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Oral Answers to Questions
(13 years, 8 months ago)
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Tom Brake (Carshalton and Wallington) (LD)
1. What recent assessment he has made of the security situation in Afghanistan; and if he will make a statement.
The Secretary of State for Defence (Dr Liam Fox)
The whole House will want to join me in paying tribute to Lance Corporal Stephen McKee, from 1st Battalion The Royal Irish Regiment, who was killed in Afghanistan on 9 March. The House will want to join me in paying tribute also to the station commander of RAF Northolt, Group Captain Tom Barrett, who was killed in a road traffic accident on the evening of Thursday 10 March. Many members of the current and former Governments will have known him well. Both men served their country with honour and distinction, and our thoughts and prayers are with their friends, colleagues and families at this very difficult time.
The security situation in Afghanistan varies significantly across the country. About 64% of violent incidents take place in just three of Afghanistan’s 34 provinces, Helmand, Kandahar and Kunar, which have about 11% of the total population. The insurgency’s heartland remains in the south. The increases in the international security assistance force and Afghan national security force have helped us to make real progress over the winter in all aspects of our counter-insurgency operations: security, governance, and development.
Tom Brake
I join the Secretary of State in his tributes to our fallen soldiers.
The security situation in Afghanistan may have a permanent impact on service personnel after the conflict. Taking into account valuable lessons learned from previous conflicts, such as the Falklands, whereby more servicemen took their own lives afterwards than died during fighting, what measures are in place to support servicemen and women who experience mental health or social problems either during or after the conflict?
Dr Fox
My hon. Friend makes a very valuable point. It is all too easy to see the physical scars of war; it is much more difficult to see the mental scars of war. It is because of the importance given to the matter by the Government that, cross-departmentally, we are making more funding available to mental health projects for our armed forces. We are looking at the scientific evidence available to see whether we can better target that help, but the measures that we are putting in place include the new phone line for service personnel.
Mr Geoffrey Robinson (Coventry North West) (Lab)
The Secretary of State will recall that on 14 February he made a moderate and encouraging statement to the House, saying that he thought that the second half of this year would be a good time to make a political push towards a settlement. He also said that we would pay a heavy price if we failed to take the opportunity that would then occur. He has since no doubt seen the Defence Committee’s report, which says that at the moment the Americans seem disinclined to pursue a political settlement. Can he assure the House that he will use his best endeavours to encourage the Americans to take the course that he has recommended?
Dr Fox
I am not sure that I am required to make efforts to get the Americans to make such a change in their posture, as the hon. Gentleman describes it. In fact, I spoke to Secretary Gates at the ISAF meeting in Brussels at the weekend, and it is very clear that we are all now moving together. The process of transition, including which parts of Afghanistan will undertake that transition, will be announced by President Karzai on 21 March.
Mr John Baron (Basildon and Billericay) (Con)
The Defence Secretary brings a welcome dose of realism to his post, but given that counter-insurgency operations in the past, such as in Malaya, suggest that not one of the pre-conditions for success exists in Afghanistan today, why does he think this is going to be different, and why does he think that we are going to beat the Taliban?
Dr Fox
Our aim in Afghanistan has been to create a stable enough Afghanistan so that it is able to manage its own internal and external security without the need to rely on the international community. We have put in place improvements in governance, as well as an improvement in the security position. We have seen a big increase in the size and capability of the Afghan national security force, which should enable Afghanistan to maintain that position when the international community leaves in an active role.
Mr David Hanson (Delyn) (Lab)
2. What recent assessment he has made of the potential role of UK armed forces in north Africa.
The Secretary of State for Defence (Dr Liam Fox)
The Government keep plans for the use of our armed forces under constant review, and planning with our NATO partners is also ongoing. A number of contingency plans with respect to Libya are being considered by NATO, including further humanitarian assistance, enforcing an arms embargo and the implementation of a no-fly zone. No decisions have yet been taken and no assets have yet been committed.
Mr Hanson
Will the Secretary of State confirm that, prior to any no-fly zone in Libya being undertaken, he will get the support of the United Nations and the Arab League to achieve that objective? Will he also look at the resources in the strategic defence review to ensure that our troops and our aircraft have the support of air force personnel and aircraft to meet those objectives?
Dr Fox
The Government have made it clear, alongside our NATO allies, that in relation to a no-fly zone, three criteria have to be met: there has to be a demonstrable need; there has to be a clear legal basis; and there has to be involvement of the countries in the region. Clearly, we would not be planning if we did not have the assets readily available for the task.
Mr James Arbuthnot (North East Hampshire) (Con)
On Friday, the BBC carried a report that two Nimrod R1 aircraft, which had been due to come out of service at the end of this month, had been reprieved, at least until June. Was it true? Are there any other recent decisions that are being reconsidered or perhaps should be reconsidered as events in the Arab world unfold?
Dr Fox
As I have just said, we always ensure that the assets are available. I asked the armed forces to look at whether we could have a temporary extension for the R1 until we were sure that we had sufficient alternative assets to be able to provide us with the same capability. That work is being undertaken at the moment.
Mr Jim Murphy (East Renfrewshire) (Lab)
We all pay tribute to the work that our forces are carrying out in and around Libya at the moment, and we support the Government’s work in attempting to achieve a no-fly zone. However, there remain serious issues about earlier decisions, not least on HMS Cumberland, which has done so much off Benghazi, but whose next journey will be to be decommissioned. Also, some Nimrod aircraft that were previously bound for scrap may have won a temporary reprieve. Given that the National Audit Office report says that the RAF currently has only
“eight pilots who are capable of undertaking ground attack missions on Typhoon”,
and that that will not be sufficient in future, why does the Secretary of State think it is right to sack almost 200 trainee pilots?
Dr Fox
As I have said repeatedly in the House, we have had to reduce the number of aircraft available for the future as part of the strategic defence and security review, not least because of the budgetary position that we inherited. It does no good whatsoever to the credibility of the Opposition to complain about reductions made as a result of their budgetary incompetence when they will not tell us what their budget would be or what cuts they would support or not support.
Mr Murphy
The Secretary of State should spare us the lecture. This from a Government who allow soldiers to be sacked by e-mail, whose actions mean that this week, for the first time in decades, we do not have the ability to put an aircraft carrier to sea, and who will not guarantee that anyone currently serving in Afghanistan will be exempt from being sacked. The defence review was rushed; it has not survived the first contact with world events. Three words missing from it were Tunisia, Egypt and Libya. Many experts are worried about new gaps in capability. Will the Secretary of State guarantee that there will be no future cuts in military capability in the lifetime of this Parliament?
Dr Fox
The word missing from the right hon. Gentleman’s comments was “sorry”—sorry for the position in which he left our armed forces, with an MOD budget massively over-committed at £158 billion. What Labour Members still have not recognised is that their own economic incompetence is a liability for this country’s national security in the long term. We are taking the measures to put this country back on a firm footing in a way that they never could and never had the courage to do.
Paul Maynard (Blackpool North and Cleveleys) (Con)
3. What recent progress his Department has made on its consultation on the defence industrial, security and technology policy Green Paper.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
Our Green Paper, “Equipment, Support, and Technology for UK Defence and Security: A Consultation Paper”, was published on 20 December 2010, and progress on the consultation is encouraging. Ministers have engaged extensively with a wide range of interested parties, including right hon. and hon. Members of this House and of the House of Lords. Last week, a consultation conference took place at which over 200 people from industry, academia, service providers, trade bodies and the public discussed the Green Paper issues with Ministers and senior officials. I encourage anyone interested to send in their views on the issues outlined in the Green Paper before the consultation period ends on 31 March 2011.
Paul Maynard
Can the Minister give me an assurance that he will give due weight to the need to have a steady and constant stream of graduates in the complex scientific disciplines that underpin the research and development work on which the future of our defence industry rests?
Peter Luff
I am delighted to give my hon. Friend precisely that assurance. I am constantly amazed and delighted by the excellent work done by our scientists. I am in regular discussions with my colleagues in other Departments to ensure precisely that outcome, and he is right to highlight its importance.
Mr Bob Ainsworth (Coventry North East) (Lab)
Does the Minister share with his colleagues in industry his plans to cut the science and technology budget by £80 million? Will he tell the House how much impact that will have on our future ability to develop military capability?
Peter Luff
It grieves me that the right hon. Gentleman, whom I hold in considerable regard and esteem, should ask such a question after the monstrous slashing of the science budget under the previous Government. Last year alone, £100 million was taken from the science budget by his party and his Government. I am glad to tell him that the science budget has been largely protected—[Interruption.] It has been largely protected from the massive problems that we inherited from him and his colleagues on the Opposition Front Bench. The budget will rise in cash terms over the spending round period. That is a remarkably successful outcome, and I am delighted by and proud of it.
Mark Menzies (Fylde) (Con)
Is the Minister in a position to update the House on the Government’s proposals to support the unmanned aerial vehicles programme, because that has a direct link to the skills that my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) spoke about?
Peter Luff
My hon. Friend is right to highlight the importance of protecting skills in the fixed-wing sector in general. I cannot give him that update at present, but good work is proceeding in this area and there are some very interesting things that I hope to report to the House in the relatively near future.
Michael Dugher (Barnsley East) (Lab)
At last week’s consultation conference on the Government’s Green Paper, which was hosted by the Minister, Mr Neil Stansfield, the head of security and counter-terrorism, science and technology at the Home Office, warned the Government of the dangers of taking equipment “capability holidays”, and argued that it is not possible to dip in and dip out. In light of that, do the Government think that it is wise to take a nine-year capability holiday in carrier strike, a decision that the noble Lord Ashdown described at the weekend as “illogical”?
Peter Luff
They just don’t get it, do they? We do not wish to have that capability gap, but were forced to take additional risks in the defence budget because of the mess we inherited from the Labour party. I regret that and do not welcome it, but it is a risk that we have to take.
Dr Julian Huppert (Cambridge) (LD)
4. What assessment he has made of the implications for his Department’s policies of proposals for further regulation of the international trade in arms; and if he will make a statement.
The Minister for the Armed Forces (Nick Harvey)
We strongly support proposals for an arms trade treaty. It should reduce the proliferation of conventional weapons and technology in unstable regions. By agreeing and implementing criteria that set high standards for the export of conventional weapons and technology, the Government maintain a rigorous and transparent arms export control system, whereby all export licence applications are assessed case by case against the consolidated EU and national arms export licensing criteria. The arms trade treaty will better regulate the international trade in conventional weapons and contribute towards preventing conflict, which is a key interest for the Department.
Dr Huppert
Our Government should be congratulated on their strong role in the international arms trade treaty talks in New York last week, which will lead to a great improvement around the world. However, does the Minister accept that sales of British defence and security equipment, licensed under this Government and the previous Government, to countries such as Libya and Bahrain show that we need to take a far more careful look at our exports, as well as advising the rest of the world?
Nick Harvey
I agree with my hon. Friend that the progress towards an arms trade treaty is encouraging. The recent preparatory committee meeting certainly went well. As I have said, the UK maintains rigorous controls. Clearly, the changing political situation means that we will have to monitor sales to various countries far more closely. When considering future export licensing applications, we will follow the terms of the newly agreed UN arms embargo in the case of Libya. In terms of other countries, such sales have been going on for some time, as my hon. Friend said, but I am pleased to say that there have been no recent sales to Bahrain, for example.
Mr John Spellar (Warley) (Lab)
We should all welcome the advances towards an international treaty. However, I urge the Minister to point out to the hon. Member for Cambridge (Dr Huppert) the huge importance of the British aerospace industry to the economy not only of the country, but of the regions where it employs many thousands of skilled workers. In that context, the criteria for deciding to whom we sell should be current criteria. For example, we should consider the huge advances made in Indonesia under President Yudhoyono, not only in its economy, but in human rights and democracy in that country. Will there be an up-to-date assessment of which countries are appropriate?
Nick Harvey
We keep under constant review the progress made in different parts of the world, and apply that against the criteria. I assure the right hon. Gentleman that the Government recognise the significance of defence exports and the rigorous controls that are in place. Exports bring great value to the economy, industry and defence. They contribute not only to our defence diplomacy, but to the interoperability of our systems with those of our allies around the world.
Julie Hilling (Bolton West) (Lab)
5. How much of the sum allocated by his Department to the Trident replacement concept phase has been transferred from its budget for the assessment phase.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
The concept phase for the programme to replace the Vanguard submarine was extended to allow potential designs to be developed more fully, and to allow the value for money of the programme to be reviewed. The previous Government approved a sum of about £255 million for that extension, and this January the coalition Government authorised an additional sum of about £25 million.
Julie Hilling
On 19 October last year, the Prime Minister said that
“a proper full replacement of Trident is the right option for the future.”—[Official Report, 19 October 2010; Vol. 516, c. 805.]
However, on 10 March, the Liberal Democrat chairman, the hon. Member for Westmorland and Lonsdale (Tim Farron), said:
“I’m pretty confident there will not be a full replacement.”
Will the Minister please tell us what the formal, agreed coalition Government policy is on Trident replacement?
Peter Luff
The coalition Government are committed to the replacement of the Trident submarine, but our Liberal Democrat colleagues have the right to argue another position.
Mr Matthew Offord (Hendon) (Con)
Can my hon. Friend assure the House that the decision set out in the strategic defence and security review will not alter the nature or credibility of our nuclear deterrent, and that it will ensure that we maintain Britain’s ultimate insurance policy?
Peter Luff
I am delighted to give my hon. Friend that categorical reassurance.
David Mowat (Warrington South) (Con)
6. What recent representations he has received on the acceptance by licensed premises of his Department’s form 90 as a means of identification.
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
Since this Government came into office, the Ministry of Defence has received a number of letters from Members of Parliament, including my hon. Friend, and from the public concerning the use of MOD form 90 as a means of identification for non-official purposes. I am delighted to confirm that we have now agreed to a change in policy, allowing service personnel to use their service identity card as proof of age, and have written to the relevant trade associations encouraging their members to accept it.
David Mowat
I thank the Minister for the answer and for the support that he has given my constituent, ex-Coldstream Guard Lance Reah, in his campaign on the matter over the past year. Does my hon. Friend agree that the change will have a big impact on the morale of our soldiers, and that the fact that the Opposition failed to make any progress on the matter in 13 years demonstrates that their actions do not match their words?
Mr Robathan
I can confirm to my hon. Friend that when I was serving in the Coldstream Guards it was a matter of some upset when young-looking soldiers who were prepared to lay their lives on the line were denied entry to pubs. I pay tribute to my hon. Friend for his campaign, and I am particularly pleased to see that I am on the front of “Warrington Matters” in connection with it. I do not think the photograph of me is very flattering, though.
Dr Julian Lewis (New Forest East) (Con)
7. What progress he has made on the implementation of the Trident replacement programme.
The Secretary of State for Defence (Dr Liam Fox)
The programme to replace the Vanguard submarine completed the initial concept studies, and we expect an announcement on initial gate approval in the coming weeks. There remain ongoing discussions, which have simply taken longer than it was anticipated a few months ago. It is important, given the size of the project, that we get the decision right.
Dr Lewis
At a press conference organised by the anti-nuclear deterrent front organisation, the British American Security Information Council, a Liberal Democrat Defence Minister stated that a very thin paper trail had led to the last Government’s decision to renew Trident. Does my right hon. Friend agree that the White Paper produced by his Department and the last Government was actually a first-class piece of work, was recognised as such by my right hon. Friend who is now Prime Minister and gave every good argument for why we went into the Division Lobby with the Labour Government to support that renewal?
Dr Fox
The White Paper was a thorough piece of work. It was the basis on which the House made a considered decision on the issue, and I still believe that for the long-term well-being and security of the United Kingdom, a continuous at-sea, submarine-based, minimum-credible nuclear deterrent in the form of the replacement for the Trident programme is the best way forward.
Jeremy Corbyn (Islington North) (Lab)
There seems to be a non-sequitur on the funding of the construction of this new weapon of mass destruction. In answers to me, the Secretary of State has pointed out that £300 million has been spent on advance orders for new steel and other things. In answer to my hon. Friend the Member for Bolton West (Julie Hilling) a few moments ago, however, the Government talked of a figure of £25 million. Where exactly has the authority come from, other than the honeyed words “custom and practice”, for the expenditure of apparently up to £1 billion on preparation for the development of this new weapons system?
Dr Fox
On the broad picture, if we choose to go ahead on the dates set out since the White Paper—we have changed them slightly since coming into government —long-lead items need to be ordered. The Government have set out clearly that we believe that that is the best course for the UK. The main gate decision will be taken some time after 2015.
Angus Robertson (Moray) (SNP)
Will the Secretary of State confirm whether UK nuclear submarines rely on back-up power supplies to run their coolant pumps, just like Japanese nuclear power stations? Is that why Commodore MacFarlane, the defence nuclear safety regulator, recently said that UK submarine reactor safety falls
“significantly short of benchmarked…good practice”?
Dr Fox
One decision in the Trident replacement will be whether we move to pressurised water reactor 3 for improved nuclear safety. The Government’s view is that that is the preferred option, because those reactors give us a better safety outlook. That is a debate on both sides of the Atlantic, but we believe that in terms of safety, the case is very clear-cut.
Harriett Baldwin (West Worcestershire) (Con)
8. What recent assessment he has made of progress in the reform of NATO.
The Parliamentary Under-Secretary of State for Defence (Mr Gerald Howarth)
The UK is a leading proponent of reform in NATO. Encouraging progress has been made over the past year, with agreement on streamlining NATO’s command structure and supporting agencies and improvements to its financial management. However, swift implementation of the reforms will be key, as my right hon. Friend the Secretary of State made clear at the meeting of NATO Defence Ministers last week.
Harriett Baldwin
In addition to those reforms, the NATO Parliamentary Assembly has the capacity to help with democratic institution-building in countries such as those in north Africa which we hope are emerging into stronger parliamentary democracies. Did the Minister’s discussions with NATO involve those capabilities?
Mr Howarth
I pay tribute to the NATO Parliamentary Assembly—indeed, I was speaking earlier to the right hon. and learned Member for North East Fife (Sir Menzies Campbell) who leads for the UK on that, and I would very much like to meet other Assembly representatives. However, I ought to point out that NATO is principally a military alliance. As my right hon. Friend the Secretary of State made clear last week, three principles will guide any intervention in Libya: demonstrable need, a clear legal mandate, and solid support from the region. That is the policy that NATO has adopted.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Does the Minister agree that NATO reform would be pretty meaningless unless we can convince our fellow NATO members to step up to the plate and spend 2% of gross domestic product on defence?
Mr Howarth
I have to agree wholeheartedly with the hon. Lady. That point has been made by the NATO Secretary-General to those recalcitrants, and by my right hon. Friend the Secretary of State to his counterparts. She is absolutely right and I am very pleased to support her.
Robert Halfon (Harlow) (Con)
9. What his policy is on cyber-security in the defence estate; and if he will make a statement.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
12. What his policy is on cyber-security in the defence estate; and if he will make a statement.
The Minister for the Armed Forces (Nick Harvey)
As we set out in the strategic defence and security review, we attach a high priority to the cyber-defence of our systems. Since I last updated the House in December, we have made considerable progress in this area. Our new global operations and security control centre is now up and running, and we have commissioned a new monitoring system to detect cyber-attacks against our defence systems. We have also appointed a very senior military officer to lead a defence cyber-security programme to transform our approach over the next four years and to meet our SDSR commitments. The House will understand if I do not comment further on the detail of the measures we take to protect our systems, but we are not complacent—we must outmatch a rapidly changing threat.
Robert Halfon
Is the Minister aware of the concerns expressed by Dr Kim Howells, former Chairman of the Intelligence and Security Committee, regarding the close links between BT and the Chinese telecoms firm, Huawei, which has close links to the red army? Does the Minister agree that that could make us more vulnerable to cyber-attack from China, and what steps can he take to reduce that risk?
Nick Harvey
The recent Green Paper on equipment, support and technology identified cyberspace as both one of the benefits and one of the risks of the modern world. We are developing a joint approach with industry because of our mutual reliance on networks, which gives us the opportunity to discuss with BT and others both those benefits and the risks to which the hon. Gentleman alludes.
Geoffrey Clifton-Brown
Given that the important threat from cyberspace affects both the private and public sectors, what steps is my hon. Friend taking to encourage innovative solutions from the private sector to help the public sector?
Nick Harvey
We have started a relationship with the private sector, and there has been an initial meeting with private sector leaders at Downing street. It is essential that we have the maximum co-operation between the private and public sectors, because many of the networks on which public services depend are managed under contract by the private sector. It is also essential that there is good international engagement with our allies, and there will be new memorandums of understanding with some of them shortly.
Chris Bryant (Rhondda) (Lab)
In the light of allegations that I gather will be made tonight on the “Panorama” programme that the News of the World was hacking into mobile phones and computers used by the Army in Northern Ireland, will the Minister ensure that the security of mobile telephones used by the Army will be protected from newspapers as well as from other agents?
Nick Harvey
The hon. Gentleman makes a good point, and we will do everything we can to ensure the maximum security of all our communication methods.
Mr Russell Brown (Dumfries and Galloway) (Lab)
With the reporting of an ever increasing number of cyber-attacks and the increasing costs of such attacks, will the Minister confirm that the £650 million announced in the SDSR for cyber-security has been ring-fenced for new capabilities? Will he also confirm the time scale for full delivery of those capabilities?
Nick Harvey
The money to which the hon. Gentleman alludes covers the whole SDSR period. It is new money intended to help prime the efforts of both the public and private sectors, as I said a moment ago, to ensure that the nation as a whole has in place the maximum possible defences over the next few years. It is a fast-changing scene, and it is essential that we keep up with the ever changing threat.
Mr David Ruffley (Bury St Edmunds) (Con)
10. What progress his Department has made on the joint search and rescue harmonisation project; and if he will make a statement.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
My right hon. Friend the Secretary of State for Transport announced the cancellation of the previous procurement process on 8 February. The Department for Transport and the Ministry of Defence are now considering the potential procurement options to meet the future requirements for search and rescue helicopters in the United Kingdom. We will make a further announcement once a way forward has been agreed.
Mr Ruffley
I know that the Minister is aware of the great concern in the search and rescue service, particularly at Wattisham in my constituency. Does he agree that a private finance initiative route might not necessarily be the most cost-effective way forward in reforming such services?
Peter Luff
I am delighted to pay tribute to the strong and close interest that my hon. Friend has taken in this issue, not least because of his close constituency interest. I can confirm that we are beginning again with a blank sheet of paper. We have learned the lessons from the previous process, which has been so unfortunately terminated, and will look again at what is the correct procurement route. That will include a thorough review of whether PFI is right for this particular procurement.
Sir Alan Beith (Berwick-upon-Tweed) (LD)
What is the mechanism for making the decision? Would it not make more sense if the Department for Transport acted as the purchaser and the MOD put forward a bid to continue the involvement of the RAF and the Navy in the provision of the service?
Peter Luff
I understand the interesting point that my right hon. Friend makes. The present intention is that current procurement arrangements should be stuck to, and I have every confidence that the defence, equipment and support organisation at Abbey Wood can do an excellent job of it this time.
Mr Alan Reid (Argyll and Bute) (LD)
11. What plans he has for the future of RAF Machrihanish; and if he will make a statement.
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
The disposal of RAF Machrihanish was announced in October 2008, and it will be sold as soon as possible. We are currently committed to working with the local community body to achieve a sale under Scottish community right to buy legislation. A final decision from the Scottish Executive on whether the community can proceed is awaited.
Mr Reid
As the Minister will know, the main problem is the age and condition of the water supply system. I hope that the MOD will continue to work with the Scottish Government, the local council and the Machrihanish airbase community company to ensure that it will be viable for the community company to buy the base and use the facilities to regenerate the local economy. This is an ideal big society project. Will he meet me to discuss the matter further?
Mr Robathan
I would be very happy to meet the hon. Gentleman. He is quite right. For more than two years, the MOD has been trying to dispose of this site, and the sooner we can do so the better for all concerned.
Sir Menzies Campbell (North East Fife) (LD)
The Minister will know that Machrihanish is not the only Royal Air Force base in Scotland facing uncertainty. Is he aware that aircraft have yet again had to be scrambled from RAF Leuchars to protect our airspace from unwelcome intrusion? Will he therefore ignore the siren voices apparently emanating from the Treasury which would put both the base and that capability at risk?
Mr Speaker
Order. I know that the Minister will want to focus his answer on the question on the Order Paper, while skilfully referring to the concerns expressed by the right hon. and learned Gentleman.
Mr Robathan
I will concentrate on the disposal of Machrihanish, but also say—if I may, Mr Speaker—that the future of bases in Scotland, about which the right hon. and learned Gentleman is rightly concerned, is being looked at carefully, and announcements will be made soon.
Laura Sandys (South Thanet) (Con)
13. What resources his Department has allocated to strategic planning in 2010-11.
The Secretary of State for Defence (Dr Liam Fox)
At departmental level, strategic planning is overseen by the director general, strategy. He has 51 military and 75 civilian staff, and an overall budget for 2010-11 of some £12 million. If my hon. Friend is interested, I recommend that she should read the excellent report by the Select Committee on Administration.
Laura Sandys
I have certainly read the executive summary. Does the Secretary of State agree that we should continue to maintain a focus on building our risk assessment strategic planning and scenario capacity, to ensure that we can anticipate the future in a changing environment and the threats to our national interest?
Dr Fox
My hon. Friend is entirely right, and that is why in the strategic defence and security review we chose an adaptable posture for the UK’s defence and security. We specifically rejected the concepts of fortress Britain or an over-committed Britain, which would result in a lack of agility. The events of recent days have shown how unpredictable the external environment can be. That is why we were correct to maintain that flexibility and agility in our armed forces.
Mr Kevan Jones (North Durham) (Lab)
A week ago 50 senior military figures called for the SDSR to be reopened. They signed a letter saying that the SDSR
“seems to have been driven by financial rather than military considerations”.
However, when the Secretary of State gave evidence to the Defence Select Committee last week, he refused to deny reports that the Ministry of Defence was facing another £1 billion of cuts. Is it not becoming clear that it is the Chancellor of the Exchequer who is in the driving seat in the MOD, not the Secretary of State?
Dr Fox
If we have financial difficulties in the MOD or elsewhere in the Government, we know where they came from. When we look across what we do in the Ministry of Defence—and, indeed, in the rest of Government —we look to see what risks the UK may face and how we might best mitigate them. We have decided that the United Kingdom needs an adaptable posture, and we have therefore decided to build flexibility into the programmes leading to Future Force 2020, which I believe provides the best security for this country.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
14. If he will assess the merits of placing currently unrequired defence equipment in reserve.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
A wide range of options are routinely considered for all defence equipment that is not required for operational use. They include extended readiness, long-term preservation, sale and disposal. In relation to preservation, we take into account factors such as the threats against which regeneration of the capability would be predicated; the cost and practicality of preservation arrangements, which may be significant; and the lead time and costs for ensuring that suitably trained personnel could be made available to operate the equipment.
Gordon Henderson
I welcome the Minister’s answer, but I am a bit concerned about cost. The shipping industry often lays up ships at minimal cost for a number of years, using small maintenance teams and dehumidifiers. Given recent events in north Africa, does my hon. Friend agree that keeping Britain’s reserve defences strong enough to meet unexpected challenges ought to be a priority, especially if it can be done at minimal cost to the taxpayer?
Peter Luff
Nothing would give me and my ministerial colleagues more pleasure than to be able to keep all decommissioned equipment in storage, but we can do so only when it makes sense financially and strategically. Sadly, it is not as simple as switching off the engine and placing the kit in an air-conditioned environment. We need to be able to maintain the equipment, retain and maintain stores, have personnel trained to use it and—something my hon. Friend may not be aware of—pay the cost of capital needed to hold it in reserve. Sadly, it is more complicated in the MOD than it is in the private sector.
Toby Perkins (Chesterfield) (Lab)
15. What assessment he has made of the effectiveness of his Department’s contribution to the operation to evacuate UK nationals from Libya; and if he will make a statement.
The Secretary of State for Defence (Dr Liam Fox)
My right hon. Friends the Prime Minister and the Foreign Secretary have already paid tribute to the members of the armed forces and the diplomatic service and all those who put themselves in harm’s way to help our people to leave safely. I would like to add my thanks to all those involved, in particular the members of the armed forces and civilian personnel, who demonstrated courage and professionalism in the co-ordinated effort to rescue British and other nationals from the crisis. The Ministry of Defence utilised a range of assets to support the Foreign Office-led operation to recover UK and other citizens from Libya. We successfully transported 926 entitled persons, of whom 286 were British nationals.
Toby Perkins
I would like to associate myself with the Secretary of State’s comments on the work done by our armed forces in Libya. Will he tell the House who in the Ministry of Defence authorised the use of special forces in the operation that started on 2 March, and what advice led to that decision?
Dr Fox
The Foreign Secretary has already set out the circumstances in which—[Interruption.] I have no intention of commenting further on special forces. I am glad that the hon. Gentleman has joined me in thanking those who took part in that work. I visited HMS Cumberland in Malta at the weekend to thank on behalf of the Government and the House of Commons the crew for their tremendous work. The fact that we were able to take 926 citizens, of whom only 286 were British, shows just how far we were ahead of the curve and doing our utmost to help those of other nations as well.
Mr James Gray (North Wiltshire) (Con)
Does the Secretary of State agree that the successful evacuation of several hundred of our own nationals, together with large numbers of overseas nationals, with not a single casualty among those people or our armed services, should be an occasion for rejoicing and congratulation, rather than for the negative party politicking that we have heard from the Opposition?
Dr Fox
It is interesting to compare the coverage that the operations led by the United Kingdom, including the command and control organisation in Malta, gets in the United Kingdom with the coverage that we get in other countries in Europe and beyond, where there cannot be high enough praise for our armed forces and for the organisation put forward by the United Kingdom. Perhaps this is a time to praise our people rather than to condemn them.
Thomas Docherty (Dunfermline and West Fife) (Lab)
18. What assessment he has made of the likely date for HMS Illustrious to return to service; and if he will make a statement.
The Parliamentary Under-Secretary of State for Defence (Peter Luff)
HMS Illustrious is scheduled to return to operational service, to assume her new landing platform helicopter role, in spring 2012. I should add that she has had 180 days’ notice to move, and that that period can be reduced, should the need arise. She will be supplementing the capability provided by HMS Ocean.
Thomas Docherty
I am sure the House will agree that the fact that HMS Illustrious is coming back into service ahead of schedule is a testament to the professionalism of the work force and the management, led by Mike Pettigrew. Will the Minister find the time to come to the dockyard to see HMS Illustrious before she sets sail, so that he can see yet again why the best place for the refit and refurbishment of the Queen Elizabeth class carriers is Scotland, rather than France?
Peter Luff
Although it is far too early to decide where that work will be conducted, I would be delighted to try to accommodate such a visit in my diary, if that proves possible. The hon. Gentleman’s constituents have certainly done a first-rate job.
Stuart Andrew (Pudsey) (Con)
19. What recent assessment he has made of the implications for his Department’s policies of the security situation in the middle east and north Africa.
The Secretary of State for Defence (Dr Liam Fox)
In response to the changing security situation in the middle east and north Africa, work is under way to understand the implications that the changing environment will have on our policies in the wider region.
Stuart Andrew
I am grateful to my right hon. Friend for that answer. Will he give an assurance that our regional basing and overflight rights will ensure that we can effectively deploy ground attack aircraft in the region if necessary?
Patrick Mercer (Newark) (Con)
The Secretary of State has rightly focused on Libya and the excellence of our operations there, but can he assure the House that his policies, in regard to resource and planning, are also focused on what might happen in other north African countries if evacuations or operations were required there?
Dr Fox
My hon. Friend is of course correct. We are looking not only at what is happening in Libya but at other countries in the region where there has been instability in recent times. They include countries such as Yemen, where we already have forward positioning of assets, should we be required to evacuate any British nationals.
Miss Anne McIntosh (Thirsk and Malton) (Con)
20. What recent representations he has received on the implications for airfields on the defence estate of the outcome of the strategic defence and security review; and if he will make a statement.
The Minister for the Armed Forces (Nick Harvey)
I have received a considerable number of representations from hon. Members, Ministers and Members of the devolved Administrations, as well as from members of the public. I have regular discussions with Government colleagues and I will make an announcement as soon as I am in a position to do so.
Miss McIntosh
Will the Minister accept another representation from me about the excellence of public service shown by RAF Linton at times of public tragedy, in respect of floods on a number of occasions and the Selby rail crash in particular? Will he give an assurance that the future of RAF Linton will be secure, in training RAF pilots in the future?
Nick Harvey
The strategic defence and security review said that RAF Kinloss and two other RAF bases would close. We are in the middle of a comprehensive basing study, covering the needs not only of the RAF but of the Army in the future. It is a complex piece of work. As soon as we are able to balance all those competing requirements, we will make a full statement to the House.
Jack Dromey (Birmingham, Erdington) (Lab)
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 the military tasks, and that we honour the armed forces covenant.
Jack Dromey
Will the Secretary of State explain in detail and publish in full his views on the unfunded liability—supposedly left by the last Labour Government —on equipment, procurement and support programmes over the next 10 years?
Dr Fox
I will not be the only one to set out that information, as I am sure the National Audit Office and the Public Accounts Committee as well as the Select Committee on Defence will want to make it perfectly clear. I have made it clear, including in the evidence I gave to the Select Committee last week, that I would like to see greater transparency in how the Department makes its information available. As for the unfunded liability we inherited from the previous Government and the damage it has done to our ability to plan for the future—
Dr Fox
The hon. Gentleman asks where the £38 billion has gone; he should know; he left it behind. It was his Government who were responsible for it. We shall diminish that unfunded liability and put the Department back on a sound footing—something that Labour Members were incapable of doing.
Dr Julian Huppert (Cambridge) (LD)
T2. The United Nations Secretary-General’s special representative on children and armed conflict recently reported on the Afghan national police’s recruitment of children to fight and on the sexual exploitation of young boys by Afghan police and military commanders. Given this disturbing evidence, will the Secretary of State explain what guidance is given to British military and police trainers when they encounter children in the Afghan national security forces?
The Minister for the Armed Forces (Nick Harvey)
Afghan civilians must be 18 or above to join either the Afghan national police or the army. That is checked as rigorously as possible through the much-improving recruitment process. If there is any allegation of wrongdoing brought to the attention of the British forces, it will be taken extremely seriously and reported to the Afghan commanders. We would unreservedly condemn any act of abuse or brutality. The Afghan Ministry of the Interior addresses children’s rights issues and certainly recognises 18 as the age of majority. If there are any specific allegations, he should—
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
T3. I am not sure that the Secretary of State’s earlier answer was entirely clear, so perhaps he will try again. Will he tell us who specifically in his Department authorised the involvement of special forces in Libya on 2 March?
Dr Fox
I have already made it clear that the Foreign Secretary set out the exact details, as far as we are able to disclose them, on that particular operation. When force protection is to be offered to the sort of diplomatic mission that was undertaken, it is quite usual for the Ministry of Defence to be asked and to agree to do it.
Mr Mark Williams (Ceredigion) (LD)
T5. The Secretary of State and his Department regularly meet the Royal British Legion and other veterans organisations. At those meetings, how much emphasis is placed on the fact that the military covenant is enshrined in law and, critically, on determining in what form and when that military covenant will be met?
The Parliamentary Under-Secretary of State for Defence (Mr Andrew Robathan)
I last met the director general of the Royal British Legion last Monday to discuss this very matter. There are many organisations involved and they all have their views to put forward. I think that the covenant is proceeding well. As the hon. Gentleman said, it has been written into law in the Armed Forces Bill and I hope that he will speak further about it on Report and Third Reading when they happen, shortly.
Gemma Doyle (West Dunbartonshire) (Lab/Co-op)
Ministry of Defence police do an essential and difficult job with a great deal of professionalism and expertise, but they face a potential cut of one third in their numbers. That would mean more than 1,000 officers losing their jobs. What assessment has the Secretary of State made of the impact of such a drastic reduction in the number of MOD police officers on the protection of military bases?
Mr Robathan
I pay tribute to the work done by the MOD police, and the protection of military bases is of course essential. However, we are constrained by the lack of funds left behind by the last Government. [Interruption.] It is no good Opposition Members grimacing; it is true. For that reason, we are having to consider savings in all areas, and I am afraid that everyone must play their part.
Robert Halfon (Harlow) (Con)
T6. As well as supporting the movement opposing Gaddafi in Libya, what steps can my right hon. Friend the Secretary of State take to support the democratic movements in Bahrain and Yemen, especially in view of the events of recent days?
Dr Fox
I think there is a difference between the two cases that my hon. Friend has cited. There is great concern about the possibility that the collapse of the Yemeni state would lead to an increase in the influence of al-Qaeda. It is therefore of great importance to the United Kingdom’s national security that we do what we can to stabilise the situation, while ensuring that we can evacuate United Kingdom citizens safely if the regime cannot hold.
Alun Michael (Cardiff South and Penarth) (Lab/Co-op)
T4. Given that Wales contains a fifth of the United Kingdom’s population but 8% of its military population, does the Secretary of State accept that the consequences of cuts that come too fast and go too deep will affect Wales disproportionately? What will he do to ensure that loyalty is repaid not with penalties but with respect?
Dr Fox
Decisions on the footprint of the United Kingdom’s armed forces are made primarily on the basis of military effectiveness. However, notwithstanding the level of cuts that must be made in order to balance the books, I personally ascribe great importance to maintaining a footprint throughout the Union. [Interruption.] What we are hearing is a very boring record. The difference between the main parties and the nationalists in the House is that we believe in maintaining a footprint throughout the Union, whereas they do not believe in having UK armed forces at all.
Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)
T10. I am sure that the Minister will agree that while our British forces are in Afghanistan, it is important for them to contribute to the development of a strong humanitarian legacy of basic health care, education and clean drinking water for the people of Afghanistan. What steps is his Department taking, in conjunction with the Department for International Development, to help to secure that legacy?
Dr Fox
We work very closely with DFID on all those issues. As my hon. Friend correctly implies, if we are to have a sustainable legacy in Afghanistan, it cannot simply involve the strength of the armed forces or the police; there must also be strong governance and a strong infrastructure.
Nick Smith (Blaenau Gwent) (Lab)
T9. Given the consideration in recent weeks of no-fly zones over Libya, do the Government still intend to make 170 trainee pilots redundant?
Dr Fox
The number of trainee pilots is designed to mirror the number of airframes that we intend to be able to fly in future. That was set out in the SDSR. As I remind hon. Members on every occasion, one of the reasons that we are having to make reductions in the budget is the £158 billion deficit left behind by the Labour Government, on which the interest payments alone are greater than next year’s defence, Foreign Office and aid budgets put together.
Bob Russell (Colchester) (LD)
The House rightly pays tribute to our military personnel who are serving in Afghanistan. On Friday the Minister for the Armed Forces visited the Colchester garrison, where he will have seen on one side of the road former Army housing that is now social housing, on which millions of pounds are being spent by one arm of Government. Can the Minister explain why the same amount cannot be spent on housing on the other side of the road, where the fathers and husbands of military personnel in Afghanistan live?
Mr Robathan
My hon. Friend has rightly taken up this cause. We want to see all service personnel, whether single or married, in good-quality accommodation. As he will know, there is a huge backlog but we are working on it, although our work is constrained by the £38 billion deficit with which we were left. I hope very much that we shall be able to continue that work, particularly in the Colchester garrison.
Mark Tami (Alyn and Deeside) (Lab)
The Minister will be aware of the widespread concern at Defence Support Group in Sealand about ongoing job losses—and, indeed, the Government’s proposals to find a buyer for the business. Why, therefore, has he barred me from visiting the site?
Caroline Dinenage (Gosport) (Con)
Given that the Batch 3 Type 22s have recently proved their value in both evacuating British nationals and vital intelligence gathering, and that no other platforms have such persistence, would it not be prudent to keep them intact during the current uncertain times in the world?
Dr Fox
It would be very attractive to be able to maintain a great deal of capability but, sadly, we are unable to do so because of financial constraints. It would be wonderful in a perfect world for us to be able not only to retain these assets but to invest in future assets as well, but if we are to be able to make investments in the future to deal with the threats we may face, we have to disinvest from some of the capabilities of the past, albeit with regret.
Alison Seabeck (Plymouth, Moor View) (Lab)
The Secretary of State will know of the commitment of the people of Plymouth to keeping the Royal Navy at sea, using all the skills we have in Plymouth. However, we need to know what is going to happen with regard to the Type 23s and the replacement for Endurance. What is the time scale for telling the people of Plymouth whether or not any of those ships will be base-ported in our city?
Dr Fox
It gives me great pleasure to be able to commend the people of Plymouth for the great commitment they have made over many years. We will have announcements to make in the very near future on some of the issues the hon. Lady mentions, and I will ensure she is made aware of them before we make them available to others.
Mark Lancaster (Milton Keynes North) (Con)
Given the unique relationship between the sovereign and members of the armed forces, will the Secretary of State update the House on what his Department intends to do to commemorate next year’s diamond jubilee?
John Woodcock (Barrow and Furness) (Lab/Co-op)
Further to the question from my hon. Friend the Member for Bolton West (Julie Hilling), exactly how are the public supposed to maintain confidence in our programme to replace the Trident deterrent when the president of one of the governing parties is apparently given carte blanche to cheer up his battered activists by telling them it probably will not go ahead at all?
Dr Fox
The coalition agreement made it very clear that the Liberal Democrats within the coalition would be free to advocate alternatives to the replacement programme. The overall Government policy remains the replacement of the Trident programme however, and, as I said earlier today, the best solution for the United Kingdom is a submarine-based, continuously-at-sea, minimum-credible nuclear deterrent that protects the UK while contributing to overall reductions in international nuclear arsenals.
Duncan Hames (Chippenham) (LD)
It is a sorry state of affairs when calls for a no-fly zone from the interim national Libyan council are endorsed by the Arab League but the European Union fails to back them. What is the Secretary of State’s assessment of the security risk of inaction, should the international community fail to take responsibility to protect the Libyan people from Gaddafi?
Dr Fox
My hon. Friend makes a useful point. The Government’s aim is very clear: we want to see the isolation of, and a diminution in the size and effectiveness of, the regime in Libya, which we believe has lost legitimacy. The aim is for the international community to speak with a single voice, and the more we are united, the more we send a signal to Colonel Gaddafi that the game is up and he has no friends and no future in Libya or beyond.
John Cryer (Leyton and Wanstead) (Lab)
Will the Secretary of State now answer the question from my hon. Friend the Member for Islington North (Jeremy Corbyn): how much has so far been spent on the Trident replacement?
Dr Fox
I have set out on a number of occasions the different areas in which we spend. We have to spend in advance because there are long-lead items that need to be spent on in order to make sure we are able to take the decisions at the points we have set in initial gate, and main gate when we get to 2015.
Jack Lopresti (Filton and Bradley Stoke) (Con)
Last week, we saw evidence that Iran continues to supply the Taliban with weaponry. Has the Secretary of State had any discussions with our allies to ensure that weapons intended for the Taliban are being actively intercepted?
Dr Fox
At the weekend’s NATO summit in Brussels and at the subsequent international security assistance force meeting we raised with our allies our concerns about the arming of the Taliban by Iran. This is a clear example, if we needed any, of the potentially malign influence that Iran can have in the region and it should be a warning to us all about its potential intent.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
I recently visited the Merseyside garrison headquarters, where I met Territorial Army soldiers. Does the Secretary of State share their concerns that changes to the home-to-duty travel allowance will mean that by 2013 a TA soldier who lives 9 miles or more from their TA centre will receive £4 less every time they attend their place of duty for training?
Dr Fox
It is with a great deal of regret that one of the savings we are having to make in the Ministry of Defence is in the level of allowances available to service personnel. However, I must say to the hon. Lady that financial remuneration and allowances will be part of the picture of the wider review being undertaken of the Territorials and the reserves. We will want to look at that in the totality of the review of the reserves to make sure we get better value for money and more effective reserves.
Christopher Pincher (Tamworth) (Con)
As my right hon. Friend concludes his consultation on the security and technology Green Paper, will he ensure that he does not make the previous Government’s mistake of allowing MOD prime contractors to obstruct small and medium-sized enterprises in getting their fair share of the defence procurement pie?
Dr Fox
It has been an aim of the Government from the outset when looking at defence technology and the procurement process to ensure that SMEs are given more than a fair crack of the whip. For too long, this has been about the prime contractors, with too little consideration given to the SMEs, which represent in this country not only vibrancy in technology and innovation but a major source of employment.
Paul Flynn (Newport West) (Lab)
On the arms trade, does the Secretary of State agree with Mr Tom Porteous of UK Human Rights Watch that our country is being made to “look stupid” because of the conduct of our special trade representative? Should we not be employing trade representatives on the basis of their knowledge of industry, ethics and human rights, rather than on the hereditary principle?
Dr Fox
Mr Speaker, you made it very clear last time that because members of the royal family cannot answer back we should be very careful what we say in this House about them. It is fair to say that not only do we follow the legislation set down by the previous Government, but we have some of the tightest regulations on arms trading in the world.
Henry Smith (Crawley) (Con)
We are entering a time of increasing geomagnetic solar flare activity. Will the Secretary of State say what mitigating effects are being considered to protect military communications?
Japan and the Middle East
(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Prime Minister (Mr David Cameron)
Before I turn to discussions at last week’s European Council, I am sure that the whole House will wish to join me in sending our deepest condolences to the Japanese people following the earthquake and tsunami that struck their country on Friday. We are all deeply shocked and saddened by the devastation that we have seen, and by the loss of life, the full scale of which will take many days, and possibly weeks, to comprehend. I am sure that the thoughts of everyone in this House, and indeed of everyone in our country, are with the Japanese people—we stand with you at this time.
As yet, there are no confirmed British fatalities, but we have severe concerns about a number of British nationals. I have spoken with our ambassador in Japan, who was one of the first to get to the affected region, and his team are working around the clock to help British nationals. Over the weekend we have had three rapid deployment teams of staff operating in the worst-affected areas, and they will be augmented by a further team that will be arriving in Tokyo this afternoon and advancing to the north-east of the country tomorrow. They will help to find out information for the families who are rightly very worried about relatives potentially caught up in this tragedy. We have set up a helpline for these families. It has taken several thousand calls and we are following up each lead. We have, of course, offered humanitarian assistance to the Japanese Government and we stand ready to assist in any way that we can. At their request, a 63-strong UK search and rescue team, which includes medical personnel, has already been deployed and it arrived in Japan yesterday morning.
The whole House will have been concerned at the worrying situation at the nuclear power station at Fukushima. The Japanese Government have said that the emergency cooling systems at three reactors at the plant have failed because of the tsunami and there have been explosions due to the release of hydrogen gas at both the Fukushima 1 and Fukushima 3 reactors. This is clearly a very fast-moving and rapidly changing picture and the Japanese Government are doing everything they can to manage the situation they face. We will keep the House updated. We are in close touch with the Japanese authorities and have offered our nuclear expertise if we can help to manage this very serious incident.
The Energy Secretary has asked our chief nuclear inspector, Dr. Mike Weightman, for a thorough report on the implications of the situation in Japan. The UK does not have reactors of the design of those in Fukushima and neither does it plan any; nor, obviously, are we in a seismically sensitive zone. But if there are lessons to learn, we must learn them.
Cobra has met several times over the weekend and again this morning, and we will keep our response to this tragedy and our support for Japan and the wider Pacific region under close and continuous review. Of course, that goes for our travel advice as well.
The devastation we are witnessing in Japan is of truly colossal proportions. It has been heartbreaking to listen to people who have had all their relatives, their friends, their possessions and their homes simply washed away. Those who have survived will not recognise the place where their homes once stood. We do not yet know the full and dreadful death toll, nor can anyone truly understand the impact that these events will have, but Japan and the Japanese people are a resilient and resourceful nation. Britain and the British people are your friends and we have no doubt you will recover.
Let me turn to Friday’s special European Council and north Africa. The reason for having this Council was twofold: first, to make sure Europe seizes the moment of opportunity to support the Arab people in north Africa and across the middle east in realising their aspirations for a more open and democratic form of government; and, secondly, to address the difficult situation in Libya. The Council addressed both issues and I will be frank with the House about where progress has been made and where more needs to be done.
First, on supporting the building blocks of democracy in the Arab world, the aim should be a big bold offer to those countries in our southern neighbourhood that want to move towards being more open societies. There was some real success on this point. The Council declaration talks of a “new partnership” founded on
“broader market access and political cooperation”
with an approach that gears support to those countries where progress is being made in meeting their citizens’ aspirations. That could be so much better than the failed approach of the past, but now Europe needs to follow through on its declaration with a real and credible offer to those countries. In my view, it must be based on the prospects of deeper economic and trade integration with the EU and free movement of goods, services and investment.
Turning to Libya, it was right for the EU to meet and discuss how we can work together to deal with the crisis. There has been considerable international co-operation on evacuation and I will bring the House up to date on the figures. We now have got more than 600 British nationals out and assisted more than 30 other nationalities. About 220 British nationals remain in Libya. The overwhelming majority of these are long-term residents and many, of course, are dual nationals or spouses of Libyan nationals. Many of that group have told us that they wish to remain in Libya, but a number of other British nationals are now contacting us for the first time. We will stay in contact with these people and continue to assist those who wish to leave.
We have also been at the forefront of the response to the humanitarian situation in Libya and on its borders. We remain deeply concerned by the situation for people inside Libya caught up in fierce fighting and the Development Secretary has repeatedly called for the protection of civilians and for unfettered humanitarian access to those in need.
On the subject of further isolating the Gaddafi regime, the European Council also made some progress. Two weeks ago, we put in place a tough United Nations Security Council resolution and agreed in record time asset freezes, travel bans and an arms embargo, as well as referral to the International Criminal Court. At this European Council, all leaders were united, categorical and crystal clear that Gaddafi must “relinquish power immediately.” We widened the restrictive measures against individuals close to Gaddafi and strengthened the financial sanctions on the regime, adding the Libyan Central Bank and the Libyan Investment Authority to the EU asset-freezing list. In doing so, the UK has increased the total of frozen Libyan assets in this country from £2 billion to £12 billion. We now need to make clear the next measures in terms of putting further pressure on the regime and planning for what other steps may be necessary.
Two weeks ago, I told the House that I believed contingency planning should be done, including plans for a military no-fly zone. NATO is carrying out that work. As we have said before, a no-fly zone would need international support based on three clear conditions: demonstrable need, regional support and a clear legal basis. In recent days, first the Gulf Co-operation Council and now the Arab League have called for a no-fly zone. In terms of the European Council, of course, the EU is not a military alliance and there is always a hesitation about discussing military options, but the Council expressed its
“deep concern about attacks against civilians, including from the air”
and agreed that all member states should examine “all necessary options” for protecting the civilian population, provided there was a demonstrable need, a clear legal basis and support from the region. That was some progress, especially compared with where Europe was in advance of Friday’s Council, but we need to continue to win the argument for a strong response in the international community—Europe included. Along with others in the United Nations Security Council, the UK is following up urgently the lead given by the Arab League by drafting a resolution that sets out the next measures that need to be taken, including the option of a no-fly zone. Included in the resolution, in our view, should be much tougher measures against mercenaries and the states from which they come, as well as against others who are attempting to breach the sanctions and assist Gaddafi.
Every day, Gaddafi is brutalising his own people. Time is of the essence and there should be no let-up in the pressure we put on this regime. I am clear where the British national interest lies. It is in our interest to see the growth of open societies and the building blocks of democracy in north Africa and the middle east. When it comes to Libya, we should be clear about what is happening. We have seen the uprising of a people against a brutal dictator and it will send a dreadful signal if their legitimate aspirations are crushed, not least to others striving for democracy across the region. To those who say it is nothing to do with us, I would simply respond, “Do we want a situation where a failed pariah state festers on Europe’s southern border, potentially threatening our security, pushing people across the Mediterranean and creating a more dangerous and uncertain world for Britain and for all our allies as well as for the people of Libya?” Of course we do not want that, and that is why Britain is and will remain at the forefront of the response to this crisis. I commend this statement to the House.
Edward Miliband (Doncaster North) (Lab)
May I start by associating myself with the Prime Minister’s remarks about the Japanese earthquake and tsunami? The tragedy that has hit that country is of almost unimaginable horror and scale, as all of us will have felt after seeing the pictures on our television screens over the weekend. We fully support the Government in their efforts to help the Government of Japan in their hour of need and, indeed, to help Japan’s people.
This is clearly an anxious time for the friends and family of UK nationals and I thank the Prime Minister for what he said about our consular activity. I am sure that consular staff will be working around the clock to deal with the inquiries that they receive. Let me also associate myself with the Prime Minister’s remarks about the work of British search and rescue teams.
On nuclear power, we should clearly see if there are lessons to be learned, but should avoid a rush to judgment given that we have a good safety record in this country. It is important not to lose sight of that.
Turning to the European Council, I want to focus on three issues: the military options available to the international community regarding Libya, the wider response to the Libyan crisis and the need to re-energise the middle east peace process. Let me take each issue in turn.
First, I welcome the clear and unequivocal statement in the Council declaration that the Libyan regime should relinquish power immediately. As the Prime Minister made clear in his statement, the situation in Libya is grave and pressing. I said, when the Prime Minister first publicly floated the idea of a no-fly zone two weeks ago, that we welcomed the possibility. It is disappointing that Friday’s communiqué did not mention it, although it is, as he has said, encouraging that the Arab League has expressed support for it. In view of the gravity and urgency of the situation, and to win greater support for the idea, it seems to us that the priority must be to translate the no-fly zone phrase into a practical plan. To that end, may I ask what progress has been made since he asked the Ministry of Defence to draw up such a plan two weeks ago? Specifically, was such a plan presented by the UK at the NATO Defence Ministers meeting last Thursday or by him at the European Council?
On the European Council, may I ask whether the ambivalence among our EU partners is based on opposition to a no-fly zone in principle or is because of practical doubts about the workability of such a proposal? Can he give us a clearer picture, because that is necessary to win broader support, of what he believes the no-fly zone would involve and, furthermore, whether it is contingent on the US Government’s participation, given that some parts of the Administration have expressed reservations about the idea?
On timing, I note that the Prime Minister repeated his statement of last week that the UK is now working on a new Security Council resolution, which I welcome. Given the urgency of the situation, to which he rightly drew attention, what is his best judgment about when such a resolution will be tabled? Above all, may I emphasise to him the importance of matching what is said in public with the diplomatic spadework needed to win international support for a practical and legal plan?
I have one more question on the military options that are available. Given the position expressed this morning by the former Foreign Secretary, the right hon. and learned Member for Kensington (Sir Malcolm Rifkind), on providing arms to some of the rebels against Colonel Gaddafi, what is the Government’s position on the legality and wisdom of that idea?
Secondly, let me turn to the other actions that we can take. I welcome what the Prime Minister said about asset freezes and sanctions. May I make a further suggestion? To maximise pressure on the regime, have the Government made any formal communication to the International Criminal Court to impress on Libyan leaders and commanders the importance of individual accountability for the commissioning and carrying out of crimes against humanity? If he has not done so—and I believe that it is open to individual countries to do this—may I suggest that he looks into the UK Government doing so?
On the humanitarian crisis, to which the Prime Minister referred, may I ask him whether the Department for International Development is planning to provide additional support to other multilateral organisations such as the World Food Programme and the United Nations High Commissioner for Refugees?
Thirdly and finally, may I discuss briefly the middle east peace process? He and I both had the chance last week to meet President Abbas during his visit to London. May I reiterate to the Prime Minister something with which I know he agrees—the central importance of not losing sight of that issue as other, more immediate crises face us. Will the Prime Minister therefore tell us what discussions took place at the European Council about how the EU can help to get the peace process back on track? In particular, what representations have been made to the United States following its recent veto of the UN resolution on settlements?
Finally, let me tell the Prime Minister that he and I are united in the view that this must be a moment when the European Union and the international community show they are more than the sum of their parts, whether it is on Libya specifically, north Africa or the middle east peace process. I hope that he and other leaders will do all they can over the coming days and weeks to put in the hard work and diplomacy that can make that happen.
The Prime Minister
I thank the right hon. Gentleman for his questions, and I particularly welcome what he said about Japan and the common ground there. On nuclear, he is absolutely right that we should not rush to judgment, but we should, as we have done, ask our experts where there are lessons to learn.
The right hon. Gentleman asked a range of questions about Libya, and let me try to take all of them. On the issue of no-fly zones, he said what support the Arab League had given, but the Secretary-General of the Arab League said very clearly:
“It is for the Security Council to take decisions as it sees fit. What we did in the Arab League is make an official request to impose a no-fly zone on military activities against the Libyan people.”
I think that that is a significant step forward. The right hon. Gentleman asked what work has been done. Obviously, work has been done in the UK to look at options on how that could be done but, crucially, the work is now being done in NATO, which is right. He asked a question about what it would involve. I am afraid that the answer is that that would depend on exactly how large the no-fly zone was, whether it was operating round the clock, which parts of the country it covered and so forth. However, it is perfectly practical and deliverable. Obviously, if it were to happen, if it is judged to have passed the milestones that we have set, it would be best if it were as widely supported as possible. It is something that no one country can do alone.
The right hon. Gentleman asked why some EU countries were more sceptical than others, and why they opposed the proposal. As he knows, 21 of the 27 are members of the NATO, which made it clear that this should be looked at. Many in Europe, as elsewhere, have made it clear that we must make sure that we learn lessons from Iraq. My argument is that no two situations are the same. We can listen to any number of experts who will warn about what happened in different places in different times, but what we are seeing in Libya is different. It is an uprising of a people against a leader, and it is quite different. No one is talking about invasions, boots on the ground and the rest of it. When a resolution should be put forward will depend on the support that can be guaranteed for such a resolution in the UN, but what has happened with the Arab League and the Gulf Co-operation Council is very encouraging.
On the question raised by my right hon. and learned Friend the Member for Kensington (Sir Malcolm Rifkind), the former Foreign Secretary, about arming the rebels, I repeat what the Foreign Secretary said this morning. We should not exclude various possibilities, and there is an argument to be made, but there are important legal, practical and other issues that would have to be resolved, including the UN arms embargo. We should also be clear that there is no single answer to speeding up the process of removing Gaddafi. That is why we should urgently be pursuing a broad range of options through the UN.
On the other actions that the right hon. Gentleman mentioned—the International Criminal Court—I will certainly look at the idea of contacting the court directly. It seems most important to me that we make the point publicly over and over again to all those people around Gaddafi, working for Gaddafi, and in his army, that they are being watched by the International Criminal Court. That is a message that we should do everything we can to get across.
DFID has responded very quickly, both bilaterally and multilaterally. We should be proud of the fact that it was Britain which flew so many Egyptians on the Tunisian border back to Egypt and helped many hundreds of Bangladeshis as well.
On the point that the right hon. Gentleman makes about the middle east peace process, that was discussed by the EU Council. We have made strong representations to other EU countries and also to the US that we must get that back on track. As the right hon. Gentleman said, both of us met the Palestinian President when he came to London recently. I was struck by something that one of his advisers said—that if we really want great progress and victory in combating terrorism and Islamic extremism, growth of democracy in the middle east, plus a solution to the Palestine-Israel conflict, would be the two things that could bring that victory together.
Sir Malcolm Rifkind (Kensington) (Con)
Does the Prime Minister agree that the Gaddafi regime has already internationalised the conflict in Libya by bringing in many hundreds of mercenaries, which is helping to put pressure on the insurgents? Against that background, is it not imperative that the international community should be able to provide military supplies to the insurgents? Of course, we must recognise the legality of the arms embargo, but does the Prime Minister agree also that the terms of the arms embargo resolution prevent arms from being supplied to what is called the Libyan Arab Jamahiriya—in other words, to the Gaddafi regime—and that it is perfectly possible to supply arms or other equipment to those who are fighting that regime, especially as the resolution itself, through the appointment of a sanctions committee, allows that sanctions committee to provide arms sales to other groups in Libya if it thinks that appropriate?
The Prime Minister
My right hon. and learned Friend made a strong and persuasive argument in his newspaper article this morning. I make three points. First, on the issue of mercenaries, what is happening is unacceptable. We should be sending the clearest possible message to those in Mali, Chad and elsewhere who are thinking of volunteering as mercenaries, and we should put into the next UN resolution the strongest possible language about mercenaries. Secondly, the same should apply to policing the arms embargo against the Gaddafi regime, because there are signs that he is seeking additional armaments right now. Thirdly, I hear clearly the argument —it is an ingenious argument that only a lawyer of my right hon. and learned Friend’s brilliance could make—about the specific way the arms embargo was termed towards the country that Gaddafi effectively renamed, but I am not sure it is an opinion that is shared by all other lawyers.
Mr Jack Straw (Blackburn) (Lab)
I was going to ask the Prime Minister about the nature of the duties on the Security Council. Five years ago, a high level working group established by the then Secretary-General, Kofi Annan, recommended that the responsibilities—the duties—of the Security Council should be broadened from protecting international peace and security to a “responsibility to protect” populations from internal humanitarian disaster, even where that did not directly pose a threat across the borders of those countries. Does the Prime Minister agree that as well as the commendable action that the British Government are taking to push the international community to deal with the immediate problem of Libya, we need to use this terrible example to press our partners internationally to broaden the remit of the Security Council so that we never get another Bosnia or Rwanda or, maybe tragically, another Libya?
The Prime Minister
The right hon. Gentleman has considerable expertise on this issue. The responsibility to protect has been pushed forward and debated, and I remember asking questions in opposition, at the time of problems in Burma and elsewhere, on whether it should be invoked. What the lawyers will advise, quite rightly, is that things have moved on and changed since Bosnia. It seems to me that one of the things we are trying to do here is learn the lessons of Iraq and the lessons of Bosnia, where the international community was neither fast enough, nor indeed decisive enough in responding.
Richard Ottaway (Croydon South) (Con)
I very much agree with the Prime Minister’s proposals to make the countries of the middle east bigger and more open societies, but those of us with reservations about the no-fly zone are concerned about where it will lead. Given that the last two no-fly zones, in Bosnia and Iraq, both needed troops on the ground to follow behind them, what does he envisage will happen if a no-fly zone is unsuccessful and Gaddafi remains in place?
The Prime Minister
Obviously, a lot has been written and said about this issue, and I totally understand the argument, but if we face a situation where there is a real danger of Gaddafi continuing to inflict devastation on his people, and if the conditions set out have been met, which are that there is a demonstrable need, regional support and a clear legal basis, it seems to me that this is the right sort of step to consider. Of course, it is not a solution to the problem, but I believe that it would have an effect on the ground. It might not be a decisive effect, but I think that there are strong arguments for taking steps that further put pressure on Gaddafi, and I think that this is a step that we should consider. We have already taken a number of diplomatic and sanction steps. I think that this is an additional step that could make a difference.
Mr Speaker
Order. Approximately 50 Members are still seeking to catch my eye. I am keen to accommodate them, so brevity is of the essence.
Mike Gapes (Ilford South) (Lab/Co-op)
The Prime Minister referred to learning the lessons from Iraq. He also said that time is of the essence. Does he agree that John Major, as Prime Minister, was right to introduce a no-fly zone to protect the Kurds and that, as a result, for 12 years Saddam was unable to attack them even though he remained in power in Baghdad? Is there not an argument today for the international community, either collectively or only some of them, to protect the people of Benghazi?
The Prime Minister
The hon. Gentleman makes a good point. I think that John Major was right, and I discussed this specific case with him over the past few days to make sure that we learn the lessons from that. That also relates to the question asked by my hon. Friend the Member for Croydon South (Richard Ottaway). The point is this: we cannot do everything, but that does not mean that we should not do anything. That is the key, and we have to work out where to draw the line. I am very clear that a no-fly zone is something that we should consider, because it may help to stop atrocities being committed against people who want a more democratic future.
Simon Hughes (Bermondsey and Old Southwark) (LD)
May I associate all my party colleagues with the condolences and sympathy expressed by the Prime Minister for the people of Japan and with the support expressed for all those coming to their aid?
On Libya, in addition to the sense of urgency that the Prime Minister has expressed on the no-fly zone, is he willing to pursue, as the crisis group in Brussels has recommended, a possible initiative for a ceasefire on the ground in Libya so that a post-Gaddafi representative and an appropriate regime could be discussed as urgently as possible, as well as military action taken elsewhere?
The Prime Minister
We will of course listen and respond to all suggestions. It seems to me that the first thing that needs to happen is for Gaddafi to cease what he is doing and go. That is the only way Libya can have a secure future and that is what needs to happen. We should be asking ourselves, with our allies, the Arab League and the Gulf Co-operation Council, what more we can do to tighten the noose around Gaddafi and turn up the pressure to ensure that he feels it as strongly as possible.
Tony Lloyd (Manchester Central) (Lab)
The Prime Minister is right that the logic of a no-fly zone is to prevent aggression by Gaddafi against innocent people in Benghazi or elsewhere. Is that not exactly the same logic, though, of providing arms to those in opposition to Gaddafi—that it gives them the capacity to defend themselves against such aggression? What assessment does the Prime Minister make of the urgency with which the international community will now deal with the legal issue?
The Prime Minister
First, to deal with the issue of urgency, there is a range of opinions on what is happening on the ground in Libya, but it does seem as if the rebels have had some serious setbacks, so time could be relatively short. The international community, therefore, needs to step up and quicken the pace of its response along the lines of some of the things that we have been suggesting.
In terms of whether a no-fly zone is better than other options, I think we should pursue a range of options. I put a no-fly zone on the table early on, because it takes planning and time to prepare for such a contingency. As I said in relation to arming the rebels, and as the Foreign Secretary said, we should not rule things out, but there is a range of practical and legal difficulties, so the steps that we are pushing for at the UN, which involve not just a no-fly zone, but a range of other, diplomatic steps and pressures, including what I have said about mercenaries, are the right approach.
Nicholas Soames (Mid Sussex) (Con)
I welcome the Prime Minister’s analysis, and his tying down of the conditions to proceed, but does he nevertheless agree that, welcome though the Arab League’s support is, there will be a requirement on it to provide some of its considerable air assets for a no-fly zone if the project is to have the wholehearted capability that it should?
The Prime Minister
My hon. Friend makes an extremely important point. Everyone will have seen the words of the Arab League and of the Gulf Co-operation Council, which are welcome, and it is—to some—an unexpected step that they are being so forthright in asking for a no-fly zone, but my hon. Friend is absolutely right: were that to happen, it should go ahead on the basis of the broadest amount of international support and participation, and crucially that should include participation by Arab states themselves, which do have the assets to bring to bear.
Mr Mike Weir (Angus) (SNP)
First and foremost, our thoughts are with the people of Japan at this terrible time, and whatever our own views on nuclear power we fervently hope that their engineers are able to bring under control the situation at Fukushima.
The Prime Minister made some perfectly valid points about the differences between the UK and Japan, but the fact remains that their reactors are specifically designed for Japanese, known seismic risk. Should that not give us pause for thought about our own nuclear plans?
The Prime Minister
We have an excellent nuclear safety record in this country, but we should never be complacent. When any nuclear incident happens anywhere else in the world, we should immediately examine it and ask ourselves, “Does this have any implications for what we do in the UK?” There are some important scientific points to take into account, including the different reactors and seismic conditions that we have here, but nevertheless we will make sure that the gentleman I mentioned in my statement does the work properly.
Mr Roger Gale (North Thanet) (Con)
My right hon. Friend has commendably promoted action rather than words. In remembering the lessons of Iraq, should we not remember also the lessons of Budapest in 1956 and the Prague spring? Is it not a fact that, when the western free world fails to act, defining moments are lost and tyrants survive?
The Prime Minister
My hon. Friend speaks with great passion about these issues. The point I would make about the lessons of Iraq, which a lot of people mention, is that no one here is talking about, and the Libyan opposition are not asking for, ground troops, invasions or anything like that; they are asking for a no-fly zone. But I think there is a lesson from Iraq, and it is this: if you talk to a lot of people in the Gulf, they will say, “If you don’t actually show your support for the Libyan people and for democracy at this time, in a way you’re saying you will intervene when it is only about your security, but you won’t help when it is about our democracy,” We need to bear that in mind in drawing the lessons, as people say, from Iraq.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Was there any discussion at the European Council about the desirability of EU nations now recognising the opposition as a legitimate power in Libya?
The Prime Minister
There was a discussion about that, and the Council’s conclusions talk about the Benghazi council being a legitimate political interlocutor, which is important. The French have obviously formally recognised that organisation. As for Britain’s position, as I am sure the hon. Gentleman knows, we recognise countries rather than Governments, but we want a dialogue and to have contact with the Libyan opposition, so we will be going ahead with that. We do, however, have a different legal position of recognising countries, not Governments.
Sir Peter Tapsell (Louth and Horncastle) (Con)
Do President Obama and Chancellor Merkel support the idea of an intervention in another Islamic state?
The Prime Minister
My hon. Friend, who speaks with great passion about these things, puts it in a very particular way. I have spoken with President Obama; he said, very clearly, that he wants Gaddafi to go. Chancellor Merkel signed up to a European Council statement that Gaddafi should go. When we are talking about intervention here, we are talking about the world coming together, having tough UN sanctions, putting in place a resolution, turning up the pressure, and looking at possibilities like a no-fly zone that could help to protect the Libyan people. As I said in my statement, it is not in our interests that we end up with Gaddafi still in power, in charge of what will become a pariah rogue state on the borders of Europe causing huge amounts of difficulty for everyone else. This is in our interests; it is not some great adventure that is being planned, if I may reassure my hon. Friend.
Mr David Winnick (Walsall North) (Lab)
The United Nations Security Council is the right way to pursue this matter. Was there any explanation at the European Council meeting of the bombs, the torpedoes, the rockets and the missiles that have been sold to the Libyan regime by France, Italy and Germany—that is apart from what we have been selling up until the past few weeks? What on earth did the Governments believe those arms would be used against?
The Prime Minister
The hon. Gentleman is extremely consistent in his line of questioning about this issue, and he is right to raise these questions. I think that all Governments and all countries are going to have to ask themselves some quite searching questions about things that were sold and training that was given, and all the rest of it, and I will make sure that those questions are asked and answered here. But to be fair to the last Government, I can understand absolutely why relations were formed with Gaddafi after he gave up the weapons of mass destruction, although tragically not all of them have been destroyed or disposed of. The question is whether we then went into a relationship that was too blind and unthinking, and there are some serious questions to ask about that.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I really think that my right hon. Friend deserves congratulations on the fact that a fortnight ago he was virtually a lone voice in floating the idea of a no-fly zone, and now he has the support of the Arab League and France. What exactly went on at the European Council? Whom was Baroness Ashton speaking for? What mandate does she have to give her opinions? Should she not serve the member states of the European Union rather than pretending to lead them?
The Prime Minister
I thank my hon. Friend for his kind remarks, and the temptation to be pulled down a particular path about Baroness Ashton, who I think does a good job. The point that I would make is this: what happened on Friday, I think, is that there was a rogue briefing by one of her spokespeople that she was extremely embarrassed about and, to be fair to her, did everything she possibly could to try to put right. But as the old saying goes, a lie is halfway round the world before the truth has got its boots on.
Nic Dakin (Scunthorpe) (Lab)
In several questions the Prime Minister has reinforced the point he made in his statement that much tougher measures should be taken against mercenaries and states from which they come. What sort of measures is he thinking of?
The Prime Minister
There is now an arms embargo that should be policed. As many hon. Members will know, sometimes the problem with UN resolutions is that we pass the resolution but we do not necessarily put in place the machinery to follow it up properly. There is more that can be done through the UN on mercenaries, but there is also more that can be done on a bilateral basis whereby countries such as Britain, and perhaps particularly France, because of its relations with some of these countries, can make it absolutely clear how unacceptable it is to supply mercenaries. The message should go out to all those thinking about it that the world is watching, the International Criminal Court is watching, and that if you take part in war crimes, wherever you are, you can still be caught and punished.
Jo Swinson (East Dunbartonshire) (LD)
Does the Prime Minister share my concern at the arrival of Saudi troops in Bahrain following the protests demanding democratic reforms, which have already been met by tear gas and rubber bullets? Does he agree that those desiring democracy in Bahrain should have as much right to peaceful protest as those in Tunisia, Egypt and Libya, regardless of whether Saudi Arabia approves?
The Prime Minister
Of course, everyone should have the right to peaceful protest. In Bahrain, the King and the Crown Prince have been making efforts to try to have movement towards a more open and democratic society. Of course people will have debates about whether they are going far enough or fast enough, but they have made that effort. Bahrain obviously has the difficulty of quite a severe divide between some Sunni and Shi’a, which can make the situation more difficult, but I hope that they keep going down that path of reform, and not repression, which is the right track for these countries to take.
Sir Gerald Kaufman (Manchester, Gorton) (Lab)
Will the right hon. Gentleman join me in condemning utterly the barbaric slaughter inflicted on the Fogel family in a west bank settlement over the weekend? Does he agree that no response to that savagery could be more futile than the building of further settlements, and that the only way to stop this useless slaughter of innocent people—both Jews and Palestinians—is for Israel to sit down and talk?
The Prime Minister
The right hon. Gentleman is entirely right. Like others, I read about that case over the weekend and found what happened extremely disturbing. Anyone who has been to Jerusalem and seen the settlement building, particularly around east Jerusalem, can understand why the Palestinians feel so strongly about building on their land. There is a danger of the two-state solution being built away if we are not careful. That is why this Government have always taken a strong view about the settlements.
Mr Edward Leigh (Gainsborough) (Con)
Is not one of the lessons of Afghanistan that arming insurgents against a regime that we do not like can have incalculable consequences? Is not the problem with the proposal to do so, and with a no-fly zone, that we could end up with a prolonged civil war in which there would be mounting moral pressure for us to send in ground troops? Will the Prime Minister reassure the British people categorically that there is no question of our being dragged into another war of attrition in the middle east?
The Prime Minister
Let me try to reassure my hon. Friend, and through him people who are concerned about this matter. There is no intention to get involved in another war or to see an invasion or massive amounts of ground troops. That is not what is being looked at. What is being looked at is how we can tighten the pressure on an unacceptable, illegitimate regime to give that country some chance of peaceful transition. We would let down ourselves and the Libyan people if we did nothing and said that it was all too difficult. My hon. Friend’s point about Afghanistan is a good one, but I would argue that the real lesson is that the mistake of the west was to forget about Afghanistan and take its eyes off that country, rather than building and investing there when it was making progress. Instead we left it alone, and we have since suffered the consequences.
Keith Vaz (Leicester East) (Lab)
Was there any discussion at the European Council about the situation in Yemen? The Prime Minister will know that the situation has deteriorated badly, with violence spreading to many cities. It is surely not in anyone’s interests, apart from al-Qaeda, for Yemen to drift into civil war. What can we do to help the Yemeni Government to stabilise the situation, but to continue with the reforms?
