Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Haskel) (Lab)
My Lords, if there is a Division in the House, the Committee will stand adjourned for 10 minutes.
Modern Slavery Act 2015 (Code of Practice) Regulations 2016
(8 years ago)
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Lord Keen of Elie
That the Grand Committee do consider the Modern Slavery Act 2015 (Code of Practice) Regulations 2016.
The Advocate-General for Scotland (Lord Keen of Elie) (Con)
My Lords, I shall speak to the draft Modern Slavery Act 2015 (Code of Practice) Regulations 2016, which were laid before this House on 14 March.
The Modern Slavery Act 2015 includes important maritime enforcement powers for constables and enforcement officers to use when investigating modern slavery offences committed at sea. These provisions will give law enforcement officers at sea similar powers of enforcement to those available to enforcement officers in relation to drug traffickers. In summary, these are: the power to stop, board, divert and detain a vessel; the power to search a vessel and obtain information; and the power to arrest and to seize any relevant evidence.
The Modern Slavery Act enables law enforcement officers to use these powers in relation to certain ships in international waters, as well as UK territorial waters. It will also allow law enforcement officers in hot pursuit of ships to exercise their powers throughout UK territorial waters, so that they have the powers they need to catch the perpetrators of these terrible crimes. These powers are important because victims can be trafficked on vessels or subject to terrible abuse and forced labour while at sea. If law enforcement officers have to wait for vessels to return to UK territorial waters or to a UK port before they can take action, this can expose victims to extended periods of abuse and risk to life.
Before these new powers are brought into force, Schedule 2 to the Act requires that a code of practice is put in place for England and Wales for English and Welsh enforcement officers to follow when arresting a person under these powers. The Government have now prepared this code of practice, which was laid before the House on 14 March 2016 with the Modern Slavery Act 2015 (Code of Practice) Regulations 2016 and debated on 18 April in the House of Commons. These regulations are necessary to ensure that the code of practice will be in operation at the same time that the maritime powers in the Act are commenced.
The code provides guidance as to the information that should be given to a suspect at the time of their arrest. The code makes clear that suspects should be provided with a summary of their rights and warned if it may take more than 24 hours to bring them to a police station. The code will ensure that law enforcement officers take into account the particular needs of suspects and vulnerable suspects during detention periods. This includes ensuring that those detained understand what is being said to them and making arrangements to safeguard their health and welfare.
To ensure that the code will be practical and effective, the Government have consulted the law enforcement agencies that will use this code, representatives of the legal profession, the devolved Administrations, other external organisations and interested government departments. The Scottish Government and the Northern Ireland Executive have also drafted equivalent guidance or codes of practice for their law enforcement officers, and we have worked closely with them to ensure the codes are appropriately aligned.
The maritime powers in the Modern Slavery Act are essential if we are to ensure that our law enforcement officers can properly pursue the perpetrators of these terrible crimes. It is vital that these powers are used properly, particularly the power of arrest. That is why this code of practice and these regulations are so important, and I commend them to the Committee.
Baroness Butler-Sloss (CB)
My Lords, I think the code of practice is absolutely excellent and I have no comment on it, other than to praise it. I am absolutely delighted that the Modern Slavery Act includes these powers on ships.
I hope the Minister will forgive me for raising an issue that is not strictly on board ship. I remain, with others, very concerned about smaller ports. I have two questions, but I do not necessarily expect the Minister to be able to answer them today. First, what are the powers and code of practice in relation to ports in England and Wales, particularly the smaller ports that have regular ferry services but are not in the larger group? Secondly, the particular port I have in mind, which those of us concerned with modern slavery are especially worried about, is Holyhead. Holyhead does not appear to have a very good organisation at the moment for checking those who are coming through, who may in fact be being brought in for forced labour or sexual or other exploitation. Perhaps I could be told at some stage what is going to be done, or is already being done, about the smaller ports, with a really close look at what is happening in Holyhead.
Lord Rosser (Lab)
I thank the Minister for his explanation of the purpose and effect of this order, which brings into force a code of practice to be followed by constables and enforcement officers when arresting a person under the maritime enforcement powers set out in the Modern Slavery Act 2015. Without the powers in the 2015 Act, law enforcement authorities are not in a position effectively to police modern slavery offences that take place in international waters, and do not have the power to stop or divert vessels in UK territorial waters.
Human trafficking and modern slavery do not occur only outside the United Kingdom. The National Crime Agency has reported that last year 3,266 people, of whom 928 were children, were identified as potential victims of trafficking in the United Kingdom, with that first figure being a 40% increase on the number of potential victims in 2014. The United Kingdom is predominantly a destination country for victims of trafficking but it is also a source and transit country. Last year, potential victims of trafficking found here were reported to be from 102 different countries of origin.
Of course, our police and border forces need to have the most effective means available to pursue, disrupt and bring to justice those engaged in human trafficking. The code covers arrest and obtaining information. Is that power restricted to the ship or vessel on which it is suspected that slavery or human trafficking is taking place, or does it cover any wider geographical area or port facilities used, or about to be used, by the ship, or other vessels supplying or servicing the ship?
The Explanatory Memorandum states that the Government are,
“working with the Scottish Government and Northern Irish Executive with a view to commencing the maritime powers in Parts 2 and 3 of Schedule 2 simultaneously across the United Kingdom on 31 May 2016”.
I am not sure whether the Minister said that that objective had now been achieved or it is still to be achieved. If it is the latter, what would the consequences be if it was not achieved by 31 May 2016?
The Explanatory Memorandum refers to consultation that has taken place on the draft code of practice and states that, in response to comments made,
“the Code was amended to improve provisions for record keeping by constables and enforcement officers, and enhance the information to be provided to arrested persons on the period of time likely to be spent in transit to a police station or other authorised place of detention”.
Were any other suggestions or requests made in the consultation in relation to the code of practice that were not taken on board by the Government? If so, what did they cover?
Finally, were any issues raised by the Independent Anti-slavery Commissioner about the code of practice, and is he satisfied with the wording of the code and its consistency, for example, with other relevant codes of practice?
Lord Keen of Elie
I am obliged to your Lordships. I shall begin by addressing the point raised by the noble and learned Baroness, Lady Butler-Sloss—in particular in the context of her mixed metaphor. Border officials are maintained at ports, particularly ones where there are commercial operations going in and out of the country. The United Kingdom has more than 11,000 miles of coastline and the demands that that raises are considerable. To try and meet those demands, I understand that field agents are also deployed to respond to intelligence about arrivals in smaller ports. There is also a system of self-reporting that operates from some of these ports. However, with regard to the particular issues mentioned in respect of Holyhead, I undertake to write to the noble and learned Baroness to outline what our position is and what the views of the border officials are with regard to operations there, in light of the concerns that have been raised.
I turn now to the points raised by the noble Lord, Lord Rosser. With regard to the question of arrest and information, the powers of arrest are limited, as I understand it, to the vessel in question.
It was proposed that, subject to agreement with Scotland and Northern Ireland, commencement would take place on 31 May. Very recent intelligence suggests that there is still an issue to be bottomed out—if I can put it that way—with the Northern Ireland Executive over which jurisdiction would respond to any complaints regarding the conduct of a police officer who moved from one set of waters into another. In other words, if an English enforcement officer begins in England and Wales and moves into Northern Irish waters, are they then subject to the jurisdiction of Northern Ireland or do they remain subject to the jurisdiction in England? That has still to be resolved. If it cannot be resolved by 31 May then consideration would have to be given as to whether Part 3 of the Act could come into force on that date without the relevant code. That is being borne in mind.
On consultation, I am told that the consultation raised only a series of minor points with regard to the code and they were all taken into consideration.
With regard to issues concerning the independent commissioner and the code, the code was, of course, discussed with his office and he expressed that he was content with the code.
I hope that that deals with the points raised by noble Lords—
Lord Young of Norwood Green (Lab)
Can I pursue the question asked by the noble and learned Baroness, Lady Butler-Sloss, on small ports? In the news recently was a ship that was detained with a significant number of weapons on board. That highlights the problem, as it was landing at a very small and isolated area. Again, I do not expect an answer here because—I am not going to use my noble friend’s analogy—it is slightly outside the range of this. There is no doubt that traffickers will react and try every stratagem and device that they can. As the Minister pointed out, there are 11,000 miles of coastline, which is a lot to patrol. What strategy do border patrols, coastguards and so on dealing with this problem have? Have they thought about today’s technology? Drones come to mind—I do not say that facetiously. If I can slightly trespass on the good will of the Minister, I would be grateful if he could take that point into account as well when he responds.
Lord Keen of Elie
I would be willing to write on this matter in general, but I do not believe it would be appropriate to disclose strategies that are being employed by field agents for the purposes of monitoring the coastline, as that would merely alert those seeking to avoid them to how we are seeking to identify them. Although I am perfectly willing to write, I suspect that the correspondence will be somewhat anodyne.
Lord Young of Norwood Green
As long as the Minister can say that the matter is in hand, that would be helpful.
Immigration (Leave to Enter and Remain) (Amendment) Order 2016
(8 years ago)
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Lord Keen of Elie
That the Grand Committee do consider the Immigration (Leave to Enter and Remain) (Amendment) Order 2016.
The Advocate-General for Scotland (Lord Keen of Elie)
My Lords, I shall begin by observing that this is a highly technical order.
The UK welcomes record numbers of visitors to come and enjoy our historic sites and experience our vibrant culture. In the year to June 2015, 9 million non-EEA visitors came to the United Kingdom, an increase of 0.5 million compared to 2014, with 1.9 million visit visas issued in 2015—an increase of 2% compared to the previous year. The Government are keen that the UK continues to attract business and leisure travellers, who will help our economy grow further. So in April 2015 we simplified the immigration system for people visiting the UK. We streamlined the visitor routes by reducing their number from 15 to four and created more flexibility for visitors to do a wider range of activities.
The order’s provisions, which are of a technical nature, have two basic purposes: first, to update provisions in the 2000 order relating to the extent to which entry clearance will have effect as leave to enter and to the categories of person who may be granted leave to enter automatically and who can be granted or refused leave orally; and, secondly, it makes provision about lapsing leave.
The order extends the period for which entry clearance takes effect as leave to enter for certain categories of visitor, who may, exceptionally, be granted a visa for a period that is longer than the usual six months. These are private medical treatment visitors, who may be granted a visa for up to 11 months, and academic visitors, who may be granted a visa for up to 12 months.
With the simplification of the visitor routes of entry, two routes—those for visitors coming to study for a short period and for parents coming to stay with their children at school here—are no longer treated as visitors. This was done to make their purpose clearer. The order makes a change to ensure that short-term students and parents of tier 4 child students are included in the categories of person to whom leave may be given or refused orally.
The order also makes changes to update the categories of person who may, provided they are a registered traveller, be granted leave to enter automatically if they enter by an e-gate. A registered traveller is a low-risk frequent traveller of a specified nationality who can benefit from quicker processing at the border by entering via an e-passport gate. This is available at most UK airports.
Finally, the order makes a change to ensure that leave granted to partners and children of certain British or settled Crown servants and British Council employees does not lapse after two years when they are accompanying their partner or parent on an overseas posting. The change also means that those granted leave under the family provisions of the Immigration Rules can complete their probationary period outside the United Kingdom before applying for indefinite leave.
I commend the order to the Committee.
Lord Rosser (Lab)
I note that the Minister gave me a look when he started by saying that the order is of a highly technical nature, which I think was a suggestion that he hoped that I might not have too much to say, and I am able to grant him his wish. Since there appears to be nothing in the order of a controversial nature, there are no questions that I wish to raise or meaningful comments that I can make, so I will leave it at that and sit down.
Limited Liability Partnerships, Partnerships and Groups (Accounts and Audit) Regulations 2016
The Earl of Courtown
That the Grand Committee do consider the Limited Liability Partnerships, Partnerships and Groups (Accounts and Audit) Regulations 2016.
The Earl of Courtown (Con)
My Lords, regulation on financial reporting has an immediate impact on businesses and those who prepare and make use of their accounts. I am sure that noble Lords will agree that legislation should enable trust and transparency for users of accounts without imposing disproportionate burdens on business. These regulations will introduce largely deregulatory changes to financial reporting requirements for limited liability partnerships. They will also introduce a lighter touch regime for the very smallest LLPs and qualifying partnerships that qualify as microentities.
