Grand Committee
(1 day, 7 hours ago)
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Arrangement of Business
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The Deputy Chairman of Committees (Lord Gardiner of Kimble) (Con)
My Lords, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Railways Bill
(1 day, 7 hours ago)
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Baroness Pidgeon
Baroness Pidgeon (LD)
My Lords, the noble Lord, Lord Blunkett, had hoped to be here today but found himself with other commitments, and therefore asked me to move his Amendment 22A, which I also support. This is a probing amendment on whether the provision in the Bill which enables Great British Railways to enter into partnerships with mayors—we will debate whether it should be mayors or others later—could be strengthened. I would be keen to hear what the Minister has to say on that.
The Bill sets out a partnership structure that enables collaborative working, local funding commissioning and other benefits, but this wording change from “may” to “must” would really strengthen the requirement for a partnership with mayors. I hope the Minister agrees that Great British Railways must treat mayors—and others, as we will come to—as genuine partners, and that the Government will consider this amendment seriously.
I take this opportunity to speak to the other amendments in this group. I think it is a very important group and that is not just because my background, like many noble Lords’, is in local and regional government. I am very aware that, for example, Transport for Greater Manchester, Transport for London and others are concerned about the Bill as drafted because it does not treat them as real partners at the table; it feels like a consultation or tick-box exercise rather than a genuinely equal partnership.
I just remind noble Lords that, when responding to my amendment on rail devolution on Report of the Passenger Railway Services (Public Ownership) Bill, on 6 November 2024, the Minister said:
“I can reaffirm to your Lordships’ House that the railways Bill will include a statutory role for devolved governments and mayoral combined authorities. They will be involved in governing, managing, planning and developing the railways”.—[Official Report, 6/11/24; col. 1543.]
Yet I believe—as do others here, hence all the amendments—that the Bill as drafted does not provide the statutory powers that mayoral and strategic authorities and others require. Since the Bill was introduced to Parliament, we have of course seen a new Prime Minister, one committed to devolution to mayoral and strategic authorities, so I really hope that some things will change.
I have already talked about the amendment that I am moving on behalf of the noble Lord, Lord Blunkett, which I hugely support as it strengthens the Bill. I hope the Government accept that. It would be useful if the Minister could set out how the Government see Clause 5 enabling Great British Railways and these authorities to develop local commissioning partnerships. I stress that this clause is particularly important for Greater Manchester, because the city region wants to take on a more meaningful role, similar to London’s, in shaping and commissioning rail services.
Many of the amendments in this group, which we will hear about, are trying in different ways to ensure that strong role for local and regional government. They include the sensible amendments from the noble Lord, Lord Lansley, which seek to bring in the term “strategic authorities” from recent devolution legislation. I hope the Government will be sympathetic to many of those amendments. In many ways, the amendment from the noble Lord, Lord Blunkett, is the simplest way to strengthen regional and local government’s hands.
The noble Lord, Lord Grayling, has Amendment 147, which allows for an authority to declare a service wholly within its area as a mayoral concession service, so it can be run rather like Transport for London is. I think that is interesting, as it feels like, to date, Transport for London and others have had to go with a begging bowl to government to take over metro railway services for their area. This would shift the balance, so I think it is an interesting proposal to discuss.
Amendment 159 from the noble Lord, Lord Moylan, would expressly forbid the transfer of TfL services to Great British Railways. This again highlights the tension between national and regional services, and concerns about the powers of Great British Railways.
I look forward to the rest of the debate on this group and the Minister’s response. Given this new Government’s agenda around devolution, I hope that we start to see a shift and, potentially, some government amendments in this area. I beg to move.
Lord Lansley (Con)
I think it might fall to me to speak next, if my noble friend does not want to speak to his amendments at this stage.
Lord Lansley (Con)
I have four amendments in this group: Amendments 26, 64, 304 and 333. They are all on the same point, which is that, in the Bill, the definition of a “relevant local government body” is expressed as mayoral combined authorities, mayoral combined county authorities and passenger transport executives. Those first two—mayoral combined authorities and mayoral county combined authorities—are, I think, based on the proposition from some months back that, over time, all the strategic authorities would move towards being mayoral strategic authorities.
Since the original drafting of this legislation, we have completed the English Devolution and Community Empowerment Act. Those of us who worked on that legislation will recall that Section 1 defines strategic authorities, and it does not do so by reference to whether or not they have a mayor; they are, basically, single-foundation strategic authorities, combined-foundation strategic authorities or county combined strategic authorities. It seems to me that, for the purposes of this legislation, the relevant local government bodies with which Great British Railways, in particular, and the Secretary of State should work would be all the strategic authorities. Why would we exclude those that do not have mayors?
I say this because, whether it takes a year or two—or three or four—there will be some strategic authorities that may not have a mayor for a very long time. I do not say this because I want them not to have mayors; I am in favour of them having mayors. It is just that we are quite a long way from that happening. From my quick survey, looking across England, we probably have two long-term single-foundation strategic authorities: Buckinghamshire and Northamptonshire. By my reckoning, at the moment, we have at least four, perhaps five, combined county authorities—Lancashire, Cornwall, Surrey, Devon and Torbay, and Norfolk and Suffolk—with no intention of having mayors. Interestingly, that includes Cornwall. The Minister will remember that, last week, when the Prime Minister was answering questions in the other place for a very long time, he referenced devolution in Cornwall and said
“with or without a mayor”.
Therefore, we are in a very simple position: we want devolution. We want GBR to have regard to the transport plans of strategic authorities. We want GBR to consult with strategic authorities, with the responsibilities that they have. We want statutory information sharing between GBR and strategic authorities. If we put “mayoral” in this legislation, we will restrict the availability of all the statutory consultation, information-sharing and advisory relationships between GBR and non-mayoral strategic authorities. I am sure that that is not anybody’s intention. The simplest thing to do would be to reference the definition of strategic authorities in Section 1 of the English Devolution and Community Empowerment Act; that would be altogether simpler and better in the long run.
Lord Harper (Con)
My Lords, I rise briefly to support what my noble friend Lord Lansley has said on his Amendment 26. I had some dealings on this when the Prime Minister was the Mayor of the Greater Manchester and when Andy Street was Mayor of the West Midlands. Both of them engaged with the department on their desire to integrate the national rail network into their plans locally. They wanted to have those conversations, which worked well. In those cases, obviously, they were both mayors.
I agree with my noble friend Lord Lansley. Given the announcement this week that local government reform and the bringing together of unitary authorities, which is, in many cases, a precursor to having mayors, have been held up and there have been legal challenges, it would be much more sensible, as my noble friend says, if we made sure that GBR could have those sensible conversations and had the powers to do that with all appropriate local authorities with a strategic transport function. We should not limit that to those authorities with a mayor.
As my noble friend said, although it was at least the preference of the Government led by Keir Starmer that there should be limits to what you could devolve if you did not have a mayor, it sounds like, from what the Prime Minister said in his answers to Cornish MPs, that he is open-minded about that. Therefore, we could have some significant local authorities with transport powers without a mayor. I know from my own experience that there are a number of proposals in the Cornish area, for example, for some rail infrastructure that would bring significant benefits to the Cornish economy. It would be perverse if the Cornish council could not have those conversations with GBR or if people had to work out weird ways of having to facilitate those conversations because we had not provided for that in this legislation.
I agree with my noble friend. The Minister would be wise either to accept his amendment or, if it needs to be worded differently or other changes need to be made, at least to take it away and come back on Report with a government amendment, or suite of amendments, to achieve the same function. That would improve the position and, in fact, get to a position that I think is the Government’s intention—certainly the current Government’s intention. It may not have been when the legislation was drafted but I think that it would more accurately reflect the position now.
Lord Berkeley (Lab)
My Lords, I rise briefly to speak to the amendments in my name, Amendments 298, 299 and 300, which follow on from the amendments about which noble Lords have spoken. I want to double-check that there will be consultation with the relevant authorities—whether it is Scotland, Wales or other authorities—before any change is made to access charges, timetables or anything else.
Several noble Lords have spoken about Cornwall, where I live. It may be down as a mayoral authority but, knowing the politics of Cornwall, I think that it is highly unlikely that anything credible will come out of that. Whether that is good or bad, we can debate.
There is also the question of what improvement—or lack of improvement—is needed to the railway in Cornwall and, to some extent, in Devon. We have been debating for many years whether the line at Dawlish is at risk and by how much. I know that my noble friend the Minister has said that it is all going to be fine. Rock bolts are being put into the hillside to stop it falling down, which I am sure is a good solution, but we still only have one rail line going to most of south Devon and the whole of Cornwall. It would be nice to think that the local authorities—the south-west regional authority is already doing some work on this—are able to take some of that forward with a budget to look at the alternatives and make sure that the various authorities, whoever they may be at the time, are properly consulted, especially on access, charges and things like that.
Lord Moylan (Con)
My Lords, before I turn to the substance of this group, I would like to say that I received this morning from the Minister, as I imagine other noble Lords have, a letter setting out certain corrections to statements that he made on Tuesday. I have not had the opportunity to study that, but I hope that there will be an opportunity at a later stage in Committee, if necessary, to come back and question the noble Lord on the points made in that letter.
However, I also yesterday received an email from a group calling itself the Association of British Commuters. It referred to the debate that we had on Tuesday concerning what constituted in this context a wholly owned subsidiary of GBR and whether that was consistent with some sort of public/private partnership for the purpose, for example, of developing land. This was not a strange email; it was very coherent, sensible and well written. The thrust of it was that not only did noble Lords on these Benches get it all wrong—if I may say so to my noble friend Lord Lansley; if he has not received the email, I will send it to him—but so did the Minister.
I have two questions before I start on this section. First, has the Minister received this email? If not, I am very happy to send it to him. Secondly, does he expect to return to the Committee at the earliest opportunity to make corrective statements? Clearly, if he has not seen the email, he will not be able to answer the second question, because his officials will not have had the chance to advise him, but he is under an obligation to return at the earliest opportunity if he has something to correct, as he has today—I am giving him that opportunity. When I sit down, I will send him the email. If he tells me at the end that he has not received it, I will very happily send it to him, as I will to my noble friend Lord Lansley.
I turn to the group of amendments that we have been debating. I shall speak to—I shall not read out the numbers—all the amendments that I have tabled in this group, which are quite a lot. I shall also speak briefly on Amendment 27 on behalf of my noble friend Lord Grayling.
These amendments go to the heart of the devolution agenda. None of us is satisfied with what the Bill contains on devolution to local authorities, strategic authorities, regional authorities—whatever they are called. I have been thinking about why none of us is satisfied and what the fundamental flaw of the Bill is in this regard. The answer is that there is no devolution in it. What the Bill does is give those authorities the right to request things from Great British Railways—as I said on Tuesday, I find the phrase “right to request” quite objectionable in a free country, because we all have a right to request things of Ministers as part of our democracy. In other words, they have the right to ask to become customers. If those things are granted to them, they will have those services provided by Great British Railways and they will make payments towards them, if necessary, to justify the carriage of passengers on that particular route. All they have, therefore, is the right to request to become customers. There are no devolved powers in any of this. There is no devolved running of railways, because that would be inconsistent, I suspect, in the Minister’s mind with the single directing brain that is going to be controlling the railways. So there is very little.
The amendments that I have tabled fall into two groups. Two of them relate to devolution in general, and the second group relates to TfL in particular. To start with TfL, I need to start by saying that although it is not a current interest, as many noble Lords in the Room will know, I used to be deputy chairman of TfL and indeed worked closely with the Minister during that time. The Mayor of London has made it clear that he wants further devolution of rail services to TfL. In fact, this is a process that started when I was deputy chairman of TfL and the Minister was commissioner, and very successful it has been. Lines that were, in effect, abandoned became busy commuter routes, with very little investment—just through good management, making the stations attractive and having some new trains. It has been a huge success. The London Overground is one of the huge rail successes that this country has achieved in the past few years—all of it run on a concession model, incidentally, involving the private sector or external train companies of one sort or another.
The Mayor of London wants more of that—that is understandable. I think Londoners want more of that. The Mayor of London now has a high-powered friend in Downing Street. The Prime Minister has said that power has been hoarded in SW1 for too long. He wants power carried to every postcode in the land—et cetera—and the Government will be redistributing power. This Bill does not redistribute power to anybody in local government. So I would hope that the Minister would have changed his mind in recent weeks and would be extremely sympathetic to these amendments.
Amendments 28 to 30 seek to ensure that the Secretary of State remains properly involved in arrangements between GBR and TfL, rather than allowing those relations to be determined solely within GBR. This is the bear in the room again. GBR is going to be so huge. It will make all the decisions. Everybody else is just a taker of decisions by GBR, they are not participating in them.
Amendment 159 seeks to protect existing TfL and London Underground arrangements and would ensure that they could not simply be displaced without proper process and consultation.
Amendment 301 makes the principle even simpler: where GBR is making a decision affecting TfL, it should inform TfL and allow TfL itself to determine whether the decision is sufficiently significant to require consultation. That seems entirely consistent with the Prime Minister’s philosophy. The same principle lies behind Amendments 23 to 25, 156 and 297 in relation to mayors and local government more widely, to which I now turn.
Amendments 23 and 24 would give greater flexibility for railway functions to be exercised locally and for the necessary financial arrangements to flow in either direction. At the moment the Bill allows GBR to collect money from local authorities. Why should it not be the other way round? What if GBR makes a profit on a line? Why should it not pay money to the local authority? Why is everything so one-sided in the Bill?
Amendment 25 would provide an independent route to the ORR where agreement cannot be reached. There is no way in the Bill of resolving disagreements. So let us provide one. Let us have an appeal to an independent ORR. It is not that I think the ORR is tremendous, but it is currently the only available appeal body. If the Minister says he is happy to have an appeal but would like a different structure, we would be open to discussing that, but let us have an appeal route so that disagreements can be resolved independently.
Amendment 156 would allow mayoral and combined authorities to procure local passenger services through concession agreements, including using private operators where that offers the best solution. Currently they are limited to using GBR to provide the services. What if GBR is no good? I know that GBR is going to be managed beautifully and nothing will ever go wrong in the utopian vision we are looking forward to, but what if it is not actually very good? What if people are constantly on strike? What if the management is sloppy? Why should you not be able to turn to a private train operator to manage your local service? This is not a question of track access or timetables, because they have been agreed, but why would you have to use GBR to provide these services if you are genuinely enjoying devolution?
Amendment 297 would require GBR to notify a mayoral combined authority before taking a relevant decision. I accept the point made by my noble friend Lord Lansley that that terminology might be improved, but I am not entering into that issue at the moment. That would allow the authority itself to judge whether the decision is sufficiently significant to require consultation. Why should GBR be the body to decide whether something should be consulted on, when it is the local authority that has the knowledge of how sensitive it might be with the local communities that could benefit from consultation?
These amendments test how far the Government intend to follow through on the Prime Minister’s policies. Do they genuinely trust mayors and local authorities to shape local services? Do they support further rail devolution to London where TfL can demonstrate that it would improve services? Will they ensure that GBR becomes a partner in genuine devolution—not simply acquiring local authority customers—rather than just a national body through which decisions are centralised? Given the new Prime Minister’s stated agenda, I hope we will see a different approach from the Minister for the first time.
The amendments tabled by the noble Lords, Lord Blunkett and Lord Berkeley, and my noble friends Lord Lansley and Lord Grayling are at the heart of many of the issues that I have raised in this group. They also sit squarely with what the Prime Minister himself advocated when he was Mayor of Greater Manchester—a song that he has continued to sing, on the whole, since he became Prime Minister, about the importance of devolving power, giving local leaders greater control over transport and allowing places to shape growth around their own priorities. It is time for the Minister to step up, get real and get with the swing of where, we are told, Burnham’s Britain is going.
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, before we move on, I return briefly to a point raised in Committee on Tuesday on Amendment 146, regarding the long-term rail strategy and its relationship with devolved railway responsibilities. I was less than clear on this issue when we discussed it previously and thought it would be helpful to make a point of order to provide clarity and correct the record.
For clarity, the Government consider that Clause 15 is correctly drafted and accurately reflects the devolution settlement. The Secretary of State’s long-term rail strategy will cover Great Britain. It will cover all of England and Wales and will address the railway in Scotland with regard to reserved matters only. Reserved matters include issues such as cross-border services, technical standards and railway safety and security. Scottish Ministers have devolved responsibility for matters such as Scottish passenger services and Scottish funded infrastructure. Accordingly, Clause 15(3) prevents the long-term rail strategy making provisions about functions of the Scottish Ministers, who will cover those matters in their own strategy.
I hope that explanation is helpful. The key point is that there is no inconsistency between describing the strategy as Great Britain-wide and providing an appropriate carve-out for devolved Scottish functions. I also reassure noble Lords—
Lord Lansley (Con)
I have a quick question. Why, then, is there not a similar provision saying that the rail strategy may not make provision about the functions of Welsh Ministers?
Lord Hendy of Richmond Hill (Lab)
The answer is that the infrastructure arrangements in Wales are significantly different and Wales does not have its own settlement in that respect. I reassure noble Lords that engagement between the Government and Scottish and Welsh Ministers on both strategies is productive and will continue until their publication. I am grateful to noble Lords who raised this issue, providing an opportunity to place my clarification on the record.
In respect of the second point made by the noble Lord, Lord Moylan, about an email from—
Lord Harper (Con)
Before the Minister concludes, may I respond, since I was one of the Members who raised this issue? I thank him for what he has just said and for the very helpful letter that he sent, to which the noble Lord, Lord Moylan, referred. I took the time to study it this morning, since I was the one who raised the issue, and I am grateful to him for making it clear that “strategy” means something slightly different north of the border, in Scotland, because of the role of Scottish Ministers. Again, it is an asymmetrical position with Wales, as my noble friend Lord Lansley, has just highlighted, because in Wales Welsh Ministers do not have the responsibility. That is very helpful, and I am grateful for the Minister’s clarification that the Government do not have to come back with amendments to fix the Bill.
Lord Hendy of Richmond Hill (Lab)
I am grateful to the noble Lord. We thought that we had been saved by the bell, but we were not, so I thought that it was right to put it right.
I should say to the noble Lord, Lord Moylan, that to my knowledge I do not have an email from the Association of British Commuters, although I do get several emails a day. If he sends it to me, I shall talk to officials about what it suggests. I think that is the most I can say.
Lord Hendy of Richmond Hill (Lab)
On group 1, of course this matter is of significance to this Government, with a new Prime Minister, and I firmly believe that the Bill already empowers mayors in local areas. I am clear that Great British Railways will not work unless it works for and with mayors and local communities.
In answer to the noble Baroness, Lady Pidgeon, who quoted me, I stand by what is said. This is absolutely not a tick-box exercise.
I turn to Amendment 22A in the name of my noble friend Lord Blunkett, to which the noble Baroness, Lady Pidgeon, has kindly spoken today. I absolutely agree with him and with the noble Baroness that the partnership approach that the Bill sets out must be effective. GBR must engage with partnership offers seriously, and the bar for GBR to reject a partnership must be exceptionally high. As we are aligned on the intent behind the amendment, which she described as the principal amendment in this group as it covers all circumstances, I commit to taking it away and I shall see what can be done after this debate.
I turn to Amendments 147 and 156. The Government absolutely support further rail devolution where it is in the interests of passengers and the wider rail network. That is why the Bill already provides a route for passenger rail services to be devolved through exemption from designation by the Secretary of State in Clause 28. Where services are devolved, mayors already have flexibility to choose their approach to securing passenger services and may secure them via a concession contract, including to the private sector, if they so wish. The Bill does not change that. TFL, as the noble Lord, Lord Moylan, describes, operates on precisely this basis. There is therefore no need to duplicate the existing devolution provision in the Bill, which already achieves that intent in full.
On Amendments 23 and 24, Clause 5 is already intended to support local commissioning arrangements: it enables mayors to contribute funding where they wish to secure services or improvements that reflect local priorities and go beyond the national railway offer. This gives local leaders a mechanism to invest in additional rail outcomes for their area where they choose to do so, providing the local input that we know is so important for enhancing our communities. The details of these arrangements, including revenue-sharing options, will be agreed separately from legislation via collaborative partnerships between GBR and mayors. Work on developing this model has already begun, using Greater Manchester as a pathfinder—I am going to meet the new mayor of Greater Manchester tomorrow.
The Government absolutely support greater local influence over rail services, but allowing mayors to run rail services is a financially significant decision, with safety and public interest impacts; that is why it is right that the current process in the Bill for devolving services to local leaders remains the route that is used for this. That route is well understood, familiar to industry and proven effective. Allowing mayors to run GBR services outside of the usual process is not necessary and does not better serve local communities.
I turn to Amendments 26, 64, 304 and 333. The Bill is focused on mayoral strategic authorities to reflect their growth across England and the role that mayors can play to convene local partners and tackle regional challenges. Mayors have the most far-reaching and flexible powers; therefore, this level of authority is of the appropriate scale and capability to integrate rail with wider public transport, enabling them to engage effectively with Great British Railways.
Furthermore, as outlined in the Cabinet statement Rewiring the State, published in July, the Government consider that mayors who are directly accountable to the residents who elect them can provide the best governance for their communities. As a result, the suite of powers available to areas with mayors will be commensurately greater, recognising the role that they play as leaders in their regions. However, this is not to say that other levels of local government will be excluded from engagement with Great British Railways, and I take the point that it is important that no local authority is left out, as indeed the Prime Minister said a few days ago. The plan is for all tiers of local government to benefit from local GBR business units, and some existing authorities have collaborated well with the existing structure, including Devon, with several new stations, and, recently, Cornwall, with the Mid Cornwall Metro.
Our approach does not intend to exclude anyone from working with the railway, but we think it is sensible to use mayors as a focal point for powers, responsibilities and representation in their local areas. That said, I am happy to see if there is anything we can do outside the Bill to reassure foundation authorities that their views will be properly considered, and I will reflect on that further.
Lord Lansley (Con)
I thank the Minister for his response to my amendments. To avoid us further returning to this issue, I should say that there are other amendments to exactly the same purpose that I did not notice had not been grouped together, in Clauses 16 and 83 and elsewhere in the Bill, so I hope we will treat this as the one debate about that issue.
The route ahead, if I may say so to the Minister, is a very straightforward one: relevant local government bodies—for the purpose of information sharing, taking advice and co-ordinating with transport strategies—should be England wide, and therefore it should be all strategic authorities. If the Minister and the Government, understandably, want to go further and have a category of strategic authorities with mayors which have the ability to go further in terms of working with GBR and taking responsibilities, the route would be to put in something for that purpose in relation to established mayoral strategic authorities, which clearly have the financial basis on which to do that. Distinguishing between those two would make this work much more effectively.
Lord Hendy of Richmond Hill (Lab)
I am grateful to the noble Lord. I am particularly grateful for his suggestion that we debate this only once. I have listened carefully to what he has just said and I will reflect on it, as I said I would do on the rest of the subject. I am grateful to him for that, and indeed the Hansard record is useful in being able to cross-reference it further to this Committee session.
I turn to the proposals on Transport for London. Amendment 27 seeks to provide all mayoral authorities with the same powers as TfL. Of course, the Government support rail devolution where it can deliver better outcomes for passengers and local communities, but those arrangements should reflect the circumstances, capabilities and aspirations of individual areas rather than applying a single model everywhere. The TfL model has a distinct legislative and governance framework developed over many years, and it would not be appropriate to automatically confer all existing or future TfL powers on every mayoral combined authority. The other point worth noting is that the geography of London includes several complete railway services, unlike much of the geography of the rest of the combined authorities in England.
The Government have already published guidance on applications for rail devolution and, as I have already said, the Bill includes a route to devolved rail services for those seeking that in Clause 28. Therefore, should mayoral authorities want to pursue full devolution of certain services, as TfL has, they are welcome to use those established routes to seek it. Devolution arrangements should be considered on their merits, taking account of local circumstances and the outcome sought for passengers. A one-size-fits-all approach will not serve all local communities.
On Amendments 28 to 30, Clause 6 of the Bill requires GBR and TfL to co-operate on railway matters, including co-ordinating passenger services and sharing relevant information to help to integrate rail with the wider London network. As the directing mind for the railway, GBR will be responsible for those operational matters and how they will be discharged when collaborating with TfL. I do not believe that expanding the Secretary of State’s role further would reflect that clear division of responsibilities, but I can reassure the noble Lord that, via amendments that the Government brought in on Report in the Commons, the Secretary of State is still enabled to enter into arrangements with TfL to support the future devolution of rail services where that is needed. The Government believe that this approach is sufficient to support TfL to integrate and co-operate with the wider rail network.
On Amendment 159, I reassure the noble Lord that the Government are supportive of the success TfL has made of rail devolution, and existing devolved arrangements will continue. To that end, existing exemption orders in relation to TfL concession services do not have an expiry date. The Bill also contains safeguards governing access decisions, including duties on GBR, a requirement to have regard to the Mayor of London’s transport strategy, a requirement for GBR and TfL to co-operate in relation to all services, and an independent route of appeal to the ORR.
Likewise, Amendment 25 seeks to enable mayors to appeal access decisions if they affect services in their area. Clauses 83 to 86 already allow GBR to request advice from mayoral authorities about services in their area, require it to consult them if a decision will significantly affect their area and, if a decision will affect the local area, GBR will work with local partners weighing up trade-offs between local and national network priorities. This enables issues to be resolved through collaboration rather than requiring relevant local government bodies to challenge GBR through the access appeals regime. Despite this, all local authorities are able to appeal an access decision they are aggrieved by, under provisions already in the Bill.
On Amendments 297 to 301, Clause 83 already requires GBR to consult mayoral authorities where a relevant decision would significantly affect their local area, including the interests of the local economy or of people living in, working in or visiting the area. The amendments would therefore add little practical benefit beyond further bureaucracy, slowing down decision-making, while mayors would have to review hundreds of decisions, often irrelevant to them, before any progress can be made.
On Amendments 298 to 301, I reassure my noble friend that the Bill is already clear, through Clause 83, that GBR will have to consult mayoral authorities on its access and charging decisions where these relate to a GBR railway passenger service in the area and would significantly affect the local region.
Alongside these legislative commitments, it is the Government’s clear intention for GBR to work in partnership with mayoral authorities. I am determined that GBR will absolutely be a proactive partner of those authorities, maximising the benefits that the Bill can bring to local areas. As a result, I hope noble Lords are reassured that the Government share their ambitions on local devolution and I ask the noble Baroness to withdraw her amendment.
Lord Berkeley (Lab)
My Lords, before the Minister sits down, I am very grateful for his response to my amendments, but on the relationships between local authorities and central government, we already have an example in the south-west—and, I think, in south Wales—where the train operators and the local authorities have come together and developed a new wifi system so that you can get wifi on the trains, which is quite important these days. They installed it in one train and it worked beautifully, and many of us have tried it. They asked the Department for Transport whether they, as the regional authority, could take over the procurement of improved wifi on all the trains on the GWR network and have it done more quickly. This was refused by the Department for Transport, which said that only it is capable of doing a procurement exercise on something as important as wifi on trains. Now, I hope that is just a one-off—my noble friend is aware of it—and that in the new GBR set-up, there will be more flexibility as to who does what.
Lord Hendy of Richmond Hill (Lab)
In quick answer to my noble friend, the only reason it should be procured centrally is because improved wifi is needed on every railway service in Britain. Therefore, the department is determined to deliver it on all those services, and fragmenting the procurement would lead only to increased cost and probably significant delay elsewhere. I have absolutely no intention of getting in the way of wifi for the south-west, I would just like it to be delivered in other parts of Britain at the same time.
Lord Moylan (Con)
My Lords, I think that illustrates a point. The Minister talks of devolution, but everything is flowing one way, so I will come back to this point. It arose in relation to Scotland—and, I think, also Wales—on Tuesday. GBR will be obliged to consult with local authorities on matters of significance. Significant is the word. But GBR will decide what is significant. Amendments I tabled that would allow the local area, or, in the case of Scotland, Scottish Ministers, to decide what is significant for them were brushed aside on the grounds that it would be far too difficult, they would have to review hundreds of decisions and could not possibly do that.
Of course, GBR has to review hundreds of decisions to decide whether they are significant. In local authority terms, one picks out very quickly what the significant decisions are because one has the local knowledge of what will cause a terrible fuss, which GBR does not have. Does the Minister see that the Bill cannot survive claiming a devolution mandate on the basis of this mentality, which keeps coming back? The Minister wants to be a proactive partner but, given GBR, I find that a rather terrifying thing, because it suggests that the other partner will be managed the whole time by GBR; then, at the end of the process, it will think it had a successful partnership. It is the wrong mentality, and it has to change.
Lord Hendy of Richmond Hill (Lab)
I think the noble Lord is in a different place in his imagination of this. These proposals will generally originate with GBR. Its structure, which I described on the first day in Committee, will be organised locally and regionally and so it will know how those proposals are going to affect local communities.
There will be timetable changes, station improvements and infrastructure improvements. It is much easier for GBR to identify those in relation to the local and combined authorities that it deals with than it would be for them to sift through what, sadly in many cases, is railwayese in describing what is going on. I do not agree with the noble Lord. I believe this will work and that it will be a genuine partnership with those authorities.
Baroness Pidgeon (LD)
I was really pleased to hear the Minister say how devolution is of such importance to the Government. We have had an interesting debate. I am glad he has committed to take this away and see what can be done with the proposal in Amendment 22A and reflect on the point about strategic authorities; I think they are both really relevant and will strengthen the Bill. On that basis, I agree to withdraw Amendment 22A.
Lord Lansley
Member’s explanatory statement
This amendment, and the amendment in the name of Lord Lansley to Clause 7, page 5, line 36, would remove the exclusion of issues including access to infrastructure, the infrastructure capacity plan, the working timetable, the charging scheme and performance scheme from the requirement to consult the Scottish or Welsh Ministers insofar as they have delegated their functions to GBR.
Lord Lansley (Con)
My Lords, there are two sets of issues in this group. Mine is terribly simple and it is by way of a question to the Minister, just to be clear.
I do not understand why, in Clause 7, at the point the Secretary of State may give directions to Great British Railways about the activities in Scotland and Wales, in each case the requirement to obtain consent from Scottish and Welsh Ministers is disapplied if those directions relate to what is in Chapter 1 of Part 3, which is access, charging and timetable capacity.
Timetabling and so on seem, on the face of it, to be tricky things where if these are directions to GBR which impact in Scotland and Wales, they should certainly require the consent of the Scottish Ministers—for reasons that we touched on earlier, a different requirement may rest in relation to Welsh Ministers. But I am surprised to see that the implication of Clause 7 is that the Secretary of State can issue directions to GBR impacting on, for example, the timetable in Scotland but does not require the consent of Scottish Ministers. Amendments 32 and 33 in my name are to probe why that seems to be the case. I beg to move Amendment 32.
Lord Harper (Con)
My Lords, I will speak briefly to Amendments 35 and 36, which are in the names of my noble friends Lord Grayling and Lord Moylan. Respectively, they deal with amending Clause 7, on the power to give directions, and Clause 9, on the power to give guidance to GBR. They specifically refer to some extra duties that would fall on Ministers if they were giving specific directions around fares and the fare structure. They set out that if Ministers are giving directions or guidance
“about the level or structure of fares”
they would have to set out
“the assumptions, criteria and objectives used … so decisions can be assessed against passenger growth and affordability”.
I support both these amendments, for the following reasons.
One of the important decisions that Ministers have to take about the railways is to balance the cost of running them and how that cost is split between the fare payer—and of course not just that person who actually uses the railways but, when it comes to track access charges, the other users of the railway network—and the taxpayer. It is a very important decision, given that most people in the country either never use the railways or do not use them very often. A relatively small number of people use railways frequently, and it is important to get the balance of costs split correctly.
Ministers also have to make an important decision in their negotiations with the Treasury around the cost that falls on the department—the taxpayer subsidy piece. I think Ministers signed up to some quite challenging targets in the last spending review to reduce the taxpayer subsidy. There are two ways you can do that: either you cut services significantly or you have to grow passenger numbers. If Ministers are making directions or guidance about fares, it is important to understand which model they are using. What are their assumptions and what is the evidence base for the fare structure? What will that do to passenger numbers and, ultimately, to revenue? Then there is any knock-on impact on costs, what it effectively does to the GBR profit and loss account, and therefore the balance of costs that lands on fare payers versus the taxpayer. Having that level of transparency is helpful for the fare-paying public and for taxpayers.
It is also helpful for Ministers, because it would force a level of rigour in the modelling that is undertaken and, importantly, the assumptions that are made about how passenger numbers respond to fares. It will also enable us to have a grown-up conversation about how we grow passenger numbers, given some of the innovations and service changes that I suspect will be required, particularly in offering better services for leisure travellers, because that is where there is the potential for significant growth in passenger numbers and revenue and therefore for reducing the overall cost of the railway.
These two amendments have a very sensible underpinning. They are not just helpful for taxpayers and fare payers; in the end, they will be helpful for the department, because they would force, as I said, a level of rigour and transparency in its financial modelling. They should therefore also commend themselves to our friends in the Treasury, who I think like rigour and robustness in financial modelling, because this just gets it all above board. Everyone has to be clear about their assumptions.
The amendments would also allow us to challenge the assumptions and enable us to have a much better conversation publicly about how we can drive up the usage of our railways and the flexibilities that we will require to do so. That will then, perhaps, provoke some helpful conversations with the trade unions and about the flexibilities that will be necessary to making sure that we have a financially sustainable railway for the long term, which is, in effect, what we need to guarantee secure jobs on the railway. That is the only way in which we are going to do this in the long term, because I do not think that taxpayers are going to continue wanting to subsidise the railway to the level they do now for the foreseeable future, given that many of them do not use railways frequently. I commend these two amendments and look forward to the Minister’s response.
Baroness Pidgeon (LD)
My Lords, these amendments cover directions and guidance from the Secretary of State. They push for greater transparency around those, which is something that we really support. Information that has supported key decisions and directions should be placed in the public domain. It is really important that Great British Railways develops an open culture right from the start and that it is clear where and how decisions have been made and on the basis of what evidence. The amendments in the name of the noble Lord, Lord Grayling, focus in particular on any Secretary of State directions relating to the level and structure of fares, which are, I think, of great interest to everyone. Clarity on these points from the Minister would be helpful as we continue our scrutiny of the Bill.
Lord Moylan (Con)
My Lords, I shall speak to Amendment 37 in my name, which is a probing amendment. It would limit the power of the Scottish Ministers to issue directions to GBR to circumstances where a KPI has been missed or performance has not been up to snuff.
I do not advance that because I think it is an appropriate thing to put in the Bill; it is a question of probing when the Government think the powers should be used, because it is not clear. We are meant to have a single directing mind—GBR is meant to be the single directing mind—but, as I said on Tuesday, we have several other directing minds here, too. One of them is the Secretary of State, who can issue directions—after all, directions are exactly what a directing mind would be expected to produce—but, now, we also have the Scottish Ministers issuing directions, and it is not absolutely clear that they cannot overturn the directions of the Secretary of State. I want to know what the powers can be used for, how clashes and contradictions can be avoided, and how all this is coherent with the Minister’s claim that he is creating a single directing mind in the shape of Great British Railways.
I wish to comment briefly on the other amendments in this group. My noble friend Lord Grayling has tabled Amendments 34 to 36, to which I have added my name. It is an important constitutional principle that directions issued by the Secretary of State are not only published but laid before Parliament. The Minister will say, “You can’t possibly expect MPs to read these things. They haven’t got time. They might be full of railwayese. What is the possible advantage of putting them in front of MPs?”, but I think that MPs and Peers would value having these important directions put before them so that the Secretary of State can be held accountable for his or her actions in the management of the railways.
My noble friend Lord Lansley’s Amendments 32 and 33 are also entirely reasonable. Where relevant functions have been delegated and the Secretary of State proposes to give GBR directions affecting infrastructure, capacity, timetables, charging or performance in Scotland or Wales, surely it is right that the Scottish or Welsh Ministers are consulted.
Lord Hendy of Richmond Hill (Lab)
My Lords, I am grateful to noble Lords for their contributions to this group.
On Amendments 32 and 33, tabled by the noble Lord, Lord Lansley, access to railway infrastructure is a reserved matter. It is important that access and timetabling decisions make sense across the entire rail network; therefore, there must be one central decision-maker, to avoid fragmented and disparate decision-making, which increases delays, cancellations and disruption. However, GBR must consult Scottish and Welsh Ministers before issuing, revising or replacing its access and use policy. It must consult them on other decisions if those decisions may affect their interests, and must take into account their transport plans when making access decisions. There are therefore already adequate safeguards for devolved Governments in relation to the access regime.
Lord Moylan (Con)
On my Amendment 37, if the Minister insists on responding solely in the literal sense to explicitly probing amendments—seeking in this case to work out how a conflict in directions between Scottish Ministers and the Secretary of State, for example, might be addressed—all he does is encourage further amendments to be tabled to the Bill to bring the subject back so that it can be debated. One has to keep finding wording that will make that happen. I genuinely would like to know how he sees these multiple direct laws, producing directions, operating together. Do they collaborate, what happens in the case of contradictions, and so forth? These are questions to which Parliament is entitled to an answer.
Lord Hendy of Richmond Hill (Lab)
I believe I did answer the noble Lord: the memoranda of understanding between Scottish Ministers and this Government, and between Welsh Ministers and this Government, set out the processes by which these things will be co-ordinated. Were there to be any real difficulty in the circumstances he is describing, we would not have been able to get as far as we did in drafting the MoUs, which we have done, and in the agreement of Scottish and Welsh Ministers to the provisions of it.
Lord Lansley (Con)
We are grateful to the Minister for his explanations—for my part, on Amendments 32 and 33. The Minister explained why the Bill says that, for reason of reserve powers, the consent of Scottish or Welsh Ministers is not required. This is an opportunity to make it clear that, if we were in the exceptional situation of the Secretary of State issuing directions that impacted in Scotland or Wales, it might be reasonable that the Secretary of State would consult Scottish or Welsh Ministers. I did not hear the Minister say that such a consultation would not take place so, on that basis, I am happy to withdraw Amendment 32.
Lord Evans of Guisborough
Member’s explanatory statement
This amendment would require the Secretary of State to obtain a formal recommendation from the Office of Rail and Road in relation to safety and standards before granting Great British Railways’ licence, and to consult the Passengers’ Council.
Lord Evans of Guisborough (Con)
My Lords, in moving Amendment 38 I will speak briefly to my Amendments 39, 41, 42 and 44 in this group. This group concerns Schedule 1, on the granting of the licence to Great British Railways, and the possible granting of licences to persons other than Great British Railways, to operate railway assets.
The purpose of my amendments is to strengthen the roles of the Office of Rail and Road and the Passengers’ Council, which are mentioned in this list of procedures but are regarded largely as consultees rather than having any larger role. They are supposed to be, and have been sold to us by the Government as, bodies which have significant powers to represent passengers and to work to assist with the regulation of the licence. I am afraid that the legislation amounts to an invitation to consult rather than anything stronger. Amendment 38 seeks to ensure that the Secretary of State obtains a formal recommendation rather than just a consultation from the Office of Rail and Road, in relation particularly to safety and standards, before granting Great British Railways’ licence. It would also ensure that there is consultation with the Passengers’ Council as part of that process.
I will speak briefly to the other amendments. Amendment 39 addresses the same part of the process and would require an agreement rather than a consultation. Again, “consultation” is a rather weak term in legal circles; “agreement” would require much greater input from the ORR and the Passengers’ Council. It would require the Minister to listen to and work with them to a greater extent than just with a consultation.
Amendments 41, 42 and 44 concern the
“Grant of licence to persons other than Great British Railways”.
They, too, seek to replace the consultation with a process of agreement and to strengthen input from the Passengers’ Council. They concern mainly new Section 8(4) of the 1993 Act, to be introduced by paragraph 3 of Schedule 1 to the Bill, and the two earlier amendments are consequential on that change in subsection (4).
I urge the Committee to support these amendments and the other amendments in the names of my noble friends. I beg to move.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
My Lords, I should advise the Committee that if this amendment is agreed to, I will be unable to call Amendments 39 or 40 for reasons of pre-emption.
Lord Lansley (Con)
My Lords, I have two amendments in this group. The purpose of Amendments 43 and 45 is to explore the circumstances in which the Secretary of State or the Office of Rail and Road grants a licence to a person other than Great British Railways to operate railway assets in Scotland or Wales. As the Bill is structured, under those circumstances there would be a requirement to undertake consultation with the Passengers’ Council if the licence is a passenger licence or a station licence. There is no other requirement for consultation.
Let us think of a practical example. I know that licensing is not about operating the railway; it gives one the licence to operate but it does not bestow any ownership over these things. Core Valley Lines in south Wales is a significant set of 57 stations. It is not owned by Network Rail or operated by Great British Railways. Presumably, it is therefore the subject of a licence. If such a licence were to be issued, or changed, in Wales, it seems to me inherent that one would want the granting of that licence to be subject to a consultation requirement with Welsh Ministers. At the moment, there is nothing in the legislation that would require that to happen. Amendment 45 would introduce such a requirement for consultation before those assets in Scotland or Wales were the subject of the granting of a licence to someone other than GBR.
Lord Harper (Con)
My Lords, I shall speak briefly to Amendment 46 in the names of my noble friends Lord Grayling and Lord Moylan, which I think is a probing amendment. It would remove proposed new Section 8(6) in Schedule 1, which says:
“The Office of Rail and Road may not grant a licence … unless the Secretary of State consents to the grant, or … the licence is granted in accordance with a general authority”.
I want to probe the circumstances in which the Minister envisages the Secretary of State to have, in effect, a block. My preference would be that the Office of Rail and Road can issue those licences. The new section envisages a general authority having been given by the Secretary of State to the Office of Rail and Road to issue those licences. The only circumstance in which the Secretary of State is required to grant something is if the ORR is trying to do something outside that general authority. Given that it is a general authority, that rather suggests it will give the Office of Rail and Road some broad powers to issue licences, but what are the circumstances in which the Minister envisages that the general authority that the Office of Rail and Road has would not empower it to issue a licence, and therefore when is the Secretary of State’s veto going to be effective?
The whole point, I think, is that we are trying to have GBR operating, as I think the Minister said in his answer to the previous group, without excessive micromanagement by Ministers. Again, if the Office of Rail and Road has been given a general authority to grant operating licences, it would seem to me not helpful if it had to be second-guessed a lot by the Secretary of State. What are the circumstances when the general authority would not run and when the Secretary of State would have to, in effect, give permission? If it turns out that the general authority is very broad and there are not really any circumstances, that power may be otiose and therefore really should not be in the Bill.
I am just trying to understand the limits on that general authority that is given to the Office of Rail and Road, and I would be grateful if the Minister could set that out when he responds to this group.
Baroness Pidgeon (LD)
My Lords, the amendments in this group are about strengthening the requirements for Great British Railways before it is able to grant a licence and to strengthen the Passengers’ Council in areas such as safety and standards. They would also strengthen the role of the Office of Rail and Road, which is something I believe is on this Government’s agenda.
The concerns of the noble Lord, Lord Evans, about consultation-only powers, rather than real teeth, for the Passengers’ Council, and the query from the noble Lord, Lord Lansley, about ensuring that Scottish and Welsh Ministers are consulted on a licence, are both very relevant, and I look forward to the Minister’s clarification on these issues.
Lord Reay (Con)
My Lords, I thank my noble friends Lord Evans of Guisborough, Lord Lansley and Lord Grayling for their amendments in this group. I will address Amendments 41, 42 and 44 first.
The Government have repeatedly emphasised the importance of independent regulation under the new system. They tell us that the ORR will remain an independent and expert regulator, while describing the new Passengers’ Council as a powerful new voice for passengers. These amendments ask how much power these bodies will actually have. Under the Bill, the Secretary of State may modify GBR’s licence after consulting the ORR and, where the changes concern its functions, the Passengers’ Council.
