the former shale exemption in line with the Commission’s decision. It will restore the environmental aim of the levy to shift demand towards less environmentally damaging sources of aggregate by exempting such materials once again.
Rob Marris
It may surprise hon. Members to know that aggregates are dear to our heart in Wolverhampton, which was the site of the headquarters of Tarmac, as was, which grew to be one of the biggest aggregates companies in the European Union. I am pleased that the coalition Government were able to persuade the European Commission that the 2002 regime introduced by the then Labour Government was not unlawful state aid and that the decision made in March this year went in favour of our country. It is unsurprising that HMRC now wants to sort out the shouting, it being all over bar the shouting for the 120-odd companies that were caught up while that investigation was ongoing. The clause is an entirely sensible way of going about that, so I invite my hon. Friends not to oppose it.
Question put and agreed to.
Clause 44 accordingly ordered to stand part of the Bill.
Clause 46
International agreements to improve compliance: client notification
Mr Gauke
Clause 46 amends section 222 of the Finance Act 2013 to allow regulations to be made requiring financial institutions and tax advisers to provide their clients with information regarding the automatic exchange of information on financial accounts between tax authorities. The purpose of the power is to support the Government’s ongoing strategy for tackling offshore evasion.
The UK has been an international leader in implementing the automatic exchange of information agreements, including through our G8 presidency. In 2012 we were the first country to sign an enhanced automatic tax information exchange agreement with the United States. In 2013 we signed similar agreements with our Crown dependencies and overseas territories and launched an initiative for multilateral exchange on a global scale. We have since played a leading role in the development and early implementation of the new global standard, known as the common reporting standard or CRS.
To date, 95 countries and jurisdictions have committed to begin sending information automatically under the CRS in 2017 or 2018. As a result, HMRC will receive information on a wide range of financial accounts and investments, of both individuals and entities, from financial centres the world over. That represents a step change in HMRC’s ability to crack down on offshore tax evasion. To coincide with that substantial increase in the flow of information on offshore accounts, we will be introducing a significantly tougher approach towards those who continue to evade their taxes. We have been consulting on a range of enhanced penalties and criminal offences.
In advance of the CRS data being received and the ramping up of penalties, there will be a last chance for people to come forward voluntarily to pay their tax, interest and penalties. That is not a soft touch by any means, and prosecution remains an option for the worst offenders. However, providing notice and a final opportunity for voluntary disclosure is appropriate as voluntary disclosure is a practice we want to encourage. In addition to media campaigns and other communications, the powers introduced by the clause will support the disclosure process. We know from previous experience that direct communication with a customer about their accounts, whether from HMRC, their account provider or their adviser, can be an effective means of communication, getting the message across and influencing behaviour.
The power will allow notification requirements to be placed on businesses that are likely to have advised clients about offshore accounts or to have helped to set up offshore accounts, which includes financial intermediaries, tax advisers and law firms in the UK and overseas subsidiaries of such UK businesses. Under the regulations it will be possible to specify the timing, form or manner of notifications. The scope of the power allows us to enact regulations to ensure that notifications are effectively targeted and proportionate. To that end, we will be consulting closely with the financial services industry as the regulations are drawn up.
I am aware that regulations made under this power will impose burdens on financial institutions, although we do not expect such burdens to be large. However, it is right that financial institutions should play their part in rooting out evasion that increases the burden on honest taxpayers. I am pleased to report that stakeholders to whom we have spoken are generally supportive.
Our current expectation is that the regulations will require financial intermediaries and advisers to notify their UK customers or clients who are known to have, or are likely to have, an offshore account. The regulations are expected to require that they provide such customers with the following information: first, that data on offshore accounts are being collected and will be reported to HMRC from 2017 by 95 other tax authorities; secondly, that HMRC will open a final time-limited disclosure facility in 2016 to regularise their affairs, as necessary, before the data are received; and, thirdly, that there will be a range of penalties, including possible prosecution, for those who continue not to pay the tax they owe.
As noted, we are consulting closely with the industry as the regulations are drawn up to ensure that they are workable, proportionate and effective. We also intend to discuss the possible use of this power to support other tax authorities on a reciprocal basis. Regulations under clause 46 would allow us to require those within scope to notify clients with accounts in the UK who reside in another country about the exchange of data. We would propose to put in place such a requirement only if that other country did likewise as regards accounts held by UK residents within its territory.
This clause forms an important part of our wider strategy to tackle tax evasion. It is a targeted tool to inform offshore account holders both the significant amount of data that HMRC will receive on their financial accounts and make them aware of the opportunity to disclose and the significant penalties that can be applied if they do not. I therefore hope that the clause stands part of the Bill.
The Chair
Before I call the hon. Member for Wolverhampton South West, I have to remind hon. Members that unless and until the recommendation of the Chairman of Ways and Means is adopted by the House—it has not happened yet—the Chairman has no power to suspend the sitting at 1 o’clock. It is therefore up to the Government Chief Whip to move the Adjournment at the time that he feels appropriate; and if he does not do so, you do not get any lunch.
Rob Marris
Clause 46 is a step forward. I congratulate, with one cheer, the Government on that, but it is a small step. The common reporting standard comes in, I think, from 2017. The Government are talking now about another amnesty. How many amnesties can we have? Hon. Members will remember the CD of information on tax evaders that leaked out of Switzerland and was used constructively by several other countries in Europe to clamp down on those of their citizens who had illegally squirrelled away money in Switzerland. My recollection is that we had some kind of amnesty in the United Kingdom for such citizens and, lo and behold, when the Swiss papers—the Swiss bank records—were finally opened several months later, the money had all gone walkies and the amount that the Chancellor of the Exchequer got in was far less than he had been proudly trumpeting would be recovered by HMRC because of that information.
I fear that the same may happen in this case. The clause is a step forward. As for the regulations, which are being consulted on, I say to the Minister that I have not seen it anywhere—it may be somewhere—that this advice should be given in writing and recorded in writing by the financial adviser. That would be a step forward, but a greater step forward to protecting the Revenue from this offshoring avoidance, if not evasion, would be, as I said to the Committee two days ago, to have much more pressure from Her Majesty’s Government on transparency, on beneficial ownership and on the tax havens around the world, which assist aggressive tax avoidance and sometimes assist, perhaps unknowingly, with tax evasion. Many of those tax havens, whether Crown dependencies or otherwise, have a relationship with the United Kingdom. We have considerable leverage there and, in terms of what is disclosed publically, Her Majesty’s Government—both this Government and the previous, coalition Government—have not used that leverage as decisively as we on the Labour Benches would wish.
This externalising of costs to financial advisers, although understandable and welcome, is an externalising of costs, so the financial adviser has to remind the client of the penalties for undertaking certain types of financial transactions. Meanwhile, the number of staff at Her Majesty’s Revenue and Customs, who are one of the lines of defence against aggressive tax avoidance, is being slashed by one quarter, as I understand it, from 70,000 to 52,000 in the period 2010 to 2016. I would be delighted if the Minister could tell me that I have got that figure very wrong—I may have got it wrong slightly around the edge. If he could tell me that the number of HMRC staff is in fact being increased as part of a Government measure to increase markedly the number of staff who can help to crack down on aggressive tax avoidance and illegal tax evasion, I would be delighted, but I fear that he will not reassure me that there has been a major increase in staff. So, although the clause is a step in the right direction, it is nibbling around the edges. A much stronger and more effective way forward would be to have a larger number of properly trained HMRC staff investigating and applying pressure, and the legislation that already exists.
Mr Gauke
I welcome the support for the clause, even if the enthusiasm for it was somewhat limited. I will not dwell at length on the wider issues raised by the hon. Member for Wolverhampton South West, but it is worth pointing out that we have been a world leader in our pursuit of tax evaders. It is a driving force behind the implementation of the common reporting standard, to which all overseas territories and Crown dependencies have signed up. It is also worth pointing out that HMRC has the option to prosecute where it deems that suitable and where it is in the public interest. We are also currently consulting on tougher penalties, including new civil and criminal offences.
The common reporting standard will give HMRC access, for the first time, to data about accounts held by UK residents in over 90 countries, which will make a significant difference to HMRC’s ability to crack down on tax evasion. We are also toughening up the penalties for those engaged in tax evasion. HMRC has been consulting on new criminal offences for corporates and individuals and on new penalties, including applying to the underlying asset for individuals and enablers. The Government will report on the outcome of the consultations shortly. Disclosure facilities are one of a number of approaches—we are also introducing tougher sanctions against those who abuse the rules—and the disclosure facilities have brought in more than £2 billion in tax.
Rob Marris
Can the Minister say briefly what the Government are doing about disclosure of beneficial ownership?
Mr Gauke
The UK is introducing a central register that is publicly available. We are leading the way on that; I am not aware at the moment of any other jurisdictions elsewhere that are pursuing that. We believe that we should set the benchmark, so I am pleased that we as a country are leading the way.
The hon. Gentleman mentioned HMRC resources and so on. He referred to headcount. He will be aware of the dramatic reductions in headcount that occurred under the last Labour Government. In the last Parliament, we invested more than £1 billion in HMRC to tackle evasion, avoidance and non-compliance between 2010 and 2015. We made more than 40 changes in tax laws, closing loopholes and introducing major reforms to the UK tax system. I think most people would agree that it is much harder to avoid and evade taxes now than it was five years ago. Over this Parliament, up to 2020-21, we will be investing more than £800 million in funding in HMRC for matters relating to evasion and general non-compliance, which will help HMRC tackle evasion.
We have a proud record. It is not purely about staff numbers, although as it happens, enforcement and compliance numbers were not reduced in the last Parliament; the reductions in head count were generally within personal tax. It is not simply about headcount; it is about making use of technology and information and acting efficiently. We have a proud record on that front and we will continue in that vein. The clause is part of that process.
Question put and agreed to.
Clause 46 accordingly ordered to stand part of the Bill.
The Lord Commissioner of Her Majesty's Treasury (Mel Stride)
I beg to move,
That further consideration be now adjourned.
The Chair
Before I put the Question, in fairness to Members and, in particular, members of staff, let me say that the Committee has made—without indecent haste and having studied each clause thoroughly—very considerable progress. It is conceivable that we might get to the end of the Bill today. I am conscious of the fact that some hon. Members have considerable distances to travel and may therefore wish to adjourn at an earlier stage. That is entirely a matter for the usual channels; it is not for me to decide. Ordinarily, I would suspend the Committee for a comfort break after about three hours, but I want to make it plain to hon. Members and to staff—because they need to know as well—that I am perfectly prepared to stay in the Chair and see this through if that is the wish of the Committee, but that is a matter for the usual channels to consider.
Question put and agreed to.
Welfare Reform and Work Bill (Ninth sitting)
(8 years, 6 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 11 / Noes: 9 - Question accordingly agreed to.
The Committee divided: - Ayes: 11 / Noes: 9 - Question accordingly agreed to.
The Committee divided: - Ayes: 9 / Noes: 11 - Question accordingly negatived.
The Committee divided: - Ayes: 11 / Noes: 9 - Question accordingly agreed to.
The Chair
I call a poorly Emily Thornberry to move the amendment.
Clause 16
Loans for mortgage interest
Emily Thornberry (Islington South and Finsbury) (Lab)
I beg to move amendment 19, in clause 16, page 15, line 25, at end insert—
‘(7A) The waiting period before a person can apply for a loan under this section shall be 13 weeks.”
To require that the waiting period before an application for a loan for mortgage interest can be made is 13 weeks.
It is a pleasure to serve under your chairmanship, Mr Owen, ill or not.
Housing costs are never far away from our discussions in this Committee, and the clause brings the subject back into focus in a new and unexpected way. It is not at all clear to me what the Government are trying to achieve with this strange proposal. Support for mortgage interest—SMI—is a benefit that has been in existence in some form or another since 1948. It is the same age as the welfare state and the national health service and is paid exclusively to those on the lowest incomes. It is an important part of the social safety net, the entire principle of which is undermined when we start talking about replacing benefits with loans, which is what the proposal would do.
We have tabled mostly probing amendments to clauses 16 to 18. We do not believe that interest-bearing loans have a place in the social security system at all, but we have sought to highlight some of the most serious flaws in the proposal in the hope that the Government might reassure us that the consequences of the changes have been adequately thought through because, at first blush, it seems to us that they have not.
Towards the end of Tuesday’s sitting, we began to air some of the arguments about waiting periods. The Government made clear their intention to fix the waiting period for SMI loans at 39 weeks, which is three times its current level. That is without a doubt a substantial change. The waiting period was set at 13 weeks in 2008 when the global financial crisis prompted the then Labour Government to shorten the waiting period as part of a range of measures intended to prevent homeowners from going into arrears and facing repossession of their homes.
A research report published by the Department for Work and Pensions in 2011—I recommend the Minister reads it because it is very interesting and enlightening—says that the measures were successful. It stated that the changes
“resulted in more people being assisted, more fully and sooner. Borrowers accrued lower levels of arrears or none at all”
and
“lenders have been more willing to forbear and not seek possession.”
The report was published in 2011 and can be found on the Government’s DWP website.
Reversing the process by reverting to a 39-week waiting period is counterintuitive and likely to be counterproductive. It seems likely to increase the probability of homeowners facing repossession and homelessness when they fall on hard times. If the measure is about saving money, making things more difficult for people who find themselves falling on hard times when trying to buy their home and more likely that repossession will happen earlier is counterintuitive because of the costs to us all to look after the people whose homes have been repossessed. As we discussed on Tuesday, I was disappointed that there was no mention of that in the latest Government impact assessment.
The Government have not been able to provide any reassurance that there is a robust evidence base or, indeed, any evidence base at all for the contention that the charge will not risk an increase in homelessness. The best that the Minister could do on Tuesday was to tell us:
“The Council of Mortgage Lenders has not said that the 39-week wait will drive repossessions. That is an eminently respected organisation, and it would have said if it felt that was the case.”––[Official Report, Welfare Reform and Work Public Bill Committee, 12 October 2015; c. 360.]
I was interested and frankly surprised to hear that, and thought perhaps I had misheard it. I gave the Minister the benefit of the doubt at the time, but I am afraid I do not now. I wondered if the Council of Mortgage Lenders had looked into this in a bit more depth than the Government, so I went back and looked over its submission to the Committee. Imagine my surprise when I found that the view it had expressed on the waiting period was the exact opposite of what the Minister told us! For the sake of clarity, I will quote the submission at length, because it is a very helpful document:
“If the waiting time is extended, as planned, we believe that it will result in more cases of repossession as lenders will not be able to allow their customers to continue to accrue mortgage arrears over this period especially where the customer is unable to make any payment. Lenders already have to carefully balance allowing a person to remain in their home while not allowing their financial position to worsen. Extending the waiting time will only cause additional consumer detriment.”
There we are. The council is against it. The one piece of evidence that the Minister was able to cite in support of extending the waiting period turns out to be nothing of the kind.
The Government have to do better than that. In order to persuade Members on the Opposition Benches, the Government ought to make an effort to produce some evidence or opinion from someone apart from Government Ministers that shows that the proposal is a good idea, and that extending the waiting period for mortgage lenders to get repayment will not mean an increase in homelessness. That, I appreciate, is an uphill task, but it is one they have set themselves.
I appreciate that I am a cracked record on this, but we must go beyond the rhetoric and look at evidence. Social policy should be based on evidence, and I will be interested to hear whether there is any evidence to show that extending the period from 13 weeks to 39 weeks, as the Government want, will actually help anybody.
Hannah Bardell (Livingston) (SNP)
It is a pleasure to serve under your chairmanship once again, Mr Owen. The Scottish National party supports the intentions behind Labour’s amendment 19, because access to support must be available within 13 weeks and not the proposed 39 weeks.
According to Shelter, around £300 million per annum in SMI is “small” in terms of welfare spending, but it is very important:
“It covers the interest payments for around 200,000 home owners on their mortgages, meaning that they are less likely to be forced into having their home repossessed and, ultimately, to end up homeless.”
Shelter also says that SMI has
“tight eligibility criteria and is restricted to very low income households who are out of work, pensioners or sick or disabled. In fact, the overwhelming majority of recipients of SMI either qualify through pension credit or employment and support allowance.”
They are already some of the most vulnerable benefit claimants, so adding a further burden by turning the benefit into a loan is essentially giving with one hand and taking away with the other. We do not support the Government’s attack on the weakest by forcing more and more vulnerable people to take on the added burden of debt just to get out of hard times. How can we define that as welfare?
Amendment 19 would ensure a waiting period for applications by eligible claimants for support with mortgage interest of 13 weeks. That would offer protection against the Government increasing the waiting period, as they have done with statutory instrument No. 1647, which will increase the waiting period to 39 weeks from 1 April 2016. The explanatory memorandum to the instrument states:
“The provisions in this instrument introduce a 39 week waiting period for all working age claimants who are required to serve a waiting period before housing costs, including payment of eligible mortgage interest, can be paid.”
We do not want yet more financial pressure on benefit claimants due to having to wait more than half a year to receive financial help with their mortgage interest payments, let alone the added pressure of that financial help pushing them into further long-term debt when that benefit is turned into a loan. Has the Minister had discussions with the Scottish Government on the implications of that change from support to loan, which will impact the people of Scotland by pushing them into further debt? I would be grateful for information on that.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr Shailesh Vara)
It is a pleasure, Mr Owen, to serve under your chairmanship. First, may I clarify one point concerning the Council of Mortgage Lenders? The other day, I spoke in good faith and on the basis of the many regular meetings that we have with the CML during which the issue has not been raised at all. Indeed, Paul Smee, its director general, did not raise the issue when he was in a meeting with my ministerial colleague, the noble Lord Freud, when they met in early September. Although the CML has definitely said that it believes that the 39-week waiting period will drive repossessions, they are unable to quantify numbers of repossessions. We will continue to work with the CML to assess any such impact in terms of repossessions but we do not believe that these will be significant.
Mr Vara
I have said all I am going to say on that. I would like to make progress as there is a lot to be said this morning. I would rather not get bogged down on issues on which I have made proper statement.
Claimants receiving income-related benefits may claim help towards the cost of their mortgage interest payments. Other than those receiving state pension credit, claimants have to serve a waiting period before the entitlement to help with mortgage interest begins. During the period of 1997 to 2009—the announcement was made in 2008 but the actual impact was in 2009—the waiting period for the majority of working age claimants was 39 weeks. In January 2009, the then Government introduced temporary arrangements reducing the period to 13 weeks, specifically to deal with the economic circumstances and to give additional protection to those who lost their jobs during the recession. At the same time, the maximum value of the mortgage for which support was available—the capital limit—was doubled to £200,000.
It was announced in the summer Budget that, from April 2016, the waiting period will return to the pre-recession length of 39 weeks, but it is important to remember and to note that the higher capital limit of £200,000 will be maintained. Given that the 39-week period was perfectly satisfactory from 1997 to 2009, and that the reduction was introduced purely on a temporary basis to deal with the then economic circumstances, it is right and proper that we should now revert to the former system.
We are all aware that the economy is on the rise and of the huge benefit that the employment market has had. We have record employment levels. I pay tribute to my right hon. Friend the Minister for Employment for her contribution to ensuring the record level of employment that we have at the moment.
The amendment would remove the current broad powers in the Bill that allow the waiting period for SMI to be set out in regulations, replacing them with a narrowly defined 13-week waiting period.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The Government’s own impact assessment says that people of pension age are more likely to be affected by the change in SMI. Has there been an assessment to look at the impact that it may have on, for example, their ability to pay social care costs, and at what overlap there may be as a result of having an ageing population?
Mr Vara
May I first pay tribute to the hon. Lady? She has a formidable reputation in health matters, particularly in relation to elderly people. I understand that she co-chairs at least one all-party parliamentary group and chairs another. She comes with a formidable background and I take what she says with considerable respect.
It is important to remember that many pensioners will have had the assets for many years. That is actually the case. During that period, those assets will have appreciated considerably. What we are saying is that the loan will be paid only when the home is eventually sold. If there is no equity left, there will be nothing to pay back to the state. The provision is reasonable given that there are taxpayers who do not own their own home but whose taxes are being used to help others—pensioners or not—with a substantial asset whose value is continuing to appreciate and rise in value thanks to those taxes. As I said, no payment will be required until the property is sold at the end. If there is a balance left, that will be written off.
Emily Thornberry
The Minister asserts extraordinary things. I am sorry, but “We do not believe that this will increase repossessions; there is no evidence that it will” is not an answer to “Please provide the evidence that it won’t.” It is not an answer simply to assert that that will not happen, when common sense dictates that people who do not pay their mortgage for three times as long as before are likely to get into trouble with the lenders. It seems perfectly straightforward.
I will move on to that in a moment, but again, many of the points made by the Minister do not accord with what we know to be the case. As my hon. Friend the Member for Oldham East and Saddleworth said, only 15% of those who rely on the payment are on jobseeker’s allowance. Half of them are pensioners, and 40% of them are disabled, so they are unlikely to be able to get back into work. Social policy should be made on the basis of evidence rather than what one would like the situation to be. I will withdraw the amendment at this stage, but the Government should go back to the drawing board and think again. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendments made: 116, in clause 16, page 15, line 25, at end insert—
‘( ) The regulations may define “owner-occupier payment”.’
This amendment provides for regulations under clause 16 to define the term “owner-occupier payment”. The definition will make provision about mortgage interest payments and payments under alternative finance arrangements.
