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Speaker’s Statement
Mr Speaker
I have a statement to make to the House. I have to inform the House that, as required by section 144 of the Representation of the People Act 1983, I have received the certificate from the judges appointed to try the election petition relating to the Oldham East and Saddleworth constituency election on 6 May 2010. The judges have determined that the election was void pursuant to section 159 of the Act because the candidate, Philip James Woolas, was personally guilty of an illegal practice. I shall lay the report and certificate on the Table, together with the full judgment and the shorthand writer’s notes, and will cause the full text of the report and certificate to be entered in the Journal. Members wishing to read the report and certificate for themselves will find it set out in the Votes and Proceedings for today, which will be circulated with the Order Paper in tomorrow’s Vote Bundle, available online and from the Vote Office. The full text of the judgment has been published by the court on the judicial communications website. I shall place a copy in the Library.
In accordance with section 160(4) of the Act, Mr Phil Woolas has been reported personally guilty of an illegal practice and must vacate his seat from the date of the report, 5 November 2010. I am advised that a renewed application for judicial review has today been made to the administrative court. The administrative court judge has ordered an expedited hearing of the renewed application as he considers it essential that the electorate of Oldham East and Saddleworth should know who is their Member of Parliament as soon as possible. My ruling is that this engages the House’s sub judice resolution, and that therefore the judgment of the election court cannot be debated in the House until court proceedings are concluded. I will not take points of order on this matter now; the opportunity for points of order will come after the 3.30 pm statement.
Oral Answers to Questions
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Gordon Marsden (Blackpool South) (Lab)
1. What steps he is taking to implement the recommendations of the “Fighting Fit” report on the provision of mental health services for service personnel and veterans.
The Secretary of State for Defence (Dr Liam Fox)
The Ministry of Defence takes the issue of mental health very seriously and warmly welcomes the findings of the “Fighting Fit” report from my hon. Friend the Member for South West Wiltshire (Dr Murrison). We strongly endorse its key themes and recommendations. I wish to thank my hon. Friend on behalf of the House and the Government for his timely and well-considered report. We are working closely with the Department of Health, the NHS and voluntary and community sector organisations to implement these recommendations.
Mr Marsden
As Member of Parliament for a town that has very much led the way in support for veterans and service personnel, and as chair of the all-party group on veterans, I, too, warmly welcome the report by the hon. Member for South West Wiltshire and the Government’s endorsement of it. One of its recommendations is for the setting up of a veterans’ information service, which is a positive and constructive proposal, but does the Secretary of State share my concern that membership of it will cost £70 a year? Is there not a danger that that might deter some of the most vulnerable service personnel—for example, those struggling to find work or those on low incomes—from signing up?
Dr Andrew Murrison (South West Wiltshire) (Con)
I am extremely grateful to my right hon. Friend for his welcome for my report and for the help that he has given in its preparation. He shares my concern for people with mild traumatic brain injury and knows that a British combat soldier is likely to face exposure to between six and nine improvised explosive device explosions in the course of his career, with the consequent risk of mild traumatic brain injury. Does he agree that more needs to be done to determine the prevalence of mild traumatic brain injury in the British military and to prevent and mitigate its effects?
Dr Fox
Indeed. There is a great deal of interest in this particular element of scientific research on both sides of the Atlantic. I recently visited the veterans agency in the United States to ascertain what the updated information was. We will certainly want to consider all the evidence as it comes forward. It is an emerging science and we will get different types of information as we go through, but the art will be to try to ensure that we best titrate the treatments available to the information given to us scientifically at any one time so that we operate on the basis of evidence, not supposition.
Philip Davies (Shipley) (Con)
2. What representations he has received from senior military officers on the deployment of V-shaped military vehicles.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
Ministers routinely have discussions with senior military officers on a wide range of issues, including vehicle protection. The advantages in blast protection that can be provided by a V-shaped hull are well understood and Mastiff, Ridgback and the new Wolfhound vehicle all incorporate this into their design. The vehicle selected for the new light protected patrol vehicle will also have a V-shaped hull. It would, however, be an oversimplification to suggest that vehicle protection is driven solely by hull design. The type of protection used on any given vehicle is very much driven by the capability the vehicle is designed to meet and the threat it is expected to face.
Philip Davies
I am grateful to my hon. Friend for that answer, but as he will know that has not always been the case. There was originally some resistance from the Army to introducing the V-shaped hull vehicles and if it had not been for the work of people such as Ann Winterton in this Chamber, as I am sure he recognises, they might never have been introduced. Given that, will the Minister assure us that when the troops finally withdraw from Afghanistan, the Government will not dispose of these vehicles in favour of the prehistoric design of the future rapid effect system’s vehicles?
Peter Luff
It is a great pleasure to join my hon. Friend in paying tribute to Ann Winterton, whose sterling work on this issue and many others in this House has made a contribution to the happier place that we are in than might otherwise have been the case. Commanders probably now have the range of vehicles they need to cope with the different threats they face in theatre. My hon. Friend is absolutely right to emphasise the importance of ensuring that once the Afghan war is over we learn the lessons and have the appropriate range of vehicles in place to ensure that we can deal with future threats, too.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
Given that the question of deployment depends very much on availability and reliability—not only of our vehicles and equipment but of those of our allies—and given that aircraft carriers are V-shaped vehicles—[Interruption.] They are undoubtedly V-shaped vehicles; there is no doubt about that at all. What views does the Minister have on the fact that the French aircraft carrier, Charles de Gaulle, has broken down yet again and is not available?
Peter Luff
Mr Speaker, your characteristic generosity has allowed the hon. Gentleman to proceed with his question. I am not sure that a carrier is a vehicle, but never mind—we will let that go. I hear what the hon. Gentleman says and, like him, I wish we could buy three of our own aircraft carriers; he challenged me on this on Monday. We cannot do that, I am afraid, and I think we have adequate arrangements in place to sustain carrier strike in the future.
Dr Julian Huppert (Cambridge) (LD)
3. What his most recent estimate is of his Department’s likely expenditure on Trident replacement in this Parliament.
The Secretary of State for Defence (Dr Liam Fox)
The 2006 White Paper “The Future of the UK’s Nuclear Deterrent” set out the initial estimated total procurement cost of the replacement nuclear deterrent as £15 billion to £20 billion in 2006-07 prices. The likely expenditure is dependent on the decision on initial gate, which is yet to be taken. I propose, however, to update Parliament on progress, including costs, after the initial gate decision through the publication of a report.
Dr Huppert
Will the Secretary of State assure me that no binding contracts will be entered into, as we have seen with aircraft carriers and the disgraceful contract in that case, so that if—as I hope—the next Parliament realises that we do not want or need to replace Trident, it will be able to do so at no huge expense?
Paul Flynn (Newport West) (Lab)
Can the Secretary of State describe any plausible situation in which Britain would use a nuclear weapon independently, because our present policy encourages other nations, however unstable, to acquire their own nuclear weapons for defence?
Dr Julian Lewis (New Forest East) (Con)
I realise that nothing would please my right hon. Friend more than to go into the next election fighting in defence of the rationale for the nuclear deterrent. Does he not recognise, however, that the appalling decision to postpone signing the main gate contracts leads us to a situation in which if—heaven forbid—there is another hung Parliament, the Liberal Democrats, who are really unilateralist, would be able to blackmail both parties to cancel the deterrent entirely?
Dr Fox
There are two things of which I am sure. The first is that my own belief in the need for an independent, minimal, credible nuclear deterrent for the United Kingdom is and will remain undimmed. The second is that I shall be fighting the general election to see a majority Conservative Government returned.
John Woodcock (Barrow and Furness) (Lab/Co-op)
The Secretary of State has said on many occasions that delays in defence contracts end up costing the taxpayer more. Will he say how much extra cost will be incurred by the delay to the Trident programme and the stretching out of the Astute drumbeat that that has necessitated?
Dr Fox
The hon. Gentleman is at least partly correct. There will be additional costs to maintaining the Vanguard class through to 2028. We expect those to be around £1.2 billion to £1.4 billion extra to maintain those submarines for longer. However, his analysis would be far more correct if the ultimate decision to delay the in-service date increased the cost of the successor programme. As no cost will be set out until after main gate, it is impossible to make that assumption.
Mr David Burrowes (Enfield, Southgate) (Con)
4. What assessment he has made of the effect of the outcomes of the strategic defence and security review on mental health care provision for service personnel.
Richard Ottaway (Croydon South) (Con)
5. What assessment he has made of the effect of the outcomes of the strategic defence and security review on mental health care provision for service personnel.
The Secretary of State for Defence (Dr Liam Fox)
The strategic defence and security review committed an additional £20 million per year for the provision of health care to service personnel, part of which will be used to deliver further enhanced mental health care services. It is planned that this will include an uplift to the numbers of specialist and supporting mental health personnel.
Mr Burrowes
Although I welcome the Government’s commitment to increase mental health services for servicemen and veterans, does my right hon. Friend share my concern about the need to tackle the prevalence of dual diagnosis alcohol-related disorders given that it has an impact on those who are in the transition to civilian life, with some ending up in the criminal justice system?
Dr Fox
Indeed, my hon. Friend makes an important point. A range of different groups suffer from mental health problems, both inside and outside the armed forces. There are those who come into the armed forces with a problem—either a mental health problem or a substance-abuse problem—those who develop one during their time in the armed forces and those who subsequently develop one. In a civilised society, it is very important that we ensure that all three groups are properly looked after. I would go so far as to say that it is the measure of how civilised a society we are that we look after the most vulnerable, and those with mental health problems must be in that group.
Richard Ottaway
Will the Secretary of State take this opportunity to pay tribute to service charities such as Combat Stress? It can take quite some time before mental health problems become apparent. It is important to support our veterans in the long term and not just in the short term or in the immediate aftermath of their retirement from the service.
Dr Fox
My hon. Friend makes an excellent point. Recent evidence suggests that post-traumatic stress disorder is likely to present at a peak at about three years, but may take as long as 14 years to present. It is therefore important that we recognise and see through our through-life responsibility to our armed forces. It cannot be right that our duty of care ends at the point of discharge from the armed forces themselves.
Mr Jeffrey M. Donaldson (Lagan Valley) (DUP)
Has the Secretary of State considered the impact on former serving personnel of the proposals by the Government to remove the mobility component of the disability living allowance benefit for those residing in residential care accommodation, which includes, of course, many ex-service personnel?
Dr Fox
On all the issues affecting the changes set out to welfare, there have been considerable cross-governmental discussions. I shall continue to have discussions with my colleagues because it is right, as I said, that we look after not only those who are serving but those who have served in a way that is indicative of the services that they have already given to this country.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
The Government are reviewing tour lengths and the interval between tours. At the same time, they intend significantly to reduce the size of the deployable force. This means that operational commitments will increasingly fall on the same individuals with greater frequency. Does the Secretary of State share my concern that that will have serious consequences for the mental health and well-being of our troops?
Dr Fox
Leaving aside the assumptions in the hon. Lady’s question, which are an argument in themselves, her key point is whether the incidence of post-traumatic stress disorder is related to tour length or tour frequency, or a combination of the two. Evidence increasingly tends to suggest that the key element is the length of the tour rather than the frequency, and that, of course, will instruct the Government’s thinking.
Sir Menzies Campbell (North East Fife) (LD)
Does the Secretary of State accept that mental health issues sometimes come to light only as a result of self-referral and that the culture of all three services is against such self-referral? Is one way of dealing with that to ensure that, during training, people—and not just those who will be in the chain of command—accept and understand the possibility of mental health issues arising, and that they are willing to recognise that and, if necessary, to take steps to deal with it?
Dr Fox
That is true for not only the armed forces but society in general. Only when we, as a society, remove some of the taboo of mental illness will we properly unlock the ability to deal with it successfully. My right hon. and learned Friend is correct that we need to look at people’s willingness to self refer, and that process is made easier if they can contact a helpline run by members or ex-members of the armed forces, in whom they are likely to be able to place greater faith.
Mrs Madeleine Moon (Bridgend) (Lab)
The King’s college review of mental health services for the military says that one way in which the mental health of those serving in theatre can be impacted is if they feel that their families are not being supported. Given the review of allowances that has taken place, how will we ensure that our serving personnel are confident that their families have good support and appropriate allowances?
Dr Fox
The hon. Lady is absolutely correct. One thing that I learned during the five years I worked alongside the armed forces and their families as a doctor was that if one wants to create unhappy service personnel, the surest route is to create unhappy service families. We must examine the situation as a whole, and we need to look at all elements of the military covenant—not just the financial elements that she mentions, but service education, access to health care for service families and other welfare issues, including accommodation.
Greg Hands (Chelsea and Fulham) (Con)
6. What timetable he has set for the return of service personnel garrisoned in Germany; and if he will make a statement.
The Minister for the Armed Forces (Nick Harvey)
As the Prime Minister announced on 19 October in the House, as part of the strategic defence and security review, the Government have decided to accelerate the rebasing of the 20,000 military personnel in Germany with a view to returning half those personnel to the UK by 2015, and the remainder by 2020.
Greg Hands
Will my hon. Friend ensure that whatever decisions are made, we continue to consult our German allies closely while also showing our thanks to the many communities throughout northern Germany that, for 65 years, have welcomed our troops as neighbours, friends and, principally, as defenders?
Nick Harvey
I am happy to give my hon. Friend the assurance that he seeks. I echo his comments about the outstanding support and friendship that the German people have given our forces over many decades. We recognise that the decision has significant implications for them. We will consult closely the German authorities at all levels as our plans develop.
Michael Dugher (Barnsley East) (Lab)
In his statement to the House on 19 October, the Prime Minister said that changes in the Ministry of Defence would save £4.7 billion and that that would be
“made easier by the return of the Army from Germany.”—[Official Report, 19 October 2010; Vol. 516, c. 798.]
However, the Minister stated in a written answer on 27 October that it is
“too early to say what the financial impact will be”.—[Official Report, 27 October 2010; Vol. 517, c. 369W.]
Given that confusion, will he tell us whether there will be early cash savings or, in fact, significant early costs associated with the move?
Nick Harvey
I welcome the hon. Gentleman to the Dispatch Box in his new role and congratulate him on his appointment. Work is in hand to start on a detailed rebasing plan. He is right to assume that moving troops back from Germany will involve an initial up-front cost, but it is important to stress that big savings will be made in the long term, because there are implicitly high costs involved in maintaining troops in Germany, and the operational rationale for their being there ceased long ago.
Caroline Dinenage (Gosport) (Con)
7. If he will assess the merits of putting to use the spare capacity at HMS Sultan in Gosport as part of his review of the defence training estate.
The Minister for the Armed Forces (Nick Harvey)
Following the announcement on 19 October of the decision to terminate the defence training rationalisation procurement, work has now begun on alternative options for the location or locations of future defence technical training. Changes to technical training and estate requirements arising from the strategic defence and security review will be taken into account and HMS Sultan will be considered as part of that process.
Caroline Dinenage
As the Minister knows, HMS Sultan already provides engineering training not just for the Navy and the Army, but for commercial organisations such as Network Rail. It recently had an excellent Ofsted report, and the good news is that it has spare capacity to do even more. Does the Minister agree, therefore, that in the spirit of good financial common sense, the Department should consider consolidating all existing military engineering training at that excellent site in my Gosport constituency?
Nick Harvey
I am happy to pay tribute to the work that goes on at HMS Sultan and congratulate everybody involved on the excellence of the training that is given. It would not be practical to bring all defence technical training together at that site but, as I stressed in my earlier answer, we are looking at location or locations, and HMS Sultan will be considered fully as part of that review.
Diana Johnson (Kingston upon Hull North) (Lab)
8. What recent discussions he has had with the Secretary of State for Justice on the likely effects on the conduct of military inquests of the proposed closure of the chief coroner’s office.
The Minister for the Armed Forces (Nick Harvey)
Ministers have consulted on this matter, and my officials have been extensively involved in discussions with the Ministry of Justice about the abolition of the chief coroner post. In the current challenging financial climate, the Government have to consider all expenditure very carefully. We judge that there will be no significant impact on the conduct of inquests into the deaths of members of the armed forces.
Diana Johnson
The British Legion’s recent poll showed that a large majority of the British public back retaining a chief coroner to ensure that bereaved families have the support and reassurance that they need at inquests. Will the Minister look again at that, in order to provide support for those bereaved families?
Nick Harvey
We are firmly committed to ensuring that families have all the support they need at inquests, but we do not believe that the creation of the post of chief coroner is an essential prerequisite to achieving that. We will continue to give every possible help we can to families involved in such inquests, and we will maintain close contact with the British Legion as we discuss those matters.
Patrick Mercer (Newark) (Con)
The Minister will be aware of a small but important number of British military fatalities that have been caused in joint operations with US forces. In their inquests, the US forces have completely different sets of rules, and it is sometimes very difficult to find out the truth or the details of those deaths. The coroner’s office has been extraordinarily useful and helpful in these matters. Can the Minister assure me that there will be no further delay once the post is abolished?
Nick Harvey
The various functions will continue to be exercised by the Attorney-General or by the Ministry of Justice. I will give my hon. Friend an undertaking to keep a close eye on that aspect and ensure that there are no delays as a consequence of the decision.
Mr Kevan Jones (North Durham) (Lab)
My hon. Friend the Member for Kingston upon Hull North (Diana Johnson) raises the support that the British Legion gave to the appointment of a chief coroner. I know from my time as a Minister in the Ministry of Defence that that was supported by a range of service charities and by the families federations. If we are not to have a chief coroner, can the Minister explain how we will get consistency across the country in inquests into military deaths?
Nick Harvey
The Lord Chancellor will take a proactive approach to ensuring that coroners conduct their investigations to national standards, including a best practice approach to conducting military inquests and monitoring cases that take more than 12 months to complete. A new complaints system will be considered as part of the work that the Ministry of Justice intends to take forward on a charter for bereaved people.
Lorely Burt (Solihull) (LD)
9. If he will bring forward proposals for a national defence medal to recognise non-operational military service.
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
The Government hold the professionalism, courage and contribution of all those who serve or who have served in the armed forces in high regard. I understand that some people believe that their service, and the service of all personnel, should warrant a medal. The coalition Government are committed to reviewing the rules governing the award of medals. However, at present, there are no plans to recommend to Her Majesty the introduction of a national defence medal.
Lorely Burt
I very much welcome the review. We are just a few days away from Remembrance day, and since 1919 we have been remembering the sacrifice of our armed services. Today, however, we have much improved media and greater transparency, and we understand more the mental, emotional and physical sacrifice that all our armed services personnel make. Is now not the time to include a national defence medal in that review?
Mr Robathan
We are going to have that review, and may I recommend to the hon. Lady that she puts forward her views at that time? Indeed, I know that they represent her party’s policy, which it adopted at a recent conference. Medals are awarded for campaign service because they recognise the risk and rigour of deployment, which is considered to be more extreme than when, I am afraid, people are in a barracks or at home on a base.
Mr Denis MacShane (Rotherham) (Lab)
May I urge the Minister to err on the side of generosity? The previous Government could not take on the review committees of retired colonels and General Blimps, who refused to order even a Bomber Command campaign medal. People like to wear medals and are very proud of the Army now, and they also serve who serve in this country. I hope that the Minister will not shove the idea out to a review. He should come back and accept the hon. Lady’s suggestion.
Mr Robathan
As I have said, we are not shoving the idea out but having a review. Some who have served would like to see a national defence medal, but my experience is that probably the majority of those who have been in the armed forces and then left accept the decisions that were made when they were serving and do not wish to revisit history in that way.
Henry Smith (Crawley) (Con)
10. What support his Department provides to those who have served in or are about to leave the armed forces.
Rehman Chishti (Gillingham and Rainham) (Con)
15. What support his Department provides to former armed forces personnel who have served in Afghanistan.
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
Regardless of where, or for how long, a member of the armed forces has served, all are entitled to receive some form of resettlement support. That ranges from housing advice through to vocational training. In addition, employment consultancy support is available through the career transition partnership for up to two years after leaving, as well as lifetime job-finding support. Those who are medically discharged will receive the full resettlement package.
Henry Smith
I am very grateful to my hon. Friend for that answer. My local authority, Crawley borough council, is interested in investigating ways in which people who have left the services and are returning to their home town will not be disadvantaged by going on to the social housing list. Can he assure me that the Defence Secretary and my right hon. Friend the Secretary of State for Communities and Local Government will work together to ensure that military personnel leaving the forces are not disadvantaged on the housing list?
Mr Robathan
I am delighted that my hon. Friend’s local authority is taking that action. All service personnel are entitled to briefings on their housing options, and some 50 briefings a year take place nationwide and, indeed, abroad. Advice includes obtaining property through a local authority, private renting or owning, and service leavers retain their key worker status for up to one year after having left. My hon. Friend will know that at the moment we are in very close discussions about the military covenant and how we can ensure that no one who leaves the services is disadvantaged when they return to their home area.
Rehman Chishti
I pay tribute to the Royal Engineers, who have two regiments serving in Afghanistan. What steps are being taken to ensure that veterans are given support in the transition back to civilian life?
Mr Robathan
I echo my hon. Friend’s tribute to the Royal Engineers. Veterans receive a great deal of support in resettlement. Everybody trying to return to civilian life from the services now receives support, and—[Interruption.] I wish the hon. Member for North Durham (Mr Jones) would not interrupt me. I was just going to say that a lot of that was put in place under the previous Administration. I accept that absolutely and pay tribute to them.
However, there are resettlement courses. Everybody now receives them, and as they move on to seek employment, organisations such as the Regular Forces Employment Association help those who have left.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Will the Minister update the House on what progress he has made in working with the national health service to ensure that those who have left the armed forces continue to receive priority treatment?
Mr Robathan
We are looking at how the Ministry of Defence and the service charities, and everybody else, interrelate in the military covenant. The local authorities to which I referred interrelate, and certainly the NHS does. There have been frankly regrettable incidents in which people have been unable, for instance, to get dental services or to get on to an NHS doctors list. We are looking at improving that situation. Again, I hate to say this, but the previous Administration did some good work on this as well.
Nic Dakin (Scunthorpe) (Lab)
11. What recent discussions he has had on compulsory redundancies from the armed forces as a result of the outcomes of the strategic defence and security review.
The Secretary of State for Defence (Dr Liam Fox)
I am in regular discussions with the chiefs of staff, and decisions on those selected for redundancy will be made by the individual services. A comprehensive implementation programme is being developed, and details will be promulgated by each of the three services in the coming months. We will ensure that those who leave are treated fairly and properly.
Nic Dakin
I thank the Secretary of State for his answer. He will agree, I am sure, that it is essential that the 25,000 civilian redundancies from the MOD announced in the strategic defence and security review do not result in service personnel being drafted in to fill the resultant gaps in capacity. Can he detail from which units within the MOD the redundancies will be made and outline any plans to supplement the lost capacity within the MOD?
Dr Fox
As I have just said, it is for the service chiefs to set out over the coming months exactly which redundancies they think will be necessary. I am sorry that I cannot be more specific at this time in relation to the services or to the civil service, as we will seek to use natural wastage and careful management of recruits in the armed forces to minimise the number of redundancies required.
Bob Russell (Colchester) (LD)
Will the Secretary of State give a guarantee that no soldier from 16 Air Assault Brigade currently serving in Afghanistan will be made redundant?
Mr Jim Murphy (East Renfrewshire) (Lab)
The Secretary of State will know that this weekend thousands of people marched in Lossiemouth against the proposed closure of the RAF base there. That base accounts for about 10% of jobs in the area. Some will argue that the proposed closure saves the MOD money, but in truth other parts of government will have to pick up the costs of increased unemployment and the failure of small businesses. May I therefore urge him to pause and think again about the devastating wider impacts that this proposed closure would have?
Dr Fox
First, may I welcome the shadow Secretary of State and his entire team to Question Time for the first time?
Let me say at the outset that neither party in the coalition wanted to see redundancies in the armed forces, and we would not be making such redundancies had we not been handed an utterly poisonous economic legacy by Labour and, indeed, a Ministry of Defence budget that was massively overheated and incompetently run. Having said that, we are very well aware of the various consequences—social, economic and regional—of the whole question of basing. I give the right hon. Gentleman my absolute assurance that we will consider all those elements when we look at the future of Lossiemouth.
Mr Murphy
Returning to the issue raised by the hon. Member for Colchester (Bob Russell), we are all rightly in awe of the men and women of our armed forces, and I welcome the commitment that the Government have given to continuing to protect the front line in Afghanistan. However, the Government have announced redundancies of 7,000 in the Army, 5,000 in the Navy and 5,000 in the RAF—17,000 in total. Will the Secretary of State therefore guarantee that no one who has served in Afghanistan will face compulsory redundancy?
Dr Fox
It would not be possible for the Government to say that no one who had ever served in Afghanistan in any way, shape or form since 2001 would not be made redundant. I reiterate what I have said: that because we need to maintain the Afghan rotation, no one currently serving in Afghanistan, or on notice to deploy, will face compulsory redundancy.
Andrew Bridgen (North West Leicestershire) (Con)
12. What plans his Department has to increase the effectiveness of its defence research and technology programmes.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
We are publishing a Green Paper before the House rises for the Christmas recess that will set out our intended approach to industrial policy and the closely related issues of research and technology. The result will be published in a White Paper next spring that will formalise our approach for the five years until the next strategic defence and security review
Andrew Bridgen
I thank the Minister. Does he agree that the Ministry of Defence’s strategy for investment in research and technology will determine the areas in which indigenous industrial capacity will thrive? Likewise, when the MOD decides not to invest but to buy in from abroad, that capacity will not thrive.
Peter Luff
It is certainly the case that ensuring sovereignty in the use of our armed forces often requires specific industrial capabilities to be maintained in the UK. That often involves research and development. However, I must emphasise that competition in the global market remains our preferred means of acquiring equipment at the best value for money, which means buying off the shelf where possible. I freely acknowledge that the issue is complex, which is exactly why we will consult formally on it in the Green Paper to which I referred.
Kevin Brennan (Cardiff West) (Lab)
Could the effectiveness of defence research possibly have been enhanced if we had had a defence training college? The Minister will know of the bitter disappointment in south Wales about the announcement in the comprehensive spending review. What can he tell the House about the potential future of that development?
Peter Luff
The hon. Gentleman is ingenious in his use of his supplementary question. That is not a matter for which I am technically responsible, but I can reassure him that we are still examining carefully the consequences of the decision. That is all I can say at present, I am afraid.
Mr James Arbuthnot (North East Hampshire) (Con)
Does my hon. Friend agree that when money is tight, as it quite often seems to be, defence research and technology is an easy target for cuts because the effect is felt some way down the line? We saw that under the last Government. Can we please avoid seeing it under the current Government?
Peter Luff
I could not agree more strongly with my right hon. Friend. The last Government’s massive slash-and-burn approach to the science budget was a major scandal and makes our task a great deal more difficult. The SDSR document makes it clear that we are maintaining our essential science and technology investment, and I can tell him that at present, we expect that budget to rise slightly in cash terms over the CSR period. That is not the ideal outcome, but it is a good one and I hope he will welcome it.
Elizabeth Truss (South West Norfolk) (Con)
13. What consultation he plans to undertake in determining the future of RAF Marham.
The Minister for the Armed Forces (Nick Harvey)
It will now take some time to work out the implications of the strategic defence and security review for defence basing, as the Secretary of State made clear a few moments ago. The work is now under way, and we will fully consult all the relevant agencies and the local communities that have given so much support to our armed forces over the years.
Elizabeth Truss
Has the Minister made an estimate of the cost of relocating engineering and maintenance facilities from RAF Marham? It is estimated at up to £50 million, and those facilities are a third more effective and efficient than their US counterparts. Will he also take into account the relative rate of unemployment, which is 7.4% in west Norfolk compared with 4.8% in Moray in Scotland?
Nick Harvey
My hon. Friend is referring to the Tornado depth maintenance facility, which includes centralised RAF and industry component repair facilities alongside the aircraft maintenance facility at Marham. It is unlikely that any decisions on Tornado basing will be taken before next spring at the earliest, but all relevant costs, including those arising from any necessary relocations, will be given full consideration prior to any decision being taken.
Esther McVey (Wirral West) (Con)
14. What timetable has been agreed for the building of the Queen Elizabeth class aircraft carriers.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
The strategic defence and security review was clear that we plan to deliver the carrier strike capability from around 2020. We are now working to provide the level of detail needed to decide exactly how that intention should be turned into reality. As the planning work is expected to take some months, we are not yet in a position to provide further details.
Esther McVey
On behalf of my constituents and the greater Merseyside area, I congratulate the Minister and his Department on the decision to continue the building of two Queen Elizabeth class carriers. Will he acknowledge with me the benefits for Wirral of the manufacturing continuing at Cammell Laird?
Peter Luff
The decision has not been without its controversy, but I am delighted to pay tribute to the work force at all the yards conducting the work on the carriers, including in my hon. Friend’s constituency. I have seen that work at first hand in government, and it is a remarkable tribute to them. Whatever the controversy of the past, I am sure the work force will continue to give the project their very best, as they have up to now.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Given that it will be significantly cheaper to build the “cats and traps” into the two aircraft carriers during construction, will the Minister confirm that when working up its plans, the MOD intends to work from the assumption that that is how it will be done?
Peter Luff
The hon. Gentleman is a doughty advocate for his constituents and for this particular project. All that I can tell him at this stage is that work has begun to consider the optimum means of delivering that capability, as a result of our decision to change to the much more capable carrier variant of aircraft. That includes considering the type of system, the cost, the procurement route, the delivery date and whether both ships should be converted. We are at a very early stage, and all I can say to him is that he should carry on pressing.
Mr David Hamilton (Midlothian) (Lab)
17. What assessment he has made of the likely effects on the future of military bases in Scotland of the redeployment of service personnel stationed in Germany.
The Secretary of State for Defence (Dr Liam Fox)
The strategic defence and security review has set the aim of returning half our personnel from Germany by 2015 and the remainder by 2020. We are now assessing where in the UK those personnel will be located but no decisions have yet been made.
Mr Hamilton
I thank the Secretary of State for that response. Could I suggest to him that, when the troops come back from Germany, and with Scottish regiments currently garrisoned in England, it would make sense to look at Scotland as a garrison base? He knows it makes sense; it is the right thing to do.
Dr Fox
The hon. Gentleman can take that as one of the early submissions in the basing review that is being undertaken. The review will be for the Ministry of Defence to determine what makes the most sense in terms of the structure of our armed forces, in terms of where they are based according to where they need to train and operate from and in terms of ensuring value for money for the British taxpayer.
Angus Robertson (Moray) (SNP)
Will the Secretary of State confirm that any takeover of RAF bases by the Army will take a number of years, so we will still see massive economic and social dislocation in Moray? What concrete assistance has the Ministry of Defence already delivered to the Moray taskforce and how much assistance is it planning to deliver in the future?
Dr Fox
The ultimate impact, of course, will depend on the future of Lossiemouth, and no decision has yet been taken. However, I reiterate what I said to the hon. Member for Midlothian (Mr Hamilton): my job as Secretary of State, and the job of Ministers, is to ensure that our basing makes sound military sense. If there are other implications—regional implications or economic and employment implications—that go wider than the Ministry of Defence, that has to be taken into account by Her Majesty’s Government as a whole.
Mr James Gray (North Wiltshire) (Con)
The Secretary of State and I are both Scots, and of course we would like the troops to return to Scotland, but does he not agree that RAF Lyneham has a stronger case than anywhere in Scotland?
Dr Fox
My hon. Friend can take that as the second submission to the basing review. One of the general points that I would make to him is that when the Army comes back from Germany, as my hon. Friend the Member for Chelsea and Fulham (Greg Hands) mentioned, there will be considerable long-term savings to be made, but we will need to have accommodation, to bear in mind bases that currently have accommodation and to assess what the cost would be of upgrading that accommodation to ensure that those bases could be utilised.
Nadhim Zahawi (Stratford-on-Avon) (Con)
18. What steps his Department is taking to increase exports of military equipment.
Mr Howarth
I thank hon. Members for that welcome.
This Government has made defence exports a priority. In the SDSR we said:
“we will…promote defence and security exports for good commercial reasons and where this will build capacity of our partners and allies, increase interoperability, potentially reduce our own defence acquisition costs, and maximise UK industry’s comparative advantage in key technologies, skills and know-how, without risking the proliferation of sensitive technologies critical to the UK’s military edge.”
All Ministers are encouraged to play their part in promoting responsible defence exports and my right hon. Friend the Prime Minister has led the way in that regard.
Nadhim Zahawi
One of the ways to rebalance the economy is to promote exports of important hubs, and defence is an important industrial hub. I am very pleased to hear that the Indian Government are getting close to concluding that the Typhoon is the fighter that they want. Will the Minister say something about that order and how we are promoting further defence exports?
Mr Howarth
We are delighted to read the reports in The Sunday Telegraph—they must, therefore, be entirely accurate—that the Indian Government have found that the technical superiority of the Typhoon is overwhelming, and we of course share that view. We are doing all we can in conjunction with our partner nations to secure that order. In this case, the German Government are leading with the Indians, but I am very hopeful that when my right hon. Friend the Secretary of State for Defence visits India, we can further promote the case of the Typhoon.
Stephen Phillips (Sleaford and North Hykeham) (Con)
T1. If he will make a statement on his departmental responsibilities.
The Secretary of State for Defence (Dr Liam Fox)
My departmental responsibilities are to ensure that our country is properly defended now and in the future, that our service personnel have the right equipment and training to allow them to succeed in their military tasks and that we honour the military covenant.
Stephen Phillips
My right hon. Friend will be aware of the considerable concern expressed by a number of commentators about the capability that will be lost to the Royal Air Force with the cancellation of the Nimrod MRA4 programme. Will he tell the House what steps will be taken to ensure that that loss of capability does not adversely affect our national security?
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
I must honestly say to the House that this was one of the most difficult decisions we were forced to take as a result of the mess in the national finances and the grossly overheated MOD budget that we inherited. Since the withdrawal of the Nimrod MR2 in March, the Ministry of Defence has mitigated the gap in capability through the use of other military assets, including Type 23 frigates, Merlin anti-submarine warfare helicopters and Hercules C-130 aircraft, and by relying, where appropriate, on assistance from allies and partners. That was originally assumed to be a short-term measure. We are now developing a longer-term plan to mitigate the impact of cancellation on our continuing military tasks and capabilities.
Mr Jim Murphy (East Renfrewshire) (Lab)
Regardless of what side of the House we are on, we are all very concerned about this weekend’s reports of the smuggling of highly enriched uranium in Georgia and other parts of the Soviet Union—[Interruption.] I mean the former Soviet Union. We know there is sometimes only one step between organised criminals and global terrorists. In the light of those reports, can the Secretary of State guarantee that any UK-funded projects to combat the proliferation of, or trade in, chemical, biological and nuclear material will have their funding protected through this spending review period?
Dr Fox
I could not be in greater agreement with the right hon. Gentleman. It is easy to forget that there has been a great deal of nuclear material out there. Not only does that still pose a threat to global security, but the development of new nuclear weapons by countries such as North Korea and, soon, Iran, which is attempting a programme, presents us with a massive threat. It is essential that programmes that give this country protection are themselves protected.
Sajid Javid (Bromsgrove) (Con)
T3. The Government are right to focus on the cyber-threat facing our nation. Fortunately, in Britain, we have many home-grown technology companies, including in my constituency. Does the Minister agree that, in the interests of our national security and our national economy, we should prioritise the use of these domestic companies to the fullest extent?
Peter Luff
I am delighted to agree with my hon. Friend and parliamentary neighbour. The strategic defence and security review identified cyber-risks as one of the four tier 1 risks to national security, pledged additional funding for investment in this area of capability and said that partnership with industry will be key to ensuring value for money. It is also a theme that we are exploring in the Green Paper on defence industry and technology policy, which has been extended to include security, and I would be delighted to visit the companies in my hon. Friend’s constituency of Bromsgrove at some stage in the future, if he would find that helpful.
Mrs Linda Riordan (Halifax) (Lab/Co-op)
T2. More than two thirds of defence experts think that the defence review was a lost opportunity. Does that not prove that the review lacks strategy and was rushed to fit the needs of the spending review, rather than the needs of the armed forces?
Dr Fox
The defence review was carried out after the National Security Council decided upon an adaptive posture. However, we inherited budgetary constraints that we would rather not have had, and had the Labour party not left us with a toxic economic legacy as well as an overspent MOD budget, we might take some lessons from Labour Members.
Jake Berry (Rossendale and Darwen) (Con)
T6. In the light of the forthcoming NATO summit in Lisbon, can my right hon. Friend update the House on what proposals we will be putting forward to ensure that NATO is modern and fit for purpose?
The Parliamentary Under-Secretary of State for Defence (Mr Gerald Howarth)
As my hon. Friend would expect, given that the United Kingdom is being rigorous in making every penny count in our own defence budget, we will ensure that NATO’s coat is cut according to its cloth, and we are expecting it to do that. My right hon. Friend the Secretary of State has been at the forefront of the campaign to reduce the number of people in NATO to about 9,000, and we hope very much that we can reduce the number of joint force command headquarters from nine to two, thereby saving money and making NATO more efficient.
Hugh Bayley (York Central) (Lab)
T4. This morning, I dedicated a bench in a park to Trooper Ashley Smith of the Royal Dragoon Guards, who died in Afghanistan in June. He was a brave and selfless young man, and a good soldier, and I know that the Secretary of State and his Ministers will join me in offering their condolences to his family. I would like to pass on two things that his family said to me this morning: first, despite their grief, they think about the soldiers still in Afghanistan and want to ensure that they get all the equipment they need, and secondly they support the Government in their strategy to create conditions so that, within the life of this Parliament, our troops can be brought home.
Dr Fox
I am extremely grateful to the hon. Gentleman for the points that he has made, and I am glad to echo the tribute to Trooper Ashley Smith. I am also grateful for the sentiments expressed by his family.
As the whole country heads towards Remembrance Sunday, this is an opportunity to remember that it is not just the sacrifices of the past that we are commemorating, but the sacrifices being made today. It is essential not only that this country supports our troops, but that we support their mission, because that is what they are asking us to do. It is important for the morale of those serving that we do so, but it is also important for the peace of mind of the families who have lost loved ones to know that their sacrifices were not in vain.
Mark Menzies (Fylde) (Con)
T7. I would like to thank the Secretary of State for including a UCAV programme—a programme for unmanned combat aerial vehicles—in the SDSR, which is important for jobs in my constituency. Will he say when he will be in a position to give the House more details on the UCAV programme?
Peter Luff
There are two aspects to this. First, there is the future of the fixed-wing sector strategy, which we will be consulting on as part of the Green Paper and White Paper process. There is also the question of UK-French collaboration on unmanned combat aerial systems of the kind that my hon. Friend talks about. The declaration that accompanied the Anglo-French summit last week made it clear that we would establish a joint assessment of
“requirements and options for the next generation,”
which are expected from about 2030 onwards.
Rosie Cooper (West Lancashire) (Lab)
T5. Could the Secretary of State share with us his assessment of the impact of service personnel reductions on the UK’s military capability?
Mary Macleod (Brentford and Isleworth) (Con)
T8. As we approach Armistice day and pay tribute to all those who gave their lives for this country, let me say that I will be attending the opening of the redeveloped Chiswick memorial homes. What message can I give our veterans about what this Government will do for them?
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
It is indeed Armistice day on Thursday, and the plethora of poppies around this Chamber are not just for window-dressing, but show that people in this Chamber care about Armistice day and the sacrifice that past generations have made. The message that I would give to veterans is that we will certainly look after our ex-service personnel as best we can. We are pledged to reinvigorate the military covenant, and if my hon. Friend watches this space, as it were, she will see that happening pretty soon. Finally, I understand that the Under-Secretary of State, my hon. Friend the Member for Aldershot (Mr Howarth) will be attending the event in Chiswick, and I hope that it goes extremely well.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)
What estimates has the Minister made of the total financial cost of military base closures in Germany?
Dr Fox
As I indicated to the House earlier, we are currently looking at the full implications of bringing the Army back from Germany. There will undoubtedly be some up-front costs, depending on the pace of those forces coming back, but there will be considerable savings, to be set out over the longer period. We will set those out when we conclude the basing review in six months.
Bob Russell (Colchester) (LD)
T9. I thought that the Minister’s response to the question from my hon. Friend the Member for Solihull (Lorely Burt) was lacking in political direction and conviction. Bearing in mind that Her Majesty the Queen, as the Head of State of both Australia and New Zealand, has graciously authorised the award of a national defence medal, can we not have that in the United Kingdom for those who have served?
Mr Robathan
We are certainly never lacking in direction. What I would say is that when the Queen is dealing with matters in New Zealand and Australia, she is the Queen of New Zealand and Australia, and that does not necessarily mean that we will follow exactly what happens in New Zealand and Australia. We are reviewing matters, but as I said before, campaign medals are awarded for the deprivations of campaigns and the extra need to recognise people for their hard work on campaigns. That is not to denigrate service in barracks, but it is a very different thing, if I might say so.
Mr Tom Watson (West Bromwich East) (Lab)
The Secretary of State has talked about the difficult decisions that he has to make on cutting civilian and military jobs in his Department. In that light, can he give an assurance to the House that he has no intention of employing a photographer, stylist or personal film-maker?
Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)
T10. Aid agencies in Afghanistan have expressed concern that offering cash rewards in exchange for information puts Afghans, their families and their communities at risk from anti-Government groups. Can the Minister assure me that this practice is not being followed by British commanders?
The Minister for the Armed Forces (Nick Harvey)
In operations in the environment of Afghanistan, our forces must of course work in co-operation with both Afghan authorities and local people to obtain information that is essential to the security of our personnel and others working in the international security assistance force. I am aware that any form of co-operation with ISAF may put people in danger of reprisals, but clearly we rely heavily on such information.
Huw Irranca-Davies (Ogmore) (Lab)
During the second world war, many thousands of young women were conscripted into service in royal ordnance factories. There were 45 throughout the United Kingdom, and many in Scotland, the north-east of England and Wales. Will the Secretary of State agree to meet a small delegation of MPs to discuss appropriate recognition of those young women, many of whom lost their lives or suffered grievous injuries when filling explosives?
Dr Fox
I can certainly assure the hon. Gentleman that one of the ministerial team will undertake such a meeting. His point is important. In any conflict in which this country finds itself, it is not only those in the military who make sacrifices, but often those in the civilian population. In Afghanistan today, we are seeing probably the highest level of civilian support for the military that we have ever seen in any conflict. I pay tribute to all those civilians who add to the national security of this country, and to their sacrifices in its name.
Mr David Ruffley (Bury St Edmunds) (Con)
I have the privilege of representing RAF Honington, which is home to the RAF Regiment, and Wattisham, which is home to the Army Air Corps. Will my right hon. Friend speak to the Secretary of State for Health to ensure that more mental health provision is directed to areas of this country where the highest proportion of servicemen and women and their families live?
Dr Fox
As part of the comprehensive spending review, we had a financial deal with the NHS to transfer NHS funding to the MOD for precisely that reason. As I told the House earlier, one of the ways that we must measure how civilised and decent a society we are is how we deal with those with mental illness, whether in the armed forces or outside. As a society, we have a lot to do to remove some of the taboos surrounding that, but if we can make a start in the armed forces, that would be great. Indeed, were we to get to the end of this Parliament and those in the NHS were crying out for the same quality of mental health care as those in the armed forces, that would indeed be a triumph.
Jim McGovern (Dundee West) (Lab)
Will the Secretary of State tell the House what assessment has been made of the outcome of the strategic defence and security review on companies and organisations that are dependent on MOD contracts? I am thinking of Remploy, but I need not go into the history of its origins. A Remploy factory in my constituency depends almost entirely on MOD contracts, and its employees have made representations to me. What assurances can he give my constituents?
Dr Fox
I am extremely aware of the dependence of a large part of the economy on the MOD’s budget. Precisely because we are so aware of that, we will produce a consultation document in the near future, which will look at the supply chain as it relates to the MOD and its budget. The Government’s aim is that small and medium-sized enterprises are given every opportunity to help us to shape the regulatory framework and the skills base required so that we can ensure that they are given every possible help to remain in business.
Mark Lancaster (Milton Keynes North) (Con)
From 13 December Camelot intends to change its rules, which will prevent many members of our armed forces who are serving overseas from playing the national lottery. It is a simple pleasure, and as they remain UK taxpayers, will the Secretary of State look into the matter and attempt to persuade Camelot to change its mind?
Mr Robathan
This is news to us. I assure my hon. and gallant Friend that I will certainly look into it and let him have a proper answer when I have done so.
Angus Robertson (Moray) (SNP)
The Secretary of State will be in Oslo this week for meetings with Nordic Defence Ministers. How will he convince them that he is serious when he has just scrapped the UK’s maritime reconnaissance fleet, is thinking of moving the joint combat aircraft away from the north of Scotland, and is considering closing both airbases closest to Norway?
Dr Fox
I shall point out our commitment to the submarine programme and to the aircraft carrier programme, and explain how we intend to ensure that across the range of capabilities the United Kingdom is a sound and secure NATO partner. The purpose of the meeting in Norway is to ensure that we deepen our bilateral relationship with Norway, that we create a NATO entity that Finland and Sweden feel a little more comfortable with, that we give further security to article 5 in the Baltic states by being a nuclear power as part of that grouping, and that as a NATO grouping we are better able to deal with regional disputes with Russia.
Duncan Hames (Chippenham) (LD)
The Secretary of State acknowledges that civilian redundancies might impact on personnel in Corsham in my constituency. Given their deep expertise in defence communications technology, will he consider opportunities for their redeployment as part of the Government’s programme for cyber-security?
Dr Fox
We are indeed looking at all opportunities to improve our arrangements for cyber-security. We have for the first time created a cross-departmental cyber-budget, for example. We will be looking inside the Ministry of Defence to see how we can better prepare ourselves not for the threats of the future but for the threats that we already face, given the level of cyber-attacks already occurring in this country and in those of our allies.
Mr Speaker
Order. As usual at Question Time, demand has exceeded supply, but we must now move on.
Departmental Business Plans
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Cabinet Office (Mr Oliver Letwin)
With permission, Mr Speaker, I wish to make a statement on today’s publication of departmental business plans. When we formed the coalition in May, we committed to a programme of fundamental structural reform that would change the nature of government. Of course, I recognise that it was the aim of the Labour Government to improve public services, to get value for money and to deliver their stated aims. The problem lay in the fact that, to achieve those laudable aims, they set up a system of bureaucratic accountability in which almost everything was judged against a set of centrally mandated, politically determined performance targets. They then used a succession of short-lived bureaucratic interventions to try to make people fulfil the targets.
Alas, the evidence of the past 13 years shows that targets and short-term bureaucratic interventions simply do not work. Despite all the new learning strategies in schools, the gap in educational achievement between the richest and the poorest widened; despite all the NHS targets, cancer survival rates in Britain were among the lowest in Europe; despite all the police form-filling and bureaucracy, there were more than 100,000 incidents of antisocial behaviour every day; and, as the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) has famously remarked, the money ran out.
So, we have argued for a power shift that will take power away from Whitehall and put it into the hands of people and communities, rebalancing the relationship between the citizen and the state. We recognise that Britain can make progress only if the Government establish frameworks that help people to come together to make life better. We have also argued for an horizon shift—[Hon. Members: “Hooray!”] Opposition Members will hear a lot of that term over the next four years, so they should get used to it. We have argued for an horizon shift, moving away from short-term bureaucratic interventions towards governing for the long term, establishing the right frameworks of incentives in the public services, sorting out the public finances and investing where it counts to create sustainable economic growth.
The publication of our departmental business plans is a significant part of achieving both that power shift and that horizon shift. In June, the Prime Minister launched a series of draft structural reform plans, in which Whitehall Departments publicly set out their reform priorities and the actions that they will take to achieve them, with a specified timetable. In July, August, September and October, we issued monthly reports on the draft plans, setting out the actions that had been completed or started, and giving explanations of any missed deadlines. Today, taking into account the results of the spending review, we are publishing the final departmental plans, setting out the vision, priorities and structural reforms of each Department.
These plans are a key part of our transparency agenda. They do not set out hopes for what we might achieve by micro-managing all the public services. They set out what we need to do, to manage the Government properly. That is, after all, our business, and we expect to be judged on whether we do it properly. The publication of the plans will bring about a fundamental change in how Departments are held to account for implementing policy commitments, replacing the old top-down systems of targets and central micro-management with democratic accountability. Every month, Departments will publish a simple report on their progress towards meeting their commitments—[Interruption.]
Mr Speaker
Order. In a way, it is a good thing that the House is in a jocular mood. I realise that the right hon. Gentleman is no longer a philosophy tutor, but I feel sure that he is accustomed to a slightly more cerebral response and deferential hearing than he is getting.
Mr Letwin
I am grateful, Mr Speaker, for that help, but I have to say that I had not anticipated anything better than I received, because Labour Members presided over a Government who acted like a magazine and we intend to preside over a Government who act like a Government. That is a profound difference and I recognise that it is very uncomfortable for Opposition Members.
Before I go on, I should correct myself as I believe I slipped into referring to 100,000 incidents of antisocial behaviour when I meant 10,000. I apologise to the House. That is an example of transparency and straightforwardness, which I hope will be replicated as we move forward.
In addition, the second part of each business plan explains how Government will give people unprecedented access to the data they need—in a simple, easily accessible form—to scrutinise how we are using taxpayers’ money and what progress we are making in improving society through our reforms. These transparency sections of the plans are being published in draft to allow Parliament and the wider public to say whether each Department is publishing the most useful and robust information to help people hold each Department to account.
Select Committees will, of course, play a vital role in the task of holding the Government to account. My Cabinet colleagues are therefore contacting Select Committee Chairmen to inform them of the new processes and to invite them to discuss the business plans in more detail in their Committees.
Once the reforms described in these business plans are fully implemented and the transparency reports are fully in place, we will have a real people power revolution— where people themselves are equipped with the power and information necessary to improve our country and our public services, through the mechanisms of democratic accountability, competition, choice and social action. I commend this statement to the House.
Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)
I start by welcoming the new Minister for milestones to the House. I could tell that he was the right Minister for this job when I received his statement three hours before he stood up. I thank him for that and urge the same habit on his hon. and right hon. Friends.
I also welcome the thrust of the Minister’s statement. When Labour came to power in 1997, we discovered that the Conservatives had run public services into the ground. Now, thanks to Labour’s investment—and, yes, Labour’s management—crime is now down 43%, hospitals have the shortest waiting lists on record and our schools and teachers are delivering record results for our children aged 11, 16 and 18, with 70,000 a year achieving good results.
The question was always going to be: what was the way forward after Labour’s job of repair? I am glad that the Government have seized on some of the principles set out in our White Paper, “Smarter Government”, published last year. It was described at the time as
“a radical dispersal of power to patients, parents and citizens”.
Today, however, the Minister tells us that his first step is to make departmental plans transparent. May I tell him that the only revolution he has delivered this afternoon is to make bad plans transparently bad plans? There will be no power shift if he is going to destroy the power of NHS patients to be treated within 18 weeks; the power of parents to get one-to-one tuition for their children if they are falling behind at school; the power of citizens to summon police officers to talk about issues of local concern.
I have only one question: if the Minister is serious about improving government—and I believe he is—will he review the ending of basic rights to high-quality public services across this Government? When it comes to public services, the public want guarantees, but all he has offered them this afternoon is an online gamble.