The Prime Minister
We did discuss the wider region. The country that is probably of the most concern at the moment is Yemen, which the right hon. Gentleman often raises in this House. Again, it is clearly in our interests that the Yemeni Government respond with reform rather than repression. Yemen is a particularly special case because of the great presence of al-Qaeda and our need to encourage its Government to take on the terrorism in their country. The situation is obviously extremely difficult and we keep it under permanent review, not least to ensure that we keep safe the British citizens who are there.
Mr Peter Bone (Wellingborough) (Con)
Does the Prime Minister think there is a danger that by the time the international community agrees to a no-fly zone, there will be no purpose for one?
The Prime Minister
My hon. Friend makes a good point—the clock is ticking. There is a strong case for saying that time could get very short. I am not arguing, and do not think that anyone should argue, that a no-fly zone is the silver bullet that will solve the whole problem. It is just one of the many options that we should look at to increase pressure on the regime and to help people on the ground. I raised it two weeks ago because a lot of contingency planning is needed. I hope that that planning can now be sped up. That is why we are pushing for it, including through the UN. Clearly, we have to make and win some arguments on the UN Security Council, where some will be very sceptical about the idea.
Jeremy Corbyn (Islington North) (Lab)
Will the Prime Minister explain exactly what are his principles on condemnation and potential military intervention? He has described his views on Libya. What is his view on the Saudi forces who are firing on protesters on the streets of Saudi Arabia, who have travelled over the border into Yemen in the past, and who today are occupying parts of Bahrain in support of the Bahraini Government against their own protesters? Where is the condemnation of Saudi Arabia for its human rights abuses and for its arrogance in its treatment of dissidents?
The Prime Minister
I do not believe that the Government are being inconsistent. We have said throughout this that the response of Governments to aspirations for greater freedom and democracy—what we call the building blocks of democracy—should be reform and not repression. That applies right across the region. What is special about Libya right now is that, as I have said, there is an uprising of people against a brutal dictator who is brutalising the people. In the international community, we should be asking ourselves, “What can we do?” We do not have a perfect answer, because there are red lines that we are not prepared to cross, but in my view that is not an argument for doing nothing.
Rory Stewart (Penrith and The Border) (Con)
While welcoming the consensus on both sides of the House that we need a coalition and cannot freelance this, may I ask the Prime Minister what steps are being taken to bring Brazil, India, South Africa and other new members of the Security Council on side with the no-fly zone?
The Prime Minister
My hon. Friend asks an extremely good question. Those discussions are actually ongoing, and the UN Security Council is meeting as we speak. I think that those who have been sceptical about needing to take further action will be struck by what the Arab League and the Gulf Co-operation Council have said, and by what the Libyan opposition themselves have said. If we were having this argument and the Arab League was saying, “No, stay out, don’t help”, that would be a different situation, but that is not the case. I hope that the Brazilians and others will look at what the Arab League is saying and say, “Actually, this is a different situation and we need to give our support.”
Yasmin Qureshi (Bolton South East) (Lab)
I know that the Prime Minister recognises the fact that the no-fly zone is not an easy option. In light of that, will he promise the House that if Britain decides to join in the imposition of a no-fly zone, the matter will be debated and voted on in the House?
The Prime Minister
I made a statement two weeks ago and I am making a statement today. We will have a further debate later this week, and I want the House of Commons to be regularly updated and to have every opportunity to discuss, debate and, if it wants, vote on the matter. I do not think we are there yet, but we now have the excellent Backbench Business Committee, which can arrange for days of debate and substantive motions, so if the Government are not fast enough for the hon. Lady, there are other options.
Mr Julian Brazier (Canterbury) (Con)
Does my right hon. Friend agree that a solution can be found before time runs out only if it has an Arab face on it? Does he agree that the two ways in which it can have that are, first, if weapons and ammunition are fairly rapidly allowed to reach the rebels, who face an extremely well-armed enemy, and secondly, as my hon. Friend the Member for Mid Sussex (Nicholas Soames) suggested, if the Egyptian and Saudi air forces are brought very much into the frame for any possible no-fly zone?
The Prime Minister
My hon. Friend speaks with great expertise about these matters. There is an Arab face on this already because of what the Arab League and the Gulf Co-operation Council have said, and that makes a big difference. When we speak to Arab leaders in the Gulf, they are very clear—unanimous, even—that Gaddafi has to go, the regime cannot continue, it is not legitimate and the situation is bad for the region. I think there would be support were a no-fly zone to happen—not only verbal support but, I hope, military support as well.
I cannot be specific about the two countries that my hon. Friend mentions. Obviously Egypt has all sorts of challenges in front of it at the moment, but I have had personal strong support from other Gulf leaders on this issue.
Clive Efford (Eltham) (Lab)
The fact that arms that could have been sold by this country and many other western countries are being used against the people fighting for freedom in Libya highlights the unacceptable nature of the arms trade. Were there any discussions at the European Union about the possibility of international agreement about who we should deal with regarding arms in the future, to prevent such circumstances from coming about?
The Prime Minister
There was not that discussion at the European Council on Friday, because we were really talking about the two issues of the immediate situation in Libya and the neighbourhood policy that Europe should have towards north Africa and countries that are yearning for democracy.
The hon. Gentleman is right to say that we have to consider such issues closely. I do not believe that the arms trade is always and everywhere a bad thing, because small countries have a right to defend themselves. A responsible trade, properly regulated, is acceptable, but although we have some of the toughest rules, we have to ask ourselves, “Are they working, and how can we improve on them?”
Mr William Cash (Stone) (Con)
The Prime Minister will understand if I tell him that I was a little troubled to hear him say that we would police the arms embargo. Should we not use political will rather than legal ingenuity to ensure that arms go to help those who are resisting that dreadful tyrant?
The Prime Minister
As I have said in answer to several hon. Members, we do not rule those things out. We will look closely at the arguments, but clearly, when a UN arms embargo is in place, there are legal and practical problems with going down a different track. We should focus on the pressures that we can put on the Gaddafi regime. We should not rule out other possibilities —we can discuss those with allies—but they are not immediately on the table.
Mark Hendrick (Preston) (Lab/Co-op)
Further to the question from the hon. Member for Wellingborough (Mr Bone), has the Prime Minister assessed—or is he aware of any such assessment—how soon a no-fly zone must be implemented for it not only to save civilians on the ground, but to change the course of events there?
The Prime Minister
That is a very good question. The point is that a no-fly zone may not make a decisive military difference, but it could make a difference. Clearly, the sooner it is put in place, the more difference it could make. However, the British Government are extremely clear that the three conditions must be in place—there must be a legal basis, regional support and a demonstrable need. Clearly, if those three conditions are met and if international partners want to go ahead, the sooner the better, because the effect, which people can debate, will be that much the greater.
Mark Pritchard (The Wrekin) (Con)
May I offer the Prime Minister my full support and congratulate him on his leadership? What more can be done by the international community, preferably through Arab countries, to ensure that Libyan opposition forces deliver a self-help no-fly zone by the provision of, and the giving of access to, their own portable, shoulder-launched surface-to-air missiles? That would provide a Libyan solution to what is primarily a Libyan problem, in addition to any future UN no-fly zone.
The Prime Minister
Clearly, while some of the military has remained loyal to Gaddafi, a lot of the military supports the rebels. Both sides in the conflict have a number of armaments, as my hon. Friend will have seen from the evidence. There are problems with arming the rebels. I mentioned the legal situation in respect of the arms embargo, but there are practical problems and questions about how quickly arming rebels would lead to any material effect. We can look at that, and we do not rule it out, but we should focus our efforts on the diplomatic efforts—the isolation of Libya—and on the contingency plans, such as a no-fly zone.
Mr Andy Slaughter (Hammersmith) (Lab)
I thank the Prime Minister for his comments on settlement building, but what are the Government doing to assist the people of Egypt? Egypt is still a military-run state. We should not sell it arms, but assist it to build civil society, political parties and the rule of law. How can the Government assist in those aims?
The Prime Minister
We are assisting the Egyptian people at this time—we hope—of transition. When I went to Cairo, I met Field Marshal Tantawi, the interim leader of that country. While we obviously want to see civilian democratic rule, and while there is at least the chance of a transition, which we are doing everything we can to help, one should not be too unfair about the Egyptian military’s role in ensuring that Mubarak left office. I have spoken to the new Prime Minister in Egypt. Our embassy, which is very well staffed and organised, is arranging a number of political contacts to ensure that we do everything to help that country with its growth towards democracy.
Duncan Hames (Chippenham) (LD)
Regional support has now been given, and the need is demonstrated. Five years ago, Heads of State at the UN General Assembly agreed that they
“are prepared to take collective action, in a timely and decisive manner, through the Security Council…should…national authorities manifestly fail to protect their populations.”
Is it not time that the Security Council acted collectively to protect the people of Libya?
The Prime Minister
The hon. Gentleman puts his point very strongly. We hope that the Security Council takes such action. There is now a discussion in the Security Council, and clearly, we must make the arguments as best we can. We can make points about the conditions that must be fulfilled before a no-fly zone comes into operation, but we should put forward other proposals, such as sanctions, asset bans and all the rest of it, that can add to pressure on the regime. We should not see one thing as a silver bullet, because there is no silver bullet—it is about ramping up the pressure.
Chris Leslie (Nottingham East) (Lab/Co-op)
There are many dimensions to the tragedy in Japan, but on the lessons to be learned for emergency planning, surely one of the issues that is starting to become clear in terms of nuclear facilities is the inability of back-up systems adequately to pump around coolant when the primary systems fail. Will the Prime Minister ensure that the Health and Safety Executive properly stress tests our current and planned nuclear facilities?
The Prime Minister
The hon. Gentleman makes a good point. I am sure that the head of the nuclear inspectorate, who is doing this report for us, will look at this issue. As I understand it, it was a legitimate issue in Japan, where the combination of the earthquake and the tsunami meant that the systems were so severely tested. We have to stress test all our arrangements—although obviously in different circumstances on the ground—as toughly as we can.
Tony Baldry (Banbury) (Con)
Will my right hon. Friend confirm that the Government intend that sooner or later Gaddafi and those closest to him who are most responsible for attacks on civilians and crimes against humanity will be held to account by the International Criminal Court?
The Prime Minister
Yes, I can certainly make that point. It is a very strong point. We talk about pressurising the regime, but we also want to isolate it. Anyone around or thinking of supporting Gaddafi should be thinking about the long arm of the law, its long reach and its long memory, and I think that the International Criminal Court is very helpful in that regard.
Ms Gisela Stuart (Birmingham, Edgbaston) (Lab)
Learning from previous no-fly zones, will the Prime Minister confirm that with hindsight it was wrong in Bosnia to have insisted on an equality of sanctions and to have put in place rules of engagement that were not specific enough about helicopters and trade planes?
The Prime Minister
The hon. Lady makes a point. There are many lessons to learn from all stages of the conflict in the former Yugoslavia, perhaps Bosnia in particular. One can make all sorts of arguments about whether the arms embargo should have been lifted, or whether there should have been tougher action earlier against the Serbs, but the most important lesson was that the international community has to be engaged and decisive at an earlier stage. That is the lesson that we should learn.
Geoffrey Clifton-Brown (The Cotswolds) (Con)
In welcoming my right hon. Friend’s stance in leading the international community in taking difficult decisions against Gaddafi, will he remind it that Gaddafi has form? He launched a brutal military takeover in 1968 and became the leader of a pariah state that tried to acquire nuclear weapons in the 1970s and 1980s. Is it not imperative that the international community takes action now?
The Prime Minister
This is an important point for people who are traditionally sceptical about these sorts of measures. We should consider what life could be like with a Gaddafi in charge of a pariah Libyan state, with all the oil money it would have and all the ability it would have to wreak havoc internationally. We know what this man is capable of, because we have seen it in the past with Lockerbie and all the other problems, not least his funding of the IRA.
Mr Andrew Love (Edmonton) (Lab/Co-op)
On the one hand, the Prime Minister has been urged to take action as soon as possible, because of the urgency of the situation; on the other, he has been asked to follow the UN track. He has indicated that the Arab League and, as far as we can judge, internal opinion in Libya support a no-fly zone. Will he recommit himself to ensuring that we get the legitimacy of a UN Security Council resolution before action is taken?
The Prime Minister
Obviously, we want to have the widest possible international support. Also, we should not proceed without a proper legal basis. The hon. Gentleman mentions the Libyan opposition. They have made it absolutely clear in what they said that they want a no-fly zone and to have this sort of international support.
Andrew Bridgen (North West Leicestershire) (Con)
Does not the welcome support of the Arab League for a no-fly zone show that the Prime Minister was both forward thinking and right when he proposed it two weeks ago? Does not his stance on this issue contrast enormously with the Leader of the Opposition, who appears to have flip-flopped in a way reminiscent of his predecessor?
The Prime Minister
I thank my hon. Friend for what he says. The point I made two weeks ago was not that we should introduce a no-fly zone immediately, but that with such a situation we have to plan in advance for contingencies that may become necessary. I believe that the time is coming when it will be necessary for the international community to step forward and make this decision. However, I do not pretend for a minute that it is a one-shot wonder that will deal with the situation—it is not—but it could help.
Nick Smith (Blaenau Gwent) (Lab)
Regarding the no-fly zone, the National Audit Office says we have just eight Typhoon pilots trained for ground attack. The lives of two Nimrods planned for early retirement have been extended. Will the Prime Minister look again at the decision to retire our Harrier fleet?
The Prime Minister
The aeroplane that is not being used at all in Afghanistan is the highly capable Typhoon, in which this country has invested an enormous amount of money and which is now proving to be an extremely good, well-performing aircraft. In our defence review we are thinking exactly about situations such as these, where we need highly flexible, well-trained armed forces, with investment in special forces, helicopters and transport planes such as the A400M. That is exactly the situation that we are envisaging.
Jason McCartney (Colne Valley) (Con)
Having served in Operation Warden in the no-fly zone over northern Iraq in the 1990s, I echo the Prime Minister’s comments about how it is possible to have a successful no-fly zone without committing ground troops. What does he think of the suggestion made by one of my constituents—a member of the Stop the War Coalition who e-mailed this lunchtime—of using financial funds seized from the Gaddafi regime to buy arms for the rebels?
The Prime Minister
I did not know about my hon. Friend’s brave record in flying for the Air Force in a no-fly zone. He brings great personal expertise, so it is good to have his backing. The frozen resources belong to the Libyan people, and we should bear that in mind when we start thinking of different and ingenious ways of spending their money.
Paul Flynn (Newport West) (Lab)
Should we not avoid a rush to complacency on nuclear safety? The pictures from Fukushima have already churned up people’s deep-seated fears of a nuclear catastrophe and reduced the acceptability of nuclear installations, which are uniquely dangerous in cases of human error, terrorist attack or natural disaster. Should we not look again at our rush to nuclear?
The Prime Minister
We have to put aside our personal preferences and prejudices about nuclear power and ask some tough scientific questions about what recent events demonstrate and what we should learn. There are big differences between Japan and Britain. We do not yet know the full extent of what has happened at the reactors, and, as the leader of the hon. Gentleman’s party said, we should not rush to judgment in considering these issues.
David Rutley (Macclesfield) (Con)
I welcome the Prime Minister’s efforts to engage the international community in developing a robust response to the barbaric acts of Colonel Gaddafi. What steps are being taken to provide humanitarian aid to displaced people in Libya, especially in the increasingly isolated town of Misurata in the west?
The Prime Minister
My hon. Friend asks an important question. What we have done so far has focused on the Egyptian and Tunisian borders, where Britain has led the way in supplying tents and blankets and in flying people back home to Egypt, because we want to ensure that a bad humanitarian situation does not become a humanitarian crisis. His point about access to western Libya is vital. Humanitarian aid agencies do not have access to all areas; they absolutely should have, and the Libyan authorities should see to that straight away.
Thomas Docherty (Dunfermline and West Fife) (Lab)
Leaving aside the juvenile and puerile crack from the hon. Member for North West Leicestershire (Andrew Bridgen), the Prime Minister will know that there is a cross-party consensus on the need for a no-fly zone. Given that time is of the essence, on how many occasions has he personally spoken to President Obama and on how many occasions has the Foreign Secretary spoken to Secretary of State Clinton?
The Prime Minister
The Foreign Secretary has probably lost count of the number of times he has spoken to Secretary of State Clinton—they seem to have an almost permanent telephone special relationship. I spoke to President Obama about the situation last week, and I have had a number of conversations with him about it. Crucially, now that we have a National Security Council and a National Security Adviser—which slightly mirrors the Americans’ arrangements—our teams have almost daily conversations, so we are totally up to date with each other’s thinking. We want the US to focus on what is happening in Libya and on what we need to do as an international community.
Mark Lancaster (Milton Keynes North) (Con)
In the light of recent events, has the time come to expand the stabilisation unit?
The Prime Minister
My hon. Friend makes a good point. There is now special stabilisation funding, which is under all sorts of pressure as there are so many unstable parts of the world. We looked at this in the defence review, but we should keep it under review.
Paul Uppal (Wolverhampton South West) (Con)
Is not the tragic situation in Japan made even more acute by the country’s demographic time bomb? Like many western European countries, Japan has an ageing population. It is in times of need that we find out what unites us rather than tears us apart, so will the Prime Minister assure me that in this darkest of hours Japan will see the full force of British friendship and generosity?
The Prime Minister
I can absolutely give my hon. Friend that assurance. I spoke to our ambassador at lunchtime today, and he said that the way in which we respond will be very important to the Japanese people. Japan and Britain have a very strong, close relationship, and we should do everything we can to say, “We are with you at this time of need, and we are going to give you aid and help.” Japan is an enormously capable country with fantastic technology and ingenious people, so if anyone can cope with the appalling things that have been visited on them, they can. There is also room for friends to help as well.
Nadhim Zahawi (Stratford-on-Avon) (Con)
Gaddafi winning would be the biggest nightmare for the Libyan people. Two weeks ago, the Prime Minister took the lead in calling for a no-fly zone, against the tide of public and media opinion. Now, however, the Arab League and the Gulf Co-operation Council have supported a no-fly zone. Considering the difficulties in Europe on Friday, if similar difficulties were to occur in the UN, would my right hon. Friend be prepared to lead a coalition of the willing to enforce a no-fly zone?
The Prime Minister
As I have said, the conditions for a no-fly zone must include the existence of regional support. Many hon. Members on both sides of the House have already made that point. There should also be a demonstrable need for it on the ground, and I think that that is becoming the case. There must also be a clear legal basis for it, and that is why we are pushing this matter at the UN and why we will, I hope, make persuasive arguments about why a new UN resolution should include lots of different measures and steps that we can take, including plans for a no-fly zone. I think that we should pursue that track.
Neil Carmichael (Stroud) (Con)
I applaud the Prime Minister for the leadership he has shown during this crisis. May I draw his attention to the problems of getting support for a no-fly zone, and to the disgraceful use of mercenaries? Is this not the time to have a debate on broadening the scope of the United Nations’ capacity to act?
The Prime Minister
This has been a perennial debate about whether the UN should have more specific capacity to act. We can certainly have that debate. I would make the argument, which I also make about the European Union, that, in the end, all the institutions in the world depend on the political will of their members. What was required on Friday in Europe—and we got some of it—was the political will for Europe to respond to what is happening in its neighbourhood. The same applies to the UN, and I think that there is political will there. It is incredible that a Security Council resolution was passed so quickly, and we need to continue to show that political will so that we can ensure that Gaddafi fails.
Rehman Chishti (Gillingham and Rainham) (Con)
In the light of the recent demands by the protesters in Bahrain for the monarchy to step down and for the setting up of an Islamic republic similar to that of Iran, has the Prime Minister made any assessment of Iran’s involvement in the events in Bahrain?
The Prime Minister
A number of people have speculated about that. From the information that I have, I would say that the Bahrainis have made efforts, not just recently but over the years, to make a stronger civil society and to put in place some of the building blocks of democracy. Of course there is an argument about whether they should go further and faster, and I would urge that they respond to what is happening now with further reform rather than with repression.
David Morris (Morecambe and Lunesdale) (Con)
Will my right hon. Friend give a categorical assurance to the nuclear power industry in the United Kingdom? What has happened in Japan is catastrophic, but there are distinct differences between the nuclear power industry here and that of Japan.
The Prime Minister
The nuclear industry here in the UK has a strong safety record, but it must never be complacent, because the consequences of failure can be so dreadful. We have to be eternally vigilant. What has happened on the other side of the world following an earthquake and a tsunami might sound like something that we might not experience in the UK, but if there are lessons to learn about how reactors fail, whether they fail safe and all the rest of it, of course we should learn them.
Mary Macleod (Brentford and Isleworth) (Con)
I know that my right hon. Friend has visited Rwanda. During the genocide there, the UN retreated and the world stood by as thousands of lives were lost. Will he reassure me that we will continue to show leadership on the Libyan situation, so that many lives will not be lost in the same way again?
The Prime Minister
The Rwandan example is a powerful one, partly because of the immense scale of the barbarous murder that took place. Anyone visiting that country, especially the memorial built on top of the graves of literally hundreds of thousands of people, will see it as a standing warning of the fact that genocide can take place in our world, even today.
Mr John Baron (Basildon and Billericay) (Con)
May I suggest a note of caution to my right hon. Friend about a no-fly zone? Our record of intervention in this region has not been good. Meanwhile, a no-fly zone could require Colonel Gaddafi’s forces to be attacked and poses the question of what happens if we fail.
The Prime Minister
Of course we have to show caution and forethought and we have to think through all the consequences of our action. As I have said, however, I think the consequences of inaction are going to be worse than taking the sort of steps that I have spoken about. Of course we must learn the lessons from other conflicts, but there is a real difference here: the Arab League, the Gulf Co-operation Council and the Libyan opposition are all saying, “Please will you help us in this one particular way?” Turning the Iraq example on its head, if we turned round and said, “No, there is no question of this at all”, opinion in the Arab world might well be, “You look after yourselves when it is about your perceived security, but when it is our future and our democracy, where are you when we need you?”
Henry Smith (Crawley) (Con)
Will the Prime Minister join me in paying tribute to fire and rescue service officers from West Sussex, based in my constituency, who are now in Japan helping with the relief effort after the earthquake and tsunami—and, indeed, to all the emergency workers from this country who so readily go out to disaster areas around the world, whether it be Haiti, New Zealand or wherever?
The Prime Minister
I certainly take great pleasure in praising people in the emergency services from my hon. Friend’s constituency and, indeed, from around the whole country who, at the drop of a hat, jump on an aeroplane and head off to New Zealand, Haiti or Japan and probably witness some appalling and truly harrowing scenes, which they then have to deal with. This is more than just a gesture from Britain to Japan, as these are some of the most highly trained people in our country and are great experts in what they do. I am sure they will make a real difference.
Points of Order
Jeremy Corbyn (Islington North) (Lab)
On a point of order, Mr Speaker. During Defence questions, the Secretary of State outlined the amount of money spent on Trident preparations. In a debate in Westminster Hall a couple of weeks ago, a Minister outlined the amount spent and said that it was custom and practice to spend that. I want to know how I can find out under what authority that money is spent when all the Ministers seem to be incapable of identifying a budget head that would demonstrate that they are lawfully allowed to spend a certain amount on preparations for building a new nuclear submarine.
Mr Speaker
I am grateful to the hon. Gentleman for his point of order. My sense is that he will want to table further—I use that word advisedly, as I dare say he has already tabled them—parliamentary questions precisely to identify the point on which he wants a specific answer. I think that is probably about as much helpful advice as I can give today, but I see the Secretary of State for Defence in his place and he will have heard the concern expressed.
Andrew Bridgen (North West Leicestershire) (Con)
On a point of order, Mr Speaker. With regard to the comments of the hon. Member for Dunfermline and West Fife (Thomas Docherty), who is no longer in his place, I urge all right hon. and hon. Members to consult the Hansard record for Prime Minister’s Question Time two weeks ago, which shows that there has been a considerable shift in the position of Labour Members on no-fly zones.
Mr Speaker
No. That is not a point of order. I yield to none in admiration for the attendance record and level of commitment that the hon. Member has shown over the past 10 months, but he must not abuse the point of order procedure to score what some people might well think is a purely partisan point. That is very untoward. I am sure he will not do that again.
Scotland Bill
(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
18:06 - The Committee divided: - Ayes: 8 / Noes: 292 - Question accordingly negatived.
20:09 - divided: - Ayes: 9 / Noes: 286 - Question accordingly negatived.
21:26 - The Committee divided: - Ayes: 7 / Noes: 393 - Question accordingly negatived.
Stewart Hosie (Dundee East) (SNP)
I beg to move amendment 37, page 16, line 17, at end insert—
‘(f) Chapter 8 provides for an Order in Council to specify, as an additional devolved tax, a duty charged on fuel’.
The First Deputy Chairman of Ways and Means (Mr Nigel Evans)
With this it will be convenient to discuss the following:
Amendment 58, page 16, line 17, at end insert—
‘(c) Chapter 5 provides for an Order in Council to specify, as an additional devolved tax, a tax charged on quarrying or mining,’.
Amendment 59, line 17, at end insert—
‘(d) Chapter 6 provides for an Order in Council to specify, as an additional devolved tax, a tax relating to air travel,’.
Amendment 60, line 17, at end insert—
‘(e) Chapter 7 provides for an Order in Council to specify, as an additional devolved tax, a tax charged on the profits of companies,’.
New clause 8—Duty on fuel
‘In Part 4A (as inserted by section 24), after Chapter 4 insert—
“Chapter 8
Duty on Fuel
80O Duty on fuel
The Secretary of State shall, within one month of the coming into force of section 80B of this Act, lay in accordance with Type A procedure as set out in Schedule 7 to this Act a draft Order in Council which specifies as an additional devolved tax a duty on fuel.”.’.
New clause 15—Scottish tax on quarrying or mining
‘In Part 4A of the 1998 Act (as inserted by section 24), after Chapter 4 (inserted by section 30) insert—
Chapter 5
Tax on quarrying or mining
80L Tax on quarrying or mining
The Secretary of State shall, within one month of the coming into force of section 80B of this Act, lay in accordance with Type A procedure as set out in Schedule 7 to this Act, a draft Order in Council which specifies as an additional devolved tax a tax charged on quarrying or mining.”.’.
New clause 16—Scottish tax on air travel
‘In Part 4A of the 1998 Act (as inserted by section 24), after Chapter 4 (inserted by section 30) insert—
Chapter 6
Tax on air travel
80M Tax on air travel
The Secretary of State shall, within one month of the coming into force of section 80B of this Act, lay in accordance with Type A procedure as set out in Schedule 7 to this Act, a draft Order in Council which specifies as an additional devolved tax a tax charged on air travel.”.’.
New clause 17—Scottish corporation tax
‘In Part 4A of the 1998 Act (as inserted by section 24), after Chapter 4 (inserted by section 30) insert—
Chapter 7
Tax on profits of companies
80N Tax on profits of companies
The Secretary of State shall, within one month of the coming into force of section 80B of this Act, lay in accordance with Type A procedure as set out in Schedule 7 to this Act, a draft Order in Council which specifies as an additional devolved tax a tax charged on the profits of companies.”.’.
Stewart Hosie
It is a pleasure to serve under your chairmanship on this second Committee day, Mr Evans. I look forward to what I hope will be a detailed and constructive debate. Given that a Treasury Minister is present, we may receive some intelligent, enlightening and instructive answers from the Government. I am intrigued to see the Exchequer Secretary to the Treasury, along with the Secretary of State and a junior Minister, the Under-Secretary of State for Scotland. Obviously the Government decided to bring in the big guns to do the difficult stuff. I am sure that that will help over the next two days.
There are four taxes that we wish to be devolved: corporation tax, fuel duty, the aggregates levy and air passenger duty. I shall touch on the first two briefly, and say a little more about the aggregates levy and air passenger duty later.
The Bill has been considered by the Committee in the Scottish Parliament. As Ministers know, there was much agreement on many matters, but there was disagreement on a number of others, including corporation tax. I think it useful for this Committee to understand the minority view of the Scottish Committee, which said:
“A major failing of the Scotland Bill is that it does not devolve control over corporation tax, one of the most important economic levers available to a Government pursuing economic growth. In many countries corporation tax has been the key component of a strategy to increase competitiveness and improve growth. Without this power, however, Scotland is missing out on the opportunity to give itself a competitive edge… This situation could soon be worsened by the UK Treasury's consideration of devolving corporation tax to Northern Ireland. The CBI Northern Ireland has stated that cutting corporation tax in Northern Ireland would have a ‘transformational’ impact on the Northern Irish economy—giving an immediate boost to the profits of businesses and generating 90,000 jobs. With control over corporation tax Scotland would be in a position”
to do much the same. The very fact that the United Kingdom Government were taking a similar approach to corporation tax would justify that position, the Committee said.
As Scottish and other Members will know, a significant body of business opinion backs the devolution of corporation tax—
Stewart Hosie
I did not want to take up too much time by listing all the business people in annexe A of the Committee’s minority report, but I shall be happy to do so if the hon. Gentleman wishes.
It is not simply the business community that has backed the devolution of corporation tax. A man who is hugely respected across the political divide in Scotland is Campbell Christie, the former leader of the Scottish Trades Union Congress. He has said:
“Higher growth will create jobs and generate more tax revenues to protect frontline public services, as well as repaying the high level of debt. To achieve this, Scotland's government need greater economic powers. But the Calman legislation does not meet this need.”
Fiona O’Donnell (East Lothian) (Lab)
I cannot let the hon. Gentleman get away with saying that the business community in Scotland supports the devolution of corporation tax. The Scottish Parliament Bill Committee report clearly states that there was not widespread support from that community.
Stewart Hosie
I did say that there was significant support in the business community, and I stand by that. The one thing I will not do in the next two days is engage in the politics of the Committee report. I want to consider its recommendations, and indeed identify proposals to which there was opposition. There is certainly significant business support for the devolution of corporation tax, which will enable the right decisions to be made to engender economic growth.
Stewart Hosie
Not at the moment.
Campbell Christie also said:
“I firmly believe a Scottish government equipped to vary all taxes—including corporation tax… would be able to tackle the serious difficulties we face.
I do not want a tax regime to be imposed on Scotland that is utterly unfair and inadequate to meet the challenges we face. I hope Scotland’s politicians will join me in opposing these unfair proposals.”
I hope that Members throughout the House will note carefully what Campbell Christie said about the devolution of that tax.
Fiona Bruce (Congleton) (Con)
The hon. Gentleman says these proposals would be unfair, but one of the fairest things a Government can do when working with the business community is ensure that businesses have time to prepare for change. At present, when there is such a great priority on the economic strengthening of the nation, we need to work in a relationship of trust with the business community. Therefore, is it not unfair to suggest the introduction of this tax at this time?
Stewart Hosie
No, it is not, and if the hon. Lady looks at later amendments she will find that an entire series of them is related to the commencement powers, precisely to ensure that the right things are done at the right time, with the agreement of everybody involved. We will consider that, and I hope the hon. Lady is still present in the Chamber when we do so.
Two specific corporation tax issues relate directly to the Bill’s provisions. Existing provisions allow assigned revenue from a share of income tax—one large tax and a chunk from that, and lots of small measures. It would be much better if there was a balanced basket of taxes, so there was not an over-dependence on, and therefore a potential volatility from, having such a large amount of assigned revenue from a single tax. It would also be preferable if there was a personal tax and business taxes, so that they could be offset. It would also, of course, be preferable to remove the perverse disincentive under the Bill in respect of any future Scottish Government reducing income tax. Let us imagine that a Government decided that, for whatever reason, such a measure might be sensible to stimulate growth, but the Scottish Government took the hit in reduced revenue yield from income tax while the UK Government took the benefit of increased corporation tax. The effect of having only a large personal tax, and not a significant business tax, is that it unfairly and unnecessarily removes the number of economic or fiscal levers open to the Scottish Government. That is an important point.
Mr Donohoe
I had experience of the shipyards in the ’60s and ’70s, and we came upon something called transfer price fixing, whereby companies in Scotland—and elsewhere—would fiddle with the prices, such as those charged for gear boxes at Linwood. How would we overcome that in practice, because I can foresee exactly the same dangers arising under corporation tax?
Stewart Hosie
The hon. Gentleman makes a very interesting point, which relates to what the Government say. They believe in tax competition, as do I, but we must avoid unnecessary tax or regulatory arbitrage not just within the UK but between the UK and other countries. There is a balance to be struck between proper tax competition, which is legitimate and fair and proper to stimulate growth, and unnecessary changes simply to get a quick short-term fix in terms of the arbitrage, which would be unhelpful. That highlights the analogy with price fixing that the hon. Gentleman drew, and he is right to be conscious of that.
We rehearsed the arguments about fuel duty at some length in our debate on the Supply day motion a few weeks ago, so I do not intend to go into that in considerable detail, but I will go into it in some detail.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
Is my hon. Friend aware that there is to be a photo call on fuel outside Westminster at 2.30 tomorrow afternoon involving the Leader of the Opposition and the shadow Chancellor? Does that not remind my hon. Friend of a couple of sly foxes complaining there are no more chickens left in the coop?
Stewart Hosie
That is the sort of analogy a crofter from Barra would want to draw. When in opposition, the Liberal part of this Tory-led coalition promised a rural fuel derogation and the Conservative part promised a fuel duty regulator, and instead of being foxes round a chicken coop I would rather they both kept their promises and delivered on their pre-election commitments.
Stewart Hosie
Not at the moment, because I want to make a couple more points.
As we have said in previous debates, this issue is important because in Stornoway, in my hon. Friend’s constituency, fuel routinely costs £6.50 a gallon; in the Chief Secretary’s constituency diesel routinely costs £6.30 a gallon; in the major cities fuel costs more than £1.33 a litre—more than £6 a gallon; and I am told that Orkney recently had the £7 gallon. Hon. Members will know from the testimonials from the road haulage industry, the Freight Transport Association, FairFuelUK, taxi drivers, the Federation of Small Businesses and many others that businesses and communities are struggling with the inflationary effects of high fuel costs.
Mr MacNeil
Tomorrow, the Leader of the Opposition and the shadow Chancellor will complain about the price of fuel, but is not the point that for years and years as the price of fuel rose they said not a cheep? They were utterly blind to the troubles we had in the Western Isles when they were in government, but all of a sudden they want to say something .
Stewart Hosie
It was not that they were simply blind to it; members of the Labour party have said—I believe that their leader recently said this—that Labour found it difficult to implement a fuel duty regulator when they were in power. It was not so much that Labour found it difficult as it actively opposed every attempt to do it.
Mr Russell Brown (Dumfries and Galloway) (Lab)
Will the hon. Gentleman give way?
Stewart Hosie
Not at the moment.
Before I get too distracted, let me return to the Bill. The whole point about this amendment and our seeking the devolution of fuel duty powers is that we are not doing this for its own sake. Everyone understands the difficulty, as we have raised it many times, so this is about action. If the UK Government will not act, it is perfectly reasonable for the powers to be devolved so that a Scottish Government can act.
The two significant taxes dealt with in this first group are the aggregates levy and air passenger duty. In written evidence to the Scottish Affairs Committee, Professor Iain McLean said:
“I am not persuaded by the UK Government’s reasons for rejecting Calman’s other two tax devolution proposals, namely Aggregates Levy and Air Passenger Duty. As Scottish Ministers have correctly pointed out, the litigation which is given as a reason for rejecting the transfer of Aggregates Levy was already in progress when Calman reported. If Scotland is willing to take any revenue risk arising from that litigation, it should be allowed to.”
Likewise, the fact that the UK government intends to convert air passenger duty into a ‘per plane’ duty argues for, not against, devolving it. The principle of subsidiarity implies that the Scottish Government, not the UK Government, should decide how to tax flights originating at small Highland or island airports. Airports don’t move. They are a very suitable devolved tax base.”
On aggregates duty, Professor McLean said:
“The shape of landfill tax is obviously complementary to that of (any successor to) Aggregates Levy.”
Landfill tax is being devolved, so the approach being taken here is rather illogical. It is also a key recommendation of the Scottish Parliament’s Committee that aggregates tax is devolved. The final Calman commission report said:
“The Commission has recommended that a number of “green taxes” (Air Passenger Duty, Landfill Tax and the Aggregates Levy) be devolved. As well as helping to increase the financial accountability of the Scottish Parliament, control of these taxes will provide important policy levers in relation to environmental issues, allowing the Scottish Parliament and Government further options in determining policy.”
That makes perfect sense. Excluding two of the three taxes in that “green taxes” category not only makes a mockery of the Calman report, but, more importantly, decreases financial accountability and removes what Calman called “important policy levers”.
Mr Donohoe
I have campaigned on this issue for some time, as has the aviation group within the House. We have asked for this tax to be looked at because it is just ridiculous, given what is happening in Europe. If the tax were to have been devolved, the Government’s position was that it should be devolved, and there was to be a variant—one would presume that that is why the hon. Gentleman is asking for the tax—where would the money come from for any downward variation?
Stewart Hosie
I shall answer that when I come to air passenger duty, because it is a perfectly valid question. In general terms, if any Government chose to increase a tax they would see an increase in yield or behavioural change. Likewise, if they chose to decrease a tax they would either see a reduction in yield or behavioural change. In the case of corporation tax, all the evidence in country after country shows that when business taxes have come down, business tax yield has increased. Those judgments would need to be made depending on the tax, the decision and the part of the economic cycle.
Stewart Hosie
I am just about to finish.
I commend the amendment to the House.