117, in clause 16, page 15, line 26, leave out subsection (8).—(Guy Opperman.)
This amendment removes definitions that are no longer needed for clause 16.
Emily Thornberry
I beg to move amendment 134, in clause 16, page 15, line 34, leave out subsection (11) and insert—
‘(11) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by resolution of, each House of Parliament.’
To require that regulations under this section must be subject to the affirmative resolution procedure.
The proposed extension of the waiting period is, in my view, just the tip of the iceberg of what we do not know about how the switch from benefit to loan will work in practice. As is often the case with this Government, the Bill contains little detail. The operation of the proposed scheme will instead be set out in regulations, which the Government intend to slip through on the nod, hoping that no one will be paying any attention. Amendment 134 would require that the regulations on the details of the proposed loan scheme under the clause be subject to the affirmative procedure. It is all about democracy.
As drafted, the Bill will allow the Government to implement significant changes to the scheme, including such important details as the loan provider, the rate of interest payable on the loan itself, the terms of repayment and any additional charges and fees, without the need to seek parliamentary approval. That is pretty extraordinary. Amendment 134 would require the regulations to be subject to a debate and a vote in both Houses, so that we may scrutinise the proposals properly and understand what we are being asked to agree to.
I have touched on some of the important details that have been left out of the Bill, some of which I wish to explore further to give a sense of the scale of the issue. The first and most immediately obvious question is, who will provide the loans? In 2011 the Department for Work and Pensions, when it called for evidence, indicated that it would be responsible for administering the scheme, but things seem to have changed. The Bill lists a number of potential providers, including deposit-taking institutions, insurers and local authorities, of which the DWP is not one. So we are left to guess.
The Bill also indicates that administrative fees and interest charges will be payable on loans, but it does not say what will be chargeable or how the rates of interest might be set. It seems ironic, and not at all fair, that when the Government are proposing that loans for mortgage interest should be subject to repayment with interest we do not have the detail in the Bill, so we are not in a position to make an informed judgment.
Another unanswered question is to do with the interaction between the proposed scheme and universal credit. If people continue to receive support for housing costs as part of their monthly universal credit payment, the Government are creating a recipe for confusion by telling claimants that part of their benefit has become an interest-bearing loan that they must at some point repay. We seem to be going in all sorts of different directions at once, and that would seem to undermine one of the core arguments that Ministers put forward in favour of universal credit, which is—I do not know if you remember this, Mr Owen, but we hear it all the time—that it is supposed to be simple. Well, that is not simple.
The Bill is silent on a number of other issues, many of them more complex, that will inevitably arise from the transition period. There are, for example, many features of support for mortgage interest that might make sense for a means-tested benefit, but which seem less appropriate when imposed as a condition for receipt of a loan. Time-limiting claims for those on jobseeker’s allowance is an obvious example. Putting a ceiling on the amount of eligible capital for which SMI is payable is another. The Government do not make it clear whether either of those features will be carried over to the loans that will replace SMI, nor have they made it clear what additional costs the loans may be able to cover.
The Minister recently tabled a number of amendments—we have just heard one—that will change the wording of the Bill to specify that loans will be able to cover “owner-occupier payments” and not only mortgage interest. It is as if a light has just gone on above the Minister’s head and he realises that more ought to be covered. It seems to reflect the Government’s realisation that the scheme has the scope to cover additional costs, such as essential repairs and service charges. For example, some of my pensioners in Bunhill might find themselves in difficulty and needing to go for SMI, but they also have huge service charges for the lifts and cleaning—many of them complain that the service charge is one of the biggest costs that they have—so the Government, at the last minute, have realised that they have to do something about that as well.
If that is the case, the recognition came late in the day, and it indicates that the full implications of the proposal are still not fully thought through. Here we are, in Committee, discussing such an important change—a change of principle, whereby we are asking people to take out a loan in order to pay off the interest on a loan—and the Government have simply not thought it through. We are talking about some of the most vulnerable people, and frankly, leaving aside the fact that the principle is wrong and the measure will not save a great deal of money, to add insult to injury, the Government have not even thought it out.
Finally, the Bill leaves out the crucial issue of the rate at which the loans will be payable. If the payments are too low to cover the full amount of interest owed—for example, if the Government, as they have suggested, use the Bank of England’s standard interest rate as a benchmark—the system will not serve its purpose, and it will increase the incentive for people to abandon their mortgages altogether. I do not know whether the Government have thought of that.
Whatever rate the Government settle on, that important detail deserves more in-depth discussion than the Committee has time for. It simply is not good governance for Ministers to pass legislation that allows them to make changes of such consequence with so little accountability. I hope, therefore, that Government Members will agree that Ministers need to be more forthcoming about their intentions on these issues before the Bill moves forward.
Mr Vara
The amendment would require the regulations made under clause 16 to be subject to the affirmative resolution procedure and to be approved by each House of Parliament. That is not necessary, since the fundamental principles we wish to achieve will have been clearly laid out during the Bill’s passage and debated in Parliament.
We had a call for evidence between December 2011 and February 2012. That is a number of years ago, and there has been debate since then. We have had oral evidence. It was between December 2011 and February 2012 that the idea of providing support for mortgage interest payments through a loan was first introduced, and the majority of responses were positive.
Emily Thornberry
I appreciate that the Minister is saying that he will be able to push the principle through using his majority, but the point I am trying to make is that the details make no sense, and the Government have not thought them through. Given that we have no indication of how the system will work, we need an opportunity to scrutinise it further in a Delegated Legislation Committee so that, frankly, we can give the Government a hand, because they are making a pig’s ear of this. The Minister talked about the call for evidence in 2011 and 2012, but the can was kicked down the road for many years, until after the Conservative party won the election, at which point the Government started pushing these things through without thinking through the consequences.
Mr Vara
There is a fundamental distinction between pushing forward an ideology, while ignoring everything and anything that may be put forward, no matter how sensible it is, and deciding to consider the evidence before the Committee and recognise the reality of Government—that it is important to have flexibility and regulations. That is why Departments across Whitehall have regulations: to be able to deal with the minutiae. It is also important to have that facility so that we can deal with things quickly and take a flexible attitude, rather than go through the cumbersome and time-consuming procedure of having everything approved in Parliament. That is simply not the way the real world works; it was not the way the Labour Government operated, it certainly was not the way the coalition Government operated, and it is certainly not the case now.
Debbie Abrahams
Can I push the Minister a little on interest rates and ask him to reflect on the experience with student loans? They started off in 2010 at a base rate, but they have now gone on to commercial rates. Allowing the issues in the Bill to be fully debated involves important considerations of transparency and openness.
Mr Vara
The hon. Lady makes a very good point, and she gives me the opportunity to make it clear that, unlike students, almost all the people we are talking about have an asset—a property. Therefore, the two groups are fundamentally different. The interest rate we charge will be what we will have paid to borrow the money, and that will depend on the gilt rates at the time. It is as straightforward as that.
The Government recognise the importance of helping owner-occupiers in times of need, and they remain committed to doing so. We are simply changing the nature of the support we provide so that in future the support will be paid to claimants in the form of a recoverable loan. We will recover the loan only when the house is sold, or earlier if individuals’ circumstances change and they are in a position to pay the money back.
Emily Thornberry
This was a probing amendment and an attempt to get more detail from the Government, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question put, That the clause, as amended, stand part of the Bill.
Emily Thornberry
I beg to move amendment 135, in clause 17, page 16, line 13, at end insert—
‘(4) The regulations must make provision for persons applying for a loan to have access to financial advice, which must be provided free of charge by an organisation independent of the qualifying lender.’
To require that those applying for a loan must have access to free and impartial financial advice which is independent of the lender to whom the application is made.
The amendment stands for itself; it is not complicated. It requires those applying for a loan to have access to free and impartial financial advice independent of the lender to whom the application is made. Given that the Department will not be dealing with the loans and will be asking various other organisations to be responsible for such loans, the amendment is consistent with the principle of having free and independent advice. When the coalition Government decided that people should be given access to their pension pots to buy a Lamborghini, they agreed that there should be independent advice before people made such important decisions, so we ask for poor pensioners and disabled people to be given independent advice before they are asked to take out loans.
Mr Vara
Clause 17 allows the Secretary of State to set out in regulations further details regarding the support for mortgage interest loan scheme, including the Secretary of State’s ability to contract out certain functions of the scheme to a third party, such as for the provision of financial advice. To be clear, the Department will administer and provide loans, but the advice and recovery will be provided by a third party, which will be chosen in an open and transparent way so that everyone can see that an independent arm’s length body is providing that advice.
Emily Thornberry
That is very interesting and helpful. Will the advice be free?
Mr Vara
That is a matter to be decided.
The hon. Lady’s amendment seeks to set parameters for the advice: who will provide it, and what it will entail. It is the Government’s intention that the regulations should set out the details of that advice, including the type of provider that we will appoint. We also intend for the advice provided to be broad, including available options other than taking out a loan, the implications of taking out a loan and whether people need to speak to potential beneficiaries of their will who might be affected by their decision, so that they can make a fully informed decision about whether to take out a loan. The amendment is restrictive, as it would prevent the Government from providing the broad advice necessary to claimants when they are considering taking out a loan. I hope that the hon. Lady will withdraw it.
Emily Thornberry
I will, but we will want to hear before Report whether the advice will be free. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Emily Thornberry
I beg to move amendment 136, in clause 17, page 16, line 13, at end insert—
‘(4) The regulations must provide for persons in receipt of Support for Mortgage interest at the time the regulations come into force to continue to receive these payments for a period of no less than 12 months before they are required to apply for a loan.’
To require that regulations setting out transitional protections for existing claimants of Support for Mortgage Interest must include provisions requiring payments to continue to be made on the basis of the current framework for at least 12 months following the date on which the regulations come into force, before they are expected to apply for a loan.
The Chair
With this it will be convenient to discuss Government new clause 13 and Government amendment 129.
Emily Thornberry
Amendment 136 asks for a 12-month grace period. The Government say that there will be a transitional period, and we think it right for existing claimants to be given 12 months in which to work out the implications of the new necessity of taking out a loan in order to pay off another loan. They need a certain period to get their house in order—to coin a phrase—and to get themselves proper advice. We ask for a 12-month grace period before they have to take out a loan.
Mr Vara
The hon. Lady’s amendment would allow existing claimants who are receiving help with the cost of their mortgage interest payments as a benefit to continue to receive that help for at least a year after the new loan scheme has been introduced by regulations. That would effectively allow existing claimants a grace period before they are required to decide whether to continue receiving support for their mortgage interest as a loan. Given that many such claimants have received help with their mortgage as a benefit for some time—in many cases, decades—it would simply be unfair to continue to provide them with help in the form of a benefit while new claimants are offered loans for the same purpose.
Emily Thornberry
Can the Minister point us to the evidence showing that some people have been receiving assistance for decades?
Mr Vara
I do not have that evidence to hand, but I am quite sure, given that the Department is responsible for paying the benefit, that it is there, and therefore that the measure is based on evidence. We all know people who have been on benefits for many years, in many cases for very good reasons, but it is a fact that many people out there have been on benefits for many years, so we must accept the reality of the situation.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
The Minister has suggested that the evidence exists but he does not have it to hand. Will he make some of it available to the Committee?
Mr Vara
First, I pay tribute to the hon. Gentleman, who has a distinguished record in the charitable sector. I take this opportunity to commend him and the hon. Member for Birmingham, Yardley, who also has a charitable background. Many people do such work but it gets very little recognition, so I am happy to give that recognition both to colleagues and to the hundreds of thousands of people working in that sector.
As for the evidence, it is abundantly clear that many millions of people are claiming benefit. It is also a fact that, in the election last May, this Government were given a mandate by the people of this country to put forward these reductions and cuts.
Debbie Abrahams
With respect, it is quite clear that the scale of the cuts being proposed was not one of the issues put to the public. The proposed cuts were published only after the general election, so for the record that is a very misleading statement to make—[Interruption.]
The Chair
Order. I am sure the Minister will correct things if he has unintentionally misled the Committee.
Mr Vara
I have not misled the Committee. It is a fact that the Government said that we would make £12 billion of reductions from the welfare budget, and it was on that basis that the people of this country, in their millions, voted for this Government as a majority Government and gave us the mandate to make those £12 billion of reductions in the welfare budget, as we are doing.
Neil Coyle
The Prime Minister also gave a commitment not to reduce tax credits, so I look forward to that commitment being implemented by the Government. To return to my previous point, where is the evidence for this Committee about decades-long benefit entitlement? [Interruption.]
The Chair
Order. The Minister has been asked a specific question. I do not want the debate to broaden out to the topic of the general election.
The Chair
Order. I am sure that the Minister is going to come back to the provisions before us.
The Chair
Order. Will the Minister take his seat for two seconds, please? Our debate is, I feel, repeating the general election debate. We have specific measures in front of us, and the Minister has been asked a question about evidence. If he could deal with that then move on, that would be useful.
Mr Vara
I have answered the question. It is a fact that millions of people are claiming benefits. We said specifically in our manifesto that there would be £12 billion of cuts. That is what the measure is all about.
Government new clause 13 will enable the Government to put in place, by way of regulations, a framework to support the transition from the current provision of support for mortgage interest as part of the individual’s benefit entitlement to the new system of loans. It is a simple transaction: instead of a benefit, it becomes a loan. The new clause will ensure that the Government can manage the introduction of support for mortgage interest as a loan—in particular, the migration to the new system of those currently receiving support for mortgage interest as a benefit—as they see fit.
In particular, the new clause includes provisions to allow a phased approach to the introduction of support for mortgage interest loans should that prove necessary. It makes it clear that regulations may make provisions about the timing of the transition to the loan system both for new claims and for individuals currently receiving support for mortgage interest as a benefit, and provides that that can be achieved by the issuing of notices to those individuals. Notices may be issued by reference to the area in which an individual lives or the type of qualifying benefit that the individual receives.
Our intention is that existing claimants should be notified well in advance both of the implementation of the changes and of when they will be affected, and that they should be provided with financial advice so that they are aware of the alternatives to receiving a loan and the implications of doing so. Advice will include discussion of the claimant’s financial position, both now and in future, confirming their understanding of the terms of the loan and encouraging them to engage with any beneficiaries there may be in due course.
Hannah Bardell
I will make this brief. In Scotland, people did not vote for the Conservative manifesto or the Conservatives’ austerity cuts—more than 50% voted for the SNP. However, on the specific point I asked about—I apologise if I missed the answer—what discussions has the Minister had on the clause with the Scottish Government? It will affect people in Scotland.
Mr Vara
I will happily answer that question. There has been contact at official level, and the engagement will certainly continue with the Administration in Scotland.
Government amendment 129 is a straightforward technical amendment, which will ensure that new clause 13 has the same extent as clauses 16 and 17 and apply to England, Wales and Scotland. I hope the hon. Member for Islington South and Finsbury will withdraw the amendment and accept Government new clause 13 and Government amendment 129.
Emily Thornberry
I have nothing to add, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendments made: 122, in clause 17, page 16, line 16, leave out “pay mortgage interest” and insert “make owner-occupier payments”.
Amendment 123, in clause 17, page 16, line 19, leave out “pay mortgage interest” and insert “make owner-occupier payments”.
Amendment 124, in clause 17, page 16, line 28, leave out
“in respect of the mortgage interest”
and insert
“in relation to which the amount is paid”.
Amendment 125, in clause 17, page 16, line 39, leave out from “is” to end of line 40 and insert
“liable to make owner-occupier payments under more than one agreement to make such payments.”
Amendment 126, in clause 17, page 16, line 46, leave out subsection (7).
Amendment 127, in clause 17, page 17, leave out lines 29 to 32.—(Guy Opperman.)
This amendment removes definitions that are no longer needed for clause 17.
Question put, That the clause, as amended, stand part of the Bill.
Emily Thornberry
I beg to move amendment 137, in clause 18, page 17, line 40, leave out “repealed.” and insert “amended as follows—
(a) insert at the end of subsection 1—
‘(1AA) In addition to the conditions set out in subsection 1 a “relevant beneficiary” must be an individual in receipt of pension credit (see section 1 of the State Pension Credit Act 2002).’”
To maintain Support for Mortgage Interest as a benefit for anyone in receipt of State Pension Credit and replace it with a loan only for those in receipt of income-based benefits for people of working age.
The Chair
With this it will be convenient to discuss amendment 138, in clause 18, page 17, line 41, leave out subsections (2) and (3).
This amendment is consequential to amendment 137.
Emily Thornberry
I do not know whether you were in Prime Minister’s questions yesterday, Mr Owen, but many of us were. We heard the Prime Minister say the Government were “very proud” to have kept all their promises to pensioners, but their actions in this Bill show that that is simply not right. The Opposition will make it perfectly clear to pensioners that the Government are going back on their promises to them.
Through the amendment, we want to exempt pensioners from the provisions in the clause. If there is a rationale for the policy, I have yet to work out what it is. On Tuesday, the Minister said—he has said this again today—that
“we believe it is wrong that taxpayers who are unable to afford to buy a home of their own are subsidising claimants who own their own homes.”––[Official Report, Welfare Reform and Work Public Bill Committee, 13 October 2015; c. 356.]
That is a very odd statement in the light of what the Government are doing generally. It is quite startling, because obviously the Minister has forgotten about the Government’s plan to extend the right to buy to housing association tenants. That policy, which the Government say is about supporting home ownership, comes with a price tag of £11.6 billion. That is almost equivalent to the savings that the Government say that they need to make in the welfare budget. Compared with that, SMI is absolute peanuts.
The last time the Government looked at the issue, which was in 2011, as we heard, the then Welfare Reform Minister said in a press release that the existing system was “not sustainable”. That is the justification for the measure and why we are going through it—the Government say that SMI is not affordable. At the time, the Government said, spending on SMI was about £400 million. Now it is £265 million a year. In three years’ time the cost will be £250 million. So far from being unsustainable, the cost is going down. If the Government’s definition of “unsustainable” is spending going down, as projected, we need to have a new dictionary.
In fact, the cost-effectiveness of SMI is one of its most distinguishing features. To quote my new favourite organisation, the Council of Mortgage Lenders, of which the Minister is also a fan, as we have heard, it is important that the Government should
“recognise the relative cost-effectiveness of SMI in preventing repossessions.”
The Government’s impact assessment for the Bill, which was the subject of some back and forth during Tuesday’s sitting, helpfully notes that the average weekly payment to working-age SMI claimants is £38 a week. For pensioners who receive the benefit, it is only £20 a week—so it is £20 a week to keep the roof over the head of a pensioner.
To put that into context, the DWP’s most recent figures show that the average weekly housing benefit payment is £95 a week. If there is even the slightest increase in the number of repossessions as a result of the changes that the Government are proposing, and homeless families have to go into privately rented housing and therefore need to claim housing benefit, we are clearly talking about false economies, because they will be moving into somewhere more expensive. Housing benefit is an average of £95 a week, but SMI for pensioners is £20 a week. That speaks for itself and shows the benefit of making social policy on the basis of evidence rather than rhetoric.
Part of my problem in understanding the Government’s intention is that the proposal seems to fit poorly with the values that they claim to hold. We have recently been through an election campaign—as the Minister was telling us—in which the Government repeatedly claimed that welfare reform would protect the most vulnerable. It was not always clear exactly what they meant by that, but what seemed never to be in doubt was that pensioners would be included, and it was certainly hoped that disabled people would be as well.
As the Government are well aware, the overwhelming majority of those who receive SMI are the very same people whom the Government had promised to protect. Almost half of those who receive SMI are pensioners, and about 40% are disabled. Only 15% are claiming JSA, which is a clear reflection of the fact that, in the majority of cases, the people who rely on SMI support will have fallen on hard times because of increasing age or disability and are therefore unlikely to return to work. A disproportionate number of them are single women.
Again, it is important to look at the evidence, and the evidence is that a disproportionate number of the people who are getting the very small sums of money that keep the roof over their head are single women. I do not know this, but I will make a leap and say that I presume we are talking about poor widows—women who have fallen on hard times and whose partners have died. The Government are taking £20 a week away from poor widows, and that might well result in those women losing their homes. Perhaps those women took their mortgage into retirement after their husband died, or perhaps they had to leave a well-paid job after developing long-term health problems. As we have heard, 40% of them are people with disabilities.
Whoever those people are, however, they are taxpayers. They have spent their entire life working and paying income tax and national insurance. They paid stamp duty when they bought their home, and they might be subject to inheritance tax when they die, although recent announcements suggest that that is less likely to be the case in future. People who receive SMI will have paid into the system and are entitled to expect that there will be a safety net for them when they need it. The Government’s proposal sets a disturbing precedent by turning a benefit to which those people will have contributed into a loan that could be clawed back at some future point. Adding insult to injury, they will be charged for the privilege.
The Prime Minister said yesterday:
“We are very proud to have kept all our promises to pensioners”.—[Official Report, 14 October 2015; Vol. 600, c. 314.]
That is not right. I cannot imagine what he means by that. The other point that my hon. Friend the Member for Oldham East and Saddleworth made is important. The Government have also failed to keep their promises in relation to social care and to what Dilnot called catastrophic costs, and have refused to give assistance to people who will need long-term care. People need to have a home to be able to sell it to pay for their social care.