Mr Letwin
First, I should welcome the welcome. As I think the right hon. Gentleman knows, I am one of the longest-term proponents of consensus not only between members of the coalition but across the whole House. If the right hon. Gentleman is in effect saying that the Opposition will now back the general principle of having a clear timetable for actions, input measures, outputs—
Mr Letwin
Mr Speaker, perhaps you will forgive me if, to avoid further confusion in the hon. Gentleman’s mind, I explain the difference between a target and a milestone. A target is an effort by a Government, of which there were many under the previous Government, to determine what the whole of the public service would achieve through micro-management. Such targets were often not met. What we are talking about are actions that lie under the direct control of Government and which it is absolutely right that we should manage ourselves.
To return to the point I was trying to make, if the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) is welcoming the idea that we should set these things out clearly and he is going to sponsor that as an approach to government, that would be in the interests of the nation, because we could continue that process over many years and that would be a huge advance.
The right hon. Gentleman asked whether we can achieve a power shift if we do not do certain things, and he mentioned citizens talking about policing with police officers.
Mr Letwin
Yes, summoning police officers to talk about that. We propose something very different, which goes beyond that. Yes, we will have beat meetings, but we will also allow people to vote for police commissioners so that they actually have accountability. That is what we mean by choice and power, as opposed to the mere window dressing of the ability to talk.
Tony Baldry (Banbury) (Con)
May I make a suggestion? My right hon. Friend says in his statement that every month Departments will publish a simple report on the progress they have made towards meeting their commitments. On the day each month when ministerial colleagues from different Departments come to the House to answer oral questions, might they not also make a written statement that all of us can see? I confess that I find it difficult to keep my own website up to date, so watching the websites of 22 Government Departments will be quite challenging. However, we are all focused once a month on each Department’s oral questions, and a written statement coinciding with that would be very helpful.
Mr Letwin
As so often, my hon. Friend makes an extremely valuable suggestion, which I shall discuss with my right hon. Friend the Prime Minister and others. I see no reason whatever that we should not be able to do that to assist the House, at the same time as we assist the general public by publishing the information on the website.
Mr Gerry Sutcliffe (Bradford South) (Lab)
Will the Minister explain what the process will be when the public disagree with a ministerial decision that changes the business plan? That question comes to mind because of the decision to cut school sports partnerships, which will affect sports provision in schools throughout the country. The public have not had the opportunity to have any say on that.
Mr Letwin
That is a very sensible question, and I am happy to explain that to the hon. Gentleman. The point of laying out these plans is so that people can see what we intend to do. Manifestly, as we move through time, external circumstances may change and decisions may be taken to change this or that—I hope not very much, but that could occur. Where it does, we are forcing ourselves to explain that, because it will become apparent—in the House in written statements, as my hon. Friend the Member for Banbury (Tony Baldry) suggested, and also on the website—that something we said we would do by a certain date we are not doing because we are doing something instead. We will have to explain that, and Select Committees and others will be able to interrogate us on it. That is what I mean by transparency.
Mr Edward Leigh (Gainsborough) (Con)
Is not the danger that this “Yes Minister” Sir Humphrey language of horizon shift will disguise the real need for change? We should not just publish more reports that will go straight into the waste paper bin. We should, for instance, give professionals in our schools real power to manage the schools in the way they want, in hiring and firing staff, setting the curriculum and selecting pupils if they want. That would produce real change, not just more words from Whitehall.
Mr Letwin
I very much agree with my hon. Friend that it is only by making the kinds of changes that he describes that we can really improve public services. That is why I have the good news for him that under the programme laid out in the Department for Education business plan my right hon. Friend the Secretary of State for Education will do exactly what my hon. Friend requests. That is why we have a programme of academies and free schools which gives those kinds of powers locally to the professionals on the ground. By doing that we enable parents and pupils, by choosing the schools of their own desire, to create real competitive pressure for excellence in the system. Combining that with the efforts to create a proper pupil premium means that the least advantaged will be most advantaged in our system, and the combination of those effects will be to give excellence and improvement for all.
Mr Kevin Barron (Rother Valley) (Lab)
The Minister says that Departments will publish a simple report on their progress towards meeting their commitments. What will happen if those commitments are often not met?
Mr Letwin
What will happen is a series of things that are inconvenient for the responsible Ministers, rising to something that is rather more than inconvenient. In the first place, a report will be made, which will be available to everybody—no Minister likes to see such a thing appear in public. Secondly, the Minister involved will find himself having a discussion with my right hon. Friend the Chief Secretary and me to explain what has occurred—[Interruption.] I do not know whether Labour Members want to know about this, but I am trying to explain it. The second thing that will happen is that the Minister will meet the Chief Secretary and me, and the permanent secretary will have a conversation with the head of the civil service. Finally, if the problem is still not resolved, the Secretary of State in question will have a meeting with the Prime Minister and the Deputy Prime Minister. This is a serious set of incentives; if one thinks about what it was like under the previous Government, or any previous Government, one realises that Ministers do not wish to go through that process and will therefore try to meet their objectives.
Robert Halfon (Harlow) (Con)
As a member of the Public Administration Committee I welcome the plans to shift some of this on to Select Committees. Will my right hon. Friend set out how the reports could be judged by those Committees and how their powers could be increased, so as to increase further the power of the legislature over the Executive?
Mr Letwin
My hon. Friend is absolutely right that the Select Committees play a vital role in that respect. This approach puts vastly more power in the hands of the Select Committees, because the biggest obstacle to their power is, of course, lack of information—and this approach opens the whole thing up. This is not just a question of the structural reform plans and the dates, on which of course Committees can interrogate, as they can interrogate explanations when things go wrong; it is also about the details of the input costs—what we are putting in—the things that have been achieved on the ground and the outcomes, by which I mean how good it is for the final customer. That gives a Select Committee the ability to haul the relevant Secretary of State up before it and say, “Look, you said you were going to do this.” The Committee could then say: “You did not do it”; “You did it, but at a greater cost than you said”; “You did it at the cost but it did not turn out to produce things”; or “It did produce things but the outcomes were not good enough.” That is a very powerful interrogative tool. Hon. Members may ask why we would subject ourselves to this. The answer is because we think that it is how we will produce a better Government.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
A very strong partnership between central and local government, with targets and with dedicated funding, has brought about a vast reduction in the number of people killed on our roads. Does this statement mean that such a successful partnership, with its targets, will be abandoned?
Mr Letwin
No. As I think the hon. Lady knows, because she has great expertise in this area, one of the decisions that we made centrally during the spending review was to focus a very large part of total capital investment on the roads. That was done to reduce congestion, improve safety and achieve the kind of goals that she was describing. These plans are consistent with the spending review and with that focus on the need to improve our transport systems.
Mr Julian Brazier (Canterbury) (Con)
Does my right hon. Friend agree that the only way of achieving a movement of power from the top to the sharp end and a movement of the money from the Government monopoly out to the voluntary sector, which can very often deliver better value, is by very strong and transparent political direction?
Mr Letwin
Yes, my hon. Friend is of course absolutely right. Part of the purpose of these plans is to ensure that we hold ourselves to fulfilling that vision. We recognise that there will be all sorts of pressures on the Government to recentralise, to re-control and to lunge for immediate interventions that will ostensibly achieve a particular result, and we know that we need to be kept to the straight and narrow of the vision of the transfer of power in this country from the centre out to the people.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
Does the Minister not agree that today’s trumpeting of the transparency agenda will ring hollow in Wales considering the actions of the Department for Culture, Media and Sport on S4C? The decision to fund the channel in future via the BBC was made without informing the S4C authority, the Welsh Government or even the Secretary of State for Wales on the eve of the comprehensive spending review.
Mr Letwin
No, I do not accept that at all. This set of departmental plans will enable people to see on the face of it what we are going to do and when we are going to do it. Of course, there will be times when there are decisions involved in those plans that particular hon. Members do not like and there will be debate. We welcome that, we accept that and we are providing the means for people to have such debates.
Miss Anne McIntosh (Thirsk and Malton) (Con)
May I welcome the opportunity for Select Committees to scrutinise the business plans? This year in particular there is a lacuna with the annual departmental reports not being published. What will be the relationship of the business plan to such annual departmental reports in future?
Mr Letwin
These business plans are a vastly superior document to the annual reports. Of course, there will continue to be the publication of the accounts of each Department, but I hope my hon. Friend will forgive me the indelicacy if I say that on some occasions the previous Government’s annual reports from particular Departments contained a load of guff. One could not tell what the thing was about. I remember in opposition desperately struggling to find out what particular Departments were doing, and all I could get was a load of jargon. In these reports, one will be able to see the information—we are going to this, we will do it by this time, and this is the effect that we expect it will have. That is a jolly useful thing.
Michael Connarty (Linlithgow and East Falkirk) (Lab)
I am afraid that the Minister will have to go back to his drawing board for me. It would appear that he is so close to the ground that his horizon is very short indeed, and he might want to raise the stakes. On the point made by my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), in local government there is the power to vote people out on close-to-the-ground programmes. What has he put in this plan to give local government real power to deliver, apart from a promised freeze in their council tax?
Mr Letwin
I have such good news for the hon. Gentleman that it might lead to his crossing the Floor. Everything that he could desire is about to come in the localism Bill. We are going to give local government eye-watering increases in power that are stipulated in these proposals and that will be seen when the localism Bill is introduced. I hope that the hon. Gentleman will consistently argue and vote with us as we transfer powers of competence and powers of retention of business rates, as we transfer powers over planning to local neighbourhoods, as we transfer powers to keep council tax and as we transfer a series of additional powers to new mayors. The hon. Gentleman will have a dream day when he comes to grips with the localism Bill.
Mr David Nuttall (Bury North) (Con)
In view of the fact that removing old regulations is necessary to boost economic growth, will the Minister confirm that, if a Department introduces a new regulation, it will be required to publish clearly which old regulation has been repealed?
Mr Letwin
My hon. Friend can also have an early Christmas. We have instituted from 1 October the one in, one out rule. I should explain that it is more powerful than the rule that a regulation should be eliminated when a new one is introduced—it is that a regulation of equivalent cost to business should be eliminated, or indeed a collection of them with an equivalent cost to business. I want to take this opportunity to tell my hon. Friend and the House that since we introduced the one in, one out rule, the large flow of domestic regulation that was crossing my desk and others before that has somewhat diminished. Since 1 October, there has been one proposal.
Mr Michael McCann (East Kilbride, Strathaven and Lesmahagow) (Lab)
May I add my name to the list of Members who are mesmerised by the use of the language of horizon shifts? On the question of monthly reports, the Government have announced that about 500,000 public servants will lose their jobs under their plans. How many of those jobs will be saved in order to support the initiative that the Minister has announced today?
Mr Letwin
The first thing that I should say is that the Government have not made any such announcement; the Government accept the Office for Budget Responsibility’s forecast about the net effect on public sector employment. That does not mean anything like that number of current employees losing their jobs—nothing of the kind. Secondly, of course, had this initiative been introduced now by a Labour Government —to judge by what the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) said it might have been, and that is a delightful prospect—it would have been accompanied by various things. Large numbers of consultants would have been hired to set up complicated websites and there would have been large reviews, huge expenditure and so on—and probably great expenditure on advertising. The total that we have spent on this exercise to date is zero. We have not employed a single consultant, we are constructing the websites ourselves and we are not advertising, because we are a Government and not a magazine.
Julian Smith (Skipton and Ripon) (Con)
Let me invoke the spirit of “Dragons’ Den” and ask my right hon. Friend which Department has done the best business plan?
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
I welcome greater transparency in government. However, is the Minister aware that no business plan for the Law Officers’ Department is available on the transparency website, and that members of the public cannot see details of ministerial and special adviser meetings, hospitality, gifts and foreign travel for the law officers? As shadow Solicitor-General, I should like to hear why the Solicitor-General and Attorney-General appear to be exempt from such requirements?
Mr Letwin
I am grateful to the hon. Lady for her general welcome. I shall ask my right hon. and learned Friend the Attorney-General to look into the declaration, which should apply universally. The reason there is no structural reform plan for the Law Officers’ Department is that we do not intend to bring about any structural reforms in the Department, because it is not possible to give its powers to someone else. It is one of the irreducible minima of Government activity, and it will continue with business as usual. These are plans not for business as usual but for fundamental structural reforms. Therefore, the hon. Lady will see no reference to the Law Officers’ Department.
Nadhim Zahawi (Stratford-on-Avon) (Con)
Does my right hon. Friend the Minister agree that the greatest challenge to the coalition reforms is motivating people to behave in the right way? One of the ways in which we get people to compare and contrast how the coalition is delivering is by having this sort of transparency.
Mr Letwin
I totally agree with my hon. Friend. It is all about people and the choices that they make. The fundamental failing of the method of doing business that prevailed for many years was not that it was ill-intentioned, because it was well intentioned, nor that it lacked energy, because it had a good deal of energy, but that it did not look into the reaction one can get from individuals when one does certain things in relation to them. This whole programme is founded on the presumption that when we trust people and give them power and make them accountable, they do the right thing, and that is what we are trying to do here.
Kevin Brennan (Cardiff West) (Lab)
I thank the right hon. Gentleman for his statement, but will he have it translated into plain English and place a copy in the Library of the House? A milestone tells someone how far they have to go to reach a target destination, even if it is on a moveable horizon.
Mr Letwin
The hon. Gentleman’s plain English is wonderful to behold. I do not think that anyone has ever accused me of being any good at speaking English [Laughter.] I do not intend to try to cure my ways now. I am trying to assist this Government to carry out the most important programme of structural reform that has happened in this country for many years so that they can improve our public services and make life better for our citizens, which matters an awful lot. The point about horizon shift is that it is serious. The previous Government caught themselves repeatedly on the hook of trying to achieve a result on Wednesday that they could show the public by Thursday. Often, the upshot was to achieve nothing whatsoever. We are saying that we will try to achieve things in the long term without trying to achieve publicity goals on the way, which is an important change.
Mary Macleod (Brentford and Isleworth) (Con)
Does my right hon. Friend agree that if we want to increase numeracy and literacy standards in our schools and reduce the gap in educational attainment between the rich and poor, we need to reduce bureaucracy, micro-management and targets and increase real local accountability?
Mr Letwin
My hon. Friend is completely right, and that is the plan that is set out here. It applies not just to schools, but to hospitals and many of our other public services. The only way in which we can improve such services is to give the professionals the ability to get on with the job without micro-managing them through bureaucracies, and to hold them to account for the actions that they take and the successes that they achieve.
Tristram Hunt (Stoke-on-Trent Central) (Lab)
Will the Minister explain how he squares taking power away from Whitehall and putting it in the hands of peoples and communities with the Government’s plan to increase the number of Ministers by 10% relative to the size of the legislature, which is the representative of peoples and communities? Is this not the old Tory centralist state at work?
Mr Letwin
The hon. Gentleman is clearly an apprentice of the hon. Member for West Bromwich East (Mr Watson), because that was the most marvellous manipulation of statistics. We propose to reduce the number of Members of Parliament, but the hon. Member for Stoke-on-Trent Central (Tristram Hunt) describes that as an increase in the proportion of Ministers to the number of Members of Parliament. That is a very strange way of describing the situation. We are keeping the number of Ministers constant in order to ensure that we can impose political will on the machine to get the fundamental reforms that give power out to the people of this country. That goal is far more important than particular numbers of Ministers.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Following on from that question, the Minister has said several times this afternoon that he wants to increase power locally, yet the Government have just published a report on waste that implies that if they want to do something serious, they will need to recentralise powers, such as by forcing primary care trusts to act together and forcing local authorities to act together. Is there not a contradiction in those two things?
Mr Letwin
In brief, no: we are not attempting to do what the hon. Gentleman describes. We believe that by placing the power of commissioning in the hands of general practitioners, by giving GPs and patients genuine choice over where patients go, and by making hospitals accountable on those choices by transforming them into foundation trusts, we can achieve the efficiencies that are needed in our health service through the medium of competition, which leads to the excellence that can be generated when professionals are able to run their own show. We are moving in exactly the opposite direction from that which the hon. Gentleman describes.
Paul Flynn (Newport West) (Lab)
As the only time in nature when horizons actually shift is when a tsunami is on the way, can the House and the country expect to be inundated—the Minister gave an example today—with more bureaucracy, more gobbledegook and more management-speak?
Mr Letwin
I respect the hon. Gentleman for his long work in areas such as drugs, but if he reads the plans he will find that they include serious efforts to change things for the better, such as through a payment by results-based drugs rehabilitation programme, for which, I think, he has long argued. That is not gobbledegook, bureaucracy or micro-management. It says to providers, “You know how to provide and we will pay you if you get people off drugs and back into the mainstream,” and nothing could be more important to the people of our country than that.
Mr Tom Watson (West Bromwich East) (Lab)
I think I understand what the Minister has announced: a series of tough, demanding and transparent moving-horizon, non-target, milestone reports. If he has, I fully support him, but to build on the point made by the hon. Member for Banbury (Tony Baldry), may I point out that publishing those reports on 22 websites will make things almost incomprehensible to citizens who wish to hold the Government to account? It would be better to place them in a single spot—perhaps directgov, the Cabinet Office website or data.gov.uk. Will the Minister also consider placing ministerial diaries and details on special advisers’ hospitality in a single place on the same site?
Mr Letwin
I am grateful to the hon. Gentleman for his brilliant translation. Incidentally, I have no doubt that he understood everything that I said because he understands everything that anyone says—he is very clever. Unfortunately, he is not very well informed because, as a matter of fact, we will enable people to go to a single place to get hold of all this stuff. Moreover, it will be put in a format that will enable people to mash it up and easily produce their own charts, and their own comparisons and analyses of everything that we issue. I anticipate that we will make more things transparent, including contracts for Government Departments right across the board, as well as all expenditure down to £25,000—and in local authorities down to £500 per item.
Points of Order
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Hilary Benn (Leeds Central) (Lab)
On a point of order, Mr Speaker. Following your reporting earlier of the certificate issued by the election court in the case involving the Oldham East and Saddleworth constituency, as the case raises important questions it would be sensible for the House to pause before considering a by-election writ, for two reasons.
First, the matter is the subject of continuing legal proceedings by Mr Woolas, as you reported to the House at 2.30, and it seems only proper that the proceedings are allowed to conclude. Secondly—without wishing to stray at all into the details of the case, which we should not do because, as you have ruled, it is sub judice under the terms of the resolution passed by the House in 2001—if the judgment were to be overturned and the former Member were reinstated, but in the meantime we had held a by-election and another Member had been elected, we could end up with two Members of Parliament for one constituency, and that would hardly be desirable.
It seems to me that the prudent and practical course of action is to allow the legal process to be concluded before the House considers the writ.
Mr Speaker
I am grateful to the right hon. Gentleman. He has made his points with great clarity.
The Leader of the House of Commons (Sir George Young)
Further to that point of order, Mr Speaker, and further to the statement that you made at 2.35, we on the Government Benches are content with the sequence of events that you outlined.
Mr Speaker
In a moment. Patience is a great virtue. I could not possibly miss the hon. Gentleman.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Further to that point of order, Mr Speaker. The House will have noted your most helpful statement concerning the finding of the court that the election result in Oldham East and Saddleworth was void. Will you confirm, for the benefit of the House, that that means that there is currently no Member elected here to serve the people of Oldham East and Saddleworth? What assurance can you give the House and the people of that constituency that they will not be denied indefinitely, by untested legal proceedings, the representation to which they are entitled?
Mr Speaker
The hon. Gentleman, for whose point of order I am grateful, essentially raises two points. The answer to his first point is yes, as indicated in my statement when I referred to the need for Mr Woolas to vacate his seat from the date of the report, 5 November 2010. The answer to his second point is that of course I attach a premium, as I am sure the House as a whole will attach a premium, to a speedy resolution of the matter in the interests of Parliament, in the interests of Oldham East and Saddleworth constituency electorate, and in the interests of the country.
It is precisely because I attach such a premium that I thought it would help the House if I caused inquiries to be made of the administrative court as to the urgency with which a judicial review application would be treated. Therefore, I reiterate both for the benefit of the hon. Gentleman and for all Members of the House that I did, indeed, cause such inquiries to be made, and I was advised that the administrative court judge has ordered an expedited hearing of the renewed application. He has done so precisely because he, too, considers it essential that the electorate of Oldham East and Saddleworth should know who is their Member of Parliament as soon as possible. I hope that is helpful to all with an interest in the matter.
Mr Leigh
Further to that point of order, Mr Speaker, and on a more general point, without in any way attempting—because you would rule me out of order if I did attempt—to get into the rights or wrongs of the case, massive constitutional issues are raised by it, which the House should debate. This is the first time in 99 years that a Member has been evicted. It is for the people, not the judges, to evict Members of Parliament.
My worry is that if the judgment is allowed to stand, robust debate during elections will become virtually impossible. People will be terrified of attacking their opponents. For instance, what happens if a minor candidate for the BNP attacks a major party candidate? The latter would be frightened of attacking the former back because he might be disqualified. These are enormous constitutional issues, which we should discuss in the House.
Mr Speaker
I am grateful to the hon. Gentleman. I note his point. Tomorrow he will have served 27 years and five months in the House. Throughout that time he has expressed himself with great force and conviction, and today is no exception. We are grateful to him.
Mr David Winnick (Walsall North) (Lab)
Further to that point of order, Mr Speaker. I am sorry that I did not catch your opening statement, but I have caught up with it since entering the Chamber. I in no way want to mention the details of the case, or defend or otherwise what is alleged, but, as you will no doubt know, the House has always been extremely reluctant to expel anyone. I know that this is not an expulsion made by a decision of this House, but the House has refused to expel Members over the years on the basis that this is not a club, despite what some people might say, and that if someone is elected it should be for the electorate to decide.
There is therefore bound to be concern about whether a court—judges—should decide, and not the electorate. From the moment I heard of the decision, I felt some concern and anxiety that the decision about whether the electorate wanted that particular Member to serve had been taken out of their hands and given to the judges. Therefore, as the hon. Member for Gainsborough (Mr Leigh) said, the question does arise about whether in future circumstances an unsuccessful candidate will use any means to say in effect that what happened during the election was unfair, and to take the issue to the judges.
Mr Speaker
In so far as the latter part of the hon. Gentleman’s point of order appeared to be a question, I hope that he will understand if I say that I will treat it as a rhetorical question. He has essentially raised a point very similar to that of the hon. Member for Gainsborough (Mr Leigh), and done so in earnest. That is respected, but I do not think that I need to respond to it. It is on the record, and that is important.
Ian Murray (Edinburgh South) (Lab)
On a point of order, Mr Speaker. The House will be aware that at the tail end of last week the Business Secretary referred the potential takeover of BSkyB to Ofcom. The reason most Members will be aware of that decision is that it was released to the media. Is it in order for that decision, although very welcome, not to be announced on the Floor of this House?
Mr Speaker
No breach of order has occurred is the straight answer to the hon. Gentleman, to whom I am nevertheless grateful for giving me notice of his point of order. He has put his point on the record. The Procedure Committee is examining the general issue of ministerial statements to the House, and I suggest that he write to the Committee with this example as evidence. He will also know that oral questions to the Department will be answered on Thursday week.
Business of the House
Ordered,
That, notwithstanding the practice of the House as to the intervals between stages of Bills brought in upon Ways and Means Resolutions, more than one stage of the Finance (No. 2) Bill may be taken at any sitting of the House.—(Mr Heath.)
Finance (No.2) Bill
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
17:40 - The House divided: - Ayes: 218 / Noes: 302 - Question accordingly negatived.
18:54 - The House having divided: - Ayes: 213 / Noes: 306 - Question accordingly negatived.
Mr David Hanson (Delyn) (Lab)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss
New schedule 2—Video Game Production—
1 After section 1216 of CTA 2009, insert—
Part 15A
Video Game Production
Chapter 1
Introduction
Introductory
1216A Overview of Part
‘(1) This Part is about video game production.
(2) Sections 1216B to 1216G contain definitions and other provisions about interpretation that apply for the purposes of this Part. See, in particular, section 1216C which explains how a company comes to be treated as the video game production company in relation to a video game.
(3) Chapter 2 is about the taxation of the activities of a video game production company and includes—
(a) provision for the company’s activities in relation to its video game to be treated as a separate trade, and
(b) provision about the calculation of the profits and losses of that trade.
(4) Chapter 3 is about relief (called “video game tax relief”) which can be given to a video game production company by way of additional deductions to be made in calculating the profits or losses of the company’s separate trade.
(5) Chapter 4 is about the relief which can be given for losses made by a video game production company in its separate trade including provision for certain such losses to be transferred to other separate trades.
(6) Chapter 5 provides—
(a) for relief under Chapters 3 and 4 to be given on a provisional basis, and
(b) for such relief to be withdrawn if it turns out that conditions that must be met for such relief to be given are not actually met.
Interpretation
1216B “Video Game” etc
‘(1) This section applies for the purposes of this Part.
(2) “Video Game” includes a game played by electronically manipulating images produced by a computer program on a display screen.
(3) A video game is completed when it is first in a form in which it can reasonably be regarded as ready for copies of it to be distributed to the general public.
1216C “Video game production company”
‘(1) For the purposes of this Part “video game production company” is to be read in accordance with this section.
(2) There cannot be more than one video game production company in relation to a video game.
(3) A company that (otherwise than in partnership)—
(a) is responsible—
(i) for design, programming and production of the video game, and
(ii) for delivery of the completed video game,
(b) is actively engaged in production planning and decision-making during design and programming, and
(c) directly negotiates, contracts and pays for rights, goods and services in relation to the video game,
is the video game production company in relation to the video game.
(4) If there is more than one company meeting the description in subsection (3), the company that is most directly engaged in the activities referred to in that subsection is the video game production company in relation to the video game.
(5) If there is no company meeting the description in subsection (3), there is no video game production company in relation to the video game.
(6) A company may elect to be regarded as a company which does not meet the description in subsection (3).
(7) The election—
(a) must be made by the company by being included in its company tax return for an accounting period (and may be included in the return originally made or by amendment), and
(b) may be withdrawn by the company only by amending its company tax return for that accounting period.
(8) The election has effect in relation to video games which commence design in that or any subsequent accounting period.
1216D “Video game-making activities” etc
‘(1) In this Part “video game-making activities”, in relation to a video game, means the activities involved in design, programming and production of the video game.
(2) The Treasury may make regulations to—
(a) amend subsection (1),
(b) provide that specified activities are or are not to be regarded as video game-making activities or as video game-making activities of a particular description, and
(c) provide that, in relation to a specified description of video game, references to video game-making activities of a particular description are to be read as references to such activities as may be specified.
“Specified” means specified in the regulations.
1216E “Production expenditure”, “core expenditure” and “limited-budget video game”
‘(1) In this Part, in relation to a video game— “production expenditure” means expenditure on video game-making activities in connection with the video game, and “core expenditure” means the total costs that relate specifically to the producing and developing of the video game up to the point of commercial release.
(2) For the purposes of this Part a “limited-budget video game” is a video game whose core expenditure is £3 million or less.
(3) In determining if a video game is a limited-budget video game, any core expenditure that—
(a) is incurred by a person under or as a result of a transaction entered into directly or indirectly between that person and a connected person, and
(b) might have been expected to have been of a greater amount (“the arm’s length amount”) if the transaction had been between independent persons dealing at arm’s length, is treated as having been of an amount equal to the arm’s length amount.
1216F “UK expenditure” etc
‘(1) In this Part “UK expenditure”, in relation to a video game, means expenditure on goods or services that are used or consumed in the United Kingdom.
(2) Any apportionment of expenditure as between UK expenditure and non-UK expenditure for the purposes of this Part is to be made on a just and reasonable basis.
(3) The Treasury may by regulations amend subsection (1).
1216G “Company tax return”
In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1)).
Chapter 2
Taxation of Activities of Video Game Production Company
Separate video game trade
1216H Activities of video game production company treated as a separate trade
‘(1) This Chapter applies for corporation tax purposes to a company that is the video game production company in relation to a video game.
(2) The company’s activities in relation to the video game are treated as a trade separate from any other activities of the company (including any activities in relation to any other video game).
(3) In this Chapter the separate trade is called “the separate video game trade”.
(4) The company is treated as beginning to carry on the separate video game trade—
(a) when design begins, or
(b) if earlier, when any income from the video game is received by the company.
1216I Calculation of profits or losses of separate video game trade
‘(1) This section applies for the purpose of calculating the profits or losses of the separate video game trade.
(2) For the first period of account the following are brought into account—
(a) as a debit, the costs of the video game incurred (and represented in work done) to date, and
(b) as a credit, the proportion of the estimated total income from the video game treated as earned at the end of that period.
(3) For subsequent periods of account the following are brought into account—
(a) as a debit, the difference between the amount of the costs of the video game incurred (and represented in work done) to date and the corresponding amount for the previous period, and
(b) as a credit, the difference between the proportion of the estimated total income from the video game treated as earned at the end of that period and the corresponding amount for the previous period.
(4) The proportion of the estimated total income treated as earned at the end of a period of account is given by— C / T x I where— C is the total to date of costs incurred (and represented in work done), T is the estimated total cost of the video game, and I is the estimated total income from the video game.
Supplementary
1216J Income from the video game
‘(1) References in this Chapter to income from the video game are to any receipts by the company in connection with the making or exploitation of the video game.
(2) This includes—
(a) receipts from the sale of the video game or rights in it,
(b) royalties or other payments for use of the video game or aspects of it (for example, characters or music),
(c) payments for rights to produce games or other merchandise, and
(d) receipts by the company by way of a profit share agreement.
(3) Receipts that (apart from this subsection) would be regarded as of a capital nature are treated as being of a revenue nature.
1216K Costs of the video game
‘(1) References in this Chapter to the costs of the video game are to expenditure incurred by the company on—
(a) video game-making activities in connection with the video game, or
(b) activities with a view to exploiting the video game.
(2) This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.
(3) Expenditure that (apart from this subsection) would be regarded as of a capital nature only because it is incurred on the creation of an asset (the video game) is treated as being of a revenue nature.
1216L When costs are taken to be incurred
‘(1) For the purposes of this Chapter costs are incurred when they are represented in the state of completion of the work in progress.
(2) Accordingly—
(a) payments in advance of work to be done are ignored until the work has been carried out, and
(b) deferred payments are recognised to the extent that the work is represented in the state of completion.
(3) The costs incurred on the video game are taken to include an amount that has not been paid only if it is the subject of an unconditional obligation to pay.
(4) If an obligation is linked to income being earned from the video game, no amount is to be brought into account in respect of the costs of the obligation unless an appropriate amount of income is or has been brought into account.
1216M Pre-trading expenditure
‘(1) This section applies if, before the company began to carry on the separate video game trade, it incurred expenditure on development of the video game.
(2) The expenditure may be treated as expenditure of the separate video game trade and as if incurred immediately after the company began to carry on that trade.
(3) If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.
(4) Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.
1216N Estimates
Estimates for the purposes of this Chapter must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.
Chapter 3
Video Game Tax Relief
Introductory
1216O Availability and overview of video game tax relief
‘(1) This Chapter applies for corporation tax purposes to a company that is the video game production company in relation to a video game.
(2) Relief under this Chapter (“video game tax relief”) is available to the company if the conditions specified in the following sections are met in relation to the video game—
(a) section 1216P (intended for commercial release),
(b) section 1216Q (British video game), and
(c) section 1216R (UK expenditure).
(3) Video game tax relief is given by way of additional deductions (see sections 1216S and 1216T).
(4) Section 1216U contains provision about unpaid costs and artificially inflated claims.
(5) In this Chapter “the separate video game trade” means the company’s separate trade in relation to the video game (see section 1216H).
(6) See Schedule 18 to FA 1998 (in particular, Part 9D) for information about the procedure for making claims for video game tax relief.
Conditions of relief
1216P Intended commercial release
‘(1) The video game must be intended for commercial release.
(2) For this purpose—
(a) “commercial release” means distribution to the paying public, and
(b) a video game is not regarded as intended for commercial release unless it is intended that a significant proportion of the earnings from the video game should be obtained by such distribution.
(3) Whether this condition is met is determined for each accounting period of the company during which video game-making activities are carried on in relation to the video game, in accordance with the following rules.
(4) If at the end of an accounting period the video game is intended for commercial release, the condition is treated as having been met throughout that period (subject to subsection (5)(b)).
(5) If at the end of an accounting period the video game is not intended for commercial release, the condition—
(a) is treated as having been not met throughout that period, and
(b) cannot be met in any subsequent accounting period.
This does not affect any entitlement of the company to relief in an earlier accounting period for which the condition was met.
1216Q British video game
‘(1) Subject to subsection (2), a video game is a British video game for the purposes of this Part if it achieves a minimum of 19 points out of a maximum of 37 from the following table, with a minimum of 9 points being obtained in sections A and B:
A | Cultural Content | Number of points |
A1 | The video game is based on locations in Europe (including fictionalised versions of locations in Europe) or on peoples of Europe. | From 0 to 4 points |
A2 | The video game is inspired by or based upon: (i) European underlying material (such as a film, a book or artistic work;or(ii) a sport (or sports) that originated in Europeor(iii) an event (or events) held (or previously held) within Europe;or(iv) any other European subject matter. | From 0 to 4 points |
A3 | The in-video game dialogue and in-video game text is mainly in the English language. | 2 points |
B | Cultural Contribution | |
B1 | The video game is an original video game (as opposed to being a sequel to a previous video game). | 3 points |
B2 | The video game is based on or strongly features a narrative (as opposed to being a purely abstract or non-linear video game). | From 0 to 4 points |
B3 | The video game incorporates any clear technical or creative innovations such as innovations in: (i) gameplay; (ii) graphics; (iii) user interface; (iv) artificial intelligence, audio or physics; or (v) online or multiplayer functionality. | From 0 to 4 points |
B4 | The video game represents or reflects: (i) diverse European culture;or(ii) European heritage;or(iii) European creativity. | From 0 to 4 points |
C | Cultural Hubs | |
C1 | At least 50 per cent. of the production budget in incurred within the UK. | From 0 to 4 points |
C2 | The in-video game text is translated into at least two other official languages of the EEA. | 2 points |
D | Cultural Practitioners | |
D1 | Executive Producer. | 1 point |
D2 | Lead Programmer. | 1 point |
D3 | Lead Artist. | 1 point |
D4 | Scriptwriter. | 1 point |
D5 | Lead Designer. | 1 point |
D6 | Lead music and audio composer. | 1 point |
Total Achievable Points | 37 points |
(2) Notwithstanding the above, a video game is not a British Video Game if it is of a pornographic nature or features extreme violence.
1216R UK expenditure
‘(1) At least 25 per cent. of the core expenditure on the video game incurred must be UK expenditure.
(2) The Treasury may by regulations amend the percentage specified in subsection (1).
Additional deductions
1216S Additional deduction for qualifying expenditure
‘(1) If video game tax relief is available to the company, it may (on making a claim) make an additional deduction in respect of qualifying expenditure on the video game.
(2) The deduction is made in calculating the profit or loss of the separate video game trade.
(3) In this Chapter “qualifying expenditure” means core expenditure on the video game that falls to be taken into account under Chapter 2 in calculating the profit or loss of the separate video game trade for tax purposes.
(4) The Treasury may by regulations—
(a) amend subsection (3), and
(b) provide that expenditure of a specified description is or is not to be regarded as qualifying expenditure.
1216T Amount of additional deduction
‘(1) For the first period of account during which the separate video game trade is carried on, the amount of the additional deduction is given by— E x R where— E is—
(a) so much of the qualifying expenditure as is UK expenditure, or
(b) if less, 80 per cent. of the total amount of qualifying expenditure, and
R is the rate of enhancement (see subsection (3)).
(2) For any period of account after the first, the amount of the additional deduction is given by — (E x R) - P where—
E is—
(a) so much of the qualifying expenditure incurred to date as is UK expenditure, or
(b) if less, 80 per cent. of the total amount of qualifying expenditure incurred to date,
R is the rate of enhancement (see subsection (3)), and P is the total amount of the additional deductions given for previous periods.
(3) The rate of enhancement is—
(a) for a limited-budget video game, 100, and
(b) for any other video game, 80 per cent.
(4) The Treasury may by regulations amend the percentage specified in subsection (1) or (2).
Miscellaneous
1216U No account to be taken of amount if unpaid
‘(1) In determining for the purposes of this Chapter the amount of costs incurred on a video game at the end of a period of account, ignore any amount that has not been paid 4 months after the end of that period.
(2) This is without prejudice to the operation of section 1216L.
1216V Artificially inflated claims for additional deduction or video game tax credit
‘(1) So far as a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it is to be ignored in determining for any period any additional deduction which a company may make under this Chapter.
(2) Arrangements are entered into wholly or mainly for a disqualifying purpose if their main object, or one of their main objects, is to enable a company to obtain an additional deduction under this Chapter to which it would not otherwise be entitled or of a greater amount than that to which it would otherwise be entitled.
(3) “Arrangements” includes any scheme, agreements or understanding, whether or not legally enforceable.
Chapter 4
Video Game Losses
1216W Application of sections 1216X and 1216Y
‘(1) Sections 1216X and 1216Y apply to a company that is the video game production company in relation to a video game.
(2) In those sections— “the completion period” means the accounting period of the company—
(a) in which the video game is completed, or
(b) if the company does not complete the video game, in which it abandons video game-making activities in relation to the video game,
“loss relief” includes any means by which a loss might be used to reduce the amount in respect of which the company, or any other person, is chargeable to tax,
“pre-completion period” means an accounting period of the company before the completion period, and
“the separate video game trade” means the company’s separate trade in relation to the video game (see section 1216H).
1216X Restriction on use of losses while video game in production
‘(1) This section applies if in a pre-completion period a loss is made in the separate video game trade.
(2) The loss is not available for loss relief except to the extent that it may be carried forward under section 45 of CTA 2010 to be set against profits of the separate video game trade in a subsequent period.
1216Y Use of losses in later periods
‘(1) This section applies to the following accounting periods of the company (“relevant later periods”)—
(a) the completion period, and
(b) any subsequent accounting period during which the separate video game trade continues.
(2) Subsection (3) applies if a loss made in the separate video game trade is carried forward under section 45 of CTA 2010 from a pre-completion period to a relevant later period.
(3) So much (if any) of the loss as is not attributable to video game tax relief (see subsection (6)) may be treated for the purposes of loss relief as if it were a loss made in the period to which it is carried forward.
(4) Subsection (5) applies if in a relevant later period a loss is made in the separate video game trade.
(5) The amount of the loss that may be—
(a) set against other profits of the same or an earlier period under section 37 of CTA 2010, or
(b) surrendered as group relief under Part 5 of that Act,
is restricted to the amount (if any) that is not attributable to video game tax relief (see subsection (6)).
(6) The amount of a loss in any period that is attributable to video game tax relief is calculated by deducting from the total amount of the loss the amount there would have been if there had been no additional deduction under Chapter 3 in that or any earlier period.
(7) This section does not apply to a loss to the extent that it is carried forward or surrendered under section 1216Z.
1216Z Terminal losses
‘(1) This section applies if—
(a) a company (“company A”) is the video game production company in relation to a qualifying video game,
(b) company A ceases to carry on its separate trade in relation to that video game (“trade X”) (see section 1216H), and
(c) if company A had not ceased to carry on trade X, it could have carried forward an amount under section 45 of CTA 2010 to be set against profits of trade X in a later period (“the terminal loss”).
(2) If on cessation of trade X company A—
(a) is the video game production company in relation to another qualifying video game, and
(b) is carrying on its separate trade in relation to that video game (“trade Y”), it may (on making a claim) make an election under subsection (3).
(3) The election is to have the terminal loss (or part of it) treated as if it were a loss brought forward under section 45 of CTA 2010 to be set against the profits of trade Y of the first accounting period beginning after the cessation and so on.
(4) Subsection (5) applies if on cessation of trade X—
(a) there is another company (“company B”) that is the video game production company in relation to a qualifying video game,
(b) company B is carrying on its separate trade in relation to that video game (“trade Z”), and
(c) company B is in the same group as company A for the purposes of Part 5 of CTA 2010 (group relief).
(5) Company A may surrender the terminal loss (or a part of it) to company B.
(6) On the making of a claim by company B the amount surrendered is treated as if it were a loss brought forward by company B under section 45 of CTA 2010 to be set against the profits of trade Z of the first accounting period beginning after the cessation and so on.
(7) The Treasury may, in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6), make provision by regulations corresponding, subject to such adaptations or other modifications as appear to them to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief).
(8) “Qualifying video game” means a video game in relation to which the conditions for video game tax relief are met (see section 1216O(2)).
Chapter 5
Provisional Entitlement to Relief
1216AA Introduction
‘(1) In this Chapter—
“the company” means the video game production company in relation to a video game,
“the completion period” means the accounting period of the company—
(a) in which the video game is completed, or
(b) if the company does not complete the video game, in which it abandons video game-making activities in relation to it,
“interim accounting period” means any earlier accounting period of the company during which video game-making activities are carried on in relation to the video game,
“the separate video game trade” means the company’s separate trade in relation to the video game (see section 1216H), and
“special video game relief” means—
(a) video game tax relief, or
(b) relief under section 1216Z (transfer of terminal losses from one qualifying video game to another).
(2) The company’s company tax return for the completion period must state that the video game has been completed or that the company has abandoned video game-making activities in relation to it (as the case may be).
1216AB The UK expenditure condition
‘(1) The company is not entitled to special video game relief for an interim accounting period unless—
(a) its company tax return for the period states the amount of planned core expenditure on the video game that is UK expenditure, and
(b) that amount is such as to indicate that the condition in section 1216R (the UK expenditure condition) will be met on completion of the video game.
If those requirements are met, the company is provisionally treated in relation to that period as if that condition was met.
(2) If such a statement is made but it subsequently appears that the condition will not be met on completion of the video game, the company—
(a) is not entitled to special video game relief for any period for which its entitlement depended on such a statement, and
(b) must amend accordingly its company tax return for any such period.
(3) When the video game is completed or the company abandons video game-making activities in relation to it (as the case may be), the company’s company tax return for the completion period must be accompanied by a final statement of the amount of the core expenditure on the video game that is UK expenditure.
(4) If that statement shows that the condition in section 1216R is not met, the company—
(a) is not entitled to special video game relief for any period, and
(b) must amend accordingly its company tax return for any period for which such relief was claimed.
1216AC Video game tax relief on basis that video game is limited-budget video game
‘(1) The company is not entitled to video game tax relief for an interim accounting period on the basis that the video game is a limited-budget video game unless—
(a) its company tax return for the period states the amount of planned core expenditure on the video game, and
(b) that amount is such as to indicate that the condition in section 1216E(2) (definition of “limited-budget video game”) will be met on completion of the video game.
In that case, the video game is provisionally treated in relation to that period as if that condition was met.
(2) If it subsequently appears that the condition will not be met on completion of the video game, the company—
(a) is not entitled to video game tax relief for any period on the basis that the video game is a limited-budget video game, and
(b) must amend accordingly its company tax return for any such period for which such relief has been claimed on that basis.
(3) When the video game is completed or the company abandons video game-making activities in relation to it (as the case may be), the company’s company tax return for the completion period must be accompanied by a final statement of the core expenditure on the video game.
(4) Subsection (5) applies if that statement shows—
(a) that the video game is not a limited-budget video game, or (as the case may be)
(b) that, having regard to the proportion of work on the video game that was completed, the video game would not have been a limited-budget video game had it been completed.
(5) The company—
(a) is not entitled to video game tax relief for any period on the basis that the video game is a limited-budget video game, and
(b) must amend accordingly its company tax return for any period for which such relief was claimed on that basis.
1216AD Time limit for amendments and assessments
Any amendment or assessment necessary to give effect to the provisions of this Chapter may be made despite any limitation on the time within which an amendment or assessment may normally be made.”.
2 In Part 9D of Schedule 18 to the Finance Act 1998, references to film should also include references to video game.’.
Mr Hanson
As the House will be aware, my hon. Friend the Member for Wallasey (Ms Eagle) referred on Second Reading to the fact that we want to bring forward a provision on tax relief in order to help to support the video games industry. Although, undoubtedly, new clause 1 would not do that in every respect, I want to put it before the House, so that we can have an in-principle debate about video game industry tax relief. The new clause provides an opportunity for the House to consider enhanced relief based on UK expenditure on video game production.
The new clause suggests that we might consider qualified tax relief for the video game industry, and that it should be based on strict criteria: the video game must be for commercial release; it must be a British video game, assessed on the basis of a points system; and it must meet a 25% UK expenditure threshold, whereby 25% of the total expenditure on the production and development of the video game is UK expenditure on goods or services. We intended to look at that issue, and I would have tabled a much more detailed new clause, but the advice was that we could not. I hope that I have, however, tabled sufficient proposed changes for the Government to consider bringing back at a future date, or supporting the principle of, tax relief for this vital sector in the United Kingdom.
The video games industry is a real success story for British industry, and we look to support it in detail. As I am sure that the Minister is aware, research from TIGA, which represents the gaming industry, shows that over a five-year period games tax relief could create or save about 3,500 graduate-level jobs, secure £450 million-plus in new and saved development expenditure, and generate about £415 million in new and saved tax relief. I hope that it would do so in a way that ensures that the cost to the Treasury amounts to about £192 million over five years, which would be more than paid for by the jobs and investment, and encouragement to the industry, that that would develop in due course.
My hon. Friends the Members for Dundee West (Jim McGovern), for Liverpool, Wavertree (Luciana Berger) and for West Bromwich East (Mr Watson) have been very vocal in supporting such a tax relief. I hope that the Minister will consider it in principle, so that we can begin to develop a cross-party consensus in due course.
Mr John Redwood (Wokingham) (Con)
If it works for this industry, why does it not work for others? Why is the right hon. Gentleman limiting it to this one industry?
Mr Hanson
Our proposal is based on an existing tax relief for the film industry, which has been very successful in helping to generate extra revenue for that industry and keeping production in the United Kingdom. I am sure that the right hon. Gentleman will be interested to know that the Under-Secretary of State for Culture, Olympics, Media and Sport, the hon. Member for Wantage (Mr Vaizey) said this on 13 April—I accept that that was in the middle of an election campaign, so we will take these words as being from that particular time:
“We are committed to a tax break along the lines of the video games tax credit. We have been calling for tax breaks for the video game industry for the last three years.”
In the spirit of cross-party co-operation, the hon. Member for Bath (Mr Foster), who then held the esteemed position of Liberal Democrat shadow spokesman for Culture, Media and Sport—the Lib Dem spokesmen are now all subsumed into one entity—said:
“Liberal Democrats support the introduction of a Games Tax Relief. Following consultation on the details, we would implement the Relief as soon as possible.”
At that time, my hon. Friend the Member for Wallasey, who is shadow Chief Secretary, the then shadow Culture Minister, who is now a Minister, and the then Liberal Democrat spokesperson supported this proposal, as did I. Since then, however, it has vanished without trace—until today’s debate.
The right hon. Member for Wokingham (Mr Redwood) may oppose tax reliefs generally. However, such a relief has been proved to work in the film industry to date. Unfortunately, the Chancellor of the Exchequer said in his Budget:
“we will not go ahead with the poorly targeted tax relief for the video games industry.”—[Official Report, 22 June 2010; Vol. 175, c. 512.]
I want to test with the Minister whether that is an in-principle opposition to tax relief for the video games industry. If not, is his opposition based on a poorly designed scheme by the previous Labour Government or on poorly targeted suggestions in today’s proposals? Is there, in principle, room for discussion, so that it would be possible for him to bring back, at some point, a tax relief that meets the objectives of the hon. Member for Bath, the Under-Secretary and ourselves, and that would, I hope, help to support the video games industry?
Mr Redwood
Just to clarify the point, the right hon. Gentleman should know that I believe that lower tax rates result in more revenue. I am delighted to see that he is now a recruit to that cause, but I suggest that he should not limit it to one industry.
Mr Hanson
We are happy to consider on a case-by-case basis whether tax relief helps to generate employment and earn business and crucially—I think that this is the right hon. Gentleman’s point—to maintain that business in the United Kingdom rather than transferring it overseas. The film tax credit has proved that that can be the case, and I suggest in the new clause that we consider it for the video games industry.
Jim McGovern (Dundee West) (Lab)
My right hon. Friend mentioned the British film industry. Is he aware that figures provided by TIGA, which represents the computer games industry, suggest that the cost of a tax break for computer games would be £55 million, whereas the film industry already gets a £110 million break, even though the revenue generated by both is much the same?
Stewart Hosie
The right hon. Gentleman was right to mention the Chancellor’s argument that the proposed tax break was poorly targeted, but he will be aware of the evidence given to the Scottish Affairs Committee by Edward Troup of the Revenue. He said:
“I am not sure I would say it was poorly targeted. It was targeted at the video games industry…it was perfectly designable if we had continued with it”,
and so on and so forth. Does not that experience from the coal face, from inside the Revenue, directly contradict the argument that the Government used to do away with the plan?
Mr Hanson
The hon. Gentleman has effectively read out the next section of my speech. I have indeed examined what was said in the Scottish Affairs Committee. The Under-Secretary said at the same meeting on 20 October:
“It may be that we can revisit a video games tax break in the future.”
Was he speaking for the Department of Culture, Media and Sport or for the Treasury? I presume that the Chancellor was speaking for the Treasury in ruling out the idea, but three months later his Minister in the DCMS said that we should consider it in future.
I do not necessarily wish to press the new clause to a Division, but I have tabled it so that the Exchequer Secretary can clarify whether, in the next 12 months or two years, he can meet the objectives that my hon. Friends the Members for Dundee West, for West Bromwich East and for Liverpool, Wavertree, and the hon. Member for Dundee East, have championed so strongly.
Mr Tom Watson (West Bromwich East) (Lab)
The important point about the new clause is the unique position of the video games industry. It has the potential for explosive growth and to create far more high-level, highly paid, highly skilled jobs in the UK. Yet its competitors, with a fiendish interpretation of international competition rules, are picking off the very best designers and developers from UK production shops one by one. The industry worked long and hard with the Treasury to build a robust model for a specific rate to allow the industry to grow over the coming years. That is why hon. Members are so concerned—many jobs are at risk if the new clause is not accepted.
Mr Hanson
My hon. Friend makes the important point that those are high-skilled, highly technical jobs that will bring investment to this country. They are intellectual capacity jobs that are helping to grow the areas of our international markets that we need to grow.
To follow up on what the hon. Member for Dundee East said, Edward Troup, the managing director of budget, tax and welfare at the Treasury, said to the Scottish Affairs Committee:
“There would be issues; there would be boundary issues,”
but crucially, he continued, “but it would work.” I am not trying to make political capital out of the matter, but if it is proved that the tax break would work—meaning that it can be applied, can deliver, will keep jobs in this country, will grow business and will help resources be reinvested in the British economy—will the Exchequer Secretary be willing to accept the principle and introduce an appropriate clause in some future Finance Bill?
If it is found that the tax break would work but the Exchequer Secretary will not introduce it, I will have to presume that he is not interested in doing so, rather than that he is concerned about its applicability and workability. If so, he is on an entirely different page from the one that the Under-Secretary was on in April, that the Chancellor was on before the general election and that the hon. Member for Bath, who is part of the coalition, was on at that time.
Charlie Elphicke (Dover) (Con)
The right hon. Gentleman makes a perennial point that shadow Ministers make, to which actual Ministers presumably perennially say no. May I point out to him the table in proposed new section 1216Q of the Corporation Tax Act 2009, in new schedule 2? It mentions points being given for at least 50% of a game’s production budget being incurred in the UK, and proposed new section 1216R states what the percentage of UK expenditure has to be. Will he confirm that that does not conflict with any European law provision?
Mr Hanson
I have taken advice in drafting the new clause, and my advice is that it is workable and applicable, although I have had to leave out certain aspects. My purpose is not to force this particular model on the Treasury, but to use the new clause as a debating point, so that the Treasury can respond to the principle and decide whether this is a good proposal that will help matters, bring investment back to the United Kingdom and be supportive. I would, potentially, be happy to withdraw the new clause at the end of the debate, and I am happy to listen to what the Minister says, but I want to get to the nub of the issue.
