House of Lords
Message from the Queen
Earl Peel
My Lords, I have the honour to present to your Lordships a message from Her Majesty the Queen, signed by her own hand. The message is as follows:
“I have received with great satisfaction the dutiful and loyal expression of your thanks for the speech with which I opened the present Session of Parliament”.
National Assembly for Wales: Referendum
(13 years, 11 months ago)
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Lord Livsey of Talgarth
To ask Her Majesty’s Government whether the referendum mentioned in the Queen’s Speech for the National Assembly for Wales to have primary legislative powers will be put to the people of Wales in October 2010.
The Advocate-General for Scotland (Lord Wallace of Tankerness)
My Lords, I refer my noble friend to the Written Ministerial Statement made under my name on 15 June 2010. In that, I repeated a Written Ministerial Statement by my right honourable friend the Secretary of State for Wales in which she indicated that it had not been possible to lay a draft referendum order before Parliament by today. She further stated that our aim is for a referendum to take place before the end of the first quarter of next year.
Lord Livsey of Talgarth
My Lords, my noble and learned friend has made that statement on behalf of the Secretary of State. I am not entirely satisfied that we cannot have an October referendum, which was our wish, but I am glad to know that it will be in the first quarter of 2011. My noble and learned friend may be familiar with Edmund Burke’s famous remark that there is a point beyond which forbearance ends and tolerance ceases to be a virtue. While Liberal Democrats and devolutionists in all parties in Wales are reaching that point, we need an early referendum for primary legislative powers for the National Assembly for Wales. We face a constitutional obstacle course in Wales.
Lord Livsey of Talgarth
This is the question. Will my noble and learned friend ensure that there is a referendum poll well before next year’s Welsh Assembly elections in May?
Lord Wallace of Tankerness
My Lords, I know from the time that my noble friend and I spent together in the other place that he is a very determined and doughty campaigner both in establishing the National Assembly for Wales and, since then, in enhancing its powers. I make it clear that I am well aware of the importance that the Secretary of State for Wales attaches to this referendum taking place, implementing the coalition agreement. In her letter to the First Minister, she indicated that the date that the First Minister had indicated before the general election should not be considered until after the general election. That has meant that the consultation work on the question has only now begun and that there will be a further reference to the Electoral Commission for it to research and approve the question. Orders will have to be debated and approved in the Welsh National Assembly and both Houses of Parliament and submitted for approval by Her Majesty in Council. Thereafter, the Electoral Commission has indicated that the statutory period of 10 weeks is the minimum that it believes necessary to allow for all the processes required leading up to polling day. With the best will in the world, it was not possible to do that by October, but we have made the commitment that we wish that to happen by the end of the first quarter of next year.
Lord Morris of Aberavon
My Lords, the Conservative Party in Wales has a long record of opposing any Welsh constitutional advance, whether it be the setting up of the Welsh Office or a devolved Assembly. Has it now abandoned this posture and will it now campaign wholeheartedly for more powers for the Welsh Assembly? If it has not, how do the coalition Government reconcile that stance with the Answer in the other place by the Minister for constitutional reform, Mr Clegg,
“Yes, the Government do support a yes vote”.—[Official Report, Commons, 7/6/10; col. 41.]
in the referendum?
Lord Wallace of Tankerness
I am grateful to the noble and learned Lord for giving me the opportunity to make it clear that my right honourable friend the Deputy Prime Minister subsequently made it clear to the House of Commons that that was not the position. The Government will not have a particular view on the outcome of the referendum. Our coalition commitment is to ensure that the referendum takes place. The referendum is not the plaything of any one political party. It is for the people of Wales to decide and we will respect their decision.
Lord Elystan-Morgan
In so far as the people of Wales are concerned, does the noble and learned Lord accept that there is a deep conviction and desire in Wales for a referendum, and for that to be carried, making Part 4 a new constitution for the Welsh people?
Lord Wallace of Tankerness
I note that when the National Assembly for Wales voted on whether there should be a referendum under the Government of Wales Act, the vote was 53 to zero. I am sure that people on both sides of the argument were voting because they want a referendum, but it is not for me at this Dispatch Box to say what the outcome should be. I have no doubt that my noble friends and my friends in the Liberal Democrats in Wales will want me to take a particular view when I am campaigning, but, as I have indicated, the Government’s view is that we want the referendum to take place and the preparation for it to be as thorough as possible.
Lord Morgan
My Lords, will the Minister acknowledge that the lack of urgency in his Answer is deeply disappointing to many of us? Peter Hain, the previous Secretary of State for Wales, endorsed a referendum in the autumn. It has been endorsed by every political party in Wales and the Jones Parry report made an unanswerable case for it. Why are the Government dragging their feet? Is this yet another fault line in the so-called coalition?
Lord Wallace of Tankerness
I wholly reject any allegation that the Government are dragging their feet. I quote from the letter from my right honourable friend the Secretary of State for Wales to the First Minister:
“Your decision that the date and question should not be considered until after the General Election has meant that we have not yet submitted a question to the Electoral Commission, which has confirmed that it will need at least 10 weeks to carry out its assessment and then report”.
I hope that I indicated earlier to your Lordships’ House that the timeline is an extensive one. We want to ensure that this happens properly, and we do not want to take any risk that by taking short cuts we could open ourselves up to legal challenge. I believe that we are taking the proper steps in the right order.
Lord Crickhowell
My Lords, as one who, during the debate on the Government of Wales Bill, said that he would vote in favour of the move proposed in the referendum, I ask my noble and learned friend whether he thinks extraordinary the suggestion that the right honourable Peter Hain should be pressing us when in a major constitutional speech at Cardiff University last October he said that he did not think that the matter should be brought forward quickly—certainly not before 2011.
Lord Wallace of Tankerness
My Lords, having taken office I am discovering that there are many things that I am responsible for, but one of them is not to answer for Mr Peter Hain, thank goodness. I can assure the House that the Secretary of State attaches a huge priority to this. We are taking the steps as quickly as we can, and that is consistent with good governance.
Lord Richard
My Lords, one of the great problems that I have always had in my political life is my nasty, suspicious mind, particularly when it comes to assurances given six months in advance. Can we take it as genuinely firm that, unless there is a catastrophe, this referendum will be held in the first quarter of next year, with no “ifs” and no “buts”?
Lord Wallace of Tankerness
The noble Lord can take it as being as firm an assurance as any Minister could possibly give. There are ongoing discussions. It has been discussed by the Secretary of State with the Welsh First Minister and Deputy First Minister. There is co-operation between the respective Administrations that that should happen. I should add that the One Wales agreement of the coalition agreement in the National Assembly for Wales seeks a referendum before next year’s elections. As part of the respect agenda, we would try to honour that commitment.
First Aid
(13 years, 11 months ago)
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Lord Harrison
To ask Her Majesty’s Government what is their response to the St John Ambulance campaign, entitled “The Difference”, promoting better public understanding and practice of first aid.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the Government admire the work undertaken by health organisations such as St John Ambulance and the Red Cross, and warmly welcome the contribution that “The Difference” can make to the treatment of the ill and injured.
Lord Harrison
Given that the St John Ambulance report suggests that some 150,000 lives could be saved if there was a rudimentary understanding of first aid, and given the paucity of understanding in this country—where only seven out of 100 of us have such knowledge, compared to four out of five of our German colleagues—will the Government redouble their efforts and consider including first aid in the PSHE part of the national curriculum? Will the Minister also study the work being done in the north-west, in a crucial project in Greater Manchester, where ambulancemen and paramedics teach primary schoolchildren about the work of providing and administering first aid? That has gone down very well indeed.
Earl Howe
My Lords, the noble Lord asks several questions there. As I have indicated, we are extremely grateful to organisations such as St John Ambulance, the Red Cross and the British Heart Foundation for the extensive and excellent work that they do. As a general approach, we are clear that the NHS locally is best placed to assess and address what is needed in its areas, as indeed in other areas of healthcare. However, we encourage NHS providers to consider the kind of partnerships that work so well.
As regards schools and PSHE, as the noble Lord will know, first aid is included in the PSHE part of the school curriculum. It is not a mandatory module, though it is often included in key stages 3 and 4. What I can do is convey the noble Lord’s concerns to my colleagues in the Department for Education.
Baroness Gardner of Parkes
My Lords, can the Minister assure me that emphasis will still be placed on the continuing need to educate the public about when to call an ambulance? I strongly support making people more aware of first aid, but there are many conditions, such as strokes, which it is too late to treat unless it is done within a certain timeframe. The ambulance service, as I learnt when I had a fall recently, is very good when you call at sorting out exactly what your symptoms are and whether you need an ambulance. Will the Government ensure that the public remain aware of that situation?
Earl Howe
My Lords, my noble friend is absolutely right. The kind of basic first aid provided by community first responders, as they are called, is extremely important, not least in terms of operating defibrillators. However, that sort of service should be seen as complementary to and supportive of ambulance responses to emergencies. It is not a substitute for emergency ambulance response, and it is right that my noble friend should raise that distinction.
Baroness Emerton
I declare an interest as a former chief commander of St John. I am in touch with the recent campaign. It is interesting to note that there were 250,000 responses to an advertisement from people showing an interest in first aid, of which 70,000 indicated a desire to learn more about it. As part of this campaign, St John has decided that it needs to concentrate—the noble Lord, Lord Harrison, has already mentioned this—on young people and the workplace. An interesting statistic is that 45 per cent of incidents where resuscitation is required occur in offices rather than on building sites. Will the Minister assist St John and the many other agencies by supporting their call to improve workplace facilities for first aid to take place?
Earl Howe
My Lords, the noble Baroness makes an important point. We all know that St John is active in major emergencies and road accidents and was active in the London bombings of five years ago. She is absolutely right that accidents in the workplace are a significant feature of the kinds of injuries that hospitals see. The ambulance service extends training in the workplace in a number of areas. However, I shall go back to the department and inquire about the extent to which St John in particular is doing this work. We may be able to feed in some important messages.
Baroness Massey of Darwen
Given the original Question, and the fact that we are in a workplace, has the noble Earl thought of enabling short first aid courses to be held in your Lordships’ House—I do not mean in the Chamber—so that we could respond in an emergency?
The Lord Bishop of Chester
My Lords, the noble Baroness has asked my question. However, I wonder whether mouth-to-mouth resuscitation might be excluded from such a course?
Baroness Masham of Ilton
My Lords, is the Minister aware that the St John’s guide on first aid and the five basics is free and can be carried round in somebody’s pocket? Should not all restaurants have it because people can choke very easily?
Earl Howe
My Lords, I was aware that the St John guide is free. I take this opportunity to congratulate it on the way in which it distributes so much free material in this area. The noble Baroness raises a concern about the incidence of choking in restaurants. I am not aware of the extent to which restaurants as a whole are equipped to deal with that, but I will find out.
Loan Companies: Interest Rates
Baroness Scott of Needham Market
To ask Her Majesty’s Government whether they plan to regulate loan companies charging high rates of interest.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, my noble friend’s Question is timely as the Office of Fair Trading has just released the findings from its review of the high-cost credit sector. Many noble Lords will be aware that I am a long-standing campaigner for consumer rights in this area, and I see this review as an opportunity for Government to reflect on these very high rates of interest and consider whether there is a better way for us to approach this market.
Baroness Scott of Needham Market
Is my noble friend aware of the growing number of companies, some of which advertise on television, which offer short-term loans at extremely high rates of interest—in one case the APR is 2,689 per cent—plus an arrangement fee? Does she share my concern that a small short-term loan could very quickly turn into a very large lifetime millstone?
Baroness Wilcox
My Lords, many of us have seen on television these advertisements by payday loan and instant loan companies offering loans at what seem to be huge rates of interest, running into thousands of per cent. This is a complicated market. The APRs may not be the most suitable method for measuring the cost of these products. For example, borrowing £100 for five days from a company attracts an APR of 3,253 per cent, as the noble Baroness said. That sounds an enormous amount, but in fact the borrower will pay a total of £111—just £11 for borrowing £100—which is less alarming than the APR might suggest. However, that said, we are always looking for ways to try to make credit and lending available to people at all levels in our society. I know that the previous Government and the Government before them struggled with whether to cap lending or let it run free. It has always been the policy of the previous Government, the Conservative Government before them and consumer groups that at least if people have access to some form of credit, they are not being forced on to the black market and loan sharks.
Lord Sugar
My Lords, does the noble Baroness agree that this type of advertising for these loans is rather misleading and that the Government should step in to regulate the content of the adverts, insisting that a significant proportion of them—on TV and in newspapers—is allocated to spelling out what consumers are letting themselves in for? I pre-empt the noble Baroness’s answer by saying that this is not a matter for the Advertising Standards Authority or the trading standards people. Can we also consider a 30-day cooling-off period when the consumer can change their mind at no penalty to them?
Baroness Wilcox
My Lords, I thank the noble Lord for that question and for actually giving part of the answer. The line to take on this is that advertisements for high-cost credit, such as those for instant loans, should carry a wealth warning. We are looking at that interesting idea. The Office of Fair Trading has just made a report which we will be looking at to find a way forward on all of this. This issue affects all of us and it does not matter which side of this House we are on. We all understand the idea that people have to have access to some form of lending and credit, but I can quite understand that seeing these advertisements on the television has upset an awful lot of people, who think that it sounds far too easy. We are and will be looking at ways to see if we can make clearer the information that the general public get, in a language that they can understand.
Lord Martin of Springburn
My Lords, can I receive an assurance that every help and assistance will given to community-based credit unions which do excellent jobs and give people in the poorest areas an opportunity to have a say in the running of their own financial affairs?
Baroness Wilcox
I am delighted to hear someone mention credit unions. They are a wonderful idea. When I chaired the National Consumer Council, we did our very best to get people interested in credit unions. They work extremely well in Germany and Canada, but for some reason they have never taken off as well in this country as we would like. It is a very simple form of people coming together, putting the money together and getting a loan when they need it. We will try again to see if we can market this idea better. It is a wonderful way and we do so hope that we can manage to bring this forward. I know that the previous Government tried as well.
The Lord Bishop of Ripon and Leeds
My Lords, will the Minister comment on the Chief Medical Officer’s recent comments that financial exclusion, which is encouraged by high interest rates, is a major cause of ill health? What plans have the Government to increase the incomes of the poorest so that fewer visits are made to the doctor?
Baroness Wilcox
My Lords, I thank the right reverend Prelate for that question. How shall I answer it? First and foremost, it is important that all people have access to the help that they need, with information that allows them to make a good, informed decision. Getting into serious debt is a worry for all of us and can affect people’s health. We must, wherever we can, encourage people to save and to move away from debt as much as possible. However, when people do get into debt, short-term loans, in particular, can be a help rather than a hindrance so long as they are well described.
Baroness Oppenheim-Barnes
My Lords, is my noble friend aware that since the very first Consumer Credit Act—I think that there have been two or three versions in my time—I have campaigned against the formula which is represented by the APR, as it is totally incomprehensible and does not fully warn what the debt situation is? Does she agree with me?
Baroness Wilcox
The noble Baroness was chairman of the National Consumer Council before I was. She was also the consumer Minister and speaks with an amazing amount of authority on this subject. There is no way that I would go against anything that she says and I am absolutely sure that she is right.
Foxes
(13 years, 11 months ago)
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Baroness Sharples
To ask Her Majesty’s Government what action they propose to take to control urban foxes.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Henley)
My Lords, recent events in London have heightened public concern about urban foxes and our sympathies go out to the Koupparis family. Local authorities have powers to control urban foxes and are best placed to decide how and when to apply those powers.
Baroness Sharples
I thank my noble friend for that reply. On my way from the Underground the other day, I saw a fox running into the Commons—it did not come here. Does my noble friend accept that common sense should prevail at this time? A fox is a predator and a wild animal, so people should not feed it. A number of people do feed foxes but perhaps if they stopped doing so the vixen would not have so many cubs to rear. Does my noble friend agree?
Lord Henley
My Lords, I am sure that foxes going into another place are a matter for another place. It might be that they are less keen on coming into this House. As regards my noble friend’s question about food, she is absolutely correct: if less food were left around, we would have less of a problem with urban foxes.
Lord Lea of Crondall
Will the Minister take into consideration a recent event in Crondall when we had a power cut? It was established that it was due to a short-circuit caused by a fox. The consequence was, of course, the demise of the fox. Could this idea not be developed, saving electricity at the same time?
Lord Henley
My Lords, I was not aware of the incident to which the noble Lord refers. I certainly think that it could be built on and I am sure that all local authorities will study with great care what the noble Lord has had to say.
Baroness Deech
Does the Minister agree that food waste is a problem? Will he give a message to local authorities that their rather chaotic plans for keeping food waste separate and for longer than necessary will contribute to the problem of urban foxes?
Lord Henley
The noble Baroness is absolutely correct to say that food waste is a problem. However, I do not believe that we should give a message to local authorities that they should not insist on separating food waste; it is for the local authorities themselves to decide on the best way of disposing of and collecting their waste of one sort or another. If food waste is put in secure bins, there is no reason why it should create a problem.
Lord Greaves
My Lords, I congratulate the Minister on his clear statement that pest control is a matter for local authorities. It is not the job of Secretaries of State and other Ministers to solve every local problem in the country. However, does he agree that this question needs to be kept in perspective in view of the fact that two years ago more than 5,000 people were treated in hospital for injuries caused by domestic dogs and, of those, 1,250 were children? Perhaps that is a bigger problem than foxes.
Lord Henley
My Lords, I am grateful to my noble friend for his support for our localist agenda, which we believe is very important. He is correct to put these matters in perspective, although, obviously, if you have had two children bitten by a fox, you tend to take the matter seriously.
Baroness Quin
My Lords, I, too, congratulate the Minister on his appointment and I wish him well with his new responsibilities. The Opposition recognise that what happened was a terrible event for the family concerned and we send our good wishes to the children for a full and speedy recovery. As the Minister is, according to the Defra website, responsible for relations with local government, is he planning to have any contact with the local authorities affected by this issue? At the moment, there appears to be no information on the Defra website about this, so can he ensure that advice, information and expertise from within his department will be available to those who want it?
Lord Henley
My Lords, I thank the noble Baroness for her kind words and I welcome her to her new role on the Front Bench. We shall talk to local authorities, but I repeat that we believe that these matters are best left to them, rather than being dealt with by direction from the centre. Advice on how to deal with foxes is available from Natural England. I can also assure her that we have commissioned research from the Food and Environment Research Agency into what I gather is referred to as immunocontraception. Currently, that is being trialled on wild boars, but it could have relevance for the control of other mammals.
Lord Marlesford
My Lords, is it legal to release urban foxes in rural areas? If it is, will the Government consider making it illegal?
Lord Henley
My Lords, my understanding is that it could be illegal to do so under the Animal Welfare Act 2006 if it were to cause distress to the fox, which I imagine it would. Obviously, it would depend on the individual circumstances of any capture and release.
Lord Geddes
My Lords, would my noble friend consider whether a repeal of the Hunting Act would assist in this context?
Lord Henley
My Lords, I was wondering when that question would come up. I have a feeling that the repeal of the Hunting Act would not make much difference in relation to urban foxes in Hackney.
Lord Brooke of Sutton Mandeville
My Lords, although I appreciate that urban foxes do not live as long as rural foxes, does the Minister know the proportion of urban foxes to the fox population at large?
Lord Henley
My Lords, some research has been done into fox numbers. It is believed that there are of the order of a quarter of a million foxes in the country and that in the region of 15 per cent are urban foxes, although those are estimates. If we brought in some form of immunocontraception, those numbers could drop further.
Lord Brookman
My Lords, will the Minister put the noble Baronesses, Lady Sharples and Lady Trumpington, in charge of this issue?
Business of the House
(13 years, 11 months ago)
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Lord Strathclyde
That the debates on the motions in the names of Lord Sugar and Lord Corbett of Castle Vale set down for today shall each be limited to two and a half hours.
Arrangement of Business
Baroness Anelay of St Johns
My Lords, immediately after the conclusion of the debate in the name of the noble Lord, Lord Sugar, my noble friend Lord Sassoon will repeat two Statements, the first entitled “Public Spending: Reviewing Commitments made since January 2010”, to be followed immediately by a Statement on banking reform.
Small and Medium-sized Enterprises: Government Policy
Lord Sugar
To call attention to the effect of the Government’s policies, such as proposals for capital gains tax, on entrepreneurship and on small and medium-sized enterprises; and to move for Papers.
Lord Sugar
My Lords, with the proposed first Budget of the coalition Government scheduled to be announced on 22 June, I feel it appropriate that in today's debate matters of change which may affect SMEs should be aired. Before I express my comments, I state that, pursuant to the Code of Conduct, I have registered with the Table Office any relevant interests that may arise from those listed in my name in the House register of interests.
After the formation of the new Government, I was surprised to hear rumours suggesting an increase in the rate of capital gains tax. I thought that such a suggestion would be totally alien to Tory policy. Your Lordships may agree when I say that there have been some rumblings of discontent in their ranks on this matter, but I quickly recognised that it was the brainchild of the new Business Secretary—no doubt part of the prenuptial agreement.
I then noticed some backpedalling on the proposal. The Prime Minister, closely followed by the Chancellor, said words to the effect of, “Don’t panic. Just wait and see”. This gave me hope that our debate today may still be in time to influence what I detect is a plan still being drafted, but I am a bit confused, because the Business Secretary said that the current policy on capital gains tax can lead to large-scale tax avoidance. That was endorsed yesterday by the Prime Minister, while discussing capital gains tax on the Jeremy Vine programme on Radio 2. In that discussion, he said that he did not come into politics to put punitive rates of taxation on savers and people who do the right thing. He concluded: “I think you’ll see that it’s a fair and reasonable outcome”.
I have researched possible schemes of avoidance. Excuse me if I am missing the point when I say that I have come across only one anomaly. It benefits individuals who manage private equity funds who somehow magically turn their commissions made by creating gains for their clients from normal income into a capital gain. I agree that that, like any other tax-dodging scheme, is wrong, but it would be simple to eliminate in isolation in the forthcoming Budget. While we are at it, can we take a look at other stupid anomalies, such as with spread betting, where it seems that trading in shares in one's own name is likened to placing a bet on the favourite in the three o'clock at Newmarket. Just like a win on the horses, those gains are tax free.
Having said all that, I do not agree that an increase across the board on capital gains tax under the guise of stopping those kind of things is fair to genuine traders and businesspeople. It will have a devastating effect on enterprising people who decide to take the leap and set up their own businesses with a view of either floating them or selling them by way of a trade sale. I know that there is currently a £2 million entrepreneur relief in place, but in this day and age that amount falls short of the aspirations of real growth companies, especially those in the technology sector. That big payout is the ultimate goal for such entrepreneurs and their loyal employees. Raising capital gains tax rates will not encourage employees of public or private companies who have been incentivised with approved share option schemes. It will depress their desire to work hard. Most devastated will be those business or asset owners who have worked honestly and hard all their lives and are reaching an age where they are considering a sale.
By all means curtail people who trade in and think up avoidance ideas, but leave the genuine people alone and allow them to prosper and generate employment by good old-fashioned trading, manufacturing and sheer hard work—or, as the Prime Minister put it yesterday, “those that do the right thing”. A taper relief system should exist, resulting in low rates, such as the 18 per cent we enjoy today. There should be a much clearer differentiation between business and non-business assets, to allow people to know exactly where they stand. It is wrong to suppress enterprise in any way. Those people who, outside of their normal work, invest in real estate in their own name to enhance or refurbish it with a view of making gains should not be punished if they have retained the asset for a fair period. The same could be said for those who are long-term shareholders. One needs clearly to differentiate between the fast-buck merchants and those who invest sensibly.
Your Lordships may be interested to note that from the tax year 1997-98 right up to 2007, when the rate was 40 per cent, with taper relief providing possible rates of 10 per cent for business and 24 per cent for non-business, an average revenue of £3 billion per year was collected. In 2007-08, when taper relief was abolished and the advantage of the 10 per cent rate was changed to a flat 18 per cent rate, there was a rush in the sale of assets resulting in a massive increase of receipts to £7.6 billion. From what I hear, it is estimated in that 2008-09, under the 18 per cent arrangement, receipts dropped back to £3 billion. I would hate to think that a significant increase in capital gains tax, albeit delayed until next April, would induce a fire sale of assets that would depress certain market sectors. Is it the Government’s real agenda to generate a massive windfall of revenue in order to boast in a year or so’s time about how well they are doing in reducing the current deficit? The Prime Minister said yesterday that revenues from additional capital gains tax will be used to supplement lifting the income tax threshold for basic-rate taxpayers. I am sceptical that the maths will work out that way. Instead, any windfall would be shallow and short-term thinking, simply playing with numbers and window dressing, ignoring the devastating long-term effect on enterprise and employment.
There is also mention that the Government intend to cut investment allowances with a view to funding a corporation tax cut. This idea will benefit only non-productive companies such as those in financial services, which make large profits with very little investment. Investment allowances have encouraged manufacturers to invest in leading-edge plant and equipment. They also release more working capital to them. These companies create employment, train the young and win valuable export sales. This is not the time to demoralise them or to create cash-flow problems for them. It will make them think twice before investing and, more to the point, investing in the UK.
Your Lordships will recall that last year I was engaged by the then Government to act as an adviser in areas relating to SMEs including, among other things, their relationships with banks. During that time, I attained quite a high level of understanding of the service provided by Business Link centres. I shall not speak of all the good things available to SMEs through these centres, save to say that it is a very good service. It makes a difference in helping and encouraging start-ups as well as hand-holding those already in business. I have heard that the Government are proposing major cuts, including cutting quangos or cutting costs at the RDAs, which worry me in respect of the future of Business Link centres. At the tail-end of my advisory role, I reviewed the cost of operating Business Link centres. I will be honest: despite being encouraged by what I saw out in the field, it quickly became clear to me that a lot of cost could, and should, be saved in running this service. I would wholeheartedly endorse a rationalisation of Business Link centres. It would generate significant cost savings if we made sensible changes by cutting duplication and centralising some of the services they provide. I am convinced that that can be achieved without any decay at all to the service they provide. My plea to the Government today is to say that, considering all the hard work in crafting this excellent service, it should not be abandoned or merged in some smoke-and-mirrors arrangement. I ask that it remains in place under its current branding and autonomy, albeit rationalised in cost terms so that it can continue to offer the great support it gives to the small business community.
In the March Budget this year, it was promised that government procurement departments will pay SMEs on time and allocate a larger percentage of their spending to small companies. I hope this promise is honoured by the Government, as it was one of the issues most voiced to me when I was engaged on the coal face with the SME community. Problems still exist getting on an approved government buying list. It is very complicated. It seems each and every department or council has its own criteria. I encourage the development of a simplified “one covers all” approval system to allow SMEs a fair crack of the whip, at least to be able to bid for the business.
My final topic is the old chestnut of the banks allegedly not lending to small businesses. Correct me if I am wrong, but do I detect in the past few weeks a complete silence on this, once branded a disaster area? From what I recall, it was frequently debated in this House and reported in the media. Why has it all quietened down? Is it that a problem did not really exist? Is it that those who complained now realise they did not deserve what they were demanding? Is it that for some people there has been a massive wake-up call that there are no free lunches out there?
The banks experienced a shock a couple of years ago from the world’s economic crisis. They were chastised for their irresponsible actions in getting into such trouble. Then, after the bailout, they were chastised again as to why they do not lend irresponsibly to every Tom, Dick and Harry.