Last year’s implementation of the accounting directive gave us an opportunity to reduce burdens imposed by the financial reporting regime for companies—especially for small companies. Having completed transposition of the accounting directive, we were able to turn our attention to other types of business entity, and we wish to introduce similar changes for LLPs. This was also the wish of stakeholders in the accountancy sector, who raised the issue of LLPs when consulted on the proposed changes for companies. It is not surprising that these stakeholders take an interest in the financial reporting requirements for LLPs. For some accountancy and legal firms and other businesses, the LLP structure has the advantage of a partnership—that is, the relative simplicity of internal governance—with the legal protection of a limited company. High-profile businesses registered as LLPs include PwC Legal and KPMG.
The UK’s approach has been that, as far as possible, the financial reporting regimes for LLPs and companies should be aligned to avoid unnecessary complexity. Last year, we consulted on our proposals to align the regimes for companies and LLPs. This approach was unanimously supported at consultation. As part of that consultation, the Government were also encouraged to introduce these regulations without delay, so that eligible LLPs could benefit from the burden reductions at the earliest opportunity. The majority of stakeholders who responded included those with practical experience of accounts—I am grateful for the contribution of the Institute of Chartered Accountants in England and Wales, the Financial Reporting Council and firms such as Ernst & Young and Deloitte, to mention a few.
The regulations before us will amend legislation that applies much of the companies financial reporting regime to LLPs. This includes secondary legislation that applies provisions of the Companies Act 2006 to LLPs and associated regulations relating to the financial reporting framework for companies. The outcomes for business should be straightforward and easily understood, coming, as they do, on the back of changes to the companies regime.
I will now explain some of the detail of these changes. The regulations will raise the thresholds for defining the size of LLPs for the first time since 2008. This will recategorise around 400 medium-sized LLPs as small, and around 40 large LLPs as medium-sized, which will enable them to access regimes more appropriate to their size. The regulations will also introduce a microentities regime for LLPs and qualifying partnerships, to mirror that made available to companies. It will enable about 3,500 of the smallest LLPs to choose to access a much less burdensome accounting regime. Among other things, the microentities regime will provide a greatly simplified balance sheet and profit and loss account. It will also largely exempt many LLPs from the obligation to draw up notes to accounts.
Other deregulatory changes include permitting small LLPs to prepare and publish abridged accounts. These are accounts whose formats omit information currently required by the general formats. However, abridged accounts will be possible only where the decision has been unanimously supported by all members. In January, it was announced that audit exemption thresholds for LLPs will rise in line with the increased thresholds for accounting. This is consistent with the Government’s deregulatory agenda and will offer savings of around £2 million per year for LLPs.
I am aware that not all members of the accounting sector welcome the raising of the thresholds. Therefore, the Government will monitor the impacts of this change to ensure that the reduced burdens to business do not lead to any unintended consequences. We will respond if evidence indicates that action is required. There will be a full review of the provisions amended by the regulations by 2021. I should explain that not all LLPs will be able to take advantage of these deregulatory provisions. As is the case for companies, certain LLPs are excluded from the small and medium-sized LLP regimes and will continue to be required to provide full accounts. This includes LLPs that are involved in activities such as providing credit and insurance, where a higher standard of transparency is expected.
In conclusion, the regulations will not substantially change the way that LLP accounts are prepared and used but, importantly, they will achieve consistency and therefore simplicity across the UK’s financial reporting regimes for companies and LLPs. The regulations will provide real deregulatory opportunities for LLPs. There are approximately 58,000 LLPs in the United Kingdom. The vast majority of LLPs—some 98%—are small and will be able to benefit most from the changes if they wish. These savings will then be available to business to get on with running, growing and consolidating their businesses.
Effective financial management underpins the success of every business. Consequently, it will always be a priority to maintain the rigour and integrity of the UK’s accounting regime. Although the regulations will be largely deregulatory, LLPs will continue to be required to provide key information to inform decision-making, improve performance and promote confidence in a business’s future. The regulations will offer additional flexibility for LLPs and qualifying partnerships while ensuring that necessary protections are still afforded to the users of accounts, including the public. The alignment with the requirements for companies means that they will also meet the understandable desire of users and preparers of accounts for consistency in financial frameworks. I commend these regulations to the Committee.
Lord Stevenson of Balmacara (Lab)
I looked around in hope, but unfortunately not many people seem to want to respond to the interesting introduction we have had from the Minister. I do not intend to detain him long, but I want to raise one broadly philosophical point and a number of detailed questions to which I fully expect the best response will be a letter at some later stage. They are probably more detailed than is appropriate for this sitting today.
My philosophical point is really aimed at the statement with which the Minister ended, which, in a sense, was trying to assert that a benefit would flow to the business community by there being a more parallel arrangement for the ways in which the accounts are organised for LLPs and for the limited company sector, from where we are more used to seeing accounts. I want to probe a little at that, because it seems to me that we are coming from two different places. A limited company, in its broadest sense, is basically a mechanism under which those who carry out business are protected from, on the one hand, their owners—those who bring up the share capital—and, on the other hand, their creditors. In other words, they are detached from the actual process of the business by the fact of having limited liability.
That in a sense means that the full weight of the pressure that can apply in a commercial environment—whether they are trading well or badly, are seeking to expand, trying to borrow money, and everything else—is wholly dependent on that vehicle which is a limited company. It is therefore right that the standards set for that, where we have got to so far in company law, should have a very detailed focus on the way in which the accounts are generated and for the subsequent registration of those with Companies House and the availability of those through other means.
Partnerships are different. People work together in a partnership to provide a better or greater service; it is not set up as a business with the aim or purpose of shielding the individuals involved from the pressure of creditors or investors. Indeed, most partnerships with an LLP in its midst are not in any sense related to shareholders. There is no investment from outside and therefore no reporting requirement for those who have put money into the company, as it were. We can immediately begin to see where I am coming from here. There are different audiences for these different operations, so I am not quite sure why the Government are trying to bring them together. If they are trying to bring them together, what will the values be? I shall come back to that in a minute.
In my understanding, an LLP arrangement for partnerships—this is described in the papers we have received on the instrument—was largely brought about because of concerns about very large partnerships having to find individual partners and the possibility that other members of the partnership, presumably for whom the state has no interest because they are people who have willingly joined up to trade together for some purpose, which is very often but not necessarily always for business services, could expose themselves to a greater risk because of the size of the partnership. It could be so great that they cannot sensibly moderate the risk when other partners are taking decisions of which they have no knowledge. Clever people thought that to park the risk of that in an LLP, joined into the partnership, would be a way of expanding the ability of law, accountancy and similar firms to go forward in a way that would limit the responsibility to an internal pressure, not an external pressure. The difference is again there. We are talking about limited liability partnerships worrying about their own internal people—the people they are supposed to be working with— so that is not the same as a limited company, which might be concerned about an aggressive creditor or a problem with a shareholder who might wish to either acquire the ownership of the capital, liquidate the company or whatever. I just pose the question: I am not quite sure where we are here and why this is necessary.
The public accountabilities are obviously very different. A limited company is registered through the stock exchanges and there is responsibility for transparency and knowledge in that sense. We are also talking about the role of the state in terms of making sure the accounts are required, in what form and how they are to be publicly displayed. It is not that the two things should be different, but there may be reasons why they could be different because of the previous history that I mentioned. Also, as we discussed in Committee not so very long ago—and, indeed, in the House more generally on various Bills that have come forward in the last three or four years—the insolvency regimes are completely different. It is not at all clear why you would want to seek similarity across these two different species of commercial animal, but I wonder why, for a particular set of reasons that the noble Earl adequately explained, we may be moving into a situation that is not necessarily right for where we are.
That is my philosophical point. I do not expect a full and frank disclosure at this point; I am putting a marker down for what I think was started this time last year when we talked on another statutory instrument to do with insolvency, where we drew attention to various points. The noble Earl may have been part of that. This is stage two of that debate, and is not necessarily contributing to this measure.
The points I want to make are largely on the Explanatory Memorandum. As I have begun to do so in recent years—because they have improved—I congratulate the department on a good Explanatory Memorandum and I hope that the good wishes can be passed back to those who have been slaving away on it. They seem to have covered the ground very well. This is a very rare occasion where we have had some serious possible alternatives as to how the regulatory impulse could be put into practice—normally, we get a straw person and the answer that the Government always wanted, whereas this time we have some serious possibilities within which options are done. It may not be quite worth the candle—I am not saying that it will—because a lot of these are relatively small changes when it comes down to the costing that one has to do for this, but nevertheless it was good to see that the work had been done. It was a solid analysis on which we can pin our thinking.
Turning to my detailed questions, on the first page of the Explanatory Memorandum, at paragraph 3.2, I was completely thrown by the reference to the “free issue procedure”, which I took to various experts around your Lordships’ House and to the clerks, none of whom had the faintest idea what we were talking about. Again, I do not wish for an answer today, but as I understand it—if I am wrong, I hope that the Minister will correct me—charging £10 for something that will apply to only a very limited number of people seemed rather strange. The idea that you would further compound that calumny by not giving it free to those who had been affected adversely by the previous mistakes seemed a little harsh, but I will not press the point. A little more knowledge about the “free issue procedure” might have been given. It would have saved me a day of tramping around the corridors trying to work out what it was—it means “free”; in other words, the department did not publish the regulations free of charge to those who might want them. This might be helpful to read in Hansard later.
At paragraph 4.3, at the bottom of the second page and going on to the third, the assertion is made—and it may be right—that the bringing together of the two types of accounting arrangements will,
“avoid unnecessary complexity for those preparing and using accounts”,
which include,
“groups which include LLPs and companies within their structures”.
Given what I have just said about where these organisations come from, I was rather surprised to discover that there were a number of organisations that had both LLPs and ordinary companies in their structure. Could we have the figures on that at some point? We are talking about a relatively small number of companies anyway, so the number of groups that include both LLPs and companies must be very small indeed. It would be interesting to know what that figure is.
The Explanatory Memorandum is quite good on the broader picture, in telling us that there are approximately 58,000 LLPs in the UK, but it is not very good on the detail. Again, could we have a bit more clarity about that at some point? I got a bit confused reading paragraphs 7.4 to 7.7 about how many were being involved. Changes of organisations will happen as a result of the changes of the size groupings, but the Explanatory Memorandum does not explain what those boundaries are. Could that be explained? There are medium-sized and large LLPs, and there are groups that include both companies and LLPs. How many are there, roughly, in each group? It would be helpful to get a rough idea. I understand that the vast majority of them are small, but what does “small” mean in those circumstances?
Since the noble Earl mentioned it, can we also have a definition of “micro” in this sense? Micro seems a little odd for an organisational structure which was supposed to reflect the difficulties of large partnerships operating where individual partners would not necessarily be known by other partners. To have a micropartnership which is specially protected because of the new regulations does not seem right, because surely the whole point about a micropartnership is that partners know each other very well because they are micro. A little more detail on that would be helpful. We are talking about 5% or 6% of the total being involved in these changes. Since this is a deregulatory measure, I am in no sense trying to oppose it, but we should know what we are talking about. Although they are not major changes, they will make an impact on certain people.
My third point is about the consultation. I understand the difficulty, as this is a technical area and these are quite technical points. There may not have been a huge appetite, especially at £10 a pop, to get involved in this. However, it should be on the record that none of the 13 responses that were received to this consultation was from an LLP. The consultation responses were from accountancy representative bodies and other bodies related to them. Will the Minister reflect on that when he has time and let me know whether he feels that all that could be done was done to make sure? Were all 58,000 LLPs written to, although I suspect that would be otiose? A little bit more flesh about why the response was so bad would be helpful.
That leads on to a related point, which is that if that is the sort of response we are getting on this, I hope there were other ways in which information was passed through—including, perhaps, responses to the BIS Twitter account, which I notice gets its first mention in a public space. If the department is going to go back and consult on the way in which these changes are going to operate, it may have to do a bit more work to reach out and be convincing about whether this has eased the burden on business. In no sense am I saying that the accountancy representative bodies are not representative of accountancy bodies, but that seems a rather small group on which to pin rather a large change. I leave that point.
Finally, I turn to a familiar topic. Why is the change—admittedly, not a major one and not affecting many people—not being brought in on one of the common commencement dates? I am sure the Minister will be able to jump up and give an immediate response to this. These regulations are being brought in,
“on the seventh day after the day on which they are made”.