Iain Stewart (Milton Keynes South) (Con)
It is a pleasure to serve under your chairmanship, Mr Evans. I shall address the Scottish National party Members’ amendments in a moment, but first let me make an observation about this part of the Bill, particularly clause 24. I strongly support the proposal to devolve substantial tax powers to the Scottish Parliament, making it responsible for raising approximately a third of its revenue. I shall not repeat the arguments I made on Second Reading, but the principle of the Scottish Parliament raising a good part of its revenue is vital. If that does not happen, the threat to the Union will be very real. To underline that point, let me quote from an e-mail that I received last night from a constituent, Mr Haig. It is worth repeating a couple of the points he expressed.
Pete Wishart (Perth and North Perthshire) (SNP)
He’s bored and is going to resign.
Iain Stewart
Not that Mr Hague—this one is spelt Haig. I think the Foreign Secretary is rather preoccupied with matters elsewhere in the world.
My Mr Haig said, of the First Minister’s comments about free tertiary education in his interview on the Andrew Marr programme yesterday:
“What is it the Scots go without that we the English enjoy? More and more people I speak to are seething with this unfairness, especially in the current financial climate. How is it the Scots can afford this, and the English cannot? They even have an extra layer of government, and are able to afford that as well. Mr Stewart, English nationalism is going to rise slowly but surely over this. Your government cannot ignore this, otherwise you are going to create a fracture in the union, and the SNP’s most ardent supporters for independence are going to be the English.”
I agree. I am a Unionist and I want the Union to survive. The hon. Members for Perth and North Perthshire (Pete Wishart), for Dundee East (Stewart Hosie) and for Banff and Buchan (Dr Whiteford) might support our doing nothing to increase support for their ultimate aim, but I do not.
Mr Russell Brown
I suggest that the hon. Gentleman responds to his constituent by making him fully aware of what the Scottish block grant is. If the Administration in Edinburgh decide to spend money in one fashion, there is no extra funding for it north of the border. In paying for one thing, we are sacrificing something else. Could that be a starting point for the hon. Gentleman?
Iain Stewart
I agree with much of what the hon. Gentleman says, but if the Scottish Parliament were responsible for raising more of its revenue, such arguments would diminish. I think it is right to give it the flexibility to raise additional revenue, if it so wishes, to fund extra programmes in Scotland from which my constituents south of the border may not benefit.
I agree with the incremental steps proposed in clause 24. We are for the first time starting to disaggregate the unitary tax system in the United Kingdom. That will have many consequences, some of which will be unforeseen, so we need to proceed with great care and attention to detail. I strongly welcome the proposal that we should not rush to set up a completely new system in one go. In particular, proposed new section 80B, which clause 24 introduces, contains a provision to allow the subsequent devolution of additional tax powers. That is the right way to go, rather than trying to devolve too much at this stage.
The hon. Member for Dundee East raised perfectly valid points about devolving other taxes, including air passenger duty, fuel duty and corporation tax, and we might well come around to doing that in the fullness of time. The Scottish Parliament’s response to the Bill noted that
“international experience does show some scope for differentiation of corporation tax,”
and we may get to that point. However, there are huge difficulties and intricacies that we must first consider about the operation of corporation tax. A later clause goes into some detail in defining a Scottish taxpayer for the purposes of the Bill and we would have to do something very similar for corporation tax. If a company were primarily located in Scotland but had its tax headquarters elsewhere, we would have to work out exactly which components of its income were liable for corporation tax.
Stewart Hosie
I have heard the hon. Gentleman make that argument before. He is being reasonable, and is making a reasoned case, but I disagree with him. However, does he accept the principle, in relation to the last point that he made, that tax liability would follow economic activity?
Iain Stewart
There will be huge consequences, some foreseen, but others unforeseen. We would need to undertake a huge amount of research to work out how to begin to disaggregate what has been a unitary UK tax system. I am not saying that it is impossible, or that it is something that we should not look at in future, but for the purposes of the Bill, I do not think that it is necessary, because clause 24 makes provision to look at devolving additional tax powers in future.
I am not going to say anything more at this point, because I want to deal in detail with other measures when we come on to the relevant clauses. Scottish National party Members have made a point about air passenger duty and landfill tax. I am perfectly content that measures are being negotiated at European level and elsewhere. Until they are resolved, it would be premature to include the devolution of those taxes in the Bill. I accept that the Calman view was that those matters should be devolved in the fullness of time, and I support that, but it is not necessary to include it at this point. I am therefore afraid that I cannot support the amendments if they are pressed to a vote.
Ann McKechin (Glasgow North) (Lab)
What a difference a week makes, as we continue our scrutiny of the Bill after our sitting last Monday. On Thursday, we witnessed a plenary debate in the Chamber at Holyrood on the recommendations in the report on the legislative consent motion. At the conclusion of the debate, there was a vote, and we witnessed a remarkable about-turn, as the Scottish National party supported the motion recommended in the majority report. After two years of sniping on the sidelines, it has joined the three other major parties in Scotland to support the Bill, and I genuinely welcome that.
Who is surprised at the pattern that has emerged yet again? This is a party that did not join the constitutional convention, but supported the devolution referendum. It came into power four years ago, promising that its top aim above all others was a referendum on independence, which was then dropped. The interesting allegations in Wikipedia about the First Minister’s comments on the party’s real aims, rather than all-out independence, add to the mix the overwhelming conclusion that it can talk about independence as much as it wants, but the SNP has never been on the true side of the people of Scotland, which is why it constantly has to play catch-up.
We have had an interesting debate about fiscal decentralisation.
Stewart Hosie
I am intrigued by the hon. Lady’s introductory remarks. They bear no relation to the amendments, but that should not surprise us.
There is indeed a very serious matter at stake. We have tabled an amendment to devolve the aggregates levy, which is a recommendation by the Select Committee on Scottish Affairs and by Calman, and will make the Bill better. If we can divide the Committees, will Labour join us?
Ann McKechin
We certainly support the principle of devolving the aggregates levy, but I wish to make sure that when we scrutinise the Bill we do so in the interests of the people of Scotland. There is genuine concern about court proceedings—interestingly, the hon. Gentleman failed to mention the comments by the British Aggregates Association in the report on the legislative consent motion, which said that it was sure that it was going to win the court case. Well, we will just have to see when that case comes to court. However, I would not want a Scottish Administration to be responsible for the risks that may result from a loss in that case, because that would not be in the interests of the Scottish taxpayer.
The report by the Holyrood Committee offers an exceptional exposition of the contentious remarks made over a number of years by the Scottish Government about why fiscal decentralisation would be to the benefit of the Scottish economy. We support the measures in the Bill, because we believe that they will make the Scottish Government and Scottish Parliament more accountable to the taxpayer. They already benefit from uniquely broad spending powers, and the Bill rightly makes that power more accountable to the electorate. However, as the Committee knows, the Scottish Government argued prior to the establishment of the Committee at Holyrood that full fiscal decentralisation would grow the Scottish economy by an extra 1% per year. I refer hon. Members to paragraph 37 of that report, which states that
“the First Minister’s claim—of an additional 1% growth per year—is an exaggerated version of what Professors Hughes Hallett and Scott have stated in their research.”
The Committee concluded that the evidential base for the statements made by Professors Hughes Hallett and Scott was, in its words, “remarkably weak” and that claims did not stand up to scrutiny. The Scottish Government did not provide any detail in the legislative consent motion.
Fiona O'Donnell
Is my hon. Friend aware that when the Scottish Affairs Committee played good cop to the Holyrood Bill Committee’s bad cop, Professors Hughes Hallett and Scott went as far as to say that there was no real link between fiscal autonomy and economic growth, and that it is what is done with the powers that achieves growth?
Ann McKechin
My hon. Friend raises a pertinent point and one which even those who have argued for fiscal decentralisation admitted in Committee, including Ben Thomson from Reform Scotland, who had been a firm advocate of that policy. It was stated that all the evidence showed that it is the powers that are available and how they are used, and factors that are not purely fiscal, such as technological progress, investment in human capital and policies on education, that largely determine economic growth. Many of those powers are already with the Scottish Government.
Stewart Hosie
The hon. Lady asserted that no information had been provided. The Scottish Government provided an extraordinary amount of information, much of it at the request of the Scottish Affairs Committee, and all of which, I understand, is in the annex to the full report that it published, so that assertion was wrong.
Ann McKechin
The hon. Gentleman did not refer to any of that evidence in support of his amendments. He also did not refer—why would he; it would be too embarrassing—to the purpose of the national conversation, which the Scottish Government instructed, and the many position papers that civil servants were struggling to produce and make sense of, at considerable cost to the Scottish taxpayer at a time when the resources could have been much better used.
The hon. Gentleman provided us with no independent evidence or statistics showing how, if fuel duty is devolved to the Scottish Parliament, it will result in a benefit to the taxpayer. The matter is urgent and we require immediate action. That is why we have called on the Chancellor to reverse the Tory-led Government’s VAT rise immediately and to suspend the fuel duty rise due in April. That would provide immediate relief to taxpayers and to drivers right across Scotland. That is the best way we can help people with motoring costs now.
The Calman commission recommended that the power on aggregates be devolved. We support that principle. The Government have indicated their intention to devolve it, presumably on the assumption that the court case will be decided in the Government’s favour. I would welcome the Minister’s comments when he replies, to confirm that that is still the Government’s intention.
It would be helpful to the Committee to understand what progress has been made on the Government’s review of air passenger duty, when they think that review will be complete, when they expect to be able to devolve the tax and whether they still wish to maintain the scheduled date of 2015.
New clause 17 relates to corporation tax, which the Scottish Government have been talking about for a considerable time. The pertinent questions that we all must consider carefully are what exactly does the SNP wish to do with the proposed power, where does it see the revenue gain coming from, and on what evidence is that based. Do we follow the Irish example of having a super-low rate, or do we follow the view of the SNP in Edinburgh and have retail business levy proposals, which were very badly thought out and arbitrarily proposed without consultation? Are we a high-tax or low-tax nation? Do we believe in high-quality, good value public services, or do we want to have a lower public expenditure base?
Some people believe that Ireland is an exact example for Scotland, but I argue that it certainly is not. Sadly, we no longer have the arc of prosperity argument from the Scottish Government. Nevertheless, it is important to note that when Ireland introduced its policy it was in a very weak economic position and the loss of revenue was relatively small, but that would not be the case for Scotland, which has a well-developed economy. If corporation tax is devolved, EU state rules require that the devolved Administration must not be protected from the revenue consequences of their decision.
It is clear that cutting corporation tax rates will cut revenue, at a minimum for some years, as suggested in the Exchequer evidence to the Holyrood Committee:
“A 10% cut in corporation tax in Scotland might cost about £600 million per year for an indeterminate period.”
The hon. Member for Dundee East (Stewart Hosie) has not specified what figure his party proposes for corporation tax, what loss to the Exchequer will result and when his party believes it will recoup the loss. No one in Scotland will want us to vote on the issue until we have the pertinent answers.
The CBI and other business organisations have firmly stated that they are against differential rates within the UK. Many of the experts who gave evidence to the Committee in Holyrood noted that it would create economic distortions—the brass-plating of booking profits through Scotland by manipulating transfer pricing. I refer Members to paragraph 54 of the Holyrood Committee’s report, which states:
“The Committee does not believe that Scotland should seek to maximise its tax income by becoming a tax haven for companies operating elsewhere in the UK.”
I entirely agree with that approach.
Some evidence was given regarding the example of Switzerland, which has a highly federalised and separate tax system in its various cantons, but the Swiss example points out that that would tend to lead to lower public expenditure. Is this what the SNP proposes for Scotland? The people of Scotland need to know whether the answer is yes or no. Paragraph 494 of the Committee’s report states that Professor Anton Muscatelli noted that the Swiss example is one where there has been
“a shift from corporate taxation to personal income taxation.”
He also pointed out that that is a volatile tax.
Hon. Members will be aware of that volatility, which occurred after the 2007 fiscal crisis. The major payers of corporation tax in this country are our banks and financial institutions. They took a huge hit in 2007-08 and onwards. The cost for the Scottish public amounted to £10,000 for every man, women and child in Scotland. Where would those funds have come from if the Scottish Government had had to bear the entire cost? Is the SNP willing to allow Scottish public finances to take that level of risk? Is it saying that it wishes to see a cut in taxes on banks? Yes or no? We have had no answer to that either. Labour has argued that the banks are not paying an appropriate share towards deficit reduction in this country and has again called today for the bank levy to be increased in the Budget.
In paragraph 505 of the Holyrood report, Professor Iain McLean, whom the hon. Member for Dundee East quoted, points out that the Northern Ireland experience between 1920 and 1972, when corporation tax was devolved, was marked by widespread tax avoidance.
Many similar questions need to be asked, but at the end of the day the SNP has failed to say what it wants to do with the tax, what kind of tax regime it wants in Scotland and what it proposes in relation to bank taxes: is it for lower or higher taxes? Today, there has been the sound of deafening silence.
I have a number of questions to ask the Government about clause 24 itself. They have still to respond in detail to the Holyrood Committee’s report, and given the timing of next week’s Budget I am sure the Exchequer Secretary has many other things in his basket. Does he not agree that, given the considerable number of points that the report raises, we can anticipate at least some substantive amendments from the Government? If so, does he agree that, to ensure the maximum amount of democratic scrutiny, they should be tabled prior to Report, not simply left until the Bill arrives in the House of Lords?
Last week, the Government announced a consultation on the so-called Cadder clauses, which, as the Exchequer Secretary is aware, were not part of the original Calman commission. That consultation will continue until mid-May. Does he not agree again that it would be better to postpone Report until it is complete in order to allow us properly to scrutinise in the Commons this important legislative and constitutional reform?
The Secretary of State for Scotland (Michael Moore)
On the issue of section 57(2) of the 1998 Act and the new clause or amendment that we will table to it, the hon. Lady is aware and has rightly highlighted that we are undertaking a consultation. I am happy to say to her in public what I have said privately: she and members of other parties are very welcome to have discussions with officials to ensure that Members are aware of how that thinking is developed. Just to reassure her, anything that is introduced in another place will come back here for proper and thorough scrutiny in due course.
Ann McKechin
I am grateful to the Secretary of State for his remarks, but I would prefer to have the earliest possible scrutiny in the House of Commons, and I certainly hope that the House will be allowed at the very minimum a proper period in which to scrutinise properly any amendments or new clauses that are introduced in the House of Lords, because this is an important constitutional issue. It is technical, but it is important that this House has the time to debate and scrutinise it properly, and that the public and the electorate know that we have scrutinised it appropriately.
Do the Government agree with the Chartered Institute of Taxation that a mechanism might be required to ensure that any future Scottish provisions do not conflict, and to consider how future UK treaties and EU rules might affect the powers that we provide to Scotland in the Bill?
Proposed new section 80B of the 1998 Act appears to include the possibility of devolving aggregates levy and air passenger duty in future. Will the Government confirm that the Scottish Parliament has a formal standing in consenting to the Orders in Council referred to in that section? Air passenger duty might be considerably altered by the time the review is complete, and that could be of significance to the revenue that can be anticipated from Scotland. Air travel in Scotland has its own distinct features, particularly within Scotland itself and to the north and isles areas, so it is important that there is a full and proper discussion not only here in the Houses of Parliament, but in the Scottish Parliament, should there be any difference in the levy’s impact on the Exchequer.
On the calculation of the block grant, will the Government consider the Holyrood Committee’s proposals that the reduction in grant might be indexed to changes in the income tax base for the rest of the UK? Will they consider also the principle of a formal review of the grant reduction mechanism after 10 years, as the report recommends? If Ministers were able to give us an indication of the Government’s view, that would be helpful. What consideration have the Government given to the Holyrood Committee’s recommendation that the transition period for the income tax powers and the calculation of the block grant reduction be reduced or done away with in its entirety if, for example, the measures on the tax base are implemented? Finally, what consideration have the Government given to the recommendation that while a flat-rate structure should be adopted initially, this decision must be carefully evaluated as experience is gained of operating it? That simply follows from the experience of other devolved Administrations in dealing with income tax.
I would welcome the Minister’s comments. We will vote against any move by the SNP on fuel duty or corporation tax. Apart from that, we will support the Government’s clause.
Mr Russell Brown
I did not intend to speak on the amendments tabled by the hon. Member for Dundee East (Stewart Hosie), but I feel that some issues need to be addressed, and I want to put to him one or two questions about fuel duty that I hope he will answer when he responds to the debate.
I am sure that no one in the Chamber does not recognise how difficult this issue has become for motorists in any part of the UK—particularly, I recognise, for those in the northern and western isles. However, when I look at the whole concept of devolving this additional tax on fuel duty, I wonder, in all honesty, whether the proposal would have been before us if fuel prices at the pumps were not so expensive. The hon. Gentleman has not given the slightest indication how this additional income would be used. More importantly, does he have even a ballpark figure on how much would be raised in additional taxation going to the Scottish Parliament? In a previous debate, he and I discussed the fuel duty stabiliser, of which he has been a great advocate. As I pointed out to him, his advocacy has not always been consistent, as there was one year when the SNP dropped the proposal. If he had his way and managed to get the amendment through, and the fuel duty charge became a devolved issue, would he totally abandon the whole concept of a fuel duty stabiliser?
I am not in favour of a fuel duty stabiliser, as I have made clear to constituents who have corresponded with me over recent weeks. I need only point to the campaign run by FairFuelUK, which has not given the slightest indication of what it thinks is a reasonable price for fuel and a reasonable level of duty. The wider public might think that this is a tremendous idea, but I warn the Committee, as I have warned my constituents, to be very careful. With the current fluctuating price of fuel—crude oil—and the way that the marketplace is at the moment, if a fuel duty stabiliser were suddenly introduced, we would end up with fuel pegged at a price that is unsustainable. People filling up their cars are already baulking at the whole concept of what they have to pay, and it is completely wrong to peg pump prices at a level that is unsustainable.
I will also briefly mention the rural fuel derogation, about which the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), who is not with us, might have some idea. I hope that the hon. Member for Dundee East will indicate the average mileage of someone living in the northern or the western isles. I recognise how painful it must be for people living in those localities to pay 10p or 15p per litre more than people on the mainland. However, the pain that such people suffer if they do 5,000 or 8,000 miles a year is comparable to that suffered by people in areas such as mine who have to do 15,000 or 20,000 miles a year, or more. Fuel prices are only one element of motoring costs. People in some places pay an astronomical price because of the miles that they have to cover. On an annual basis, people on the islands might not pay more; they might even pay less if they have a low mileage.
Mr Alan Reid (Argyll and Bute) (LD)
The hon. Gentleman should not denigrate the fuel duty derogation in the way that he has. On large islands such as Mull and Islay, people do a significant mileage. The use of fuel is not just about the number of miles one drives; if one drives on single track roads and has to stop and start all the time, one uses a lot more fuel. The important thing is to get the derogation established on the islands and to make it workable. It can then be extended to remote parts of the mainland.
Mr Brown
The hon. Gentleman, like so many people, has merely used the terminology of significant mileage. We need clarification. Will somebody in this Committee please put figures on this? To a person on the islands, significant mileage may mean 5,000 or 6,000 miles. I appreciate how difficult it is for people living in remote, rural localities. However, we are talking about finance—something that I am not an expert on, as I am sure hon. Members know. We need to be clear in our minds about what we are doing here.
Mr Reid
Perhaps I can give the hon. Gentleman an indication of the distances involved. The distance from Fionnphort on Mull to the largest town on the island, Tobermory, is 50 miles. Somebody driving from Fionnphort to the largest town on the island and back therefore travels 100 miles.
Mr Brown
I appreciate the hon. Gentleman’s clarification of the distances that people travel. I believe that that will be important in the case that the Government are trying to make for a rural fuel derogation. I am not demeaning anyone, but saying that we need to be clear when discussing finance what the situation will be.
Those are the brief points that I wanted to make, and I hope that we can get clarification before we vote on these issues this evening.
Fiona O'Donnell
You may not have been present the last time I spoke on the Scotland Bill, Mr Walker, but it was my birthday. Every time I speak about the Scotland Bill, it feels like my birthday.
In contrast to the amendments tabled by the hon. Member for Dundee East (Stewart Hosie), the Bill offers real progress for Scotland and a recognition of all that has been achieved at Holyrood. At the same time, it offers the stability of remaining as part of the Union, which protects Scotland against some risks. The hon. Gentleman seemed to be disappointed by what he called the politics in the report of the Scottish Parliament’s Scotland Bill Committee. Perhaps, however, we should look at the history of how we have come to this point.
We had the Scottish constitutional convention and the Calman commission, both of which the hon. Gentleman’s party declined to be part of. Those things stand in sharp contrast to the SNP’s own record, because the national conversation, which my hon. Friend the Member for Glasgow North (Ann McKechin) spoke about at some length, has delivered nothing for the people of Scotland or the Scottish Parliament. That contrasts with what is on offer before the Committee today. Of course there is detail in the Bill that we need the Government to iron out, but even the Bill Committee in the Scottish Parliament—I believe it is the first time that a Committee of that type has been established, to give the Bill the scrutiny that it deserves and merits—has acknowledged that there is time to work on some of the details.
We could fair see how all puffed up with pride the hon. Gentleman was about all the amendments that he had brought before us, but I have to say that I found his arguments unconvincing. The SNP had all the time that Calman was discussing a way forward to come up with some detailed proposals, and it had some weeks of the Scotland Bill Committee’s work in Holyrood, yet what do we see? A single piece of paper containing its proposals for lasting change and progress in Scotland. I am afraid that is the sum total of its contribution.
Stewart Hosie
This is very confusing. I am not puffed up with pride; I am simply doing my job. We have tabled amendments on capital borrowing, revenue borrowing, corporation tax, fuel duty, air passenger duty, aggregates duty and previously on air weapons, road safety, the coastguard and other matters. I believe Labour’s substantive amendment would re-reserve some food labelling powers. That is not a hugely impressive record.
Fiona O'Donnell
I will withdraw my remark, then, and acknowledge the humility that we have now heard from the hon. Gentleman. Up until 20 February, however, we had seen none of the details of the SNP proposals. I have sometimes accused Conservative Members of shotgun legislation, and I have to level that accusation against him as well.
Sheila Gilmore (Edinburgh East) (Lab)
Does my hon. Friend agree that one reason why we do not need to table copious amendments is that we took part in the deliberations of the Calman commission and in all the consultation related to it?
Fiona O'Donnell
I absolutely agree. The whole process has been about consultation, and at some point the SNP has to admit that perhaps the reason why it has been outside the process, and why it had to file a minority report, is that it is just plain wrong on this issue. I genuinely appeal to SNP Members to pause and consider whether Unionist parties would really advance legislation that would put Scotland and the Union at risk.
I am tempted to think that spring has come to the House, because what we have heard today is not the sound of chickens but the sound of constitutional cuckoos. That is what SNP Members are. They allow others to do the work and build the nest, then they come and try to throw our eggs out.
Stewart Hosie
We are hearing some interesting analogies. Far from throwing the eggs or the chicks out of the nest, we are bringing to the table today the aggregates levy amendment recommended by the Committee in the Scottish Parliament and by Calman. We hope to divide the Committee on it today. Will the hon. Lady join us in backing it?
Fiona O'Donnell
My hon. Friend the Member for Glasgow North has answered that question. If the hon. Gentleman was not listening, or if he was not able to follow it, I am afraid I cannot take responsibility for that.
I will press on and talk about the SNP’s corporation tax proposals.
Fiona O'Donnell
No, I would like to make some progress and actually talk about the amendments. [Hon. Members: “Come on!”] Oh, alright then. Don’t say I’m not kind.
Pete Wishart
I am trying to understand Labour’s position on our amendments. They are what the Scottish Bill Committee and Calman agreed on, and we are providing an opportunity to put them to the vote today. Is she honestly saying that she will not take the opportunity to support her own case?
Fiona O'Donnell
This may not be something that the hon. Gentleman is used to hearing, but I am going to tell him, “Not yet”. As my hon. Friend the Member for Glasgow North said, until we have a ruling and clarification, there is a risk to the Scottish Government. That does not mean withholding those powers for ever, but it is about protecting Scotland and looking out for its interests.
The Exchequer Secretary to the Treasury (Mr David Gauke)
It is a great pleasure to serve under your chairmanship, Mr Walker, and to respond to the debate on the proposed amendments to clause 24.
Pete Wishart
Just before the Minister starts, can he explain why a Treasury Minister is replying to the debate when the Bill was presented by the Scotland Office? I know there are plans to do away with the useless Scotland Office, with which the SNP agrees, but does this situation just add flames to that particular fire?
Mr Gauke
Perhaps the hon. Gentleman has read the Command Paper, which was signed off by both the Secretary of State for Scotland and I. The debate relates to taxation, so it seems perfectly appropriate for a Treasury Minister to respond. Indeed, I warmly welcome the kind response I got from the hon. Gentleman’s colleague, the hon. Member for Dundee East (Stewart Hosie). It is very unusual for me to be described as a “big gun” but I am none the less grateful for those words. The Scotland Office and the Treasury have worked closely on the Bill, and in particular on the provisions that we are debating, and I am pleased to continue that co-ordination.
Stewart Hosie
The Minister suggests that he signed off the Command Paper with the Secretary of State for Scotland, but the names on it are those of the Prime Minister, the Deputy Prime Minister, the Secretary of State for Scotland and the Chief Secretary to the Treasury. I am sure the Minister’s name is in there somewhere, but it would be good if he could tell us where.
Mr Gauke
I only wish I could have signed it off—such is my enthusiasm for the Command Paper. I work closely with my right hon. Friend the Chief Secretary, however, and the point I made was that the Treasury signed off the Command Paper. We work happily as one Government, so I am pleased to be able to respond to the amendments—assuming I now have the chance to do so.
The Government’s proposals in the Bill facilitate the largest transfer of power from the United Kingdom to Scotland since the creation of the UK. By devolving stamp duty land tax and the power to set a Scottish rate of income tax, the Scottish Parliament will be able to raise approximately one third of its own budget, thereby significantly improving its financial accountability. Only last Thursday, the Scottish Parliament voted overwhelmingly to endorse the Bill—121 in favour, three against and one abstention. To devolve additional taxes now, as the hon. Member for Dundee East argues, without the consent of the Scottish Parliament would be thoroughly inappropriate. There has been a long consultative process that both the UK Government and the Scottish Government and Parliament have been through, so to include the devolution of additional taxes now, on a whim, would not be the right course of action.
As well as those general points, there are some specific reasons why these taxes should not be devolved now in the Bill. I shall deal with those in a little detail. First, on amendment 37 and new clause 8, the Calman commission did not recommend that fuel duty be devolved. It concluded that different fuel duty rates would make artificial opportunities for cross-border shopping, creating economic distortions. More significantly, however, it highlighted the EU energy products directive that sets a principle of one rate of fuel duty per member state. Devolving fuel duty to the Scottish Parliament would require the EU to grant the UK a derogation from this directive, and the Calman commission acknowledged that it would be unlikely to be granted. A contrast can be drawn with the rural fuel discount derogation that the Government are pursuing.
Amendment 58 and new clause 15 relate to quarrying and mining. Although the Calman commission recommended devolving the aggregates levy, a tax on quarrying and mining is much wider and has not been endorsed by the Scottish Parliament. Even if the scope of the amendment was narrowed to devolve only aggregates extracted from the land, as Calman recommended, I would not accept it at this point. The aggregates levy is currently under legal challenge in the EU courts, and it would be reckless to devolve it while the challenge remains. I will not devolve a tax to the Scottish Parliament where there is any risk that it could subsequently be deemed to be illegal. That would be a substantial risk for the Scottish Parliament, which was the point made by the hon. Member for Glasgow North (Ann McKechin).
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
Will the Minister clarify how it is reckless? What is the element of risk involved were it to be transferred now to the Scottish Parliament?
Mr Gauke
The risk is this: should it be found subsequently that the aggregates levy, as currently constituted, is not legal, the loss of that revenue would be immediate and significant for the Scottish Government. The hon. Member for Dundee East referred to the special rates of aggregates levy in Northern Ireland, and asked why they could not therefore be applied in Scotland. I make the point, however, that the Northern Ireland credit scheme was suspended on 1 December owing to the legal challenges at the European courts.
The confirmation sought by the hon. Member for Glasgow North is set out in the Command Paper accompanying the Bill: once the aggregates levy has overcome the legal challenge, we will devolve it to Scotland. Clause 24 enables that to happen.
Mr Davidson
I am genuinely unclear about the point that the hon. Gentleman is making. I fail to see how the Scottish Government lose if the action results in the aggregates levy being ruled illegal. They do not have an aggregates levy at the moment. If it is transferred to them and then abolished, they will not have it either. Not losing something that they do not have already is not a deficiency. Would any additional risk result from the transfer of the aggregates levy?
Mr Gauke
The point is that there would be a reduction in the block grant, because the revenues from the aggregates levy would be going to the Scottish Government. If it was subsequently found that the aggregates levy in its current form was not legal, either we would have to readjust the block grant or the Scottish Government would have to bear the shortfall.
I shall move on to amendment 57 and new clause 16. The Calman commission recommended the devolution of the UK’s air passenger duty, not a general power to tax air travel, which is what the amendment seeks. The UK Government are exploring changes to their aviation tax system, as stated in last year’s June Budget, and will look at devolution of this tax base in that future work. However, it is not appropriate to devolve aviation tax until these changes have been explored, with any major changes subject to consultation, and a decision on the future of UK aviation tax made. To do otherwise would mean that the Scottish Parliament would have to plan the future of their new tax without the context of the UK version. I would also like to answer the point about the process of a new tax. Clause 24(6) provides that any new tax would need to be approved by the Scottish Parliament, under section 80B of the Scotland Act 1998. That would clearly apply in these circumstances.
I turn to amendment 60 and new clause 17. The Calman commission recommended that corporation tax not be devolved. The Scottish Parliament has endorsed this, although it wants to stay engaged in any future discussions on corporation tax devolution. Both the Calman commission and the Scottish Parliament recognised very good reasons why not to devolve the tax. First, the Calman commission concluded that if comparable levels of public services were to be maintained, the scope for substantive reductions in the rate of corporation tax in Scotland was limited, unless the Scottish Government are able to increase revenues from other sources. As the hon. Member for Glasgow North said, under European law there will have to be a reduction in the block grant commensurate with the value of the reduction in the corporation tax rate.
Secondly, the commission also believed that the potential administrative impacts of such a move were significant. The creation of compliance costs to businesses operating on either side of the border, as well as the increased collection costs to the Government, would be undesirable in the present economic climate.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The Exchequer Secretary might be aware that the Conservative economics commission in Wales has advocated the setting of corporation tax at a regional level. What does he say to that?
Mr Gauke
We will consider that. At the moment, however, we are concerned with Scotland and Wales in particular. There is a slightly different issue with Northern Ireland, where the Government have not yet made a decision on the devolution of corporation tax. Clearly, however, the circumstances in Northern Ireland are different: it does not have a land border with the rest of the UK, but does have one with a country that has a substantially lower rate of corporation tax.
There are a number of detailed questions about how some of these tax matters will be addressed. Various points arose from last week’s Scottish Parliament report, and we will respond to those in due course. However, I am keen that the joint exchequer committee—that is the title suggested by the Scottish Parliament, and it is one we are happy to take onboard—which will consider these matters in some detail, meets as soon as possible after the Scottish elections and the formation of a Scottish Government. We can then discuss some of these matters and provide further details in the future.
John Stevenson (Carlisle) (Con)
Can the Minister assure me, as a Member representing a seat on the English side of the border, that such reviews will take into consideration the effects that any tax powers may have on the English side of the border, as well as the Scottish side?
Mr Gauke
It would be fair to point out that the Calman commission took into account some of those issues, because—to take the examples of corporation tax or fuel duty—there could be significant issues with full devolution, and we will of course take into account the interests of all parts of the country.
Pete Wishart
Perhaps the Minister could answer the question—a question that the hon. Member for Glasgow North (Ann McKechin) also raised—about the process in which we are now involved. When are we likely to see amendments that reflect the will of the Scottish Parliament’s Committee? Will they be introduced in the House of Lords? Like the hon. Lady, I would find that unacceptable: such amendments have to be debated in this place. When will we be able to debate them in this House?
Mr Gauke
My right hon. Friend the Secretary of State for Scotland addressed many of those issues earlier, but let me make this point about the devolution of tax. It is important to have the consent of the Scottish Parliament, which is why we are proceeding as we are, which is not the approach of the Scottish National party. Neither this Government nor, I believe, the vast majority of hon. Members would seriously consider making amendments that affected the powers of the Scottish Parliament without its consent. However, as has been said, devolution is a process, not an event. This is an enabling Bill. The Scottish Parliament can ask for additional tax powers over the course of time and have them duly considered. Clause 24 gives the power to add new devolved taxes. The Command Paper accompanying this Bill sets out the process for taking forward the devolution of the aggregates levy and air passenger duty, but any future devolution must happen with the wholehearted consent of the Scottish Parliament, not just following the proposals of a minority of Members of this House. Given that, I ask the hon. Member for Dundee East to withdraw his amendment.
Stewart Hosie
Let me respond briefly to some of the key points raised. The hon. Member for Dumfries and Galloway (Mr Brown) talked about a fuel duty regulator, as he has done on a number of occasions. He knows very well the difficulties faced by hauliers and others in the south-west of Scotland. He asked whether I would give up on the proposal in this place if it were delivered in Scotland. I said in my speech that if the UK Government would not deliver it, the powers should be devolved, so that the Scottish Government could act. I simply want fair play on fuel. It is important that the power should be devolved, so that the Scottish Government can act if the UK Government will not.
The hon. Member for East Lothian (Fiona O'Donnell) made an interesting speech, as she always does. She valiantly tried to defend the lack of Labour attempts to strengthen the Bill. She spoke in favour of Calman, but rejected one of the key Calman recommendations, which was the aggregates levy proposal. The hon. Member for Glasgow North (Ann McKechin) also made an interesting speech. She raised the notion of—I think—a £600 million loss every year if there was a 10p cut in corporation tax. No one has ever suggested an immediate 10p cut in corporation tax. That was a straw man, set up to be knocked down, and bears no relation to the policy of any party in this House.
Ann McKechin
Perhaps the hon. Gentleman could clarify what rate of corporation tax he would propose if the power was devolved.
Stewart Hosie
I would like it cut over a number of years, taking the benefit of the announcement effect and taking advantage of the experience of other countries, where, with modest changes on a downward spiral in corporation tax, the business tax yield has increased. That is very sensible and is, I think, what the current Government have in mind.
Let me turn briefly to what the Minister said. He said that the proposal would provide around one third of Scotland’s budget. That is similar to the figure of 35% proposed by the Calman commission, but that included all the revenue proposed by Calman, much of which is not in the Scotland Bill. That figure was also calculated on a baseline that excluded capital expenditure from the Scottish budget. The Minister will find that the actual percentage share is considerably lower. He said that the Government would never seek to devolve taxes on a whim. Let me assure him that we would certainly not want to do that either. We would want to devolve taxes only to provide balance and a basket of taxes to mitigate any volatility, which may well arise when the bulk of our assigned revenue comes from a single, personal tax.
I am not convinced by many of the arguments I have heard. There is a very strong case indeed for trying to push forward with the Calman proposals, particularly on the aggregates levy, so I intend to divide the Committee on amendment 58, but for now I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 58, page 16, line 17, at end insert—
‘(c) Chapter 5 provides for an Order in Council to specify, as an additional devolved tax, a tax charged on quarrying or mining,’.—(Stewart Hosie.)
Question put, That the amendment be made.
Ann McKechin
I should like to ask the Minister a couple of questions about this clause, which is technical in nature and will enable HMRC to disclose information to the Scottish Ministers. Given the terms of the Holyrood Committee’s report on the appointment of an additional accounting officer responsible for Scottish income tax, and the duties and accountabilities of HMRC, should that proposal be put on a statutory footing? That question was raised by the Committee, and I should be grateful for the Minister’s response.
Will the Government also consider the Committee’s recommendations that the work of Her Majesty’s Revenue and Customs and the Office for Budget Responsibility be subjected to audit in respect of aspects of devolved taxes? If it is subject to audit and the Government have thought about it, I should be grateful to find out whether, in order to facilitate proper accountability to the UK Parliament and the Scottish Parliament, it should be carried out by the National Audit Office or the Auditor General for Scotland, or both. It is important to clarify these points at an early stage. In debating the previous group of amendments, the Minister spoke about the new Treasury committee between the UK Government and the Scottish Government, but I am sure that Select Committees in this House and those in the Scottish Parliament will want to have an opportunity to look into this work and, where necessary and when the clauses are implemented, to review the work of HMRC. At this stage, I would be grateful for any further clarification from the Minister.
Mr Gauke
I thank the hon. Member for Glasgow North (Ann McKechin) for her questions. We do not believe it is necessary to put the additional accounting officer on a statutory footing, but let me repeat our assurances, which I hope will satisfy the hon. Lady. She asked detailed questions arising from the Holyrood Committee report published last week and she will not be surprised to hear that I believe we can look at this matter within the bilateral Exchequer committee. I understand her desire to have greater clarity as soon as possible, but it is important to get the matter right. The committee will have an opportunity to meet shortly after the formation of the Scottish Government, and I hope we will be able to make some progress on some of those detailed points.
Clause 25 is a technical provision. It enables HMRC to share with the Scottish Government information about the collection and management of devolved taxes, while ensuring the confidentiality of that information. I thus believe that the clause should stand part of the Bill.
Question put and agreed to.
Clause 25 ordered to stand part of the Bill.