Your Lordships will recall how this House, and those in the other place, raised concerns based on misreporting in the media of comments I supposedly made last year when trying to be realistic and honest on this subject. The then Government were so intimidated by this banking issue that in the last Budget they announced that the Financial Intermediary Service would set up a national credit adjudicator. So concerned were some that it prompted the noble Lord, Lord Razzall, then residing on the opposition Liberal Democrat Benches, to inquire,
“bearing in mind the well known views of the noble Lord, Lord Sugar … that there is no difficulty … obtaining finance from banks … that the noble Lord, Lord Sugar, will not become the adjudicator he referred to?”.—[Official Report, 25/03/10; col. 1067.]
I am delighted that the noble Lord, Lord Razzall, has decided to join in this debate and I look forward to his contribution, but let me allay any fears. There was never any intention of me being an adjudicator, but I did chair a committee tasked to find one. Interestingly enough, when the subject was discussed in detail to try to home in on what, if any, problem existed, it exposed many facets which needed consideration, including the possibility of concluding there was very little on which to adjudicate.
If I have one criticism of banks it is that they should be held responsible for giving detailed explanations to people as to why they have been turned down for finance. I am sure this constructive information will help companies understand what they need to do to with their businesses in future to secure finance. I am encouraged, as we start to see some recovery of the economy, by some banks divesting away from broking or other trading activities and refocusing, as traditional banks, on what they used to do best—lending money to businesses.
I conclude by saying how amused I was to hear that the Business Secretary—who last year, in response to my comments on banks, stated that I was “out of touch” in the business world—seems, having been in office for no more than 15 days, to have taken a leaf out of my book. Some may argue he infringed my copyright in his less than encouraging statement to the small business community when he said:
“I don't want to raise unrealistic expectations. I'm not going to go around the country with a chequebook signing cheques for every company that has a bright idea”.
If he carries on like that, who knows? He might get his own TV show.
Lord Haskel
My Lords, I congratulate my noble friend on his excellent speech in moving this Motion. For my part, I want to start first with a conundrum for the Minister. What do the following have in common: clothing with sensors that monitor and transmit data about people with long-term health conditions, so that they spend more time at home and less in hospital; an oral fluid that enables the police to detect the increasing number of drivers who are under the influence of drugs—previously they had to do this by observation; and a technology that will make our mobile phones more secure as they become a source of replacing cash in our wallets? The answer is that all three are Small Business Research Initiative programmes.
How does it work? A government department identifies a need for a product or service. Through the Technology Strategy Board, this is framed in the form of a competition. Small businesses enter and the winners gain a contract to develop and supply the product or service. Since 2009, more than 400 contracts have been awarded to mainly small businesses by 13 government organisations. As my noble friend Lord Sugar indicated, everybody benefits. Government departments procure new technologies faster and with managed risk. Small companies get paid contracts at the critical stage of product development. Some of the financing gap left by the banks gets filled.
This illustrates the reality of the relationship between government and small businesses, but there is also a lot of myth about this relationship. Sadly, the coalition agreement is strong on the myth and weak on the reality, so let me try to separate them out. Before I do, let me remind noble Lords why there should be a relationship between the Government and small businesses. As many fund managers will tell you, the reason is that many of our large companies have their best years behind them. They have experienced most of their growth and innovation and, unless they change, somebody else—leaner, fitter, more hungry, more innovative—will take their place and outperform them. The Government must encourage this to happen here instead of elsewhere.
It is a pity that we are not hearing from more noble Lords opposite—but that is the problem of having this debate during Ascot week. If they were here, they would say that the way in which to encourage small companies is to cut red tape and to have low rates of tax. This is where we have to separate the myth from the reality.
Let me start with the red tape. When the noble Lord, Lord Heseltine, became Secretary of State for Business, he promised us a bonfire of red tape. It did not happen because of lack of fuel. When Margaret Beckett became Secretary of State—I had the honour of serving in her team—we, too, tried to cut red tape. We started a website where people could tell us where the problems lay—anonymously, if necessary. As a result, we simplified the auditing and the VAT regulations for small companies, but the effect was not great. We asked a lot of businesspeople to be specific, but they said that the problem was a lot of small things hard to specify. I am convinced that a myth has grown up around the whole question of red tape and I urge the Minister not to let the myth distract her from the reality.
What is the reality? It is that the myth has held back all Governments from dealing with market failure and lack of competition by regulation. Look no further than the banks. Instead of regulating from the perspective of the customer—of the wider community—the regulation was captured by the industry. Let me give another example. I notice that once again the FSA is—or was—investigating the closed shop that controls initial public offerings in London, an important source of development finance for small companies. This unregulated market failure has been going on for years. The high charges certainly deterred me 30 years ago and it must have been the same for hundreds—perhaps thousands—of others. It is an example not of too much red tape but of too little.
The other area where myth and reality become confused is taxation on small companies. My noble friend Lord Sugar spoke of this. We are told that, if the Government raise capital gains tax, diminishing returns will set in and entrepreneurs will leave the country. The myth surrounding this relates to the so-called Laffer curve—tax rates on one axis and government income on the other. I am sure that the curve exists, but the trouble is that no one knows where it peaks. Economists cannot tell us because of the many external factors, as mentioned by my noble friend Lord Sugar. Actual tax rates have been as low as 18 per cent and as high as 90 per cent. The answer of course lies somewhere in between, but your guess is as good as mine. So do not let this myth distract you from the reality.
The reality is that small companies need help in their early stages when they are struggling to establish themselves. That is why at present they benefit from lower business rates, lower tax on profits and increased investment allowances. I ask the Government whether this will continue. In reality, tax breaks are needed earlier rather than later when a business has been successful and the investors are collecting their profits. Higher tax may encourage them to leave the money in the business long term, which is an objective in the coalition agreement. I agree with my noble friend Lord Sugar that there should be arrangements for those who invest long term.
What other realistic ways are there for the Government to encourage small companies? Europe provides opportunities. I find Mario Monti’s paper on the completion of the single market very convincing. The single market may provide more competition, but it will also provide more opportunities for our small companies—the kind of opportunities from which our economy will benefit. The Government are keen on a green economy. Raising the target to cut carbon emissions from 20 per cent to 30 per cent by 2020 will help small companies. It will encourage them to engineer new green technologies. We already have a Technology Strategy Board which can champion this.
Let me end with another conundrum for the Minister. What do the following have in common: an ozone laundry system, which is becoming the European standard to prevent MRSA and Clostridium difficile; a new carbon composite produced at lower cost and with a lower carbon footprint, which is currently being used on the brakes of a winning F1 car and being tested on aircraft and trains; and a shock-absorbing polymer, which is used not only by the MoD but in the shoes of ballet dancers all over the world to protect their toes? The answer is that all these are new technologies developed in Britain, which, through the Materials Knowledge Transfer Network, have been transferred to small companies, thus helping them to grow.
I think that my conundrums have demonstrated that under a Labour Government small companies flourished. Will this support continue? If so, I hope that the Government will stop pronouncing Britain bankrupt and start showing confidence and pride in the small firms that are our future.
Lord Taylor of Warwick
My Lords, I, too, thank the noble Lord, Lord Sugar, for securing this debate. The writer Robert Frost said:
“By working faithfully 8 hours a day, you may eventually get to be boss and work 12 hours a day”.
We all know that running your own business is hard work, especially if, like the noble Lord, Lord Sugar, you started it from nothing. In business, you do not need a wishbone, you need a backbone. I am afraid Ronald Reagan was right when he claimed that the most terrifying words in the English language are:
“I’m from the Government and I’m here to help”.
Over the last 13 years, business has become complicated, bureaucratic and full of red tape. The Minister now has an opportunity to kiss and make up with the business community—and by kiss, I mean “keep it simple”.
We know that the Government are not a cashpoint machine. The former Labour Government’s Chief Secretary to the Treasury left a note stating, “I’m afraid to tell you there’s no money left”. So we know that the economic recovery will not come from the public sector; it can come only from wealth created by the private sector—from business. The fact is that over 90 per cent of all business in the UK is small business, employing fewer than 50 people. The entrepreneur has long been recognised as an important driver of economic growth.
Enterprise UK is an independent business-led charity founded by the British Chambers of Commerce, the Confederation of British Industry, the Institute of Directors and the Federation of Small Businesses. This week the charity produced a report based on a number of ideas that had come from 100 companies in the UK, ranging from multinationals to small business owners. It makes the point that small business tends to be more innovative than large business. But in terms of ease of starting a new business, the UK ranks only 16th in the world. There are barriers. The main obstacles are red tape, bureaucracy and lack of access to finance. The UK will continue to face significant challenges over the next decade from increased global competition. As we know, financial power in the world is gradually moving east, and the UK must respond by building a new economy based on business solutions.
The report also points out that enterprise is more popular than ever. Over half of the UK adult population says that it would prefer to be self-employed, but positive attitudes are not enough. From education campaigns to TV programmes like “Dragons’ Den” and “The Apprentice”, in which the noble Lord, Lord Sugar, makes such an impressive appearance, people’s minds can be opened up to the opportunities of running their own business. But too many are put off from turning their business ideas into reality because they cannot find the right advice and support. In my opinion, mentoring has an important role to play in helping businesses start up; and libraries, universities, colleges, job and community centres should all play their part in linking potential entrepreneurs with locally based mentors.
I turn to another report, one produced by the Department for Business, Innovation and Skills in November last year about black, Asian and minority ethnic-led business. It made the point that that sector is vital to the UK economy. There are an estimated 310,000 ethnic minority SMEs in the UK, contributing around £20 billion to the economy each year. They make up about 7 per cent of all SMEs in the UK. There are higher aspirations within these groups to start up their own companies than within their white British counterparts, but the conversion to start-up remains low, again because of the ongoing problems of lack of access to finance, business networks and mentors.
Levi Roots is a reggae-singing businessman. I see from his smile that the noble Lord, Lord Sugar, is aware of him. Levi developed his own sauce, called Reggae Reggae Sauce. I declare no personal interest in the sauce other than the fact that a bottle is in my fridge at home, and it does taste good. But Levi realised that that was not enough to make it sell. After years of failure and disappointment in life generally, he adopted the bold approach of going on to the “Dragons’ Den” TV show—he probably could not get on to “The Apprentice” because it is too popular—with his guitar and a bottle of his sauce. He presented his business plan to a stunned panel in a rather unusual way by singing his plan and the merits of the sauce. Well, it worked, because he was signed up by one of the dragons. That sauce is now sold in major retail stores all over the country. However, not every aspiring businessman can play the guitar or sing, so we have to make it easier for people who cannot sing and cannot play the guitar—I am not convinced that Levi Roots can sing and play the guitar—to succeed
The taxpayer bailed out the banks but is not getting the right service in return. The banks may be led by the new big society bank about which we have heard, but they must start to provide the small business community with the finance it needs to survive and grow. I agree with the noble Lord, Lord Sugar, that if applications for finance are turned down, businesses should be given the reasons for that refusal; often they are left completely in the dark.
Corporation tax should be reduced, both the main rate and the small companies’ rate. The Government should also exempt all new businesses from employers’ national insurance payments on the first 10 employees they hire in the first year. They should also reduce the burden of red tape. No new regulation should be introduced unless the burden can be reduced elsewhere—one in, one out. The number of forms needed to register a new business must be reduced. Again I agree with the noble Lord, Lord Sugar, on that point. There should be an end to restrictions on people starting a business in social housing. This would enable social tenants to become entrepreneurs.
There is a desperate need to simplify business taxes in order to give small businesses more certainty and stability. The Government must maintain generous tax exemptions to encourage enterprise. The income tax threshold needs to be increased, helping to lift millions of people out of income tax altogether and improving incentives to work.
The noble Lord, Lord Sugar, mentioned the thorny issue of capital gains tax. There are genuine concerns about the difference between the rate of capital gains tax at 18 per cent and income tax of up to 50 per cent as this could provide scope for tax avoidance by changing income into capital gains. At least the existing annual threshold of £10,000 must be kept, with any gains below this level being tax free. The Government’s aim must be to encourage savings and responsibility, not to penalise them. Capital gains tax could be tapered so that anyone selling assets would pay the tax at an increasingly lower rate the longer the assets were held.
Government procurement needs to be extended to small and medium-sized businesses. Again I agree with the noble Lord, Lord Sugar, on that. There should be an aim that at least 25 per cent of government contracts go to SMEs. The KISS principle should certainly apply—keep it simple.
The Government need to make Britain Europe’s leading high-tech exporter of manufactured goods by implementing Sir James Dyson’s recommendations to boost science and engineering. Apprenticeships tend to be associated with manufacturing and engineering, but we must not forget that they apply equally to the creative industries—media, music and the arts generally—which make up 8 per cent of UK GDP. Training for skills needs to be encouraged within that sector by further investment.
Finally, I encourage the Government to develop their Work for Yourself programme to enable people to move into self-employment. They need to continue to partner groups such as the Prince’s Trust and the Bright Ideas Trust and to offer support to the small business community.
Enterprise not the state will restore our economy, and I urge the Government to allow enterprise to lead the way so that Britain can be open for business again.
Lord Harrison
My Lords, many of your Lordships have run successfully big businesses. That is why I am encouraged to welcome my noble friend Lord Sugar, with his experience of small businesses, and the two succeeding speakers who also have knowledge of small businesses and the field of being hired and fired. If there is one thing that I could bequeath the business community in the United Kingdom, it would be the American approach, where to fail is not to fail. If you fail in one small business and fail in the next, you win in the one succeeding. If we could inculcate that view, we would go a long way towards establishing an even more successful small business community.
Labour’s record has been good; the noble Lord, Lord Haskel, detailed it well. Chancellor Brown had 10 years of stability, which is so essential for small business to grow. At the time of the global financial problems and instability, he it was who encouraged the G20 in 2008 to co-ordinate the stimulus which I think has worked and been successful. Indeed, there is evidence that it is working, albeit that the recovery may be fragile. That is why I say that the Government must be careful not to introduce precipitate, insensitive cuts which would cut off the recovery and, in turn, result in a double-dip recession. They should not resort to fondue economics, forever dipping in and out of recession. What businesses require above all is stability, because it gives SMEs the opportunities to plan, to invest and to expand. For 10 years, we had that stability, and we must recover it.
Labour’s record is good. There were 4.8 million private sector enterprises in the year for which they were last counted. That was 2.2 per cent higher than the year before and the highest number of small businesses since 1994. It is interesting that the stimulus in the last two years of the outgoing Government has resulted, perhaps unexpectedly, in fewer people being unemployed. There were threats of 3.5 million people being unemployed; the figure stands at just under 2.5 million. I think that that shows that the one thing that small businesses wanted to cling on to was people, relevant staff, who would lead them forward once the recession had been left behind. The Sunday Times reports that small businesses in Scotland were prepared to ban the use of first-class stamps or to phone around suppliers to cut by 10 per cent electricity, phone and internet costs, but they were determined to retain key workers, because small businesses rely on people, whether they are entrepreneurs or those who work with them. I ask the Minister to say what HMG can do to encourage the retention and expansion of the skills of small business people.
I want to be positive today. We have a new, alliance Government. This offers new opportunities, not least because the two parts of the alliance have had to bring together their ideas to form the coalition agreement, which contains a good section on small businesses. It is also good for our party after 13 years to have a period of reflection and renewal. We can be proud of what we have done, but we, too, need new ideas. We are therefore in a state of flux where new ideas can flourish. Where should they not flourish if not in small businesses?
I have analysed the coalition programme to see which parts are attributable to which of the two parties. It is a bit like dissecting the Beatles’ songs to see whether it was Lennon or McCartney who was the major contributor. The plangent bits are more Tory; the softer bits are more Lib Dem. That is illustrated in the vexed question of small business taxation, IR35, which has plangent elements and softer bits. I would be interested to hear the Minister dilate on the coalition programme and the elements of it which refer to small businesses.
I offer the noble Baroness, Lady Wilcox, my welcome. I know that she will be a feisty campaigner for small businesses and am very pleased that she is coming to address the Genesis Initiative, outlined in Britain’s Economic Revival. I shall raise some of the ideas expressed there. One initiative is that there should be a small business person within the Cabinet. Would she reflect on that? The legislation that applies to small businesses covers the whole field of government policy, and we need someone at the centre to see and understand that. Also, the noble Lord, Lord Taylor, has just mentioned that public sector contracts should be made more available to small businesses. That is a good idea, but how do the Government plan to achieve that in not too mechanistic a way—say, 25 per cent?
I have given the noble Baroness notice that I wanted to raise the question of succession planning. Too many small businesses fall by the wayside for the lack of having someone to take up the cause of the business when the proprietor retires. Certainly, when I was in Brussels speaking about small businesses, I remember the Commission producing a very important document highlighting that. Does the Minister have any figures on that? If I may be bold enough to suggest this to my noble friend Lord Sugar, it would be a very interesting area to explore, because we lose businesses that are absolutely viable for the want of someone who is in the know, who can take up such businesses and carry them to new heights.
I should also like the Minister to examine the world of audits, which my noble friend Lord Haskel mentioned, with regard to his period of looking after small businesses. Much was done by Labour to improve the situation, but a recent article by Anthony Hilton in the Evening Standard says that most audits are useless. I would not say that, but most audits coming from the big four on big business are questionable in the sense that they are so guarded and hedged that they do not provide proper information. However, a good audit for a small business is crucial for a better understanding by the entrepreneur of the business and its prospects. What ideas do the Government have for improving what I would hope could be meaningful audits that actually help the business to grow?
I want to mention red tape. The noble Lord, Lord Taylor, mentioned the “one in, one out” approach to red tape, but that can be naive and time-consuming, as well as too mechanical. We do indeed want to reduce red tape to ensure that it becomes the framework in which the invisible hand of the market can operate. However, you need a Government to frame and police the market. We have too little policing of the markets that are established, and we need to be careful about that.
I shall conclude on the European Union, and the biggest ambition, which I know that the noble Baroness, Lady Wilcox, will share with me, of achieving the single European market. If we were able to achieve that market, and make it viable for British businesses to use their expertise and energies in it, we would give them a wonderful opportunity to succeed. I shall give an example that the noble Baroness, Lady Wilcox, might like to take up. According to GE Capital, 60 per cent of UK businesses that export into Europe still only export and invoice in sterling. That is not good enough when you are dealing with customers.
I conclude by saying that I am very grateful to the noble Lord, Lord Sugar, for securing this debate. I hope that it can be a productive debate and flow with ideas and that the Government in both their parts can be athletic in responding to the genuine flourishing of 100 ideas, which I hope we hear today.
Baroness Gould of Potternewton
My Lords, like other noble Lords, I thank my noble friend Lord Sugar for initiating the debate. I also thank the many organisations that have sent me information. How pleased I am that the noble Baroness, Lady Wilcox, a successful businesswoman herself, is replying to this debate. It is the role of women entrepreneurs and women business owners on which I wish to concentrate my remarks. I want to try in some way to get a guarantee and an assurance that none of the Government’s new proposals will in any way deter women from entering the business world.
There are different categories of women in business, be it self-employed women, women employee-owners or women entrepreneurs. While each category may have different specific requirements they all require differing degrees of initial funding, refunding and support mechanisms. Encouragingly, the support mechanisms we have in place at the moment have meant that all those categories have steadily grown. However, there still appears to be a perception of women as a disadvantaged group outside the mainstream. That generalisation needs to be broken; it perpetuates a feeling of exclusion for some who have yet to reach a level of awareness to see that anything is possible.
The COGS 2009 report, Challenges and Opportunities for Growth and Sustainability: A Focus on Women Entrepreneurs, provides significant evidence which clearly makes the case for a more holistic approach and dispels a number of myths about women’s business. Women invest as much in their businesses at start-up as do men. Women experience similar rates of job and turnover growth to men from when they started. Women’s turnover growth and job-creation expectations are similar to men’s. Women are prepared to work the long hours in order to make their businesses succeed, and they are more likely to appreciate the business support they get from public and private sources and to feel that they are creating intangible value through their companies, as well as tangible value such as market share and company value. Yet all the women who participate in enterprise offer a wealth of untapped talent and economic opportunity, and are crucial to the service and retail industries.
What, then, is the motivation for women joining the business-owning community? According to the Labour Force Survey of 2007, despite general similarities between the reasons given by men and women there are significant differences. Those need to be taken into account. The most notable difference was that women were five times more likely than men to raise family commitments, the freedom to choose their own hours, to work at home and flexibly; conversely, men were almost twice as likely to say that one of their reasons was “to make money”. That was again evidenced by the COGS 2009 survey, which further identified that 62 per cent of women felt a desire to make a difference either socially, environmentally or in job creation, compared to 37.6 per cent of men.
Women-only businesses already contribute significantly to the economy, with an annual turnover of £130 billion, so without question women’s entrepreneurship is an important driver for economic growth, competitiveness and job creation. Stimulating entrepreneurship is an important challenge for the whole UK. More women-led enterprises are needed to increase the stock of businesses and so contribute to economic growth and innovation.
There has, over the past few years, been significant government investment in a variety of initiatives aimed at supporting women on their entrepreneurial journey. Those have ranged from the strategic framework for women’s enterprise to the establishment of the women’s employment task force and the enterprise strategy. Those initiatives were accompanied by funds, some specifically for ethnic minority women; as an aside, it is interesting that women from ethnic minority groups are more likely to be growth-oriented than men in the same groupings. We should take note of that. There is also the Aspire fund, which was launched in 2008 with the aim of co-investing and investing in women-led enterprises through Business Link.
Business Link has substantially increased its reach to female customers and has made a noticeable difference to the number of women in the SME sector. Overall, it is estimated that women-owned businesses accounted for around one-third of Business Link customers in the past four years. This morning I had breakfast with a woman who is now running her own successful business. I said that I would be discussing Business Link, and she said that she could not have started or continued her business without the support that she got from it.
The coalition agreement raises questions: will the Minister clarify what is going to happen to Business Link if the RDAs are abolished? How will the popularity of RDAs be determined, and will their role in developing SMEs play any part in that decision? It is estimated that women account for 40 per cent of customers using government-sponsored business support services. Which services are going to be maintained?
There is a concern that local enterprise partnerships will have a detrimental effect on the expansion of businesses rather than having a regional structure that means that businesses can stretch across the regions in a simple and easy way. Will there be a continuation of any government funding specifically to assist women starters? The outcomes of these decisions are crucial for women who have not been able to raise funding from their own or from external finances such as the banks, as they are four times more likely to access a source of government grants than men.
Of course, there are different ways of funding, both for setting up a business and for its development, but initial support for business start-ups is critical and for many women it will be the first time that they have sought funding, so they will require support and advice. Again, it is Business Link that has provided much of that support and advice. It will be crucial in maintaining women who are starting businesses. Many women have a lack of self-belief, concerns about finance and confusion about red tape. Those are commonly cited reasons for women not launching their own enterprise, so advice, training and networking are essential elements in taking that leap of faith.
Some years ago I did an Industry and Parliament Trust small business fellowship, looking particularly at the development of women ownership. I spent a day at Barclays Bank sitting in on a training session for women who were considering or wanting to develop or start a new enterprise. What was fascinating was that it was almost possible to identify those who would succeed—it was not those who had just had a bright idea and expected others to help them with it but those who had taken advice, done their research, looked for a gap in the market, had a strategy and a properly worked business plan and developed financial skills. The support mechanism to ensure that they have the capacity to look at all the things that contribute to starting a small business is essential.
The advice has to be clearly understood. There are specific issues faced by women in accessing finance in general and risk capital in particular. Again, this is provided by Business Link. I accept, though, that that support, in the form of financial or personal development initiatives, has to be based on whether the businesses are viable, sustainable and scalable.
According to the British Association of Women Entrepreneurs—I am sure it is right—the majority of women entrepreneurs focus not on the fact that they are women but on the fact that they are business owners, and they are not looking for preferential treatment. However, they want mechanisms in place to encourage and guide those who want to make that dramatic change in their lives and become their own boss. I would like to hear an assurance from the Minister that all the initiatives will in no way be cut, so that there will be no way in which women will be deterred from starting their own businesses.
Lord Borrie
My Lords, I understand that the speakers list has been changed so that the noble Lord, Lord Razzall, will be the last of the Back-Bench speakers and I am therefore in this slot.
I, too, congratulate my noble friend Lord Sugar on initiating this debate. He has many remarkable gifts, one of which is informing people about significant public issues through entertainment, as shown in his highly successful television programme, “The Apprentice”, and its successor. I wish him continued success in that, not for his own sake or for my enjoyment but because the success of that programme is of benefit to the economy in terms of a greater appreciation among its viewers of the value of training, effort, challenge and hard work.
I also congratulate the noble Baroness, Lady Wilcox, on her ministerial appointment and I look forward to her winding up this debate. She has been chairman of the National Consumer Council and she succeeded me as president of the Trading Standards Institute. Particularly from those vantage points, I think that she will agree that the ultimate purpose of business, whether small or big, is the satisfaction of the customers or consumers, whatever you call them. In order to achieve that, entrepreneurs, particularly those in small and medium-sized enterprises, need fair access to credit facilities, the timely payment of money that is due to them for services rendered and rules regarding a matter that has not specifically been mentioned so far today—ensuring fair trading between small suppliers and supermarkets, which seem to be getting bigger and bigger.
My noble friend Lady Kingsmill, who I do not think is present today, said in the debate on the gracious Speech:
“Since the beginning of the banking crisis, we have lost more than 30,000 small firms, and the drying up of bank credit is largely to blame”.
She said that there are too many,
“businesses with solid credit records being refused loans or offered them on … punitive terms”.—[Official Report, 2/6/10; col. 354.]
A short while ago, the noble Lord, Lord Taylor of Warwick, referred to the fact that sometimes these refusals are given without any reason or explanation.
A related aspect of this problem is that SMEs that are largely or even wholly dependent, as many of them are, on reasonably prompt payment of money that is due to them are too often kept waiting because customers—often, perhaps, with substantial resources, though not necessarily—ignore their contractual commitments to pay debts promptly. As someone once put it, “Money delayed is money denied”, a phrase similar to the one that we lawyers are familiar with from Magna Carta:
“Justice delayed is justice denied”.
The Government have made some efforts to ensure that at any rate their own debts to business should be paid promptly and they have encouraged all sorts of government agencies—quangos, if you like—to do likewise. However, despite the passing of an Act of Parliament whose terribly long name is not terribly well known—the Late Payment of Commercial Debts (Interest) Act 1998—to enable people to sue for statutory interest at 8 per cent above the bank rate on delayed payments, it hardly needs me to explain that creditors, particularly small and medium-sized enterprises, are reluctant to engage a substantial customer in legal proceedings. They do not exactly want to lose that major supermarket as a customer. There are not that many alternative customers.
I have wondered whether it might be desirable to enable public officials to take up the cudgels on behalf of several SMEs. Usually, not just one or two but umpteen of them have the same sort of problem with a particular major customer. Officials could do so on behalf of people who are owed long-standing debts and could take the necessary court action. I mention this particularly because the noble Baroness, Lady Wilcox, has such knowledge of trading standards officials and local authorities and she may sympathise with this approach.
There is also a question about a relatively unknown provision—I seem to be devoting myself to relatively unknown legal provisions today—in the Companies Act, which requires that businesses specify their payment plans in their annual reports to Companies House. Apparently, some 4,000 companies do that, as they are so legally required. Unfortunately, another 6,000 do not. The latter are acting illegally. Who is supposed to be responsible for enforcing the law and why do they not do it?