The Under-Secretary, the hon. Members for Bath and for Dundee East, who speaks for the Scottish National party, my hon. Friend the Member for Dundee West and Labour Front Benchers all think that some form of games tax relief to help maintain the industry in the United Kingdom would be a good thing. All I want today is for the Minister to say, “Yes, I agree with that general principle. Over a period of time, I will look at how we make this proposal workable and how we bring it back in a future Budget or Finance Bill.” Indeed, he could say today that he is happy with the proposals and that the Government will look at them again in the near future in whatever format they choose. It is important to get that on the table.
Dr Richard Wilson, TIGA’s chief executive, has set out his view that we will potentially lose jobs. He said that
“the UK is losing out on jobs and investment because of the absence of Games Tax Relief.
High-skilled jobs could be created in Manchester and Warrington. Instead they are being created in Montreal.”
He says that that is particularly because our
“key competitors, particularly Canada, have tax breaks for games production. The UK does not.”
Others who comment on these matters, such as Danny Bilson, THQ’s vice-president for core game brands, has said:
“The talent in the UK is extraordinary...We have a studio up in Warrington that’s an excellent studio…but I’m sorry, it’s…about money at the end of the day.”
We need to ensure that we have the support for such things. That is the reality of the market. World-leading publishers recognise that we have an asset, which it has taken years to build up and which is worth hundreds of millions of pounds, but it will go abroad if we do not compete on the same level as our Canadian colleagues. In France, there is a 20% tax reduction for video games, and tax provisions in Canada have driven up staff numbers by 43%, but in the United Kingdom we have seen the head count start to decline over the past few years.
I do not want to go into great detail or to take up the House’s time. I simply want to tell the Minister that there is real scope for these proposals. There is scope to develop the UK film tax credit model and to use it for the UK video game tax model. We can ensure that we help to grow the sector, and we can meet the commitments that colleagues made during the general election campaign. I tabled the new clause so that we could hear whether the Minister is still of the view that there is no scope for such proposals or whether he could look at the issue in detail and bring back proposals in due course. I commend the new clause to the House.
Mr Mark Field (Cities of London and Westminster) (Con)
The video games industry is very important. Its spiritual home is, in part, in my constituency, in places such so Soho and Covent Garden—
Mr Field
They are the spiritual home of so many things, as I am sure the Opposition Whip would agree.
I have spoken on many occasions to leading lights in the video games industry, and they outlined many of the concerns that have been expressed by the hon. Members for Dundee West (Jim McGovern), for Dundee East (Stewart Hosie) and for West Bromwich East (Mr Watson). There is a risk that a significant amount of business is leaving these shores because of a perception, and indeed the reality, that there is unfair tax and regulatory competition from further afield.
One of my concerns, which I expressed before the election to leading lights in the video games industry, is that trying to emulate the film tax credit is not necessarily the right route down which to go. Back-Bench and Front-Bench veterans of Finance Bills going back a decade or more—you are one, Madam Deputy Speaker, from your time as a Minister, as am I from my time in opposition—will know of the concern that the film tax credit has had to be updated almost annually, because of the clear abuses and unintended consequences resulting from it. There was a sense that although the film business in this country benefited from it, there was a significant through-flow of cash that was not in the interests of either the Exchequer or the high-quality products of which our film industry has been rightly proud in decades gone by.
Stewart Hosie
Notwithstanding the hon. Gentleman’s points about the film tax credit, I am sure that he will understand the business model around which the video games industry operates. A large amount of cash is spent in the development of games, but revenue drops off in the run-up to a new hardware offering or console being developed. The difficulties that the sector faces are exacerbated by the regular new hardware offerings. Does that not make a stronger case for some sort of assistance?
Mr Field
I accept that. There is also little doubt that we have some tremendously high-quality people working in this business. I must say, in parenthesis, that one difficulty is that hitherto we have had to import far too many such people from beyond these shores. I know that our university media studies industry is much discredited, but those media studies courses that are linked to the video games industry in particular often ensure that we get some of the brightest and best of the home-grown talent in our universities entering the industry.
I take on board the concerns of the right hon. Member for Delyn (Mr Hanson), given that the issue before us has been in the ether for years. I would prefer not to rush into anything, although I hope that my hon. Friend the Minister will take on board the deep concerns expressed today so that we can come back, perhaps during next year’s Finance Bill, with a workable model based on the proposals before us.
I would like to put in a word not just for the video games industry, unique though its interests are in the minds of those who run and work in those businesses, but for the animation industry. It is a related industry within the media sphere, and faces many of the problems expressed by the hon. Member for Dundee East and businesses in the industry. The animation industry is deeply concerned that it is losing some of its brightest talent, and feels that—this is felt not just in the animation sector—it is facing unfair competition not only from the Canadian and French models, but from Ireland and, dare I say it, Scotland. It feels that it is losing out to a large degree. I would therefore like to see a clause that brings the video games industry, the animation industry and all these other industries under a single protocol. Such a protocol could operate well and effectively, so I hope that the Treasury will consider one in next year’s Finance Bill.
Jim McGovern
The hon. Gentleman has indicated that part of the computer games industry is based in his constituency—in fact, he seemed to indicate that the industry originated there. Does he agree that a change of name or title is required? When people hear “computer games industry”, they think of young lads between 15 and 30 sitting in front of a computer screen playing “APB” or “Grand Theft Auto”, when in fact, as people who have visited Abertay university in Dundee will have seen, it is used in medical research, construction and architecture. Perhaps we need a change of focus, rather than continuing to call it the “video games industry”.
Mr Field
The hon. Gentleman is right to make that important point, although it also raises the question of how we couch such a new clause and schedule in a future Finance Bill to ensure that it takes on board an industry that we want to encourage rather than see go much further afield. I am not a young lad of 15 or 30—or even of 46—so the industry has passed me by, but there is no doubt about the enthusiasm of the companies operating in this sphere. One of my biggest concerns is that all too often those companies have to employ programmers from eastern Europe and other parts of the world in order to get the relevant level of expertise. That is a regrettable state of affairs. None the less it is undoubtedly a thriving and enormous industry, in which we are cheek by jowl with the Japanese in terms of our expertise and export potential.
I implore the Minister to take our concerns seriously. Now would not be the time to accept a proposal such as the one before us, but I hope that he will give sufficient comfort to Opposition Members to ensure that they do not press the matter to a vote. However, the issue is worth discussing at length today.
Sheila Gilmore (Edinburgh East) (Lab)
One thing that I have not understood—I have not understood it from either the debates that we had in the Public Bill Committee, on which I served, or the responses to the various parliamentary questions that have been asked about the video games industry and tax relief—is whether the objection is to the detail of previous proposals or this proposal, or whether there is a more fundamental objection about giving such a relief at all. At times, it seems to be suggested that it is not appropriate to give such a relief, but it would be extremely helpful to know which it was.
If the issue is the detail or exactly how the proposal is to be implemented, that could be discussed further. However, targeting such an industry—or indeed any industries—might be felt to be inappropriate. In one answer given in the Chamber last week, the suggestion seemed to be that a lower rate of corporation tax generally would be sufficient, without targeting specific emerging industries. However, a tax relief is important to a growing industry in that it allows it to get off the ground and develop in the way that it needs to. People have already spoken about the cash-flow difficulties for sectors such as the video games industry, so it would be helpful if the Minister could clarify where the Government are on this issue and what their future plans might be.
Mr Redwood
I am delighted that the Opposition have highlighted the example of the video games industry. However, I fear that it is only one example among many of how we are at risk of losing talent, enterprise, jobs and business development in a number of areas because our rates of taxation are now not internationally competitive. It is interesting that the Opposition, who do not normally favour lower rates, have identified lower rates—or a lower tax imposition—as the answer in this case. I hope that they will think on these things more widely, because the combination of a high marginal rate of income tax and what is now quite a high rate of corporation tax by international standards is not a good combination in an intensely competitive world, where there has been a shock to overall demand and where we are having to fight for our commercial lives in world markets.
From my point of view, there are a couple of problems with the proposals before us. The first is that going for 25% British content is a low ambition. I would have thought that one would want a rather higher rate of British content if we were formulating some special treatment for the industry. There is also a problem with concentrating on the profits that a company generates, because some companies will be small businesses with talented entrepreneurs. They might have just one good game in them that earns them an awful lot of money in a short space of time. That is when high marginal rates on apparently high earnings—they become genuinely high earnings where it is possible to sustain them—could become quite an imposition, because those entrepreneurs might get caught in the year or two of their success, but find afterwards that they are no longer able to achieve that.
The issue is therefore not just about corporation tax or profits tax; it can also be about income tax. I hope that the Minister will reassure us by saying something about how he sees our overall tax regime developing, in both corporation tax and income tax, because we have a general problem and we need to show the way to lower rates as quickly as possible in this very competitive world. I would also repeat to my hon. Friend the simple point that the evidence from the American and the British experiences is that when countries have been bold enough to cut rates on enterprise, income and profits, they have usually found their revenues increasing. It is quite obvious that the Government need a lot of extra revenue, so I would recommend that proposal to him.
The Exchequer Secretary to the Treasury (Mr David Gauke)
New clause 1 and new schedule 2 seek to provide additional tax relief for companies producing video games. The measure was announced, but not implemented, by the previous Administration. As the Chancellor said in the emergency Budget statement, this tax relief for the video games industry is poorly targeted, which is why we have decided not to introduce it.
The United Kingdom’s video games industry is recognised as a world leader, having produced hugely successful games such as the “Grand Theft Auto” series, and has led to innovations in industries as diverse as defence and health care, as the hon. Member for Dundee West (Jim McGovern) pointed out. All that has been achieved without specific Government intervention for the sector through the tax system.
We estimate that the relief proposed by the Opposition would cost some £40 million to £50 million a year—that was the costing for the previous Administration’s proposal—and we believe that without strong evidence of a market failure in the games industry, it is difficult to justify spending that amount of money on such an intervention, particularly given the state of public finances.
Jim McGovern
At a recent meeting with the Minister, I told him that before the Budget that announced the intention to promote tax breaks, there were at least six ministerial visits to Dundee, which included the then Secretary of State for Scotland, Ministers from the Departments for Business, Innovation and Skills and for Culture, Media and Sport, and the Chancellor. There was a lot of consultation before the then Chancellor eventually announced the decision on tax breaks. Will the Minister tell the House how many visits were made to Dundee before this Government’s decision to withdraw them?
Mr Gauke
The circumstances facing us in the run-up to the June Budget were such that we wanted to introduce a more fundamental reform of corporation tax. In that Budget on 22 June, we announced a reduction in the main corporation tax rate from 28% to 24% over the next four years. In doing that, we wanted to show a sense of direction, to ensure that Britain was open for business, and that we were providing lower rates. Our approach is to have a broader base but lower rates rather than targeted intervention, unless there is clear evidence that intervention is the right approach.
Stewart Hosie
The Minister is being generous. He is paraphrasing the Green Book, which says that the Government will
“prioritise spending which supports private sector growth and investment”.
Various forms of those words have been used since his party and the Liberal Democrats took office. Surely tax breaks that would cost perhaps £195 million and would deliver £415 million in tax receipts are precisely the sort of investment in precisely the sort of industry that would meet the Government’s objectives.
Mr Gauke
We have heard the figures quoted by TIGA, but we do not accept the validity of that analysis because we feel that some of the assumptions underpinning those estimates are erroneous. The research commissioned by the industry implicitly assumes that the investment incentivised by the subsidy is entirely additional to the UK economy. In reality, it is likely that the relief will displace investment from elsewhere in the economy, so the net impact on total UK investment could be limited. For example, it is possible that such a tax subsidy would divert investment from more productive sectors to the detriment of the productivity of the UK economy as a whole.
If Opposition Members are making the case that lower taxes always result in growth in the economy, I would listen with great interest and it would—my right hon. Friend the Member for Wokingham (Mr Redwood) made this point—be an interesting conversion to supply-side economics. I do believe, however, that the strongest economic case can be made for lower tax rates as a whole, across a broader base, as opposed to targeting some sectors, unless there is a strong case that there is some kind of market failure. We have not yet heard such a case being expressed in a way that we find persuasive, and that is why we decided not to proceed with video games tax relief.
That is not to say that we do not wish to support British businesses—far from it; we do. It is vital that we have a strong private sector to drive the recovery, but we must support that growth in the right way. In the emergency Budget, the Government announced a major package of reforms to the business tax regime with the aim of creating the most competitive corporate tax system in the G20.
Mr Mark Field
The Minister has twice referred to the concept of market failure. Did not the hon. Member for Dundee East (Stewart Hosie) make a compelling argument when he spoke about the very nature of this market? Perhaps we should be talking not about market failures but about the way in which the video games industry operates and the fact that its nature makes it susceptible to the kind of tax relief that we are looking for. The Minister is understandably, and rightly, sceptical about some of the figures being put out by TIGA, but a multiplier of nine seems pretty high. What level of multiplier would be so unacceptable as to allow this kind of relief to be put in place?
Mr Gauke
The TIGA analysis makes the assumption that everything achieved as a consequence of the relief would be additional to the economy. It does not appear to recognise that there would also be displacement, and that highly skilled graduates would not remain unemployed if they did not find work in the video games industry. We are therefore sceptical about the TIGA analysis. My hon. Friend makes his point well, however, and the nature and profile of the video games business clearly have some significance for his constituency, but we are as yet unconvinced of the necessity for the tax relief that was proposed by the previous Government, and that is proposed in the new clause.
The Government’s focus must be on providing a strong business environment for sectors across the board, including video games. Our reforms will reduce rates of corporation tax by four percentage points over the next four years, which means that the UK will continue to have the lowest main rate in the G7. This will improve our relative position significantly, compared with that of our competitors, after the years in which we have fallen behind. This will benefit companies across the economy, including those in the video games industry.
Stewart Hosie
My party welcomes the reduction in corporation tax; we believe that it is a good thing. However, some of the businesses that are creating video games are not big enough to pay corporation tax. Many of them are dependent on the annual allowances, but some of those have now gone, and one has been halved. So although I welcome the reduced corporation tax, the overall package will not necessarily help the start-up studios and small studios as they develop their games.
Mr Gauke
We have also reduced the small profits rate of corporation tax from 21% to 20%, when it was set to go up to 22%, and we have effectively reversed the jobs tax—the increase in national insurance contributions that would have hurt start-ups. We are also offering start-ups, including those in the hon. Gentleman’s constituency, a national insurance contributions holiday for the first 10 employees, so there were plenty of positive policies for start-ups announced at the time of the Budget. Indeed, given the state of the public finances, it was a very pro-business, pro-growth Budget in the way that it set up proposals for lower taxes.
On tax simplification, the Office of Tax Simplification earlier today announced the list of reliefs and exemptions within the tax system. When its work began in the summer, the general expectation was that there would be about 400 reliefs and exemptions; the total reached is 1,042 such reliefs and exemptions. Many play an important role within our tax system—I do not wish to decry that—but we have to think carefully about introducing new areas of complexity and new reliefs and exemptions, unless there is a strong case for doing so. Members have already made the case for video games, but the Government remain unconvinced.
Jim McGovern
I thank the Minister for giving way again. He talks about hearing what has been said in the Chamber, but as far as I am aware he has not yet met Richard Wilson of TIGA. Like everyone else who mentions the organisation, I originally referred to it as “teega” but Mr Wilson continually refers to it as “tiger”, and I assume that he knows better than I do. I believe the logo resembles a tiger, so there is a connection with the pronunciation there. Will the Minister agree to come to Dundee and I will arrange for Richard Wilson to be there? If figures are to be bandied about, with the Minister saying they are erroneous and Richard Wilson saying they are correct, it would be better if those two were in the same room at the same time to discuss the issue.
Mr Gauke
I am grateful for that invitation. I am sure it will be small comfort to the hon. Gentleman, but I will accept the pronunciation “tiger” and concede that point. I am not sure that it would be terribly helpful if we were all in the same room to discuss these particular numbers. As I say, we are not convinced by the case made on these numbers. Of course, Members with constituencies that have a concentration of video game companies will want to make that case, but it is right for the Government to look at the economy as a whole and to bring forward policies that benefit all parts of the country and all sectors, including the video game sector. As I said in the meetings I have had with the hon. Member for Dundee West, there is no sense in which the Government are in any way anti-video games or think it is an antisocial issue or anything like that. It is a question of economic efficiency and where we believe the role of Government can be best used—and that is in providing a favourable climate for businesses.
I appreciate that the new clause and new schedule proposed by the right hon. Member for Delyn (Mr Hanson) are probing measures, but I would like to touch on a point made by my hon. Friend the Member for Dover (Charlie Elphicke). This relief is targeted at a specific sector and it would be considered to be state aid; as such, it would require notification to and approval from the European Commission. The new clause and new schedule would be effective from Royal Assent. As the Government would not be able to secure approval in such a short period, the provisions would create an illegal state aid. As I said, I understand that the amending provisions are probing, but the same issue applies to the previous Government’s proposals—and they, too, would have required state aid approval, which is worth putting on the record.
The new clause would create unjustified distortion and complexity in the corporate tax system. We do not think that such an intervention would represent good value for money for the Exchequer or be conducive to providing a simple and competitive tax system. The UK needs a tax system that supports all businesses, because it is the private sector across the board that will drive the recovery. I therefore ask the right hon. Gentleman to withdraw the new clause and new schedule.
Mr Hanson
I am grateful for the Minister’s clarification of the Government’s response. If we take into account the comments made by my hon. Friend the Member for Edinburgh East (Sheila Gilmore), it is clear that the Government are not in favour of the principle of this type of tax relief rather than the practicalities of the suggestions in the amending provisions. I am disappointed about that. I remind the Minister again of what the Under-Secretary said. When asked during the election campaign whether the Conservative party was in favour of a games development tax break, he answered:
“emphatically, 100 per cent in support for game tax breaks. No ifs, no buts.”
That does not appear to be the Government’s position today, which disappoints me.
Perhaps at this point I should declare that PricewaterhouseCoopers helped me to draw up the new clause. I shall register that in due course.
Chris Leslie
(Nottingham East) (Lab/Co-op): I beg to move, That the clause be read a Second time.
New clause 2 would force the Treasury to come clean on its plans to withdraw child benefit from families with higher-rate taxpayers from January 2013, which will take £2.5 billion a year from those families from 2014-15 onwards.
Ever since the Chancellor announced the policy of means-testing child benefit a month ago at the Conservative party conference, the policy has gradually unravelled. The Treasury has struggled to spell out exactly how it will implement the idea—especially as there has rightly been separate and independent taxation of individuals since 1990, when it was recognised that there were major problems with taxing women as though their income were effectively part of their husbands’ property. Those days may seem long ago now—it is 20 years since Lady Thatcher left Downing street, and 20 years since Britain joined the exchange rate mechanism—but the Government have adopted a déjà-vu approach to policy making which looks set to reopen that history.
We have grown used to the principle of independent taxation over the past two decades, and many now take it for granted, but we ought to pause and reflect on why it is so important. The Government’s proposed changes to child benefit imply a requirement for mothers to disclose their receipt of child benefit to their partners, and a requirement for partners or husbands to be taxed on the income of their spouses. That represents a potential breach of the principle of separate and individual taxation which, as the new clause says, was introduced in the Finance Act 1988, and which applied from 1990 onwards.
The 1988 Act introduced a radical change in the system of taxing husbands and wives: independent taxation. Until then, husbands and wives were viewed as one person for tax purposes, and the Revenue, of course, saw only the husband. The spouse’s income and gains were added together, and the couple were treated as if the total income were that of the husband. He was responsible for completing the annual tax return and for paying all tax due, including that on his wife’s income and gains. However, with the introduction of independent taxation, spouses were treated as separate individuals for tax purposes and for the first time married women enjoyed privacy in, and responsibility for, their own tax affairs. In addition, some married couples were paying more tax because they were married than they would have if they had been cohabiting. That drew much criticism at the time.
It is instructive to look back at the speeches advocating the virtues of independent taxation, especially by the then Chief Secretary to the Treasury, who has since been ennobled as Lord Lamont. In the 1988 Budget debate he called this reform
“a radical proposal for independent taxation…It will give married women the independence and privacy in tax matters that they have been denied for so long…Under the new system, a married woman will be treated as a taxpayer in her own right with a full personal allowance to set against her income, and her own basic rate band. She will have responsibility for her own tax matters and will be able to enjoy complete privacy if she wishes…It is an important principle that there should be independence and privacy in taxation matters.”—[Official Report, 16 March 1988; Vol. 129, c. 1193-94.]
Clearly the Prime Minister should heed the words of his former boss in these matters. I gather that Lord Lamont is still occasionally called upon to give advice to his former special adviser. Perhaps their diaries clashed on the day of the fateful decision on child benefit, but there is still time for the Prime Minister to make that call to Lord Lamont, and to see the error of his ways and rein in his doctrinaire Chancellor on this issue, especially as the Prime Minister promised before the general election to protect child benefit. Winding the clock back 20 years and reversing decades of progress in equality in taxation and in the responsibilities of individuals for their own income risks creating a set of major perversities in the tax system that could have significant ramifications. That is why the Opposition are opposed to the changes in child benefit.
Let us consider the administrative shambles that would be created if the Government were to get their way. The Wall Street Journal has reported insiders in the civil service talking of “panic stations” at the Treasury with growing acceptance that the policy is virtually “unenforceable” and “likely to be ditched”. If a mother is under no legal obligation to tell the father that she is in receipt of child benefit—unless we do see the end of independent taxation, of course—how can this tax on families work? Currently, the father’s tax status is irrelevant to the mother’s entitlement to child benefit. Can the Minister tell the House how this clawback arrangement will work, especially if parents are divorced or divorcing or separated or separating, or if the mother simply declines to report the tax status of the father of her children to Her Majesty’s Revenue and Customs officials?
Can the Minister also tell us whether the rumour that the Treasury is considering a new database to match mothers with their partners is true, and would that not make the Child Support Agency seem a bit like a pocket calculator by comparison? Will the Minister spell out the mechanisms the Treasury envisages in respect of this policy, and the enforcement mechanisms it is planning to put in place to take these sums off families earning approximately £45,000 or above? Will the Treasury be relying on a self-certification approach by the partner not in receipt of child benefit? Will the Minister take this opportunity to state for the record that the Government will continue with the important principle that mothers should be the primary recipient of child benefit payments?
The poor design of this policy could easily undermine revenue plans too. Clawing back the cost of the benefit from higher rate taxpayers through the tax system would be “intrusive” and involve lots of form filling. That is the opinion of one of the Chancellor’s own advisers on tax policy, John Whiting, whom the Chancellor recently appointed as the tax director of the Office of Tax Simplification. Mr Whiting suggests that the policy would be an administrative burden that would merely “make a dent” in the estimated £2.5 billion of savings the Treasury claims the change would bring. We are not alone in questioning the logic of this ill-thought-through proposal, therefore. We know from the reporting on this policy that the Chancellor rode roughshod over his Cabinet colleagues when it was announced at the Conservative party conference. Clearly many in the Cabinet were oblivious to those plans when the Chancellor sprung them on them, but it is now clear that he also rode roughshod over those in the civil service. They were insufficiently included in the plans for this policy and had he consulted them properly, they would have pointed out the chaos that it would create.
These are serious matters affecting millions of families across the UK, not only millionaires such as the Chancellor’s family or the Prime Minister’s family, but those on relatively modest incomes. They include police officers, college tutors, health service workers, senior teachers, pharmacists, paramedics, train drivers and air traffic controllers. Many are caught up in this category, the arbitrary design of which will create great unfairness with punitively high marginal rates of taxation.
Charlie Elphicke
The hon. Gentleman seems to want to convince the House that £45,000 a year is not very much money, but he should tell that to my constituents, whose average annual earnings are less than £20,000; that is what the average job pays in Dover and that is the norm in many parts of this country outside London. My constituents look askance at the fact that people on £45,000, a sum of earnings that they aspire to and dream of having, receive benefits. They tell me on the doorstep that they think that that is wrong, in principle, and that this measure is the right one to take.
Chris Leslie
The hon. Gentleman is doing his job, supporting a policy that was not the one espoused in his party’s manifesto. It certainly was not the policy that the Prime Minister advocated before the election when he promised to protect universal child benefit—he now says that it should be taken away from these “rich” individuals, but I do not agree. I do not believe that this class of middle-income families is necessarily finding life easy on this particular range of salaries. We have to speak up for that squeezed middle in society and that is absolutely what the Opposition intend to do. Where a policy could see a £1 pay rise for these families result in the loss of £2,000 in child benefit, depending on the number of children involved, it involves a punitively high rate of marginal taxation that surely even Members on the Government Benches would agree is flawed.
At last week’s Treasury Committee sitting, the director of the Institute for Fiscal Studies, Mike Brewer, described these cliff-edge issues as “economically perverse” and “distorting”. He also said that it “seems unfair” that two families in different circumstances but perhaps separated by very small sums should be “treated so differently”. His colleague, Carl Emmerson, added:
“The income tax system, by being individually based, is basically neutral about whether individuals”
should be taxed separately or together and that that is an “advantage” in the tax system.
My right hon. Friend the Leader of the Opposition has rightly asked,
“why should a family on £45,000 where one person stays at home lose their child benefit—£1,000, 2,000, £3,000 a year—but a family on £80,000 where both partners… are working should keep their child benefit?”—[Official Report, 13 October 2010; Vol. 516, c. 322-23.]
Even the Treasury has, begrudgingly, had to publish some statistics showing that this policy would create all sorts of anomalies and odd behaviour. It published a figure in the Budget suggesting that it expected to lose £270 million each year in revenue from people tax planning as they navigated this madness.
A family with three children on £33,000 a year after tax is to lose £2,500 from 2013—that is the equivalent of a 6p in the pound hike in their income tax. Middle-class families are being hit, and it is particularly pernicious of the Conservatives and the Liberal Democrats to focus on children in this way as a means of raising money—they are clubbing families over the head with a higher tax burden while, of course, letting the banks off the hook. At the very least the Treasury should accept the new clause and agree to publish an independent review of the consequences for independent taxation if its plans for child benefit taxation of higher rate paying family members are to proceed.
Chris Evans (Islwyn) (Lab/Co-op)
The conflicting press reports on this policy that we have seen over the last couple of months mean that the Government must explain their plans to withdraw child benefit. Like many commentators and Members of this House, I am deeply concerned by proposals that will see a lone parent or single-earner couple earning just above the higher rate threshold lose their child benefit while a dual-earner couple both earning just under the threshold would continue to receive it.
The reform could also distort incentives for those with incomes around the higher tax threshold. As I understand it, those earning above the 40% tax bracket will no longer receive child benefit for their children—that bracket is currently about £44,000. The system is complicated by the fact that that rule applies to single wage earners. If both parents earned, say, £42,000—or £84,000 between them—their family would continue to receive child benefit.
The Treasury has a duty tonight to explain how its plans to withdraw child benefit from families with a higher rate taxpayer could work in practice. Some tax experts have said that ending child benefit payments to couples with one higher rate taxpayer earning more than £43,875 a year is unenforceable. The method of recovery will require taxpayers to submit annual paperwork, new HMRC tax codes and a change in the law to cover parents who separate or live apart.
Higher rate taxpayers will need to tick an honesty box on their tax return, stating whether they or their partner have received child benefit in the past year, and it is said that they will be fined if the information provided is incorrect. According to press reports, taxpayers might face fines if they fail to disclose whether their household received child benefit. On 29 October 2010, the Financial Times stated:
“From 2013, higher-rate taxpayers in the self-assessment system will be required to tick a box declaring that their household claims child benefit. They will then pay a higher rate of tax corresponding to the level of benefit, which is worth £1,700 to a couple with two children.
Those on the pay-as-you-earn tax system will be asked in a letter to disclose if their household claims the benefit—a declaration that will put them into a different tax code. The benefit would then be deducted in the next tax year, in an ‘end-year adjustment’ similar to that in the tax credit system.”
We have seen the problems that that has caused over the past couple of years. The article went on:
“Legislation to implement the changes will include laws setting out what will happen to the benefit if parents split up, remarry or share custody.”
To me, it is not clear how a system based on an end-year adjustment would cope with in-year changes in circumstances such as the birth of a child, a partner moving out or a new partner moving in. It is also unclear what a household will constitute for these purposes. As I have said, parents who earn £42,000 each would keep the benefit—worth £1,752 a year for a couple with two children—whereas a family relying on one income of £44,000 would lose out. Someone with children on a £42,000 salary would be better off than someone on a £45,000 salary, as they could keep all their child benefit.
At present, there are no definitions of “household” in either tax or child benefit law. Defining a couple is not easy, particularly if a couple split up. He might be a higher rate taxpayer while she is the carer for the children—or, with equality fresh in the mind, she could be a higher rate taxpayer while he is the carer for the children. When they part, she could claim child benefit as she has little other income, but if the rules treat them as still part of the same household—perhaps they have split up but are still living together—she could lose her child benefit, or even have to pay back whatever she has received.
We already knew that the plans were unfair, but what has been increasingly clear is that they simply have not been thought through. We do not even know if the provisions on independent taxation will be repealed. If mothers are under no legal obligation to tell fathers that they are in receipt of child benefit, how can this tax on families work? The policy will simply create more work; there will have to be a lot of checking up. People will have to put a lot of effort in to get it and to make sure they are getting the right amount.
We are now seeing significant confusion about what the policy means in practice. Quite simply, it is creating more questions than answers. In the June emergency Budget, it was announced that the income tax personal allowance will rise by £1,000 to £7,475 from April 2011. However, the 20% tax band is being squeezed so as not to benefit higher rate taxpayers: whereas the 40% tax band currently starts at £43,875, with no tax on the first £6,475 and 20% on the next £37,400, that will change from April next year. At that point, the 40% tax bracket will start at £42,375, with a personal tax allowance of £7,475 and a reduced £34,900 tax band of 20%. Does that mean that people could lose child benefit even if they earn less than £44,000 from April next year? If that is the case, an additional 800,000 wage earners will be brought into the higher rate tax band from next April, which makes a mockery of the Government’s claims to be on the side of hard-working families. If tax allowances remain as planned, those earning more than £42,375 will be denied child benefit. The Government must answer these questions ahead of April 2011.
Mr Chuka Umunna (Streatham) (Lab)
Let me make three very quick points, parts of which will pick up on comments that have already been made.
The first point is the issue of declaration. My hon. Friend the Member for Nottingham East (Chris Leslie) mentioned last week’s Treasury Committee hearing, during which I asked the Chief Secretary to the Treasury how he intended to enforce the new child benefit measure. He said that the coalition Government will introduce legislation to require higher rate taxpayers to declare whether child benefit is coming into the household. Such a declaration is partly dependent on information being passed from one partner to the other. The Chief Secretary was very clear that the obligation to provide the information will be on the higher rate taxpayer. Why not also introduce a requirement in respect of the other half of the couple? As the Chief Secretary did not answer that, will the Minister now shed some light on it and reveal whether the Treasury has taken proper legal advice? The hon. Member for Dover (Charlie Elphicke), a former tax lawyer, is in the Chamber. I wonder whether he advised his colleagues.
Charlie Elphicke
I thank the hon. Gentleman for his kind words. As a lawyer, I might be very cautions, but as someone who has been in a relationship and who has found that couples tend to talk, I will ask the hon. Gentleman whether he is aware of any couples with children who do not share their financial information?
Mr Umunna
I do not usually ask my friends and acquaintances whether they share financial information with their partners, but I hear the comments of the hon. Gentleman.
My second point is, how will it be possible to prove the connection between the mother and the higher rate taxpayer, bearing in mind the problems that we have been having at Her Majesty’s Revenue and Customs? Given that HMRC’s resources have been cut over the past few years, how will it be able to keep tabs on the situation between couples on a monthly basis? As some 1.2 million families will be affected by the new measure, will HMRC be given any more funding to enable it to enforce the new change and to keep tabs on what is happening out there in the nation?
Finally, John Whiting, joint interim head of the Office of Tax Simplification, has obviously commented on the problems of the new measure, but what is the point in setting up such an office when the people working within it and those heading it up have not been properly consulted or asked to advise on this measure? Surely, if the Government are not minded to accept this new clause, it would be a good idea to delay the introduction of this measure and ask the Office of Tax Simplification to do its job and advise on how it can be more efficiently introduced.
Geraint Davies (Swansea West) (Lab/Co-op)
My hon. Friend makes a powerful case to look again at the detail. Does he agree that if the objective was to be fair and to put the burden on to the broadest shoulders, surely it would have been better to raise the marginal rate of tax from 40% to 41% , so that the people who have more pay more, and not just clobber people with children, who now have to pay more for their children. Those are couples, only one of whom might be working, where the 40% does not signal the best-off households.
Mr Umunna
No doubt the Government will consider my hon. Friend’s interesting suggestion and comment accordingly.
One of the main problems with the new measure is that people fall off a cliff edge when they hit the higher rate. Have the Government considered introducing a taper mechanism to prevent that anomaly from occurring, because obviously that is where the unfairness shines through?
Mr Gauke
The new clause would link the future withdrawal of child benefit from higher rate taxpayers with the principle of independent taxation. The payment of child benefit is clearly a spending issue and is not directly linked to the Bill. I therefore shall not try your patience, Madam Deputy Speaker, but it is important to set out the background to the change.
The spending review set out how the Government will tackle the deficit that they inherited from the previous Administration. Given the comments that have been made by the Leader of the Opposition—I congratulate him on becoming the recipient of another child benefit payment, and wish him and his family well—as well as by the hon. Member for Nottingham East (Chris Leslie) and several other Labour Members today, I take it that the Labour party remains opposed in principle to our reform of child benefit and believes that it should continue to be paid to all households.
Sheila Gilmore
Does the Minister agree that this is a case of reforming in haste and repenting at leisure? However tempting it might be to put in place something that sounds simple in principle, the complexity of the proposal should have been examined. The Government could have acted differently, such as by making child benefit part of taxable income. I do not necessarily suggest that that would be the best solution, but it would mean that several issues around independent taxation would not apply. If the Government wish to reduce child benefit to some households, there are other ways of doing it.
Mr Gauke
I take the hon. Lady’s point, but I am not clear about whether her party’s position is to say, “Something should be done, but we don’t like the way it’s being done,” which, I think, is the position that she sets out, or to say, “We don’t think anything should be done at all,” in which case we must include the £2.5 billion that the measure will save the Exchequer—that is an estimate from the Office for Budget Responsibility—as part of our assessment of the Opposition’s fiscal policies.
Mr Umunna
The Minister cites savings of £2.5 billion, but will he estimate the likely cost of administering the new policy, which will have an impact on those savings? John Whiting has said that the extra burden associated with administering the change in the way it is envisaged will make a fairly big dent in the expected savings.
Mr Gauke
The hon. Gentleman asks a fair question, but I will not give him a precise number because that is something that we continue to consider. The implementation of any policy clearly involves a cost, but I assure him that this cost will be small when compared with £2.5 billion. I am keen to ensure that the policy does not place an undue burden on HMRC. He made a fair point about HMRC. It faces a budget reduction, even though the Government are protecting it by ensuring that it has more resources to tackle evasion and avoidance, but we are keen to ensure that the burden of administering the policy will not cause it undue difficulty.
We have to take tough decisions and make tough choices, and this is one of the decisions that the Government have taken because we believe it is the right thing to do. We do not think it is fair to tax people on low incomes to pay for the child benefit of those earning much more. We cannot afford to continue providing financial support through child benefit to better-off households where there is a higher rate taxpayer. From January 2013, the Government will therefore withdraw child benefit from families that contain a higher rate taxpayer. Despite the noises from the Opposition, the British people understand that this is a tough, but fair, decision.
Geraint Davies
Can the Minister explain why the proposal to tax higher rate taxpayers in that way was made and announced before the comprehensive spending review? I put it to him that the reason for that was to warm up the audience and to make out that the comprehensive spending review would be fair and balanced, as opposed to the IFS’s conclusion that it hit the poor two and a half times as much as it hit the rich. Was not the timing of the announcement entirely cynical?
Mr Gauke
The policy underlines the fact that the Government are looking to address our deficit in a way that is fair, and to ensure that all parts of society play their part and those with the broadest shoulders make the biggest contribution. That is what we are doing. It is remarkable that it is Opposition Members who appear to be trying to prevent that happening, though I am not sure whether they object to the way in which it is being done or whether they intend to fight in the last ditch to defend the principle of universality as it applies to child benefit.
We wanted to avoid creating a complex new means test for household income. To do so would fundamentally change the nature of child benefit and come at a significant cost to the taxpayer. This policy has therefore been designed to avoid affecting the vast majority of the population—some 80%—who are basic rate taxpayers. It also avoids additional systems being developed, as the measure can be delivered within existing pay-as-you-earn and self-assessment systems.
Let me deal with the issue behind the new clause—the principle of independent taxation, which was introduced in the Finance Act 1988. It is a great pleasure to hear Opposition Members applauding the 1988 Budget. If I remember rightly, proceedings in this place at the time were interrupted as the Chancellor of the Exchequer was shouted down by some Opposition Members. Section 32 abolished the provision that a wife’s income was income of her husband for income tax purposes. That remains the case, and none of the proposed changes to child benefit alters it.
Child benefit is provided for a child within a family and it is therefore necessary to consider the family as a group. The policy merely withdraws child benefit from a family to whom it is difficult to justify paying it. Furthermore, the withdrawal of child benefit from families containing a higher rate taxpayer will not affect the personal allowance or rate band applicable to an individual. The changes apply a simple test to ensure that child benefit is not provided to those who need it the least.
Of course, the House will have the full opportunity to debate the changes to child benefit when they are legislated, ahead of implementation in January 2013. That would be a better time to discuss the various specific issues that have been raised in the course of the debate. Although I understand that Opposition Members may wish to draw a link between child benefit and independent taxation in order to have this debate today, it is clear that the two systems remain separate and independent.
Chris Leslie
I am trying to follow the Minister’s logic. Does HMRC envisage child benefit continuing to be paid to all mothers, but that higher rate taxpayers will have a sum equivalent to child benefit deducted from their income, on top of taxes?
Mr Gauke
The hon. Gentleman, who has been somewhat ingenious in tabling the new clause, again seeks to draw me into a wider debate about the implementation of child benefit. He sets out one way in which it could work; in other circumstances, claimants might seek to stop receiving child benefit. However, I must stress that, although he has been somewhat ingenious in raising the issue in the context of the Finance (No.2) Bill, the new clause has nothing to do with independent taxation, so I ask him to withdraw it.
Chris Leslie
I am astonished by the Minister’s blinkered approach in sticking to the robotic text, “This has absolutely nothing to do with independent taxation,” when it patently does. If a higher rate taxpayer is being asked to pay for income that their partner or spouse receives, that clearly breaches the principle of independent taxation. The hon. Gentleman would not be drawn into the mechanism by which the scheme would be set up, but, given the great fanfare with which the policy was announced at the Conservative party conference, I would have thought that by now the panic stations at the Treasury might surely have subsided, and that he would be able to share with the House exactly how the measure would work.
Geraint Davies
In my constituency, my hon. Friend’s constituency and throughout the country, there are women who do not earn any money but live in a household with a partner, receive child benefit and spend the money on their children. In the light of their uncertainty about the future, given what we all know about the divorce rates, those women are critically concerned that the hand of government will suddenly come in and snatch that money from them or their children because of what the man earns. The Bill is clearly an infringement of independent taxation and an attack on children and mothers.
Chris Leslie
My hon. Friend highlights the fact that I cannot see this being the end of the matter. The Minister suggests that the measure is part of the Government’s carefully calculated spending commitments, but I do not think that they will continue with the plan. There are so many anomalies and problems in its design and operation that they clearly did not think it through properly. They might have looked at the ready reckoner, saying “Oh yes” as they licked their lips at the £2.5 billion that they could take from families, and went straight to the first day of the Conservative party conference to announce their proposal, but it is unravelling by the moment.
The Institute for Fiscal Studies and others are starting to highlight the economic perversities and distorting effect of this measure. Even the sole issue of independent taxation is sufficient to hole below the waterline the Government’s plans to tax child benefit. I therefore hope that we can divide the House on the new clause.
Question put, That the clause be read a Second time.
Chris Leslie
I beg to move, That the clause be read a Second time.
This is a short new clause, which stands in my name and those of my hon. Friend the Member for Bristol East (Kerry McCarthy) and my right hon. Friend the Member for Delyn (Mr Hanson). It might be naive of me to expect that the promises made by the Prime Minister in opposition still hold good today, but this debate is necessary because of his rhetoric then, when he said that
“there should be a day of reckoning”
for the banks—
“A day when we would not flinch from spelling out the rightful consequences of irresponsible behaviour…this is a question of fairness…on behalf of working families”.
He continued:
“we show clearly that…there is not one rule for the rich and a different rule for everybody else.”
Those are the words of the Prime Minister—before the last general election, of course. Time has moved on, the ministerial cars have become very comfortable, but the Treasury has barely lifted a finger to fulfil the promises to reform the tax regime in which the major banks operate. Perhaps that is a convenient state of affairs for the Conservatives and Liberal Democrats as they desperately try to shift attention from the banks’ culpability for the state we are in, but there is still an urgent need to take stock of their contribution to repairing the public purse and to see decisions taken that might help to alleviate the looming crisis of public service redundancies and cutbacks.
The Chancellor’s spending review, to which the Opposition obviously take great exception, is based on the pretext that “There is no alternative”. In other words, anyone who even dares to murmur that there is any other course of action is somehow using flawed, unreasonable or unrealistic logic. That not only insults the intelligence of the public at large, but is profoundly short-sighted, as there are a great many alternative strategies that the Government should be considering. However, they insist that there is no plan B.
The new clause would shed further light on the facts behind the claim that there are no alternative revenues that could alleviate the burden of service and welfare cuts, which will fall heaviest, as we know, on middle-income families and some of the poorest adults and children in this country. We surely owe it to those people—our constituents—to try harder to find ways to close the tax gap, to create growth and new jobs, to generate new income and to bear down on the tax avoidance that costs billions of pounds each year.
Let us remember why we have the budget deficit. Contrary to the spinology that we will no doubt get from Government Members, who are obviously desperate to politicise the deficit in the hope of providing cover for their ideological scaling-back of public investment, our national debt was caused primarily not by a spending spree, as they claim, but by a dramatic collapse in revenues to the Treasury from income tax, VAT and corporation tax as a result of the global credit crunch and recession. The £132 billion rise in the deficit in the last financial year was, yes, partly the result of £53 billion in extra social protection expenditure, which was necessary, for example, for unemployment benefits. More importantly, however, there was the £79 billion decrease in revenues. It is that collapse in revenues, which was compounded by the need to spend billions shoring up the banking system and preventing its collapse, that the Conservative party consistently and mysteriously want to overlook.
Let us remind ourselves of the banking bail-out, because significant sums were spent, and had to be spent, on it. Those sums included £76 billion to purchase shares in the Royal Bank of Scotland and Lloyds Banking Group, £200 billion to indemnify the Bank of England against losses occurred in providing liquidity support, £250 billion to guarantee banks’ wholesale borrowing and strengthen liquidity in the banking system, £40 billion to provide loans and other funding to Bradford & Bingley and the Financial Services Compensation Scheme, and £280 billion agreed in principle to provide insurance for a selection of banking assets. All in all, it was the credit crunch, as we know, that led to the banking crisis and the recession. It is those things, not the public service inflation on which the Conservative party is completely fixated, that were the underpinning factors fuelling the deficit.
The banks owe taxpayers a massive debt of gratitude—that much is clear. They would have gone bust were it not for the deficit facility that we are now grappling with. My constituents are therefore repeatedly asking one simple question: will the banks be made to pay their fair share, getting us out of the deficit that they helped to create because of their business mistakes? Before the election, the Prime Minister gave every impression that that would be so, but so far very little action has been taken.
I do not want to penalise the banking sector to the point of annihilation; nobody wants our economy’s financial services sector to fail further. Indeed, it should be resurrected in a more sustainable, diverse and healthy form for the future. However, when the Government are raising VAT on the rest of us, cutting police budgets, for example, by 20%, severely squeezing students and those on housing benefit, and forcing the closure of fire services, libraries and community services—the list goes on and on—we should surely examine more closely the level of taxation that the banks are paying. That is the point of new clause 3.
Stewart Hosie
This is interesting. I have seen many of these quotes before, and I am certainly minded to support the new clause, if the hon. Gentleman pushes it to a vote. An examination of the level of tax on banking is sensible, but I would like to know what the Labour party proposes for the level of taxation, given that every billion out of the banks is about £10 million to £15 million less to lend in the real economy. I am curious, therefore, to find out how punitive the Labour party would be.
Chris Leslie
I accept the hon. Gentleman’s point. We have to be prudent in how we address these questions, and I hope to come to some of the matters he raises as we explore corporation tax and so on. If he bears with me, I will—hopefully—elaborate.
UBS analysts said that they expected Lloyds and HSBC to benefit by 2012 because of the cut in corporation tax bills, which in their case was larger than the hit they expected to be sustained through the banking levy. It seems, therefore, that the banking levy is playing quite a small part, perhaps a walk-on character—
Chris Leslie
A walk-on character with very few lines—unlike the hon. Gentleman, to whom I give way.
Charlie Elphicke
I would like to put a couple of points to the hon. Gentleman. First, taking the case of Lloyds and RBS, are there not likely to be substantial carry-forward losses in those banks, which will not be paying corporation tax for many years to come, let alone by 2012? Secondly, were they then to face a higher rate of tax, which I believe he is proposing, would the cost on those banks not result in the devaluation of their shares, which are now owned by the public? Surely, it would go round in a circle.
Chris Leslie
I will come to deferred tax in a moment, because the corporation tax questions require much greater scrutiny. That is one reason we tabled the new clause. I hope that the hon. Gentleman will join me in the Lobby, should we divide on this issue—unless the Treasury concede it—and that he agrees that we should have a review of the level of tax the banks are paying. If they are paying too much, which I doubt, I will be happy to look at the evidence and the facts. However, there is opacity about these questions, and given the hit falling on the shoulders of families and children in this country, it is incumbent on us to ask whether the banks will be paying their fair share. That is all we are asking this evening.
We think that the Government’s banking levy has been a limp effort so far. Given some of the corporation tax changes, there is a bit of a cashback arrangement for some of the banks. I would like to touch on three areas of corporation tax that I think require more serious and rigorous review. The first is that cashback boost for the banks resulting from the reduction in corporation tax rates announced in the Budget. The Exchequer Secretary confirmed in a written answer that over the lifetime of the spending review the Treasury expects that the cut in corporation tax main rate from 28% to 27%, and eventually down to 24%, will return £1 billion to the banks—specifically to the banks:
“£0.1 billion in 2011-12, £0.2 billion in 2012-13, £0.3 billion in 2013-14 and £0.4 billion in 2014-15.”—[Official Report, 1 July 2010; Vol. 512, c. 610W.]
Mr Gauke
It is dangerous to intervene given that I do not have the answer to which the hon. Gentleman has referred in front of me, but my recollection is that the answer to that parliamentary question was in the context of financial services companies as a whole, including insurance firms, not specifically banks.
Chris Leslie
It might well be that in that written answer the Exchequer Secretary’s definition of “financial services” extends slightly beyond the banks. I am happy to concede that point. Of course, we framed the new clause in order to explore the tax burden not just on the banks but on financial services more widely. However, even the hon. Gentleman would have to concede that the banks will probably be the principal beneficiaries of the corporation tax cut that he is choosing to give them at a time when he is taking money from young, pregnant mothers—the health in pregnancy grant, to name one example of an incongruous decision that might be questioned by our constituents.
The Economic Secretary to the Treasury (Justine Greening)
I can see that the hon. Gentleman is slightly confused about the written answer, so I want to clarify it for him, as I have a copy of it. The figures he gave relate to “financial sector” companies, so does he accept that he got his figures wrong when he said he was talking specifically about the banks?
Chris Leslie
The hon. Lady has several thousand civil servants—for the time being, at least, before they are made redundant—in the Treasury to help her with the costings for such questions. I can only go with the facts published in Hansard. Perhaps she could save me the trouble of tabling a further written question to find out what the bank cashback arrangement will be on corporation tax. I will give way to her if she has to hand the precise figures on what the UK banks will be gaining from the corporation tax cut. Can she tell us what those figures are? If not, I will table a written question. If she can swiftly answer that, it will be for the benefit of the House. I am pretty sure that it will be a net gain for the banks.
Mr Gauke
Let me deal with this directly. The Treasury and Her Majesty’s Revenue and Customs figures that we have look at hits by sector—in this case, the financial services sector, which includes not only banking but insurance and financial auxiliary services. The hon. Gentleman quoted his figures and suggested that they represent a net gain. In fact, by the time we get to 2014-15, the bank levy will be £2.4 billion. At the same time, the corporation tax cuts in 2014-15 will benefit the financial services sector by £0.4 billion. However we divide £0.4 billion, it is hard to see how it will ever be higher than £2.4 billion.
Chris Leslie
Were those the only two relevant factors, that might be the case, but of course they are not. There are other tax changes through which the banks will more than benefit from the arrangements. If the Exchequer Secretary had had the patience to wait, I would have elaborated on that. I will come to that quicker.
It is important that the Exchequer Secretary listens to those experts who have talked about the benefit to the banks from the corporation tax change. Lloyds Banking Group plc could gain more from a cut in corporation tax than it loses under the new banking levy, according to analysts at Redburn Partners legal practice. Lloyds, 41% of which is owned by the British Government, might see a 3% rise in its earnings per share in 2012 as corporation tax begins to fall to 24% from 28% over those four years, according to Redburn analyst, Jon Kirk. There will therefore be a net positive for Lloyds. That is one example of a net gain for the banks.
Secondly, the banks have already found a way of minimising their corporation tax liabilities. A report published only last week by the TUC on the corporation tax gap showed a gap between the headline rate of corporation tax paid and the actual or effective rate of corporation tax paid. The TUC’s analysis of data on UK corporate returns showed that the larger a company is, the better it tends to be at reducing its effective rate of corporation tax, which fell from 28% in 2000, when the headline rate was 30%, to about 23% in 2009, when the headline rate was 28%. On that basis, the TUC’s economists predict that by 2014, the largest companies will be paying corporation tax at a rate of no more than 17% on average, while small companies will still be paying corporation tax at 20% or more.
Stephen Hammond (Wimbledon) (Con)
The hon. Gentleman will know that there are all sorts of reasons why the headline rate of corporation tax may not reflect the rate of corporation tax that is actually paid, which are to do with credits for R and D, and all sorts of things. He keeps quoting what the TUC report says about larger companies, but what does it say about the banking sector?
Chris Leslie
The TUC says that the effective rate of corporation tax for the banks will fall from 25% in 2000 to below 20% this year, which means that, in reality, they are already paying a rate that is below the headline rate that small firms pay. Those findings are certainly eye-catching. All I am saying in new clause 3 is that they merit further review and consideration, which would be a reasonable step to take. Indeed, those findings suggest that we could even be heading towards a regressive corporation tax system in the UK. Small businesses should be paying less in corporation tax than the banks, but the evidence suggests that that might not be the case.
The third wheeze that the banks might benefit from, in their navigation of the corporation tax system, is known as deferred tax, which can be defined as the tax liability that might be payable at some point in the future because of transactions that have already taken place, albeit where there is no certainty about when it will have to be paid. Deferring the payment of tax is not something that ordinary taxpayers can indulge in with great ease, yet it appears that the banks are playing that game on a gargantuan scale, according to the findings of Richard Murphy, the director of Tax Research LLP. He suggests in his recent report that the banks’ deferral of tax reserves are absolutely phenomenal. He calculates that a sum totalling nearly £19 billion, which is nearly half what this country spends on capital projects annually, might not be paid by the banks in corporation tax as a result. He describes that as
“an extraordinary double subsidy going on for these banks.”