Clause 26
Scottish rate of income tax
Ann McKechin
I beg to move amendment 68, page 18, line 11, after ‘may’, insert
‘after consultation with such persons as Scottish Ministers consider appropriate’.
The Temporary Chair (Mr Charles Walker)
With this it will be convenient to discuss the following:
Amendment 69, page 20, line 5, after ‘may’, insert
‘after consultation with (a) Scottish Ministers, (b) the Scottish Parliament and (c) such persons as it considers appropriate’.
Amendment 70, page 20, line 21, leave out subsection (4).
Government amendments 61 and 62
Amendment 43, page 20, line 35, after ‘Treasury’, insert
‘, with the consent of the Scottish Parliament,’.
Amendment 44, line 38, at end insert—
‘(6A) For the purposes of subsections (4) and (5)—
(a) reference to the consent of the Scottish Parliament means consent by resolution, and
(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
Government amendment 63
Amendment 47, clause 29, page 23, line 12, after ‘Treasury’, insert
‘, with the consent of the Scottish Parliament,’.
Amendment 48, line 28, at end add—
‘(7) For the purposes of subsection (4)—
(a) reference to the consent of the Scottish Parliament means consent by resolution, and
(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
Government amendment 64
Amendment 49, clause 31, page 24, line 8, after ‘Treasury’, insert
‘, with the consent of the Scottish Parliament,’.
Amendment 50, line 8, at end add—
‘(5) For the purposes of subsection (4)—
(a) reference to the consent of the Scottish Parliament means consent by resolution, and
(b) standing orders must provide that only a member of the Scottish Government may move a motion for such a resolution.’.
Government amendments 65 and 66
Government new clause 18—Orders
Ann McKechin
I am speaking to amendments 68, 69 and 70 and I wish to put it on record that the wording of those amendments was suggested by the Law Society of Scotland. I shall speak to the amendments first and then to the clause stand part—with your agreement, Mr Walker. I have a substantial number of questions to put to the Government about the implementation of this important clause.
On amendment 68, new section 80C empowers the Scottish Parliament to set by resolution the Scottish rate of income tax. This is an important power that is required to be exercised in accordance with the principles set out by the consultative steering group report published by the Scottish Office in 1999. These principles include accountability, openness and accessibility with a view to making possible “a participative approach” to “policy and legislation”. Accordingly, Scottish Ministers should, we believe, be required to consult those considered to be appropriate when proposing the resolution for the Scottish rate—much in line with existing practice of the Treasury here.
On amendment 69, new section 80G enables the Treasury to disapply or modify section 6 of the Income Tax Act 2007. This could involve issues such as gift aid relief or pensions relief. The order would be introduced in the UK Parliament and debated and passed or rejected in the UK Parliament. However, it could substantially affect the Scottish rate and Scottish taxpayers, as well as Scottish charities and pension funds, so we believe that Scottish Ministers and the Scottish Parliament should be specifically consulted prior to any amendment of these reliefs.
Finally, amendment 70 takes out subsection (4). We have concerns about the provision. Section 80G(4) provides that an order made under that section
“may, to the extent that HM Treasury consider it to be appropriate, take effect retrospectively”.
We believe that HM Treasury should, at a minimum, consult Scottish Ministers and the Scottish Parliament if retrospectivity is required. The Minister will not be surprised to hear me say that I think all Governments should avoid retrospective legislation whenever possible—unless there is a proven and specified need. We think that the case for retrospective application in this instance has not yet been made out.
The amendment is designed to probe this issue. The Scotland Office has indicated that the power would be used to make tax reliefs applicable retrospectively, but I suggest that this could be done either by regulation or statutory instrument. The clause enables a charging order to be made by the Treasury, which is a matter of concern to us. Any retrospective action by the Treasury could—I stress could—have a detrimental impact on individual taxpayers and on the Scottish parliamentary budget. I hope that when the Minister responds he will provide some assurance about the circumstances in which and when the Government intend to use this power. I hope he will confirm how limited the power will be when it comes to its practical exercise.
Paragraph 673 of the report by the Holyrood Committee asked a number of questions about residence. The question of residence is one about which most of the tax experts we consulted expressed some concern. I understand that there is no statutory definition of a UK resident taxpayer. This legislation, however, attempts to define by statute a Scottish resident taxpayer. Given that that is, in a purely technical sense, a subset of a UK resident taxpayer, I think the Minister would accept that it is unusual to have a fixed statutory definition within a floating definition. I would like to question him a bit further about how this will work in practice and what the levels of risk are in respect of the current application of the law.
Paragraph 673 of the Holyrood Committee report asks what “place of residence” means, as defined in clause 26, as it appears to be different from how residence is understood in other areas of tax law such as capital gains tax. Does place of residence imply ownership when juxtaposed against “main place of residence” in new section 80E(a), (b) and (c)? Place of residence and main place of residence are not defined in that new section, which I fear could present problems of interpretation. I would be grateful if the Minister clarified his understanding of the interpretation in this case.
How the tax is to be applied in practice is an important issue. The vast majority of Scottish taxpayers live the whole period of their lives in Scotland or live there for very substantial periods, and it is relatively easy to define who those people are. What about people working on board ships or on oil rigs, for example? What about members of our armed forces and what about those who are neither UK resident nor employed by non-UK employers? As I said, the Scottish taxpayer is defined by reference to an individual who is resident in the UK for income tax purposes. The current definition of UK residency lies in 86 pages of guidance that are the subject of frequent revision by HMRC. How, then, can the Government be confident that this definition is going to work? Do the Government agree with the Chartered Institute of Taxation that the introduction of a possible statutory residence test for the UK is now essential? Experts in, for instance, the Institute of Chartered Accountants of Scotland, the Chartered Institute of Taxation, the Federation of Small Businesses and CBI Scotland have expressed concern about the lack of a concrete definition. What are the Government doing to address those concerns expressed by professional experts? I understand that they are considering the issue. Will the Minister tell us whether they are likely to attempt to provide a better definition of a UK resident taxpayer in the Finance Bill that will follow next week’s Budget statement?
John Stevenson
The hon. Lady has raised many issues connected with income tax. I may be demonstrating my ignorance of the Scotland Act 1998, but under that legislation the Scottish Parliament could have increased or decreased the basic rate by 3p. Why were these issues not addressed then?
Ann McKechin
I was not a Member of Parliament at that time, unlike some of my colleagues who were in the House when the legislation was discussed in detail. I think it fair to say, however, that a great deal was left to the potential for secondary legislation. As the hon. Gentleman knows, those provisions have never yet been used. That is one of the reasons that the Calman commission specifically addressed the issue of fiscal accountability.
The hon. Gentleman may also be aware of recent debates in the Scottish Parliament following the decision of the Finance Secretary—without informing the Parliament—to advise HMRC that it would not be required to implement the rules for a few years. I do not wish to discuss that controversy, but I will say that the establishment of the Calman commission was partly due to the fact that the rules had never been implemented. Much of the detailed work that we are now considering had been put on the shelf without being properly examined. I take the hon. Gentleman’s point, but I think it necessary for me to ask the Minister a number of detailed questions in order to ensure that the Government’s intentions are on record.
Rory Stewart (Penrith and The Border) (Con)
Given that income tax issues such as this are addressed throughout the world where jurisdictions—for example, American states—abut each other, does the hon. Lady consider them to be reasons for fundamentally objecting to the Bill, or simply matters of minor detail that could be resolved by means of secondary legislation?
Ann McKechin
As I have made clear, on Second Reading and throughout this debate, Labour fully supports the principles behind the Bill and the additional fiscal powers given to the Scottish Parliament. Before the election, the Labour Government supported the Calman commission, as we made clear in a White Paper published in the summer of 2009. I think that all these issues can be dealt with, but, as I am sure accountants and lawyers will confirm, the devil is in the detail at times. It is important for the House of Commons and, no doubt, the House of Lords to give the Bill proper scrutiny, because ultimately individual taxpayers, businesses and employers will have to live with the consequences of its implementation.
Mr Frank Roy (Motherwell and Wishaw) (Lab)
Is it not worth reminding the Committee that, no matter what was said in 1997, the Opposition voted against it?
Ann McKechin
Indeed, and the fact that we now have converts to the cause shows what a difference the passage of time makes. As I said earlier, I am pleased that even the SNP has agreed to the LCM motion.
Our present approach is consistent with the approach that the Labour party has always taken to constitutional reform, which is to seek political consensus before introducing legislation in the House of Commons. The reason we have such a degree of consensus this evening is that we have spent a good deal of time examining details of the legislation. I congratulate the Holyrood Committee, which has done an excellent and thorough job in examining many of the issues in great detail. We all benefit from its work and from last week’s debate in the Scottish Parliament, which showed that the Scottish Parliament and its Committees are more than capable of doing a thorough job in scrutinising legislation.
I should be interested to know whether the Government agree that the retrospective application of an order could adversely affect the budget of the Scottish Parliament. For example, if the Budget is set in March and the Treasury lays an order in October to apply a relief clause retrospectively, that could have grave implications for the Scottish Government’s budget. That is another reason why I seek some reassurance about the Government’s intentions for the use of this clause.
How do the Government propose to deal with avoidance of the Scottish tax rate? Unlike other jurisdictions that have devolved taxes, and where there are different forms of collection and reporting, many people self-assess or are in pay-as-you-earn schemes, and they are not currently specifically called on to declare their residence to the tax authorities in the way required by the Bill. The Bill’s provisions only apply to income; they do not apply to dividends or to interest on savings, and we would want appropriate measures to be taken to ensure that people do not end up transferring income into another route, to try to avoid the income tax provisions made by the Scottish Parliament.
What provisions have the Government put in place for the self-employed? Will, as anticipated, the self-assessment tax return have to be altered, with additional questions on residency for example, particularly for those who work in a different part of the UK? I realise there are specific measures dealing with Members of Parliament and we are automatically included, but it has been pointed out that Scottish judges serving at the Supreme Court are not covered by the Bill’s provisions. Similarly, other senior Government officials travel from different parts of the country for their work. It is important that they are aware of what may be expected of them in terms of self-assessment claims.
David Mowat (Warrington South) (Con)
Many of the hon. Lady’s comments imply that she is unhappy with residency being the method for working out where people pay tax, but it seems to me that there is no alternative. Is her position that she would like everybody to fill out a tax return?
Ann McKechin
No, I can assure the hon. Gentleman that I do not want to burden the taxpayer unnecessarily with additional questions and pieces of paper and that I think the residency basis is the simplest way to deal with this issue. The problem is that we have a floating definition of a UK resident taxpayer, and from that we are trying to define in very exact terms a Scottish resident taxpayer. That is the point at which there could be challenges, and sometimes mischief in that people might try to change their declaration of where they believe they are resident.
This situation is unlikely to arise for the vast majority of taxpayers in Scotland; most of them will be faced with a very simple exercise. Nevertheless, as I have pointed out, in other jurisdictions with devolved income tax there are ways in which people have to declare where their residence is that we currently do not have in the UK. I want the Minister to say whether the Government are aware of any potential problems, and what measures they intend to put in place to avoid them, so that the maximum level of tax that is due is collected and returned to the Scottish Government, and so that administration is kept to a minimum. All hon. Members will be concerned about the cost to the Exchequer, and also about the costs to individual businesses. That is why I am asking these questions, but I agree that residency is the easiest way to define who should be liable to tax.
I also appreciate that a decision has been taken not to include interest on dividends and on savings. People will comment that that perhaps creates a degree of unfairness because some individuals get the majority of their income from those sources, but I acknowledge that there are complex and expensive practical difficulties in applying a residency test for those types of revenue, and that ultimately the benefit may not be great. We therefore understand why the Government have phrased the clauses in this way, but the devil is in the detail of defining exactly what they will mean in practice.
Stewart Hosie
The hon. Lady will understand that there is a very close relationship, particularly at the lower levels of income, between dividends and savings income, income tax and, as importantly, income tax allowances and thresholds. We have not tabled amendments on this topic, and it is extremely complicated, but if it were proved that there is an inherent logic in bringing together income tax, the tax on savings and dividend income, and how that relates to thresholds, allowances and the Scottish rate, might the hon. Lady and her colleagues be prepared to listen to that argument in future?
Ann McKechin
The Holyrood Committee did not consider that in detail, and the Calman commission did not make any specific recommendations that would lead us to legislate tonight. We have to reach a compromise in respect of striking a balance between fairness to Scottish taxpayers and having a system that is as simple and easy to understand as possible, and that reduces the administration costs to the Scottish Government as far as possible.
On thresholds, given that the Welfare Reform Bill has just been introduced with proposals on universal credit at the same time as this Bill is passing through the House, I ask the Government to say what consideration has been given to the impact on welfare benefits. Those on low incomes often have the most complicated tax affairs. Most benefits are calculated on after-tax income. If the Scottish rate income tax is higher than the basic rate, Scottish taxpayers on benefits will be entitled to claim more benefit. Will the Government ensure that the extra benefit is paid automatically, or will they issue public information on how full entitlement can be claimed? How will the new proposals on universal credit be implemented in respect of these tax changes? The Government have stated that their general rule on the tax base is one of no detriment, but I ask the Minister to reflect and give any assurance he can about whether there might be a possible conflict.
Conversely, if the Scottish tax rate is lower than that of the rest of the UK, Scottish taxpayers on benefits will be entitled to fewer benefits in some cases. What mechanism will the Government put in place to ensure that adjustments are made to their payments? We would be concerned if those on the very lowest incomes were adversely affected in their entitlement to the welfare benefits system. That is largely based on the national insurance system of course, which is separate from the tax system, but, as the Minister will be aware, the interaction between benefits and taxes is complex, and I am sure none of us would want to do this in a way that adversely impacts on pensioners, people on lower incomes, single parents, the disabled and others who may already have many concerns about what is being proposed in the Welfare Reform Bill. I hope the Minister can reassure us that he will not be adding to that burden.
Are the costs of implementation still as estimated in the Command Paper? How do the Government intend to control those costs? There is a long period of implementation, and hon. Members may be concerned about that, as some implementation schemes have taken longer, and been much more expensive, than originally estimated. Will the Minister tonight undertake to produce an annual report to the House of Commons until the full-scale implementation of the scheme, so that we may better scrutinise it, and ensure that value for money to the taxpayer is maintained and that the burden—which, of course, is ultimately to be met by the Scottish Government—is kept to a minimum?
Iain Stewart
I support the clause, but I wish to raise a couple of specific examples just to test that the definition of a Scottish taxpayer as set out in the Bill is robust and covers all eventualities. I appreciate that the examples I am about to give are technical, and if the Minister is unable to give me a definitive response tonight, I hope he will be able to do so on Report.
My first example is based on the situation my father was in for a number of years. It relates to proposed new section 80E(3)(c) on the definition of Scottish residence, as opposed to residence of another part of the UK. My father’s home was, and is, in Hamilton, just outside Glasgow. By any reasonable test, that is his main residence: it has been the family home for generations; my mother lives there; and it is what my father would call home. However, for a number of years he worked for the Civil Aviation Authority and although he was mainly based at Prestwick, the nature of his job required him to spend a considerable amount of time at its headquarters in London. He rented a flat in central London, where he was registered on the electoral roll for council tax, for utility payments and for all the other aspects of living in a dwelling. For a number of tax years he spent a majority of nights in London, as opposed to spending them at the family home in Scotland. Therefore, if I have read proposed new section 80E(3)(c) correctly, he would not be deemed to be a Scottish taxpayer. I would be grateful if the Minister would confirm whether that is the case. If so, is this not an anomalous situation and will the Government re-examine what the definition of “a Scottish taxpayer” should be?
Secondly, I wish to discuss the “Caledonian sleeper” question, which relates to proposed new section 80F(1)(a) and the number of days spent in Scotland
“at the end of the day.”
I do not have a detailed knowledge of the railway timetable, but let us suppose that the sleeper train left Glasgow at 10.30 pm or 10.45 pm and so was clearly in Scotland at the end of the day. If it traversed the border before midnight and so was actually in England on the stroke of midnight, would that day be counted as Scottish or English for the purposes of this calculation? I hope hon. Members will forgive me for raising this very detailed point, which will affect only a small number of people, as it is the job of this Committee to tease out these practical matters. I do not expect the Minister to give me a definitive reply right now, but I would be grateful if he undertakes to examine the matter and give an answer at a later stage in our proceedings.
Sheila Gilmore
It is important that we move forward on these tax powers for the Scottish Parliament. The big difference between these proposals and the ones in the Scotland Act 1998 are that these apply to all the different rates of tax. The structure being used and the fact that there will be a corresponding reduction in the block grant will deliver to the Scottish Parliament a real ability to make decisions, be accountable and test how well these things work. We wanted that in Scotland and we need it, but that is not to say that the arrangements will not have any complications and that there is no need to be clear about the answers to some of these questions. Some could be covered by regulations that are to follow, but there is always an anxiety involved in depending too much on detailed regulations, as opposed to primary legislation.
I wish to discuss two particular areas, one of which is tax avoidance and the provisions that the Government suggest we put in place to deal with it. The last thing that we would want is for those who have the ability to arrange their tax affairs in different ways to be able to avoid paying this tax, as that would harm the Scottish economy and undermine the whole principle behind what we are trying to achieve. We need to know what provisions will be put in place to deal with tax avoidance in the future. My hon. Friend the Member for Glasgow North (Ann McKechin) mentioned the self-employed, and they are also important. It is easier for them to arrange their tax affairs in a beneficial way, whereas those of us on PAYE may not be able to do that. It is important for self-employed people to know exactly how this system will work for them, particularly if they generate earnings in different parts of the United Kingdom, as it is quite possible for such people to generate.
I also have concerns about the future interrelationship between the benefits system and the tax system. This is important because the way in which benefits are calculated for some people depends on their income after tax, which means that a variation in tax will affect benefits. The Government may be clear that systems will be in place to deal with that very quickly, but the last thing that people on benefits need is any uncertainty about their income. They need to know how any increases in their income, and therefore in their tax liability, or any decreases in their income will affect them, because at that level of income people suffer particularly badly when changes are made. If the Welfare Reform Bill proceeds in full, we will be moving towards a new benefits system at just about the same time as some of these new powers come into force, so it is important to get this right. I urge the Government to provide answers to these questions, if not now, in time for Report, so that we can be clear about how this interrelationship will work.
Fiona Bruce
May I begin by telling hon. Members how pleased I am that, after a thorough independent evaluation of the devolution settlement in Scotland, this Government have been quick to legislate on this issue, fulfilling a manifesto commitment of more than one party in this House? After more than a decade, the time is right to assess the implications and consequences of the devolution settlement.
I shall now speak generally in support of the provisions of clause 26. The Calman commission review predates the economic crisis, but the need to recover the UK’s economic strength makes this issue ever more important. It is clear that economic growth will be driven by enterprise in local communities. Creating a Scottish rate of income tax will give the Scottish Government more responsibility over not only how they spend revenue, but how they raise it. That is a crucial discipline, which we hope will increase the likelihood that fiscal decisions will reflect the needs and priorities of Scotland, the Scottish economy and, most importantly, the people of Scotland. This is an opportunity for genuine fiscal accountability.
The proposals outlined in the Bill are not entirely new, but they do mark the next stage of the devolution settlement for Scotland. The existing Scottish variable rate gives the Scottish Government the power to raise or reduce the basic level of income tax. As Donald Dewar, the original First Minister, said, the Scottish variable rate
“asks the Scottish Parliament to face real financial choices and makes it, in a sense, more directly accountable to the people it represents.”—[Official Report, 31 July 1997; Vol. 299, c. 465.]
However, as we have discussed tonight, the Scottish variable rate has previously been only somewhat theoretical, in that it has never been employed as a tool to influence the economic fortunes of Scotland. That raises the question of whether the new rate will be any different, but I believe that it will be. I believe that the Scottish Government can and will enjoy more financial responsibility through the radical proposals in the Bill. More importantly, the proposals have the propensity to have long-lasting positive effects in Scotland.
To understand that, we have only to ask ourselves how our constituents—no matter which part of the UK we represent—would respond if more funding were raised and distributed locally, rather than by central Government. If that were the case, I am sure that my constituents would take an even greater interest in what their money was spent on and would be able to assess more easily whether politicians were responding to local priorities. Although the provisions relating to Scotland are based at the national level, not the local one, the same phenomenon should apply. This move should strengthen democratic accountability and bolster political engagement in Scottish communities.
I am sure that I am not the only hon. Member recently to have received letters from constituents unhappy about the level of block grant funding given to the devolved nations and, in particular, concerned that there is a difference in funding for certain policy areas, such as university fees and prescription charges. What needs to be communicated more effectively is how the Scottish Government can prioritise their funding. In England, all funding is distributed by the UK Government but in Scotland, the UK Government pay for national—that is, UK-wide—public services, such as defence and industry, and the block grant funding is distributed by the Scottish Government and pays for devolved powers: education, various aspects of health policy and so on. As a result, although decisions on funding in England must involve national, regional and local priorities, the Scottish Government can spend their block grant funding on regional and local issues only.
Sheila Gilmore
Will the hon. Lady concede, nevertheless, that choices are made about how to spend that block grant and that if a Scottish Government make a choice about how to deal with university funding, they do so to the potential detriment of other funding? The decisions that have been taken in this place about tuition fees and the reduction of the teaching grant for universities have had a considerable impact on Scotland, so we are not somehow free from those decisions.
Fiona Bruce
The hon. Lady makes a valid point and that is why I prefaced my remarks with the phrase, “What needs to be communicated more effectively is how the Scottish Government can prioritise their funding.” By that, I meant that checks and balances are involved and that that needs to be communicated nationwide. A greater understanding of that needs to be gained.
David Mowat
My hon. Friend’s answer to that intervention was very generous. It is right that the Scottish Parliament should make decisions about priorities in Scotland—about free tuition, prescriptions and whatever else—but the question that remains and needs to be answered is whether the baseline of the block grant, as it is set up, is fair on Scotland, England and Wales.
Fiona Bruce
My hon. Friend makes a valid point.
Let me turn now to the proposals in the Bill. It is only right that I should explain why complete financial independence would not, in my view, be beneficial for the Scottish or wider UK economy. Members of the Scottish National party might say that the Bill’s financial provisions do not go far enough but devolving full economic responsibility while retaining various regulatory and other competences would create a two-tier system that would serve to weaken our economy. Devotees of the two-tier system argue, I believe, on the basis of a fiction, if not a fantasy, that such a fragmented system could exist without disastrous consequences. The Calman commission and the Scottish Parliament’s report on the Bill both rule out financial independence on the grounds that it would create havoc for taxpayers and break up the Union.
In its final report, the Calman commission gave its reasons why income tax should not be fully devolved, including that it would not, in the commission’s view,
“be consistent with the social Union”.
We can add a further reason. There are certain areas of government that a responsible country will retain at a national level, such as defence and national security. They should remain UK-wide in the interests of the shared public good, and fragmenting them would be both inefficient and dangerous for national security. The same basic principles apply to immigration and trade. Unco-ordinated approaches in those areas could lead to potentially disastrous consequences so it is important that we act responsibly and in the whole country’s interest.
Such protections can be afforded only under a single economic framework and any moves to meddle in that area unnecessarily will create more damage than good. It is therefore refreshing that the Scottish Parliament recognises the merits of the Bill’s provisions and, rather than running before attempting to crawl, its report on the Bill does not go so far as to recommend full financial responsibility.
The Bill is about improving the devolution settlement and promoting economic growth. The income tax proposals in the Bill retain the reservation of overall fiscal management within the UK Government, which will ensure that the needs of Scotland are supported alongside a UK-wide strategy of promoting growth and economic stability. I welcome the Scottish Parliament’s Committee’s report on the Bill, which states in paragraphs 36 and 39, with reference to fiscal decentralisation:
“The evidential base was, in our view, remarkably weak, and the claims made did not stand up to challenge or scrutiny…the overwhelming balance of expert economic opinion in Scotland and internationally was that the existing evidence base supports neither any clear link between fiscal decentralisation and an economy’s long-run rate of growth, nor…a precise numerical link between fiscal decentralisation and an increase in GDP.”
It goes on:
“The Scotland Bill is about good government. It is intended to improve how Scotland is governed and align decisions on spending and taxation more closely so that the Scottish Parliament will be more accountable and, in the long run, take better decisions. Better decisions will, in the longer term, mean improvements to many aspects of Scottish public life.”
In true political fashion, I have a favourite section of the Scottish Parliament’s Committee’s report, which was mentioned earlier. In paragraphs 43 and 44, the report states:
“Full Financial Responsibility was the Scottish Government’s alternative to the plans in the Scotland Bill. The Committee did not examine this in detail, as there was no detail to examine. We received no costings for these plans, no material explaining the practical implications for taxpayers, employers, Scotland’s financial sector or collection plans. However, we were able to come to several obvious conclusions. Firstly, as was made clear in evidence to us, fiscal systems serve constitutional ends. Full Financial Responsibility is no exception. The constitutional aim it serves, however, is not the preservation of the UK. Secondly, it is plain that under fiscal responsibility, Scotland would run a substantial deficit…Finally, it is clear that no thought has been given to the effect of these plans on the economy of the UK, to which Scotland will inevitably remain linked…The Committee is clear that the evidence shows that full financial responsibility or autonomy is not a serious alternative to the fully worked out plans in the Scotland Bill.”
Lindsay Roy (Glenrothes) (Lab)
Is it the hon. Lady’s contention that full financial accountability is a euphemism for independence?
Fiona Bruce
It is my contention that full financial responsibility would not benefit either Scotland or the UK more widely.
In conclusion, it has been made clear by the Scottish Parliament and acknowledged by the Calman commission report that reform of the devolution settlement in Scotland is essential. It is fair to assume that the Bill would exist regardless of which party was in government, and I hope it receives the support it deserves. Any futile disagreements with its premises discredit the fine work undertaken by the Calman commission and serve only to play partisan politics. It is difficult to argue against the income tax proposals laid out in the Bill as they further cement the coalition Government’s commitment to the localism agenda. That agenda is about devolving power to meet more local needs, but that does not mean that all powers can or should be devolved. Powers should be devolved to the most local level possible if feasible and responsible. I hope that if the Bill is successfully passed and implemented, Scotland will be able more effectively to deliver Scottish solutions for Scottish needs and the Scottish people. I support clause 26.
Stewart Hosie
I rise to support amendment 42, tabled in my name and those of my hon. Friends, and amendments 43, 44, 47, 48, 49 and 50. All those amendments are concerned with the commencement only of a number of clauses. I congratulate the hon. Member for Glasgow North (Ann McKechin), who is not in her place, on her technical questions. I have a very similar list so I shall not reread the questions but I would like to reinforce two of the points that were made.
The first concerns Labour’s probing amendment 70, on retrospectivity in the tax code. I am seeking a guarantee, as far as the Minister can give one, that such use of any retrospective tax powers would only be in relation to stopping tax avoidance or tax evasion. That is extremely important. The second is about people on board ships and other installations. Is the Minister convinced that the description in new section 80E(4), introduced by clause 26, that a place
“includes a place on board a vessel or other means of transport”
is sufficient?
Before I address my amendments, let me make an observation about the lovely speech of the hon. Member for Congleton (Fiona Bruce). She spoke about accountability under the proposals and not wanting things to be fragmented. I wonder how having control of 50% of the base rate, a quarter of the 40% rate and only a fifth of the top rate, and having no control over allowances and thresholds, is unfragmented. I understand that she wants things to work, but I fear that she might not understand that that might be deflationary. She said that there would be a link between tax and spending, which there might well be, but the provisions in total will assign the Scottish Parliament control of only 15% or so of the tax raised in and on behalf of Scotland. She also said that the Bill was a fully worked out plan. It is so fully worked out that there are amendments that we do not yet have, which we will debate on Report, and I suspect that amendments will be tabled in the other place. Of course, the Bill is also likely to be subject to a second legislative consent memorandum after the Scottish election, so it is not quite the fully worked out plan that she described.
Today, however, I am more concerned about commencement and I am glad that all the commencement amendments are being debated in a single group. They relate to tax provisions on the Scottish rate of income tax, stamp duty land tax and landfill tax, which come into force two months after the Bill receives Royal Assent. However, those provisions will not have any practical effect at that point because the Bill includes an additional step requiring the Treasury to appoint a tax year as the first year in which the income tax provisions are to operate. For SDLT and landfill tax, the Treasury will appoint a specific start date, but the principle is the same. Until the Treasury does that, those tax provisions will sit on the statute book without changing the current arrangements whereby the UK Parliament controls all aspects of income tax, SDLT and landfill tax. Similarly, although the measures to repeal the current Scottish variable rate provisions will commence two months after Royal Assent, they will have no practical effect until the Treasury appoints a tax year as the last tax year in which SVR will operate.
This two-stage approach to commencement is highly unusual but not unique. The practical effect is that the tax proposals will operate only when the Treasury decides they should. The powers conferred on the Treasury to appoint start dates are not subject to any parliamentary procedure and will not even be publicised by means of statutory instrument. The processes for bringing the tax provisions into effect do not require the consent of the Scottish Parliament, Scottish Ministers or even the Westminster Parliament. That would be a fundamental flaw in terms of scrutiny, particularly where the commencement of flawed provisions would result in something damaging the economy.
The SNP believes that there has to be a role for the Scottish Parliament. The Scottish Government have outlined the serious gaps remaining in the proposals, not least the fact that crucial details remain unknown. It is essential that the Bill should include a specific mechanism giving the Scottish Parliament the opportunity to consider the proposals after Royal Assent but before they are brought into effect. Our amendments seek to change the commencement provisions to ensure that the tax provisions cannot be brought into effect without the specific consent of the Scottish Parliament.
As the Bill alters the devolution settlement, the Scottish Government do not consider it appropriate for the key provisions on taxation to be brought into effect by means of an administrative decision by the Treasury. There are plenty of precedents for Scottish consent to be required before UK legislation comes into force. Section 127(4) of the Anti-terrorism, Crime and Security Act 2001 requires a joint order to be made by the Secretary of State and Scottish Ministers before certain measures can be brought into force. Section 148 of the Adoption and Children Act 2002 contains a range of commencement procedures involving Scottish Ministers and the Welsh Assembly. Certain provisions in the Policing and Crime Act 2009 relating to football banning orders require the consent of Scottish Ministers before being brought into force. Finally, the Public Bodies Bill, which is currently being considered in the other place, includes a requirement to obtain the consent of Scottish Ministers before an order abolishing or reforming a public body is made where that order includes provisions on a devolved matter.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I want to raise a technical point that was stimulated in my mind by the comments of the hon. Member for Milton Keynes South (Iain Stewart). It is a fairly minor point, but the aim of the Committee is to bring out such points. The hon. Gentleman referred to the Caledonian sleeper situation in which someone got on a train late at night in Glasgow, Edinburgh or somewhere else in Scotland and found that they were in England after midnight. There could also be a situation in which someone got on a train before midnight in Glasgow or Edinburgh, expecting to be in England after midnight, but found, on looking out of the window, that they were in fact in a siding in Carstairs due to the vagaries of the weather—a situation that has perhaps faced some of us in the past.
Leaving that fairly limited example aside, it occurs to me that the issue the hon. Gentleman raises could have wider implications. Take the situation of someone who lives in Dumfriesshire or the borders, perhaps in the constituency of the Under-Secretary of State for Scotland, the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell). That person may live in Scotland but be a night-shift worker in England—perhaps a delivery worker for a retailer or a regular night-shift worker in a factory. Such a person could be defined as being in England, rather than in Scotland, under one definition even though he clearly lived in Scotland—or vice versa. It probably would not be appropriate to amend the Bill specifically to cover this issue, but it should certainly be given some thought. Perhaps the Minister could consider it with a view to giving guidance to clarify how such a situation should be addressed. A large number of people would not be affected in that way, but more than a handful might, so it would be useful to get clarification on such points from the Minister now or later.
Ian Murray (Edinburgh South) (Lab)
This evening’s debate has centred around the complexities of this hugely complex legislation. I had not intended to speak, but I, too, was prompted by the contribution of the hon. Member for Milton Keynes South (Iain Stewart), which led me to think about my experience of running a small business with 12 to 14 staff, doing payroll on a weekly basis and the huge complexities of keeping up with changes in legislation and making sure that my staff were aware of such legislation. Hon. Members would not believe the number of staff I have employed over many years who did not understand what a tax code was, how they were taxed on their income and how national insurance was involved.
Jim McGovern (Dundee West) (Lab)
Some of the previous speakers, such as my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) and the hon. Member for Congleton (Fiona Bruce), should remember that these proceedings are televised and that the public hope to understand what we are talking about. My hon. Friend the Member for Edinburgh South (Ian Murray) has kept his contribution fairly simple so far, but I failed to understand some of the earlier contributions.
Ian Murray
I am grateful for my hon. Friend’s intervention, which highlights the fact that the Government’s agenda for growth is about growth in the small and medium-sized enterprise sector, and making sure that small businesses in particular can contribute a significant amount to the private sector to take up the slack caused by the job cuts in the shrinking public sector. However, the complexity of the legislation we are examining is detrimental to the many small business owners who will be concerned about the complex process they will have to go through to make sure that they employ people in accordance with the right piece of income tax legislation. Many issues have been raised about travel—I do not call the train the Caledonian sleeper; I call it the Caledonian keep-you-awake, as I have yet to sleep on it—and I hope that the legislation does not include provisions on where someone falls asleep, otherwise my own tax affairs could be rather complex.
We must consider the issue of close connection. People may work in a different part of the UK, but it is not necessarily the place that they call home. Any Scottish MP who has regularly done the trip from Scotland to London will recognise many faces on their train or flight as people who work in London Monday to Thursday. They leave Scotland on Sunday night, and return on Thursday evening or Friday morning to their family. They would not regard themselves as English income taxpayers. They would very much regard themselves as being resident in Scotland. It is where they call home, but, as we have heard from the hon. Member for Milton Keynes South, it would not necessarily be classified as their place of residence for the payment of income tax.
Jim McGovern
My hon. Friend will have used the Caledonian sleeper. Does he agree that “Murder on the Orient Express” has nothing to do with that train?
Ian Murray
I was about to say that I was delighted to receive an intervention from my hon. Friend, but perhaps I should say that I have noted his comments, and will move on.
I should like to mention Her Majesty’s Revenue and Customs. At my surgery—no doubt this is the case at the surgeries and advice sessions of many right hon. and hon. Members—I have been beset by the complicated problems that my constituents have experienced as a result of their not understanding the HMRC process. Indeed, taxation errors have been made by both HMRC and employers. HMRC is undoubtedly under pressure, with more job losses over the next few years. In fact, I think its work force will have halved by 2015. I hope that the Government will take into account the complexities of the legislation to make sure that HMRC has the resources to be able to deal with it properly. The Federation of Small Businesses has been mentioned by my hon. Friend the Member for Glasgow North (Ann McKechin) in connection with the number of small businesses that use the pay-as-you-earn system. There are problems with self-assessment, which can become complex for someone who satisfies some of the tests of the legislation, but conducts personal business in different parts of the UK.
My hon. Friend the Member for Edinburgh East (Sheila Gilmore) raised the issue of tax avoidance. If there are different income tax rates in Scotland and England, I hope that HMRC will have the resources to deal with that so that people do not deliberately try to satisfy the tests of the legislation to benefit from a different income tax rate on the other side of the border. Many of the constituents of the right hon. Member for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) will be affected by those cross-border issues, as we have heard.
HMRC definitely needs the resources required to be able to deal with that properly, and to put provisions in place to make sure that people understand the system. All too often, as the Member representing Edinburgh South, I have dealt with self-employed constituents who have filled in self-assessment forms and then experienced a hard-nosed approach from HMRC in some pretty dreadful letters. Some letters say that it will send agents round to seek to pin down possessions and sell them to cover the debt when, in fact, HMRC has made an error in its tax coding and the problem has to be sorted out at a different level.
All those issues come together. The measure is welcome, as it gives the Scottish Government and Parliament real accountability for the proportion of tax that they can raise locally in Scotland for the people of Scotland. However, we must be aware that there will be many small businesses, employers and employees who will be concerned about how the measure will operate. If the system is to be accountable and is to operate practically for the benefit of the people of Scotland and for the Scottish Parliament, we must make sure that it is not undermined by a complex set of rules that are easily circumvented as a result of tax avoidance or because genuinely self-employed or small businesses cannot understand it sufficiently. We must put support in place to ensure that they follow the rules properly and so that the measure operates in the most effective manner.
Mr Gauke
We have had a lengthy and thorough debate. First, I intend to address the amendments and then set out in a little more detail the various tests on what constitutes a Scottish taxpayer. Finally, I hope to pick up the points that have been made in the debate and try to answer as many technical questions as possible. Whether I will be able to find the solution to the question of whether Mr Stewart senior is a Scottish taxpayer remains to be seen, but I will do my best.
Amendment 68 would require the Scottish Parliament to consult such persons as Scottish Ministers consider appropriate before setting the Scottish rate. I believe that that is inappropriate, as it interferes with the accountability of the Scottish Parliament to the people of Scotland. It should not be for the UK Parliament to tell the Scottish Parliament or Scottish Ministers how they should go about setting the rate of tax. It is for them to decide and ultimately to be accountable for that decision to the Scottish people through the ballot box. There is nothing to stop the Scottish Parliament in its Standing Orders including a requirement to consult or take evidence on setting the rate if it wishes to do so. Rule 6.6 of the Standing Orders of the Scottish Parliament sets the remit of its Finance Committee, which is required to consider and report on, among other things,
“proposals for the making of a tax-varying resolution”.