A concern of small suppliers in the food industry is the other problem that I wanted to mention. Farmers, particularly small farmers, and others are often faced with credit terms that are unilaterally extended for the benefit of powerful supermarkets, which have the clout that can rarely be matched by small suppliers. The last Government accepted in principle the view of the Competition Commission, which had carried out a two-year inquiry into this matter, in 2008. It said that what was needed was a grocery market ombudsman to investigate complaints, anonymous or specified, that supermarkets were being paid unfairly and contrary to the detailed code of practice that exists. The Competition Commission accepted that the grocery market was generally competitive—as ordinary ultimate consumers, we all know that the benefits in variety, quality and price of supplies have come to us. However, there are abuses. One of these is retrospectively imposing charges on suppliers to finance some special offer that the supermarket has decided to give to the consumer. There are elements here of what my noble friend Lord Haskel would undoubtedly call a market failure. It needs some form of redress.
Page 13 of The Coalition: Our Programme for Government says that the Government will introduce,
“an Ombudsman in the Office of Fair Trading”,
to curb abuses of power of the kind that I have just mentioned. The Minister will know that a Private Member’s Bill had a Second Reading in the House of Commons in March, not long before the general election. The Bill proposed that the Office of Fair Trading should create, but not itself act as, an ombudsman. The Office of Fair Trading would create an ombudsman that would be, the Bill emphasised, independent. My question to the Minister is a simple one: can she explain more precisely what the coalition Government intend in following up this matter?
Lord Corbett of Castle Vale
My Lords, I, too, welcome the noble Baroness to her new responsibilities and I congratulate my noble friend on the measured and informed manner in which he opened this Labour Back-Bench debate. It is a pity that the monitors do not make this clear so that everyone can know exactly what is going on.
I come from the West Midlands, which is the cradle of the Industrial Revolution. We built the first iron bridge and named a town after it. We built the first iron boat. Men such as Matthew Boulton, James Faraday and James Watt—with his steam engine—pioneered that era’s technology, which gave us immense prestige and power all around the world. More lately, the regional development agency, Advantage West Midlands, has provided £19 million, which has been invested in research and development for some of today’s technology—in this case, low-carbon vehicles. This is centred at the University of Birmingham, which also hosts the national nanotechnology centre. Invention and innovation are in our bones in the West Midlands.
It is an enormous shame that the coalition Government started their life by immediately breaking promises that they gave over the Future Jobs Fund. In the course of that, they will this year deny an estimated 80,000 young people the chance either to set up their own business, or to get the kind of jobs and develop the skills they need to make successes of their lives and contribute to our economic recovery. I do not say this in a flippant manner. The then leader of the Opposition, Mr Cameron, in Liverpool described this as a great scheme. He was backed up by Mrs Theresa May, then a member of the shadow Cabinet, who said that the Conservative position had been “misrepresented” and:
“We have no plans to change existing”,
Future Jobs Fund “commitments”. Little Mr Echo, Steve Webb, on the Liberal Democrat Front Bench, was even more explicit. He said:
“We have no plans to change or reduce existing government commitments to the Future Jobs Fund”.
You could normally bank those promises and undertakings, but they were broken, torn up and ignored, even before the ink was dry on them. In my own region, an allocated 10,100 jobs under the fund will now not happen, and young people under this Government will be forgotten and left to rot, as they were in the 1980s and early 1990s.
The Prime Minister has a great sense of irony. The Minister he appointed as Secretary of State at the Department for Business, Innovation and Skills is none other than the man who spent the election campaign arguing for its abolition, but we will pass gently over that. The smell of power encourages people to change their minds.
I declare an interest as an ambassador for Advantage West Midlands, our regional development agency. Its record is impressive in a region which has stubbornly high unemployment and too low a level of new small business start-ups. In a word, there is a lack of entrepreneurship. Overall, for every £1 invested by Advantage West Midlands, £8.14 is generated for the regional economy. Between 1994 and 2007, new business growth was 1.6 per cent a year—a tad lower than the national figure. Matching national growth would have produced something like an extra 5,000 new businesses in the region. The new Secretary of State for Business has caused great confusion with his remarks yesterday about the future of RDAs. He said that:
“RDAs will be replaced by local enterprise partnerships”.
He went on to say that the RDAs,
“will be replaced, but the structures that emerge could have a regional scope if that is what people want”.
He added further to the confusion that he has caused by saying that RDAs,
“will not perform the same range of functions as they do currently”.—[Official Report, Commons, 16/6/10; cols. 906-08.]
That has got the Government off to a good, clear start, has it not? Significantly, the Secretary of State said not a single word in that debate in another place about the financing of the RDAs. Maybe the Minister will have something to say about this in winding up. What will their funds be? Will they be cut, left alone or expanded? On what basis will they be allocated? We need to know this.
In 2009-10, Advantage West Midlands invested more than £150 million in business support activity, aligned with the then Government’s Solutions for Business products portfolio. This meant that it assisted 28,000 businesses, safeguarding or creating 17,500 jobs and assisting 17,000 people with their skills needs. This real assistance at a time of economic peril will be at risk if the axe is taken to AWM and other regional development agencies. It will deny those opportunities—we desperately need those opportunities to grow our way out of this financial meltdown—to budding entrepreneurs, add to the bill for keeping people idle, slow economic recovery and depress life chances and community cohesion. Now, self-employment among men in the West Midlands is close to the national average. Among women, it is the lowest of all the UK regions. Young people also have lower rates of self-employment in the West Midlands than nationally and the same is true of minority-ethnic groups. Importantly—I know this from the experience of a very successful secondary school in my former constituency in Birmingham—attitudes among young people to starting their own businesses are exceptionally positive, reflecting the success of improved secondary school teaching and learning and the rising aspirations of today’s young people. That, surely, is what any Government should want to encourage.
I wish to give some examples of the success that Advantage West Midlands has had in assisting the start-up of small businesses. Vicky Cargill, of Remote Business Support Ltd, offers virtual PA services, including audio transcription, presentation, formatting to diary management and marketing advice from her home. She took advantage of a three-day start-up course run by Business Link West Midlands, and already has several clients. Peter Morrison of BioFuels International is the first in the United Kingdom to manufacture an eco log made from compost material, 70 per cent of which is fallen leaves. With help from Business Link, he secured the patent pending on the leaf-log invention and he and his partner are now awaiting exclusive rights to trademark the name. An Australian couple, Michele Forge and Stephen Burnett of Greenbean Mobile Coffee Company, set up an Aussie-style mobile coffee company with a difference in Stratford-upon-Avon. They travel between business parks, markets, food festivals and trade fairs in their bright green caffeine machine dispensing hot drinks. Steve Westwood and Emma Wood set up SEMS Wood and Wax. They did not let redundancy or the impact of the credit crunch stop them having a go at running their own business. They have used support from Business Link to launch this wood and wax retail outlet specialising in quality second-hand furniture, candles, holders and fragrances for the home and are currently putting the finishing touches to a 1,000-square-foot store, which will offer a large selection of their goods. Kevin Jew and Kenneth Mole set up KJ Fasteners when their employer went into administration after three decades. They are looking for a turnover of half a million pounds a year. In only the second year of their business, they got help from Business Link West Midlands and are striking out on their own as nut and bolt distributors.
These are all vital pieces in the jigsaw of getting economic recovery going. I say to the noble Baroness that nothing which this Government do should imperil that entrepreneurship. We need to encourage it, not to chop it off, particularly as the recovery is still so fragile. I hope very much that the noble Baroness will clear up this confusion about the RDAs because lots of people, not just those working for the RDAs, have built up a lot of experience. People are looking to support from the RDAs and want to know now—perhaps they are in the middle or early stages of their engagement with RDAs such as Advantage West Midlands—what will happen. I hope that the noble Baroness can put their minds at rest and give them a nice weekend.
The Earl of Erroll
My Lords, I thank the noble Lord, Lord Sugar, for introducing the debate, especially as I am chair of the All-Party Parliamentary Group on Entrepreneurship. I endorse the comments made by the noble Baroness, Lady Gould. There has been a series of events over the past couple of years concerning enterprising women and entrepreneurship. It is interesting to see that some of the things which are perceived as women’s issues are generic to everyone. However, some barriers exist, and a lot of it is due to people’s mindset. Being married to a highly enterprising woman, I have certainly encountered people who see her as a “little blonde”. Someone said to her on a building site the other day, “Goodness gracious, you do know what you’re talking about, don’t you?”, when the job in question was being made a complete mess of.
One of the reasons why I am very interested in this area is that, to me, SMEs are the country’s engine of growth and innovation. The successful SMEs get larger, and larger companies, which tend to rationalise and downsize, swallow them up, which gives the entrepreneurs money to start something else. Big businesses rationalise and downsize SMEs to try to make themselves more efficient. SMEs are not necessarily the most efficient organisations because they are concerned with getting the job done and with growth. Therefore, they do not have time to get involved with tons of regulation and risk.
I wish to break up this subject into four areas: regulation, finance, mentoring and incentive. A lot of what I intend to say applies to all small and micro businesses. They are not all entrepreneurial; many of them are sole traders, one-man bands, but they all have similar characteristics. I often hear it said that about 3 million people are employed in these businesses. That is a very large slice of the taxpaying population and we disadvantage them at our peril. Many of these bodies are not incorporated; they are not limited companies. Therefore, many of the breaks available to limited companies do not apply to them.
As regards regulation, these businesses are terrified of inspections, with all the HSE issues. They may not be aware of all the regulations in relation to their VDUs, offices and the disabilities Act, but they are meant to be complying with them. What is worse, they do not know what it is that they do not know. As regards contracts of employment, they may not be able to write an acceptable use policy for computers. They may not know their rights regarding monitoring and what they should put in place to protect themselves should inappropriate material be sent out via their e-mail address. All sorts of issues arise that small businesses may not be aware of. Moreover, the staff are concentrating on running the one thing on which they are expert.
As a result, people such as my wife who would have expanded their businesses to a far greater extent do not dare risk employing people in order to do so. They do not know whether they will say the wrong thing when conducting a job interview and be sued. That is very easy to do. You do not take someone on to become an extension of the social services; you take them on to work for you and to help you try to build a business. You are told that certain exemptions apply to companies that employ below a certain number of employees, but does that refer to head count or full-time equivalents? If you are a sole trader and you employ someone to do the garden or help clean the house, are such domestic employees included in your head count of employees, even if they are non-business staff? Where will you find out that information? It is too detailed. The procedures for getting rid of someone who does not fit in or do the job are totally inhuman. If they have a problem such as depression and the employer sends them an official letter, what is the first thing they will do? Will they commit suicide? Do you really want to do that to someone? In a small business, you are living on a far more personal level with these people. The procedures laid down by civil servants sitting in large offices just do not work in small businesses.
I entirely agree with what the noble Lord, Lord Sugar, and everyone else has said about procurement. The unintended consequences worry me. For example, the Equality Act says that the Government will drive the equalities agenda by government procurement throughout the supply chain. That is a clear intention. That could wipe out small businesses further down the supply chain. How many small businesses can, or know how to, tick the relevant boxes on equality, climate change, energy, sustainability and all the other bits and pieces and conditions that you are expected to fulfil on a government procurement contract? As the noble Lord, Lord Taylor, said, you cannot get on a government procurement list if you cannot tick the boxes. I think that the noble Lord, Lord Sugar, also mentioned that, and it has been referred to by several other noble Lords. The trouble is that the Civil Service perceive risk as not ticking boxes; it is not about failure. They say, “If you don’t have 14 months of accounts, you are probably not secure enough”. The Government have lost a lot more money with the failure of large systems integrators on the NPfIT, the Rural Payments Agency and several other large contracts than they will ever lose from a few small contractors going out of business. It would be a lower risk to get small innovators in there and to stop wasting huge fees of up to £9,000 per day on consultants who have no incentive to conclude a contract.
A lot of finance for start-ups comes not from banks but from friends and family. People do not really know what to do at this level. There are one or two business angels, but you have to know them personally. Sometimes the Government step in competently in some areas where people are better organised. The Welsh Assembly Government and Finance Wales have helped several people I know to get off the ground and become established there. There is a long way to go, but it is worth it, and there are some good set-ups. It is sad that, in certain other places, RDAs have not been able to emulate that, but it may help local areas.
The Government’s tax regime makes life difficult for cash flow. If you have a really good year, you will have to pay up front half the tax on next year’s possible profit, and that hits your cash flow. If you then want to invest, perhaps in equipment, you will not have the spare cash to do so. It is not taken off your tax in its entirety in the first year. In your first year, you will save only the tax percentage of the depreciation due that year. If your tax rate shoots up to 40 or 50 per cent, it will take you much longer to repay the capital loans that you have put into your business. This happens in any business. You do not think about doing it. It makes such investments uneconomic.
Then, the Government do things like proposing an extra eight days’ holiday. That is equivalent to a sudden 3.5 per cent pay rise. What will you do when these people are not working? You suddenly have to bridge the gap, because you no longer have people to do the accounts. How do you employ someone for half a day a week? Sometimes there are many unintended consequences of measures such as this.
We have talked about the banks. There was a big issue over rebalancing the balance sheet and calling in well secured overdrafts. The banks left the dodgy companies alone but called in the overdrafts of people who were well secured. That bankrupted a few businesses. As for the “know your client” rules and foreign investors, I have been involved in development and I know that it always runs late. People will suddenly need a cash injection and foreign investors, who are sometimes ex-pats who have made a lot of money, may be willing to take a small risk for £10,000, £20,000 or perhaps more. Have you tried to get money into a company in such circumstances? Perhaps you are setting up a new company with a foreign investor and trying to get past the “know your client” rule. I have seen companies go bust while waiting eight weeks or more, which is normal. Does that really prevent money laundering, as it is supposed to? Of course it does not.
The Government should invest heavily in infrastructure. We must have a good IT infrastructure if small businesses are to flourish from wherever they start. They are situated all over the place and are frequently not in town centres.
Mentoring is vital. Enterprise UK, the Chartered Management Institute and the Worshipful Company of Information Technologists mentioned to me that they have helped in this area. I highly recommend that noble Lords look at what these organisations have done. Many entrepreneurs are visionary. The trouble is that they often do not know how to run things. You need someone who knows how to dot the “i”s, cross the “t”s, talk to the bank and put together a business plan that has roots in reality somewhere down the line. That is difficult. I am delighted that Business Link has taken a huge turn for the better. Its image was that failed business people tended to end up there. It is wonderful to hear that it is getting better.
At the end of the day, this issue is all about incentives. It is sad that we have a tax structure that forces our highly successful people to go abroad into tax exile while we are a tax haven for other people. The answer is not to tax the foreigners but to have a favourable tax regime whereby our successful people can stay here to redistribute their wealth locally. That will boost employment and diversify skills. Such people do not sit on their cash; they either reinvest it or spend it. That employs more people. If you want to get the economy going quickly, allow people to keep some money. The Government will employ people on the big, heavy stuff and for the box ticking and paper pushing. Entrepreneurs who make money will spend it on other things—skills and the arts, including craftsmen and high-value people, and not the cheapest possible labour.
Finally, there are two other types of business. Some people are building lifestyle businesses, as the noble Baroness, Lady Gould, said, while others are building up businesses to sell and restarting again. Make sure that you let them keep their money so that they can restart here.
Lord Mitchell
My Lords, I congratulate the noble Baroness, Lady Wilcox, on her new position. I know that she started in a family business. I hope that she never forgets her background because it is crucial that in government she represents us in all these areas.
Sometimes I wish that Members of the other place, who are often dismissive of your Lordships' House, could be present at a debate such as this. There is real expertise, born of experience at the coal face and able to voice opinions and recommendations that really do have validity. Interestingly, of the 11 Back-Bench speakers, eight come from the Labour Benches. This contrasts with what I suspect happens in the inner circles of the Treasury and Her Majesty’s Revenue and Customs, where a PPE at Oxford seems to be the prime qualification for running the tax affairs and business policy of the nation.
I thank my noble friend Lord Sugar for introducing this vital and highly topical debate. The noble Lord is an entrepreneur to his very core and his successes are there for us to see. He started his business life selling aerials from the back of his car. I started mine selling vacuum cleaners door-to-door. You do that, you learn a lot and you never forget. But my noble friend has done more. When I started running my own business in the early 1970s, people thought I had taken leave of my senses. Not only was it risky, but it was somewhat socially unacceptable. Nice boys—never nice girls—where I came from joined banks, became chartered accountants, solicitors, or, heaven forbid, even estate agents; but start a business—never. In those days, we were simply not an entrepreneurial nation.
However, my noble friend Lord Sugar, through “The Apprentice”, has brought the thrills and spills of being an entrepreneur into the sitting rooms of the nation. Now people know that business is challenging and brutal, but is also fun and creative. We must thank him and others like him for changing attitudes very much for the better. I have to say that I notice young people coming out of universities, even those from Oxbridge, who are rejecting going into the City or the professions. They want to get into business as quickly as they can.
Being nice to SMEs is not just about speaking warm words, but goes to the very soul of our economy. In the United States, it is estimated that between 1985 and 2005, nearly all new net jobs were created by firms that were five years old or less. This amounted to 40 million jobs. That means that established firms created no new net jobs during that period. I bet that the same is true here. Unemployment will not come from bailing out losers, but only from new companies with new technologies and new business models. Think British Airways and then think Virgin and Ryanair. Think Apple, think Microsoft and think Google. None of them existed 30 years ago; indeed Google is only 12 years old. That is where the growth and jobs are to be found.
This new coalition Government will not get this sort of entrepreneurial growth if they continue in their plans to decimate our education system. Maybe Labour in government did not get everything right, but we were very clear that you cannot build a 21st century economy if you hack into our schools, our universities and our colleges of further education. What is proposed by the coalition Government for science is truly scandalous. The previous Prime Minister, Gordon Brown, has become much maligned, but he was always very clear that small businesses were key to our prosperity and that the tax system should reflect it.
I speak as a serial entrepreneur. In my career, I have founded and grown three quite separate businesses in the IT services sector. Each became a market leader, and two had major operations abroad. I created employment and my companies provided a vital service in the high technology marketplace. In each case, I sold my shareholding when I thought that it was time to move on. To be honest, it was when I became bored.
In 1987, when Margaret Thatcher—now the noble Baroness, Lady Thatcher—was running the show, I sold one company and was faced with a sizeable capital gains tax bill. It was in the region of 40 per cent. Today, 23 years later, writing out that cheque still hurts. Four years ago, I sold another company when new Labour was in charge and I paid 10 per cent capital gains tax. Now tell me, my Lords, which Government were pro-business and pro-entrepreneur? It is very clear that capital gains tax is going to increase—the Lib Dems demand it. On the other hand, many in the Conservative Party are against any change. The coalition is divided down the middle; next Tuesday we shall see who has won.
To me, it is very clear what a capital gain is. It is when an investment is made with the intention of securing a gain over a period of time; it is about the expectation of gain but the possibility of loss; it is about risk; it is about the medium to long term; but, most of all, it is about investment in business. Today’s CGT situation is plainly bonkers. It is far too wide and 18 per cent is clearly inappropriate for all classes of assets. However, I really believe that 18 per cent or something like that rate should remain in place in respect of genuine investments in business where the investment remains in place for the medium term—say, three years. In the UK, we tend to love complex, arcane tax rules that few understand. If there are to be changes, let them be simple.
During the recent election, the Lib Dems, and the Deputy Prime Minister in particular, fought the campaign on the subject of fairness, so I now propose two ways in which CGT and the tax system could be made much fairer and generate significant taxation revenues. The first, referred to by my noble friend Lord Sugar in his excellent speech, concerns the area of reward known as carried interest. These days, hedge funds, venture capital funds and private equity funds gain most of their return from carried interest. When a fund is set up and investors are located, the fund usually pays the managers an ongoing management fee—usually in the region of 1 or 2 per cent per annum of the fund’s value. This amount is used to run the business. However, in addition, when the investors eventually receive their investment back, any additional gain is usually split 80 per cent to the investors and 20 per cent to the managers. The investors have clearly put their capital at risk and any benefit they receive is a very legitimate capital gain and should be taxed as such, but how about the 20 per cent in the hands of the managers? Is that a capital gain? I do not think so. It is a fee earned by the managers and, as such, it should be taxed as income, but currently it is not; it is taxed as capital. This is not fair and should be reversed.
Secondly, continuing the example of unfairness, I want to refer to a particular bugbear of mine which I have raised in your Lordships’ House several times before. It is the subject of non-doms—people who were born abroad and are able to avoid tax on their non-UK generated income because they are effectively non-domiciled. This was a hot potato three years ago but it went off the boil when we in government dealt with it in a half-hearted manner because we were frightened of upsetting the City. If the Government want to be fair and courageous, they should say the following. If you were born abroad but live in the UK and you have lived here for seven years or so, then you have become a de facto resident. As such, you should pay tax on the same basis as the rest of us, and it should be based on your worldwide income. That is what the Americans and most other developed nations do. It is only fair. If people say, “Well, that’s too much. We’re off to Singapore or Geneva”, I shall say to them, “It’s better to be taxed to death than bored to death”.
It is not my Budget; it is Mr Osborne’s. However, if it were mine, I would make it small-business-friendly, I would keep CGT at its current rate for business investment and I would have no hesitation in plugging the carried trade and non-dom loopholes.
Lord Graham of Edmonton
My Lords, it is a joy and a pleasure to speak in this debate initiated by my good friend the noble Lord, Lord Sugar. When I first met him in the House, I looked him straight in the face and said, “PCW 9512 - Amstrad”. He laughed and said, “You haven’t still got one of those, have you?”. I said, “Yes. For our ruby wedding anniversary 20 years ago, my wife bought one of these and, give or take the odd little hiccup, it has served me well”. He said, “Get another one. Bring it up to date. There are better models out now”. He tried very hard but failed. I am sorry to say to my noble friend that it still works and gives me pleasure.
By now, my noble friend Lord Sugar should know that if you come into this House preceded by a reputation and a record of achievement, that speaks much louder than the words that you use and the speeches that you make. So we thank him very much for initiating this debate and for opening it so brilliantly.
I see from the Annunciator that the subject of the debate is “The Effect of Government Policies on Entrepreneurship and Small and Medium-Sized Businesses”. Of course, one cannot cover the whole spectrum, but we have had a feast today with various people speaking from different points of view. However, I want to speak from the perspective of the small business that has grown into a big business, and, with the support of this Government, as with the previous Government, there is more to come. I refer to credit unions and co-operatives. I tried to intervene during a Question on that subject this morning but did not manage to do so. The point I was going to make was that only last year the Department for Work and Pensions reported that those who used the services of a credit union paid £86 million less in a year than they would have done if they had borrowed the money from what one might call loans sharks, or small businesses that appear to be generous and fair but are not. In the context of the billions that we are talking about, £86 million is not a lot of money, but I am talking about little people.
Coming from the background that I did, one thing that inspired me was the realisation that one needs capital and capitalists, as well as big business and experience. We should not forget that invariably every big business was once a small business that was well managed, well directed and lucky, where those running it hit upon something that was not already available.
My main experience is of the Co-operative movement, and I shall come to that in a moment. However, in my view credit unions are a success story, and I know, because of what she said earlier, that the Minister will agree that they need to be encouraged and supported. I am not talking about large sums of money; I am talking about being loved and wanted and being part of the big picture. Nothing has pleased me more in life than going into a boardroom or a committee meeting and coming across what I would call ordinary people—men and women who have no pretence to be accountants or experts—who have taken on the running of a business, such as one in the Co-operative movement or a credit union, and are doing so because their heart is in it. They are not in it to get big fees or to make a profit from selling shares but because they know that their community needs it to keep going.
When I was very heavily involved in the Co-operative movement, there was a saying that the Co-op never made a millionaire or a pauper. I would rephrase the first part, as I think that they have made a few millionaires over the past few years. However, because of the soundness and ambition of the people that run them, no one has ever lost their money. I am talking about ordinary people who see a need in their community.
In Rochdale in 1844, weavers and mill workers, bereft of what you might call the wherewithal, having been failed by the churches and the Chartists, decided to form a co-operative, and from 28 people the movement grew. Now, the Co-operative movement is big business. It takes over building societies and successful retailers; it employs hundreds of thousands of people; and it is a success story. It has ambition. The great ambition of the Co-operative movement is to become mainstream in relation to the business community. What does that mean? It means simply that our rules, regulations and legislation have inhibited the spread of co-operatives. When the Minister replies, it would be helpful if she could say something about the ongoing relationship between the Government, the departments and the Co-operative movement.
At one time we knew the Co-operative movement as the CWS, the Co-operative Wholesale Society. It has now changed its name to the Co-operative group. When I was involved, the other body was the Co-operative Union which changed its name to Co-operatives UK. It is astounding that, many years ago, if one talked about the Co-op, one simply referred to the shop on the corner because, in the main, the Co-op was primarily a consumer-oriented business. We now know that the Co-operative movement is much more than that. It has always been and still is the biggest farmer—not a landowner—in the country. It has a big business in banking and insurance. I am not taking this as an opportunity to knock the banks, bankers or big institutions. Their reputation has taken a knock recently and people are examining the term “trust” in relation to the banks.
This could be a golden opportunity for the expansion of people-oriented businesses. What do I mean by that? The amount of money required to establish a credit union is very small, but they do a big job. I do not wish to bore the House, but I have some statistics. Partnerships with credit unions are big business: 60 per cent of credit unions work with schools; 60 per cent with employers; 57 per cent with housing associations; 50 per cent with citizens advice bureaux; 26 per cent with Jobcentre Plus; and 12 per cent with prisons.
The idea of a credit union is that one regularly contributes a small amount of money and so has access to loans. Twenty years ago, one of the fears was that they were being run by amateurs, people who did not understand accountancy and so on. That has all changed. They are now very successful businesses. Perhaps the Minister could tell us about the marvellous concept of marrying the credit unions with the Post Office network. The Post Office is struggling to maintain business, but with the nexus of credit unions, it could provide a banking service, built on reserves and backing from a wider movement. It could be a kind of people's bank, and it would be an opportunity to marry the two together.
I see that my time is up, although there is a great deal more that I could say. I am grateful to the Minister, who is a friend of mine. I respect her record in this area. I know that she will be good for the department where she works. I thank my noble friend Lord Sugar, as his presence in this House will be good for all of us.
Lord Razzall
My Lords, I join other noble Lords in thanking the noble Lord, Lord Sugar, for giving us the opportunity to express our views on this very important topic. I also congratulate the noble Baroness on her appointment, as she joins other Liberal Democrat colleagues in the department.
I should make it clear that I do not speak for the Government but for the Liberal Democrat partners in the coalition Government. Listening to all the contributions, one thing on which we can all agree is that it is vital that as little damage as possible is done in the Budget to SMEs, as it is now generally accepted that significant growth in the economy can come only from that sector, particularly, as a number of noble Lords have indicated, in the high-technology businesses which spring up. If they are fortunate enough to be owned by the noble Lord, Lord Mitchell, they will be sold for large amounts of money.
In an ideal world we would not be contemplating tax increases or any form of cuts in expenditure. Listening to the eight Labour speakers who have spoken so far—I think every speaker has come from the Labour Party except for the noble Lord, Lord Taylor—one would imagine that we live in a perfect world which they have created for the small business sector. To be fair, I do not think we can look at the problems that the Government face without looking at the overall state of the economy, left behind by the Labour Party.
Perhaps I can put on the record some of the numbers which we now have from the Office for Budget Responsibility. In relation to the Government’s forecast for growth for the next four years, by 2014 the estimate is that the economy will grow by only 2.6 per cent as opposed to the 3.5 per cent that Alistair Darling put in his last financial statement. Much of that growth will come from the SME sector, but it will be significantly less on this objective forecast than anticipated. Looking at the debt figures, one ray of sunshine in the Office for Budget Responsibility figures was that the actual borrowing costs for this year will be significantly less than originally forecast but, even given that, by 2014 we shall still be borrowing in that year £71 billion, of which £51 billion will represent the structural deficit, which means that the deficit that will not be eradicated by growth in revenues.