However, consultation is not agreement. The licence is fundamental to how GBR operates and to the conditions against which the ORR will ultimately regulate and enforce its performance. If the ORR is to be the robust and independent regulator that the Government say it will be, why can the Secretary of State alter that licence without its agreement?
The same question applies to the Passengers’ Council. The Government describe it as a powerful new voice, but the Bill requires only consultation. There is no express requirement in this provision for the Secretary of State to have regard to the council’s consultation response. The Secretary of State must subsequently consider representations or objections made during the formal notice period, but that is not the same as giving the passenger watchdog a meaningful role in agreeing changes that may directly affect passenger interests.
I turn to Amendment 46, tabled by my noble friend Lord Grayling. Under the Bill, the ORR may grant a licence to a non-GBR operator only if the Secretary of State consents or if the licence falls within a general authority previously given by the Secretary of State. As my noble friend Lord Harper asks, why is that ministerial veto necessary? If the ORR—the independent regulator that the Government repeatedly tell us will remain robust and expert—has considered an application and concluded that a non-GBR operator satisfies the relevant requirements, why should the Secretary of State have the final trump card?
If the Government genuinely want an independent regulator and less day-to-day political interference in the operation of the railway, surely licensing decisions of this kind should rest with the regulator. I would therefore be grateful if the Minister could explain in what circumstances the Government envisage the Secretary of State refusing consent to a licence that the ORR considers should be granted and why that power remains necessary.
Amendment 45, tabled by my noble friend Lord Lansley, seems entirely reasonable. Where a GBR licence concerns railway assets located in Scotland or Wales, I see no good reason why the relevant Scottish or Welsh Ministers should not be consulted.
Lord Hendy of Richmond Hill (Lab)
My Lords, I am grateful to hear from noble Lords on this group, and it is a special pleasure to hear from the noble Lord, Lord Reay.
Amendments 38 and 39 would undermine one of the fundamental principles that the Bill seeks to establish. The Secretary of State will set the overall strategic direction for GBR, and the Bill provides her with the sole ability to issue GBR’s licence. This reflects that it is the Secretary of State, not the ORR or the passenger watchdog, who is ultimately accountable for GBR both to Parliament and to the wider public. This aligns with the wider programme of regulatory reform that this Government are undertaking, where Ministers set the strategic direction and regulators are empowered to enforce against that. Regulators should not be making key strategic or political decisions for fundamentally important sectors.
However, regardless of who issues the licence, the ORR will enforce GBR’s compliance with it exactly as it does today. It has strong enforcement powers to ensure that GBR does not contravene the terms of its licence, including mandatory, legally binding directions requiring GBR to change its behaviour. It would not be appropriate to provide the ORR or the passenger watchdog with the power to veto the licence. The Secretary of State will, however, consult both those bodies and consider their views before issuing the licence.
On Amendment 38 specifically, I reassure noble Lords that safety remains fundamental to the operation of our railways and that the Bill does not weaken or alter the existing railway safety regime, nor the ORR’s role within it. No licence will be issued that is not fully compliant with safety regulations and safety law. Furthermore, we expect that GBR will have a licence condition to support the continuity of the current industry safety and standards framework to preserve our world-leading culture of rail safety. The Secretary of State will consult the ORR on the licence precisely to ensure that these kinds of conditions are fit for purpose.
I turn to Amendments 41 to 46. Currently, the Secretary of State is the ultimate licensing authority for the railways under the Railways Act 1993, and the current Bill does not change that. As it does now, the ORR will continue to issue all non-GBR licences under the general authority given to it by the Secretary of State. Not only would removing the Secretary of State from the process or requiring the ORR to consent undermine continuity and stability for the industry but it would be superfluous in practice, as the ORR already issues these licences on behalf of the Secretary of State.
Let me also clarify that railway licensing is, and will remain, a reserved matter. Scottish and Welsh Ministers are not licensing authorities under the current system, and the Bill will not change this. However, that does not mean that Scottish and Welsh Ministers are prevented from making their views known. The ORR is required under the Bill to provide notice prior to any licence being issued and to consider any representations, including any by Scottish and Welsh Ministers. We therefore do not consider it necessary to create an additional consultation requirement specifically for Scottish and Welsh Ministers.
I also note that the Government have spent long and productive hours discussing the provisions of the Bill with Scottish and Welsh Ministers and, in both cases, they are content with the licensing provisions as drafted. In fact, Scotland has already published its legislative consent Motion. I therefore ask noble Lords not to press their amendments.
Lord Lansley (Con)
Can I ask the Minister why, if it is not necessary to create a statutory consultation requirement, it is necessary to have a consultation requirement in relation to the Passengers’ Council? Can it not respond to the consultation on a licence in the same way as Scottish or Welsh Ministers could?
Lord Hendy of Richmond Hill (Lab)
I am sure it could, but it is desirable to mention the Passengers’ Council, since we are setting it up and it is an important body. The distinction I am seeking to draw is leaving the Passengers’ Council as a consultee, rather than requiring its permission.
Lord Harper (Con)
Can I press the Minister on the question I asked? As he said, the Secretary of State is the holder of the licensing power, but the Office of Rail and Road is given a general authority to issue licences for non-GBR operators, but I still do not understand what the purpose is, in new Section 8(6)(a) inserted by Schedule 1, of the requirement for the Secretary of State to consent to the grant. In what circumstances would the Office of Rail and Road be operating outside its general authority? It would be helpful if the Minister could give an example of where that Secretary of State veto would kick in, because I do not quite understand the point of it.
Lord Hendy of Richmond Hill (Lab)
I think we are leaving things as they are, but if the noble Lord would like a specific example, I will have to write to him because I do not have such an example immediately in my mind.
Lord Hendy of Richmond Hill (Lab)
The broad principle is that we are leaving licensing in the position it is in at the moment.
Lord Evans of Guisborough (Con)
My Lords, I thank noble Lords for their contributions to this debate, which have been very helpful and largely supportive across parties. I am grateful to the Minister for his response. He has dealt with questions from some of my noble friends to their satisfaction. I am not sure he has dealt with the issue which I originally raised to my satisfaction, but for now I am happy to withdraw Amendment 38.
Baroness Pidgeon
Member's explanatory statement
This amendment, and others in the name of Baroness Pidgeon, seek to include the London Transport Users’ Committee in consultation requirements.
Baroness Pidgeon (LD)
My Lords, I am delighted to move Amendment 40 and speak to the other amendments in this group, which are about London TravelWatch. For those of your Lordships who do not know—although, as we have joked before, I feel this Room is a reunion of those of us who were involved in London government—London TravelWatch, officially known as the London Transport Users’ Committee, is the independent transport watchdog set up under statute speaking up for the travelling public in and around London.
It was established in its current form under the Greater London Authority Act 1999, although its roots go back to the Transport Act 1947 and beyond. Its remit covers national rail issues within the London railway area. Those boundaries are defined under the Railways Act 2005 and go beyond what most of us think of as London. It also covers transport services under the responsibility of Transport for London, such as buses and the Tube, and Eurostar services, which is a service not just for those in London.
Lord Moylan (Con)
My Lords, when I was deputy chairman of Transport for London, I found London TravelWatch a rather annoying body. I suspect that when the Minister was the transport commissioner he found it even more annoying than I did, because of course it was there to complain as well as to make suggestions for improvements, so I can understand that there may well be a level of resistance to the suggestion from the noble Baroness, Lady Pidgeon. However, I have added my name to her amendments because, objectively speaking, she is absolutely right: this is a very important statutory body. It should be treated on a level footing with other transport users’ committees. I can see no possible grounds for objection that the Minister may have. I suspect this will be one of the concessions he makes on Report and, if he does not, it will be inserted in the Bill whether he likes it or not. I look forward to hearing him say that the noble Baroness is spot on about this and that he willing be able to accept, if not her amendments as drafted today, at least amendments in lieu to the same effect that he might produce in the near future.
Lord Hendy of Richmond Hill (Lab)
I thank the noble Baroness, Lady Pidgeon, for these amendments. I should directly contradict the noble Lord, Lord Moylan: as the commissioner of transport for Transport for London, I found London TravelWatch a very constructive body. I enjoyed dealing with it; there were other people we dealt with who were far more difficult.
Lord Hendy of Richmond Hill (Lab)
Some of the board.
As the noble Baroness says, London TravelWatch plays a vital role as the statutory watchdog for London, championing the interests of people who travel across all modes of the city’s integrated transport network. That is precisely why the Bill will strengthen its rail powers to ensure there is consistent passenger advocacy across Great Britain.
However, the passenger watchdog will have a new role in the reformed railways which will be different to the role of London TravelWatch. It will go beyond being solely a watchdog and passenger champion. It will have a central role in holding rail operators, including GBR, to account by setting consumer standards for the industry and monitoring operator compliance with them. It would not be appropriate to have two different bodies setting standards, which is why the watchdog will work closely with London TravelWatch to ensure that standards applied across all operators reflect its expertise. That is why London TravelWatch is treated differently in the Bill and why GBR, the Secretary of State and the Office of Rail and Road must consult only the watchdog on certain matters such as the licence, the long-term rail strategy and GBR’s business plan. London TravelWatch is not expected, for example, to have any role on the licence.
That said, I can reassure the noble Baroness that I absolutely agree that London TravelWatch must continue to have a voice on matters that impact the London transport network, and indeed the wider scope of London TravelWatch that she referred to. I understand that Transport Focus, the future passenger watchdog and London TravelWatch will update their existing collaboration agreement to reflect changes in roles. I expect this will include additional expectations around consultation and engagement where matters will affect London and the other services which London TravelWatch oversees. For these reasons, I urge her now to withdraw her amendment, though I am happy to discuss this with her further after Committee.
Baroness Pidgeon (LD)
I thank the Committee for this debate; I would say “short debate”, but I spoke quite extensively and maybe comprehensively on this matter. I understand what the Minister is saying, but it would be helpful, even if he has to define it differently, to put London TravelWatch, where appropriate, on the same footing as the Passengers’ Council for certain areas of consultation. A collaboration agreement between two organisations would be between them, but I would like to see something on the statute that makes it clear in which areas we would expect London TravelWatch to have a role. I would be happy to meet the Minister outside to see whether the Government can come up with some wording that would deliver that and ensure London’s voice is not lost in this. On that basis, I am happy at this moment to withdraw my amendment.
Lord Bradshaw
“Protection of rail funding settlements(1) This section applies where the Secretary of State proposes to make a material change affecting an agreed multi-year funding settlement for the railway (“the settlement”), whether by—(a) reducing the funding provided under the settlement,(b) altering the outputs, or the scope of works, specified under the settlement, or(c) making any other decision, whether or not framed as a change to the settlement, which materially affects the cost or deliverability of the outputs agreed under it.(2) Where subsection (1) applies, the Secretary of State must refer the proposed change to the Office of Rail and Road before it takes effect.(3) Where the proposed change would reduce funding available under the settlement, Great British Railways must set out how the reduction would be accommodated, including which works would be deferred, which activities reduced, and in what sequence.(4) The Office of Rail and Road must assess and publish a report on the proposed change. The report must include— (a) an assessment of the effect on—(i) delivery of the outputs agreed under the settlement,(ii) the supply chain and the skills required to deliver the programme, and(iii) whole-life cost and asset condition,(b) any statement provided by Great British Railways under subsection (3).(5) Where Great British Railways has given the Secretary of State advice on the proposed change, that advice must be published alongside the report under subsection (4).(6) A proposed change to which subsection (1) applies may not take effect until the report under subsection (4) has been published.(7) The function of the Office of Rail and Road under this section is limited to assessment and publication; it does not include determining where reductions should fall, directing the activities of Great British Railways, or the structure or content of the timetable.(8) Nothing in this section prevents the Secretary of State from making a change to a settlement; this section requires only that the change be assessed and published before it takes effect.”Member’s explanatory statement
This amendment would require the Secretary of State to refer any material change to an agreed rail funding settlement to the Office of Rail and Road for independent assessment, and to publish that assessment, together with any advice given by Great British Railways, before the change takes effect.
Lord Bradshaw (LD)
The amendment that I am moving is almost self-explanatory. I think that most people in the Room will have witnessed arbitrary cuts in expenditure on the railway. These cuts probably emanate from the Treasury but come through the Department for Transport, which says that it must cut 10% of rail services or cut certain staff—or maybe have a recruitment ban. I am seeking to ameliorate that process somewhat so that if a Government—not necessarily the Minister’s—propose to make an arbitrary cut in the money available to the railway, whether that is the money available now or at some time in future, instead of leaving the railway to make the best of a bad job, a proposal can be made to the regulator. It would give the regulator a real job.
The regulator would have already approved the business plan of the railway at some time previously. If an arbitrary cut was made in future, that cut should be referred to the rail regulator and, as it were, deferred for three months, during which time the regulator would have the opportunity, together with the industry, to come forward with better solutions than have been proposed under the arbitrary cuts. For example, it could seek to postpone some work or alter the scope of the work. Instead of having a crude ban on recruitment, it could ensure that it applies only to staff who are not absolutely essential to running the railway. In this amendment, I seek to make a change to the way in which the Treasury and the Department for Transport handle their relations with the industry.
That would be a good thing that would give the rail and road regulator a chance to propose an alternative. As its remit also includes roads, it might also consider the terrible amount of money that has been wasted on smart motorways. It might propose that some form of taxation is levied on heavy goods vehicles, which I am sure most people would agree do enormous damage to our roads. I beg to move.
Lord Lansley (Con)
My Lords, I have two amendments in this group: Amendments 65 and 73. Rather than the broader issues of funding, mine are much more nitty-gritty questions about the transparency of the business plan and how the funding processes for Great British Railways are to work.
Amendment 65 is to Schedule 2, which is that part of the Bill where Great British Railways shows us in its business plan how its money is received and allocated towards activities. If I remember correctly, we are in that bit where it has to set out various things. We are at line 27 on page 71:
“The plan must set out … the activities Great British Railways proposes … the costs of carrying on those activities, and how Great British Railways proposes to meet those costs”.
Strictly speaking, all the things that I am asking for in Amendment 65 might be comprised within that.
This is an opportunity for us to be clear about what Great British Railways should do. In a separate group I will come to another issue related to the relationship with local government bodies. In this particular instance, there would be important transparency in Great British Railways being required, when setting out its business plan, to show what contributions are received by GBR itself from GBR companies, presumably by way of profits or revenue remitted to GBR for this purpose, and vice versa: how much is being paid out through GBR companies and how much is being received. Amendment 65 is for that purpose: where the activity is carried out by a GBR company, the contributions received from or provided to GBR in relation to those activities. I hope that is a straightforward transparency issue when the business plan is being presented. A good plan would do that anyway; it is just a case of trying to be clear about that now.
This affords me the opportunity to say something to my noble friend Lord Moylan. We discussed on Tuesday the question of GBR companies, and he returned to this issue and chastised me, saying that I was inaccurate. I do not think I was as inaccurate as he might imagine.
Lord Moylan (Con)
I would never dream of doing that. It is inconceivable that I should do that. I drew to my noble friend’s attention an email that I had received that said that he had made a mistake and that the Minister had also made a mistake. I gave no opinion myself on that. It was very well argued, and I shared it with the Minister and the noble Lord. In writing to the noble Lord—I hope he has received that by now—I explicitly said that I did not know whether it was right or wrong, but I wondered whether he wished to make a comment. Of course, the noble Lord, Lord Lansley, may wish to make a comment at any time he chooses, but not a comment, I hope, that is intended to be a rebuttal of any chastisement, or even a mild criticism, suggested by me.
Lord Lansley (Con)
I thank my noble friend for that correction. He has shared the email with me. I think it is worth putting on the record the point, made in that email, that it is important to distinguish between joint ventures on the one hand and corporate activities of companies on the other. However, the point of the debate on Tuesday was that I was seeking to establish under the legislation that GBR companies do not have to be wholly owned. Hansard will show that the noble Baroness, Lady Jones of Moulsecoomb, was seeking to establish that GBR companies are required to be wholly owned. That was the simple debate.
As I understand it, Clause 99 of the Bill makes it clear that GBR companies are a subsidiary of GBR, and a subsidiary under the Companies Act does not require to be wholly owned. If the Government had wanted GBR companies to be wholly-owned subsidiaries, they would have said so. So, as far as I am concerned, it is a subsidiary and, as we know, under the Companies Act, a subsidiary is a matter of control, not of complete ownership. As far as I am concerned, I got what I wanted out of that debate, which was my assurance that GBR companies are not required to be wholly owned.
Lord Moylan (Con)
My Lords, we are now redebating what was debated the other day. However, since there was an element of confusion, the noble Lord has accurately characterised the difference in position between himself and the noble Baroness, Lady Jones of Moulsecoomb, but it was in the context of an important debate about whether GBR would be able to carry out partnership—I use the word loosely—arrangements with private sector developers for the development of land in which GBR had a stake, with a view to achieving things like more housing or whatever it might be. Of course a subsidiary does not have to be wholly owned, since it is a question of control, so there can easily come a point where a joint venture company might not be controlled by GBR, and the question then is whether those arrangements would still apply.
The fundamental issue in the debate as I saw it—I entirely understand what the noble Lord is saying—is whether the structure proposed by the Government in the Bill inhibits what we would all agree are desirable developments that could take place using GBR assets working with the private sector. I heard the Minister give assurance on that, and of course I accept that, but I was merely advancing this to him because the suggestion was that confusion had arisen about joint ventures, subsidiaries and wholly-owned control in the course of debate, and that the Minister had fallen into that confusion, along with others. Therefore, I was giving him the opportunity to say whether that was in fact the case, although I do not expect him to do so today because he has only just had the email.
Lord Lansley (Con)
I think that was an intervention. I can only speak for myself, but I do not think I am confused now. The Bill does not inhibit this from happening in future and that is a satisfactory position for us to have reached. That is relevant to this debate in that my Amendment 65 is about the relationship between GBR and its companies, and financial transactions—the resources provided to or the resources received from GBR companies—ought to be explicit in the business plan.
I turn to Amendment 73. Now we really are in a happy position. It is many years since I was responsible for the public expenditure of a government department. I do not mean as Secretary of State; I mean as the official responsible. Knowing what powers one is using in relation to spending money is important. Amendment 73 is a probing amendment but I have used the structure of saying that the same activity should not be funded out of both the powers in the Bill, where financial assistance can be provided by the Secretary of State to GBR, and Section 6 of the Railways Act 2005, which noble Lords who know these things better than I do will remember is a broad-ranging power to provide financial assistance to GBR. I want to establish at this point—we might return to it at a later stage to see whether it is a satisfactory position—which GBR activities will be in receipt of financial assistance from the Government under the Section 6 power that exists now under the 2005 Act, or the financial assistance to be provided under this legislation. We need to avoid the confusion of two different powers providing financial assistance to the same activity.
Lord Harper (Con)
My Lords, I will speak to Amendment 54 in the name of the noble Lord, Lord Bradshaw, and Amendment 55 in the name of my noble friend Lord Moylan. Obviously, I have not heard my noble friend’s exposition of the purpose of his amendment, which I look forward to listening to shortly, but I understand why these amendments have been tabled. I think that they are both intended to make it more difficult to change funding for railways, as opposed to other areas of public expenditure, but I am not sure that that is entirely a good thing. I completely understand why that would be a good thing if you were looking at it through the railway end of the telescope, but if you look at it from the point of view of a taxpayer or a citizen, I am not sure that tying the hands of Ministers in that way is entirely helpful.
I will take the two amendments in turn. In terms of background, it is worth saying that, if I have understood the Bill correctly, in part 1 of Schedule 2,
“Funding by the Secretary of State”,
the structure for setting the budgets in the first place is broadly the position now. The Government set out a plan for funding over a multiyear period, they notify various people of that funding and the funding is set out, as are the things that are expected to be delivered by the funding, so that it is all transparent for us to see what is going on. As far as I understand it, the Bill as drafted requires the Secretary of State purely to notify the ORR if they propose to vary the financial assistance—the Secretary of State has to tell the ORR in various circumstances. It is very clear that only notification is required; there is no requirement for the Minister to await the ORR doing anything before the Minister is able to proceed with the funding change. I am content with that set of circumstances, if I have understood them correctly.
My noble friend Lord Moylan’s amendment, which I understand is a probing amendment to test this, would make it very difficult for the Secretary of State to change that funding settlement, except in two cases: if the things they required GBR to do had changed and therefore the funding was different; or there was an emergency in the country at the level of what is set out in the Civil Contingencies Act. We do not have those very often, but there are lots of circumstances in which the Government have to make changes to public expenditure, for all sorts of reasons, without the country being in an emergency situation at the level defined in the Civil Contingencies Act. It is the proper role of Ministers to have that flexibility and the ability to set budgets, make funding decisions and even to choose within the departmental allocation that they have. Even if the Treasury is not changing anything in terms of the money that the department has, it is the job of Ministers to decide how that money is allocated between the different parts of the department’s expenditure, whether it is a—
Lord Bradshaw (LD)
May I just say that three months’ notice is not a long time and any arbitrary cut cannot possibly take place in three months because timetables, trains and rosters have to be altered? Three months is a very short amount of time to give the rail regulator to make decisions.
I am not talking about giving the rail regulator lots of extra powers to alter the timetable. I am quite satisfied with where we have got to on that. I am saying that, if any future Government wish to reduce the money, they should have the grace to have the matter properly considered by people who are professionally competent. That does not always include Ministers.
Lord Harper (Con)
I am grateful for the noble Lord’s intervention. I had not yet started dealing with his amendment in detail—I was dealing with my noble friend Lord Moylan’s—but I listened carefully to what he said and will deal with it when I get to his amendment.
I am not sure that I agree with my noble friend Lord Moylan, although I understand that his amendment is probing. I would not want to tie the hands of Ministers in the way that he set out. I understand that it is of course desirable not to change funding for any public service once it has been set—one does not do that if one can avoid it—but there are occasions when that is necessary. If we are looking for the appropriate people to make those decisions, they should be Ministers.
The problem with ring-fencing certain parts of expenditure to make it more difficult to make changes is that, in effect, you are deciding that any changes to public expenditure have to fall in other areas. Those decisions should properly be taken by Ministers at the time that those changes are made, because they have to balance the consequences of making those expenditure changes and the changes that they will necessitate to public services, and they have to make the case about why they are doing that. Those decisions are properly for Ministers, rather than expenditure being arbitrarily ring-fenced in legislation.
The noble Lord, Lord Bradshaw, tabled Amendment 54. I am concerned about this amendment, but I would be very happy if, when I finish my remarks, he comes back to say that I have misunderstood it. He referred to arbitrary changes. “Arbitrary” is a word that people usually use when they do not agree with the changes proposed by somebody else. Ministers may well bring forward changes, and they may be because the overall amount of money available to the Government has had to be changed for some reason or because of some event. It may be that Ministers have decided that expenditure needs to be spent in another area or that the Transport Secretary has decided that there is a higher priority elsewhere. Those are perfectly reasonable decisions that will have to be explained to Parliament, and Ministers will be subject to questioning by Members of both Houses in making those decisions, which are properly for Ministers.
I have a slight problem with this because it involves the Office of Rail and Road. I listened very carefully to the noble Lord, Lord Bradshaw, when he was setting it out and he, I think, suggested that that the Office of Rail and Road could come back with alternative propositions. It could come back by suggesting funding decisions balanced between rail and road, starting from his proposition that rail funding is better than road funding. I think the noble Lord was also talking about decisions on taxation or heavy goods vehicles. I humbly suggest that all those decisions are properly for Ministers.
I accept that the noble Lord was not suggesting that those decisions should be taken by the Office of Rail and Road, but he was suggesting that that office should take some time, produce a report and then make suggestions to Ministers. However, it is not the role of a regulator to get involved in making qualitative opinions about where public money should be spent. Those are not decisions for regulators; they are properly decisions for Ministers, who are accountable to Parliament. Unless I have misunderstood the noble Lord’s amendment, I do not think that getting regulators to come back, second-guess the decisions of Ministers and make alternative public spending propositions is good for the conduct of public policy.
The Bill is currently structured such that Ministers have to notify the ORR if they are going to make funding decisions, so that there are right and proper levels of transparency and people know what is going on. There is quite an important principle to maintain, which is that there are certain things that regulators should do and certain decisions that are properly for Ministers. I do not like to criticise the noble Lord, who I know takes a great interest in this area of policy, but I cannot support his amendment because it has those effects, which I think would be deleterious to public policy-making.
In the spirit of balance, the noble Lord will have noticed that I was also not entirely enthusiastic about the amendment tabled by my noble friend Lord Moylan, which I know is a probing amendment. So I think that I have been quite even-handed in my non-approval of both amendments, which have a similar fault: tying the hands of Ministers in making public spending prioritisation decisions.
Baroness Pidgeon (LD)
My Lords, what an absolute pleasure it is to hear from my railway expert noble friend Lord Bradshaw. It is such a delight that he has been able to join us in Committee in person today and to contribute to our debate, particularly after he had a significant birthday yesterday.
Funding certainty is absolutely crucial for the railway going forward. Being able to plan investment and work properly, and deliver it in a timely manner, is essential. My noble friend Lord Bradshaw’s amendments try to show the seriousness of changing mid-programme railway investment and putting in additional steps for any material change to an agreed funding settlement by involving the ORR for an independent assessment, which should be published. This would ensure transparency and expert assessment if funding for the railway is changed, particularly mid-year.
Amendment 65 in the name of the noble Lord, Lord Lansley, would require more transparency. That is welcome, as was the contribution from the noble Lord, Lord Harper. In fact, it is notable that he has spoken on every group apart from the one with solely my amendments on London TravelWatch. I will not take that personally, but I say, “Once a Secretary of State, always a Secretary of State”. I look forward to the Minister’s response.
Lord Moylan (Con)
My Lords, I have a number of amendments in this group: Amendments 55, 56, 70, 78 and 86. I start with Amendment 78. Paragraph 15 of Schedule 2 states:
“Financial assistance given to Great British Railways or a GBR company”
primarily to enable it to carry out its infrastructure functions under Clause 3(1)(a)—this is one of the general functions that we discussed on Tuesday—is not to be treated as
“a subsidy for the purposes of the Subsidy Control Act 2022”.
This is a probing amendment to find out the justification for that. I suspect that the justification is that it is not treated as a subsidy currently and, therefore, the Bill simply carries forward the existing situation. I wonder whether that is appropriate.
The Subsidy Control Act 2022 exists for a purpose and requires that public authorities should consider whether subsidies are proportionate and necessary, whether they distort competition or investment, and whether their benefits outweigh their adverse effects. I wonder why the management, renewal and operation of infrastructure on railways should be specifically exempt from those requirements. This exemption does not apply to the other general functions listed in Clause 3, but it applies to this one. I do not want to be hypercritical, because I know that these things are very difficult and there are often excuses, but why should this condition not apply to these functions—particularly when there is a general lack of confidence in these functions being carried out with great efficiency at the moment and when they always seem to be very expensive? Is there a reason other than simple inertia? I do not think that inertia is enough.
The Act also requires safeguards on transparency, the scrutiny of particularly significant subsidies by the Competition and Markets Authority, and ultimately the ability to challenge subsidies decisions via the Competition Appeal Tribunal. Noble Lords may say, “All of this is going to happen. It’ll be GBR doing stuff for GBR rail, so how does competition come into this?” But, as noble Lords know, a great deal of maintenance activity on the track is carried out by private companies contracted for that purpose; that may upset the noble Baroness, Lady Jones, but there we are.
As far as I know, there is no indication in the Bill that that will change, and so I understand why the provision of subsidies might raise competition concerns. There is an appropriate authority here that can address them. That is my first question. It is a probing amendment, but I would like to know why these potentially very substantial sums should be outside the regular framework.
In Amendment 70 I am simply asking for the business plan to be published. I think it is important that people should be able to see it. It is possible the Minister will say that he has every intention of publishing the business plan; TfL publishes its business plan, and most other similar organisations publish their business plans. As far as I can see, there is no statutory obligation in the Bill—I may have missed it—to publish the business plan each year or period to which a new business plan would apply.
Amendments 55, 56 and 86 are about building financial discipline, both in the Government and elsewhere. Here, perhaps, I contest the comments made by my noble friend Lord Harper and will say something about the amendments tabled by the noble Lord, Lord Bradshaw. There is a serious issue here and I do not think that the noble Lord has got it right. I do not actually think that my amendments have got it right, but this is the right place for us to talk about the general question of how the Government treat the railways in terms of funding and the provision of funds—not how much they give, but how they do it and what the process is.
The reason for that is as follows. I used to be in a local authority and very often we had to set a budget in March but did not know until Christmas—even after Christmas—what the subsidy from government would be. It is extremely difficult to put budgets together at short notice. With the railways, it is even more difficult. The noble Lord, Lord Bradshaw, has already said that significant changes require a great lead-time and planning to be delivered and just as long for them to be reversed.
Most of my amendments are trying not to fetter Ministers—I accept the comments from my noble friend Lord Harper that Ministers have to be accountable for public expenditure and that they have to make difficult decisions sometimes—but to build in a notice period. I have suggested two years so that, if changes are to be made, they would be lagged by that period, so that Great British Railways knew where they were going to be.
When the noble Lord, Lord Bradshaw, talked about timetables and so forth, he was discussing the operational side of the railway, but there is also the infrastructure investment side of the railway, which may extend to building a completely new railway. One of the problems we have—we all acknowledge this—is that it is impossible to build new infrastructure on a one-year settlement. We give long-term settlements to railway developers so that they know that they will have the money to carry the project through to the end. Should that change in funding not also be subject, if it is necessary, to some sort of notice period?
Further down the line from that, we have the supply chain. A colleague of mine recently visited a British train manufacturer. I will not say which one because I cannot remember. Maybe I can, but what I was going to say might be adverse—not about the manufacturer but about its situation—because it is down to using one manufacturing line at the moment, as the orders have effectively dried up.
We all know that the ideal situation is that British train manufacturers have access to a steady supply and a steady stream of demand, so that they maintain jobs and do not go from famine to feast. Where is the discipline going to come from, as a result of all these changes, to address that? What sort of lags and notice are necessary? As I said, I do not think I necessarily have the answer in these amendments, although they all point to this debate. We may not get further on this today, but the Government will have to talk seriously about this. When they create a wholly new structure to operate the railways—Great British Railways—funding has to be mentioned. An understanding of the approach to funding, not just for the operations but for the infrastructure, has to be addressed.
Lord Berkeley (Lab)
My Lords, briefly, the amendments from the noble Lord, Lord Moylan, on producing a business plan are absolutely essential because, as he noted, the railways need long-term investment. It is not just trains which need to somehow be ordered 10 or 20 years before they are needed but things such as HS2, which we have no budget for at the moment. We have no real knowledge of how much is going to be spent each year and when it is going to open, so there needs to be much greater discipline on this. I fully support these probing amendments to see what my noble friend is able to tell us.
Lord Hendy of Richmond Hill (Lab)
My Lords, I thank all noble Lords for this debate on group 5 and will echo the noble Baroness, Lady Pidgeon: it is a delight to see the noble Lord, Lord Bradshaw, in his place this afternoon. I am sure that the rest of the Grand Committee wishes him, as I do, a very happy significant birthday for yesterday. I have also read and heard what he has argued carefully and, as he is a man of huge experience in the railway, I will reflect on what he said.
The Committee will be relieved to know that I am not going to redebate the status of GBR companies and subsidiaries. I thought I would leave it to the noble Lords, Lord Lansley and Lord Moylan, to fight that out. I think I had the same clarity as the noble Lord, Lord Lansley, at the end of that debate.
I think noble Lords’ amendments are, collectively seeking, first, that the Secretary of State considers GBR’s duties, her long-term rail strategy and the wider planning considerations when determining GBR’s funding settlement; secondly, that that funding settlement is transparent; and thirdly, that it is protected. Finally, the noble Lord, Lord Moylan, seeks to ensure that it is in place two years before the next financial period.
I start by providing some explanation of the provisions. The Bill already establishes a comprehensive funding framework. Schedule 2 sets out that the Secretary of State must publish a statement of objectives for the railway. In doing so, she is absolutely bound to consider her duties and her own strategy, and she will, of course, consider wider planning and the impact of the network. Following the statement of objectives, the Secretary of State must then publish a statement of funds available, so that GBR can understand its funding parameters and produce a high-quality business plan.
Schedule 2 then provides that GBR must produce, publish and keep up to date the five-year integrated business plan across both infrastructure and passenger services. The Office of Rail and Road will advise the Secretary of State on the effectiveness of the business plan, including whether it represents good value for money. If it does, the Secretary of State will then approve the plan and issue a five-year settlement.
Under paragraph 7 of Schedule 2, as in the proposal of the noble Lord, Lord Moylan, the Secretary of State is required to publish details of the five-year funding settlement she gives to GBR, including the funds agreed. She will absolutely ensure that that these published details are clear enough to allow stakeholders to understand the settlement, meeting the noble Lord’s request for transparency, while protecting key commercially sensitive information.
GBR’s business plan will also contain all its planned activities, costs and how it plans to meet those costs. This plan will be updated and published annually after the initial settlement. A clear summary of ORR’s advice through the funding process will also be published, as set out in paragraph 4(6), which means that the desires of the noble Lord for an annual report on GBR’s financial performance will be delivered. Other further reporting requirements are duplicative and unnecessary, and all this amendment would do is increase the time GBR spends on bureaucracy instead of getting on with its job of delivering.
On protecting the funding settlement, which the noble Lords, Lord Bradshaw and Lord Moylan, spoke about, I agree that when maintaining and renewing long-term railway assets, certainty of funding is critical. It provides a stable basis of planning, supports efficient delivery and helps build investor confidence throughout the supply chain. I repeat that the intention behind setting a five-year settlement is that it should endure for the full five-year period.
On the amendment of the noble Lord, Lord Moylan, I can assure him that the Secretary of State must publish any updates to the settlement that are likely to have a material impact. If she wishes to make a material change to the settlement, she must also notify the ORR, which will advise on the likely impact on the railway, and that is one of its important and critical roles. This will ensure that there is transparency around any funding changes and that there will be scrutiny if material changes are proposed that will not support an effective railway.
On Amendment 55 from the noble Lord, Lord Moylan, I do not agree that the Secretary of State should be restricted to changing the funding settlement only in emergencies. As the noble Lord, Lord Harper, says, the Government have a lot of priorities to deliver across healthcare, housing, transport and public safety, which all require funding. While, of course, in my mind, the railway is absolutely the most important of those priorities, I recognise that the Government and Ministers need to be able to move money in response to changing circumstances, because choices about funding priorities are ultimately for the Government of the day.
On the details of Amendments 74 to 77 from the noble Lord, Lord Bradshaw, the first key point is the question of which funding changes the ORR should get involved in. The Bill already requires that the ORR is notified when changes to the funding settlement are material enough to affect delivery, but not in every circumstance. This approach is proportionate. There may well be some smaller accounting-type changes to funding needed, which will not affect delivery and do not require a true statutory formal change process. This could, for example, include GBR offering to return small underspends back to the Government where efficiencies have been found but, of course, material changes, as I have said, should be notified to the ORR. This process ensures that they will be.
The Bill currently requires that the Secretary of State notifies ORR before a material funding reduction is made to the five-year infrastructure settlement. This allows ORR to exercise its independent and expert judgement when it receives notice of a potential change. I can reassure noble Lords that the ORR would absolutely act if significant funding were taken out of the railways, including by advising the Secretary of State and publishing that advice. This approach is most practical, rather than requiring ORR to respond to each change in funding in a set way. To summarise this point, certainty is crucial for the railways, the Government and the wider supply chain, but it must be proportionate and balanced against the ability of Ministers to allocate public resources.
The noble Lord, Lord Moylan, raised the question of rolling stock manufacturers and the Government’s answer to this is to construct and publish in due course a rolling stock and infrastructure strategy, the first for more than 30 years, in order to give that part of this market the long-term certainty it craves and which will keep the production facilities and jobs going.
Finally, I agree that, given the amount of investment on the line, it is important that funding is in place in good time to allow GBR and industry to prepare for the next settlement. Although I do not think this should be in primary legislation, because requiring funding levels to be confirmed two years before the start of a funding period would reduce flexibility and risk settlements becoming outdated before they can even take effect, I reassure the noble Lord that details of the timing will be managed by the ORR, as they have been in successive control periods, to ensure that the financial settlement is never at risk.
Schedule 2 sets out that the statement of funds available must be published early in the process and created to timelines determined by the ORR. I can confirm that in practice, as seen under the periodic review process, this information will be published significantly in advance and has to be more than a year ahead of the final settlement to work. I understand that the ORR will ensure that the process concludes fully with time for industry to prepare. I hope this is a reassurance.
I reassure the noble Lord, Lord Bradshaw, that the Bill leaves flexibility to fund more of GBR’s activity through the five-year settlement, once this becomes once this becomes practical and Ministers are more comfortable funding an integrated entity. If Ministers fund passenger services through the five-year settlement using the route in the Bill, all the protections we just discussed would already apply.
Turning to a related issue, on Amendment 65, I reassure the noble Lord, Lord Lansley, that we are in agreement, and the outcome of Amendment 65 is already achieved by the Bill’s provisions. Under paragraph 4(3) of Schedule 2, GBR will be required through its business plan to set out its activities, the costs of those activities, and how it proposes that those costs are met. In practice, this means that the business plan must cover everything that GBR does, through its subsidiaries as well as the parent company, and must cover its revenue sources across all its subsidiaries.
I turn to Amendment 70—and once again I confirm for the Committee that the Bill already requires the full business plan to be published and kept up to date, in paragraph 4(7), and there is a commitment to update it in paragraph 5(3) of Schedule 2. However, the Bill contains slightly more discretion for GBR to redact sections of the business plan than this amendment proposes. This is because it is important that all types of sensitive data, not just commercially sensitive, are able to be protected. Personal data, security-sensitive information about stations and public places, or anything legally privileged are all examples of content which may need redaction from the final plan, and a flexible requirement can be better used to navigate these nuances. That flexibility is important, but I should be clear that GBR cannot withhold information simply to avoid scrutiny. The ORR will assess and advise the Secretary of State on the unredacted version of the business plan, and GBR’s public law duties and wider accountabilities framework will ensure that GBR will not be able to hide important information relevant to public scrutiny.
I understand that the intention of Amendment 73 is to prevent the Secretary of State circumventing the process as set out through the Bill, by restricting access to the broader funding powers in the Railways Act 2005. The purpose of paragraph 6(7) is to make it clear to Parliament that the Secretary of State can use her other funding power in the 2005 Act. This will be necessary when funding activity outside the five-year settlement, such as individual enhancement projects or one-off funding packages, are needed following a natural disaster, for example. I assure the noble Lord that this does not reduce transparency over GBR’s funded activities. GBR’s business plan, covering all GBR’s activity, will be costed, updated and published as GBR’s outputs change. The business plan will include enhancement projects and will show clearly where the funding for them has come from, therefore transparently identifying the use of the 2005 power for Parliament and others to scrutinise. I therefore hope that the noble Lord can see that the inclusion of paragraph 6(7), to allow the Secretary of State to use other funding powers, is purely practical.
Finally, I thank the noble Lord, Lord Moylan, for Amendment 78. For clarity, relevant subsidy control law does not apply to infrastructure funding. However, it applies in full to passenger services funding, as we discussed in the ticket retailing debate on Tuesday. Railway infrastructure being exempted from subsidy control rules is something that happens on the current railway; railway infrastructure funding provided to Network Rail today is not subject to subsidy control law. The Bill does not change this principle but simply enshrines it for clarity and transparency.
Over many years, funding provided for the operation and management of the main national railway infrastructure has not been treated as subsidy as this market has been effectively closed for competition, because there are not multiple infrastructure managers operating on the same infrastructure. That position has underpinned the funding arrangements for Network Rail and continues to be appropriate for GBR as its successor. Removing this provision would not change the way that the railway is subsidised; it would just mean continuing to rely on previous legal interpretations, rather than the additional transparency provided by this clause.
Part 3 in Schedule 2 therefore provides clarity and legal certainty, and it makes sense for this stance to continue as there is no competitive market for the railway infrastructure that GBR will be responsible for, so there is no need to waste resources administering this funding as if there is. I therefore urge noble Lords not to press their amendments.
Lord Bradshaw (LD)
I start by saying how much I disagree with the remarks of the noble Lord, Lord Harper. His idea that parliamentary scrutiny is carried out properly in the House of Commons is absolutely false, because the whipping system there does not permit a full and frank discussion such as we are having now. He is yesterday’s man in respect of his remarks.
I am quite content to leave my amendment in the hands of the Minister. I reiterate that I am not asking for much. I know that the ORR will be consulted about a lot of things but, in the event of what I call an arbitrary cut, I believe that three months’ notice would not affect the eventual savings and that better savings would result from further scrutiny by the ORR together with the players in the industry. With that, I am prepared to withdraw my amendment, and I look forward to it appearing on Report.
Baroness Pidgeon
Member’s explanatory statement
This amendment and two others to Schedule 2 in the name of Baroness Pidgeon would align funding of designated passenger train services with the five-year funding cycle for infrastructure.
Baroness Pidgeon (LD)
My Amendments 57, 58 and 61 are about aligning the funding of designated passenger train services with the five-year funding cycle for infrastructure. There is absolutely no point in bringing track and train together if their funding cycles are over different periods of time. For this new organisation to succeed and run the joined-up railway that we are seeking, funding—both capital and revenue—the investment side and passenger services must be provided for in a five-year funding cycle.
Critical elements of the running of the railway are included in passenger services funding—for example, staffing at stations and rolling stock maintenance depots, and of course train crew, such as drivers, guards and conductors, as well as driver and staff training, which we know is a huge issue. If you do not get this bit right alongside the infrastructure, you will not benefit from what Great British Railways is supposed to deliver. So I hope the Minister can explain how this can be addressed, and I look forward to his response to my amendments.
Other amendments in this group probe aspects of the business plan, but most striking are the amendments of the noble Lord, Lord Moylan, about ending or reducing taxpayer funding for the railway. As I said on day one of Committee, the railway will continue to need investment and subsidy, and I just do not think it is right for such clauses to be in the Bill. We heard about political direction, and it is for the Government of the day to deal with the budget as they see fit. But I hope we can look forward to having joined-up funding in five-year periods to make sure that Great British Railways is a success. I look forward to the Minister’s response.
Lord Lansley (Con)
My Lords, I will speak on my two amendments in this group, Amendments 67 and 72. Amendment 67 is simply another opportunity, as there was in the last group, to explore and, I hope, again extract assurance from the Minister that the business plan and GBR’s statements in it will be sufficiently transparent such that we can see the financial relationship not only—as we said in the last group— between GBR and its companies but between GBR and any arrangement that it enters into with any local government bodies. So we should see what money is being paid to GBR for these purposes and how it is attributed to those activities.
I hope the Minister will say that that will definitely form part of the business plan. If he does, I would accept it, as it does not all need to be specified. In an earlier debate, my noble friend Lord Harper quite correctly referred to the dangers of specificity, which can come whenever one gets any kind of list. If there is no list at all, we all agitate as we do not know what will be in the business plan; if we try to specify too much, we start to create a statutory prohibition—or “inhibition” may be the more correct word—on what is put into the business plan. I have explained that amendment.
Amendment 72 is more interesting, in the sense that—in parentheses—I think the Minister slightly missed the point of my amendment in the last group. I was not saying that there should not be flexibility to provide for activities to be funded from different powers, in reference to Section 6 of the 2005 Act. My point is that the same activity should not be funded from two different statutory powers. There would be a particular problem if that were to occur.
Section 6 of the 2005 Act is very broad:
“The Secretary of State may provide, or agree to provide, financial assistance to any person … for the purpose of securing the provision, improvement or development of railway services or railway assets; or … for any other purpose relating to a railway or to railway services”.