We are in April. If they had been brought back three or four weeks ago, they could have been brought in on 6 April like all the others that are supposed to be brought in, or they could wait until October. I know these regulations are important, but I do not think they are that important. I am sure the Minister will understand that I am not going to ask him under what conditions he sought regulatory approval from the appropriate committees for this change to be made, because that would be ridiculous, but I again point out that the whole purpose of common commencement dates, which the Minister’s colleagues in the department have often echoed as being important, is that they should be common dates that we all accept to bring in new regulations. We have failed again.
The Earl of Courtown
My Lords, I thank the noble Lord, Lord Stevenson, for his contribution. Having worked for the Minister on previous occasions in the Committee, I remember and understand his concern over common commencement dates. I understand that the professional bodies were exceedingly keen that the regulations came in as soon as possible. If there is anything more on common commencement dates that concerns the noble Lord, I have made a note of it, and if there is any more information, I will write, as on any other points he raised.
The noble Lord raised a number of issues, and I will respond as well as I can to most of them, but some I will write to the noble Lord about. The purpose of the accounts for LLPs and companies remains. Prior to the 2015 regulations amending company frameworks, the two systems were aligned. These regulations reinstate that position. The fundamental differences relevant to each business structure remain. The reports and accounts of both structures are reporting to the business owners.
Nuclear Installations (Liability for Damage) Order 2016
(8 years ago)
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Lord Bourne of Aberystwyth
That the Grand Committee do consider the Nuclear Installations (Liability for Damage) Order 2016
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, we are today considering an instrument which amends the Nuclear Installations Act 1965 in order to implement changes to the Paris convention on nuclear third-party liability and the Brussels supplementary convention. The powers to make this order are contained in Section 76 of the Energy Act 2004.
Before briefly outlining what the draft order seeks to do, I take the opportunity to restate the Government’s commitment to make sure that we have a secure, affordable and clean energy system to keep the lights on in the decades ahead.
As noble Lords may be aware, the United Kingdom is a signatory to the Paris convention on nuclear third-party liability and the Brussels supplementary convention. These conventions establish a largely western European framework for compensating victims of a nuclear incident. The regime has been in place since the 1960s and is one of the cornerstones of international nuclear liability law. This special international regime is necessary since ordinary common law is not well suited to deal with the particular problems in this field. The regime provides compensation to the public for damage resulting from a nuclear accident and makes sure that the growth of the nuclear industry is not hindered by bearing an intolerable burden of liability. The reciprocal nature of the regime scheme also provides for consistency internationally. Amendments to the conventions were agreed by the Paris and Brussels signatory countries in 2004, including by the United Kingdom. They will come into force once the amendments have been ratified by the signatories to the conventions. The United Kingdom is committed to ratifying the amending protocols and to do so we need to implement the changes in United Kingdom legislation.
This order will upgrade the existing nuclear third-party liability regime and ensure that, in the event of a nuclear incident, an increased amount of compensation will be available to a larger number of claimants in respect of a broader range of damage than is currently the case. The proposed changes will apply to existing operators of nuclear licensed sites and to operators of any new licensed sites in the future. The liability regime will be extended to facilities used for the disposal of low-level nuclear radioactive waste.
Operators must put in place insurance or other financial security to cover their potential liability. It will be for operators to bear the costs of this on their balance sheets. At societal level the policy is estimated to have zero net impact as the current resource cost of government holding the contingent liability is considered equivalent to the future insurance costs for the industry.
The provisions of the order will come into force at different times. Some provisions will come into force shortly after the order is made so as to allow secondary legislation to be made to complete implementation of the regime changes. However, the main provisions will not come into force until the revised regime comes into force in respect of the United Kingdom. Joint ratification of the Paris protocol is required with the other EU signatories to the conventions, and this has a current target date of 1 January 2017.
On the specifics of the order, it provides for the inclusion of new categories of damage, in addition to the existing categories of personal injury and property damage: costs of measures of reinstatement of the impaired environment, loss of income deriving from a direct economic interest in any use or enjoyment of the impaired environment and costs of preventive measures where there is a grave and imminent threat of nuclear damage and consequential compensation.
The amendments to the conventions increase significantly the amount of funds available for compensation in the event of a nuclear incident. Under the current regime approximately €300 million in total is available for compensation, and this will rise to €1,500 million. Operators will be required to bear much greater financial responsibility for a nuclear incident. Operators of power stations and similar sites will have an immediate increase in liability from the current €140 million to €700 million and this will then rise by a further €100 million annually up to €1,200 million. We are continuing to use the flexibility in the conventions to set lower liabilities for lower-risk situations where, in the event of an incident, there is unlikely to be significant damage. The lower liability levels for low-risk and intermediate sites and low-risk transport will be brought into effect by additional regulations to be made in advance of the commencement of the order. All liability levels will be topped up from public funds to a total of €1,500 million per incident, if needed, to meet compensation claims as required by the amended Brussels convention. Contributions from all Brussels convention countries will be used to top up the funds from €1,200 million to €1,500 million.
Contracting parties are permitted to impose a higher liability limit or unlimited liability. The UK has adopted an approach similar to most other contracting parties in capping liability to make sure that operators are able to put in place insurance or other financial security specifically to cover their third-party liabilities.
The geographical scope of the conventions is extended so that it is wider than countries that are party to the conventions, including non-nuclear countries and countries that have equivalent and reciprocal liability arrangements.
The order increases the period in which claims for personal injury can be brought against operators to 30 years from the date of an incident. The limitation period for other claims remains 10 years.
The provisions on allocation of jurisdiction between Paris convention countries now take into account the establishment of exclusive economic zones under international law and other types of maritime zone. The provisions also specify that only one court in the convention country where the incident has occurred should deal with claims arising from it. This avoids conflicting judgments as to liability, as well as ensuring that the responsible operator’s liability limit is not exceeded. This provides clear benefit to the United Kingdom if it is affected by a nuclear incident in another country.
The instrument brings into the liability regime operators of disposal sites for nuclear radioactive waste. We are working with Paris convention countries to agree an exclusion for operators of disposal installations that take only low-level and very low-level nuclear radioactive waste since the risks such waste present are not what the Paris convention was designed to address. If excluded from the regime, general tort law will continue to apply to these sites.
The revised Paris convention now requires every Paris convention country to ensure that its law allows another country to bring representative actions on behalf of its people. This does not create any new right to compensation; rather, it provides an alternative avenue for claiming compensation and allows for co-ordination of large volumes of claims. The order creates rights for other countries to bring representative actions in the UK. The UK Government will have the equivalent power to bring representative actions in other Paris convention countries.
One of the key features of the Paris regime is the requirement for operators to maintain insurance or other financial security to cover their liabilities under the convention. Operators currently meet this requirement by purchasing insurance from the market. Under the new regime, the market is willing to provide cover to the full extent of the operators’ new liabilities, apart from the extension of the limitation period from 10 to 30 years for personal injury claims. If operators are unable to obtain cover for a liability, Governments are required to provide it, so we will, on a commercial basis and for a charge, consider arrangements to fill this gap in cover until the market is prepared to cover it. If such arrangements are made, I will ensure that a report is made to Parliament on them every two years.
The United Kingdom will review the operation of the revised regime in line with the timings set by the contracting parties to consider any revisions to the Paris convention. The form and timing of the review is a matter for the contracting parties—including, of course, the United Kingdom—to agree.
I finish by emphasising the importance of this update to a long-standing regime. Nuclear power in the UK has a strong safety record and the likelihood of a nuclear incident occurring is extremely small. The production and use of nuclear power, however, involves the use of hazardous radioactive materials and an incident could have far-reaching adverse consequences for human health and, indeed, the environment.
Guarding against those risks is therefore of the highest priority for the Government. The United Kingdom has in place robust safety, security and environmental protection regimes that comply with frameworks laid down at EU and international level. The liability regime is aimed at ensuring adequate and fair compensation for victims, while ensuring that the operators, who are in the best position to ensure the safety of their installations, take responsibility for any failure in safety. Further, recognising that the effects of a nuclear incident do not stop at national boundaries, the conventions aim to provide a high degree of uniformity in certain basic rules across their signatory countries.
The Earl of Kinnoull (CB)
My Lords, I had not intended to speak on the order, but given that I have spent 25 years in the international insurance markets at senior level in Hiscox—I therefore declare my interest—and given that I was involved in and responsible for this area of insurance for some time, I have some knowledge. I shall make two points and ask one question of the Minister.
My first point is that greater use of commercial insurance in these risks will undoubtedly drive better risk management simply because we are very much less rich as insurers than the Government, so we are very careful with our risk management to try to ensure that things go well. Therefore, I thoroughly welcome the arrival of the order and the greater reliance on third-party insurance.
Lord Grantchester (Lab)
My Lords, before I begin my remarks on the order before the Committee today, I should like to start by congratulating the Minister on his visit to New York last week to sign the Paris agreement on climate change on behalf of the United Kingdom. I trust that it was a wonderful experience as well as an honour to sign on our behalf, and I am sure that he will not mind me reminding him of this from time to time during our debates in future. Regarding the signing, perhaps I may ask him whether there are further legal requirements to make the Paris agreement operational. Is there a need for formal parliamentary ratification or, indeed, for possible amendments to the Climate Change Act down the line?
However, returning to more normal events, I thank the Minister for his introductory explanation today. The order is a lengthy document, and he has given the Committee an excellent summary. The instrument amends the Nuclear Installations Act 1965 in order to update and extend changes following the Paris agreement, as he has mentioned, and the Brussels supplementary convention, to both of which the UK is a signatory. The order covers the aspects of insurance liabilities for nuclear operating companies and how they are changing. As the Minister said, the powers to make the order come from the Energy Act 2004.
In the other place, questions focused on the decision to phase in higher levels of cover, from €700 million to €1,200 million, over five years, and whether that should be speeded up. The questions also covered the higher and lower aspects of the transport risks of materials and the pricing costs around the Hinkley Point deal. These were very helpful, and I understand the responses made by the Minister there, especially on the problems with pricing mechanisms where there is little or no track record of claims dealing with low-probability outcomes. The fact that any outcome could have high impact adds to the complexity.
At this point, I should declare my interests as a dairy farmer in Cheshire as I reflect that my reading of the order was made poignant by remembering the effects on farmers in north Wales at the time of the Chernobyl accident in the Soviet Union, when rain from the east deposited radioactive sediment on grass consumed by livestock in that area. At the time, there were thoughts that the land might be contaminated for several decades. Therefore, in noting the new category of,
“Loss of income deriving from a direct economic interest in any use or enjoyment of the environment”,
for which the example of “fishermen and cockle-pickers” is cited, I assume that this would also apply to farmers who have grazing on common land. Are there any definitions around “insignificant” in paragraph 7.14 of the Explanatory Memorandum, which states that,
“the impairment must not be ‘insignificant’”?
Any comments that the Minister could make on that would be helpful.
Following on from that, I also note the new category “Costs of preventive measures”, in paragraphs 7.15 and 7.16 of the Explanatory Memorandum, to mitigate the damage that might result from an incident. Here I could envisage a situation where the contamination of a large area could lead to food retailers refusing to take supplies of agricultural produce as a precaution, even though certain products could be said to be uncontaminated. Can the Minister say whether this situation would be compensatable?
The Explanatory Memorandum also explains the concept of an “occurrence” and cites the Magnohard case. Paragraph 7.31 explains that the order makes specific provision to address the point and that,
“the court took an expansive view of the meaning of ‘occurrence’ … The Order … does not adopt as broad an approach”.
Is the Minister able to explain why and what is the effect of this? The memorandum is silent on this point.
Lastly, I have a simpler question. The order requires that nuclear operators assume full responsibility for any breach, that insurance cover is to rise to new levels and that liability is extended to 30 years for claims for personal injury. The Explanatory Memorandum states:
“The Government will, subject to any EU or UK legal requirements such as state aid … fill any gap in cover”.
It is understood that such a gap may exist regarding extension to 30 years for claims for personal injury. Given that personal conditions and physical reactions can take several years to develop and can be severe and costly, will the Minister confirm that the Government will be providing the shortfall of cover in these circumstances? This will be a matter of prime public interest.
The UK has one of the strongest nuclear regulatory regimes in the world. Even as new reactor designs are developed, we can be confident that regulatory regimes will continue to maintain and improve all aspects of safety at nuclear installations. I am happy to approve the order before the Committee today.