Other horrendous figures include the following: the spending on social security for this year will be £169 billion, which will rise to £192 billion in 2014. Perhaps the most shocking figure of all is that the interest paid on the British Government’s borrowing will rise from £42 billion this year to £67 billion in 2014. Those are absolutely shocking figures and explain why, when those figures were made available to the Liberal Democrat members of the coalition Government, we changed our minds with regard to the necessity to take action now. We went into the election believing that no action should be taken for the first year; we agreed with the Labour Party, but it had the information and we did not. For that reason we have changed our minds.
Listening to the eight Labour speakers, we would get the impression that all was well in the garden of the SMEs on their watch. I am not entirely sure that that is correct. As the noble Lord, Lord Taylor, said, we are regarded as the 16th country in the world for the ease of starting a business. We ought to be significantly higher. I will not touch on the restrictions, which the noble Lord did very ably. The noble Lord, Lord Mandelson, when he was Secretary of State—he is now, I understand, known as the third man—introduced many initiatives, many of which were unproven. Several speakers have rightly said how successful the Business Link centres were, but by the time that the Labour Government went out of office, it was unproven to what extent many initiatives were helping or were unhelpful.
Then there is the issue of the control of the banks, especially those in which there is significant taxpayer investment. The noble Lord, Lord Sugar, referred in his opening remarks to the witty exchange that he and I had on another occasion, when he said that he was misquoted as saying that anybody with a decent idea and a decent business plan could easily get a loan from a bank. Listening to what he said this morning, I got the impression that that is still his view. From my experience with clients and anecdotal evidence, that is not the case. Banks have made it much more difficult for small businesses to take advantage of loans. Often, they have required personal guarantees from entrepreneurs where no personal guarantees would have been required in the past. They have often required significantly increased interest rates. The general bureaucracy involved with a lot of the clearers in obtaining loans for small and medium-sized enterprises has been a problem. No one I talk to disagrees that that has been a problem. The overall problem has been that a large amount of capacity was taken out of the market with the collapse of the Irish and Icelandic banks. If all the clearers lent the same to SMEs as they did before the collapse of the market, a third or a quarter of the capacity would still not be there, so there would still be a shortage of funding.
It has become clearer recently—I am grateful for the research that has been done by the Institute of Directors—that it appears that under the Labour Administration, during the boom years of what are now known as the noughties, one-third of FTSE 100 companies paid no tax at all, while one-third paid only a nominal amount. Notwithstanding the marginally lower rate of tax for SMEs, during the Labour period, the SMEs’ share was disproportionately greater than that of the FTSE 100 companies. That clearly bore heavily on the SMEs.
What should the Government now do? We have had a very interesting debate on capital gains tax, and the noble Lords, Lord Sugar and Lord Mitchell, have come up with a lot of interesting ideas about what, even if the capital gains tax rate is to be increased, can be done to protect the entrepreneur and small businesses. The Government need to review the “Mandelson initiatives” to see which of them should be left in place—which of them have been effective—and which of them should be closed down as ineffective. The Government need to concentrate on the mechanics to achieve greater lending from the clearers, particularly those in taxpayer control, to SMEs.
To make a slightly partisan political point, bearing in mind the mess in the economy with which the Labour Government have left this Government, as Mr Attlee once said to Mr Laski, “Perhaps a period of silence on this topic would not come amiss”.
Lord Young of Norwood Green
My Lords, I, too, congratulate my noble friend Lord Sugar on securing this debate and on his excellent contribution.
Although I did not agree with much of what the noble Lord, Lord Razzall, said, I agree that this debate needs to take place against the backdrop of the coalition Government’s economic strategy. Recently, George Osborne was keen to point to the recently agreed G20 communiqué on the need for countries to reduce their budget deficits. He failed to acknowledge that the agreement also requires countries to put in place credible growth-friendly measures. The communiqué states:
“The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances”.
The communiqué mentions growth-friendly measures, not just deficit cuts.
Removing key support for industry, as the coalition Government advocate, far from strengthening the economy, will weaken it. The Government seem to see spending cuts as the silver bullet to rebalance the economy—something stressed by David Cameron in a recent speech at the Open University and by the recently converted Chief Secretary to the Treasury, Danny Alexander, who said:
“The best thing that we can do to increase growth and create jobs in this country is tackle the enormous budget deficit”.—[Official Report, Commons, 8/6/10; col. 171.]
Again, nothing is said about the importance of creating growth opportunities.
Far from having a plan to support growth, the coalition has, in its first acts, undermined growth by cutting regional development agencies, which support businesses across the country. My noble friend Lord Corbett gave a graphic account of the importance of Advantage West Midlands in helping SMEs to create new business opportunities. The Government have also created uncertainty for industries of the future by their decision to review the Labour Government’s policy of supporting those industries—new industries that have the potential to be strong and create jobs, whether by producing low-carbon cars or in the nuclear industry. Targeted government action can unlock the private sector investment that brings new jobs. That is why we decided to invest almost £1 billion in key industrial projects spanning a range of industries: aerospace, low-carbon electric cars, nuclear advanced manufacturing, and wave and tidal energy. If the coalition Government pull the plug on the Sheffield Forgemasters loan, for example, they will display a complete lack of vision for Britain in the worldwide nuclear supply chain.
Interestingly, in the belief that cuts are the way forward, Vince Cable said that he wishes his department to be the department for growth, but he sees no role for government and indeed wishes it to get out of the way. We believe that there is a vital role for government. It is not enough to have a strategy for deficit reduction; we must have a plan for growth.
The noble Lord, Lord Razzall, reiterated the determination to say that we—the previous Government—left the economy in the worst possible position, while seemingly he did not worry about the impact that saying that has not only in this country but abroad. I thought that the Office for Budgetary Responsibility’s recent report was interesting. Although the growth forecast clearly fell short—of course, we had not been able to take into account what happened in the eurozone, which will clearly have a big impact on growth—the report pointed out that the deficit in 2009-10 has reduced from £166.5 billion to £156.1 billion. Government borrowing was £10.4 billion lower than forecast at the Budget, proving that the Labour Government had taken a cautious approach in their forecast of public finances; indeed, we had set out a plan to halve the deficit over four years. We therefore reject the view that we left the economy in a terrible state.
There are now significant examples of the recovery being under way. The economy grew in the fourth quarter of 2009 and the first quarter of 2010. Retail sales rose by 4.3 per cent in the year to April and manufacturing output rose by 3.3 per cent in the year to March. Interestingly, the OECD forecasts that the UK will achieve faster growth than the eurozone or Japan in 2011. That does not sound like a complete record of failure, as the Government are alleging. I could cite other statistics but, given the time, I shall not. However, one is interesting: company insolvencies are at one-third of the rate that they reached in the recession in the early 1990s. Unemployment is significantly lower than it is in the US or the eurozone and claimant count unemployment is half the level that it reached in the early 1990s recession. On capital gains tax, the Minister has had a lot of sage advice from my noble friends Lord Sugar and Lord Mitchell, so I do not think that I need to expand on it.
I want to emphasise some of the measures that we took. We cut corporation tax to 28 per cent, which is the lowest rate in the G7. We doubled the capital tax allowance to encourage business investment in 2009-10. Contrary to what the noble Lord, Lord Taylor of Warwick, said, the UK has the lowest barriers to entrepreneurship of all OECD countries and, last year, was ranked fifth in the world by the World Bank for ease of doing business. There is clearly a clash of analysis or research here, but I stand by that evidence. From April 2010, the annual investment allowance will be doubled from £50,000 to £100,000, which will provide further incentives for SMEs to invest in their businesses. The enterprise finance guarantee scheme has helped almost 9,000 businesses to access loans totalling more than £900 million. The number of businesses claiming R&D tax credits has continued to rise. The time-to-pay scheme has allowed more than 200,000 businesses, which collectively employ 1.4 million people, to delay more than £5 billion in business taxes on a timetable that they can afford. We introduced the strategic investment fund, which is worth £950 million, to provide investment in advanced industrial projects where specific market failures are preventing otherwise viable developments.
There has been an interesting debate on the value of the Business Link service. I know that my noble friend Lord Sugar feels that there is an opportunity for it to make some savings, but it is providing benefits in advice and training. My noble friend Lady Gould gave examples of the important help that it gives to women. On procuring government contracts, in 2009 we announced that businesses would no longer have to pay a fee to search for government procurement contracts worth up to £100,000. The Labour Government said that they would provide thousands of free business opportunities to SMEs. I noticed that the noble Lord, Lord Sassoon, announced a further development, which is a move in the right direction. We also facilitated the opening in August 2009 of the National Enterprise Academy, the first UK educational institution dedicated solely to enterprise and entrepreneurship. Later that month, we joined forces with the Federation of Small Businesses to offer up to 10,000 graduates internships in small businesses. That is a vital area of co-operation. The Labour Government also reduced the time taken by government to pay its bills from 90 days to 30 days. I would welcome some assurance that the Government will keep moving in that positive direction, because we know that that is another incentive for businesses to embark on government contracts.
I am conscious of the time. I think that I have previously congratulated the noble Baroness, Lady Wilcox, on her appointment, so I shall not reiterate that. Before the election, the parties now in government made quite a lot of noise about how they would assist business, especially SMEs. The test for them now is that they have to deliver.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I congratulate the noble Lord, Lord Sugar, on securing this debate and giving us the opportunity to discuss these issues which are so critical to our country’s future. The noble Lord, Lord Graham of Edmonton, said the most encouraging things about the noble Lord, Lord Sugar; I shall leave that with him because he knows him so well. The noble Lord, Lord Graham, also spoke on behalf of credit unions and the Co-operative movement. I know him to be an expert and passionate supporter of them, and I wonder whether he will be prepared to let me write to him on them more fully after the debate.
Baroness Wilcox
The noble Lord, Lord Sugar, has done a huge amount through his success, his television work and in visits to schools and universities to inspire the next generation of British entrepreneurs and young apprentices. He spoke passionately about apprenticeships, and it is a passion that I share. I still have my father’s apprenticeship deeds as a journeyman carpenter. He eventually became a master cabinet-maker, and I remember how proud he was of that journey and how it prepared him to become the successful businessman that he was and to encourage his son and daughter to train well. Here I stand today, so I am very grateful to him and to the apprenticeship system as it was then.
Our Government has already announced that £150 million cut from the Train to Gain programme will be reinvested to create up to 50,000 new apprenticeship places this year. The Government are determined that small and medium-sized enterprises should be supported in securing apprenticeships, and that is why we intend to introduce an apprenticeship bonus to help small businesses to participate. We also want to overcome other barriers that may make it difficult for such companies to take on apprenticeships, as well as to ensure that the training received is of high quality and brings real benefits to the individuals and to the businesses concerned.
The noble Lord, Lord Harrison, spoke about skilled workers. The ability to think innovatively and entrepreneurially is highly valued by employers, and utilising the skills and ideas of their employees will help all businesses to grow. Skills provision and training need to be accessible, relevant and responsive to the needs of business, and we want to free colleges to be able to respond quickly and flexibly to the skills needed in their communities and to harness the power of sector skills councils to improve skills and qualifications at all levels.
On fostering enterprise and driving growth, as a Government we are ambitious for Britain’s future, but we recognise that the private, not the public, sector is best placed to generate prosperity and jobs. Ultimately, it is Britain’s 4.8 million small and medium-sized enterprises that will lead that recovery. We believe that government can most help those businesses by securing the best possible conditions for their success and then getting out of their way.
We want a rebalanced economy—one built on strong enterprise and balanced, sustainable growth across industries and our country, and not one built, as in the previous decade, on a debt-fuelled spending boom, an inflated housing market and an overleveraged banking sector. That means, first, tough talking and tough measures to tackle Britain’s budget deficit. Next week, the Chancellor will set out in an emergency Budget how we plan to cut the bulk of that debt over this Parliament. Such constructive action is essential to strengthen market confidence, bolster investment and give our entrepreneurs the space they need to start businesses and prosper. To that end, we have already identified and agreed to cut over £6 billion of wasteful spending across the public sector. This is, however, just one—albeit crucial—part of the work that we need to do to sustain our economic growth in the decades ahead.
We want the next decade to be the most entrepreneurial and dynamic in Britain’s history, and we are prepared to start now. We are building the competitive business environment to make it happen, so that Britain’s entrepreneurs can get the support and capabilities they need to start and grow a winning business, without the burden of unnecessary red tape and regulation. The noble Lord, Lord Taylor, talked about keeping life simple. He also talked about black and minority-ethnic entrepreneurs, and I agree with him that we can do more to help those underrepresented groups. That is why we have committed to setting up the targeted national enterprise mentoring scheme for black, Asian and minority-ethnic individuals who want to set up their own business.
The noble Baroness, Lady Gould, talked about women entrepreneurs, which was very pleasant for me to listen to, and I thank her for highlighting their importance. We want to maintain an open dialogue with female small business owners and entrepreneurs to hear directly from them what it is they need, and what they see as the key barriers to starting and growing their businesses—barriers like failure in the education system to build aspiration and skills, the need to promote suitable role models, and problems accessing finance.
In the coalition document we set out our commitment to get banks lending again to viable SMEs. The Government are determined to ensure that the banks, including those part-owned by the state, honour their agreements to supply credit on acceptable terms to SMEs. The noble Lords, Lord Sugar and Lord Taylor of Warwick, both raised the issue of the detail and nature of feedback given to SMEs when their applications for lending are turned down by banks. Currently, in the banks’ lending code, they will offer feedback should applications be rejected on request. In some cases the detail of this feedback is dependent on the size of the business. Smaller companies may get a brief automated response, while larger ones may get more comprehensive information on why their application was not approved. We are working to strengthen the voluntary codes with the banks, and this is ongoing. It is also important that banks recognise the need to rebuild trust and relations with their business customers, as well as continuing improvements to business education on financial matters. We will work with the industry to take that agenda forward.
With regard to the proposed credit adjudicator, we believe there would be serious market implications to the state intervening directly in banks’ commercial decisions, and that would not be appropriate. The creation of this body would also add to a field where professional support from trade bodies, accountants and financial advisers is available to help SMEs access credit. In our consideration of the most effective way to provide support and education to businesses, we will engage with these experts on provision of advice.
The noble Lord, Lord Sugar, spoke about efficiencies of Business Link. I share his view that there are efficiencies to be made in how we deliver business support. No decisions have yet been taken on this; however, the Government’s business support offer needs a rethink. We are prepared to do that and will look to him to help us, if he feels able to do so.
In this context, we must make sure that publicly funded support at all levels is more effective and works in partnership with private sector services. That is why we want to enable local authorities, located in natural economic areas, to work with business to form local enterprise partnerships. In reply to the noble Lord, Lord Corbett, these may cover the same geographical area as an existing RDA if that is what works best in that locality. Equally, however, they may take a different form elsewhere if that is what local business wants. We have an opportunity to create a modern, cost-effective business support system targeted at what business needs. It is a complex issue, however, as those of you who have been in government and have worked through this over the last 10 years will recognise. We need to consider all the options carefully and we will work closely with the business community. We are also in discussion with the RDAs as they continue to deliver existing business support services.
A World Economic Forum report now ranks the UK 84th out of 133 countries in terms of the competitiveness of our tax system, and 86th for regulation. These perceptions stifle good ideas and deter valuable investment and, over the next few months, we will reform our corporate tax system to make it more competitive, simplifying reliefs and allowances, and tackling avoidance to reduce headline rates.
We are already working to stop the most damaging effects of the previous Government’s tax on jobs. In addition, we want to make sure that all eligible small businesses benefit from small business rate relief, and we are looking for practical means to automate this, freeing up SMEs to get on with growing their own businesses. Taxing capital gains made by individuals and trusts helps raise revenue, ensures a fairer tax system, and reduces opportunity for tax avoidance. To be truly effective, however, a CGT system must also encourage enterprise and support entrepreneurship.
For business owners, entrepreneurs' relief provides a CGT rate of 10 per cent up to a lifetime limit of £2 million. This relief covers the vast majority of entrepreneurs in small and medium-sized enterprises. The coalition agreement commits the Government to maintaining generous reliefs for entrepreneurial business activities. Further detail on CGT reform will be provided at the emergency Budget on 22 June. I am obviously not able, therefore, to say more at this stage.
Our Government are also determined to make the UK the fastest place in the world to set up a business. We believe every small business could do more, and grow more, if small business owners did not have to spend so much time on pointless bureaucracy. We are starting a revolution in Whitehall. We are cutting red tape by introducing a “one in, one out” rule for regulations; we are empowering the public to challenge the worst regulations; we are ending the culture of tick-box regulation and, instead, targeting inspections on high-risk organisations. We are establishing a new committee of experts to end unnecessary regulation; we are imposing sunset clauses on regulations and regulators to ensure every regulation is regularly reviewed; we are ending gold-plating of European Union rules so that British businesses are not disadvantaged relative to their European competitors; and we are making it easier to set up a limited company with a new one-click registration process.
It does not end there. We want to open up the opportunities for Britain’s SMEs to sell their goods and services around the world with the support of UKTI, and to enable these companies to win their share of valuable public sector contracts right here at home. We are the first Government to set out an ambition that 25 per cent of government contracts should go to SMEs. We are also going to do whatever we can to make it simpler for more of Britain’s small and medium firms to bid for, and secure, this business.
In conclusion, our commitment to a five-year coalition Government gives us, I believe, the long-term institutional stability necessary to make the right choices about the future for our country. We know what we need to do and what the private sector wants us to do. This Government are focused on restoring balanced, sustainable growth to Britain’s economy and fostering enterprise must be at the heart of our efforts.
I again thank the noble Lord, Lord Sugar, and all noble Lords for their valuable contributions to this important and interesting debate. I have been able to answer only one or two questions in the time allocated to me and I hope that your Lordships will allow me to write in reply to those I have not answered.
Lord Sugar
My Lords, I express my belated congratulations to the noble Baroness, Lady Wilcox, on her new role and I thank her for her comments. If required, I would certainly make myself available to assist in reviewing the future of the Business Link centres. I also thank the noble Lord, Lord Taylor, for reminding me of that excellent example of Reggae Reggae Sauce, and the noble Baroness, Lady Gould, for focusing our attention on the importance of women in business—something I fully endorse.
I would say to the noble Lord, Lord Razzall, if he does not mind, on his comment about people having to put up their houses or give personal guarantees to get loans, why not? If you are not prepared to take the risk on yourself, why should a bank?
We have had a wide-ranging debate on the subject and I am grateful to all noble Lords who have spoken. Time obviously prevents me making further comment, but I am sure that we will return to these matters after the Budget. I therefore beg leave to withdraw the Motion.
Public Expenditure: Review of Commitments
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Chief Secretary to the Treasury. The Statement is as follows.
“Mr Speaker, with your permission, I would like to make a Statement on the Treasury’s review of the public spending commitments made by the previous Government between 1 January 2010 and the general election.
In the review, we examined the £34 billion of spending that was approved in their final few months of office. The aim was to test in each and every case whether these commitments are affordable, whether they deliver value for money, and whether they remain genuine priorities for this Government.
This review is now complete. My decisions on these commitments fall into three categories. The first is projects where spending will be approved because they are a high priority or because the money has largely been spent. The second is projects that will be cancelled. The third is projects whose long-term affordability will be considered as part of the wider spending review process over the coming weeks and months. A detailed list of the projects that have been cancelled or suspended until the spending review has been laid in the Libraries of both Houses.
For those projects that offer value for money and meet the Government’s priorities of fairness and responsibility, or for those where it is simply too late to withdraw, we have acted quickly to confirm approval in order to avoid disruption. For example, we have approved the funding for essential medicines in the case of a flu pandemic, for some hospital projects and for support to post offices, as well as spending on crucial equipment for military operations in Afghanistan.
However, the House will be aware that as a country today we have the biggest peacetime budget deficit in our history. We have a choice: we can act fairly, responsibly and decisively now, or follow the approach of the previous Government—deny and delay—which would only end in greater cuts being forced upon us. Given our priority to get the deficit under control, the Government collectively have looked closely at each project. I am grateful for the support of Cabinet colleagues in this process.
Some commitments are simply unaffordable, do not meet government priorities and will be cancelled. We have taken the decision to immediately cancel 12 projects, which would have cost nearly £2 billion over their lifetime. These include, first, the CLG’s regional leader boards; BIS’s loan to Sheffield Forgemasters; DWP’s low-value employment programmes, including the extension of the young person’s guarantee to 2011-12; and the jobseeker’s two-year guarantee. Secondly, they include the Department of Health’s active challenge routes; county sports partnerships; and the North Tees and Hartlepool hospital project. They include, thirdly, the local authority business growth incentive, and, fourthly, the withdrawal of government funding for the Stonehenge visitor centre.
Many of these are difficult decisions and, I fully understand, painful ones for some of the communities affected, whose hopes were irresponsibly raised by the previous Government. But they are decisions that a responsible Government must face up to in these difficult economic times.
There are other decisions which we feel should be weighed up against all other significant pressures on public spending within the context of the spending review—a spending review that the previous Government delayed because they did not want to admit that painful decisions had to be made. For this reason, I can announce that there are a further 12 projects with a total value of £8.5 billion, approved since 1 January, which we will suspend and refer for consideration to the spending review over the coming weeks and months. These include the health research support service; the Kent Thameside strategic transport programme; and the libraries modernisation programme. Any other new major hospital schemes will be assessed in the context of the spending review, to ensure that they are affordable and represent the highest possible value for money. Only the highest priority schemes will be able to go forward.
We will do this in the context of the approach set out in our spending review framework, which will include a fundamental review of all capital investment plans, to identify those areas that will achieve the greatest economic returns. The Secretary of State for Education has already announced that he is looking at the whole Building Schools for the Future programme and will shortly set out the outcome of this work. This programme has been very heavily overcommitted and we are in agreement that tough decisions need to be taken. Government departments have also independently reviewed projects with budgets within delegated limits approved since 1 January. They will report the results of these reviews in due course. Together, these decisions will significantly relieve burdens on departmental budgets that will be under major pressure in the spending review.
While conducting this review, I have discovered yet another black hole in the books that we inherited. I can tell the House that billions of pounds of spending commitments were made for this financial year that relied on underspends or access to the reserve. There was no reason to suppose that underspends would have occurred on anything like that scale and there is insufficient contingency in the reserve to cover the remainder. I will therefore be cancelling at least £1 billion of commitments where there is not the money to pay for them. We will announce the action we take to tackle this further hole in the accounts in next week’s Budget. As far as the reserve is concerned, I am sure the House will agree, our priority is that we keep this for genuine emergencies and new pressures that may result from military operations in Afghanistan.
The previous Government committed to spend money they simply did not have. They made commitments that they knew the next Government could not fulfil and in doing so cynically played politics with the hopes of our communities. The actions I have set out today show that this Government will take responsible spending decisions, which, although sometimes difficult, will be guided by fairness and the overriding need to tackle the deficit. We did not make this mess but we will clean it up.
I commend this Statement to the House”.
My Lords, that concludes the Statement.
Lord Eatwell
My Lords, I am most grateful to the noble Lord for repeating the Statement on spending cuts. I am sure that it was not a happy thing for him to do and I am grateful to him for having done it.
Let us first deal with a major red herring. Everyone is against waste. If some government spending is wasteful, it should be cut. But if it is necessary to maintain overall demand in the economy, the money released should be spent on something useful. Demand really is central to this deficit-and-cuts debate. Businesses need the prospect of growing demand to encourage them to invest and innovate. The falling pound earlier this year stimulated demand for tradable goods, as I remember the noble Lord acknowledged last week.
In 2009, there was a massive withdrawal of demand by the private sector. Households and businesses increased their savings by a whole 10 per cent of GDP in one year. The increased savings could not be channelled back through the financial sector, which was desperately cutting lending to rebuild shattered balance sheets. Fortunately, the Government raised net spending, the deficit, by around 9 per cent of GDP, offsetting much of the decline in private sector demand. But now the Government seem determined to remove demand from the economy.
The central question that the noble Lord must answer is: where then is the demand coming from? It will not come from Europe where Governments are cutting as well. The slide in the pound against the euro has in the past couple of months been reversed. It will not come from households where there is increasing unemployment and the fear of unemployment will tend to increase the savings rate. It will not come from firms. How will the expenditure of firms be stimulated? It will not be by monetary policy. Interest rates can hardly go any lower. Are we to have more quantitative easing? I think not. The question of whether these cuts will simply lead to a decline in output and greater unemployment is central to consideration of the validity of the policy as a whole. Will the Office for Budget Responsibility be publishing an assessment of the impact of these cuts on economic output and employment?
I do not want to go through all the specific cuts set out by the noble Lord, which would be painful for both of us. But the Statement refers regularly to total lifetime cost. What was the discount rate used in the assessment of total lifetime cost?
Turning to the specific cuts, there seems to be an almost obsessive attack on education and skills. Schools for the future, the capital funds of universities and other skills programmes are to be reviewed. It is most extraordinary. We have just had the debate from the noble Lord, Lord Sugar, when the Government asserted their commitment to the development of skills. It is most extraordinary to find that there will be so many cuts in skills.
There are the significant cuts to the MoD search and rescue helicopter programme. Given the emphasis which noble Lords throughout the House have placed on the need for military helicopters—obviously, those in theatre, but also the search and rescue ones which may be released to go to theatre—this seems to be an extraordinary element undermining our Armed Forces.
Finally, as a Wiltshireman, perhaps I may say how sad I am to see that the Stonehenge project has again been abandoned. When will this degradation of one of our greatest national monuments stop? Why are we allowing it to continue?
Lord Sassoon
My Lords, I am grateful to the noble Lord, Lord Eatwell, for the points that he has made. Of course, it is not happy announcing these cuts, but it is absolutely necessary. It is a reflection of the speed with which the new Government have picked up the inheritance that again we are coming forward with a significant review of some of the wasteful spending decisions that were taken in a haphazard and speedy way in the last few months of the previous Government. I do not know whether the noble Lord was listening to his Front-Bench colleague in another place, the former Chief Secretary, but I heard him start his response to this Statement by saying that these cuts were so trivial that they were not worth making. That seems to be rather at odds with the argument of the noble Lord, who says that these cuts somehow are fundamental to how we support demand in the economy. I defer to the noble Lord. I am more of an accountant than an economist, but I am a little confused.
However, the maintenance and growth of demand in the economy are critical to the programme of the new Government. Restoring confidence for businesses and individual savers is at the heart of that. Maintaining low interest rates, supporting the flow of credit to businesses, having a clear path on corporate taxation and reducing the burden of regulation will all be parts of the underpinning of growth and demand. Although the noble Lord runs down the current prospects for the economy, he refers to the depreciation of the pound, which indeed seems to have had a positive effect that is now coming through in much stronger export growth.
The noble Lord asked about the OBR forecasts. As I said earlier in the week, the OBR will publish new forecasts in connection with the Budget next week and will take account of the effects of all decisions made by the new Government up to and including the Budget. He also asked about discount rates used in assessing total lifetime costs. Perhaps I may write to him on that point.
To take the specific cuts in reverse order, the noble Lord talked about Stonehenge. The costs and benefits of this project had to be considered in the light of the current financial picture and the benefit of going ahead with it simply does not at this time justify the costs.
The search and rescue helicopters project is a joint DfT-MoD project, which would deliver a harmonised search and rescue service for the United Kingdom for 25 years from 2012. Given the pressures on public spending, the MoD and DfT intend to conduct a rapid but thorough review of this project. We will continue to work closely with the preferred bidder while this review is taking place.