The Government’s rhetoric again flies in all sorts of different directions. We hear high-flown talk from the Chancellor of the Exchequer about how important it is for people to be able to pass their savings and their money on to the next generation, and to be able, when they die, to hand over to the next generation without being clobbered by inheritance tax. There really does seem to be one rule for the rich and another for the poor. Widows who need £20 a week will have that taken away from them. They will be expected to take out a loan in order to pay off the interest, and will be charged to do so. It is cruel.
Amendment 138, which is consequential to amendment 137, provides that SMI will continue to be paid to low-income pensioners as a non-refundable benefit.
Neil Coyle
My hon. Friend is making a really solid point about the Government’s rhetoric. It is typical of the Government to create a false divide between taxpayers and those in receipt of benefits, as we have discussed in Committee previously. The Government seem to assume that the two do not overlap at all. As my hon. Friend has already pointed out, those who have put into the system for many years will find that the system is not there to support them, and we will now be charging them to draw down what they have contributed over the years. It is typical of a Government who are out of touch with ordinary working people.
Emily Thornberry
I could not agree more, and I thank my hon. Friend. I would go even further: I think that the welfare state and the principles on which we built it are one of the things we should be proud of about being British, and that is being fundamentally undermined by nasty little clauses such as this one. The Government should be ashamed. The Opposition will certainly fight it.
As I have said, amendment 138 is consequential to amendment 137, which will provide for SMI to continue to be paid to low-income pensioners as a non-refundable benefit. If the Government wish to go ahead and convert the benefit into a loan for working-age people, that is an idea that we can debate separately, because that is a different matter, but for pensioners who are unable to work there should be different considerations. If someone is coming to the end of their life and is not expected to work any more—that is what being a pensioner is—or if they are disabled, circumstances ought to be different. If someone is of working age and on jobseeker’s allowance, there might be a different argument—I have yet to be persuaded, but I appreciate that they might be a different group. However, as we have heard, most of the people affected by this nasty little clause will be pensioners.
If pensioners are to consider the Government’s promises worth the paper they are written on, Ministers should go back to the drawing board and rethink this cruel and unnecessary proposal. It is unnecessary because, in the great scheme of £12 billion, how much money are the Government really saving? It is an amount of money that is going down and down, and it is a fraction of a percentage point of the money that is to be saved.
The measure is a mistake. I hope that the Minister is listening—we are trying to help and the Government are making a profound mistake. I will press amendment 137 to a vote. If Conservative Members really believe that they cannot bring themselves to find, from a £120 billion welfare budget, £20 a week to help poor widows not lose their homes, the public have a right to know where the Government stand.
Mr Vara
We have heard a lengthy and passionate speech, the bottom line of which is, “Can we make an exception for pensioners?” As I have said before, we are talking about pensioners who have an asset, probably the biggest and most valuable asset that they have—the biggest asset that most people have is their home. That asset will appreciate in value. There is an element of fairness involved in the measure, as well as ensuring that we make some savings, and it will save £250 million.
I come back to the fundamental point: we are talking about individuals who have an asset that is being subsidised by the taxpayer. Many of those taxpayers do not have such an asset of their own. It is important to recognise that the proposed system is almost the same as the existing system, save that the benefit is converted into a loan that is payable on sale of the valuable asset or, to the extent that there is nothing left in the equity, the Government will write off the balance. All the care, attention and other benefits that pensioners receive will continue.
Emily Thornberry
I hear what the Minister is saying, but his difficulty is that it flies in the face of what the Government are doing for people who are being helped to buy their housing association homes, a measure that will cost £11.6 billion. People—taxpayers—who do not own their own homes are contributing to the £11.6 billion pot that will help housing association tenants to buy. SMI is chickenfeed compared with the amount of money that the Government are using to subsidise that.
Mr Vara
If £250 million is chickenfeed, to quote what the hon. Lady said, I am afraid that people reading our proceedings in Hansard will take a deep breath and say, “This is what those people think of £0.25 billion.” The consequence of several such chickenfeed decisions is the mess that the country is in now.
Neil Coyle
Given what the Minister has said about the economic competence of the Government before last, will he remind us of the savings projected for employment and support allowance and housing benefit in the previous Parliament and whether they were met?
Mr Vara
I do not have those figures to hand, but I am happy to obtain them and write to the hon. Gentleman. He is seeking to make a name for himself. On Tuesday he sought to do so by calling other Members names. Today he seeks to be clever by asking questions, which are important, but which he knows will get a written answer.
The amendment will not make a difference. This is all about fairness.
Debbie Abrahams
I want to push the Minister again. The context of the clause is so important given that the Government have reneged on their commitment to cap social care costs. There has been no assessment of that. During the summer, the Government said that they would not be pushing forward with the Dilnot figures—actually, slightly different figures from the Dilnot ones—and the cap on care costs of £70,000-odd. That is not going to happen. We can add all that together, but it does not seem to have been considered at all by the Government.
Mr Vara
It has been considered. There will be a minimal overlap between the DWP loans and the Department of Health deferred payment arrangements for social care. Those people expected to avail themselves of a deferred social care payment are likely to be mortgage-free or to have income levels above the benefit threshold and so would not qualify for SMI loans. [Interruption.] We will have to agree to disagree. Simply, the bottom line is that the measure is about fairness—fairness for taxpayers. We have to recognise that pensioners have an asset that appreciates, although they are not expected to make any repayment until that asset is sold.
Emily Thornberry
The answers we have heard are profoundly disappointing, and they will be disappointing to the most vulnerable pensioners throughout the country who have paid into a system and who deserve better from the Government.
Neil Coyle
Does my hon. Friend agree that the Minister is making a mockery of the Government’s supposed commitment to protect the disabled and pensioners, which is what they claimed? The Government seem to be relying on a low number of people being affected by the measure to hide their false pretence.
Emily Thornberry
That is absolutely right. Of course, for people who are affected, it will not matter whether the number is a low one—their life will be profoundly affected by the changes made in the Bill. A relatively small amount of money is involved. I appreciate that huge numbers of people will not be affected, but that does not change the principle, the justice or the unfairness to the individual concerned. We will not withdraw the amendment and will press it to a vote.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss Government amendments 142, 143, 145, 146, 170, 173, and 163 to 168.
Mr Vara
The social rent clauses relate to the Government’s commitment to achieve a reduction in rents for social housing of 1% a year over four years. That will be good for the tenants and for the taxpayer, saving £1.445 billion by 2020-21. The amendments are the consequence of the Government listening to points made since the Bill was published by social landlords, local government and housing bodies, among others. We hope our amendments address some of the issues raised. The amendments in the group are either concerned with issues of clarification or make small drafting changes.
Amendments 141 and 143 clarify that the 1% rent reduction applies in each relevant year, which is to say, each of the four years from 2016. Amendments 142 and 146, taken together, clarify that the reduction relates to the amount of rent that is payable by a tenant in respect of a year—not the amount that is actually paid by the tenant, which is to recognise the reality that those figures might differ. Amendment 145 is a minor drafting point to clarify that the “amount” relates to the “amount of rent”. Amendment 170 is to simplify the drafting of clause 19 and amendment 173 is a drafting change to the clause to provide that a relevant year for a private registered provider whose practice is not an April start to a rent year will be determined in relation to the rent practice for the number of tenancies, not tenants.
Amendment 163 deals with the potential failures of providers to comply with the clause. It seeks to give the regulator of social housing the appropriate grounds on which to exercise monitoring and enforcement powers. With this amendment we have had regard to how the Housing and Regeneration Act 2008 established such powers and the need to avoid any confusion in how the regulator should exercise its power.
Neil Coyle
The Minister mentioned that he had had meetings with or representations from social housing associations. Will he clarify how many housing associations supported the measures proposed by the Government? How many housing associations have outlined to the Minister and the Department the risk that they might have to close some of the housing they provide as a result of the measure?
Mr Vara
Let me put things into context. We have spoken with a lot of organisations—I have a list at the back of my file and am happy to read out some of the names if necessary. The context of the measure is that it is part of the Government’s £12 billion welfare reduction. We made that absolutely clear to the country at the time of the general election. The people of the country voted democratically, in their millions, and we have a mandate to make those cuts. That is the reality of the position, which might be something that the Opposition do not like—
Mr Vara
I will not give way for the moment; I will finish my answer. The reality is that that is the position.
We have, however, spoken with a lot of people. I simply refer to the comments made by David Orr, the chief executive of the National Housing Federation, when he give oral evidence before the Committee. Most of us were at that sitting on Tuesday 15 September 2015. In response to a question from my hon. Friend the Member for Sutton and Cheam, Mr Orr said:
“I think that, in truth, there is no sector anywhere that is not still capable of making further efficiency savings. That is as true in our sector as it is anywhere else.”
Neil Coyle
Riverside Housing Association has said that
“a year on year rent reduction would make this element of our business loss making.”
St Mungo’s has said that
“the requirement to reduce rents in social housing in England by one per cent per year for four years will result in the loss of supported housing schemes for homeless and vulnerable people.”
The Homes and Communities Agency has estimated that those services save the taxpayer £640 million per year. Where is the saving in the longer term if those services do not exist?
Mr Vara
I am sorry that the hon. Gentleman was so keen to ask his question and so busy thinking about it that he paid no attention to what I was saying. He referred to one organisation. I referred to the comments of the chief executive of the National Housing Federation. We have done our homework, and estimate that we will save nearly £1.5 billion, as I have said.
Amendment 163 provides that a failure or risk of failure to comply with clause 19 is not to be, of itself, a ground for exercising certain monitoring and enforcement powers under part 2 of the 2008 Act, by removing clause 22(1) and (2) from the Bill as introduced. The practical effect of the amendment is that, before exercising those powers, the regulator must satisfy the specific grounds relevant to each power in chapters 6 and 7 of the 2008 Act, as amended by clause 22(3) to (8) of the Bill. Amendments 164 to 168 insert the correct title of the Bill into certain provisions.
Debbie Abrahams
This is my first opportunity to say that it is lovely to see you in the Chair today, Mr Owen. I will speak more fully on the clause when we discuss the Opposition amendments, but I will comment on this first group of amendments. With respect to the Minister, the Government have tabled 42—I have just counted them—amendments, so we can hardly say that they have done their homework. I am afraid that that reflects the nature of the Bill as a whole, which has been made up on the hoof. There has been no thorough assessment. I will go through my concerns about the lack of assessment and the evidence we have heard about today on the impact the Bill will have not just on the viability of housing associations but on their ability to provide affordable housing.
The Minister quoted the National Housing Federation. Housing associations have been working incredibly hard to ensure that they have a going concern and are able to afford to invest in the development of affordable housing. One issue with the clause is that it would threaten their viability and ability to borrow at low interest rates. Moody’s, the credit rating agency for the 44 social landlords, has said:
“A traditional credit strength of English [housing associations] has been the predictability of the policy environment…This stability has been eroded by the sudden removal of the rent-setting formula, which was preceded by limited consultation.”
If anything, the measure will make it even harder. I will speak more fully on the implications, not just for housing associations.
Peter Dowd (Bootle) (Lab)
My hon. Friend referred to the fact that this 1% reduction will have a significant effect. Is she aware that Riverside Housing Association has estimated it will lose £3.9 billion nationally?
Debbie Abrahams
My hon. Friend makes a very good point. I am indeed aware of that. When preparing for this part of the Bill, I was inundated with concerns from my local housing associations about what it will mean for their bottom line and how it will affect their ability to build. Later this afternoon, I will go over what the potential loss of income means for housing associations and local government.
Mr Vara
I simply say to the hon. Lady that we have done what Governments are often accused of not doing: we have listened. Since the Bill was published, we engaged with the relevant communities and stakeholders and listened to their concerns. As will become apparent as the debate progresses, we have made changes that will clarify the position better for those concerned.
I am sorry if the Government, in listening to communities with a view to making the Bill better, are now being accused of doing wrong.
Amendment 141 agreed to.
Amendments made: 142, in clause 19, page 18, line 12, after first “in” insert “respect of”.
This amendment and amendment 146 make clear that the rent in question is the rent due to be paid in respect of a given period.
Amendment 143, in clause 19, page 18, line 12, leave out first “a” and insert “that”—(Guy Opperman.)
The Chair
With this it will be convenient to discuss Government amendments 169, 171, 147, 148, 150 to 153, and 157 to 160.
Mr Vara
This group of amendments deals with some important elements of the rent-setting process. Amendment 144 provides flexibility to registered providers to set reductions in rent of more than the required 1%.
Amendment 169 provides that the rent reductions must be applied on a pro rata basis if the tenant’s tenancy comes to an end part way through a relevant year. The same principle applies if the rent reduction provisions cease to apply to a tenant part way through a year because an exception under clause 20 or an exemption under clause 21 no longer applies. The amendment therefore makes it clear for registered providers that, in the circumstances specified, the rent reduction should apply on a pro rata basis.
Amendment 171 is an essential amendment that clarifies a number of important points. Proposed new subsection (3) provides that the amount payable by the tenant in the preceding 12 months is to be treated as having been the greater of: the amount that would have been payable if the rent at 8 July 2015 had applied during those 12 months; or, if the Secretary of State consents to the use of a different permitted review day, the amount of rent that would have been payable if the rent on the permitted review day had applied during those 12 months. We expect to use the flexibility to grant providers whose normal rent review date is after 8 July permission to use an alternative date as the reference date when calculating reductions, providing there is no evidence that the provider in question has manipulated his rent review date or implemented rent rises after 8 July 2015 in order to avoid the effects of the rent reduction.
Proposed new subsection (3A) clarifies that the Secretary of State’s consent for an alternative permitted review date may be for a particular case or for a description of cases. It is likely that the Secretary of State will issue a general consent covering typical cases. Proposed new subsection (3B) clarifies that, if a tenant was a tenant on 8 July 2015 and continues as a tenant of the same social housing until the beginning of the first relevant year, they will be treated, for the purpose of clause 19(1), as if they had been a tenant for the 12 months preceding the first relevant year—whether or not that is in fact the case—in order to establish the baseline of the rent on which the reductions will then apply.
Naz Shah (Bradford West) (Lab)
It is great pleasure to serve under your chairmanship, Mr Owen. Will the Minister highlight whether service charges are subject to the 1% cut and explain the process for introducing rent reductions for tenants when rents changes are not usually announced until April?
Mr Vara
My answers to those questions will come subsequently. There are other issues at hand and I am more than happy to address the matter raised by the hon. Member for Bradford West. That comes up in another section and I will happily deal with it then.
Amendments 147 and 148 clarify that clause 19(7), which allows an alternative relevant year, applies only to private registered providers. Unlike local authorities, whose budgeting and rent reviews are carried out on a traditional financial year cycle, starting 1 April, the housing association sector practice regarding rent review dates varies. Clause 19(7) therefore enables the use of a different relevant year, where the provider’s rent review date for the greater number of its tenancies is not 1 April. The amendments ensure that that subsection applies only to private registered providers, as local authorities do not need that flexibility.
Amendments 150 to 152 on private registered providers, and amendments 157 to 159 on local authorities, provide some important flexibility in the levels of permissible rent once an exemption has been granted by direction. They modify the provision in clause 21 for limited exemptions from the rent reduction requirement, which means that providers will have the flexibility to make a greater reduction in the rent than that set out in the direction.
Amendment l53, which is for private registered providers, and amendment 160, which is for local authorities, deal with circumstances where a registered provider may need to be able to increase rents but it is not appropriate to completely exempt the provider. They allow the regulator and the Secretary of State to issue a direction setting a maximum threshold up to which a provider can increase rents. The amendments give the regulator and the Secretary of State the tools they need to support registered providers in difficult circumstances while protecting hard-working tenants from excessive increases.
Debbie Abrahams
Again, these are technical amendments, which we have no specific comment on. My earlier remarks apply. It is good that the Government are in listening mode. It is just a shame that that was not done when the Bill was drafted. As I said, I will discuss my particular issues with the clause later this afternoon.
Mr Vara
I take on board the hon. Lady’s comments. Clearly, the matter will come in for further debate and I am sure that other members of the Committee will wish to comment. Mr Owen, I ask the forbearance of you and the Committee as a number of technical amendments need to be dealt with.
Amendment 144 agreed to.
Ordered, That further consideration be now adjourned—(Guy Opperman.)
Finance Bill (Sixth sitting)
(8 years, 6 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 14 / Noes: 8 - Question accordingly agreed to.
The Chair
With this it will be convenient to discuss the following:
Government amendments 11 and 12.
That schedule 8 be the Eighth schedule to the Bill.
The Financial Secretary to the Treasury (Mr David Gauke)
I welcome you back to the Chair this afternoon, Sir Roger; I am delighted to see you.
Clause 47 and schedule 8 introduce new means for Her Majesty’s Revenue and Customs to recover tax and tax credit debts from debtors who refuse to pay. The changes will allow HMRC to recover debts directly from the debtor’s bank and building society accounts, subject to a number of robust safeguards. That will help to level the playing field between hard-working, honest taxpayers and those who seek to play the system and avoid paying debts that they can afford to pay. It will also help to modernise HMRC’s debt collection powers, bringing them in line with those of many other advanced economies.
I would like briefly to explain the context for the changes being introduced, as it is important to understand how this new method of enforcement will complement HMRC’s existing procedures. The UK is a very tax-compliant nation. Last year, £518 billion revenue was paid by 50 million taxpayers. Around 90% of that was paid on time. The remaining 10%—around £50 billion—was not paid on time and was perceived by HMRC as a debt. Most of those with a debt simply need an additional reminder before they pay. Others are businesses and individuals who may be temporarily struggling, unable to pay the full amount that they owe.
HMRC takes a sympathetic approach to those who are in genuine financial difficulty. That includes support through time to pay agreements, allowing people to pay their tax in instalments over a longer time period. There are others who find themselves in a vulnerable position—perhaps because they are going through a difficult time in their lives—and find it a struggle to keep on top of everyday matters such as tax. In those cases, HMRC will provide the additional support that is required. For example, HMRC has established its well-received needs enhanced support service, which offers the appropriate support, including home visits, for HMRC customers who are struggling with their obligations. However, a persistent minority do not respond to HMRC’s repeated attempts at contact and do not require additional help. It is for that group that HMRC uses stronger powers as a last resort.
We should be clear that this measure will apply to the small population of debtors who are refusing to pay what they owe, despite having significant assets in their bank and building society accounts. Almost half of them have more than £20,000 in readily available cash, but are choosing not to pay their tax and tax credit debts. It cannot be fair that some should be able to abuse the process in that way. It is not fair on the people who pay what they owe on time and it imposes costs that are borne by every taxpayer.
The changes made by clause 47 and schedule 8 will allow HMRC to recover funds directly from the bank and building society accounts of those who refuse to pay. In explaining how those changes work, I would like to address three misconceptions about this power.
First, I will address the perception that there is no independent oversight of this power, that HMRC will act as “judge and jury”, and that it cannot be trusted to use these powers responsibly. Independent oversight is embedded in the legislation and debtors will have the opportunity to appeal against the use of the power. Before the stage of direct recovery is reached, taxpayers have the right to challenge and appeal against their liabilities before they go overdue and become debts. These existing rights are unaffected by the changes, and this power will only ever apply to established debts once the appeal process has concluded.
Furthermore, if a “hold notice” is sent to the debtor’s bank or building society to hold moneys up to the value of the debt owed, there is a 30-day window before any funds can be transferred to HMRC. During this time, the debtor can object to HMRC on specified grounds. If they do not agree with HMRC’s decision, they can appeal to a county court.
I understand that some people would argue that a court judgment should always be obtained before that power is used. However, the purpose of this measure is to focus on those who seek to frustrate HMRC’s attempts to recover money owed, including debtors who rely on HMRC taking up costly and lengthy interventions before they agree to settle. These debtors owe, on average, around £7,000 in tax or tax credit debts, and almost half of them have more than £20,000 in their bank and building society accounts.
The power will also be used transparently. HMRC will publish regular statistics on its use, including the number of objections and appeals that are filed and upheld. The Government have also committed HMRC to lay a report before Parliament once the power has been in use for two years.
Secondly, I will address the concern that HMRC will make mistakes and use this power against innocent parties. This is not a measure that will be used lightly, and every case will be assessed by a dedicated team before any action is authorised. However, the Government have listened carefully to the concerns that have been raised, including by those representing vulnerable members of the public and by respected members of the tax agent community. In response to their feedback, the Government have committed that every person whose debts are considered for direct recovery will receive a guaranteed visit from an HMRC officer. This will be an opportunity for debtors to have a face-to-face conversation about their debt, confirm beyond any reasonable doubt their identity and give them another opportunity to pay.
If a payment in instalments is appropriate, that route will be offered, and if the debtor is identified as vulnerable, or needs additional support, they will be referred to a specialist unit and explicitly ruled out of debt recovery through this power.
Finally, I will address the misconception that the moment a tax bill is owed, HMRC will be able to “dip its hands” into someone’s bank account. That could not be further from the truth. As I have explained, this power is a “bolt-on” at the end of a very long process during which HMRC will take every opportunity to recover the established debt that is owed. The power will target those who are making an active decision to delay paying what they owe. Out of the 50 million taxpayers that it serves, HMRC expects to use this power in around 11,000 cases per year. It will only apply to those who have debts of more than £1,000, and a minimum level of £5,000 in funds will be safeguarded in the debtor’s accounts to cover essential living expenses.