Lord Bourne of Aberystwyth
My Lords, I am very grateful to noble Lords who have contributed to this debate and thank them for their general support. I reiterate that the United Kingdom has a very strong record both on nuclear safety and on protection in the event of a nuclear accident. I shall try to deal with the various points that have been raised by noble Lords.
First, I thank the noble Earl, Lord Kinnoull, for his comments and general support. I am most grateful for that. I reiterate that we have very strong performance in the London insurance markets—and, indeed, internationally, as this is not limited to just the United Kingdom—and he is right that the competitive element, not just in the UK but internationally, will help to ensure that standards are even better than before. On the noble Earl’s precise question on Article 37, I confess that I am not nearly as expert as him in these areas of the London closing exchange rate. I shall endeavour to find out and provide him with a more precise answer than the one I am now giving, but I would anticipate that either it is custom and practice that there is a particular exchange rate closure on a particular day or that there is a definition elsewhere that is cross-referred in the order. We are definitely checking that and the team will provide me with an answer. I shall write to the noble Earl and copy in the noble Lord, Lord Grantchester.
I thank the noble Lord, Lord Grantchester, very much for his typically kind and generous comments about signing the Paris agreement. It was indeed a great privilege to be there signing the agreement for the United Kingdom. I am conscious of the amount of hard work that has been done by many people, not just within the United Kingdom, but clearly within the United Kingdom cross-party—and, indeed, beyond party—that made all that possible, building on the success at Paris. The most challenging part of the whole ceremony was avoiding Zimbabwe—sitting straight behind us in the shape of Robert Mugabe. That apart, it was a very enjoyable and significant occasion.
The noble Lord asked whether the signing had a particular impact and when the agreement will come into place. It will come into place when 55 states have ratified, out of the 185 that concluded the agreement in Paris. I should say that 175 countries signed on day one, but they have to go through their internal ratification procedures, so it is 55 states representing 55% of emissions worldwide. As he and other noble Lords will know, the European Union made a joint statement on the position with regard to meeting the targets. Therefore, because the United Kingdom is part of the European Union, our position on ratification is that we will not ratify—and therefore the European Union will not ratify, because it depends on unanimity—until we have agreement on the effort share among the 28 member states. Work on that has begun.
The noble Lord referred to the coverage of the order. As he rightly said, it also covers Hinkley and is designed to cover potential new sites, as I think I said initially. He mentioned Chernobyl. Of course, there have been two major international nuclear incidents, of which Chernobyl was one; Fukushima was the other. The impact of Chernobyl, as he rightly said, was felt in north Wales—as I know—Cumbria and parts of Scotland. The increased protection that we have here will not help in that regard because Ukraine is not a party to this convention. We would be thrown back on to international law because Ukraine is not a party to the other major treaty either, the Vienna treaty, which has a less generous compensation regime.
The noble Lord asked why we are saying that it has to be something “significant” and therefore ruling out incidents that are “insignificant”. This is a fairly common legal practice—a de minimis situation to stop something that is so minor—to prevent vexatious litigation. I think that is the thinking behind it. He also asked whether this would allow claims by the likes of grocery shops, butchers and so on if there were a nuclear incident like Chernobyl in a member state of the convention. I think there would be an issue—I am treading very carefully because the noble Lord, Lord Faulks, is sitting close by—about the remoteness of damage and how far down the chain you can go in such a situation, but I will write to the noble Lord.
Lord Grantchester
I may be able to help the noble Lord, in so far as I think that third-party traders may not be affected. I meant the produce from that area may be affected, even though it could not be said to be contaminated, because of a general ban on products from that area getting into the food supply chain.
Lord Bourne of Aberystwyth
I thank the noble Lord for that clarification. I think there are two issues in relation to that. One is indeed the remoteness: it would be a question of how far down the chain you could go in terms of liability. I did refer the noble Lord and other noble Lords to the fact that this new protection allows for the costs of preventive measures where there is a grave and imminent threat of nuclear damage and consequential compensation. I think that might cover it. The noble Lord raised a specific issue about Magnohard. I will write to him on that to give him a definitive answer.
I am grateful for noble Lords’ help and their broad acceptance and approval of the order. This is a more generous system. It is widely welcomed. It provides added protection and characterises our approach to nuclear energy.
Lord Grantchester
Has the Minister had confirmation from the officials behind him that the Government will be picking up any gaps regarding personal injury claims being extended to 30 years?
Lord Bourne of Aberystwyth
I thank the noble Lord. I had written that down in my notes but I missed it. Yes, we will. I covered that in my introduction, I think. I said that we will fill that gap until the commercial market is able to take over. We will be making a commercial charge to cover that, but we will certainly fill that gap.
I commend the order to the Committee.
Crown Court (Recording) Order 2016
(8 years ago)
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Lord Faulks
That the Grand Committee do consider the Crown Court (Recording) Order 2016.
The Minister of State, Ministry of Justice (Lord Faulks) (Con)
My Lords, the draft order removes the prohibition on recording court proceedings to the extent necessary to enable a judge’s sentencing remarks in the Crown Court to be recorded on a not-for-broadcast basis for the purposes of a test. Before setting out details of the order, I will briefly explain some background to the policy.
As noble Lords may be aware, the recording and broadcast of proceedings in courts, other than the Supreme Court and the Court of Appeal, is prohibited by Section 41 of the Criminal Justice Act 1925 and Section 9 of the Contempt of Court Act 1981. Section 32 of the Crime and Courts Act 2013, which received Royal Assent in April 2013, enables the Lord Chancellor, with the agreement of the Lord Chief Justice, to make an order specifying circumstances in which the prohibitions on recording and broadcasting may be lifted. The Crown Court (Recording) Order 2016 is the second order to be made under that power.
Why are the Government doing this? There is evidence to suggest that the more informed people are about the justice system, the more confidence they will have in it. Of course, few people have direct experience of court proceedings, and public understanding of the way the justice system works is inevitably limited. In principle at least, our courts are open to all members of the public who wish to attend, but in practice very few people have the time or opportunity to attend and see what happens in person. We believe that we should make our courts more accessible and make it easier for the public to understand court proceedings. Increasingly, people rely on television and the internet for access to news and current affairs. It is right to respond to changes in technology and society, and therefore to allow cameras into our courts.
While it is important for justice to be seen to be done, this cannot be at the expense of the proper administration of justice, the integrity of the trial process or the reputation of the courts. The courts deal with very serious matters that can affect the liberty, livelihood and reputation of all parties involved. The proposed test period at the Crown Court venues agreed with the Lord Chief Justice provides the opportunity to examine how we can film in our courts in a way that protects the individuals involved and preserves the dignity of the courts and the trial processes.
I am conscious that there will be concerns about the welfare of victims and witnesses, and the potential for court broadcasting to have a detrimental effect on their experiences in court. In the event that a victim or witness is present in court during the recording of a judge’s sentencing remarks, there are a number of safeguards in place designed to minimise any potential impact that the recording might have. The order does not permit the filming of victims or witnesses, or indeed any other court user, including staff, members of the public, defendants and advocates. It will be a matter for the judge to decide whether or not filming of a particular case should be allowed and they will take into account the interests of victims and witnesses when considering this. In addition, existing reporting restrictions will continue to apply, and Section 32(3) of the Crime and Courts Act 2013 provides that the court may stop or suspend filming in the interests of justice, or to prevent prejudice to any person. Any breach of the terms of the order may amount to a contempt of court.
None of the cases recorded during the test will be available for broadcast to the public. Recorded material will be used only by the judiciary, Her Majesty’s Courts & Tribunals Service and the Ministry of Justice for the purposes of the test, including assessing whether or not it has been successful.
The Government are committed to increasing transparency and providing the public with information on the operation of public services, and the justice system is no exception. To many people, the law remains mysterious. Public understanding of how the courts work, and sentencing in particular, is critical to maintaining confidence in the system and ensuring that justice is seen to be done. We believe that the order before your Lordships today is an appropriate step forward in testing how we allow for greater visibility of what goes on in our courts without undermining the quality and reputation of our justice system.
At the end of the test period the lessons learned will be considered by the Lord Chancellor and the Lord Chief Justice to help inform their decision on whether or not broadcasting of judges’ sentencing remarks in the Crown Court should be permitted in future. If they agree, we will return to the House with a third order to allow broadcasting of recorded material to commence. I commend the draft order to noble Lords and I beg to move.
Lord Falconer of Thoroton (Lab)
I am grateful to the Minister for introducing this very interesting and important order, which my party and I support. I will ask a number of questions about the order itself and the policy underlying it, but before I do so, I will set out our position in relation to this. In principle, more broadcasting and recording of courts is a good thing because it increases public understanding of the court system and allows transparency in one of the important institutions of state.
I accept what is implicit in what the noble Lord, Lord Faulks, said, which is that any movement towards broadcasting of courts has to be done carefully. It has to protect witnesses, jurors, claimants, defendants and members of the public—children in particular—from any problems that may arise from the recording of court proceedings. In particular, one is conscious that being a witness in a criminal or civil trial is an anxiety-inducingin any event and one does not want to make people more anxious by having it filmed or recorded. But in principle we consider that there should be much more openness and broadcasting of what goes on in court.
First, the Act allows the lifting of the prohibition on recording what goes on in court, which is prevented by the Criminal Justice Act 1925. If the ban on recording is lifted, is it assumed that live broadcasting can take place or is it envisaged that all that can occur is a subsequent broadcast? I ask because the prohibiting word is “recording”. I respectfully suggest that the right course is that there should be the possibility of near-live broadcasting, subject to a very minimal delay, of what goes on in court but subject to the issues that I have identified.
Secondly, as the Minister said, two orders have been made under the Act: the Court of Appeal order and the sentencing remarks order. Is there a plan that will lead to maximum openness, assuming the process works, subject to the sorts of protections I have identified? That is, you do not want to film jurors, witnesses and victims. Is there a plan? It feels a bit random. We have had a Court of Appeal order in 2013 or 2014 and now a sentencing remarks order. Can the Minister please tell us what the overall plan is?
Thirdly, I understand that the Court of Appeal order has been considered, by which I mean that some review of it has taken place. Can the Minister tell us what the outcome of that review was? For example, what did the judicial participants in the Court of Appeal process think about it? Secondly, to what extent was it thought that there were changes in behaviour in court? I think I am right, although I may be corrected, that in the Court of Appeal the judges and advocates are now filmed as a matter of course. Do the Court of Appeal or the advocates—I hope that the advocates were consulted as well—think that their behaviour has changed as a result? Does it mean that things take more or less time?
I was very grateful for the very clear explanation of this order by the noble Lord, Lord Faulks. I read it in exactly the way that he read it, which is that it allows for the filming only of the judge himself and nobody else in court is filmed. It is for the judge himself, under Section 32, to decide whether or not a particular set of sentencing remarks will be broadcast. I do not see any time limit in the order but I assume that a timescale is envisaged. I am not asking for a time limit, but can the Minister say what time limit is envisaged?
The Minister indicated that the only people who would be assessing this would be judges and people in the Ministry of Justice. I recognise and accept that none of this is for broadcast, but I strongly urge the Minister that the group of people assessing the process should be much wider, obviously subject to appropriate confidentiality and to not allowing the not-for-broadcast test to be broadcast. We need much more, in all honesty, than simply the judges and the excellent Ministry of Justice officials; there needs to be a much wider group, subject to confidentiality, to look at it.
Finally, I have just come from the Hillsborough inquest. It is the most appalling shame that the conclusions of that inquest were not recorded, for either live or near-to-live broadcast. What are the proposals in relation to inquests? It would have been so good if what the jury concluded could have been readily available—for example, on the 1 pm, 6 pm and 10 pm news. You would not need to film the jury, you would have needed only to film the coroner setting out what the remarks were.
I am very supportive of this order but I am terribly anxious that things are going much too slowly. Although I completely agree about the need for care and thought about this, this is the second order after two and a half years with no apparent plan. Perhaps something a bit more focused is required, but we support this order.
Lord Faulks
My Lords, I am very grateful for the noble and learned Lord’s constructive comments and questions about this order and I am grateful, of course, for the Opposition’s support of it.