Not only were the banks underpinned by the taxpayer in 2008—they are still underpinned in the form of the guarantees offered by the Treasury—but they may receive another fillip, he argues, from that deferred corporation tax gain.
Stewart Hosie
Unless my memory is playing tricks on me, at least one of the nationalised banks used those unused or deferred tax assets to pay for the asset protection scheme, which was set up—rightly—by the Labour Government in the previous Parliament. Without those unused tax assets or that deferred tax, the asset protection scheme would not have been possible, thereby imposing an even bigger burden on the banks, so I am not quite sure where the hon. Gentleman is going with this.
Chris Leslie
I am not making any particular proposals at this point; I am simply saying in new clause 3 that we should review the level of tax that banks are paying. There may be perfectly good and justified reasons for it, but we are talking about enormous sums of money. If, as some allege, the banks are playing a canny game, with sums of money that might have prevented many of the swingeing cuts that we are seeing to public services, it is incumbent on us, on behalf of our constituents, to ask those questions. If we are indeed “all in it together”, as we are constantly told, we should ensure that the banks pay their fair share and do not leave the rest of us picking up all the bills.
Mr Umunna
Has my hon. Friend noticed that in the same package of measures in the emergency Budget—this was also touched on in the comprehensive spending review Green Book—there is also provision for a remuneration disclosure scheme? In the emergency Red Book and the CSR Green Book, we were told that the Government would come forward with details on how they would implement the scheme, which would require greater transparency in the financial services sector, so that the country could see what those in the sector were earning and whether there were irresponsible remuneration packages in place. It seems that the scheme will not now be implemented in time for the bonus round that my hon. Friend has just mentioned.
Chris Leslie
Absolutely, and it is no coincidence that it is on the first page of promises in the coalition agreement—actually, the reason is alphabetical; the first page starts with b, for “banking”—that many of those promises, including the promise to tackle banker bonuses, were made. The Government have tried to suggest that they are being tough and that they will take action, but that action has not been forthcoming. I want to hear from the Minister whether the Government are now content with the current framework, in which higher banker bonuses look set to continue to be paid. If not, will he say when the Government will bring forward proposals to act? It is a specific and simple question. The House wants to hear what the Minister has to say.
The coalition agreement also promised to use net lending targets for the nationalised banks as a means of getting credit flowing to businesses, as the hon. Member for Dundee East (Stewart Hosie) has suggested. Yet last week, the Prime Minister again shifted his stance. In a meeting with business leaders in Hertfordshire, he stepped back from that pledge, and indicated that lending targets for banks would not be reintroduced. He said:
“You can go for lending agreements with the banks. The trouble is, what I find with lending agreements is that they will promise to do a certain amount of lending to one sector, but they’ll shrink it somewhere else.”
His comments were followed by similar remarks from the Minister with responsibility for small businesses at the Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk). Last Monday, the Government published their response to the Green Paper consultation on financing the economic recovery, and it was conspicuous by its absence that no mention was made of net lending targets. Have the Government softened their position on the pursuit of net lending targets to business?
During the summer, the Chancellor said that he would be exploring the costs and benefits of a financial activities tax on profits and remuneration. He repeatedly said that he would consider such a levy on the total profits and remuneration of financial institutions rather than on individual transactions, and the European Commission backed the financial activities tax, but when it was brought forward for discussion at the EU Council summit on 28 September, Ministers seemed to be rowing back from even that pledge. Will the Minister tell the House where the Government stand on the proposal for a financial activities tax? The rumour was that the Government did not want that idea going forward to the G20 summit in Seoul this coming weekend. If so, why?
Many of our constituents will be aware of the proposal from 50 or so charities and other voluntary bodies for a financial transactions tax, which is slightly different from a financial activities tax, and would apply to a wide range of individual capital movements, including equities, bonds and derivatives. That Tobin tax or Robin Hood tax deserves a thorough review, although clearly there are arguments for and against with regard to the details and the relative impact on London as a centre for financial transactions. Nevertheless, the Government have singularly failed to respond to that campaign so far. Any review of banking taxation would need to analyse the case for a financial transactions tax far more rigorously as it is a serious proposition meriting a serious response. All in all, the banks’ tax position needs a far more serious review than the piecemeal commitments offered by Ministers so far.
Justine Greening
Will the hon. Gentleman clarify whether the Labour party supports a financial transactions tax?
Chris Leslie
We want to review it. Does the hon. Lady? Is she interested in looking at the proposition, or is she ruling it out completely?
Justine Greening
I note that the hon. Gentleman failed to answer my question. I will respond to him broadly when I have heard the rest of the debate, and when I have a chance to respond to his new clause.
Chris Leslie
I thought it was a simple question. I thought the whole point of a debate was to exchange views. I am happy to review the financial transactions tax. It is an important proposition, and it deserves serious consideration. The Minister does not seem to know whether she is allowed to review it. Perhaps some inspiration has come down from on high. There is scurrying around, and I see that the Chancellor has been paging her officials. I am sure that inspiration will come to her shortly.
Will the Minister say whether there should be a change in tax policy to rectify some of the loopholes, such as those in corporation tax? Should there be a further review of, for example, the bank payroll tax? Should banks have their right to carry tax losses forward limited so that they expire after a specific time, or would that be detrimental? Clearly, the Government’s feeble attempt to recoup something from the banks through the banking levy alone is barely denting their balance sheets and is dwarfed by, for example, the deferred tax assets that the banks are wielding according to the report.
Ministers should concede that the whole matter needs clearing up urgently if they are to have any hope of preventing widespread public cynicism, discontent and anger. In short, as things stand, all we see from the Government is a puny banking levy, banks still using corporation tax loopholes at taxpayers’ expense, promises on bankers’ bonuses unfulfilled, promises on banks’ net lending targets more distant than ever, and inaction on reforms to the banking taxation system. The taxpayers of this country deserve better.
Chris Evans
Since coming to the House, I have seen a lot of history being rewritten. We are told whenever we stand in the Chamber that we must apologise for the economy, but to coin a phrase from The Sun on the day after the general election in 1992, “It was the banks wot did it.” There is widespread public anger with the banks, and people believe that they are getting away scot-free.
At my surgeries, in my local Labour party and out in the streets, people ask me why our nurses and teachers are bearing the brunt of the deficit—what about those casino bankers? If it were not for their reckless practices, why did the then shadow Chancellor just before the general election commit to follow Labour’s spending plans for two years if we were so bad at running the economy? The simple fact is that the banks have not paid the price for the deficit that they helped to run up.
The new clause is not about destroying the banking system; it is about strengthening it, which means changing it and making it mixed. I know that this is outwith the amendment, but I would like a mutual element in the banking system, and that could start with Northern Rock. The simple fact is that the banks received £1 trillion. Can anyone imagine what £1 trillion looks like? Can anyone imagine what public works we could do with £1 trillion? Projects in my constituency are crying out for money. The Newbridge Memo, the memorial hall, needs restoration. So much could be done with a tiny part of that £1 trillion. But the bankers remain blasé and people think they are plain arrogant.
If no one believes me, let them look at Lloyds TSB, which this week appointed a chief executive. I will not embarrass myself by trying to pronounce his Spanish name, but we are told he will receive a package of £8 million. Who is worth £8 million, and what message does that send to people who are struggling to get by? It sends the message that the Government do not care how much damage bankers have done—they can carry on as they have been. When we read about such figures, what are we saying to people on the ground? They are the ones who must pay.
My hon. Friend the Member for Nottingham East (Chris Leslie) talked about bankers’ bonuses, and I wholeheartedly agree that something must be done to rein them in. However, I have been a high street banker. I worked for Lloyds TSB, and I know for a fact that someone working as a personal account manager or personal banker is desperate for their bonus at the end of the month, because it makes up their wage. If we rein in the big City bonuses, we must think about the people on the ground. Let us not rein in their bonuses. They still have to pay their bills, and we must think about that. I ask the Government to consider the new clause because the banks really must pay their fair share.
Mr Umunna
I endorse the comments made by my hon. Friend the Member for Islwyn (Chris Evans). I, too, hear similar sentiments expressed on the streets throughout my constituency.
Opposition Members are not under any illusion that banker-bashing, as it has been called, or reining in bonuses alone will sort out the problems with the financial services sector. It is important to reform the way it operates generally, which is why I welcome the banking commission that the Government have set up. Its terms of reference are sensible and, as a member of the Treasury Committee, I look forward to providing some input to that.
There are legitimate questions to be answered on whether the financial services sector is doing what the Chancellor said in the emergency Budget he would require it to do. He said:
“I believe that it is fair and right that in future banks should make a more appropriate contribution, reflecting the many risks that they generate.”—[Official Report, 22 June 2010; Vol. 512, c. 175.]
That is why I welcome the new clause. We should reflect on the huge contribution that the British public have had to make to the financial services sector since September 2007 and before.
Nic Dakin (Scunthorpe) (Lab)
My right hon. and hon. Friends have asked a number of questions that deserve detailed answers. The new clause calls for a review of the total level of taxation on the banks and the financial services sector before the setting of the 2011 Budget, and at its heart is the simple question of accountability, transparency and openness. It must be made clear to the people of this country that the banks are paying their fair share. It was, after all, the banks that got us into this situation. At a time when this Government are taking so much away from honest, working people—particularly those with families—it is crucial to demonstrate that we are all in this together and that the banks are paying their fair share.
People are facing an increase in VAT, students are facing a trebling of tuition fees, the education maintenance allowance is being taken away, and child benefit is being capped, frozen and even taken away from many people. With all those massive cuts in public spending, it is crucial that we should know for certain that the banks are paying their fair share. That is all that the new clause endeavours to achieve. We want to make it clear that the banks are not continuing with their present bonus culture, and that they are making a fair contribution to the country. After all, it was the taxpayers who delved into their pockets to keep the banks afloat. This is a simple proposal, simply put, about openness, transparency and accountability, and I can see no good reason not to support it. It would give the people of this country great confidence in the Government if they were to accept this proposal tonight.
Justine Greening
The new clause relates to the taxation of the banking and financial services industry, and proposes that the Treasury publish a report before the 2011 Budget examining the level of taxation on those sectors. Before I discuss the new clause directly, I think it would be helpful to set out some of the background and context relating to the Government’s approach to taxation of the banking sector. The Chancellor set out clearly in the recent spending review the Government’s objective in taxing the banking industry. We inherited the largest peacetime deficit in UK history, and, during these difficult times it is only right that steps are taken to ensure that the banks pay a full and fair contribution.
I listened with interest to Opposition Members, who appear to have a very blinkered perspective of regulatory issues. They skimmed over their own Government’s part in the regulatory failures that led to the banking sector crisis. It is worth going back to some comments made by the previous Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). I know he is now making speeches in the House again, but it might have been helpful if he had participated in this debate, given his own involvement in these matters. When opening Lehman Brothers’ new European headquarters in 2004, he said:
“I would like to pay tribute to the contribution you and your company make to the prosperity of Britain”.
He also said that Lehman Brothers
“has always been an innovator, financing new ideas and inventions before many others even began to realise their potential.”
The last Government clearly had a huge role to play in that the regulatory system they brought in during their term in power absolutely failed the British public.
Justine Greening
I will give way. I see that Labour Members have now perked up from when they were skimming over their past, as they were so clearly intent on doing. It is more difficult for them, is it not, to hear the failures of their Government being set out so clearly? Let us not forget that the last Prime Minister, back in 2007, described this as a golden age. He obviously felt that the regulatory system he had put in place was a great one, but that was subsequently proved not to be the case.
Mr Umunna
Does the Minister not accept that there was a move towards a light-touch regulatory model across the entire political system? I am well aware of this because I used to work in the industry myself, and I do not recall the Economic Secretary or any of her colleagues jumping up and down when the Financial Services and Markets Bill went through this House, complaining that it did not introduce stronger regulation. Secondly, did she, like me, hear the comments of the Governor of the Bank of England, Mervyn King, at the Treasury Committee this summer? He was asked whether, if the new regulatory model championed by the Minister had been adopted, the global financial crisis would have been averted—and he said no.
Justine Greening
If the hon. Gentleman checked the Hansard of our debates on the original tripartite regulatory system, he would see that we did raise concerns about the nature of that system. We were told that our warnings were wrong. It is not acceptable for Labour Members simply to wash their hands of the regulatory system that they now clearly feel absolutely failed.
In fact, we have to respond to the regulatory failures of the past by returning the role of supervising the banks to the body charged with the overall monitoring of the economy—the Bank of England. That is why we have also set up the Independent Commission on Banking to advise on the reforms necessary to ensure that we are better protected against another banking meltdown in the future.
Stewart Hosie
On that point, I entirely agree with the Minister. A fundamental part of this is the new capital requirements under Basel III—some 7% higher for at-risk banks. Does she not agree, however, that a review of bank taxation, along with the Bank commission and the new Basel III regulations, would be sensible to ensure that we have the balance in the round between taxation and capitalisation, risk and regulation, and supervision both at the UK level and with respect to this rather complicated European structure?
Justine Greening
The hon. Gentleman is right that the bank levy itself needs to be viewed in the context of overall policy. He is right that it is not just about the bank levy; we have to look at it in the light of the broader changes around regulatory reform and the work of the Independent Commission on Banking. I will shortly come on to explain what that means for new clause 3.
We know that we have to tackle the regulatory failures of the past. We also know that it is right that banks make a contribution in respect of the risks they pose to the UK economy, but there is no benefit in taking action that would simply drive banks abroad. As the hon. Member for Islwyn (Chris Evans) pointed out, hundreds of thousands of jobs across the UK depend on Britain being competitive in this industry. For the financial services sector as a whole, as of June 2009, it had 1 million employees. The jobs are not just in London and the south-east, as there are nearly 100,000 people employed within the financial services industry in the north-west, while there are between 69,000 and 70,000 people employed by that industry in the east of England and about 90,000 in Scotland. Although there have been serious failures in the past, we also have to remember that many of the jobs that are part of this overall sector do not bring in high incomes, as the hon. Gentleman pointed out.
Chris Leslie
I am following the hon. Lady’s logic. She is saying that we do not want to do anything that would drive the banks away—that old chestnut again—but is she seriously saying that the proposal in the new clause to have a review of the level of taxation would be enough to frighten them all offshore? Is she really saying that?
Justine Greening
I am sure that the hon. Gentleman is following my comments closely. I was setting out the context for the situation in which we find ourselves. I have pointed to serious regulatory failure, which needs to be sorted out, and the fact that we have inherited a huge fiscal deficit, which also needs to be sorted out. In that context, we should recall that the previous Government had said that they would not introduce a bank levy at the national level and that they wanted international agreement before any such levy were put into place. At that time, we argued that we should get on with that, as a Government, and not necessarily wait for international agreement. The Labour Government rejected that.
In our first Budget, we decided to introduce a permanent levy on banks, which we expect to generate about £2.5 billion of revenue each year. The levy reflects the potential risks that banks pose to the UK’s financial system and the wider economy, and it will ensure that banks make an appropriate contribution to deficit reduction that balances fairness with the competitiveness of the UK banking sector. It is also intended to encourage banks to move away from risky funding models that threaten the stability of the financial sector.
We were the first country in the G20 to take such action—the hon. Member for Streatham (Mr Umunna) talked about leadership, and I think this is leadership—and we have been joined by France and Germany, which made announcements on bank levies in June. Germany’s plans for its bank levy have been before Parliament there, while France outlined the details of its bank levy at its budget in September. Hungary, Portugal and Austria have since also outlined plans to introduce bank levies, while Sweden has already introduced a levy. Our bank levy is a permanent one and a regular source of revenue—unlike the one-off bonus tax of the previous Administration.
Mr Umunna
What does the Minister say to the International Monetary Fund? I have already mentioned the IMF’s views on the level at which this levy should be imposed. Conservative Members are fond of quoting the IMF to us time and again, yet the IMF takes the view that at least £6 billion a year can be raised from this levy. Does she agree with the IMF and, if not, why does she think it is wrong?
Justine Greening
The IMF has expressed its own views around levels of taxation. In the broader international context, which the hon. Member for Nottingham East (Chris Leslie) mentioned, there are questions about the introduction of a financial transaction tax and a financial activities tax. Unlike the hon. Gentleman’s party, we were prepared to introduce a bank levy nationally, but there are also discussions taking place about international measures that might be taken.
In fact, over and above the bank levy, the Government are taking a tougher approach to tackling tax avoidance by the banks. Prior to the spending review, only four of the top 15 banks had adopted the previous Government’s code of practice. We have asked Her Majesty’s Revenue and Customs to work with banks to make sure they adopt and implement the code by the end of this month, thereby making the commitment to comply with both the letter and the spirit of the law, and not to engage in or promote tax avoidance.
New clause 3 provides:
“The Treasury shall publish a report before the 2011 Budget examining the level of taxation on the banking and financial services industry.”
We have had some sort of rationale for it, but I have to say that I see little merit in making such a report in isolation. The report itself would be no substitute for the overall strategy for improved regulation and the complementary bank levy ensuring banks make a contribution in respect of the risk they pose to the financial system and wider economy. As set out in the spending review, the Government will continue to monitor tax receipts from the banking sector to ensure that banks make a fair and growing contribution to the public finances as the economy recovers.
In addition, there are, of course, already statistics available on the amount of tax revenue derived from the financial services sector. Historical figures for corporation tax receipts paid by several broadly defined business sectors are regularly updated and published on the HMRC national statistics website. To improve predictability, it is important that the Government provide clarity on the direction of tax policy, and the vehicle through which that is best delivered is the Budget itself. The new clause would require the Government to produce a superfluous report in advance of the Budget and therefore in advance of any announcements that the Chancellor might wish to make about tax policy generally that might impact on the banking and financial services industries.
The Opposition want a report on the banking industry. What the Government want, and what we have, is a strategy to ensure that the financial services sector pays its fair share. We have been clear about what we want to achieve, not only through the bank levy but through the code of practice, and by fixing the banks’ ineffective regulatory system—the system established by the last Government, who let our country down so badly. The new clause does nothing to support those aims, and I ask the hon. Member for Nottingham East to withdraw it. If he is not willing to do so, an apology to the British people for the mess of a regulatory scheme that he left behind would not go amiss.
Chris Leslie
What cheek the Minister has to start claiming, in that revisionist way, that her party was always saying that it wanted heavier regulation of the banks in the 1980s and 1990s, and that the Labour party was always advocating the lightest of light touches.
The Minister has completely failed to address the substance of the new clause. We were not even arguing for a change of policy, although I think that we may deal with that on another occasion; we were simply asking for a review of the levels of tax paid by the banks. The Minister did not address that. Nor did she address the issue of bankability. My hon. Friend the Member for Islwyn (Chris Evans) rightly distinguished between lower-paid employees in the banking sector and the high-rolling, highly paid bonus recipients who are in a league of their own.
The Government have taken no action on banker bonuses, despite all their rhetoric. As my hon. Friend the Member for Streatham (Mr Umunna) pointed out, although the Government had claimed earlier that they wanted to see the banks paying their fair share, they were quite happy to set the banking levy at a puny level. It was interesting to note that the Minister body-swerved the point about the IMF’s suggestion that the levy should be higher, and I think that we should examine that methodology on another occasion.
My hon. Friend the Member for Scunthorpe (Nic Dakin) rightly observed that new clause 3 simply seeks transparency and accountability, which must be an important part of proving that we are genuinely all in it together, as the Government like to claim. The Government are going to hit the public generally, cutting services, abolishing education maintenance allowances, taxing child benefit and raising VAT; yet they are unable to do anything about the banks.
We accept that the Independent Commission on Banking is investigating the matter and that regulatory reform is needed, but why can we not have a review of the level of taxes? That is all that we are asking for. What are the Government scared of? They have not given us an answer, and I think that we should divide the House.
Chris Bryant (Rhondda) (Lab)
On a point of order, Mr Deputy Speaker. I have never seen you in the gym, although you may visit it regularly, but when I was there earlier this evening, the Division Bell did not ring. I do not know whether it did not ring in other parts of the estate, but I hope that it will ring on this occasion—although I am here now.
Mr Deputy Speaker (Mr Nigel Evans)
Funnily enough, that is a point of order for me. It may be the first that I have taken.
I do go to the gym, although I do not go to the one to which the hon. Gentleman has referred. I thank him for giving me notice of his point of order. I have asked for someone to be in the gym in time for the next Division in order to ascertain whether the bells are working normally. The hon. Gentleman should be reassured that the matter is being investigated as we speak.
Question put, That the clause be read a Second time.
The House proceeded to a Division.
Mr Deputy Speaker: Order. It has been brought to my attention that there is a problem with the Division bells not only in the gym, but in other parts of the parliamentary estate. I am therefore giving Members a further two minutes to vote in the current Division. In the meantime, may I ask that the bells be investigated in Norman Shaw North as well as in the gym? I also advise all Members to be attentive to the monitors as well as the Division bells, because there may be more Divisions this evening.
Chris Leslie
I beg to move, That the clause be read a Second time.
New clause 5 takes us into completely different territory from that of the previous debate, and it picks up on a discussion we had in Committee about the legal definition of incapacitated persons. Committee members were concerned by the outdated nature of some of our tax law, under which antiquated terminology can often still find its way into our tax regime through extracts from statutes simply being cut and pasted into today’s legislation.
One such anomaly concerns a definition in the Taxes Management Act 1970, which I am told is still very much a cornerstone of our tax law. It defines an “incapacitated person” as
“any infant, person of unsound mind, lunatic, idiot or insane person”.
Those terms of reference are clearly insulting and demeaning to people who would be regarded as incapacitated. Not only is it out of date for those terms of reference to be extant in our legislation, but it is hurtful to those individuals who may suffer from incapacitation to be categorised and described in such derogatory terms. That definition derives from the 19th-century lunacy Acts and today appears grotesquely at odds with modern terminology, and this insulting state of affairs ought to have been reformed many years ago. That definition relates to section 72 of the 1970 Act, which says that an incapacitated person’s tax liabilities should apply to their
“trustee, guardian, tutor, curator or committee”
as if to a non-incapacitated person.
In Committee, we pressed Ministers to concede this small and surely non-controversial reform. We did not feel that it was a matter of party politicking; after all, it should not be a dividing line between the parties. The new clause is simply and straightforwardly about replacing and modernising the definition of an “incapacitated person” and aligning it with the meaning in the more modern and more appropriate Mental Capacity Act 2005, whose far more flexible and sophisticated definition is less hurtful in tone and more precise in its interpretation. It states:
“For the purposes of this Act, a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain.”
That is a far more appropriate definition.
By updating the definition, we would also update provisions to encompass new arrangements relating to trusteeships. For example, the new arrangements would also modernise those of donees of powers of attorney, who would be properly included in the legal definitions, as well as those of Department for Work and Pensions appointees. I should like to thank the Chartered Institute of Taxation’s low incomes tax reform group—LITRG—for highlighting the issue consistently. It has been championing this minor technical change in the law for at least seven years and has been promised on numerous occasions that, “A tax law rewrite is just around the corner”, “More time is needed for consultation” and so on. I gather that it has been having discussions with officials, following our discussion in Committee. Although LITRG may have cause to trust the Minister’s officials, I believe that time is running out for this change to be made. When the Minister was unable to concede on this point in Committee, I said that we would try to have this debate on the Floor of the House because of the importance and urgency of making this reform.
It is a pity that the Minister has not tabled a Government new clause on Report, but I shall wait to hear what he has to say. We did try to reflect on the points that he raised in Committee. The provision that we had tabled then did not refer specifically to children and we have rectified that by making the appropriate change for the Report stage. As far as I can see, this new clause has no revenue implications and there is no clear reason for any Member to dispute the need to modernise this terminology. There is clear evidence that people are hurt and insulted by the terminology from a bygone age. It therefore seemed sensible to put this point again on Report, and I urge the Minister to accept the new clause.
Mr Gauke
As we have heard, new clause 5 seeks to change the definition in the Taxes Management Act 1970 of an “incapacitated person”. I appreciate that the purpose of the new clause is not to change the scope of the definition, but to ensure that it better reflects the modern understanding of an “incapacitated person”. Members of the Committee will recall that we debated a similar proposal at the end of the Committee stage. As I explained then, a definition is required to ensure that the obligations of the 1970 Act properly fall to those acting for children or for those with mental health problems. The existing definition can be traced back to at least 1880, and I reiterate that I agree that the wording used, such as “lunatic” or “idiot”, no longer feels appropriate, belonging as it does to the Victorian age, rather than to today’s times.
Sheila Gilmore
Earlier today I made the point, on another matter, that it may be unwise to reform in haste and repent at leisure. I am very pleased that the Minister has now decided to agree with me.
Mr Gauke
I am delighted if that is how the hon. Lady interprets my remarks, and if that pleases her, it pleases me.
In June, we produced our paper on the making of tax policy and we believe that it is very important to adopt a deliberative and consultative approach and, wherever possible, to consult thoroughly. We wish to avoid the experience of making reactive and piecemeal policy announcements that have been insufficiently thought through and result in unexpected consequences—we saw too much of that under the previous Government. Instead, we believe that appropriate consideration should be given to changes, thus providing an opportunity for those affected to comment and have certainty about our decisions. Any change on this matter should go through that process to ensure that we can come to this House with legislation that will work as intended.
Let me be clear that I agree that the wording in the current definition is outdated and that I am committed to delivering change. As I have said, my officials have already started to work with LITRG and will work with other groups that have the expertise to ensure that we get this right. The hon. Member for Nottingham East (Chris Leslie) has alluded to the fact that LITRG is happy to work with Treasury officials and accepts the need to get this right. I believe that it will be possible to deliver change to the definition in the next couple of years along the timetable that LITRG accepts.
I ask the hon. Gentleman not to press his new clause to a vote, but I hope that he will engage with us on how to make the change behind the clause that we both agree is necessary. I am grateful to him for raising the issue in Committee and today. I agree that this should not be a matter of party political dividing lines and we will seek to address it. It has been of long-standing concern, but the Government are determined to address it, so I ask him to withdraw the clause.
Chris Leslie
I am impressed that the Minister has taken the time to encourage his officials to meet LITRG. I am pleased that he agrees about the outdated nature of some of these archaic terms: “idiot”, “lunatic”, “insane” and so on should not be part of our modern legislative lexicon. I am interested that yet again he manages to find a flaw in the drafting. It is almost like one of those circular nightmares: no matter what point any Opposition party makes to any Government, there is always a desire to resist by pointing out drafting and terminological problems. I think that the Minister accepts the spirit in which we have been trying to raise this issue.
I agree entirely that it is important to take whatever time is necessary to frame the definitions correctly in law, but we are not talking about designing a whole new regulatory regime for financial services or some convoluted way of taxing child benefit. We are simply talking about a minor change to modernise the terminology in tax law. I am still slightly sceptical about the argument that we need to take another couple of years to do so.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Does the hon. Gentleman agree that it is important that any proposals work for the whole of the UK and not just for one or two parts of it?
Chris Leslie
Indeed, and that is probably why on this occasion I am happy to accede to the Minister’s request that Treasury officials be given more time to frame the change. However, I think that the patience of the House will be tested if we go for another seven years with these terms still in statute as we go through Finance Bill after Finance Bill after Finance Bill—we are going to have three, after all, this year, with another possibly coming shortly, although it is up to the Minister when that happens. I do not want to be back here tabling similar amendments. I hope that during the Minister’s tenure, before he is promoted to even higher office—I accept that that is probably imminent, whenever the reshuffle might come—he will make a commitment, at least, to show that this was one reform that he was able to champion. I would be grateful for that. On that basis and in that hope, I am happy to beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
Clause 4
Seafarers’ earnings
Chris Leslie
I beg to move amendment 1, in page 7, line 40, leave out clause 4.
In Committee, we discussed the implications of clause 4, which I am happy to discuss again. It seeks to extend to seafarers resident in the European economic area the same 100% deduction from income tax of their earnings from employment as a seafarer wholly or partly outside the UK during an eligible period. I know that this is something about which many Members of the House will be very concerned.
At present the tax relief is available only to those seafarers who are ordinarily resident in the UK, but there are clearly seafarers resident in other EEA states yet not ordinarily resident in the UK who might also warrant the seafarers’ earnings deduction. The measure is listed in the Budget Red Book as costing the Exchequer £5 million annually and we debated the technical details of the clause, such as the navigation of waters beyond the UK continental shelf, how long would be spent away from the UK and how many seafarers are involved in the concession. The Minister said that it was in the order of 16,000.
The Minister also helpfully explained that the clause was brought forward as a result of the European Commission’s decision to challenge the compatibility of seafarers’ earnings deductions with the UK’s treaty obligations and to comply with our EU and EEA associations. It is welcome that the Conservative party is rushing to legislate to comply with these European arrangements. I know that some hon. Members—including the Minister of State, Foreign and Commonwealth Office, the hon. Member for Taunton Deane (Mr Browne), who is sitting on the Front Bench opposite—will be more pro-European than others, but he seems to be persuading the Conservative party towards the pro-European stance. It is interesting that there is no dissent from that interpretation.
In Committee I raised in particular a specific and contemporary issue that has been a subject of some controversy: the impact on the mackerel fishing dispute between UK and Icelandic fishermen. The clause is highly relevant and might have a significant bearing on that dispute, because if enacted it would grant to the Icelandic fishermen—and the Norwegians for that matter—a set of tax relief arrangements that would be very useful to them. I asked the Minister a series of questions on that, but he merely asserted in his indomitable way that the clause was “not relevant” to those discussions. So, I want to try again.
Will the Minister say what discussions have taken place between the Government and the Governments of Norway and Iceland in the drafting of the provisions and in what respect they will be reciprocated for UK-resident seafarers in those countries? Has the Minister spoken with his counterparts in the Department for Environment, Food and Rural Affairs, the Scottish Executive—I know that some hon. Members will be interested to learn about that—and the FCO regarding the impact that the change might have on the sensitive negotiations between the EU, Norway and Iceland over the mackerel quota? I gather that the practice of the Icelandic fishing community unilaterally to declare a larger catch quota for valuable fish, risking the sustainability of fish stocks and disrupting previously settled agreements, has caused consternation in some quarters. Is it therefore appropriate for the Treasury to grant this tax concession to Icelandic fishermen while there is such great sensitivity?
On Friday, I understand that the Icelandic ambassador to the UK, Benedikt Jonsson, met the chief executive of the Scottish Fishermen’s Federation and others to discuss the mackerel dispute at a meeting in Aberdeen organised by the Icelandic consulate. I gather that “frank views”, as they are often called, were exchanged about what constitutes responsible management of that mackerel quota. Iceland continues to assert its right to catch a significantly increased quota this year outside the bounds of the international agreements. What are the UK Government doing to bring the dispute to a sensible conclusion? Would it not be wise to pause on the gifting of the seafarers’ earnings deduction to the Icelandic fishing community until such time that the question over the fair fishing of mackerel stocks is resolved?
Other issues might be relevant, too. Are we, for instance, still confident that the relationships between the UK and Iceland are ensuring that our fiscal position is protected? For example, the UK ought to be getting money back from the collapse of Icesave and other Icelandic banks, but there have been recent suggestions, particularly resulting from protests in Iceland, that there might be some delay in repaying foreign creditors with the priority that is deserved. Is it sensible to be offering tax concessions to Iceland when such negotiations are going on? I understand that there are also some question marks over whether the EEA treaty arrangements necessarily require such a tax concession to be ceded to the Icelanders.
I have asked a number of questions and I wonder whether the Minister can address them. They are not necessarily at the top of people’s minds in every constituency in this country, but there are some corners of the country where this is a big issue. I would be grateful for the Minister’s attention to it.
Mr Gauke
As we have heard, amendment 1 seeks to remove clause 4 on the seafarers’ earnings deduction from the Bill. Doing so would prevent the extension of seafarers’ earnings deductions to EEA resident seafarers. By way of background, it is worth pointing out that in November 2008 the European Commission sent a pre-infraction letter on this matter. The Commission stated that the rules for seafarers’ earnings deductions are incompatible with the EU rules because the deduction is available only to seafarers who are ordinarily resident in the United Kingdom. After due consideration of the Commission’s letter, the previous Government decided to respond by enacting a change in the law. Consequently, last year they said that they would legislate to extend the rules for this deduction, enabling European economic area resident seafarers from outside the UK to claim. The previous Government committed to implementing the change from April 2011.
Chris Leslie
I am grateful to the Minister for his comments, which, given that he addressed some of the issues pertinent to the mackerel wars question in respect of arrangements for Icelandic fishermen—that was probably the biggest reason for the question mark over this clause—were certainly more thorough than those we had in Committee. He mentioned a couple of reasons why he did not feel that the measure would bite on that issue—if I may use that fishing pun. I am glad that he did not repeat his red herring claim against the amendment. The self-employment point was a fair one. He also said that the measure would hit only if there was a claim when Icelandic fishermen were landing their catches at UK ports and so forth. In particular, he talked about the European Court of Justice situation and the requirement that would fall on the UK and the consequences that would come from that. I know how much Members on the Government Benches are keen to abide by their European obligations. Given those strictures, I am happy to beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Third Reading
Mr Gauke
I beg to move, That the Bill be now read the Third time.
We find ourselves in the unusual situation of having considered three Finance Bills this year. The first, as usual, was introduced following the May Budget, but was curtailed by the election. The second allowed this Government to enact measures that were deemed necessary to address the financial mess that was left to us. This third Bill has allowed this Government to take forward those technical and uncontroversial measures set out by the previous Administration. The nature and timing of this third Bill are a product of both the economic position and our commitment to improving future Finance Bills.
The enormity of the challenges facing Britain was one of the catalysts for a brief, focused Finance Bill in the summer. As my right Hon. Friend the Prime Minister set out, private sector-led growth is at the centre of the changes that this Government need to make to avoid the mistakes of the previous Government. The first part of providing that must be macro-economic stability, which is why it was necessary to enact in the summer those policies that would quickly tackle Labour’s deficit. Doing so restored the confidence in the economy of both the financial markets and the British people. Stable public finances are the only way in which to prevent higher interest rates, rising inflation and more taxes.
Alongside such policies was the need to show that Britain is, once again, open for business. We have taken such steps and committed ourselves to more. In so doing, we have been opposed by Members on the Opposition Benches, particularly on our measures for growth. I am sure that many hon. Members will remember the hon. Member for Wallasey (Ms Eagle) invoking Lord Kitchener on Second Reading. I am more drawn to the words of Churchill, who contended that a people taxing themselves into prosperity is like a man standing in a bucket and trying to lift himself by the handle. That is why we are reducing the rates of corporation tax for large and small companies and removing nearly 1 million people from tax, and why we did not go ahead with Labour’s jobs tax.
It was because of the need to take such steps in the summer that a short, focused Bill was required, which meant that an additional Bill was needed in the autumn. However, this Bill has also been an opportunity for the Government to demonstrate how we will improve tax policy making. On 12 July, the clauses in the Bill were published in draft for consultation. More than 60 comments were received and resulted in changes to nine clauses. The publication of the clauses in draft followed the commitments set out in the June Budget. The changes will ensure greater predictability, fewer changes and better consultation. We have already made a good start on the first of those. Last week, my right hon. Friend the Chancellor announced the date of the Budget, four and a half months ahead of time. This evening, I can confirm that we will be publishing the majority of the clauses for the Finance Bill 2011 later this year. We will set out the draft clauses on 9 December.
I have discussed the foundations of the Bill and the process that we will undertake for future Bills, but we should not forget the important measures before us. Clauses 1, 2, 3 and 16 will provide for fairer tax treatment for carers. Clauses 5 and 6 will assure the future of venture capital schemes, which have supported more than £10 billion of investment. The support to real estate investment trusts under clause 10 will allow them to meet their regulatory requirements more easily. The changes in clauses 19 to 22 ensure EU compliance on several technical but necessary issues. I shall not press this point, but I remind hon. Members of the important action that we are taking against long cigarettes and the tax avoidance connected with them.
The Bill is a result of necessary action that was taken earlier in the year and of the greater scrutiny and consultation to which all future Bills will be subjected. Although it is not packed with headline measures, it will help many groups. It assists businesses and individuals, supports investment and benefits those in need. The Bill will make a real difference in the real world and I commend it to the House.
Mr Hanson
The Labour party predominantly supports the Bill. It had its genesis under the previous Labour Government when my right hon. Friend the Member for Edinburgh South West (Mr Darling) brought forward many of its measures. We give the Bill a warm reception, although we scrutinised it in Committee, as was our duty, as the Opposition.
I was going to give the Minister a much warmer welcome than I might now do, but he raised several points that strayed beyond the Bill, even though they are important for the House to consider. There is a clear difference between the Government and the Opposition on public spending and taxation regimes over the next few years. Even during today’s consideration of the Bill, we saw the clear differences between us on child benefit, taxation on banks and video game tax relief. We will return to such important issues in due course. They will frame the economic debate between the Government and the Opposition over the next 12 to 18 months, and we will watch closely how the backdrop to the Bill meets the needs of my constituents and those of my right hon. and hon. Friends in relation to employment, prosperity, taxation and the economic health of the United Kingdom, because we remain of the view that the Government are cutting too far, too fast, and that they will therefore damage the economy. However, let us put those matters to one side because they are not in the Bill.
As I said, my right hon. Friend the Member for Edinburgh South West developed many of the policies in the Bill. The uncontroversial nature of the Bill is attested by the fact that there were only two Divisions in Committee. One was on the sittings motion, following a disagreement about a clash of business in Committee and on the Floor of the House—as a matter of good practice, we should try to avoid that in future. The other Division was on a matter of more significant principle: the definition of “incapacitated person”. We had a rerun of that debate today.
We support many of the detailed provisions in this technical Bill. It includes important measures on foster care relief and relief for adopters. It contains provisions to simplify value added tax and to address film tax credit. As the Minister said, it includes important measures to tackle the smuggling of cigarettes through its consideration of taxation regimes for long cigarettes. We support those measures, which were the subject of discussion in Committee. The Bill puts in place important and welcome green allowances as a kick-start for zero-emission goods vehicles. When we discussed those measures in Committee, there was broad support for their implementation.
The Bill gives welcome support for asbestos-related trusts through taxation measures, including on capital gains tax. After we tested the Minister on those measures, we reached the conclusion that they were worthy of general support. We also support the clarification in the Bill on landfill tax.
Try as I might in Committee, I could not find much in the Bill with which to disagree. However, our sittings allowed us to tease out the Government’s thinking on a range of issues and to reflect the concerns of a number of outside bodies about the implementation of policy, rather than the policy itself.
As hon. Members can see, Labour Members are so content with the Bill—and have such trust and faith in my ability—that they have left it to me to bring our proceedings on it to a close. Although we welcome the Bill, we will consider real differences between us regarding the economy of the United Kingdom on future days, and I look forward to those debates in due course.
Charlie Elphicke
As a member of the new intake, it was a privilege to serve on the Government side of the Pubic Bill Committee. I congratulate Ministers on ably putting forward the Government’s case in Committee.
This important Bill is one of the three key pieces of the Government’s programme for the finances of the country—the first was the emergency Budget and the second was the comprehensive spending review. It forms part of the way in which we will start righting the finances of the nation. Only today we heard a lot of deficit denial from Labour Members, yet the nation needs its finances sorted out. We in Dover are trying to help to do that, in our small way, through the prospective sale of our port. We say, “Don’t wait two years to flog it off overseas like Cadbury; let’s get on and do it now, with a community mutual purchasing the port, to ensure that the Government get their money by the end of the financial year.” Understandably, the harbour board is not pleased about that. Under its plans, it hopes to get millions for management, but I want millions for the people of Dover and the betterment of the community, just as the Government, through the Bill, seek the betterment of the nation as a whole.
Our finances are in a bad state. We have a structural deficit of £109 billion a year. By the end of the Parliament, even after we have reined in the deficit, our debt will have increased by £292 billion, and that is before we get on to asking how we pay down the national debt. The key message of the Bill, the Budget and the comprehensive spending review is that we must stop debts mounting before we can pay down the mortgage. We must get the finances of the nation back under proper control and on a level keel.
Just as I was privileged to be a member of the Public Bill Committee, I am privileged to support the Bill, and I congratulate Ministers on their excellent work.
Penny Mordaunt (Portsmouth North) (Con)
I wish to start by briefly mentioning the public consultation on the Bill. During our discussions about the Bill and the comprehensive spending review, much was said about the previous Government’s mismanagement of the economy and the behaviours that led them to spend £5 for every £4 that they brought in, but the systems that they put in place did not help either. The Minister has referred to the failure of regulation, but the previous Government’s other practices—the prime example is their failure to hold a comprehensive spending review—hindered public and parliamentary scrutiny of their ability to manage the economy. That enabled a bad situation to escalate, with a scandalous overspend, as well as allowing them to adopt the shocking scorched earth policy in their death throes with which we are all familiar.
I therefore welcome any move towards more transparency and public consultation. We have heard that Departments will publish business plans, and we were given reassurances in the summer that the clear line of sight project would allow us to see not just what Departments were spending, but what they were raising. In addition, consultation on Finance Bills is an extremely good innovation in the interests of quality and transparent Government. I hope that in future consultations, a broad audience beyond the usual tax practitioners will let their views be known to the Treasury. That will help to hold Governments to account, and it will certainly give us something interesting to talk about in Committee.
With reference to the Bill, I welcome the amendment to collection procedures for income tax for individuals and the harmonisation of administration regimes for different taxes, which is a further advance towards simplification and transparency. I have received assurances on the issues that I raised on clauses 26 and 27 about the failure to make returns and late payment. I sought assurances that those measures would not overburden taxpayers or impose disproportionate penalties.
I applaud first-year allowances for zero-emission goods vehicles, a genuine incentive for logistics firms to pursue a green agenda, and a sign of the Government’s determination to reward green behaviour. In Committee, there was some discussion about what constituted a vehicle, which at the time I thought might be rather a waste of time, but given that earlier today, at Defence questions, an hon. Member managed to ask a question about aircraft carriers under the topic of vehicles, perhaps the discussion in Committee was not a waste of time at all.
The clause that will be of most interest to my constituents is clause 31, because many people in Portsmouth North are suffering from asbestos-related illnesses. The clause will facilitate compensation payments and is a proper response to the tax liability to which many well intentioned trusts have found themselves exposed. Many of our constituents will suffer from asbestos-related industrial illnesses. The long period from exposure to presentation of symptoms, as well as lack of awareness, means that we will see new cases for decades to come.
Currently, the trusts established to pay compensation to asbestos illness sufferers can be liable for inheritance tax, capital gains tax and income tax on their assets. Clause 31 will introduce a retrospective exemption for trusts established between 6 April 2006 and 23 March this year. Ultimately, that means more money going to victims, and it will be warmly welcomed in Portsmouth. I was reassured to learn during the debate in Committee that other trusts that do not fall into that time frame will not miss out. No trusts that might be affected have been set up since 23 March, and in future the problem can be avoided if new trusts fully consult the Charity Commission and HMRC. This is an extremely important clause in an important Bill, and I urge all hon. Members to support it.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Business without Debate
Mr Deputy Speaker (Mr Lindsay Hoyle)
With the leave of the House, we shall take motions 3 to 12 together.
Motion made, and Question put forthwith (Standing Order No. 118(6)),
Health Care and Associated Professions
That the draft Medical Profession (Responsible Officers) Regulations 2010, which were laid before the House on 26 July, be approved.
European Union
That the draft European Communities (Definition of Treaties) (Côte d’Ivoire Economic Partnership Agreement) Order 2010, which was laid before this House on 11 October, be approved.
That the draft European Communities (Definition of Treaties) (Central Africa Interim Economic Partnership Agreement) Order 2010, which was laid before this House on 11 October, be approved.
Value Added Tax
That the Value Added Tax (Emissions Allowances) Order 2010 (S.I., 2010, No. 2549), dated 19 October 2010, a copy of which was laid before this House on 20 October, be approved.
Taxes
That the draft Tax Avoidance Schemes (Penalty) (Amendment) Regulations 2010, which were laid before this House on 13 October, be approved.
Capital Gains Tax
That the draft Double Taxation Relief and International Tax Enforcement (Austria) Order 2010, which was laid before this House on 15 July, be approved.
That the draft Double Taxation Relief and International Tax Enforcement (Mexico) Order 2010, which was laid before this House on 15 July, be approved.
That the draft Double Taxation Relief and International Tax Enforcement (Singapore) Order 2010, which was laid before this House on 15 July, be approved.
That the draft Double Taxation Relief and International Tax Enforcement (Switzerland) Order 2010, which was laid before this House on 15 July, be approved.
That the draft Double Taxation Relief and International Tax Enforcement (Oman) Order 2010, which was laid before this House on 15 July, be approved.—(Jeremy Wright.)
Political and Constitutional Reform
Ordered,
That Catherine McKinnell be discharged from the Political and Constitutional Reform Committee and Mr Fabian Hamilton be added.—(Mr Heath.)
FINANCE AND SERVICES
Ordered,
That Luciana Berger be discharged from the Finance and Services Committee and Mr Clive Betts be added.—(Mr Francois, on behalf of the Committee of Selection.)
Mr Deputy Speaker
Nominations closed at 5 pm today for the by-election for the two Labour members of the Backbench Business Committee. Two nominations were received. A ballot will therefore not be held tomorrow. I congratulate Ian Mearns and Mr George Mudie on their election as members of the said Committee.
Reconstructing Gaza
(14 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Dr Julian Huppert (Cambridge) (LD)
Thank you, Mr Deputy Speaker, for granting me this debate, and particularly for granting it to me so early in the evening. Before I start, I refer Members to my entry in the register and the fact that I was funded by Sir Joseph Houghton trust for a recent three-day visit to Gaza. I was joined by my hon. Friends the Members for Bradford East (Mr Ward) and for Gloucester (Richard Graham), whom I hope to see shortly in their places. We were also joined by Lord Warner. I would like to thank Graham Bambrough and Ed Parsons from the Council for Arab-British Understanding, and all those whom we met in Gaza.
It is entirely as a result of that trip that I requested this debate, to feed back in a public venue the thoughts and reflections that I and my colleagues had while we were there. I should say that I also had other private meetings ahead of this debate, with the Minister and with the deputy Israeli ambassador, Mr Roth-Snir, for which I thank them both.
It is worth noting that our delegation was not allowed to cross between Gaza and Israel, and as a result it was, sadly, not possible to talk to people on both sides of the blockade, which we would very much have liked to do. May I, through the Minister, suggest to Israel that its interests may be better served by facilitating people to visit it, as well as Gaza?
My purpose in this debate is not to explore the history of the conflict, which has been done extensively elsewhere, and which, I think, does not do any participant proud. Sadly, discussions of the past were all too prevalent in our visit, with discussions going back as far as 1286. Instead, I want to focus on the present and on the future. But first, I believe that we do have shared goals that we all wish to see. Israel has a clear right to exist, and for its citizens to live in peace and security. The Palestinians have a clear right to have a fully potent state, with self-determination and autonomy.
Currently, Palestine does not have a truly functioning state or security, and Israel is concerned that it does not have the safety that it needs. Unfortunately, despite the ever ongoing peace talks, I fear that both sides are headed away from those goals.
One cycle of recent events began when Hamas won the elections in both Gaza and the west bank, under the banner, “Reform and Change”. Although I am no supporter of Hamas, it was poorly served by the west, which told it that it could stand in those elections only if it agreed to change its name and its platform. It did so and, in what seem to have been legitimate elections, won but was not recognised either in its own right or as part of a joint Government with Fatah. We need to learn the lessons, and consider more carefully how to respond when people whom we do not like win elections.
Kerry McCarthy (Bristol East) (Lab)
I was out in the west bank as an election observer during the very elections that the hon. Gentleman has mentioned. He said that they were seen to be fair and impartial. It goes a little further than that, in that although people from the Carter and EU delegations and the British MPs who visited found minor things wrong with the way in which the elections were conducted, generally speaking there was an incredible turnout and there was very little on which we could challenge the elections.
Dr Huppert
I thank the hon. Lady for commenting. It is great to have the vision of somebody who was there and saw what happened. Whatever we think of the election result, Hamas clearly won it.
That led to the situation that we see now—a Fatah takeover in the west bank, and a Hamas takeover in Gaza, and to the events with which we are all too familiar: the rockets fired into Israel; Operation Cast Lead, with Israel killing 1,300 Palestinians, including 352 children; brutal repression of Hamas by Fatah and of Fatah by Hamas; the kidnapping of Gilad Shalit; the illegal blockade and siege of Gaza by Israel and Egypt; and the assault on the flotilla bringing aid to Gaza.
In our visit to Gaza, we saw a population who felt under siege, trapped inside their own small strip of land, and overcrowded—an intelligent, peaceful population, desperate for education and opportunity.
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Can the hon. Gentleman say a little more about what the young people told him and what message they sent about what they want us to do to ensure that they are assisted with their education?
Dr Huppert
I thank the hon. Lady for intervening on that issue, and I shall come on to develop some of those points.
I was struck by the tolerance. We attended a human rights lesson at one of the United Nations Relief and Works Agency-run schools, where the pupils were asked about tolerance. One of the questions was, “How should you respond to people who are not tolerant of you?” and I thought that the response from one young lady was fantastic. She said, “You should be tolerant of them to show them what they ought to be doing,” and a lot of that is taking place, certainly in the UN schools. The message was, “We should be acting and listening. People should pay attention and help.”
We did not see a huge humanitarian crisis while we were in Gaza, but that is largely down to the excellent work of UNRWA, which has been in place, providing housing, food and education since 1949, and its excellent director, John Ging, who has been in place for a rather shorter period. In that short time, however, he has already had to witness his own UN compound being shelled by Israel.
UNRWA does amazing work, and I think that I speak for all of us who went on the visit when I say that we were very impressed by the range and quality of provision, from housing for refugees to schooling for their children, from women’s centres to summer camps. It was clear as we drove around in UNRWA vehicles that its work is well supported by the general public, with children cheering the cars as we drove by, but its ability to play that critical role is under threat.
Although the blockade around Gaza has been lifted somewhat, there are still great concerns, because the construction equipment that should be able to enter Gaza legitimately comes under a lot of scrutiny and is often not allowed in. The crossing at Sofa, which is intended for construction materials, has been closed since 2008, and, although some material is allowed in at other crossings, it is fairly minimal and unreliable. We were told of UNRWA-led housing schemes, which aim to deal with housing shortages and to replace refugee homes that have stood for too long and buildings that were destroyed or damaged during Operation Cast Lead. Those schemes are funded by the international community, including the European Union, but they either cannot go ahead or they go ahead very slowly, because Israel will not allow in the cement and steel bars to build them.
We heard of a crisis in UNRWA-led education, which is far more liberal than that in the Hamas-controlled Palestinian Authority schools and even includes a course on the holocaust. However, despite the fact that most UNRWA schools are double-shifted, with separate classes in the morning and the afternoon, there are about 40,000 refugee children who should be educated by UNRWA but are not, because of a lack of buildings. The money for eight much-needed new schools and two extensions has been obtained, the plans have been prepared and the contracts have been let, but the materials struggle to get in. While we were there, of the 48 trucks bringing in materials for the schools, 47 were turned back for no clear reason.
I raised the matter in International Development questions on 13 October, and the Minister of State, Department for International Development, agreed:
“Schools must be rebuilt, and we certainly urge the Israelis to ensure that any materials that can be used for the essential reconstruction of schools and the like can be allowed through.” —[Official Report, 13 October 2010; Vol. 516, c.316.]