While removing part of Section 6, the Government have kept the wider meaning of railway from this section, which is a pretty broad-based power.
It is interesting to contrast that power in the 2005 Act with paragraph 6 of Schedule 2 to this Bill. The power to provide financial assistance is
“for the purpose of activities … carried on in exercise of Great British Railways’ function under section 3(1)(a)”.
We recall that Clause 3(1)(a) is on the provision of infrastructure. Paragraph (b) is on the provision of railway passenger services and (c) is on determining fares, but I think we can probably ignore that, since the financial assistance is not to provide the fares but to determine them. However, I was quite interested because paragraph (f), on research and development and innovation, was also excluded.
This is a probing amendment, but I want to be clear: is it the Government’s intention with this Bill to provide financial assistance only for infrastructure and that there will be no financial assistance for the provision of passenger railway services and no money for research, development and innovation? Will all that be funded by the fare structure? The Government have given themselves a power in the Bill, through regulation, to add additional purposes for which financial assistance could be provided but, at the moment, it is just for infrastructure. If, at the moment, money needs to be provided to GBR for the provision of railway passenger services, that would have to come from the 2005 Act. I am just trying to follow the money. Where will it come from? If the Minister can tell us that it is only for infrastructure, I will stand down. At the very least, a specific power for the Government to support GBR for research, development and innovation is a power that we ought to retain.
Lord Berkeley (Lab)
In response to the point made by the noble Lord, Lord Lansley, about the subsidy, the consequence of what he is suggesting could happen is that GBR could subsidise a passenger service that was on the same route as, and in competition with, a private sector operator. To me, that would be quite difficult.
Lord Lansley (Con)
I am not sure if that is a question to me, but let us assume it is. I am not sure that I am saying that. I am saying that, as things stand under this Bill, the Secretary of State is not providing money to GBR for the purpose of providing railway passenger services. The Secretary of State has the power to do it under the 2005 Act. Nothing I am saying determines how that money is to be used.
Lord Young of Cookham (Con)
My Lords, Amendment 314 in my name, supported by my noble friend Lord Moylan, enters the arcane world of Treasury theology—what is and what is not public expenditure. It would require the Secretary of State to report on the impact of the Bill on public finances. This is important because the Government constantly emphasise, rightly, their commitment to the fiscal rules to contain borrowing, build market confidence and reduce upward pressure on interest rates and taxes.
One of the fiscal rules is the investment rule: public sector net financial liabilities— sometimes known as PSNFL—which is a broad measure of national debt, must be falling as a share of the total economy by 2029-30. Another is the stability rule: the Government must forecast a surplus on day-to-day spending by 2029-30, meaning that regular public services are funded entirely through tax revenues rather than borrowing.
Clearly what GBR spends is public expenditure, but expenditure or borrowing by private companies can be classified as public expenditure if certain qualifications are met. Decisions on that are taken not by the Government but by the Office for National Statistics, and it operates according to international definitions. It does not allow for consideration of political or commercial significance when making its classification decisions; they are essentially statisticians.
The Minister may not have read “UK Economic Statistics Sector and Transaction Classifications: The Classification Process”—he may not even have heard of it—but it is relevant to Amendment 314. I shall summarise: the difference between the public and private sectors is determined by where control over the organisation lies rather than by “ownership” or whether the entity is financed from public funds. Control is the ability to determine general corporate policy. I will come on in a moment to the relevance of this to the rolling stock companies where, under the new scenario, GBR will be the principal customer, but there are two relevant instances where attempts by government to circumvent these rules have come unstuck, with consequences for the balance sheet.
One that will be familiar to the Minister was Network Rail. Network Rail was set up in 2002 as a private company limited by guarantee, primarily to keep its massive debt off the Government’s balance sheet. By structuring Network Rail as a private company limited by guarantee without shareholders, the Government could then borrow large sums of money for infrastructure upgrades without adding those billions to the official national public debt.
However, in 2014, ONS reclassified Network Rail as a central government body in the public sector, and this resulted in roughly £30 billion of debt moving on to the Government’s balance sheet. The Minister will have had direct experience of the consequences of that at Network Rail. We know because we have the Hendy report, which sets out the consequences for Network Rail of this reclassification. Debt was controlled, capital was rationed, assets were sold off and upgrades were postponed. I think the last thing the Minister wants to do is to write another Hendy report, mark 2, when rolling stock is classified as Network Rail is.
Lord Moylan (Con)
My Lords, it is difficult to follow my noble friend Lord Young of Cookham because his expositions of difficult issues are always so clear and compelling. There is a movement on the left wing of the Labour Party—which is well represented in your Lordships’ House—to nationalise the roscos so that we can have a full sweep of nationalisation. To date, nationalisation of the railways has cost the Government nothing because, of course, they already owned nearly everything. All it has done is allowed certain franchises to expire at no cost to the taxpayer.
But the cost to the taxpayer of nationalising the roscos would be absolutely enormous, which is one of the reasons why the Government have resisted pressure from the more Corbynite wing of their party to proceed on that basis. My noble friend Lord Young of Cookham is suggesting that, at the stroke of some scribal pen in the Office for National Statistics, at least the financial consequences, if not the legal consequences, of nationalising the roscos would land on the Government’s plate as a result of the Bill—in other words, as a result of eliminating the relative multiplicity of buyers of rolling stock that exists at the moment and replacing it with a single buyer: a state-owned entity. As I understand it, that is the gravamen of what my noble friend is saying.
The amendment is almost too gentle for the circumstances because this is something that we would need to know in advance of the passage of the Bill. It is dilatory of the Office for National Statistics to say that it would review this matter only after the Bill has passed because it is of such consequence that legislators should know before they pass the Bill whether it will ensue as a consequence of their doing so. This is a matter of considerable importance. I do not know whether the officials advising the Minister perceived the full complexity of the noble Lord’s amendment in advance. They may not have given him a full response to the points made by my noble friend—although they may have done so, of course—so he may wish to follow up in writing. That may be acceptable to my noble friend—I do not know—but this is an extremely important matter that we really need to know about.
I do not propose to comment on the other amendments in this group so I turn to my own amendments, which were slightly mocked by the noble Baroness, Lady Pidgeon. We have been told—I accept that this is probably the case—that, should the Bill pass into law, it is likely to set a framework that will last for many years. People say that it is often 20 or 30 years before you get round to restructuring the railways; that is roughly the cycle on which it happens. I think, therefore, that it is very disappointing that the Government are seeking to restrict the debate to very narrow issues around the structure of the railway, which is the main basis of the Bill, when noble Lords want to debate other matters.
For example, in our debate on the previous group, the noble Lord, Lord Bradshaw, who is sadly not in his place any more, wanted to discuss the whole structure of funding the railways—not the amounts of funding but the mechanism by which it is done—in order to avoid crashing from one decision to another and to make it possible for both the railway and suppliers to plan what they will do with some knowledge that the funding will continue for at least a period into the future. Essentially, the Government want to escape having that debate and say, “Everything’s fine as it is so we’ll carry on as before”.
Through my amendments here, I want to have what I think is a very important political discussion about the Government’s vision for the level of subsidy that should go to the railway and for the balance between fares and taxpayer funding to support it. We have in this country a particular balance that is different from what exists in many European countries, and we have held on to it, but where do we want to go with it? The noble Baroness says that the railways will always require funding but, for their first 100 years, they did not require any public subsidy at all, and they provided the most comprehensive, intense and innovative transport system you could imagine, reaching to nearly all parts of the country. Further, they did so at a time when there were practically no roads, and there was certainly no air travel. Yet they did this without subsidy. We really only talk of subsidies to the railways when you get to the 1920s and 1930s, when money started leaking out of government and into the railways. That was before we had the full subsidy regime that came in with the Second World War and what followed. So it is possible to think about it.
I am not saying that it is particularly realistic to think about it, because I accept what the noble Baroness says: there is likely to be an element of subsidy all the way through. But what is the Government’s plan and what is the direction of travel on this? Would the Government not like to set out their policy and vision? If they do not want to do so today, then where in this process is it going to appear? Is the noble Lord going to tell us that it will all be in the long-term rail strategy, so that we can have a debate then about what is the appropriate level between taxpayer and fare payer? Remember that only 10% of the population makes regular use of the railways; the rest of the population is expected to subsidise it through their taxes, but only 10% actually use it. Is that a fair and sensible balance in an allocation of subsidies? These are important issues.
Amendment 112 is closely related but not quite the same. It asks for the railways to publish annual savings targets. Why should they not have such targets? There are great inefficiencies in every organisation. I do not say “in every public sector organisation”, although that is true, because there are inefficiencies in private sector organisations as well. When I was deputy chairman of Transport for London, we had a process for trying to reduce, with an annual savings target of 3% per annum. We took out that amount of cost year after year, bringing it down because we could find those efficiencies. I had learned from local government officers that they could do exactly that, because they knew where the inefficiencies were. In fact, they built them in a little, to give themselves some fat, but if they were required to reduce them under pressure, they could do it. Why should Great British Railways not have a similar discipline imposed on it? Where is the sense of financial discipline that we are looking for?
These are times when the Government have very little money; I think we know that. The tax burden is higher than ever, yet public expenditure is under huge pressure. Choices about defence and so forth cannot be made sensibly because of commitments elsewhere. I am not disagreeing with or criticising the noble Baroness. It is all very well to say that railways will always require subsidies, but the fact of the matter is—I believe this firmly, and I am a believer in the railways—that a railway that relies consistently and heavily on subsidy, in the current and foreseeable fiscal circumstances of this country, is a railway that will come under huge pressure and will be cut. It is not sustainable unless it can show that it is contributing from its own efficiencies and through generating higher fare income, which does not necessarily mean through higher fares but can be a combination of fares and passenger numbers. It needs a plan to show that it is doing that. These amendments ask the Government to set out that plan or tell us when they are going to do so, in the interests of Great British Railways itself.
Lord Hendy of Richmond Hill (Lab)
My Lords, Amendments 57, 58 and 61 are about the funding of passenger services. In principle, I support the intentions of these amendments and acknowledge the benefits to business planning that aligning the funding cycles could bring. However, the reality of passenger services funding is that it is inextricably tied to passenger revenue, which changes in response to a number of factors that are difficult to predict, particularly over longer time spans.
Certain factors, such as wider economic conditions and the weather, are outside both GBR and government’s control, so it is quite difficult for any Government to commit passenger services funding in fixed five-year periods, given the revenue-forecasting challenges. It will, however, be a goal to work towards, and in particular it cannot be achieved before GBR’s funding settlement processes have bedded in and Ministers have confidence in how the settlements operate.
I recognise how important it is that GBR has the confidence to plan across track and train to make the most of integration. That is why it will be required to produce and publish a business plan covering all its activity, including on passenger services, and this plan will span the duration of the five-year funding period, regardless of changes to passenger funding. In addition, once Ministers have more experience of funding an integrated body and GBR has demonstrated that it is fiscally responsible, the Bill will provide a route to include passenger services in the five-year funding settlement in future, via statutory instrument. That will allow passenger services funding to join the five-year settlement. I hope the noble Baroness sees that we are as aligned as we can be on this amendment and that she can therefore support the Bill as drafted.
Lord Moylan (Con)
Is the noble Lord’s position that one of the consequences of this Bill, if enacted—we will not know for some months until after it is enacted—is that roughly £25 billion-worth of rolling stock could be added to government debt? I do not want to argue about the figure, but I believe that is roughly right. We are going into this in the dark, not knowing whether that will be the case. What soundings has the Minister taken with Treasury colleagues about this interesting possibility?
Lord Hendy of Richmond Hill (Lab)
Since it is independent, nobody can predict the consequences of an Office for National Statistics examination until it concludes one. I said that the Secretary of State will work with it, because it will also need to consider the recent past. The Bill is in Parliament because it has cross-government agreement from all the departments of government. We cannot contemplate what the future might hold in respect of the decisions of the ONS.
Lord Moylan (Con)
I am sorry to press the noble Lord. I agree that if the ONS is independent he cannot say what its decision will be, but he could secure that decision before the passage of the legislation. That cannot be too difficult. Given the consequence, it must be possible to secure the decision first. Nobody, I think, is suggesting that you would try to manipulate the decision; that is not my objective. Could the Government not take that approach? These are very significant sums, and to hold one’s nose and just jump into the dark seems reckless.
Lord Hendy of Richmond Hill (Lab)
I already said that one thing the Secretary of State will do is to help the ONS with its understanding of both the recent past and what will happen as a consequence of the Bill. In the recent past, the Government have specified, to the most extraordinarily detailed degree, all the rolling stock used in all franchises for probably the past 10 or 12 years. They have also determined how long it runs for and how long it lasts. In those circumstances, we are very content to wait for the ONS to do its work when it chooses to do it.
Lord Lansley (Con)
I have a question pursuant to the debate about the powers to fund the GBR business plan. I understand from the Minister’s reply, and it is a reasonable proposition, that the Secretary of State should provide financial assistance in relation to activities set out by GBR in its business plan. Indeed, paragraph 3 says that the Secretary of State should do exactly that and say what financial assistance is expected to be provided. But would it not be logical, therefore, that the powers to provide financial assistance that are specified subsequently should extend to those activities within the business plan, rather than having only infrastructure being capable of being funded by the Secretary of State using the powers? We would end up with something much more visible: specific powers to provide financial assistance in relation to the business plan over this funding period.
Lord Hendy of Richmond Hill (Lab)
I thank the noble Lord. Since I managed in the end to have to correct myself after the last session on Tuesday, I would rather take some advice and write to him about this. I understand his point, but I am not sure I am capable of expressing an answer in language that will be clear enough for him, so I will drop him a line, if I may.
Baroness Pidgeon (LD)
My Lords, I thank the Minister for his response and the fact that, in principle, he supports my amendments in this group as a goal to work towards. It is reassuring that he pointed out—if I understood him—that, within this legislation, there is the potential for a statutory instrument to include passenger services in the future within the five-year settlement. I welcome that and, on that basis, I withdraw my amendment.
Lord Lansley
Member's explanatory statement
This amendment would require the Secretary of State’s statement of objectives to include objectives as to the standards to be achieved in relation to railway services.
Lord Lansley (Con)
My Lords, I have two amendments in this group. Amendment 59 looks at the statement of objectives that the Secretary of State sets out for GBR and what is intended to be achieved over the funding period. The objectives, as we can see in paragraph 2(2),
“may include objectives as to standards to be achieved when carrying on activities”
that are to be set out in the business plan. It is a simple proposition and one of those happy subjects that we always discuss in Committee: should the word be “may” or should it be “must”? The implication of “may” is that it may not be, and we are considering whether it would be acceptable for the statement of objectives not to include reference to the standards that are to be achieved in relation to these activities. One of these lists about which we are not supposed to be too specific follows, but standards to be achieved are not set out as such in that subsequent list. They tend to be objectives relating to other things.
However, my other amendment is intended to see how these things interact. Separately, in Clause 65, Great British Railways has the responsibility to consider whether it should have a performance scheme, which, as I understand it, is essentially about minimising disruption to the network and to passengers. The question is: where are the objectives in relation to minimising disruption to passengers? I do not see them in paragraph 2(3). You could argue that they arise from the carriage of passengers and goods, but I do not think it is sufficiently explicit. I am not sure whether it is included in objectives as to standards. Are those the same standards as in a performance scheme?
I see the two amendments being linked. We are looking to ensure that the objectives set out standards and are clear about what is required in terms of avoiding disruption and enabling passengers to be confident about the availability of services according to the timetable. I beg to move.
Lord Moylan (Con)
My Lords, it may be helpful to the Committee, since I have such a large number of amendments in the group and no one else who is present has any, if I speak now, and then it will be easier for the noble Baroness to comment on the amendments I have moved.
I shall start with Amendment 63A. I have tabled it because in the last 24 hours I have been contemplating the wipe-out of 10% of the global population by artificial intelligence, which a whistleblower at Anthropic has said is a very likely prospect some time in the next 10 years. It is possible that these claims are somewhat overblown—I do not know—but it is astonishing that we have a Bill whose measures in all likelihood, as I say, will stay in place for 30 years but we are not having any debate about digital, artificial intelligence or the innovative future of the railway.
Lord Lansley (Con)
May I just interrupt my noble friend? I think he has moved on to the next group. We are on the group led by Amendment 59, to which I just spoke.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
And today’s Committee is due to conclude with Amendment 63.
Baroness Pidgeon (LD)
I will speak to my Amendment 82 in this group, to which the noble Lord, Lord Moylan, has added his name. It would create a new board of Great British Railways, and it provides detail of the composition of this board. The board would increase the transparency and accountability of the Secretary of State’s decisions, as it would create a vehicle for these to be properly discussed and would ensure that a wide range of expertise were at the table. If the Secretary of State decided to make a decision that was against the advice of the board, the reasons for that would need to be set out clearly and publicly.
The membership of the board would represent Great British Railways and other key stakeholders in the running of the railway, such as open access operators, freight operators, the Office of Rail and Road, the Passengers’ Council and organisations that represent passengers with accessibility requirements. It would comprise of at least six members. To make sure that there is a voice for other stakeholders, no more than half of the board’s membership would be employed by or otherwise represent Great British Railways.
This amendment would allow for any decision or direction from the Secretary of State concerning Great British Railways to be notified to the board prior to its being made. The board would then need to publish any decision or direction it had considered and whether it had approved it. If the board did not agree with the Secretary of State, it would still be free to go ahead with the decision, but it would need to publish a statement setting out its reasons for that. For us, this is a way to ensure that the Secretary of State uses the powers in this Bill wisely, with a proper sounding board for feedback from experts with different viewpoints in the field. I hope that the Minister will consider this proposal seriously.
The other amendments in this group are around clear objectives for Great British Railways. Amendment 64A from the noble Lord, Lord Moylan, would require consultation with the supply chain and railway service providers when preparing objectives for a funding period. That would appear to be a sensible way to ensure industry buy-in and prioritisation. Other amendments seek different ways to try to measure and assess the performance of Great British Railways. I hope that the Minister will be able to provide details of how the Secretary of State and Parliament will assess this going forward, and I look forward to his response.
Lord Moylan (Con)
I beg the Committee’s pardon: I got slightly muddled because of changes to the groupings.
I come to my Amendments 60, 64A, 83, 84, 87, 94, 124, 125 and 291. The central issue running through these amendments is accountability. We are creating an enormous, new, publicly owned organisation that will, in all likelihood, receive billions of pounds of taxpayers’ money and exercise extraordinary control over the railway. It therefore needs clear objectives, measurable performance indicators and consequences for when it fails to deliver.
Amendment 60 addresses the funding objectives. As drafted, the Bill says that the Secretary of State “may include” the specified objectives. My amendment would change that to “must include”.
Amendment 64A would require consultation with railway service providers and the rail supply chain when those funding objectives are prepared. GBR will continue to rely enormously on the private rail supply chain. These businesses invest in skills, equipment and capacity on the basis of decisions taken by the Government and GBR, so it is sensible that those decisions are informed by their expertise and knowledge, as well as the consequences for employment and profits in the private sector that would arise from those decisions being made. They should be consulted.
The remainder of my amendments address what might be called the problem of the missing key performance indicators. We have repeatedly been told that GBR will be held to robust performance measures, but what does “robust” actually mean? Amendment 124 would answer that question by establishing a proper, statutory KPI framework covering the things that passengers and taxpayers actually care about: reliability, safety, passenger experience, affordability and value for money, passenger growth, financial sustainability, productivity and efficiency, and freight performance. Of course, one can argue about what should be on the list; I would be willing to enter into discussions with the Minister about putting in something else or maybe adjusting something that I have proposed. However, we need to know what performance indicators are in the Bill—otherwise, we will be allowing GBR far too much unconstrained power and latitude, with little accountability.
Amendment 94 would ensure that the long-term rail strategy is geared towards enabling GBR to meet these KPIs. The Government may say that a long-term rail strategy should not be dictated by short-term measures, but we have to get from the short term to the long term. A 30-year aspiration is of little value if there is no way of measuring whether GBR is moving towards it year by year.
Amendment 125 would, therefore, require annual reporting and quarterly updates against those KPIs. Even I admit that quarterly updates might be a little onerous so, if the Minister objects, I will meet him half way and say, “Let’s have semi-annual updates”—I am a reasonable person and am open to suggestions—but something is needed if we are going to succeed. It is no good saying, as we did the other day, that the target is to achieve 75% growth in freight by 2050. Only the day before yesterday, the Government produced a statement saying that they have set an interim target. So they appreciate what I am saying, which is that there should be interim targets. However, the interim target is that freight should achieve 40% growth by 2040. None of us will be here. Nobody is asking, “What is the 2030 target?” There is no 2030 target; there is merely a 2040 target. That is not good enough. It is playing with achieving targets and would be simply laughable in the private sector. We need these targets; as I say, quarterly updates may be too onerous, but an update every decade or 15 years is just not good enough.
Amendment 291 would give the ORR the important, independent job of assessing whether GBR is actually achieving its targets. Surely GBR cannot be allowed to mark its own homework.
Amendment 84 would apply the same principle during the transition. This is a generational restructuring of the railways, involving employees, operators, freight, open access, local authorities, the supply chain and millions of passengers. A quarterly ministerial Statement—or even one once every six months—on progress towards GBR becoming fully operational would increase transparency, maintain focus and, importantly, prevent drift.
Lastly, Amendment 87 concerns consequences. When I have asked the Minister privately how the Secretary of State will exercise control over GBR, he has said—he said this in a meeting for all Peers the other day, so I think I can repeat it—“Of course, she can always sack the chairman”. I suppose she can, because she is the sole shareholder in the business, but there was nothing about sacking the chief executive. Of course, it is not the Secretary of State’s job, as I understand it—we are not vouchsafed of these arrangements—to appoint or sack the chief executive; that would be a decision for the board. I am trying to introduce some accountability for the chief executive. We are giving the Secretary of State the power—not a duty, obviously—to dismiss the executive head of GBR when the organisation is failing against the KPIs and has also failed to act on guidance issued by the Secretary of State. It is not enough just to sack the chairman. You will not get anybody of any quality applying for the job if they are the only person whose head can roll; the chief executive needs to have their neck on the block as well.
My noble friend Lord Lansley’s Amendment 59 is obviously sound. The Secretary of State may
“include objectives as to the standards to be achieved in relation to railway services”,
but that “may” ought to be a “must”.
My noble friend Lord Grayling’s Amendment 66, to which I have added my name, would require GBR’s business plan to contain measurable performance indicators for its statutory duties. This is simply basic accountability. If Parliament gives GBR duties, its business plan should explain how its performance against them will actually be measured.
Lord Hendy of Richmond Hill (Lab)
My Lords, let me turn to Amendments 94, 124, 125 and 291. I am pleased to say that I agree with many of the performance indicators set out in the noble Lord’s amendments, which will be important in GBR delivering the service the public expect. I also agree with the concept of an annual report. I reassure the Committee that, on both counts, such a thing already exists.
The Bill requires GBR to produce an annual business plan and we have already confirmed that this will include meaningful KPIs around performance. For example, the business plan will clearly have to include GBR’s progress towards reaching its statutory freight growth target and I happily confirm today that it will. The 2050 target is a long way out, but progress against it should be measured in the business plan in 2040 and in 2050. By keeping these KPIs in the business plan, we ensure that a reflection of GBR’s activities, the cost of those activities and its performance against those activities and costs are always transparent and available for scrutiny.
GBR will publish annual updates to this plan which can, and should be, scrutinised by Parliament in the usual way. GBR will need to consult with the ORR and the passenger watchdog when creating these updates, ensuring expert and independent advice. As the noble Lord, Lord Moylan, proposes, the ORR will monitor GBR’s performance against the KPIs in its business plan as part of its monitoring function. An important distinction, however, is that the ORR’s role under the Bill as drafted is not confined to looking backwards at whether a target has been met. The ORR can also recommend to the Secretary of State whether GBR’s commitment and performance measures are realistic and measurable—something not factored in to the amendment.
Linking KPIs to the long-term rail strategy, rather than the business plan, would undermine the purpose of the strategy. The rail strategy is designed to provide ministerial direction on the long-term trends that will affect the railways and, at a high level, what they expect GBR to do about them. But GBR must be independent enough to respond to the rail strategy with a self-developed, proactive and detailed activity plan covering the next five—
Lord Lansley (Con)
Forgive me for interrupting. I cannot find where it is required that there be an annual business plan. I can see there is a provision for the business plan to be kept up to date, but nothing that says this has to be done at any specific time or on an annual basis.
Lord Hendy of Richmond Hill (Lab)
Let me come to that point. I believe that there is a provision, but before I say so, let me check.
The long-term rail strategy is designed to provide ministerial direction on the long-term trends that will affect the railways and, at a high level, what they expect GBR to do about them. The business plan is clearly the right place for short and medium-term targets to be included, which GBR should set for itself and which the ORR should review and comment on.
Lord Moylan (Con)
Can I be absolutely clear about that? The Minister is saying that GBR should set its own KPIs. The ORR may look at them and comment but, having heard the comments, GBR will set its own KPIs and amend them, or not, as it sees fit. That is the plan.
Lord Hendy of Richmond Hill (Lab)
The long-term rail strategy will set out the Secretary of State’s expectations. The business plan will set out what GBR believes it can achieve to move towards the long-term rail strategy. The business plan has to be agreed with the Secretary of State, who might well disagree with some of its targets. In the end, GBR has to satisfy the Secretary of State about the progress that it proposes to make. I do not think that is much different, as the noble Lord will recall, to the Transport for London business plan, which translated the mayor’s transport strategy into targets related to the budget of the organisation and which were agreed by the mayor.
Lord Lansley (Con)
Surely there is, between the long-term rail strategy and the business plan, the statement of objectives. Surely the question, which I think my noble friend through his amendments has explored quite positively, is that the statement of objectives needs to be quite specific. Some of them need to be performance indicators in themselves, because the business plan is GBR explaining how it is proposing, through its activities and funding, to meet, or to contribute to meeting, what is set out in the statement of objectives.
Lord Hendy of Richmond Hill (Lab)
I have to say to the noble Lord that I do not see the difference, in the sense that the long-term rail strategy must express the Secretary of State’s desire, for example, for a reliable railway in terms that enable the business plan to set out the measures that would be used to decide whether it is reliable. Indeed, in the recent past, one of the things that has had to be done since this Government took office was to agree, for the first time, what the measurements are and what the target should be for expressing the performance of the railway. I do not see that conflict in the way that the noble Lord does.
Lord Lansley (Con)
Forgive me, but I do not see it as a conflict at all. I am expressing, as I think the Minister has done on a previous occasion, that there is a difference between what is long term and what needs to happen this year, next year and indeed, for the purposes of the funding period, in the next five years. The statement of objectives is specifically about the next five years. The long-term rail strategy is on a different timeframe.
Lord Hendy of Richmond Hill (Lab)
The noble Lord is right, actually: I am beginning to confuse myself about this. There is a danger of getting into too great a specificity. He is right that the statement of objectives will include specific standards, but that translates into the business plan.
Lord Berkeley (Lab)
My Lords, before the noble Lord sits down, referring to the discussion we have had on KPIs, it occurs to me that there needs to be some differentiation between the list—whether it is the list produced by the noble Lord, Lord Moylan, the list in the Bill or another one—of issues which are basically in the total control of Great British Railways and those which are not. The noble Lord, Lord Moylan, mentioned freight. Freight is not in the control of GBR, in respect of how many trains run and how much money GBR makes from them directly. Of course it can fiddle around with the access, the signalling and everything else, but it is dependent upon many other people delivering the KPI, which I think is supposed to be the KPI of Great British Railways. It would be interesting to hear from my noble friend how the two different criteria are set when coming up with the calculation of who does the KPI and what it covers.
Lord Hendy of Richmond Hill (Lab)
My noble friend is right that some of these KPIs relate to wider economic circumstances than the railway currently has, but we discussed on the first day in Committee the fact that the need for a long-term freight target is so that GBR focuses on its own part in growing freight. Clearly, it is much subject to what shippers want to send, how they want to send it, where they want to send it and so forth, but I do not see any conflict in GBR having a long-term freight target. It may have to take different action if the economy or the things which are transported by rail change over time. There has been no greater case of that than the case of coal and steel, which were once a significant part of railway freight but which today are virtually nothing. On the other hand, intermodal traffic and construction materials have vastly increased, and there is no doubt in my mind that the railway could contribute more than perhaps it has done in the recent past to growing those particular categories if it were minded to do so, and the freight target is designed to make it think about how it could do it.
I do not see any contradiction in that; it will be like running any other business. The noble Lord, Lord Moylan, referred to his experience at Transport for London and it is, of course, exactly the same. It is a large organisation which is contributing to, but to some extent dependent on, the economy of London; that will be true of the railways as a whole. I agree with noble Lords that there should be KPIs for GBR, and it should be held to account for meeting them. The reason we are discussing these now is because there is no doubt that, in the end, they should be in its business plan, set next to the costs that they incur and the revenue it will derive from them.
I should go back to what the noble Lord, Lord Lansley, said. Paragraph 5(1) of Schedule 2 says that GBR must keep the business plan up to date. We are pretty clear that that means annually; it could be more often if circumstances change. It is not unknown for businesses of this scale to have to change their business plan if the economic circumstances dictate, but I think annual is reasonable. I would not expect the Secretary of State or the board of GBR to tolerate any circumstances where it did not propose an annual business plan.
If I may, I will try to find my place regarding Amendment 66. I am glad that the noble Lord agrees that GBR’s business plan is where its KPIs should sit. However, these need to evolve over time while, by contrast, GBR’s duties are unchanging—a core list of ambitions guiding GBR over the next decades. While GBR’s business plan is where it will show both how it will discharge its duties and set out its KPIs, there is an important distinction between them. Duties and KPIs are not the same thing. KPIs need to be driven by the specific, often numerical, outcomes sought by the Government, whereas duties are behavioural expectations. Some of the duties would be impractical to even turn into measurable KPIs. How would GBR measure whether it has provided businesses with certainty or acted in the public interest? I believe it is right that the two should not be statutorily linked.
Amendment 87 proposes action about the chief executive. I hope the noble Lord understands that, primarily, the powers of the Secretary of State rest with the right, in the end, to dismiss the chair if that chair fails to do the job that the Secretary of State expects of the chair and the board. That might well be the case if the Secretary of State believed that the chair failed to challenge the executive and chief executive effectively. The Secretary of State will also have the right, as we discussed this afternoon, to issue legally binding directions to GBR, and those could be where remedial action is required. The Secretary of State could also remove accounting officer status from the CEO, effectively taking financial management of the company into the department.
Lord Hendy of Richmond Hill (Lab)
What I would say to the noble Lord about all these things is that we are setting this organisation up and, conventionally, it is the chair and the board that support, hire and fire the chief executive. I do not believe that his amendment is the right way of doing this. It should be done through the chair and the board, and the expectations of the Secretary of State should be conveyed to them. Whatever action might be necessary regarding the chief executive should be taken as a consequence of that relationship.
On Amendment 83, the Bill already does what the noble Lord is trying to achieve. Much of the substance of this amendment is already enabled by the process created by Schedule 2. GBR is already required to produce a business plan containing all its activity and how its costs will be met, which will be reviewed annually, as we have discussed, to ensure it is up to date. The plan will be published, which will allow Parliament and the public to hold GBR to account. The ORR will monitor GBR’s delivery of its business plan. I agree with the noble Lord that transparency is important, but we do not need to hardwire in excessive bureaucracy, as this amendment would.
On Amendments 59, 60, 62 and 64A, I can understand the desire to codify the contents of the statement of objectives, but this legislation needs to be drafted to last as long as the last Railways Act has and therefore needs to be open to future Governments to suggest their own objectives for the funding period. The Bill provides a suggested list of what could be included, setting a strong precedent for future government but leaving options open for Secretaries of State. This is a tried and tested method, being the same approach that underpins the periodic review of funding today. The periodic review is widely considered one of the most successful parts of the current regime, which is why the Bill replicates the five-year length of it. Similarly, the statement has to be capable of accommodating different approaches based on wider environmental and socioeconomic circumstances. That is why the current list of potential topics to be covered by the statement serves as a guide for future drafters but does not constrain the Government.
Lord Moylan (Con)
My Lords, the Bill should be amended to say that the business plan is annual, especially as that is the Government’s clear intention. The Minister has just said the business plan is going to be annual and it was precisely to get stakeholder engagement with business away from the annual cycle that the amendment was tabled. Can the Minister take account of that? It is not good enough to turn up once a year and have a word with the industry about what your plans are. That is what we are trying to get away from.
Lord Hendy of Richmond Hill (Lab)
I think I understand what the noble Lord is saying. I am expecting an organisation, as GBR will be, to be constantly in discussion with the wider railway industry and the supply industry, and indeed its customers, simply because, as we have discussed, the market will change over time. I do not see that there is any confusion between an annual exercise of producing a business plan and the sort of engagement over a prolonged period that will confirm and vary industry’s advice over time about what should be in it. That is a perfectly natural way of doing business. If I refer, as I probably do too often, to Transport for London, that is precisely the way in which Transport for London did it. The business planning cycle was an annual cycle, but the engagement with those parties who had an interest in both the inputs and results was an activity throughout the year.
Lord Moylan (Con)
The Minister has just changed the story. A moment ago, he was saying that engagement with business stakeholders would be through the business plan. Now he is saying that it is not actually through the business plan once a year—because anyway, we do not know it is going to be once a year, but it is likely to be once a year—but it will be a continuous process. Of course, it can in a sense be both, and other things, but that is not giving us the level of assurance and precision that I think noble Lords are looking for. This is one of our big opportunities to speak up in Committee for the interests of the supply chain—there may be other opportunities coming in later groups. This is the chance for the Government to nail down our interests. We are interested in passengers and freight, but we are also interested in the supply chain, and trying to secure for it a degree of visibility about the future is important. What we are getting is not very clear, I am afraid.
Lord Hendy of Richmond Hill (Lab)
I agree with the noble Lord that the supply chain is crucial. Actually, for much of the supply chain, what really makes a difference is the five-year periodic settlement. That highlights the need for this engagement to go on, both at the time when the five-year plan is formed and the rest of the time. I do not see any contradiction in those two things happening. The five-year settlement for infrastructure could not possibly be done properly without the involvement of the supply chain, but they do not go away for the next four years until the next one. The dialogue with them is constant—and so it should be. I had better make progress, if I may.
I turn to Amendment 82, tabled by the noble Baroness, Lady Pidgeon. I do not often completely disagree with the noble Baroness, but I do here, I am afraid, because her amendment would fundamentally blur accountability for the railway system and undermine the clear responsibilities in the Bill. I do not think that interposing another board between the Secretary of State and the board of GBR would be right. However, the Bill contains a number of provisions such that both the Office of Rail and Road and the passenger watchdog will have many opportunities to provide the Secretary of State with advice before she takes decisions. The reality is that she will most likely have taken advice from either, or both, of them before any performance matters should escalate to the point of requiring a direction.
On Amendment 84, as we discussed in earlier groups, the Government are dedicated to providing a steady drum beat of publications that will inform the House—and, indeed, this Committee—on progress in establishing GBR. I encourage the noble Lord, Lord Moylan, to look at the Government’s policy publication timetable on GOV.UK; indeed, I have just written to noble Lords about the publication of the draft access and use policy by Network Rail. Given the ambitious timeline that we are working to on this, it would not seem to make much sense to divert resources away from the business of establishing GBR in order to write progress reports that would largely duplicate existing information that the Government are already making available.
Given what I have said, I encourage noble Lords and the noble Baroness not to press their amendments.
Lord Lansley (Con)
My Lords, I thank all noble Lords who took part in this interesting debate. To my mind, we established one or two rather important propositions.
The first is that, when the Government are setting out their statement of objectives, in relation to which GBR writes its business plan, it would be helpful if it were as specific as possible about the performance indicators that are to be included in that; my noble friend made a lot of good points where that is concerned. I made, in effect, only one point: I accept that, on Amendment 62, relating it directly to the performance scheme may not be the way to do this, but, as with the question of how many trains arrive within 15 minutes of the timetable, there are standards that need to be included, and it is important that we have those standards in the statement of objectives.
The other thing that we have established is an interesting reflection on the relationship between the business plan and the funding arrangements. I draw noble Lords’ attention to paragraph 1 of Schedule 2 on funding. The ORR is setting a timetable, and we have four components to this. I do not envy the Office of Rail and Road’s process of trying to establish in precisely what relationship these four dates are, because it has to say to the Secretary of State, “You’ve got to tell us what your statement of objectives is”. Then it has to say to the Secretary of State, “You have to tell us what funding is available”, which is an interesting question because the answer might be “not much”. Thirdly, Great British Railways has to go off on a third element and give us the business plan. Lastly, the Secretary of State tells GBR and the ORR how much financial assistance is going to be provided.
I have two points to make. I am not at all sure why the fourth of those components is there in that form. There is nothing in the schedule saying that there is a requirement on the Secretary of State to provide such a notice. There is no notification requirement; it is simply that the power to provide financial assistance is there. So I would have thought that the Secretary of State might give notification of how much financial assistance there is, but looking across the whole funding period and having to notify them of what financial assistance is available seems a curious requirement to me.
Lord Hendy of Richmond Hill (Lab)
If I may intervene on the noble Lord, for once, I say to him: welcome to the five-year funding periods. We are now in control period 7, I think. The process that was described is complex, but it works remarkably well, which is why the industry and the Government are wholly aligned in wanting to carry on with it. I could discuss with him in more detail how it works, but it has generally been very effective. It relies on a lot of collaboration between the parties, which is why it has been successful.
Lord Lansley (Con)
I take that point, but, of course, that is if the financial assistance under this is restricted to infrastructure, which we debated a short while ago. If there is a requirement to notify of the financial assistance, I do not see it at the moment. The Minister might have a look at whether such a notification is required. That being the case, I have made my points.
Finally, I apologise in advance that I will not be here on Wednesday for the next day in Committee. I will endeavour to leave notes with colleagues about any amendments that are my responsibility; I will have the benefit of reading what is said. We might have the benefit of the presence of my noble friend Lord Grayling to speak to his amendments. With that, I beg leave to withdraw Amendment 59.
House of Lords
Introduction: Lord Jabbar
Introduction: Lord Davey of Chalk Farm
Jobcentre Plus and National Careers Service: Merger
(1 day, 7 hours ago)
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Baroness Stedman-Scott
To ask His Majesty’s Government what progress they have made on merging Job Centre Plus and the National Careers Service and what the costs will be.
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, we are on track to merge the National Careers Service and Jobcentre Plus in England from 1 October 2026. The current annual cost to outsource the National Careers Service community-based contracts is £40 million. The cost of delivering the new service will depend on the number of employees who join the DWP in October and on decisions about transforming the service as part of the wider jobs and careers service programme.
Baroness Stedman-Scott (Con)
My Lords, Sense has released a report this morning which states that 68% of disabled people say that the welfare system does not have high aspirations for them. Two-thirds said that Jobcentre Plus did not help them overcome the barriers they face and 72% found it difficult to look for work because there were few jobs that met their needs as disabled people. Can the Minister tell the House how the merger of Jobcentre Plus and the National Careers Service will ensure that disabled people get the help that they need to move to meaningful employment?
Baroness Sherlock (Lab)
I can indeed. I am very glad that the noble Baroness has asked this question, because it is really important. The whole point of merging the jobs and careers service is to bring these together in one place to make it easier for individuals who come in to get the help they need. The jobs and careers service will provide more personalised support and help people overcome their barriers, whatever they are. We have launched a jobs and careers service pilot in the north-east which is testing how people with health or disability problems can be helped into work. If they are in the same place, rather than people having to go somewhere else or to a different organisation, this will have to make a difference.
Lord Palmer of Childs Hill (LD)
My Lords, I take what the Minister has said about the trials they are doing, but will the merger result in any closure or consolidation of offices? What assessment has been made of the impact of this on rural and disadvantaged communities?
Baroness Sherlock (Lab)
My Lords, one of the great things about making sure that these services come into the jobcentres is that jobcentre services are right across the country. At the moment, the Department for Education contracts this careers service support out to prime contractors, which then contract regionally to community contractors. We are merging them, so they will be working alongside their colleagues in the jobcentre. Alongside jobcentres, we have increased the number of vans that go out into the community. Some of these careers services will be asked to locate themselves in youth hubs or community settings such as libraries. The aim of this is to get the support to where people need it, not just to make them come to us.
Lord Watts (Lab)
My Lords, does the Minister remember when the Conservative Government closed all the Remploy sites? When they closed them, they told the people they would find them alternative jobs. That did not happen. Should they not apologise before they ask a Question on this subject?
Baroness Sherlock (Lab)
My Lords, I will leave the Opposition to account for their own record. Let me talk about what this Government are doing. Our Connect to Work programme is one of the most exciting things we have seen. We are working with people who face real challenges in getting into work, often because of a particularly strong health condition or complex disabilities. Our individual advisers will work with them, find out what their skills and ambitions are, and then find an employer with an opportunity to match them with. They can help them work together. It is about getting people into jobs but also supporting them to stay in them once they are there. It is that kind of personalised support that people need. Everybody has an opportunity and everybody has potential; our job is to find it and help them fulfil it.
Baroness Boycott (CB)
This is very encouraging. Has the Minister had any conversations with organisations such as Feeding Britain, which I have been the chair of for a long time? We have almost 300 outlets and we supply all sorts of information. Maybe there is a way we could link up, as well as linking up with food banks, where a lot of people go who do not have jobs.
Baroness Sherlock (Lab)
I am very grateful to the noble Baroness for that suggestion. I now lead on poverty in my department, so it would be useful for me to have a conversation with her about some of these questions. When the new service is up and running from 1 October, we want to make sure that everybody knows what help is out there, so any ways in which we can get information out are very much welcome.
Lord Young of Cookham (Con)
My Lords, the House of Lords Select Committee on Social Mobility produced a report in which we looked at the careers service. In the words of our report, we found it very patchy across the country. We also looked at the careers service in schools and found it to be enormously varied and fragmented. To what extent will this new structure deal with those issues of uneven quality of service across the country?
Baroness Sherlock (Lab)
The merger does not affect provision in schools—that remains the responsibility of the Department for Education—but I will make sure my colleagues have seen the report from the House of Lords committee and are addressing it. The merged service will be in a single place, so, for example, a work coach who meets somebody coming into a jobcentre who needs help then has the capacity to refer them directly, if that is what they most need, because the colleagues providing those services will also be working for DWP. That will make a difference. We will also be in a position to set clear performance standards and expectations across the whole of our network, so I hope that will address some of the issues the noble Lord has described.
Lord Scriven (LD)
My Lords, regardless of whether the two services merge, evidence shows that people who are providing the service for people with learning disabilities lack knowledge and training. What specific requirements will be in the new contract and service to ensure that staff are fully aware of the requirements of people with learning disabilities and are trained to meet individual needs?
Baroness Sherlock (Lab)
The noble Lord raises a very important point. I think there are two different questions. The careers advisers will continue to be careers advisers, who are appropriately qualified, and they will work closely with work coaches. The DWP has a range of support and learning for our staff to make sure they understand the range of customers and disabilities, including learning disabilities. I am quite confident that the relationship between the two will address those points, but I will look specifically at this and make sure we embed it in the guidance and training.
Baroness Browning (Con)
My Lords, the Minister will understand why I ask her this question, because we have discussed it many times before. When this new regime comes in, will there be any restriction or criteria at all that would prevent any disabled person of working age walking into a Jobcentre Plus and not being turned away at the door because they do not meet the criteria? Can they just walk in and get help?
Baroness Sherlock (Lab)
My Lords, I hope people would not just be turned away. We will always prioritise resources for those who need them most. One of the great things about the new service is that there are lots of different ways to get help. For example, those who are already in touch with the DWP because they are on benefits will have a work coach, but the work coach will now find it easier and more seamless in the journey for them to be referred on to help. We have also created the work hub, a brilliant new set of digital tools which allows people to use all kind of things—not only CV builders but AI tools to enable them to find a job, putting in their particular skills and challenges. But there are categories of people who at the moment are not covered by any of these things, and we will make sure they get the support they need. The aim is to make sure you can phone up a helpline or get help online. If you need particular kinds of help, you will get the help you need.