The overall purpose is, as I indicated, to ensure that the public have a clearer idea of what goes on in courts. The noble and learned Lord is right to say that progress is slow, but there are, I respectfully suggest, reasons to go slowly. Great care, as he acknowledges, has to be shown in how we develop it; care has to be shown for all those people potentially affected, including witnesses, as he said. Children are being excluded from this experiment, or test, altogether; clearly, we would be most concerned that children, in so far as they are allowed into court at all, would potentially be affected by expanding the scope of this order.
Of course, the Court of Appeal has been progressing with its own broadcasting and those who are disposed to find such things interesting can see a live feed of the Supreme Court. There is only a limited take-up, but I do not think there is any suggestion that it has adversely affected the way that the judges or advocates behave. Likewise, the judiciary considers the Court of Appeal experiment to have been successful and it has not noted any change of behaviour. I suspect that what happens is that people forget after a bit that the cameras are there.
Education (Repeal of Arrangements for Vocational Qualifications Awarded or Authenticated in Northern Ireland) Order 2016
Baroness Chisholm of Owlpen
That the Grand Committee do consider the Education (Repeal of Arrangements for Vocational Qualifications Awarded or Authenticated in Northern Ireland) Order 2016.
Baroness Chisholm of Owlpen (Con)
My Lords, this order, which was laid before both Houses on 11 March this year, repeals the provision that makes Ofqual, which is the English examinations regulator, the regulator of vocational qualifications for Northern Ireland. Instead, the Northern Ireland Council for the Curriculum, Examinations and Assessment—known as CCEA Regulation—which already regulates GCSEs, A-levels and other non-vocational qualifications, will become responsible for regulating all types of qualifications awarded in Northern Ireland.
This order brings qualification regulation in Northern Ireland in line with that in Scotland and Wales, where specific regulatory bodies oversee all qualifications awarded in their respective countries. When Ofqual was established in 2009, it assumed the regulatory functions of the Qualifications and Curriculum Authority —QCA—which regulated vocational qualifications in Northern Ireland. The Northern Ireland Department for Employment and Learning proposed that Ofqual took on the QCA’s responsibilities in Northern Ireland. This proposal was included in the legislation that established Ofqual.
In recognition of the fact that the Northern Ireland Administration committed to keep the arrangements for regulating qualifications under review, the Act made provision for Ofqual’s responsibilities in Northern Ireland to be removed by order. The Northern Ireland Administration now wish to make use of this provision. The Northern Ireland Department for Employment and Learning reviewed these regulatory arrangements last year and concluded that it would be more appropriate for a single body to be responsible for the regulation of all qualifications in Northern Ireland, including vocational qualifications.
The Minister for Education in Northern Ireland, John O’Dowd, endorsed the proposal in December 2015. Subsequently, the Northern Ireland Minister for Employment and Learning, Dr Stephen Farry, wrote to the Secretary of State for Education in January 2016 requesting the assistance of the Department for Education to amend the 2009 Act to remove the responsibility for regulating vocational qualifications in Northern Ireland from Ofqual to allow CCEA Regulation to perform that duty under Article 75 of the Education Order (Northern Ireland) 1998.
The UK Government and the UK Parliament should not take a view on policy decisions made by the Northern Ireland Administration. Therefore, in responding to this request, we have sought only to ensure that the decision made in Belfast is implemented properly, fairly and efficiently and that it does not adversely affect people taking these qualifications in England or Ofqual’s ability to regulate the qualifications for which it is responsible. The proposals in front of the Grand Committee today, and the practical arrangements that sit alongside them, achieve this. The Department for Education in London has worked with its Northern Ireland counterparts, Ofqual and CCEA Regulation, to implement these changes, and I am grateful to these organisations for their co-operation. The Northern Ireland Office has been informed of the proposed changes.
Since the beginning of the year, CCEA Regulation and Ofqual have communicated with all the awarding organisations that will be affected by this change. The two regulators will continue to work together and with their counterparts in other parts of the UK to minimise burdens on the awarding organisations that they regulate jointly. Ofqual intends to sign a memorandum of understanding with CCEA Regulation as it takes on its new responsibilities, as it has recently done with the new qualifications regulator in Wales, as many similar qualifications are used in all three jurisdictions. As a result of this legislative change, Ofqual’s small office in Belfast will close. The Northern Ireland Department for Employment and Learning will provide funding for any associated costs and the change will be cost neutral for Ofqual.
These changes and this order are just one example of devolution in action. Each part of the UK should be able to make the arrangements for regulating qualifications that support its objectives and priorities and to change those arrangements where appropriate. That is what the Northern Ireland Administration are doing, and that is what this order enables for vocational qualifications. I commend it to the Committee.
Lord Empey (UUP)
My Lords, the order before us may appear to be uncontentious—indeed, it is—but I declare an interest as the Minister for Employment and Learning who asked Ofqual to continue its regulatory role because the then Executive were planning to create an education and skills authority on which, like on many other things over there, they spent millions, took years and eventually had to scrap. My anxiety about this is simply about a factor that is occurring within the United Kingdom. People are marketing the European Union as a place where you can come and go with free movement. We are trying throughout a range of disciplines to get commonality of qualifications so that we recognise each other’s qualifications. At the rate we are going in this country, we will very soon have to start recognising qualifications from within the United Kingdom. My fear about this is that it is change for the sake of change. Can anybody explain what practical benefit there is? How different can a qualification in engineering, construction or whatever subject be? We are going to end up with four separate series of qualifications within the United Kingdom. Standards will probably be different, the technicalities will be different and how they will be taught will be different. Until this point, the CCA had no capacity in this area, so we are having to create new capacity where capacity already exists.
There is a big issue with devolution and the United Kingdom Government. We have got into the habit of devolving and forgetting. It is a mistake not to take a view or to argue that this is devolution in action, as it is. I do not dispute that it is within the competence of the Administration, but we cannot simply forget these things and ignore them. They have to be monitored. Let us not forget that devolution is exactly what it says. We have given a power of ours to Wales and to Belfast, but it is fundamentally our responsibility. I do not accept the principle that you simply devolve and forget. I am not opposing the proposals per se, but there is a risk that a Northern Ireland qualification authority is being created for no good reason.
The Minister referred to the Northern Ireland Education Minister. As a result of his activities, because he refused to sign on to or use some of the English examination board papers, the CCA does not have as broad a range. Consequently, pupils are not able to access some examinations. I do not think that is progress. There is a risk that over time we will create different regimes. The labour force should be free to move around the United Kingdom and get qualifications. If there is something unique, different and local, I am for it. I believe in devolution, but I do not believe in change purposely for the sake of change or in setting up a new bureaucracy purely for the sake of setting it up in order to say that it is ours and not somebody else’s.
I am not making a big deal out of this relatively minor change, but it is symptomatic of what can go wrong in the long term. If we get young people, in particular, taking certain qualifications in different parts of the United Kingdom, will they be recognised throughout the United Kingdom? That is the issue that worries me. Who is going to determine whether they are recognised? Ultimately it is up to employers, and do employers understand the difference between the different variable factors? Those are the questions that need to be asked when we are looking at these things. You cannot close your mind simply because it is within the legislative remit of the Assembly and say, “It’s up to them; they can do whatever they like”.
It is the outcomes that need to concern us. What are the prospects for young people getting those qualifications? Are they recognised professionally by employers and employers’ organisations? Will they give those people the same opportunities to get jobs? Do employers understand what the differences might be? These are the areas we should be paying attention to.
Lord Watson of Invergowrie (Lab)
My Lords, I thank the Minister for setting out clearly the background to these regulations and the rationale underpinning the proposal to repeal the existing arrangements.
The words that I prepared have been knocked slightly off balance by the comments of the noble Lord, Lord Empey, because I was about to say that the draft meets the expressed will of the Northern Ireland Administration. The noble Lord, Lord Empey, has cast some doubt over whether that is the case and perhaps whether it should be the case, but our understanding is— indeed, the Minister said—that the Northern Ireland Administration, as provided for in the Apprenticeships, Skills, Children and Learning Act 2009, will place qualifications regulation on the same level as that which currently applies in my homeland of Scotland, as well as in Wales.
The issues to which the noble Lord, Lord Empey, referred are certainly not without relevance, but there is one matter on which I would take issue with him. I was going to talk about this being the purest form of devolution—which rhymes with revolution, which is a slightly different concept—which I notice is the term that the noble Lord, Lord Empey, uses. It is important that devolution is understood in the appropriate way. It is a term that has been used rather loosely and even inaccurately in some contexts recently; for example, in some recent education legislation. However, this is the purest form of devolution. Perhaps, as a Scot, I would say this, but the movement of power away from the centre has been a very important feature of the way in which the United Kingdom has operated over the past 20 years. Within that context, it is important that the legislatures in Belfast, Cardiff and Edinburgh have the power to do what they are able to do to the extent of that power. It seems to me, and I am certainly a novice when it comes to issues relating to Northern Ireland, that the Northern Ireland Administration have said, “We have the ability to take on board this power, and that is what we want to do”.
With regard to vocational qualifications, I give credence to the comments of the noble Lord, Lord Empey. The authentication of qualifications is absolutely essential. At a time when apprenticeships and vocational education are a very hot topic in ensuring that we have the skills that our economy will need in the years ahead, it is important that young people—who we must encourage to a greater extent to take on those apprenticeships and follow vocational routes—are confident that when they complete that training or study, they can take their piece of paper and immediately know that it has been validated and that employers will recognise it. That is a very important point. If there was a suggestion that this would weaken the options open to young people in Northern Ireland, I would be concerned. Until a few moments ago, I had not heard that suggestion but I think it is probably for everybody’s benefit that the Minister addresses that not unimportant point, at least to some extent.
We are pleased to support this order as it stands because we recognise that it is what the Northern Ireland Administration have requested. Before I sit down, there are one or two other points of clarification that perhaps the Minister might be able to provide. When this order was discussed in another place my colleague, Nic Dakin MP, asked the Minister for Schools about the support that will be given to staff affected by the closure of Ofqual’s office in Belfast. The Minister merely replied, and the noble Baroness repeated it today, that the Minister had asked Ofqual,
“to do everything to ensure the best preparation for those staff and to help them in any way possible”.—[Official Report, Commons, Delegated Legislation Committee, 20/4/16; col. 6.]
He then mentioned that the cost of the closure would be met by the Northern Ireland Executive’s Department for Employment and Learning, which suggests—at least to me— that the staff may be made redundant. It could well be that such an arrangement will suit some—I understand that there are only three of them—but my background as a trade union official leads me to ask the Minister whether she is aware of consideration being given to alternative employment for the staff.
That is relevant to another point made by the noble Lord, Lord Empey, when he talked about new capacity being created within the Council for the Curriculum, Examinations and Assessment in Northern Ireland. As he said, capacity already exists. That is a parallel argument to my point. The Ofqual staff have that capacity, and my suggestion to the Minister is that, given the skills which the Ofqual staff have built up, they might usefully be transferred to the CCCA, obviating the need for redundancy, if that is what the individuals concerned want, of course. Whereas the cost of employing somebody for the foreseeable future is greater than the cost of a redundancy payment, it can very much be seen as a beneficial cost. Perhaps the Minister may consider that. It is unrealistic to expect her to give a detailed reply to that point today, but perhaps she will write to me when she has had the opportunity to give the matter some consideration.
Baroness Chisholm of Owlpen
My Lords, I thank the contributors to this important debate. I will deal with the points in the order in which they were raised. Should I not have answered all the questions at the end, I will make sure that I write to noble Lords.
The noble Lord, Lord Empey, raised an interesting point about why the change should be made now. That is a question for the Northern Ireland Administration to answer, so it would not be appropriate for me to speak for them. In enacting this legislation, we want to ensure that a decision made in Northern Ireland is implemented as efficiently as possible and in a way that does not affect people taking qualifications in England. Indeed, the qualifications will be recognised in the UK, but of course, it is the responsibility of others.
Baroness Chisholm of Owlpen
My Lords, I was answering some questions asked by the noble Lord, Lord Empey. I cannot remember whether I had got to the fact that the qualifications will be recognised across the UK. That is already happening in Wales, so there is no worry about that, but, as I think I mentioned, recognition is the responsibility of employers and the institutions.
We are taking every care to make sure that Ofqual and Northern Ireland’s CCEA will have a working relationship and will work together to ensure a smooth transition. In particular, Ofqual and CCEA Regulation will continue to share an IT platform and register for the qualifications and awarding organisations that they each regulate, so plenty of talking will be going on.