The noble Lord talked more generally about skills. I can assure him that the combined skills and support for those entering the jobs market is central to the Government’s overall programme. Perhaps I can write a more comprehensive answer for him on that than I can give immediately.
Lord Howarth of Newport
My Lords, we all agree that the UK’s fiscal deficit needs to be reduced, but is there not a crucial issue about timing? If you attack the deficit too fast, you abort recovery. If you deal with it too late, you risk inflation and possibly a downgrading of Britain’s credit rating. What is the reason for the Government’s hasty attack on public spending in an increasingly deflationary global environment? We see Governments withdrawing stimulus all across the world. China is seeking to slow its economy. Germany is deflating. Demand is imploding in the eurozone, which is such a crucial market for our exports. The noble Lord did not answer the question posed by my noble friend Lord Eatwell as to what the sources of growth will be to enable the private sector to drive the recovery of the UK economy. Is not the explanation for the Government’s zeal and impatience in cutting public spending that they are born not of a pragmatic judgment about how to secure sustainable economic recovery for this country but of a doctrinaire determination to cut back the role of the state without proper regard for the state’s own essential contribution to the promotion of innovation, for the quality and reliability of public services, for fairness to the poor and vulnerable in our society and for national self-respect? I strongly endorse the point made by my noble friend Lord Eatwell about Stonehenge. Stonehenge is an emblem of this country. It will be extraordinarily important for us in 2012. The Government’s decision announced today means that we shall present ourselves shoddily to the world.
Lord Sassoon
I thank the noble Lord, Lord Howarth, for his comments, but we really do need to get back to the central point today, which is that the previous Government left us with a series of projects that are unaffordable and in many cases present poor value for money. We need to do this. There are huge pressures on public expenditure, which are going to be looked at in the round through the spending review, but we have to take off the further pressures that have been put on by projects that simply cannot be justified. That will provide us with a much better baseline from which decisions made in the Budget next week and then in the spending round going forward can be taken to protect what really matters—projects that present good opportunities to invest in sustainable growth in the future. That is absolutely central and the announcement today helps to contribute to it.
In the short term, I cannot stress enough that to pay for these projects the previous Government were relying on an assumption that £7 billion of underspend would be made in the current year. That is approximately 1.8 per cent of DEL expenditure, but the evidence of recent years shows that the underspend has been reducing to what is estimated to be less than 1 per cent of DEL in 2009-10. The issue is not whether these projects stack up as value for money but that there is simply no money left to pay for them.
I would like to make a point about Stonehenge. I would hate anyone to be left with the thought that we are somehow abolishing Stonehenge or knocking it down—I see that the noble Lord agrees with that. Of course it would be nice to enhance the visitor centre, but unfortunately this is a project that does not stack up in the current circumstances.
Lord Newby
My Lords, does the Minister agree that probably the most depressing part of this Statement is the issue that he was just discussing—that billions of pounds of commitments relied on underspend or access to the reserve? Was that not a series of decisions which could have been taken only by a Government who knew that they could not win an election and which therefore represents a poison pill for their successors? Can the Minister ensure that, at the time of the Budget, the total component of that expenditure is set out so that we can see what it is? Can he also make sure that all departments understand that, in the future, they simply cannot get away with that kind of sharp practice?
Lord Sassoon
I am grateful to my noble friend Lord Newby. I agree completely with his analysis and that the numbers should be set out. As far as the reserve is concerned, I reinforce my hope that everyone in this House will agree that the reserve needs to be kept for genuine emergencies and new pressures that may result, particularly from military operations in Afghanistan.
Lord Harrison
My Lords, the Minister said that he sees himself as an accountant rather than an economist. I have to confess that I am neither an accountant nor, despite the best efforts of my noble friend Lord Eatwell when he was my director of studies at Cambridge, an economist. All the projects described by the Minister had a past and a present and they would have had a future. In respect of each of them, what exactly are the costs that have been incurred in preparing for them through the tendering processes that have gone on so far? Even more particularly, can he tell us the costs of cancellation and the liabilities that the Government are incurring as a result of these decisions?
Lord Sassoon
My Lords, I think that I can help the noble Lord, Lord Harrison, with those questions. Of the 12 programmes and projects that are being cancelled, nine have costs in the financial year 2010-11 totalling £491 million; the total realisable savings from their cancellation will be £474 million in the same year. From that it can be seen that the difference between the two is less than £20 million. Those are the costs that will either be incurred as a result of cancellation or have already been sunk into the projects. However, the great majority of the money is to be saved, starting in the current year.
Baroness Noakes
My Lords, we should congratulate the Government on taking early and decisive action to deal with the deficit. The Benches opposite seem constantly to want to ignore the deficit and find a reason for not dealing with it. I am proud that our Government are getting on with it. The announcement made by my noble friend today clearly does not deal with the whole of the deficit and we will expect more from the Budget and the Comprehensive Spending Review later this year, but it is a very good start. It will help to restore confidence in our country, which is a key element of restoring growth. That is the most important aspect that we have to work on at the moment.
I have one question for my noble friend, which echoes the point made by the noble Lord, Lord Newby, in relation to the commitments that relied on underspend or access to the reserve. The Statement refers to billions of pounds’ worth of spending commitments made in this way, but goes on to say that £1 billion-worth will be cancelled. I think that my noble friend said that a total of £7 billion was concerned in this way. Why cannot the whole £7 billion-worth of projects be cancelled, because, in the terms of the Statement, there is not the money to pay for them?
Lord Sassoon
I am grateful to my noble friend Lady Noakes for taking us back to what is in fact the basis of this and I share completely her analysis of how important it is to get a grip on the deficit. Let me try to help her with some of the numbers. The total of spending decisions that have been found as a result of this exercise to be unaffordable and bad value for money is £10.5 billion. Those have been put into either the “cancelled” or the “suspended” category. We have cancelled projects with a total value of just under £2 billion, so the rest—approximately £8.5 billion-worth—have been suspended and will go into the process that I have described. I hope that this helps to reconcile the numbers.
Baroness Farrington of Ribbleton
My Lords, will the Minister go into more detail about the cancellation of BIS’s loan to Sheffield Forgemasters and any implications that that may have for future development? Can he also give us a guarantee that, by the time we have the details of the impact assessments, he will be able to tell us what the implications are, in particular for the construction industry and the many small firms that will now not have work to do?
Lord Sassoon
I am grateful to the noble Baroness for that question. On Sheffield Forgemasters, the problem with the loan is simply that it is unaffordable. In the context of tighter resources, we have had to focus support in areas where market failures are clearest and, where we can, we need to look to the private sector and private investment to provide solutions. I know that my right honourable friend the Chief Secretary to the Treasury has spoken to my right honourable friend the Secretary of State for Business, Innovation and Skills about this project and we hope very much that there will be a private sector investment solution.
The noble Baroness made a point about the connection between jobs and investment. There is a particular connection between Sheffield Forgemasters and the nuclear industry and we are of course continuing to support collaborative projects such as the nuclear Advanced Manufacturing Research Centre, which is led by Sheffield University, so we remain absolutely sensitive to the job creation priority to which she referred. She also talked about the construction industry. In respect of all industries, I go back to where we start on this, which is that we have to keep interest rates low and show that we are getting a grip on the deficit. We also have to provide a basis on which the private sector can lead the economy forward.
The Lord Bishop of Ripon and Leeds
My Lords, I want to ask about the implications of the Statement and the philosophy behind it for the voluntary sector, in particular where that sector provides resources, thus fulfilling exactly the requirements of a big society. What reassurance can the Minister give to those of us who develop local projects, such as those for English as a second or other language, using government money alongside voluntary contributions? We have employed people to develop such projects and it is crucial that that contribution is not now wasted through lack of funding at this stage.
Lord Sassoon
I am grateful to the right reverend Prelate for raising that point. I am not aware of any particular projects referred to in the Statement where the co-mingling of voluntary contributions and public money will be affected. However, I will take that point back, consider it and, if there are projects that fall into that category, refer the relevant departments to him so that he can get a specific response. I take his general point that the Government should continue to encourage projects that involve joint public and private funding, whether from the voluntary sector or from other parts of the private sector.
Lord Higgins
My Lords, does the Minister agree that the debate between the two sides on how quickly cuts should be made is largely false? Those of us who have been involved in expenditure cuts know that frequently there is a long time lag between a decision being taken and its having any effect. To the extent that things can be done quickly with regard to the items mentioned today, that is all to the good, but we must recognise that these cuts are bound to be spread over a long period, however quickly we try to do them. On the need for aggregate demand to increase steadily, is he not concerned that, despite quantitative easing, the increase in the money supply has been virtually nil and, in some cases, negative? That will need to be taken carefully into account if we are to have further growth in the economy.
Lord Sassoon
My Lords, I thank my noble friend Lord Higgins for that. He is right: there is a considerable time lag on many expenditure decisions. That is why it is so important to send a signal to the markets—we have comprehensively done so in today’s Statement and in the earlier Statement on the £6 billion-worth of cuts—to show that we are getting on with it. As I explained, the cuts today will save close to £500 million on unaffordable and poor-value-for-money projects in the current year. As to aggregate demand and the money supply, I take his point that the flow of credit to business is critical. I expect my right honourable friend the Chancellor of the Exchequer to refer to that in the Budget next week and to explain how we are driving our policies forward.
Lord Christopher
My Lords, picking up on the point made by my noble friend Lady Farrington, the Minister indicated that the Government are now heavily relying on private investment in projects that have been dropped. My noble friend mentioned Sheffield Forgemasters, about which we have been given little information, but if you are going to rely on the private sector in that area, you are certainly seeking to whip a dead horse. The private sector has not contributed to any significant degree in the specialist steels required in the nuclear industry, in which I have had a past interest; it was deplorable to me to see how much steel was being imported in order for us even to maintain and expand what we had in the nuclear industry. Does the Minister agree that it is right that the public should know how much the Government expect to expend in importing steel instead of making it, how many jobs might have been created that will not now be created, what will be the loss to the local community because this is not being proceeded with and—to take up the point made by the noble Lord, Lord Higgins—whether this decision makes any sense, as the money was going out not this year or next year but progressively over a considerable period?
Lord Sassoon
I thank the noble Lord, but it would be wrong to call Sheffield Forgemasters a dead horse, which I think I heard him say. Sheffield Forgemasters makes some of the largest forgings—
Lord Christopher
I did not say that. I said that if you were to rely on the private sector to fill the gap that you have now created, you would be flogging a dead horse. History shows that to be a reasonable point of view.
Lord Sassoon
I am grateful for that clarification. However, given that Sheffield Forgemasters is one of the very few firms in the world capable of making the largest forgings required to supply critical components to the civil nuclear industry, there is every expectation that there may be a private sector solution out there. I stress the broader point about jobs: we need to underpin the economy on a firm foundation, where the private sector can go forward and create the jobs that we need, whether in steel or many other industries.
Baroness Sharp of Guildford
My Lords, perhaps I may press the Minister a little further about the Stonehenge visitor centre. Stonehenge is a world heritage site and attracts the most visitors within the UK. The current visitor centre is a disgrace. Plans have been under way for a long time and it has taken a long time to get the planning permissions in place, which has now just been achieved. Of the money to be spent, only £10 million is coming from Her Majesty’s Government; the rest is coming from English Heritage and other private sources. Is it really necessary to cancel this now?
Lord Sassoon
I thank my noble friend Lady Sharp. I was at Stonehenge last year and it is clearly one of the most inspiring sites in this country. However, we have to be realistic about the predicament in which the economy has been left by the previous Government. There are certain projects that we simply cannot afford and which do not represent good value for money. The £25 million Stonehenge visitor centre is one that fails the test.
Baroness O'Cathain
Can my noble friend confirm that the Department for Culture, Media and Sport has stated that, if it could get private funding for this, the project would go ahead? This is yet another important area. There is a lot of money sloshing around in the arts world, but it is directed to projects that are not as important as a good visitor centre at Stonehenge. By implication, I am sure that many people thought today that we were going to let Stonehenge crumble way. The stones are wonderful, but we are concerned about access and the visitor centre. It seems an awful lot of money to spend on a visitor centre.
Lord Sassoon
I am grateful to my noble friend Lady O’Cathain for pointing out the pressures within the DCMS budget, as there are within the budgets of other departments. Difficult decisions will have to be made in all departments. This could be a project—I do not know—where there may be a private sector solution.
Banking Reform
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, with leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Financial Secretary to the Treasury. The Statement is as follows.
“With permission, Mr Speaker, I wish to make a Statement on the Government’s plans to reform the institutional framework for financial regulation.
The tripartite system of financial regulation failed spectacularly in its mission to ensure financial stability and that failure cost the economy billions. The British people rightly ask how this Government will stop it happening again. This is why our coalition agreement committed us to reform the regulatory system for financial services in order to avoid a repeat of the financial crisis. Today I would like to set out in detail the changes to the regulatory architecture that will make this possible.
At the heart of the banking crisis was a rapid and unsustainable increase in debt. Our macroeconomic and regulatory system utterly failed to correctly identify the risk this posed, let alone prevent it. No one was controlling levels of debt, and when the crunch came no one knew who was in charge. So we need a macro-prudential regulator that has a more systematic and detailed knowledge of what is happening, not only in individual firms but across the financial system as a whole. Only central banks have the broad macroeconomic and markets understanding, the authority and the knowledge required to make macro-prudential judgments.
We will therefore place the Bank of England in charge of macro-prudential regulation by establishing within the Bank a Financial Policy Committee. We will also create two new, focused regulators: a new prudential regulator under the Bank of England, headed by a new Deputy Governor; and a new Consumer Protection and Markets Authority—the CPMA. All the new bodies will be accountable to Parliament and their remit will be clear, so that never again can someone ask who is in charge and get no answer.
First, we will legislate to create the Financial Policy Committee in the Bank of England. It will have the responsibility to look across the economy at the macroeconomic and financial issues that may threaten stability, and it will be given tools to address the risks it identifies. It will have the power to require the new Prudential Regulation Authority to implement its decisions by taking regulatory action with respect to all firms.
The FPC will be accountable to Parliament in two ways: directly, as is the case with the MPC; and also indirectly, through its accountability to the Bank’s Court of Directors. The governor will chair the new committee. Its membership will include the deputy governors for monetary policy and financial stability, the new deputy governor for prudential regulation, the chair of the new Consumer Protection and Markets Authority, as well as external members and a Treasury representative. An interim FPC will be set up by this autumn in advance of legislation.
Secondly, we will legislate to create a Prudential Regulation Authority—PRA—as a subsidiary of the Bank of England. It will conduct prudential regulation of sectors such as deposit-takers, insurers and investment banks. The PRA will be chaired by the Governor of the Bank of England, and the new deputy governor for prudential regulation will be the chief executive. The deputy governor for financial stability will also sit on the PRA board.
Thirdly, a new Consumer Protection and Markets Authority will take on the FSA's responsibility for consumer protection and conduct regulation. The CPMA will regulate the conduct of all firms, both retail and wholesale—including those regulated prudentially by the PRA—and will take a proactive role as a strong consumer champion. It will have a strong mandate for ensuring that financial services and markets are transparent in their operation so that everyone, from someone buying car insurance to a trader at a large bank, can have confidence in their dealings and know that they will get the protection they need if something goes wrong.
The CPMA will regulate the conduct of every financial service business, whether it trades on the high street or trades in high finance. We need to ensure that this body has a tougher, more proactive approach to regulating conduct, and its primary objective will be promoting confidence in financial services and markets.
The CPMA will maintain the FSA’s existing responsibility for the Financial Ombudsman Service and oversee the newly created Consumer Financial Education Body, which will play a key role in improving financial capability. The CPMA will also have responsibility for the Financial Services Compensation Scheme, but given the important role that it plays in crises, it will work closely with the FPC and the PRA. We will also fulfil the commitment in the coalition agreement to create a single agency to take on the work of tackling serious economic crime that is currently dispersed across a number of government departments and agencies.
Before we set up these new bodies in their permanent form, we will conduct a full and comprehensive consultation process and publish a detailed policy document for public consultation before the Summer Recess. Our goal is radically to improve financial regulation in the UK, strengthening the prudential regime by placing it in the Bank of England and delivering the best possible protection for consumers.
During the period of transition to the new regime, the Government will also be guided by the following four principles: minimising uncertainty and transitional costs for firms; maintaining high-quality, focused regulation during the transition; balancing swift implementation with proper scrutiny and consultation; and providing as much clarity and certainty as possible for FSA, Bank and other staff affected during transition. In order to do this, we will ensure the passage of the necessary primary legislation within two years.
I am delighted that Hector Sants, the current CEO of the FSA, has agreed to stay on to lead the transition and become the CEO of the PRA. He will be supported by Andrew Bailey from the Bank of England as his deputy in the new regulator. This is a strong team to ensure a smooth transition.
The financial crisis has cost taxpayers dearly. The regulatory system needs radical reform to make the sector more stable and stronger. The last Government could not do this because they were caught up in a structure designed by the former Chancellor and Prime Minister. The fundamental flaws in its architecture contributed to the failure in the banking sector and ultimately undermined economic stability. The continuing financial and economic uncertainty across the eurozone strengthens the urgency with which we must equip ourselves with better tools and arrangements to tackle any future financial instability. We have already paid a high price for the previous Government’s failings, and we must do all we can to prevent this happening again. I commend the Statement to the House”.
My Lords, that concludes the Statement.
Lord Eatwell
My Lords, I am once again grateful to the noble Lord for having repeated the Statement made by the Financial Secretary in another place. It is a very useful Statement, since it reveals beyond all reasonable doubt the degree of influence that the Liberal Democrat wing of the coalition has on the development of policy in this area—it is nil.
To assess the importance of this massive institutional upheaval, it is worth reflecting on the earlier upheaval that accompanied the creation of the Financial Services Authority 13 years ago. I was at that time a member of the board of the old Securities and Futures Authority. I later sat on the regulatory decisions committee of the new FSA. I can assure your Lordships that with the best will in the world, and with the talented leadership of Sir Howard Davies, regulatory enforcement was none the less seriously impaired by the transition process itself. Putting together complex institutions with different organisational structures, different pay grades and different employment and management practices, inevitably tends to take the eye off the ball. It took more than two years for the new structure at the FSA to become what could be called fully operational.
There must be a real fear that the same will happen again—at a far more critical time. The DNA of the Bank of England and of the FSA are quite different. The Bank makes one important decision every month; the FSA makes a hundred decisions a day. Has a comprehensive risk assessment been made of the negative impact of the upheaval itself? If so, will the Government publish that risk assessment? Is it planned to unify the employment and management practices of the Bank of England and the new subsidiary? Given that the FSA and the Bank have very different structures—the FSA has a chairman and a chief executive, the Bank has but a governor—what is to be the governance structure of the new organisation? What is the estimated cost to the taxpayer of the creation of the new institutions?
Another important angle from which to assess these institutional proposals is their congruence with the objectives of financial policy. Again, it is worth while looking back to the creation of the tripartite structure. The Chancellor of the Exchequer said yesterday that,
“our plan is to hand over to the Bank of England the responsibility for macro-prudential supervision. That should never have been taken away from it”.
I am sure that the Minister will acknowledge that this statement is rather less than accurate. Will he confirm that, on the day that Lehman Brothers collapsed, around 100 staff were working in the financial stability division of the Bank of England? Will he also confirm that their task was to analyse and manage the stability of the financial markets?
My point, however, is not to pick over the entrails; it is, rather, to emphasise that prior to the crisis, nobody in the Bank, the FSA, the Treasury, the Basel committees or the Federal Reserve was paying sufficient attention to the issue of systemic risk. Now it is universally agreed that macro-prudential regulation and supervision must be a fundamental task of the authorities, and that new macro tools are needed. It is equally agreed that this must require close co-ordination between all aspects, macro and micro, of the regulatory process. However, the nature of that co-ordination must of necessity be a function of the policy to be pursued. Unfortunately, the Government have not as yet presented their policies for macro-prudential regulation. They have not decided what the new tools to be wielded by the authorities will be. In restructuring the institutions before they know what they want them to do, and how they want them to do it, are they not putting the cart before the horse?
I wonder whether the noble Lord will indulge me by allowing me to refer to some other matters raised in the Mansion House speech that he and I discussed yesterday and which are relevant to the future of banking in this country. I refer to the membership of the new Independent Commission on Banking. The noble Lord told us yesterday that the membership,
“will require a well balanced set of skills and experience covering banking, business, competition, consumer issues and regulation”.—[Official Report, 16/6/2010; col. 987.]
In the Mansion House speech last night, the Chancellor announced the membership of the commission. In addition to Sir John Vickers, it comprises an outstanding economic journalist, a former head of Barclays Bank, a former utilities regulator with long, recent experience of the insurance industry, and the man who led the team at JP Morgan that created credit derivatives, one of the main toxic instruments of the recent crisis. They are all distinguished and competent people with wide experience but there is nobody from any business other than financial services—not a single person with recent high-level experience of industry, and hence of the relationship between industry and finance; somebody, for example, from the Engineering Employers’ Federation who has experience of small and medium-sized industry and its financial needs. There is not really a single person with experience of the consumer interest, although I acknowledge that Miss Spottiswoode has been part of the Which? inquiry. Will the Chancellor be making further appointments to the commission to redress the current imbalance?
I return to the main point. The Government have failed to demonstrate the necessity of the extraordinary concentration of powers in one institution announced today. Monetary and fiscal policy will be united once again—not in the hands of elected Ministers, but instead in the hands of unelected officials of the Bank of England. Will the Minister confirm that that is not what he described yesterday as a restoration of powers? It is a major enhancement of powers to levels never experienced in this country before. Britain will now have the most centralised, monolithic financial management structure in the world.
To create this structure will require the replacement, or at least substantial amendment, of the Financial Services and Markets Act. Will the Government follow the good practice of their predecessor and establish a pre-legislative scrutiny committee for the requisite Bill? And when are we likely to have sight of the Bill? This side of the House is as committed as are the Government to the need for regulatory structures that sustain stable and secure financial services for British industry and British families. We remain to be convinced that the proposed upheaval is either necessary or sufficient to achieve that goal.
Lord Sassoon
My Lords, I thank the noble Lord, Lord Eatwell. It feels as if I am having four tutorials in a week, when one was what I was brought up to do. Let me try to take as many of the points as I can.
The noble Lord stresses the transition arrangements. These are very serious issues which we have been thinking a lot about, and my right honourable friend the Chancellor stressed that in his Mansion House speech. I would draw a sharp distinction, though, between what we are doing now and the task that Sir Howard Davies took on originally. He was trying to get somewhere between 10 and 20 bodies together to create the FSA, while here we have principally the Bank and the FSA; and as we explained, the transition will be managed by Hector Sants, who has very generously agreed to stay on and see the transition through. He will be managing that in conjunction with Andrew Bailey of the Bank of England. So I think that the transition will be in the hands of a very strong management team.
The noble Lord referred to the DNA of the Bank. He seems to be talking about DNA in rather a short-term way. As I understand it, DNA can be traced back through the generations over many thousands if not hundreds of thousands of years. I remind him that in this reorganisation of responsibilities we are getting responsibility back to the Bank of England for most of what it historically did throughout large parts of its existence. I would argue that the Bank has the DNA there and that we are putting right a short-term aberration of the past few years.
The noble Lord went on to question, quite properly, the governance and management of the Bank. It will be principally for the two management teams themselves to work out the details of how the management beds down, but it is clear, I hope, that the new PRA, although it will be structured as a subsidiary, will be embedded fully in the management structure of the Bank, reporting up to the governor. I have already said but would like to repeat that thoughts about governance processes will be critical to this. As regards the Financial Policy Committee, there will be reporting based on the MPC’s reporting methodology—direct accountability to Parliament, published minutes and a clear remit from the Chancellor. I absolutely share his view that governance needs to be thought of as part of the process.
As for assessing the costs and risks of the changes, I have said that the Government will undertake a full public consultation process on the plans. Of course, in that connection, we will publish a detailed policy document before the Summer Recess, which will include a regulatory impact assessment in the normal way.
On macro-prudential tools and putting carts before horses, if we took that approach to life we would never make any progress because we would always find reasons why the world was imperfect and we should not go forward. It is absolutely critical that we get a regulatory structure that makes it clear who is in charge. We cannot risk again the experience of the past three years, so we will put in place the FPC, which will be responsible for the macro-prudential judgments. It must have the toolkit, but it is clear from the international discussions at G20 level and in other fora that the emerging toolkit will almost certainly include capital liquidity and, in some role, leverage, and there may be other tools. I am confident that the FPC will not be short of tools.
On the composition of the banking commission, I do not think that my right honourable friend the Chancellor has any intention of adding anybody else to it. However, let me point out one or two things that the noble Lord omitted to say. Martin Taylor, before he was the chief executive of Barclays Bank, ran Courtaulds, a major manufacturing company. He also referred to Clare Spottiswoode. She has been the regulator in other regulated industries, well away from the financial services sector, including, of course, gas. So the experience of the commissioners goes much wider than the noble Lord set out.
The noble Lord then talked about putting more power into the hands of unelected officials, as he put it, in the Bank of England. As I explained, we need to make it clear that there is somebody in charge of taking the decisions. He pointed out that the Bank of England had a significant number of people in its financial stability division in the run-up to the crisis, but the trouble was that they did not have a clear and unequivocal mandate and they had no statutory duty to be responsible for financial stability. Now we will have people in place with a statutory responsibility, which the Bank of England did not have, although the previous Government, in their botched attempt to patch things up, did at last give the Bank a statutory responsibility. They did not have that before the crisis. So we will have somebody in charge—it is the Bank of England, appropriately, and there will be a high degree of accountability, including in the ways that I have laid out.
The Bill was set out in the Queen’s Speech, and it will be introduced in this Session. I am sure that it will follow the normal processes for a Bill of this sort.
Lord Newby
My Lords, our concerns about plans to abolish the FSA in the run-up to the election centred, first, on our concern that the governor was not the person to be in charge of micro-prudential regulation and, secondly, that there would be a long period of hiatus in which there would be no continuity in senior management on financial regulations. We are greatly reassured by the fact that Hector Sants has been persuaded to stay on to deal with the second problem and, given his new position, will be able to deal largely with the first. Can the Minister reassure us that both the Government’s and the Governor’s top priority over the next few months will be to ensure that as many of the senior members of the FSA staff as possible remain in place to work with Hector Sants and to ensure the continuity which everybody thinks is so important?
Lord Sassoon
I am grateful to my noble friend Lord Newby for pointing out, very helpfully, how the Government’s programme in this area has taken account of some of his concerns from before the election. On the transition, it might be helpful if I additionally confirm that the FSA will remain the financial services regulator until the legislation is implemented, so it is quite clear who will be doing what. I am grateful to my noble friend for stressing the management arrangements and I will relay to both the Bank and the FSA his concern that they do what is of course a high priority—to make sure that they retain the essential and extremely good staff they have in both organisations.
Lord Haskel
I thank the Minister for telling us about the regulation of debt and banking, and about taking care of the consumer at the Bank of England. Who will take care of inflation? Will it just be the poor relation, somewhere between the Bank of England and the Monetary Policy Committee, or will it be somebody’s special responsibility?
Lord Sassoon
I am grateful to the noble Lord, Lord Haskel, for raising this rather important question. Let me stress absolutely clearly that the Monetary Policy Committee will continue just as now, with an unchanged remit. It will have, if the Chancellor does not change the remit, the 2 per cent inflation target, and nothing in that respect will change.