Baroness Spielman (Con)
My Lords, could the Minister address the part of the Question relating to the costs of completing this merger?
Baroness Sherlock (Lab)
I said in opening that the outsourced part of the current service, which is merging into the DWP, costs £40 million. As I explained, the final cost of that will depend on two things. We are in the middle of the process, where the staff who work for the various contractors at the moment are going through the TUPE process to work out whether they come over to us. The final cost will depend on how many of them do. It will also ultimately depend on how we choose to shape that service; we are not simply going to replicate what is there now. At the moment, for example, some careers advisers spend a lot of time helping customers to build up a CV. We have lots of tools available now which can do the CV building for you, so we really want people to use those skills to work more directly with people to find out what they need and what their aspirations and skills are, and to develop them. There should be savings in some aspects of efficiencies, but the aim in the end is a better service. What we need now is to get people into work, whatever their challenges are. This is part of that enterprise and we are going to do it.
Lord Harris of Haringey (Lab)
My Lords, the Prime Minister has made very clear his desire that more and more services should be focused regionally, on mayoral areas and so on, and in particular that the educational offer should be linked clearly to what is needed in those areas. To what extent are the DWP, jobcentres and all of this area working together with mayoral authorities to ensure that the opportunities made available to people are entirely geared into local and regional priorities?
Baroness Sherlock (Lab)
That is a really important question. We have already been working very closely with them. For example, at a simple level, we reshaped Jobcentre Plus boundaries to align with mayoral authority boundaries. We are also working very closely with local authority and mayoral authority partners and with local community groups. In the end, labour markets are intrinsically local or regional and we need to find ways of making sure the service reflects that. We will carry on doing that. In broader terms, there will be a White Paper in the autumn on broader devolution, which will include our areas, and more information will come out then.
Defence Spending
(1 day, 7 hours ago)
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Baroness Goldie
To ask His Majesty’s Government what assessment they have made of their progress towards spending three per cent of GDP on defence by 2030.
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
My Lords, the defence investment plan published in the summer increased defence spending by £15 billion over what was agreed at last year’s spending review. This means that MoD spending over the next four years will total almost £300 billion. Under current plans, defence spending will reach 2.7% of GDP from 2027. By the end of the decade, the MoD budget will be 27% higher in real terms than in 2023-24. The Chancellor has said that at the spending review the Government will set out a clear path towards the NATO commitment to reach 3.5% of GDP on core defence spending by 2035. This will include a target date for increasing defence spending to 3% of GDP.
Baroness Goldie (Con)
My Lords, in July, ahead of visiting the Trident build at Barrow-in-Furness, the Prime Minister said:
“Keeping this country safe is the first responsibility of any government”.
Yesterday, at Prime Minister’s Questions, he said
“national security … cannot come at the expense of social security”.—[Official Report, Commons, 9/9/26; col. 1036.]
The Benches behind me, particularly at this critical time, are resolute that the first responsibility of any Government is keeping this country safe. Can the Minister explain why the Prime Minister has reneged on his priority?
Lord Coaker (Lab)
Let me first say something that I have always said from the Dispatch Box: I do not believe that there is anybody in this House or the other place who does not want to keep this country safe—I just do not believe that. On the noble Baroness’s question, presumably about cutting welfare spending in order to put it into defence, this Government’s position is very clear. Of course we all want to reduce the welfare bill, but we will do it in a planned, methodical way that gets people into work, and we will act on what the Timms review and the Milburn review say. What I do not think is helpful for a debate on spending is to pitch welfare against defence spending; that is a really unfortunate way to frame the debate. Of course we want to reduce the welfare bill and to spend more on defence, and this Government will do both.
Baroness Coussins (CB)
My Lords, can the Minister say whether the cost of working towards achieving the objectives set out in the Defence Diplomacy Strategy, published in March, are part of the 3% or whether there is a separate budget for the strategy?
Lord Coaker (Lab)
In the overall MoD budget, there is funding for the defence diplomacy strategy. For example—I know this will be of keen interest to the noble Baroness—the strategy seeks to professionalise the integrated global defence network with better language training and professional training, and that will be funded in the normal way through the MoD budgets. It is an important part of what we do.
Lord Bruce of Bennachie (LD)
My Lords, there is understandable frustration that the Government set out a target but have delayed how they will implement it. Can the Minister address two specific and urgent questions? With the phasing out of our destroyers and their current lack of readiness, what action are the Government taking now to develop advanced layered ballistic missile defence for our country? What action are they taking now to replace depleted stockpiles of munitions and to scale up an always-on munitions supply chain?
Lord Coaker (Lab)
I will take the last point first on what the Government are doing now. The noble Lord will know that, in the DIP, there was £11 billion-worth of investment announced, to be invested in six munition sites, to give us the stockpiles that we need. What we cannot do is magic them out of nowhere, but we are investing to deliver the very thing that the noble Lord rightly suggested. He will also see that in the DIP there is a whole range of ways in which we are building ships. To be fair, as I said, everyone wants to defend our country, and the previous Government started to rebuild and to replace the ship capacity that we need; we see examples of that on the Clyde. We are also looking at different ways to do the same thing through an increased use of drones and using a mother ship concept.
Lord Beamish (Lab)
My Lords, does my noble friend the Minister agree with me that, in this debate on the level of defence expenditure, we should look at how we got to where we are today? Between 2010 and 2017, from the Tory-led coalition Government onwards, the then Government cut the defence budget by 16% and made people compulsorily redundant, leading to the smallest standing Army since Napoleonic times. Because of the Liberal Democrat veto, the then Government delayed the replacement of the Trident nuclear deterrent, leading to extra costs today. Does my noble friend agree with me that, in this debate, the Opposition should be a little humbler in their approach by taking some responsibility for why we have got to where we are today?
Lord Coaker (Lab)
I accept the points that my noble friend has made. As the Defence Minister, I always lay out what the Government are trying to do to deal with the situation as it currently exists. One or two years on from the last spending review, the Government took really difficult decisions, within a spending review cycle, to increase the defence budget by £15 billion. Some of that has led to very difficult decisions. I will give him one example relevant to anybody who lives in and around the East Midlands, but I could cite examples from other areas. As a result of those decisions, the A38 and A46 road projects, which were about to start, were delayed to fund defence. Those are some of the tough decisions that the Government have taken, and there are other examples from across the UK about how we are seeking to deal with this. At the next spending review, watch how the Government will set out a path to 3.5% by 2035.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
My Lords, we will hear from the noble Baroness, Lady Foster, next and then the Conservative Benches.
Baroness Foster of Aghadrumsee (Non-Afl)
My Lords, at the RAF town show in Enniskillen at the weekend, which the Minister was very kind to attend, there was a very welcome acknowledgement of the importance of our Armed Forces, not just to the safety and security of our nation but to local communities. How can we have that conversation with local communities right across the United Kingdom about the importance of increasing the defence budget spend?
Lord Coaker (Lab)
I thank the noble Baroness for remarks about me attending the Royal Air Force show in Enniskillen last Saturday and for hosting me. Something the Government need to accelerate is the national conversation and the ability to explain to people why changes may be needed for welfare and other budgets right the way across government to fund defence. We need to set that out clearly, by saying that this is the threat that the country faces and these are the things that we need to do, and therefore difficult priorities will need to be made, including moving some things from areas where we would like to spend to defence. We need to make those tough decisions in a calm way, without referring to cheap headlines.
Lord Jackson of Peterborough (Con)
I have a straightforward question for the Minister. Will the damaging, dangerous and wholly unnecessary Chagos deal be funded by mainstream defence expenditure?
Lord Coaker (Lab)
I have seen various figures around the Chagos deal and where the funding may go. The previous Government sought to ensure that the Diego Garcia base was maintained; they were in negotiations about that. This Government are determined that ,whatever the rights and wrongs of the debate—this debate will continue whatever the Government go forward with—the fundamental principle, accepted by both the previous Government and this one, is that we have to make sure that one of the most strategically important bases to our nation, and to the defence of democracy and freedom, is maintained at Diego Garcia. That is the intent of this Government.
Lord Singh of Wimbledon (CB)
My Lords, can the Minister tell the House what proportion of the money spent on defence is recovered by our selling arms to other countries?
Lord Coaker (Lab)
I do not have the exact answer at my fingertips, but the defence industry is an important part of this country’s defence and what we do. There are thousands upon thousands of jobs right across the nation which depend on a legitimate defence industry contract, and that is also part of the defence of our country. I go to Select Committees where I defend those exports against the very strict criteria that we have. This country has a proud record of ensuring that, as far as we can, the defence industries comply with all the various international rules to which they should do. It is a legitimate business, and we seek to encourage it.
Lord Barber of Chittlehampton (Lab)
My Lords, given the pace of change in the nature of defence and warfare, does my noble friend the Minister agree that expenditure on defence research is increasingly important and that the establishment of the Defence Universities Alliance is a major step forward?
Lord Coaker (Lab)
Yes, I do. My noble friend makes an important point, because research and development is a battleground as well. If we can get in front of our adversaries in terms of the technological battle, that will make a real difference. I will lay this out to your Lordships’ House: the drone technology space is a competing space. If you can block your adversaries from communicating with their drones, ships or warplanes, you are halfway towards defeating them. Therefore, the technological space is crucially important. That is backed by the world-class research that we have in our country.
Jodrell Bank Observatory: Funding
(1 day, 7 hours ago)
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Viscount Stansgate
To ask His Majesty’s Government what assessment they have made of the implications of UK Research and Innovation withdrawing funding for the Jodrell Bank Observatory.
Baroness in Waiting/Government Whip (Baroness Ramsey of Wall Heath) (Lab)
My Lords, we recognise Jodrell Bank’s historic and continuing importance to UK science. Science and Technology Facilities Council—STFC—funding for the e-MERLIN radio telescope network remains in place until March 2028 but will not continue beyond the current agreement, following an evidence-based prioritisation process in response to rising cost pressures. We firmly support decisions that protect world-leading scientific research and ensure the long-term sustainability of the UK’s research portfolio. This is not a withdrawal from radio astronomy. The UK is investing £327 million in the Square Kilometre Array observatory to 2030, headquartered at Jodrell Bank.
Viscount Stansgate (Lab)
My Lords, I thank my noble friend for that Answer. Since I first tabled the Question in July, I have been struck by the amount of public support there has been for Jodrell Bank, which is an iconic symbol of our contribution not just to radio astronomy but to world-class science. I am heartened by reports that the Prime Minister wants to find a way to preserve Jodrell Bank—which is, after all, on the doorstep of No. 10 North—but respected bodies such as the Royal Astronomical Society and the Institute of Physics have expressed great concerns about the extent of potentially devastating cuts to international partnerships, projects and UK astronomy that will do great damage. Is it true that the STFC has to find a cut of £162 million? Is that figure correct? Finally, does my noble friend agree that public support for science is vital if we are to utilise our science and technology expertise for economic growth and that projects such as this are part of a vital ecosystem that we cannot afford to put at risk?
Baroness Ramsey of Wall Heath (Lab)
I recognise the strong public support for Jodrell Bank. It is not closing and will remain a vital UK science asset. As part of the STFC’s prioritisation exercise, to put the council on a sustainable footing, UKRI has protected discovery-led research in particle physics, astronomy and nuclear physics, including the grant for post-doctoral researchers, which ensures that the UK leadership in those disciplines can be sustained in a more focused way.
My noble friend mentioned a figure of around £160 million. That is indeed the case by 2029-30, but UKRI is providing £135 million of transitional support between now and then. On the third point, I agree.
Lord Hintze (Con)
My Lords, I declare my interest in UK astrophysics, which I support through the Hintze Centre for Astrophysical Surveys. Embedded in this decision is the prioritisation of the SKA over e-MERLIN. What worries me is that there is no public data on why the SKA has been prioritised over e-MERLIN. Can the Minister please supply that data? I underscore that both are important.
Baroness Ramsey of Wall Heath (Lab)
UKRI and the STFC made a strategic decision to focus resources on the next generation of radio astronomy capability. That decision was taken as part of an evidence-informed process and prioritisation exercise across our research portfolio.
Earl Russell (LD)
My Lords, on these Benches we too welcome the statement made in the other place by the Prime Minister. However, the details of how that support will be provided are not clear at this time, and the industry is concerned. Physics-powered business generated over £303 billion in GVA in 2023 and supports 2.6 million jobs, with over half those jobs outside the south-east. Does the Minister agree that protecting facilities such as this is not simply a science policy question but essential to UK economic and regional growth? What assessment has been made of the wider economic contribution?
Baroness Ramsey of Wall Heath (Lab)
I assure the noble Earl that the Government have put a record £86 billion into research and development between this year and 2029-30, with £38.6 billion allocated to UKRI, supporting curiosity-driven research in universities through to business innovation and commercialisation, including the creation of many jobs.
On jobs, the SKAO will return £225 million of foreign direct investment and £280 million of additional UK economic value. We continue to invest significantly in the north of England, including over £5 billion over the previous spending review and £7.4 billion over the current one, running to 2029-30.
Lord Markham (Con)
My Lords, when we heard the Prime Minister say on 1 September that Jodrell Bank was safe, I am sure that many people breathed a sigh of relief. But as we saw, the Written Answer from the Government on 7 September said that Jodrell Bank would remain as a heritage and education centre, with alternative funding sources. I just want to be clear: when the Prime Minister says it is safe, is he really saying that it is not safe as a government-funded scientific research centre and more that it will be kept as some tourist theme park?
Baroness Ramsey of Wall Heath (Lab)
I repeat that Jodrell Bank is not closing, and nor is scientific research on it closing. UKRI is focusing resources on the future with the SKAO and its global HQ at Jodrell, investing over £300 million from 2021 to 2030. Jodrell Bank, including the Lovell telescope, which is owned and operated by the University of Manchester, is exploring alternative funding arrangements for delivering on that. Finally, on that point, I emphasise that the SKAO will have a vastly more powerful and broader science range than e-MERLIN when it becomes fully operational.
Lord Wigley (PC)
My Lords, I draw attention to my registered interests and the fact that I received my physics degree at the University of Manchester, partly facilitated at Jodrell Bank. Can the Minister give an assurance that these changes will affect neither the teaching capacity associated with Jodrell Bank nor the use of the inspirational sky dome there, which is an essential part of the UNESCO world heritage site designation?
Baroness Ramsey of Wall Heath (Lab)
Understandably, there is great public support for the UNESCO world heritage centre that is Jodrell Bank, which has 150,000 visitors a year. That will not change, and nor will the engagement and education programme on those decisions.
Baroness Brown of Silvertown (Lab)
My Lords, I simply ask why the Government have stopped funding a national programme in order to invest in a global programme. Should we not be prioritising national infrastructure?
Baroness Ramsey of Wall Heath (Lab)
My Lords, I would not characterise this as replacing a national programme with a global one. UKRI worked closely with the astronomy community to make difficult but evidence-based decisions and choices that maintain a strong, balanced and sustainable astronomy portfolio overall. The UK has invested in the SKAO for many years as part of a range of astronomy investments. As a world-leading observatory headquartered in the UK, it helps to maintain British leadership in radio astronomy and delivers significant benefits to UK science and industry.
The Lord Bishop of Chester
My Lords, I declare the interest that Jodrell Bank is in my diocese, and we are rightly proud of the work done there, not least in releasing young scientists. What principles are His Majesty’s Government using in reviewing these projects, particularly in the communication of those reviews, in order that long-term stability might be prioritised?
Baroness Ramsey of Wall Heath (Lab)
On communications, I think it has been recognised that communication can always be better and improved, and there is certainly a commitment from the Government to deliver that. I am so sorry—I know I should not say this—but I have momentarily forgotten the beginning of the right reverend Prelate’s question.
The Lord Bishop of Chester
It was about the principles used to review the decision.
Baroness Ramsey of Wall Heath (Lab)
The principles are using an evidence-based approach and a prioritisation programme to look to the future, not only to our excellent and important heritage in our world-leading role in radio astronomy.
Lord Redwood (Con)
When these cuts are finally made, how many jobs will be lost and how many people will no longer be able to get grants or contracts?
Baroness Ramsey of Wall Heath (Lab)
The global headquarters of the SKAO, which will be based in Jodrell Bank, will account for about 200 jobs. My understanding is that Jodrell Bank, including the Lovell telescope, which is owned by the University of Manchester, is exploring alternative funding arrangements. We do not have details of any particular job changes at this moment.
Australia: Social Media Algorithms
(1 day, 7 hours ago)
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Baroness Berger
To ask His Majesty’s Government what assessment they have made of Australia’s proposed legislation that would permit individuals to disable algorithms on social media.
The Parliamentary Secretary, Cabinet Office, and Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Twycross) (Lab)
My Lords, Australia’s draft legislation was published only on Monday. The Government have therefore not made a full assessment, but as I am sure my noble friend would expect, we are following developments closely. The UK’s Online Safety Act already requires platforms to address algorithmic risks, including the promotion of illegal content and content harmful to children. Building on that, we have announced measures to switch personalised recommendation algorithms off by default for 16 and 17 year-olds. We also committed earlier this year to giving users greater control over their feeds, including through algorithmic reset.
Baroness Berger (Lab)
My Lords, there is now a clear international shift towards giving users a genuine choice over their algorithmic feeds on social media. The recent Meta settlement and connected structural remedies in the United States, Australia’s proposed legislation that came out this week and the EU’s Digital Services Act, under which this option has already been live for three years, all reflect a growing consensus. Yet our Online Safety Act currently stops short. It does not give any adult or child the ability to turn off their algorithm. I listened very closely to my noble friend’s response, but I ask what more steps the Government are considering in order for us to catch up.
Baroness Twycross (Lab)
The Government completely agree with my noble friend that users should have greater control over their online experiences. We have committed to taking steps for 16 and 17 year-olds that go further than Australia’s proposal and Meta’s commitments by switching off teenagers’ personalised feeds by default. Services will also have to use highly effective age assurance to enforce this. The Online Safety Act’s user-empowerment duties will come into force next year and will allow users of the largest platforms to control what content they see in their feeds. Ofcom is currently consulting on this measure. In addition, we committed earlier this year to building on these duties to give users greater control over their algorithms.
Baroness Northover (LD)
Does the Minister agree that the burden for safety should be with the platform rather than the user? She made reference to the Online Safety Act in terms of tackling algorithms in this way. Why has not Ofcom used those powers?
Baroness Twycross (Lab)
We have been really clear that the Online Safety Act is not the end of the road for online safety, and we had the Secretary of State’s announcement earlier this week. The Secretary of State has met the new chair of Ofcom to reinforce the importance of robust enforcement of the Online Safety Act. The Government have also asked Ofcom to publish a clear enforcement strategy and report to Parliament on progress. As the noble Baroness will be aware, it has significant enforcement powers and launches investigations, but we are trying to work with it to make sure that these are used as effectively as possible.
Lord Tarassenko (CB)
My Lords, the Expert Panel for Growing Up in an Online World was convened by DSIT earlier this year to provide independent, evidence-based advice supporting the growing up in the online world national consultation. It met three times in May and June this year, and the panel’s views informed the Government’s response to the consultation in July. Does the Minister agree that DCMS should reconvene this expert panel and ask it to work at pace to make recommendations on how best to give individuals greater control over what social media content is presented to them?
Baroness Twycross (Lab)
I thank everyone involved in the panel. It is really important that we address such issues collectively. I will speak to my colleague, Minister Murray, about the future of the panel and come back to the noble Lord as soon as possible.
Lord Stevenson of Balmacara (Lab)
My Lords, at the heart of this issue is surely whether the Online Safety Act is capable of dealing with the issues that are arising through technological change and the way in which users are experiencing difficulties. Can my noble friend explain to us whether the Government plan to look again at some of the underlying structure of the Act in order to address these issues, which I think would respond better to these questions?
Baroness Twycross (Lab)
This whole area is clearly developing on an ongoing basis. We will always keep under review whether the measures we have in place are adequate; we will always make sure that we take steps to do that. It is an absolute priority of this Government to keep people safe online, and we want to work across party divides to make sure this happens and that we both harness the benefits of this sector and everything that the online world can contribute and make sure that we keep everyone safe online.
Lord Parkinson of Whitley Bay (Con)
My Lords, the Australian proposals are are all about allowing users to have the choice about what sources they see on their feeds, as are the tools and user empowerment in the Online Safety Act. Does the Minister see a tension here with the approach outlined in the Government’s media Green Paper, which is about giving the Government the power to decide which news sources are trustworthy? If we are giving people choice to switch off algorithms, will they have the opportunity to opt out of government-sanctioned trustworthy news in due course?
Baroness Twycross (Lab)
The noble Lord makes a very interesting point, and I would be very keen to discuss it further with him. We are working with different and conflicting issues. We are really keen that it is a priority to make sure that people have trusted sources of news and they know that those news sources that come to the top of their feeds are the most trustworthy. I would be surprised if there was a huge number of people who wanted to turn off an option to get trusted news at the top of their feed, but I am happy to discuss that further with the noble Lord.
Lord Roe of West Wickham (Lab)
My Lords, alongside the Question my noble friend rightly asked about how we might ban or prevent people accessing harmful content and poorer models, can my noble friend the Minister say what we are doing to help generate good role models, and therefore algorithms that do not get banned? If I think about my own sport, boxing, which I have been involved in since I was 15 years old, it is awash with really good male role models, rather than the toxic kind we often see. How is her department helping to support grass-roots youth, sports, community hubs and interventions in a way that might generate better content that people do not need to ban?
Baroness Twycross (Lab)
My noble friend must be commended for being the first person to bring a boxing ring into the Houses of Parliament. It was a remarkable event and full of energy. The young people who came along were a credit to themselves, their families and the very trusted adults who brought them along. We are keen to counter the impact that online content can have, particularly on boys and young men. We think about the exposure to misogynistic, abusive and extremist content in this field. We co-produced the Government’s youth strategy with young people. As well as ensuring that more young people have access to trusted adults, we will have a £500 million investment in youth services over the next few years. We are also working with departments across government to increase the investment in this space. I commend all those who are involved in getting positive role models.
Baroness Stowell of Beeston (Con)
My Lords, does the Minister realise that her response to my noble friend Lord Parkinson on trusted news is precisely what is concerning about the Government’s proposals and their media Green Paper when it comes to giving prominence to what the Government define as trusted news?
Baroness Twycross (Lab)
Where we talk about trusted news, there is a difference between that and the misinformation and disinformation that has fuelled hate in this society. It is not about what I think that people should read but about getting a factual basis for the news sources that people have access to. We have a huge amount of misinformation and disinformation circulating. We see this spill out on to our streets with the extremist views that should be countered with this.
Baroness Keeley (Lab)
My Lords, following on from the earlier points, particularly the point about Ofcom and its use of enforcement powers, the Communications and Digital Committee is just starting an inquiry into the Online Safety Act—in effect, post-legislative scrutiny. We will be looking at that issue, but it is heartening to hear my noble friend the Minister say that the Secretary of State is already raising this with the chair of Ofcom. We want to see Ofcom using those powers. There is a very strong public feeling that it has not done so. It is a case of “Watch this space”. I would be interested to talk to the Minister about that.
Baroness Twycross (Lab)
I would be very happy to meet my noble friend regarding this issue. We find with all legislation that the Bill becoming law is not the end of the road. We are determined that it is enforced and that people are as protected and as safe online as possible. I look forward to hearing more about the committee’s inquiry.
Arrangement of Business
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
My Lords, on my appointment as Government Chief Whip and Captain of the Gentlemen-at-Arms in July 2024, I wanted to ensure that noble Lords and the staff of the House are given as much notice as possible of recess dates. Today is a good time to update the House on the planned dates for the Whitsun and Summer Recesses in 2027. There is no need to write these dates down as my office has arranged for notices to be placed in the Royal Gallery and the Printed Paper Office. Your Lordships will also shortly receive an email from me direct to your parliamentary email accounts.
Subject to the usual caveat of the progress of business of the House, the current plan for the adjournment of the House is as follows. For the Whitsun Recess, the House will rise at the conclusion of business on Thursday 27 May and return on Monday 7 June. For the Summer Recess, the House will rise at the conclusion of business on Wednesday 28 July and return on Monday 6 September. I have included several additional sitting Fridays in the early parts of next year which are also set out in the notice. I hope that noble Lords find this helpful when planning summer holidays with family and friends.
Finally, I place on record my thanks to the staff across the House for their continued professionalism, dedication and support in all the different roles that they undertake for us. I know that this view is shared by all Members across the House.
Fiscal Outlook
(1 day, 7 hours ago)
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Lord Bridges of Headley
That this House takes note of the UK’s fiscal outlook.
Lord Bridges of Headley (Con)
My Lords, one word hovers like a spectre over this debate on the fiscal outlook: debt. Two years ago to this very day, your Lordships’ Economic Affairs Committee, which I then chaired, published a report on our national debt, It’s Time for Tough Decisions. It concluded that the UK’s national debt risks becoming unsustainable unless tough decisions are taken in this Parliament to address the major challenges that the UK faces and put debt on a gradual downward path. We found that sustainability depended not just on the level of debt but on having sufficient fiscal buffers to absorb future shocks and on avoiding a trajectory of rising debt service costs.
Two years on, our debt stands at nearly £3 trillion, over 94% of GDP, almost £96 billion higher than a year ago and, relative to the size of our economy, at levels last seen in the early 1960s. My argument today is that our debt remains on an unsustainable path. Our fiscal buffer is dangerously small. The risks facing our public finances have grown and are growing still. All this is thanks in very large part to the actions that this Government have taken.
Some may point to the fact that the debt accumulated during the last Administration, which is correct. I have argued that the last Government made mistakes, but however critical one is of that Government, one must accept that they faced Covid and the energy shock. Others may argue that Britain has carried far higher debts before—notably after the Second World War. That too is correct. However, after 1945, the baby boom, the peace dividend and the opening of world trade all boosted growth, which helped to lower our debts.
Today, Governments here and worldwide face the challenges of the Ds: higher defence spending, the demographic challenge of ageing populations, dependency—large welfare states—and decarbonisation, with the green transition. All these Ds increase demands for higher government spending at a time when Governments are already drowning in debt.
Across the advanced economies, government debt rose from around 70% of GDP on the eve of the financial crisis to around 110% today. That debt explosion took place during an era of low inflation, ultra-low interest rates and unprecedented quantitative easing, and in a world that is largely at peace. That world has gone, but government debt remains at record levels and is growing. The OECD expects Governments to borrow around $18 trillion this year. Almost four-fifths of that is simply to refinance debt coming due. Advanced economies spent more than $2 trillion on debt servicing alone last year. Dozens of nations, including the USA, now spend more on debt servicing than defence. In this rising tide of red ink, the price that each Government pays on their debt—ours included—is ultimately determined by investors, by their judgment on the health of a nation’s economy. To coin the Prime Minister’s phrase, it is that thing of being in hock to the bond market.
That brings us to the question that bond traders and all of us here today are asking: just how resilient are the UK’s finances? On Monday, the Chancellor told us that Britain is turning a corner. If so, surely debt should be on a steady downward path—but no, it is not. Debt will be higher at the end of this Parliament than at the start, before falling only slightly to around 95% of GDP by 2030-31. Even that fall is questionable. As the OBR notes:
“Plans to reduce borrowing and stabilise debt have been a common feature of forecasts since the pandemic, but have not yet materialised in outturn”,
or, as St Augustine might have put it, “Lord, make me fiscally responsible, just not yet”.
Indeed, the OBR concluded in July that Britain’s public finances were
“in a challenging position relative to history and to other similar countries, with … debt having increased by one of the largest shares of GDP of any advanced economy over the past two decades”.
It is the structure of our debt that makes us unusually vulnerable. QE shortens its effective maturity, while Britain has a particularly large stock of index-linked debt, so when borrowing costs rise, we feel the effects very quickly. Even before the economic impact of the Gulf war, the OBR was forecasting that debt servicing would cost us £110 billion in 2025-26. That is 3.5% of our national income, which is more than we have spent on education and approaching twice what we spend on defence. By 2030-31, that figure is expected to hit £137 billion.
The bond market is beginning to reflect investors’ anxiety about all this. Britain may not be an outlier in the amount it owes, but it is becoming an outlier in what it costs us to borrow. Our 10-year borrowing costs are now the highest in the G7 and the fourth highest in the advanced world. On Tuesday, Britain paid the highest borrowing cost on a sale of 30-year debt in almost three decades, and that rising interest bill is eating into the Government’s fiscal buffer. At the spring forecast, that buffer was around £24 billion. Against £3 trillion of national debt and £1 trillion of annual spending, that is not a buffer; that is a wafer, and some estimates suggest it has already shrunk to just £5 billion.
The Chancellor’s optimism cannot camouflage the facts: debt is high and still rising, its structure leaves us unusually exposed to shocks, our fiscal buffer is wafer thin and shrinking, and investors are demanding an increasingly high price to lend to us. In that sense, though, the Chancellor may be correct: we are turning a corner. Ken Rogoff, the former chief economist of the IMF, now puts the chances of a major UK debt crisis by 2030 at more than 50:50.
This brings us to a central question: what would convince investors that Britain has a credible plan to stabilise its debt? The answer, I would argue, lies not so much in economic theory as in political choices. A central conclusion of the Economic Affairs Committee two years ago was:
“If we wish to maintain the level and quality of public services and benefits that we have come to expect, we face a choice: taxes will need to rise or the state will need to do less. Addressing this will demand clarity as to the responsibilities and the role of the individual versus that of the state. Muddling through is not an option. If this choice is ducked in this Parliament, the UK risks being on a path to unsustainable debt”.
Two years on, my argument is not that the Government have failed to take tough decisions: it has, but it has taken the wrong tough decisions. Labour decisions have weakened growth, dug us deeper into the debt hole and increased our fiscal vulnerability. What is needed is a plan to control spending and strengthen the underlying budget so we live within our means, bear down on inflation and the cost of our debt, and, above all, get the economy growing faster. But the Government’s actions have produced the reverse of all that.
Let us look at spending. I was intrigued to hear the Chancellor say on Monday:
“Staying true to our values means being honest about the need to control government spending”.
For a moment, I thought I was listening to fake news. By the end of this Parliament, the Government will be spending around £260 billion more a year than at the start. Public spending will absorb more than 44% of national income. That is a level we have not seen on a sustained basis, outside shocks and their aftermath, since the 1970s. Let us look where that increase is going. Welfare spending is set to rise by some £75 billion a year over this Parliament, to £390 billion. Within that, spending on health and disability benefits is forecast to hit £104 billion, an increase of more than a third.
Instead of taking the tough decisions needed to control spending, the Government have chosen higher spending, financed by higher taxes. Working hard, investing, setting up a business, employing more people—the very activities that drive growth and generate the revenue needed to stabilise our debt—are being taxed more heavily. To give one example, the rise in employers’ national insurance alone means an employer now pays around £900 more a year for every worker on median earnings, and the tax burden is set to rise still further, to the highest level on record.
Then there is inflation. I fully concede that the war in the Gulf has made the fight against inflation more difficult, but that is all the more reason for the Government to double down on measures to cut costs on business. I welcome the Government’s promise to take an axe to the bureaucracy holding back private investment, but why are they stopping there? If regulation is holding back investment and growth, the Government should take an axe to the burdens they have themselves imposed on business and employers, such as their energy policies and the Employment Rights Act—an Act that will impose direct costs on business of around £1 billion a year.
These policies have undermined growth, which is the all-important ingredient to bring down our debt. The Government will rightly point out that there was stronger growth in the first half of this year, but two good quarters do not solve the structural problem. The OBR still puts our potential growth rate at only 1.5% and forecasts GDP per head to grow by just 1.1% a year over the rest of the decade. That is roughly half its pre-financial crisis rate. For debt sustainability, it is that underlying rate of growth—year on year, not a couple of strong quarters—that matters.
Let us put this together. What lies around the corner? A higher-spending Government, extracting ever more tax from a weak, debt-laden economy. There is clearly a debate to be had about the role that the fiscal rules play in all this. My view is that today’s fiscal rules, like their predecessors, can be too easily gamed, and we can debate how to address that, but let us not lose sight of the main point. What matters is whether the underlying fiscal trajectory is credible, and that trajectory is shaped by political choices and political belief. Do you believe the state should be the driving force of growth, or do you trust people and the markets? Should the state encourage people to take greater control of and more responsibility for their lives, or should the state assume ever more responsibility for itself? The answers to these questions will shape our fiscal trajectory and the decisions in next month’s Budget.
The Minister obviously cannot prejudge that Budget, but, that said, there are some simple questions he should be able to answer. First, does he think British business can afford to pay still higher taxes without damaging growth—yes or no? Secondly, the Prime Minister has said he will use “flexibility” within the existing fiscal rules. Can the Minister define what “flexibility” means? Thirdly, what did the Prime Minister mean exactly when he said:
“We’ve got to get beyond this thing of being in hock to the bond markets”?
Finally, what does the Minister think about the current trajectory of our national debt? Is it sustainable—yes or no?
My answer to that question is a firm no. We may not face a debt crisis today, but the horizon is darkening, with weak growth, a record tax burden, sticky inflation, rising welfare dependency and more of our national income consumed by servicing the debts of the past. I do not see this as turning a corner. I see it as proof that, after two years of Labour, with its massive majority, we are on the wrong path and going in a very dangerous direction. We need to change course now, before that thing called the bond market forces us to change, and in a way that will be more painful and more costly.
Let me end by taking us back 50 years to September 1976. Britain had just turned to the IMF for a loan. A few days later, standing at that Dispatch Box, Lord Carrington said something which echoes down the generations. He said that
“you cannot go on spending vast sums of money which you have not got. You cannot go on improving your own standard of life on other people’s money because, sooner or later, they will not lend you any more. … Whether we like it or not—and we do not—and the sooner the better, we are going to have to cut our public expenditure. Of course, it is not going to be nice. Of course, we are all going to be hurt by it, and of course, we shall all have to cut the things we would much rather not cut. Of course, we will dislike it very much. But what other alternatives are there?”—[Official Report, 4/10/1976; col. 953.]
Viscount Chandos (Lab)
My Lords, it is a privilege to follow the noble Lord, Lord Bridges of Headley, and I congratulate him on securing the debate. The challenges facing this country and many others globally because of the current fiscal outlook have been a consistent focus for him, both during his distinguished stint as Chair of the Economic Affairs Committee and since. I welcome my noble friend Lord Pitt-Watson to the Front Bench, as this is the first time I have spoken in a debate to which he will be responding. I should declare interests, as in the register, as a trustee of LAMDA, an adviser to the family office WFO and a director of Digbeth Loc. Studios.
The survey of the fiscal outlook by the noble Lord, Lord Bridges, could be described, perhaps by Sir Humphrey Appleby, as very grounded, verging on the bleak. There is no denying that globally the challenges are formidable, with economies in a more vulnerable position to future new shocks, by some measures, than before the global financial crisis of 2008. As the noble Lord described, the UK is, unfortunately, not a positive outlier relative to the global picture and in too many respects is at the wrong end of the spectrum.
Before I make my observations on these challenges and some of the responses to them, I begin on a positive note by welcoming the encouraging trend in productivity growth that has emerged in recent weeks. Output per job increased by 1.4% in the 12 months to 30 June and has been consistently above average since late 2024. It is premature to call victory or attribute the improvement to the effects of AI, but productivity is so central to the turnaround of the economy and the balancing of the fiscal books that there seem to be grounds for cautious, tentative optimism. It perhaps supports the argument that my noble friend Lord Eatwell made after the Government’s first Budget: that the increase in employers’ national insurance would drive productivity growth more than hit employment.
But for all that, there are powerful headwinds to contend with. The Financial Times this week described the issue of national debt service globally as “a $2tn monster”. The US, France and the UK are all having to pay more debt interest than they spend on defence. This not only poses real challenges in setting steady state spending plans but, as I have already noted, gives less leeway to respond to future financial crises. The OBR, in its long-term forecasting, assumes a financial crisis every nine years. In this week’s announcement by the Dutch central bank that it was moving the physical custody of 14% of its gold from New York and Ottawa to London—an eloquent demonstration, perhaps, of the damage that the Trump Administration are doing to international confidence—it made a strikingly blunt assertion:
“This ensures that DNB is … prepared for severe crises”.
As my right honourable friend the Chancellor prepares his Budget, he is undoubtedly constrained by the commitment in the Labour manifesto not to increase the three most significant personal tax rates. Taxation policy has always been part of the political debate, but perhaps most acutely since the Conservative Party’s campaign—fake news—“Labour’s Tax Bombshell”, which can credibly be seen as having swung the 1992 general election result. It is understandable why the party, scarred by that, has sought to avoid a repeat. But, to be frank, it is not conducive to the best management of the economy in inevitably changing circumstances.
Those changing circumstances include, most importantly, the effects of the war in Iran. The NIESR has estimated that every 10% increase in the oil price reduces GDP by 0.12%. So the rise of 40% or more since the US’s misconceived attack on Iran is likely to have reduced GDP by 0.5%, with the IMF having concluded that prior to this the UK economy was on a positive, improving trend.
I will end on one or two more positive notes. The fiscal devolution started by the last Chancellor and turbocharged by the new Prime Minister has the potential to have disproportionately beneficial effects on growth, employment and housing, as I am already seeing in the work I am doing in the West Midlands. My right honourable friend Gordon Brown made a compelling analysis in the Financial Times of the role of innovation in driving growth and the UK’s world-leading strength in science and technology. I hope my noble friend the Minister can reassure the House of the Government’s understanding of the need to address the fragile state of the higher education sector.
The scale and severity of the challenges that we face are formidable. These are global challenges, faced by multiple countries and exacerbated overwhelmingly by the policies of the US Administration. The noble Lord, Lord Bridges, is wrong to attribute the causes of that challenge to this Government. In fact, in contrast, I am totally confident that the Labour Government—governing, unlike its predecessors, in the national interest—are best placed to find a successful path through these challenging times.
Lord Burns (CB)
My Lords, the noble Lord, Lord Bridges, has outlined the challenges facing fiscal policy very well. I was a member of the Economic Affairs Committee that he chaired so ably, and he has summarised the conclusions of the report of that committee two years ago. Since then, the OBR too has set out the significant risk that UK debt could become unsustainable unless offsetting action is taken. While the previous Chancellor was successful in stabilising the debt ratio, we now need to make significant progress in reducing it, not just in the forecast but in practice. The need for early action is not removed because the debt ratio of other countries is similar or even worse than that of the UK. Having a shared problem might make it feel less urgent, but the UK debt ratio can be brought on to a sustainable downward path only by our own actions.
The noble Lord also set out the initial source of the problem very clearly. Since 2007 we have engaged in three rounds of exceptional expenditure in response to events. There were good reasons in each case why that was undertaken, even if in some cases it was overdone. In one case, the financial crisis, we were trying to protect savings and maintain a functioning financial system; the Covid crisis required support for people who were suffering in lockdown; and there was a sharp rise in energy prices after the invasion of Ukraine. So some of that was right in principle, but I cannot recall any Government giving much warning that these rounds of fiscal support would eventually have to be paid for, even if not immediately. Nor did Governments warn that the longer the delay, the greater the cost in terms of higher debt interest. Taxes were cut when the opportunities arose, and expenditure control proved to be too difficult politically.
While there is general support for changing the fiscal rules to accommodate public sector investment, less has been said about the debt service costs involved in that, at a time of rising and very high global interest rates. Taking out a mortgage means starting your monthly payments immediately. The same applies to government borrowing and we are, of course, experiencing that.
Both the Economic Affairs Committee and the OBR have set out the significant headwinds we are facing, and they are very tough. They include an ageing society, increased defence spending and rebuilding our energy grid to make the best use of renewable energy.
Dealing with these matters will not be easy. In my view, it means a combination of increased taxes, restraint on increases to benefits and improved public sector productivity. As far as possible, this should involve reducing the array of exemptions and tax credits that are characteristic of our tax and benefits systems, and we need closer scrutiny of claims for benefits. The goal should be a wider tax base and a narrower welfare base, and we should be doing our best to avoid the high marginal tax rates or damaging cliff-edge withdrawal rates that are also very evident now.
Faster growth could improve the situation, but we need to be cautious. The OBR has pointed out that if faster growth is simply translated into proportionate growth in the provision of public services, growth on its own will not be sufficient to solve the problem.
Here lies a fundamental challenge. Demand for the major public services tends to increase more than proportionately in a growing economy. We see this with health, social care, education and some aspects of welfare. So, it is not surprising that costs rise more rapidly than the growth rate itself. Indeed, in the case of the triple lock the arrangements mean that pensions will grow faster than earnings. It was designed to produce that effect. This explains why growth alone will not solve this problem.
In an earlier phase of my career, I had close experience of three difficult periods for fiscal policy: 1976, 1981 and 1993. I was an academic and commentator during the first, and a Treasury official during the second and third. In each case, decisive action was taken, even though it involved difficult and often unpopular decisions, as the noble Lord, Lord Lamont, will remember in the case of the 1993 event. But eventually, we saw an improvement in the balance of the economy and improved market confidence.
If coping with excessive debt becomes the priority for a Government, it tends to crowd out discussion of longer-term structural policy and issues such as tax reform, which are so necessary. Once debt is clearly on a downward trajectory, life becomes much calmer, leaving more time for dealing with the longer-term issues that really deserve scrutiny. Above all, if we could get on to a path of a falling debt ratio, we might spend less time discussing the fiscal rules and whether they are a sufficient buffer for the next Budget—and I suspect we would all welcome that.
Lord Hill of Oareford (Con)
My Lords, it is a great pleasure to speak after the noble Lord, Lord Burns, who brings so much experience and authority to his comments. They were extremely balanced and will be well received by all sides of the House.
My noble friend Lord Bridges set out his case with his customary clarity. The figures he gave speak for themselves. The rest of the world is now catching up with the warnings two years ago of our own Economic Affairs Committee. Not a day goes past at the moment without more evidence of the stresses and strains, not just in the bond markets but in the wider world of geopolitics, that are adding to the pressures and bringing closer some kind of reckoning.
Although I agree with my noble friend that the decisions the Government have chosen to take over the last two years—ducking cuts to the welfare budget and increasing taxes on business and employment—have made the problem worse, we on this side have to acknowledge that this is a problem that has been a long time in the making. Whereas in 1997, the Conservatives left office with a surplus—I repeat, a surplus—in 2024, the fiscal signs were already flashing red.
That brings me to the main point I would like to make today. It may seem slightly to one side, but I want to bring it to the discussion. Our fiscal and economic problems are a consequence of structural political problems, and we will not be able to address them unless we also address the whole way in which our political system operates and our political classes have come to behave.
When I started working in government back in the 1980s, the basic operating model for politicians was something like this: the leadership worked out their overall vision and values, and then developed policies that were coherent with that vision. The job of politicians was to make an argument in favour of that vision and seek to persuade as many people as possible of the wisdom of a particular course of action. I am not arguing that this was universally applied, nor that there were not sometimes contradictions, but I do argue that the Government and Parliament were fundamentally transmission mechanisms and that their core job was to make an argument that was as coherent as possible.
We did not obsess over opinion polls. We did not carry out endless focus groups and taxpayer-funded market research. We did not, at bottom, think our job was to split the difference between competing interest groups. Contrast that with what we see today: incoherent and contradictory policy positions to please different lobby groups. For example, there is a drive on deregulation, on which I believe the Government are to be congratulated, but it sits alongside higher taxes on business, employment taxes on non-doms and laws to make it less attractive to hire workers. One set of measures is pro-investment but another is anti-investment. The result is incoherence.