I turn to the Government amendments. We have always been clear that vulnerable customers should not be affected by the powers. Our amendments are a result of continued collaboration with the tax agent community and the voluntary and community sector, and I put on the record my gratitude for the advice and expert insight that those groups have given to us. Through this process of open and transparent consultation, we are now able to demonstrate in legislation the strength of the Government’s commitment to protecting vulnerable customers.
Amendment 12 puts a duty on HMRC officers to consider whether debtors may be put at a particular disadvantage if this power is applied to them, and it imposes a positive obligation on officers to ensure that the power is not used inappropriately in those circumstances. Further, amendment 11 requires that HMRC affirms in writing that officers have complied with those requirements.
The amendments make clear our commitment to protecting vulnerable members of society, and we will continue to work with experts to identify best vulnerable taxpayers and provide the most appropriate support.
I hope that clause 47, schedule 8 and amendments 11 and 12 stand part of the Bill.
Rob Marris (Wolverhampton South West) (Lab)
I thank the Minister for that helpful explanation. I place on record also my thanks to the ever helpful Chartered Institute of Taxation for its briefing, with which no doubt the Minister is familiar.
I understand the safeguards, which will, through the amendments, be increased: the debt must be more than £1,000; there will be a face-to-face visit from HMRC; there will be particular reference to and recording of a decision on whether HMRC thinks that the allegedly recalcitrant taxpayer is vulnerable; they must have sufficient money in their account; and there are 30 days in which to object before any money is transferred from the account to HMRC. During the 30-day period, the individual can apply for a court order to prevent HMRC from transferring money without itself seeking a court order, and HMRC must leave £5,000 in the account of the allegedly recalcitrant taxpayer.
There are still problems—for example, with those who hold joint accounts. The innocent or uninvestigated party to a joint account will have to make their objections known to HMRC. The Chartered Institute of Taxation says that
“we do question whether it is right for a totally innocent joint account holder to have to make such representations to stop HMRC accessing their money in the mistaken belief that it belongs to someone else.”
There are safeguards and reassurances, and my critique is not that HMRC would be acting as judge and jury, which the Minister, helpfully, was at pains to say would not be the case. That is not the substance of my critique; it is not why I will ask my hon. Friends to vote against the clause and the consequent schedule in a Division. I oppose clause 47 because in effect it makes one rule for the Government and one rule for everyone else.
I am aware that under what used to be called distraint, HMRC has since, I think, 1970 had powers to seize goods and chattels, not money from bank accounts. The Chancellor of the Exchequer, when mentioning the prospective clause in the Budget on 19 March 2014, said:
“I am increasing the budget of Her Majesty’s Revenue and Customs to tackle non-compliance.”—[Official Report, 19 March 2014; Vol. 577, c. 785.]
I am not entirely sure, despite the Minister’s reassurances this morning, that that has been the case. It certainly needs to be the case.
I did take the opportunity to look at the helpful consultation document on this prospective power; I congratulate the Government on having a long and thorough consultation on the power, and so they should have done because it is quite draconian and quite new. The introduction to the consultation document was written by the then Exchequer Secretary to the Treasury, the hon. Member for South West Hertfordshire, who has deservedly had a promotion. On page 2 of the document, it gives this as one reason for wishing HMRC to have the power to take money out of people’s bank accounts without a court order:
“The current processes for recovering debts…can be costly”.
In paragraph 2.31 on page 9 of the document, it repeats that rationale, saying that
“a county court judgment…can be a slow and expensive process.”
I am aware of that. I and at least two of my hon. Friends knocked around the county courts for a number of years as solicitors. The process can indeed be slow and costly, but the speed and cost of county court processes in England and Wales are in part down to the Government. The Government decide on the resources available to the court system for the administration of civil justice; we are talking about civil matters, not criminal matters. The Government of the day provide or do not provide the money and make or do not make the rules, in liaison with the judges, who write what used to be called the white book and the green book before the Woolf proposals of 1999. The Government have a big hand not only in funding the courts, but in setting the framework within which the courts and their very able staff, judges and advocates operate.
Christian Matheson (City of Chester) (Lab)
My hon. Friend the Member for Wolverhampton South West has given his usual detailed and forensic objections to the clause. Mine are a little bit more about the Minister’s tone and presentation. First, I associate myself with his comments about those who seek to evade their taxes. I have no time for such people. If people are able to pay their taxes, they should do so. That is the price that we pay for a having a stable society that is paid for by taxation. I have no time for people who are, frankly, freeloading on the hard work of others. The hon. Gentleman was correct on that.
My concern with the Minister’s presentation is the tone compared with the tone of the previous discussion about compliance for those who seek to hold their assets offshore. In the discussion on that clause, the hon. Gentleman seemed to suggest that enforcement action would be very much a last resort—a route that HMRC would not necessarily want to go down. With this measure, the enforcement action seems to be a whole lot tougher. If I am doing the hon. Gentleman a disservice, I apologise; this is a genuine point. The impression I get is that once again it seems easier, and the Government seem more ready, to go after, shall we say, the little man, rather than those who have substantial assets elsewhere. However unacceptable individual tax evasion is, I cannot help but wonder whether the real issue we face is large-scale corporate avoidance of tax. I realise that is not part of the clause, Sir Roger, but I hope you will allow me a little latitude. The Government are focusing on small individuals rather than tackling the big issues of corporate taxation. If I am doing the Minister a disservice, I apologise, but I felt that the tone of his presentation focused too much on smaller-scale enforcement.
Mark Garnier (Wyre Forest) (Con)
I sympathise with some of what the hon. Gentleman says, but his party surely cannot be advocating that just because someone is a small person, they can avoid paying taxes. The Government are bringing in measures to tackle every level of tax avoidance. Clearly, some cases will be more obvious than others, but where someone has blindingly obviously not paid tax and has a cash asset, rather than go to the huge trouble and cost of taking them to court, seizing their assets and selling those assets, why is this the wrong thing to do? Surely we must collect tax from everybody who owes it.
Christian Matheson
I certainly do not think we should not take enforcement action against people who can but do not pay their taxes. That is not the issue. I agree with much of what the hon. Member for Wyre Forest said about enforcement for non-payers. I was slightly concerned that in the tone of what the Minister said, there was much more zeal for enforcement action at the lower end of the market than at the higher end. If that is a mistaken impression, I apologise, but there has to be more focus on large-scale corporate taxation, which may of course be covered in other parts of the Bill.
Mr Gauke
Let me say first that I am disappointed the Labour party will not be supporting the measure. I reiterate: these powers will be used at the end of an exhaustive process, whereby there will have been many opportunities for a debtor to have paid the debt and to have challenged the application of the debt to them. It is a measure targeted at individuals and businesses that are making an active decision not to pay or to delay paying the money they owe, despite having sufficient funds in their accounts and despite attempts by HMRC to contact them and encourage them to put their affairs in order. We must remember that we are talking about allowing £5,000 or so to remain in an account, so that people have the sums to make ends meet in the short term. I accept that court action is appropriate in some circumstances, but it imposes significant costs on both the debtor and HMRC.
Mr Gauke
Let me make this point first, which is not an immaterial one: whatever reforms the hon. Member for Wolverhampton South West proposes for the courts system, there are risks of people gaming the system. For example, they might believe that HMRC will not want to go to court to recover a certain level of debt. It is widely acknowledged that there has been robust engagement with interested parties, and as a Government we have listened constructively to those interested parties to make reforms. In circumstances where substantial safeguards are put in place, this is a proportionate measure.
Rob Marris
I appreciate that there can be unrecovered costs, but if HMRC takes on a court case and wins, it is not the case, as the Minister said in his opening remarks, that the costs are borne by every taxpayer, unless the paying party—the losing taxpayer—does not in fact meet that judgment debt. The costs will be paid by the debtor.
Mr Gauke
I come back to the practical operation of this power. Let us remember that the existence of this power will encourage some debtors to pay tax at an earlier stage in the process, knowing that HMRC is able to pursue them more effectively. In Committee, and on the Floor of the House, we often debate the need to reduce the tax gap. The shadow Chancellor made that point on the Floor of the House yesterday. Of course, the tax gap consists of many things, including corporate tax avoidance, which I did not specifically address in my remarks because this clause does not specifically relate to corporate tax avoidance, but these powers could apply to any debt owed to HMRC, including debt involving corporate tax avoidance. If it is determined that a debt is owed, HMRC may pursue it in that way.
Christian Matheson
Will the Minister confirm that this clause will not simply apply to personal accounts but will also apply to corporate and business accounts of corporations that owe tax?
Mr Gauke
The clause will apply to both individual and business accounts, so it could be used in such circumstances. I will not detain the Committee for long on this subject but, on corporate tax avoidance, we have strengthened the capabilities of HMRC’s large business teams, introduced a diverted profits tax and led the way on the OECD’s work on base erosion and profit shifting. The Government have a proud record in that area.
However one looks at the tax gap, and there are different views on the size of the tax gap, corporate tax avoidance is a relatively small proportion. Whether one looks at the authoritative and well-respected HMRC numbers or at Richard Murphy’s numbers, no one claims that corporate tax avoidance is a large part of the tax gap. That is not to say that corporate tax avoidance is not important. It is important, but we also need measures that address all types of people who fail to pay the taxes that are due.
Richard Burgon (Leeds East) (Lab)
I thank the Minister for confirming that the clause will apply to business, as well as to individuals. Will he also clarify whether leaving £5,000 in a debtor’s account will also apply to small businesses that owe tax? I am concerned that small businesses may need much more than £5,000 to pay the wages of their staff.
Mr Gauke
The £5,000 limit applies across the board, including for businesses. This measure is used only at the end of a process and, particularly for businesses, HMRC operates a time to pay process. I dare say that members of the Committee have experience of businesses in their constituencies that have had difficulty in paying tax when it is due and that have engaged with HMRC. Very large numbers of businesses have been able to defer such tax payments because of short-term cash-flow issues and have subsequently repaid them. HMRC does a lot of that, and it works successfully.
Joint accounts have been raised with us, and they have been raised in the Chartered Institute of Taxation briefing. If joint accounts were automatically excluded from the scope of this provision, it would provide an obvious opportunity for debtors to avoid paying what they owe. If we had gone down that route, it would be perfectly reasonable for the Opposition to say that it would be easy to walk around the provisions. However, we have made it clear that we want to strike a balance between recovering money from debtors who are refusing to pay and protecting the rights of other account holders. There are safeguards for joint account holders, including third parties who have a beneficial interest in money in a debtor’s accounts. Direct recovery will only be applied to a pro rata proportion of an account’s balance. All account holders will be notified that action has been taken, and all account holders will have equal rights to object or appeal. Joint account holders will also have clear appeal routes if they feel that their funds have been wrongly targeted.
Rob Marris
I am grateful to the Minister for that explanation and apologise for not being clearer. I was not suggesting that joint accounts should be exempt from the procedure; I was using joint accounts as one more example of why the procedure should not pass into law at all.
Mr Gauke
I disagree with the hon. Gentleman, although I appreciate his point. If we are being serious about reducing the tax gap, this is an important additional measure. According to Treasury figures, which have been verified by the Office for Budget Responsibility, it will bring in something in the region of £100 million a year. It will ensure fairness between those taxpayers—the vast majority—who pay the tax that is due on time and in full, and indeed those who pay shortly after being reminded; and the small minority who persistently fail to pay the tax that is due, which they can indeed pay, and fail to engage with HMRC. The power will ensure that taxpayers are more likely to engage with HMRC and more likely to pay the tax that is due, which will fund the public services that we need and help to reduce the deficit. I will be disappointed if the Opposition, who talk a great deal about wanting to reduce the number of people who fail to pay proper taxes, oppose the measure.
Rob Marris
The Minister suggests that £100 million may be recoverable under the procedure and earlier he estimated that the measure will cover 11,000 people, so that is an average of £9,000 per person. I would suggest that such an amount makes going to court well worth while. Of course Labour wants to close the tax gap and get in revenues. Will he address my point that it is a matter of principle that the Government should not—in my words—make a mess of the courts system and then give HMRC an end run around that?
Mr Gauke
I again make the point that HMRC has a set of processes and procedures, and a number of safeguards, that are not comparable with anything that a private individual or company would have. It is important that we ensure that we have a properly functioning tax system and HMRC must collect substantial sums—I outlined the numbers—so that we have a properly functioning state. It is therefore right, given the safeguards that are in place, that HMRC has an additional tool at the end of a pretty exhaustive process through which there could be six to nine communications with a taxpayer, although I am not saying that that is a minimum in every case because sometimes the process moves more quickly for a repeat debtor. That taxpayer is not likely to be one of the most impoverished people, because the most impoverished, by and large, do not have more than £5,000 in their bank account. It is legitimate that HMRC has these powers. The Government are determined to bring down the tax gap and ensure that people pay the tax due, whether they be big businesses or private individuals. The power is welcome and I hope the Committee will support it.
Question put, That the clause stand part of the Bill.
Mr Gauke
The clause will ensure that when HMRC is party to a tax-related debt, the rates of interest payable by or to HMRC are those contained in tax legislation, whether the debt follows from a court order or not. The measure amends the rate of interest on tax-related debts owed by or to HMRC under a court order or judgment to an appropriate level given prevailing interest rates.
When HMRC is party to a tax-related debt, different interest rates currently apply depending on whether the debt follows from a court order. If the debt results from a court order, an interest rate of 8% applies. In England and Wales, that rate is set out in legislation under the Judgments Act 1838 and County Courts Act 1984, which is the responsibility of the Ministry of Justice. Scotland and Northern Ireland set their own rates of judicial interest, which are also 8%.
If the debt does not result from a court order, the relevant interest rates are set out in the Taxes Acts. Different interest rates apply if tax or other duties payable to HMRC are paid late, and if tax or other duties have been overpaid, resulting in repayment by HMRC. Those rates are linked to the Bank of England base rate. They are currently 0.5% if HMRC is paying interest and 3% if interest is being paid to HMRC.
The changes made by clause 48 will ensure that the rates of interest for all tax-related debts are contained in tax legislation, whether the debt follows from a court order or not. It will affect taxpayers in litigation cases where there is a tax-related judgment debt with interest due and HMRC is either the debtor or creditor. The clause will simplify the HMRC debtor and creditor interest rates. The Government will reduce the rate of interest that applies to tax-related debts payable by HMRC under a court order or judgment to a rate equal to the Bank of England base rate plus 2%, and apply the late payment interest rate of 3% as specified in the Taxes Acts to tax-related debts owed to HMRC under a court order or judgment. The changes will apply to new and pre-existing judgments and orders in respect of interest accruing on and after 8 July 2015. The new rates of judgment debt interest in tax-related cases will compensate the receiving party for any delay in receiving the money that a court has ruled is owed to them at an appropriate level considering prevailing interest rates.
The clause ensures that the rates of interest payable on tax-related debts to which HMRC is a party are all contained within tax legislation. It also reduces the rates of interest on tax-related judgment debts owed by or to HMRC to an appropriate level given prevailing interest rates.
Rob Marris
Having so narrowly lost the vote on clause 47, I am tempted to press this clause to a Division, but I can assure the Minister I will not. However, there are similarities between the measures. My objection to clause 47 and HMRC taking money out of people’s bank accounts without a court order was that it was one rule for HMRC and one rule for everybody else. In the clause immediately following—clause 48—the Government cannot wait to do that again, and I am worried about that trend. I understand that if one wishes for consistency, one cannot always achieve it because the situation depends on the corresponding factor with which another factor is compared. In this case, the Government are saying, “We don’t like comparing the interest payable on moneys owed to HMRC pursuant to a court order,” as per the Judgments Act 1838 or the County Courts Act 1984, which I have written endlessly in pleadings—as they used to be called—over the years. They are saying “We want to compare it with an internal rate that HMRC has for debts owed to HMRC,” which are adjudicated on, but not via the court system.
There is an inconsistency if you have what I would call, for shorthand, an internal, non-court HMRC rate and an external, court HMRC rate. The bigger issue for me, however—this is where I come down decidedly for the opposite comparison for consistency to the Government’s—is that there should be consistency for the individual when faced with the court system of England and Wales, and there should be consistency in the interest rate payable on a county court or High Court judgment, regardless of who the applicant, claimant or, to use the old term, plaintiff is. Even if the plaintiff is HMRC in a tax-related case and the claimant or plaintiff wins that case—HMRC wins—the interest payable upon that judgment debt should be the same as if the winning party who successfully claimed at court that they were owed money was a private individual or a company.
As I said, I appreciate that there is a certain dilemma for HMRC, but it has put up with that dilemma since about 1838, as far as I can tell. I therefore think that it should carry on putting up with that in the interests of having one court rule for everyone, rather than one that relies on the identity of the claimant.
Mr Gauke
I note the hon. Gentleman’s remarks. I am pleased that he is not seeking to divide the Committee on this particular clause, as he did on clause 47. I argue that the measure is appropriate and proportionate. I understand that the Ministry of Justice is reviewing why there is not one court rule regarding when the Judgments Act rate of interest is reduced. I do not know whether the hon. Gentleman takes any comfort from that, but I am pleased to inform the Committee of the fact.
The clause is reasonable in respect of tax-related debts which, of course, flow both ways—there is money owed to HMRC and money owed by HMRC. There should be consistency, and provisions on the rates of interest payable to debts to which HMRC is party should be in tax legislation. Although the hon. Gentleman and I disagree about the operation of the process, I am pleased that we do not have a disagreement on the clause, which I hope will stand part of the Bill.
Question put and agreed to.
Clause 48 accordingly ordered to stand part of the Bill.
Clauses 49 and 50 ordered to stand part of the Bill.
The Chair
We now come to our consideration of the new clauses. All but one of them have already been debated, so with those measures we will move immediately to a decision. Mr Mullin has indicated that he does not intend to seek a vote on any of his new clauses 1 to 3, so the first new clause that we will consider is new clause 4, which has not been debated before.
New Clause 4
Consultation on reforms to the system of tax reliefs for businesses
‘(1) The Chancellor of the Exchequer shall, within three months of the passing of this Act, initiate a public consultation on potential reforms of the system of tax reliefs for businesses which would encourage long term investment and growth in the UK; and the Chancellor shall lay a report of the consultation before both Houses of Parliament by the end of September 2016.
(2) The consultation under subsection (1) must address (though need not be limited to) the following issues:
(a) how reforms to the system of tax reliefs could benefit small businesses in particular;
(b) how such reforms could provide greater long-term certainty about business taxation;
(c) the impact of such reforms on Exchequer revenue; and
(d) the wider societal impacts of such reforms.”—(Rob Marris.)
Brought up, and read the First time.
Rob Marris
I beg to move, That the clause be read a Second time.
Hon. Members will be pleased to hear that I will not detain the Committee for long. I have to say that in recent years HMRC and the Treasury have done a pretty decent job of carrying out consultation. They have got a lot better regarding the number of issues on which they consult, and especially the timeframe allowed. Rushed consultations were carried out under the previous Labour Government and in the early years of the coalition Government, and they sometimes still happen. Sadly, all of us have probably come across such consultations in local government around the country. It is a question of not only a consultation’s terms of reference or whether something is put out for consultation at all—I do not agree with consulting on everything—but the timeframe. HMRC and the Treasury have got better at that, for which I thank the Minister.
For a number of years—this is not exclusive to the coalition Government and the new Government—there has been a lack of monitoring of tax reliefs, which are the substance of new clause 4. I understand that the National Audit Office has criticised the Government for not properly monitoring their tax reliefs. The NAO has found more than 1,300 tax reliefs, which seems an awful lot for a Government of any political colour when we want a simpler system. The NAO found that only 200 of those reliefs are properly monitored by HMRC, meaning that the vast majority—1,100—are not. We could have a long debate—we will not—about what proper monitoring means, but if I understand the NAO report properly, there are difficulties in a major area of our tax regime.
I would venture that Governments around the world have any number of tax reliefs. Other countries may have more or fewer, but we have an awful lot and they are not being properly monitored. They are integral to our tax regime in terms of not only revenue and foregone revenue, but the Government using taxation as a lever to encourage and discourage certain behaviours. We sometimes overlook that, although we debated it earlier in the context of the effect of vehicle excise duty on people’s behaviour when buying light passenger vehicles. Some reliefs are intended to encourage behaviour, such as tax relief on pension contributions, which is quite properly being lessened by this Bill, but an awful lot of relief still remains. We are talking about billions of pounds, so there should be proper monitoring.
It might be that the Minister, who is very assiduous, can reassure the Committee that there is an overarching, ongoing consultation, or even a new consultation, on our tax relief system and, as is proposed in new clause 4, on reforms, specifically in relation to tax reliefs for businesses. I referred to Governments using tax reliefs to encourage and discourage certain behaviours, and there is agreement across the House that tax reliefs have a part to play in fostering the business growth that we all want.
Mr Gauke
The hon. Gentleman will be aware that his party’s leadership is looking to eliminate what I recently heard the hon. Member for Leeds East refer to as £93 billion of “corporate welfare” to reduce the deficit and fund public services. Some of that constitutes tax reliefs or exemptions—however one wants to describe them—including £20 billion of capital allowances. Does the hon. Gentleman consider the £93 billion of “corporate welfare” to be a potential source of revenue for a future Labour Government?
Rob Marris
I thank the Minister for that question. The £93 billion figure has been much misunderstood.