The noble Lord, Lord Watson, mentioned the staff in the office, who are very important. Ofqual is managing the consequences of the change for its three members of staff in Belfast and is doing everything to ensure that the best preparation is laid down and to help them in every way possible. Any financial consequences of the closure of the office will be borne by the Department for Employment and Learning in Northern Ireland. This includes any possible redundancies or problems with pensions. The noble Lord makes the very good point that there are well-qualified staff there already. I cannot answer his question at the moment, but we should certainly think about it, because what he said makes perfect sense.
I think that I have answered the questions put. Anything that I have missed will be picked up, and I will write to noble Lords. The order will support the Northern Ireland Administration in implementing their education policies, and I commend it to the Committee.
Rural Economy
Baroness McIntosh of Pickering
To ask Her Majesty’s Government what is their assessment of the state of the rural economy.
Baroness McIntosh of Pickering (Con)
My Lords, I am delighted to have secured this debate on the rural economy and look forward to hearing contributions from your Lordships, the Minister’s assessment of the state of the rural economy and what measures might be taken to improve it.
I grew up in Teesdale, one of the wildest and most beautiful parts of the country, and one with among the lowest farming incomes in the country. As a GP’s daughter, I saw every aspect of rural life. I declare an interest as owner and director of a consultancy company which provides strategic advice on food, farming and the environment, and that one of the clients is the board of the Dispensing Doctors’ Association, which I advise on rural policy matters. I also sit on the Rural Affairs Committee of the Church Of England Synod. It was an honour to represent, initially, the Vale of York and then Thirsk, Malton and Filey for 18 years in another place, culminating in my being elected to chair the Environment, Food and Rural Affairs Committee for five years.
We have to eat, and those living and working in the countryside ensure that we have food on our tables. Today’s debate is a celebration of the countryside, those who live and work there and how departments such as Defra and DECC interact with them in England. More than 20% of the population live in rural areas, contributing a fifth of England’s total economic activity. The agrifood sector is worth £103 billion—6.8% of the gross value added of the national economy. The role of the EU impacts greatly on the rural economy and possibly nowhere else is gold-plating more evident. One example I was involved in as an MEP some 20 to 30 years ago, the abattoirs directive, forced the closure of some small abattoirs in England. At the time of the BSE and foot and mouth crisis this meant that livestock had to be transported further to slaughter, raising issues of animal welfare, as well as animal health.
The rural economy in England is frequently overlooked in government policy initiatives. We hear a lot about city regions, devolution and the northern powerhouse, yet the countryside is crying out for policies specifically aimed at the rural economy, such as more affordable housing, lower rural crime, better rural transport, with more frequent rural bus services, faster broadband—or even just a stable broadband connection—and better mobile phone coverage. Improved access to banks and post offices is also needed.
The key things I would like to explore this afternoon are the importance of farming to the countryside and the rural economy; the importance of food security and the role farmers play; and how Britain is currently only 62% self-sufficient in food production. The Government are rightly seeking to add value through exports and, wherever possible, substitute imports, such as Shepherds Purse Cheeses, from near Thirsk, which competes with Roquefort cheese from France. The Government should enthusiastically support public procurement of British products and we should all be proud to buy and eat British food. Opening up new markets, such as China, to products such as pigs’ trotters and other pigs’ parts that we may not eat in this country, as well as dairy foods, would add multimillion pounds of exports to companies in North Yorkshire and across England.
The impact of late farm payments under the new CAP is great on farming and the wider countryside and rural economy. Given the delayed payments from 2015 and the problems that the Rural Payments Agency has experienced with the new system, the recent announcement of partial payments is particularly welcome. We must not lose sight of the fact that 88,000 applications are due, mostly by paper, since rural areas are simply not yet digitally enabled, or that some farmers have still not been paid from 2015. Farmers are seeking an extension to the deadline for the 2016 application of 17 May, on which I hope the Government and the Minister will look favourably. There is a particular problem for tenant farmers through basic farm payments. Upland farming makes a unique contribution to rural areas in producing livestock, tending the countryside and often providing accommodation for visitors. Basic farm payments should go to the active farmers, in this case the graziers on common land tending sheep, rather than the landowner who earns money elsewhere through shooting rights. We must recognise problems with registration and mapping of common land, with the particular issue in North Yorkshire of a review being undertaken this year, whereby rights not registered this year may be lost, not to be revived. Looking ahead, I welcome and recognise the need for reforms promised by the EU Commissioner, Phil Hogan, in 2017 of a CAP that is simply too complicated.
The six-day rule impacts on farmers. It is a standstill rule imposed after the 2001 foot and mouth disease outbreak. Restricting the movement of livestock, it disrupts trade and affects price. It has been in place since 2003. When will it be lifted? The role of auction marts in rural areas should be recognised, setting prices and having an economic and social role by allowing vital interaction among farmers who often live in isolation. The Groceries Code Adjudicator is doing valuable work but needs greater powers and the ability to investigate of her own initiative malpractice within the supply chain. Of particular concern are low prices in the dairy sector, where currently the adjudicator cannot intervene because this is an indirect supply chain.
Severe flooding of land threatens food security, as well as causing huge economic loss when houses flood. Some £5 billion is the estimated cost nationally of the December 2015 floods. Spending on flood defences is being hampered by not having a total expenditure budget through the merging of maintenance and capital spend into one operational budget. Maintenance spending should match the six-year spend the Government have announced on capital spending. Regular and effective maintenance, where appropriate, by way of dredging, desilting and clearing water channels of weeds reduces the risk of flooding. A whole catchment area approach, retaining water upstream, prevents flooding downstream, as we saw so successfully in the Pickering slow the flow project, demonstrating the effectiveness of more natural flood defences. The Government should encourage the use of greening money under the CAP to reward framers for retaining flood waters temporarily on farm land by reimbursing them for the loss of income in return for the public good they do. Abstraction policy reform will pose challenges for competing users: farmers, industry, rural businesses and other users, such as anglers.
The impact of rural crime on farming and the rural community is huge. There is theft on a grand scale of quadbikes and livestock, poaching and lamping. The cost of rural crime is estimated to be £800 million, which is equivalent to £200 for every household in the countryside. Fly-tipping costs farmers and rural firms up to £150 million a year in removing waste. A more visible police presence and speedier response times are called for.
We must see a greater supply of housing and affordable homes in rural areas. The planning issue, which is very vexatious, must be addressed while respecting the rights of those already living there.
The impact of Brexit on the rural economy, the potential loss of access to the single market, the subsequent imposition of tariffs, depending on what negotiations are in place, and the potential loss of support are causing great concern among farmers. The impact of the CAP on the rural economy has been considerable. The new greening provisions and the impact of graziers on common land must be addressed.
The cost of delivering public services is much higher in rural areas and the per capita funding for patients and pupils is often substantially lower.
Baroness McIntosh of Pickering
In conclusion, I hope the Minister will realise that we need to spend more to deliver public services in rural areas to ensure that we have GPs who can act as community hubs; that we keep all the community hospitals we have; that farming, tourism and other rural businesses continue to have their roles to play; and that those living in rural areas will not be left behind and will have the same per capita spend on health, education and broadband services as those living in urban communities.
Baroness Miller of Chilthorne Domer (LD)
My Lords, I congratulate the noble Baroness, Lady McIntosh of Pickering, on securing the debate and her powerful introduction. I am really grateful for the timing of this debate because I want to speak about the rural economy and the massive part played by EU funds over the past few decades.
It is impossible to think about the rural economy without the part played by EU funds and I fear deeply for the economy of the UK if it votes for Brexit. Do noble Lords really believe that rural areas, with just under 20% of the population, will receive an equivalent sum from the Treasury in the case of Brexit? Some £2 billion in single farm payments, £500 million for environmental measures, and development funds such as LEADER have all been crucial to underpinning and developing the rural economy, whether through infrastructure or particular projects. The Treasury has never been keen to match the European funding even when such funding has been contingent on domestic input. That applies to successive Governments.
Rural businesses and villages, people living in rural areas and farmers themselves—who I think are very seized of the issue—need to understand that the Treasury will never come up with the sort of support that has made rural economies vibrant and healthy over the past few decades. Why not? As I said, it is because only 20% of the population lives in rural areas. It is also because it is hard, long-term work to invest effectively in sparsely populated areas. You get more quick bangs for your buck in urban areas and that is something the Treasury is very keen on.
When the CLA says that,
“the vital financial support provided to farming businesses and the wider rural economy must continue”,
I say to the CLA, “Dream on!”. The Treasury is never going to give the same level of support to lagging rural areas. The CLA really must get off the fence and campaign to remain, like the NFU, which I think has been very brave and clear-sighted and has clearly acted with its head. It is right because there will be a quadruple whammy for farmers: no more CAP; fewer willing seasonal workers; less support for infrastructure helping them to access markets; and much more uncertain export opportunities. Just take tariff export quotas. I ask the Minister: how would the UK negotiate if these had to be shared out? That is not a detail I have ever heard mentioned by the Farming Minister, George Eustice, who, ironically, is so keen on Brexit. I fear for food prices: I think they may rise.
In conclusion, there is so much infrastructure we need to worry about. It is all about how rural areas are going to keep their vibrant economies in the face of a massive lack of funding.
Baroness Byford (Con)
My Lords, I congratulate my noble friend on securing the debate and her forthright overview of the current situation. I remind the Committee of our family’s farming interests, which are on the register.
Successful agriculture, horticulture, forestry and fishing industries are crucial to the health of the nation in terms of locally produced food, the employment opportunities they offer and a countryside that is open to all. Farming is a foundation stone of the UK’s food industry. It is the fourth-largest exporting sector, worth some £97 billion, and in 2013 it provided more than 3.5 million jobs. The UK is the third-largest wheat and dairy producer in the EU, the fourth-largest beef producer and the largest producer of sheep-meat. Some 142,000 businesses are registered as farm businesses.
But all is not well. World commodity prices are low and some farmers are struggling to survive. Their plight is made all the more acute by the failure of the 2015 basic payment scheme and of the consequent queries for 2016. I hope that the Minister will clarify the current position and explain the reasons for the delays. We have received our full payment, and while others are waiting, part payments are at least some form of welcome relief.
We also need to ensure that disease in crops and livestock is kept to a minimum. Last year, the NFU and others, through their Healthy Harvest Report, campaigned for sound, risk-based regulation of plant protection products. The withdrawal of products, especially when there is no satisfactory alternative, risks crop yield losses. UK hop growers may number only some 60, but they are facing just such a scenario. Their crop is worth over £9 million. Hops are sold to brewers and traditional UK beers cannot be produced without hops. The brewing industry is worth in excess of £18 billion. I understand that hop growers do not have effective means to control pests in the way that they need.
Lastly, I continue to encourage more small businesses into rural areas. I welcome the new food and farming degree apprenticeships, the advances in technology, the sharing of expertise and the direct promotion of products. So much has been achieved, but there is much more to be done. There are opportunities to be taken, but in some areas even a minimum provision of broadband is needed and urgently required.
The Lord Bishop of St Albans
My Lords, my thanks go to the noble Baroness, Lady McIntosh, for securing the debate. I will focus on three areas that I believe are crucial to creating a strong, dynamic rural economy.
First, I underline the importance of affordable housing in creating sustainable rural communities at a time when rural house prices continue to be pushed well beyond the reach of many local residents. A failure to provide for local people and local families to live and work in rural areas leaves the rural economy seriously inhibited. An affordable housing supply, available to local workers on low and middle incomes, is an essential feature of the rural economy, providing homes, and, in many cases, workplaces for those who would work in rural areas. I wonder, therefore, whether the Minister could outline how his department intends to work with DCLG to unlock the affordable homes that are so desperately needed, particularly given plans to exclude smaller developments, which form the bulk of rural development, from starter home and affordable housing requirements.
The second area is one already alluded to by other noble Lords: broadband and mobile connectivity. According to the CLA, nearly 50% of rural premises cannot receive broadband higher than 10 megabytes per second, while only 31% of people living in rural areas can expect to get “all networks” coverage indoors. The Government’s commitment to a universal service obligation on broadband is welcome. Progress is being made, but I hope that similar promises will eventually be made on mobile coverage.