Lord Higgins
Could my noble friend clarify the position regarding ministerial responsibility? As I understand it, this Statement was made in another place by the Financial Secretary to the Treasury—an office which I once held a very long while ago. Is he now responsible for the banking side, and how has the situation changed from that under the previous Government, who created a financial secretary for banking? Will my noble friend the Minister assume that role? Could he clarify the overall position? The position was, of course, previously filled by the noble Lord, Lord Myners.
Lord Sassoon
I am grateful to my noble friend Lord Higgins for asking that question. Since I carry the newly-minted title of Commercial Secretary, I can try and explain that my responsibilities straddle both the financial services sector and wider business interests. My friend in the other place, the Financial Secretary to the Treasury, bears the primary responsibility in most areas of financial services policy. If my noble friend would like to look at the Treasury website, he will see a much clearer explanation of the split of ministerial responsibilities. I would be happy to send him a copy.
Baroness Noakes
My Lords, I welcome this Statement and I am sure that the City will welcome the clear directional steer that it was given yesterday. In particular, the staff at the FSA who have been very concerned about what the future would hold for them can now see a clear path forward. The suggestion made by the Benches opposite about pre-legislative scrutiny needs to be looked at very carefully. The Financial Services and Markets Bill indeed underwent pre-legislative scrutiny, but that Bill was a much more complicated matter, bringing together a large number of bodies into a completely new body whereas, as I understand them, my noble friend’s proposals are that the existing FSA will be split into a number of pieces and put into different places.
In addition, notwithstanding that that Bill had pre-legislative scrutiny it did not, as far as I am told by those who bear the scars, save one single minute of time in Committee when all the arguments that went on in pre-legislative scrutiny were re-run on the Floor of the House. I am not at all sure that doing that is a good use of time, but that question is above my pay grade—and, doubtless, above my noble friend’s pay grade.
I have two questions for my noble friend. First, what is to happen to the financial stability committee in the Bank of England, which was created in the Banking Act 2009? It seems to me that we are accumulating rather a lot of committees all over the place with a lot of cross-membership. I wonder whether it will have the same purpose once the financial policy committee is created. Can he also say what is to happen to the UK Listing Authority, one of the functions of the FSA which I do not think was covered in his Statement?
Lord Sassoon
I am grateful to my noble friend Lady Noakes for letting me off from answering her first observation, but I take the point. There are others better equipped than I to know what will be the appropriate way to take this particular legislation through. On the financial stability committee, that was of course introduced by the previous Government as part of their sticking-plaster job, trying to put together something out of the wreckage of the tripartite system. That will fall away when the new structure gets into place. As I have already stressed, the financial policy committee will be up and running in shadow form. It is also important to note that through the transitional period, the Chancellor, the Governor of the Bank of England and the chairman of the FSA will need to be in close discussion regularly. Concerning the UKLA, the Treasury will be bringing forward proposals prior to the Summer Recess on its future, along with the significant number of other matters on which we will consult.
The Earl of Caithness
My Lords, this is my first opportunity to congratulate my noble friend on his appointment to the Front Bench. Whether or not his is a newly-minted position, it is still very good to see somebody in this House on the Treasury Bench. Does my noble friend agree that the current financial crisis started not with the bankers but with the banking system? All that the bankers have done is to use the banking system which was established by judicial review rather than by legislation. In order to combat debt and, as the Statement says,
“to get the best possible protection for consumers”,
can my noble friend update me on the current thinking of the Government about separating deposit and current accounts and returning ownership of a deposit to the depositor, rather than having it in the control of the bank?
Lord Sassoon
I am grateful to my noble friend Lord Caithness. This gives me an opportunity to pay tribute to him as, I think, my predecessor but one representing the Treasury on the Front Bench in this House—a job which he carried with distinction. He makes a very important point on the banking system, one on which we have not touched in detail this afternoon. It is fine and very important to have an appropriate regulatory system but we need to examine the structure of the banking system, something which the previous Government—for reasons that I genuinely fail to understand—did not want at all to look at. That is why we have, yesterday, established the banking commission. There will be many detailed and important points on which your Lordships will want to make direct representations to the commission; the structure of deposit and current accounting might will be one of them.
Viscount Trenchard
My Lords, I also take this opportunity to congratulate for the first time my noble friend Lord Sassoon both on his ennoblement and his appointment, which is indeed excellent news. I believe that there are three of us in your Lordships’ House today who served on the pre-scrutiny committee on the Financial Services and Markets Bill under the noble Lord, Lord Burns, who is in his place. Although I think that the noble Lord, Lord Eatwell, did not share that view at the time—it was 10 or maybe 11 years ago—I recall that there was extensive debate then on whether the FSA was being given too many powers. Certainly, some of us on the committee felt that the FSA should have been in a subordinate position to the Bank of England even from that time. Therefore I welcome the Government’s proposal that financial stability and monetary policy should be combined—in other words, the prudential regulatory functions of the FSA should be either transferred to the Bank of England or made subject to oversight by it. That is indeed a positive move and will help to ensure that there is no doubt in future as to who is in charge.
I ask my noble friend, though, whether there is not some concern about creating too many new quangos—too many new bodies. I see that the FSA is going to be replaced by three bodies: the CPA, the CFEB and the PRA, the rump of the FSA, each with its own board and, to some extent, with overlapping functions. I worry about the cost of these new bodies to the financial services industry. I wonder whether the consumer protection functions could not equally efficiently, or perhaps more efficiently, be taken on by existing consumer protection bodies, such as the one whose name I forget that operates under the business department.
I have a second question. I note the four principles that the Government will be guided by during the transition to the new regime, but might the Government consider adding a fifth—the maintenance of the competitiveness of the City of London as a financial centre? If we fail to do that, it will not be much good for us, however perfect a regulatory system we establish.
Lord Sassoon
I am grateful to my noble friend Lord Trenchard for his warm words. He mentions the question of too many powers under the old regime. I stress that I think it is more a question of the mindset and the regulatory approach rather than the powers themselves; it is the whole approach to regulation that needs to be changed. He raises the important question of whether we are creating too many bodies. I shall try to reassure him on that; indeed, the landscape is being simplified. Although the PRA will be a subsidiary of the Bank of England, it will be fully embedded in the bank structure. In that sense, I do not see that as the creation of a new body. My noble friend draws attention to the CFEB, which was created as a self-standing body but will now come under the auspices of the CPMA. We are creating a much simpler and more efficient structure in the landscape that should not create any additional difficulties.
My noble friend asks about the remit of the CPMA. Although its principal remit will be to ensure that the conduct of business is properly regulated across all markets, the question of secondary responsibilities, which could become primary responsibilities, including the competitiveness of markets, needs to be considered during the consultation process.
Lord Haskel
My Lords, the noble Viscount, Lord Trenchard, reminded me that I too served on the Joint Committee for the Financial Services Act, under the chairmanship of the noble Lord, Lord Burns. I remember that we imposed a duty on the FSA to educate the public about financial matters and financial regulations; indeed, we ring-fenced money so that that could be done. Will all this remain in place?
Lord Sassoon
I ask the noble Lord, Lord Haskel, to be patient with us and, as we get into the detailed design, to see how we deal with all these matters. I take his point that this is another thing that needs to be addressed in the detail of the proposals.
Lord Christopher
My Lords, I apologise to the Minister in advance; I did not register his reply to one of my noble friend Lord Eatwell’s points. Has there been a risk assessment of this, and if there has, is it to be published? It is relevant that there should be one because, as I understand it, nowhere in the world is there a model like the one that is now being created from which we can draw any experience at all. I remind him that the Financial Services Authority requires financial services companies not only to have regularly revised risk assessment reports but to have plans B, C, D and E in the event that the risks appear to be too great.
We have talked about the top brass, but no one has mentioned the staff. Is it going to be an easy matter to integrate them? What discussions will be taking place with them?
Lord Sassoon
The noble Lord enables me to repeat again, for the avoidance of doubt, that we will publish a detailed policy document before the Summer Recess that will include a regulatory impact assessment in the normal way. In preparing the plans for the transition and for the regime thereafter, alternative scenarios have already been, and will continue to be, thought about.
The noble Lord makes an important point about the staff of the FSA. I should take the opportunity to say that the staff of the FSA and of the Bank of England have done an extraordinary job through the very tough conditions of the past few years. I know that the management, led through the transition by Hector Sants and Andrew Bailey on the two sides, are seized of the need to keep the staff fully informed of the transition arrangements, and the noble Lord’s point is well taken.
Chronically Sick and Disabled Persons Act 1970: 40th Anniversary
(13 years, 11 months ago)
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Lord Corbett of Castle Vale
To call attention to the 40th anniversary of the Chronically Sick and Disabled Persons Act 1970; and to move for Papers.
Lord Corbett of Castle Vale
My Lords, it is a privilege to be asked to open this Back-Bench Labour debate. I am just sorry that the remarks I made about that earlier are still not reflected on the Annunciator, but there we go. It is a great pleasure to see so many dedicated, determined and experienced people from all the fields of disability lined up to speak.
Over the past 40 years, the eight pages of the Act have changed the lives of literally millions of people in the United Kingdom and around the world. There cannot be many Members of Parliament who, having come first in a ballot for the restricted time to launch a Private Member’s Bill, can have had such a profound and long-lasting impact. The author of the Chronically Sick and Disabled Persons Act did more than leave a footprint in the sand; he made history. His was the first legislation in the world to enshrine the belief that people with disabilities had rights which should be respected and enforced in law, and to set out a detailed framework of what those rights were and remain. From the bleak, ignored existence of those whom society hid away, this Act offered liberation, recognition and a start on the long road towards equality with all other citizens.
Some might say that this was enough of an achievement—not, however, the father of this Act. He went on in 1974 to gain another first—to become the world’s first Minister for Disabled People. As noble Lords already know, I refer to my much respected noble friend Lord Morris of Manchester, whose determined and passionate commitment has achieved so much over this past 40 years. It was a Labour MP and a Labour Government who put this groundbreaking legislation on the statute book, but I quickly acknowledge that, over the years, others of all political colours and none, in both Houses, have also promoted legislation to bring people with disabilities in from an isolated cold.
The words of my noble friend, in moving the Second Reading of what was then the Bill in another place on 5 December 1969, stand proudly. They are as passionate, dignified and inspirational now as they were 40 years ago. I will not quote the whole of this passage, much as I wanted to, because I suspect at least one other speaker may do so before we have finished, but the ambition he set out for the Bill included that,
“if years cannot be added to the lives of the most severely disabled, at least life can be added to their years”.—[Official Report, Commons, 5/12/69; col. 1863.]
What a beautiful use of language to express such an important, although simple, thought.
The Act unlocked doors which had kept people with disabilities ignored, isolated and unheard. It asserted their fundamental right to be assisted to participate fully in society and, crucially, the ways in which this was to be achieved. The Act required local councils for the first time to listen and talk to people with disabilities about their needs and then—this was the important bit—to set out how they were going to meet them. No longer would young people with disabilities be hidden in long-stay geriatric hospital wards, nor elderly people left, ignored and forgotten, in substandard residential homes. The special educational needs of people who were deaf, blind or dyslexic, or those with degrees of autism, would be acknowledged and met. All buildings open to the public would be, for the first time, just that—open to all of the public, including people with disabilities, with toilet facilities for them.
As opposition disability spokesman, I helped the Labour candidate in Nuneaton in the 1997 election. He put me in a wheelchair and took me round some shops to buy a suit. The first was easy to enter but had two steps in the middle of the shop which were impossible to navigate in a wheelchair. The assistants and manager were more puzzled than anything else by why anybody in a wheelchair should want to buy a suit; presumably, they had not seen people in wheelchairs wearing suits before. We made our excuses and left. The second shop had steps at its entrance, which again made wheelchair access impossible. The third had an almost vertical flight of stairs up to the gents’ suit department on the first floor. The owner, to his credit, offered to bring down some suits for me to try on and then did so. However, this had to be done in the women’s changing cubicle, with him holding the curtains across the back of the wheelchair. The candidate and I explained what we were about. Again, to his credit, the owner acknowledged that he had never even considered access for customers using wheelchairs and would do so.
Ignored and forgotten, in 1970 no one accurately knew how many people there were with disabilities. There was little research into their needs or plans to meet them. It was estimated in that year that there were, perhaps, 1.5 million. A survey in 1996-97 revealed that there were 8.5 million. The scarring offence to people with disabilities—sadly, some of this remains—is that they were told what they could not do, rather than being asked what they could. In my experience, people will often do more than is expected of them, but it makes huge sense to ask them before any decisions are taken.
These assumptions about people with disabilities led to a denial of the right to work where this was possible with assistance from employers. We all know that the ability to work, with training for skills and assistance with adaptations, expands life chances, helps individuals to fulfil themselves and makes society stronger. It adds up to the cement and bricks of community building.
Much is changing in the employment available to people with disabilities. Since 1998, there has been a 10 per cent increase in the number of people at work who have disabilities—up from 38 per cent to 48 per cent in 2008. Nothing must be done by this coalition Government to slow this progress. It is also perhaps a recognition that we should think much more about people with different abilities than people with disabilities.
The previous Government’s Access to Work budget was due to rise by £138 million by 2013-14. Last year, this scheme helped around 32,000 people with different abilities to help or get jobs, assisted in part by the IT revolution. One of the challenges for this coalition Government is to understand the importance to people’s lives and our economic health and prosperity of protecting and promoting the opportunities for people with different abilities to help build our future. I assume from the rhetoric of the coalition’s programme for government that this is what the proclaimed aims of freedom, fairness and responsibility imply. It must be the freedom for people with different abilities to access the new jobs that must be created in our low-carbon economy. Fairness implies that they will get all the access they need to get these jobs. All I can say is that they are ready and willing to take this responsibility.
But it is not only about money. Attitudes towards people with different abilities must continue to change, not least as regards people with learning disabilities and mental health conditions. I said earlier that people with different abilities need assistance to help get them into work to gain dignity and self-respect. We need also to help create and sustain the small and medium-sized enterprises that provide 96 out of every 100 jobs in our economy. People with different abilities deserve and demand their place in this process. Some are doing just that. I was told about a woman in her 40s working as a sales rep, who discovered that she had epilepsy. She was her family's main earner and was anxious about what would happen to her job. At her local hospital, an epilepsy nurse told her how to contact the Government’s Access to Work scheme. Her adviser arranged for her to have a paid driver so that she could keep her job and feed her family. That is why I say that this Government should keep their hands off the Access to Work scheme. There are broader backs who can help than this woman's.
I much applaud the charity, Sports Leaders, and know that many in the House do so. It seeks to change lives by encouraging and motivating young people to create and run sports activities in their communities. In schools, colleges and universities, more than 200,000 people a year, including some in prison, learn how to help their local communities to flourish and grow. For example, Sally Wallace is a school sports co-ordinator who fell badly off her bike and spent six months learning how to adapt to life in a wheelchair. She now lives independently at home, has got her job back and works for Priory Sports and Technology College in Preston and five linked primary schools, helping students to achieve Sports Leadership awards.
Reuben was involved in a hit-and-run car accident, resulting in traumatic brain injury, and spent five months in hospital with cognitive and physical difficulties. After rehabilitation at a brain injury centre, he started a 35-hour, level 2 award in community Sports Leadership. He completed the course, and the 10 hours’ volunteering that went with it, last summer. He now lives independently in sheltered accommodation, and coaches in a local gym and, in his spare time, the local football team. He is now training for the 2012 Paralympics, his goals being the 100 metres and the blind seven-a-side football. As somebody said, it can be done.
Emma is profoundly deaf, worked as a daycare assistant and wanted to get more involved in sports. She attended a five-day Sports Leadership coach course, joining a group of deaf and hard-of-hearing people. Since completing the course, Emma has learnt to use her own initiative when creating and administering training sessions. She organises activities, leads and motivates others and, with the skills gained from the course, has secured a work placement at Ramsgate Leisure Centre, if anybody is passing those doors. These are just some examples of what people with different abilities can achieve when their determination is matched by the assistance that they need, the pathway to which was so well laid by my noble friend Lord Morris.
I mention these people because they illustrate how, with assistance, they can overcome medical conditions and go on to succeed in paid and fulfilling employment. The previous Government planned to guarantee 3,500 places on the Access to Work programmes for people with learning disabilities and mental conditions. I hope that the noble Lord, Lord Freud, will tell me that the Government will honour these plans as part of their fairness agenda. The scaremongering of the Deputy Prime Minister about the severity of cuts needed in public expenditure has been shown to be hollow. The noble Lord, Lord Razzall, who is no longer in his place, does not seem to have understood this either. The truth—which the Office for Budget Responsibility has confirmed—is that borrowing will be £10 billion less than forecast in March by the previous Government, and next year it will be £8 billion less than forecast. That is enough to protect people with different abilities from the impact of savage cuts.
I want to say this clearly—it repeats what I said in my maiden speech in the other House in November 1974—there is no possible reason or excuse to take away assistance from people with different abilities for whom we have the legal and moral responsibility to assist in becoming fully equal citizens. I have no doubt that I carry the House with me on that.
I turn to some of the challenges ahead. The Government’s Office for Disability Issues published Roadmap 2025, which set out plans across government of how it would seek to assist disabled people to achieve equality. It listed 14 steps, but I shall not list them because I do not have time. They aimed for better service provision for disabled children and set aside £370 million to support short breaks for these children and their families. I hope that the Minister can confirm that that money will not be stolen. The Ministry of Justice and the Department of Health are developing plans to help access to mental health services including learning disability services for offenders. This will partially implement the recommendations of the report of my noble friend Lord Bradley to divert offenders with mental health problems or learning disabilities away from prison into more appropriate services.
There is always more to do, but the progress achieved in the past 40 years must have been unimaginable, even to my noble friend Lord Morris when he set out on his journey. Since then, successive Governments and parliamentarians have worked towards equality for people with different abilities, and that mission remains incomplete.
Lord Rix
My Lords, I speak in this debate to celebrate the Private Member’s Bill of the noble Lord, Lord Morris of Manchester, which, with the support of both Houses, became an Act of Parliament some 40 years ago.
As I said during the debate 10 years ago to mark the 30th anniversary of the Bill of the noble Lord, Lord Morris, the years 1970 and 1971 were particularly good for advancing the interests of people with a learning disability and their families and carers. Not only did we have the Chronically Sick and Disabled Persons Act, but we had a White Paper on learning disability, better services, attendance allowance and invalidity benefit, and the Education (Handicapped Children) Act, which ensured the provision of education for children with severe learning disability, who had hitherto been excluded from the education system.
The Chronically Sick and Disabled Persons Act focused on three principles: the identification of disabled people, their involvement and their rights. The Act enshrined in law these very important principles and laid the foundations upon which subsequent legislation in the field of disability has been made.
I am delighted that since the Act’s inception some 40 years ago, significant progress has been made to improve the quality of life for people with a learning disability. I welcome the important steps made in these areas. However, the often stark and shocking reality is that too many people with a learning disability, their families and carers continue to suffer the consequences of prejudice and discrimination as a direct result of their disability.
People with a learning disability want to make the same choices about where they live, how they spend their leisure time and what relationships they want to form, in the same way as everyone else, but all too often are denied the opportunities to do so. Ensuring that the right resources are in place is vital, but on its own this is not enough. People with a learning disability do not want choices and assumptions made for them, but are entitled to expect that they are at the centre when any decisions are made about their future and their quality of life. The Chronically Sick and Disabled Persons Act helped to establish this very important principle.
One area where people with a learning disability continue to suffer from such prejudice and discrimination is employment. At a meeting last week of the All-Party Parliamentary Group on Learning Disability, of which I am co-chair, we discussed this very issue and the ways in which it can be tackled. People with a learning disability are the disabled group most excluded from the workplace. Of those known to social services, there are just 6.8 per cent in paid employment. Even where people with a learning disability do work, it is often for low pay and for part-time hours. Too often, the work carried out by people with a learning disability is described as work experience and does not lead to real pay or a real job. This is despite the fact that many people with a learning disability want to work and can make a significant contribution to the workplace.
Among those who spoke at the recent APPG meeting was Ismail Kaji, who has a learning disability and is a campaigns and media spokesperson for Mencap, the royal society of which I am proud to be the president. He works full time in Mencap’s campaigns and policy department, and indeed I was on the phone with him only this morning. Ismail gave an excellent presentation to all those who were present and spoke with real passion about his personal experiences in relation to achieving paid employment. Without a job, Ismail felt that he was always being told what to do, that he relied on benefits and on other people, and that he did not have control over his life. His search for a job was very hard. He did not receive the help and support that he needed at the jobcentre with things such as CVs and application forms. He found interview questions difficult to understand and found it hard to express himself.
Ismail decided to go to a local college to complete a basic skills course. A Mencap staff member in our employment service came to the college and worked with him to find the right job to fit his needs and skills, as well as helping him with applications and interviews. The outcome was positive. Ismail has now worked for Mencap for 14 years and in the campaigns and policy team for four of those years. His life has changed for the better. His only benefits are tax credits and disability living allowance. Ismail feels that he has control over his life and can take care of his wife and children. He feels an active member of society—something that most people take for granted.
During the APPG meeting, we also received a presentation from Kathy Melling, who is the national employment lead for Valuing People Now, working in the cross-government Valuing Employment Now team. She is also the employability development manager for Kent adult social services. She spoke about the fact that, while 47 per cent of disabled people overall are in paid work in this country, the figure is only 6.8 per cent for people with moderate and severe learning disabilities, rising to about 28 per cent for people with mild learning disabilities.
Kathy also talked about the importance of supported employment, or the place-and-train model, which is widely regarded as the best way to help people with learning disabilities to get and keep jobs. The evidence is that investing in supported employment can lead to cost savings. Work in north Lanarkshire and Kent indicates the potential for savings, in both service costs and welfare benefits, when people move into employment of 16 hours or more per week. The challenge for national and local government is how to bring together the money already in the system—in areas such as day services and education—to ensure that it is spent on things that actually help people with a learning disability to get a job.
The final speaker at the APPG was Jacqui Henderson, who is currently Director of Creative Leadership and Skills Strategies and co-chaired the National Skills Forum inquiry with Gordon Marsden MP. Jacqui talked about the NSF report and emphasised that employability does not depend on qualifications alone. The importance of so-called “soft skills”, such as interpersonal, communication and teamwork skills, which are often valued highly by employers, must not be overlooked and can be of even greater importance when considering people with a learning disability. Work experience and supported employment courses are crucial in helping disabled learners to develop these soft skills. There is a need for more opportunities for learning to take place in the work environment for disabled learners, particularly through the use of supported employment agencies, which, the research found, are currently underfunded.
As your Lordships will be aware from my brief synopsis of the all-party parliamentary group meeting, we covered a great deal and made a positive case on the effective contribution that people with a learning disability can make to the workplace. That is why opportunities for apprenticeships are vital for people with a learning disability.
I welcomed improvements made to the previous Government's Apprenticeships, Skills, Children and Learning Bill, particularly amendments tabled in my name and those of my noble friend Lord Low designed to make it easier for disabled students to take an apprenticeship. The previous Government agreed that they would make entry requirements for would-be apprentices more flexible, with the previous Minister for Business, Innovation and Skills, the noble Lord, Lord Young, accepting my proposal to allow students with learning disabilities to submit a portfolio of evidence to show that they are ready for an apprenticeship. I understand that discussions have already begun with key stakeholders, such as representatives from Mencap and others, and government officials, to work out the practical details of implementing my proposal. Needless to say, I hope these discussions are fruitful for all concerned.
Another amendment to the Bill, accepted by the previous Government, extended the entitlement to an apprenticeship for suitably qualified students with a learning disability up to the age of 25, rather than the previous limit of 18. It is practical steps such as those outlined in the Apprenticeships, Skills, Children and Learning Act that will help to improve opportunities for employment for people with a learning disability.
In conclusion, I have no doubt that much of the progress made in improving the lives of those with a disability over the past 40 years has its origins in the inclusive and empowering agenda first set out in the Chronically Sick and Disabled Persons Act. That Act set the benchmark by which future progress would be judged and I congratulate the noble Lord, Lord Morris, and pay tribute to his success in making sure it was placed on the statute book in the first place and, in 1974, for becoming the first ever Minister for Disabled People. He deserves the grateful thanks of each and every one of us.
Lord Morris of Manchester
My Lords, I am most grateful to my noble friend for doing so much to secure and for having opened this, for me, deeply evocative debate. A parliamentarian with integrity to spare and an abiding commitment to social justice, he made plain again today his concern for the value of things as well as their cost. We first met a week or so after I entered the House of Commons in 1964. He then worked for Farmers Weekly, and I was Fred Peart’s Parliamentary Private Secretary at the then Ministry of Agriculture, Fisheries and Food. He was a trusted friend then, and I am delighted to be calling him my noble friend today.
One of the penalties for longevity in parliamentary life is the loss, by attrition, of so many close and valued colleagues. The longer one survives here, the more colourful and crowded one's gallery of sorely missed friends becomes. Many of the most honoured in my own gallery are those who laboured with me to enact my Chronically Sick and Disabled Persons Bill 40 years ago: the honourable John Astor, David Weitzman QC, Sir Neil Marten, Lewis Carter-Jones, Dr Michael Winstanley and, of course, the late and revered Davina, Lady Darcy de Knayth, among many more.
They were not all of one party. They were of all parties—and of none—but they were all of one mind. What united us was a shared determination that Westminster and Whitehall must no longer be allowed to ignore the rightful claims of long-term sick and disabled people. They must be free to live their lives as normally as possible in their own homes and their own families, to have the same opportunities to contribute to industry and society as everyone else and to receive support based on statutory rights.
Those who helped me to enact the Bill included, first of all, Jack Ashley, who was of inestimable help throughout. I rejoice that we remain in such close fellowship today. That he will be speaking in the debate is heart-warming and I very much look forward to hearing him. Happily Sue, the noble Baroness, Lady Masham, who made her maiden speech in this House in the Second Reading debate on my Bill in April 1970, is also with us to participate in this debate and I am delighted to see her. I know that the noble Earl, Lord Snowdon, very much wanted to be with us today but, sadly, it has proved impossible for him to be here.
For Back-Benchers in the House of Commons, winning first place in the annual Private Members’ ballot is the most coveted prize in the lottery of parliamentary life. That was the prize I won in November 1969, giving me the right to parliamentary time to introduce a Bill of my choosing. Not every honourable and right honourable Member felt that it was fair for me to have won the prize. Even Manny Shinwell, for whom, as a young, new Member I could do no wrong, felt that it was a little unfair. He had been in Parliament since 1922 and told me, “You know, it wasn’t your turn, Alf: you’ve only been here five years”, before adding, “but on reflection, I don’t think that it was mine either, just yet”.
Very few Members have a Bill ready to introduce, which is why some who win the ballot take one off the shelf, fully drafted and complete with offers of help with speeches, secretarial and other support from some well heeled pressure group. While I too had no Bill drafted, I knew what I would do. I was resolved to try to legislate on the problems and needs of long-term sick and disabled people as, in my view, the most deprived and neglected minority in Britain, but more realistically, perhaps, I wanted at least to put that policy area firmly on the parliamentary agenda.
Richard Crossman, then Secretary of State for Social Services, was not best pleased when he heard of my intention. In hard summary, his reaction was that if he had thought that such legislation was needed, he would already have introduced a Bill, not waited for me, with barely five years of parliamentary experience, to teach him social priorities.
Crossman was not alone among Ministers in wanting me to drop the whole idea. The Minister of Education asked me why I proposed to include in the Bill help for people with dyslexia which he said, “simply does not exist”, to which, having heard from a ministerial colleague of his that Treasury officials were describing my proposal as unaffordable, I was provoked to reply: “Then at least you can tell the Treasury that, ipso facto, it won't cost them anything”.