The new clause is part of the probing that we want the Government to carry out on behalf of the country. My hon. Friends the shadow Chancellor and the Leader of the Opposition want to examine what tax reliefs exist—what we are spending the money on, in lay terms, although I appreciate that the process often involves leaving it in the taxpayer’s pocket. As the shadow Chancellor made abundantly clear to the House last night, he is quite rightly in the business of evidence-based policy—[Interruption.] Someone says that he is in the business of “changing his mind”. Yes, my hon. Friend is, as he made clear last night. He interprets the evidence, and evidence changes as more comes out. Like him and, I presume, other colleagues, I want evidence-based policy making.
Whether the figure is £93 billion, £193 billion or £3 billion, the fact is that the Government are foregoing billions of pounds of tax revenues. I think it would be agreed across the House that some of that will be a jolly good thing. There might be differences of opinion among hon. Members about whether a given tax relief is socially desirable, in the sense that its intention is to achieve a socially desirable outcome, and about the evidence of whether a socially desirable outcome is in fact being achieved through the tax measure. There therefore could be disagreement in two ways: first, about the outcome; and, secondly, about whether the tax relief is getting us anywhere nearer to that outcome, or near enough to it—about if we are getting bang for the buck, to use the vernacular.
New clause 4 would require a wider review of tax reliefs for businesses to encourage long-term investment. Were the review carried out and the evidence collected, it might be that my party would call for changes, and I do not rule out the possibility of increases in tax reliefs for businesses. I am not making a pledge on behalf of the Labour party, but it might be that we would think, on the basis of the evidence, that there should be greater relief for businesses regarding research and development—innovation.
On Tuesday, we discussed tax matters for small, growing, knowledge-based companies. We had that debate because the previous Labour Government set up a tax relief regime to encourage research and development. Again, I think there is generally agreement across the House—perhaps not among every right hon. and hon. Member—that encouraging research and development is a desirable goal for any Government. I think that there is also general agreement across the House—again, perhaps not from every Member—that the tax regime has a role to play in encouraging the research and development that almost all of us, if not all of us, want.
Mr Gauke
On a point of clarity, and to reassure businesses throughout the country—including, I suspect, in Wolverhampton—while the shadow Chancellor and the Leader of the Opposition talk about eliminating £93 billion of “corporate welfare”, to use their phrase, is the hon. Gentleman saying that there is no plan to remove capital allowances or R and D tax credits, which constitute sizeable elements of that £93 billion? When he says that the £93 billion “corporate welfare” estimate has been much misunderstood, does he mean by his own leadership?
Rob Marris
I said to the Committee earlier that I was not about to start freelancing on tax policy for the Labour party. That will not surprise the Minister, or other hon. Members. It might disappoint him, but it will not surprise him. He tempted me on two major areas of tax relief for business; I will repeat what I said earlier. We are in the business of trying to develop evidence-based policy, so if the review were, as we hope, to be accepted by the Government and to take place, we might say that business tax relief should be increased in certain areas. I do not rule out that possibility. We might say that it should be reduced in other spheres of activity. I do not know yet.
I cannot help the Minister any more than that, because that is the whole point—or perhaps not the whole point: the major point of having the review is to get the evidence so that all parties can review their policy. After the review, perhaps the Government would review their policy and increase or decrease tax relief for businesses in certain areas.
As to the £93 billion, it has, as I said, been much misunderstood. It may be a coincidence, or perhaps it is a borrowing—many politicians are prone to borrow—but until very recently the most successful federal election in Canada for my party’s sister party, the New Democratic party, of which I used to be a member, was in 1972 under the then leader Ed Broadbent, the honourable member for Oshawa. He was a great leader of the New Democratic party. The campaign slogan referred to “corporate welfare bums”, and it was about large corporations—often multinational—having unfair tax breaks. It was very successful.
There is a tradition in capitalist democracies of corporate welfare. [Interruption.] Yes, there is, and I think we should be honest about that. Sometimes we socialists would support that, to encourage certain activities. I gave the example of research and development; but, yes, there is corporate welfare. Some of it, I suspect—but do not know—is unjustified. I will not know unless we can gather the evidence, and the Labour party will endeavour to gather the evidence as best we can, but it would help if the Government would put resources into doing so by accepting new clause 4, as I hope they will.
Mr Gauke
I thank the hon. Member for Wolverhampton South West for the thoughtful way in which he put his case, injecting, to some extent, scepticism into claims of £93 billion of corporate welfare that might be easily available to reduce the deficit and fund public services, as some of his colleagues have perhaps been inclined to suggest in recent weeks.
Having welcomed some of his remarks I will, I am afraid, disappoint the hon. Gentleman by urging my hon. Friends to oppose new clause 4. The Government are committed to supporting investment and growth through the tax system, which is why we provide businesses with a range of tax reliefs and allowances. The Treasury and HMRC keep all tax policies under review and routinely consult on changes as part of the policy-making process. However, a general consultation on the system of tax reliefs would not be appropriate, since each relief has been designed in a particular way to address a specific issue.
The new clause raises questions about the impact of tax reliefs on investment and growth. The Government recognise the importance of supporting growth and investment through the tax system. In fact, we have designed tax reliefs to do exactly that. For example, through the annual investment allowance, businesses can offset the first-year costs of plant and machinery against their corporation tax liabilities. That supports investment by reducing its cost to businesses. Small businesses in particular benefit from that; 85% of the total value of the annual investment allowance goes to small and medium-sized enterprises.
To support further investment, the Government are raising the permanent level of the AIA to £200,000—its highest permanent level ever. Similarly, R and D tax credits, which the hon. Gentleman referred to, are an incentive to invest in research and development. A recent HMRC study found that each £1 of tax forgone through tax credits stimulates between £1.53 and £2.35 of additional R and D investment, which fosters innovation and helps the economy to grow.
Looking forward, the Government remain committed to supporting investment and growth. We will publish a business tax road map by April 2016, setting out our plans for business taxes over this Parliament. That will provide businesses with the certainty they need to plan for long-term investment.
Rob Marris
I am somewhat reassured by the Minister’s remarks about the framework document in 2010, for which I thank him; I hope that we will see another framework document soon. I am also somewhat reassured about the “road map”, as he calls it, that will be published next year, and the consultations that he referred to. For example, he referred to the annual investment allowance increase in the Budget this year. From memory, when I spoke in the House on the Budget on 8 July I praised that increase in the allowance.
However, the Minister went on to say that he was concerned that if he accepted the new clause it would call into question and create uncertainty about many tax reliefs that are working effectively. With due respect to him, to some extent that assumes what he is trying to prove, by saying that things are working effectively when Opposition Members are asking for an investigation to be carried out holistically—to use the everyday term that is used these days—into the business relief part of the tax regime. The risk is that the Government’s consultations, which I have previously spoken positively about, will become somewhat piecemeal in their approach.
We would like an overarching investigation, because tax reliefs—whether the 1,300 overall, or the smaller number within that 1,300 that apply to businesses—may produce what in chemical terms would be called the cocktail effect. In fact, some such effects have been addressed by provisions in the Bill. That is where a tax measure is put into place and then it is found that it contradicts an existing tax measure. Not surprisingly, those contradictions are often resolved in favour of taxpayers, which is understandable, but correspondingly that is at the expense of revenue for the Exchequer.
A piecemeal approach is not what we need. The new clause is part of our desire to have evidence-based decision making, a holistic approach and zero-based budgeting, to which we are committed. I will not press the new clause to a Division, but I urge the Government to avoid being piecemeal. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Mr Gauke
On a point of order, Sir Roger, before we conclude I would like to take a moment to make one or two remarks and thank a number of people. I am pleased that the first Finance Bill of this Parliament has received excellent scrutiny from members of the Committee. Inevitably, more focus has been placed on certain clauses than on others, but debate has been insightful and wide-ranging throughout. I am pleased that the Committee has reached consensus over much of the content of the Bill, including measures that will support businesses and tackle avoidance and aggressive tax planning.
Most impressively, the Committee has displayed unparalleled efficiency, with debate on all clauses concluded in just six sittings. Having done every Finance Bill since 2006, Tuesday afternoon’s session was perhaps my favourite, on the basis that it lasted only 17 minutes.
I thank you, Sir Roger—through you, I also thank Mr Howarth—for your guidance and your wisdom in steering both new and experienced Committee members through what can be a complex process. The hon. Member for Wolverhampton South West is of course both new and experienced. I also thank my hon. Friend the Member for Wyre Forest for his brief unexpected spell as Chairman during the debate on corporation tax, and his guidance at that time was invaluable.
I thank all members of the Committee for their contributions and non-contributions. I thank Members on the Government side for their patience, forbearance and, above all, attendance. I also thank the Members from the SNP and from the Labour party where, for understandable reasons, there has been something of a changing of the guard over the course of the Bill. For me, it is surprising that Front Benchers change from decade to decade, but they perhaps change more frequently when a party is in opposition.
I put on record my thanks to the hon. Member for Worsley and Eccles South (Barbara Keeley) for the work that she undertook from the Labour Front Bench at the beginning of the process. I was delighted to see the hon. Member for Wolverhampton South West in his place. I say delighted, but I was slightly apprehensive, knowing that he is an extremely assiduous Member. It is very difficult to get much past him, and I welcome him to the Front Benches, as I do the hon. Member for Leeds East.
Earlier this week, the hon. Member for Wolverhampton South West compared our encounter to the South by Southwest festival—SXSW—given that we both represent seats that are in the south-west of their particular areas. He is clearly more familiar with trendy festivals than I am. Though I admit that the Finance Bill Committee can occasionally resemble Glastonbury in a wet year—a confused crowd struggling through a vast expanse of mud while someone at the front is shouting loudly—I am pleased that on this occasion, proceedings have been far more harmonious. For that, we have to thank the usual channels: my hon. Friend the Member for Central Devon, who has worked with quiet efficiency with both the hon. Member for Scunthorpe and now the hon. Member for St Helens North. I am particularly grateful for the assistance I have received from my hon. Friend the Economic Secretary, who led on the banking measures.
Finally, I thank the representative bodies and interested parties that have submitted to the evidence to the Committee. I thank our Clerk, Mr Hamlyn, the Hansard Reporters and the doorkeepers, who have ensured the smooth running of the Committee, the HMRC and Treasury officials, and the Office of the Parliamentary Counsel, without whom none of this would be possible. I am sure all hon. Members will join me in looking forward to Report and other stages of the Finance Bill in due course.
Rob Marris
Further to that point of order, Sir Roger. I will briefly add my thanks to many. First, I thank my colleagues who were previously members of the Committee, most notably but not only my hon. Friend the Member for Worsley and Eccles South. I thank the staff both within and outside the House, most explicitly the Treasury staff, who were very astute in assisting the Minister to remember the details of certain matters.
I thank all members of the Committee on both the Government and Opposition sides for their assiduous attention to our proceedings. I thank the Economic Secretary, who was the first Minister I went up against, as it were. I also thank the Financial Secretary, who I went up against a lot more. As Members will know, he has done this a lot more than I have. This is my seventh Finance Bill Committee, but he is probably up to 11 or 12 now, because in years—such as this—there is more than one Finance Bill. I salute his tenacity.
In terms of the speed of proceedings, this is not like Glastonbury; it is more like the South by Southwest festival, which takes place in Texas, where mud is much less frequent and one just makes breezy progress in the sunshine, in a collective and collegial manner. Finally, I thank the two Chairs, Sir Roger and Mr Howarth. I will always remember the Committee, because if I have the honour to lead or contribute for the Opposition officially in future Committees, this will always be the first one in which I was able to do so. Thank you for your chairmanship.
The Chair
All of that is absolutely fascinating and, of course, completely out of order, because none of it is a matter of order for the Chair. As we are rambling on out of order, I thank Members on both Front Benches for their appreciation, which I extend to our Clerk, Matthew Hamlyn, to the officers and staff of the House, without whom none of us could do the job we are required to do. It is much appreciated.
I thank the Committee very sincerely indeed for the courtesy and conduct of the proceedings. Not all Committees are like this, but it has been amicable and sensible. The fact that it has been considered so well and so expeditiously is a credit to all Members present. I hope that those of you who were doing this for the first time have found the process exhilarating and that you will enjoy many more Committees under my chairmanship.
Bill, as amended, to be reported.
Welfare Reform and Work Bill (Tenth sitting)
(8 years, 6 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 10 / Noes: 7 - Question accordingly agreed to.
The Committee divided: - Ayes: 8 / Noes: 5 - Question accordingly agreed to.
The Committee divided: - Ayes: 7 / Noes: 5 - Question accordingly agreed to.
The Committee divided: - Ayes: 7 / Noes: 5 - Question accordingly agreed to.
The Committee divided: - Ayes: 8 / Noes: 5 - Question accordingly agreed to.
The Committee divided: - Ayes: 8 / Noes: 5 - Question accordingly agreed to.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr Shailesh Vara)
I beg to move amendment 172, in clause 19, page 18, line 25, leave out subsections (4) to (6).
This amendment and amendments NC19 and NS1 alter the provision for determining the amount of rent payable in respect of the first relevant year (or a later relevant year) in cases not covered by clause 19(1).
The Chair
With this it will be convenient to discuss the following:
Government amendments 174, 175, 178 and 179.
Government new clause 19—Further provision about social housing rents.
Government new clause 20—Provision about excepted cases.
Government new clause 21—Rent standards.
Government new clause 22—Interpretation.
Government new schedule 1—Further provision about social housing rents.
Government amendments 180 to 183.
Mr Vara
It is good see you this afternoon, Mr Owen, as it was this morning.
We recognise that tenancies will start at different points in the four years of rent reductions and that providers will want to know what rent is set on re-lets for new social housing and for conversions to affordable rent. First, I turn to the more substantial amendments in the group, which make more detailed provision for this situation than clause 19 as introduced. They enable a provider to determine the amount of rent that is initially payable when a tenancy begins after 8 July 2015. The cases are not covered by clause 19(1), which applies to the generality of tenants who were tenants of their social housing on 8 July. Clause 19(1) also governs the future rent reductions for all tenants whose tenancies began after 8 July 2015, once they have been tenants for a full relevant year.
New schedule 1 sets out the details of how rent should be set for different types of new tenancies starting after 8 July 2015. It also provides for exceptions, exemptions and enforcement of the schedule. Part 1 provisions are intended to clarify how the rent reduction requirements should be applied in relation to new tenancies after 8 July, whether that is a re-let of existing housing, new social housing or letting at affordable rent. In the first of those instances, re-lets that exist in social housing will be able to be let at the greater of a social rent or an assumed rent rate.
The social rent rate, which is prescribed in sub-paragraph (4) of new schedule 1, is set in relation to a formula that will be set out in regulations. Sub-paragraphs (7) and (8) provide that the Secretary of State may define “formula rate” in the regulations. Our intention is that the regulations will mirror the formula set out in the rent standard guidance and the Government’s guidance on rent. For supported housing, we will continue to allow rents to be set at up to 10% above formula. I appreciate that these are important issues for social housing providers, so I draw Members’ attention to this change.
The assumed rent rate, which is prescribed in sub-paragraph (5), is based on the rent that was payable under a tenancy in place on 8 July, but the calculation reflects the rent reduction requirement. This is important for providers whose rents have historically been set higher than the formula rent at 8 July 2015. In those circumstances, we do not want providers losing more than 1% year-on-year in rent reductions, which would have been the case if rents for all new tenancies were set with reference to the social rent rate.
Sub-paragraph (6) clarifies that, if the tenant is in that social housing for a part of the year only, or if the requirement ceases to apply because of an exception or exemption, the reduction in rent applies on a pro rata basis. In instances of new social housing, the rent will be set with reference to the social rent rate as described above. Paragraph 3 sets out the case for a person becoming a tenant of affordable rent housing after 8 July 2015.
Sub-paragraphs (2) to (4) provide that the rent payable by that tenant should be set at no more than 80% of what would be the market rent for that social housing and that, in the following years, a reduction of 1% per annum applies. Again, such rents will be on a pro rata basis if appropriate. What constitutes affordable rent housing will be set out in regulations made under paragraph 4. The intention is to mirror the existing policy that homes should be let at affordable rent levels only in certain circumstances, including where there are agreements or arrangements with the Homes and Communities Agency, the Greater London Authority and the Secretary of State, to control housing benefit costs.
Part 2 of the new schedule sets out exceptions to, exemptions from, and the enforcement of, the requirements in part 1. Paragraph 5 makes provision for exceptions that mirror those set out in clause 20, namely low-cost home ownership and shared home ownership accommodation, and various exceptions applicable to mortgagees and other lenders when those persons take steps to enforce a security. Paragraph 5(4) gives the Secretary of State a power to make regulations to disapply the requirements of part 1 in other cases, set out in sub-paragraph (5). In particular, the regulations may include provisions on tenants, tenancies, accommodation and events. They may also include provisions on high-income social tenants and on periods when a tenant’s rent is temporarily reduced or waived.
Paragraph 6 of the new schedule relates to the granting of exemptions by the regulator or the Secretary of State and makes equivalent provision to that in clause 22. Paragraph 7 gives the Secretary of State a power to make provision about the enforcement of the schedule, including provisions to apply part 2 of the Housing and Regeneration Act 2008 with modifications.
Part 3 of the new schedule sets out the conditions relating to regulations made under the schedule. Paragraph 9(2) provides that providers must have regard to guidance when determining assumed rent in cases of properties that were not tenanted on 8 July 2015.
Amendment 172 removes the provision made for other cases in the Bill as introduced. Amendment 174 is a drafting amendment linked to new clause 20 on excepted cases under the new schedule and new clause 19, and is necessary to introduce the new schedule. Amendments 175, 178 and 179 are minor technical amendments consequential on new clause 22 and, in the case of amendment 175, on new clause 21.
New clause 21 expands the provision in clause 19(9) of the Bill as introduced. Sections 194(2A) and 198(3) of the 2008 Act give the regulator of social housing the powers to set and revise standards relating to levels of rent. The new clause ensures that the regulator may not issue standards inconsistent with the provisions on social housing rent in the Bill.
New clause 22 simply gives the meaning of various terms set out in the provisions on social housing rent in the Bill. In particular, subsections (3) and (4) clarify when a tenancy begins, when a tenancy is to be treated as continuing although a new tenancy has been granted, and when a tenancy that has been assigned should be treated as coming to an end. The new clause clarifies the position in respect of new grants of tenancies to the same tenant, including at least one of the tenants who formerly held a joint tenancy, as well as certain changes of tenancy under schedule 1 of the Rent Act 1977 and assignments by way of exchange.
I turn briefly now to new clause 20, which provides the Secretary of State with a power to make regulations regarding the maximum amount of rent payable by a tenant in a category excepted by regulations under clause 20 or the new schedule. It also enables the Secretary of State to make provision regarding the maximum amount of rent payable by a tenant who ceases to be excepted from the rent reduction provisions. Those powers are important as they enable the Secretary of State to make regulations to establish the appropriate rent regime for such excepted cases. In so doing, they give flexibility to make provision for special cases—for example, supported accommodation and tenants whose rent has been temporarily reduced. Providers, at present, have discretion to charge high-income social tenants a higher rent, and it is the Government’s intention to except such tenants from the rent reduction provisions. It is important to ensure, however, that if a tenant’s income drops below the high-income threshold, they will no longer be required to pay a higher rent, and the Secretary of State will be able to require that under the regulations.
We also recognise that providers’ individual circumstances will differ significantly, and the new clause will give the Secretary of State power to provide in regulations for an exemption regime if a provider needs it. The new clause will also enable regulations to provide for enforcement of the regulations by the regulator. Amendment 180 is consequential on the addition of the new clauses and the new schedule to the Bill.
Amendments 181 to 183 are technical and relate to the date upon which the various provisions come into force. Amendment 181 will ensure that the provisions exempting a registered provider from the rent-reduction measures can come into force from the date of Royal Assent. Although we do not expect registered providers to plan on the basis that an exemption will be granted, it is nevertheless important that a provision is put in place quickly where it is needed. Amendment 182 is consequential on amendment 181. Amendment 183 is consequential on the addition of the new clauses and the new schedule and will enable the Secretary of State to introduce regulations quickly following Royal Assent. The Bill provides that such regulations will come into force on other appointed days for other purposes. The intention is to bring the Bill’s provisions into force on 1 April 2016.
I wish to make a clarification. Earlier, I said that paragraph 6 relates to the granting of exemptions by the regulator or the Secretary of State. I said that it makes equivalent provision to that in clause 22. I should have said clause 21.
I thank you, Mr Owen, and colleagues for forbearing in listening to these detailed, technical and necessary comments. I am sure everyone will appreciate that it is necessary to provide such detail on the changes.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
As I said this morning, I accept that these are technical amendments. We will scrutinise them in detail, but I will make more general remarks in relation to my own amendments.
Amendment 172 agreed to.
Amendments made: 147, in clause 19, page 19, line 9, after “a” insert “private”.
This amendment and amendment 148 secure that only private registered providers may have relevant years starting on a date other than 1 April.
Amendment 173, in clause 19, page 19, line 10, leave out “tenants” and insert “tenancies”.
This amendment secures that a private registered provider’s usual practice is determined by reference to numbers of tenancies.
Amendment 148, in clause 19, page 19, line 19, after “A” insert “private”.
Amendment 174, in clause 19, page 19, line 22, at end insert—
“( ) This section is subject to—
(a) section (Provision for excepted cases) (provision for excepted cases);
(b) Schedule (Further provision about social housing rents) (further provision about social housing rents).”