I hope that he and the question have had some effect, because on Friday I heard from the Israeli embassy that approval had been granted for the eight schools, the two extensions and for two clinic centres, and that building materials will be allowed into Gaza in accordance with the building work.
Richard Graham (Gloucester) (Con)
My hon. Friend speaks eloquently about our visit, and I agree with all the points he has made. Does he agree that the slowness in building those schools, which Israel has already approved from a list of 13 projects, is partly due to the fact that the crossing in Karni is not properly open? Of the 404 trucks for which UNRWA requested permission to enter Gaza, only 70 have so far done so. Does he agree that that is a crucial issue, and one on which we would be grateful for the help of the Minister here tonight?
Dr Huppert
Indeed, and I thank my hon. Friend for going on the visit. It was a great pleasure to share many experiences while we were there. He is absolutely right. One can look at different time scales, and his figures date back to 3 October, if I recognise them correctly, but in general UNRWA says that only about 1.7% of the material that it requires is allowed in. Indeed, as he says, the Karni crossing is open only two days a week. It could be open six days a week. The Sofa crossing could be open, and we could allow for the transfer of construction materials at Kerem Shalom. I am delighted, however, that we seem to be making progress on those schools, because the materials for them were our No. 1 priority after the visit.
Kerry McCarthy
It seems entirely counter-productive not to allow through those construction materials, when, as the hon. Gentleman says, the UNRWA schools are far more moderate in their teachings than the Hamas-led schools. I appreciate that he did not have a chance to visit Israel and hold meetings there, but did he receive any feedback on why there are delays, and why there is no real push or zeal on the part of the Israeli authorities to get those schools built?
Dr Huppert
That is a fascinating question. I thank the hon. Lady for raising it, and in a moment I shall refer to what I have heard about the situation.
I am delighted about the schools, but we should be cautious. Approvals have been given in the past and then withdrawn, and allowing such basic building materials in should be a standard right, not a long drawn-out victory, but I thank the embassy for its information and urge the Minister to monitor carefully the progress on those projects, and to make the strongest protests possible if the flow of materials for those projects is curtailed. I hope he will agree to that.
On the question the hon. Lady asked, the argument used by Israel for not allowing construction materials in for these and other projects is one of security. The argument is that such materials—and there is a relatively long banned list, although it is better than it used to be—could be used by Hamas for military purposes. That argument makes sense superficially, and Israel does of course have a legitimate reason for wanting to control materials that could be used to make rockets, but it falls apart on closer examination.
It is well known that there are hundreds of tunnels under the border with Egypt which are used for smuggling. At the peak of the blockade, there were 1,200, including some large enough to drive a car through. We went into one—not the whole way, I hasten to add—and they are impressively constructed. At its peak, we were told, the value of the tunnel economy was between $500 million and $700 million a year, although the relaxation of the blockade on food and similar consumer goods has reduced activity significantly. The taxes that Hamas levies on imports through the tunnels provide a significant income to that organisation, helping to fund its activities and to buy up land and businesses throughout Gaza. However, those tunnels provide a regular supply of building materials, and we saw trucks being loaded with large amounts of cement and steel bars, along with signs throughout Gaza of construction works.
We found it ironic and deeply concerning that Hamas and related private individuals can have all the materials they need to build anything, from apartment blocks to bunkers, while the only effective constraints appear to be on the UN, non-governmental organisations and legitimate businessmen. That is surely counter-productive to Israel’s interests. It also serves to weaken UNRWA, which risks losing support through its inability to build while others are able to, because it is of course not prepared to use illegal materials. Given the flow of materials through the tunnels, Hamas can quite easily obtain any military equipment it requires, without having to try to acquire goods via the Israeli border.
Egypt plays an important role in the area. Indeed, we entered Gaza through Egypt. The press rarely highlights the fact that Egypt maintains a blockade on people movement in Gaza, just as Israel does, largely out of fear of the spread of Hamas ideology. However, Egypt could easily close down the tunnels if there was a desire to do so centrally, and if local military and police commanders were prepared to act—although that might go against their financial interests.
Mr David Ward (Bradford East) (LD)
Was my hon. Friend as amused as I was by the secret, hidden tunnels from which one could wave at the Egyptian border guards who were apparently unaware of their existence?
Dr Huppert
I thank my hon. Friend for intervening. It was a great pleasure to have him on the trip as well, and yes, it is absolutely absurd to imagine that Egypt does not know about the tunnels, when one can drive along and see large tents. One has to speculate on how materials suddenly, magically appear out of them. Egypt could find those tunnels on the other side of the border as well, and the trucks that go backwards and forwards for supplies could surely be found, too. There is a considerable Egyptian presence of tourist police and other organisations, as anyone who has been there will know.
Egypt is concerned about Hamas ideology, and it was fascinating to discover how broad the Hamas support base is, along with the spectrum that it covers, from reformers to hard-liners. It was also interesting to see how some of the more extremist Islamic groups there consider Hamas to be far too moderate. Those groups have been involved in many recent attacks on Israel, and Hamas has where possible put them down brutally. The feeling is often reciprocated.
While I am on the subject of tunnels and imports of materials, let me mention the lack of exports and the effect that that has on the economy. Exports have been barred since June 2007, with minimal exceptions: there have been a few shipments of strawberries and carnations. This does not make for a serious export market or a way of earning income for a country. I was fascinated to find that some entrepreneurial Gazans use the internet to do paid work, but that is very much in its infancy and cannot be a substitute for a proper export economy. I note in passing that one of our party inadvertently left a medical device behind in Gaza, and we are still struggling to find a way to get it back again. Without exports, there is no hope of the Gazan economy starting to re-function. The collapse of the economy has led to 40% unemployment rates, and 60% youth unemployment. These are not good conditions for a transition to a more peaceful solution.
There are problems with the provision of fresh water and with sanitation, and we heard about the desperate struggle to undertake rebuilding projects of those kinds as well. On physical construction, we need to think ahead. When the next Operation Cast Lead happens—we all hope that it will not happen—what steps will the Minister be taking to ensure that any future assaults by Israel would not blow up the provisions that we in the international community paid to have built? We need to ensure that we are improving Gaza, not stuck in a cycle.
Reconstruction is not just about the economy or infrastructure; mental reconstruction is also an issue. We met a fascinating gentleman called Iyad Saraj from the Gaza community mental health programme, as well as people from other non-governmental organisations that operate there, who made it clear how much psychological harm is being done to Gazan residents, especially children. As well as the traumatic events of Operation Cast Lead and other Israeli assaults, there is a sense of imprisonment in what the Prime Minister has called a “prison camp”. There are 800,000 under-18s in a population of 1.5 million, and more than half of them have never left Gaza.
Serious construction is needed in leadership. Time and again, we heard of the desperate shortage of leadership on all sides. The ongoing feud between Hamas and Fatah exemplifies the suggestions that they are each more interested in their own interests. There is a long history between the factions, and an urgent need for them to overcome their differences. Talks facilitated by Egypt have been ongoing for two years, but are still unresolved. At the intended signing of the deal recently, there were five remaining differences, which have now been reduced to one—security. However, the talks on this issue that were supposed to start on 20 October fell apart almost immediately, and it is now urgent for these two factions to unite if they are to be able to represent the Palestinian people.
We were told on several occasions that some exciting visitors from Britain had come to visit. Gerry Adams went to Gaza to give advice to Hamas. Of course, he is in a unique position to do so, with the benefit of detailed experience of armed uprising. In his comments, as reported to us, he said that there is a time to stop fighting, and that in Northern Ireland they had waited too long, increasing the death count for no benefit; and he argued that Hamas had gone beyond that point. I hope that he is heeded. Hamas has also been in talks with the African National Congress and with bodies around the world. It is not clear, however, that there is a Palestinian leader who can be Gerry Adams, Nelson Mandela, or anyone even close; it seems that there is no one who can take the dramatic steps required for peace to be serious. Hamas will not take steps to amend its founding, and outdated, charter. There is no one who will release Gilad Shalit, who has been held by Hamas for more than four years.
However, there is leadership in other places. I would highlight the leadership in human rights provided by Jaber Wishah of the Palestinian Centre for Human Rights. He was jailed by Israel for his part in fighting against the Israelis, and he spent many years in jail, but while he was there he decided to renounce violence, and he now dedicates himself to fighting fearlessly for human rights throughout Gaza, courageously reporting infringements by Palestinian and Israeli alike against people from any background. It was a privilege to meet him; we need more people like him in Gaza and elsewhere.
Richard Graham
Does my hon. Friend agree that in an environment in which the people have been so badly let down by their leaders and their neighbours, the best role that Britain can play in this difficult situation is to encourage the moderation and education that come through UNRWA’s crucial work in Gaza, and that that is where our focus should be, while encouraging the Palestinians to try to create unity among themselves?
Dr Huppert
Indeed; we have to focus on what is there. I was struck by the fact that many of the younger generation are ready for something different. We met people who are ready to start thinking in another way, and they need our support. I hope that that Minister can comment on whether the British Government are in any way able to provide support and training to some of the up-and-coming young people in Palestine.
Israel is not acting like a partner for peace at the moment. Although it is clear that the vast majority of Israelis do seek peace, as indeed do the vast majority of Palestinians, the leadership in Israel is undermining the search for a lasting peace. Avigdor Lieberman’s recent comments are inflammatory, as is the continued construction of illegal settlements on the west bank—only today, we heard of 1,300 more. The time available for peace is running out. There are currently Israelis and Palestinians who know each other, who have worked together, or who are friends, but this is fading. The younger generations on each side increasingly know each other only as enemies, and with every passing year this becomes worse.
We were told a chilling story, with which I will conclude. One woman we saw was given permission to travel to Israel to meet a colleague, and to take her daughter with her. Her daughter met her friend, and asked what she was. She was told that she was, inter alia, an Israeli. The daughter said, “That can’t be right. Israelis are soldiers who wear masks and carry guns.”
If we are to avoid a perpetual state of conflict, a perpetual siege of Gaza, and a pressure cooker that will eventually explode in furious violence, then Israel and Palestine must up their games. They must find leadership to overcome their differences—to act in the common interest and the long-term interest of their citizens. We in Britain must play a role in supporting and helping them to take these difficult steps. We must be prepared to criticise firmly and actively when needed, and to encourage and assist when required. We must not take our eyes off Gaza. We must not allow the people in Gaza to bear the brunt of collective punishment and bear the burdens of a long and sorry history. The siege has to end. Senior Members of Parliament, from the Foreign Secretary down, must go there to see for themselves what is happening.
I look forward to hearing the Minister explain how he will ensure that Britain is a more active participant in the region, how Britain will ensure that UN Security Council resolution 1860 and all the others are enforced, and how Britain will ensure that it is a force for peace, for human rights, for the rule of law and for the people.
Yasmin Qureshi (Bolton South East) (Lab)
I congratulate the hon. Member for Cambridge (Dr Huppert) on securing this Adjournment debate. It is an extremely important debate that needs to be had.
I went to Gaza this summer with two Members of the House of Lords. It was the first time that I had been to Gaza or anywhere in the middle east region. Like the hon. Gentleman and his colleagues, we travelled to the Rafah crossing from Egypt into Gaza, and we saw some of the tunnels as well. We spoke to people from UNRWA and saw the people living in the camps. It completely shocked me and, I think, the people with me to see almost three generations of people—grandparents, children and grandchildren: people of all different ages—who had lived in one room for more than 40 or 50 years. That surely cannot be acceptable in the 21st century. It does not matter about the rights and wrongs of Hamas, Israel and so on. We, the international community, have an obligation.
As Members probably know, under a settlement made a long time ago, people cannot extend their camps into any other space but must keep building on the land they have. There are therefore a number of layers of homes, with people in flats of up to eight floors. On each level there may be a room with a family of 10, 12 or 15 people living in it. Some 1.5 million people live in a space of 2.5 or 3 sq km of land.
I saw many people rushing off to the beaches, yet we were told that all those beaches were unsafe and polluted. They cannot be cleaned, because pipes would need to be sent out there, and no materials for reconstruction are allowed through. The only pastime that young people seem to have is going to the beach. In this country, we would never tolerate people going en masse to severely polluted beaches that were very bad for their health. A number of people in Gaza have suffered ill health precisely because they have disregarded advice, gone to the beach and gone swimming.
We spoke to people in Gaza and saw some of the schools that they have constructed. The tragedy of Gaza is that, as the hon. Gentleman said, there is money there. It is not like some parts of the world where there is no money and no finance, and nothing can be done. The money is there, but Israel has imposed embargoes that do not allow anything to be exported or imported properly. In some respects Israel is kicking itself, because if goods were allowed to come in properly and the money could be used to rebuild schools, hospitals and other institutions, it would create an enormous number of jobs and the economy would prosper. Trade with other people would be possible.
Historically, the best way for countries to negotiate or become friendly has often been through trade. That is often the most peaceful way for countries to build better relationships. By not allowing trade and reconstruction, Israel is hurting itself. It is important that the siege is lifted and reconstruction can start. That will be better for everyone concerned.
The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Alistair Burt)
I congratulate the hon. Member for Cambridge (Dr Huppert)—my hon. Friend now—on securing the debate. I appreciate not only what he said but the way in which he said it, and I thoroughly enjoyed his contribution. It was made better by the fact that he did not have to squeeze it into the usual time and could extend it. I thank him for the great courtesy of giving me the outline of his speech earlier, because, at their best, Adjournment debates are not ambushes but an opportunity for colleagues who share many opinions and concerns to inform each other, the House, yourself, Mr Deputy Speaker, and the public of what we are about.
I also thank the hon. Member for Bolton South East (Yasmin Qureshi) for her contribution. Both contributions indicated the importance of travel. Occasionally, the House has to defend itself against those who think that every time we step outside our own shores, it is for purposes connected more with us than with what we are about. The descriptions that both colleagues gave of their personal experiences, and those of my hon. Friends the Members for Gloucester (Richard Graham) and for Bradford East (Mr Ward), who accompanied the hon. Member for Cambridge on his visit to Gaza, were good examples of how important it sometimes is to see things on the ground, so that we can report them faithfully to the House. I see my long-standing friend, my hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes), in his place. He will know of the many times that we went to South Africa together in the difficult days of the 1980s. We hope that our personal experience of going there when many others could not made a difference to discussions in the House.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I am grateful to my very good friend the Minister for that kindness.
In probably every constituency in the United Kingdom, and certainly every urban one, there are people who daily worry about the future of Palestine, Israel, Gaza and the middle east. We therefore have a particular responsibility to be informed. I have been twice to the west bank and Israel, although I have not been to Gaza. The faith groups want us to do that, and Britain has a historical responsibility to be as engaged as possible—not just Government but Parliament. My hon. Friend is absolutely right that we are right to go and right to put the matter on the agenda in the House.
Alistair Burt
Yes, indeed, and the number of letters that I deal with from colleagues expressing the concerns of their constituents certainly confirms what my hon. Friend says.
I applaud the aim of the hon. Member for Cambridge, following his recent visit and that of his colleagues, to ensure that eight new UNRWA schools are built in Gaza. Like him, I welcome the recent announcement that that will be done. The situation in Gaza continues to cause the Government concern, and it was high on the Foreign Secretary’s agenda during his recent visit to Israel and the occupied territories. I hope to explain in my remarks what action the Government are taking to reconstruct and stabilise Gaza, and why that matters to the middle east peace process.
To begin with, I should like to set out the scale of the reconstruction challenge in Gaza and explain briefly how we got where we are. Although we agree with the hon. Gentleman that there is no longer a humanitarian crisis as such in Gaza, the situation there remains extremely fragile and could deteriorate very quickly. Despite Israel’s welcome announcement on 20 June of measures to help ease access restrictions, we remain worried about what the UN has termed the “de-development” of Gaza, with the economy, institutions and skill base steadily eroding.
Although I am not tempted to go back to 1286, it is impossible to consider the current issues in Gaza without recognising the historical context and noting the tragedy of the people of Gaza, caught up in the generations-old dispute concerning Israel and Palestine. After years of occupation, and much international criticism, Israel withdrew from Gaza in 2005, pursuing its policy of swapping land for peace and evicting a number of settlers and settlements. The UK, along with international partners, welcomed the withdrawal as a positive step towards meeting Israel’s road map commitments. We also pushed hard for Israel to co-ordinate with the Palestinian Authority on the aftermath of withdrawal.
However, far from being freed, Gaza’s population found itself the battleground for a gradually intensifying dispute between Fatah and Hamas for the control of the land. Hamas’s repressive control of Gaza gradually tightened. Israeli soldier Gilad Shalit was kidnapped in 2006, kept completely incommunicado for many years and denied Red Cross access, and he is still detained. Hamas violently ousted Fatah from the Gaza strip in 2007, leading Israel to declare Gaza a “hostile entity”. A regular barrage of rockets directed towards southern Israel began. Israeli Government statistics claim that in 2005 Hamas and other Palestinian groups launched about 850 rockets and mortars at Israel from Gaza. By 2008 that figure had climbed past 2,000.
Although I heard and understood the hon. Gentleman’s point about responding differently to those who win elections with policies that we may not like, equally, those who wish to play a serious part in deciding the future of a people need to know that an acceptance and encouragement of violence, and a refusal to accept the existence of the state of Israel, will result only in closed doors, and rightly so.
A downward spiral of restricted access, the cutting of fuel supplies and retaliatory violence prompted aid agencies to describe the situation in Gaza in early 2008 as the worst since the 1967 Yom Kippur war. As hon. Members know full well, a shaky ceasefire was not renewed towards the end of 2008. Militants in Gaza fired barrages of rockets at Israel, and Israel responded by launching Operation Cast Lead. The conduct of both sides in that war is the subject of a number of inquiries and is not for this debate. However, the consequences for the people of Gaza have been severe.
To prevent the rebuilding of supplies of arms, Israel ensured a tight blockade of Gaza. The UK Government understand and support Israel’s right to protect itself. However, to come to one of the hon. Gentleman’s key points, we were, and are, less persuaded that the economic blockade that was simultaneously imposed would be of any benefit to Israel, and we share the hon. Gentleman’s assessment. The fact that the economy of Gaza has been so reduced that 80% of Gaza’s population is in receipt of food aid, and that unemployment is calculated at 40% for adults and 60% for youth, has not produced serious political gain for Israel or ruin for Hamas, but simply added to the misery of the people. We do indeed call on Israel to rethink that part of its policy, which would not undercut its concern on security, and might indeed, for reasons that have been outlined, assist its security. We make that case regularly to Israel, and we will continue to do so.
Following Operation Cast Lead and resolution 1860, the international community lobbied Israel hard on the need to allow access for humanitarian and reconstruction relief to Gaza. However, it was not until after the flotilla incident earlier this year that international pressure made a difference, and Israel announced on 20 June measures to ease controls on goods entering Gaza. We welcomed that announcement and the Israelis’ subsequent implementation on 5 July of a move from a list of permitted items to a list of banned and dual-use items. The latter step resulted in an increase in the variety and volume of goods entering Gaza.
Further steps have been taken by Israel, including procedures to allow the entry of dual-use items, such as building materials, into Gaza, and I will come to that key point a little later. The Government of Israel are also taking steps to improve access for Palestinian business people into and out of Gaza. We welcome those steps and acknowledge that the volume and range of goods entering Gaza has increased in recent months.
I spoke this morning to John Ging, and I very much echo the hon. Gentleman’s appreciation of his work. I had the pleasure of meeting John during the summer to help me understand the area for which I now have responsibility. He tells me that the consumer goods picture is much improved. Indeed, he estimates that there is only 20% of the tunnel traffic that there was. Once again, we share the hon. Gentleman’s perception. Tunnel traffic simply became a source of revenue to Hamas and to criminals and appears to have done little damage to Hamas politically.
However, John Ging also said that the situation in terms of construction material remains dire. He cannot find what he needs to tackle the under-resourcing of school building. We share his welcome, and that of the hon. Gentleman and other colleagues, for the eight school projects, but they will not satisfy the demand of 40,000 children. Once again, I echo the hon. Gentleman’s point. If UNRWA, with the support of the international community, is not seen to, and cannot, provide the development that is needed, yet Hamas and its allies can provide it because of access to materials through routes other than the official crossing, who will get the blame and who will get the support?
It is possible that it is not any political ill will that is affecting the delivery of construction material specifically orientated towards UNRWA, and UNRWA must, rightly, be held responsible should any material go missing and assist Hamas. However, John Ging informs me that there is a significant capacity issue, which hon. Members have mentioned. I understand there are sheer logistical difficulties in getting more material through the existing crossing. To that extent, therefore, reopening other crossings may assist, and we certainly intend to take that up, although we appreciate that it requires serious consideration and cost to Israel. The gain, however, may make it well worth while.
It is not just schools. The sewerage system needs serious work to stop untreated sewage entering the Mediterranean. Some 90% of mains water is undrinkable. As I indicated, 80% of the population is dependent on food aid. It is also vital, therefore, to take steps to revive Gaza’s economy, including allowing exports and the movement of people. That is key to ensuring Israel’s long-term security interests. The empowerment of Gaza’s legitimate, non-Hamas controlled business community will act as a counterweight to radicalisation.
Kerry McCarthy
Before the Minister moves on from aid deliveries to Gaza, will he give us the Government’s view on the informal conveys? Those are certainly an issue in Bristol, where people have donated. Trucks have set off from Bristol, and constituents have gone to Gaza to try to deliver food and other aid, but they have been blocked. Is that useful, or would be it better to go through the official channels?
Alistair Burt
The hon. Lady makes an important point, on which I have received a number of letters. Our position is: we do not advise unauthorised travel to Gaza. As we know, it is still a dangerous place, and we cannot guarantee the safety of British nationals who go there. For those who want to contribute aid to Gaza, there are recognised channels to go through, which include the United Nations. We encourage that. There are ways in which people can take aid directly and use existing channels to ensure that it gets through. However, as she will be aware, there are opportunities taken where the political point of breaking the blockade appears to be almost as important as any of the humanitarian aid behind it, with sometimes tragic consequences, so we are right to be cautious. We want to ensure that those who feel strongly have an opportunity to express it, and there are legitimate ways to do so. However, we do not encourage unauthorised activity, hard though it may be for some to accept. We advise people to use the official channels to support Gaza.
Dr Huppert
We had a number of interesting conversations about the convoys while there, and one concern expressed to us was that, in many instances, the goods being provided were not the things that were desired. Medical supplies have far too much of some things, and far too little of others. They do not need more Tamiflu, and they do not need old X-ray scanners; they would rather have some spare parts. Perhaps people considering sending convoys could first find out what is wanted and needed, and then go.
Alistair Burt
That makes a lot of sense. The aid agencies actively involved are very good and know what they are doing. However, I do not want this to be misconstrued. We do not want the aid agencies to be there at all. We want the economy to be working properly, and we want Gaza to be a fully functioning part of the middle east.
Julie Hilling (Bolton West) (Lab)
Mine is a question raised often by constituents. Their belief is that the UN aid is not getting through. Can the Minister reassure me on the Government’s view of whether that aid is getting through to Gaza?
Alistair Burt
As I indicated earlier, we know there are capacity problems, but in the main we believe that aid gets through. I do not think it is fair for people to feel that, if they send it through a recognised source, sometimes it all just sits there. There were more issues with that in the past, but we have found, since the flotilla incident, that the Israelis are genuinely moving more goods through, and have responded to the concerns. There might be individual instances of hold-up, and where that happens all pressure should be applied, However, there is a logistical problem with the amount of aid, to which I just referred, and the hon. Lady was right to pick up on that.
I made the point about ensuring that if the business elite in Gaza are given the opportunity to develop and grow, and handle things themselves, they can be a counterweight to radicalisation. John Ging made an interesting point to me this morning. He said that the closing of the tunnels, with more goods travelling through official routes, has not met with what might have been anticipated, which was an aggressive response from militants seeking to disrupt official traffic. They have gone along with it, partly because, we think, the business community and others have made it clear that they want to see the official channels open and will not accept the militants and extremists getting in the way of the development of the economy. That is good news for those who believe that the economy is the key to the future of Gaza.
There are issues on the Palestinian side, however, that also need improvement. The Department for International Development is working closely with the Palestinian Authority to help increase its co-ordination of goods into Gaza and to speed up the approvals process. I would like to reiterate the call for Hamas to release Gilad Shalit, because it is clearly unacceptable that he remains in captivity after four years. The Foreign Secretary met the Shalit family during his visit to Israel and heard their experiences at first hand. I also call on Hamas to end its interference in humanitarian operations in Gaza.
I am sure that hon. Members would agree, following the remarks of the hon. Member for Cambridge, that there are sobering facts on the ground, and that reconstructing Gaza will require vast amounts of reconstruction and development support. He concluded by asking what the British Government are doing and what more we intend to do to fulfil resolution 1860 and other requirements. The United Kingdom should play, and is playing, its part, primarily through aid provided by DFID. We are providing basic services to Palestinian refugees through funding for the United Nations Relief and Works Agency. Some 70% of Gazans are refugees who rely heavily on it. Last week the Minister of State for International Development, who was on a visit to the west bank, announced an additional £8 million for UNRWA, bringing our total support for 2010 to £27 million.
Turning to the Gazan economy, we have just announced a further £2 million in new funding to support the recovery of Gaza’s dormant and damaged private sector, which was laid waste after Operation Cast Lead. That will help 300 existing businesses and four start-ups to generate an additional $5 million in revenue and employ an extra 2,200 people. Finally, we are funding the United Nations and Palestinian Authority teams working to facilitate access to imports in Gaza.
Simon Hughes
The Minister referred to the severe problems with good water supplies and the offshore pollution along the coastal strip. Will he say whether the Government are working with others to deal with what is both an environmental and a health crisis? Clearly we cannot deal with it on our own, but is that on the agenda of DFID or his Department? Clearly, not much has been satisfactorily achieved so far, so what more can we do?
Alistair Burt
So as not to flannel my hon. Friend, I should give a better response when I have spoken to colleagues in DFID. I know that the problem that he raises is a serious one, and it is also caught with the problem of construction materials, which are vital to do the work that is necessary for the sewerage system and the like.
Mr Ward
We were disturbed by the appalling situation —which we could smell as we drove along the beach—of sewage going into the sea. The terrible consequence is that the sewage is finding its way back into the land through the water table, which is serious for agricultural development as well.
Alistair Burt
My hon. Friend describes an unbearable situation. I know that colleagues are on to it, so rather than speak in generalities I will find some detail. Indeed, if he submits a written question, I can supply an answer, and that will disseminate the information more widely.
On the diplomatic side, we are working closely with the UN, the office of the Quartet representative— Mr Blair—and the European Union to co-ordinate the international community’s demand for further progress. Mr Blair has played a very important role on Gaza, and was helpful in the period immediately following the flotilla incident. He did a great deal of work—and continues to do so—with the Government to deal with the authorities there. We are also working with the European Union to co-ordinate the international community’s demand for further progress. Although we welcome the steps that Israel has taken so far, we need to see further progress. In particular, we want to see faster approvals for key UN reconstruction projects. The international community is listening closely to UNRWA’s feedback. We urge Israel to work with UNRWA to expedite its reconstruction plans, particularly for schools. We want Israel also to show greater flexibility on the movement of people and exports, in order to increase employment, reduce aid dependency and allow the full movement of humanitarian workers.
There is a final point to make this evening. Sometimes I worry that a given situation remains unresolved because, in reality, it suits all parties, rather than those most affected, to leave it be. For Israel, Gaza is a heavy security risk—a dagger potentially pointing at its heart, through Hamas. It is a place of missed opportunities, following—Israel believes—the generosity of its withdrawal. For Hamas, Gaza is a counter to Fatah—an element in its war with Fatah, as much as in its role of resistance to Israel. For Egypt, Gaza is a conundrum too—part of the need to resolve the Palestinian situation, but where, in authority, it finds a political entity to which it is opposed, and in whose success it has no more vested interest than Israel. In the middle are the people—the children; those whose future could and should be so much better; those who, as my hon. Friend the Member for Cambridge said, are crying out for leadership, to take them out of this situation, and for a future.
The only path is that Gaza will be part of the ultimate settlement in the middle east. That is why we and other parties are urging those involved in the direct negotiations to keep at it. We are pressing both sides to stay with the talks, to overcome the difficulties on settlements. That is why the Foreign Secretary pressed the point in relation to Israel, and why all friends of both Israel and Palestine should keep the parties at it. Ultimately, Gaza’s future salvation lies in a comprehensive peace settlement: the two-state solution, which is so important.
As my hon. Friend the Member for Cambridge said, time is running out. My story meets his in terms of those he spoke to. A couple of years ago, I was on Israel’s northern border and talking to some of the young people—they are very young—who guard those border posts. I asked them whether their children and grandchildren would be doing the same thing, and they thought that they probably would be. That is as sad and depressing as my hon. Friend’s story.
We have lived through momentous times during our period in Parliament. We have seen the unresolvable dealt with, and we have seen all sorts of things change during the past 20 or 30 years. The most intractable political problems have been solved, and it is always possible that that can happen in the middle east. The time is now.
I hope to visit Israel and the occupied Palestinian territories early next year. I have been to the west bank and Israel, and I hope to have the opportunity to go to Gaza. I will take a message from this House that we are all determined to redouble our efforts to drive the peace process forward, and we look to all those in the region and beyond to join us for the sake of all those in Gaza we have spoken about tonight.
Question put and agreed to.
Written Ministerial Statements
Double Taxation Agreement (UK and Qatar)
(14 years ago)
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The Exchequer Secretary to the Treasury (Mr David Gauke)
A protocol to the double taxation agreement with Qatar was signed on 20 October 2010. The text of the protocol has been deposited in the Libraries of both Houses and made available on HM Revenue and Customs’ website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
Departmental Business Plans
(14 years ago)
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The Minister of State, Cabinet Office (Mr Oliver Letwin)
Today, we are publishing business plans, publicly setting out how and when Government Departments will achieve the radical structural reforms needed to deliver the coalition’s programme for Government.
Taken together, these plans will change the nature of Government. They represent a power shift, taking power away from Whitehall and putting it into the hands of people and communities; and an horizon shift, turning Government’s attention towards the long-term decisions that will equip Britain for sustainable social success and sustainable economic growth.
The publication of these plans will bring about a fundamental change in how Departments are held to account for implementing policy commitments; replacing the old top-down systems of targets and central micromanagement with democratic accountability. Every month, Departments will publish a simple report on their progress towards meeting their commitments.
In addition, the second part of each business plan explains how Government will give people unprecedented access to the data they need—in a simple, easily accessible format—to scrutinise how we are using taxpayers’ money and what progress we are making in improving society through our reforms.
These transparency sections of the plans are being published in draft to allow Parliament and the wider public to say whether each Department is publishing the most useful and robust information to help people hold the Department to account.
Select Committees will of course play a vital role in the task of holding the Government to account. Government Departments are contacting Select Committee chairmen to inform them of the new processes and to invite them to discuss the business plans in more detail.
Our reforms will give people the power to improve our country and our public services, through the mechanisms of democratic accountability, competition, choice and social action. By 2015, we will have made the structural changes set out in the programme for Government that are needed to secure the long-term prosperity and sustainability of our country.
The business plans are available on departmental websites and on the No.10 website at: http://www. number10.gov.uk/transparency.
Copies have been placed in the Libraries of both Houses and are also available in the Vote Office and Printed Paper Office.
Fire and Rescue Service
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)
On the evening of 4 November, following ongoing meetings, the Fire Brigades Union agreed to call off their 47 hour strike which was due to start at 10 am on Friday 5 and end at 9.00 am on 7 November. The proposed strike would have coincided with bonfire nights and Diwali—one of the busiest periods for fire and rescue services.
The two parties have agreed to refer their outstanding issues to the National Joint Council Resolution advisory panel, which comprises an independent chair and the joint secretaries of the National Joint Council for local authority fire and rescue services. The panel meets on 16 November. I very much hope that this process will result in agreement between the two parties without recourse to further dangerous and damaging strikes.
The two strikes witnessed in London on 23 October and 1 November, highlighted the need for all fire and rescue authorities to have in place robust business continuity plans which allow them to continue to provide a service to the public during a range of different types of disruption. I would encourage all fire and rescue authorities to satisfy themselves that they have such plans in place and to continue to strengthen these where necessary. I would like to thank all those who worked during these strikes, often in the face of serious provocation.
Beak Trimming (Laying Hens)
(14 years ago)
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The Minister of State, Department for Environment, Food and Rural Affairs (Mr James Paice)
I am today laying an amendment to The Mutilations (Permitted Procedures) (England) 2007 before Parliament, principally to extend the use of routine beak trimming of laying hens beyond 31 December 2010, while restricting the method used to the infra-red technique only. I know this is a significant issue for the House, as demonstrated by the large number of signatures for my right hon. Friend the Member for Worthing West (Peter Bottomley) (EDM 260). I therefore want to set out the background behind these amending regulations and explain this Government’s approach to working towards a future ban on beak trimming.[Official Report, 12 November 2010, Vol. 518, c. 4MC.]
Currently, the UK makes use of a derogation in the EU Council Directive 99/74/EC on the welfare of laying hens, which allows for beak trimming of laying hens that are less than 10 days old if carried out by qualified staff. The procedure is only permitted to prevent feather pecking and cannibalism. The Mutilations (Permitted Procedures) (England) Regulations 2007 implements this derogation but only allows routine beak trimming to be carried out until 31 December 2010, after which beak trimming of laying hens would be banned. The ban was put in place when the laying hens directive was implemented in the UK in 2002, allowing eight years to develop a strategy to manage birds without the need to beak trim. At the same time, the previous Government established the Beak Trimming Action Group, comprising representatives from industry, welfare groups, DEFRA, and scientific and veterinary professions. The group’s task was to devise an action plan which would work towards the ban on beak trimming by the end of 2010—looking at changes to management practices or selecting birds that are less prone to feather pecking. However, progress in the control of injurious pecking under commercial conditions in England has not been sufficient to implement a ban on beak trimming without causing a significant risk to animal welfare. In the meantime, a new infra-red technique was developed and is now used to beak trim birds commercially, as an alternative to hot blading. Currently, the infra-red technique is the method used on 95% of all beak trimmed laying hens.
The Farm Animal Welfare Council reviewed the evidence in 2007 and 2009. On both occasions it recommended that, until an alternative means of controlling injurious pecking in laying hens can be developed, the proposed ban on beak trimming should not be introduced, but should be deferred until it can be demonstrated reliably under commercial conditions that laying hens can be managed without beak trimming, without a greater risk to their welfare than that caused by beak trimming itself. The Farm Animal Welfare Council recommended that infra-red beak treatment should be the only method used routinely, as the evidence indicated that it does not induce chronic pain.
While the Government’s long-term goal is to ban routine beak trimming, the Farm Animal Welfare Council’s advice represents a sensible and pragmatic approach in the circumstances we have inherited and is in the interests of laying hen welfare. A ban on beak trimming for laying hens at this current time would result in significant welfare problems through outbreaks of feather pecking and cannibalism. The Government consider it is therefore right that the legislation needs to be amended to remove the impending ban on routine beak trimming, which would otherwise come into force on 1 January 2011.
However, I want to emphasise that the Government see the proposed removal of the ban as very much an interim solution. The previous Government’s consultation on proposals to amend the legislation, did not propose any date to review the policy or any date for a future ban. This Government have taken heed of the strength of feeling on this issue and decided to adopt the Farm Animal Welfare Council’s recommendation of setting a review date of 2015. We will assess the output of this work, with a view to banning routine beak trimming in 2016. We are committed to working with the Beak Trimming Action Group to find solutions to this very complex issue and to establish an action plan, which will include the following key milestones leading up to a full review of beak trimming policy in 2015:
November 2010—Industry to be asked to carry out study tours to those European countries, such as Austria, Finland, Sweden, Norway and Switzerland where beak trimming is not carried out.
January 2011—The Beak Trimming Action Group (comprising key representatives from industry, welfare groups, scientific and veterinary professions) will be reconvened and I will attend the first meeting which will establish an action plan to develop a strategy to manage birds without the need to beak trim.
Spring 2011—Industry to feedback the experience of other countries to a meeting of the Beak Trimming Action Group.
Summer 2011—Beak Trimming Action Group to begin to consider the outputs of a three year intervention study by Bristol university, funded by the Tubney trust, on strategies to reduce the need for beak trimming with a view to ending the practice by 2016.
1 January 2012—the EU-wide ban on the keeping of laying hens in conventional cages comes into force. As the impact of feather pecking is greatest in systems of management which do not house birds in cages, the risk to the welfare of laying hens from injurious pecking is likely to increase after this time.
2012-2014—Hold regular meetings of the Beak Trimming Action Group to gather data from producers on their experiences in managing flocks over two cycles in alternative systems, which will be fed into the review.
2015—Review established to assess the achievements on the elimination of beak trimming to date. The review will advise whether a ban on routine beak trimming of laying hens will achieve the maximum welfare outcome, with a view to reinstating the ban in 2016.
2016—Provisional date for the ban on routine beak trimming of laying hens.
NATO Parliamentary Assembly (New UK Delegation)
(14 years ago)
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The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
The following will represent the United Kingdom at the NATO Parliamentary Assembly.
Harriet Baldwin MP
Lord Bates
Hugh Bayley MP
Peter Bottomley MP
Sir Menzies Campbell MP (Leader)
David Crausby MP
Caroline Dinenage MP
Nigel Dodds MP
Mike Gapes MP
Stephen Gilbert MP
Lord Jopling
Jason McCartney MP
Madeleine Moon MP
Mark Pritchard MP
Baroness Ramsay of Cartvale
John Robertson MP
Lord Sewel
Sir John Stanley MP
Parliamentary Oral Question (Correction)
(14 years ago)
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The Secretary of State for the Home Department and Minister for Women and Equalities (Mrs Theresa May)
I regret to inform the House that there was an inaccuracy in an answer given to oral question 19942 on 28 October 2010, Official Report, column 458.
The response indicated that no recent representations had been received on the likely effect on women victims of domestic violence of reductions in funding to supporting people programme.
I can confirm that in fact Sandra Horley, CEO Refuge, sent a letter to the Minister for Equalities, my hon. Friend the Member for Hornsey and Wood Green (Lynne Featherstone) on 3 August regarding this matter, copied to Ministers in CLG and DWP. My hon. Friend met Sandra Horley on 12 October to discuss Refuge and tackling violence against women more generally.
Grand Committee
The Deputy Chairman of Committees (Baroness Harris of Richmond)
My Lords, before the Minister moves that the first statutory instrument be considered, I remind noble Lords that in the case of each statutory instrument the Motion before the Committee will be that it do consider the statutory instrument in question. I should perhaps make it clear that the Motions to approve the statutory instruments will be moved in the Chamber in the usual way.
Freedom of Information (Time for Compliance with Request) Regulations 2010
(14 years ago)
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Lord McNally
That the Grand Committee do report to the House that it has considered the Freedom of Information (Time for Compliance with Request) Regulations 2010.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, perhaps I may say to my noble friend Lady Harris what a pleasure it is to make my debut ministerial statutory instrument speech in the Moses Room under her chairmanship.
The purpose of these regulations is to allow academies more time to respond to freedom of information requests to take account of school closures, for example during school holidays.
The Freedom of Information Act gives any person the legal right to request access to recorded information held by a public authority. The Act applies to over 100,000 public authorities, and last year central government-monitored bodies received more than 40,000 requests, which is a 16 per cent increase on the number received the year before. Under the Act, freedom of information requests must be responded to promptly, normally within 20 working days. It is right that people making requests should receive a timely response.
However, there are limited occasions when the deadline is impractical. That is why regulations have previously been made in 2004 and 2009 to provide maintained schools in England and Wales, and schools and pupil referral units in Northern Ireland, with an extension to the usual 20 working-day time limit in dealing with FOI requests in certain circumstances.
Other organisations that have been provided with an extended time limit to respond to requests for information include: archives, to deal with requests for information contained in a public record that has been transferred from a closed file, because one of the freedom of information exemptions applies; operations of the Armed Forces requests, where information needs to be obtained from front-line units of the Armed Forces and they cannot be reached for operational reasons; and requests involving information that is held outside the UK and will take time to retrieve.
The Academies Act 2010 extended the Freedom of Information Act to proprietors of academies. Like other schools, academies can also face difficulties in answering requests received during periods of closure and other times when they are unstaffed. This is a particular problem during school holidays, which can be around six weeks long and therefore longer than the 20 working days normally permitted for a response.
Without this extension in place, academies may find themselves in a position whereby they will unavoidably be unable to comply with the time limits provided for under the Act, and I am sure that noble Lords will agree with me that this is neither fair nor sensible. These regulations will ensure that proprietors of academies have the same reasonable allowance in respect of the time limit for responding to requests as other schools in England, Wales and Northern Ireland that are subject to the FOI Act.
If the regulations are made, proprietors of academies would not have to count any day that is not a school day, such as during the school holidays, towards the period of 20 working days within which requests must be answered. However, under the regulations, requests must be answered within a maximum of 60 working days, including any period of closure.
However, these regulations do not mean that academies can delay responding to requests. They will be required to answer requests promptly. Where it is possible for an academy to respond earlier to a request, the response cannot be delayed until the end of the extended time limit. I beg to move.
Lord Campbell-Savours
My Lords, the Minister said that academies cannot delay; I wish to argue that they can delay, and I will set out the circumstances in which they can and which cause me concern about these regulations.
I am a regular user of the freedom of information legislation that applies to all public bodies—I have a number of applications outstanding with both government departments and local authorities at the moment—and I ask the Committee to recognise that while academies fulfil the same function as maintained schools in the state sector, they are different in that they comprise a greater element of independence, and it is that independence and the influence of that independence on the management of such schools that worries me.
Under existing legislation, educational institutions can be quite tardy in dealing with freedom of information applications. Unlike government departments and local authorities, whom I find fairly reliable, educational institutions can often be difficult. The problem with these regulations is that they are not accompanied by safeguards. In my view, this will lead to an abuse of the system. If evidence of abuse is needed, we need do no more than consider the report of the Campaign for Freedom of Information, which, when reporting on delays by the Information Commissioner in completing investigations, found that the completion of 46 per cent of the cases it handled were delayed by one or two years, 25 per cent by between two and three years, and 5 per cent by more than three years. When it wrote its report, one case showed a delay of three years 9 months after the Information Commissioner had dealt with the report. I understand that efforts are being made by the Information Commissioner to tighten up on these delays, but what we are doing today may hinder applications unless proper safeguards are introduced.
Let me give an example of what happens when educational institutions decide they want to delay and deny the public information they should have in the public interest. A maintained school within the United Kingdom, which could easily become an academy, decided upon a course of action which we will describe for the purposes of the debate as its project. The project was opposed by a number of expert organisations, one of which took the school to court, and huge legal fees were paid to fund the case of the expert objector. An MP took an interest in the case in the other House, advised against the action and used freedom of information legislation to unravel the affair. On 20 February 2008, the MP wrote to the school to establish the cost to the school of defending its action in proceeding with the project, the source of the funding, the role of the local authority, what legal advice had been given to the school, and the role played by the head and the governing body.
We should remember that these regulations will extend the period that schools have to reply to questions under freedom of information legislation. The school replied and refused to provide the information. On 15 March 2008, the MP applied under freedom of information legislation; the school still refused. On 15 May, the MP wrote to the school asking for an internal review of the decision to refuse to comply. There was no reply from the school. On 29 July 2008, the MP approached the Information Commissioner. On 11 September 2008, 44 days later, the Information Commissioner replied, saying that he had asked the school to issue a review within 20 days. On 23 October, a further 42 days later and eight months after the original request, the school revealed that it had spent £76,000 on legal costs to that date. The school carried on refusing to answer the other questions. Perhaps now the relevance of the 60 days may be dawning on Members of the Committee.
In March 2009, the MP made a fresh application, asking further questions under FOI. The school again refused to respond. On 16 April 2009, the MP wrote again to the school under FOI; the school later claimed that it had lost the letter. The MP sent a copy of the letter to the school; the school replied but again failed to answer the questions. In May 2009, the MP wrote to the school offering to extend the deadline by 20 days. On 27 May 2009, the school replied with evasive answers. On 9 June 2009, the MP wrote to the school, asking for an internal review of the decision to refuse to comply. On 6 July 2009, the school replied with evasive answers, hiding behind spurious exemptions.
On 15 July 2009, the MP wrote to the Information Commissioner to complain about the refusal to answer questions. Three months later, on 8 October 2009—one and a half years after the original application and three months after the complaint to the commissioner—the school wrote to reveal that £170,000 had been spent on legal costs. The school still refused to answer the other questions. The Information Commissioner then gave the school until 4 November to answer questions. On 23 November, the Information Commissioner stated: “Unfortunately, the authority”—that is, the school—
“initially struggled to understand the role of the Information Commissioner’s Office … as regulator of the Freedom of Information Act 2000 … I am, however, pleased to confirm that it now has a full understanding of our role and is working towards providing a full response by the 7th December 2009”.
A month later the Information Commissioner made a further statement, saying that,
“it appears that the authority still does not fully understand the role of the ICO. The Commissioner has today therefore issued an Information Notice to the Authority … compelling a Public Authority to provide the Commissioner with a copy of the disputed … information. The Authority has 30 days … from the date of the Notice to comply. Failure to comply may result in the commissioner making written certification of this fact to the High Court … I do however hope that that will not prove necessary”.
That was nearly 11 months ago.
In May 2010, the Information Commissioner revealed that a freedom of information notice to the school, dated 17 December 2009, had to be cancelled on legal advice because it had been addressed to the school, as against the governing body of the school. On 9 July 2010, the Information Commissioner wrote to the MP to state that the corrected information notice was being appealed by the school. In August 2010, the tribunal dismissed the appeal. The school then offered the Information Commissioner half-answers to the questions asked, which the Information Commissioner regarded as inadequate. The Information Commissioner then gave the school 14 days—as I understand it, to 21 October—to answer. So, it has taken two and a half years to get precisely nowhere on what I regard as perhaps the most significant piece of legislation of the Labour Government in the past 12 years. The school refused to answer the questions, making a mockery of the Act.
Today, we are considering giving institutions, which will be the subject of greater private sector influence, an additional 60 days without building into this new power for academies—at least, it is available in the maintained sector—any safeguards to prevent what I referred to happening again in the future. Although I am in favour of the 60-day period, I believe that the Government should now review this legislation with a view to reconsidering the powers available to the Information Commissioner for enforcement of the law. We cannot allow schools and other bodies to make a mockery of the legislation in the way that I have described.
Baroness Gale
My Lords, first, I congratulate the Minister on making his debut on statutory instruments. It is good to be working with him again. As he may recall, in the late 1970s when I was working in the Labour Party office in Cardiff and the Minister was in No. 10, we often had little chats about what the Prime Minister would be doing when he came to Wales. It is good to be working with him again, although I do not think that at the time either of us thought that we would be working on opposite sides of the Chamber.
I thank the noble Lord for his remarks and for his explanation of the statutory instrument. My noble friend Lord Campbell-Savours has raised some very interesting points, to which I am sure the Minister will reply. However, I believe that the safeguards are there in that academy proprietors remain subject to the obligation to respond promptly. If a request can be answered in less than the maximum period allowed, they must do so, and the SI can be reviewed by the Information Commissioner if there is a significant increase in the number of complaints from requesters.
With those assurances, I am happy to say that we agree that the statutory instrument is very sensible. It will make the workings of this section of the Act clear and understandable to all concerned. As it is so straightforward, we therefore have no objection to it.
Lord McNally
Oh yes, I remember it well. It was a very happy period indeed and a clear demonstration that Governments can get through very difficult economic problems.
I am very grateful for the intervention of the noble Lord, Lord Campbell-Savours, which was made with his usual thoroughness. I am unable to comment on individual cases but I shall read very carefully the Hansard report of this debate and send it to the Information Commissioner. As one who was very much a supporter of the Freedom of Information Act, I want to see it work. I am therefore very grateful for the noble Lord’s contribution because it is important that the Information Commissioner has the capacity to enforce the power.
On the backlog, I saw the Information Commissioner recently and he was able to assure me that significant progress was being made. I think that there was a period when his office did not deal with matters quickly enough, but a real effort has been made to speed things up and I think that we are now well on track. In addition, in November and December the Department for Education and Skills is holding a training event for academy principals and chairs of governing bodies to acquaint them with their responsibilities under the Act. Written guidance on handling requests will also be provided to the academies. I am grateful for the support of the Opposition and for the contribution of the noble Lord, Lord Campbell-Savours.
European Communities (Definition of Treaties) (Central Africa Interim Economic Partnership Agreement) Order 2010
Baroness Wilcox
That the Grand Committee do report to the House that it has considered the European Communities (Definition of Treaties) (Central Africa Interim Economic Partnership Agreement) Order 2010.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the economic partnership agreements, or EPAs, with Cameroon and Côte d’Ivoire set in place a secure trading arrangement between these countries and the European Union to promote development-friendly trade. The arrangement is compatible with the World Trade Organisation’s provisions.
The agreements mean that Cameroon and Côte d’Ivoire will receive duty-free, quota-free access to European Union markets. Without them, these countries would face tariffs on up to 25 per cent of their exports, including on industries critical to their economies such as bananas and cocoa.
The EPAs allow Cameroon and Côte d’Ivoire to remove their own tariffs gradually, over 15 years, and each contains safeguards enabling them to protect infant industries and prevent import surges. However, in accordance with the wishes of Cameroon and Côte d’Ivoire, the EPAs do not include provisions on services, investment, procurement, intellectual property or other “deeper integration issues”.
Each agreement also contains a chapter on development, ensuring that Cameroon and Côte d’Ivoire receive the development assistance they need to make the most of the opportunities created by the EPAs. As a first step, in September 2009 the European Union signed off a €97 million package for Cameroon to accompany its EPA and to help boost its economy and trade activities. The UK is committed to monitoring this money closely to ensure that it is spent wisely and achieves the maximum impact on poverty reduction.
The benefits generated by duty-free, quota-free access to the European market and by improved rules of origin are the areas in which the EPAs will most quickly bring benefits. Without them, for example, the tariff on banana imports from Cameroon and Côte d’Ivoire would be €148 per tonne.
In the longer term, the biggest benefits will come from the increased trade and investment that will flow from Cameroon and Côte d’Ivoire removing their own tariffs and moving towards more open economies.
No nation can achieve prosperity by closing its borders to trade. Indeed, the World Bank’s 2008 Global Monitoring Report calculated that removing all trade tariffs could reduce the headcount poverty index by 5 to 6.5 percentage points over a 10-year period. A 1 per cent increase in Africa’s share of world trade would generate about $70 billion of additional income annually, which is about three times the total aid that Africa currently receives. So by removing tariffs and promoting free trade, the EPAs will deliver lasting benefits to Cameroon and Côte d’Ivoire, and to Britain.
To secure these gains for Côte d’Ivoire and Cameroon, we need to ratify these two EPAs. By agreeing to the orders today, the Committee will allow us to proceed without delay.
Lord Young of Norwood Green
My Lords, I welcome the Minister’s opening remarks on the orders. She will be reassured that we largely welcome the agreements. The trading agreements are designed to support parts of the African economy and should benefit workers in training and employment generally. In turn, businesses and workplaces will be made safer and more efficient. As the Minister said, economic partnership agreements are intended to be broad agreements that help to build regional markets and diversify economies in the African, Caribbean and Pacific regions, before opening up the international benefits of increased, balanced and sustainable trade between the regions. They will change our relationship from one that offers tariff preferences to one that builds lasting and more efficient regional and international markets for the ACP regions.