Official reaction to my proposals for helping children who are both blind and pre-lingually deaf and those with autism was no more supportive; so the Bill's prospects looked grim. Indeed, I was told by more than one organ of opinion that I was being overambitious in cramming my Bill with too much legislative change. To have any chance of success, they said, it must be toned down and made more affordable.
It must seem incredible and outrageous now, but from 1945 to 1964, there was no mention in any party manifesto of anything specifically about disabled people. Between 1959 and 1964, there was not one parliamentary debate nor even a single Question on disability. Westminster and Whitehall always had more pressing things to do than to respond to the claims of people with disabilities. The attitude of both was one of serene satisfaction with the status quo.
No one even knew how many disabled people there were in Britain. They were mostly seen or heard only by their families or, if they were in institutions, by those who controlled their lives. Even to talk then of as-of-right cash benefits for chronically sick and disabled people or for their carers was to invite ridicule. Local authority services were wholly discretionary and often non-existent. There were countless disabled people with every kind of moral justice on their side, but no statutory right whatever to vitally needed help.
That was how things were when, against all the odds, my Bill became law in 1970. Those who worked with me to enact it will remember how often and how close we came to disaster but, in the end, it was Dick Crossman's main Bill of that parliamentary Session that hit the rocks, while ours sailed safely by.
The Chronically Sick and Disabled Persons Bill became an Act of 29 sections. It imposed new duties and responsibilities on 12 departments of state and became the model for legislation on disability in countries all over the world. It amended 39 existing Acts of Parliament in the interests of disabled people, including such major statutes as the Public Health Act 1936, the Education Act 1944, the National Health Service Act 1946, the National Assistance Act 1948 and the Housing Act 1957. It legislated also where neither here nor in any other country was there any existing law to amend: for example, its five sections on access for disabled people to the built environment. Claire Tomalin, a steadfast supporter, described the legislation as the Act that made disabled people visible; and that applied worldwide as one country after another adopted its provisions on access to all buildings open to the public, thus changing the lives of countless millions of disabled people.
Official statistics show that, since its passage into law, the Act has helped individually over 60 million people in the United Kingdom, more than our present population. Leaving aside its access sections, the Act provided, among other forms of help, for the world's first statutory provisions for: purpose-built housing for disabled people; adaptations to their homes; practical help in their homes; transport to and from services outside their homes; and the installation of telephones for housebound disabled people living alone. The blue badge scheme of special parking concessions for disabled drivers, of which there are now over 2.4 million beneficiaries, has also been important in increasing outdoor mobility, just as the Act's provision for the world's first Institute of Hearing Research has been of crucial importance globally in developing new help for people who are deaf or hard of hearing. Again, the improvements the Act provided in amending the war pensions scheme have helped countless war pensioners and war widows alike, and their benefits are well recognised by the ex-service community.
Forty years on, I well remember Harold Wilson telling me in the 1970s that there was no cause for me to worry about cuts in help for disabled people when the economy was under such daunting stress and the IMF became involved. He said that his policy would be that “the broadest backs must bear the biggest burden”, and he assured me that since my role was to help people with broken backs, among other severe disabilities, he would go on giving it high priority, and he was as good as his word.
Much apart from being cut, my budget increased, enabling me to legislate for the mobility allowance, the carers allowance and many more new benefits during the crisis. When I left the post of Minister for Disabled People after Labour's defeat in the 1979 general election, I told the House of Commons that there remained a long unfinished agenda of unmet need and, sadly, that is still the case today.
I conclude with the closing paragraph of my speech commending my Bill to the House of Commons on 5 December 1969. I said, Mr Speaker, if we could bequeath one precious gift to posterity, I would choose a society in which there is genuine compassion for the long-term sick and disabled people; where understanding is unostentatious and sincere; where needs come before means; where, if years cannot be added to the lives of the chronically sick, at least life can be added to their years; where the mobility of disabled people is restricted only by the bounds of technical progress and discovery; where people with disabilities have the fundamental right to participate in industry and society according to ability; where socially preventable distress is unknown; and where no one has cause to be ill at ease because of his or her disability.
That is how I explained the Act's purpose and why Marcel Napolitan, who represented disabled people in France with such distinction, called that day “un moment critique” for disabled people across the world. Much the best way of marking the 40th anniversary is to recognise that we still have much more to do to turn humane precept into practice and to make it our bounden duty to meet that challenge.
Baroness Campbell of Surbiton
My Lords, I very much welcome this debate, which recognises the groundbreaking legislation introduced by the noble Lord, Lord Morris, 40 years ago. It presents us with an opportunity to reflect on how we can continue to build on its legacy. When the noble Lord, Lord Morris, took the Chronically Sick and Disabled Persons Bill through the other place, he was a relatively new MP and I was a wee child. I feel like a child now, trying to follow such a wonderful contribution.
The world was a very different place for disabled people in 1970, full of barriers and social prejudice that kept us segregated and excluded. I was a very fortunate child because I would grow up alongside millions of other disabled people to benefit from the provisions of this groundbreaking Act. The noble Lord, Lord Morris, is to many disabled people, including me, what Millicent Fawcett was to women—a visionary leader, who understood how to change attitudes and social policy from within the heart of the establishment, a leader who worked hand in hand with the people for whom he was fighting. In 1970, most disability advocates spoke for disabled people. The noble Lord, Lord Morris, was one of the first parliamentarians really to understand our slogan:
“Nothing about us without us”.
He spoke with us, not for us.
In preparing for this speech, I spoke to disabled people who fought alongside the noble Lord, Lord Morris, to get the Act on to the statute book. One of them will be very familiar to your Lordships: Sir Bert Massie, the former chief executive of RADAR. He said to me that the Alf Morris Act—it was never known as the Chronically Sick and Disabled Persons Act, which was always a bit of a mouthful; we all called it the Alf Act—was a watershed in turning a homogeneous disability culture of handouts and charity into one of entitlement and recognition.
Sir Bert reminded me of the benefits that I inherited from this first major battle for rights in Parliament since the 1940s. It was the first legislation that recognised the existence of autism and dyslexia. It was the first legislation that recognised the importance of buildings and the built environment being accessible to disabled people. It also created the blue badge scheme to enable people to park close to their destination. Finally—and this is very dear to me—it was the first legislation that recognised the desirability of involving disabled people in the decisions that affect our lives. For example, the Act required the appointment of disabled people on a number of government committees. I wish that the Government would remember that now, because we are still not yet there.
Although the Act was groundbreaking, it was not long before disabled people realised that it could be undermined and that there were loopholes and get-outs for people who did not want to comply. It required buildings catering for the public to be accessible, but in the legislation were the words
“in so far as it is … practicable and reasonable”.
As early as 1971, Tesco wanted to build a supermarket on the site of a cinema in Liverpool. The cinema was accessible, but it would have to be demolished. It was proposed to build a new one on top of the supermarket. Liverpool City Council requested that the new cinema should also be accessible, but Tesco and the Cinema Exhibitors’ Association resisted this under the get-out that it was not reasonable or practicable.
That gave a clear message that, even then with a brand-new building, it was acceptable to ignore the access needs of disabled people. It took until the mid-1980s before building regulations were changed to require new buildings to be accessible. It was not until 2004 that the requirement for services to be accessible to disabled people, regardless of the building from which they are provided, became law. Even today, as I know from personal experience, many buildings are still a no-go zone for those of us with mobility impairments. In that sense, the Act is still unfinished business, with a long way to go.
Section 2 of the Act listed a number of services that local authorities should provide for disabled people. When the noble Lord, Lord Morris, became the world’s first Minister for Disabled People in 1974, he made it clear that, if a local authority determined that a person had a need under the provisions of the Act, it had a duty to ensure that that need was met. Local authorities could not use limitations of resources as an excuse not to act. This enabled many hundreds of disabled people to begin planning for independent living. During the late l970s and the early l980s, severely disabled people, who once only had the choice of living in institutions or in their parents’ sitting rooms, began to get local authority support to live independently. Nevertheless, this entitlement to support, enshrined in the Act, was eventually challenged in the courts. Yes, “reasonable and practicable” raised its ugly head again.
The Lord Bishop of Ripon and Leeds
My Lords, I add my gratitude to the noble Lord, Lord Corbett, for sponsoring this debate and to all those who have spoken so far and who will be speaking. I feel humbled to speak in the company of those who have played such a major part in the development of the contribution to our life and society of those who are disabled. I hope that noble Lords are aware of the pride that this House has in all that they have given and achieved for us.
I also want to affirm the major progress made in the years since 1970 and the way in which the “Alf” Act has made it possible for disabled people to enjoy a much greater dignity and quality of life, and to contribute so much to the quality of the lives of those with whom they are involved. Nevertheless, there is a real fear among those who are disabled, their representative organisations and those of us who are in contact with them that the principles of the 1970 Act and the Equality Act, to which the noble Baroness, Lady Campbell, has just referred, will be undermined by the financial pressures of the present situation.
I want to concentrate on the needs of young people—first, those with learning disabilities. Since 1970, there has been a massive improvement in the educational achievement of those with learning disabilities. This perhaps is particularly dramatic in the case of those with autism who are now enabled to contribute so much more massively to our society and our thinking than they were when I was first involved in schools for the autistic in the 1970s.
At the same time, there is increasing concern about the mental health of children and young people with learning disabilities. The 2002 report, Count Us In, demonstrated that young people with learning disabilities are six times more likely to have mental health problems than the rest of the school and college population. Low self-esteem, social isolation and a sense of insecurity continue to lead to severe mental stress. Those findings were confirmed by the 2008 study, What About Us?, also from the Foundation for People with Learning Disabilities working with the Faculty of Education at Cambridge University. The welcome inclusion in mainstream education has not always led to the valuing of disabled children and young people, to their inclusion in student representative groups, in decision-making in their own lives, or the life of the school or college.
In my experience, the pressure for academic achievement can mean a failure to respond to the needs of those with learning disabilities. I hope that there will be a new encouragement to schools, not least through the Ofsted process, to provide better space and opportunities for these students. It is surprising how little is made in many Ofsted reports, and in the reports that develop from them, of the valuing of the contribution made by disabled students in schools. I am aware of a Leeds school, for example, where there has been much debate about its quiet space. Pupils, whether disabled or not, can find respite there from the pressures of their lives. It is a space that is particularly valued by students who are disabled as well as those who are under pressure for whatever reason. There is, however, continuous pressure to requisition the space for what are called “more economically productive purposes”, and the debate is ongoing.
Helping young people to make decisions about their lives and to feel a part of the decision-making structures of their institutions are well developed and welcome parts of school life now, but much still needs to be done for those with disabilities to feel similarly appreciated and supported.
Secondly, I want to highlight the needs of those with multiple disabilities and their families. Again, real progress has been made since 1970, not least in enabling such young people to remain with their parents and siblings in the family home. Nevertheless, I know from pastoral experience in our parishes just how much of a fight there needs to be to achieve proper support for the young disabled and their carers. I can think of a teenager who has, three times in his very short life, gone through the multiple testing process to determine his need for one-to-one support—testing that the noble Baroness, Lady Campbell, just described as “obscenely tough”. He has had to go through it three times because his family moved, and each local authority to which they moved would not accept the assessment of the previous authority. The provision of proper support, demonstrably effective for this young person as for many, takes years to provide—during which he becomes increasingly frustrated and both his educational achievement and health decline. The lack of co-ordination between health and education, the absence, in this case for example, of physiotherapy for years on end, means that we are failing that young person, and that is despite agreement between professionals and parents as to what ought to be done. Continual well intentioned meetings mean that these parents have less time to be with their non-disabled son, and there is no effective provision of respite for them as carers. And this is an articulate, middle-class family, well able to argue its case and with substantial spiritual resources helping them to cope. Life is much harder for many who find that the complexities of our systems simply defeat them.
Into this difficult mix comes the threat of cuts. We are told that everyone, including, maybe, this young person, needs to bear their share of cuts. I hope the Government can make it clear today that those already in pain and under pressure such as I have described will not be required to receive even less opportunity to live fulfilled lives contributing to the community. We remain amongst the richest countries of the world and in our present financial issues we need to remember that. It is immoral for us to fail young people such as this. Many of us are well able to bear a significant share of the cuts rightly pursued by the Government. I am one of them. I do not have detailed knowledge of your Lordships’ financial circumstances, but there are many in the House who, in an economic downturn, can shoulder additional burdens. What we must not do is to increase the pressure on those least able to bear it. I hope the Government will be able to assure us that in the field of disability this simply will not happen.
Baroness Gale
My Lords, I thank my noble friend Lord Corbett for securing this important debate today and for his wonderful opening speech. I congratulate my noble friend Lord Morris of Manchester; it was a privilege to listen to his great speech and I thank him for it. I also thank him for his dedication to the promotion of rights for disabled people throughout his parliamentary career. It is thanks to his pioneering work that those with long-term illnesses have entitlements such as assistance in their own home, equal access to public facilities and even parking permits. The 1970 Act was groundbreaking and changed people’s lives. It placed new obligations on local authorities and helped to transform the way in which the state and society treated some of their most vulnerable people.
I declare an interest as chair of the All-Party Group on Parkinson’s Disease and as a member of the charity Parkinson’s UK. One in eight people in the United Kingdom is affected by Parkinson’s, which is a complex, long-term, degenerative condition and for which there is no known cure. Those affected rely on high-quality health and social care, as well as the right to financial support. With the right care their symptoms can be better managed, their quality of life improved and they can be supported to make an economic contribution to society.
As this is Carers Week, I take this opportunity to pay tribute to the 6 million people who perform the vital task of caring for others. Part of the legacy of my noble friend Lord Morris is recognition of the invaluable role of carers, but now more needs to be done. The All-Party Group on Parkinson’s carried out an inquiry, which I chaired, into access to health and social care services for people with Parkinson’s and their carers. Its findings were published last year and I would like to inform your Lordships’ House of what we found in regard to the role of carers. The report stated:
“Many carers said they were not getting the respite care they needed due to funding restrictions in many areas”.
Denise Maule, a carer providing round-the-clock care for her husband who has Parkinson’s disease and dementia, described in oral evidence to the inquiry how she had eventually managed to access a short period of respite care support after reaching breaking point. However, soon after this period of respite, she was informed by social services that she was no longer eligible despite her need being ongoing. Another carer said:
“It is difficult to put into words the feeling of abandonment and loneliness I feel. Carers have enough to cope with without the constant battle to get some attention for their loved ones”.
Research by Parkinson’s UK has shown that more than half of carers had been caring for five years or more. This is not surprising given that Parkinson’s is a long-term condition. More than half of carers reported that their health had got worse as a result of caring. More than a quarter of carers were worse off financially since becoming a carer. Just under half of carers were not receiving any form of break from their caring responsibilities; even fewer—16 per cent—had any emergency back-up. Seven out of 10 carers were not aware that they were entitled to an assessment of their needs. The lives of carers are therefore one of dedication and love for those for whom they care. They need help and support, and especially respite care.
As the first Minister for Disabled People in 1974, my noble friend Lord Morris of Manchester introduced benefits for disabled people and their carers. I am concerned that the coalition Government plan to retest all those who are on incapacity benefits and that their proposals to change the benefit system may leave people with Parkinson’s and other conditions without the financial support that they need.
Research has shown that many people with Parkinson’s rely on benefits for all or part of their income. Nearly half of people with Parkinson’s of working age are in receipt of incapacity benefit, including 47 per cent of those under the age of 45. Without the right financial support, people with conditions such as Parkinson’s will be unable to live independent lives, which was one of the key aims of the 1970 Act.
Under the heading, “Jobs and Welfare”, page 23 of The Coalition: Our Programme for Government states:
“We will re-assess all current claimants of Incapacity Benefit for their readiness to work”
This could result in people with Parkinson’s and other long-term conditions being wrongly reclassified as capable of work. A lot of these people do work. With the right drugs regime, they can work. However, there are others for whom it would be extremely difficult, and they are very concerned about that.
The assessment for the employment and support allowance introduced in 2008—I know that it was under a Labour Government—has been widely criticised as unfair and inaccurate, especially in terms of fluctuating conditions such as Parkinson’s. The coalition Government have said that they will retest everyone on incapacity benefit immediately and either move them on to ESA and keep testing them yearly or, if the test shows that they can work, move them on to jobseeker’s allowance and programmes to get them into work. I am sure that many—those who may be capable of doing some sort of job—would welcome that, but those jobs have to be available for them. However, if assessments are inappropriate, if assessors are not properly trained and if medical records are not taken into account, those with fluctuating conditions may be wrongly deemed ready for work. People may then be denied the benefits that they rely upon. Many of these issues have already been highlighted by a Parkinson’s UK report, Of Little Benefit and Not Working, which raised serious concerns about the accuracy and fairness of employment and support allowance testing.
However, a great deal has been achieved in the past 40 years. The lives of disabled people and those with long-term conditions have been improved. The Act has ensured that public authorities take responsibility for their well-being, and there has been an increase in equality of access to services. Perhaps above all, we have sought to tackle the stigma attached to those in need of care and support. I hope that the Minister will take note of the great concerns of many people on this matter.
Lord Low of Dalston
My Lords, like other noble Lords, I congratulate the noble Lord, Lord Corbett of Castle Vale, on having secured this important debate. The Chronically Sick and Disabled Persons Act must be one of the most celebrated pieces of legislation in modern times. It was unquestionably a landmark Act. We had had legislation concerning disabled people before, notably on employment, but nothing on this scale or so wide-ranging. Indeed, the speech that the noble Lord, Lord Morris, made in moving the Second Reading of the Bill in another place was included as one of the most historic speeches ever delivered in Parliament in a volume brought out by Hansard last year to celebrate its centenary.
I know that a lot was owed to the Chronically Sick and Disabled Persons Act but, when I had occasion to flick through the Act recently for a celebration of the 40th anniversary of its introduction into Parliament, I was staggered to be reminded of just how much. As we have heard, for the first time local authorities were required to collect basic information about the numbers of disabled people in their area. The Government were required to produce an annual report on progress, with research and development of equipment designed to promote the independence of disabled people. The orange—now the blue—disabled persons’ parking badge owes its origin to the Chronically Sick and Disabled Persons Act, and so does the Institute of Hearing Research. For the first time in statute, separate provision was made for children with autism and acute dyslexia. But of course the Act was centrally concerned with access, services and representation. Indeed, it did much to entrench the very concept of disability itself in public policy and consciousness. It also revealed the consummate parliamentary fixing skills of its author, the noble Lord, Lord Morris of Manchester, to whom I pay my tribute, along with everyone else. As we have had occasion to say close-up recently, it would be no mean feat for a private Member to get a Bill through in the wash-up, but that was exactly what the noble Lord, Lord Morris, achieved in 1970. I have acquired a newfound respect for his skills, but also for his indefatigable energy and commitment in your Lordships' House, as I have watched him campaign for justice for victims of Gulf War syndrome and contaminated blood products. If the Government would not set up an inquiry, undaunted, the noble Lord would simply set one up himself and get the funding for it.
The Chronically Sick and Disabled Persons Act faces two ways. Like the music of Bach, it was in many ways the culmination of an era, rather than the beginning of one. Within a short time of its passage, a new paradigm would be involved, which thought more in terms of rights than welfare and of banning discrimination than providing services. We have come a long way since the Chronically Sick and Disabled Persons Act, and much of the transformation in our thinking is as a result of what the noble Lord, Lord Morris, set in train when he was the world’s first Minister for Disabled People. It all goes back to the Chronically Sick and Disabled Persons Act, which paved the way for many of the changes that we have seen since. The Act has lost none of its relevance, and the services paradigm has never been more important, as local authorities’ social services come under threat as never before. But it is important to look forward as well as back, and today’s debate gives us a good opportunity to ask the new Minister, whom I welcome to his position, how the new Government’s approach to disability issues and policy is shaping up. I have a few questions for him; I do not suppose that he shall be able to answer them all, since the answers to some of them lie outside his department, but it would be good if we could arrange meetings in the near future to follow up on some of the issues that I shall raise in areas where the Minister is unable to provide an authoritative answer this afternoon.
The best summary of the previous Government’s policy, as the noble Lord, Lord Corbett, reminded us, is contained in Roadmap 2025 which, building on the 2005 Cabinet Office report Improving the Life Chances of Disabled People, set out how government departments were working towards disability equality by 2025. It showed how 14 themes prioritised by disabled people combined to make up the total vision of disability equality. These themes also reflected the commitments made in the previous Government’s Independent Living strategy, the United Nations Convention on the Rights of Persons with Disabilities, which the UK ratified last year, and departmental Secretary of State commitments. I suppose that my first question is: does this still represent the Government’s policy? Are the Government willing to pick up this ball and run with it, and can they improve on it?
There is a sense out there that the life chances report, and hence the road map, were not sufficiently attentive to the needs of older people. This is a serious omission, given the association of disability with age and the fact that the population is ageing, and it highlights the importance of getting on with the reform of social care. Our society may not be broken but our social care system certainly is, as the noble Baroness, Lady Campbell, reminded us.
There is also a sense that the road map is lighter on some disabilities than others. Organisations representing visually impaired people—I declare my interest here as a vice-president of the RNIB—certainly feel that more needs to be made of the right to have information made available in accessible formats for people unable to read ordinary print. The Minister will know that, just before the election, we amended the Equality Bill when it passed through this House to strengthen the right to information in accessible formats. I would like to think that the Government would now work with the Equality and Human Rights Commission and organisations representing visually impaired people to ensure that this right is effectively enforced. We also need to maintain the focus on ensuring the availability of textbooks in accessible formats, because children are notoriously ill served in that area at present. The audio description targets for television need to be raised from 10 to 20 per cent and we need a help scheme for the switchover to digital radio, such as there was for television. Ofcom has left the decision on the audio description target to Ministers, so I would very much welcome an opportunity to explain to Ministers why it needs to be raised.
Venturing further afield, will the Government review the reservations which the previous Government entered upon their ratification of the UN convention, as the JCHR has recommended? The so-called equal treatment directive is making heavy weather in Europe. More enthusiastic support from the British Government could make a significant difference to its prospects and would be very welcome—especially in relation to the accessibility of manufactured goods, which can only be secured through European legislation. Similarly, we look to the British Government to support the European Parliament’s extended list of non-exemptible rights under the proposed bus and coach regulation when that comes back to the Council. Coming closer, finally, to the Minister’s own sphere of responsibility, where he might be able to give us some more answers, will the Office for Disability Issues remain as the vehicle for ensuring that disability is mainstream right across Government? There have been rumours that it is under threat.
One area where disabled people have the greatest need is employment, and nowhere is imagination on the part of Government more necessary. We are lucky in having the Minister responding to the debate this afternoon, because he has already brought a great deal of imagination and analysis to bear on the employment problems of disabled people, and it would be very helpful if he were able to respond to one or two questions in this area. How will the pledge on assessing people for access to work prior to a job offer be taken forward, and what plans do the Government have to make sure that employers and disabled people are made aware of this important new right? Will the Minister assure us that the previous Government’s commitment to doubling the Access to Work budget is secure? Any move to cut back spending here would directly undermine the Government’s efforts to move disabled people off benefits and into work.
In terms of supporting the most vulnerable and marginalised groups into work, the Government’s focus on meeting individual needs is very welcome, as are the proposals for differential payments, through which funding will be directed to sustaining in work those with the greatest needs. When can we expect more detail on the new work programme and the future of work choice contracts? How will work choice fit within the overall work programme—assuming, of course that work choice contracts will be progressed?
As the right reverend Prelate the Bishop of Ripon and Leeds has told us, disabled people are anxiously awaiting the Budget next week, with the possibility of cuts in their income through means-testing and restrictions on benefits such as the disability living allowance and attendance allowance. Two-thirds of blind people, for example, are not in work and live on fixed incomes, so their finances are extremely fragile. The Government must honour their pledge—this is a theme that has resounded throughout the debate today—to ensure that the most vulnerable in our society are protected from the sharp reductions in public expenditure that we all know are coming.
Lord Ashley of Stoke
My Lords, it is difficult at this stage in the debate to avoid repetition. Inevitably, much of what I wanted to say has already been said, but I warmly endorse the praise for my noble friend Lord Corbett. I thought that his was a brilliant speech, and he said much of what many Members would want to say.
So far as the powers of the poet are concerned, the noble Lord, Lord Morris, was a marvellous guide and driver, combining the two functions in one set of activities. We are all very grateful to him for his marvellous work on that. The Bill will be a perpetual monument to his hard work in piloting it through all its stages in the House of Commons. In retrospect, that was far more difficult than it appeared—I appreciate that.
Of course, it was a team effort, which was one of the main reasons for the passage of the Bill to an Act. I add my tribute to some of the team players mentioned by my noble friend Lord Morris. In addition to the Labour MPs Lewis Carter-Jones, Laurence Pavitt and Fred Evans, there were Conservative activists who worked extensively, such as John Hannam, Neil Marten, John Astor, John Page, Jim Prior and the late Davina Darcy de Knayth, who my noble friend Lord Morris also mentioned.
We worked harmoniously during the passage of the Bill—there was no friction—and yet I would not want people to think that we were sentimental. One of the problems about disability is that some people tend to speak in dulcet, sentimental terms about the subject. They say, “We support the principle of your Bill but regret we can’t support the Bill itself”. Even the present Prime Minister, David Cameron, fell into that trap. In correspondence with him a few years ago, when I tried to persuade him to support my Bill on independent living for disabled people, he said,
“although we are unable to support your Bill, we fully share your aims and aspirations and would hope to play a constructive role in realising them under a future Conservative government”.
It is good that there is so much good will there, but when it comes to the crunch where do we stand? I will write to the Prime Minister following this debate to ask him how far he has got in supporting those sentiments.
In the course of the Bill we rejected sentimentality and had a tough, hard-edged argument. One of the many achievements of the Chronically Sick and Disabled Persons Act, which is rarely understood, was that it led to the foundation and success of the All-Party Group on Disability. That group has grown in influence over the years. On a personal note, I served on it for 40 years, until I retired a few weeks ago. It is now in the extremely competent hands of the noble Baroness, Lady Campbell, and carries on with its influential and unostentatious work for disabled people.
One of the main achievements of the Act was that it drew attention to the subject of disability, which had hitherto been ignored completely. That meant that disabled people had been ignored as well. The Act became a hallmark and a point of reference that was absolutely crucial to progress. No one can doubt that disability is now a mainstream subject. Plenty of people are determined that it should remain so. Disabled people deserve all the attention that they can get. The Act of the noble Lord, Lord Morris, remains a major contribution to their health and welfare.
Baroness Masham of Ilton
My Lords, I thank the noble Lord, Lord Corbett of Castle Vale, for introducing this debate, and for his excellent speech. This debate is to mark the 40th anniversary of the Chronically Sick and Disabled Persons Act. It is also the 40th anniversary of my becoming a Member of your Lordships’ House. The noble Lord, Lord Morris of Manchester, was in 1970 a Member of Parliament for one of the Manchester constituencies, and was lucky to win the ballot to enable him to introduce the Bill. It took much hard work and persuasion to get the Bill accepted in another place, and the noble Lord must be congratulated on his doggedly determined way of not giving up on such matters.
Looking back over the past 40 years and discussing this Act of Parliament, I am filled with nostalgia. Four of us who were disabled Members of your Lordships’ House made our maiden speeches on that Bill. We all used wheelchairs. A Cross Bench was removed and we became known as the mobile Bench. My sadness is that I am the only remaining Member of that first mobile Bench, all of whom were very close friends of mine. They were Viscount Ingleby, Lord Crawshaw and Baroness Darcy de Knayth, all of whom have sadly died.