If the aim on broadband is to be achieved, however, investment in innovation is essential. I highlight the excellent example of WiSpire in the diocese of Norwich, which uses church spires in rural villages to transmit and receive broadband. We need lots of creativity about what we can do, yet the problem is that WiSpire is finding it very difficult to access funding and investment. That could make a significant difference. With that in mind, will the Minister tell us whether Her Majesty’s Government have plans to make matched funding and investment for broadband projects more widely available?
Finally, I want to talk about fostering a spirit of innovation. Across rural communities are many thousands of microbusinesses, often operating out of kitchens and on small premises, that form a vital cornerstone of the rural economy and provide opportunities of diversification to more established industries, such as agriculture.
As technology changes and sectors like the “sharing economy” develop—the rise of Airbnb is a good example—we need to ensure that rural communities are well equipped to take advantage of the opportunities on offer. Housing and connectivity are part of this, but it also requires that would-be entrepreneurs have access to the right advice, training and support. I draw Peers’ attention to the Germinate Enterprise course, which has been released by my colleagues in the Arthur Rank Centre and will be run though churches and community organisations. Can the Minister tell us what steps Her Majesty’s Government are taking to encourage entrepreneurs and business start-ups in rural areas?
Baroness Redfern (Con)
My Lords, I speak in this short debate to add my continued support of economic growth in our rural areas, which at the moment contribute a fifth of England’s total economic activity, for future job opportunities and improved prosperity.
Promoting a strong rural economy will be enhanced with local neighbourhood plans in place which will encourage and support all types of businesses and enterprise, promoting the development and diversification of agricultural and other land-based small businesses where, on average, 29% of all businesses employ only up to nine employees.
Starter homes for first-time buyers are so important where they can connect the places where young people work with where they want to live. Local services and community facilities in villages, such as small local shops, meeting places, sports venues, cultural buildings, public houses and places of worship are invaluable and must be developed and supported. Where would we be without our village schools, often described as the pulse of a community?
However, there are many challenges facing rural life and one has to look back only a few short months to the flooding that not only affected market towns and villages but had a severe impact on agriculture and the confidence of businesses going forward. An area of importance is connectivity. Superfast broadband plays a significant role in supporting businesses. As leader of North Lincolnshire Council, I am pleased that we will have rolled out broadband by May this year to an impressive 95% coverage. I allude to the speech of the right reverend Prelate the Bishop of St Albans. We use lots of water towers and church spires as well to get that coverage across. It is a lifeline, too, for many people to have access to internet in their homes, helping to combat loneliness, which in turn can be a real health problem as many retired people live in our rural areas.
In supporting the rural health agenda, we have introduced and developed five well-being hubs, such as the one in Epworth where I live. It provides many choices of activities from Cook4life, fitness and singing for the brain to maths, with lunch clubs and GPs so that people can meet and gain support and information—not only to reduce that feeling of isolation but to meet new people and build new friendships.
Connectivity is highly important when it comes to education, and again, we in North Lincolnshire recognise that for many students where they live is a barrier to further education, so we provide free post-16 school transport, giving all our students real choices to further their education and where they wish to study.
Sustainable rural tourism and leisure benefit not only businesses but communities and visitors alike, so we must expand our visitor facilities in appropriate locations, making sure that they are all-inclusive for all to access.
As we embark on our devolution deal, harnessing all of Lincolnshire’s districts, where many have large rural areas, the much-needed extra funding which comes with that deal will kick-start our ambitious infrastructure projects which, I feel sure, aid and accelerate growth and investment. Collectively, we can attract more businesses while helping established businesses expand, bringing those much-needed new jobs to our rural economy.
Finally, there will always be challenges and we have to manage the risks, but local authorities offer significant support in making sure that wealth is created in our rural areas. I thank my noble friend Lady McIntosh for securing this debate, but I must say that I am not very keen on pigs’ trotters.
Lord Grantchester (Lab)
I thank the noble Baroness, Lady McIntosh, for her excellent introduction to this debate. I declare my interest as a dairy farmer in Cheshire.
Slightly hesitatingly, I have decided to speak today specifically to raise with the Minister his department’s announcement on the average farm gate price of milk for February 2016. The announcement led to an outcry from producers and industry organisations because Defra announced an increase in the milk price for February of an astonishing 10.8%—up by 2.4p to an average 25.57p per litre—when UK farm gate prices have been falling steadily since 2013. They are down 33% to a little above 23p, a price generally recognised to be below the cost of production.
I think I am on very safe ground to say that there has been no such increase. Reporting of this increase came about largely because the department appears to have bundled Arla’s annual 13th payment into the February milk price, despite the bonus accruing on milk produced for the whole of 2015 and regardless of the fact that less than half the money has actually been paid into farmers’ bank accounts as the rest went on paying AMCo farmers’ membership fee to join Arla.
When the industry is facing a crisis arguably much worse than the crisis in 2009, this announcement has given a highly contentious signal from the Government that there is an end to the crisis in the dairy supply chain and retailers. Will the Minister ask his department to reflect on what it is calling the 13th payment and how it is reflected in its reporting of average pricing? Will his department publish its methodology and open it to consultation?
I might question how his department arrives at a credible figure. There is a very complex jigsaw of pricing at the farm gate at present. Many dairy farmers have had their production supply capped so that any increase above the cap is paid at a B price several pence below the A price paid for the set quantity. Is the Minister confident that his department is able to analyse the complexities in the national milk supply and account for these effects in the average farm gate price? At a time when there is a general consensus that the agricultural sector in the rural economy is facing severe difficulties with many knock-on effects to allied trades, it is surprising that the department does not appear to reflect the true nature of the circumstances of one of its stakeholders—indeed, they could almost be called customers, if farmers could be described as such. The Minister’s clarification would be welcomed throughout the industry.
When the rural economy has such wide-ranging issues to address, I recognise that it is somewhat indulgent to bring up such a narrow matter.
Baroness Smith of Newnham (LD)
My Lords, as a lifelong city dweller, I have no declarations of interest today, other than a non-declarable interest as a proud citizen of the United Kingdom who enjoys the beauty of our rural areas when travelling in England, Scotland and Wales, although I regret that I travel very rarely in Northern Ireland. When I represented Newnham, some residents seemed to believe that they lived in the country thanks to the proximity to the iconic Grantchester Meadows—not the Grantchester in Cheshire, but Grantchester Meadows.
My reason for speaking today is to highlight one of the issues touched on by the noble Baroness, Lady McIntosh, at the end of her introductory speech, namely the importance to the rural economy of British membership of the European Union, and to ask the Minister whether the Government have any idea—not necessarily plans—how common agricultural policy receipts would be replaced in the case of a vote to leave and what impact such a vote would have on agricultural exports and tourism.
Looking first at agriculture, as my noble friend Lady Miller said, under the common agricultural policy the United Kingdom received direct payments of £2.95 billion in 2014. Would the Government commit to replace such funding in the event of a vote to leave the European Union? If so, how, given that those who wish to leave seem to want to spend the money on the NHS? If not, what would the impact be on our rural communities?
Turning to trade, exports of food, drink and animal feed were some £18.9 billion in 2014. Our principal export markets were the Irish Republic at 18%, France at 11%, the US at 10% and the Netherlands at 7.1%. Leaving aside the United States, around 36% goes to European Union states. What assessment have the Government made of the impact on the agricultural sector in the event of a vote to leave resulting in UK exporters being on the wrong side of EU tariffs on agricultural products?
Finally, turning to tourism, at Questions on 18 April, the noble Lord, Lord Forsyth of Drumlean, expressed some incredulity at the idea that after a Brexit EU nationals would be less keen to visit our great country. I believe he is right—indeed, the devaluation of the pound that might follow Brexit may make visiting the United Kingdom even more attractive—but if we are so keen to regain control of our borders that we feel the need to impose visa restrictions on our erstwhile EU colleagues, might that not put people off coming to the United Kingdom simply because it will not be worth the effort? Have the Government any idea what impact that would have on the rural economy?
The Earl of Arran (Con)
In the peninsula economy of south-west England connection is vital to ensuring good-quality local jobs and high levels of productivity and that all our communities, particularly those in the rural economy, can achieve their full potential.
What is taken for granted in most urban centres across England—a good road, a decent local bus service, a reliable train and an airport with a hub link—are scarce resources across large areas of Devon, Somerset and Cornwall. For us, the car is a necessity, not a luxury, yet even here services are contracting, as evidenced by the alarming rate of closure of small rural garages faced with competition from multinational petrol companies and supermarkets in never-ending price wars. However, what can rectify all this at a stroke and place businesses great and small, including the sole trader working from his or her third bedroom, on a national or international trading platform is broadband—I make no apology for returning to this—and a 21st century mobile telephone service rather than a 20th-century one.
The economic evidence is very clear indeed. In 2013, digital businesses grew at 12%, compared with growth of 4% for those not connected. Connected businesses are projecting growth four times faster than those that are not connected. By 2017, a lack of digital knowledge will mean that 25% of businesses will lose their market position. Digital access is drastically changing the knowledge economy to a point where 35% of jobs, many in the white collar sector, will be automated.
This problem has been recognised and is being partly addressed. Cornwall has received a superfast network, which means that it has more fibre per head of population than London. This is powering the economy of the poorest county in England by enabling many small and micro businesses to break into new markets and, importantly, by inspiring a new, young generation of entrepreneurs to enjoy exciting careers with a decent work-life balance. Many lower-cost public sector support services are being developed as a result, with huge potential in areas of remote learning. Cornwall has a realistic opportunity to break out of decades of subsidy as a direct result of this technology.
Would that this investment was reflected across the rest of the peninsula. Cornwall has the benefit of a significant European funding package but this does not apply to all areas. Connecting Devon and Somerset has enabled many areas to enjoy a level of digital access that will deliver a minimum of 2Mbps—which is an internet speed—to 90% of the area by the end of 2016. This programme has been funded through state aid, with up to £1.6 billion allocated to subsidise BT’s introduction of a fixed-line fibre network to a target of 95% of the UK. However, this has not silenced criticism about the rate of the rollout and the speed and extent of the service. A 2Mbps service is regarded as no more than a fig leaf when compared with many parts of mainland Europe, as well as with countries that are less developed than the UK. The Prime Minister, thank goodness, has got it and has now announced that access to the internet should be a right in 21st-century Britain secured by law under a universal service obligation regardless of where you live. We welcome this.
The Earl of Kinnoull (CB)
My Lords, I, too, congratulate the noble Baroness, Lady McIntosh, on tabling this important Question. I will make two points. The first concerns the economic and biodiversity damage done by the invasive alien species, the grey squirrel. Here I declare my interests as set out in the register; in particular, as chairman of the UK Squirrel Accord, which has 34 signatories comprising the four Governments within the UK, the relevant private sector bodies and the relevant voluntary bodies. The accord has twin aims: first, to promote the survival of the red squirrel; and, secondly, to try to do something about the great damage done to our broadleaf trees by the rapidly expanding population of grey squirrels.
The damage done by grey squirrels is caused by their ring-barking the trees. Trees aged between 10 and 40 years have their bark gnawed away so that the grey squirrels can get at and suck the sap. This kills the trees or, at best, kills them above the area of ring-barking, and causes the rural economy, according to industry estimates, tens of millions of pounds a year of damage to this very large and important industry. It means that for the oak, beech and other broadleaf trees in our country, there are no replacements coming up for the existing stock of old trees. People are stopping planting these trees and it is a big problem. The accord represents a determined effort to co-ordinate UK efforts, involving many scientists and others, to address this. The Minister is highly engaged and knowledgeable about everything and very generous with his time—indeed, Defra is a signatory—but I would like him to affirm his determination on this very difficult issue.
Secondly, I raise the England Coast Path. This admirable initiative of Natural England is going to produce 2,800 miles of coastal path around England by 2020. Last month a 60-mile section in Somerset was opened. It provides enormous benefits to the countryside through people coming to visit. Indeed, the South West Coast Path reports that it generates more than £400 million a year to the local economy. There is a second benefit to the nation in that going for a walk makes people healthier and this reduces costs and burdens on the NHS. There are various estimates of that running into millions of pounds. I ask the Minister to join me in congratulating Natural England on its energetic handling of this tremendous initiative, which benefits not only the rural economy but the health of our fellow citizens.
The Earl of Shrewsbury (Con)
My Lords, I am grateful to my noble friend Lady McIntosh for securing this important debate today. I declare an interest as a member of the NFU, the Countryside Alliance and other similar organisations, and my younger son is a free-range egg producer in Lincolnshire.