The ACP economies are too small to go it alone and regional integration has the potential to boost local trade and to create larger markets, which will attract trade and investment. Eliminating the barriers between neighbouring countries and creating real integration favours trade exchanges and boosts economic growth. It also creates bigger markets that are more attractive to investors, and facilitates trade with landlocked countries. We have already heard from the Minister about the benefits of trade with Africa overall.
I have no criticisms of these agreements, but I would appreciate clarification from the Minister on a number of points. First, on the central Africa agreement, noble Lords will note that Cameroon is the only central African country to have signed the document. Its strong links with the EU are well documented. It is estimated that 61 per cent of its exports go to the EU and 56 per cent of its imports come from the EU. Will the Minister confirm that the agreement will strengthen the quality of the Cameroon economy, which might benefit its trade dealings outside the EU? Does she expect the agreement to be superseded by one that includes the seven countries of the Economic and Monetary Community of Central Africa and, if so, when? Are there plans for the agreement, or any future agreement, to be extended to cover not only goods but services? The Minister has spoken of the specific requests of Côte d’Ivoire and Cameroon that these be goods-only arrangements, but are there plans for wider arrangements that include services?
Obviously there are gains to be had when the less developed members of such trading arrangements gain fairer access to larger markets such as the EU. However, that is not the only prize. There is an opportunity to improve access to the larger, more developed markets of fellow African continental members. Does the Minister agree that that in itself is a big prize in expanding the membership of the central Africa group?
Finally on this agreement, is the Minister satisfied that the gradual reduction of tariffs on goods entering from the EU, such as vehicles, chemicals and power generation equipment that are not manufactured in Cameroon, will reduce production costs and product prices in the Cameroon economy quickly enough?
Will the Côte d’Ivoire agreement be a stepping stone to securing a larger agreement that encompasses more of western Africa? Whereas the EPA covering Cameroon has been established in preparation for a possible expansion under the central Africa banner, I am concerned that the Côte d’Ivoire EPA is restricted to just the one country. Will the Minister update noble Lords on the progress of the discussions on securing similar agreements with Côte d’Ivoire’s neighbours, in particular Nigeria and Ghana, but also other members of the Economic Community of West African States? When might we expect to see further developments towards a regional-based agreement for west Africa?
Countries such as Côte d’Ivoire are using the agreements as a gateway to larger markets among their African neighbours, which will allow them to grow their national industries before looking to other international markets in a significant way. Does the Minister see such goals as significant in the domestic economy of Côte d’Ivoire? Are those goals hampered by this being a single agreement with Côte d’Ivoire, without any additional African benefit? As with the Cameroon agreement, will the Minister confirm whether he has ambitions for an economic agreement covering not just goods but services? Does she feel that the reduction in the tariffs over 15 years on certain manufactured products that could drive the Côte d’Ivoire economy is being done over an appropriate period? We have heard about the case of the central African EPA, and the Côte d’Ivoire agreement will be negligible in its impact on UK imports and investment.
It would also be useful to know when the Minister last met the relevant trade Ministers from each country to ascertain what assistance they need to make best use of these agreements. It is vital that the interests of Cameroon and Côte d’Ivoire are central to the legislation. I am keen to find out whether the Minister’s department works closely with colleagues in DfID on such matters.
Lord Dykes
My Lords, I, too, wish to thank my noble friend for presenting these orders for approval and join in the support for the two orders. I thank the opposition spokesman for his points and questions. I associate myself with some of them in respect of future arrangements.
The European Union is making process in doing deals that are equitable for these countries, which are still very poor, but it does take time. The Lomé convention had many imperfections, but at least some progress was made. It was succeeded by the Cotonou agreement, which made still further strides, but I think the EPA system is better, because it can deal with segmental differences and the isolation of a particular product in more detail, which is a good thing. I, too, would be interested to speculate with the Minister whether other countries, not just Cameroon, will join in the central African part of the first order. A large number of countries were involved, and it would be interesting, if the Minister had time, briefly to enunciate why those negotiations with other countries did not go ahead and why they decided not to pursue that. There is still some feeling in west Africa that these agreements are inherently unfair and unbalanced. That is an over-exaggerated impression; the European Union is definitely trying to do something more for these countries, genuinely and sincerely—but there are still those anxieties.
Will the Minister, if she has time, speculate a little, although not too long, on the political situation in both countries? Unrest can of course delay economic progress. On the Côte d’Ivoire order, I presume that having the same list of products that will come from the EU as imports into Côte d’Ivoire, as in the central Africa agreement, is a sign of making these negotiations uniform. Presumably in future there will be significant differences. In the mean time, we wish these countries well in their development. They are not really significant for United Kingdom exports, and for imports to them. We are very marginal in both those places. Whether that is a good idea or not I do not know, but there has been a habit for it to be dominated by the French and, to a lesser extent, the Germans, Dutch and Belgians. I hope that in future there will be more British business activity in these countries and the rest of west Africa. I agree with the opposition spokesman that an all-territorial agreement for all the countries would be a very good achievement in future.
Baroness Wilcox
My Lords, I am delighted to see the noble Lord, Lord Young, in the Room. I seem to follow him on all sorts of things that he has started, and which I finish. He hit me with a flurry of questions, most of which I will not be able to answer this fast, as he will know from being in this Room and trying to do so. However, I may be able to cope with one or two. He knows this subject very well, and most of his questions seemed to seek reassurance that we will follow the line that he has taken before.
In response to a question asked by the noble Lord, both the Cameroon and the Côte d’Ivoire EPAs are intended to be stepping stones to full regional EPAs. Côte d’Ivoire is part of the western Arica grouping, and, with the other nations in the group, it continues actively to negotiate a regional goods-only EPA. The negotiations are moving slowly, but some progress was made in 2010 and they could be concluded in 2011. Cameroon is part of the central Africa grouping, as the noble Lord will know. That grouping contains a large number of fragile states, such as the Democratic Republic of Congo, for which signing an EPA with the European Union is not a priority at this time. The Cameroon interim EPA is therefore likely to remain in place for several years, but the European Commission stands ready to negotiate a regional EPA, and, when the region indicates that it is ready, we will be able to move.
The services will come later, as the United Kingdom must negotiate at the pace of the developing countries. They must feel comfortable with the pace at which we are working and not intimidated or pressured by us, so that they have a chance to get used to systems that we ourselves find easy to use.
In response to the noble Lord, Lord Dykes, Cameroon and Côte d’Ivoire will liberalise gradually over 15 years. As to the political situation, the European Union has pledged more than £500 million to help to implement the agreements. This will help to overcome the difficult political situation and, we hope, will provide greater political stability. As I said in my opening remarks, this is the right way to develop with these countries so that they do not feel pressured by us but, at the same time, free trade is extended across the world, particularly with Côte d’Ivoire; Cameroon; the South African Development Community; the Pacific, eastern and southern African regions; and so on. It all takes a great deal of time, as the noble Lord, Lord Young, knows very well, but I think that it will be worth while in the end.
I do not think that I have picked up anywhere near as many questions as I have been asked but I know that we will reply to noble Lords in writing unless there is a very pressing matter that I have not managed to answer now. I thank all noble Lords for their contributions today and commend the orders to the Committee.
European Communities (Definition of Treaties) (Côte d’Ivoire Economic Partnership Agreement) Order 2010
Baroness Wilcox
That the Grand Committee do report to the House that it has considered the European Communities (Definition of Treaties) (Côte d’Ivoire Economic Partnership Agreement) Order 2010.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.
Disabled People’s Right to Control (Pilot Scheme) (England) Regulations 2010
(14 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the Grand Committee do report to the House that it has considered the Disabled People’s Right to Control (Pilot Scheme) (England) Regulations 2010.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I can confirm that, in my view, the statutory instrument is compatible with the European Convention on Human Rights. I am very pleased to take part in today’s debate and commend these regulations on right to control. This is a groundbreaking advance, which for the first time gives disabled people a legal entitlement to choice and control over the public services they receive.
When noble Lords debated the Welfare Reform Bill in this House last October, I noted just how important choice and control are to all our lives. There is an emerging thesis that happiness, quality of life and fulfilment depend on our ability to contribute on our own terms and be valued for that contribution. Like anyone else, disabled people need to be empowered to be in control of their own lives. They should have the same opportunity to be involved in a society that recognises them as individuals who contribute, rather than as people defined by disability. So I am proud that, with right to control, we have developed a policy that commands such broad support.
I am happy to congratulate the noble Lord, Lord McKenzie, for the work that he and his colleagues have done to bring the policy to this stage. I also pay tribute to the many people who have been involved in laying the groundwork for these regulations. A great number of organisations and individuals have expended a huge amount of time and energy in shaping this legislation. However, it would be remiss of me not to reserve a particular mention for the noble Baroness, Lady Campbell of Surbiton, who has been such a potent advocate for right to control. Her work, and that of the advisory group she chairs, has been critical in shaping this policy and advising the Office for Disability Issues. Even then, we could not have come so far without the support and co-operation of the many disabled people and user groups who have been crucial in ensuring that we get this right. This sum of knowledge and expertise is reflected in the clear insights and attention to detail that we see in the regulations under debate.
Right to control represents an important landmark but it is one stage in a longer journey. The coalition Government have a broad vision to decentralise, empower individuals and cut bureaucracy. Right to control fits well with our plans to allow local authorities, communities and individuals to manage their own destinies with less interference from the centre. By shifting the focus from what people need—or what somebody thinks they need—to what they want, we are working towards, first, services that meet the aspirations of disabled people, as well as their needs; secondly, services that are planned and designed around the disabled person; and, thirdly, a diversity of services that help disabled people choose the right package for them. In short, these are personalised and responsive services.
The right to a personal budget and, ultimately, the right to take the cash and buy services directly is the mechanism for empowering disabled people. Too many people are currently offered services that are designed for the convenience of the provider, not the customer. Too many people still find that their own complex needs are not fully understood and catered for, despite the best efforts of the local social care department. Right to control will put the people who are the experts in their own care firmly in the driving seat when it comes to putting together a package of support. I fully recognise that some disabled people will still need support and advocacy to discover what is available and what they can aspire to. But I want to be clear that right to control is designed for all disabled adults and our trailblazers will deliver the guidance and support needed to ensure that everyone can exercise that right.
Baroness Campbell of Surbiton
My Lords, I also really welcome the regulations. I, too, pay tribute to the noble Lord, Lord McKenzie, for introducing them; it was a very inspirational thing to do. It was risky and I think it will pay great dividends in the future. How nice that all sides of the Committee can support this initiative.
The right to control is, as the Minister said, a significant landmark for disabled people. For decades, disabled people have campaigned for the right to have choice and control over our lives. A small thing, you may say, but it is something that we have not been able to take for granted in the way that non-disabled people have. Now we have equality.
The regulations take us a long way towards the goal of choice and control. If implemented well—and they do need to be implemented well—they have the potential to transform the way we live. By exercising the right to control, disabled people will inevitably become more confident in taking personal responsibility for their role in the community and family life. It will enable greater freedom to plan and pursue educational, work or volunteering opportunities. In short, disabled people have at last been put in the driving seat of their own destiny. What is more, this is a legal right, enshrined in legislation—not a gift or a charitable favour, for which one must be grateful, but a right. This is a real step forward for disabled people.
As the Minister said, one of the key articles in the UN convention on the rights of disabled people is Article 19. It concerns the right of disabled people to live independently and be included in the community. As noble Lords will be aware, the UN convention states clearly that disabled people should have and enjoy the same human rights as everyone else. It sets out obligations on states to ensure that those rights are met. The right to control goes straight to the heart of Article 19 and provides a vehicle to realise this right and, consequently, goes a long way towards implementing the convention. That is terrific.
In addition, the way in which the right to control legislation has been conceived and developed accords well with the UN convention duty on states to involve disabled people in the planning and implementation of such rights. Both the previous Government and now the coalition Government have involved disabled people at every stage of developing the right to control legislation and now its implementation. I should know because I am the chair of the advisory group of disabled people and experts in independent living who helped to shape the legislation, proposals for the trailblazers and the evaluation. Everything about us was discussed with us during this process. The seven trailblazers are following the same model of co-production at a local level. This will ensure that the experience and knowledge of disabled people permeates how the right to control continues to be delivered and developed.
The way in which we have developed the right to control over the past two years, as an advisory group and on the ground with our buddies, has taken the personalisation agenda a step further and set a new dynamic support service culture whereby disabled people, who once had to apply to five or six different agencies for support, will now engage with one support planning process. This is something for which disabled people have been asking for a long time. A new public support service where disabled people will, again by legislative right, decide for themselves how best to use their resource allocation is at the heart of this process. We will be able to devise creative solutions of our own for our own support, and exercise as much control in the commissioning of the outcome as we feel able. If you do not feel that you can control everything, you do not have to; you can have a plurality approach.
I know that some noble Lords have concerns that some disabled people may not be able to take that kind of control over their lives in this way. However, I can reassure them that on the advisory group we looked at this issue and made sure that the right permits flexibility and will be well supported throughout the process. Flexibility, of course, is the key. Disabled people can ask for a particular service to be provided or take a mix of existing services and a direct payment, or, in my case, use a direct payment to purchase all their support themselves and be totally 100 per cent in control. However, I know that most disabled people are not control freaks like me.
There will be support and advice for those who want their payments to be managed by a third party, and advice, training and guidance for people who want to employ personal assistants. Advocacy and support will be an integral part of the right to control. I am particularly keen to see how well the trailblazers fulfil this important part of the right-to-control culture and keen that we scrutinise it as it develops.
Peer support is incredibly powerful in demonstrating to disabled people what can be achieved. It is another important part of trailblazer activity. Before I began employing my personal assistants more than 20 years ago, I needed to observe how other disabled people managed their employees and I learnt from their mistakes—as I am sure others have learnt from mine.
We all have dreams or expectations from life; disabled people are no different. Delivered successfully, a right to control will change for ever the way in which the state responds to our needs. I am confident that, by transferring power from the state to the individual in this way, we will overturn decades of low expectation and witness a transformation in people’s capability and well-being.
However, I recognise that this is an ambitious project. We are overturning a culture of dependency and philanthropy. There will be teething problems as we bed it down. However, I have been extremely pleased to be part of this transformative exercise. I have seen how people have grown, even during the two years in which I have had the privilege of chairing the advisory group. I am looking forward to seeing the success of the trailblazers and their eventual rollout across the country.
Baroness Thomas of Winchester
My Lords, as my noble friend said, it is just over a year ago that the band of Peers who speak on DWP matters welcomed the amendments to the Welfare Reform Bill, now Act, of 2009 which have triggered these regulations for pilots. I, too, can give them a hearty welcome.
I said a year ago that the amendments, now regulations, would herald a real shift in power from the state to disabled people, ensuring that they are in the driving seat when it comes to the support they need. I seek a few clarifications and have a few questions.
The amendments, which inserted a new clause, included a power for the Secretary of State to issue directions under existing community care legislation to deliver alignment under existing enactments. The then Minister, the noble Lord, Lord McKenzie of Luton, to whom I also pay warm tribute, said:
“Alignment means delivering the effect of the right to control to individuals in receipt of adult community care services”.—[Official Report, 27/10/09; col. 1114.]
My noble friend Lord Freud responded that it made far more sense to base the right-to-control approach on community care services, which are likely to be required on a sustained and long-term basis, than on the more transitory requirements surrounding support for disabled people to secure employment.
I should be grateful for clarification on that point. I think it means that adult community care is not included in these regulations because it comes under other legislation on direct payments, but that under these regulations authorities are enabled to share information about community care. Is this correct? Presumably this means that assessments will be shared so that disabled people do not have to undergo multiple assessments.
We all know how stretched local authorities’ financial resources will be. Will any support be provided to authorities to enable them to develop and implement a single assessment system? Will there be any practical support for organisations that provide information, advice, peer support and advocacy? There is an obligation for authorities to give to the disabled person information about organisations that provide advice and assistance, but there is no duty to sustain those organisations, nor is there a right to advocacy. Perhaps my noble friend can say what support there will be for the pilots.
Having read the document helpfully provided by the Office for Disability Issues, Making Choice and Control a Reality for Disabled People, I end by asking my noble friend one or two questions arising from that document. On page 20, I see that the Office for Disability Issues is working with the Department of Health to consider allowing, within the trailblazers only, third parties to carry out non-complex assessment reviews. Are we talking about people other than healthcare professionals? I was not sure. If we are, there is already a certain amount of controversy about those who carry out the work capability assessment, and it is important to get all these assessments right.
Another small point is the rule that a disabled person has to be informed in writing of various things. We are told that this means,
“in a format that is accessible to the person”.
If that is what the regulation means, why does it not say so?
Finally, have we got anywhere with the idea that the excellent access to work provisions might be guaranteed to a disabled person before the offer of a job, so that a potential employer would be more encouraged to offer that person employment? I hope that my noble friend can answer those questions—perhaps in writing, if not today. However, in general, I welcome the regulations most warmly.
Lord McKenzie of Luton
My Lords, I thank the noble Lord, Lord Freud, for his full explanation of these regulations and for his kind words. We certainly welcome the introduction of the right-to-control trailblazers, which, as all noble Lords who have spoken identified, flow from the Welfare Reform Act 2009. The Minister referred to them as groundbreaking; the noble Baroness, Lady Campbell, referred to them as transformational and overturning a culture of dependency. I very much agree with that. The noble Baroness was the driving force behind the development of the right to control. She described the legislative process as one of co-production. It would seem that this approach has very much continued in the development of the regulations before us. The right to control is predicated on the principle that disabled people are the experts in their own lives: and that their being passive recipients of whatever support is deemed appropriate, and how that support is delivered, is no longer acceptable. I agree.
I have one or two specific questions that perhaps the Minister can help me with. The Independent Living Fund is not one of the qualifying services, although it is one of the six funded services that are to be included in the right-to-control trailblazer areas. Notwithstanding that further applications are to be considered during the current financial year, my understanding is that the right to control can still apply to existing recipients. I should be grateful if the Minister could confirm that. Can he also explain the position for future years? What are the planned allocations over the CSR period? If he cannot tell us today, he might let us know when that information will be available.
Work Choice is one of the qualifying services. According to the DWP website, contracts have now been awarded for the delivery of that programme. Can the Minister say a little about how those contractual arrangements sit alongside the right to control? For example, will the duty of the responsible authority to provide information to the beneficiary under Regulation 7 remain with the Secretary of State or, by agreement, be passed to the third-party provider? In second arrangements with providers, what estimate has been made of the likely numbers of people who will opt for arrangements other than those available under these contracts? More generally, can the Minister say whether any of the six funding streams are likely to be inculcated in whole or in part into the universal credit when introduced, or if any of the relevant services within the meaning of Section 39 of the Welfare Reform Act would be so included? I understand that we may get more detailed views on that later in the week.
It is understood that the Work Choice programme, when introduced, will focus very much on an individualised approach to supporting people towards and into work. That is something that we should support. Can the Minister say something about the relationship between that programme and the right to control? As the noble Baroness, Lady Thomas, said, concern was expressed during our deliberations on the Welfare Reform Bill that expressly excluding adult community care services from the legislation would substantially diminish benefits from the right-to-control approach. The reason for the exclusion was that similar provisions exist under other legislation. We are told that the Department of Health will issue directions to local authorities to ensure that people assessed for adult community care services living in the pilot areas will have the equivalent facilities of the right to control. Given that the regulations have now been laid and that the pilots are due to commence shortly, have those directions now been finalised?
Supporting People is a vital, non-statutory programme that helps about a million of our most vulnerable citizens each year. It is a sign of the times that it is considered a reasonably protected budget, although it suffers a 12 per cent real-time reduction over the CSR period. It is a qualifying service for the purposes of these regulations, to the extent that it helps disabled people to live independently. Funding from the centre is no longer ring-fenced and there is great concern that local authorities, under extreme financial pressure because of budget cuts, will shift resources to other programmes. To the extent to which that happens, vulnerable people who are eligible to benefit from these and other regulations will suffer. Will the Minister say how this issue is to be monitored?
It is comforting that the DFG regime has been brought within the right-to-control pilots. Again, the budget will be under extreme pressure because local authorities typically top up their central capital allocation. Obviously, their scope for doing so is diminished. Will the Minister deal with one point? It is focused on the changes to buildings, but it should cover the provision of equipment as well. Do the processes envisaged here facilitate the recycling of equipment? I recall instances in the past such as when I was on a local authority and someone had a stairlift fitted. Sadly, within two weeks, they died, but it was pretty much impossible to get the stairlift taken out of that property and installed in another property with an equivalent need. I am not sure that I have my mind around all the processes envisaged here, so I should like to check whether that is facilitated, or not precluded. Obviously, that would damage the interests of disabled people.
Finally, could the Minister remind us of the basis on which the pilot areas were chosen?
In conclusion, these regulations are a hugely important step forward and a tribute to a lot of work that has been done by many people, particularly the noble Baroness, Lady Campbell. They give us a chance to test the proposals in practice and open up opportunities for disabled people to transform the quality of their lives. We give these regulations our full support.
Lord Freud
My Lords, I thank everyone who has spoken in this debate for their unanimous supportive approach. We are looking at a watershed moment—despite the level of consensus in this Committee, or maybe even because of it—in the way that right to control will enable disabled adults to have a real say in how services are provided and choose how to purchase those services. As the noble Baroness, Lady Campbell—who will, I think, be watching—said, these pilots need to be implemented well. While I could not possibly comment on her claim that she is a control freak, I know she raised the issue that some people who may not be quite as enthusiastic about taking total control will still be part of the pilot. Full support for them will be built into the pilot and will be a vital aspect of it.
I will now deal in no particular order with the questions that were raised. The noble Baroness, Lady Thomas, asked about the number of assessments required. We are working with all the local authorities involved to support them in undertaking just a single assessment, and have a field support team working with the different local authorities to share the approach. The noble Baroness asked why the regulations do not refer to accessible formats for the provision of information. These do not need to be specified in the regulations because there is a general duty under the Equality Act. The noble Baroness asked how community care will work. It is aligned with right to control. These regulations work alongside the legislative framework for community care. Indeed, the data-sharing regulations extend to community care.
The noble Baroness asked about the support provided to user-led organisations during the pilots. Trailblazers work with the local organisations that supply the support and advocacy. The representatives are members of local project boards, and the Government will provide support to trailblazers, which can include support for user-led organisations. The noble Baroness raised the issue of general support. The concept of right to control involves assembling the money that is already there and making it accessible in a right-to-control way. For the purpose of the pilots, we are putting resources in because there is clearly extra cost for the communities. From memory, the figure that we are adding to that package is £7.5 million, which will be a mixture of cash and practical support.
Asylum (First List of Safe Countries) (Amendment) Order 2010
(14 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Earl Attlee
That the Grand Committee do report to the House that it has considered the Asylum (First List of Safe Countries) (Amendment) Order 2010.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.
Earl Attlee
My Lords, the order adds Switzerland to the first list of safe third countries set out in Part 2 of Schedule 3 to the Asylum and Immigration (Treatment of Claimants, etc.) Act 2004. This provision is concerned with situations in which an asylum seeker may be removed to a safe third country—that is, one of which he or she is not a national or citizen—without substantive consideration of the asylum claim. Countries in the first list of safe countries are presumed to be places from which an asylum seeker will not be returned in breach of the refugee convention or the European Convention on Human Rights.
Provided that the Secretary of State is able to certify, therefore, that the applicant is not a national or citizen of the state listed, the applicant may be removed to it and no right of appeal lies against the decision on the grounds of presumed or deemed safety. In other words, the applicant cannot bring an appeal arguing that the country in question is not safe.
Applicants may resist their removal on other human rights grounds in the usual way, although provision is made for such claims to be certified as clearly unfounded unless we are satisfied that they are not. If the claim is so certified, any appeal may be made only outside the United Kingdom. The Part 2 list currently includes all member states of the European Union, Iceland and Norway, all of which are bound by the arrangements for determining responsibility for examining an asylum claim set down in EC Regulation No. 343/2003, also known as the Dublin II Regulation. This regulation determines which member state is responsible for dealing with an asylum claim made within the EU or in another participating country. Dublin II combats the problem of asylum shopping in Europe by making one participating state—most often, though not always, the first one that the asylum seeker entered or the one in which he or she first claimed asylum—responsible for an asylum applicant and allowing him or her to be returned there if he or she tries to make a claim somewhere else. Since 2004, the Dublin regulation has allowed us to remove a net total of more than 7,500 people to other participating states.
Switzerland has signed an agreement with the EU allowing it to join the Dublin system and has been taking part in it since December 2008. The UK Border Agency has considered research from a number of sources, including UNHCR reports and the US State Department, and has conducted its own country research. We are satisfied that Switzerland has adequate procedures in place to ensure that individuals will neither be exposed to persecution in Switzerland nor be returned to their country of origin in breach of the refugee convention. We therefore believe that it is appropriate to make this order, which will allow us to operate the Dublin II Regulation with Switzerland as effectively as possible. I beg to move.
Lord Rosser
My Lords, as the Minister said, the order adds Switzerland to the list of safe third countries to which an asylum seeker can be removed from the UK without substantive consideration of the merits of his or her asylum claim. One effect is that there is no scope to contest removal to the third country on refugee convention grounds either before or after removal from the UK.
The Secretary of State has said that she is satisfied that removing asylum seekers to Switzerland will not be in breach of the European Convention on Human Rights and that any asylum seeker returned to Switzerland will be afforded the rights and benefits accorded to all asylum seekers under its domestic law. Paragraph 8.1 of the Explanatory Memorandum refers to:
“Extensive research into the treatment of asylum seekers in Switzerland”,
having been,
“carried out using objective material and information provided by the Swiss authorities”.
Can the Minister say a little more about what that objective material was? From what is said in the Explanatory Memorandum, one takes it that it is independent material, but it would be helpful if the Minister could say a little more on that score.
The list of safe third countries includes, as the Minister said, all member states of the European Union and states in the European economic area. The Explanatory Memorandum also states that since December 2008 eight asylum seekers have been removed to Switzerland. Can the Minister tell us in general terms something about the eight cases? Did the people involved seek to contest the decision to remove them? Have there been any cases of decisions to remove to Switzerland being successfully contested and, if so, on what grounds did they succeed? On what general grounds or basis was Switzerland considered in these cases to be the appropriate country in respect of those eight asylum seekers? Was it, as the Minister said in his introductory comments, that Switzerland was the first country entered? With the introduction of this order, is there expected to be an increase in the number of asylum seekers being removed to Switzerland if the process is simplified?
Paragraphs 10.2 and 12.1 of the Explanatory Memorandum state that adding Switzerland to the safe third country list and its associated procedures will reduce the scope for errors. What kinds of errors are referred to in these two paragraphs?
This does not appear to be a contentious order but, finally, there is a reference in paragraph 12.2 of the Explanatory Memorandum to the instrument being,
“subjected to internal review within the UK Border Agency to ensure that it has met that aim”.
When that internal review has been undertaken, will the results be made public?
Baroness Hamwee
My Lords, this is not a contentious order, but one phrase that the Minister used in his introduction caught my attention. He referred to the net total of those subjected to these orders since 2004. Is that the net total of those who have come into the UK? Net is not a term that I would have expected to hear in the context.
Earl Attlee
My Lords, I am grateful to all noble Lords who have contributed to this short debate on the order. The noble Lord, Lord Rosser, asked what constituted objective material: the answer is the US State Department reports that I mentioned and the experience of that country. Switzerland is clearly going to be a safe country as it is another European country, although obviously not part of the European Union, and so I do not see any difficulties. However, we had to go through a rigorous objective assessment of that state.
The noble Lord referred to the number of asylum seekers. Clearly, there are very few asylum seekers being sent back to Switzerland because it is not an obvious country for them to first arrive at. I was asked whether there would be an increase in removals to Switzerland. The answer is, no, the numbers are very low, but some asylum seekers will be subjected to this new procedure. The noble Lord needs to understand that procedures are already in place to allow removals but the Secretary of State must give each case a more difficult and protracted consideration. Once this order is approved, it will be easier for the Secretary of State to require removal.
The noble Lord touched on the scope for errors. It is sensible to have a universal procedure for all asylum seekers. Having different procedures for one very small proportion of asylum seekers seems unwise, and therefore it is better to approve this order and reduce the scope for errors. However, that does not mean that lots of errors are occurring.
The noble Baroness asked about the net total. I have not had any inspiration on that yet. The noble Lord, Lord Rosser, asked how many removals had been challenged. I shall have to write to him on that one, but there have been 12 removals since the Explanatory Memorandum was published.
Earl Attlee
My Lords, I shall write on the questions that I have not answered.
Lord Rosser
One question to which the Minister has not responded—and I can hardly imagine that it is a difficult one—is whether or not the results of the internal review will be made public.
Earl Attlee
My Lords, I am afraid that I shall have to write on that one as well.
Immigration (Biometric Registration) (Amendment) Regulations 2010
(14 years ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Earl Attlee
That the Grand Committee do report to the House that it has considered the Immigration (Biometric Registration) (Amendment) Regulations 2010.
Relevant document: 3rd Report from the Joint Committee on Statutory Instruments.
Earl Attlee
My Lords, on 25 November 2008 the UK Border Agency issued the first biometric residence permits, through regulations made under the UK Borders Act 2007, to applicants granted further leave under student, marriage and partnership categories. In 2009, the regulations were amended to include students applying under tier 4 of the points-based system and other, smaller categories. January 2010 saw the rollout to skilled workers extending their stay under tier 2, and now I beg to move that the Immigration (Biometric Registration) (Amendment) Regulations 2010 be considered to incorporate the two remaining active tiers of the points-based system for migration.
In addition to those in migration categories who are already required to apply for a biometric residence permit, the regulations will introduce the biometric registration requirement for migrant workers applying to extend their stay in the UK for more than six months under tiers 1 and 5 of the points-based system, and for their dependants. Tier 1 covers highly skilled workers, investors, entrepreneurs and post-study work. Tier 5 is for certain types of sponsored temporary workers whose entry helps satisfy cultural, charitable, religious or international objectives. These permits enable the UK to comply with European regulation EC 1030/2002, as amended by EC 380/2008, which prescribes uniform residence permits containing fingerprints and photograph to be issued to third-country nationals staying in member states for more than six months.
Key to any immigration control system is the ability to establish that a migrant granted leave to enter or remain in the UK is the rightful holder of immigration status set out in the document that evidences that entitlement. The integrity of immigration control is threatened by those who seek to make multiple fraudulent immigration applications, to work illegally and to access public funds and services to which they are not entitled. By enrolling a migrant’s unique biometric information, we can establish a reliable link between the holder and the permit. We can link the biographical details they give us to their unique biometric identifiers and check a person against our existing records before deciding whether to grant their application to be in the UK.
Biometric residence permits make it easier and more reliable for the UK Border Agency, employers and public service providers to confirm a person’s immigration status and eligibility to entitlements in the UK. The infrastructure for these permits is in place and permits have been well received by legitimate migrants, employers and service providers as a secure and reliable way of confirming identity, immigration status, the right to work and the entitlement to access services. With more than 300,000 biometric residence permits now issued, the permit is now widely recognised and trusted as a secure immigration document. Guidance on checking the cards is available on the UK Border Agency’s website and a telephone verification service is available for employers.
To date, the rollout has largely run smoothly, with the majority of successful applicants receiving their permits within a few days of being notified that their application for further leave was granted. Enrolment provision has been expanded to meet customer need, with 11 Home Office biometric enrolment centres and 17 Crown Post Offices offering enrolment.
I will briefly set out the categories to which regulations already apply. Biometric residence permits are currently issued to those granted further leave to stay in the UK for more than six months as skilled workers applying under tier 2 of the points-based system, which is for people coming to fill shortage occupations or a gap in the labour market that cannot be filled by a settled worker and includes elite sportspersons and coaches, ministers of religion, missionaries or members of religious orders.
Tier 4 of the points-based system, which is for students is also already covered, along with a number of other categories of applicant extending for more than six months: spouses and partners of persons present and settled in the United Kingdom, representatives of overseas businesses, academic visitors, visitors for private medical treatment, domestic workers in private households, those applying on the grounds of United Kingdom ancestry and retired persons of independent means. Those transferring their conditions of limited leave from an old passport are also covered. Where the Immigration Rules allow dependants to join the applicant, the biometric regulations also apply to them, whenever they make such an application.
The 2010 regulations build from the previous biometric registration regulations and take us further towards complying fully with our obligations under EU regulations. To complete rollout to all tiers of the points-based system, we now seek to incorporate tiers 1 and 5. Tier 1 is designed to attract to the UK the brightest and best migrants from around the world who have the most to contribute to our economy and the Committee will be aware that the Immigration Minister recently confirmed:
“Those coming into the UK under the highly skilled migrant route should only be able to do highly skilled jobs—it should not be used as a means to enter the low-skilled jobs market”.
There are four sub-categories: general, for the most highly skilled workers, who are granted free access to the UK labour market so that they can look for work or self-employment opportunities; entrepreneurs, for those investing in the UK by setting up or taking over and being actively involved in the running of one or more businesses; investors, for high-net-worth individuals making a substantial financial investment—at least £1 million—to the UK; and post-study work, for the most able international graduates who have studied here, to enhance the UK’s overall offer to international students and providing a bridge to highly skilled or skilled work.
Tier 5 is for youth mobility and temporary workers who are coming to work in the UK for short periods for primarily non-economic objectives. There are two sub-categories of tier 5: temporary workers, for certain types of temporary worker whose entry helps to satisfy cultural, charitable, religious or international objectives, and the youth mobility scheme. Those coming to the UK under this sub-category are not able to extend their stay in the UK under the Immigration Rules so will not be affected by these regulations.
I am happy to try to answer specific questions about these regulations if noble Lords wish to raise them. I commend these regulations to the Committee. I believe they are proving to be a useful tool in tackling illegal immigration and illegal working. Employers have told us they welcome the documents as a secure and reliable means of confirming the right to work. When we intend introducing further categories of foreign nationals who are required to apply for a biometric residence permit, we will return to Parliament and seek further approval. I hope that I have explained the purpose of the regulations, and I beg to move.
Lord Rosser
My Lords, I thank the Minister for his explanation of these regulations which, as I understand it, continue the incremental rollout of biometric immigration documents to include groups of foreign nationals who are subject to immigration control and who have limited leave to stay in the United Kingdom. I understand that the biometric immigration document issued under the regulations is a card with a chip containing biometric data; namely, fingerprints and a digital facial image.
As the Minister said, these are the fifth set of regulations to be made under the biometric registration provisions of the 2007 Act and are intended to enable us to move closer towards complying with the EU requirement for member states to confirm leave to stay through the issue of a residence permit in the form of a card from May 2011, and with a biometric card from May 2012. Do these regulations mean that the UK will have fully complied with its legal obligations under the EU legislation by May 2012, or am I to infer from a comment the Minister made towards the end of his speech that still further measures need to be taken to enable us to fully comply?
The Minister said that under these regulations individuals applying for further leave to stay in the UK for more than six months under the immigration rules in tiers 1 and 5 of the points-based system for migration will now have to apply for a biometric immigration document, as will the dependants of such applicants. The changes apply only to foreign nationals subject to immigration control. Already covered by the scheme are those in tier 2 of the points-based system—who, as I understand it, include intra-company transfers—and tier 4, which covers students. Paragraph 7.4 of the Explanatory Memorandum states:
“Employers are also becoming increasingly familiar with the biometric immigration document as the numbers in circulation have increased following previous roll outs”.
I think the Minister said—I may well have misunderstood him—that there were 3,500 such documents now in circulation. Can he clarify whether that is the case? If it is not, what is the figure, and by how many will the number increase as a result of the order coming into force? In the light of the statement in the impact assessment that tiers 1 and 5 constitute approximately 16 per cent of the total projected numbers of biometric resident permit applicants, will the 3,500 be increased by roughly one-sixth?
To what extent are the numbers of people extending their stay in the United Kingdom under the terms of these regulations affected by the proposed cap on the numbers coming to this country each year? Will the provisions of these regulations or the earlier regulations covering tier 2—which I thought covered intra-company transfers, among other things—made under the biometric registration provisions of the 2007 Act apply to those coming to this country under intra-company moves, who, it appears, may now not come within the constraints of any intended cap on numbers coming to Great Britain.
Paragraph 8.1 of the Explanatory Memorandum states that there has been no formal consultation, but that the rollout strategy and policy have been discussed with internal and external stakeholders. Can the Minister indicate exactly who were the external stakeholders with whom discussions have taken place, if there were any in addition to those referred to in paragraph 9.1 of the Explanatory Memorandum? It may be that paragraph 9.1 covers all external stakeholders.
The impact assessment refers also to the social costs of £8.1 million which relate to the costs of travelling to enrol biometrics. Can the Minister say how the figure is calculated and broken down, at least in general terms? Likewise, the impact assessment refers to a reduction in benefits fraud and states that this could total £0.4 million over 10 years. Once again in general terms, how is that figure calculated? How does one come to the conclusion that that would be the figure after 10 years?
The Immigration Law Practitioners’ Association expressed concerns that processing times will increase when the volume of applications increase because applicants from tiers 1 and 5 will also need to enrol biometrics. The Explanatory Memorandum appears to reject these concerns. On what basis, and against what criteria, have the Government come to the conclusion that they have increased the capacity of enrolment facilities and options sufficiently, as is inferred on page 21 out of 56 of the Explanatory Memorandum documents?
Likewise, the ILPA expressed a view that the requirement for a biometric residence permit will adversely affect frequent business travellers because it adds an extra stage to the application process. The response was that, as part of the review of the front-office biometric enrolment service, the Government will be looking to further improve the service offered to applicants, including increasing the availability of enrolment offices and faster processing times. Since, as I understand it, the policy is to be implemented next month, what specific further improvements do the Government intend to make to address this point made by the immigration law practitioner service, and its further point that the range of locations at which biometric data can be enrolled, to which the Minister referred in his speech, is limited?
I appreciate that there are a number of questions there. I do not know the extent to which the Minister can respond today, but I would be grateful if he could write to me on those questions that he is unable to respond to.
Baroness Hamwee
I, too, am grateful for the explanation. I have given the Minister notice of some questions which, in fact, cover very much the same ground as those asked by the noble Lord, Lord Rosser.
On the question of compliance with EU requirements; to put it another way round—what more is outstanding on that score for the UK fully to comply? My other questions are practical in regard to enrolment and access by employers to the information. I am unclear how biometric information, as distinct from simply the production of the card, makes it easier for employers to check eligibility to work in the UK—something which the impact assessment tells us will be the case. Can employers check the position without having access to a reader? The Minister mentioned a telephone verification service. I do not know whether I am confusing the different bits of the mechanics of this, but I am unclear what that service will provide.
The Minister also talked about 11 centres for enrolment, plus 17 Crown post offices. This seems to have been an issue in the consultation. What further rollout will there be and what geographical coverage has already been obtained by the centres that are in place? They seem to be quite small in number.
Earl Attlee
I am grateful for noble Lords’ questions about this. The noble Lord, Lord Rosser, asked about the rollout and whether the UK would be fully compliant by 2012 as per the regulations. Yes, it will. Companies are becoming familiar with them, because there are 300,000 in circulation. Certain types of companies tend to use more migrant labour and are therefore more familiar. He asked how many more would be issued. We think about 80,000 per annum. He also asked about consultation. In the Explanatory Memorandum there is a very long list of people consulted, but I shall not weary your Lordships by reading it out.
The noble Lord touched on enrolment capacity and limitations. That is one reason why we did not introduce the BRPs in one go. It is a rollout programme, taking in new tiers.
I was asked how an employer can check a BRP without a reader. Guidance clearly sets out that the security features of BRPs are available to download from the UK Border Agency website. There is also a BRP verification telephone service, which employers can call to check whether a card has been cancelled—for example, because it has been reported lost or stolen.
I was asked where applicants can register their biometric identifiers. They can do so at one of 11 Home Office biometric enrolment offices around the UK, or one of 17 Crown post offices participating in a pilot. At present there are 28 venues located at UK Border Agency inquiry offices at Croydon, Solihull, Sheffield, Liverpool, Glasgow, Belfast and Cardiff. There are also biometric enrolment centres at passport service offices enrolling foreign nationals on behalf of the UK Border Agency at London Elephant and Castle, Birmingham, Derby and Brighton. The post offices are at Aberdeen, Beckenham, Beeston, Bracknell, Cambridge, Durham, Kingstanding, Battersea, Camden, Earls Court, Old Street, Middleton, Oxford, Redditch, Romsey, South Shields and Stamford. So there are plenty of locations.
We have also rolled out a mobile biometric enrolment service for those physically unable to attend an enrolment centre for medical or other reasons. This service is also available as an exclusive super-premium service whereby UK Border Agency officers will visit an applicant to enrol their biometric information—fingerprints, photograph and signature—and decide and conclude their application. This costs £15,000. The super-premium service is not currently available to customers applying for an extension of leave under a category that does not require a BRP, or applying for permanent residency or citizenships.
I was asked what we were doing to address the problems that applicants have experienced when applying for BRPs. Most have not experienced problems. The UK Border Agency takes any problems or issues very seriously, and is determined to learn lessons and continuously improve the service provided to its customers. It investigates any complaints received and aims to resolve them as quickly as possible and take steps to put things right if and when they have gone wrong. The vast majority of people find applying for a permit trouble-free. We have been collecting customer feedback and the vast majority of responses have been very positive.
I was asked why applying for a BRP delays applications. It does not do so, but the biometric enrolment must take place before the case is concluded, so that we can check the applicant against the existing databases and link their biographical details provided to the unique biometric identifiers.
The noble Baroness, Lady Hamwee, asked several questions. First, she asked what more was required for the UK fully to comply with the EU requirements. EU legislation requires BRPs to be issued to all non-EEA migrants, granting permission to stay in the UK for more than six months, by May 2012. We are on target to do that. She asked how biometric information, as distinct from the card itself, makes it easier for employers to check eligibility in the UK and whether that did not require employers to use a reader to check the information. Biometric information makes the link between the document and the holder more reliable, which in turn means that employers can have more confidence in the BRP than other less sophisticated documents. Currently, an employer can perform a visual check of the biometric facial image incorporated into the face of the card against the person present as well as checking the BRP’s security features and using the telephone verification service. We are currently developing plans for an automated online checking service. In time, readers capable of unlocking the data on the chip will be more readily available and will enable employers to check the biometric information of the person presenting the document against the facial image and fingerprints stored on the chip. They will also have the ability to authenticate the document electronically.
House of Lords
EU: Membership
(14 years ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Pearson of Rannoch
To ask Her Majesty’s Government what is their latest estimate of the net cost to the United Kingdom of membership of the European Union.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the UK's net payment to the European Union budget is projected to increase from £3.8 billion in 2009-10 to £8.6 billion in 2014-15. The main reasons are the increase in the size of the budget and the disapplication of the abatement to non-agricultural spending in the new member states. Both were signed up by the previous Government for 2007-13. We are very concerned about those growing contributions, and we are working hard to moderate them.
Lord Pearson of Rannoch
My Lords, I am grateful to the noble Lord for his reply, which does not accord with the Treasury's spending review in October, which reveals that the net cash we are sending down the drain in Brussels this year is £8.3 billion, or £23 million a day, or the salaries of 750 nurses every day. Will the noble Lord confirm the other ruinous costs of our EU membership, which the Taxpayers’ Alliance has given as more than £100 billion a year? Also, what conceivable benefit do the British people get out of our EU membership? Do not the Government yet understand that we would create—
Lord Pearson of Rannoch
This is my second question. Do not the Government yet understand that we would create a great many jobs and be very much better off out of it?
Lord Sassoon
Now that the noble Lord has given up the strains of office of leading a party, we should allow him to be a bit more expansive—this afternoon, at least.
Of course, if we look at the wider benefits of EU membership, we can see that the UK gets much more out of it than it puts in, including in better access for British companies, whatever their size, to EU markets, cheaper prices and greater choice on our high street, more foreign investment, and a stronger voice for the EU in co-operation with countries such as India and China. The benefit of free trade with the EU alone has been estimated to boost GDP by more than 2 per cent—which, for the UK, would equate to benefits of about £25 billion to £30 billion each year.
Earl Cathcart
My Lords, as individuals, I do not believe that any of your Lordships would continue paying good money to the bank which looked after their money, their savings, and perhaps their mortgage, pensions, life policies and investments if the auditors refused to sign off the accounts because of fraud, theft, mismanagement and embezzlement, yet Britain continues to pay good money to Europe, although the auditors have refused to sign off on the accounts for 14 years for those same four reasons. Why do the Government not pay our great contributions to the EU into a bank account in London, draw down on that to make a payment to the British people as necessary and then pay only the net amount to Brussels if and when the auditors are happy to sign off the accounts? That might concentrate a few minds.
Lord Sassoon
I am grateful to my noble friend for that suggestion. Certainly I thoroughly endorse anything that concentrates minds in Brussels on the need for good housekeeping. I am not sure that his specific arrangement would quite meet our treaty obligations, but I shall bear it in mind.
Lord Clinton-Davis
My Lords, if we were to withdraw from the European Union, would not the costs be infinitely larger than the noble Lord, Lord Pearson, suggests?
Lord Sassoon
My Lords, I agree with the noble Lord and, as I have already explained, the huge benefit from our membership of the EU significantly outweighs the budgetary contribution that we make.
Lord Stoddart of Swindon
My Lords, is the Minister aware that we run a consistent trade deficit with the EU of about £40 billion a year? Could he say in relation to our net contribution, given the extra £450 million agreed by the Prime Minister at the recent quarterly meeting—or perhaps the £900 million which we will have to pay if the European Parliament has its way—how much we will then be paying?
Lord Sassoon
My Lords, in answer to the first part of the noble Lord’s question, 40 per cent of the UK’s trade goes to Europe, so it is a critical trading partner. On the potential increase of our budget contribution for next year, I should say that it was only thanks to the work of my right honourable friend the Prime Minister that the budget was put on to the agenda of the Council of Ministers and, thanks to the work he did with a number of other member states, the ridiculous proposal of a 6 per cent increase has been thrown out of court. The Council instead discussed the 2.9 per cent increase which we believed to be the absolute upper limit of what should be acceptable for next year.
Lord Dykes
My Lords, further to the Minister’s answer when he was referring to the enormous benefits in all sectors, would he agree that even the City earnings from being the largest euro currency trading centre in the whole world are enormous in comparison with the budget contribution we have to make? There are many other examples.
In view of the low quality of the characteristic questions of the noble Lord, Lord Pearson, should he not return to being leader of UKIP, the only party in Britain that wants us to leave, after 37 years of membership of the EU? If he were right, Richard Branson and many other businessmen would be wrong.
Lord Sassoon
My Lords, I suppose there was a question in there for me somewhere. I certainly agree with my noble friend that the City of London over a number of decades has indeed become the principal financial centre for the European Union. It is important that business across the European Union understands what benefit it gets out of the financing that goes through the City of London.
Baroness Symons of Vernham Dean
My Lords, the Minister said a moment or two ago that the only reason that the 2.9 per cent had been adhered to was because of the Prime Minister’s intervention. Indeed, the Prime Minister claimed he was “building an alliance” to “insist on the 2.9%”. Can the Minister explain therefore why it was that before the Prime Minister’s intervention 20 countries supported the 2.9 per cent cap, and after the Prime Minister’s intervention only 13 did?
Lord Sassoon
My Lords, the question of next year’s budget was not even on the Council’s agenda for the latest meeting. Therefore, getting 13 Heads of State to sign a letter on 29 October was critical to getting a sensible result out of the Council. Meanwhile, as I said in repeating the Statement by my honourable friend the Financial Secretary, Labour MEPs in the European Parliament were voting on an amendment to increase the budget next year.
Parliament Square
(14 years ago)
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Baroness Trumpington
To ask Her Majesty’s Government whether any agency is responsible for the removal of those occupying the pavement in Parliament Square.
The Minister of State, Home Office (Baroness Neville-Jones)
My Lords, Westminster City Council is responsible for the pavements under its control and the Metropolitan Police are responsible for policing crime and managing protests in the designated area around Parliament. The Government share the public’s concern about the current state of Parliament Square and are working with all the relevant agencies to protect this place of national importance. The Government intend to introduce legislation shortly.
Baroness Trumpington
My Lords, I am terribly sorry, but I hardly heard one single word that the Minister said. This is therefore guesswork, and I apologise. Does she not agree that it is not a demonstration but a squat? Furthermore, does she not agree that this beautiful square is now a mess? Why cannot this Government get together with whatever authority is liable and, after all this time, do better than the previous Government to put this matter right?
Baroness Neville-Jones
The Government share my noble friend’s sentiments and those of the House. Let me say what the Government have been trying to do. My honourable friend in the other House, the Minister for crime prevention, has been working with the GLA, Westminster Council and the police—there are, of course, several authorities involved in Parliament Square—to bring about the situation we have now. As we know, the squatters have been evicted, the grass has been reseeded and the pavements have been repaired, so we are dealing with the mess. The problem is that the continuing demonstration is based on the existing law, which allows one person to attach 20 others to the application for a demonstration. That law, which was passed in 2005, has been abused in a way that Parliament most certainly did not intend. That is why we believe that it is necessary to bring forward legislative proposals, which we intend to do in a first Session Bill, to clarify this situation and to restore the balance between the right to protest and public enjoyment of an amenity such as Parliament Square.
Baroness Neville-Jones
My Lords, as many noble Lords may know, the problem is that no single authority owns Parliament Square. Westminster Council has responsibility for the pavements on the southern and western sides of the square and the GLA has responsibility for the pavements on the northern and eastern sides and for the grass. This means that we have to have partnership between these various agencies, and the Government have been involved in fostering that in order to bring about improvement in the square.
Lord Boston of Faversham
My Lords, does the Minister agree that the most effective agency to remove these people in Parliament Square would be the noble Baroness, Lady Trumpington?
Baroness Neville-Jones
My Lords, I think my noble friend Lady Trumpington has been very helpful in asking this Question.
Lord Waddington
My Lords, it is surely not necessary to spread litter around the place in order to exercise the right to protest. It would surely be perfectly lawful for any citizen to go along and remove all the unsightly litter and the tents without offending against any law whatever. I simply cannot understand why some of us are not enlisted to do precisely that.
Baroness Neville-Jones
My Lords, there are many public services that we could all perform in this area. My noble friend and this House are right to be concerned about the encampment, which is at the root of our problems. In the legislation that will be coming forward, it will be very important for Parliament clearly to express its will as regards what it sees as being the rightful use of Parliament Square. We are trying, while safeguarding the legitimate right to protest, to make it clear that encampment and other abuses of an amenity are not permissible.
Baroness Butler-Sloss
Will the Minister consider in the future legislation reducing the number of local authorities which run Parliament Square?
Baroness Neville-Jones
The noble and learned Baroness puts her finger on a real issue. In the short term, that will not be very easy to do. But, certainly, over the longer term it is something that might be looked at.
Lord Peston
My Lords, I speak as a member of the Joint Committee on Security, which has been looking at this for years and has got nowhere. At our last meeting, we were told something quite extraordinary; namely, that although what surrounds the square may look like a pavement and, if you fell on it, would feel like a pavement, the High Court has announced that, as it does not go anywhere, is not a pavement—which shows the idiocy of judges. That is one of the things that prevents anyone, including the Met, from doing anything about these squatters.
Baroness Neville-Jones
This is getting into territory on which I tread with some trepidation. I think that the noble Lord is referring to the judgment which stated that, given the circumstances of the pavement in front of Carriage Gates which, I think it was judged, “did not lead anywhere”, it was permissible for the two protestors and those who were attached to them to continue their protest there.
Baroness Hamwee
My Lords, will the noble Baroness accept that, while there are many—and I share this view—who see the value of Parliament Square as an open space which supports a site of world heritage importance, it is entirely natural and proper to allow protests in the vicinity of Parliament?