This amendment is a drafting change linked to amendment NC20 (a new clause about excepted cases) and amendment NS1 (a new Schedule making provision about initial levels of rent for tenancies beginning after the beginning of 8 July 2015).
Amendment 175, in clause 19, page 19, line 23, leave out subsections (9) and (10).—(Guy Opperman.)
This amendment and amendments NC21 and NC22 secure that the provision in subsections (9) to (10) is also applied to the provision about levels of rent that appears in the new clause and new Schedule added by amendments NC20 and NS1.
Debbie Abrahams
I beg to move amendment 21, in clause 19, page 19, line 25, at end insert—
“(9A) The Secretary of State must, within 12 months of this section coming into force, produce a plan to offset the impact of lower social rents on housing associations and local government.”
To require the Secretary of State to produce a plan to offset the impact of lower social rents on housing associations, so that their ability to build new affordable homes is not affected.
The Chair
With this it will be convenient to discuss the following:
Amendment 85, in clause 19, page 19, line 25, at end insert—
“(9A) The Secretary of State must, within 12 months of this section coming into force, produce a report outlining the impact of the reduction in social housing rents on the availability of accessible and supported housing.”
To require the Secretary of State to report on the impact of lower social rents on the availability of accessible and supported housing.
Amendment 184, in clause 19, page 19, line 35, at end insert—
“(11) Sections 19 to 22 will cease to have effect on 1 April 2020.”
The Bill as currently drafted does not explicitly provide for the end of the rent reduction policy in 2020. This amendment would clarify this.
Debbie Abrahams
I hope everyone has had a good lunch. The amendments are in my name and those of my hon. Friends.
Clause 19 requires registered social housing providers to reduce the amount of rent payable by a tenant in social housing in England by 1% a year for four years from 1 April 2016. The Government argue that the measure will save money paid on housing benefits. They estimate in the impact assessment that the saving will be approximately £1.995 billion, which, on the surface, seems like a good deal for social tenants. However, there are significant implications for current and future renters.
The Local Government Association has estimated that councils in England will lose more than £2.6 billion, and that 19,000 fewer affordable homes will be built by 2019-20 as a result of the measure. I will come to what that will mean in terms of fewer homes in my area of Oldham, but for housing associations in general, the situation is even worse. The National Housing Federation calculation is that housing association income, collectively, will reduce by £3.85 billion over the next four years, resulting in 27,000 fewer homes being built. That contrasts markedly with the Office for Budget Responsibility assessment in the Budget, which predicts 14,000 fewer affordable homes being built.
Will the Minister confirm how that discrepancy has arisen? Is there a calculation that we are not aware of? Exactly how has that difference come up between the OBR’s 14,000 and the figures of the LGA and the NHF? May I also ask why that was not included in the impact assessment process? At the same time, will he confirm the actual figure for loss of income to be suffered by housing associations by 2020? My colleagues will want to comment about their own areas, but in my area the estimate for loss of income is £15 million. In places such as Oldham, that has significant implications for affordable homes.
In May 2014, following the 2013 spending review, the Government committed to a 10-year rent settlement, which was meant to introduce the necessary long-term certainty needed to attract private investment into building new affordable homes. What has changed? As a result of the longer-term planning with assumptions about what rental incomes they would be receiving, housing associations have been able to borrow for house building at reasonable rates, attracting £6 from the private sector for every £1 of public money, as the Minister said this morning. Moody’s, the rating agency for the social landlords, commented that the change to the 10-year rent settlement and long-term planning came out of the blue, without any consultation, and is making things incredibly difficult, threatening the viability of many housing associations. We will debate that under a subsequent clause. The OBR acknowledged the difficulty caused by such a sudden change—it is due to be implemented next year. It also said—this is absolutely key—that:
“We do not expect private sector house-builders to offset this effect to any material degree.”
That is in paragraph 3.84 of the OBR publication accompanying the July Budget.
The ability of housing associations to borrow and the effect of the measure on their ability to build more affordable homes are key concerns not only of housing commentators, but of the 1.38 million or so people who are on local authority housing lists—that is a 2014 figure, the latest produced by the Government—71% of whom are in receipt of housing benefit. I will be grateful if the Minister confirms what assessment has been undertaken. How will the provision affect social housing waiting lists? We know from last year’s Work and Pensions Committee report on affordable housing that there are considerable issues for people in receipt of housing benefit in being taken on by private sector landlords. What will be the impact of the measure on social housing waiting lists and people’s ability to move into the private rented sector?
It is important that we look at what the Government are proposing in the context of the housing market as a whole. Most people recognise—possibly the Government do not—that there is a housing crisis in this country, and this measure will make it worse. The Government’s own figures show that from 2012 onwards there has been a huge decline in affordable homes being built, from 37,680 in 2012 to 10,840 in 2014. That brings it to a 20-year low.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
My hon. Friend may be aware that my local authority, Southwark, is the largest landlord in London. In the previous Parliament, it was able to build more affordable homes than any other local authority, and it has a commitment to 11,000 new council homes in a welcome house building programme. However, the measures in the Bill would leave Southwark Council’s housing revenue account with a loss of £62.5 million by 2019-20, and in that year it would lose £28.2 million, with a knock-on effect on its ability to provide sufficient accommodation. I hope the Minister will commit to meeting my council to address those concerns, and I would welcome my hon. Friend encouraging him to do so.
Debbie Abrahams
As my hon. Friend rightly says, Southwark is the largest housing provider in London, and London faces particular issues.
Policy measures that have already been implemented have exacerbated the problems that we face on affordable homes. For example, the Government waived the mandatory quota for building affordable homes in new developments, which has further contributed to the poor quantity of affordable homes. The coalition Government allow developers to build more properties for rent in the private rented market, and by deregulating what was already the least regulated private rental sector in Europe, they open the door to rogue landlords.
The Government used £12 billion of taxpayers’ money to guarantee £130 billion of new mortgage lending in the form of the Help to Buy scheme. That has done little to help renters become buyers and homeowners. Instead, it has fuelled increases in new house prices and private sector rents, as many owners either sell or rent their properties as soon as the subsidies run out, and the increase in private sector rents has fuelled the increase in the housing benefit bill over the past five years. It has gone up from £4.4 billion in 2009-10 to £24 billion in 2014-15.
Neil Coyle
To further demonstrate the Government’s inability to understand the housing crisis in London in particular, is my hon. Friend aware that the Help to Buy scheme helped a very round number of people in the run-up to May 2015—an incredibly round number of zero—and that I have written to the Government to ask for improvements to the scheme? Unfortunately, no sufficient response was forthcoming.
Debbie Abrahams
My hon. Friend makes an important point. To be honest, I am not surprised. The Minister this morning was unclear about the rise in the housing benefit bill. As I was saying, it is up from £4.4 billion in 2009-10 to £24 billion in 2014-15—those are the actual figures. I know my hon. Friends will want to raise this point, but I will bring it up first: the number of people in work and claiming housing benefit has doubled to 1.1 million since May 2010.
Neil Coyle
Those people in work are also paying taxes. There seems to be some misunderstanding on the Government Benches about who pays taxes in this country.
Debbie Abrahams
Absolutely. The language used is sometimes unfortunate; it leads to a misconception that is commonly put out to the public arena. We all have an obligation to not mislead the public.
Extending the right to buy, which was mooted in the Tory party manifesto and set out this week in the Housing and Planning Bill, may increase homeownership —we all want to encourage homeownership—but without building more social housing, the extension will just reduce the supply of affordable homes for people on low income to rent. What will happen then? The average house price in the UK is more than £180,000. In London, it is more than £460,000. It has been estimated that it would take 22 years for people on low and middle incomes to save for a deposit.
I remind the Government of all the warm words from last week’s Tory party conference about helping people in poverty and with low incomes. There is a practical measure that the Government can take to do something about that, and I challenge them to do so. Housing is one of the biggest costs families face, and the Government’s plan will make the situation worse. Many young people, but not exclusively young people, are living with their parents or renting—the so-called “generation rent”. Inequalities are unfortunately increasing, not only in income but in wealth and assets, such as housing and land. Those inequalities, including the cost and availability of land, are key to addressing the housing crisis.
In addition to the effects of the plans on the building of affordable homes, there will undoubtedly be an impact on housing repair and regeneration programmes. The Local Government Association estimates that the loss in income from rent is equivalent to 60% of all local authorities’ total housing maintenance budget. That is significant. Ultimately, there will be an impact on both the integrity and the condition of the stock, and on maintaining decent home standards.
Peter Dowd (Bootle) (Lab)
Is my hon. Friend aware of any Government assessment of the medium to longer-term impact of the policy? If they denude associations of cash now, it saves the Government their £250 million or £300 million, but in the longer term, trying to claw back the lack of investment and denuding of the infrastructure might cost double or triple that.
Debbie Abrahams
My hon. Friend makes a valid point that needs to be driven home. There is such a poor evidence base to justify the policy. The Government have calculated the savings to the housing benefit bill, but the potential impact in other areas is significant. As a former public health consultant—I qualified in the ‘90s—I can remember the housing issues such as the need for rehousing on medical grounds, which was commonplace due to the poor quality of housing. A lot has been done to improve housing conditions though the decent homes programme and so on, and we do not want to reverse that. It would be particularly harmful to tenants, and particularly the young.
Naz Shah (Bradford West) (Lab)
Is the Minister aware that the measure will disproportionately affect certain housing associations in my constituency that cater for larger families? We have had the bedroom tax, and these measures feel like an extension of that sanction, which particularly affects more vulnerable people, such as women fleeing domestic violence. The Black Women’s Support Project in Bradford will suffer; I know because had a conversation with the chief executive, as I have served on the board in the past.
Debbie Abrahams
Again, my hon. Friend makes a valid point. Yes, there will be a small reduction in rent, which will be reflected in a reduction in housing benefit, but the cumulative impacts on individual families and in other spending areas will be considerable.
My point is that the measures will particularly affect the very young, the very old and people with existing health conditions and disabilities. As we anticipate, that is a logical consequence of reducing the maintenance budget, because the quality of housing will be affected. What assessment has been made? It is clear that the provision will push more households into the private rented sector, where there are currently 1.5 million families with insecure tenancies who could be evicted with as little as two months’ notice. Homelessness and rough sleeping have risen over the past five years, with 54,000 accepted as homeless, up 36% since 2010, and 920 families with children being illegally housed in bed and breakfasts for longer than six weeks because there is no affordable housing. That figure has risen by 820%. Again, how is it anticipated the measures will affect the homelessness figures?
Neil Coyle
On the point about homelessness, is my hon. Friend aware that in London since 2010, the number of former armed forces members sleeping rough has risen elevenfold, and does she agree that that heaps shame on the Government’s attitude towards those who have served in our country’s armed forces?
Debbie Abrahams
My hon. Friend makes a valid point. People whom we should be supporting after their service to our country are unfortunately finding themselves without a roof over their head. I say “unfortunately”; there are means to prevent it. The measure will stop the roll-out of the affordable homes programme and have an impact on armed forces personnel and people leaving care, who are more likely to need affordable homes. A whole host of people will be impacted.
What assessment has been undertaken of the viability of registered social landlords? I know that we will debate that when we come to a later clause, but given the risks that people already face, for example from the introduction of universal credit and the lowering of the benefit cap, housing associations have a genuine concern about how they will measure it in practice. I refer to one of my own local housing associations. I mentioned the £15 million reduction in income from rent; it will have to deal with that, including through redundancies and by rowing back on some of the programmes by which it hoped to upgrade accommodation. What assessment has been made of the risks being shifted to housing associations?
Amendment 21 would compel the Secretary of State to produce a plan within 12 months of the provision coming into force to offset the impact of the reduction in rent, so that the building of affordable homes is not affected. We are asking the Government to say within 12 months how they will stop the building of affordable homes being pared back, as the LGA and the NHF anticipate.
Peter Dowd
I am sure that my hon. Friend is not aware of this; I do not know whether the Minister is aware, but it would be interesting if my hon. Friend could check it out in due course. Riverside Housing Association, which is one of my local housing associations, estimates that the rent reductions will require an additional internal subsidy of £12,000 per home built for rent, and an additional internal subsidy of £12 million for the current programme—a 50% increase. Are the Government aware of the implications for building when they take that much money out of the system in one fell swoop? Do they seriously believe that that will not have an impact on housing in the medium term?
The Chair
Order. Before I ask the hon. Member for Oldham East and Saddleworth to continue her speech, may I say that the Minister will be on his feet later, so if Back-Bench Members wish to ask him aw question they will be able to do so directly?
Debbie Abrahams
Thank you, Mr Owen, for that clarification. My hon. Friend makes a relevant point, and perhaps he will ask the Minister directly.
Amendment 85 would require the Secretary of State to produce a report on the availability of accessible and supported housing. Finally, amendment 184 would introduce a sunset clause so that there would be no further reductions in rent after 2020. These things have a way of continuing, so we want to ensure that it is clear that the Government intend there to be no further rent reductions after 2020.
Mr Vara
I am grateful to the hon. Lady for the measured way she has approached the debate and presented the case for her amendments. I am grateful to her for moving amendments 21 and 85, because they give me the opportunity to set out clearly why we have put these measures in the Bill.
The housing benefit bill for England in the social sector now stands at £13 billion, having risen by nearly a fifth over the past ten years. Rising rents in the social housing sector are fuelling that increase, with average rent increases in the social sector more than double those in the private sector over the past five years. The Government are determined to put welfare spending on a sustainable footing and reduce the deficit while protecting the most vulnerable. We made commitments to deliver £12 billion of welfare savings, and the scale of the housing benefit bill means that we must address it, including through social rents, if we are to reduce the deficit.
Neil Coyle
The Minister’s concern for the rising rents in housing associations might be more welcome if it were married with concern for the rise in the private rented sector. Why is the Minister reluctant to address the concern of 70,000 private renters in Southwark and the steep rent rises they face?
Mr Vara
Let us talk about the private rented sector. In the years 2004 to 2014, the rent increase in the private rented sector was 23%, according to the Office for National Statistics. In the same period, the social housing rent increased by 63%. If that does not show that there is a difference, I do not know what does.
Emily Thornberry
I would be happy to take the Minister around Islington, where, I can assure him, the social rent levels are very much lower than private rent levels and the private rents are going up enormously. In my borough, we have great problems finding accommodation for people in the private rented sector if we cannot provide sufficient housing for them in the social rented sector, which we cannot. Our concern is that everything that the Government are currently doing is undermining the social rented sector and will, in the end, lead to a bigger benefit bill.
Mr Vara
I am grateful to the hon. Lady for her contribution, but I suggest she takes up the issue with the Office for National Statistics, rather than with me, as it is a highly regarded independent body. I am minded to say that the vast majority of the public will agree with the ONS, rather than with her.
Peter Dowd
May I ask for clarity? The whole point about the public sector is that it reinvests the money into new houses, new stock, decent homes and so on. The corporate group of the public sector tends to do that—it is part of its raison d’être—but the private sector is not doing it. Will the Minister give his view on that?
Mr Vara
I thank the hon. Gentleman for that contribution. I am mindful of the fact that he was a council leader before entering Parliament, and he brings added value to the Committee, and indeed the House, as a result. I will address the issue he has referred to and the argument that there will be a reduction in housing, so if he will please bear with me for a while longer, I will tell him why I believe that these measures will not have the impact that Opposition Members seem to think they will.
The Government have taken the decision to reduce rent increases within the social sector, which is good news for tenants. Just as I did on Tuesday, I pay tribute to the right hon. Member for East Ham (Stephen Timms), who acknowledged on Second Reading that the 1% reduction was a good thing and that he supported it. He is a distinguished Member of Parliament, and I am sorry that the Opposition Front Bench team has been deprived of the benefits he brought to it. He is a former Chief Secretary to the Treasury and a former Department for Work and Pensions Minister, and commands respect on both sides of the House. Given his ministerial experience, he knows the real position, and he said that he felt the 1% reduction was necessary. To be fair to him, he said he had concerns about the housing stock; I will address those concerns shortly, as I said to the hon. Member for Bootle. However, he recognised that the 1% reduction is necessary.
Rents paid by social housing tenants in England will reduce by 1% a year for four years from 2016. That means that by 2020 they will be paying roughly £12 per week less than they would have had to pay under the current policy of increases at a rate of the consumer prices index plus 1%. The policy will also help taxpayers, who are subsidising rents through the rising housing benefit bill. It is interesting that we have heard a lot of comments regarding housing associations, but no one seems to be acknowledging the financial benefit of £12 a week to the people living in those houses.
Jess Phillips (Birmingham, Yardley) (Lab)
To return to the Minister’s point about the benefit to the taxpayer, people living in lots of different types of supported accommodation, in social housing or in housing association housing are also in work and are taxpayers. I wonder how many times we will have to repeat that point to the Minister. They are not two distinct groups. Everybody pays tax, so will he please stop making out that one group of people is paying for another?
Mr Vara
The hon. Lady speaks of one group. The only conversations we hear are about the people she refers to; she does not talk about the people who are paying through their taxes for social housing but do not live in it. She speaks of a distinction she would rather I did not make—she would rather that we all spoke of just one group. She needs to recognise that there is another group. Perhaps she might reflect on those people occasionally.
Jess Phillips
Is the Minister telling me that the taxes of people who do not live in social housing are put in one pot and the taxes of people who do are put into another, and that those pots pay for different things? Am I confused, or is that money mixed?
The Chair
Order. This is a debate, and I am sure that the Minister will deal with the questions that have been raised.
The Chair
Order. I am conducting a Bill Committee at parliamentary level, and I am sure that the Minister will respond at that level.
Mr Vara
Absolutely, Mr Owen. I refer to all taxpayers, whether or not they are in social housing. All are equal in the contribution they make, but we must recognise that the taxpayer is paying a huge amount into the social housing budget at the moment. We have decided that a 1% reduction is fair. An argument has been put forward about there being inadequate housing; I will come to that shortly.
Mr Vara
A lot of questions were asked, and I would like to have the opportunity to address the issue of additional funds. I will give way to the hon. Lady in due course.
We need to recognise the £2.4 billion in surplus funds that housing associations have and the £2.2 billion that the 165 local authorities have in their housing revenue accounts. We should also remember the Government’s £10 billion debt guarantee scheme to support the delivery of new rental homes, and we are encouraging the supply of new homes with a £1 billion build to rent fund.
Mr Vara
I will not for the moment.
The Government remain committed to the delivery of 275,000 homes over the course of this Parliament. I remind Opposition Members that we have a track record of delivery—in the past five years we delivered more affordable homes than the Labour party did in 13 years of Government.
Several hon. Members rose—
The Chair
Order. The Minister is not giving way, and I would appreciate being able to listen to him without the conversations on both sides of the Committee Room.
Mr Vara
In England, only 75,000 homes were started between June 2008 and June 2009, the lowest level of building since the 1920s. So Government Members will take no lectures from Opposition Members when it comes to house building. They need to reflect on a whole host of other things—
Neil Coyle
The Minister used careful language—“most” and “many”—when talking about the financial robustness of housing associations. What distinction is made for those housing associations that are not in as strong a financial position? How will they be supported through a change that could see them lose significant sums?
Mr Vara
I appreciate that the hon. Gentleman is still reading the Bill, but when he gets further on he will find a subsequent clause that deals with exemptions, including local authorities or housing associations that might be in financial difficulty, and there are measures to deal with them.
To help further, the regulator will be on hand to assist housing associations in considering how they can deliver more efficiency and better value for money. My colleagues at the Department for Communities and Local Government continue to engage with all those concerned as they develop plans to meet the reductions. We acknowledge, however, that there might be some circumstances in which the reduction policy should not apply. Clause 20 therefore provides some statutory exceptions and for further provision to be set out in regulation. In clause 21 we have also allowed for circumstances in which the financial viability of a private registered provider might be jeopardised. In such circumstances a provider may apply to be exempt from the rent reductions; similar provision is made for local authorities.
As for the number of new homes being built, the Government remain absolutely committed to ensuring housing for those who cannot access the market, and we support the ongoing role that the housing association sector has to play in the supply of affordable housing, as well as driving more home ownership. There continues to be a role for housing associations in delivering the mix of housing supply that the country needs, as we have already seen with the delivery of 260,000 new affordable homes over the past five years. We are committed to delivering 275,000 homes by 2020.
We do not believe that there is a need for a plan or a report, as suggested in the amendments. Our approach is measured and will be good for tenants and taxpayers while building in safeguards for supported accommodation and the financial viability of private registered providers. On amendment 184, the Government have made a commitment to reduce rents for a period of four years from April 2016, which is made clear in clause 19 and the new schedule. I hope amendment 21 will be withdrawn.
Debbie Abrahams
The amendments have been drafted in consultation with a number of agencies, housing associations, the National Housing Federation and the Local Government Association. Moody’s has also criticised the Government’s measures. The Minister said that my right hon. Friend the Member for East Ham supports this measure, but he supports and has put his name to amendments 21 and 85.
Debbie Abrahams
Amendment 21 reflects the concern about the affordable homes building programme, which is why we have asked for a plan. We are not convinced that the Government will follow through, which is why I have moved the amendment.