In essence, we have moved the Government and Parliament from a transmission mechanism into one that is always on receive and sits on top of a giant lobbying system, where the plaudits go to the politician who can negotiate the next 24 hours most skilfully or take most plausibly some ludicrous line—ideally, while wearing a high-vis jacket or hard hat. So is it a surprise that our fiscal problems have compounded as our political system has become ever more performative? I remember my noble friend Lord Lamont once saying, “To govern is to choose”. More recently, we have had a Prime Minister who said, “I’m pro-cake and pro-eating it”.
Fortunately, we face a test that will show whether we have a political system that is indeed capable of being serious once again. What are we going to do about the pension triple lock? It is already clear that, in the circumstances we face, it is indefensible economically. But if, as a society, we believe in some kind of intergenerational fairness, it is clearly also indefensible morally. A policy that locks in the transmission of money from a declining number of young people to a growing number of relatively well-off older people—or, if you like, from our children to us—is not the path to a strong, balanced society.
I hope we can rise to this challenge, which applies to my Benches as much as it does to the Benches opposite. As my noble friend Lord Bridges said, we can either take steps ourselves to start sorting out the mess or wait to have change forced on us. I know which I prefer and which I believe is better for our democracy, but honesty about our fiscal situation requires honesty in our politics. To restore seriousness to our fiscal position, we first need to restore seriousness to our politics.
Baroness Alexander of Cleveden (Lab)
My Lords, I also welcome this debate. I thank the noble Lord, Lord Bridges, for bringing it and welcome the noble Lord, Lord Pitt-Watson, to his place. As for the tone of the debate, it is inevitable that the conference season, immediately before the Budget, is a time when all parties lay out their stall, although I have been particularly encouraged by the contribution of the noble Lord, Lord Burns, and the contribution that we have just heard from the noble Lord, Lord Hill, about some of the thoughtful longer-term structural issues with which we are contending as a nation.
The nation’s fiscal challenges are self-evident, and my party in government faces understandable public anxiety. As the noble Lord, Lord Hill, just noted, the party opposite is also contending with some public scepticism about their record in government. As for what that does to our politics, it brings to the forefront the populists: those who peddle easy solutions to these structural challenges and who are determined to convince the country that the answer to our fiscal challenges is to blow up the system. It is not made any easier by the markets being spooked by a US President who, on social media last week, was telling the Federal Reserve in capital letters to lower the rate and who today promised a “cash bung” to those who voted the right way.
That creates a challenge for all of us, but, as the noble Lord, Lord Bridges, recognised, the real rocket fuel for populism and difficult politics is low growth. Low growth is the root of our fiscal pressures. It is a result of the financial crisis, as we have heard, which was exacerbated in Britain by Brexit and then a series of global shocks: the pandemic, the war on our continent, the rising energy prices and the Iran conflict. There is common ground here that on top of those pressures come spending pressures of an ageing population and the need to raise defence spending. All that requires a Government willing to face up to those headwinds, and I believe that is what we are seeing.
Our times demand serious responses. We have heard from the noble Viscount, Lord Chandos, about Gordon Brown and I am going to come to that, but I took inspiration this week from the noble Lord, Lord Hague, who wrote:
“The old Conservative philosophy … is no longer a convincing governing programme. That is because circumstances have changed. We now face ageing populations, housing scarcity, energy insecurity, technological competition with the US and China, Russian aggression, weak productivity, strained public services and increasingly expensive welfare states”.
Those are wise words indeed, and they echo what we have heard in this Chamber today. However, there was also an honest acknowledgement of the new fiscal challenges and an invocation to us all to not be tempted by easy populist solutions. His remedy was growth, particularly innovation and entrepreneurship. Gordon Brown, who wrote 24 hours later in the Financial Times, also urged a focus on growth and innovation, both men arguing for a Budget as an economic event as much as a fiscal one. Encouragingly, the new Chancellor’s inaugural speech on Monday focused on growth and innovation and scaling start-ups in the north.
I will put the case for the Government. Despite the headwinds, the Starmer Government delivered the economic stability that we promised. Growth is the best in the G7. I stress that we are cutting the deficit faster than others in any other G7 economy, although I accept that a sustainable long-term path is something we have to find. Productivity is up, wages are up, business investment is rising, with planning delays, judicial reviews and the Green Book all being tackled and young people put back to work. Meanwhile, the Chancellor has reaffirmed the Government’s commitment to fiscal discipline and respect for manifesto commitments, and wisely has made no false promises on tax. I say to the party opposite, we await what the new shadow Chancellor’s prospectus is.
The last shadow Chancellor told us that his strategy was not to focus on innovation—indeed, he was proposing cuts to the British Business Bank—but for a rather implausible £23 billion to come from welfare. Welfare spending outside of pensions has hovered around 5% of our national wealth for the last 40 years, so there is scant evidence of where the axe would fall. We have been told that half a million children would be pushed back into poverty by restoring the child benefit cap. That, along with raising VAT on disabled drivers and cutting housing benefits, is not the totality of the solution. Nor is cutting overseas aid. That ship has sailed. We are told asylum hotels will be cut—another ship that has sailed. Legal and illegal immigration are both decisively down. Cutting back on some of the extra 150,000 civil servants employed in the last decade and a half is perhaps wise. My point is that the luxury of opposition should not involve aping the populists, because that is not a governing strategy.
We have heard from the noble Lord, Lord Burns, that the way forward may be to look at tax. We have heard from others, including the noble Lord, Lord Hill, that we should perhaps look at the triple lock. There are legitimate differences around where and how spending might be addressed and where the axe should fall, but I simply say in conclusion that we know from the Chancellor that this Budget will be one that sticks to the fiscal rules, restores the fiscal headroom, as it must, and reinforces the Government’s commitment to growth with a 10-year plan to follow which signals where change is coming on devolution, social care and defence. I believe these are the priorities that resonate with the country.
Lord Howell of Guildford (Con)
My Lords, I congratulate my noble friend Lord Bridges on bringing forward this debate—he probably had to do a bit of pushing and shoving—and for his crystal-clear demonstration, which will be hard to challenge, that with our national debt interest we are on a path to unsustainability and no one has a clear idea what to do about it, including the present Chancellor. Fair enough, this is not new, as the noble Lords, Lord Hill and Lord Burns, with their enormous experience, have said. This is an old problem which has its seeds in the past. I can go back further than the late 1970s to 1970, when we talked about a new style of Government and Ted Heath slightly unexpectedly became Prime Minister. We urged that we should start unravelling the almost entirely socialised public sector inherited from the war years and begin to regain some balance between private enterprise and the market economy on the one hand and the necessary government framework of laws, guidance and support on the other. As I say, it is not new, and anyone who says it is all the fault either of the present Government or the past Government makes an interesting comment but it is completely irrelevant to what on earth we do about it now.
I declare my interests, given that energy is often at the root of all these problems. I am a chairman of the Windsor Energy Group and I advise Crystol Energy, both without pay. I also advise the Kuwait Investment Office, which is an enormous sovereign wealth fund that longs to invest, as do others, in the British economy but finds great difficulty in doing so and has vastly reduced its commitment in the British economy rather as the pension fund has been vastly reduced. When I was young, pension funds with their surpluses put 60% of their money in the British economy and mostly in British equities. Now the figure is 3.8%. What on earth has gone wrong? No wonder there is a shortage of resources for investment if our main investors, at home and overseas, are quietly packing their bags and going elsewhere.
I will put four points on the question the noble Lord, Lord Hill, has rightly raised: what to do about it. The roots are deep and the problems will require an enormous change of attitude in the digital age, which will be difficult for a lot of people to face, including a lot of politicians.
First, around the world there are a lot of methods of merging or matching private finance and enterprise with public and state frameworks for basic needs—in particular, longer-term public infrastructure projects which simply cannot be delivered without a Government pump-priming and underpinning but for which there is no state cash left. There is no money. There is no more room to borrow, or if there is, the borrowing cost of interest cancels out what one was trying to borrow. And there is no room to tax, because if you tax beyond a certain point, as we know from Arthur Laffer and many others—although there are exceptions to this—you end up with less revenue, not more. So, the ceiling is being bumped against and there is no way out of that.
Secondly, these new methods that I mentioned, which we invented here under the name of PFI 25 or 30 years ago and which are now called PPP, are being developed and used in several countries. They are not just experiments or hopes for the future, but what is actually going on at the moment. We dropped the idea back in 2018, but a whole range of countries, which I will come to if I have time, are adopting varieties of this method of harnessing private enterprise to public needs. Compatibility between state and private investment can be reached through risk analysis, insurance developments and careful phasing of projects. The whole resources of private enterprise can be brought in, easing the bond markets’ tensions, worries and consequent increases in interest rates for lending us their money. There are opportunities opening, certainly not for any more bogus financial headroom and that sort of thing but definitely for carrying forward some of the projects we need, from potholes to power stations, without burdening the bond markets or government accounting. These are being followed in a number of countries.
Finally, these are immensely powerful new insights that I hope we can pursue and share, aside from the politics. We on this side think that the wrong Government are in office and that they are bound always to bow to the state. That is a statement of fact and raises all sorts of other issues. There is no point in bemoaning it. At this time, we have a role in opposition to try to state some constructive ideas. If the Government borrow them, that is fine—at least we are making progress.
I hope that we can unlock a great deal of progress. A lot of this lies in the great energy transition and providing 24/7 reliable, affordable clean energy in the quantities that are going to be needed if we can ever get growth going. The experts planning our energy future have persistently underestimated the amount of clean, green energy we will need and the amount of investment we will need to achieve that—certainly for our modern growing economy and, even more certainly, to cover the enormous requirements of the data centres we will need to keep up with the world, which are very thirsty indeed. At present, our plans are proving totally inadequate for meeting their needs.
The nations moving this way are the Netherlands, Ireland, France, Germany, Norway, Sweden, Finland, Canada, Australia, South Africa and some provinces and states in Canada and Australia. The province of Ontario is launching a huge new nuclear programme that is much quicker than ours, much more efficient and much more reliable, with the help of the Japanese and without going to its Government. There are many other examples, some of which might well bring down the cost of borrowing, which for this country is too much and too expensive, and we must call a halt. There is a third way of a sort. It does not let the Government or politicians off the hook, but we should realise that the private enterprise pattern for public expenditure of this kind is vital for the projects of the future and is attainable if we think clearly and wisely about it.
Lord Londesborough (CB)
My Lords, I, too, salute the noble Lord, Lord Bridges of Headley, for securing this critical, timely debate and for his compelling opening remarks. It was a pleasure to sit on the Economic Affairs Committee under his astute chairmanship, especially during our inquiry into the sustainability of our national debt. Some noble Lords will remember that we debated the title National Debt: It’s Time for Tough Decisions for some time, as many of us, me included, had little confidence that Governments of any colour would make those tough decisions. So it proved with Keir Starmer and Rachel Reeves, as I fear it will with Prime Minister Burnham and Chancellor Healey—more on that in a moment.
The committee’s two subsequent inquiries raised further concerns about our fiscal outlook: one was on preparing for an ageing society, which, in short, we are not doing; and earlier this year we looked at our fiscal architecture and asked the key question of whether the fiscal framework is fit for purpose. In short, it is not. Our track record, as the noble Lord, Lord Bridges, has pointed out, is disturbing to say the least. Debt is at £3 trillion. It has tripled in size over the past 20 years, and yet we have so little to show for it—witness our anaemic growth rates. The annual interest bill now stands at £110 billion, almost double our defence budget, and our budget deficits continue to run well north of £100 billion a year, financed by yet more borrowing despite our overall tax burden rising above 36% of GDP and heading, I fear, for 40%. The OBR copped a lot of flak for its projection that debt would climb to 270% of GDP in 50 years’ time, but given our economy’s vulnerability to global shocks, let alone our baseline trends, that forecast strikes me as conservative.
That is enough fiscal hammering from me, as I want to focus on the outlook and the need for turnaround. Here I draw on lessons learned from my private sector experience in rebooting companies that have lost their great momentum and become overly dependent on outside financing. Turnaround always involves taking tough, unpopular decisions on costs in the interest of financial sustainability; the triple lock is a classic example. However, far more important than cost controls, turnaround depends on sustained revenue growth. What areas do you need to protect and nurture to accelerate growth? That is the only way out of our fiscal trap, yet Government after Government have failed to address this. Rachel Reeves’s first Budget was a classic example, trumpeting economic growth as the number one mission yet hitting the supply side, our businesses and employers, with an extra £25 billion on NICs, doing huge damage to jobs, growth and investment. I have seen the impact first hand across SMEs that I chair, invest in and advise, and I should declare my interests as set out in the register.
It is deeply disappointing to hear Andy Burnham repeat Keir Starmer’s pledge not to touch income tax, employee national insurance or VAT, because that points to raising taxes on businesses and wealth creators. This Government appear to be hanging their growth strategy on the peg of devolution, “Good growth in every postcode”. It is a mission that may come back to haunt them, because such ambitions will generate pain before gain—if, indeed, we get the gain. It will mean increased spending on reallocating resources and power, recruitment, training, management and execution, and that is before we even address infrastructure. It is a long-term strategy which in parts of this country has some merit, but it requires financing up front and will disrupt output and productivity, adding even more fiscal pressure that will not go unnoticed by the bond markets.
Economic growth is the only way out of our fiscal hole, but we need to address this head on and with realism, so let me conclude by suggesting a pathway. We need a plan and a coherent strategy that delivers a minimum of 2.5% real GDP growth from 2027 to 2032, compared to our current rate of 1% to 1.5%. This would be achieved not by shifting resources around the country or building high-speed railway networks but by addressing the core productivity issues within our workforce of 34 million, in both the public and private sectors.
I am talking about performance: management and leadership, the way we pay and incentivise our workers, recruitment and retention, training and adoption of technology, especially AI. Above all, we need to target productivity gains and reward performance—an enterprise culture, in other words. I contend there are very few organisations or companies out there that cannot achieve a 2% annual improvement in productivity if that is their prime focus.
What would this do fiscally? By adding just one percentage point of real GDP growth in each the next five years, we would see £60 billion to £70 billion a year of additional tax revenues by the end of that period without increasing tax rates. Of even greater benefit would be the impact on interest rates because debt sustainability turns on the gap between the interest rate the Government pay and the growth rate of the economy or “r minus g”. Right now, that gap is unfavourable: gilt yields are sitting at 5.2% to 5.9% against nominal growth—real growth plus inflation—currently running closer to 3.5%. We have to close this credibility gap otherwise our economy will remain chronically dependent on borrowing at unfavourable and unsustainable interest rates while our miserable GDP growth rates continue.
Lord Redwood (Con)
My Lords, the Conservative Government were swept from power, first because they did not deliver on immigration control in the way that they promised but, secondly, because they presided over a very major surge in inflation in the early 2020s, which had been brought about by excessive spending, excessive borrowing, the deliberate repression of interest rates and the artificial creation of very large sums of money by the Bank of England. Like many, I supported the first very substantial injections into the economy when lockdown was first announced. Lockdown took a lot of activity and income out of the economy and a very major offset was needed. However, I became increasingly critical and impatient in the recovery period because the Government and the Bank of England did not seem to understand that we were into recovery and carried on with excessive borrowing, excessive spending and excessive money creation. I and others told them that it was bound to be inflationary, but much of the great British economic establishment was slow to see that and the result was a nasty cost of living crunch that did damage to the electorate and drove the Conservatives from power in a perfectly understandable way.
By 2024, however, the Conservative Government had got much better control of the economy and, for the first six months of 2024, under Conservative direction, the inflation rate came back down to the 2% target. For those six months, it was the fastest-growing economy of the G7. The Government set out a five-year plan in their 2024 Spring Budget, as always, which had entirely credible figures to show the deficit and therefore the borrowings coming down year by year to reassure bond markets. Under the Conservatives, of course, it was considerably cheaper than it is today for the Government to borrow because there was a bit more credibility in the medium-term prospects for controlling borrowing than there is today.
I think the fairest thing to do to try and analyse where we are, because I want the Government to succeed and I think they need to consider very carefully where they are when framing their next Budget, is to compare the plans of the outgoing Conservative Government in the 2024 Budget for 2027-28 with those of this Government. Let us concentrate on 2027-28 because that is when the new Prime Minister and his new Chancellor can make any changes they like. They have inherited the current year and have chosen not to make many changes, just a few incidental, very small increases in spending. They have basically lived with the Reeves/Starmer construction of this year, but let us hope they think carefully about what they want to do for 2027-28.
What have they inherited from Reeves and Starmer? Well, in two Budgets, Reeves and Starmer increased taxes by £66 billion by policy changes—there is also, of course, a much bigger increase in taxes from fiscal drag and inflation—and for 2027-28 they suggested that they wanted to borrow £97 billion more than the outgoing Conservative Government had planned to do. The Conservatives were planning to borrow £50 billion in 2027-28, and the current Government inherits £147 billion. There is then the level of spending: the Reeves/Starmer Government added £145 billion extra spending for 2027-28 compared with the £97 billion that the Conservatives were planning for that year. The total package is to borrow a lot more, tax a lot more and spend a great deal more.
Looking at the economic performance of the last two years, we see that this has not been a benign policy mixture for the economy. Unemployment has gone up and inflation has gone up, not entirely because of world events in the Middle East, but also driven by public sector costs where there has been a very big increase in public sector wages. I have no problem with paying people in the public sector more, but there should be productivity gains to help pay for it, and those have been sadly lacking. We have seen the Government stumbling to maintain tax revenues at the more elevated levels because they have triggered what in the 1970s was called a brain drain. A lot of talented people and a lot of people with wealth have decided that they want to make their lives or to make their investments elsewhere, which is a considerable concern. I have no problem with wanting to tax the rich more than everybody else, because they have the money to tax, but if you overdo it they do not stay to pay the money you wish to raise from them and then everybody else has to pay rather more, because you have lost those easier amounts you can get if you tax the rich in a sensible and internationally competitive way.
As has been made very clear by my noble friend Lord Bridges, the Government have to take action on spending. I do not think higher taxation is going to help get the Government out of this, given that they have ruled out the main taxes on most people. They would have to target the wealthy, the energetic, the people who work harder rather more than anybody else. More of that would do damage to growth and would mean less revenue rather than more, so they have to find public expenditure reductions that can start to bring the budget into a proper shape.
I do not share the view of those who think we should pick on the pensioners or the disabled to make particular sacrifices at this juncture. Those who are genuinely disabled need our proper financial support and I think both parties were right to promise the triple lock in the election and should keep to their word. There are many easier targets, which I have often mentioned, but which time does not permit me to handle today, but my party has set out a very good set of cuts for the benefits bill to start us off.
Baroness Noakes (Con)
My Lords, I congratulate my noble friend Lord Bridges of Headley on securing this debate. The fiscal outlook, as my noble friend set out in his excellent speech, is pretty awful. The upcoming Budget will be particularly difficult. The small headroom left by the previous Chancellor has probably already disappeared. Public expenditure at 44% of GDP is too high, debt at approaching 100% is too high, taxes at 38% are too high and growth at around 1% is way too low. The Bank of England seems incapable of getting inflation down to its 2% target. The backdrop to the Budget could hardly be worse.
The Government have now been in power for over two years. They may want to continue blaming their economic inheritance—as the noble Lord, Lord Livermore, did ad nauseam—but that simply will not wash. We are where we are because of choices made by this Government. They have been true to form: Labour Governments always spend too much, borrow too much and tax too much. The solution is definitely not more of the same, but there is no sign that the new leadership in No.10 and No. 11 will change course.
I will focus my remarks today on two areas: debt, spoken about by my noble friend Lord Bridges of Headley, and taxation. We used to think that 40% of GDP was a de facto ceiling for debt. In the wake of the global financial crisis and then the pandemic, we seem to have normalised debt staying at historically high levels. The fiscal rules require only that debt falls, and that could be by any amount, by the end of the current forecast period. There is no commitment to putting debt on a serious downward trend. The noble Lord, Lord Burns, rightly emphasised the need for this.
Debt has to be serviced, and the cost is rising. As we have heard, the UK’s long-term borrowing rates are the highest for 30 years; 10-year rates are the highest in the G7. Bond yields reflect the market’s view of our economic prospects: we are being judged as weaker than the rest of the G7. Persistent inflation, weak growth and worries about a Government that show no sign of controlling expenditure or moderating debt levels will keep our borrowing expensive. The ultra-low interest rates that we experienced after the financial crisis lulled Governments around the world, not just our own, into seeing borrowing as a cost-free option. But since rates have normalised again, the real cost is now visible and, as my noble friend Lord Bridges said, we will be spending over £100 billion a year on interest. This is way more than on defence.
There are three ways to reduce debt. The Government seem to be betting on growth solving the problem. Many of their policies, however, are positively anti-growth: employment laws and the jobs tax in particular. The two other ways are to spend less or to tax more. I do not believe that this Government will cut expenditure. Does anyone believe that the Government will be able to keep a lid on the out-of-control NHS expenditure? Does anyone believe that they will have the courage to face down their Back-Benchers to cut the benefits bill? If they cannot make headway on these two big-ticket items, expenditure will remain too high.
That leaves taxation. The Chancellor has refused to rule out raising taxes in next month’s Budget, but raising taxes is about the worst thing that he could do. He ought to learn from the last Chancellor’s dreadful decisions that hiking taxes has consequences. Loading more national insurance on to employers will simply destroy jobs, especially entry-level jobs. Increasing taxes on banks, as the TUC has called for this morning, simply means that they will have less to lend to the real economy. Taxing oil and gas companies might satisfy the green zealots, but it will threaten our energy security. The Chancellor may be tempted to satisfy calls from his left wing to tax the rich more, but that will backfire. Wealth taxes have not worked anywhere. Higher rates of capital gains tax are counterproductive, because people simply do not sell assets. Creating higher rates of income tax will drive even more wealthy people to head for the departure lounge.
Some of us were privileged yesterday to hear Dr Art Laffer speak. He was clear that the decline in the UK economy over the past 70 years is highly correlated with periods of high rates of taxation. He was also clear that there is no example of an economy which has been taxed into prosperity. The Government would do well to take note of this.
A serious response to our woes must be rooted in unburdening the private sector so that it can grow without interference. The economy needs less regulation, lower tax rates and increased incentives, and this applies to individual taxpayers as much as to our business sector. The state must play its part by doing less and spending less. I do not think that the Prime Minister or his Chancellor are remotely capable of achieving those things. That is a tragedy for us all.
Lord Davies of Brixton (Lab)
It is a privilege to take part in this debate. I enjoyed the typically powerful speech from the noble Lord, Lord Bridges of Headley. What I think he got right was his comment that this debate is really about political choices and political beliefs. It will come as no surprise to him that, on this side of the House, we have different beliefs leading to different choices; that is as it should be. I will speak about the triple lock, which on the OBR’s figures is a key element in determining the UK’s fiscal outlook.
I support my party’s commitment to the triple lock up to the next election. The inevitable question is: what follows? A number of noble Lords have mentioned the triple lock, and it was raised several times in last week’s parallel debate. I will not mention them all, but it is clearly a big issue. A number of people simply say that we need to abolish it. I am sorry, but this is facile—that is only a part of the equation, because you also have to say what should replace it. Crucially, we must also discuss the right level of the state pension, because the debate about the triple lock is as much about this as the technical details of the revaluation basis. In my view, these are jobs for the Pensions Commission, and I hope that it will address them in its report early next year.
I favour the triple lock because it is highly effective at protecting pensioners, particularly those on low incomes. I take it people understand the triple lock, but what is often missed is that it does not apply to the whole of the state pension. It applies only to the new state pension and the basic pension. The rest of the state pension is tied to the CPI. It does not, of course, apply to all the other sources of income received by pensioners. The net result for most pensioners is that incomes during receipt, as they get older, do not increase faster than those of the working population. There seems to be an implication that pensions are going up faster because of the triple lock. This is only part of the equation, and most pensioners experience a decline in their income during their retirement. The only people for whom it actually leads to a protection—even an increase, in some cases—are the poorest pensioners. This is because, by definition, their only income is the new state pension or the basic state pension.
Any system of pension uprating serves three distinct objectives, hence the triple lock. First, it allows pensioners to share in rising living standards, which I hope we would all support. Secondly, it protects pensioners against inflation. Last but not least, it protects the Government against difficult political circumstances.
The first two objectives could be achieved through linking pensions solely to earnings or prices. The triple lock, of course, goes further by guaranteeing the most favourable outcome each year. That reduces political risk but increases long-term costs through the ratchet effect. As I have explained, the core argument in favour of the triple lock is that it disproportionately benefits poorer pensioners. It is targeted and then recouped from better-off pensioners through them paying taxation like everyone else. For many low-income retirees, the state pension and related benefits make up the majority of their household income, and a significant minority have no income beyond their state support. It is these people that the triple lock benefits.
The 2.5% minimum increase has raised the most questions. This floor was introduced partly in response to the politically controversial 75p weekly rise in the basic state pension in 2000, which complied with the rules at the time but was widely regarded as inadequate. It still ensures that pensioners receive a meaningful increase even during periods of low inflation and weak wage growth.
The policy has helped bring the state pension close to the level anticipated by the 2005 Pensions Commission, which envisaged it being around 30% of median earnings—the sort of level it is at the moment. Coming back to the focus of this debate, clearly the triple lock’s most significant drawback is that it comes with a fiscal cost. It has increased pension spending more rapidly than was envisaged when it was introduced, particularly because the 2.5% floor has been higher than earnings growth over a number of years. Critics argue that pensioners as a group are now relatively better off, but that is not true of all pensioners: as I explained, there are large numbers of pensioners on low incomes. I agree with my noble friend Lady Alexander of Cleveden that we need a reassessment of the triple lock. What are we going to do after the next election? However, as part of that, we have to recognise the value that it brings to the poorest pensioners.
Baroness Lane-Fox of Soho (CB)
My Lords, I too thank the noble Lord, Lord Bridges, for securing this debate and for his masterful opening. I will be more modest than him in my remarks and direct my comments to just one number: that pesky 1%. As we have heard, that number is roughly the rate of productivity growth that the OBR assumes we will reach by the end of its forecast. As we know, it is one of the numbers on which the fiscal outlook turns. Higher productivity means higher wages, stronger tax receipts and more capacity to fund public services. Weak productivity means that every aspiration—better services, better jobs, lower taxes or lower borrowing—collides with the same hard constraint. We spend a great deal of time in this House debating how we divide up the economic pie, but we must help the pie grow faster. Every Chancellor will face increasingly miserable choices otherwise.
Technology is not the only explanation for Britain’s productivity weaknesses, but investment in technology, and the ability to spread it rapidly through businesses and the public sector, is a vital part of the answer. I recently chaired the Mayor of London’s taskforce on AI and the future of work. Our starting point was that the future is not predetermined. AI is not a weather system rolling towards us that we merely observe; we still have choices. We can wait for disruption and deal with the consequences afterwards, or we can act early, shape the change and create opportunity from it. That distinction goes directly to our fiscal future.
Successive PMs have assured us that Britain can produce the next great trillion-dollar AI company, and I for one very much hope that we can. But there is another race that matters just as much: can we get these technologies into the rest of the economy quickly enough to make Britain’s jobs more productive and fulfilling? AI sitting in a data centre is not productive, but AI used well in millions of workplaces might be.
The latest ONS evidence gives us a glimpse of both the opportunity and the problem. Among businesses with more than 10 employees, reported AI use rose from around 12% in late 2023 to 35% in June this year, yet only one in 10 businesses using AI says that it is using it extensively or helpfully. That suggests that, in many cases, AI remains an add-on to existing work, rather than a chance to rethink what work is and how it is done. Having spent three years as president of the British Chambers of Commerce, I can say that SMEs are always at the forefront of my mind. The productivity revolution will not happen simply because another brilliant AI company opens up in King’s Cross; it will happen when a manufacturer in the Midlands, a hotel in Cornwall or an accountancy practice in Newcastle can use these tools to do things better and faster, increasing profits and increasing employment.
My first ask of the Government is simple: do not treat the diffusion of AI through the economy, including in the public sector, as anything less than a national productivity mission every bit as important as the next invention at the frontier. We must help smaller firms to have the skills to use this new technology, redesign processes and build businesses around it.
My second ask is to act earlier. One of our taskforce’s recommendations was an early-action system to spot changes in London’s labour market as they emerge, combining data with what employers and workers are seeing on the ground, as well as where opportunities are available. Its wider approach was to act early, shape change and create opportunity. We need the same discipline nationally. If we wait until somebody has lost their job before we think about retraining them, we have failed. Helping people move into new work is cheaper, more productive and far better than leaving them with the consequences of redundancy. Workers must not simply be the recipients of technological change. The people who do jobs understand best how technology could improve them. If we bring workers into the redesign of work, we are much more likely to use AI to augment people rather than simply removing them.
I welcome the decision to put AI much closer to the centre of government, particularly with the recent appointment of the noble Lord, Lord Vallance, but AI will not rescue government systems and processes that do not work. Success must not be measured by whether Whitehall has an AI strategy; it will be measured by whether it becomes easier for a parent to obtain support, whether businesses spend less time navigating bureaucracy, and whether front-line public servants spend less time moving information between outdated systems. AI can make the Government more productive, but not by bolting new technology on to old and bad ways of working. We must start with the greatest points of friction, and then we must give good teams the freedom, tools and support to fix them.
On Tuesday, I was lucky enough to see Demis Hassabis—as was the noble Baroness, Lady Batters, who I see is in her place. As noble Lords are well aware, he was the founder of DeepMind, and this week he received the Albert Medal from the RSA for his work. He is undoubtedly one of our greatest assets, and inevitably one of the most productive people on the planet. In his acceptance speech, Demis painted an optimistic and exciting vision of an AI future. He sees no reason to proceed with fear. But his caution was this: very few of us have an idea of what is coming, and we are not acting with enough creativity, imagination and urgency to make sure that the UK is in an advantageous position for the next decade. Let us heed Demis; let us be bolder. After all, the test over the next few years is, in some ways, remarkably simple: did that 1% go up?
Baroness Meyer (Con)
My Lords, I congratulate my noble friend Lord Bridges on securing this important debate and on his excellent opening speech.
The Prime Minister wants to “bring back hope”, but he blames Thatcherism and Blairite economics—which he once supported—for Britain’s problems. What is his solution? More state control and more regulation. He calls it “business-friendly socialism”, but how can an economy be business-friendly with more union power and less economic freedom? We have been here before. In the 1970s, the state controlled large parts of the economy, while trade unions wielded enormous power. I remember those days: rampant inflation, power cuts, rubbish piling up during strikes, disrupted transport and economic decline.
The Soviet Union offers an even starker lesson, with state-controlled production, prices and investment. Private enterprise was not allowed. The result was shortages, inefficiency and stagnation. The Soviet Union collapsed because central planning destroyed incentives, innovation and production. Governments cannot create prosperity by controlling the economy, yet the Prime Minister appears determined to take us back to an era in which the Government owned and trade unions ran the economy.
Here lies the first contradiction. The Prime Minister says that growth cannot be ordered from the top down, yet he advocates public ownership of essential services and wants to decide which sectors of the economy should be prioritised. History shows us that Governments are notoriously bad at picking winners. The second contradiction is fiscal. The Prime Minister embarks on his 10-year plan when the fiscal headroom has fallen to just £8 billion, welfare accounts for almost a quarter of government spending and the national debt is approaching £3 trillion. Yet he has already run up a potential bill of more than £50 billion while proposing further uncosted public ownership. Nationalising water alone could cost some £140 billion.
Where will the money come from? Will the Prime Minister break his pledge and Labour’s manifesto commitment not to raise taxes? The tax burden, as we have heard before, is already at a record high. Any further increases will discourage hiring, investment and entrepreneurship and accelerate capital flight. Some 27,300 high net worth individuals and 6,000 business owners have left Britain in the last two years, taking with them investment, ideas, jobs and tax revenues. There comes a point when higher taxes produce less growth and revenue by weakening incentives to work, save and invest. Policies that suppress growth do not protect the poor and vulnerable. Ultimately, they make the poor even poorer.
Will the Prime Minister borrow more? We already spend £110 billion a year servicing our debt—money that could be spent on education and defence. As my noble friend Lord Hannan has said:
“The markets are not interested in moral hazard or in justice. All they care about is whether they will get their money back”.
The bond markets are taking note. As we heard before, 10-year yields are at a record high—higher than under Liz Truss. Some economists warn that Britain could again find itself going cap in hand to the IMF for a bailout, as we did in the 1970s.
Rather than reverse Thatcherism, the Government should remember that her reforms reversed Labour’s economic decline and reduced our debt. With welfare spending continuing to rise as our population ages, we are passing an ever-larger bill to our children. This is the fundamental contradiction at the heart of the Prime Minister’s programme. He wants a bigger state when we can no longer afford the state we already have.
But the Prime Minister has an opportunity to build the pro-business, innovation-led economy he wants. The Chancellor’s recent call for more private investment, more profitable businesses and more wealthy founders is encouraging—but that requires less government, not more; lower taxes, not higher ones; and an economy that rewards enterprise rather than penalising it. Will the Government rein in spending, reform welfare and reverse the most damaging elements of his predecessor’s Employment Rights Act so that Britain can once again be a country where businesses want to start, grow and stay?
Lord Rooker (Lab)
My Lords, I am obviously not alone in enjoying the period I spent on the Economic Affairs Committee under the chairmanship of the noble Lord. I really enjoyed it—and most of his speech. It was one of the most interesting committees I have served on, but I have to say that no Government of any kind paid much attention to our reports. I am very pleased with the appointment of the Chancellor of the Exchequer and have every confidence that he will obtain growth, but there is a need for some reforms of taxation. I will make three little points before two bigger ones.
First, council tax should be revalued, extended up the scale and absorbed, with an abolished stamp duty, into a land value tax. Secondly, why should small businesses want to remain small? The VAT threshold must be dealt with, because we want growth. Thirdly, why on earth should working over-65s not pay national insurance?
I have a declaration to make in that between 1999 and 2001 I was the Pensions Minister and I was responsible for the 75p pension increase. It was not all bad, as the poorest pensioners on supplementary benefit had an increase of over £3. They do not queue up to the TV cameras to say, “I’m poor and I had £3”. I explained this to the Labour Party conference that year. When I sat down on the platform, Gordon Brown said I should acknowledge the standing ovation. It is how you tell the tale. It was not just 75p—there was more to it than that.
Of course, this resulted in the double lock, leading to the triple lock, and it is now unsustainable—I have said so publicly. What is the answer? My answer is a triple average. It is fairer and easier to explain. I have done some calculations and got the Library to calculate it for me: if it had been used in the past three years, the increases would not have been 10.1%, 8.5% and 4.1%; they would have been 6%, 5.9% and 2.8%. The triple average could work after the next election. It is easy to explain and fair. We have to reset the pension—I am not arguing with my noble friend—but the mechanism for changing it could simply be the triple average, which would remove the major public expenditure obstacles we have.
My second main point—this is the message to this Government—is the need to avoid attacking the poorest low-income pensioners. This will happen unless the Chancellor changes the personal allowances—the tax threshold. It is no longer a stealth tax, following the work of the late Audrey Wise and Nigel Lawson and me in 1977. The law requires a vote in the Commons for the allowances to be raised by less than inflation. On 2 December last year, Labour MPs voted to freeze the allowances until 2030-31. They voted for a tax increase. The manifesto is completely out of the way. Everybody knows they voted for a tax increase.
This Government perpetuated the freezing of the allowances started by Jeremy Hunt and Rishi Sunak, and this policy is now dragging millions of low earners and low-paid pensioners into taxation in the first place and millions more into the higher rates. For anybody interested in the technicalities, these days the 1977 law is set out in Section 35(1) of the Income Tax Act 2007. Taxing the very basic state pension—which is what this Government are going to do unless they change the allowances, because freezing them will cause that to happen—will be very bad news. It will be a lot worse than the abolition of the heating allowance, and it has to be dealt with. It can be avoided, but are they going to avoid it?
I understand the pressures, but it is no good saying, “Oh well, everybody’s got to carry the burden”. I do not believe the poorest pensioners have the broadest backs. Why should they not have the basic state pension? It has never happened before, but it will happen unless the Government do something about the threshold. They can do it in a way that does not affect it for everybody else. I do not agree with freezing the threshold in the first place, but the fact is that it cannot be done, as it used to be done, by stealth. You have to knowingly vote for it. I read the debate, and nobody ever told Labour MPs, “By the way, this is a tax increase, and we have to do this because those three people back in 1977 forced us to; it used to be done without that”. It was all about indexing the allowances. Therefore, they used the law—but without telling people what they were doing. I want to tell Labour MPs: you voted for a tax increase and, unless you do something else in the next Budget, you are going to be responsible for taxing the basic state pension. That is not a good idea.
Lord Elliott of Mickle Fell (Con)
My Lords, over the course of this three-hour debate, the national debt will have grown by £45 million. That might not seem like a lot of money compared with some of the figures we discuss in this Chamber, but that is 65p of additional debt for everyone in the nation. Interestingly, when we sat for Questions this morning, with the 21 hours of sitting time over the week, £315 million had been added to the national debt. Sadly for us, Britain’s third-largest taxpayer, Chris Rokos, who gave us £330 million in tax last year, is no longer around to pick up the bill.
The growing national debt is not a new problem. In my early 20s, I founded the TaxPayers’ Alliance. In the spring of 2010, we launched a debt clock tour in Parliament Square. A 14-metre Scania truck carried a 1 metre by 7 metre debt clock, which counted up the public borrowing in real time. The truck visited all four countries of the UK on a 1,300-mile tour with the message, “Wake up to the national debt”.
In April 2010, the national debt was hovering at just below £1 trillion. Between 2010 and 2020, it grew by another £1 trillion. We are currently at £3 trillion, and it is set to hit £3.5 trillion by 2030. Crucially, according to the latest analysis from the TaxPayers’ Alliance, this year’s real national debt—the figure taking into account the £1.5 trillion of public sector pension liabilities and almost £7 trillion in state pension liabilities—will be £11.7 trillion, or almost four times the size of the UK economy.
I agree with other noble Lords that our fiscal position is perilous. We clearly need to address our ballooning spending. I will not attempt to provide a comprehensive spending plan in the few minutes I have, but I would like to briefly touch on two important budget lines: welfare spending and public sector pay.
As the Prime Minister told the BBC in July:
“We have to get really serious as a country at getting the welfare bill down”—
not slowing its increase or freezing it but getting it down. He is absolutely right.
According to table 4.6 of the OBR’s report on the Spring Statement, we currently spend £333 billion on welfare, a sum almost as big as the combined GDP of Scotland, Wales and Northern Ireland. It is also a sum that exceeds the £331 billion of income tax that the Treasury hopes to collect in the current financial year. The key to solving this is obvious: we need to help more people transition from welfare into work, because there is no better form of welfare than a good, well-paying job. Sir Charlie Mayfield pointed out in his Keep Britain Working report that a young person out of work costs the state around £1 million, with the same amount of money lost for the young person in lifetime earnings. Alan Milburn also spoke about this powerfully before the summer. He said:
“What is shameful … is that … for every £25 that we spend keeping young people on benefits, we spend only £1 helping them get into work through employment support”.
I commend the Government for commissioning these reviews and I hope they will be acting on them in the forthcoming Budget.
On the question of public sector pay, one statistic that came out during the Summer Recess caught my eye. Last month’s ONS figures show that private sector pay has risen by 2.8% over the past year, compared to a much greater 6.1% rise in public sector pay. Since January, there are now 110,000 fewer private sector jobs, but 42,000 more public sector jobs. Increasing taxes on a shrinking private sector to pay for an expanding public sector is the economics of the madhouse, and we should not fool ourselves that the way to solve the national debt is more tax rises.
Since this Government came into office, we have seen 24 tax rises: increasing employers’ national insurance, increasing both the capital gains tax rates, restricting business and agricultural property reliefs, freezing income tax thresholds, increasing the energy profits levy, increasing taxes on flights and plastic packaging and raising the climate change levy. If raising taxes were the answer to our economic challenges, we would be experiencing the highest growth rate in living memory.
A different attitude to business is required to get more people into work, enabling us to reduce our spending, increase our revenue and create a society with a more comfortable fiscal outlook. I am reminded of Sir Winston Churchill’s comments on business:
“Some regard private enterprise as if it were a predatory tiger to be shot. Others look upon it as a cow that they can milk. Only a handful see it for what it really is: the strong horse that pulls the whole cart”.
Lord Turnbull (CB)
My Lords, there are two pillars to the Government’s financial framework: monetary policy and fiscal policy. Monetary targets were introduced in the late 1970s, being replaced by inflation targets in 1992. Since 1998, the MPC has been given responsibility to adjust interest rates when the inflation rate target is not being met. With the egregious exception of 2021 where it misjudged the economy after Covid, the Bank has kept inflation reasonably close to target—not perfect, but a creditable record.
Fiscal targets for deficits and debt were introduced in 1997. The governance here is different and the record is much poorer. If the fiscal metrics go off target, it is for the Government themselves to respond. Too often they have not done so. Instead, the metrics have been changed, with new definitions, new baselines and new time horizons. Announcements have been made that have been quickly reversed. Meanwhile, the debt to GDP ratio has continued to rise.
The OBR produces two reports a year. The Economic and fiscal outlook comes out with the Budget, providing a five-year outlook. As a result, it receives quite a lot of attention. The other is the Fiscal risks and sustainability report, which provides projections for another 40 years, starting where the EFO leaves off. It comes out mid-year and receives much less focus, though it is arguably the more important of the two. The two reports appear to have been written by two different organisations. In the first period, the fiscal position improves with a dramatic turnaround in the primary balance by 2030, enough to stop the debt ratio from rising. In the second period, covered by the Fiscal risks and sustainability report, it gets progressively worse all the way through to 2070, when it could have risen by 300%. Neither of these projections on its own is plausible. The improvement in the EFOR five-year programme is because the OBR is required to embody the path being assumed by the Government, even though few people believe it. The path tracked by the FRSR would blow up long before we got to 2070.
If we look through this bizarre first down and then up trajectory, some features are clear. The EAC report of 2024, which we are discussing today, said that the path we are on was not sustainable. Two years later, it is still not sustainable. Not enough is being done on either tax or spending, difficult decisions are being dodged and too many commitments are not being followed through. That many other large economies face similar problems is no comfort. We are not in the world of Tom Lehrer’s “We Will All Go Together When We Go”. Markets may well pick on what is perceived to be the weakest economy outside of the US. Of those, it is the UK that now has the highest cost of borrowing. It would be much better to be an early adopter of a more credible policy.
The term “headroom” can be ambiguous. Headroom, which is seen as a margin providing resilience, allowing time to respond to shocks, is fine, but it has to be replenished in better times. Otherwise, it slips into being a cosy back pocket to get you around the next corner, leaving you no better off to face the next shook.
As society ages, an increase in spending on collectively provided services will be unavoidable, as will spending on defence. Ruling out increases in major taxes would be unwise. The Government will not be able to rely on funding from domestic pension funds to the extent that they have been in the past. It is vital to improve the structure of the tax system as well as increasing the level.
There are many choices to be made, and I have time to mention only a few. As highlighted in last week’s debate on an ageing economy, it will be essential to increase the participation rate of those between 50 and 70, and to help more people into jobs rather than leaving them stranded on benefits. We need to be building more affordable homes to reduce the cost of rents in the housing benefit bill. We need to look at reforming the taxation of wealth that is locked up in owner-occupation. We need a more measured approach on climate change to reduce the cost of electricity closer to that of our competitors, by being prepared to exploit our own fossil fuels rather than importing them, but there many other difficult choices beyond that.
Baroness Morrissey (Con)
My Lords, it is an honour to follow many interesting and thoughtful contributions to this timely debate. I thank the noble Lord, Lord Bridges of Headley.
I bring a distinct perspective as a former bond fund manager. For 15 years, I managed both UK gilt and global government bond funds totalling several billion pounds. As set out in my register of interests, I continue to have several active investment roles. I chair Eton College’s endowment fund, I serve on the board of a US investment company and I chair a US-listed insurance company whose balance sheet is invested mainly in government debt. All these roles require me to keep my finger firmly on the pulse of markets and, I am afraid, make me all too aware of our perilous position today.