Baroness Neville-Jones
The Government accept my noble friend’s contention that it is right and proper for people to be able to protest peacefully within Parliament Square or its environs. The legislation will seek to restore the right also of the general public to enjoy the amenity of the square.
Coalition Policies
(14 years ago)
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Baroness Smith of Basildon
To ask Her Majesty’s Government how many responses they have had to their consultation on The Coalition: Our Programme for Government; and how many of those solely endorsed coalition policies.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, no fewer than 9,500 comments were received in response to the publication of The Coalition: Our Programme for Government. Departmental responses are still available to view online and I have asked for a copy to be laid in the Library. An exercise to count the number of comments which solely endorsed coalition policies could be carried out, but only at disproportionate cost.
Baroness Smith of Basildon
My Lords, I suggest that it would not take too long. Is the Minister aware that 9,500 people made comments, gave suggestions and put forward ideas, yet not one government policy was changed or even tweaked as a result? The responses are not on the websites—they have been taken offline—so we will be pleased to see them in the Library. Does the noble Lord accept that this was a disappointing PR exercise? Does he think that it should be done again? If so, will he assure this House that it will be a case of the Government not just noting the responses but actually listening to what people have to say?
Lord Strathclyde
My Lords, I cannot agree with the noble Baroness even though she puts it most charmingly. It was a useful exercise and we learnt a lot from it. Each department has given its thoughts and ideas on what has been said; those are available on departmental websites. But they have not gone back to each response, partly because, although it was a commentable document, it was not part of a consultative exercise. We learnt a lot and I am sure that in due course we will repeat it.
Lord Dholakia
My Lords, does the Minister agree that there have been fundamental reappraisals of government policy, particularly in the field of criminal justice and prisons? Was there consensus endorsement of that policy? Will he thank the Secretary of State for these profound changes in policy and make sure that they are converted into legislation before long?
Lord Strathclyde
My Lords, it is very good of my noble friend to point that out. The whole process of creating the original document, Our Programme for Government, was done extremely quickly, with maximum co-operation between the two parties, which is one reason why I believe that it was a success.
Lord Richard
My Lords, in his response to my noble friend the noble Lord twice said: “We have learned a lot”. What have they learned?
Lord Strathclyde
Would the noble Lord, Lord Richard, believe me if I said that the volume of correspondence generated far exceeded our expectations? The process of moderating these websites and sifting comments and ideas proved to be more resource-intensive than we had anticipated. However, we remain committed to canvassing the public’s views on a range of issues using on and offline channels.
Lord Hamilton of Epsom
My Lords, is my noble friend not concerned that, with the decline of religion in this country, consultation runs the risk of becoming the opiate of the people?
Lord Strathclyde
My Lords, not everybody is keen on consultation, but on the whole it is a good idea to give people as many opportunities as possible to comment on government policy, and I am rather pleased that 9,500 bothered to reply to this document when it was issued.
Lord Brooke of Alverthorpe
But if I heard the noble Lord correctly, he stated this was not a consultation. In those circumstances, is it not true that manifestos have now become a mockery and that the British people’s confidence in politics has been further undermined by having been presented with policies over which they have had no say? If this Government had been open and honest with the public when drafting their coalition policy—and if they had wanted to give a lead to the rest of Europe—should they not have put it to them in a referendum?
Lord Strathclyde
My Lords, when the noble Lord said that manifestos have become a mockery, he must have been talking about the Labour Party’s manifesto.
Lord Mawhinney
My Lords, bearing in mind the welcome initiative by the coalition, does my noble friend envisage that after future general elections each Government will publish their programme for the forthcoming Parliament?
Lord Strathclyde
Of course we do that already, vis-à-vis the Queen’s Speech, but we would not have needed to publish this document if there had been a clear majority by the Conservative Party. It was needed because we got together with our Liberal Democrat allies to create the coalition.
Baroness Royall of Blaisdon
My Lords, I thank the noble Lord for his utterly charming responses this afternoon. Does he believe—I do not—that the Salisbury/Addison convention should apply to policies which are outlined in the coalition agreement?
Lord Strathclyde
Broadly speaking, yes, I do, because they have the support of the majority in the House of Commons and were overwhelmingly and clearly pointed out in the respective manifestos. There are one or two exceptions where that is not the case but, as I said before, we will recognise them when we see them.
Lord Grocott
As it is not necessarily feasible to go through and analyse every single response, can the Leader of the House at least tell us how many people wrote in saying they thought it would be a good idea to spend £100 million on a referendum on the alternative vote?
Lord Strathclyde
My Lords, the noble Lord is of course right that it is far too short a time to look at each one but I flicked through the responses usefully over lunch and, for instance, here is one taken at random:
“We want referendums on national issues as we were promised”.
Another is:
“We want FAIR VOTES NOW!”.
Here is another one:
“I am concerned that having an elected upper house will mean that there is less accountability rather than more”.
I thought that one would go down well.
Lord Roberts of Llandudno
Will the Leader of the House confirm that, as the alternative vote was a manifesto pledge of the Labour Party, when we come to discuss it next Monday and following from then, that party will stand firm on its commitment to the alternative vote?
Lord Strathclyde
My Lords, I am looking forward to the Labour Party’s support on that Bill.
Health: Chronic Fatigue Syndrome
(14 years ago)
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The Countess of Mar
To ask Her Majesty’s Government what event precipitated the Department of Health decision to exclude all people who have or have had myalgic encephalomyelitis/chronic fatigue syndrome from donating blood from 1 November 2010.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, this decision by the UK blood services was prompted by a recent independent expert risk assessment of a possible link between a murine retrovirus and CFS/ME. Although the risk assessment found no evidence of a link or of a risk to transfusion recipients, the UK blood services recognised that practice for CFS/ME should be brought in line with other conditions where individuals are permanently excluded from blood donation to protect their own health.
The Countess of Mar
My Lords, I am grateful to the noble Earl for that reply. I offer my congratulations on the precautionary principle being called on in this instance, but ask him why the Department of Health did not say this in its press release. The notice said only that it was for the benefit of patients and no one, but no one, believed it. In the light of the findings on various viruses, not just XMRV, in the blood of patients suffering from ME, what new biological research as opposed to psychological research is being conducted into this terrible illness?
Earl Howe
My Lords, it is important to make clear to the noble Countess that no definite picture has yet emerged from the published literature on whether the virus in question, XMRV, is implicated in CFS/ME. The National Expert Panel on New and Emerging Infections has considered all the available evidence about XMRV and has reported that no public health action is required at this time. The Advisory Committee on the Safety of Blood, Tissues and Organs, on the basis of current evidence,
“does not recommend further measures at present, but wishes to continue to monitor the situation”.
As regards research into CFS/ME, the Medical Research Council is committed to supporting scientific research into all its aspects, including studies into the biological basis of the condition and evaluation of treatments. In 2009-10, the MRC spent £109,000 on research directly related to the condition.
Baroness Gardner of Parkes
My Lords, I am sure that everyone would agree that we would rather be too cautious, but can the Minister explain why anyone over a certain age is automatically excluded from being a blood donor?
Earl Howe
My Lords, this is a pragmatic decision by the advisory committee on donation. In the case of CFS/ME, which we are looking at at the moment, the committee recommended that the donation policy should be brought into line with other relapsing conditions, where the rule is that we do not take blood from people with such conditions.
Lord Alderdice
My Lords, given that there is no medical test that is pathognomonic for this disorder or group of disorders, how do the authorities propose to police its exclusion other than simply by hoping that people will come forward with the information themselves?
Earl Howe
My noble friend is right to say that there is no diagnostic test for CFS/ME other than a process of elimination and watching the symptoms. It is largely on a self-reporting basis that the blood transfusion authorities will be alerted to the condition unless, of course, a patient’s GP is involved and can report his or her opinion.
Baroness Finlay of Llandaff
My Lords, do the Government intend to ask NICE to evaluate pathogen inactivation, which is already used on fresh frozen plasma for children, for blood components as well because of new and emerging infections and the increased risk of infections in donors because of the increase in international travel?
Earl Howe
My Lords, I understand why the noble Baroness asked that question. I believe that platelets cannot be stored in refrigerated conditions and are therefore, in theory, open to more infection. I am advised that SaBTO, the expert committee, looked at this and advised that no action was currently necessary.
Baroness Thornton
My Lords, I took a look at the blood transfusion service’s excellent website over the weekend to see what it had to say about who should and who should not donate blood. Basically, it said that you should be in good health. People with CFS/ME often experience a range of symptoms that could be made worse by donating blood. Notwithstanding the problem of diagnosis and that the precautionary principle is exactly right, surely that is the point. There should be a common-sense approach that people with ME should not give blood because they are not well enough.
Earl Howe
My Lords, the noble Baroness has put her finger on it. On a precautionary basis, even though the risk is considered low to those with CFS/ME when they are without symptoms, it was considered appropriate to exclude them permanently from being blood donors in case it affected their own health.
Lord Skelmersdale
My Lords, my noble friend gave us the figure for total research into CFS/ME. How much was for biological research as opposed to psychiatric research?
Lord Turnberg
My Lords, is it not the case that we have not been able to discover the cause of this very unpleasant disease so far and we have no real effective treatments? While we are waiting for both of those, the best form of management seems to be cognitive behavioural therapy. Does he agree?
Earl Howe
My Lords, cognitive behavioural therapy is indeed part of the NICE recommendations, but only a part in so far as it is appropriate for any chronic condition to have such therapy. I am sure that the noble Lord agrees that the NICE guidance recognised a clinical and physical basis to this condition as well. Therefore, a multifactorial approach is appropriate.
Clerk of the Parliaments
(14 years ago)
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The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, the current Clerk of the Parliaments, Michael Pownall, who was appointed for a three-year term on 4 November 2007, has at my request agreed to an extension of his appointment until 15 April 2011. I am pleased to say that Her Majesty the Queen has agreed to such an extension. Mr Pownall has written to me in the following terms:
“Dear Leader of the House,
I am grateful to you for notifying me of the extension of my appointment as Clerk of the Parliaments.
In coming to the decision to retire next April, I have borne in mind that I will by then have served the House of Lords for nearly 40 years. There have, of course, been many changes and challenges over this period, not least during my time as Clerk of the Parliaments; and it has been a great privilege to have played a part in the development of the House as an effective second chamber. As Clerk of the Parliaments, I have been extremely well supported by the staff of the House who as you know, show great commitment to the House and its work.
Please would you convey to Members of the House my appreciation for their support and friendship over the years.
Yours sincerely
Michael Pownall”.
I am consulting the other party leaders in the House, the Convenor of the Cross Benches and the Lord Speaker on a process to appoint a successor to Mr Pownall. The timetable for that process should mean that the recommendation for a successor to Mr Pownall can be made to Her Majesty shortly after the Christmas Recess. As is customary, I will put before the House nearer the time of his retirement a Motion to enable Members to pay proper tribute to the services of Michael Pownall.
European Union Committee
The Chairman of Committees
That Lord Maclennan of Rogart be appointed a member of the Select Committee in place of Baroness Sharp of Guildford, resigned.
Budget Responsibility and National Audit Bill [HL]
(14 years ago)
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The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, the Budget Responsibility and National Audit Bill makes provision to enhance the transparency and accountability of the public finances. The Bill has two main subjects: first, it establishes the Office for Budget Responsibility on a statutory basis as part of broader reforms to the UK’s fiscal framework; secondly, it modernises the corporate governance of the National Audit Office. I will speak to each subject in turn.
Fiscal discipline is perhaps the single greatest priority for this Government. We are all aware of the current fiscal climate and the situation that we are in. To address that situation, the Government are taking action on a number of fronts. In June, the Chancellor announced the Government’s intention to eliminate the structural current deficit in this Parliament and to put debt on a sustainable downward path. We set this out through our new fiscal mandate. Last month, the spending review comprehensively set out the spending reductions that will deliver this mandate. The plans are tough, but they are fair and deliverable. Now, through the Bill, the Government are strengthening the framework of the UK’s fiscal institutions.
The greatest single step forward is the establishment of the independent Office for Budget Responsibility, which will make independent assessments of the public finances and the economy. Up until the new Government’s first Budget, the responsibility for producing the official forecasts had rested with the Chancellor. The key judgments were made by Ministers, but the possible incentive to forecast optimistically, whether on lower borrowing or higher growth, led to scepticism over the credibility of the forecasts. Budget forecasts over the past decade consistently underestimated borrowing, compared to both its actual level and to what other independent forecasters expected at the time. The coalition Government intend to take a different approach.
We have removed the responsibility for forecasting from Ministers and given it to independent experts. The independence of the OBR’s judgments will ensure that policy is made on an unbiased view of future prospects. The establishment of the OBR is a reform that has been welcomed by both the IMF and the OECD. In its recent Article IV report on the UK, the IMF has said that the OBR is,
“a welcome step toward strengthening the budget process”.
The OECD has said that the OBR is an important initiative in improving public confidence. The UK is now one of the few advanced economies in which an independent fiscal institution produces the official forecast. It is worth emphasising this point because it influences many aspects of the legislation.
As I have explained, the establishment of the independent OBR will completely overhaul how the Budget is put together—indeed, it already has. The OBR was set up on an interim basis immediately after the coalition was formed. Led by Sir Alan Budd, in only a few weeks the OBR produced an independent assessment of the economy and public finances both ahead of and as part of the emergency Budget in June. It also scrutinised the Government’s assessments of the cost and yield of budget policy decisions and confirmed that we are on course to meet our fiscal mandate. Great strides were also made in transparency. More information was published than ever before—a fact noted by both the Treasury Committee and the IFS.
The final task of the interim Office for Budget Responsibility was to provide advice on how the permanent, statutory OBR should be established. I am happy to report to the House that the Bill is designed in line with the detailed recommendations made by Sir Alan Budd in his letter to the Chancellor. We are now moving to permanent arrangements and a new Budget Responsibility Committee is in place, to which Robert Chote, Stephen Nickell and Graham Parker have been appointed. Their appointments were subject to the confirmation of the Treasury Committee. The resources made available to the OBR have been increased. There has been a transfer of technical forecasting capacity from the Treasury to the OBR and a transparent, multi-year funding settlement has been agreed for the spending review period. Robert Chote has also announced a new location for the OBR’s offices, outside of the Treasury building.
I turn to the specific provisions of Part 1. The Bill will repeal the previous Government’s fiscal framework, including the Fiscal Responsibility Act 2010, and replace it with reformed and streamlined provisions. Clause 1 requires that the Treasury must produce a charter for budget responsibility, which will set out the Government’s objectives for fiscal policy, particularly the fiscal mandate. Clause 2 requires the Treasury to produce a budget on an annual basis. Clause 4 sets out the main duty of the OBR to examine and report on the sustainability of the public finances.
The Bill also makes explicit provision that the OBR has complete discretion over how it carries out its statutory duties. This is a broad remit and is not limited to forecasting. However, at a minimum the OBR will be required: to produce economic and fiscal forecasts at least twice a year; to make an assessment on the likelihood of the Government meeting their fiscal mandate alongside those forecasts; to publish a sustainability report at least once a year; and to publish a report on the accuracy of its forecasts at least once a year.
Clause 5 lays down a set of principles that will guide how the OBR goes about fulfilling its remit. The OBR must perform its duty objectively, transparently, impartially and on the basis of government policy. These principles protect independence and ensure a clear separation between analysis and policy-making. Analysis is rightly the domain of the OBR, but policy-making is the responsibility of publicly elected Ministers. The charter for budget responsibility will set out further details on the OBR’s remit and a draft will be made available to the House.
The establishment of the OBR takes executive responsibilities for producing economic and fiscal forecasts out of the hands of Ministers and entrusts them to an independent body. The OBR will report directly to Parliament on the public finances and the members of the Budget Responsibility Committee will be available for select committee scrutiny. The OBR’s forecasts and analysis will be laid directly before the House. On funding, there will be separate reporting of the OBR’s expenditure in the estimates that the Treasury presents to Parliament. In addition, the OBR will be able to submit an additional memorandum alongside that of the Treasury. Written Questions will be passed to the OBR to respond to. All these measures will enhance the ability of Parliament and the public to hold the Government to account for their fiscal policy. In terms of institutional status, the Bill establishes the OBR as an executive non-departmental public body. This status gives the OBR its own legal identity. Conferring Crown status allows appropriately skilled civil servants to move easily to and from the OBR.
The OBR’s executive responsibilities are to be undertaken by the three-person Budget Responsibility Committee. Its members will be appointed by the Chancellor, but the Bill provides the Treasury Select Committee with a veto over their appointment and dismissal. The Chancellor has said that he is giving the committee this veto to ensure that there is no doubt that the individuals leading the OBR are independent and have the support and approval of the committee. A chairman will lead the BRC and run the office. All staff will report to the chair, who will control the hiring and firing of the staff. In addition, there will be at least two non-executive members to provide support and constructive challenge.
For the BRC and its staff to produce the best possible forecasts and analysis, they will need access to the necessary resources and information. Clause 9 gives the OBR a statutory right of access to all government information that it may reasonably require. To facilitate close working, memorandums of understanding will set a framework for the working relationship between the OBR and other government departments. The provisions of Part 1 deliver the coalition’s aims of increasing transparency and enhancing accountability for the public finances; the same aims apply to the scrutiny of public expenditure, which is the subject of Part 2 of the Bill, to which I now turn.
Part 2 of the Bill modernises the governance of the National Audit Office. The NAO is best placed to assess the Government’s use of public funds, especially in the current climate. Effective independent oversight of spending is critical when public resources are under such pressure. The provisions of the Bill strengthen the resilience and integrity of the body. Noble Lords will be aware that very similar provisions were included in the previous Government’s Constitutional Reform and Governance Bill but that there was no time for the House to consider these provisions at the end of the Parliament, so they were lost at that time. This Bill represents the earliest possible opportunity in the new Session to bring them before the House.
The provisions in Part 2 implement recommendations made by the Public Accounts Commission following its review of the NAO’s corporate governance arrangements. Clause 11 confirms that the office of the Comptroller and Auditor-General will continue. The C&AG will be an independent officer of the other place who will be limited to a single term of 10 years. Clause 20 provides for the establishment of the new National Audit Office as a corporate body. Of course, the NAO already exists, but Clause 20 incorporates it formally for the first time as a body corporate. The new NAO’s functions include: providing resources for the C&AG’s work; advising him on that work; and approving certain services. The NAO will be able to support and challenge constructively the C&AG’s decisions, but it may not prevent him from carrying out his statutory responsibilities. The NAO will have a majority of non-executives and be led by a non-executive chair. The C&AG will be the chief executive but will not be an NAO employee.
I emphasise that those provisions do not compromise the discretion of the C&AG in forming audit judgments and in carrying out value-for-money studies. When the provisions were discussed in the other place during the passage of the Constitutional Reform and Governance Bill, both the then chairs of the Public Accounts Commission and of the Committee of Public Accounts supported them. Schedules 2 and 3 set out details on the new NAO and the relationship between the new NAO and the C&AG. Schedule 6 provides a framework power to enable the National Assembly for Wales to legislate for the governance arrangements of the Wales Audit Office.
The provisions in the Bill are a key part of the Government’s fiscal reforms. They will provide a strong institutional framework for the future and help secure the sustainability of the public finances. I beg to move.
Lord Eatwell
My Lords, I am most grateful to the Minister for his introduction to the Bill. I shall begin by referring to the second part of the Bill, which deals with the revised arrangements for the re-establishment of the NAO and its relationship with the Comptroller and Auditor-General. I am assured by the Treasury Bill team that, apart from minor drafting changes, this is the same Bill as that introduced by the last Government and lost at the end of the last Parliament. I can therefore begin this afternoon by congratulating the Government on having recognised the wisdom of the Labour Government’s proposals. I may have some small amendments to propose later, when I have had the opportunity to examine the Bill in more detail, but for the moment, with that part of the Bill, I am content.
I turn to the real novelty before us: the proposed legislation to establish an independent OBR. We on these Benches regard the idea of an independent Office for Budget Responsibility as a very good idea—perhaps the only good idea that the Government have had so far. We are therefore totally committed to ensuring that the legislation establishing the office is robust and fit for the purpose of establishing an independent office that will become an enduring and credible part of this country’s policy-making apparatus. To that end we apply the following tests to the legislation: first, independence; secondly, credibility; and thirdly robustness—that is, are the structures in place sufficient to maintain independence and credibility among the political storms that will invariably assail the office from time to time?
First, on independence, the comparison of the legislation establishing the OBR with that re-establishing the National Audit Office, conveniently contained within the same Bill, reveals that the OBR’s independence is a pale shadow of the independence of the NAO; and, correspondingly, that the independence of the chair of the OBR is a pale shadow of the independence of the Comptroller and Auditor-General. For example, Clause 17(1) makes it clear that the Comptroller and Auditor-General,
“has complete discretion in the carrying out of the functions of that office”.
Clause 6(3), by contrast, requires that the OBR must,
“in the performance of its duty … act consistently with any guidance … in the Charter”,
as described in Clause 1 of the Bill—which, by the way, incorporates Clause 1(6), stating that that guidance may be modified at any time. Let us remember that this guidance is guidance by the employer, since all OBR funding comes from the Treasury. It is not casual suggestions by a disinterested party. So the guidance of the charter is fundamental to the status of the OBR. It qualifies virtually all the supposed freedom and independence of the organisation. So, when will the charter be available for scrutiny by your Lordships' House?
In the absence of the charter, let us examine Clause 1 more carefully. In Clause 1 we read that the charter will outline,
“the formulation and implementation of fiscal policy and policy for the management of the National Debt”.
Notable by its absence from the charter is any reference to the economic health of the nation—the level of unemployment, for example. It therefore fails to provide transparent guidance to the OBR concerning the performance of its duties, as set out in Clause 4, to provide fiscal and economic forecasts. Will the Minister tell the House whether the catch-all clause, Clause 1(3), which states:
“The Charter may contain … other material as the Treasury considers appropriate”,
will contain guidance as to the economic variables to be included, or, perhaps even more important, those variables to be excluded from the activities of the OBR?
More broadly, Clause 1 makes it clear that the guidance of the charter will ensure that all activities of the OBR will be those that “the Treasury considers appropriate”, save one. At only one point in this whole Bill are independent powers provided to the OBR—that is, in Clause 6(2), which states that,
“the Charter must not make any provision about the methods by which the Office is to make any such forecast, assessment or analysis”.
That is it; that is the only independent bit. I do not want to suggest that that method of forecasting is unimportant—of course it is important, and I shall return to it in a moment—but I am certain that the phrase “an independent Office for Budget Responsibility” might be expected, in the understanding of ordinary people, to mean much more than that. However, the OBR does not have freedom over what it is to study. It does not even have the freedom apparently suggested by Clause 5(2), which was quoted by the Minister and states:
“The Office must perform that duty objectively, transparently and impartially”.
You would think that that was clear. However, that clause is qualified by Clause 6(1)(b), which mandates the provision of guidance as to what subsections (2) and (3) of Clause 5 entail. So the Treasury has to provide guidance on what transparency entails, and even what impartiality means. That does not sound very independent to me. If I have misinterpreted these clauses, may I suggest that the Government amend them to place their interpretation beyond all reasonable doubt?
One element of the guidance that we on this side agree with is that in Clause 5(3), which seems to confine the activities of the OBR to consideration of the impact of government policies alone. I am sure it is right that the OBR should not become embroiled in political controversy. However, will the Minister confirm that I have interpreted the clause correctly, because the clause qualifies the scope of the office’s consideration by the words:
“Where any Government policies are relevant … the Office may not consider what the effect of any alternative policies would be”?
I quite see that this may allow work on methodological issues or research into econometric technique, but what about circumstances in which the Government have no policy and hence the qualification no longer applies? Suppose, for example, that the Opposition put forward proposals to reduce the level of unemployment by means of schemes to be funded by the European Union. Could the OBR test these against a base-case scenario, as is the approach of the Congressional Budget Office in the United States? Or would it be prevented from doing so by Clause 5(3)? It is not at all clear. If the role of the OBR is to test government policies alone, why not say so explicitly?
Finally, on independence, paragraph 1(c) of Schedule 1 allows for the appointment of no fewer than two members of the office, who are not required to have,
“knowledge or experience likely to be relevant to the performance of the Office’s duty under Section 4”.
I suppose we should refer to these as non-executives. Schedule 2, on the other hand, establishes a National Audit Office with a majority of non-executives and a non-executive chairman. The NAO’s non-execs are appointed by the Public Accounts Committee and the OBR’s non-execs are appointed by the Chancellor of the Exchequer, so independence is eroded again. Moreover, the NAO’s non-execs have a clear responsibility, as set out in paragraph 10(2) of Schedule 2, to sustain the complete discretion of the Comptroller and Auditor-General. But a peculiarity of the OBR legislation is that it fails to place any responsibility on these non-execs, other than participating in the preparation of the annual report and in the audit. Since paragraph 12(3) of Schedule 1 explicitly excludes them from any role in the preparation of forecasts, what are these non-execs supposed to do? Make the tea? They certainly do not have the power to protect the independence of the OBR such as it is. Surely that should be the non-executives’ main role. The conclusion must be that this Bill neither establishes the independence of the OBR nor embodies procedures to protect the independence, save in one respect—the forecasting methods used by the committee.
Let us now turn to our second criterion, that of credibility. If the OBR were to be truly independent, as we on this side would wish, then it is inevitable that it will become a powerful brand. The access of the office to detailed government information, as described by the Minister, would make its reports the defining landmarks for those interested in economic and fiscal affairs—a very worthwhile achievement. As noble Lords may be aware, economic forecasting is a controversial discipline—an art not a science. Even widely used techniques do not command universal agreement or even respect. Forecasting models inevitably embody contentious theoretical assumptions, and econometric techniques are matters of often heated debate. It is therefore enormously important for the credibility of the OBR that its methods are subject to rigorous peer review and challenge.
The first component of this will be transparency. As already noted, the requirement of transparency is qualified by the provision of guidance as to what transparency actually means. However, some of my fears would be allayed if the Minister would guarantee that the data, methods and costings used in the preparation of forecasts will all be published simultaneously with those forecasts in readily accessible electronic form. This is necessary if there is to be informed review and challenge of the OBR's methods.
There should also be provision in the Bill for a peer review committee such as that provided in the structure of the US Congressional Budget Office. The peer review committee should be appointed by an independent person—perhaps the president of the Royal Economic Society—subject to the approval of the Treasury Committee in another place.
I turn finally to our third criterion: robustness. If the Bill were to establish a truly independent and credible OBR, future Governments would meddle with it at their peril. This is not a matter of the people involved. I have full confidence in the personal integrity and independence of Mr Robert Chote. I declare an interest as he is an active member of the Cambridge college of which I am master. However, the robustness of the OBR should not rest on personalities. That is why the severe limitations placed by the Bill on the OBR's independence, and the lack of any support for the credibility of its methods, indicate that the drafting fails the robustness test. Therefore the Bill fails all three of our tests. The OBR is not meaningfully independent, save in the methods that it uses—and those methods are not buttressed by the credibility of peer review. Failing those two tests, it is not robust.
I am prepared to accept that this outcome was not the Government's intention, and that the problems that I have identified are errors of drafting. If that is the case, I assure the Minister that I will be more than willing to work with him to produce a Bill that will establish an independent, credible and robust OBR. Of course, much of that work will be facilitated by sight of the proposed framework agreement between the Treasury and the OBR. Will the Minister confirm that such an agreement is being drafted, and will he tell me when I may have sight of it?
This part of the Bill is a failure. It need not be. I have a proposal to put to the noble Lord on behalf of my right honourable friend Alan Johnson, the shadow Chancellor. I propose that, at the end of Second Reading, the noble Lord, on behalf of the Government, should formally withdraw Clauses 1 to 10 of the Bill, and Schedule 1—that is, all material relating to the OBR. The Bill will then become the National Audit Bill, and will, I believe, receive support from all sides of both Houses. An all-party pre-legislative committee of both Houses should then be formed—or such all-party structure as the Government wish—to thrash out an independent, credible and robust structure for the Office for Budget Responsibility. This would be a major step toward increasing democratic accountability and transparency in our country. I hope that the Government will accept my right honourable friend's proposal.
Lord Newby
My Lords, I, too, welcome the Bill. When the proposal first came forward for the Office for Budget Responsibility, I regarded it as a gimmick. However, a number of things since then have persuaded me that I was wrong. First, when we discussed the statistics Bill several years ago, we discovered that only 17 per cent of the population believe any government statistics. Whether that is a rational view is irrelevant; the way in which politicians down the years manipulated official statistics left them with no credibility whatever. Therefore, a number of things needed to be done. Fortunately, the new structure of the Office for National Statistics is improving that figure, but it was a salutary reminder that, whereas we may take statistics seriously, politicians and Ministers have fallen so low in public regard that we are atypical.
Secondly, it became clear, not least from reading the book of the noble Lord, Lord Mandelson, that the previous Prime Minister and Chancellor believed that growth figures were a matter for political manipulation. It is absolutely clear that that is what Gordon Brown sought to do. This gives me another reason to believe that we have to take that power and oversight away from the Treasury. During Gordon Brown’s chancellorship, we had the delightful business of the golden rule and the way in which it was stretched, expanded and diminished to fit the requirements of the Chancellor. It is fascinating to hear the huge support of the noble Lord, Lord Eatwell, for these principles of independence. He shows all the zealotry of a convert. Certainly, while his party was in government, nothing was done to promote the principles that lie behind those parts of the Bill. That does not necessarily mean that his criticisms—
Lord Eatwell
My Lords, would the noble Lord like to make it clear that the independent structure of the Office for National Statistics was implemented by the Labour Government?
Lord Newby
My Lords, the structure was implemented by the Labour Government but, if it had not been for this House, the body would have been emasculated. The current structure is miles away from the feeble structure that came before your Lordships’ House. It required a cross-party coalition of former senior civil servants and Members from other parties to change virtually every aspect of that Bill, so that when it left your Lordships’ House it was almost unrecognisable. That is why the noble Lord is right to want to subject this Bill to careful scrutiny about whether it will achieve the aims that have been set for it.
Three areas deserve the scrutiny that the noble Lord has set out. It is important that the structure, the people and the role are right. First, the structure is slightly odd in some respects. The role of the chair and the way in which that person is appointed by a transparent appointment procedure obviously make sense. The other two members of the office are being scrutinised by the Treasury Select Committee and clearly must have relevant experience. Their roles are relatively clear, although it is not clear to me whether the Government envisage that these will be full-time or part-time roles. I find the context of the other non-executive directors strange in relation to this body and I am not sure what their role will be. I was slightly surprised by the use of the phrase “at least two”. If the chair decided that he would like half a dozen, would that be acceptable? More important, what role will they play? They will not be technical people, but much of the work of the office will be intensely technical. Will their role be to protect the independence of the office in some way and to proselytise about the role of the office? It would be helpful to have further clarification from the Minister on that.
Secondly, three positive aspects of the way in which the top people will be appointed will be crucial to the success of the body. First, they will be in place for five years, which is a long time. Secondly, unlike for members of the MPC, for example, the recruitment process will be open. It will not be a matter of the Chancellor ringing up someone on a Sunday evening and saying, “I’d like you to take this job and, by the way, I need to know by Monday morning”. Thirdly, the role of the Treasury Select Committee is important as regards the quality of the people involved. The Government have made a good start by their appointment of Robert Chote as the first chair of this body.
The third area where the noble Lord, Lord Eatwell, has demonstrated that there is room for further discussion is the remit and how it will work. I do not think that the word “independent” appears in the Bill, which is slightly surprising. There is some ambiguity about where the independence of the body starts and stops. We know from many other areas of public life that, if you give the Treasury an inch, its inclination is to take a mile. I look forward to discussions in Committee, where, I hope, we can clarify that slightly.
I do not think that the Government would be sensible to take up the generous offer of the noble Lord, Lord Eatwell, of a hugely long period of scrutiny on this. This body is of great significance and there has been a lot of public debate on it already. We have the opportunity in your Lordships’ House to debate all these technical issues carefully, as we always do, and so will those in another place. We need to get the formal infrastructure on to the statute book now, without further considerable delay. With those caveats, I am looking forward to the Committee stage and I support the Bill.
Lord Turnbull
My Lords, several justifications have been given to the budget responsibility half of this Bill. Originally there was talk of a fiscal policy committee as a mirror to the Monetary Policy Committee, but it soon became apparent that fiscal policy is quite different from monetary policy. The interest rate required to achieve a given rate of inflation is largely a technical issue, but the question of the size of the budget deficit and how the burden is shared between one generation and the next is political, as is the issue of the extent and distribution of public services. The fiscal policy mandate, therefore, must remain with the Chancellor of the day.
The current Chancellor has spoken of the need to prevent the Chancellor of the Exchequer from “fiddling the figures”. I do not think that that is an adequate explanation or that there is a true forecast but the Chancellor knowingly presents a false one. All forecasts are judgments, although some may be more plausible than others. The main problem is wishful thinking and a lack of objectivity about one’s own work—being judge and jury in one’s own cause. The problem has existed for a very long time and has affected some exalted people. We find it in chapter 1, verse 31, of the Book of Genesis:
“God saw everything that he had made and behold it was very good”.
A son of the manse might have been familiar with that.
To continue the religious theme, the previous Government were believers in the doctrine of what Stephanie Flanders of the BBC called the “immaculate recession”, in that it had no preceding boom and everything was on track and on trend until the world financial crisis hit us out of the blue. We must ask ourselves how it came about that after 60 quarters of consecutive positive growth—after boom and bust had been eliminated—we entered the recession with a structural deficit. Despite supposed adherence to the golden rule, there had been a cyclically adjusted current deficit in each of the six years to 2007-08. Public expenditure had been growing significantly faster than GDP, while the tax to pay for it stayed flat as a proportion of GDP.
We can now see that at least two errors were embedded in the fiscal policy of this period. It was claimed that the underlying rate of growth of GDP was 2.75 per cent per annum. That has now been revised down by OBR to around 2.25 per cent. Many observers believe that it could have been lower even before the recession. Had this more cautious rate been embedded in the public sector finances, as page 21 of this year’s Red Book explains, it would imply that the structural position of the public finances was worse than estimated at the time.
The second error was in assuming that a number of sources of revenue were sustainable, but the VAT receipts from credit-fuelled consumption, the various receipts from an overheated property market and the taxes levied on bank profits have all proved exaggerated. That point was acknowledged on page 201 off the April Budget document. In my view, all this makes a powerful case for introducing a greater degree of challenge and independent scrutiny into the fiscal framework. While it is true that, unlike monetary policy, the final decisions on the Budget will still rest with the Chancellor of the Exchequer, the political cost of departing from the OBR’s forecast is greatly raised.
Just as central bank independence was the big idea of the 1990s, greater scrutiny by independent financial councils is the current new idea, urged by both the IMF and the EU. It is ironic that this Government find themselves adopting a proposal supported by the EU, although the difference is that we want to construct our own mechanism rather than be subject to the scrutiny of the Commission or other member states.
Another benefit from the creation of the OBR relates to the fact that, even if the fiscal projections are basically sound, a number of tricks can be played in the presentation of the details: judicious choice of time periods, splicing different time periods together or switching between different definitions. In part, it will fall to the Statistics Commission to put an end to these and point them out, but the OBR can help by presenting its analysis on a consistent basis.
Like many others, I believe that the OBR is an idea whose time has come, but what about the detailed structure that is being proposed? In short, I believe that the Treasury Select Committee and the Government have broadly come to the right conclusion. I wonder whether the noble Lord, Lord Eatwell, considers that the Bank of England would pass the tests that he has set. After all, the Chancellor sets its mandate, chooses the members of the MPC and prescribes the mechanisms for accountability.
Some have argued that the OBR should be entirely independent of the Treasury, with its own staff, its own models and its own premises—this is what one might call the self-sufficiency model. The problem with that is what Sir Alan Budd has called “harvest time”: in certain months of the year around PBR and the Budget, it is all hands to the pump. Maybe 200 people are involved in preparing Budget forecasts, including experts on the North Sea, social security benefits or EU finances. At other times, they go back to their other duties. If these resources were transferred, the Treasury would need to recreate them for its own policy development work.
At the other end of the spectrum was what may be called the validation model—all staff stay in the Treasury but none of their work can be published unless it has been validated by the OBR. I was initially attracted to this but I believe that the Treasury Select Committee and the Government have correctly concluded that it would not carry conviction. What is proposed is a pragmatic and, in my view, well judged hybrid, with a core of around 20 staff being transferred but the work of all people involved in the Budget being validated.
The Treasury Select Committee proposed a non-ministerial department. The Treasury has responded by proposing a non-departmental public body. This is a distinction without a difference. The key issue at stake is the assurance that the OBR is adequately resourced and, if the funding coming from the Treasury is thought to be compromising its work, the chair is free to raise the matter with the Select Committee.
The real choice is between an OBR that is on the executive side of the fence and one that is an emanation of Parliament, like the NAO. Both the Treasury Select Committee and the Government have opted for the former, which I believe is right. The OBR is not just a commentator or expert auditor. It has an executive function: it supplies the Treasury with the basis for its projections. Another safety valve in the Bill, which I think should be supported, is the provision for two or three non-executives. Their role, I think, is to protect the OBR’s independence, to sort out tensions between the OBR and the Treasury and possibly to ensure that the chair of the OBR does not go off on an ego trip. I support both the structure and operating model that have been devised, but we have to recognise that these arrangements are experimental and, whether or not a review is provided by statute, we should certainly revisit the design in a few years’ time.
The other half of the Bill relates to the NAO, on which there is really only one issue, which is to provide that the C&AG should serve a single 10-year term. This prevents a repetition of what I consider to be gross mismanagement by the Public Accounts Commission in allowing the last C&AG to serve for 20 years, which was far too long. It was always ridiculous for the NAO to be urging best corporate practice and governance on departments while failing to practise it itself.
The new NAO leadership has an opportunity to develop the way in which the NAO operates. Historically, it has sought to extract the wisdom by examining one class of case—departmental spending that has gone wrong. However, best practice can be found in a wider universe—in looking at what has gone right, whether in departments, the private sector or abroad.
In conclusion, both parts of the Bill are worthy of support. In particular, the OBR can provide a valuable and hitherto absent degree of external challenge and so avoid the self-congratulatory tone of much of recent policy-making. We must also put an end to the cherry-picking used by the previous Government. It is ironic that when they wished to emphasise stability and growth, the cycle was written out of the script, but when they wanted to excuse the continuation of a current fiscal deficit, the cycle was miraculously reinvoked.
Baroness Noakes
My Lords, the Bill before us this afternoon is really two Bills dealing with the quite separate matters of the Office for Budget Responsibility and the national audit arrangements. The only thing that they have in common is their Treasury parentage, which in times past would not have been a good enough reason to have had only one Bill. I merely remark that it is a pity that the current Government have adopted the bad legislative habits of their predecessors.
Let me start with the OBR provisions. The OBR puts the UK leading the pack globally on fiscal transparency. We will now have a body that will issue independent fiscal and economic forecasts and give an independent verdict on whether the Government have achieved their fiscal mandate. I am sure that the Treasury civil servants who developed and manned the previous Treasury model over the years did an excellent job, but at the end of the day the Budget and PBR forecasts were determined by the judgments—or, as the noble Lord, Lord Turnbull, would have it, wishful thinking—of Treasury Ministers. The OBR is needed not to make the Treasury officials make better forecasts but to stop Treasury Ministers making bad ones.
In particular, I praise the formulation in Clause 5 that the duty of the OBR must be performed “objectively, transparently and impartially”. The noble Lord, Lord Eatwell, has tried to undermine that, but his criticism sounded more like sour grapes to me. When the Labour Party came to power, the then Chancellor claimed that he was committed to transparency, but I do not believe that he ever claimed to be objective or impartial—history will judge just how objective, transparent and impartial he truly was. I praise the courage of my right honourable friend Mr George Osborne in becoming the first Chancellor unambiguously to put judgments on the credibility of his economic and fiscal policies in independent hands. There will be no war of the Treasury's forecasts against those from outside the Treasury; there will be one clear, authoritative and independent judgment for the world to see.
That brings me to the first of my questions to the Minister. Another authoritative and independent voice in the land is the Bank of England, which also produces its own forecasts. Although those forecasts have a different aim—to support monetary policy—the forecasts inevitably cover much of the same territory. At present, there is a degree of co-operation between the Treasury and the Bank of England at working level, and a Treasury representative attends meetings of the Monetary Policy Committee. How is that expected to play out in future? Will there be any relationship between the OBR and the Bank of England as forecasts are developed? If so, how will this work in practice? If not, what is the Government's view of having two independent bodies that might have divergent views about the future economic path?
My second question—notice of which I have already given to my noble friend—concerns Clause 4. Clause 4(4) requires the OBR to produce two rather different reports each year, each of which seems to be similar to the reports that the Treasury has been producing since 2002. One of the required reports is to be on the sustainability of the public finances. The Treasury’s first Long-term public finance report: an analysis of fiscal sustainability in 2002 stated that the UK’s public finances are “sustainable in the long-term”, but by last year the equivalent report contained many references to challenges but no firm conclusions about sustainability. I have no doubt that, if the OBR had been in existence last year, it would have reported unambiguously that the public finances were not then on a sustainable footing.
The other report required under Clause 4(4) is rather different, as it will be an assessment of the accuracy of the OBR's own forecasts. My concern is whether it is right to give the OBR the responsibility to assess itself. Would that we had all been allowed to write our own school reports—how much easier life would have been. A parallel can be drawn with the Bank of England, which assesses itself each year on its forecasting performance. Earlier this year, the Financial Times said:
“Every August, the Bank does its own evaluation of its forecasting record and always pats itself on the back. This tiresome tradition arises since the Bank gives the forecasts extremely easy tests to pass”.
The FT's view was that,
“the Bank's forecasts are biased and have no information content at the forecasting horizon the Bank says is relevant for monetary policy”.
The Bank is judged ultimately on its monetary policy decisions and whether it delivers the inflation target set by the Chancellor rather than on the quality of its forecasts per se. However, the OBR’s core purpose will be to produce forecasts. Earlier, my noble friend reminded the House that the Treasury’s forecasting performance is poor, but that is not evident from the self-assessment that the Treasury produced each year. I hope that my noble friend will look again at whether the assessment would be better carried out by an independent person or body.
I have one final question on the OBR for my noble friend to comment upon. As other noble Lords have noted, tucked away in Schedule 1 are the detailed arrangements, which include having two members of the Office for Budget Responsibility in addition to the three with whom we are already familiar. The Explanatory Memorandum says that,
“These members … may assume the role of non-executives in the Office's governance”.
Why does the Bill not provide that they are to be non-executive members, as Schedule 2 does for the NAO’s members? I agree with the noble Lords, Lord Eatwell and Lord Newby, that their role should be better explained in the Bill. Can my noble friend also say why it is appropriate for the OBR to propose its own members? If the Government want them to be independent, why is there no independent appointments process? I have no problem with the Chancellor making the final formal appointment, but the important thing is that the process of selection must be demonstrably independent.
Lastly, my noble friend will be aware that the normal formula in the private sector is that the numbers of non-executives should be at least equal to the number of executive members. For non-departmental public bodies, it is generally provided that there is a numerical dominance of non-executives or that they are of an equivalent number, with an independent chairman. That is what Schedule 2 provides for the NAO. In the case of the OBR, there are to be three executives but only two non-executives. Can the Minister explain what model the Government are trying to create and why?
Although the majority of today's debate will focus on the OBR, we must not forget the changes that the Bill proposes to the Comptroller and Auditor-General and the National Audit Office. These clauses are a hangover from the previous Government's ill-judged Constitutional Reform and Governance Bill. I can quite see why the Government feel that it is necessary to press ahead with those reforms—not least because the substance of the restructuring has already taken place on a non-statutory basis—but I will offer a small commentary on the relevant clauses.
Before the National Audit Act 1983, there was a suspicion about the role of the Treasury in relation to the C&AG. The 1983 Act took the Treasury out of the picture, made the C&AG an officer of the House of Commons and created the Public Accounts Commission to oversee the NAO’s budget. When there was a fuss about the expenses of the C&AG more than 20 years later, the Public Accounts Commission commissioned a report from Mr John Tiner, who was then on gardening leave at the end of his service with the Financial Services Authority. Mr Tiner said that he was,
“not aware of the background to the C&AG being an officer of the House of Commons”—
that is, he did not know what he was talking about. As the Constitution Unit of University College London has pointed out, he made absolutely no assessment of the effectiveness of the Public Accounts Commission in carrying out its statutory role. Nevertheless, he concluded that the answer lay in the governance of the NAO and prescribed the usual formula of a board with a chairman and non-executive directors, which we have before us today. This was, of course, a convenient solution for those in another place to sign up to because it avoided any issues about the responsibility of the other place.
I recount that story to show how policy can be made at the highest level with relatively little real foundation. The failures of oversight of a component of the expenditure of the C&AG could have been dealt with relatively easily. Instead, the Bill will impose a costly and cumbersome superstructure of a board and non-executives. I have no criticism of the people who are undertaking those roles—they are excellent people—but do they add any real value to the process of public audit, about which there were absolutely no concerns? I doubt it. I hope that, before the Minister and his colleagues in the coalition Government pick up any more left-overs from the previous regime, they will in future examine critically whether changes are indeed necessary.
Lord Myners
My Lords, I will confine my comments to the Bill’s first 10 clauses, which refer to the Office for Budget Responsibility. Depending on the answers that the Minister gives, I may or may not be minded to propose amendments for the Committee stage. Clearly, a particularly important answer will be that to my noble friend Lord Eatwell’s suggestion that the Bill be divided and that the OBR part be subject to proper pre-legislative scrutiny.
I am broadly supportive of the intention behind the first 10 clauses, but I believe that the critical question must be around the independence of the Budget Responsibility Committee. As noble Lords have already noted, there is no reference to independence when describing the role and work of that committee. The OBR committee got off to a wobbly start—assumptions about the forecast for the economy were changed without full and proper disclosure and data were released early—but the fault, in my view, lay not with the members of the interim committee of the OBR but with the politicians who chose to use the OBR in the way that they did. That said, the Government have recognised the need to work hard to repair the damage done to the concept of the OBR, including by involving the Treasury Select Committee in the appointment of members of the OBR and in reviewing their resignations as well as in the appointment of what appears to be an excellent chairman of the committee of the OBR.
The tests that need to be set for the committee of the OBR relate to its independence, the transparency of its processes and the professionalism or objectivity of its work. It is clearly important that the committee of the OBR should be as independent of the Treasury as possible while recognising the reality—as described by the noble Lord, Lord Turnbull—of the need to work closely with people involved in the preparation of budgets and economic forecasts within the Treasury. The leadership and the membership of the committee are critical in that respect, as are the location and staffing of the OBR. I am delighted to see that the OBR is moving to premises outside the Treasury; I hope that at all times the staffing of the OBR will also be appropriately independent of the Treasury.
The independence of operations is covered in Clause 6(3), which deals with the processes of the committee of the OBR in respect of the guidance issued under the charter. My noble friend Lord Eatwell is absolutely right that there is considerable scope for mischief and hazard around the guidance process that is envisaged and the way in which the OBR is circumscribed. Clearly, the guidance given could potentially seriously limit the work and independence of the committee of the OBR. Indeed, Clause 6(3) seems to override the requirement under Clause 5(2) that the Office for Budget Responsibility—and, presumably therefore, the committee—should perform its work “objectively, transparently and impartially”. Perhaps, to be complete, that provision should also state, “but subject to any limitations that the Government of the day might wish to place in respect of those three criteria under the guidance that is issued”.
The Chancellor has described the OBR as creating a rod to beat his own back, but I suggest to the Minister that it will be less a rod than something that could be used gently to tickle the Chancellor if the guidance provided under the charter should be such as to limit the freedom of the committee. I do not believe that that is the Government’s intention, so I suggest that, prior to Committee stage, the Minister look again at the wording of the Bill. To his great credit, the Minister has shown a willingness in previous debates to look at the drafting of Bills, to listen to what the House says and to bring forward his own amendments—I think in particular of the Terrorist Asset-Freezing etc. Bill—so I hope that he will look at the way in which, in the hands of a different Government, the proposed charter and guidance could be used severely to limit the operations of the committee of the Office for Budget Responsibility.
I am particularly keen to hear from the Minister whether, under his interpretation of that wording, the committee of the Office for Budget Responsibility would be free to launch reviews on its own initiative or whether such reviews could be launched only with the prior approval of the Treasury and whether, if the OBR launched such reviews, it would need first to discuss their contents with the Treasury before they were published. As the Bill stands, I do not think that the committee of the OBR can be described as independent by virtue of Clause 6(2) alone, particularly to the extent that that might be inconsistent with Clause 5(2).
It would also be helpful if the Minister, in looking again at the drafting of the Bill before Committee stage, could reflect on the meaning of the term “sustainability” as used in the Bill. It seems to me that sustainability can be achieved at a number of different levels, particularly in relation to the size of the state. A sustainable fiscal policy might relate to a small state and a small government, but a sustainable approach might also relate to a much larger state and government. There is a danger that, in opining that a particular outcome is sustainable, the OBR might be construed as saying that that is the only sustainable outcome. My view is that there are multiple sustainable outcomes. There is some risk in suggesting that there is a simple test of sustainability that only one configuration of expenditure, tax and borrowing is capable of meeting.
Clause 4(3) refers to a need for a review of “fiscal and economic forecasts”, which is entirely welcome and has my full support. However, noble Lords previously have spoken about the language in which financial forecasts are proposed. We know from the Chancellor of the Exchequer’s recent Statement on the comprehensive spending review and from previous Statements by previous Chancellors of the Exchequer that there has been an increasing tendency to give partial, unbalanced or incomplete Budget Statements and Statements of a similar nature. I urge the Minister to add to the roles of the OBR by requiring it to comment on the completeness, objectivity and balance of such Statements. In the CSR Statement, we saw the right honourable George Osborne mixing up real data with cash data, inflation-adjusted data with non-inflation adjusted data and percentages with absolutes, all of which undermines the credibility of the budget process. We have seen how Sir Michael Scholar at the UK Statistics Authority has improved the presentation of statistics by Government; we need something similar in respect of Government financial statements.
Transparency is another important element in the effectiveness of the committee of the OBR. I remember that, when the House debated the establishment of a council for financial stability, the noble Baroness, Lady Noakes, was such a great believer in transparency that she wanted just about every meeting to be appropriately minuted and for those minutes to be published. I thought then—and even more so since I have had a chance to reflect on the matter away from the hurly-burly of office—that was rather a good idea. Will the minutes of the meetings of the committee of the OBR be published?
Thirdly, and finally, I come to what I might describe as professionalism, on which I believe a number of issues arise. First, on resourcing, we could clearly create the committee and the Office for Budget Responsibility but then under-resource the body so that it was incapable of doing the duties that we expected. It would be beneficial if paragraph 14(1) of Schedule 1 included an additional requirement that the chairman of the committee of the OBR should each year certify the sufficiency of its resources and the adequacy of its independence from the Treasury. That would give considerable comfort.
On the issue of its forecasting performance, I find the OBR’s role in that somewhat questionable. Forecasting is extremely difficult—as suggested by the noble Baroness, Lady Noakes, the Bank of England’s record in forecasting has not been particularly good—and I am not sure that we need another set of forecasts. Why not simply use consensus forecasts, which the Treasury frequently uses when it suits it and which the Bank of England also uses? The only basis on which we need another forecaster to add to the 40 or so credible forecasters—if such a phrase is not a contradiction in terms—is that the Minister can assure us that the OBR’s forecasts will be better than those of any other forecaster. I see even a degree of naivety in the drafting of the Bill, which requires that the committee of the OBR publish a commentary each year on its own forecasts, which implies that past mistakes can provide lessons from which it could learn. However, the reason why the OBR’s forecasts might be wrong in one year might give very little guidance as to why a forecast might be wrong in a future year. I endorse the view that the report on the OBR’s forecasts should be produced by a peer review group rather than by the OBR. Surely that is a sequitur to the whole thrust of creating an independent Budget Responsibility Committee.