It will be for the Scottish Parliament to decide whether a similar provision should be made in relation to any proposal to set the Scottish rate of income tax. That is a matter for the Scottish Parliament—it is not something that we should prescribe in Westminster.
Amendment 69 requires the Treasury formally to consult Scottish Ministers, the Scottish Parliament and other persons before it uses its powers to disapply or modify the application of the Scottish rate of income tax. It may help if I describe the purpose of this power. We plan to use it to set some of the detailed rules on the operation of the Scottish rate of income tax, because any changes have to operate within the UK income tax framework, which is a reserved matter. The Scottish Parliament has given its consent to the Bill through the legislative consent motion, which includes that power and the way in which it will operate. It was not raised as a concern by the Scottish Bill Committee in its extensive scrutiny of the measure.
Having said that, I can confirm that HMRC will work closely with all parties concerned, and it has set up three technical groups that include representatives of business and of individual taxpayers. The Scottish Government participates in all those groups, which cover in particular how reliefs for charitable contributions and pensions will be treated. The Government will publish draft legislation in advance, giving all parties an opportunity to comment. That is very much in line with our approach outlined in “Tax policy making: a new approach”, which was published at the time of the June Budget. Tax policy making has been criticised as piecemeal and reactive. I want a new approach, with consultation on policy design and scrutiny of draft legislative proposals as its cornerstone.
I accept the motivation behind the amendment, but I hope that the hon. Member for Glasgow North (Ann McKechin) agrees that this is something we are very much doing already, so the amendment is unnecessary. Proposed new section 80G of the Scotland Act 1998 provides the Treasury with supplementary powers to allow modifications to be made at a later date. It allows, for example, certain types of income or relief to be included or excluded from the Scottish rate to provide the flexibility to be able to respond to stakeholder input and the changing environment.
Subsection (4) of new section 80G gives the Treasury a limited power to make any changes retrospective to the beginning of the tax year. The timing of the Budget cycle is such that many Finance Bills contain proposals that come into effect before Royal Assent. I hesitate to bring back painful memories for the official Opposition, but hon. Members might recall that the previous Government introduced a clause on Report of the Finance Bill 2008, increasing the personal allowance by £600 in 2008-09 in response to pressure over the abolition of the 10p rate of income tax. As is common, Royal Assent did not occur until the summer of that year—until 21 July 2008 to be precise—but that clause took effect from the start of the tax year. A more technical example is section 60 of the Finance Act 2006, which I imagine you recall well, Ms Primarolo. That redefined the income tax exemption for employer-provided mobile telephones, and removed the ability of the family or household of the employee to use such a phone tax free. The clause took effect for the tax year 2006-07, but did not receive Royal Assent until 19 July 2006.
Jim McGovern
On the subject of retrospective taxation, the previous Government committed to tax breaks for the computer games industry. Will the coalition Government commit to introducing tax breaks for the computer games industry retrospectively to April 2010?
Mr Gauke
With the greatest respect to the hon. Gentleman, I am not sure that that is entirely in order. I am sure the Chair would not want me to be diverted into that matter.
I assure hon. Members that the Treasury is not seeking a general power to impose retrospective legislation. I am not in a position to predict what consequential changes might be needed to other legislation because of future finance or other Acts in relation to the Scottish rate of income tax. The period of potential retrospection is rightly restricted to the start of the tax year in which the order is made, so that if we need to make a consequential change it can take effect at the same time as the provision to which it is consequential. To do otherwise would create complexities.
Stewart Hosie
The Minister will recall that on a small number of occasions an anti-avoidance measure went further back than the start of a financial year. In those circumstances, would he have to come back and seek a different power so that an avoidance measure in England went further back than the start of the financial year in Scotland? I would not like to see such an irregularity.
Mr Gauke
The hon. Gentleman is right. There are circumstances in which anti-avoidance measures have been retrospective and go back further. As I say, the power would take us only to the beginning of the relevant tax year in which the order is made. Other sorts of anti-avoidance measure would not fall under this power because of the constraint within it. The Bill is not designed to meet that purpose. I hope that provides the hon. Gentleman with some clarity. I hope also that my comments on amendments 68 to 70 are helpful and that he now feels able to withdraw the amendments.
Amendments 42 to 44 and 47 to 50 seek to make the process by which the Treasury appoints tax years to bring into effect the provisions relating to the new Scottish rate of income tax and the effective date that UK stamp duty land tax and landfill tax are disapplied subject to the consent of the Scottish Parliament. This is to be indicated by way of resolution. I consider this to be unnecessary. We have stated our intention to commence the Scottish rate of income tax from April 2016, and to devolve the landfill tax and stamp duty land tax by April 2015.
The Scotland Bill Committee in the Scottish Parliament welcomed these proposals, as it stated in its report. The Scottish Parliament has now given its approval to the measures included in the Bill through the legislative consent motion. The Bill provides for the new Scottish rate of income tax to be brought into effect in such tax year as is appointed by the Treasury as a precautionary measure. Appointed day orders will be issued in advance of disapplying the stamp duty land tax and landfill tax. We have also tabled Government amendments, which I will come to later, to ensure that this process is completed by order made by statutory instrument so that these are printed and published for transparency.
Lindsay Roy
Given the points made by my hon. Friend the Member for Edinburgh South (Ian Murray) and various other points about the need for operational effectiveness, is it likely that the introduction of the Scottish income tax rate will create additional HMRC jobs and, if so, are they likely to be based in Scotland?
Mr Gauke
If the hon. Gentleman will forgive me, I want to deal with the amendments first, as I stated in my opening remarks. I will then deal with some of the questions that have been raised as a consequence, and touch on some of the administrative consequences of the changes.
We made it clear in the Command Paper that accompanied the Bill that if the Scottish Parliament is not ready to introduce the smaller taxes in April 2015, we would consider delaying the switch-off of the UK-wide versions of the taxes in Scotland. That said, we must be clear that clauses 29 and 31 enable the disapplication of the existing tax in Scotland. Should the Scottish Government and Parliament decide that they do not wish to put in place a Scottish version to cover the existing tax base, we will not leave the current stamp duty land tax or landfill tax in place. It will be for the Scottish Government to decide what, if any, arrangements they wish to put in place in this area once it is devolved to the Scottish Parliament.
Stewart Hosie
That is clear. The problem arises if the timing is wrong. Why would the Minister disapply the existing legislation and leave a gap for the Scottish Government to fill at some point in the future? Why should disapplication not happen until the Scottish Parliament gives its explicit consent? Making that happen properly would match the respect agenda and avoid any difficulties.
Mr Gauke
The Scottish Parliament has made it clear that it supports the proposals. We are setting them out some years in advance. My understanding is that there is a consensus on the proposals, and it is for the Scottish Government to ensure that there is no gap after 2015. We have made it clear that we will work closely with the Scottish Government as we move towards full implementation of the measures set out in the Bill. This engagement will ensure that the Scottish Government can keep the Scottish Parliament apprised of implementation work in good time. I consider the additional requirements to be unnecessary, and I therefore urge the hon. Member for Dundee East to withdraw the amendments.
I shall deal briefly with Government amendments 61 to 66, and new clause 18. These are minor and technical and ensure that we have a proper parliamentary process attached to the provisions that bring into effect the provisions of the Bill. Government amendments 61 to 64 amend the existing provisions in the Bill to bring into effect the provisions in clauses 26, 29 and 31. The amendments make it explicit that the days or tax years appointed by the Treasury under these clauses will be appointed in orders made by the Treasury. New clause 18 ensures that these Treasury orders are classed as statutory instruments and are therefore printed and published.
Government amendments 65 and 66 both amend the existing provisions in clause 38 relating to commencement. These should be read in conjunction with new clause 18, which ensures that the order-making powers provided for by the Bill are all statutory instruments and therefore subject to the applicable parliamentary process. The amendments do not have any substantial effect on the provisions in the Bill, and are simply drafting amendments. I commend them to the Committee.
A number of hon. Members asked about the definition of a Scottish taxpayer. Let me say at the outset that the Bill sets out a definition of Scottish taxpayers, as opposed to Scottish residents, and can therefore apply, notwithstanding the absence of a statutory residence test. It might be of help if I set out how that will work. The definition of a Scottish taxpayer will determine which individuals are liable to pay income tax at the rate set by the Scottish Parliament. It is based on the definition included in the Scotland Act 1998 for introducing legislation on the Scottish variable rate, a point made by my hon. Friend the Member for Carlisle (John Stevenson). However, we have taken the opportunity to review the definition to make it easier to administer and simpler to apply, and to remove some of the potential unfairness that could arise from the application of the definition provided for the purposes of the Scottish variable rate.
Following the recommendation of the Scottish Parliament Committee that examined the Bill, which was endorsed by the Scottish Parliament on 10 March, we also intend to table a new clause on Report to apply the new definition of a Scottish taxpayer for the purposes of the Scottish variable rate. The new definition is structured as a series of conditions that will enable an individual to see whether they are a Scottish taxpayer. Where they meet any one of these conditions, they can simply disregard the remainder. As I will explain in a moment, this means that relatively few people will need to consider every condition. In other words, the definition will produce an answer in only a few steps, avoiding the need for the majority of people to record and count the number of days spent in Scotland.
A Scottish taxpayer will be someone who meets two tests in a tax year. The first test is that the individual in question is UK resident for tax purposes. It is important to emphasise that the definition does not disturb those rules or increase their complexity, but merely sits on top of them. We are not replacing the underlying rules of UK tax residence with an entirely new concept of Scottish tax residence. The second test is whether the individual meets any one of three conditions—A, B or C.
Condition A is that the individual has a “close connection” with Scotland, which is defined in proposed new section 80E. For the majority of people, it will be a straightforward question of whether they have a close connection with Scotland. If they have one place of residence in the UK and it is in Scotland, they will have a close connection with Scotland and will therefore be a Scottish taxpayer, provided that they live there for at least part of the year. This last condition—that the individual lives in the place of residence—is a crucial part of the definition and ensures that it is simple to operate. Someone may stay in a place of residence which is not their home, perhaps while on holiday or as part of their work, but such nights away are disregarded because those are not places where the person lives, but merely places where they stay.
Let us consider the example of sales reps who have one home in England in which they live with their family at weekends, but who spend their working week in Scotland. While they are away, they stay in a variety of hotels. Because the family home in England is the only place in which they live, they will not have a close connection with Scotland and will therefore not be a Scottish taxpayer, even though they physically spend more nights in Scotland than they do in England. That is all they need to do; there is no requirement for them to keep a detailed record of the number of nights they spend in each part of the UK. This is one way in which we have sought to improve on the definition of a Scottish taxpayer set out in the 1998 Act, which would have required people in such a position to keep records of the days they spend in each part of the UK.
Mrs Anne McGuire (Stirling) (Lab)
I want to offer the Minister a note of caution, as the understanding of where a person lives and where they stay is slightly different in Scotland. I hope he will come up with something that is legally a little more robust than the simple distinction between staying and living. The nods from Scottish Members, who understand the vernacular, verify the advice that I am trying to give him.
Mr Gauke
I am always grateful for advice on Scottish vernacular, and to the right hon. Lady for her comments. If I may complete my explanation, I hope that things will prove to be reasonably clear.
If someone has two or more places of residence in the UK, the question of whether or not they have a close connection with Scotland will depend on whether their main place of residence is located in Scotland for at least as much time as they spend somewhere else in the UK, again provided that the place of residence is where they live. This will apply to those who split their time between a house in Scotland and a house somewhere else in the UK, both of which can be described as their main place of residence. It will also apply to those individuals who sell their homes sometime during the tax year and move from Scotland to somewhere else in the UK, or vice versa. Within that year, they will have more than one place of residence in the UK, and which of those will be their main place of residence will effectively depend on what stage in the year they move house. In the case of someone who starts the year with their home in Scotland but moves to England after eight months, their Scottish home will be their main place of residence for longer than their new home in England. Such individuals will therefore be a Scottish taxpayer for the full tax year.
Condition A has been designed to enable the vast majority of people to decide whether they are a Scottish taxpayer without the need to consider the other two conditions. After all, most people will have no difficulty deciding where their main place of residence is located.
Iain Stewart
I have been listening carefully to what the Minister is saying but am still a little puzzled. I understand the example of a sales rep who might use hotels or temporary accommodation, but if the other residence is another house or flat that the resident has registered for council tax or for the purpose of being on the electoral register, for example, does that come under that definition? My father, for example, could self-declare his home in Scotland as his principal residence, even though he might spend a minority of the time in a year there.
Mr Gauke
The ordinary meaning of the main place of residence is set out in case law. It is not necessarily determined by the number of days one spends at a location. To use the example of my hon. Friend’s father, if a commuter has his family home in Hamilton and stays there every weekend, although he might spend more time at work in London, Hamilton would be his main residence. HMRC guidance will provide a number of worked examples of that. I am reluctant to give too much information that could constitute specific advice, as I obviously cannot comment on individual cases, but I hope that that is helpful.
Jim McGovern
I presume, and hope, that the Minister has discussed what he is talking about with the Independent Parliamentary Standards Authority.
Mr Gauke
I will come to condition C in a moment, which I hope will provide the hon. Gentleman with the answer that he and others are looking for.
Having dealt with condition A, it would be remiss of me not to address condition B. It is possible for some people with two or more places of residence in the UK to be unable decide which is their main place of residence. I do not think that that applies to Mr Stewart senior, but it might apply in some cases. It is for such people that condition B has been designed. Someone who cannot determine under condition A which part of the UK they have a close connection with will need to count the number of days they spend in Scotland, compared with the number of days they spend elsewhere in the UK—in other words, a straightforward day count test. If they spend more days in Scotland than they do elsewhere in the UK, they will be a Scottish taxpayer. If they spend more days elsewhere in the UK than they do in Scotland, they will not be a Scottish taxpayer. We recognise that it might be onerous in some cases to have to keep a day count record, but the number of people within that category should be relatively few.
To deal with one question that my hon. Friend the Member for Milton Keynes South (Iain Stewart) raised, for the purposes of the day count, an individual has spent a day in Scotland or in any part of the UK when they are present at the end of the day—in other words, at the stroke of midnight. That is consistent with the existing and long-standing rules that determine presence in the UK for the purposes of tax residence.
Condition C, which I suspect is of particular interest to a number of hon. Members, is set out in proposed new section 80D of the 1998 Act and is very straightforward. If someone represents a Scottish constituency in the Scottish, UK or European Parliaments for any part of the year, they will be a Scottish taxpayer for that tax year, provided of course they are UK resident, which I assume will generally be the case. The definition has also been designed in such a way that an individual will be a Scottish taxpayer for a full year. They cannot be a Scottish taxpayer for part of the year and not a Scottish taxpayer for the rest of the year. That again helps to reduce unnecessary complexity in applying the definition and understanding of whether or not an individual is a Scottish taxpayer.
It is envisaged that the new Scottish rate of income tax will first be applied from 6 April 2016, as we have already heard. There are more than five years before the provisions take effect, and during that time we will continue to discuss with businesses, employers, taxpayer representatives, charities and software providers the necessary practical steps to achieve a successful implementation. The measure will need to work successfully throughout the UK tax system, as it will not impact on Scottish taxpayers or on Scottish employers alone.
HMRC has therefore established three technical groups with representatives throughout the UK, including a pensions group, charities group and an income tax group. Those groups are reporting to the high-level implementation group, which the Secretary of State and I established last summer. We are discussing with the technical groups the implementation issues—for example, the application of differing rates throughout the UK on tax relief for contributions to pension schemes and on gift aid. It is also conceivable, given the lead time to implementation, that there might be changes in the business or tax environment or to processes.
As we discussed when considering the earlier amendments, the clause includes a number of supplementary powers to allow certain modifications to be made at a later date—for example, enabling certain types of income or relief to be included or excluded from the Scottish rate to provide the flexibility to respond to stakeholder input and to the changing environment.
I shall pick up on some of the questions that I have not dealt with in my explanation, which I hope the Committee has found helpful. A worker who spends significant amounts of time on an offshore oil rig or another place of work off the UK coastline will not usually need to count the number of days they spend there to determine whether they are a Scottish taxpayer. The oil rig is not likely to be their sole or main place of residence in the UK, so any time spent on it can be disregarded when deciding whether they are a Scottish taxpayer. The only exception is if the location of the individual’s main place of residence is genuinely unclear. In such cases, whether someone is a Scottish taxpayer will be determined by the day count. If the oil rig is in Scotland, those days will need to be included for the Scottish count.
We continue to look, with the Ministry of Defence, at the issues surrounding our armed services, and we will come to a firm conclusion on that in the near future.
The question was raised of whether a personal representative of a deceased person will be a Scottish taxpayer, and the answer is no. A Scottish taxpayer will be an individual, and after their death that will not extend to the personal representative. It follows that any income arising during the administration of the deceased’s estate will not be subject to the Scottish rate of income tax.
I was asked whether it was fair that people will not receive split-year treatment when they move between Scotland and the rest of the UK, and I touched on that briefly a moment ago. No split-year treatment applies to those leaving or arriving in Scotland: an individual will be a Scottish taxpayer for a full tax year or not at all. There is no prospect of double taxation when someone lives part of the year in Scotland and the rest of the time in another part of the UK. It would be administratively much more complex were we to try to split the year.
On whether proposed new section 80G is too broad, that goes back to my earlier discussion of the amendments in this group. The power in the new section is needed to deal with mainly technical changes and to decide which reliefs should be taxed at the variable or UK rates. That is almost a mirror image of the power to deal with the consequences of setting the Scottish variable rate, which is already in section 79 of the 1998 Act. It is worth pointing out, as I said earlier, that we have set up three technical committees, on charities, pensions and income tax, to discuss the impact that the Scottish rate of income tax will have on the wider tax system, and to consider where modifications might be required. Therefore, we need the power to deal with that situation.
I reassure the Committee that the Treasury does not seek a general power to impose retrospective legislation; the measure set out in proposed new section 80G is limited to the start of the tax year. If we need to make a consequential change, we will ensure it takes effect at the same time as the provision to which it is consequential. We think that that will be helpful.
A point was made about what HMRC and the Government will do to support employers, and about the concern that the measure might be administratively difficult for employers when identifying who is and is not a Scottish taxpayer. Let me assure the Committee that it will be HMRC’s responsibility to identify who is and is not a Scottish taxpayer. Scottish taxpayers will then be given a Scottish tax code by HMRC, and employers will use it in the PAYE system, just as they do with other employees. It is also worth mentioning that there will be an awareness campaign in Scotland and in the rest of the UK ahead of the system’s introduction.
The rights of appeal will be based on existing mechanisms, but they might need to be adapted, and HMRC will discuss that with the professional associations in due course through the technical groups that it has established. The self-assessment form for the self-employed will need to be altered to reflect the existence of Scottish taxpayers.
On condition C, which applies to Members of Parliament and of other elected bodies, the question was asked, “Why not Scottish judges, other senior members of the Scottish civil service and so on?” We have singled out only elected representatives; others will be subject to the same rules as other Scottish taxpayers. We think it appropriate that there is no ambiguity in the case of elected representatives, and those representing Scottish constituencies at whatever level should be Scottish taxpayers.
That is a rather lengthier speech than I had hoped to make, but a number of questions were raised and I wanted to provide as many answers as possible to what is one of the most technically challenging aspects of the Bill. The solutions that we have reached are those that improve what we are building on, and they should provide as much clarity as possible.
Ann McKechin
May I welcome you to the Chair again on this Bill, Ms Primarolo? I also thank the Minister for a full explanation of the various technical measures, and for his response to the questions that have been raised in the debate. I appreciate that it might not have been the most exciting debate; indeed, it might have rendered some Members closer to sleep than the Caledonian sleeper could have done. Nevertheless, it is important that we have on the record the Government’s response to a number of key questions that, when we come to implementation, will impact on many hundreds of thousands of people. It is important that we have as full a picture as possible in our debate this evening.
I accept the Minister’s comments about amendment 68 requiring the Scottish Government to consult such persons as they consider appropriate. The taxpayer would anticipate and expect the various business organisations and tax specialists who are generally consulted by the UK Treasury as a matter of routine and good practice to receive the same approach and level of consultation from the Scottish Government. I am sure that the Scottish Government, of whichever political hue, will want a full consultative process. The Minister noted that the Scottish Parliament has a specific power to lay this down in Standing Orders, and I hope that it will give recognition to what has been said in this debate.
Mrs McGuire
Does my hon. Friend recognise that the situation can be further complicated if one asks where they come from?
Ann McKechin
Yes, indeed.
That brings us to how the questions are phrased on any self-assessment form and the guidance that is provided to individual taxpayers and to their employers. Obviously, employers will have a high level of responsibility in advising their staff about whether they will be covered. The Minister cited the example of a travelling salesman, but there are many other examples of staff who travel the country from time to time. Some people’s lives are entirely peripatetic—entertainers, for instance. I remember many years ago, when I was a lawyer, acting for entertainers who spent the summer season living down in Blackpool and then came back up to Scotland for the winter season.
Mrs Eleanor Laing (Epping Forest) (Con)
Does the hon. Lady recall the leading case on residence in Scots law—Udny vs. Udny—in which the fact that the person in question, despite having a house in England, continued to take The Sunday Post every week proved that he was still domiciled in Scotland?
Ann McKechin
Indeed. The hon. Lady attracts me into an interesting debate on the difference between residency and domicile, but I am not going to bore the Committee—I can see that the Under-Secretary is getting a bit concerned—about the distinction between the two. That sort of thing keeps tax lawyers very busy.
Jim McGovern
Surely my hon. Friend would agree that going to Blackpool in the summer guarantees that one is Scottish.
Ann McKechin
Indeed. Travelling down there on the train to the Labour party conference on a Glasgow holiday weekend was an interesting experience. One could easily distinguish between those who were delegates and those who were on their holidays. I remember one occasion when people had brought along half a band, which was playing on the train.
The hon. Member for Milton Keynes South (Iain Stewart) and others commented on the Caledonian sleeper. Let me say that the Caledonian sleeper provides an essential travel service for many of us, and long may it remain so, because otherwise our travel plans would be even more difficult than they are given that certain flights will be withdrawn at the end of this month. That brings to mind a story that I recall being told about a colleague who represented the city of Glasgow many years ago, and who was a member of the railwaymen’s union. He regularly managed to sleep on the train. One night, he asked the guard to make sure that he was taken off the train at Motherwell, not Glasgow, because he had to address a union meeting just before the workers went on shift. There would be several hundred people there, and it was absolutely essential that he got off. He duly woke up in the morning and found himself at Glasgow Central station. The guard opened the door and said, “I know you’re really angry, but you’re not as angry as the man we shoved off the train at Motherwell.” I am sure that there are many such stories about Members of Parliament.
I note the Minister’s comments regarding residency of Members of Parliament. Some people might think we are getting special preferential treatment so that we can easily distinguish whether we are UK tax residents who are not living in Scotland or vice versa. However, I do not object to the definition. Perhaps it makes things a little easier if, when the Bill becomes law, we are asked awkward questions about our own position. I am sure that some of the points raised today will be considered by implementation committees.
On the Minister’s comments about armed forces personnel, we need to be able to define this at a fairly early point. It would be preferable if at some point during the passage of the Bill—certainly before it comes back from the Lords—we knew about the position of the armed forces. Will the Minister ask his colleagues to ensure that we have a definitive response before we reach our final conclusions on the Bill?
The Minister’s comments on amendment 70 were helpful in defining the circumstances in which retrospective amendments may be made. I acknowledge that there will be limited circumstances where that is appropriate. Given the timing of the Budget, it is almost inevitable that this may occur from time to time. His clarification helped to show that he regards this as a de minimis clause rather than one that will be used to the maximum extent. However, I hope that he can assure us that Scottish Ministers and the Scottish Government will be provided, at the earliest opportunity, with information about how this is likely to impact on them. Perhaps it is part of the Exchequer’s standard consultation process and pre-Budget report that it is fully engaged with the Scottish Government so that they are able to make appropriate contingency plans should a clause in the Finance Bill then be passed by this House and by the House of Lords.
I believe that we have had a reasonable level of reassurance from the Minister on those questions. These are primarily probing amendments. Accordingly, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 26
Scottish rate of income tax
Amendment made: 61, page 20, line 31, after ‘Treasury’, insert ‘by order’.—(Mr Gauke.)
Amendment proposed: 42, page 20, line 31, after ‘Treasury’, insert
‘, with the consent of the Scottish Parliament,’.—(Stewart Hosie.)
Question put, That the amendment be made.
Ann McKechin
I wish to ask the Exchequer Secretary a couple of questions about this technical clause. Can he confirm how deductions for pension contributions and gift aid will be made? Will the taxpayer be able to choose the order of deductions against various sources of income?
The Scottish Parliament will need to know the size of the tax base before setting the rate. Will the Government undertake to ensure that they give the Scottish Parliament, as well as the Scottish Government, early notice of changes in the level of income tax personal allowance and thresholds? I asked that question in relation to clause 26, but it is important to have the earliest possible consultation and information given not only to the Scottish Government but to the Scottish Parliament.
Mr Gauke
I thank the hon. Lady for her questions. If somebody is classed as a Scottish taxpayer, they will be liable for income tax at Scottish rates on the income that they receive from their pension. We recognise that the treatment of reliefs associated with pension contributions is complex, and our approach will be set out in implementing legislation. Her Majesty’s Revenue and Customs has set up a pensions technical group to consider those very issues, and it is examining the practical questions surrounding the new Scottish rate and will make its recommendations in due course. Those recommendations will inform the implementing legislation. There are some potentially difficult administration issues to consider, and HMRC is working with the sector to keep the administrative burdens to a minimum.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28
Scottish tax on transactions involving interests in land
Question proposed, That the clause stand part of the Bill.
Ann McKechin
Again, I should like to ask the Exchequer Secretary a couple of technical questions about the implementation of the clause. He has defined in proposed new section 80J(2) the people who will not be liable to pay the tax in question. Perhaps he could clarify for the record that that relates to people acting in their official capacity, and that if they happen to have property in Scotland on a personal basis, they will still be liable for the tax.
Will the Government undertake that they will not appoint the day on which the tax powers will come into effect until the Scottish Government confirm that they have satisfactory legislation in effect? I realise that the proposed implementation date is 2015, and perhaps the Exchequer Secretary could confirm that that is still the Government’s intention. It is important that people with an interest in property have an early indication of when they can expect the tax to be changed.
Mark Lazarowicz
I, too, have a couple of questions, and I would be most grateful if the Exchequer Secretary could deal with them. Does he believe that the provisions of the clause mean that the tax will be applied at the same rate throughout Scotland, or will it be possible for different rates to apply to different parts of Scotland? At the moment, for example, there are times when stamp duty land tax is waived for certain areas that require special assistance. Could that still apply?
Will the Scottish Parliament have the ability to delegate the power in clause 28 to local authorities, for example, so that varied rates could be offered? I am aware that that would not normally be permissible, but the Exchequer Secretary will certainly remember the debate about the possibility of a local income tax in Scotland a couple of years ago. There was a suggestion that if the Scottish Parliament introduced such a tax, it would be ultra vires. That was never tested, because of course the legislation never went through. The suggestion was that a local income tax could give local authorities the power to levy income tax through the back door. Similarly, it could be suggested that they be given the power to vary stamp duty land tax if the Scottish Parliament allowed them to do so. I would very much appreciate some guidance on those points.
I do not want to skip ahead to clause 30, but the same question applies to tax on disposals to landfill—will there be a Scottish rate, or could it be varied? Perhaps the Minister could give me the same reply to deal with both clauses.
Mr Gauke
As far as the list contained in proposed section 80J is concerned, I can provide the reassurance that transactions will be non-taxable only when people are acting in their official capacity. There is not some perk being made available to particular people.
The switching-off of stamp duty land tax will be achieved by Treasury order. However, the UK Government will consult the Scottish Government in setting the switch-off date and will not disapply SDLT in Scotland until the Scottish Government have the necessary legislation and administrative arrangements in place for the devolved tax.
The Scottish Government will be able to delegate the SDLT power in question to local authorities, so the matter could be further localised.
Mark Lazarowicz
I thank the Exchequer Secretary for his answer on that point, which I think will be received with some interest in Scotland. My other, perhaps more substantial, question was whether the Scottish Government could implement a variable rate of SDLT, or whatever equivalent they wished to introduce, in different parts of Scotland. For example, could they decide that in certain areas of high unemployment there would be no SDLT, or a lower rate? Would that be within their powers?
Mr Gauke
Yes, that would be within the Scottish Government’s power. I hope that my points of clarification are helpful to the Committee, and that the clause will stand part of the Bill.
Question put and agreed to.
Clause 28 accordingly ordered to stand part of the Bill.
Clause 29
Disapplication of UK stamp duty land tax
Amendment proposed: 63, page 23, line 12, after ‘Treasury’, insert ‘by order’.—(Mr Gauke.)
Mark Lazarowicz
For the sake of clarity, the point that I raised about the Scottish Government’s ability—
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
Order. I am sorry. I should have put the Question, because the amendment has already been debated in a previous group.
Amendment 63 agreed to.
Clause 29, as amended, ordered to stand part of the Bill.
Schedule 4
Scottish tax on land transactions: consequential amendments
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
With this it will be convenient to discuss Government amendments 34 to 36.
Mr Gauke
Schedule 4, which is introduced by clause 29, makes consequential provisions in connection with the disapplication of stamp duty land tax in Scotland, and is in two parts. Part 1 provides for general amendments to stamp duty land tax legislation in consequence of stamp duty land tax ceasing to apply in Scotland, and part 2 provides for the Scottish Government to supply information to HMRC regarding Scottish land tax.
Amendment 33 makes changes to the stamp duty land tax first-time buyers relief to ensure that a person who has previously bought a property in Scotland cannot qualify for relief when he or she subsequently purchases a property in England, Wales or Northern Ireland. Amendment 34 omits a further reference to Scottish land law terminology.
Amendments 35 and 36 omit provisions in the Finance (No. 2) Act 2005 and the Public Finance and Accountability (Scotland) Act 2000, which is an Act of the Scottish Parliament relating to functions of the keeper of the registers of Scotland. Those relate to the registers of Scotland’s automated registration of title to land system, which includes facilities for returns and payment of stamp duty land tax.
Lastly, amendment 36 makes detailed modifications to the provisions in the Finance Act 2009 in relation to alternative finance investment bonds or sukuk. Those modifications reflect the fact that the stamp duty land tax relief will no longer apply to sukuk in relation to land in Scotland, although the provisions for capital gains and capital allowances will continue to apply. Those changes are essential to the proper operation of stamp duty land tax after the tax is disapplied in Scotland.
Amendment 33 agreed to.
Amendments made: 34, page 35, line 36, at end insert—
‘( ) In paragraph 10 (tenants’ obligations etc that do not count as chargeable consideration), in sub-paragraph (1)(a) omit “(in Scotland, the leased premises)”.’.
Amendment 35, page 36, line 9, at end insert—
‘Finance (No. 2) Act 2005
In section 47 of the Finance (No. 2) Act 2005 (e-conveyancing) omit—
(a) subsection (1);
(b) subsection (6)(b).’.
Amendment 36, page 36, line 12, at end insert—
‘Finance Act 2009
(1) Schedule 61 to the Finance Act 2009 (alternative finance investment bonds) is amended as follows.
(2) Paragraph 1 (interpretation) is amended as follows.
(3) In sub-paragraph (1)—
(a) before the definition of “HMRC” insert—
““effective date”, for a transaction relating to land in Scotland, is the date which would be the effective date (under section 119 of FA 2003) if Part 4 of FA 2003 applied to land in Scotland;”;
(b) omit the definition of “qualifying interest”.
(4) After sub-paragraph (1) insert—
(1A) In this Schedule “qualifying interest”—
(a) in relation to land in England and Wales or Northern Ireland, means a major interest in land (within the meaning given by section 117 of FA 2003) except that it does not include a lease for a term of years of 21 years or less;
(b) in relation to land in Scotland, means—
(i) the interest of an owner of land, or
(ii) the tenant’s right over or interest in a property subject to a lease,
except that it does not include a lease for a period of 21 years or less.”
(5) Paragraph 5 (conditions for operation of relief) is amended as follows.
(6) In sub-paragraph (6) (Condition D)—
(a) after “Condition D” insert “(which applies in the case of land in England and Wales or Northern Ireland)”;
(b) omit paragraph (b).
(7) In sub-paragraph (7) (charge or security for purposes of Condition D)—
(a) omit “or security”;
(b) in paragraph (a) omit “, or a security ranking first granted over,”.
(8) In paragraph 6(1)(a) (relief from stamp duty land tax) for “the United Kingdom” substitute “England and Wales or Northern Ireland”.
(9) In paragraph 7 (withdrawal of relief in certain circumstances)—
(a) in sub-paragraph (1) after “This paragraph applies if” insert “paragraph 6 applies but”;
(b) in sub-paragraph (2) after “This paragraph also applies if” insert “paragraph 6 applies but”.
(10) In paragraph 9 (discharge of charge when conditions for relief met) omit “or security”.
(11) In paragraph 11(2) (disapplication of CGT relief if charge not given) for “the United Kingdom” substitute “England and Wales or Northern Ireland”.
(12) In paragraph 12(1)(b) (CGT relief on second transaction) for “the United Kingdom” substitute “England and Wales or Northern Ireland”.
(13) In paragraph 18(5) and (6) (discharge of charge if original land replaced)—
(a) for “the United Kingdom” substitute “England and Wales or Northern Ireland”;
(b) omit “or security”.
(14) In paragraph 19(1) (HMRC to notify Registrar of discharge)—
(a) omit “or security”;
(b) omit paragraph (b).
Public Finance and Accountability (Scotland) Act 2000 (asp 1)
In section 9(1) of the Public Finance and Accountability (Scotland) Act 2000 (Keeper of the Registers of Scotland: financial arrangements) omit “(other than payments of stamp duty land tax)”.’.—(Mr Gauke.)
Schedule 4, as amended, agreed to.
Clause 30
Scottish tax on disposals to landfill
Question proposed, That the clause stand part of the Bill.
Mark Lazarowicz
I shall again raise the two points that I raised in relation to clause 29. Can the Scottish Government vary the tax rate applied to different parts of Scotland, and can they further devolve the power to local government to a greater or lesser extent if they so wish? I presume that the Scottish tax rate could be different from the rate that applies in England. If so, what measures can be taken to stop the flow of waste towards the part of the country that has the lower rate of landfill tax?
Mr Gauke
Clause 30 provides for the devolved tax on the disposal of waste to landfill sites in Scotland. One Calman commission recommendation on tax was to devolve landfill tax, which was endorsed by the Scottish Parliament when it voted its consent on 10 March.
The tax will be a devolved tax for the purposes of part 4A of the Scotland Act 1998, which is introduced by clause 24. That means that the Scottish Government and Parliament will have complete control over the design and administration of the Scottish landfill tax, allowing them to complement their wider waste policies and to legislate to introduce a devolved tax to replace the existing UK landfill tax in Scotland. I hope that answers the main questions asked by the hon. Member for Edinburgh North and Leith (Mark Lazarowicz).
The revenue raised by the tax will remain in Scotland for use by the Scottish Government. Clause 30 provides as blank a canvas as possible for the Scottish Government to design their tax by simply providing the power to introduce a tax on material disposed of as waste to landfill sites in Scotland. It will come into effect when the Bill receives Royal Assent, which will allow the Scottish Parliament to legislate for the devolved tax, and for the Scottish Government to make the necessary administrative arrangements. The clause, however, provides that the devolved tax cannot apply to disposals made before the date on which the existing UK landfill tax is disapplied in Scotland, as provided in clause 31.
To answer the question on landfill tax competition, the Government are fully devolving that matter. Those setting the structure and rates of landfill tax in Scotland will clearly want to take into account the factors that were raised, such is the nature of devolution in such areas.
Question put and agreed to.
Clause 30 accordingly ordered to stand part of the Bill.
Clause 31
Disapplication of UK landfill tax
Amendment made: 64, page 24, line 8, after ‘Treasury’, insert ‘by order’.—(Mr Gauke.)
Clause 31, as amended, ordered to stand part of the Bill.
Schedule 5 agreed to.
Clause 32
Borrowing by the Scottish Ministers
Stewart Hosie
I beg to move amendment 51, page 24, line 20, leave out from ‘which’ to end of line 22 and insert—
‘are required by them to meet current expenditure because of a shortfall in receipts from the Scottish rate of income tax or devolved taxes.’.
The Second Deputy Chairman of Ways and Means (Dawn Primarolo)
With this it will be convenient to discuss the following:
Amendment 52, page 24, line 22, at end insert—
‘(1ZA) In borrowing sums under subsection (1), the Scottish Ministers must have regard to any code of practice agreed by them and the Treasury.
(1ZB) A code of practice agreed under subsection (1ZA) may include provision as to—
(a) how the Scottish Ministers are to determine and keep under review how much they can afford to borrow,
(b) the terms and conditions on which sums may be borrowed,
(c) limits on the aggregate at any time outstanding in respect of the principal of sums borrowed.’.
Amendment 54, page 24, line 23, leave out from ‘may’ to ‘any’ in line 24 and insert ‘borrow’.
Amendment 55, page 24, line 28, at end insert—
‘(1C) In borrowing any sums under subsection (1A), the Scottish Ministers must have regard to any code of practice agreed by them and the Treasury.
(1D) A code of practive agreed under subsection (1C) may include provision as to—
(a) how the Scottish Ministers are to determine and keep under review how much they can afford to borrow,
(b) the terms and conditions on which sums may be borrowed,
(c) limits on the aggregate at any time outstanding in respect of the principal of sums borrowed.’.