Of course, many Governments have seen a sharp jump in their debt levels in the past two decades thanks to the triple whammy of the global financial crisis, Covid policies and the inflationary pressures of the Russia-Ukraine and Middle East wars. Also, nearly $500 billion of debt has been issued year to date by tech companies in the US and that has recently increased the pressure on US Treasury yields, which act as the reference point for all the bond markets of developed Governments.
There is no safety in numbers, as far as bond investors are concerned. Moreover, as the noble Lord, Lord Bridges, mentioned at the start, the UK gilt market has specific structural features that make us more vulnerable to a borrowing crisis in a high inflation, low-growth world.
Today, just as an example, 10-year gilts yield a full percentage point above Italian 10-year bonds. That is a risk premium demanded by investors for the extra risk they see in investing in our government debt, compared to Italian government bonds. To give some historical perspective on that, in January 2012, Italy had to pay its bond investors five percentage points more interest every year than the UK.
Why is the UK seen as a particularly deteriorating credit risk? The bond investors see us as running out of options to escape a fiscal doom loop because of the policy mistakes we have made over several Governments and the idiosyncratic features of the gilt market. I will give a couple of specifics on that to show the order of magnitude. First, a quarter of our debt mountain is index-linked. That is a far greater proportion than other countries. In France, for example, it is just 10%. In a persistently high inflation environment, like today, the UK suffers much more than other nations in terms of the incremental burden financing our national debt.
Secondly, the average maturity of British debt is much longer than other G7 countries: it is around 13.5 years, compared with eight years for France and less than six years for the US. This is a big problem because of the changing nature of UK pension funds, which is resulting in dwindling domestic demand for long-dated gilts. Defined benefit schemes required pension funds to match their liabilities with assets, so they had to buy long-dated gilts, particularly long-dated index-linked gilts, which offer the best match for inflation-linked, final-salary pensions.
However, in today’s increasingly defined contributions pensions world, that no longer applies. Of course, the Debt Management Office is aware of that, and it is going to experiment later this month with what it is calling a switch auction. It is just an operational test; no gilts will actually be switched. It is trying to see if it can reprofile the maturity of outstanding debt. The problem is that holders of long gilts will be crystallising their losses if they swap them for shorter bonds, so that may not fly.
One of the most active sellers of long gilts today is the Bank of England, as it tries to reverse the long period of quantitative easing after the global financial crisis. The bank will announce its plans for the so-called quantitative tightening in a weeks’ time. So, next Thursday is another worrying date for gilt market participants.
Bond investors are acutely aware that there are very limited ways for a country to escape spiralling interest payments on its national debt. My noble friend Lady Noakes mentioned three ways; I will add a fourth. In many cases, a country may be able to try inflating its way out of the problem, by devaluing the face value of the outstanding debt. However, as I mentioned, that is not an option here, because we have the huge preponderance of indexing bonds. The other three are growing our way out; raising taxes, which has been discussed a lot; and cutting public spending—or, of course, some combination of the above.
I will add my two pennies’ worth to the options. We would all love to see robust economic growth. As we all know, over the past two years, the Labour Government have often described this as their priority, but the fact is that their policy actions have undermined and not supported business and growth. Others have mentioned many examples: the increased national insurance burden on employers is the most obvious. As we have heard, economic growth depends on wealth creation, which goes hand in hand with internationally competitive levels of taxation.
My noble friend Lord Elliott of Mickle Fell just mentioned the departure of Chris Rokos from these shores. As well as contributing £333 million to the Treasury coffers last year, he has also been an incredibly generous benefactor to Cambridge University and Eton College. All of us are left poorer by his departure, and I remind those who have the ear of the Treasury that 100% of nothing is obviously nothing.
We are well past the optimal point of taxation rates that yield the most revenue. There is just one option to curb government spending. The noble Lord, Lord Davies of Brixton, talked about political choices, but sometimes we do not have the choice. Sometimes, we do not have that luxury. Today, the warning lights are flashing. There is a headline in today’s City AM:
“Could Britain collapse under the weight of Labour spending?”
As a nation, we are in hock to the bond markets. When I am personally in significant debt to a bank, it is the bank that sets the terms and can call in the loan, raise the interest rate and refuse to lend me more. Unhappy gilt market participants are like banks and taxpayers, and they will vote with their feet. They will not accept vague reassurances about fostering growth or taking responsibilities of a fiscal nature seriously. They need and demand specific, concrete actions.
To avert a fiscal crisis, Chancellor Healey must not raise spending and taxes in next month’s Budget. Instead, he must set out quantified and credible plans to cut spending. That would be the first but critical step towards restoring government finances, so that we can start regaining control of the national debt, escape the fiscal doom loop and start to focus on our economic future.
Baroness Kramer (LD)
My Lords, this has been an outstanding debate, and I join others in congratulating the noble Lord, Lord Bridges, on obtaining it and opening with a powerful speech. I did not agree with all of it, but it was definitely powerful.
I want to slightly change the tone of this debate. I suppose that is strange for a winding speech, but it seemed to me that we had very little attention to the extraordinary strengths that we have as a country. A significant part of our workforce is very highly skilled. Our legal framework is the basis for much of global commerce. We have world-leading sectors in financial services, life sciences, technology and the creative arts—I think the noble Viscount, Lord Chandos, focused on technology—and that is to name but four. We have exceptional universities which breed new opportunities. We have a track record of entrepreneurship, often at the leading edge. We are the place to start a new business.
The noble Baroness, Lady Lane-Fox, focused on AI and digital as an extraordinary opportunity to completely reset where we take our economy. Some people look at this only as risk, but I see this as the most extraordinary advantage if we go from being on the back foot and talking just about strategy and step-by-step minor adjustment to seize the chance of change. Thanks to the noble Lord, Lord Pitt-Watson, I and others had a meeting yesterday with Chris Woolard, who is now the wholesale digital markets champion. For once, I was hearing someone within the orbit talking about serious action at speed. That is the lesson that the Government have to take on board.
Today we have heard about the appalling headwinds that we face as a country, economy and government. I started trying to write down the names but suddenly realised that everybody was naming those headwinds, whether it is public debt to GDP at 94%, taxes at the highest levels since World War II or gilt issues at the highest interest rates since 1988. The noble Baroness, Lady Morrissey, and somebody else, perhaps the noble Lord, Lord Hill, focused on index linking. I have screamed at the Bank of England so often on that issue, and unfortunately it is coming home to roost.
I want to pick up the issue stressed by the noble Lord, Lord Bridges, on demographics and the dependency ratio, because this is something else that I and my colleagues have attempted to stress constantly. That dependency ratio is now at 57.8%. Alarm bells go off when a dependency ratio gets to 50%, and we are well over that point. It is getting worse with our ageing population. We have to address the issue that we have a very small working-age population to sustain our growing elderly population. We dodge that issue. It ties into the immigration debate as well and is so often ignored.
We have to thank the noble Lords, Lord Howell and Lord Turnbull, for bringing in climate change, which seemed to be generally overlooked. Other than a quick mention by the noble Baroness, Lady Alexander, nobody talked about Brexit. How extraordinary. There is a 6% to 8% scarring of the economy. The other blows that we have had have been temporary and we have had a chance to recover from them. This is permanent scarring to the economy and ignoring it is extraordinary. I know that is Tory party policy at the moment, because you cannot be blamed for the damage if everybody forgets about it. On these Benches, we do not forget.
How can we turn all this around? We need to focus on growth, which was part of the discussion here but only a small part. This House will not be surprised that my first proposal is to negotiate a bespoke arrangement for a customs union and single market with the EU. The supposed freedoms that the public were promised by Brexiteers turned out to be few. In economic terms, any benefits were utterly insignificant while the damage has been huge. Businesses, especially small businesses, have struggled to grow without participating in EU supply chains and getting the benefits of an EU domestic market of an additional 450 million people. That scarring of 6% to 8% is not something that anybody can ignore. It is huge. Ordinary people pay the price daily as Brexit harms push up the cost of living.
The noble Baroness, Lady Alexander, and others talked about devolution. If it is done properly then I agree that it can drive growth. Importantly, for it to do so it must be across the country and include disadvantaged areas. The House can therefore imagine my utter frustration when this Government rejected my amendment to the Financial Services and Markets Bill which would have led to a rapid expansion of the available credit to small business to be provided by a growing network of community banks and credit unions qualifying as community development financial institutions. My amendment, which is inspired by the “Fair Banking for All” coalition and campaign, would require the mainstream banks, where they have abandoned local lending, which they have, to fund community development financial institutions.
Little businesses are the backbone of our community. Many want to grow a little bit faster than they would organically but cannot get that loan for the next shop, van or worker or for the workshop extension. We always talk about unicorns, but we forget that the backbone of our economy is in those small businesses that are growing just more than organically. It also has that spread into every area and community. I am afraid that, sadly, the Government will not deliver their agenda of good growth in every postcode without my amendment or something very similar. At present, even though the Government make money available for credit to small businesses, the mechanisms are simply not there to deliver the appropriate lending to small firms. As I have said many times, mainstream banks no longer just do not have the branches, but do not even train their staff in the necessary skills base.
I also agree that businesses which intend to scale up and be the next unicorn need different financing from that which is currently available, in the form of long-term patient capital that can carry high risk. We all want those companies to stay in Britain. I still have troubles with the Mansion House Accord and the recent pensions legislation. They are just so narrow. They are based on taking the tiny pensions of the lowest paid and least financially aware and putting them into high-risk illiquid investments. Most of those investments will fail. It is a very unattractive strategy.
We need a structure that will produce the products that Britons will be willing to invest in. Britons have something like £61 billion in investment savings that could be channelled in large part into these activities. With the end of the defined benefit schemes, we have seen that new products that are attractive to people and meet their risk appetite and return appetite are not being provided by the markets as they are at present, even though there are plenty of willing investors. I suggested that there could be a structure in which the Government encourage risk investment but provide some sort of backstop for the poorest. I thought that no one would take the idea seriously, but the industry is starting to do so and I am now involved in quite a number of conversations around this issue.
However, it needs much more imagination. The Government should focus on driving the private sector to produce the kinds of investments that would attract people, because the money essentially is there. I think we could go on, and all of us could produce a significant number of proposals which could stimulate and drive growth, but the Government will have to pull the levers on it.
As my very last comment on what I want to see, I agree with all those who are pleading with the Government to be consistent. Having a policy of growth and then a policy—the last person to discuss it was the noble Baroness, Lady Morrissey—of raising employers’ NICs is a complete insanity. There needs to be consistency and direction. The Minister will be well aware that many of the voices that have spoken today have said that: set the strategy, set the goal and then keep to it in every policy decision that is made.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful for the opportunity to contribute to what I agree has been an outstanding debate, and I thank my noble friend Lord Bridges of Headley for setting out the scale of the challenge facing the country in his usual persuasive style. He rightly drew attention to the conclusions of the Economic Affairs Committee two years ago that the UK’s national debt risked becoming unsustainable. This was echoed by my noble friend Lord Howell of Guildford.
Our public finances are in a worse state now than two years ago, when Labour took office. The party opposite likes to talk about Liz Truss, but, this morning, 10-year gilt rates were at 5.24%, which was more than in the financial crash of 2008. This is significantly higher than under Liz Truss. My noble friend Lady Morrissey warned us that there is no safety in numbers among bond investors. In some sense, we are
“in hock to the bond markets”.
We have heard that debt is approaching £3 trillion, borrowing was approximately £130 billion last year, and debt interest costs around £109 billion now and is expected to continue rising. We cannot allow this to happen. At the same time, the tax burden is forecast to rise to 38.5% of GDP by 2030-31, which will be its highest level since records began in 1948.
The truth is that our fiscal position is much worse than the public realise, and it will not take anything major to trigger a surge in the bond markets, leading to a crisis. The Chancellor would be wise to study what happened in 1976, when another Healey had to be bailed out by the IMF—and, indeed, the experiences of 1981 and 1993, referred to by the noble Lord, Lord Burns.
The international pressures we are experiencing come at a time when the UK is combining historically high levels of taxation and public spending with weak productivity, pressure on our public services and very little margin for error. Unfortunately, the Government do not have a credible plan to restore fiscal resilience, generate stronger economic growth and put the public finances on a sustainable, long-term footing.
I will make three further points. The first is that the Government’s fiscal rules cannot be a substitute for an economic strategy capable of delivering genuine growth. The Government’s so-called headroom is already extremely limited, but it is not nearly as important as the wider economic context. Growth is forecast at just 1.1% this year, while the deficit remains some 4% of GDP. This is unsustainable.
Over the past two decades, as we have heard, we have experienced a global financial crisis, a pandemic, war in Europe, energy shocks and repeated geopolitical disruption in the Middle East. It would be a reckless Government who constructed fiscal policy on the assumption that there will not be another crisis.
We need over £300 million every day simply to service the national debt—and we can all imagine what a difference that would make to our Armed Forces or our services, or, indeed, in tax cuts geared to generating growth. Dr Arthur Laffer, as we have heard, was in London this week, saying that we are taxing ourselves to death and explaining how, in contrast, over the years, tax cuts have increased revenues and fired growth in the United States.
My second point is that we cannot tax our way out of a productivity problem. The denominator in almost every fiscal ratio is the size of the economy. Without stronger growth, fiscal consolidation ultimately becomes an impossible choice between higher taxes, poorer public services and still more borrowing. Productivity must therefore sit at the heart of any credible fiscal strategy—it was good to hear from the noble Viscount, Lord Chandos, that it might be edging up. That means creating more of an enterprise culture, as the noble lord, Lord Londesborough, said, and using AI effectively, as we heard from the noble Baroness, Lady Lane-Fox. It is right to think of our strengths, as the noble Baroness, Lady Kramer, said. That includes our very strong network of SMEs in this country.
Productivity also requires conditions in which businesses are prepared to invest and innovate, energy is internationally competitive, skills are better matched to the needs of employers, regulation becomes simpler, and, most importantly, people who are able to work, work. The employment rate was estimated at 75.1% in the second quarter, in a soft labour market. At the same time, welfare spending is forecast to increase from about £334 billion to £409 billion by 2030-31.
Alan Milburn has rightly condemned the insane sick-note culture as NEET figures reach an all-time high, with £25 spent on benefits for every £1 spent on employment support, as we heard from my noble friend Lord Elliott of Mickle Fell. A CSJ report has laid bare a worrying post-pandemic trend of graduates coming straight from university on to sickness benefits. That is the opposite of how welfare should function. On this side, we are agreed on the damaging effect of the Employment Rights Act on new employment.
My third point is that we must become much more willing to confront our spending pressures. I agree with my noble friend Lord Redwood on this. The demands on defence, social care, infrastructure and public services will be substantial, especially if the PM seeks to move utilities into public ownership, as my noble friend Lady Meyer suggested he might. Every major new commitment should therefore be accompanied by a credible timetable, a long-term costing, an identified source of funding and a clear assessment of the consequences for wider public finances. That will be our conservative way under Kemi Badenoch.
In politics, we spend a great deal of our time discussing inputs. The Government announce another billion pounds here or another programme there, and present the scale of the expenditure as though it were in itself evidence of success. It is not. We need to know what expenditure actually achieves. The taxpayer is entitled to expect not simply higher spending—an input without an output measure—but better value and better outcomes.
Like others, I was particularly struck by the thoughtful contribution from my noble friend Lord Hill of Oareford. We need honesty over the challenge of things such as pensions, and a change to the 24-hour political system buffeted by the demands of different lobby groups. Incidentally, I agree with the noble Lord, Lord Rooker, that the poorest pensioners should not be taxed by stealth. I was also very concerned to hear from my noble friend Lord Elliott that public sector pay had risen by 6.9% compared with 2.8% in the private sector, with public sector numbers going up by 42,000 and numbers in the highly taxed private sector declining by 110,000. This is not right.
In a typically trenchant analysis, my noble friend Lady Noakes set out the dilemma facing the Chancellor in his Budget on 28 October—we must have some sympathy for him—and the need to learn from the last Chancellor’s record, which has hit business and entry-level jobs so hard. As my noble friend said, there is no living example of taxing into prosperity. I also look forward to the reply to the rather challenging questions from my noble friends Lord Bridges and Lord Howell.
In conclusion, the fiscal outlook is grim. I agree with those who argued that we should tackle that by reducing spending and not by tax rises, which would only reduce growth and risk a downward spiral. Yet today’s leading story is of a visitor levy, which will hit growth, and a TUC request for a bank tax. Is it a surprise that so many high-rate taxpayers are leaving the country?
The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)
My Lords, I thank the noble Lord, Lord Bridges, for securing this debate, and congratulate him on his opening speech. I also thank all noble Lords for their contributions today. It is a pleasure to respond to this debate. In doing so, I must say that I absolutely cannot do justice to the number of comments that have been made and the expertise that has been brought to the debate. But I will try to frame my response around some logic: first, the economic context; secondly, the fiscal rules and OBR; and, finally, the fiscal outlook and long-term challenges. I have to warn that, with the Budget coming up, there are things I cannot talk about because they could be in it, nor can I say anything that could lead to market speculation. But I hope that within the framework I have laid out, I can at least respond well.
I frame my remarks around the lead given to us by my noble friend Lady Alexander. I believe there is considerable consensus in this House. This is an Opposition day debate, and I heard a number of speeches that were a bit polemical, which is understandable, and a few Aunt Sallies about Britain being like the Soviet Union—I think that if you had ever visited the Soviet Union, you would not be saying that. There was also the odd speech that sounded a wee bit funereal about our wonderful, resilient country. But there were lots and lots of speeches which expressed a shared overall goal, which is to drive good growth in every postcode and to back investment, innovation and jobs across our economy. That is what the Chancellor set out in his speech earlier this week.
I believe the choices that have already been taken since this Government came to office put Britain in a stronger position today to deliver those plans and capitalise on the growth opportunities ahead. I know that one swallow does not make a summer, but in the first half of this year we had the highest growth in the G7 and government borrowing fell to its lowest level in six years. My noble friend Lord Chandos mentioned productivity. We need to be very careful about productivity figures, but last year we saw a greater than 2% increase in productivity, which was the best in 10 years when you adjust for the effect of Covid.
The Government are trying to build on our strengths—my noble friend Lord Chandos mentioned our world-class universities, and we have world-leading sectors such as life sciences, defence, technology, creative industries and, as the noble Baroness, Lady Kramer, mentioned, financial services. On the need for growth, which the noble Lord, Lord Londesborough, made absolutely clear, there are a whole set of things, including trade deals and planning reform, that we are trying to do.
Nevertheless, as was made clear in the debate, global instability, conflict and trade frictions are continuing, and they drive up inflation and interest rates around the world. Although these shocks are international in nature, their impact is particularly being felt here in the UK, from the cost of the weekly family shop to the cost of government borrowing. But Britain has shown a resilience in the face of these pressures, and I think the country is on the up. In the context of a more uncertain world, we must continue to make responsible choices, and fiscal discipline will underwrite every promise that this Government make.
I do not want to dwell on how we got to 100% borrowing or on the moment when Britain ended up having the highest borrowing costs among the G7. We are looking for a coherent policy going forward, which the noble Lord, Lord Hill of Oareford, was pushing us to look for. In the past, we have had so many different fiscal rules. Every time a Government were going to break the fiscal rules, they just changed what the fiscal rule was going to be—that point was made by the noble Lord, Lord Turnbull. Both the Prime Minister and the Chancellor have been unequivocal in committing to meet the fiscal rules in the Budget next month with a buffer for uncertainty.
The first fiscal rule, the stability rule, moves the current budget into balance so that day-to-day spending is met by revenues and ensures the Government will only borrow for investment. Previous fiscal rules discouraged investment. The second fiscal rule, the investment rule, ensures that net debt falls as a proportion of GDP, which is what the noble Lord, Lord Burns, was advocating. This keeps debt on a sustainable path while supporting over £120 billion of additional departmental capital spending in housing, energy, transport, and other growth-driving infrastructure—also in some pump-priming, which the noble Lord, Lord Howell, was encouraging us to think about. Taking this approach is responsible: it means the Government will balance the books with a buffer to protect against uncertainty, will control borrowing, and will reduce long-term pressures on our public finances. As the Chancellor said, there is nothing progressive about spending £1 in every £10 on debt interest.
I thought the speech by the noble Baroness, Lady Morrissey, was a classic speech from the House of Lords of such insight and expertise about how the bond market works. I will not try to respond to it in this talk. Beyond the fiscal rules, the Government have also taken a number of steps to strengthen the wider fiscal framework, including holding regular multi-year spending reviews so that departments have certainty on what their funding will be and protecting and respecting the independence of the OBR.
The Office for Budget Responsibility will produce an updated review of the economic and fiscal outlook alongside the Budget on 28 October. As I said at the outset, our economy is beginning to turn a corner; at least I hope it is. It is an uncertain world, and Britain has shown such resilience in the face of global pressures. We see this in the uptick of confidence among many businesspeople, including the successor to the noble Baroness, Lady Lane-Fox, at the British Chamber of Commerce. But clearly there remain challenges to the fiscal outlook. The war in Iran has pushed up energy costs and inflation, which in turn raised the cost of borrowing in all major economies, including in the UK. That is why the Chancellor has committed to reduce borrowing and get debt down, because that is the route to lower inflation, lower interest rates and higher economic growth.
The central point is to get debt under control, as the noble Lord, Lord Bridges of Headley, reminded us. As a result of the action the Government have already taken, borrowing fell last year from 5.2% to 4.2% of GDP. Okay, there is still borrowing, but the lowest in six years, and according to the IMF, for the first time since 2004 we are forecast to be borrowing less this year than the rest of the G7 on average. But this problem, which arose over half a generation ago, will take time to solve. It will take careful thought and clear discipline.
In the longer term, the OBR’s recent Fiscal Risks and Sustainability report confirms the need to boost growth and maintain sustainable public finances, and that is what the Government intend to do. People have raised questions about tax, particularly business tax. I spoke in the House about this only last week. It is true that businesses have been paying more tax, but it is also true that businesses have been responsible for that productivity increase and growth. The noble Baroness, Lady Neville-Rolfe, made a point about the Government stopping going on about inputs and starting to think about outputs. I agree that that is fundamental.
There were lots of questions about pensions and where pensions are invested. The Government are taking action on this by—let me acknowledge it—picking up a baton from the previous Government about the asset allocation of pension funds not being as good as it could be.
We had questions about employment and training. I say to the noble Lord, Lord Londesborough, that a 1% increase in productivity for every business would solve many problems. One statistic strikes me when we talk about people not in work: in the past 150 years there were only two peacetime years when the average annual employment rate was higher than in 2025.
Great things are there for us to do. The corporation tax rate for businesses is the lowest in the G7. The effective tax rate for a single individual with no children on average earnings is the lowest in the G7. The tax paid by a worker on a low or average income is at a historically low level. Lots of good stuff is going on.
For me, the standout speech of this debate was by the noble Baroness, Lady Lane-Fox, about productivity, creativity and imagination. They are in no way the exclusive preserve of Parliament or government. They belong to the British people and British businesses. Fiscal credibility is the bedrock for economic stability and national security, because without sound public finances we cannot give businesses and families the breathing space and stability that they need for the future. The ultimate goal, as the noble Baroness, Lady Kramer, reminded us—we have both congratulated the noble Baroness, Lady Lane-Fox—is growth: good growth in every postcode. It will be delivered not by the Government alone but by the people and businesses of Britain, the strong horse that pulls the whole cart. The foundation for that is a sensible, well-financed Government with real fiscal discipline, and that is what I think this Government are offering to the country.
Lord Bridges of Headley (Con)
My Lords, this has been an excellent debate. Let me start by apologising to the noble Lord, Lord Pitt-Watson, for not welcoming him to his place; this is the first time I have debated against him. I very much applaud his emollient and reasonable style. I think those of us on this side of the House think it is a welcome change from what we had before. We can have a proper debate about the issues before us. I also thank all noble Lords who have spoken from all sides of the House and made such incredibly thoughtful contributions, in particular—forgive me for singling them out—those members of the Economic Affairs Committee who served under me. This is rather like the reunion of a pop group: we are playing our golden oldies.
I will speak very briefly. There was so much to cover that I hope noble Lords will forgive me as I am not going to go into depth and detail on all the points that were raised. At the start of the debate, I listed the Ds that we and other nations face: defence; demographics and the ageing population, which the noble Lords, Lord Rooker and Lord Davies, the noble Baronesses, Lady Alexander, and my noble friend Lord Hill picked up; welfare dependency, which others including the noble Lord, Lord Elliott, picked up; and decarbonisation and the green transition, which the noble Lord, Lord Howell, spoke about.
I missed two Ds. The first D is depressing. This debate can be incredibly depressing. But that said—and the noble Baroness, Lady Kramer, makes a good point, as does the Minister—we do have strengths. We absolutely have strengths as a nation, and it is very important that we do not play them down. I do not for a moment want to suggest that this country does not have massive potential but, if we are to unleash that, we have to be honest about the challenges we face.
The Minister said, and I wrote it down, that he thinks this country is on the up. I would love to think so. I hear him, and he obviously makes a very valid point about statistics that have come out suggesting that productivity might be turning the corner. He hopes it is—I noticed that little tweak on the Chancellor saying that it is turning a corner. When I think of a country on the up, very sadly, the things I see going up are our taxes, our debt and our debt interest. Unless we are honest about this, we will not be able to bring the public with us in taking the tough decisions that need to be taken.
The second D I missed is digitalisation and AI. I agree with the Minister that the noble Baroness, Lady Lane-Fox, is absolutely right to talk about this. AI is the revolution sweeping the world, transforming business models and entire economies. It offers immense potential and massive opportunities, but we also have to confront the challenges and risks it poses. One of the risks that we face right now as regards the fiscal outlook—the noble Baroness, Lady Morrissey, will know all about this—is the immense amount of debt that tech companies are issuing around the world. This relies on productivity, profits and this revolution continuing to gather momentum. That in itself poses a risk, and the noble Baroness is absolutely right to highlight it.
This debate, though, confronts a very simple point, which my noble friend Lord Hill and others made. We have to have honesty about the challenges we face. We are in this position because, over the best part of a generation, as a political class we have not had the courage to confront the public with the consequences of the decisions we were taking, not just in the next year but in the year after that and the decade after that. The noble Lord, Lord Burns, alluded to this. During Covid and the energy shock we ran up enormous bills and enormous debts. We were not honest about that.
We now need that honesty; we need to be honest about our solutions based on clear conviction and clear belief. Above all, we have to be honest about the trade-offs that need to be made in response to the challenges we face. As my noble friend Lord Hill said, we cannot try to tell everyone that we can have our cake and eat it; I am very sorry to say that these decisions are going to be painful. But the British public are not stupid. They know that we as a nation are now living beyond our means. They will reward the politicians from whatever side of the House who speak to them with this honesty and have a credible, coherent plan to get us out of the mess we are in. Choices will have to be made. We all know that a country can spend beyond its means for a time. It can borrow, it can tax more and it can hope that growth will come to its rescue, but we know from our history that if Governments wait too long, they risk losing the freedom to make those choices themselves.
I want to end by thinking about the Budget, which a number of noble Lords have referred to. I think that the Budget will be a battle between two cities: the City of London and the City of Westminster. The noble Baroness, Lady Morrissey, made a point very clearly. There, in the City of London down the road, they are looking at nearly £3 trillion of our national debt, our rising debt interest and our shrinking fiscal buffer, and asking whether we as a nation have a credible plan to live within our means. Here, down the Corridor in the other place, in the City of Westminster, are 403 Labour MPs, many demanding that the Government spend more, tax more, borrow more or, at the very least, do not spend less.
Many of those MPs understandably argue that: indeed, it is what brought them into politics. Plaudits to them; they are standing up for their convictions and beliefs. They believe, quite possibly like the Prime Minister, who holds passionate beliefs, that we took the wrong turn in the 1980s. I end with this thought: we ended up making very tough decisions in the 1980s because, during the 1970s, we ducked them. We consistently pushed things down the road. The circumstances today are no doubt very different, but the lesson is not. We still have the freedom to choose and we should use it, because if we do not take the tough decisions now ourselves, eventually others will make them for us.
Patient Data: Research
(1 day, 7 hours ago)
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Lord Patel
To ask His Majesty’s Government what assessment they have made of the use of patient data for research.
Lord Patel (CB)
My Lords, after listening to the last debate, I am tempted to speak only about how health research data might help economic growth to alleviate all the debt that we were talking about, but I will not. I thank the noble Baroness, Lady Merron, for taking this debate and ,all noble Lords who signed up to take part, despite the brief time for which they are allowed to speak. I also thank the Library for its excellent brief and POST for the publication of its report on the subject of health data research.
I fully support the Government’s initiative to strengthen the collection and use of health data for research but I hope that the commitment from the Government will be longer term and that they will be prepared to do whatever is necessary to make the UK a world leader in health data research. The use of health data to improve healthcare is not new. In the 14th century, plague killed one-third of the population because they did not have the ability to use data and track the epidemic. By 1854, however, John Snow tracked the cholera outbreak in Soho and controlled the spread of the disease. There are many examples of the use of data and epidemiological studies leading to improvements in healthcare, such as the association made in 1954 between smoking and lung cancer and chronic lung disease and, later, the association between HPV and cervical cancer. Most recently and quite importantly, the UK Cystic Fibrosis Registry, kept by the Cystic Fibrosis Trust, identified genetic mutations that occur in some children and adults who suffer from cystic fibrosis, and identified an effective drug that improves their ventilatory function.
The advent of AI and machine learning, genomics and pharmacogenomics, and the linking of such data through machine learning and imaging technology will transform the research using health data for better healthcare and innovations. Better data means fewer deaths.
A strong, efficient health data platform that can be accessed for research is crucial for the success of the life sciences strategy and for economic growth. Currently, the life sciences sector has a turnover of £146.9 billion and employs over 360,000 people. Apart from delivering better healthcare, health data research is the fuel that will accelerate that by adding more than £10 billion annually in value added growth. The UK’s strands for health data curation have the ability to track longitudinal data from a diverse population of 63 million, but the current system is fragmented and scattered across thousands of GP practices, hospital trusts, community health clinics and others that deliver healthcare.
However, the UK health data environment is changing from a siloed system to a national framework. One hopes that the active phasing-out of data sharing, which often led to data breaches, will now stop that from happening. Data sharing will be replaced with the secure data environment, SDE, and the data stay-put model, where the data will stay on one platform and not be shared but rather acted upon. Researchers will be allowed to access only that data, and it will not be exported. The Five Safes model for data access and outputs will make the data secure. The launch of the HDRS, the Health Data Research Service, which is backed by £600 million of Government investment, keeps the promise going. That is all very good, but the verdict is that, while it is a great blueprint, delivery is the test. We have good plans, but let us hope that delivery will follow.
What are the challenges? Currently, regional secure data environments operate in silos in over 180 trusts. Often, they are written and uncoded, which means that using them is difficult. They are diverse, handwritten and uncoded, and they occur in 180 trusts and thousands of GP practices, and are therefore not connected. Data is currently written and collected in different hospitals and general practices but is not unified in any data models. The governance to access data for research is multi-layered, causing bottlenecks. One has to answer to so many different regulators just to be allowed to use the data. If the UK is to become a leader in clinical trials, health data needs to be coded and easily available in every hospital. To maintain public trust, there need to be clear, transparent, and legally binding arrangements as to how data can be accessed and used for the pharma and tech industries, and how the NHS will benefit from the benefits that accrue, both in healthcare improvement and money. I personally approve of the opt-out model rather than the opt-in model, because the latter will not work for health data research.
What are the consequences of not addressing these challenges? If we do not address them, it will affect the NHS; it will affect patients, because they will not receive modern care; and it will affect the UK economy. I therefore have four key questions for the Minister. First, what specific legal mandate will be needed for longitudinal data streams that link GP and hospital data? Secondly, what effective plans will be put in place to end the fragmented secure data environment? Thirdly, on public trust, will the Government legislate that any benefits from the use of and access to NHS data by commercial companies flow back to the NHS? Fourthly, are there plans for trusts to have a workforce, such as data engineers, to clean up the data and produce the appropriate codes that will be used by AI and machine learning to national standards and, if so, how will they be funded? I look forward to the Minister’s answers.
Baroness Nargund (Lab)
My Lords, it is a great pleasure to follow the noble Lord, Lord Patel. I congratulate him on securing this very important debate and on his insightful and excellent introductory speech.
The National Health Service is one of Britain’s greatest institutions. After 30 years as a front-line NHS consultant in women’s health, I believe it can be more than a healthcare provider. The NHS holds the richest longitudinal health dataset in the world. It can help to improve outcomes, accelerate innovation, create intellectual property, patents and high-value jobs, and attract global investment. The new Health Data Research Service presents a significant opportunity. Our ambition should go further, to create the high-quality representative datasets needed to develop and validate AI safely.
AI can analyse data at a large scale in a way that humans cannot, predicting risk, promoting early detection, accelerating drug discovery and clinical trials, and enabling the much-needed shift from treatment to prevention. However, AI is only as good and equitable as the data it is trained on. We need richer data points—not simply age and sex, but ethnicity, disability, socio-economic deprivation, postcode and wider determinants of health—to identify who is missing out and why, why outcomes differ and how to address them. Diseases do not care about borders, and nor should any medical research. The UK should ensure regulatory interoperability with international standards and lead global research with our data. This is essential in particular for rare diseases and cancers, and for ethnic minority communities who are underrepresented in research.
Public trust must be the foundation. Patient consent, privacy, security, transparency and appropriate safeguards must be embedded from the outset. If the challenges my noble friend Lord Patel described are addressed, the NHS patient database can become a powerhouse for health research and AI-driven innovation, and economic growth. Can the Minister say whether the Government will ensure that the Health Data Research Service develops representative datasets for AI research and also pursue international data interoperability, so that Britain can lead in equitable and rare diseases innovation, while driving economic growth? Good patient data can drive good medical research and help deliver good health and good growth together.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank the noble Lord, Lord Patel, for securing this debate. I declare something of an interest, in that I am just back from the ninth World One Health Congress in Lisbon, partially supported by DSAC.
I go to the UKRI to start with the basic fact that the social determinants of health determine up to 80% of health outcomes, with clinical care accounting for only 20%. We must not lose sight of this reality, particularly given that healthy life expectancy is down two years in the past decade. We do not need data to know that poverty, inequality and austerity have enormous health costs. Data collection does not really add to our understanding of a reality that includes the impacts of financial insecurity, poor housing, filthy air and discrimination. The noble Lord, Lord Patel, spoke about economic growth having an impact on health. I would argue that we need a major redistribution of the resources in our society to tackle those things. Waving the magic wand of AI and saying we will fix it with that just does not satisfy.
However, when we come to health data, and there is no doubt it is extremely important and useful, we have a huge problem of trust: patients trusting the system and trusting the Government to govern if their data is handed over. If there are no transparent controls, patients are not going to allow it. I note that the Government themselves, in a letter to the chair of the Commons health committee, acknowledged that, in recent times, tens of thousands of patients have withdrawn their data from use in research projects, with very many of them expressing concern about the involvement of the US defence and health tech company Palantir.
There really is no wonder about that. We need to think about this. Peter Thiel and Alex Karp have said some very disturbing things, but I also go to Palantir’s UK head of operations, Louis Mosley, at last year’s Alliance for Responsible Citizenship. He said Western civilisation was in an existential battle against the “armies of fact-checkers and experts”, lawyers, academics and journalists. Palantir is supposed to be supplying unbiased, fact-based data analysis for the NHS: this is the company that we are talking about.
We know that it had very little track record in health data before it enlisted the aid of the company of the former Member of this House, Lord Mandelson—Global Counsel—and secured this contract. The Government have a really important decision to make on health data and whether they continue with this contract. We must not allow ourselves to be trapped into using these companies. Also, as the noble Lord, Lord Bridges of Headley, referred to in the last debate, we have to ask questions about their financial stability; if we rely on them and they are not financially stable, that is another issue as well.
Lord Tarassenko (CB)
My Lords, I am very grateful to my noble friend Lord Patel for securing this timely debate, in which I only have time to speak about UK Biobank. I declare an interest, as I have been not only a participant since 2007 but also a co-investigator in a research study analysing UK Biobank data to develop AI algorithms for the early detection of atrial fibrillation.
Ahead of this debate, there have been some very biased, negative briefings about UK Biobank—a not-for-profit charity—with multiple claims backed by no evidence whatever. UK Biobank is a visionary project in modern science, admired the world over. It has assembled a unique dataset from 500,000 UK volunteers. Over 22,000 scientists have been approved to analyse the data, contributing to 18,000 peer-reviewed papers. Now, we all know that access to UK Biobank data was offered for a very short period in April on a Chinese e-commerce website. There was swift action to deal with the data breach and the advice from China was that there had been no sales of data.
Since mid-2024, Biobank has been making a transition to its data being available only within a trusted research environment, a TRE, with an airlock. The data from UK Biobank does not contain any personally identifying information. It is de-identified. No participant has ever been re-identified without their active co-operation. All participants were informed of the data breach in China and given the opportunity to ask for their data to be removed. The number of those who did so is staggering: 344 out of 500,000 participants, less than 0.1% of the total number of participants.
This voter confidence, I believe, stems not only from the altruism of the participants but from the awareness that UK Biobank has already enabled new diagnostics and treatments that are saving thousands of lives: for example, through polygenic risk scores being added to heart disease risk measurement, through non-invasive diagnosis of fatty liver disease and through near real-time automated cardiac MRI analysis.
The current UK Biobank model for patient data research could be scaled up as a result of the introduction of the single patient record. I hope that the Minister will be able to confirm that the NHS Modernisation Bill will make this possible.
Lord Davies of Brixton (Lab)
My Lords, I very much thank the noble Lord, Lord Patel, for introducing this debate. I very much agree with the points he made and I hope the answers will be forthcoming. Clearly, I support the use of patient data for research; the benefits from medical innovation, prevention and treatment are substantial. But I want to focus on a narrower issue: the gap between what we know about public opinion and how policy responds to it.
The evidence consistently shows strong public support for the use of health data in research, yet the same evidence also shows continued concern about how data is handled and, in particular, the role of private companies in accessing and using that data. These concerns are acknowledged in many reports but are too often treated as secondary. This is especially important for mental health data. Research indicates that willingness to share mental health information remains high and differs only marginally from willingness to share physical health data. However, trust is critical. People’s confidence depends not simply on whether data is used but on who is using it and for what purpose.
For those with stigmatised conditions, the consequences of any misuse or breach can be profound. Recent events have demonstrated that public confidence cannot be taken for granted. I was not going to mention UK Biobank, but since it has been mentioned, I hear the defence clearly. I am a fan of it and a participant in it, but that case illustrates the problems we face, because once trust is lost participation may decline, undermining the very research that depends on public co-operation.
I therefore ask the Minister two questions. First, will the Government consider establishing a standing oversight body with substantial patient representation to review access to particularly sensitive categories of data, not least on mental health, and to publish the reasons for its decisions? Secondly, where commercial organisations benefit from access to NHS data, what steps will the Government take to ensure that the knowledge gained is returned to the NHS and to patients?
Lord Mair (CB)
My Lords, this House’s Science and Technology Committee, which I chair, has been investigating innovation in the NHS, including the use of patient data for research. We expect to produce our report in the next few months.
There is no question that the UK has unique and exceptionally rich health data. Better use of it would save lives, benefit the NHS and grow the economy. However, enabling access to this data for research has been a long-term policy problem. Professor Cathie Sudlow’s review warned that access is in danger of going backwards since the pandemic. The £600 million Health Data Research Service, the HDRS, is intended to help address this. It has the potential to be transformative, but there are two key areas of concern: funding and public trust.
First, on funding, after its initial five-year budget period the Government have set a target for the HDRS to be self-funding through commercial partnerships. But since there is not yet clarity around which services it will offer, what its expenditures will be and what prices it will charge, we cannot assess whether this is realistic. High access fees on existing health data research projects already lock out life sciences SMEs and could push researchers overseas, where they could access health data more easily. The self-funding model risks the HDRS ending up dependent on large pharmaceutical companies just to maintain its operations. Could the Minister explain how and why the department decided that the HDRS should be self-funding, and will she publish the analysis behind that?
Secondly, there is the question of public trust. Its importance has already been referred to by my noble friend Lord Patel in his excellent opening speech and by other noble Lords. There is a long list of well-meaning policy initiatives to enable access to patient data, including care.data and the GPDPR, which were undermined by a loss of public trust. Public support for using health data for research is real but conditional—it is undoubtedly weaker when it comes to commercial uses. Trust cannot be assumed. It has to be earned through transparency, clarity about how data is used and visible, tangible benefits to patients. Can the Minister tell us how the HDRS will become a trusted data custodian? What safeguards will it use for patient data and how is it going to engage with the public?
I hope the Minister will tell us how the HDRS will address these important issues about funding and public trust. It is vital to ensure that we can realise the immense opportunity offered by full use of patient health data.
Lord Weir of Ballyholme (DUP)
My Lords, I join others in thanking the noble Lord, Lord Patel, for securing this debate. Across a range of medical conditions, we are hopefully on the brink of medical advances, underpinned by robust research, which have the opportunity to save lives or transform them for the better. With the structure of the National Health Service, we have a unique asset which puts us in a much better position than most other countries across the globe.
Data can be of major benefit when it is collated correctly by government, its quality is uniform in nature and it is used effectively. I will give an example from outside the health service. During the pandemic, in Northern Ireland we had a single education authority which held all data for every person in Northern Ireland on free school meals and the uniform grant. That meant that, when support needed to be given to families in need, we could identify them straightaway. About 98% of families could be helped from the very start, which contrasted with most areas of Great Britain, where the data was quite often of a different nature and fragmented between different local authorities.
I think that the Government’s response to the Sudlow review, in terms of the HDRS, is the right way forward, but there are four conditions which are critical to implementation. First, it is about not simply the quantity but the quality of data, particularly as most health data tends to be qualitative in nature. As has been highlighted, it is critical that data is codified, but must also be coded in a consistent way, and that we have linkages between datasets.
Secondly, it is critical that we provide clarity and certainty for medical companies and researchers on what can be available. We need to ensure that data is research ready and that companies know what data they are getting, what the cost will be to them and how long they can have that data. That will enable them to plan research for the future.
Thirdly, as has been highlighted, public trust is critical. One of the main barriers whenever the Government looked at some form of national identity was public concern over how their data would be used and whether it would be secure. Particularly now with malevolent foreign states and criminal gangs, we know that there is a risk of data breaches and data capture, so we need to ensure that what is put in place is secure from the start.
Finally, it is important that we are comprehensive in our approach to geography and subject matter. We need to ensure that, for example, if we are going to integrate social care, that is factored into data provision, and that we have systems which take account not simply of NHS England but of services across the UK, involving all the devolved institutions working together to provide that data.
Baroness Finlay of Llandaff (CB)
My noble friend Lord Patel, in introducing this important debate, spoke about health data secure systems. I will speak about the Secure Anonymised Information Linkage system—the SAIL database—based in Swansea and funded by the Welsh Government, which runs on the mantra of “public data for public good”. It has been going for almost 20 years and has data reaching back a quarter of a century. The SAIL Databank was highlighted in the Health Data Research Service (HDRS) Digital Ecosystems Analysis report, because it has expertise in data pipelines, advanced data linkages and secure research infrastructure, powered by the Secure eResearch Platform, or SeRP. These capabilities are essential for the future of health data research.
The SAIL database is very widely trusted, because it was so carefully set up and is so carefully managed. The report identifies it as one of the UK’s established examples, with
“documented transformation logic and quality assurance”
built in. The database has an extensive number of research projects internationally, and it reinforces the importance of trusted research environments, TREs, and secure data environments, SDEs, where approved researchers analyse sensitive data within secure settings, rather than downloading or transferring information. That model has maintained public trust while enabling high-impact research.