On the other, more general points, I gently refer the Minister to the Government’s own data on house building performance, which were published this summer. Unfortunately, since 2010 the Government have presided over the lowest level of house building in peacetime since the ’20s—those are the Government’s own figures. I will not press the amendment but, again, I refer the Minister to the figures on affordable homes. We are really concerned about what is happening. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Neil Coyle
On a point of order, Mr Owen. I raised a point of order on Tuesday about a letter promised by the Minister for Employment. I now have a copy of the letter, for which I am grateful. There was clearly a mix-up, because it was sent some time ago. However, the letter does not answer the specific point about how the Government will assess the impact on disabled people in different areas.
On 17 September we discussed the impact on disabled people and carers and how to assess that impact more effectively. The Minister committed to providing an explanation of how that will be done. The letter I received talks about how Dr Simon Duffy has not responded to something for which the Department has asked—that is the block. I expected that the Department would outline what it is doing, not what it is not doing. I am keen to get more information on how the Government will address that.
The Chair
I have the gist of what the hon. Gentleman is saying. I was not in the Chair for the first point of order, and this is not a point of order for me. He has asked a question of the Minister, who is in her place. If she wishes to enhance what she said, she has the opportunity to do so, but he hon. Gentleman has his point on the record. We now need to move on.
Question put, That the clause, as amended, stand part of the Bill.
Mr Vara
I beg to move amendment 176, in clause 20, page 19, line 42, leave out paragraph (c) and insert—
‘(1A) Section 19 does not apply in relation to social housing that consists of or is included in a property if, where the property is subject to a mortgage or other arrangement under which it is security for the payment of a sum or sums—
(a) the mortgagee, or a person entitled under the arrangement to be in possession of the property, is in possession of the property,
(b) a receiver has been appointed by the mortgagee, by a person entitled under the arrangement to do so or by the court to receive the rents and profits of that property and that appointment is in force, or
(c) a person has been appointed under or because of the mortgage or the arrangement to administer or sell or otherwise dispose of the property and that appointment is in force.’
This amendment expands the exception from the rent reduction requirements in clause 19 so that it includes, as well as cases of a mortgagee in possession or a receiver appointed under a mortgage, cases where steps are taken under a different form of security to realise the security. See also amendment 177.
Mr Vara
The amendments relate to clause 20, which provides for an exception from the rent reduction requirements when a mortgagee takes possession of a property, or when a receiver is appointed by the mortgagee or the court, or where a property is sold by a mortgagee in possession or the receiver. This exception is intended to protect the value of stock held by all private registered provider landlords, to ensure that they can continue to use their assets as security for borrowing in the same way that applies in similar circumstances under the existing rent policy.
Our intention is that the rent reduction measures should be aligned as far as possible with existing policy on social housing, currently set out in the regulator of social housing’s rent standard guidance and the Government’s guidance for local authorities. Amendment 176 expands the exception from the rent reduction requirements in clause 19 so that it also includes cases where steps are taken to realise security under a different form of security, and where any person is appointed under a mortgage or different form of security arrangement to administer or sell the property.
Amendment 177 provides that the exception applicable to a sale by a mortgagee in possession or a receiver is not limited to the first person or body becoming successor in title of the registered provider on the sale or transfer of the property by a mortgagee or receiver, but extends to all subsequent purchasers or owners. It also expands the exception to cases in which the property is sold under a different form of security arrangement.
Amendment 149 clarifies that events for which the regulations may provide may include periods when the rent payable by a social tenant is temporarily reduced or waived. Such provision could be used to clarify how the rent reduction should apply when a registered provider has temporarily reduced or waived a tenant’s rent—for example, because they are making repairs to the property.
The details will be set out in the regulations. Without these amendments, there would be an impact on the private registered provider sector, potentially reducing the value of all social housing assets currently being used for security for borrowing, which would lead to a need for more security, and preventing them from borrowing more to build the homes that we need.
Debbie Abrahams
I should like to make a reference to my amendment, if I may.
Debbie Abrahams
In which case I will leave my remarks until then.
Amendment 176 agreed to.
Amendment made: 177, in clause 20, page 19, line 47, leave out paragraph (d) and insert—
‘( ) If a registered provider’s interest in property that consists of or includes social housing—
(a) was mortgaged or made subject to an arrangement other than a mortgage under which the interest in property was security for the payment of a sum or sums, and
(b) is sold or otherwise disposed of after the coming into force of section19 by—
(i) the mortgagee or a person entitled under the arrangement to do so,
(ii) a receiver appointed by the mortgagee, by a person entitled under the arrangement to do so or by the court to receive the rents and profits of the interest in property, or
(iii) a person appointed under or because of the mortgage or the arrangement to exercise powers that consist of or include the sale or other disposal of the interest in property,
section 19 ceases at that time to apply in relation to that social housing.”—(Guy Opperman.)
This amendment expands the exception so that, where there is a sale of a registered provider’s property by a mortgagee or receiver, the purchaser and all subsequent purchasers are excepted from the rent reduction requirements in clause 19. It also expands the exception to cases where the property is sold or otherwise disposed of under a different form of security.
Debbie Abrahams
I beg to move amendment 109, in clause 20, page 20, line 5, at end insert—
“(e) the accommodation is specified accommodation, as defined in the Housing Benefit and Universal Credit (Supported Accommodation) (Amendment) Regulations 2014.”
To provide that the mandatory 1% annual reduction in social housing rents will not apply to the tenants of “specified accommodation”.
I apologise for the confusion earlier, Mr Owen. Clause 20 sets out certain exemptions to the 1% reduction in rent for social housing providers, but the Opposition believe that there has been a major omission, which amendment 109 would address. It would include “specified accommodation” as defined in the Housing Benefit and Universal Credit (Supported Accommodation) (Amendment) Regulations 2014. I am grateful to Women’s Aid, Homeless Link, Sitra, Unison, St Mungo’s, the National Housing Federation, the Housing and Support Alliance, YMCA, Crisis, the Salvation Army and Centrepoint, which have all made a compelling case for the amendment.
Peter Dowd
Does my hon. Friend agree that Government policy on parity of esteem for people with mental health problems, which is trumpeted in relation to health, is not only about health, but about a range of social services, including housing? The Government proposal potentially directly affects parity of esteem for people with mental health problems.
Debbie Abrahams
Absolutely. My hon. Friend makes a powerful point. Those housing providers provide housing and support to a very vulnerable group, including people with mental health conditions. The measure will affect their opportunity and ability to live independently and well.
The impact on accommodation for homeless people with support needs demonstrates how damaging the change would be for supported housing as a whole. Over 90% of residential homelessness services rely on housing benefit as a key funding stream. One homeless organisation in the north-east of England has modelled the impact of the change on the 300 beds of supported accommodation that it provides, which accommodate 1,400 disadvantaged people a year. The impact of the 1% rent reduction, assuming that other costs increase by 2% or 3% a year, is that 50% of its accommodation projects will be financially unviable in 2016-17. It is absolutely imminent. That is key. The pace of the clause’s implementation means that we will be facing problems in the next few months and I hope the Minister responds appropriately. It gets worse, I am afraid: the organisation has mentioned 100% financial unviability by 2017-18. What will happen to that vulnerable group of people?
A second organisation, St Mungo’s Broadway, provides accommodation support to 3,800 people each year across London and the south-east of England. I have visited the project here and in the midlands. St Mungo’s estimates that the 1% annual rent reduction requirement will result in it losing £1.25 million in rental income by year 4—between £250,000 and £300,000 each year. Taking into account the rental income that the organisation anticipates over that period, the overall impact on its finances over the four-year period is a loss of £4 million. That loss of income will force some projects to close, resulting in the loss of accommodation for homeless and disadvantaged people.
Mr Owen, I expect that you have experienced an increase in rough sleeping in your constituency. I was shocked recently, in the last month or so, when I arrived back in Manchester from Parliament late one night. Every 50 metres there was somebody sleeping rough. The fact that the measures will affect organisations such as St Mungo’s is serious. I have mentioned the groups of people supported by those housing providers. The providers have estimated who will be affected in percentage terms. They expect that people with learning disabilities and physical health problems, people who have slept rough and people with a history of offending, and people with alcohol, drug and mental health problems who have been accessing their services for support needs, will be affected.
As has been mentioned, the measures will have an enormous impact on services working with other disadvantaged people. A large national provider of supported housing has estimated that the change will lead to the loss of 104 schemes, removing 1,969 support spaces for clients, including 228 spaces for people experiencing domestic violence. A small specialist learning disability provider will have its operating margins reduced to 0.2% and will be forced to cancel all proposed development of learning difficulty schemes. A large national organisation will be forced to reduce planned development of extra care by 400 units, including units specifically to help people home from hospital. Such organisations reduce the pressures that our beleaguered NHS is experiencing—the measures will have a direct impact on the NHS.
There is a precedent. The principle of treating supported housing separately from other social housing for welfare reform purposes was recognised in the previous Government’s proactive decision to keep housing costs for specified accommodation out of universal credit and the benefit cap calculations.
Jess Phillips
Does my hon. Friend want to pay credit to Ministers for removing specified accommodation during the previous Government? It most certainly meant that, at the refuge where I worked at the time, we could maintain operations exactly as they were, and in fact develop some others. The Minister spoke earlier about listening. Perhaps we should pay credit to the Government for listening on that occasion.
Debbie Abrahams
My hon. Friend is absolutely right. That is a valid point, and I hope the Minister can do so. On that note, I will stop there.
Neil Coyle
In rising to speak to the amendment, I just want to say that I welcome the Minister’s commitment this morning to write to me so I can find out a bit more information. He suggested that I was trying to make a name for myself—I believe that was the term he used. I certainly do not intend to upset him in any way, not least because I understand he has a black belt in martial arts.
Neil Coyle
The commitment to providing information was linked to the amendment because we were talking about housing associations, representations and the discussions that the Department is having. It would be useful if the Minister, when answering in writing, could provide information on the number of housing associations that have been met; the numbers that indicated that they support the policy, especially those providing specified and supported accommodation; those that specifically outlined the risk to their business case of the policy going ahead; and any representations to the Department from organisations suggesting that they would be unable to provide specified accommodation. I would be grateful to receive that information. I do not expect an answer today.
We heard about specified accommodation in great detail from my hon. Friend the Member for Oldham East and Saddleworth, and from all the organisations that made representations—I am particularly grateful to Homeless Link, St Mungo’s Broadway, Shelter and Crisis. The amendment is designed to cover shared houses, hostels, refuges and self-contained accommodation owned by registered providers, and instances where housing-related support, including financial management, is provided.
St Mungo’s Broadway operates in my constituency. Of its residents—the people that it provides support to—52% have previously been rough sleepers, 72% have mental health needs, 44% have significant physical health problems and more than one in five have experienced violence or abuse from a family member or partner. That is the client group, to use the Department’s language, that we are talking about. The total number of units provided at the moment is around 105,000. My hon. Friend the Member for Bootle mentioned Riverside, which estimates that it provides about 4,600 units of that kind of accommodation. We are not talking about a huge number, but the measure would make the provision of the services and housing more difficult for those organisations.
The Homes and Communities Agency was mentioned earlier. It has estimated that investment in supported housing results in a net cost-benefit to the public purse of £640 million per year. Does the Minister have any information about how that cost-benefit analysis has been undertaken or about the risk to that cost-benefit if housing is put at risk? The cost to local authorities of rough sleeping is roughly £8,600 per person. That does not include any cost to the Department of Health, the Ministry of Justice or the Home Office—it is just the cost to local authorities. Getting this wrong and putting accommodation for vulnerable people at risk could have knock-on costs for all taxpayers.
The Department for Work and Pensions and the Department for Communities and Local Government have commissioned a review into supported accommodation to establish a better evidence base for future funding decisions. Would the Minister give an indication of where that review is at and why the Government are not prepared to wait for the outcome of that review before pressing on with the policy?
Riverside estimates that the cumulative cost of the policy to it would be about £100 million. It has said that
“a year on year reduction in rental income would make this element”—
the specified accommodation—
“of our business loss making”.
It would either have to subsidise from elsewhere or stop providing that accommodation.
St Mungo’s Broadway has said that
“the requirement to reduce rents in social housing in England by one per cent per year for four years will result in the loss of supported housing schemes for homeless and vulnerable people.”
It is saying categorically that it will be unable to provide some of the accommodation that it currently provides, and that there is a knock-on cost that the Government have not taken into account. As my hon. Friend the Member for Oldham East and Saddleworth has mentioned, St Mungo’s Broadway has said that it will lose £1.25 million by the end of this Parliament as a result of the annual rent reduction. The four housing associations that I have spoken to, which provide some of their accommodation in Bermondsey and Old Southwark, have said that collectively, the cost to them of the proposed policy would be more than £180 million during the lifetime of this Parliament alone.
Mr Vara
May I initially address the hon. Gentleman’s points, although I will of course write to him? As a caveat, I must say that we have lots of meetings with lots of organisations, and many have asked whether we could look at something differently. Policy is not reached purely on the basis of asking, “Do you agree with this, or don’t you?”. Instead, we make it clear that we propose to do something and that we have a Government mandate to do so, and we ask how we can do that so that we best accommodate others’ views. Matters are not clearcut, but I will certainly write to the hon. Gentleman.
The hon. Gentleman referred to the evidence review that the Government have commissioned on the specified accommodation and supported housing sectors to understand better the scale, shape and cost of the sector in England, Scotland and Wales. We hope that the findings will be available sometime next year.
I welcome the contributions to the debate, all of which have been heartfelt. I commend the hon. Member for Oldham East and Saddleworth for the measured way in which she put forward her arguments, and I have taken her points on board. I am very grateful that the amendment was selected, because it gives me the opportunity to set out what is in the Bill, and to explain why we cannot support the amendment. However, I hope that the hon. Lady will take comfort from my remarks.
We recognise that the rent reduction measures introduce a significant change to existing rent policy. We have listened to comments and concerns about the housing of vulnerable groups, and I can offer the hon. Lady a number of assurances that mean that her amendment is unnecessary. First, in the light of this new policy, we will look to align as far as possible exceptions under the new policy with those that apply under the existing rent policy for social housing. That means that we intend to except from the rent reduction requirement the types of housing that are excepted from the rent standard. Those include specialised supported accommodation, which provides support for the most vulnerable people and which is developed in partnership with councils or the health service. Also excepted will be residential care homes and nursing homes. Clause 20(2) gives the Secretary of State for Communities and Local Government a power to set further exceptions should they be needed, to except that accommodation from rent reductions.
Clause 20(3) further clarifies the cases and circumstances that regulations may provide for, which include groups of tenants and types of accommodation.
Peter Dowd
I acknowledge what the Minister is saying, but I would ask him to cast the net more widely. For example, does he recognise that, under section 117 of the Mental Health Act 1983, if accommodation cannot be continued, provision becomes much more expensive because of a statutory requirement, notwithstanding the forthcoming amendments? That provision would be much more expensive if organisations could no longer provide it. The Government are taking money from Peter to pay Paul, but Paul is much more expensive.
Mr Vara
I take on board what the hon. Gentleman says, some of which I will address later when I talk about other forms of help, assistance and funding.
We have tabled amendments that provide the Secretary of State with powers to allow, by regulation, rent setting for new tenancies in supported housing at up to 10% above the formula. That is similar to the existing rent policy and standard practice. We believe that should help providers of supported accommodation for vulnerable people to continue to provide that important housing. We also acknowledge that there might be some circumstances in which the financial viability of a private registered provider or a local authority could be jeopardised—something the hon. Member for Bermondsey and Old Southwark mentioned. In those cases, the providers could apply to be exempt from rent reductions.
Neil Coyle
It sounds like some of what the Minister is saying is likely to be welcome. Let me reiterate that the borough of Southwark is the biggest landlord in London. In bringing forward other exemptions, would the Minister be willing to meet my local authority to ensure that the most appropriate accommodation is exempted to best effect?
Mr Vara
I would of course be happy to meet the hon. Gentleman and anyone he wishes to bring to the meeting. What I would say is that we have been mindful of the fact that we cannot judge the situation as it is now. Where local authorities or housing associations find themselves in financial difficulty and their viability may be an issue, there are processes in place to ensure that the regulator works with them to make sure that things can be worked out. If it is felt necessary, then with the consent of the Secretary of State there can be alterations through a rent reduction, and organisations can make their case. However, we hope to set out in regulations the criteria that would be applied.
We intend to work with organisations—housing associations and local authorities—because we want to make this work. The change is not simply being imposed; we are consulting widely. The hon. Member for Oldham East and Saddleworth was right to say that there have been a number of amendments, and I repeat that that is a direct consequence of lots of organisations coming to us and saying, “Well, how about this?” We have taken what I think is a commendable decision, in that we have genuinely listened and tried to clarify what we thought we were aiming for. It was not clear enough for the people concerned, so we sought to clarify it.
It is important to get the balance right between reducing the burden on taxpayers and supporting the provision of housing for vulnerable people, as well as the balance between supporting the provision of that housing and treating fairly those older or disabled tenants who pay their own rent and who should benefit from the rent reductions, but will not do so if there is a blanket exemption.
When it comes to dealing with vulnerable older and disabled people, it is important to look at the wider context. As a Government, we are determined to protect the most vulnerable in society and help them to live independent lives, and assistance goes beyond what we are discussing today. Funding for supported housing is included in the wider settlement to councils. The Government continue to support local areas to meet their local needs by maximising funding flexibility. For example, in 2015-16, we are investing £5.3 billion in the better care fund to deliver faster and deeper integration of health and social care. This will enable councils to invest in early action to help people to live in their own homes for longer and help to prevent crisis, as well as supporting councils to work together more effectively, deliver better outcomes for less money and drive integration across all services.
The Government are also investing in specialised housing for older and disabled people through the £315 million care and support specialised housing fund. Phase 1 is expected to deliver over 4,000 homes by 2018; phase 2 was announced in February and will set aside up to £155 million in capital funding for the development of specialist housing to meet the needs of older people and adults with disabilities or known mental health issues.
Neil Coyle
My understanding is that the better care fund is entirely restricted to new projects, so it cannot help towards councils’ existing accommodation costs. Given that we know the waiting lists that councils across the country have, I am not convinced that the better care fund is the solution to the specific problem before us. At the same time, the Government are ending the independent living fund, leaving councils potentially significant new costs for providing residential care accommodation for disabled people who had previously been able to be supported in their own homes.
Mr Vara
I repeat that we should not look at this solely in the context of what we are discussing today; there is a wider picture here, and I have given details of the other moneys available alongside the 1% reduction we are discussing.
I repeat that the Government are committed to ensuring that the most vulnerable people are protected. Statutory homelessness is lower now than in 26 of the past 30 years, at less than half the peak it reached in 2004. This Government have increased spending further to prevent homelessness, making over £500 million available to help the most vulnerable in society. That has resulted in local authorities preventing 935,000 households from becoming homeless since 2010.
Neil Coyle
There is a brilliant charity in Bermondsey called UK Homes 4 Heroes, which supports former members of the armed forces. We have seen a dramatic rise in the number of former members of our armed forces sleeping rough in London. How will this specific policy help councils and others to better support those coming out of the armed forces, to prevent them from ending up sleeping rough, given what the Minister has just said?
Mr Vara
That issue commands huge respect across Government and on both sides of the political argument. There is discussion and debate across Government to make sure that brave men and women who are prepared to put their lives on the line for our safety and security get the best possible treatment. There are clearly still issues that need to be resolved. It is an ongoing debate. I am very aware of the situation to which the hon. Gentleman refers; there are RAF bases in my constituency, and I am only too aware of how we need to look after those people a lot better. We have made progress in the past five years, but we need to do more and should remain vigilant.
I believe that there are sufficient safeguards in place to ensure the continued financial viability of housing providers while balancing the need to support tenants who should benefit from a reduction in their rent. I urge the Opposition to withdraw the amendment.
Debbie Abrahams
I am grateful to the Minister for that positive response and look forward to the regulations he mentioned setting out the criteria on requests for exemptions that providers of supported housing may put to the regulator. I believe that the Minister recognises the dire situation those providers are in. I also thank my hon. Friend the Member for Bermondsey and Old Southwark, who provided us with the wider context about, for example, how the end of the independent living fund will affect local authorities’ provision for supported accommodation; that is very relevant.
I differ from the Minister in my interpretation of the homelessness situation at the moment. We can trade off figures, which I do not think is helpful. We need to move beyond that. I have the Government figures here, and in the past five years, for example, there has been an 840% increase in the number of families with children who have been declared homeless and are living in bed-and-breakfast accommodation. The situation is certainly not rosy. We have anecdotal evidence of that ourselves. However, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chair
With this it will be convenient to discuss Government amendments 155, 156, 161 and 162.
Mr Vara
We have recently been talking about exceptions and exemptions and it might be helpful if I clarify the position. We will set out the criteria for exceptions in the regulations. When we talk about exemptions, the financial viability conditions are in the Bill. We can also set out other conditions for an exemption in the regulations. I hope that that is helpful in drawing a distinction.
The amendments seek to introduce flexibility into the exemption process in relation to clause 19. Amendments 154 and 161 allow a direction to be made in relation to only some of the social housing that a private registered provider or a local authority have, ensuring that exemption can be targeted. Amendment 155 enables the regulator of social housing, the Homes and Communities Agency, to publish guidance on steps that a private registered provider should take before seeking an exemption. Amendments 156 and 162 give the Secretary of State power to prescribe conditions other than serious financial difficulties in which an exemption may be granted to a local authority.