Amendment 53, page 24, line 31, leave out subsections (6) to (8) and insert—
‘(5A) Subsections (2) and (3) are omitted.’.
Amendment 56, page 24, leave out line 38 to line 5 on page 25.
Amendment 57, page 25, leave out subsection (10).
Clause 32 stand part.
Stewart Hosie
The borrowing powers in the Bill are at the heart of devolution. On Second Reading, a number of serious questions were raised on both revenue and capital borrowing powers. I shall come to the detailed issues in the main part of my comments, but, fundamentally, I am seeking to put in place a code of practice for the Treasury and the Scottish Government to address limits, restrictions, thresholds, maximum amounts and the nature of borrowing, be it through bonds or direct loans from the consolidated fund. That is a sensible way to amend the Bill. To make such provisions otherwise would require draft orders to be tabled, but amendments to Bills cannot be made with draft orders. Much of the narrative on this matter is in the Command Paper, but it is likewise impossible to amend by amending the Bill.
The amendments are pretty self-explanatory but I would like to detail the reasons for them. The revenue-borrowing powers are fundamentally linked to the wider taxation proposals in the Bill. Both the Scottish National party and the Scottish Government have previously made clear their concerns about the tax proposals. If a full range of fiscal policy levers were available to the Scottish Government, it would have to include a borrowing regime with sufficient flexibility to allow public spending profiles to be managed across entire economic cycles, not simply four-year forecast periods. The UK Government’s proposals, however, fall far short of that, yet by exposing the Scottish Government and the Scottish Parliament to cyclical fluctuations in income tax they embed a high degree of volatility in Scotland’s public finances, which cannot be right when we are seeking to protect public services and find means to grow the economy.
The Bill proposes to allow for annual borrowing of up to £200 million in any one year, and for a maximum limit of £500 million to finance current expenditure where there are differences between forecasts and the outturns of Scottish tax revenue under the Bill’s income tax proposals. Loans must be made within four years of being taken out. I understand that these provisions are additional to the provisions of the Scotland Act 1998, which allows revenue borrowing for the purposes of providing cash balances and maintaining cash flow. The aggregate limit of the Act is also £500 million, so the additional purpose proposed in the Bill, plus the passage of the 13 years since the original limit was set, has apparently not been considered sufficient reason for lifting the limit. We do not believe that that is credible.
The Bill also lacks flexibility to deal not necessarily with forecast errors, but forecast falls identified in advance. I will return later to the reason that that is a problem. More crucially, the provisions in the Bill are insufficient to manage volatility in tax receipts that might reasonably be expected to occur. Importantly, over the past decade, UK Government income tax forecasts have, on average, been overly optimistic, and the annual cap of £200 million would have been insufficient to offset deviations in income tax receipts relative to forecasts in recent years.
Jim McGovern
The hon. Gentleman might have heard me earlier saying that these proceedings are televised. The general public would like to know what we are speaking about, so will he keep his remarks as understandable as possible?
Stewart Hosie
I thought that my remarks were always understandable. The problem is that we are dealing with the technical provisions—the fiscal and borrowing powers—of a Bill. It is necessarily technical. However, I shall try to summarise it in plain English, if possible, when I get towards the end of my remarks.
In 2010-11, the difference between the Treasury’s original forecast for UK income tax and the most recent estimate is about £35 billion. Under the Scotland Bill, an equivalent forecasting error would have reduced the Scottish Government’s budget by approximately £1 billion. The implication of that and the four-year payback period is that had the system been in place during the last spending review period, repayment of the loan would have had to be made within what are now pressurised budgets—a £1.3 billion cut to Scotland this year, and over £3 billion in the comprehensive spending review—between now and 2014.
In contrast, the UK Government can spread the repayment of cyclical borrowing over a significantly longer period to ensure that it does not adversely impact on the resources available for public services. That is important, because it is accepted in all parts of the House that in times of recession or downturn, tax revenue falls and borrowing goes up—that is an automatic stabiliser—but the same implicit provision has not been made in the Bill. That is a flaw that I know is now recognised by people in many parties.
The inadequacy of the borrowing powers for this purpose was highlighted in the written evidence to the Scottish Affairs Committee from Professor Andrew Hughes Hallett and Professor Drew Scott. They said:
“Over the decade before the current recession, 1997-2007, the UK governments track record for income tax receipts is one of forecast errors that range between +7% to -4%, with an average of +1.1%”
a year. They continued:
“Since borrowing will follow from overestimates”—
the real amount will be less than the forecast—
“this means the Scottish Government will need to cut spending or borrow every year on average and should expect to exhaust its borrowing limit several times in a decade.”
To have such a flaw built into a Bill from the outset is profoundly unhelpful to the efforts of the Scottish Government to protect public services and grow the economy. The proposals also lack any ability to smooth the effects of cyclical downturns.
Unlike the UK Government, the Scottish Government will have no opportunity to use borrowing to compensate for a forecast decline in income tax revenues in the event of, for example, an anticipated slowdown in the global economy. Scotland would have no option but to cut spending to match the reduction in revenue at precisely the time when we might want to invoke an economic stimulus—a policy of the previous Government that we supported. However, it would be impossible to do that, because cuts would be required to match a forecast fall in revenue.
The Bill misses the fundamental point about being able to respond effectively to the natural volatility of tax revenues in managing public expenditure. Paradoxically, the more accurate the Office for Budget Responsibility is at forecasting falls in future revenue, the greater the volatility in the budget, because borrowing is permitted not against a forecast fall but only against a discrepancy between the forecast and the actual level. That is a huge problem with the borrowing powers at the heart of the Bill. If the Exchequer Secretary or his Scotland Office colleague wants to indicate that they intend to table the necessary amendments on Report or later to rectify that, I would be happy for them to intervene at any point.
Jim McGovern
Most hon. Members will know that the hon. Gentleman is my constituency neighbour. He mentioned “Strengthening Scotland’s Future”. Does he actually believe that separating Scotland from the UK would strengthen Scotland’s future?
Stewart Hosie
I certainly think that improving the provisions of the Bill that relate to capital borrowing would strengthen the Scottish Government’s ability to do the right thing, whoever was in power. If we want to have a debate about the relative merits of independence versus the Union, I am happy to do that—[Hon. Members: “When?”] Not today, because we are dealing with the Bill.
Mr Frank Roy
Does that mean that there will be a referendum in Scotland? Yes or no?
Stewart Hosie
I think it was Wendy Alexander who said, “Bring it on,” but Labour then ran away. Let us deal with the provisions of the Bill, because we need to get them right. I suggest to the hon. Gentleman, whom I like and respect, that we will have plenty of time in the next 52 days leading up to the Scottish elections to have this discussion, but we should not take up the Committee’s time tonight.
The Scottish Government, and the SNP here at Westminster, do not consider an arbitrary statutory limit on borrowing set by Westminster and lacking any objective justification to be an acceptable basis for an agreement between the Governments. In particular, an arbitrary limit this low will do little to promote long-term capital investment or responsible capital budgeting. A regime along the lines of the prudential borrowing regime that applies to local authorities, in which decisions are based on affordability, would be far more appropriate. Such an approach could be operated within the guidelines suggested in our amendment. Such guidelines would be agreed between the Scottish and UK Governments, including any terms, conditions and limits set out in the code in relation to capital borrowing between the Treasury and the Scottish Government.
Fiona O'Donnell
I was present when Fiona Hyslop gave evidence to the Scottish Affairs Committee, and I am aware that the SNP’s position is to promote unlimited borrowing. Will the hon. Gentleman at least concede that the UK Government do have some interest in this matter, given that any amount that a future Scottish Government might choose to borrow under his proposal would have an impact on the deficit here and on the country as a whole?
Stewart Hosie
I recognise that, which is why the proposal is about affordability, and why the code of practice would have to be based on established principles to promote long-term sustainability. Of course, within that, there understandably has to be a recognition of the debt and the deficit position. I was critical of the rise in the deficit, and in the debt, in Budgets from 2005 onwards, before the recession and before the banking crisis, so of course sustainability and affordability have to be considered within this proposal and dealt with in some detail.
Fiona O'Donnell
The hon. Gentleman is really confusing me. He seems to be trying to have his Dundee cake and eat it. He said that, in times of difficulty, the last thing we should do is cut expenditure. Is he saying that it was wrong of the previous Government to spend money bailing out the banks when we faced the crisis?
Stewart Hosie
No, I said that I welcomed the fiscal stimulus to the economy. Many of the efforts on financial intervention were absolutely necessary, and I supported them. Of course that had to be done. My criticism was not that action was taken during difficult periods, but that we went into the recession and the downturn with half a trillion pounds of debt. I am digressing, however—
Stewart Hosie
I am not giving way immediately, as I want to carry on developing my case on capital borrowing.
Any code has to take into consideration all the issues and be based on an established set of principles for long-term sustainability. That is incredibly important. The Bill, however, currently limits borrowing to loans, which prevents the use of bonds and other instruments. That is significantly more restrictive than the borrowing powers available to Scottish local authorities and to many Governments in other countries with comparable responsibility.
Mr Davidson
I want to clarify whether the hon. Gentleman has a specific figure in mind for borrowing. I understand his point about the criteria, but it would be immensely helpful if he gave us an indication, first, of the figure and, secondly, of whether the bonds and other means of borrowing money would be in addition to that amount or part of the total.
Stewart Hosie
I do not have a specific figure, and let me tell the hon. Gentleman why. If bonds are issued in such a way as to generate revenue, that revenue can be used in one sense to offset the level of the loans. That is why I am not being prescriptive about the amount. What I am saying is that the cumulative £2.2 billion is too low for the reasons that I have explained and that the code of practice would allow us to take into consideration all the sustainability and affordability issues and reach a figure that would be much more appropriate. I am not going to be prescriptive; it would be wrong for me to do that.
Mr Davidson
If the hon. Gentleman cannot give a figure, how can he say that £2.2 billion is too small? How does he arrive at that judgment when he is unable to use the same reasoning to identify what the figure might be?
Stewart Hosie
There are annual amounts and cumulative amounts. The annual amount at 10% of the capital departmental expenditure limit is very modest and the cumulative amount is less than the amount spent on capital in recent years. That strikes me as inappropriate when we are seeking to stimulate the economy and do all the things that the hon. Gentleman and I both want to see happen. As we can have revenue streams coming in to offset some of this, I do not want to put a limit on it, but the code of practice would do that. [Interruption.] I am not going to be drawn on that. I have explained why and I want to move on to bonds, which is another important issue.
Professor Gerald Holtham said in his evidence to the Committee that there is no macro-economic rationale to prevent the Scottish Government from having bond-issuing powers. I raised that on Second Reading, when I said:
“The borrowing powers in the Bill will limit the Scottish Government to certain types of borrowing. They will be able to use loans, rather than bonds or other instruments that would provide greater flexibility. Transport for London, which is a local authority in respect of its borrowing powers, is currently issuing commercial paper worth £7 billion for Crossrail and other projects. Birmingham city council issued paper to the tune of £250 million in 2006”.—[Official Report, 27 January 2011; Vol. 522, c. 541.]
As I said at the time, it is strange that what should be a seriously enhanced power for the Scottish Parliament, as described in the Bill, does not even put it on a par with TfL or Birmingham city council in its ability to raise cash through commercial paper for important national infrastructure works.
Professor Iain McLean and others have noted that bond issues would have several benefits. First, they would provide the Scottish Government with greater flexibility in the financing of capital projects, and the ability to issue a range of instruments would allow projects to be financed by a mixed portfolio of borrowing both in terms of repayment periods and the interest and other terms of the borrowing instrument. Secondly, in certain circumstances, issuing instruments in the market may offer a better deal on rates and repayment terms than a loan from the Treasury or a commercial bank. Indeed, the Treasury recently announced in the spending review a 1% rise in the charge or cost on loans from the Public Works Loan Board, increasing the cost of local authority borrowing. Having an option to seek financing from the market would provide an alternative in the event of a punitive interest rate being imposed at some future point by the Treasury. Professor McLean said in his evidence that
“it should be for the Scottish Parliament and Scottish ministers—not the UK Parliament or UK ministers—to decide on the soundness of the capital projects to which they commit themselves, and to deal with revenue fluctuations.”
That is the answer to the point raised by the hon. Member for Congleton (Fiona Bruce). If we are serious about responsibility—I hope that we all are—the Scottish Government must be allowed to make the decisions. Those decisions should land squarely on the desks of Scottish Ministers, or those in whatever other body is responsible for raising capital.
Ann McKechin
I welcome the clauses relating to borrowing powers. We agree that they make sense in terms of both short-term revenue and capital.
In paragraph 597 of its report, the Holyrood Committee accepted that
“Given its responsibility for macroeconomic management”,
the United Kingdom Government
“has a proper interest in the flow of borrowing”.
We agree with that. However, there is a worthwhile discussion in the report about evidence from the Government and other experts relating to the overall level of borrowing, both short-term and on the capital account, and we think that the Government should consider the Committee’s arguments. It did not identify an alternative figure, but made some suggestions that we think worthy of consideration. I ask the Government to confirm that they will examine the report in detail, and will take the earliest opportunity to present their assessment to the House of Commons or the House of Lords. I note that the Scottish Government will be able to borrow from commercial lenders as well as from the National Loans Fund, and I welcome that as well.
The hon. Member for Dundee East (Stewart Hosie) should be careful. I assume that his are primarily probing amendments, and I think it right to test some of the issues discussed in the Holyrood Committee, but as well as looking for the benefits, he must accept the responsibilities of the Scottish Government for overall public sector borrowing limits. Although we may disagree with the Government on what those limits should be and on the scale of the deficit reduction, we accept that as an important criterion in the debate.
Stewart Hosie
I am sure that the hon. Lady will want to be generous and accept that I made it clear on two occasions that affordability and sustainability must be taken into consideration. No one wants to do anything silly with the public finances.
Ann McKechin
That marks a first. I cannot recall the Scottish Government asking for less money. I seem to remember that when Labour was in government, they kept asking for more money and saying that they did not have enough.
The hon. Gentleman made a comment about the deficit. Before 2007 it was about 2%, which was perfectly manageable within the fiscal settlement. The increase in the deficit was primarily caused by the banking crisis, which was an international crisis as the hon. Gentleman accepts, and by the fact that we stimulated the economy, which he also accepts, although he said we should have stimulated it even more. He cannot have his Dundee cake and eat it, however. He either accepts one interpretation of what happened, or he accepts the interpretation of the coalition Government, which we believe to be false.
The hon. Gentleman raised a number of queries about the Holyrood Committee recommendations, particularly in respect of the requirement that the first £120 million of any tax shortfall must be met by spending reductions in the year in question. It would be helpful if the Minister could explain the rationale for imposing that. I think that measure is in the Command Paper—it is not in the Bill itself, of course. This issue is of particular concern in the light of the Government’s decision to abolish the end-of-year flexibility scheme at very short notice this year, which will cost the Scottish budget an estimated £23 million.
When the Minister gave evidence to the LCM Committee, he drew a distinction in respect of end-of-year finance arrangements, but at no point did he intimate that the Government or Chief Secretary to the Treasury had decided that they would be gobbling up the £23 million as part of the deficit reduction plan. That raises concerns about the nature of the relationship between the UK Government and the Scottish Government in the so-called respect agenda. Will the Minister confirm at what point this issue was raised with the Joint Ministerial Committee and the Scottish Government? Why was no mention made of this when he and the Chief Secretary were giving evidence to the LCM Committee? Again, this is about trust and the maintaining of good governmental relationships. As I have mentioned before, it is key that that is maintained to the highest degree in these clauses.
There have been issues to do with the Government’s criterion of setting a limit of £2.2 billion for capital expenditure. There are some very good suggestions in the Committee’s report about increasing borrowing capacity, which we think are worthy of consideration.
Finally, as the Minister will be aware, my colleagues in the Scottish Parliament have called for the borrowing powers to be brought forward from the proposed implementation date of April 2013 to April 2012. Given that we anticipate that this legislation will be on the statute book by the end of this year and before the next financial year, I can see no good reason why the power cannot be advanced to April 2012, which, as the Minister will be aware, is within the current comprehensive spending review period. That would assist the Scottish Government —of whatever political hue—in making appropriate planning decisions after the election. If the Minister could give an early indication that the Government are minded to bring forward the introduction of this power to 2012, that would be widely welcomed. I therefore hope he can give the Committee one positive piece of news tonight.
Mr Gauke
I propose to deal with amendments 51 to 57 first, and I recognise that, as has been said, they partly overlap with the report from the Scotland Bill Committee in the Scottish Parliament. As my right hon. Friend the Secretary of State for Scotland set out last week, the UK Government will consider the recommendations in the Committee’s report thoroughly, alongside an assessment of the impact on the UK fiscal position.
The purpose of amendment 51 is twofold. First, it would remove the requirement for Scottish Ministers to access revenue borrowing to meet current expenditure only in accordance with rules determined by the Treasury. Secondly, it would allow such borrowing to be accessed due to a shortfall in outturn receipts against forecast receipts from devolved taxes and the Scottish rate of income tax. I will deal with each of those in turn.
On the need for borrowing by Scottish Ministers to comply with rules determined by the Treasury, I note that the report from the Scotland Bill Committee in the Scottish Parliament—where the Scottish Government voted with the motion—recognised the need for the UK Government to constrain the borrowing powers. I am delighted that there appears to be a consensus in the Committee that nobody wants to do anything silly with the public finances, as one could have been forgiven for thinking that that has not been the case over recent years.
There are important reasons for Scottish Ministers to comply with Treasury rules on borrowing. The Bill’s new borrowing powers will sit within the UK fiscal framework as a whole; interest on Scottish borrowing will be included in the total UK public sector borrowing aggregates. As overall macro-economic policy will continue to be a reserved matter, it is necessary for the UK Government to set controls and limits on the borrowing powers in order to retain overall control of UK borrowing, protect overall economic stability and minimise fiscal risks to the UK Exchequer. This Government believe that the specific terms and conditions set out in the Bill and the Command Paper strike the right balance between protecting overall levels of UK debt and increasing the financial accountability of the Scottish Parliament.
On the second point, I wish to thank hon. Members for bringing an important discrepancy to the attention of the Committee. Although the Command Paper was clear that revenue borrowing would be used to meet current expenditure because of a shortfall in receipts compared with forecast in devolved taxes and the Scottish rate of income tax, the Bill was not so clear. The Government will therefore introduce their own minor and technical amendment on Report to include the Scottish rate of income tax alongside devolved taxes. In conclusion, given the continued control by the Government over the UK fiscal mandate and the fact the Government will be introducing their own amendment in respect of the second issue, I ask the hon. Member for Dundee East (Stewart Hosie) to withdraw the amendment.
Stewart Hosie
The Exchequer Secretary has said that the Government will be bringing the Scottish rate of income tax into the consideration, and I presume that that is still to allow borrowing when the actual figure there is less than the forecast. But that does not address the fundamental issue that if there is a forecast fall, the Scottish Parliament will take the entire hit, because there is still no cyclical borrowing—borrowing where a forecast fall actually happens.
Mr Gauke
The point of the amendments that will be introduced on Report is to do exactly as I have described. May I make a point about the cyclical impact and the adequacy of current borrowing? In the past downturn, income tax receipts fell by about 6% or 7%, so we are looking at a variation of 6% or 7% of the £4.5 billion estimated Scottish income tax receipts. That is about 1% of the Scottish budget, because it needs to be seen against the continuing bedrock of stability afforded by the block grant. I make that point so that we can place this issue in context.
Amendments 53 and 66 would have the effect of removing the borrowing limits. They do not replace the limit with an alternative figure, as has been made clear following a number of interventions from hon. Members, so I have assumed that the intention is for these limits to be determined by a new “code of practice”, as set out by the hon. Member for Dundee East and put forward in amendments 52 and 55. There are important reasons why the Bill contains limits, which I have already set out and which include the fact that Scottish borrowing would have an impact on the UK borrowing figures. It is surely right that the limit should be determined by the House, first through its consideration of the Bill and subsequently through approval of any order altering the limit. UK Government analysis continues to suggest that the limits in the Bill for revenue borrowing, together with the Scottish budget absorbing the first 0.5% of the deviation between forecast and outturn receipts, are sufficient in normal conditions.
Fiona O'Donnell
Why did the Conservative members of the Bill Committee in the Scottish Parliament vote for the measures?
Mr Gauke
We will, of course, look at what the Scottish Parliament has set out and we will engage with those suggestions on alternative ways of proceeding. None the less, given the difficulties that would arise if bonds were issued, particularly in the circumstances we face—there is a crisis in the public finances and it is essential that we meet our fiscal mandate and stick to our spending and deficit reduction plans—we need to take into account the uncertainty and additional cost that could be created at this point. However, there is a general point to be made about borrowing limits. Circumstances will change and the opportunity for greater flexibility in future is something we are willing to look at, but we believe we have the balance right at the moment.
Mr Davidson
Am I correct in assuming that the Minister is pretty strongly wedded to the set of proposals that he has introduced at this time, but that he and the Government are not necessarily wedded to them for all time? If devolution continues to evolve, that may well result in the relaxation of those rules, a review and a beneficial alteration of the figures.
Mr Gauke
The hon. Gentleman sets the position out well, and I do not disagree with him. The Bill essentially sets out a base for current and capital borrowing. It can be increased, and there is a mechanism in the Bill to do so. We would need to look at the circumstances in future to see whether we could increase flexibility in that area. We have to bear in mind the state of the public finances and the importance of maintaining credibility.
Ann McKechin
I asked a question about the transitional borrowing powers that require Treasury consent, and whether the Treasury would be minded to bring them forward to 2012. The Minister has given conditions, which we accept would have to apply in the transitional period, but nevertheless that flexibility would be welcomed by everyone.
Mr Gauke
I note the hon. Lady’s comments. We are looking carefully at the recommendations by the Committee in the Scottish Parliament. We note her representations, and we will respond in due course. I wish to underline the fact that it is of absolute importance that we manage to maintain credibility, which is perhaps why there is less flexibility now than there may be in future. The hon. Member for Glasgow South West (Mr Davidson) suggested that there might be greater flexibility in future, but we would need to assess that nearer the time. However, I note the hon. Lady’s remarks on the transitional period for borrowing.
Amendment 57 is consequential on amendment 56. As hon. Members wish to remove the borrowing limits from the Bill and the ability to revise those limits with the approval of the House, clause 32 (10) would no longer by necessary as there would be no such secondary legislation. The hon. Member for Glasgow North (Ann McKechin) raised the issue of end-of-year funds across all the devolved Administrations and Departments amounting to some £20 billion. Such large sums of accrued EYF present a fiscal risk to the UK Government, which is why new arrangements will be detailed in the forthcoming Budget. I hope that that clarification is helpful.
I thank the hon. Members for the opportunity to set out the Government’s position on the important borrowing powers provided by the Bill. This has been a helpful and perhaps probing debate—we shall see. However, we do not accept any of the amendments, so I invite the hon. Member for Dundee East to withdraw amendment 51. For the reasons that I have set out, I hope that hon. Members agree that that clause 32 should stand part of the Bill.
Stewart Hosie
The Minister has said a great deal, and it was very instructive indeed. The Scottish Government will still be required to absorb the 0.5% cut in the budget before revenue borrowing can take place. On current forecasts, there would perhaps be £127 million in extra cuts even before we could borrow. There has been no confirmation that cyclical borrowing is permitted—it will still only be against changes to the forecast, which means that if there is a forecast fall we take the full hit. That cannot be right if the Office for Budget Responsibility is accurate and there is increased volatility in the Scottish budget. Repayments on the revenue will still be made over four years, which might well mean that if we borrowed at the height of the recession we would now be paying back, because it is such a short-term repayment schedule, even though there is already additional pressure on the Scottish budget.
The Minister said that capital borrowing of £2.2 billion on a 10% annual CDEL was exceptional, but the Scottish Government and the Scottish Parliament Committee did not think so. He is flatly ignoring the recommendations that have been made. He was anxious that the requirement for the Treasury to approve borrowing should be removed. I ask, what price the respect agenda? Incredibly, he offered no support for bonds, even though it was an explicit Committee recommendation that the
“Scottish Parliament should have the power to borrow directly from the markets by issuing bonds.”
The hon. Member for East Lothian (Fiona O’Donnell) sensibly asked what the Tory members of the Scottish Parliament Committee would make of that. One might ask what the Liberal members of the Scottish Parliament Committee make of that. I might ask what all the Unionist members of that Committee would make of that, given that they thought they had a deal and that the recommendations would see the light of day in one form or another in amendments in Committee, on Report or in another place. We will be watching extremely carefully to see whether the Government backtrack now on what appeared to be promises, abandoning all the recommendations of the Scottish Committee, which would be a shameful thing to do. I beg to ask leave to withdraw the amendment, but given how little comfort we have had, I intend to divide the Committee on amendment 52.
Amendment 51, by leave, withdrawn.
Amendment proposed: 52, page 24, line 22, at end insert—
‘(1ZA) In borrowing sums under subsection (1), the Scottish Ministers must have regard to any code of practice agreed by them and the Treasury.
(1ZB) A code of practice agreed under subsection (1ZA) may include provision as to—
(a) how the Scottish Ministers are to determine and keep under review how much they can afford to borrow,
(b) the terms and conditions on which sums may be borrowed,
(c) limits on the aggregate at any time outstanding in respect of the principal of sums borrowed.’.—(Stewart Hosie.)
Question put, That the amendment be made:
Mr Davidson
On a point of order, Mr Hoyle. According to the votes, eight nationalists have been voting on all these things, and now they are down to seven. Has somebody been kidnapped? [Laughter.]
The Chairman of Ways and Means (Mr Lindsay Hoyle)
Now, then.
Clause 32 ordered to stand part of the Bill.
Clause 33
Maximum penalties which may be specified in subordinate legislation
The Parliamentary Under-Secretary of State for Scotland (David Mundell)
I beg to move amendment 31, page 25, line 31, leave out ‘the amount specified as’.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss Government amendment 32.
David Mundell
The Government have identified the need for these minor technical amendments to clause 33, which updates the maximum penalties that can be applied to criminal offences created in subordinate legislation made under the Scotland Act 1998. The amendments are sensible additions that will ensure consistency across the different legal systems within the UK. The first amendment is a minor technical amendment to ensure consistency in the terminology used to refer to fine limits for different jurisdictions, which are provided for in the amendments to section 113 of the Scotland Act made by clause 33.
The second amendment ensures that the correct terminology is used in relation to fine limits in section 113 for either-way offences created in relation to the law of England and Wales and Northern Ireland, with the statutory maximum rather than level 5 on the standard scale on summary conviction. Level 5 has meaning only in relation to summary-only offences by virtue of the definition in the Interpretation Act 1978. Clause 33, as introduced, makes this terminology change in relation to fine limits for Scots law offences, and the amendment makes the same change for offences that form part of the law of England and Wales and Northern Ireland.
The amendments will ensure consistency in the terminology used to describe the fine limits for offences created in the Scotland Act orders for each of the legal jurisdictions in the UK.
Amendment 31 agreed to.
Amendment made: 32, page 26, line 2, leave out from second ‘exceeding’ to end of line 3 and insert—
(i) in the case of a summary offence, level 5 on the standard scale,
(ii) in the case of an offence triable either way, the statutory maximum,’.—
(David Mundell.)
Clause 33, as amended, ordered to stand part of the Bill.
Clauses 34 to 37 ordered to stand part of the Bill.
Clause 38
Commencement
Amendments made: 65, page 28, line 5, leave out ‘made by statutory instrument’.
Amendment 66, page 28, line 9, leave out ‘made by statutory instrument’.—(David Mundell.)
Clause 38, as amended, ordered to stand part of the Bill.
Clause 39 ordered to stand part of the Bill.
New Clause 18
Orders
‘Any power to make an order conferred by this Act is exercisable by statutory instrument.’.—(David Mundell.)
Brought up, read the First and Second time, and added to the Bill.
New Clause 1
Abolition of regional members of Scottish Parliament
‘(1) The Scotland Act 1998 is amended as follows.
(2) In section 1—
(a) in subsection (2) “Two members” is substituted for “One member”; and at the end there is inserted “save for those identified in paragraph 1(a) to (c) of Schedule 1, each of which shall return one member,”;
(b) subsection (3) is omitted.
(3) In section 5, subsections (1) and (3) to (9) are omitted.
(4) Sections 6, 7, 8 and 10 are omitted.
(5) In section 11, subsection (2) is substituted by—
“(2) A person is not entitled to vote as an elector in more than one constituency at a general election, and may cast no more than two votes at a poll for the return of constituency members.”.
(6) In section 12—
(a) in subsection (2), paragraphs (e) and (f) are omitted;
(b) subsection (3) is omitted;
(c) after subsection (4) the following subsection is inserted—
“(4A) The provision to be made under subsection (1) must include provision for—
(a) each elector to cast one or two votes of equal value, with no more than one vote to be given to any one candidate, in constituencies returning two members;
(b) the two candidates with the most valid votes to be elected in such constituencies.”.
(7) In Schedule 1—
(a) for paragraph 1 there is substituted—
“(1) The constituencies are—
(a) the Orkney Islands,
(b) the Shetland Islands
(c) the Western Isles [Na h-Eileanan An Iar], and
(d) the parliamentary constituencies in Scotland at the time of an ordinary or extraordinary general election for the Scottish Parliament, except the constituencies of Orkney and Shetland and Na h-Eileanan An Iar”;
(b) paragraphs 3 to 14 are omitted.’.—(Mr Donohoe.)
Brought up, and read the First time.
The Chairman of Ways and Means (Mr Lindsay Hoyle)
With this it will be convenient to discuss new clause 2 —Regional members of the Scottish Parliament—
‘(1) The Scotland Act 1998 is amended as follows.
(2) In section 81, after subsection (2), there is inserted—
“(2A) No provision shall be made under subsection (2) for any allowances for representative work in any constituency or region by a regional member in a registered political party or a group of such regional members; and no allowances may be made for offices or staff or related expenses incurred by such members other than in connection with or at the Parliament’s place of meeting or in connection with a committee meeting.
(2B) Any allowances paid to regional members in a registered political party shall be founded on the assumption that they are representatives of that party from the relevant region and not from any single constituency.”.
(3) In Schedule 3, after paragraph 2 , there is inserted—
2A The standing orders shall include provision for withdrawing from a regional member in a registered political party any or all of his rights and privileges as a member, including any allowances, if he is found to have purported to act, or has held himself out, as a constituency member for any single constituency or for a group of constituencies other than the region from which he was elected.”’.
Mr Donohoe
New clauses 1 and 2 relate to regional Members of the Scottish Parliament, who were introduced in an irksome move and have been with us for a long time—since the outset of the Scottish Parliament.
Mark Lazarowicz
My hon. Friend describes the provisions for a system of proportional representation as irksome. How many representations have been received by Government or anybody else that call for a change to the voting system for the Scottish Parliament, apart from those of my hon. Friend and a few of our colleagues?
Mr Donohoe
Since I have been in a position to see this matter at first hand, I have received many representations over the years from constituents who have concerns about the system, as I am sure has my hon. Friend. As a result of my tabling the new clauses, a number of individuals have written to me to tell me that I was spot on in making this argument. Therefore, there have been a number of representations. Not many people have come to me and argued for the continuation of the crazy system that is in being. I will expand on that point later in my speech.
Never in the history of politics has a political party given so much power to its opponents as in the Scotland Act 1998. Since then, all sorts of people have come on to the scene, cherry-picked within the constituencies and caused mayhem. That is why I have tabled the new clauses. Obviously, we must look at this whole question. We must go back to the first election to the Scottish Parliament in 1999. In my constituency, there was the crazy situation in which not only was the person who came second under first past the post elected to the Scottish Parliament through the pool for constituency Members, but the people who came third and the fourth. As my constituents tell me, something is fundamentally wrong when such a system is allowed to continue. That is the crux of my argument this evening.
Jim McGovern
I go round the doors every weekend, as I am sure does my hon. Friend and most Members here. Does he agree that most people on the doorstep are confused about how they vote for the list person? In politics, the people who know about it regard it as the assisted places system.
Mr Donohoe
My hon. Friend is absolutely right. I will develop that argument in my speech.
Pete Wishart
I am interested to know the view of the Labour party on this issue. The names of the hon. Gentleman and five of his hon. Friends are listed as supporters of the amendment. What is the view of those on the Labour Front Bench on Westminster controlling what happens with Members of the Scottish Parliament? What is the view of Labour Members of the Scottish Parliament on that?
Mr Donohoe
I am sure the hon. Gentleman knows that there are varying views on the subject, as there are on many subjects. As far as my constituents are concerned, however, there is no doubt: to a person, they support the argument that I am making tonight that there should be a fundamental change to how we elect our MSPs. There was immense resistance to the fact that the person who came fourth under first past the post was eventually elected to the Scottish Parliament. That seems to me to be wrong.
David Mundell
The hon. Gentleman has been very consistent on this issue, and I respect his views even though I do not necessarily agree with him. However, I am confused about the Labour party position. For many years, those of us who were list MSPs heard the arguments that he is making about how the list was an assisted places scheme for people who failed to be directly elected under first past the post. Now I find that Labour party first-past-the-post candidates are on the list, and some of them are even topping lists when there is a fear that they will lose in the first-past-the-post constituency. How does he feel about that?
Mr Donohoe
I had the greatest respect for Phil Gallie, the former MP for Ayr, who was also a list MSP. He hated every minute of his time in the Scottish Parliament, because he knew that as a list Member, he had absolutely no powers. I will develop that argument later in my speech, but even Tory MSPs were opposed to the concept of the list system.
Mrs Laing
I understand that the hon. Gentleman’s argument is that the simple first-past-the-post system used in elections to Westminster produces a fairer result than other systems. Is he concerned that the introduction of the alternative vote for Westminster would undermine elections to this place, and therefore the legitimacy of this House of Commons?
Mr Donohoe
I am not sure that I want to wander down that road, because the hon. Lady is well aware that I am the joint chairman of the all-party group for the promotion of first past the post, and also the secretary of the relevant group in the Labour ranks. Indeed, last week I asked the Prime Minister a question about the matter and he agreed with me, which is a first. Members all know where I stand and where the campaign on first past the post is going.
Let us examine the situation as it stands. If I go to a health board meeting in Ayrshire, how many MSPs can turn up? Some 24 can turn up and be part of the debate. That is not a problem in itself, but some of those list Members represent areas outside Ayrshire. There is therefore immense conflict when decisions are taken about where health services for them and their constituents should be. I have seen that at first hand on at least a dozen occasions. As a consequence, I no longer go to those meetings. Instead, I sensibly insist on the health board meeting the MPs and constituency MSPs alone, instead of the nonsense of the cherry-picking that was and is going on among list Members north of the border.
Mark Lazarowicz
My hon. Friend clearly has strong views. I must say that in the area that I represent, where there are Conservative, Liberal Democrat, Green, Labour and independent list MSPs, I do not have the problems that he seems to encounter. Is not the real difficulty with his proposal that it would lead to an end to the proportional system for the Scottish Parliament? Is that not what it is really about? Would it not be undemocratic and wrong if Labour, the SNP or any other party got a majority of seats with 30% of the vote?
Mr Donohoe
I am sure my hon. Friend has examined my two new clauses, which are self-supporting. It is correct that in the first instance I want to bring back coterminous boundaries for all MSPs, so that there is a semblance of an organisation that can be supported by all parties in this place and elsewhere. However, the second point that I want drive home is as important as the first. I do not believe that list Members should be allowed, under any circumstances, to pick up the funds that are currently available to them to represent—or not represent—what they perceive to be their constituents.
That brings me neatly to list MSPs themselves. On a substantial number of occasions, the list Member has cherry-picked, to the detriment of the possibility of inward investment by companies of some size into my constituency—I take exception to that more than anything. On the basis of what they perceived to be environmental issues, they have come in and destroyed any possibility of a company coming into my constituency. That is wrong, and there must be accountability, but the list Member is not accountable to constituents as I am to mine. That must be fundamentally wrong. No hon. Member can tell me whether the list Members have any accountability within the structures of their political parties. That is the problem. There is no accountability whatever for list Members—[Interruption.] Does the hon. Member for Na h-Eileanan an Iar (Mr MacNeil) want to intervene?
Mr Donohoe
I did not think he would. That demonstrates exactly what I am saying. There is no accountability, and no structure to allow it, for list Members. That is a major problem, and why I have tabled new clauses 1 and 2.
Jim McGovern
Does my hon. Friend agree that most people would recognise their MP, some would recognise their MSP, and some may even recognise their MEP, but very few would know who their list MSP is?
Mr Donohoe
The only one I could think anybody would recognise would be the ex-Member for Cumnock, Carrick and Doon Valley, George Foulkes. Whether that is because of his politics or because he was the chairman of Hearts I do not know.
Mr MacNeil
I am grateful that the hon. Gentleman mentions list MSPs. In the highlands, we know that Rob Gibson and David Thompson are the SNP list MSPs, but I have no idea whatever who the Labour MSPs are.
Mr Donohoe
The hon. Gentleman makes my point. Nobody actually knows their list Members. I could not name the ones in my constituency because there are 24 of them.
Pete Wishart
Does the hon. Gentleman know how many people in Scotland recognise Iain Gray? What would he make of these proceedings?
Mr Donohoe
Perhaps the hon. Gentleman’s smile will be on the other side of his face come the end of May. There is absolutely no doubt that Iain Gray will become as well known as anyone in Scotland as a result of becoming First Minister after 3 May this year. That was a great intervention—I would be happy to take similar ones all night.
Mr MacNeil
I do not know who the highlands Labour list MSPs are, so could the hon. Gentleman inform us?