Professor Simon Thompson, a co-director of the SAIL Databank and SeRP, has pointed out that they have been
“recognised as a benchmark for the UK”
and that their work linking
“Welsh population data across health, education, housing, justice and beyond shows what’s possible when secure, person-level linkage is done properly and at scale”.
It is one of the leading environments.
Sharon Heys, the head of legislation and due diligence at SeRP, has discussed the difficulties in defining the lines of anonymisation and whether data is likely to be identifiable. I am grateful to my noble friend Lord Tarassenko for talking about the Biobank data. I had the privilege of being on the ethics committee as Biobank was being set up. The durability of Biobank and of SAIL represents the importance of considering all aspects before you even get started.
Baroness Freeman of Steventon (CB)
My Lords, I have worked on decision aids to help patients and healthcare professionals, and I am also an unpaid adviser on the board of OpenSAFELY, a system for allowing research to be carried out securely on data.
Every healthcare decision we make is based on knowing what has happened to people like us in the past. Knowing the outcomes for thousands of people and how much those outcomes vary is the only way we can do better than just blind hope. It allows us to say, “Out of every 100 people like you who have taken this option, X had this outcome”. That makes all the difference for those faced with a hard decision. For those developing potential new treatments, analysing data helps them to see those outcome differences in detail. Shared information is the whole basis of medicine. We in the UK have unique health data, and we must do all we can to continue to learn from it and to communicate it to patients.
On the other hand, I know how people feel when their trust is undermined. Society works by spreading the costs and the benefits across many people, but industries such as insurance and marketing benefit financially if they can target their products to individuals. They would love to get their hands on our medical data. As other noble Lords have said, when you talk to people, they say that they share their data for the benefit of society but do not want it to be used for things that stratify society such as differential insurance pricing, differential access to healthcare or welfare, or profiteering—quite understandably.
Some people’s experience has been that of trust abused—healthcare records accessed or used inappropriately. Every abuse of power we learn of undermines trust a little more. The thing about data is that you need it to be representative. If trust is lost from some groups of people, we will end up losing the data of those groups of people; that erodes the value for everyone, especially those groups themselves.
If you want to be trusted, you need to be trustworthy. Demonstrating trustworthiness takes dialogue, listening, honesty, owning up to mistakes, good faith and trying to do better. Where there is a breach, like at UK Biobank, it needs to be fully and transparently investigated with lessons learned. Everyone needs to know that their voices are heard, respected and acted on. Everyone should be able to say what they want to happen to their data. If they do not want it shared, that has to be respected too.
I do not expect that my doctor’s consultation will be recorded and uploaded to AI for note-taking. For me, that is sharing my data, and I do not know with whom. As the National Commission into the Regulation of AI in Healthcare today reported from its consultation,
“a majority of participants believing that patients should be informed when AI has been used in their care”.
What are the Government’s plans for data-sharing opt-outs, and how will they ensure that they are always respected? Is consent always going to be explicitly sought for AI during consultations? Are patients being meaningfully involved in dialogues about all the uses of their data, as the Government make plans for more? We have to be able to answer “yes” to all these questions before we can reap the benefits that our data should give us.
Baroness Gill (Lab)
My Lords, today I address a challenge that sits at the intersection of public service and my professional background, and I thank the noble Lord, Lord Patel, for this timely debate. Over a decade ago, I was working in the data analytics sector. It was an era when my colleagues and I routinely repeated a phrase that has now become a bit of a cliché: “Data is the new oil”. We were at the beginning of a digital bonanza, watching a frontier expand while Governments maintained a largely laissez-faire approach, long before modern privacy regulations were covered by the Data Protection Act and GDPR that we rely on today.
I raise this because the data landscape has evolved exponentially since my time in the industry. Today, the pressures to find solutions to chronic diseases are immense. While I deeply share the health professionals’ enthusiasm for laudable life-saving research, those of us with backgrounds in data know a quiet truth. In the rush to find health solutions, individual privacy can inadvertently be compromised if our security frameworks do not evolve as fast as the technology.
We had wake-up calls this April, and some noble Lords who spoke before me highlighted the case of rogue researchers at a partner institution in China who violated their contracts and attempted to list the data of 500,000 UK Biobank volunteers on Alibaba. It was a near miss for our research ecosystem. Thankfully, swift action prevented actual sales and the data itself lacked direct personal identifiers but, as your Lordships’ House knows, the methods of data manipulation have grown sophisticated—far beyond what we imagined a few years ago. The rise of advanced artificial intelligence has fundamentally changed the game.
Today, deidentifying data is no longer a permanent shield. With modern AI algorithms, bad actors can cross-reference anonymised health files with external commercial datasets to reidentify individuals with terrifying ease and accuracy. If the public begin to fear that AI will be used to turn their altruism into exposed personal medical records, public trust will evaporate. We cannot let that happen. I urge the Minister to secure the system so tightly that public trust remains unbreakable. I urge a shift away from data extraction entirely, moving instead towards trusted research environments and requiring external commercial players to run their AI analytics inside a secure government-hosted cloud, where they can query the data but never download or export raw files.
Baroness Murphy (CB)
My Lords, I take this opportunity provided to us by the noble Lord, Lord Patel, to talk about the data for research for the greatest health challenge of our time—dementia. We need to improve the quality, accessibility and use of dementia data to support research, which is in an extremely poor state. We identify people too late, if at all. There is poor follow-up and data linkage, and difficulty matching people to the right trials. One problem is that people get referred to memory clinics over here, often remote from hospital services there. That is good for access, but where there are no links to research organisations, diagnosis is rarely followed up and, if you have a mild problem, you are never seen again. There is a wholesale lack of understanding that if you wish to research dementia, you need to understand that social care services, both statutory and independent providers, are where the subjects are. Coding is inconsistent. Data is often unusable. Those eligible for clinical trials are invisible to research, so recruitment to trials is very low indeed.
Over the four years from 2021 to 2025, dementia trials recruited only 551 participants, compared with 24,000 in cancer. The UK has strong basic sciences, major data resources, early phase trial capability and a trusted regulatory environment. However, the science is moving rapidly, and while the UK now has a major opportunity to build on these strengths and become a global leader in dementia research, we are very constrained by the lack of national leadership to align the science, diagnostics and trial delivery. We are even further away from the NHS adopting results and realising the full value of government investment.
Governments since the early 1920s have done some very positive things. The Dame Barbara Windsor Dementia Goals programme in 2022 and the Medical Research Council’s £20 million investment into a dementia trials accelerator were excellent initiatives, but we need to go further and faster. Does the Minister agree that we should use the modern service framework to improve the quality and usability of dementia data and ensure that people are not lost to research after diagnosis? BARBARA is the brain ageing registry for biomarkers, access to trials, research and adoption—it is a marvellous name; I would love to know who thought that up. Surely the Government should make BARBARA a government priority by 2030. I ask for that to happen.
Baroness Brinton (LD) [V]
My Lords, it is a pleasure to follow the noble Baroness, Lady Murphy. I congratulate the noble Lord, Lord Patel, on securing this debate. As an obstetrician, clinical teacher and academic, his exceptional work for well over 50 years has reduced the risks to women in pregnancy and childbirth. I am sure that patient data will have been key at every stage and contributed to the life-saving and life-changing therapies and treatments.
From these Benches we are clear that patient data must be available for medical research. I thank the Alzheimer’s trusts and others for their briefings on the real progress in treating diseases as well as the hopes for future research. I especially thank the Cystic Fibrosis Trust. My dear childhood friends, Julie and Vivienne Gastor, both had CF. All their lives they took dozens of tablets every day to mitigate their symptoms. In the early 1960s there was no hope of tackling the underlying disease and, as they and we knew would happen, they died as teenagers in the early 1970s.
These days, using patient data, eligible people with cystic fibrosis can receive new drugs that treat the underlying causes by targeting the faulty CFTR protein. A partnership involving the CF registry collects evidence on their effectiveness in routine care before NICE appraises the therapies. This has meant that people with CF are able to access the new drugs while effectiveness data is still being gathered. What a life-giving transformation.
However, we have also heard in the debate today of concerns about the wider use of patient data, especially regarding AI. It is prescient of the noble Lord, Lord Patel, to have called this debate before your Lordships’ House starts to consider the Government’s health Bill. The BMA has told us about threats to the common-law duty of confidentiality of patient data—that patient data can be used beyond the narrow protections available for use in academic research studies, that data functions would move from NHS England to the Secretary of State.
This is not the first time that a Government have tried to change the data protection for patients regarding their own personal and medical data. From these Benches, we will challenge the Government to keep the research black box protections which my noble friend Lord Clement-Jones and I negotiated, with Labour support, during the passage of the Health and Care Act 2022. We will do this because—this gets to the heart of today’s debate—the vast majority of patients, doctors and academics believe that it is vital that patient medical data is made available for medical research but, and this is key, with the data securely, appropriately and strongly anonymised and pseudonymised.
Lord Kamall (Con)
My Lords, I thank the noble Lord, Lord Patel, for securing this debate on using patient data for patient-centred research, health and social care. I also thank all noble Lords who spoke and refer the House to my interests in the register—I will not name them all, because that would be the rest of my three minutes.
We can have the most innovative healthcare systems in the world, but that will be meaningless if patients do not trust the NHS and other health and social care providers with their data. There is some consensus on the need to collect and share patients’ data to improve patient care and research, not only for today but for the research that will drive the innovation of tomorrow. Currently, not all patient data is digitised or shareable. Records do not always follow the patient. Information is often duplicated, delayed or not available when most needed. Although we hope that the single patient record and Health Data Research Service will respond to that challenge, the key will be patient trust.
First, recent events that have been mentioned, such as the UK Biobank incident, have shown how fragile public confidence can be when governance and, outside that, cyber security, are not watertight. How does the Minister’s department intend to address the problem of researchers downloading patient data to work in less secure environments, sharing it on sites such as GitHub, or even perhaps selling or offering to sell it—they did not actually sell it—as we saw? Secondly, can the Minister tell the House whether organisations and individuals accessing patient data for research will be required to meet minimum cyber security standards? Thirdly, how will they address the concerns of civil liberties organisations such as medConfidential, which have found UK Biobank’s response less than reassuring? At this point, I should also thank the noble Lord, Lord Tarassenko, for his reassuring points on that particular incident.
Nowhere is the need to get this right clearer than in dementia, as the noble Baroness, Lady Murphy, said. It is the leading cause of death in the UK, affecting individuals, families and the economy. A recent Alzheimer’s Research UK report tells us that the UK has world-class medical science, major data resources, early-phase trial capability and a trusted regulatory environment, but that progress is constrained by weaknesses in data co-ordination and implementation. Without high-quality data and interoperable systems, researchers and clinicians cannot identify patients early, recruit them into trials, evaluate new diagnostics or scale treatments across health and social care. This is not a technical detail; it is a foundation on which meaningful progress to diagnose and treat dementia will stand or fail. Will the Minister tell the House whether her department has considered how to connect existing initiatives so that dementia data is linked, accessible and usable for research?
Real progress will depend on confidence: from clinicians that systems help rather than hinder, from patients that their data is secure, and from the wider public that data governance is transparent, proportionate and accountable.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, I congratulate the noble Lord, Lord Patel, on securing this debate and on his acknowledgement of the importance of patient data to research and of what the Government have done to date. I also thank noble Lords for their very thoughtful and informed contributions. I very much understand the point about trust, which has been made several times. We will come back to that, but I want to assure all noble Lords of the understanding that it is not always whether people have distrust because of something factual; if they feel distrustful, that in itself is a challenge for us.
We have some of the richest health data in the world, thanks to our diverse population and because we have an NHS that has supported and cared for us for some 78 years; we are fortunate indeed. It is the case that patient data drives life-saving discoveries. The noble Baroness, Lady Brinton, spoke very personally to that point, and I know many noble Lords could also draw on their personal experience to do so. It helps us to understand disease and to develop new treatments, many of which we could never have dreamed of.
This is also essential to improving the nation’s health and prosperity; it is key to our life sciences sector, and to creating jobs, driving investment and powering innovation. Ensuring that benefits flow back to patients and the public, as the noble Lord, Lord Patel, asked for, is also, I agree, essential. That is why we have published a value-sharing framework for NHS data, and also why we will charge organisations for access.
I can assure my noble friend Lord Davies, who asked about an oversight body, that the confidentiality advisory group is the independent oversight body; I feel that is probably what he seeks. It decides whether confidential patient data can be used for research without individual consent. As many noble Lords have acknowledged, we all know that people do want their patient data to be used for research, but I completely agree that this trust is conditional on our keeping the data secure and making that known.
We are committed to moving from a system of data sharing, in which copies of people’s data are sent to researchers, to a system of data access by default, using secure data environments. The noble Lord, Lord Patel, spoke to this very point. Perhaps I can give some further outline and further reassurances and pick up a number of the questions. On any key questions that I cannot answer because of time, I will be glad to write to noble Lords.
The noble Lord, Lord Patel, said that NHS England now uses secure data environments—SDEs—as the default route for accessing data for research. Its network brings together around 300 local and regional datasets that were not available previously. The Health Data Research Service—HDRS—will build on that foundation by developing a much clearer route into the system and more consistent processes. That is important more broadly because, although investment in secure data environments had begun previously, and services were being established, we are now taking the system from where it was—as has been said, it was somewhat fragmented—to a coherent approach. I can say to your Lordships’ House that a simpler, safer and more accountable set-up is where we will get to by the end of this Parliament.
In answer to the point raised by the noble Lords, Lord Patel and Lord Weir, last year we commenced powers to allow us to mandate information standards and to create binding rules across both GPs and trusts. Yes, there is more work to do, but I think that sets us absolutely in the right place. There are some examples of very good practice. We can look to Greater Manchester, where they have linked GP and hospital data. This is not commonplace, because it is GPs who currently decide, on a practice-by-practice basis, how their patient data are used. We are currently running a programme of national engagement with GPs on the use of patient data, and we will use that to work with GPs and other primary care professionals to improve the use of GP data in the future. Our new guidance on enabling safe access to UK human genomic data demonstrates that we expect human genomic data to be accessed through secure data environments—and, I would emphasise, only by approved researchers.
I agree with my noble friend Lady Gill that we have to act swiftly and robustly where things go wrong. Of course, we minimise that possibility, but we have to be realistic.
I am grateful to the noble Lord, Lord Tarassenko, for setting out the facts on Biobank, to which my noble friend Lord Davies also referred. I will not repeat the points he made, because I share his analysis.
On the federated data platform, I say to the noble Baroness, Lady Bennett, that it is not used for research; it supports NHS operations and direct care. This means that opting out of sharing your health data for research and planning will not stop your data being used by the FDP to support your care. That is an important reassurance to those who wish to opt out of sharing their health data. As I mentioned, the FDP contract will be reviewed ahead of the February 2027 break clause.
I say to the noble Baroness, Lady Freeman, that the issue of gaining and maintaining trust is key. That means giving people meaningful choices over their data. So, following public engagement, we are reforming how people can opt out of having their data used for planning and research, and making it clearer and simpler, so that they do not feel bound should they not wish to participate.
As noble Lords have said, it is true that people generally support the use of patient data when they understand who is using it, why it is being used and for what purpose. I accept that awareness remains low, so we have to be transparent about its purpose, as well as maintain strong safeguards and involve the public in decision-making.
On the safeguards about which I have spoken, we want to make it easier for legitimate researchers to access data. The Sudlow review described just how long it can take for approved researchers to access health data. That is an issue. So, through the NIHR, we are investing around £1.7 million a year in research and research infrastructure. Alongside that, the NHS data and analytics academy is developing the workforce of data engineers, analysts and other specialists we need, as per the point of the noble Lord, Lord Patel, in order to turn this into better treatments and care.
Our NIHR reforms mean that clinical trials are being set up some 47 days faster than last year. But we want to go further and faster, which is why we have established the HDRS. I say to the noble Baroness, Lady Murphy, that the question of dementia research will indeed be one for the HDRS.
The noble Lord, Lord Mair, asked about HDRS. Processes will indeed be streamlined. On the matter of funding, I say to him that the future funding model is to be developed and we certainly will take into account the patients and the public. I am sure that is something we will want to develop further.
This has been a helpful debate. We are moving towards a coherent strategy. A number of other questions were raised, including from the noble Lord, Lord Kamall, and others, and I will be glad to follow up on those. For now, I hope this will take us forward and that we can all move to using patient data to better manage how we provide our health services.
Home Owners and Home Ownership
(1 day, 7 hours ago)
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Baroness Eaton
That this House takes note of home owners and levels of home ownership.
Baroness Eaton (Con)
My Lords, I open this debate with both a sense of history and a sense of urgency. For generations, across parties and across social classes, the desire to own one’s own home has been one of the most powerful and consistent aspirations in our national life. It has shaped communities, underpinned family stability and helped to create the social and economic resilience on which a civilised society depends. It is not a narrow economic goal, but a means for profound social good. Yet today, for too many people, especially the young and those on modest incomes, home ownership feels less like a realistic ambition and more like a distant dream. I want this afternoon to remind the House why this aspiration matters so deeply and to highlight how recent government policies, sometimes by design and sometimes by neglect, are undermining it. I hope to suggest how we might adopt a more hopeful and practical approach.
Home ownership is not simply about bricks and mortar; it is about roots, belonging, agency and responsibility. Families who own their own homes are more likely to invest in their neighbourhoods, voluntary groups and civic life. Children enjoy greater stability with deeper ties to schools, friendship networks and community support. People are better protected against economic shocks and the insecurity of short-term tenancies and sudden rent increases. We know from decades of experience that home ownership can be a ladder of opportunity, enabling families of modest means to build an asset over time, support retirement, help the next generation and weather life’s storms.
However, the wider context is deeply troubling. Home ownership in England now stands at 65%, broadly unchanged for over a decade but well below the peak of 71% in 2003. Affordability has deteriorated dramatically. The average home now costs 7.6 times average earnings, compared with around four times average earnings at the turn of the millennium. In London the ratio is over 10:1. For young people, the picture is even starker. The average deposit for a first-time buyer is now £78,000, with the median still an eye-watering £36,500. Deposits have grown to the point where they are worth more than a year’s salary for many. The average age of a first-time buyer has risen from 31 to 34, and the proportion of under-25s entering the market has collapsed from 25% in the 1990s to just 6% today. More than half of first-time buyers now need two incomes to purchase a home. Surveys show that while 75% of renters aspire to own, around 60% believe they will never be able to afford to do so. That is not aspiration; it is despair.
These pressures are compounded by the Government’s economic decisions. Youth unemployment has reached 16%—higher than during the pandemic—and rental reforms have reduced supply, driving rents upwards. High rents make saving for a deposit harder, trapping families who could afford a mortgage but cannot reach the starting line. Under the previous Conservative Government, 800,000 people bought their first home through Help to Buy and stamp duty relief, yet since Help to Buy ended major developers have reported a nearly 50% fall in first-time buyers. This is simply not sustainable or a fair model for a country that believes in social mobility.
The supply side tells a similar story. The Government pledged 1.5 million homes in this Parliament, yet in their first year they delivered just 208,600 net additional dwellings, a fall from the previous year and far short of what is required. On current trends, they will miss their target by 400,000 homes. Worse still, the new mandatory housing targets shift responsibility away from cities and on to our rural communities, cutting housing numbers in London, Birmingham and Coventry while imposing huge increases on rural authorities. This is not a serious plan for meeting demand. It is a political redistribution of targets.
Taxation policy is also central to this debate. Stamp duty has become a significant barrier to home ownership. Conservative Governments recognised its distorting effect and acted to limit the damage, including during the pandemic, but the current Government have cut first-time buyer stamp duty relief and now preside over a system that slows the market, penalises mobility and reduces affordability. The housing Select Committee concluded earlier this year:
“Stamp Duty Land Tax … puts barriers in front of people seeking to buy a new home … and … damages the economy”.
It is simply an unfair tax and yet another hurdle for individuals trying to get on the housing ladder.
Meanwhile, Labour’s Social Housing Bill downgrades right to buy, one of the most successful Conservative policies of the past half century that brought more than two million people into ownership and delivered measurable social benefits. Labour’s reforms raise the minimum tenancy period to 10 years, exclude new homes for 35 years and slash discounts. These changes do not expand opportunity, but restrict it.
For those who have managed to buy, the leasehold system remains fraught with unfair charges. Progress on reform has been slow and partial, leaving families trapped in unsaleable homes and undermining confidence in new-build flats.
Taken together, these trends paint a deeply discouraging picture. Home ownership is becoming simply a distant prospect for too many. If we are to honour the aspiration of home ownership, we need a coherent, long-term strategy, stable planning, fair taxation, well-designed support schemes and robust leasehold reform. Above all, we need a clear statement of principle that home ownership is a public good that we actively wish to promote.
When we debate home ownership, we debate the kind of country we wish to be: a country where a young couple with steady jobs can reasonably expect to buy a home or a country where they find themselves permanently locked out, paying ever-higher rents with little prospect of ownership. Government policies either support that aspiration or undermine it. Too often in recent years they have done the latter. We must renew a balanced housing system in which the aspiration to own is respected, supported and attainable. If we fail, we erode not just economic opportunity, but a key element of our national story: the belief that through work, saving and contribution, a secure home can be achieved.
Baroness Gill (Lab)
My Lords, I congratulate the noble Baroness, Lady Eaton, on securing this debate because for a generation across Britain the dream of owning a home has felt entirely out of reach. It is not because they lack ambition but because they have been trapped in an adversarial stop-start system designed to benefit speculators rather than communities.
Having led housing organisations providing both social housing and homes for sale right here in London, I know first-hand the delicate balance needed to make a city liveable. I know that a healthy city needs mixed-tenure communities where social rent, private sale and affordable home ownership co-exist seamlessly. Our mission must be to structurally rewrite the rules of British housing to enable those families and others who want to transition out of renting permanently to do so.
To understand how this Government are addressing this, look at how buyers were locked out. First, there was the deposit wall. Lenders routinely pulled high loan-to-value options during economic dips, meaning a young couple could work hard and save diligently only to find the goalposts moved overnight under the previous Government. I welcome that this Government solved this by launching the Freedom to Buy scheme, transforming a temporary set-up into a permanent government-backed guarantee. By removing the risk for high-street banks, we changed lending behaviour. Lenders now confidently offer 95% mortgages through all market cycles, meaning that if you can afford the monthly payments, a 5% deposit is permanently enough to secure your foundation.
But fixing finance does nothing if buyers are left competing for non-existent supply. For a decade, the “why” behind the lack of houses was local political paralysis. Councils routinely bowed to pressure and scrapped housebuilding targets, choking the market. We broke that logjam by immediately reinstating mandatory housing targets and aggressively streamlining the planning rulebook through the updated National Planning Policy Framework. By introducing brownfield passports and opening underused grey belt land, we have removed the bureaucratic vetoes to clear the path for 1.5 million new homes.
This Government are addressing the supply issue too. We have changed who gets new housing by establishing local priority windows. We have blocked overseas investors from buying up entire developments off-plan, ensuring that those new keys go to local families first. This is especially critical for our key workers—the nurses, teachers and first responders who keep our country running but are routinely priced out of communities they serve. For many of them, shared ownership was supposed to be the safety net but let us be honest about what has happened to it: high interest rates and volatile service charges have left many shared owners struggling.
In response to this, the Government have injected new protections through the social and affordable homes programme. We have tightened regulations around optional fees, enforcing greater transparency on costs and backing the new Shared Ownership Code to protect buyers from financial hardship. We are also reforming the model so that it serves as a sustainable staircase to 100% ownership, not a dead end.
Yet solving this crisis is not just about pouring new concrete or tweaking intermediate tenures; it is about better utilising all the homes that we already have. Right now, there are thousands of older citizens living alone in large multi-bedroom family houses who want to move closer to their children, grandchildren or wider family. They want a home that is easier to manage, but the heavy financial friction of moving stops them.
I urge the Minister to look at targeted initiatives that the Government can prepare to help older home owners to right-size. There is data—from the Radix Big Tent housing commission’s landmark Resizing Rightsizing report—that indicates that nearly half of those over the age of 65 find the current stamp duty rates an active barrier to moving. This effectively locks up an estimated 870,000 underused homes across the UK. If we want to bring family-sized properties back into the active supply chain for the next generation, without laying a single brick, I ask the Minister to consider a tailored scheme that will help them to unlock a massive hidden housing supply.
Lord Gascoigne (Con)
My Lords, I am delighted to speak in this debate, and I congratulate my noble friend on securing it and on setting a good tone of hope and practicality, as she said, where we can talk about the type of country that we want to be. There are three things I wish to raise. The first is a more general point. I am always struck by how many people in this country care passionately about all aspects of housing and growth. We should surely acknowledge that as a healthy sign. For those of us who want growth, we should, however, look at doing things differently, and articulate a clearer vision that faces the facts and comes up with solutions. In these debates—and you may hear it today—I sometimes get exasperated when hearing the terms “nimby” or “yimby” being thrown around. Too often, it belittles the debate and oversimplifies views.
Broadly speaking, people want development. Last year, polling from Public First showed that 55% of the population are in favour of development in their area and, for many who do have concerns, that does not translate automatically into a total rejection of new housing. We greenies should not instantly object to growth and development, because you can do both. Last year, I visited a development in Aylesbury where they are delivering some 2,500 homes, yet biodiversity has flourished simply by planning to put nature and development together from the outset.
While I am always delighted to see them, I am particularly glad to see my Chief Whip and leader on the Front Bench today. I never tire of thanking them for giving me the privilege of chairing the Built Environment Select Committee here in your Lordships’ House. Most recently, as the Minister knows all too well, we have been talking about new towns. This great endeavour has bedevilled many a Government, but the Minister knows better than many that, if done properly, they can create a lasting positive legacy.
Our committee’s second report on new towns focused on making sure we can create strong communities. Some will say that we just need to build homes, but what those homes look like matters—they need to become places and communities where people want to live and that they want to take care of. To be fair, I would say developers want to build homes that people love and that will stand the test of time. We did a recent report about how to get the views of younger people embedded in the whole process, from education through to employment and through consultations. If we begin to combine this with doing other things differently—such as better ways of engaging, and ensuring people see the uplift locally by making sure Section 106 and CIL payments are being delivered, and looking at why on earth major infrastructure projects like HS2 take so long and cost so much—then I think we can begin to make a difference and change the tone of the debate. Optimism or “cakeism” alone is not enough, and you cannot satisfy everyone. There must be some trade-off, and of course there are challenges. But it is our job as politicians to take them on, to fix the issues we face and own this agenda.
Secondly, I was in Downing Street under Prime Minister Johnson; we accomplished some great things on supply-side reforms, and in my view we should have carried on. I confess that, while I still have reservations about the Planning Act and how it will work, I think that the new NPPF, as the noble Baroness, Lady Gill, was just mentioning, should be welcomed. To give confidence and clarity, it would still be good to hear more detail about where exactly these well-connected stations are.
If we look at the market right now, we have about 1.4 million homes sitting with approval yet waiting for work to commence. That is not to say we should reverse the policy to unlock land, but the debate should move on to the demand side. The Minister will perhaps say later that the Government will not set out the detail now, but I hope that, in the upcoming Autumn Statement, there will be a lot more on helping first-time buyers to get on to the housing ladder, which will hopefully kick-start the wider housing market beyond first-time buyers. If we look at what previous Governments have done, this area is a rare opportunity for government to step in and have a positive impact. What we did with Help to Buy, for example, when we were in government, had a net benefit to the Treasury, fired up the sector and helped get more than 300,000 first-time buyers over the line.
Finally, I will briefly comment on the capital. I briefly worked in City Hall, and sometimes when I speak in these debates it feels a bit like a reunion—particularly when I see my noble friend Lady O’Neill, a good friend, on the Front Bench and the noble Lord, Lord John, opposite. I worked in City Hall for a few years after the crash, and I came to make London my home. As a northerner who made it his home, I can say that Samuel Johnson remains right: if you are tired of London, you are tired of life—it does have everything. However, there are challenges, and they are stark. There is the tragedy of families and children in temporary accommodation, and there are issues relating to the cost of rent, lack of social housing and supply not meeting demand, which are driving those less able to afford the costs out of the city. A fascinating yet sobering recent report from the Centre for London sets out the scale of the problem, as well as measures to tackle the plethora of issues at play that are:
“Touching the lives of almost every Londoner”.
In that vein, given that this is not a single issue but one requiring a much broader response, do the Government recognise this complexity? Is work taking place to develop a different and more comprehensive package of solutions? This is a vital debate beyond simply building homes. It is not something that has gone awry overnight, but there is a huge opportunity here to not just increase home ownership but create jobs and growth, do things differently and get people more involved in society.
Baroness Seccombe (Con)
My Lords, in this short contribution, I will stress just one point. But first, I congratulate my noble friend Lady Eaton on procuring this debate. I take the opportunity to thank her for her copious contributions to the House and for the many years of service she has given to local government.
I grew up with my mother and brother in my grandmother’s house. Ours was not possible to live in due to bomb activity during the war, so when I married, you can imagine the thrill of my husband and me about owning our own home. Early in our marriage, many years ago, we had a painter and decorator named Mr Brown—who was always called “Mr Brown”. He was a rather testy figure, particularly where his young assistant was concerned. One day, he told me that no one in his family had ever owned their home, and he was nervous about doing so. I suggested he talk to my husband, a solicitor, after which he took the plunge. Ever after that, he repeatedly told me that my husband had given him the best advice he had ever had. He was a proud owner and certainly made his home his castle. It mattered to him, as he felt he had a stake in society.
Home ownership is always popular with the public. I remember the excitement when the right to buy was introduced, giving those who rented from local authorities the right to buy their council houses. It was remarkable how soon those houses looked different, as the owners cared for them and brightened them up. Some 65% of people now own their homes, but I hope we can find ways to increase that level of ownership. I hope the Government will realise the damage that has been done by their attitude to stamp duty. The value of properties today means that the deposits needed have increased dramatically, making the chance of owning your own home seem almost impossible. I believe it is a noble ambition to try to give future generations an opportunity to buy their own homes, and we have a responsibility to make it happen.
Lord John of Southwark (Lab)
My Lords, before I start, I remind the House of my interests in this area, as a partner in Quoin Partners and as the chair of H4Life. I thank the noble Baroness, Lady Eaton, for bringing this debate, because it has prompted me to really think about the philosophical question of why we truly value home ownership. I commend her and all those who have made contributions so far.
As a child of the Thatcher era, I suppose I grew up thinking that the gold standard for one’s housing was home ownership. Over the past 40 years, we have also seen housing become an increasingly prudent investment vehicle: the equity in your house is your wealth. I have been a beneficiary of this thinking, seeing my £72,000 first home, a one-bedroom flat in Bermondsey, as the financial foundation for my current, fortunately mortgage-free, home. Home ownership has historically provided both housing security and financial security for those fortunate enough to have been part of that generation buying their homes since the 1980s. However, of those two, it must be right that we focus our attention on housing security. Now it seems that the era of ever-upwards house price inflation is on pause, so we have to look at pensions, savings and investments to act as the financial growth vehicles which recently we tended to look to our homes to provide.
If the most vital importance of home ownership is housing security, how can we as a society best replicate that security outside of ownership? How can we ensure that people who do not own their own homes still feel invested in and part of their communities? I should add that one of the drivers of Mrs Thatcher’s policy of right to buy, which has been discussed today, was the belief that people would take greater pride in, and care of, their homes if they owned them. Initially, that seemed to be true. However, as a consequence of the right to buy, we have seen some instances of the fracturing of those communities, such as in my experience in Southwark, as some of the first-generation right to buyers moved on and their properties became buy-to-let housing. The point I am making is that home ownership has not always demonstrated itself as the only way to achieve housing security in settled and safe communities.
This Labour Government’s Renters’ Rights Act makes a very positive contribution towards the housing security I have been talking about, with the overdue end of no-fault evictions. I well remember a conversation with a facilities management worker at Southwark about 10 years ago, where he told me that the following week his daughter would be five and that for each of her five years she had lived in a different home. They had had the misfortune that, every year, their landlord would serve an eviction notice and relet the property at a much higher rent which he simply could not afford. He asked me what I could do to help. Sadly, it took the Renters’ Rights Act to provide that help a decade later.
I would not argue that home ownership is not a valuable source of housing security. With that in mind, it is perverse that we live in a world in which someone renting for many years and paying significantly more in rent than they would on a mortgage for the same property, and having demonstrated that ability and reliability to pay over a long period, remains shut out of the home ownership market because their income, even if multiplied by five, does not equate to the purchase price of the home they are living in. Why is that the case? In trying to cure the failures of the subprime market from 2008-09, we allowed a banking and lending system to be created which too often seems to work against the interests of the public and which bears a great deal of responsibility for public disaffection with the system or the establishment. The banks were seen to get away with their failures, and the people who were punished were the Great British public, who found it harder to get a loan and impossible to get a mortgage.
What more can be done to radically rethink the approach that the banks and lenders take to those who could meet a mortgage rather than a rental liability? Essentially, whether we see an increase or decrease in home ownership in coming years—I accept that the factors influencing that are many and varied—we need to ensure that housing security is the gold standard for everyone, not just those fortunate enough to be able to buy.
Baroness Hodgson of Abinger (Con)
My Lords, I too thank my noble friend Lady Eaton for introducing this debate so ably. I declare my interest as a director of a company that has carried out a very small development—and as a home owner.
As we have heard, home is more than an investment or a place; it is one’s sanctuary. A home is more than bricks and mortar. It encompasses general surroundings, community and neighbourhood. Where we live has an effect on our mental well-being and health. As the old adage goes, an Englishman’s home is his castle. As we have heard, home ownership has been a long-held aspiration in this country, more so than for our colleagues on the continent, who have a tendency towards a rental culture. Much of the recent home ownership debate has centred on numbers of houses, but it is much more than this. Most of us value a home by what it looks like, where it is and other factors.
You so often hear how housebuilding has fallen behind in recent years, so I was really interested to read in the briefing notes that we were given by the House that housebuilding kept up with the population until 2021. While current ownership data suggests that home ownership here is at a fairly constant level, it has never been easy for first-time buyers to get on the ladder, and it has got progressively more difficult. House prices are rising, and the average ratio of prices to earnings of 7.63 is higher than the five times average affordability benchmark used by the ONS.
I think we all agree that we need to do more to help younger people get on to the housing ladder, and that means we need to build more houses. However, just applying a sticking plaster of mass building is not the answer. We should also address the causes. Some is due to the huge influx of people into this country. Also, for many years we have allowed people from all over the world to buy properties in central London, pushing prices beyond affordability for most British people—thus doughnutting our capital city of its settled population. Do the Government have figures on this? How will they enable more British people to buy in their own capital city? The effect of this is rippling out around the surrounding counties.
We are the custodians of this country, with its beautiful old towns and villages and an outstandingly lovely countryside. Yes, we need more housing, but it is important that we do not spoil what we have and that new housing is sensitively done in the small rural towns and villages where small numbers of extra houses are needed. We need beautiful housing built in a way that harmonises with the existing community. We need to encourage and facilitate local builders who will build a few houses and are invested in their neighbourhoods. We should make it easier for people to build just one house or two houses. The report Building Homes Better by the Housing Forum recently highlighted:
“Government policy has prioritised growth in housing delivery”
over quality, and documented “poor-quality workmanship” and falling customer satisfaction levels.
Housing should be a long-term asset. We should be building beautiful, not adding to what Roger Scruton called the uglification of the UK, driven by utilitarian modern architecture, corporate greed and a cultural rejection of traditional beauty. We are seeing this too often in the developments going up around the country—often big, unsightly developments inappropriately tacked on to and spoiling small villages. Have we yet implemented the statutory requirements in the Levelling-up and Regeneration Act 2023 for LPAs to prepare design codes? If not, why not?
In discussions about the Planning and Infrastructure Bill last year, it was identified that there were 1.2 million brownfield sites, around half a million planning permissions given and over 300,000 empty neglected houses that could be refurbished. We need to end the practice of development companies land banking planning permissions until prices rise. It is perfectly possible to meet the Government’s target of 1.5 million houses without encroaching on greenfield sites.
The planning Bill also introduced grey belt, citing examples of disused petrol stations and abandoned car parks as sites in the green belt that could be released for development. However, new research from the Campaign to Protect Rural England reveals that the Government’s grey-belt policy is paving the way for large-scale development on England’s unspoilt rural landscape. What are the Government going to do to stop the misuse of this policy and erosion of genuine green belt?
Before I close, I would like to raise an issue that I have spoken about before. Under human rights law, we are entitled to live without our property being interfered with. The party wall Act cuts across this. This can result in damage to adjoining houses and, in some rare cases, houses have collapsed. I declare that I have been a recipient of three party wall notices in the last four years. The noble Lord, Lord Dubs, tried to put forward a Private Member’s Bill in 2016 to address aspects of this. I have tabled some Written Questions about this, and the Government said they would engage with stakeholders and the public to gather insights and explore ways to improve its implementation. During the passage of the planning Bill last year, I tabled some amendments. I understood that the Minister said she would meet further to discuss this, so I hope she will not mind me asking whether we can meet, and not before too long.
To conclude, of course we need to help young people to be able to buy their own homes, but in doing so we must ensure that this is not at the detriment of present home owners and existing communities, and that we continue to preserve our countryside.
Lord Frost (Non-Afl)
My Lords, I congratulate the noble Baroness, Lady Eaton, on securing this debate. She set out very eloquently the benefits of home ownership, and I do not need to dwell on them again. We know what they are, and I am sure most of us agree with them: the stability it gives and the stake in society and in your local area that it provides—we all saw the socially transformative effects of the council house sales programme in the 1980s.
We can all agree on that. The problem is: how do you deliver home ownership in modern conditions? We need to achieve it. We need an effectively functioning housing market that is capable of providing housing where people want to live, at affordable prices. At the moment we simply do not have that in this country, and we have not had it for quite a long time.
Much government policy over the last 20, 40 or even 70 years—it depends where you start—has been going in the opposite direction. Obviously, this all began with the Town and Country Planning Act and the green-belt policy that first came in in the 1950s and has expanded since then. But a lot of the real damage was done in the 1990s and afterwards, with the huge rise in stamp duty that has persisted, and the constant green and environmental restrictions on what can be built, how it can be built, where you can build, the style in which you can build, and so on and so forth. To mitigate all this, successive Governments have engaged in price manipulation, such as the so-called affordable housing scheme—subsidised housing, really. Of course, we have had the latest wave of restrictions on tall buildings, specifically in London, that has brought housebuilding almost to zero. We have had the war on renters across successive Governments that has also destroyed rental stock.
This has taken us to a position in which we have a planning process where there are simply too many blockers in the process to get the job done. We have the absurd situation that the green belt now is actually bigger than the developed area of the country. It is quite an unusual belt that is bigger than the area it is trying to constrain, and it is certainly constraining the growth of our cities and towns pretty effectively. Prices are of course super high as a result of all this.
It is worth pausing for a moment to contrast the situation in this country with that of other European countries, which are of course our nearest comparators. It is true that the UK is a fairly small and dense country, and England even more so. However, there are European comparators, and the story is not particularly flattering. Belgium is a country I know well. It still has a lot of natural beauty of all kinds and is only slightly less dense in population than England is. Of course, the Netherlands is significantly more dense.
Here in England, we have 430 dwellings for every 1,000 in the population, in the Netherlands there are 490 and in Belgium there are 500. Our dwellings are also the smallest in Europe. If we want to give English people the same housing opportunities as those in Belgium and the Netherlands—and that is a reasonable aim—we will have to build 2.8 million houses just to catch up with just the Dutch, 3.6 million to catch up with the Belgians, and 4.5 million if we aim for the European average. That is simply to catch up, not to deal with any of the social changes or trends that are currently driving the problem.
We have to face up to this reality. Much of the current debate on this question—not just today but generally—is about trying to avoid this reality and the belief that we can somehow have more houses without changing any of these rules: the magical Tardis-like powers of the brownfield in cities that can supposedly accommodate everything we need. We have a policy that appears designed to maintain the economic geography of the 1950s and 1960s and never allow villages to merge or towns to grow. We have the belief that people can be made to live where the houses are, rather than the other way around, and we have an endless circular debate about social, council and affordable housing—we have one of the biggest sectors in Europe, of course—all of which is avoiding the problem.
The Government deserve a bit of credit for the planning Act and for the latest plan, but the solution is not driving the current system to work harder, and still less is it, as some have suggested, to allocate housing to favoured categories of workers. It is not about telling people they need to rightsize and that they are somehow occupying the wrong kind of house. It is about freeing up the system and trying to generate a real housing market with incentives to build, invest and grow, but we are simply not achieving that.
I fear we are heading to a social and economic crisis if we do not look this hard in the face and realise we have to do some things that many of us do not particularly like. We have to give opportunities to our young people to settle and to have houses, as we did. We need to get serious about this.
Lord Jackson of Peterborough (Con)
My Lords, I thank my noble friend Lady Eaton for giving us the opportunity to debate the issue of home ownership and the Government’s record on housing delivery. I will focus on one or two areas. One is about family housing, the other is about the current housing crisis and supply and demand, and a few practical solutions to the current malaise.
I will not rehearse the comments I made at Second Reading of the Social Housing Bill on 1 June. Suffice it to say that there is little evidence that the Government understand the need to support more home ownership for families and have failed to address, via regulatory policy or legislative changes, the economic and social impact of falling birth rates. What we saw in that Bill was a spiteful ideological assault on right to buy, which will be all but scrapped by raising the required tenancy length and eligibility and reducing the discount to 5%, which will lock 600,000 potential householders out of the scheme. A future Government will and should reverse this pernicious and incoherent policy.
There is no doubt that the Government’s housing record is lamentable. Nationally, housebuilding starts are at a 12-year low. There were 261,000 housing starts in the last 18 months, compared to the implied target in the Labour Party manifesto of 525,000. Bloomberg predicts a shortfall of between 90,000 and 100,000 starts each year between 2026 and 2029.
The situation under Mayor Khan in London is even worse—indeed, it is dire. In quarter 1 of 2026, 6,325 homes were started, just 7% of the mayor’s target. Some 22,000 homes are unsold or under construction. There is no way that the Government’s annual target, which is broadly supported on both sides, will be achieved to meet their 1.5 million homes aspiration. Are we surprised, given the Government’s mishandling of the economy? We have the highest energy costs in Europe, and there are labour shortages and increased inflationary pressures on materials. Higher national insurance contributions, a higher minimum wage, rising taxes, increased borrowing and mortgage rates have all contributed to and exacerbated what Savills has described as a “particularly gloomy” outlook for the housing sector.
On the supply side, the Government’s planning reforms are, to be fair, a small step forward in the right direction, but no more than that. I welcome some aspects of the revised NPPF. Under the NPPF changes, faster infrastructure consent was brought into force in August. There was a redesignation of low-quality green belt and a focus on brownfield and transit land sites, but it is simply not enough to overcome the inherent viability squeeze on new building sites. Planning hold-ups, long decision times, biodiversity rules, nutrient and water neutrality conditions, infrastructure levies, tighter building standards and the forthcoming building safety levy—due later this year—all mean that land which is viable and buildable on paper cannot and will not be developed profitably. The Government should address that.
In addition, we have one of the highest levels of affordable housing targets in the western world. It is much higher than most of the developed world. That means that sites are land banked and lie idle and undeveloped. We need to look at this 40% to 50% figure again, because it is not delivering housing that we need.
The Government have also failed to look at demand. Only 27% of tenants in social rented accommodation are in work, so the Government intend to borrow £39 billion for their social and affordable homes programme to build more properties to warehouse welfare—a direct capital transfer from business, working people and pension funds to the workless, who will continue to receive benefits. This is economically insane and unsustainable. Immigration and welfare are integral to better housing policy. We must look again at prioritising working families and young people. It is a badge of shame that in 2021, over 100,000 social lettings in London were held by foreign-born tenants. It is indefensible and offends against fairness, efficient resource allocation and social equity, and it is a breach of the social contract. The figure is 12% across the whole of the UK.