The Bill was led in this House by the late Lord Longford. Many amendments were moved in your Lordships’ House and the Bill was improved. We moved amendments such as one requiring that public buildings with access for wheelchairs should be signposted. The Chief Whip from another place used to come through because he was so concerned about the amendments we were discussing. This was the first significant legislation to improve the lives of disabled people. Many people were uneasy about the Bill, as people who do not understand disability fear the unknown. They thought that we were going to change society. Indeed, the Bill did improve society for many people.
Disability covers so many different aspects of daily living that non-disabled people take for granted. A disabled person, who may be a child, can mean a family being disabled if adequate housing and suitable aids—as well as access to public buildings, public lavatories and transport, including trains, airplanes, buses, taxis and ships—are not available. Disabled people using wheelchairs often had to travel in the guards van. The provision of telephones, the recognition of dyslexia and access to places of entertainment were all in the Bill. Now, 40 years on, we have to look forward. Aspects of life have changed. We have a new mobile Bench with other Members of your Lordships' House who are well qualified to provide their knowledge and expertise on many aspects of life.
So much has improved over the years but there is still a great deal to do, and much of it is due to the attitudes of some people. I give an example. In my local village of Masham in north Yorkshire, the chemist’s has a four-inch step with no ramp. Many elderly people with varying disabilities find that step impossible to negotiate without help, but because Masham is not a large town, the chemist was told by the PCT that a ramp was not necessary. That is not satisfactory when many residents and visitors to this most attractive part of Yorkshire have a disability. Legislation is being flouted. I know how hard many Members of both Houses of Parliament worked on this legislation, so it is disappointing when a pharmacist, of all places, takes this attitude.
Many disabled people are living much longer. They are often treated as elderly but their disability is forgotten. When disabled people visit hospitals, they very often find that there is no suitable equipment for their disability. Again, it is often a question of the attitude of staff who need better training about the multitude of different disabilities. Disabled people want to be treated as persons first. However, their disability needs to be taken into consideration and they should be helped when necessary. Police and other professional people need to recognise disability so that unfortunate mistakes do not occur. It is still not possible for disabled people to use many facilities. For example, a passport photograph booth has a fixed stool, so disabled people in a wheelchair have to hunt around to find an accessible booth to have photographs taken for the many passes for which they may have to produce photographs as identification, such as the blue badge scheme.
I visited the mobile X-ray unit in London that takes X-rays of people who may have tuberculosis from among the homeless living in hostels and people in prison. It is a great asset to public health. I was pleased to see that this mobile unit had a lift to enable a person using a wheelchair, or who has difficulty climbing steps, to enter the vehicle. The mobile unit was built in Holland. I was told that the mobile units in Holland all have lifts; not so in the UK. The breast cancer units that travel round all have steps and no lifts. We have a great deal to learn from other countries which remember the needs of their disabled members—sometimes better than us. It can be a major problem for disabled people in a rural area who sometimes have to travel for miles to have a mammogram.
On Tuesday there was a debate on poverty. The Minister, the noble Lord, Lord Freud, said:
“Disabled people are at a substantially higher risk of poverty than non-disabled people. Nearly one in four families with a disabled member live in poverty, compared with less than one in six for families where no one is disabled”.—[Official Report, 15/6/10; col. 947.]
I want your Lordships to know that many disabled people have extra expenses for wear and tear to clothes, extra heating, extra equipment that can be very expensive—such as light wheelchairs to help their carers—special food when needed, and extra help to enable them to lead a normal life if they need help getting up, going to bed, dressing and going to the lavatory. Disability can happen at any time to anyone. They can have an accident which leaves them paralysed, a stroke, a condition such as motor neurone disease, or they are born with a condition which leaves them disabled.
The Chronically Sick and Disabled Persons Act 1970 has helped a great deal, but there is much to do to educate new Members of Parliament, councillors, medical staff and educators to understand the very varied and sometimes complex needs of disability.
Lord Addington
My Lords, I spoke in the debate 10 years ago to celebrate this Act which allowed me to go through the state school system as a dyslexic person. I do not know how many other noble Lords in this Chamber have been directly touched in that way—I suspect that that is the case for many of those who have spoken, if not all. This Act changed the world and it is clear, from listening to those noble Lords who were there at the time, that it scared the living daylights out of everyone who was having their world changed.
Any veteran of these debates, when looking at the issue—I have a little more than two decades-worth—would say, “Wait a minute; we had to discuss that again and again”. As noble Lords have said, people do not like having their lives changed. They say, “We don’t have to do that; it is awfully difficult; oh, you mean there is a reasonableness test; we have better lawyers than you”. I am afraid that such sentiments run through all the debates on this legislation. People in both Houses of Parliament take on these issues, listen to those outside, often have personal experience, enact legislation and then what we are doing is whittled back by those outside who do not want to change. All parties and none have been on both sides of that process. It is a matter of how much better we have become at blocking it off. It is like an ebb and flow. We have gone a long way, but there are always little defeats and there is slowness in implementation.
People usually panic. They say that everything will be terribly expensive. They say: “We can’t do anything; the world will change”. I remember a discussion about wheelchair access within schools. It was said: “How on earth could we possibly have a lift that brings a wheelchair from one floor of a school to another? It would be used only three times a day and not at all in some weeks”. Then you say: “If you buy one that cannot move heavy piles of books and avoid back strain, you really are very dumb”. You carry on in that vein and keep going. You approach the fact that people panic and do not want to change.
Another example is the attitude of organisations. The education issue is the first in which I became involved and is regularly raised. People say: “You mean that our class may have to stop or start five minutes early to get somebody who can’t move very fast into the classroom?”. So no one is allowed to get sick in your classroom, use a loo or occasionally turn up late. They are not supposed to but they do, so you adapt and carry on. I think that this type of thing underpins most of this debate. There is always that fear of the unknown and an unwillingness to change.
The noble Lord, Lord Corbett, described the Trojan horse incident using a wheelchair, getting people to react after a lot of necessary legislation had been introduced. It just goes to show how dumb people are. We have to ask what would happen if the person who wanted to buy the suit went to the shop to buy it. The person in the shop might say, “What do you mean?”, to which the answer would be, “They are going to spend money in your shop. They’re going to give you profits”. The person in the shop would reply, “I hadn’t thought of that”, and would then try to get the idea into his head.
The right reverend Prelate the Bishop of Ripon and Leeds put his finger on many of the driving forces in relation to children, including the fact that a child from a middle-class background does much better out of the system than anyone else. After he had finished his speech, I said in an aside to the right reverend Prelate that I thought the best combination was a lawyer and a journalist. People really do not like tangling with those two, and education systems, shops and local authorities have now learnt to back off.
I turn to the bailiwick of the noble Lord, Lord Freud. The real test lies with people whose backgrounds mean that they do not have that degree of access to the media or legal process at their fingertips. This is nothing new and there is a great deal of consensus about it, but it can lead to those nasty arguments that often break out within parties—we all agree on what should happen but we disagree slightly on how it should come about. It is one of those arguments where there is very little room for manoeuvre, so we tend to go for the eyes and throat.
We also know that huge costs are involved in not dealing with situations at an early stage. My own unlooked-for area of specialisation is dyslexia. We know that there are a lot of dyslexics in prison, but why is that? The answer is that if you fail in the education system and cannot fill in forms to get jobs or money outside, then crime is an option. If you do not come from a middle-class background, you do not have the necessary push or support.
We also know—indeed, today we are agreeing quite a lot with the Bishops’ Benches—that mental health problems tend to occur in the groups that do not have support. As the right reverend Prelate pointed out—and there is no point in denying it— certain people in these groups are more liable to have problems. The fact is that if you have something to be depressed about, you can become depressed more easily. If the education or benefits systems do not pick up the costs of helping these people, then the problems, which can be short term, will often multiply. This issue also relates to aspects of the health service and Prison Service.
With the current Government, there is one bright spot in this process, and it goes back to an initial part of the legislation. I refer to assessments in education. This does not relate directly to the Minister’s department but I think that the idea of departmentalising the whole issue is nonsense. As with many problems in politics, you must look across departments. If all children are assessed to find out whether they have special educational needs, I think that autism and dyslexia will probably come top of the poll, but early identification of other needs will not hurt. Furthermore, even if it is obvious that children have a problem, the fact that it is recorded in the system will help. Can we ensure that this attitude towards carrying out skilled assessments is carried on throughout the whole system? Steps have been taken and, although matters may be better than they were before, they are not good enough yet. I do not directly criticise the Government’s intention, but this will probably not be finished in the lifetime of anyone listening today.
We must carry on. We must ensure that we have a greater understanding of people who have missed an initial opportunity for educational support. Showing an adult who has failed or who has not received support how they can survive would be a realistic step. People can succeed. Intelligent people who are active, lucky and have the right parents and an inspirational teacher can succeed. Ultimately, we will have overcome this problem when someone who is not exceptional or does not have the right parents or a bit of luck by birth or by circumstances succeeds. Although we seem to be closer than we were 40 years ago, we still have a long way to go.
Baroness Thornton
My Lords, I congratulate my noble friend Lord Corbett on introducing this debate. I join other noble Lords in paying tribute to my noble friend Lord Morris for the very many wonderful achievements he has to his name over his long and distinguished career—of course, it is still not over—not least his achievements concerning the subject of today’s debate. It is 40 years since the passing of the first ever legislation for disabled people, the Chronically Sick and Disabled Persons Act 1970. I join my noble friend Lady Gale in saying that I thought that the manifesto read out by my noble friend Lord Morris when he introduced that Bill is as relevant today as it was then.
For the second time this week, I am substituting for my noble friend Lord McKenzie and, like the noble Baroness, Lady Campbell, I intend to address the future. Yet again, I shall be seeking assurances from the Minister that the Government, perhaps in their enthusiasm for downplaying or finding fault with the work of the past 13 years, do not lose sight of the progress which has been made on disability rights, much of which has already been mentioned.
In preparing for this debate, I was sent the link to the transcript of the debate which took place in your Lordships' House 10 years ago, referred to by the noble Baroness, Lady Masham. That was obviously on the occasion of the 30th anniversary of the Alf Morris Bill. I commend it to the Minister if he has not already read it. Some noble Lords who spoke then have also spoken today, including the noble Baroness, Lady Masham, the noble Lords, Lord Ashley, Lord Addington and Lord Rix, whose debate it was and, of course, my noble friend Lord Morris.
Sadly, some who spoke then are no longer with us, such as Lady Darcy de Knayth, who was beloved and respected across this House. In that debate she berated the Government—my noble friend Lord Hunt of Kings Heath was answering the debate—on the proposed reforms in disability benefits. The Minister might want to take heed of the effectiveness of the disability lobby on that occasion. She also spoke about mobility, which had been the subject of her maiden speech 30 years before when the original Bill was discussed in the House. The noble Baroness, Lady Masham, also made her maiden speech in the original debate. It was a debate of enormous significance.
Noble Lords might wish to know that two Earls spoke in that debate, the noble Earl, Lord Snowdon, and Lord Longford. Lord Longford said:
“When I find myself before St Peter in the near future, he may say to me, ‘Did you do any good down there?’ I shall be able to murmur a little bit about the honours I have received. And he will say, ‘I do not want to know about that. I want to know, did you do any good?’ I shall be able to say, ‘I played a small part in helping to carry the Alf Morris Bill through the House of Lords 30 years ago’. He will probably say, ‘OK, you can take a day off purgatory for that’”.
I say amen to that. The noble Earl, Lord Snowdon, reminded the House:
“Fifteen years ago I objected in the strongest possible terms to disabled passengers being shoved into the unheated luggage van with no facilities, not even a lavatory”.—[Official Report, 19/4/00; cols. 737-40.]
I reflect that we have come a great distance. Many noble Lords have ensured that disabled people get treated with dignity and have facilities where they need them. A great deal of progress has been made in the 10 years since that debate. I know from my recent experience as a Minister in this House taking through the Equality Act and the Personal Care at Home Act what an important voice the disability lobby is in your Lordships' House and what a valuable and influential role noble Lords have played in shaping and improving both those Acts, and many before.
The noble Baroness, Lady Campbell, and I shared what I think can be described as a glance when the right reverend Prelate referred to the lack of portability of assessment for the disabled. We got that into the free personal care Bill, but this Government are not enacting it. I urge the Minister to bring forward proposals to this House as soon as possible at least to bring forward that part of that legislation.
It was the Labour Government who legislated to protect people who may be unable to make decisions for themselves under the Mental Capacity Act, which provides safeguards to help people to make decisions about their daily lives and be supported where they need it. It was the Labour Government who gave new rights to disabled people through the Disability Discrimination Act and signed the United Nations convention on the rights of people with disabilities, as was mentioned by the noble Lord, Lord Low. It was the Labour Government who made families with disabled children a priority, with a total of £770 million in new funding for local authorities and primary care trusts to support disabled children and their families, as was mentioned by my noble friend Lord Rix. I join him in urging the Government not to cut that important money.
The Access to Work budget has been increased from £15 million in 1994-95 to £69 million in 2008-09 and £81 million in 2009-10. Access to Work is likely to help about 35,000 disabled people to take up and stay in work in 2009-10. Will it be safe?
The Labour Government introduced free nationwide off-peak travel on local buses for the over-60s and eligible disabled people in England. Will that be safe? We established the Equality and Human Rights Commission to act as a strong and independent champion to tackle discrimination and promote equality for all. Labour in government was determined that the UK should always be a world leader in disability rights, and we legislated to provide protection against discrimination at work while offering new support for people to get into work. We will be carrying forward the campaign to strengthen the rights of disabled people to access to services and work and to be supported to make choices about their lives. Where the Government are also doing that, they will have our support.
The independent living strategy was published in 2008, written jointly with many disabled organisations. It is jointly owned by six government departments and details more than 50 government commitments to deliver choice and control for disabled people. Will the Government be taking forward the independent living strategy and, if so, what progress is being made? Is the disability living allowance to be reviewed? It supports people into work. It is paid to people irrespective of whether they are working. Will the Government honour the previous Government’s commitment, mentioned by the noble Lord, Lord Low, to raise the disability living allowance above inflation this year and, from April 2011, to extend the higher rate of the mobility component of DLA to more than 20,000 severely visually impaired people, allowing them greater freedom to get out and about, either socially or to find work?
As I mentioned, the DWP offers a range of specialist disability employment provision designed to help disabled people with high support needs to find and stay in employment. Remploy will have helped about 10,000 disabled people in 2009-10. What will happen to the new specialist disability employment programme for disabled people with the highest support needs, the work choice programme, which was due to start in October 2010, replacing the specialist disability employment programme? Between 1979 and 1997, the number of people on incapacity benefits trebled and people were left without the support to help them ever return to work. The number of working-age people on employment and support allowance and incapacity benefit is now down by 148,000 since its peak in 2003. What does the future hold for the employment and support allowance?
The Labour Government had planned that, by 2015, £370 million would have been spent on the railways for all schemes to improve the accessibility of our railway stations, including £35 million for immediate improvements to the busiest stations. Will the Government continue to deliver this programme?
We strengthened the Disability Discrimination Act in 2005, fulfilling the then Government's commitment to a comprehensive and enforceable set of civil rights for disabled people, and in 2006 we introduced a duty on public authorities to promote equality for disabled people, known as the disability equality duty. We further strengthened disability discrimination legislation through the Equality Act. The noble Baroness, Lady Campbell, is completely correct. These initiatives take disability rights to another level. The Equality Act imposes a new duty on all public organisations to consider the needs of disabled people and actively to seek to promote equality. It will allow public organisations and businesses to take positive action to diversify their teams, including by appointing a disabled candidate where that candidate is equally as qualified as a non-disabled candidate, if the disabled are underrepresented. I hope the Minister will be able to assure the House that the Government will be enacting all the provisions of the Equality Act in the timescale that was intended.
This has been a wonderful debate, and it is an honour to respond on behalf of the Labour Opposition. I can pledge our continuing determination to extend disability rights and our determination to join other noble Lords across the House to ensure that the Government do not lose momentum and do not slip back.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thank the noble Lord, Lord Corbett, for leading this important debate and all noble Lords who have made valuable contributions today. I consider it a great honour to have the responsibility of closing for the Government among such knowledgeable, committed and powerful champions of disability equality. I very much welcome the opportunity that this debate provides to discuss the new Government’s approach to equality for disabled people. I also pay tribute, as so many others have done today, to the noble Lord, Lord Morris, and to his remarkable determination in bringing his Act—the Alf Morris Act—into being. We have been privileged today to hear a moving, first-hand account of his battle with complacent authority. His unceasing efforts, and the efforts of those who worked with him, brought into being the first legislation, not just in the UK but across the whole world, to recognise the rights of disabled people.
As other noble Lords have highlighted, we have made significant progress since the Act was introduced 40 years ago. We now have a strong disability rights framework, which was most recently extended by the Equality Act 2010 and the UN Convention on the Rights of Persons with Disabilities. This Government are committed to using the UN convention as a driver to achieve equality for disabled people. We are looking at how we can best implement the Equality Act 2010 and we will be making announcements about its implementation in due course.
The Chronically Sick and Disabled Persons Act was also a catalyst to making Parliament more accessible and resulted in many changes, including, as the noble Baroness, Lady Masham, told us, the invention of the mobile Bench, which is so welcome today. There is still more to do before Parliament is truly representative of the disabled population, which is why this Government have committed to introducing extra support for disabled people who want to become MPs, councillors or elected officials.
Since the Act was introduced, we have moved on from a time when disabled people were essentially invisible to society and were hidden or forgotten. We have moved through a long period when disabled people, although finally visible, were treated as objects of pity or charity. Today, the disability equality agenda is part of mainstream discussions and receives the recognition that it deserves. It is an agenda on which, no matter of what political persuasion, we are all determined to make progress.
Despite disabled people’s voices now being recognised and heard, disabled people still remain, in many ways, the objects of society’s benefaction rather than the subjects of their own lives. There are still many disabled people whose day-to-day lives are not within their control. Disabled people remain categorised by labels—even the term “disabled” to me separates them out from the rest of society—rather than being recognised as individuals who deserve the same opportunities as anyone else to succeed.
While preparing for this debate, I was thinking about how, ultimately, we are all seeking happiness or quality of life, a fulfilment that many philosophers argue comes from the ability to contribute, to be fully appreciated for those contributions and to be of value. According to this thinking, not only is society missing out on the value that disabled people can contribute, but we are denying disabled people the fundamental right to lead fulfilled lives. We are denying the right to seek the attributes that lead to happiness and self-worth—attributes such as social interaction, employment, pleasure, income, democratic freedom and meaning, to name a few. For me, the challenge is how we can empower disabled people to make that complete transformation from object to subject and how we can support disabled people to be completely in control of their own lives so that they have the opportunity to be fully involved in a society that recognises them as individuals rather than people defined by disability.
The Independent Living Movement is important here in terms of,
“disabled people having the same choice, control and freedom as any other citizen—at home, at work, and as members of the community”.
Those principles—designed by disabled people themselves—are fully signed up to by this Government. I must pay tribute to the noble Baroness, Lady Campbell, and to the noble Lord, Lord Ashley, who have done so much to champion independent living for disabled people.
Building on independent living, the right to control, introduced through the Welfare Reform Act 2009, will provide disabled people with greater choice and control over their own lives. It will empower them to make informed decisions about how they want to receive the support to which they are entitled. We will be testing the right through trailblazers, which will commence later this year.
A key factor in people having independence is having the chance of employment. The importance of work extends far beyond the financial benefits that it can bring. As my forebear, Sigmund Freud, said:
“No other technique for the conduct of life attaches the individual so firmly to reality as laying emphasis on work; for his work at least gives him a secure place in a portion of reality, in the human community”.
Some noble Lords will recall that he practised what he preached and wrote some of his most powerful work while in the 17-year grip of the cancer that killed him.
We know that work is generally good for people’s well-being, as investigated by Waddell and Burton in their 2006 report Is Work Good For Your Health and Well-Being?. Conversely, long-term worklessness can have negative health effects, particularly for people’s mental health. This is true for disabled people, people with health conditions and people in the wider population. We recognise, however, that not enough people are experiencing the benefits of work. Sickness absence remains high, with around 170 million working days lost to illness in 2008. Over 600,000 people flowed on to incapacity benefits last year. While less than half of all working-age disabled people are in work, almost 40 per cent of disabled people who are not in work would like to be.
Right now, we have a welfare state that divides our society into neat segments where the poorest are left to live a life of helplessness, undermining their self-confidence and breeding social exclusion that splinters families and communities. That is why we are starting a radical programme of welfare reform. We will reassess all current claimants of incapacity benefit on their readiness to work. We will also introduce the work programme by summer 2011, which will offer a single integrated package of support, providing personalised help for everyone who finds themselves out of work, regardless of the benefit they claim.
The support offered through the work programme will be based on individual need rather than on the benefits claimed and will radically simplify the complex array of existing employment programmes. It will be designed to meet the needs of a wide range of customer groups, including disabled people, helping to ensure that those with the greatest barriers to work do not get left behind. I hope it will mean that those who have been left behind, referred to by my noble friend Lord Addington, will get a real second chance through this programme.
The noble Lord, Lord Rix, who has contributed so much in this area, powerfully pointed out how difficult it is for people with learning difficulties to get a job. We recognise that there are some groups of disabled people, particularly people with learning difficulties, mental health conditions, and autism, who face additional barriers to employment and will need additional support to move into, or return to, work. We are quite clear that everyone who can work should get the support they need to get a job, and we remain committed to tackling the particular disadvantages that those groups face in employment and across other areas of life. I would like to take this opportunity to remind the right reverend Prelate the Bishop of Ripon and Leeds that I was proud to make my maiden speech in this House in support of the Autism Bill. I can assure him that we are committed to addressing the needs of people with autism and their families.
We also recognise that some disabled people will not be able to make the move into employment. If people genuinely cannot work, we will make sure they get the unconditional support they need. As I mentioned earlier, one of the main challenges is changing the way society perceives disability, and that includes tackling the prejudice and ignorance that leads to bullying and harassment. One of the most shocking aspects of today’s society is that disabled people are still subject to harassment of the worst kind. All disabled people deserve to be free from bullying, to feel safe in their own communities, and to be able to make their full contribution to society in safety and security. This Government take this issue seriously—which is why we have committed to promoting better recording of hate crimes—in order to work towards eliminating that very destructive barrier to participation in society. The Equality and Human Rights Commission launched an inquiry this week into disability-related harassment, which we welcome and fully support.
One of the concerns expressed by a number of noble Lords, including the noble Lords, Lord Corbett and Lord Low, and the right reverend Prelate the Bishop of Ripon and Leeds, was that the financial pressures we currently face will effectively undermine progress in disability equality legislation. I can only emphasise that it is vital that any budget cuts do not disproportionately affect disabled people. We are committed to championing disability equality across government and we have a Minister for Disabled People.
I must admit that as it is early in the Administration my responses to many of the specific questions will be of a similar nature—that we are looking at the issues and will respond as soon as we can. I will give some dates. One of the issues on which noble Lords wanted assurances was the access to work programme. It was referred to by the noble Lord, Lord Corbett, and the noble Baroness, Lady Thornton. We are committed to supporting disabled people to enter and remain in employment, and we are currently undertaking a review on how best to do that. We expect to announce further details shortly.
The noble Lords, Lord Corbett and Lord Low, asked whether we will keep the road map to disability equality. We are committed to achieving equality as soon as practically possible. The road map is a useful guide which we will want to use. The noble Baronesses, Lady Campbell and Lady Thornton, and the noble Lord, Lord Low, raised social care. We acknowledge that urgent reform of the social care system is needed. It is one of the biggest challenges facing this Government. That is why we plan an independent commission to consider how to ensure sustainable and responsible funding. That will go ahead.
The noble Lord, Lord Low, asked about the work programme and the noble Baroness, Lady Thornton, asked about work choice. We are moving ahead on the work programme at great speed, as noble Lords will have seen from the announcement last week. We plan to have that in place in the first half of next year. Clearly, one of the most complex issues in designing that programme is differential payments. I will commit to bringing information on our progress as soon as it is available. We are planning to make an announcement on work choice reasonably soon.
I will effectively ask for a little time on the question from the noble Lord, Lord Ashley, on support for his Bill on independent living for disabled people. An Oral Question is down for that and I shall leave my noble friend Lord Howe to answer that for the Department of Health next week—I have dodged that one. The independent living strategy was raised by the noble Baronesses, Lady Campbell and Lady Thornton. We are looking at how to bring that forward and we are discussing it with interested parties and across government. That is work in progress.
The noble Baroness, Lady Gale, asked about our plans regarding carers’ allowance. We recognise that 6 million carers play an indispensible role in looking after friends or family members who need support. Clearly, cash benefits play an important part in that, although a minority of carers, around 10 per cent, receive them. We have set out our commitment to simplify the benefits system in order to improve work incentives and to encourage responsibility and fairness. I can assure the noble Baroness that we will carefully consider the needs of carers as we develop our thinking on welfare reform.
The noble Baroness, Lady Gale, also raised the work capability assessment in the context of Parkinson’s. It was developed in close consultation with experts and specialist disability groups. It is kept under review and we are confident that it is working well. We are committed to conducting an independent review of that assessment every year for the first five years and we are currently in the process of commissioning it. We expect the first findings to be reported later this year.
On the concern of the right reverend Prelate the Bishop of Ripon and Leeds about the provision in schools for pupils with special educational needs, we are looking forward to the Ofsted review of the issue which is coming forward this summer, and will respond to it then. The noble Lord, Lord Rix, raised the issue of apprenticeships for those with learning disabilities. It is clear that people with learning disabilities should have fairer access to apprenticeships. It is a priority for the National Apprenticeship Service to improve the number of learners from diverse backgrounds taking part, and both categories will be included; that is, those with learning difficulties and learning disabilities.
In closing, I stress that we are committed to equality for disabled people, to empowering them to have the freedom to control and shape their own futures and to live full and fulfilling lives. We recognise that there is still some way to go, and we do not underestimate that, but today’s debate has highlighted how far we have come on the journey to disability equality. It has underlined the commitment to a fairer, better Britain with equal opportunities for disabled people so that they can be full and valued members of society.
Lord Corbett of Castle Vale
My Lords, I thank the Minister for that response, which I am sure will be welcomed all around the House. He has made some specific and important commitments and I just want to say to him that all who have taken part in this debate, along with many other noble Lords, will be there assisting him to do his very best to make sure that those commitments are carried out. Not the least of those are two that he mentioned several times. The first is to continue to make progress towards full equality. Secondly, and what I most especially welcome, he has taken the point made from all sides of the House that the most vulnerable must be protected from the impact of the cuts that are going to be made.
I have, if I may, a little task for the government Chief Whip. It is a matter of great regret that we have been denied the views of Conservative Back-Benchers in the debate, but I know that there are many on that side of the House who take an interest in these affairs. Over the weekend, the noble Baroness might want to consider whether she should get the naughty bench out and talk to one or two of her colleagues on Monday morning.
At the start of the debate, I said that there was a distinguished and dedicated cast list and I hope that your Lordships will recognise that in no way did I exaggerate. I want to thank all noble Lords who have made the time to take part in what I think has been an important debate. This is a milestone that deserves to be recognised and, again, I pay tribute to my noble and much respected friend Lord Morris of Manchester. Progress has been made and, while we all know that there is a long way to go, I think that we are going to get there. I beg leave to withdraw the Motion for Papers.