Finally under the heading of professionalism, I want to mention the word “audit”, which appears a great deal in the subsequent parts of the Bill but not at all in the first 10 clauses. Nevertheless, the Chancellor of the Exchequer told the other place last week that the forecasts he made in the comprehensive spending review had been audited by the committee of the OBR. Can the Minister explain whether auditing is a proper function of the committee and how that function could possibly have been carried out in such a short period of time by such a small unit? Does that not place at risk the integrity of the language around audit? If audit is to be a function of the OBR, that should be properly specified in the Bill, including the methodology to be used.
Finally, I have two brief points relating to the UK Debt Management Office in relation to Clause 1(1) and Clause 1(2)(a). Can the Minister tell us whether those provisions imply in some way a change in the future operation and accountability of that quite excellent office?
Baroness Browning
My Lords, I support both parts of the Bill, but there are issues which I hope my noble friend on the Front Bench will be able to answer in Committee. To put the Office for Budgetary Responsibility on to a statutory footing is undoubtedly a good thing, but as we have heard, the office’s remit is ambitious to say the least. It is therefore important not only that it develops and maintains a reputation for trust, reliability and transparency, but also that the structure which is put in place resolves from the beginning some of the difficulties that have unfortunately arisen while it has been on a non-statutory footing.
I want to ask first about Clause 9 and the right to information given to the Office for Budgetary Responsibility. The Minister mentioned in his opening remarks that there is to be a memorandum of understanding between the OBR and the Treasury. I assume that such a memorandum will extend to other government departments such as the Department for Work and Pensions, which would almost certainly be another department where there will need to be a similar arrangement. Further, as my noble friend Lady Noakes pointed out, there is also the question of the Bank of England. There is a clear interface and how it is to be managed is very important.
More particularly, the word “reasonable” is writ large throughout Clause 9. That is a good thing. I am not a lawyer, but I am aware that lawyers love the word “reasonable” because it is open to many interpretations and is one on which many decisions are made. Can my noble friend advise the House today whether, in light of the reasonableness I have just mentioned and the detail of the subsections of this clause, the memorandum of understanding will be made available to noble Lords before we start our detailed scrutiny of this clause in Committee? It is always helpful when passing legislation, if something as important as this is going to come up, that we can anticipate that it is going to be available. It will be of interest not only to noble Lords but, I am sure, to another place. I am sure, too, that members of the Treasury Select Committee would also have an interest. I ask this because it seems to me that the future reputation and integrity of the OBR will depend on its ability to access and use information.
On that last point, Clause 9(4) quite properly states:
“This section is subject to any enactment or rule of law which operates to prohibit or restrict the disclosure of information or the giving of any assistance or explanation”.
I think we can all understand why the provision is there, but has my noble friend thought through how the OBR will deal with freedom of information requests when, for example, it is in receipt of information it has obtained from other government departments in order to carry out its own duties and fulfil its responsibilities? How will this interface with other government departments affect the OBR’s ability to respond to FOI requests before it publishes information and data?
I turn now to the second part of the Bill. Having for many years had the privilege of serving, along with a colleague on the Labour Benches of your Lordships’ House, on the Public Accounts Committee, I have a particular interest in the move to introduce corporate governance into the National Audit Office. I hold the National Audit Office in the highest regard. Its work is some of the finest that we produce in this country and it is an exemplar internationally. It was always a great privilege to be able to study its reports, although they sometimes seemed to come thick and fast.
The Tiner report in 2008 has already been mentioned. It was given a warm response by the Public Accounts Commission. By introducing this measure into this Bill, rather than picking up clauses from a former Bill which did not proceed, have the Government benchmarked this section against the Tiner report and, in particular, against the Public Accounts Commission’s response to the Tiner report? The commission made some important points and set out three particular issues that it felt should be looked at in terms of how corporate governance was introduced. The commission said:
“The C&AG must have the authority to form completely independent judgements about the audits and value for money and other studies conducted by the NAO and the presentation of these to Parliament”.
It went on to point out:
“The NAO must maintain systems of governance and internal controls consistent with best practice, applied in ways which do not fetter its independence from Government, and to report publicly on these systems in its Annual Report”.
The Public Accounts Commission pointed out that those two objectives are not quite compatible. I hope that my noble friend has struck the right balance in bringing forward these measures in the Bill. As the commission said in its third point, it is clear that:
“The NAO must conduct its work according to relevant auditing and professional standards and prevailing best practice”.
It is somewhat ironic that the NAO, which must be like Caesar's wife in the way that it conducts its own affairs, has for so long been without the protection of what I believe is put into the corporate governance of this legislation and which will be very helpful to it.
My noble friend Lady Noakes mentioned the board that would be introduced. The Public Accounts Commission, in its response to the Tiner report, expressed some concerns. It said:
“We have considered carefully the extent to which the C&AG should be constrained by the Board as regards the overall strategy of the NAO and control over resources. In our view it is important that the Board should not be able to prevent the C&AG conducting an audit which he or she considered necessary or oblige the C&AG to undertake an audit which he or she did not regard as of sufficient priority”.
I totally support that and hope that my noble friend will reassure me about the independence of the C&AG. It is the case that the NAO submits to the Public Accounts Committee lists of reports that it is engaged in. Those are debated in another place. It is at the discretion of the Public Accounts Committee which reports it uses for evidence sessions. It is also an important part of that flexibility and the responsibility of the C&AG that there have been times when the Public Accounts Committee itself has proposed to the NAO reports that it believes should be brought forward. For the independence of the Public Accounts Committee, it is important that it can collectively go to the Comptroller and Auditor-General and ask through him or her that the NAO should carry out certain studies that are deemed to be particularly important.
I support this legislation, but I hope my noble friend will reassure me that these matters will be addressed when we get to Committee stage and that he will bring forward more information on the sharing of information between particularly the Treasury—but also other government departments—and the Office for Budget Responsibility.
Lord Touhig
My Lords, I am delighted to follow the noble Baroness, Lady Browning. She and I served for a number of years on the Public Accounts Committee in the other place. She was a formidable inquisitor; woe betide any senior official from any department who came before us and who did not really get to the point and answer her questions. I am sure that the Minister will take note of that.
As your Lordships will be aware, the Public Accounts Committee works very closely with the National Audit Office and the Comptroller and Auditor General produces his value-for-money assessments for the committee. As a result of the experience which I had in serving on the committee, I have been able to witness at first hand and appreciate the tremendous work that the National Audit Office does and how important the audits carried out by the Comptroller and Auditor General are in keeping a check on how the Government spend taxpayers’ money. As a result, I am mindful that when we are considering reforming the way in which the National Audit Office and the Comptroller and Auditor General operate, we must ensure that we do not undermine the independence of their capacity to scrutinise public spending.
In considering the Bill, we must satisfy ourselves that the measures which it contains will strengthen the independence and internal governance of the National Audit Office and not undermine them at all. Crucial to that is the operational independence of the Comptroller and Auditor General. As the Public Accounts Commission noted in its 15th report, the Comptroller and Auditor General’s independence is an,
“absolute requirement for effective audit, and … is the cornerstone of integrity in public finance”,
in the United Kingdom. It is therefore vital that nothing is allowed to prevent the Comptroller and Auditor General from forming independent judgements and deciding what value-for-money assessments it is appropriate to make.
It would therefore be unacceptable if the NAO board were able to prevent the Comptroller and Auditor General from conducting certain audits or were to constrain his audit decisions, not least as this would lead to the relationship between the board and the Comptroller and Auditor General becoming untenable. I therefore welcome the fact that this legislation does not infringe on the Comptroller and Auditor General’s freedom to decide how to conduct value-for-money assessments of government departments. In that respect, the legislation preserves the vital operational independence of the C&AG, while seeking to improve internal systems of governance within the NAO.
However, while the Comptroller and Auditor General must have operational independence, he must still be capable of being held to account for his decisions. That is the proper role of the NAO board. In setting out how the board will carry out this function, the legislation sensibly separates the Comptroller and Auditor General’s statutory and non-statutory work. We should be rightly proud of the international reputation of the National Audit Office, which is such that it is asked to carry out work in other parts of the world and for organisations other than the Government. However, by giving the board the power to veto such work, the legislation places a check on the C&AG to ensure that the core function of the NAO and its public work are not undermined by any other activities. That is a sensible precaution and precisely the sort of function that the board should be carrying out.
It is entirely logical that the NAO board should set the overall strategy for the National Audit Office. This will allow the board to guide the balance of the Comptroller and Auditor General’s programme of work, which complements its power to veto non-statutory work and so ensure that the NAO properly fulfils its role in protecting the tax payer. It also allows the board to challenge the Comptroller and Auditor General if he departs from what has been agreed, and to call on him to explain why an audit has or has not taken place. Clearly, we hope that there will be a harmonious relationship between the Comptroller and Auditor General and the NAO board, but these arrangements make proper provision where such harmony is absent.
Protecting the independence of the Comptroller and Auditor General means not only preventing others from influencing which audits are and are not carried out, but ensuring that the Comptroller and Auditor General is seen to be independent. This clearly means that none of his decisions should be seen as being born out of self-interest. With the introduction of the 10-year term limit for the Comptroller and Auditor General there will be a real prospect that, on leaving office, former Comptrollers and Auditors General will seek alternative employment rather than simply retiring. If former Comptrollers and Auditors General were to be able to accept a position in any body that had been audited by the NAO or that was in the gift of the Government, then there would be a danger that some people could perceive such an appointment as being a reward for actions while in office. This would clearly undermine the integrity of the Comptroller and Auditor General and lead to actions in office being called into question through speculation about his future.
The Public Accounts Commission suggested in its fifteenth report that Comptrollers and Auditors General should be prohibited from accepting any post that the NAO has audited or that is in the gift of Government. It is proposed that, where conflicts of interest could arise if he were to accept any other position, the Comptroller and Auditor General should abide by the view of the Advisory Committee on Public Appointments on the appropriateness of his taking such a post.
The Bill, however, waters those two proposals down. It prevents the Comptroller and Auditor General from providing services to the Crown or to a body that is required to open its accounts to the NAO for audit only for a period of two years, rather than the lifetime envisaged by the commission. On some levels it is understandable that we should not wish to put such a restrictive limit on former Comptrollers and Auditors General, but I suggest that two years may be too short a period of time. If we accept that the greatest risk is of attempts by the Executive to influence the Comptroller and Auditor General, then the sensible course would surely be for the time limit to be of five years so that there was the real prospect of the Government having changed by the time that the Comptroller and Auditor General was eligible to be appointed to another position. Such a time limit would mean that the Comptroller and Auditor General would not be able to rely with any certainty on the then current Government still being in office at the time he was eligible to accept Crown appointments, and hence he could prevent any suggestion of political interference in his report.
The Bill also reduces the obligation that former Comptrollers and Auditors General must abide by the decisions of the Advisory Committee on Public Appointments. Instead, it states only that former Comptrollers and Auditors General should consult with such people as are specified by the Public Accounts Commission. The original, firmer objective is preferable, otherwise a former Comptroller and Auditor General could take up a post that was wholly inappropriate for him to do so. If the Bill is not amended to include such provisions, it would be sensible for provisions having that effect to be introduced in any contract of employment drawn up for a new Comptroller and Auditor General. With the exception of these reservations regarding the employment of former Comptrollers and Auditors General, I am broadly in favour of the Bill as it relates to the National Audit Office and I encourage the Government to address the concerns that I and others are expressing today.
I also welcome the measures in the Bill that grant legislative competence to the Welsh Assembly in relation to the Auditor General for Wales. The new competence would allow the Assembly to put in place new governance arrangements in relation to the Auditor General for Wales that could be similar to those which the Bill will introduce for the NAO and Comptroller and Auditor General. This is a sensible step, which will allow the Assembly to take the necessary action in order to ensure that there is a thorough and properly operating Auditor General in Wales, auditing areas that operate in Wales alone. The Bill introduces provisions to protect the Auditor General's independence from the Assembly. That, too, is to be welcomed. With such safeguards, we are enabling the Assembly to have a Comptroller and Auditor General fit for the 21st century.
Independence is vital for the Office for Budget Responsibility; we have heard a number of comments from noble Lords about that already today. Earlier this year we saw the reputation of that office being called into question when figures that assisted the Government were released before a session of Prime Minister’s Question Time. I therefore welcome the fact that the Bill requires the Treasury Committee of the other place to consent to the appointment of members of the Office for Budget Responsibility.
This is a good Bill in principle and it does many sensible things. However, our role is to question it and improve it where we can. I hope that the Government will listen to the views expressed today and will seek to amend the Bill accordingly. If they do that, we can be content that the legislation that is now being considered by your Lordships’ House will be fit for the 21st century.
Lord Burns
My Lords, I propose to address my remarks to those parts of the Bill that deal with budget responsibility. I, too, fully support the principle of publishing a charter for budget responsibility, including the objectives for fiscal policy and the means by which they would be attained. The challenge is to have a framework that both constrains fiscal behaviour in a responsible way and is capable of dealing with the range of surprises and unexpected events that inevitably occur. All attempts to frame budget responsibility in this way have at some stage met that particular problem—some have dealt with it better than others.
The main innovation in this Bill is the formation of the Office for Budget Responsibility. I agree that this has the potential to increase confidence in the projections and to reduce suspicion that they are modified by government to give the impression of a greater chance of success. I agree with the noble Lord, Lord Turnbull, that support for this independent scrutiny does not require a belief that there is widespread fiddling in fiscal projections. I also agree with him that there is a natural tendency for a Government to believe that their policies have a better chance of success than many sceptics will claim or, indeed, than often tends to be captured by the official forecasting process. Sometimes they are right. On other occasions, they are wrong. Sometimes, they are very badly wrong.
Given the natural degree of uncertainty and error in any projections of this kind, we should not overstate this problem. Interventions by government in projections tend to involve some bias towards optimism. However, it has to be recognised that some of that is to counterbalance a natural bias towards pessimism, sometimes among the officials in the department. We all agree that it is better to remove any doubts about this. I wholeheartedly support the idea of scrutiny and of having an independent office.
When the idea was first mooted, I, along with the noble Lord, Lord Turnbull, were rather attracted by the hope that it might be an audit process—or what he has called a validation model—and that its main role would be to test the validity of assumptions used in the forecast and to concentrate on the question of the prospect for the underlying public finances, taking into account the position of the business cycle. The Government have taken a different approach. This Bill involves outsourcing the responsibility for the published forecasts, including the main economic magnitudes as well as the public finances.
It is no secret that most of the Chancellors with whom I worked had the ambition to hand the responsibility for forecasting to someone else. That is not surprising, given the limitations and the inevitable range of error around any forecasts for output public spending and tax collection. For right or wrong, most Chancellors end up damning forecasts and the requirement to publish them. I will be interested to see whether this new arrangement ends that long history. Personally, I am not sure that having forecasts done somewhere else entirely solves the problem for Chancellors, but that is not the issue for today. The decision has been made. However, we should be in no doubt that forecasts are uncertain—sometimes very uncertain—and that any organisation that builds its reputation on the accuracy of its forecasts is going to have a difficult time on occasions, whether it is inside or outside the Treasury. I fear that that will also apply to the OBR at some stages.
This decision has some important implications for the structure and operations of the OBR. It is something that has to be considered when framing its remit and governance. Many of the details involved in preparing the forecast for the economy—particularly public finances—require a close working relationship with officials, particularly when it comes to public expenditure and taxation. Furthermore, as the Bill requires the forecast to be produced on Budget Day, the OBR has to be an insider as far as the Budget is concerned. Consequently, it will inevitably work closely with the Treasury, which I fear will make it more difficult to have a clear line of separation between the OBR and the Treasury. On occasion this will cause suspicion but I fear that it is a fact of life. Given the OBR’s responsibility in this regard, it is simply not possible to have the degree of separation that some people would like to see. It is an integral aspect of the decision to make the OBR responsible for the forecasts.
I emphasise the whole question of the OBR’s independence. I fear that this will not be secured by putting it into a different building, employing completely new people or giving it unlimited resources. Independence is much more about the quality of the people who are involved and depends crucially on the remit that is given, the clarity of that remit, the governance structure that surrounds the organisation and whether that enables us to see much more clearly the kind of job that it is doing.
To my mind, the biggest danger to the independence of the OBR is if it is dragged into the political debate through being asked to give an opinion on political issues or on issues that cannot be verified by outcomes. I strongly believe that, if these arrangements are to have any chance of working, the OBR should be required to limit its activities to assessing whether the Government’s objectives will be met. I am particularly concerned that it should not be involved in making judgments about hypothetical proposals or in making impossible comparisons with counterfactual outcomes. It should not be pulled into the political debate about the effects of alternative policy. Therefore, it is important that we should be clear not only about the things that it has to do but about the things that it should not be doing. For example, the OBR should not be asked to give a view on the effects of a Budget by comparing that with someone’s alternative Budget, or even with not having a Budget at all. It should not be asked to widen its remit or to give a view on the impact of packages of measures, whether framed by government or opposition. Therefore, like other noble Lords, I am concerned about the open-ended nature of Clause 6 and the ability to move the remit gradually over time, as clarity of remit will be crucial to the body’s success.
It was clear that the interim OBR was handed a virtually impossible task in presenting a pre-Budget forecast shortly before the Budget was published. That opened up the opportunity for analysts to try to interpret from the two what the effect of the Budget would be, which, of course, gets one into deep political debate. I hope that in the future this will not be the case. Therefore, I am anxious that there should not be remit creep. If there is any danger of this, it would be enormously helpful if it could be made clear by the Minister or in the Bill how far the remit can be stretched and what degree of discretion is left with the Treasury to change the remit given to the OBR.
My next point relates to governance. It is proposed to have a chairman and two additional persons who form the Budget Responsibility Committee and who are required to have relevant knowledge or experience. In addition, it is proposed to have at least two persons, who are described in the Explanatory Notes as “non-expert”, as part of that office. I do not find this distinction between experts and non-experts helpful, particularly in this area of forecasting and public finances. It is much more helpful to think of it in the terms mentioned by a number of noble Lords this afternoon—that is, the distinction between executive members and non-executive members of the OBR.
Clearly, the executive members—essentially, there are three experts—make up the Budget Responsibility Committee and are responsible for the published work. However, in my view the Bill should be much more specific about the role of the non-executive members. I suggest that they should not be involved with the published content but should be consulted if any issue of process emerges during the forecasting rounds. Similarly, they should be involved in post-mortems of how the process worked in relation to content and relationships with the Treasury and other relevant bodies. They can give guidance and support the independence of the OBR, if this question ever becomes an issue, and help the executive members to navigate their way through the inevitable issues that will arise from month to month in determining how the remit should work and how they should respond to pressures from the Treasury and to the whole variety of issues that people who have been non-executive directors know come before boards on a regular basis. They should also be involved in setting the OBR’s own budget and adding weight to any issues over resources that the OBR has. Along with a number of noble Lords, I would be grateful to hear from the Minister whether this type of interpretation accords with his view of the role of the non-expert members of the OBR. I agree with others that it would be helpful for the Bill to be much more specific about the role of the non-executive members.
This takes me to my final point, which relates to resources for the OBR. The main weakness of the proposed structure is the dependency of the OBR on the Treasury for resources, both financial and with regard to some of its people. I have no doubt that, in the early days, this will not be an issue, but it could become an issue. This could work either way. Public bodies that work without a budget constraint have a tendency to grow and grow. On the other hand, we know that one way of constraining the independence of any body is to leave it underresourced. Along with the noble Lord, Lord Myners, I agree that some transparency and safeguards need to be built in.
I would like a role to be given to the Treasury Select Committee in another place with respect to resources. For example, the budget for the OBR could be published and scrutinised by the Treasury Select Committee. The OBR should have the opportunity to set out to the committee whether it believes that it has the resources that it needs to meet its remit. If the chairman of the OBR thought that the OBR was being underresourced, there should be an opportunity to raise that question with the committee. Similarly, the committee could have the opportunity of testing whether the budget for the OBR was growing too rapidly. Simply having the finances of the OBR as a part of the Treasury’s expenditure programme may be all right on this occasion, but some years down the line it may not be quite such a comfortable process.
I end by noting that my former colleague, Alan Budd, showed typical wisdom and independence when faced with the difficult task of setting up the interim OBR. I have full confidence in Robert Chote’s ability to carry out this extraordinarily difficult role. The key to making a job of this type work is to be absolutely clear about its remit, the extent of that remit and the governance arrangements that surround it and to ensure the certainty of the organisation with regard to its resources. I fear that confusion in any of these areas will in the end be the biggest danger to independence and to the success of what otherwise I wholeheartedly support.
Lord Higgins
My Lords, the speakers list today includes a number of the usual suspects involved in Treasury and economic affairs. I suppose I also have something of a record as chairman of the Treasury Select Committee in another place for something like a decade and a half. I therefore begin by welcoming the fact that the Treasury Select Committee is to be given an operational role in approving or consenting to the appointment of the members to the OBR. This is quite possibly the first occasion a departmentally related Select Committee has actually had such a role embodied in legislation.
First, I want to say a word or two on the matters raised by the noble Lords, Lord Myners and Lord Burns, as far as forecasts are concerned. I am also not at all sure that we will gain much by having yet another forecasting body with all the staff that involves. The Treasury already publishes an almost comprehensive list of forecasts, prepared by various government and non-government bodies, and it may be that the data in those would provide a more impartial view than those produced by the Office for Budget Responsibility.
I certainly welcome the point in the Bill which repeals the proposal of the previous Government to have the National Audit Office auditing the assumptions on which the forecasts are made. It always seemed very odd that one could audit such things as assumptions. However, it is important that the OBR, if it produces its own forecasts, should also publish its assumptions. We all know that forecasts depend crucially on what the assumptions are, and that, unless they are published, we have no basis on which to appraise the situation.
I am sad that the forecast established by the Industry Act 1975 is to go. The previous Government built, on what used to be called the Red Book, a huge paraphernalia of propaganda. Now that the forecast has gone, I presume that the present Government will have some difficulty in finding a similar opportunity. However, the forecasting situation needs to be appraised very carefully, and no doubt we will have an opportunity to do that in Committee.
The OBR will have responsibility for not only forecasts but appraising, on the basis of a fiscal mandate, the extent to which the Government are achieving their objectives. I find the concept of a charter, set out in Clause 1 of the Bill, a little devoid of content. The charter must set out objectives in relation to fiscal policy on the one hand, and secondly, the means by which they are to be achieved—the fiscal mandate. It would be immensely helpful in Committee if we could be given some idea, or perhaps a draft, of what such documents—namely, the fiscal mandate and the charter—are likely to comprise. In that context, I worry about the fact that the Treasury is to have almost complete discretion, first in creating the charter and the fiscal mandate, and then, if need be, in modifying it. There is a case for Parliament having an opportunity to debate this in some form, and, if necessary and appropriate, to amend it. This, too, is something that we can reasonably pursue in Committee.
We are also involved here in creating significant changes with regard to the Comptroller and Auditor-General. Part 1 of the Bill makes preparation for looking forward in economic policy, and Part 2 for auditing what has actually happened, and in particular for considering the important issue of value for money, in which the National Audit Office has played an important role for some considerable time. However, I am puzzled by exactly what role the new National Audit Office board will fulfil; and by its relationship to the Public Accounts Commission—not the Public Accounts Committee, but the Public Accounts Commission, which I chaired until I left the Commons in 1997. It seems that, although the commission has subsequently recommended that an independent board should be set up, the relationship between the commission and the board is a little obscure. Perhaps the Minister will clarify the matter.
Overall, this is a forward step. We will have a more impartial approach to these matters than has hitherto been the case. However, I urge my noble friend to ensure that the present, albeit provisional, set-up for the OBR does, as soon as possible, get on with producing an accurate appraisal of what the situation is.
I come now to an entirely topical point with regard to the implications of the comprehensive spending review. We are currently in uncharted waters, and it is a very complex thing to try to work out the review’s effect on aggregate demand in the economy. Until we know that, we have no reason to say that further stimulating measures, particularly QE, are appropriate. I hope that the OBR will not delay until it becomes a statutory body in getting on with this extremely urgent task.
The committee of the OBR is to have three members, and I am not sure whether it will publish minutes in the same way as the MPC does. It increasingly appears from press reports that there is considerable division of opinion among the MPC members. We ought to consider to what extent the OBR will also publish minutes and to what extent it is appropriate for those to be in the public domain. Having said that, I look forward very much to the Committee stage, and I hope we can clarify some of the points that I have raised.
Lord Barnett
My Lords, I am delighted to participate in a debate which has been largely non-party political and in which we have heard from two senior ex-Treasury officials, the noble Lord, Lord Burns—I nearly said my noble friend—and the noble Lord, Lord Turnbull.
I am in favour of reform and change, but change should be for a specific purpose. While I agree with much of what has been said about the OBR, certainly as outlined by the noble Lord, Lord Sassoon, today, and in various documents before us, I am not as sure as my noble friend Lord Eatwell that there is a real purpose in having an OBR at all. I shall explain a bit more why I think that. I agree with my noble friend Lord Eatwell and others about the personalities of who we are told will be executive members of the OBR—Robert Chote, Stephen Nickell and Graham Parker, all three of whom have had great responsibility for preparing forecasts and are highly respected in this area.
The noble Lord, Lord Sassoon, told us—this also appears in many documents—that the whole purpose of the OBR is to provide independent assessments of forecasts. When he referred to the past, he spoke about Ministers being responsible for the forecasts. Theoretically they are, but we all know that the forecasts were prepared by the same Treasury officials who are now in place. It is very sad that the Chancellor said:
“The creation of an independent Office of Budget Responsibility has brought back honesty to official forecasts”.—[Official Report, Commons, 20/10/10; col. 949.]
To accuse your own Treasury officials of not being honest is frankly a dishonest thing to do. I hope that the noble Lord, Lord Sassoon, will apologise for that loose language, which we have had all too often from the Chancellor. I am not accusing the noble Lord, Lord Sassoon, of that, but it is an appalling thing to have said about the people who prepare those forecasts. Effectively that is what he was saying.
The forecasting by anyone, no matter how independent, is to say the least, as the noble Lord, Lord Burns, said, uncertain. We are now told that around that uncertainty we will have audited sustainability. In the past, I have done some auditing as a professional accountant. However, that was a long time ago as, when you become a senior partner, you no longer do any specific auditing. When auditing, you look at the figures on a balance sheet and in a profit and loss account, which is easier than forecasting and auditing sustainability. Perhaps the noble Lord, Lord Sassoon, can tell us how to audit sustainability, as we are told the Office for Budgetary Responsibility has done. We were told that by the Chancellor, but I have never been able to find a report of what the OBR said. Can that be published and can we be told whether that audit of sustainability and forecast was carried out without any qualification? Is that what we are being told? Frankly, I find it hard to believe.
On independent forecasts, we have a document issued by the Treasury called Forecasts for the UK Economy, within which there are 58 independent forecasts. I wonder how many of those forecasts the noble Lord, Sassoon, could tell us were totally right. I am not sure that the new chairman, the highly respected Robert Chote, who controlled the IFS—I assume that he audited the IFS as well—could tell us that the IFS never got a forecast wrong. Of course, he cannot. No one could ever say that they have never made a forecast that was wrong. That would be an incredible thing to do. Is the noble Lord, Lord Sassoon, telling us that the Bank of England, which has often got forecasts wrong, is dishonest? Are all those who issue truly independent forecasts, which have been wrong, dishonest?
There is no doubt whatever that independence is crucial here. I am not sure whether there is truly any need for yet another independent body. Unless, in Committee, we can amend this Bill substantially, as has been suggested by my noble friend and others, I do not think that we will have a body which will be of huge importance to us. We are told that the current OBR has issued forecasts and that, at the moment, it still has offices right next door to the Chancellor. Can we also be told how often the head of the OBR had formal and informal chats with the Chancellor when he was giving the office details of his comprehensive spending review, which no one else received in advance? We are told that these were better independent forecasts because they had been audited. You cannot audit a forecast or sustainability accurately. No doubt, in winding up the Minister will tell us how to do it. I shall be glad to hear it.
When all is said and done, what on earth are we really doing here? Are we setting up a new independent office which will be able to provide us with forecasts, without qualifications, that are better than many of the other forecasts now being made? My experience of a few years now is that, for every Budget, the Treasury lists the number of occasions when independent forecasts are wrong. No matter how good it is, I am not sure that the OBR—using excellent Treasury staff, no matter whether they are “dishonest” or not, to prepare the basic work—can, without qualifications, give us forecasts on which we can rely more than we have ever been able to in the past.
I turn briefly to the other major reform in the Bill—the National Audit Office. I suppose I should declare a past interest. After five years as Chief Secretary, I was chair of the Public Accounts Committee for a Parliament. I found that both the C&AG and the National Audit Office did a first-class job. As two former members of the Public Accounts Committee have said today, it could not have been bettered. However, we are now told that there are not going to be new value for money audits; it is all going to be done the same, presumably with the same staff. I take it that the Government are not going to change the whole staff of the National Audit Office. The Minister is shaking his head. I am happy to hear that. There is a better case for change because of what has happened in the past and I strongly support the recommendations for carrying this change through. For now, I would be glad to hear what “positions reserved” means. It is so often referred to in the Bill. If positions are reserved there, so are mine on the Bill itself.
Lord Tunnicliffe
My Lords, I thank the noble Lord, Lord Sassoon, for introducing the Bill so clearly—he confirmed that, fortunately, I have managed to read it with reasonable accuracy—but he also introduced a number of other points and promises in relation to a framework agreement and potential memorandums of understanding. It is very important that he should produce those, in draft at least, before the Committee stage.
I will touch on other contributions to the debate. Like the noble Lord, Lord Barnett, I was pleased that it was largely non-political or at least non-party political. The noble Lord, Lord Newby, had a little poke at us but made the important point that we all want to work together so that reports, as we have in the NAO, enjoy public confidence. He also brought out the whole issue of what the non-executives will really do.
The noble Lords, Lord Turnbull and Lord Burns, put the political interference issue in perspective, using the rather nice term “wishful thinking”, which is probably a fairer way of reflecting how politicians have been involved—in practice, somewhat reluctantly—with responsibility for forecasts. Broadly speaking, we support the OBR because of the extent to which it will take politicians out of that. The noble Lord, Lord Turnbull, made important points about the need to challenge and to have consistent presentation so that data are easier to use year by year, policy by policy and change by change.
A bit uncomfortably I even found myself agreeing with many of the points made by the noble Baroness, Lady Noakes. I, too, would like to see two Bills. Indeed, we are proposing that there should be two Bills. We take the point that writing one’s own school report has a certain lack of comfort about it. We will be probing and pressing strongly in Committee the whole issue of who audits the auditors—who does the peer review—to achieve an appropriate mechanism for a review of the whole thing. I think that her contribution was very useful. Many noble Lords came forward with the idea that we must have more clarity of what the non-executive directors do.
The noble Lord, Lord Myners, moved on to the issue of independence, which is key to this proposal. This is about the Treasury’s involvement. I know that the Treasury is a wonderful place, but when I was a public servant the word “Treasury” gave one a little cold feeling round one’s heart. It has an ability to permeate its influence through the staff and the charter. The general point made by the noble Lord, Lord Myners, about the Treasury, the staff and the charter is important. I am sure that it is not the Government’s intention to influence the OBR through the charter or the staff, but there may be another Government, with a different attitude, who may find those tools usable.
The noble Lord, Lord Myners, mentioned the word “sustainability”. The word “sustainability” is one of the most worrying things in the Bill, because it is presented as if it is a well defined term. It is not; it is very much a matter of what outcomes you want to be sustainable. We will need to probe that in Committee.
The noble Baroness, Lady Browning, and the noble Lord, Lord Touhig, clearly have enormous experience of the NAO and I thank them both for their contributions. We will be reading them with care to see whether there are points that we need to probe in Committee through amendments. I have to say that, at first look, the NAO part of the Bill seems fairly straightforward, but it is important that we have the experience of two such contributors to make sure that we get enough depth.
The noble Lord, Lord Burns, as well as putting the whole issue of politicians’ involvement in its proper perspective, raised the big question of how we solve this problem: what are the appropriate degrees of separation and what do we mean by “independence”? He called it “remit creep”; I would call it “mission creep”. It is important that we probe what the size of the mission should be in the Bill. I shall be reading Hansard with great care. The noble Lord started to flesh out what these non-executives might do and made the important point that, in the Bill, not only do we need the word “independent”—it happens not to be there, but at least the concept is—but we must have the resources, the money and people.
The noble Lords, Lord Higgins and Lord Barnett, both asked the real question: do we need this at all? We on these Benches think that we do, as a step forward, but there is the whole issue of what it adds and how it usefully contributes. It will have a good brand, but it also needs review, audit and debate involving those who have different points of view.
Lord Higgins
The noble Lord was right to say that that is what the noble Lord, Lord Barnett, said. I do not think that it was what I said overall; I just had a qualification with regard to particular parts.
Lord Tunnicliffe
I apologise to the noble Lord to the extent that I misinterpreted his words. I certainly agreed with two important points that I think he made—he may have to correct me again. I apologise; my note-taking may not be very good. I think that he strongly made the point about publishing assumptions. That is an important point, which we should have clear either in the MoU or in the Bill. I think that he raised at least a question mark as to whether the charter will be helpful or—I cannot think of a better word—sinister as a way in which to control the OBR. That needs to be clarified. Finally, the noble Lord made an important point about the OBR looking at the CSR and describing its outcomes. At least in those areas, we enjoyed some common ground.
The noble Lord, Lord Barnett, has his way of looking at these things and asked some questions of the noble Lord, Lord Sassoon, the answers to which I await with interest. He, too, asked about the word “sustainability”, which is in the Bill as if it has a clear meaning. That is a point that we will really have to mine.
We like the idea of the creation of an independent and credible OBR. It would be an important step forward in transparency and open government and an important addition to the democratic institutions. On this side of the House, we think that it is a good idea and we are prepared to co-operate to the full with the Government to achieve it. We are not prepared, however, to co-operate in the production of a seriously flawed institution. To do so would both ruin a good idea and potentially bring the whole project into disrepute. “Disrepute” is a strong term but that at least in part happened during the unfortunate events before the Summer Recess.
It has become clear in the debate that the Bill fails on this objective. We do not criticise the Government’s objective but we are critical of its execution. Perhaps Ministers were diverted from their laudable goal by their advisers; perhaps Sir Humphrey was meddling. What seems to come through is that the Treasury needs to hang on to its tools of control. Have the Government considered alternatives? Across the road, in Dean Trench Street, there is an internationally respected economic forecasting organisation, the National Institute of Economic and Social Research, a body that is already substantially publicly funded. The institute is recognised as being totally impartial and one of the best forecasting organisations in the world. A suitable contract could have handled all the confidentiality issues and much public money would have been saved. Instead of setting up a new quango, why did the Government not simply contract out the OBR to the institute? Are there good reasons for not doing that or is it because the Treasury would lose control? Why did the Government not consider going to the other end of the spectrum and placing the OBR under the control of Parliament, just as the Congressional Budget Office in the United States is under the control of Congress? The OBR would then be able to perform the range of services to Parliament and the Executive that the CBO provides in the US.
It is important to understand that the OBR is not and will not be a policy-making institution. It is therefore not part of the political process. The OBR is in the assessment business, not the making-policy business. Why, therefore, are so many control mechanisms built into the Bill? My noble friend Lord Eatwell compared the powers of the Comptroller and Auditor General set out in the Bill with those of the OBR. I compare the role of the two and their independence. Independence depends—as I said, I once worked in the public sector—on how one is appointed and how long for, how one is paid and how secure one is in that role.
The Bill strongly brings out the difference between the C&AG and the chairman of the OBR. With regard to status, one is appointed by the Prime Minister, while the other is appointed by the Chancellor. One is agreed to by the chair of the Public Accounts Commission; in the case of the OBR, it is just a matter of consent. The C&AG will serve for 10 years, while the chair of the OBR serves for two times five. Two times five is not 10, because a lot happens between those two fives. Termination is difficult in the case of the C&AG but, while it is quite difficult for the chairman of the OBR, it will not be difficult between those terms of office. At that point, the Chancellor and his concerns will come very much to the forefront of the individual’s mind when contemplating his further five years of employment. The individuals there now will be above these influences, because we know them as individuals, but we have to think in the longer term.
In matters such as pay, the pay of the C&AG can be indexed, whereas the pay for the OBR will be determined by the Treasury. The money for paying the C&AG comes from the consolidated fund; the money for the OBR comes through the Treasury. The terms and conditions of staff in the National Audit Office are determined by the NAO; in the OBR, they are determined by the Minister for the Civil Service. The finance in relation to the NAO and the C&AG comes from the public accounts commissioners—finance is pretty well independent when it comes to the National Audit Office. In the case of the OBR, it comes from the Treasury, which will have an influence on resources.
Finally, we have the staff of the OBR. I think that the Minister said that he saw them as civil servants coming in and out of the office. It is important to bottom out just who these people are going to be. Will they be an independent group, as, very clearly, the staff of the NAO are, or will they be people who, while doing their best to be totally independent, are influenced by their prior career and by where their career will be in future? All this needs to be questioned. We are not convinced that this organisation has sufficient independence.
We have looked at the work of the Treasury Select Committee and have suggested that the three tests are independence, credibility and robustness. The committee asked similar questions in paragraphs 126, 128 and 132 of its report on the OBR. Independence and credibility are crucial. We believe that the Bill as drafted fails these three crucial tests. However, we see the potential of this good idea, which is why we are prepared to work with the Government to create an OBR that passes the three tests. At the end of his speech, my noble friend Lord Eatwell advanced a concrete proposal on behalf of the Official Opposition. It would be a major step forward if the Minister could accept that proposal. The proposal remains on the table. We are ready to consult as to the particular all-party forum that is used to design the new OBR. It need not take time. It could well be done before Christmas. We are ready to accept that the OBR’s interim structure is satisfactory for the time being.
Lord Sassoon
My Lords, I thank noble Lords for their contributions to a stimulating and interesting debate on both parts of the Bill, although noble Lords focused more on Part 1 than Part 2. The debate has focused on the role of institutions and the part that they can play in ensuring transparency and accountability in the public finances. This is clearly a matter of much importance at the current time. At the beginning of the debate I explained the Government’s broader plans to reform the fiscal framework, and the establishment of the Office for Budget Responsibility is the most substantial aspect of this reform. For the first time, we are introducing independent and impartial scrutiny into the official forecast.
I should start by welcoming the confirmation by the noble Lord, Lord Eatwell, that the Opposition welcome the creation of the OBR, which was confirmed by the noble Lord, Lord Tunnicliffe, just now. The only substantial note among those who have spoken this afternoon questioning the purpose of change has come from the noble Lord, Lord Barnett. However, I think that the reason for change was very clearly set out in different ways both by my noble friend Lord Newby, who quoted from ministerial memoirs from the former Government, and by the noble Lord, Lord Turnbull, who made it quite clear—he referred to wishful thinking in the past—why, in his words, this is an idea whose time has come. I completely agree with that. I should as a rider say that I was not in what I said questioning in any way the work of Treasury officials. I would like to think that the noble Lord, Lord Barnett, recognises that. What I was questioning was precisely the way in which forecasts were put together—whether it was by way of wishful thinking or whether it was something more sinister in the past. That is precisely why I think that the overwhelming majority of speakers this afternoon have confirmed that the OBR’s time has indeed come.
I shall come back to the point about independence.
Lord Barnett
The Chancellor, in his comprehensive spending review speech, referred to the previous forecasts as dishonest.
Lord Sassoon
I think that the noble Lord was also quoting remarks that I made in my opening speech this afternoon. I have tried to make it clear that I am not in any way questioning the very fine work of Treasury officials, but questioning the overlay that was put on the forecasts whether as a result of wishful thinking or for whatever other reason.
Lord Myners
My recollection of the words that the noble Lord, Lord Barnett, used was “official forecasts”. So I think it is quite clear that the Chancellor of the Exchequer had in mind forecasts by the officials. Is the Minister aware of any case in which an official objected to an economic forecast that the Government presented to Parliament on the basis that it was incorrect? I certainly participated in discussions on economic performance and I saw no examples of officials objecting to the work which came from Mr David Ramsden and other members of the Treasury responsible for economic forecasting under interrogation by Ministers. Will the Minister make it clear that the use of the term “official forecasts” was not a criticism of officials? If it was a criticism, on what basis was it made, given that there were no objections?
Lord Sassoon
My Lords, I have made it completely clear that there is no question of my making any criticism of officials. I am making criticisms of the previous structure in which Ministers were able—whether from wishful thinking or, as I say, from more sinister motives—to decide on the forecasts. That is why we need an independent body. I am conscious of the game that is played here—that I have to sit down after about 18 or 20 minutes. I will do my best to answer as many of the points as I can but if noble Lords want to interject, of course I will listen to them but I may not get through as much as I otherwise would and will have to write to noble Lords afterwards.
In answer to the question from my noble friend Lord Higgins and others about the desirability of having a draft of the charter for the House to see—absolutely, that is what I intend should happen. We are working to that end. Related to that in terms of what happens next, the OBR will publish forecasts before the end of the month which will bring its forecasts up to date to reflect the decisions announced in the comprehensive spending review.
As we think that this is the challenge that has been set, the Bill absolutely takes away the responsibility for determining the forecast from Ministers and gives it to independent experts. It needs to be a new independent body, rather than a case of just asking one of the fine existing forecasting houses. At the critical times of the year when the forecasts need to be produced, particularly at the time of the Budget, it is essential—as has been explained in different ways by the noble Lords, Lord Turnbull and Lord Burns—to have a close relationship. We need to have an independent body of the sort that we have designed, rather than just taking consensus forecasts after the event. I think that the House would be rightly outraged if we did not at the time of the Budget immediately have forecasts available.
Ministers will retain the responsibility for making policy and for the OBR to shine a light on the state of the public finances resulting from those policy decisions. I can therefore confirm that it is the intention that the OBR should remain outside politics and should not, for example, be asked to cost alternative policies, wherever they come from, including from opposition parties.
We have heard a wide range of questions about the design of the OBR. On independence, without dwelling on it, I do not think that the comparisons in any way with the NAO are right. These bodies have very different objectives and come from very different starting points. In answer to other points, the fact that they are put in the Bill together is a result of the fact that the NAO provisions are sufficiently important that we should bring them forward at the earliest possible date. As noble Lords will understand, legislative time is hard to come by. So, in terms of the trade-off between two Bills and finding a slot to bring forward important provisions of the NAO, we have taken the decision to put the two sets of provisions in the same Bill. However, that does not mean to imply in any way that we believe that there is a comparison to be made between the provisions for the two very different bodies.
I take to heart the words of the noble Lord, Lord Burns, who said that complete separation would not be appropriate and pointed to the quality of the people as being particularly critical to the way in which independence works. The OBR’s independence will be judged on the quality of its analysis and on the ongoing scrutiny by the public and by Parliament. Our provisions have been informed by the NAO report published on 22 June which examined the forecast prepared by the interim Office for Budget Responsibility for the emergency Budget. It set out a number of indicators of independence which have informed the design of the Bill. These are set out in Clause 5(1), which talks about “complete discretion”; Clause 6(2), which talks about independence and the method of analysis; Clause 9, which talks about the “right of access” and assistance to “Government information”; and paragraph 8 of Schedule 1, which talks about staff being appointed by the OBR. The latter point was made a number of times. There are other matters not strictly in the Bill—“physical location”, for example, which has already been addressed by the OBR, and questions of funding, which can be raised directly with the Treasury Select Committee.
It was asked whether it could be argued that the OBR is independent when it is clearly working for the Government in its remit. I would describe the words “complete discretion” as the critical key here, and refer to the Bill preventing the Treasury from specifying the methods of the OBR’s analysis.
There was then a question about why the word “independence” did not appear in the Bill. Not only does the term “complete discretion” encapsulate what is intended by independence in this case but the same wording is used to empower the Comptroller and Auditor-General and the NAO, and nobody questions their independence.
Lord Eatwell
My Lords, before the noble Lord leaves the issue of independence, I wonder whether he can help me. Clause 5(2) states very clearly:
“The Office must perform that duty objectively, transparently and impartially”.
Everyone must applaud that wording. But then Clause 6(1) states clearly:
“The Charter for Budget Responsibility may include guidance to the Office about how it should perform its duty under section 4, including (in particular) guidance about … what subsections (2) and (3) of section 5 entail”.
So, is there to be guidance about what impartiality entails?
Lord Sassoon
My Lords, rather than discuss the primacy of the wording in Clause 5(2) in the abstract, it will be easier to return to these matters when we see the draft wording. I can, however, assure the noble Lord that the words in Clause 5(2), to which he rightly draws attention, are the keystone here.
Lord Sassoon
Indeed. While the Bill makes it clear that the charter may include guidance to the OBR on how it should perform its main duty, the charter must not make provision about the methods the OBR should use. That is absolutely clear and I am glad that we agree on it. Nevertheless, to provide the OBR with guidance on how it should fulfil its duties is not, in the Government’s judgment, inappropriate. While the OBR will need to act consistently with any guidance in the charter, any such guidance will have been approved by another House, so it will be wholly transparent.
The noble Lord, Lord Burns, asked how far the remit can be stretched by the guidance. It can relate only to the functions conferred by the Bill, so it cannot add to or in any way distort the remit and it has to be exercised consistently with the Bill. It cannot compromise, for example, the basic principles set out in Clause 5(2), but it can explain how they are to be applied. I do not think that the guidance should in any way lead to mission creep.
Questions were also asked about resources and whether the chair of the OBR should report each year on whether he has sufficient resources. There will be transparency of reporting through the Treasury Estimates and accounts. The non-executives will be expected to inform Parliament of any concerns they have over the independence of the OBR and its resources, and the OBR will present its annual report and accounts to Parliament through the Treasury. There will be ample opportunity, through direct contact with the Treasury Select Committee, to air any concerns on resources.
In answer to a question from the noble Lord, Lord Myners, I can give him an absolute assurance that the OBR will have full autonomy over its work programme, and within its statutory duties it will not be required to secure the Treasury’s approval of its work. On another dimension of independence raised by the noble Lord, Lord Myners, and my noble friend Lord Higgins, regarding whether the minutes will be published, that will be a matter for the OBR but I am sure that it is listening carefully to this debate.
Questions then followed about the accuracy of the forecasts and peer review. The crucial point about these sorts of forecast is that they will be wholly transparent. Each time the forecasts are published, the outcome will be clear. It will then be for all experts, economists and commentators, both Houses of Parliament and its committees to scrutinise the information. However, the Bill allows the OBR to establish expert committees if it so wishes to help it with analyses or for any other purpose.
The noble Lord, Lord Barnett, asked about meetings between the OBR and Treasury Ministers. This is something on which the OBR has been reflecting, and it has decided that in order to ensure that communications with the Treasury are transparent, the OBR will aim to publish a log of contact twice a year, each autumn and at the time of the Budget. This will begin with the autumn forecast on 29 November. I know that the noble Lord has tabled a Question for Written Answer on that point.
A number of questions were put to me about the functions of the non-executive directors. When I first saw the Bill there was a distinction between professional and non-professional. I hope noble Lords will agree that expert and non-expert improves the drafting a little, but I take the point that, equally, the words executive and non-executive could be used. For the moment I will say that the legislation follows what is common in other legislation establishing statutory bodies, including Natural England, Ofgem, the Office of the Rail Regulator, the Office of Fair Trading and the UK Statistics Authority. I will reflect on the points made about the non-executives, but the critical point is that it will be for the first meeting of the board to decide exactly what the remit should be. I think it was the noble Lord, Lord Burns—I hope I will be forgiven if it was not him—who described the remit and his description encapsulated it rather well.
Questions were asked about the relationship with the Bank. It is expected that the OBR will have a good relationship with the Bank and there will be a regular exchange of views. But it is critical that there should be no collusion between them in any sense in producing their forecasts. They should be completely independent.
Points were raised by my noble friends Lady Noakes and Lady Browning about the relationship with other government departments. Indeed, the MoUs will cover departments other than the Treasury.
Lord Higgins
Are we to understand that there will be two sets of forecasts? In that case, which will prevail?
Lord Sassoon
My Lords, at the moment separate forecasts are made by the Treasury and the Bank of England in the course of their inflation reporting. That situation will continue.
There were detailed questions about freedom of information, on which I will write to my noble friend Lady Browning. I can assure her that freedom of information legislation applies.
There will be no changes to the debt management arrangements. I agree with the noble Lord, Lord Myners, that the Debt Management Office does a fine job.
I want to spend one minute talking about the National Audit Office, because—
Lord Barnett
Before the Minister does that, he said that the Freedom of Information Act applies. The Chancellor referred to the audit done by the OBR on his comprehensive spending review. Will we see that?
Lord Sassoon
I have already said that the next forecast will be produced by the OBR before the end of this month. Clearly, that will include forecasts based on all decisions taken by the Government, including the comprehensive spending review. We have approximately three weeks to wait for that.
I want to spend one minute on the points made about the National Audit Office. The critical point is that credit is due to the Public Accounts Commission for its work that led to the Bill brought forward by the previous Government and on which we have built. In answer to the points made by my noble friend Lady Browning, the provisions enshrine the independence of the Comptroller and Auditor-General. A similar point was also made by the noble Lord, Lord Touhig, to whom I am grateful for his welcome of the provisions relating to Wales. I will respond in writing to his detailed point that the period should be five years rather than two years or what was proposed by the Public Accounts Commission. I am grateful to noble Lords for confirming our direction of travel on the National Audit Office provisions.
I conclude by thanking all noble Lords who have attended and spoken in this debate—
Lord Myners
Before the Minister concludes, would he like to have a second try at answering the question asked by the noble Lord, Lord Eatwell, about the terms of Clause 6(1)(b), which require the Treasury to give guidance on the meanings of the words “objectively, transparently and impartially”? Why would the Treasury need to give guidance on such matters? Surely it should be for the courts to determine that in any situation in which those words were subject to debate or criticism.
Lord Sassoon
My Lords, I am conscious of the time and of the conventions of this House. I have explained at some length—but clearly not with sufficient clarity for the noble Lord, Lord Myners—that guidance will be given. That does not override in any way or compromise the three critical tests set out in Clause 5. I do not for one minute think that it should be necessary to get into questions of interpretation in the courts or anywhere else.
Lord Eatwell
At the end of my speech I made a formal offer of co-operation on behalf of the Official Opposition. I would be grateful if the Minister would respond to that offer.
Lord Sassoon
My Lords, in my next sentence I was about to say that I will of course respond to the challenge from the noble Lord, Lord Eatwell, which was repeated by the noble Lord, Lord Tunnicliffe. I am sorry to disappoint the noble Lord, Lord Eatwell, if he thought that I was building up to a grand conclusion where I would propose to withdraw the clauses in Part 1.
We have had an interesting debate. I will reflect on a number of points and I have endeavoured to answer as many as possible. Nevertheless, the tone of the debate from the majority of speakers this afternoon confirms to me that we are absolutely on the right track, generally, and that we should press ahead. There has already been considerable scrutiny of and discussion about the OBR over the past few months. I look forward to the continued scrutiny by noble Lords as the Bill wends its way through subsequent stages, and I ask the House to give the Bill a Second Reading.
Bill read a second time and committed to a Grand Committee.