Currently, agriculture is experiencing some of the toughest times seen for very many years. Pigmeat prices are atrocious and dairy prices are shocking, with overproduction of milk and milk products and a seriously depressed world market in which many export outlets have either diminished or been closed to us. Dairy farmers continue to leave the industry at an unprecedented rate, finished livestock prices are greatly depressed and it would appear that one of the very few positive agrisectors is free-range egg production, and that is really only because of cheaper cereals.
In general terms, considerable economic success has been achieved through wide diversification: conversion of redundant farm buildings to accommodation and offices; farm-shop retail businesses, many of considerable quality; equiculture; tourism—the list goes on. Angling and shooting more than play their part. Shooting and fishing are most important sources of revenue to the countryside economy, providing much-needed employment in both full-time and part-time jobs, often in areas where employment is very hard to come by and where land use is, at best, restricted. The benefits of both activities to the countryside are numerous. Both must be treated as tourism and, additionally, as a seasonal harvest of delicious, healthy, natural food for the table. Ever more top-end chefs are extolling the virtues of preparing and serving game products.
Both pastimes are becoming ever more popular. In particular, shooting brings into this country a considerable number of high-net-worth individuals, many from America. Their spend is very substantial indeed. I know: I shoot with them. Without the shooting sports—this is backed up by extensive research by the shooting organisations—investment in conservation, and hence the promotion of habitat in these often less-favoured areas, would simply not happen. For example, without the responsible and selective burning of stale, unproductive moorland areas to promote new heather growth, grasses and reeds would encroach and engulf the hill. Grouse numbers would tumble and a valuable source of considerable income to the rural economy would be lost. Without coppicing, headlands, wildflower meadows, beetle banks and myriad other regimes, habitat is lost to both game and wildlife. Unless we conserve and invest, we cannot reap the benefits.
With respect, I submit that the entire subject of the rural economy is far too diverse and important a matter to be restricted to a few three-minute offerings in a one-hour QSD. I implore my noble friend the Minister to persuade his colleagues to promote a full two-and-a-half-hour debate on this subject very early in the new Session.
The Earl of Caithness (Con)
My Lords, I rise in the gap very briefly to support what my noble friend Lord Shrewsbury just said. I wanted to put my name down for this but when I saw the list of speakers I thought that that would only delay matters. My noble friend the Minister is Deputy Chief Whip. It is high time the Government allowed time for a full debate on the rural economy, like we used to have. This is such a varied and complex issue. In fact, the noble Lord, Lord Grantchester, said it was a complex jigsaw. It has got a lot more complex in recent years and therefore I plea that we get a decent time for a good full-length debate.
Baroness Jones of Whitchurch (Lab)
My Lords, I am grateful to the noble Baroness, Lady McIntosh, for tabling this debate today and to all noble Lords, who have brought great insight and experience to it. Of course, if the Government were to be honest in their response, they would have to admit that things are not going very well. It is tough for working people trying to bring up families in the countryside today. Average annual wages are more than £4,500 lower than in urban areas and the gap between the two has grown by £1,000 since 2010. Rural communities have been the worst affected by reductions in public services. Energy, transport and childcare costs, for example, have spiralled. There are GP shortages in many rural areas. Educational attainment is lower than in the urban equivalents and, as we have heard, the housing crisis has hit rural communities hard, with prices rocketing and waiting lists getting longer.
In addition, the 600,000 small rural businesses in England and Wales are feeling undervalued by this Government, despite the fact that they contribute over £200 billion to the economy in England alone. As we have heard this evening, the number one cause of small business complaints is poor or non-existent broadband. It is time the Government got a grip on this. Will the noble Lord confirm that the target of 95% of the country receiving broadband by 2017 will be met? What is the answer to critics who say that the universal service obligation, far from being universal, will add a cost penalty to those living in very rural areas?
Finally, a number of noble Lords raised the economic plight of farming communities and, undoubtedly, it would be worse under Brexit. In addition, the problem of delayed payments from the Rural Payments Agency has come at a particularly difficult time. The recent Public Accounts Committee report makes painful reading, highlighting a failing IT system and a payments fiasco. Will the noble Lord confirm that these problems will be sorted before the next payments deadline?
Meanwhile, the dairy sector is caught in the perfect storm of global market saturation and a plummeting milk price, with a growing exodus from the sector. We all feel alarmed at the implications of this for our rural communities and for longer-term food sustainability. Clearly, one aspect of recovery would be to strengthen the labelling of milk products and to encourage consumers to buy British. Another aspect would be to strengthen the role of the Groceries Code Adjudicator to cover indirect as well as direct suppliers. Will the noble Lord give insight into his department’s longer-term projections for the UK dairy industry? I look forward to his response.
Lord Gardiner of Kimble (Con)
My Lords, I am more than grateful to my noble friend Lady McIntosh for securing the debate. A strong and vibrant rural economy is vital for the health and wealth of our national economy. At the outset I declare my farming interests and my rural background, which are in the register.
What is the current position? Rural areas contribute more than £200 billion to the English economy each year—around 17% of the total. They are home to nearly a quarter of all registered businesses in England and employ almost 20% of the country’s workforce. Some 76% of residents in rural areas are in work. There are more registered businesses per head of population in rural areas than in our urban areas, excluding London. I have to say to the noble Baroness, Lady Jones, that my politest words are that I dispute her accusation that the relationship between small businesses, rural businesses and the Government is poor. It is completely the contrary. My experience of having met many rural businesspeople around the country is that the environment which the Government seek to create for the economy is one that they identify with. Business start-up rates remain strong at 47 per 10,000 people. The rural economy is extremely diverse. Manufacturing represents 13% of gross value added from rural areas and the service sector is significant. Business services now represent 10% of rural output.
But this Government and this department agree that much more needs to be done. We want to help the rural economy achieve its full potential. Indeed, an increase in annual growth of just 0.1 percentage point would add around £500 million per year to rural gross value added. So the Government set out in the rural productivity plan, published last August, a range of measures. This relates to what my noble friend Lady McIntosh said in her wide-ranging speech, because so many of the features of rural life are so wide-ranging and they interconnect. Many areas of rural England are seeing improved broadband, mobile and transport connections. Wearing my former hat as DMCS spokesman, I very much agreed with what my noble friend Lord Arran said about Cornwall and the extraordinary impact that the enhanced connectivity in Cornwall, including the Isles of Scilly, has made. It has made a dramatic difference. Everyone can now access basic broadband speeds of 2 megabits per second—fast enough for online access to every government service, including CAP payments. Some 90% of UK premises now have access to superfast broadband and we are on track to reach 95% by 2017.
A number of your Lordships, my noble friend Lord Arran in particular, referred to the broadband universal service obligation. We and Ofcom are consulting on the introduction of that USO so that we have it in place for everyone by 2020. A broadband USO aims to provide a safety net for those without access to superfast broadband. Our ambition is to set the USO at 10 megabits per second. I am conscious—I declare an interest as I await a better service in my part of rural Suffolk—that we need to extend the mobile phone 2G coverage, allowing access to basic voice and text services to 90% of the UK land mass by 2017. I was reminded by what the right reverend Prelate and my noble friend Lady Redfern said of the use of church spires. The department entirely recognises the appropriateness of using church buildings; it wishes to use them and I hope that we might have a discussion. It might be a topic for one of the rural bishops’ meetings that we have in Defra. That would be extremely helpful.
We are also very conscious—the noble Baroness, Lady Jones of Whitchurch, was teasing this out, and rightly so—of the question of how we deal with the remaining 5% of premises that are in hard-to-meet and difficult areas. That is why we have deployed pilot projects in Wales, Northern Ireland, Scotland, Hampshire, Northumberland, North Lincolnshire, North Yorkshire, Devon and Somerset. These are to test the options of expanding to that final 5% of premises where the commercial case for investment is at its weakest. We all recognise the importance of this service, which is essential for all communities, whether urban, rural or suburban. This is something that we all need to have. Indeed, as entrepreneurship has been mentioned, it is essential for small businesses that rural areas can be part of that.
The Government are also seeking to improve the availability of skills in rural areas through better schools and more apprenticeships. Clearly, ensuring a skilled workforce in rural areas is vital to their future economic success. That is why the Government will increase apprenticeships in rural areas, including tripling apprenticeships in food and farming. The right reverend Prelate spoke of the need to expand the number of businesses in rural areas. In fact, as part of the productivity plan, 15 new enterprise zones in smaller towns and rural areas will give businesses the space to grow and the opportunity to take advantage of tax and planning benefits.
A number of your Lordships raised the issue of rural housing, and I was very conscious of my noble friend Lady Redfern, who is such a great champion of North Lincolnshire. We are committed to increasing the availability of housing in rural areas, allowing rural towns and villages to thrive, while promoting the greenbelt and the countryside. I can express my personal commitment to this. I should perhaps declare that I facilitated a rural housing scheme on the farm at Kimble. I am very much committed to this as a way in which we can assist villages to prosper so that the school roll remains vibrant and the hubs in the village community can continue. Thousands of families will also benefit from the 30 hours of free childcare that will be rolled out from September this year. Three of the eight early-adopter local authorities are in rural areas.
We also wish to devolve more decision-making to local areas, including devolution deals. My noble friend Lady McIntosh mentioned the northern powerhouse and other areas where the Government have been working. We are also seeking to ensure this in the west of England, greater Lincolnshire and the east of England. The Government also recognise the strong part that tourism plays in rural areas, and that is why we have set out measures to support tourism in our five-point plan. The noble Earl, Lord Kinnoull, spoke of the English coastal path. It is clearly very important for our well-being, but it is also important as a catalyst for tourism and all the knock-on positivity for economic growth.
My noble friend Lord Shrewsbury mentioned the contribution country sports make to the rural economy. Shooting alone annually contributes £2 billion and 74,000 jobs. I know my noble friend has experience of it. You only have to go to those very remote areas to see that shooting is one of the major economic contributors, if not the only one. Anyone who does not understand this ought to go to see it before they make observations. It is essential to those remote rural areas. I know many noble Lords would be very pleased to facilitate a visit from any of your Lordships who would like to take the opportunity.
Tourism relies on a beautiful and varied countryside—landscape—and trees play a pivotal role in it. I can confirm that the comments about the grey squirrel made by the noble Earl, Lord Kinnoull, chime with what Defra is seeking to do. There is no doubt that the grey squirrel is the greatest destroyer of trees. The arrival of this species has been a great disaster for our treescape, and we need to do something about it.
I am very conscious of the importance of a vibrant agricultural sector. It is at the core of the rural economy, generating £100 billion and supporting one in eight jobs. I have two minutes and a lot more to say.
It is our ambition to make the industry ever more a world leader. We are very determined to ensure that we have better procurement policies and that we enhance exports. The Secretary of State has just returned from the United States, promoting British food and products. I particularly want to take on board what my noble friend Lady Byford said about beer and hops. The whole basis on which the department works on pests is to receive the best scientific advice available: that is the basis on which we make decisions. We are in the year of great British food. Where there is a contribution that we need to make, including opening up beef exports to America and Japan, there is a lot going on in the department across the ministerial team.
The noble Lord, Lord Grantchester, mentioned the dairy sector in particular. Given the time, I can say only that we are certainly not complacent. I am very glad that the noble Lord raised this, because dairy farming is at the heart of farming in many rural areas, particularly on the west side of the country. We need to work as hard as we can to support the dairy industry. I do not have time to go into Brexit and so forth, but I say to the noble Baronesses, Lady Miller of Chilthorne Domer and Lady Smith of Newnham, that the package received from the European Commission —£26.3 million of aid to the dairy farmers, which was paid out in November and December—is an indication of the sort of community support we receive. Indeed, the new system of tax averaging introduced this month will help farmers. I am very conscious of the need to help the farming industry.
Unfortunately, there is more to say but I will take away all that was said on rural-proofing, which the review by the noble Lord, Lord Cameron of Dillington, was all about. Having once achieved a two and a half hour debate on the countryside, I will take away what my noble friend Lord Caithness and others have said about the need for a debate. The countryside is very important to us. It is in the national interest that we have a vibrant rural economy. We should respect its traditions and its way of life, but surely our objective is to unlock the enormous opportunities that there still are for the rural economy. I am most grateful to noble Lords and I will take back all that has been said and write to them.