In conclusion, a future Conservative Government—or, indeed, perhaps even a Reform Government—should cut taxes for SME builders, which suffered so grievously in the downturn in 2008-09. We must reduce regulations; establish a sovereign wealth fund to build new houses; give priority to families, married couples, veterans and young working people; restore right-to-buy eligibility post ante; and relaunch the coalition Government’s very successful new homes bonus policy. The present Government’s anaemic policy response will do nothing to tackle this grievous housing crisis and build enough homes. Much more radical change is needed.
Baroness O’Neill of Bexley (Con)
My Lords, I start by reminding your Lordships of my declaration of interest: I am a vice-president of London Councils and a co-owner of a rental property in Bexley.
I congratulate my noble friend Lady Eaton on securing this debate. It is an important subject, and I know she feels as passionately about it as I do. We recently had some conversations about home ownership as part of the Social Housing Bill debate. I hope that this debate will allow expansion of that discussion, especially around the value of right to buy and the potential of the shared ownership model.
Contrary to some of the comments from the Government, we should recognise that right to buy council properties gave opportunity to many who would not otherwise have had that chance. Many were on low incomes. It afforded them the aspiration to be a home owner. Ownership did not go without benefits to their communities and, contrary to what is often suggested, the majority of tenants who bought continued to live in those properties and raise their families. If they had not bought under the scheme, they would likely have remained council tenants.
It was noticeable that one of the first things that many of them did was to install a new front door. I am sure that most of us saw that when we were out canvassing. I do not know why that was so important, but it seemed to be the first action that most former tenants did when they transferred to being a home owner. As my noble friend Lady Seccombe said, the sense of pride in those who bought through right to buy did not stop there. They got more involved in their surroundings and their community. That benefited others, as well as what was happening within their property.
There were other benefits as well. Research says that the children of people who bought under right to buy did better in schools. I am sure that my noble friend Lord Jamieson will remind the House that receipts could be used to build additional social housing. Ownership through right to buy benefited many people and it is such a shame that the Government are looking to water it down.
Moving on to shared ownership, as we discussed during the Social Housing Bill, shared ownership can also allow some to get a foot on the property ladder who would not do so otherwise. This often includes the key workers whom we all depend on to run our vital services on a daily basis. However, as we heard during the social housing debate, there can be issues with the current offer around service charges, legal costs and sales. I thank the Government for agreeing to a review and hope that any change brought forward through that review will make the offer more attractive to potential purchasers.
Right to buy and shared ownership can help people who want to buy their own home. However, for the vast majority of those who are looking to buy, there are many other barriers, some of which have already been identified. The first, of course, is affordability. The average cost of buying a property now is out of the reach of many, and the multiple of salary, size of deposit or length of mortgage can be eye-watering. Many cannot access the bank of mum and dad, and the cost of private rental often means that they are unable to save the required deposit.
Often, the cost of private rental is higher than a mortgage payment might be. The previous Conservative Government’s help-to-buy scheme and saving schemes helped many first-time buyers. There is now a gap in that support. The Minister did say that conversations were being held with banks and building societies to come up with some more attractive products. Maybe she can share some of that information with us this afternoon.
Stamp duty is another barrier—one reason why our party is promising to look at that and take action. It is not only expensive but can stop people accessing the housing market. They might not buy that starter flat with a view to moving into a bigger home, or it might discourage those considering downsizing, thereby freeing up valuable family accommodation.
Another barrier to home ownership is availability of the right type of properties, whether that be starter homes, flats and apartments for those commuting, student accommodation, family accommodation, supported living or properties for those wishing to downsize. While it is important to build, it is also vital to consider the types of homes that are being built to ensure that need is met. It is also worth considering the knock-on impact to other public sector services if that does not happen.
Nobody is suggesting that home ownership is right for everyone or that it is the only type of accommodation, but we should definitely recognise the benefits it can bring.
Baroness Paul of Shepherd’s Bush (Lab)
My Lords, I am grateful for the opportunity to contribute to this debate and I thank the noble Baroness, Lady Eaton, for having brought before the House. Home ownership matters, and the decline in the number of people who are able to buy a home should be of concern to all of us. On that point, I suspect that there is more agreement than disagreement.
I begin with a personal matter and a personal perspective. I grew up in a high-rise council flat, my grandparents lived in a council house, my uncles and aunts lived in council houses, and, in the community where I grew up, that was entirely normal. Owning your own home felt like an unattainable dream. Then, in the early 1990s, after a lifetime of hard work—and I really do mean hard work, with multiple jobs and lots of saving—my mum was able to buy our family home through the right to buy scheme. Whatever view noble Lords take of this policy, and I am sure there are differing views across the House, it was transformative for working people.
The shame, of course, was that some of the receipts were not able to be reinvested into other homes. I just want to put on record that it did not turn all of us into Tory voters, as was an ambition of the programme. But it was transformative: it gave us our own front door, security and the feeling that we were finally set up for life. It also—I do not think we understood this at the time—turned out to be a defining moment for the generations that followed.
It turns out that home ownership, as has already been discussed, is not simply about having a property; it is a way of passing security and opportunity from one generation to the next. It also showed that it was possible to work hard and, because of your own efforts and a helping hand from the state, change the trajectory of your life. That is why some recent research from Cambridge University was so sobering and spoke so loudly to me. It found—this is hardening and lengthening and has taken place over the last decades—that housing wealth and home ownership are increasingly linked to parental home ownership and parental education, even after taking into account an individual’s own work and achievements. However hard you work, or save, or educate yourself, the thing that is most likely to determine whether you will go on to own your own home is whether your mum or dad did. This cannot be right. This is not about the bank of mum and dad; it is evidence that the housing ladder is increasingly becoming an inherited ladder.
We know the importance of firsts in working-class families: the first to travel abroad, to go to university, to own your own home. These milestones change horizons and expectations for those who follow. The danger is that, if fewer people become first-generation home owners, these advantages are increasingly concentrated within the same families over time, and that should trouble us. Home ownership should not be hereditary. As noble Lords know, on this side of this House we are not general enthusiasts for hereditary principles.
I am therefore delighted that Labour, after many years of policy neglect, has decided that it needs to tackle the issue of supply and build more homes. That is why Labour’s ambitious housing programme matters so much. Delivering 1.5 million homes is significant, but it is a difficult target, which can be achieved only through a pragmatic, partnership-based approach to removing barriers. The Government have already shown a willingness to confront some of the difficult decisions and vested interests that previous Administrations have too often avoided, such as the grey-belt reforms, revised planning guidance, and measures to bring forward land around transport hubs for new developments that will help accelerate delivery. We know that progress will be hard and incremental and will probably involve setbacks, but I am proud of our ambition, purpose and desire to do this, because it is the most difficult thing.
Alongside supply, however, there are other practical routes into ownership that matter too. Housing associations, at their best, are not simply landlords. Through shared ownership, which has already been mentioned, and other affordable ownership projects, they help thousands of families take their first steps onto the housing ladder. Organisations such as Clarion demonstrate the important role housing associations can play in supporting aspiration and widening access to ownership. They can be transformative, but they need a review to make sure that they are opening access in the way that was intended, and that these are schemes to be proud of, not a burden to those who take them up. Housing associations have highlighted many challenges with the schemes, including thresholds to participation that have not kept pace with the challenges of rents and wages, and are keeping out the people who they were designed to help.
In addition, pressure needs to be applied and incentives developed to encourage innovation among mortgage lenders, helping them to develop new products and new ways of assessing risks that reflect the realities of how we live. I want to call out some of the great new products and some of the companies that are doing just that, such as Nationwide’s “helping hand” mortgage and Skipton Building Society’s “track record” mortgage. That means that if you have a track record of paying your rent on time, you are likely to pay your mortgage as well, and on the basis of that, it will lend you money. This is great, and is rooted in common sense. These are practical solutions that help creditworthy households overcome barriers to ownership, and they should be applauded.
The Opposition have brought this debate because they believe home ownership matters, and I agree with them. We should also agree that hard work should be the gateway to improvement, and that is not always the case right now. These things need to change, but that will not happen simply because we talk about it. It means planning reform. It means supporting development in places where too often it has been resisted. It means saying yes as well as no. It means welcoming developments and the people who live in them.
Although I welcome this debate, I ask the noble Lord opposite whether they will go beyond diagnosis and commentary, and help to support the remedies as well. The test is not whether we can agree that home ownership matters, but whether we will make the difficult decisions to make it happen. That is the challenge that this House faces, and I hope that we will find common cause in it.
Lord Fuller (Con)
My Lords, it is common ground that we need more homes, but this Government are going entirely the wrong way about it. We are on track to complete fewer new homes in this Parliament than in the last—a period that was disrupted by Covid and the strategic supply shocks unleashed by a European war. It is not hard to understand why we are failing, but to mask the failure to grow in our cities, impossible unachievable new targets have been set in the countryside, and have undermined the equity and collateral in the largest sites with the greatest entry costs. Any old orchard for a handful of homes has economic preference over the strategic allocations, which are being left to moulder. Yes, the five-year land supply is part of the problem, not the solution. New levies, fees and charges amount to between £30,000 and £40,000 for a new dwelling house, and I now learn that regulatory costs for high-rise flats amount to about £70,000—a real fiscal disincentive, borne disproportionately by the young and the first-time buyer making a start.
There are three elements to sustainability, but Natural England has been granted a veto on the creation of new homes in the largest parts of the country with the greatest housing potential—as if not building new homes is going to clean up our rivers. All those ecological and archaeological reports, which can only be done at certain times of the year, add delay, cost and increased risk. Failure to dot an “i” or cross a “t” means growth is postponed for a year by quangos acting as judge and jury in their own court, using the consent process as a make-work scheme for university chums and colleagues, while bricklayers, tilers, roofers and ground workers are put out of work. The Labour Party, which was established to represent the journeyman, has nothing to say to these people.
Only last week, the Home Builders Federation told me about the case of a small piece of ground suitable for nine homes that cost about £40,000, but was burdened with proposed biodiversity charges of over £200,000. That was before the madness of the nutrient neutrality levies. No wonder the developer walked away—no homes built there. Now there will be more mayoral taxes, and building safety levies in London—£90 a square metre in Fulham—are chilling our capital’s housing growth. The fiscal incontinence of this Government, unable to get spending under control, has led to the highest interest rates for two decades, which have killed off nearly all the small builders. Even the largest operators, public companies, are now struggling with the number of active sites, which is down 20% in London since this Government started.
Only this morning, the Times reports that worse is to come: 140 of the 166 developers operating in London are working on projects due to complete in 2027. Without a pipeline of work from 2028 onwards, the Times says they will “effectively exit London”. Of course, the Government try to blame councils for this sorry situation, but to find the culprits they just need to look in the mirror. This is their calamity.
Looking at the situation for families who have aspired to, and own, a stake in their own home, we have a Prime Minister who tells them that their land and property is not taxed enough; the politics of envy, and a mansion tax that falls on the old widow eking out a pension while living in a home bought generations ago; second home surcharges that are crashing the tourist economy of coastal communities; a resistance to addressing the injustice in the balance of power, and sharp practice, between shared-ownership owners and the RSLs, where the residents cop all the costs and the landlord gets off scot-free; and crazy stamp duty rates that damage labour market liquidity, trap people in their homes and discourage inward investment in our economy.
The Government are trying, of course, but their medicine is making the patient worse. Vibes alone will not build these homes. The new town programme is dead on arrival, not even going so far as to long list schemes with fast rail connections, grade-separated junctions and all the land assembled in the adopted plan, with the unanimous support of the local planning authority. It is just incompetent.
The emergency relaxations on high-rises in London will expire before they can do any good, so that is another three years wasted. On 1 January, the Government plan to implement even more taxes—on steel and cement. How many more burdens can the construction industry take? We have to call time on these delusions, because build costs have leapt while house prices have fallen. Can they not see the jeopardy here? Why would anybody want to catch a falling knife like this?
The property market is being taxed to death. Whether you are building, buying, selling, owning, renting or being a landlord, this Government are crushing aspiration while missing their own numeric manifesto target by miles. This matters because workers cannot move about, growing families cannot get on, the old cannot downsize and the young cannot upsize. Worst of all, the journeymen are being put out of work.
The economist Arthur Laffer, with whom I had dinner last night, says that you cannot tax yourself to success. But Britain is taxing itself to death, no more so than in building, construction and housebuilding, with a dogmatic whole-economy experiment on housing that is killing home ownership and aspiration. It is just not working.
Lord Evans of Rainow (Con)
My Lords, I am delighted to speak in this debate, for which I am most thankful to my noble friend Lady Eaton. It is we on these Benches who have been and proudly remain the party of home ownership. Like the noble Baroness, Lady Paul, I declare that I was born in a council property, on a south Manchester council estate, which my parents had the good sense to buy in 1972 under the Conservative Government of Ted Heath. Unlike the noble Baroness, obviously, I became a Conservative.
We are committed to supporting first-time buyers specifically to help home ownership to become a reality, especially for younger generations. Under the previous Government, 800,000 people bought their first home through schemes such as Help to Buy and stamp duty relief. The lifetime ISA was also introduced to help young people save towards their first home. We understand the Government are seeking to introduce a new ISA scheme. Any assurances the Minister can give to existing lifetime ISA scheme users and clarity on how they will be affected, if at all, would be greatly appreciated. Savers should not be punished for doing the right thing. As for stamp duty relief, Labour let the threshold expire. My party has pledged to scrap stamp duty altogether on all primary residences. If implemented, the average buyer could save over £4,500.
The policy is there for the Government’s taking, but, alas, millions of prospective buyers face exorbitant stamp duty bills, slowing the housing market, disincentivising those who want to downsize and keeping larger family homes and home ownership out of reach. If noble Lords do not believe me, the Housing Select Committee reported in June this year:
“Stamp Duty Land Tax reduces the affordability of home ownership, slows the property market, and ultimately damages the economy. While it is a valuable source of revenue for public finances, Stamp Duty Land Tax must not be maintained in its current form and needs to be reformed”.
The tax did generate £15.2 billion in the most recent financial year, but this is a question of priorities. Do the Government care more about increasing levels of home ownership or would they rather increase welfare budgets? We have done the work for them. This is not an unfunded announcement. We have identified £47 billion of savings, around half of which could come from the ballooning welfare budget. Would the Government rather see that increase or would they rather see more people get their keys to their first home? Some 76% of renters—
Baroness in Waiting/Government Whip (Baroness Ramsey of Wall Heath) (Lab)
My Lords, I apologise for interrupting, but the noble Lord has two minutes in the gap.
Lord Evans of Rainow (Con)
I apologise. I simply ask the Minister whether the Government will consider scrapping the stamp duty land tax for primary residences. I thank my noble friend Lady Eaton for giving me the opportunity to voice this cause, and I look forward to the response from the Minister.
Baroness Thornhill (LD)
My Lords, I thank the noble Lord, Lord Evans, for speaking in the gap, because it saved me from pouncing immediately on the noble Lord, Lord Fuller, whose comments were so provocative—I should know by now. I also thank the noble Baroness, Lady Eaton, for securing this timely debate and introducing it with her customary experience and insight. I agreed with much of what she said, although obviously not all.
We have heard a thoughtful and wide-ranging discussion from across the House. Coming at this point in the debate, I knew that noble Lords would have covered all the key aspects and asked all the main questions, so I am going to take a slightly different tack. I particularly enjoyed the thoughtful contributions from the noble Lords, Lord John of Southwark and Lord Gascoigne, and, interestingly, the noble Lord, Lord Frost. I felt they had something slightly different to say and what I am going to say might chime with them.
We may have completely different perspectives, as was all too evident, but there is a striking degree of agreement about the scale of the challenges facing aspiring home owners today. We have heard contributions on housing supply, on planning, good or bad, on infrastructure—a real issue when we are trying to get people to agree to housing—on mortgage access, on rental costs, and on the wider functioning of the housing market. All noble Lords have posed detailed questions to the Minister, and I do not intend to repeat them.
Instead, I want to focus on two issues that have only been touched on: affordability and intergenerational fairness. As former Mayor of Watford, I met many people whose experiences illustrated why this issue matters. They were not looking for special treatment; they simply wanted the opportunity that previous generations often took for granted—the chance to buy a home, put down roots and build a future.
Several noble Lords have spoken about the need to build more homes, and it is difficult to avoid the conclusion that, as a country, we have not built enough homes for many years, and certainly not enough social homes. I want to publicly disagree with the noble Lord, Lord Jackson, for his use of the phrase “warehousing welfare”. My question is: where should the most vulnerable people in society live?
As today’s debate has demonstrated, supply alone does not explain everything. Of course more homes need to be built; I doubt anyone in this House would seriously disagree with that proposition, though some housing experts do. But perhaps we should be honest about the limitations of what building can do. Do we really believe that we can build our way to affordability alone? If so, over what timescale? Five years, 10 years, 20 years? Even if ambitious housing targets are reached, targets do not build houses; builders do. I get fed up of the “Our targets are higher than yours” kind of willy-waving that goes on where targets are concerned.
Even if they are achieved, are we confident, as somebody said, that homes will be built in the places where the demand is greatest, where the jobs are concentrated and where people want to live and work? These are not arguments against building more homes. They are arguments against believing that a complex problem has a simple answer: just keep building.
If affordability is the objective—and we on these Benches believe it should be—should we not be honest enough to say that building more homes is a means to an end and not an end in itself? Affordability lies at the heart of almost every aspect of housing policy. It determines whether young people can save for a deposit, whether families can afford mortgage repayments, whether people can move as their circumstances change and, ultimately, whether home ownership remains a realistic aspiration.
One of the difficulties in housing policies is that political debate, as evidenced today, often searches for a single cause and a single solution. We are told that housing would become more affordable if the planning rules were changed, if there were not all the extra taxes that we have to pay, if only interest rates were lower or if one element of the market behaved differently. The reality is far more complicated than that, and it is important to say that where we are now has been decades in the making, not just the past few years.
Housing affordability is shaped by supply, definitely by planning rules, by land values—an interesting one—but also by wages, interest rates, demographics, construction costs and wider economic conditions. It is also affected by how effectively people can move through the housing system at different stages of life and by the availability of supported and specialist housing. Now, no one mentioned that today, so I immediately look over and say, “Lord Best, where are you?” as that is something that he always reminds us of.
During my years in local government, I would encounter two very different conversations about housing. One resident would proudly tell me how much the value of their home had increased since they bought it, but another, a renter, would tell me they had all but given up hope of ever buying a home; sometimes, those conversations were on the very same street. This captures the dilemma at the heart of housing policy. Those seeking to enter the market understandably want greater affordability and, as we have heard a lot today, those who already own their own homes often see rising house prices as a source of security, which for many is an important component of their long-term financial planning. In truth, we celebrate affordability when we are trying to get on the ladder and rising house prices once we are on it. That is why housing remains one of the most politically difficult areas of public policy.
Almost everyone agrees there is a problem. The disagreement begins when we discuss who should bear the costs of solving it, because every serious solution creates winners and losers—and I am sure the Minister is very aware of that. More development can place pressure on existing communities and infrastructure. Lower house price inflation may be welcomed by aspiring home owners, but not necessarily by those whose wealth is tied up in their homes. Reforms to planning, taxation, land use and incentives involve trade-offs. The challenge is not that the choices are unknown but whether Governments are prepared to make them.
An equally important theme arising in today’s debate is intergenerational fairness—mentioned ably by the noble Baroness, Lady Paul, and I agree with her challenges. The reality for many young people is that they are attempting to enter a housing market that is fundamentally different from the one that we entered and that was entered by their parents and grandparents. Deposits take longer to save for, high rents consume the income that might otherwise have been used to build a deposit and mortgage affordability remains challenging. Increasingly, access to home ownership appears to depend not simply on work and saving but on whether someone has access to support from parents, grandparents or inheritance. That is a stark reality that I believe we on these Benches and the Government are trying to address. This is a question not of whether one generation has worked harder than another but of whether opportunities available to successive generations are broadly comparable. Increasingly, many people doubt that they are, and this should concern us all.
I hope the Minister will address two issues in particular. First, does she accept that affordability pressures are increasingly creating a housing market in which access to home ownership depends more heavily on parental wealth and inheritance? If so, what do the Government see as the answer to that challenge? Secondly, if affordability is the objective, how should success be measured? Is it by the number of homes built or whether a young person on an average income in 10 years finds it easier to buy a home than they do today? It will take that long.
We all know that home ownership should remain an aspiration achievable through work, savings and endeavour, not a consequence of inheritance. We know many of the drivers behind the affordability challenge and many of the potential solutions. The difficulty is not that the problem is misunderstood but that the solutions involve trade-offs, winners and losers, competing interests—some very powerful—and difficult political choices, with electoral consequences at the ballot box.
I will leave with a final question for the Minister. Does she believe the Government accept that the real obstacle is no longer understanding the problem of housing affordability but having the potential courage to confront the trade-offs required to solve it and to confront the consequences of what we already know?
Lord Jamieson (Con)
My Lords, I first declare my interest as I am still a councillor in central Bedfordshire. I thank my noble friend Lady Eaton for bringing forward an essential debate on housing and home ownership. It has been quite an enlightening debate across the House. I think there has been quite a lot of agreement and I would not say disagreement but puzzlement because, as the noble Baroness, Lady Thornhill, rightly says, this is a very complex issue. It will require trade-offs and there is no simple solution. I do not think anyone knows what outcome we all desire. There are so many different outcomes, whether it is housing numbers, affordability, security of tenure and so forth.
However, I think we can identify the biggest problems. Housing is the single biggest cost facing most families. It puts enormous pressure on household budgets. Too many people are living in overcrowded accommodation, paying too much rent or mortgage and increasingly unable to live anywhere near where they work. My noble friend Lady Eaton gave some statistics about how many people would like to own their own home. I will not repeat them, but there are some other good statistics from that survey. Some 65% of people believe it is harder to buy or rent today than it was for their parents, and 62% believe that housing is on the wrong track.
Many noble Lords, including my noble friend Lady Seccombe, the noble Baroness, Lady Paul of Shepherd’s Bush, and the noble Lord, Lord John of Southwark, raised the benefits of being able to own their own home and how it helped them or people related to them in their lives. We are unashamedly the party of home ownership. We recognise that not everyone will want to buy—that is perfectly legitimate—but everybody should have the opportunity to do so. Those who rent should have access to affordable, secure alternatives.
Sadly, this situation has deteriorated since Labour came into power. One-year mortgage costs have risen from around 5% to 5.7% and average rents are up 10% to £1,450 a month. This is not simply a housing crisis; it is a growth crisis. Building homes creates jobs, investment and economic activity, but the wider economic benefit is even greater. If people can afford to live close to where they work, businesses can recruit more easily, productivity improves and our towns and cities become more vibrant.
Look at London, as raised by the noble Lord, Lord Jackson of Peterborough. Rents for a two-bedroom flat in central London are above £2,000 a month. Someone needs to earn close to £100,000 a year to be able to afford to live in the centre of our capital city. That is not realistic. Alternatively, people face a punishing daily commute or overcrowding. Is it any wonder that London is losing its appeal as a destination for graduates and skilled workers?
We have repeatedly debated housing in this House. Since Labour’s election, every time I speak on this subject the position appears to worsen. The Government talk about building 1.5 million homes, but this is an ambition; it is not delivery. Delivery fell again last year, by 3%, to around 200,000 homes. By contrast, the last Conservative Government delivered their target of 1 million homes in four and a half years. The pipeline is getting weaker, as others have mentioned. Only 1,220 sites for private housing received planning permission in England in the first quarter of this year, down from the 2,000 sites approved in 2022.
When I first became a councillor in 2009, my priorities were about improving services, rebuilding the local leisure centre, reducing costs and fixing potholes. Those things all matter, but I quickly learned that in the long term nothing is more important than planning, than building great communities, good housing, infrastructure, local jobs, schools, leisure, public services and beautiful homes, as mentioned by the noble Baroness, Lady Hodgson of Abinger, and my noble friend Lord Gascoigne.
We have all seen the transformative effects of successful regeneration, whether it be King’s Cross, Brindleyplace in Birmingham or Kidbrooke Village in Greenwich. The Minister has on occasion suggested that I am a little too focused on London and brownfield development. I make no apology. Yes, there will be need for development on greenfield land, but our greatest missed opportunity is the failure to build enough homes in our towns and cities where there is the greatest demand. MHCLG’s own figures show that two-thirds of local authorities failing to meet the housing delivery test of 75% are essentially urban areas, and 21 of London’s 33 boroughs are also failing this test. The housing crisis is particularly acute in London. Since 2016, the number of households in temporary accommodation has increased by 50% to 76,000. There are more statistics, but we do not have the time.
The cost of building has also soared. It is not one regulation or levy: it is the cumulative effect of layer upon layer of additional costs, building levies, landfill tax, building safety requirements, Section 106, the future homes standard and others. That is not to say that any one of them is not valid in its own right, but the cumulative effect is clear: the Home Builders Federation estimates that the cost of building a low-rise home has increased by £76,000 since 2020. The Government argue that that will be reflected in lower land prices and so forth, but that ignores the reality. The problem is particularly acute on brownfield land, where remediation and build costs are often higher and the land value has higher alternative use. If we genuinely want to regenerate our cities, gentle densification of urban areas is essential. We must make brownfield land viable. We cannot load so many costs on to a development that the finished product costs more than people can afford. Manchester is an example: the council and the mayor recognised the need for compromise, including on affordable housing targets, and homes were built.
The principle is simple. If you want more affordable homes, the cost of building them must be below the price that people can afford to pay, whether to buy or to rent. The Government need to change direction. You cannot tax your way to growth, as my noble friend Lord Fuller said. The Social Housing Bill will undermine the right to buy—one of the greatest engines of social mobility that we have seen. If the proceeds are reinvested, this will also drive more housing and more availability of social housing. The Renters’ Rights Act risks yet more landlords leaving the sector, reducing supply and putting upward pressure on rents while undermining the build-to-rent sector.
By contrast, the Conservatives have proposed positive measures, such as removing stamp duty on housing—as mentioned by my noble friends Lady O’Neill of Bexley and Lord Evans of Rainow—which would free up the market and reduce the cost of buying your home. It is not just the deposit; when you have to find another £20,000 for stamp duty, buying a home gets even more difficult. Removing stamp duty would allow people to do what we used to do: buy a very cheap one-bedroom studio somewhere that is maybe not the most salubrious location and move up the housing ladder. That is no longer possible with stamp duty.
Finally, the Government should stop distracting councils with top-down local government reorganisation. We warned that this would consume local authorities’ time and resources, and that the Government’s proposals would not work. I am sad to say that we have been proved right not once but twice—please do not prove us right a third time. Will the Government commit to reviewing the burdens placed on urban brownfield development? Will they look at what support they can give buyers, such as Help to Buy, and when will they publish the report they commissioned on Help to Buy?
On the grey belt, will they ensure that those commitments in the NPPF are held to by developers, and that they do not walk back from them on the basis of viability? The Minister committed to a shared ownership review, which—as we discussed during the debates on the Social Housing Bill—if done properly, is another great way to get on the housing ladder. When will the Government move forward with that review and publish it? Is there a timetable?
Britain does not need more targets—it needs delivery. It needs homes people can afford in places where they want to live and work. It needs a planning system that enables rather than obstructs development, and a Government prepared to remove the burdens that make new homes unaffordable. If we get housing right, we do more than solve the housing crisis; we unlock growth, improve productivity, strengthen communities and give the next generation something that too many are being denied today: the chance to call a home their own.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank the noble Baroness, Lady Eaton, for securing this important debate. I also thank her for her enormous contribution to local government over many years. I very much remember her tenure in the Local Government Association, and I thank her for that. I also extend my gratitude to all speakers for their very valuable contributions to this important discussion. As ever, the House has brought a wealth of experience and perspective to an issue that matters deeply to people across this country.
The Motion before us is broad, and that is appropriate. Home ownership cannot be separated from wider questions around housing supply, affordability, economic opportunity or community; it is bound up with all of them. For generations, owning a home has represented something important: stability and independence. It has given families a stake in their community and confidence in their future. For many people, it remains one of the clearest expressions of aspiration and security. The noble Baroness, Lady Eaton, spoke powerfully about roots, belonging, aspiration and security. That aspiration is still very much alive; the challenge is that, for too many people, the pathway to achieving it has become increasingly difficult. It would be wrong to pretend otherwise.
I am sorry but I am not prepared to absolve the party opposite from the legacy of the worst housing crisis for generations, which was our legacy when we came into office. As the noble Baroness, Lady Thornhill, said, many of the themes raised during this debate reflect pressures that have been building over decades: house prices have outpaced earnings, saving for a deposit has become more difficult, and housing supply has failed to keep pace with need. For many across the country, people who work hard and do the right thing nevertheless find themselves unable to take the next step towards home ownership.
The consequence is that too many people feel that opportunities available to previous generations are becoming harder to reach. That matters not only to individual households but society as a whole. A strong housing market should allow people to move through different stages of life. It should allow young people to leave home and establish themselves, renters to buy if they wish to do so, growing families to find homes that meet their needs, and older people to move when that is the right choice for them. That is why the Government see housing as both a social and economic priority.
Housing is about more than bricks and mortar. It affects productivity, labour mobility, health, community cohesion and opportunity. It shapes people’s confidence in the future, and nowhere is that more apparent than in the debate about home ownership. My noble friend Lady Paul clearly articulated some of those issues.
This Government want a country in which more people have a genuine choice about where and how they live. We want a housing market that works better than it has in recent years and a fairer system in which opportunities are not determined solely by geography, wealth or family circumstance. That requires a long-term approach, as the noble Baroness, Lady Thornhill, rightly diagnosed. There are no quick fixes to challenges that have developed over many years, nor is there a single policy lever capable of solving them. Instead, progress depends on addressing the fundamentals.
It means increasing the supply of homes, because we cannot tackle a housing shortage without building more homes. That is why we have taken urgent action through bold planning reforms—which was recognised by my noble friend Lady Gill and the noble Lord, Lord Jackson—and a record £39 billion investment to kick-start social and affordable housebuilding at scale across the country. In response to the noble Lord, Lord Jackson, I say that it is not the case that all social and affordable housing is occupied by those on benefits. Many occupiers of social and affordable housing are working people who continue to contribute to communities, in the same way that, in my town, when I was growing up, the majority of homes were council housing and they developed an entire community from that housing.
We need to increase the supply of homes, so we have also launched the £16 billion National Housing Bank to unlock private capital, support delivery on large and complex sites and accelerate the construction of new homes across the country. Together, these measures are designed to address the root cause of many of the challenges discussed today: the simple fact that, for too long, we have not built enough homes. It also means ensuring that aspiring home owners have realistic routes into ownership. That is why we are supporting first-time buyers through a range of measures, including shared ownership and reforms to mortgage lending that will help more people access suitable mortgage products. We have also consulted on a new first-time buyer savings product to replace the lifetime ISA, and that means making the experience of buying and owning a home simpler and fairer.
That is why, on 19 June, we published a road map setting out actions the Government will take over the course of this Parliament to reform the home buying and selling process. I am very grateful to the cross-sector partners who have worked with me to deliver this. At a time when families are feeling the squeeze, these changes will cut home-buying times by around four weeks, save first-time buyers an average of £650 and stop the nasty surprises in the house-buying process that cost time, money and heartbreak. Overall, first-time buyers are set to save a total of more than £200 million a year from these reforms.
Finally, it means recognising that housing policy must work for existing home owners as well as future ones. That is why we are taking action to improve the experience of home ownership itself. The King’s Speech confirmed that the commonhold and leasehold reform Bill will be introduced this Session, delivering long-overdue reforms for millions of leaseholders and helping to make commonhold the default tenure for new flats. At the same time, we remain committed to ensuring that people are safe in their homes, accelerating the remediation of unsafe buildings and removing barriers that prevent vital works being completed. Our aim is to create a system that offers more choice, more opportunity and greater security for people at every stage of life. Whether you are taking your first step towards ownership, moving to meet the needs of a growing family or considering a move later in life, everyone should have confidence that the housing system is working for them.
Throughout today’s debate, there has been a common thread running through many contributions, regardless of political perspective, and that is a recognition that home ownership remains important. There may be different views on precisely how to expand access to it; there may be disagreements about individual policies or interventions; but I suspect there is broad agreement across this House that we should be striving for a society in which people have a realistic opportunity of buying a home if that is what they choose to do. In fact, I agreed with much of what the noble Lord, Lord Frost, said in this respect; we cannot just keep doing what we did when it has not worked.
That is certainly this Government’s ambition. We want aspiring home owners to feel that this ladder is once again within reach. We want existing home owners to have confidence that the system works fairly. We want future generations to look ahead with optimism, rather than resignation. Achieving that ambition will take time. The barriers facing many households today were not created overnight. We have to take sustained action with our partners across the sector.
I will address some of the issues that were raised individually by noble Lords, but I am sure I will not get to them all. I will respond in writing where I do not reach any particular issue. I appreciate that there were different approaches on these issues, so I will set out our government view.
First, I want to talk about first-time buyers. This was an issue mentioned by many noble Lords, including the noble Baronesses, Lady Eaton, Lady Gill, Lady Seccombe and Lady Hodgson. In addition to increasing the supply of homes for all tenures, the Government are supporting people into home ownership, including through the shared ownership scheme and the lifetime ISA. On first-time buyers, I want to tackle the stamp duty myth. The noble Lord, Lord Evans, and the noble Baronesses, Lady O’Neill, Lady Eaton and Lady Thornhill, all spoke about stamp duty from slightly different perspectives. First-time buyers benefit from paying no stamp duty land tax up to £300,000 and are able to claim relief on purchases up to £500,000. From noble Lords on the Conservative Benches, I keep hearing about all this money they are going to spend from what they are taking out of the welfare bill, stamp duty being yet another one of those—following on from defence, tax cuts and so forth. I wait to hear which part of the welfare bill that is coming from, and I look forward to those discussions later.
The Government have also introduced a new permanent mortgage guarantee scheme to support and sustain the availability of low-deposit mortgage products for prospective buyers. The Bank of England has eased the loan-to-income limit. My noble friend Lord John mentioned the need for flexibility on finance, and he is quite right. The Financial Conduct Authority has an ongoing review of the mortgage market, which means many borrowers can now borrow 10% more towards a property purchase, and I commend Lloyds and Santander, both of which have reintroduced their 5% mortgage deposits. In June, the FCA published proposed new mortgage rules to support first-time buyers and underserved customers, including wider access to interest-only mortgages and greater flexibility for borrowers on variable and non-traditional incomes.
The noble Baroness, Lady Paul, mentioned some of the great examples that building societies are taking up. I really commend the Building Societies Association on its “Think again” campaign. The noble Baroness, Lady Seccombe, mentioned an example of someone who did not think they would be able to buy and could—that is what the “Think again” campaign is looking at. There is a much more flexible consideration now around, for example, fluctuating income levels and taking payment of rent into consideration as a guarantee of mortgage payments.
A number of noble Peers, including the noble Baronesses, Lady Eaton, Lady Hodgson, Lady Paul and Lady Thornhill, and the noble Lords, Lord Jackson, Lord Fuller and Lord Jamieson, mentioned supply and the 1.5 million homes. We inherited this acute housing crisis after decades of not building enough homes. That is why the Government are committed to delivering 1.5 million safe and decent homes this Parliament. I do not apologise for the ambition of that target. We are pulling every lever at our disposal. We have taken urgent action through bold planning reforms and a record £39 billion investment to kick-start social and affordable housing at scale across the country. We have launched the National Housing Bank, unlocking over £53 billion of private investment, as well as our programme of new towns—I am grateful to the noble Lord, Lord Gascoigne, for all the work he has done on that programme. Our interventions are showing positive signs of change, with new-build starts in March 2026 up 15% on the previous year and residents in outline applications up 54%. That mission signals our commitment to the country and to the market that we are serious about solving the housing crisis and ending this ingrained break on aspiration. It was always the case that we were going to have to take some time to put these steps in place before we started to see the outcome that we are looking for.
A number of noble Lords raised the issue of planning reforms: the noble Baronesses, Lady Gill, Lady Hodgson and Lady Paul, and the noble Lords, Lord Gascoigne, Lord Frost and Lord Jamieson. I thank the noble Lords, Lord Frost and Lord Jackson, for their support for the planning reforms—it is good to hear that. This has been a very important step: a set of pro-supply, pro-growth planning reforms to support our commitment to build those 1.5 million homes. The changes we have introduced to the National Planning Policy Framework involve a wider set of growth-focused interventions that will help us build the homes in places people want to live, but also supported by the right infrastructure that needs to go alongside it. The new NPPF confirms those reforms to make planning policy easier to use.
To specifically answer the question asked by the noble Lord, Lord Gascoigne, about well-connected stations, there is a definition of that in the National Planning Policy Framework, and I think I am meeting the noble Lord, Lord Banner, next week to discuss that further.
We are building on our landmark Planning and Infrastructure Act, a major step in the reform programme to unlock a new scale of housing delivery, especially focusing on the right type of housing, mentioned by the noble Baroness, Lady O’Neill.
Noble Lords raised the issues around right-to-buy reforms. We are reforming right to buy to deliver a fairer, better value and more sustainable scheme. We want a scheme that helps long-standing tenants to buy their own homes, while protecting much-needed social housing stock and ensuring that more homes are built to last. As my noble friend Lady Paul said in her thoughtful and analytical speech, echoed by the noble Baroness, Lady Thornhill, for too long, social homes have been sold off without being replaced. That is why we have already acted to reduce maximum right-to-buy cash discounts to their pre-2012 levels. The Bill will implement more comprehensive reforms to right to buy, including minimum tenancy requirements and allowing councils to keep 100% of the receipts generated by right-to-buy sales. This is an important move which will enable the building of much-needed council homes, and it is something that councils have called for for a long time.
A number of noble Lords raised issues about London. The noble Lord, Lord Gascoigne, spoke about the complexity of building in London, as did the noble Baroness, Lady Hodgson, and the noble Lords, Lord Frost, Lord Jackson, Lord Fuller and Lord Jamieson. In March, the Government and the Greater London Authority confirmed a package of temporary emergency measures providing targeted, time-limited support for housebuilders, to improve the viability of schemes and get quicker approvals on new housing schemes across every borough. That includes the GLA’s fast-track planning process for sites with at least 20% affordable housing, removal of guidance that constrains density, expansion of the mayor’s planning powers, temporary partial relief from development levies and £324 million for the GLA to establish the City Hall developer investment fund to unlock stalled sites and increase supply.
We are backing London with a major long-term investment, with up to £11.7 billion from the social and affordable housing programme confirmed for London over the lifetime of the programme, and an allocation of £1.5 billion of the new low-interest loan scheme for social and affordable housing. I am very aware that we need to give some assistance to London to deliver the housing it needs.
The Renters’ Rights Act was mentioned by the noble Baronesses, Lady Eaton and Lady Thornhill, the noble Lords, Lord John and Lord Jamieson, and by the noble Lord, Lord Frost, who mysteriously called it a war on renters. I think it was actually a big support for renters. It is transforming the experience of private renting for the 11 million private renters and 2.3 million landlords in England, delivering our manifesto commitment to end Section 21 no-fault evictions, which were an enormous cause of homelessness in this country. Tenants also have stronger protections against unfair practices. The Act also prevents landlords from demanding excessive amounts of rent in advance and helps remove barriers that can prevent renters from accessing accommodation. I am very proud of the Renters’ Rights Act. It is going to deliver much greater security of tenure for renters, and we do not expect those reforms to have a destabilising effect on the supply of rented homes and the rental market. So far, that has proved to be the case.
I will comment briefly on the support we are giving to SME builders, which the noble Baroness, Lady Hodgson, mentioned. She also mentioned rural homes; we have specific policies around making sure we have rural exception sites, to make sure that local people can think about what homes they need in their local areas. The noble Lord, Lord Fuller, also mentioned that issue, on SMEs.
There is a package of financial support for SMEs. We will unlock £53 billion of private investment through the National Housing Bank and support the building of over 500,000 new homes, including supporting SME housebuilders. We have also doubled the ENABLE Build guarantee scheme to £2 billion to increase SMEs’ access to finance. We recognise the challenge SMEs have in accessing suitable land and, to support them, Homes England has committed to sell more of its sites through SME-only sales, with a less bureaucratic sales process to help level the playing field.
I will respond in writing to other issues that I have not got to.
Lastly, a number of noble Peers raised shared ownership, including the noble Baronesses, Lady Gill, Lady O’Neill and Lady Paul, and the noble Lord, Lord Jamieson. Shared ownership continues to have an important role to play in supporting households. However, the Government are aware that some people who entered the shared ownership process have faced challenges. As many noble Lords will know, this was recently discussed on Report of the Social Housing Bill. As I set out in that debate, we have a programme of improvements in place to make shared ownership work better for customers, but there is more to come in the improvement programme. We are continuing to consider what more can be done to improve our customer experience for shared owners. My right honourable friend the Housing Minister is in discussion with the noble Lord, Lord Young, on many of those issues.
There are no quick fixes to these housing issues. The barriers to home ownership were not built in a single Parliament, and they will not fall in a single Parliament. But the direction is settled: building the homes the country needs, opening the route to a deposit and a mortgage, rebalancing the market towards people who want somewhere to live and making ownership secure for those who already have it. I am proud that Labour has picked up the challenge of tackling the housing crisis we inherited from the previous Government. To pick up the analogy from the noble Lord, Lord Fuller, we grabbed that knife that was falling and turned it into steel for building. I am grateful to the noble Baroness, Lady Eaton, for giving this House the opportunity to debate this issue.
Lord Jamieson (Con)
Before the Minister sits down, may I just clarify a couple of things? First, there was a lot of discussion on planning and there was some recognition that some of the things in the NPPF—not necessarily all—are positive. The biggest issue now is not just getting planning permission but the viability of the site. The Minister did not address that issue, other than mentioning a temporary measure in London. If it is not viable to build in London, then it is not viable not just on a temporary basis. Will the Government consider extending that? What else will they do, as I mentioned in my contribution, to make sites viable, possibly by reducing these levies and regulations on sites?
Secondly, if the Minister wishes me to share with her the full calculations of how we would fund the stamp duty cut, then I would be happy to do so.
Baroness Taylor of Stevenage (Lab)
My Lords, we continue to have active discussions with the sector on viability. There are elements in the National Policy Planning Framework that look at that, and we continue to debate this very important issue. The immediate crisis was in London, and we worked with the mayor and his team to introduce measures that we hope will help with that. Homes England is looking at it as well, so we continue to explore that.
We have to be careful about broad statements about how we are going to cut away at the welfare bill. It is easy to say we are going to chop the welfare bill and do this, that or the other with the money. It is when it comes to actually saying which bit of the welfare bill you are going to cut that the difficulties start to arise.
Baroness Eaton (Con)
My Lords, I thank all Members who have taken part in this debate today. The many contributions have shown and highlighted that, across the parties of the House, we see clearly the value of home ownership to society. As the Minister said, this was a broad title for the debate, and that was deliberate. I have seen, as we all have, the contributions from many different angles about this complex agenda. They have shown that we have a consistent interest in delivering more homes for people.
I thank the Minister, because she addressed with great detail and thoroughness the questions and issues we raised for her today and she has again shown her commitment. Although we do not always agree with her solutions to the problems, she certainly is committed to the housing situation in the country.
One of the things that the many contributions have shown is that there are no easy fixes, and we need to look at changing many of the restrictions that have been raised, such as planning complexities and infrastructure and financial policies. If they are addressed appropriately, it might alleviate the problems arising with home ownership. I thank all noble Lords for their contributions and I hope that our deliberations will bear fruit.