Amendment 154, 155 and 161 recognise that exemption is a tool of last resort and, if needed, should be used in as targeted a way as possible. Amendments 156 and 162 provide for greater flexibility in the exemption regime.
Debbie Abrahams
I am grateful to the Minister for his clarification. We are talking about the financial viability of supported housing providers and, more broadly, housing associations. The Government are considering the problems that they face, so has there been any assessment of the housing providers whose viability could be threatened as a result of the measures? Will one be undertaken? I am grateful for the detail on the amendment, but it seems that implementation is already anticipated. Should there not be a step before that?
Mr Vara
We are not anticipating difficulty. We are trying to recognise what might happen in future, so we are making it absolutely clear that, although we propose a 1% reduction, where financial viability is threatened, there are measures in place to deal with it.
We must recognise that the regulator is there to help, assist and advise. Its job is to assist, but as a default mechanism we have those provisions. However, as far as I am aware, we do not anticipate anyone having difficulty. I reiterate that we are confident that housing associations and local authorities are robust organisations that can deal with the 1% reduction. It must be considered in the wider context. Individuals and other organisations throughout the country are having to put up with difficulties. We are asking for a 1% reduction. I repeat the comments made by David Orr, chief executive of the National Housing Federation. I will not repeat the whole quote, as I gave it earlier, but simply two lines. He said that
“in truth, there is no sector anywhere that is not still capable of making further efficiency savings. That is as true in our sector as it is anywhere else.––[Official Report, Welfare Reform and Work Public Bill Committee, 15 September 2015; c. 91, Q144.]
Amendment 154 agreed to.
Amendments made: 155, in clause 21, page 21, line 11, at end insert—
“( ) The regulator may publish a document about the measures that the regulator considers could be taken by a private registered provider to comply with section 19 and to avoid jeopardising its financial viability.”
This amendment enables the Regulator of Social Housing to publish documents relating to the condition in clause 21(4).
Amendment 156, in clause 21, page 21, line 13, after “(9)” insert “or (9A)”.
This amendment and amendment 162 provide that the Secretary of State may issue a direction if an alternative condition is met, that is, a condition that the circumstances of the local authority must satisfy requirements prescribed in regulations by the Secretary of State.
Amendment 157, in clause 21, page 21, line 18, after “for” insert ““at least”.
This amendment and amendment 158 permit a local authority to which a direction in the terms of clause 21(7)(b) is issued to make a reduction in rent, instead of keeping the rent the same.
Amendment 158, in clause 21, page 21, line 19, for “the same as” substitute “no more than”.
Amendment 159, in clause 21, page 21, line 21, after “required” insert “at least”.
This amendment permits a local authority to which a direction in the terms of clause 21(7)(c) is issued to make a greater reduction in rent than the reduction specified in the direction.
Amendment 160, in clause 21, page 21, line 22, at end insert—
“(d) a direction that section19 is to have effect in relation to a local authority specified in the direction as if section19(1) required the authority to secure that the amount of rent payable by tenants of their social housing increased by no more than the percentage specified in the direction.”
This amendment provides for directions that exempt a local authority from the rent reduction requirements in clause 19 but limit what increase in rent the authority may impose.
Amendment 161, in clause 21, page 21, line 24, at end insert—
“, and
(b) the social housing in relation to which it is to have effect.”
This amendment enables a direction to affect only some social housing of a local authority.
Amendment 162, in clause 21, page 21, line 27, at end insert—
“(9A) The condition in this subsection is that the circumstances of the local authority satisfy requirements prescribed in regulations made by the Secretary of State.”
Amendment 179, in clause 21, page 21, line 31, leave out subsection (11).—(Guy Opperman.)
This amendment is consequential on amendment NC22.
Question put, That the clause, as amended, stand part of the Bill.
Priti Patel
It is a pleasure to serve under your chairmanship this afternoon, Mr Owen.
The amendments are about fairness for taxpayers. Currently the Government divert benefit payments to Motability Operations Ltd on behalf of claimants who participate in the Motability scheme. That is of direct benefit to Motability Operations Limited, but the cost of doing it is borne by the taxpayer. The new clause seeks to rectify that by granting the Government the power to recover the expenses incurred in the administration of that arrangement and any similar future arrangement in respect of benefit diversion to an organisation that leases or sells motor vehicles to disabled persons.
Amendment 130 will enable the Government to exercise the power in England, Wales and Scotland. The power will not have an impact on customers. It will merely allow the Government to recover the expenses incurred in diverting the benefit. It has the support of Motability.
Debbie Abrahams
New clause 14 and amendment 130 make provision for the Department to recover costs made in administering the payments to relevant providers for the lease or hire-purchase of motor vehicles for those in receipt of the higher rate mobility component of disability living allowance or the enhanced mobility component of PIP.
Currently, around 620,000 people lease vehicles through the Motability scheme for an average of £3,000 a year over three years. Concerns have been expressed about the number of people who previously qualified for the higher rate mobility component of DLA, but who failed to qualify for the enhanced rate of the mobility component of PIP and so no longer qualify for the scheme. As the Minister is aware, about 360,000 current Motability scheme users will be reassessed between October 2013 and 2018.
What assessment has the Minister made of the numbers of people who to date will no longer be eligible for the Motability scheme? In addition, will the Minister inform the Committee of the cost to the Department of administering payments to providers, as outlined in the new clause? Will she estimate how much per lease the recovery of DWP expenses will cost? Furthermore, what estimate has she made of the recoverable expenses as a percentage of the overall average leasing or hire-purchase agreement? When will the Government produce an impact assessment for the provision?
I am sure we all recognise the importance of the vehicle-hire schemes to disabled people, and of the benefits that the independence of having a suitable vehicle brings in health, social, work and financial terms. My father-in-law was registered blind and, through a mobility scheme, my mother-in-law was able to drive him around. The independence that that gave him was very important to him.
Opposition Members would welcome the Minister’s assurance that the changes outlined in new clause 14 and amendment 130 will not negatively impact on a disabled person’s ability to secure access to vehicle leases and rental agreements, and the independence and the lifeline that they provide. We would also like assurances that there will be no further shifting of costs to disabled people.
Priti Patel
I have a number of points, and I will come back to the hon. Lady specifically on quantity information and data. The measure has the support of Motability, and working with Motability is the right thing to do because Motability Operations Ltd provides great support for claimants. She makes it abundantly clear that a great deal of vital and valuable support is provided. This is a valuable lifeline to claimants.
The hon. Lady mentioned costs. I have some figures. The measure costs less than £1 million a year, and Motability has confirmed that it is affordable and will not have an impact on its users. She has specifically asked for further information, and I will ask officials in the Department to get back to her.
Neil Coyle
I welcome the Minister to her place. It is interesting to hear that Motability supports the amendment. Does the amendment arise from the expectation advertised by Motability that it will be forced to withdraw vehicles from disabled people as a result of the transition from disability living allowance to the personal independence payment?
Priti Patel
My understanding is that there will be no impact on claimants who participate in the scheme. The measures are about ensuring the service and reclaiming costs in a fair way for taxpayers, as I explained in my initial comments. This is not about service provision changes. I hope that answers the hon. Gentleman’s question.
Question put and agreed to.
Question put, That the clause be added to the Bill.
The Chair
With this it will be convenient to discuss:
New clause 18—Review of Disability Living Allowance and Personal Independence Payment—
‘(1) Part 4 of the Welfare Reform Act 2012 (Personal Independence Payment) is amended as follows.
(2) Insert new section after section 79—
“79A Review of Disability Living Allowance and Personal Independence Payment
(1) The Secretary of State shall in each tax year review the standard rate and enhanced rate of the daily living (section 78) and mobility component (section 79) of the personal independence payment.
(2) In carrying out a review under subsection (1) the Secretary of State shall consider the effect on the rates if they were increased by—
(a) the percentage increase in the general level of earnings at the end of the period;
(b) the percentage increase in the general level of prices for goods and services, as measured by the Consumer Price Index or by any measurement formally replacing the Consumer Price Index; and
(c) 2.5 per cent.
(3) The Secretary of State shall within three months of this review concluding lay before Parliament a draft order which increases the value of the amount referred to in subsection (1) by the greatest of the three amounts calculated under paragraphs (a) to (c) of subsections (2).”’
For DLA and PIP to be triple locked to further protect their value.
Neil Coyle
Thank you, Mr Owen. That was a bit of a surprise; I thought that there were more Government new clauses to get through.
I pay tribute to my hon. Friend the Member for Sheffield Central (Paul Blomfield) who supported the drafting of the new clauses. I also pay tribute to the citizens advice bureau that serves Sheffield Central and Sheffield, Brightside and Hillsborough for providing case studies. As the explanatory statement makes clear, the new clause is designed to improve support for disabled people who become terminally ill when they are already in receipt of DLA and are in the process of being transferred to the PIP. Welfare rights advisors have identified delays in support to that group. Are the Government were willing to address the concerns?
Today, we heard the Government again suggest that they are protecting disabled people and the most vulnerable. My new clause is solely concerned with terminally ill disabled people—people with an existing impairment or health condition and a terminal prognosis of six months or less left to live. It is very small group. On September 9, I asked the DWP for the specific number of people on DLA who would be affected by the measure. The answer I got back was disappointing—it was not from the Minister, but one of her colleagues. The answer was that the information on the number of disabled people affected by the issues “is not collated” by the Department
“and could only be provided at disproportionate cost.”
That was an incredibly disappointing response, not least because the DWP publishes PIP statistical ad hoc reports.
The most recent figures from May 2015 on registrations, clearances and awards indicate how many people within the figures might qualify for support. As of 31 March 2015, 774,800 new PIP claims and 123,700 DLA reassessment claims had been registered. For the entire period of PIP, the number of reassessments under the
“special rules for the terminally ill”
—to use departmental language—was 16,000. To put a figure on it to enable the Government to cost the measure, we are talking about just 800 people a year, roughly, who are disadvantaged by current process and would benefit slightly from a more sympathetic position from the Government. Those are purely disabled people who are on DLA and moving to PIP due to terminal illness. The new clause is designed to ensure that they receive their first PIP immediately instead of waiting four weeks from the final DLA payment and another four weeks before receiving their first PIP. When people are terminally ill, time is more pressing and precious, and that is a ridiculous amount of time to wait to receive support. That length of time was not required by the former DLA rules, under which the payment would have been received far more quickly.
In the welfare rights advice sector, the perception of the coalition Government’s welfare reform legislation is that it was an accident, rather than a deliberate policy designed to delay support for terminally ill disabled people. Will the Minister indicate whether making terminally ill disabled people wait longer to access vital support was an intended outcome of the change under PIP?
Citizen’s advice bureaux throughout the country have been working as part of the big society—we do not hear so much about that any more. In Southwark, those services have seen a 40% jump in demand. Their support for society has got far bigger as a direct result of welfare reform. I am grateful to the citizen’s advice bureau in Sheffield for providing information about Carol. Carol is 59 and was in receipt of the DLA care component at the lowest rate of £21.80. On 27 May this year, following a diagnosis of metastatic breast cancer, she notified the DWP that she wanted her claim reconsidered under special rules. The Department awarded her the highest rates of the daily living and mobility components of PIP, which equates to £139.75 a week. However, due to the application of transitional rules, payment was from 8 July—four weeks after her next DLA payment date. Had she been a new claimant for PIP who was not already in receipt of DLA the benefit would have been awarded from 27 May. In Carol’s case, that meant losing £117.95 a week for the period of 27 May to 8 July. Some claimants in similar situations would simply not live long enough to receive their awards under existing rules.
I must ensure that I anonymise the next example, as I do not believe that I have permission to name the individual. C1 was diagnosed with terminal lung cancer. He has chronic obstructive pulmonary disease and has had his right leg amputated below the knee. He received the DLA higher-rate mobility and lower-rate care payments. C1 was told that he could claim PIP instead of DLA but would then be entitled to enhanced care as well as higher-rate mobility. His PIP would not increase until four weeks after his next DLA payment date, so it might take four to eight weeks for the increase to take place, despite his significant disadvantages and terminal prognosis. On the date the advice was given, the client would not have been entitled to receive the enhanced rate until 30 September. He was given the advice in August. The individual has agreed to allow his story to be put forward, and he is happy for us to discuss his circumstances, but not to be named. However, it is a genuine example from Sheffield.
Peter Dowd
I support my hon. Friend and new clause 4. The Under-Secretary of State for Work and Pensions, the hon. Member for North West Cambridgeshire, talked earlier about a wider context, and I want to talk in a wider context now. Not many weeks ago we debated the Assisted Dying Bill—many people in this room were there. I suspect many Members, like me, voted against that Bill. We said it was a question of giving people dignity in death and as much support as possible in the weeks and months leading up to their death. The new clause would go a long way to helping with that concept, because we can have the abstract idea of supporting people who do not think people should be assisted when they are dying, but the new clause is a practical step to help those who voted against the Assisted Dying Bill to put that into effect.
We recently had a discussion about the hospice moment. I wrote an article about the movement in which I said it was part of the wider context and the wider support that we give in society to people who are on the doorstep of death—let us not beat about the bush, that is exactly what it is. The new clause is a practical proposal to help such people.
For those of us who have had a relative or a friend with a terminal illness, or for those who have worked in the sector and had to deal with people with a terminal illness, the new clause would provide reassurance. It would reassure me that I could be part of the process of saying, “Yes, we have helped you. It might be minor in some regards, but we have been able to help you in your last days and weeks.” That would take some of the stress from the family, and it might take some of the stress from the dying person as well. It is important that we play a part, even if we in this room can play only a small part.
There is another aspect. Some people with a terminal illness might have co-morbidity. They may have Parkinson’s disease; indeed, they may have Alzheimer’s. In those circumstances, it is incumbent on us to make sure that we link the abstract with the practical. This is a genuine opportunity to link our abstract principles and philosophy— on assisted dying, for example—with the practical implications.
Neil Coyle
I also attended the debate on the Assisted Dying Bill, and there was a strong consensus that there was insufficient support for those who are dying or contemplating suicide. It is unfortunate that, even where there is an indication that some cuts in support have contributed towards tragic consequences for individuals, the Government are reluctant to analyse that properly and to prevent that from happening—not for any other purpose, but to ensure support to prevent people from taking their own lives and to support people at the end of their lives.
Peter Dowd
That is a well-made point. The more we get into this debate, the more we have to move from the philosophical and the abstract to the practical. This is a practical example of where we can say to people, “You’ve got so many pressures on your life at the moment, the least we can do is try to take away just a little of the pressure on you and your family.” If we can just do that, it would be a small step, but a great achievement.
Priti Patel
Let me start by thanking the hon. Members for Bermondsey and Old Southwark and for Bootle for their contributions, and particularly the hon. Member for Bermondsey and Old Southwark, who has experience in this area from his professional background. For the record, I also thank the third party organisations that have submitted written statements to the Committee and its members. The hon. Gentleman gave some examples—not attributable ones—but I repeat my offer to the Committee: if there are cases that he or any other member would like me to look at, I would be happy to do that and to meet them to give support and assurance.
New clause 18 seeks to create a duty to increase the rates of disability living allowance and PIP by the highest of the CPI, the rise in average earnings or 2.5%. DLA and PIP are benefits that offer support, as we have heard, for those needing care or supervision as a result of their disability. New clause 18 would require the Secretary of State to review those rates every tax year, considering the effect on them if they were increased by earnings, prices or 2.5%, and, within three months of concluding that review, to lay an order increasing them by the highest of earnings, prices or 2.5%.
Making this change to the Welfare Reform Act 2012, rather than to the Social Security Administration Act 1992, would create a second review process of DLA and PIP rates, which would overlap with the general review of benefits conducted by the Secretary of State every tax year. That would create uncertainty for benefit recipients, who may find their benefit rates reviewed and announced at different times. Furthermore, the change would remove the alignment between the rates of the care components of DLA and the daily living components of PIP, and those of the attendance allowance, causing further confusion for recipients between working and pensioner age.
This discussion has been highly relevant, however, because we all understand and share the desire of hon. Members who have contributed to the debate to protect and to support those in receipt of DLA and PIP. That is why we have in place many protections, which I would like to set out. We already continue to uprate DLA and PIP by price inflation; specifically, we have exempted certain benefits relating to the additional costs of disability and care from the benefits freeze. Those include DLA and PIP, as well as carer’s allowance, attendance allowance and the support group component of ESA. We have also exempted recipients of DLA and PIP from the benefits cap. The welfare system continues to provide support and to protect those recipients. As we have heard, there are families who cannot work and require the support of DLA and PIP, which is why we have these exemptions. We have also ensured that both DLA and PIP remain universally accessible benefits and have committed not to means-test either. We have also committed to keep them non-taxable. We have built extra protections into the system for claimants who may need extra support.
That brings me on to new clause 4. During the course of our welfare reform programme, the Government have always made it clear that, in our steps to achieve a higher-wage, low-tax and low-welfare society, we will always provide support for those with the greatest needs. In particular, PIP recognises the unique challenges of claimants who are terminally ill. Special rules and criteria for the terminally ill have been introduced to ensure that the PIP system handles such cases both efficiently and sensitively to reduce burdens on individuals and their families at what is inevitably a difficult time. PIP has a fast-track system to allow us to process special rules claims more quickly, with claims, on average, being cleared within six working days. Some 99% of those who apply under the special rules are awarded the benefit, and we have ensured that each of those individuals is guaranteed the enhanced rate of the daily living component.
Evidence for special rules cases is reviewed on a paper basis, and we do not expect individuals applying in such circumstances to undertake any face-to-face assessments. We have worked closely with stakeholder organisations to design a system that allows us to make the correct decisions in such instances without the need for a face-to-face assessment, thereby reducing intrusion and stress for claimants and families. It also helps us to deliver vital support for claimants in the most practical way as soon as possible.
In many cases where an individual may not be aware of their prognosis, or where that might be a particularly distressing subject to discuss, we have worked to design the system to support family members, or representative third party organisations, through the claims process to ensure that individuals can still access the support to which they are rightly entitled in a way that is sensitive to their needs. Through those steps, we have a clear focus on delivery for the individual. It is also important that case managers still have sufficient time in which to consider an individual’s case to ensure that they are being awarded the correct level of support and benefits. Reducing that time, as suggested, would potentially increase the risk of an incorrect payment being made. In such cases, the claimant would either be left with less support or little support. Obviously, we want to ensure that we are not creating any arduous or difficult processes. We are focused on supporting individuals.
Debbie Abrahams
Will the Minister clarify that point? My hon. Friend the Member for Bermondsey and Old Southwark has said that that happens automatically in the current DLA system. It happens in the DLA system, but not in the PIP system. Why would there be an issue if it is transferred to the PIP system?
Priti Patel
As I have just said, that would undermine its value. The best way to put this is that, importantly, it is about the individual and ensuring that we have the right rules so that we can support the individual in the right way.
Neil Coyle
It is a bit disturbing to hear the Minister worrying about an inappropriate payment, because she is suggesting that the Department cannot handle this issue. It already handles the issue through disability living allowance so that people get the support when they need it. A very small number of people are moving from disability living allowance to the personal independence payment—we are talking about a maximum of 800 people a year, according to the Department’s figures. We are talking about a very small number of people and a change that aligns the support with DLA for those people in the DLA to PIP transition areas.
Priti Patel
I completely understand those points. The focus is on ensuring that PIP is delivered in the right way and providing the right support. Having listened to the debate today, I will happily consider the views expressed. We are working with stakeholders under the independent reviews, as well. That is important for the efficacy of the delivery and roll-out of PIP. I will take the views and representations made by the Committee into consideration, and we will work with hon. Members, as well. I will be happy to discuss this matter further outside the Committee.
The hon. Gentleman touched on the issue of how frequently claimants who are terminally ill receive their DLA or PIP. Those claimants receive their benefit payment weekly in advance, as opposed to four weeks in arrears, the normal payment cycle for PIP. As I said, I am happy to discuss the matter further and take on board hon. Members’ considerations and representations. I therefore urge the hon. Gentleman to withdraw the new clause.
Neil Coyle
I thank the Minister for her response. It is good to know that there is a window of opportunity to explore this issue in a bit more detail. As I mentioned at the beginning of my remarks on the new clause, I hope that my hon. Friend the Member for Sheffield Central and the organisations in his constituency can be included in the discussions.
The fast-track system the Minister mentioned is there not out of the goodness of the Department’s heart; it reflects the fact that these people have only six months to live from diagnosis. Looking to have equivalent support for those on disability living allowance who are transitioning to the personal independence payment gives us a small window of opportunity to make sure that there is no time lapse and that people do not end up out of pocket purely because of a postcode lottery.
I welcome the Minister’s commitment and hope the discussions she mentioned are fruitful. If things are not as clear as we would like before Report, there will be the opportunity to discuss the provisions in the new clause at that stage.
To come back to the earlier point about taxpayers, there are many disabled people who use DLA and PIP to support themselves in work. In-work costs are higher for many disabled people—public transport costs, different work uniforms or whatever it might be. We should not lose sight of that. It would be useful if the Government could give a stronger indication that they would be willing to consider having higher payments, which the triple lock would achieve.
I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
The Chair
This is my last sitting of the Committee. I thank all members, including the Ministers and those sitting on the Opposition Front Bench. In particular, I thank both Clerks, who have been tireless in their work, and Hansard.
Ordered, That further consideration be now adjourned. —(Guy Opperman.)