Mr Donohoe
The hon. Gentleman indicates that I got that one right.
The fact is that we must look seriously at the current situation. This argument is what might be described as a slow burner, but I would like to develop it by moving on to the first-past-the-post system. I realise that I am running out of time, but I have a lot of support on both sides of the Committee, even if some hon. Members are hiding behind their mantle.
The fact is that there is only one solution to the problem that we face north of the border—to bring about first past the post for every MSP. As a result, I suggest, for all sorts of reasons, that the best solution is that instead of the list Members system, by which there are 129 MSPs, we simply have two MSPs per Westminster constituency, with the exception of the Western Isles and Orkney and Shetland. I would make that concession. I am sure that the hon. Member for Na h-Eileanan an Iar would be very happy with that indeed. As a result, we would have 119 Members.
Business without Debate
Hindi Radio Service (BBC)
(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Edward Leigh (Gainsborough) (Con)
This is an important Adjournment debate about the future of the BBC’s Hindi radio service. At the moment, it is broadcast for three hours a day, divided between the morning and the evening, and reaches no fewer than 10 million listeners, mostly in the northern Hindi-speaking regions of Uttar Pradesh, Bihar and Jharkhand. Hindi is the second largest language audience of the BBC World Service worldwide—of course, English is the first—and it is precisely these three poorer states in India that the Department for International Development has committed to support until 2015 to the tune of £280 million.
The BBC is cutting its shortwave Hindi service, which costs £1 million a year, but once cut, it will save just 2.5p per listener. This, I contend, is the wrong saving to make, and I very much hope that the BBC will think again. The BBC Hindi service began in May 1940, on the very same day that Churchill became Prime Minister, and it employed I. K. Gujral, who later became the 13th Prime Minister of India. The Hindi service was also the first news outlet to break the news of Indira Gandhi’s assassination.
There has been a so-called partial reprieve—I would call it a climbdown—after the massive outcry over the total abolition of a radio service that serves 10 million people, and which most radio stations in the world would give their eye tooth to have. However, all that will do is save one hour of Hindi broadcasting for just one year, and that is not enough. The work schedules of the poorest Indians mean that they can often hear only one broadcast or the other. Many listeners want their radio news in the morning. This decision will wipe out a large proportion of the audience overnight.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
Does the hon. Gentleman agree that there is widespread concern across the UK about the decision that the BBC appears to be making? Many of my constituents share his concerns about the future direction of the BBC on this service.
Jeremy Corbyn (Islington North) (Lab)
I congratulate the hon. Gentleman on securing this important debate on what is a ridiculous decision by the BBC. Running the service costs very little compared with the audience that it gets. This decision has been made by people who do not understand that millions around the world rely on ordinary, old-fashioned, shortwave broadcasting. They are not part of the digital revolution, and if this kind of cut goes through, they will not even be informed about the digital revolution.
Mr Leigh
That is precisely the point. The false argument that the BBC makes is that there is a revolution in India and elsewhere—as indeed there is—and that more and more people have television, but the poorest of the poor in those states depend on shortwave radio. We provide a relatively cheap and effective service, and we should maintain it.
Penny Mordaunt (Portsmouth North) (Con)
As a former director of Diabetes UK who was involved in setting up health care programmes in India, I would echo that point. Quite often the service is the only way that messages about health care or things that are happening in a particular province can reach people.
Mr Leigh
That is absolutely right.
Let me read out a couple of quotations by ordinary people from an article in The Times:
“Vijay Kumar Pandey…every day at 6 am, takes his battered transistor radio and places it on a small table outside his house. Through the shortwave crackle a burst of familiar Indian classical music announces the beginning of a half-hour news bulletin.
Other villagers arrive to listen to the world’s most important events. They have been doing this since 1940, gathering at dawn and dusk to hear BBC Hindi’s twice-daily news programmes.
‘I am in shock,’ said Mr Pandey, a farmer in…Uttar Pradesh. ‘It’s like a family member departing from me.’”
The article continued:
“My life would lose its meaning if BBC Hindi stops its service,”
said Tarachand Khatri from Rajasthan.
“Can you imagine living with somebody throughout your life and, suddenly, that person is gone? BBC Hindi was a person; we used to interact with it through its programmes; we used to share our happiness, feelings, thoughts and concerns.”
The respected Indian news weekly Outlook reports that some villagers have threatened to burn David Cameron in effigy—something that we would all deprecate. Mohammed Hasnain Khan, a schoolteacher from Ghazipur, has threatened to immolate himself if BBC Hindi is shut. Ravindra Chauhan of Assam says that hearing that BBC Hindi will close was as if
“someone tells you that your parents will die in March.”
And so the arguments go on. This decision is an attack on people who have no way of hitting back, and I think that we should protect them, especially as the Department for International Development is set to continue funding the poorest states in India to the tune of £250 million.
Mr William Cash (Stone) (Con)
Given the BBC’s enormous revenue, which is something like £4 billion a year, and how many correspondents it sends across the world in batches, does my hon. Friend agree that this incredible waste—in respect of which he and I fought to bring the BBC’s accounts within the purview of the National Audit Office—is completely disproportionate to the value that is attached to this service? Lastly, he might be fascinated to learn that 10 May 1940—the day on which the service began—happens to be the day I was born.
Mr Leigh
It is a very notable anniversary.
At this precise moment the BBC is wasting hundreds of thousands of pounds on a regionalisation programme—a programme that involves moving the headquarters of “Question Time” to Glasgow, for instance, even though it will continue to move around the country—while it is cutting a valued service in India.
Keith Vaz (Leicester East) (Lab)
I congratulate the hon. Gentleman on securing this debate and on getting the climbdown from the BBC, but does he agree that this reprieve is not enough? We need to settle this matter once and for all and acknowledge the important contribution that the Hindi service makes. We need not just a temporary reprieve but a permanent one.
Mr Leigh
The right hon. Gentleman is absolutely right. The purpose of this debate is to illustrate that we are saying, loud and clear, from all sides of the Chamber in the House of Commons, that this is only a partial climbdown. The BBC did not realise the extent of the outcry that would be caused by its decision. Some of the service’s best staff will go, and people will stop listening to it. They will no longer be able to listen in the morning; the service will be available only for one hour in the evening. That is not good enough, and we must fight the decision.
We often talk about soft power, and about proclaiming our values. Service such as these represent soft power. They are increasingly recognised as a hugely effective means of delivering diplomacy and our values, with few of the risks associated with more heavy-handed foreign policy interventions. Unlike other countries, Great Britain has a medium through which it can engage with a wide range of Indians, and not simply with the urban elite. That is the point that the hon. Member for Islington North (Jeremy Corbyn) made. We are not simply engaging with the urban elite online; we are engaging with the rural poor.
Rehman Chishti (Gillingham and Rainham) (Con)
The service is empowering people in some of the most rural parts of India who might not otherwise get the information that it provides. Providing that information empowers them to become masters of their own destiny and to know what is going on around them, which they might otherwise not do.
Mr Leigh
Absolutely. One of the values of the service is that it is a news service. Of course the BBC can go on broadcasting on FM radio, but hon. Members might not know that it is not allowed to put news on FM. It can broadcast news only on shortwave radio. One person has written to ask me what the point is of the BBC just beaming out Bollywood-type programmes on FM when it can beam out real independent news on shortwave radio.
Joseph Johnson (Orpington) (Con)
I agree with much of what my hon. Friend says about soft power, and about this decision perhaps not having been taken on the basis of a solid cost-benefit analysis, but why, if he believes in markets, does he believe that only the BBC can provide independent, impartial news in India, which has a very vibrant media sector?
Mr Leigh
Of course India has a vibrant economy and many other news outlets will come into the picture, but the fact remains that many radio programmes in India do not have the tradition of real independence and unbiased reportage that the BBC Hindi programme has.
The service also reaches large numbers of listeners in areas affected by Maoist-inspired violence in central India, which Prime Minister Manmohan Singh has described as the most serious threat facing the country. Many BBC Hindi service listeners might be forced to switch to China Radio International or, for Muslim listeners, Radio Voice of Iran, if the service is shut. I would point out to my hon. Friend the Member for Orpington (Joseph Johnson) that the only domestic competition that the BBC Hindi service faces is All India Radio, which has a poor reputation for news and current affairs programmes and is often seen as a Government mouthpiece. In contrast, the BBC Hindi service has built up a strong reputation based on its unbiased coverage of news and current affairs.
Of course news and information will be available via the internet and other new media, but most of the listeners who have access to that technology have already shifted to it. More than 10 million listeners do not have reliable access to the internet or to television, and they would be cut off from the BBC completely if the service were to close. The existence of the BBC’s Hindi broadcasting augments the depth of the BBC’s English language coverage, granting reporters access that they might not otherwise have. Politicians, especially those from the Hindi-speaking north, know and interact with the BBC primarily through the Hindi service. The service has a wide range of local part-time correspondents and information suppliers who provide critical input that goes to the rest of the BBC as well.
The BBC will try to pass the buck to the Minister. It will say that the Foreign and Commonwealth Office has stated that it believes that £25 million of World Service expenditure counts as official development. It is talking about commercial opportunities, and it will ask for funding from the Department for International Development, but I want to put the spotlight firmly on the BBC, which has taken this decision.
Let me end on this note. During the battle of Crete, Admiral Andrew Cunningham was criticised for using Royal Navy ships heavily exposed to assault from German aircraft to evacuate the Army to Egypt. Cunningham, however, was determined that the Navy would not let the Army down, no matter how many ships it lost. Admiral Cunningham said:
“It takes three years to build a ship; it takes three centuries to build a tradition.”
For 70 years, the BBC has built a tradition of unbiased reporting to the poorest people in the world. We must not let this service down.
The Minister for Europe (Mr David Lidington)
I congratulate my hon. Friend the Member for Gainsborough (Mr Leigh) on securing this debate and on attracting such conspicuous and widespread support from both sides of the House this evening. As he said, the BBC Hindi service is not, after all, being completely discontinued. The World Service had announced that the shortwave broadcasts would be stopped, but that the FM and online service would continue. However, the World Service has now been able to identify savings from within its budget to postpone the cessation of the shortwave service. Like many Members who have spoken this evening or attested to their support for my hon. Friend through their presence in the Chamber, we welcome this recent decision by the BBC World Service board.
There is no doubt that the BBC World Service is a much-respected and much-loved British institution. As my right hon. Friend the Foreign Secretary made clear on 26 January, it performs an invaluable role, reflecting British democratic values overseas and supporting British influence in the world. The services it provides are a beacon to many in some of the poorest and most insecure countries of the world.
It is also true that the World Service, like any other body funded by the taxpayer, must ensure that it is working on the right priorities and as efficiently as possible. Last October, my right hon. Friend the Foreign Secretary announced that the World Service’s expenditure limits would be reduced by 16% in real terms over the next three years. There is no doubt that these cuts are challenging, but it is right that all parts of the Foreign and Commonwealth Office family should contribute to reducing the deficit inherited from the previous Government. As part of the settlement, and to provide a balanced package, the Foreign Office provides £13 million a year to help with the deficit in BBC pension funds and £10 million a year for new services in markets that we and the World Service have identified as priorities.
My hon. Friend touched on the division of responsibilities between the Foreign and Commonwealth Office and the BBC World Service, and the broadcasting agreement between the two sets out clearly the responsibilities of each. My right hon. Friend, together with the BBC, sets the objectives, priorities and targets for the World Service and gives his authority for the opening or closure of any foreign language service. Other changes fall under the managerial independence of the World Service and are its responsibility.
From 2014, the funding for the World Service will be transferred to the BBC under its licence fee arrangements—a development welcomed by the BBC Trust. I emphasise, however, that the Foreign Secretary’s oversight role will remain and that he will continue to be involved in the setting of priorities. His authority will still be required to open or close any foreign language service.
On 26 January this year, the World Service announced plans for working within its new budget, and it had to take some difficult decisions. Among the announcements made was the one about the cessation of the shortwave broadcasts in a number of languages, including Hindi. As my hon. Friend said, the Hindi service has a long and honourable history, having been established as far back as 1940. Many millions of people have grown up listening to its broadcasts, and its popularity has certainly been shown by the number of representations that we and the BBC have received and by the passion with which they were made. My hon. Friend cited a number of those representations in his remarks.
According to the World Service, the shortwave audience in India has been falling for some time. In 2007 there were 19.1 million listeners, but by 2010 the number had fallen to about 11 million. That is still a large audience, but it represents a reach of just over 1% of the population, although—as my hon. Friend made clear—the areas covered by the shortwave broadcasts include some of the very poorest parts of India. There is only a small audience for shortwave in any of the urban areas, and the service was broadcasting for only three hours a day.
Last week the director of the World Service told the Foreign Affairs Committee that it had intended to close the shortwave service eventually and concentrate its efforts on the rapidly growing parts of the Hindi media market: online, mobile and television. Its broadcasts on FM would not be affected. The Hindi service has a network of FM partners throughout India whom it supplies with programmes, but—as my hon. Friend said—because of the regulatory framework in India, those services cannot supply hard news programming.
We are aware that the Hindi service was approached with proposals for alternative funding models for the shortwave broadcasts, but needed time to explore whether those possibilities were practicable. In discussions between officials, we made it clear that any decision would have to be made by the BBC World Service within its budget allocation. However, we supported the approach by the Hindi service to continue its shortwave broadcasts.
I am pleased that the BBC World Service has been able to find extra funds in its budget to support the Hindi shortwave service for another year and give it time to establish whether any of the alternative funding proposals are viable. The Hindi service will continue to broadcast on shortwave, albeit for only one hour a day rather than three. The World Service has decided to reprioritise £170,000 of its transmission budget for that purpose. I believe that that is a sensible response not only to legitimate concerns, but to the pressure to explore viable alternatives to continue the Hindi service not just for one year but for much longer, on a sustainable basis.
My hon. Friend spoke of the continuing priority given by the Department for International Development to helping the poorest communities in India. I know that a number of questions have been asked in the House about why that Department could not fund the Hindi service or cover the shortfall in the World Service’s overall budget. Under the broadcasting agreement between the Department for Culture, Media and Sport and the BBC, funding for the World Service should come from the Foreign and Commonwealth Office rather than the Department for International Development. Members will have seen the announcement in which, on 1 March, my right hon. Friend the Secretary of State for International Development clearly set out his priorities for the next few years. They did not include core funding for the BBC World Service, as it did not fulfil the criteria that he had identified.
That said, some World Service activity may count as official overseas development assistance. We are discussing with DFID and the OECD how BBC World Service expenditure may be reported as official development assistance. I understand that the World Service is discussing funding for specific projects with DFID, which already supports the BBC World Service Trust, the charitable arm of the World Service. The Government remain committed to an enhanced partnership with India.
Mr Lidington
There have been discussions at official level about the BBC decision to discontinue the Hindi service and about the pressure from the Hindi service for there to be a stay of execution while it explored other funding models. As far as I am aware, discussions between the Foreign Office and DFID about whether World Service expenditure can be classified as overseas official development assistance have been held largely at official level, although clearly if there were to be a major policy shift in this area the Minister of State, my hon. Friend the Member for Taunton Deane (Mr Browne), who is the Minister responsible for the World Service within the FCO, would be directly involved with his DFID counterparts.
Mr Thomas
With due respect, surely the Minister knows whether or not there have been ministerial discussions, and given the strength of concern in the House, surely a Minister from the Foreign Office could talk to DFID colleagues, or, potentially, to those who run the BBC World Service, to get some clarity about possibly at least extending the one-hour service back to the three-hour service.
Mr Lidington
The discussions that have taken place so far have been at official level about the decision the BBC took on the Hindi service earlier this year. The point I made a few moments ago is on a bigger issue: the extent to which expenditure on the World Service could qualify as official development assistance, and whether there were any problems in respect of the International Development Act 2002, which has to govern DFID’s expenditure. It is sensible that those conversations should initially take place at official level before advice is put up to Ministers, taking account not only of the views of the people in the two Departments, but also, as I mentioned, the opinions of the OECD, which has an authority in defining those areas of expenditure which count for ODA purposes and those that fall outside that definition.
There has been significant progress on building the bilateral relationship with India since the Prime Minister’s visit in July 2010, with increased co-operation across the full scope of activities in areas such as the economy, defence, counter-terrorism, climate change, science and innovation, and education. The presence of the World Service is one of many important elements in our ties with India, and we hope a solution can be found to the problems in respect of the Hindi service that demonstrates this value. Clearly, the World Service cannot be immune from public spending constraints or the need from time to time to reassess its priorities in the light of changing technologies and audience patterns.
Bob Stewart (Beckenham) (Con)
Does the Minister agree that it is very important that we keep the Hindi service and other such BBC services, because we are retracting from our embassies? The influence throughout the world of the BBC World Service in all the languages is therefore terribly important.
Mr Lidington
First, I want to assure my hon. Friend that this Government are not going to be retracting from our network of embassies and high commissions. Indeed, my right hon. Friend the Foreign Secretary has made it clear that he sees the network of posts overseas as absolutely core to the mission of the FCO as a Department. I agree about the continuing importance of the World Service, but I also say that the current pattern of the language services provided by the BBC World Service cannot be preserved in aspic. There will be changes in priorities as the years go on. Changes will be occasioned by: the political priorities of the Foreign and Commonwealth Office; shifts in audience; and changes in technology. In some parts of the world the use of online access to the BBC is increasingly rapidly, and that is being coupled with a significant reduction in the use of shortwave broadcasting. Clearly the patterns of provision need to take account of that. I am pleased that in this instance the World Service has been able to keep the Hindi service shortwave broadcasts operating while a sustainable solution is explored, and I hope that that leads to success.
Question put and agreed to.
Ministerial Correction
(13 years, 8 months ago)
Ministerial CorrectionsRead Full debate Read Hansard Text
Regulation
(13 years, 8 months ago)
Ministerial CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Philip Davies
To ask the Secretary of State for the Home Department how many regulations sponsored by her Department have been (a) introduced since 18 November 2010 and (b) revoked since 2 February 2011.
[Official Report, 7 March 2011, Vol. 524, c. 878-79W.]
Letter of correction from Mr Nick Herbert:
An error has been identified in the written answer given to the hon. Member for Shipley (Philip Davies) on 7 March 2011.
The answer contained two typographical errors: in the first table the transposition of the words ‘Accession (Immigration’ and an incorrect S.I. number, and in the second table the omission of a reference to the revoked regulation 3 of S.I. 2009/3136.
The full answer given was as follows:
Nick Herbert
The following statutory instruments in the form of regulations have been made by the Department on or after 18 November 2010.
S.I. No. | S.I. Title | Made date |
|---|---|---|
2010 No. 2807 | The Immigration and Nationality (Fees) (No. 2) Regulations 2010 | 21 November 2010 |
2010 No. 2826 | The Police Authority (Amendment No. 2) Regulations 2010 | 24 November 2010 |
2010 No. 2851 | The Licensing Act 2003 (Premises licences and permitted temporary activities) (Forms and notices) (Amendment) Regulations 2010 | 29 November 2010 |
2010 No. 2958 | The Immigration (Biometric Registration) (Amendment) Regulations 2010 | 13 December 2010 |
2010 No. 3018 | The Private Security Industry Act 2001 (Exemption) (Aviation Security) Regulations 2010 | 20 December 2010 |
2010 No. 3030 | The Police Authority (Amendment No. 3) Regulations 2010 | 21 December 2010 |
2011 No. 230 | The Police Federation (Amendment) Regulations 2011 | 4 February 2011 |
2011 No. 300 | The Police Act 1996 (Equipment) Regulations 2011 | 9 February 2011 |
2011 No. 448 | The Misuse of Drugs (Amendment) (England, Wales and Scotland) Regulations 2011 | 18 February 2011 |
2011 No. 544 | The Immigration (Accession and Worker Registration) (Revocation, Savings and Consequential Provisions) Regulations 2011 | 24 February 2011 |
The following statutory instruments in the form of regulations are revoked by the Department since 2 February. None of the revocations are yet in force.
(1) Regulations revoked | (2) References | (3) Extent of revocation | (4) Revoking instrument |
|---|---|---|---|
The Misuse of Drugs (Amendment) (England, Wales and Scotland) Regulations 2010 | S.I 2010/1144 | Regulation 3(a) | S.I 2011/544 |
The Immigration (European Economic Area) Regulations 2006 | S.I. 2006/1003 | Paragraph 7 of Schedule 5 | S.I 2011/544 |
The Accession (Immigration and Worker Authorisation) Regulations 2006 | S.I. 2006/3317 | Paragraph 1 of Schedule 2 | S.I 2011/544 |
The Accession (Immigration and Worker Authorisation) (Amendment) Regulations 2007 | S.I. 2007/475 | Regulation 3 | S.I 2011/544 |
The Accession (Immigration and Worker Registration) (Amendment) Regulations 2007 | S.I. 2007/928 | The whole Regulations | S.I 2011/544 |
The Accession (Worker Authorisation and Worker Registration) (Amendment) Regulations 2007 | S.I. 2007/3012 | Regulation 3 | S.I 2011/544 |
The Accession (Immigration and Worker Registration) (Amendment) Regulations 2009 | S.I. 2009/892 | The whole Regulations | S.I 2011/544 |
The Accession (Worker Authorisation and Worker Registration) (Amendment) Regulations 2009 | S.I. 2009/2426 | Regulation 3 | S.I 2011/544 |
The correct answer should have been:
Nick Herbert
The following statutory instruments in the form of regulations have been made by the Department on or after 18 November 2010:
S.I. No. | S.I. Title | Made Date |
|---|---|---|
2010 No. 2807 | The Immigration and Nationality (Fees) (No. 2) Regulations 2010 | 21 November 2010 |
2010 No. 2826 | The Police Authority (Amendment No. 2) Regulations 2010 | 24 November 2010 |
2010 No. 2851 | The Licensing Act 2003 (Premises licences and permitted temporary activities) (Forms and notices) (Amendment) Regulations 2010 | 29 November 2010 |
2010 No. 2958 | The Immigration (Biometric Registration) (Amendment) Regulations 2010 | 13 December 2010 |
2010 No. 3018 | The Private Security Industry Act 2001 (Exemption) (Aviation Security) Regulations 2010 | 20 December 2010 |
2010 No. 3030 | The Police Authority (Amendment No. 3) Regulations 2010 | 21 December 2010 |
2011 No. 230 | The Police Federation (Amendment) Regulations 2011 | 4 February 2011 |
2011 No. 300 | The Police Act 1996 (Equipment) Regulations 2011 | 9 February 2011 |
2011 No. 448 | The Misuse of Drugs (Amendment) (England, Wales and Scotland) Regulations 2011 | 18 February 2011 |
20 H No. 544 | The Accession (Immigration and Worker Registration) (Revocation, Savings and Consequential Provisions) Regulations 2011 | 24 February 2011 |
The following statutory instruments in the form of regulations are revoked by the department since 2 February. None of the revocations is yet in force.
(1) Regulations revoked | (2) References | (3) Extent of revocation | (4) Revoking instrument |
|---|---|---|---|
The Misuse of Drugs (Amendment) (England, Wales and Scotland) Regulations 2009 | S.I. 2009/3136 | Regulation 3 | S.I. 2011/448 |
The Misuse of Drugs (Amendment) (England, Wales and Scotland) Regulations 2010 | S.I 2010/1144 | Regulation 3(a) | S.I. 2011/448 |
The Immigration (European Economic Area) Regulations 2006 | S.I. 2006/1003 | Paragraph 7 of Schedule 5 | S.I. 2011/544 |
The Accession (Immigration and Worker Authorisation) Regulations 2006 | S.I. 2006/3317 | Paragraph 1 of Schedule 2 | S.I. 2011/544 |
The Accession (Immigration and Worker Authorisation) (Amendment) Regulations 2007 | S.I. 2007/475 | Regulation 3 | S.I. 2011/544 |
The Accession (Immigration and Worker Registration) (Amendment) Regulations 2007 | S.I. 2007/928 | The whole Regulations. | S.I. 2011/544 |
The Accession (Worker Authorisation and Worker Registration) (Amendment) Regulations 2007 | S.I. 2007/3012 | Regulation 3 | S.I. 2011/544 |
The Accession (Immigration and Worker Registration) (Amendment) Regulations 2009 | S.I. 2009/892 | The whole Regulations | S.I. 2011/544 |
The Accession (Worker Authorisation and Worker Registration) (Amendment) Regulations 2009 | S.I. 2009/2426 | Regulation 3 | S.I. 2011/544 |
Written Ministerial Statements
(13 years, 8 months ago)
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Independent Fuel Poverty Review
(13 years, 8 months ago)
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The Secretary of State for Energy and Climate Change (Chris Huhne)
The coalition Government announced their intention at the spending review to launch an independent review of the fuel poverty target and definition. I have asked Professor John Hills of the London School of Economics to lead this review. The review is expected to publish interim findings in autumn 2011 and to deliver a final report to Government by January 2012.
The terms of reference for the review are:
1. To consider fuel poverty from first principles: to determine the nature of the issues at its core, including the extent to which fuel poverty is distinct from poverty more generally, and the detriment it causes.
2. As appropriate, and subject to the findings under (1), to develop possible formulations for a future definition and any associated form of target, which would best contribute to:
addressing the underlying causes identified;
helping Government focus their resources (which are set out in the spending review for the period to 2014-15) and policies on those who need most support;
measuring the cost-effectiveness of different interventions in contributing to progress towards any target; and
developing practical solutions, particularly around identification and targeting of households and measuring progress resulting from Government action.
The review’s website is available at www.decc.gov.uk/hillsfuelpovertyreview where any updates on progress will be posted.
Linda Norgrove
(13 years, 8 months ago)
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The Secretary of State for Foreign and Commonwealth Affairs (Mr William Hague)
In my statement of 2 December 2010, Official Report, columns 987-994, I informed the House of the outcome of the US/UK military investigation into the death of the British aid worker, Linda Norgrove, who was taken hostage by insurgents in Afghanistan on 26 September 2010 and who died during a US-led rescue operation on the night of 8 October 2010. I reminded the House that Her Majesty’s coroner for Wiltshire and Swindon was legally responsible for determining the cause of death and that my statement could not in any way prejudice the course of his inquiries.
HM coroner completed his inquest on 15 February 2011 and has recorded a narrative verdict. The full redacted US/UK military investigation report was published on 9 March 2011.
I am grateful to the US/UK investigation team for the thoroughness of their investigation. It is our long-standing policy not to comment on the tactics of British or our allies’ special forces but I am confident that the appropriate tactical lessons have been shared and learnt. I pay tribute to the courage of the US forces who risked their own lives to try and rescue Linda Norgrove.
The inquest has confirmed the tragic circumstances of Linda Norgrove’s death. Ms Norgrove’s parents have shown great dignity and strength throughout their ordeal. They have set up the Linda Norgrove Foundation to continue their daughter’s desire to help bring prosperity and security to the Afghan people as their country is rebuilt. Linda Norgrove’s work will continue to be an inspiration.
Rosemary Nelson Inquiry
(13 years, 8 months ago)
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The Secretary of State for Northern Ireland (Mr Owen Paterson)
In anticipation of the publication of the report of the Rosemary Nelson inquiry, I have today asked a team of officials to commence the checking of the inquiry’s report in relation to human rights and national security matters, as outlined below. I intend to adopt the same approach as was used for the checking of the report of the Bloody Sunday, Billy Wright and Robert Hamill inquiry reports.
As I informed the House in my written statement of 16 December 2010, Official Report, column 131WS, the Nelson inquiry intends to complete its report by the end of April 2011. I am responsible for publication of the inquiry’s report, once it is delivered to me. I am advised that I have a duty, as a public authority under the Human Rights Act, to act in a way that is compatible with the European convention on human rights (ECHR). To fulfil this duty, I need to take steps to satisfy myself that publication of the report will not breach article 2 of the convention by putting the lives or safety of individuals at risk. I am advised that these obligations must be met by me personally, in my capacity as Secretary of State for Northern Ireland. Although the inquiry is also a public authority under the Human Rights Act, I am not entitled to rely on the inquiry to satisfy my article 2 obligations and I have a duty to assess this myself. I also have a duty to satisfy myself that publication will not put national security at risk, for example by disclosing details of sources of protected information.
I have established a small team to assist me in carrying out this necessary exercise. The team will comprise the Northern Ireland Office’s principal legal adviser, two officials from the Ministry of Defence, one official from the Police Service of Northern Ireland and one official and one legal adviser from the Security Service, who are familiar with the sensitive material provided to the inquiry panel. This team will be granted access to the report under strict terms of confidentiality and for the sole purpose of carrying out the necessary checks, and they will report directly to me alone. Neither I nor any official beyond the members of the checking team will have access to the report until 24 hours before it is published. Sir Michael Morland has agreed that this team can carry out the checks on the inquiry’s premises while the report remains in the custody of the inquiry. I understand that the report will be made available for checking today.
I want to publish the report in its entirety. Should any concerns about the safety of any individual arise, my first course of action would be to consider whether these can be addressed through alternative means. Were I to reach the conclusion, on advice, that a redaction to the text might be necessary, I would consult Sir Michael Morland. In the very unlikely event that any redaction was deemed necessary, my intention would be to make this clear on the face of the report.
The report must be published first for this House, and I intend to publish the report as soon as possible once the report and the checking process has been completed. However, I acknowledge the importance of this inquiry’s findings in the lives of a number of individuals. As with the publication of the Bloody Sunday and Billy Wright inquiry reports, I intend to consider giving advance sight to those who were designated as represented parties by the inquiry. I intend to discuss this with the Speaker of the House in due course.
Coastguard Service (Consultation)
(13 years, 8 months ago)
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The Parliamentary Under-Secretary of State for Transport (Mike Penning)
My statement of 16 December 2010, Official Report, columns 133-34WS, announced the commencement of a consultation on proposals for the modernisation of the coastguard service, concluding on 24 March. These proposals cover both the reorganisation of the rescue co-ordination work undertaken by regular coastguard officers and specifically include an investment of resources to strengthen the support given to the volunteers in the coastguard rescue service who serve their local communities by providing an effective, knowledgeable and responsive local rescue service.
An extensive programme of public engagement meetings organised by the coastguard will be completed by 16 March 2011. I have been very grateful for the contributions of all of those who have attended these meetings. However, to give all interested parties more time to further develop their thoughts and submissions, including alternative proposals, I have decided to extend the period for submission of written responses by a further six weeks to 5 May 2011.
The Transport Select Committee has also announced its intention to hold an inquiry into the modernisation proposals. Provided the Transport Select Committee is able to produce its report in a timely manner, I would expect to allow a further short period for consultation following publication of that report.
Employment, Social Policy, Health and Consumer Affairs Council
(13 years, 8 months ago)
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The Minister of State, Department for Work and Pensions (Chris Grayling)
The Employment, Social Policy, Health and Consumer Affairs Council met on 7 March 2011 in Brussels. I represented the United Kingdom.
The first debate focused on Europe 2020 and the European semester. The presidency asked member states for views on social and employment measures that needed tackling urgently. The Commission reiterated the need for national targets in meeting the Europe 2020 headline targets and highlighted that not all member states had set a national employment or a poverty target. Some member states’ responses included setting a high level of ambition in the employment and social inclusion targets, while others argued for more realism. For the UK, I stressed that actions to remove obstacles to employment should be at the heart of policies to promote growth and that addressing the EU’s relatively low labour market participation required a mix of measures, including improvements to welfare policies, education systems and regulatory policies. The EU should focus on growth and reducing regulatory burdens, particularly for small and medium-sized companies. I explained the UK approach, prioritising welfare reforms aimed at helping people break the cycle of benefit dependency and ensuring that work was a better option than welfare. I also stressed that the UK was investing heavily in targeted interventions and in improving skills.
In the second debate, the Commission presented results of the Green Paper consultation on adequate, sustainable and safe European pension systems. Most member states agreed with the need for reforms, but many pointed to the need for subsidiarity, recalling the very different national situations and conditions across the European Union. There was broad support for continued use of the open method of co-ordination. For the UK, I explained the recent pension reforms in the UK and also argued against unnecessary changes such as the revised solvency rules which could cause employers to close their occupational pension schemes. This was an issue on which all UK stakeholders were in agreement.
The Council adopted a number of Council conclusions. These covered the joint employment report in the context of the annual growth survey 2011, the European platform against poverty and social exclusion, the further development of an electronic exchange system facilitating the administrative co-operation in the framework of the posting of workers directive, and the European pact for gender equality (2011- 2020). The UK abstained on the joint employment report as it had not cleared parliamentary scrutiny.
The Council also took note of the annual report on progress towards equality between women and men 2010. The report acknowledges areas where progress has been made, both at national and European level.
Under any other business, the presidency reported on the informal meeting of the Ministers for Employment, and provided an update on two legislative areas, “seasonal workers” and “intra-corporate transferees”. The Employment Committee and Social Protection Committee chairs provided information on their work programmes for 2011, and there was a presentation from the French delegation on plans for their G20 Labour and Employment Ministers’ meeting, which will take place in September 2011.
House of Lords
Health: Visitor Service
(13 years, 8 months ago)
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Lord Northbourne
To ask Her Majesty’s Government whether their proposed development of the Health Visitor service will be targeted at those families in greatest need.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, the health visitor implementation plan, published last month, confirms our intention to recruit an extra 4,200 health visitors and sets out the enhanced offer to families that the increased workforce will bring. The new model ensures a universal service for all, a rapid response from the health visitor team when parents need specific expert help and ongoing support to deal with more complex needs over time, including services from Sure Start children’s centres, other community services and, where appropriate, the Family Nurse Partnership.
Lord Northbourne
I am most grateful to the Minister for that encouraging Answer; it sounds very good indeed. Is he aware, though, that some of the families in the greatest need are very hard to contact, sometimes simply because they are embarrassed by their inability to parent and sometimes because they are afraid that the local authorities, if they hear about it, will take their children away? Is he also aware that there is a strange geographical distribution of the supply of health visitors, which as it stands has nothing to do with need? Will he assure the House that these issues will be addressed in the new plan?
Earl Howe
My Lords, the noble Lord is undoubtedly right that in many areas the current health visitor workforce is very stretched. They are there as a universal service but, at the same time, they try to target their efforts to families in the greatest need. Some struggle to do so, which is why we have set this ambitious programme of recruitment over three to four years. It is a very tough target—I do not disguise that from the noble Lord—but we think that it is necessary if we are to focus on the needs of the most disadvantaged families.
Baroness Gardner of Parkes
Is the Minister aware that many people apparently now view health visitors with suspicion as agents of the state? They are frightened, as the noble Lord has said, of the child being taken away. Does the Minister therefore think that one great answer is the system of adoption whereby children can be fostered by someone who could adopt them if, for example, the drug addict mother does not overcome her addiction, but which also leaves open the possibility of the child returning to the mother? That gives the mother an opportunity to recover. It is a very good scheme and it is in operation in some parts of the country. Would it not be a help in addiction cases?
Earl Howe
My noble friend makes a good point. The kind of intensive interventions that she is referring to are very much the domain of the family nurse partnerships, which are there to assist and support those families with the greatest needs, particularly single mothers, families where there is addiction and so on, and try to keep the family together. With regard to the health visitors, however, I take her point that there is suspicion out there. It comes down to creating a relationship of trust with a named health visitor, and we have seen the success of that over the past few years. The results of the assessments have been very positive.
Lord Hughes of Woodside
My Lords, when health visitors were attached to local authority services, co-operation between the different arms of local authorities was much easier. In many cases, health visitors are now attached to general practice services. Can the noble Earl assure me that there will be the widest possible consultation to make sure that health visitors can reach out to the community at large, which would be very valuable in terms of public health?
Earl Howe
My Lords, the noble Lord makes an extremely good point. The health visitor initiative is very much part of our public health drive. Local authorities will have an important part to play in commissioning services in the future. However, at the start of this big programme of recruitment, it is very important to have a concerted national drive. That is why we have said that it will be the responsibility initially of the National Health Service Commissioning Board to push this agenda forward. Thereafter, we will see much more local commissioning as the programme moves on.
The Lord Bishop of Wakefield
My Lords, given that the Department of Health accepts that the family nurse partnerships—to which the Minister has referred—have been shown through an international report to have a great effect in minimising the maltreatment of children, are there plans to introduce them across the board alongside the implementation plan for health visitors?
Earl Howe
The right reverend Prelate draws attention to a very important area. Family Nurse Partnership is essentially a preventive programme for vulnerable young first-time mothers. It complements and supports the work of health visitors, providing intensive care. We are committed to expanding the Family Nurse Partnership Programme for those families and doubling the number of places on the programme by 2015.
Baroness Jolly
My Lords, this is a really large programme. Will the noble Earl clarify whether, if these posts are filled from within the NHS, those posts will in turn be backfilled?
Earl Howe
My Lords, we hope to recruit nurses and midwives for upskilling from a variety of sources. Some will come out of retirement, we hope, while others will, we trust, come from the acute sector. As my noble friend knows, the trend for a long time has been to try to get care increasingly out of acute settings and into the community. I think that we will see that transfer of skills taking place from a variety of sources.
The Earl of Listowel
My Lords, given the important and welcome drive to recruit health visitors, will the Minister consider hosting a meeting for health visitors and Members of the House of Lords so that we can understand this issue better and support this work as far as we can?
Earl Howe
My Lords, I draw the noble Earl’s attention to the document which my department published last month, Health Visitor Implementation Plan 2011-15: A Call to Action, which sets out how we are going to work with partners to deliver our ambition, including, very significantly, the Sure Start children’s centres which play an important role in our agenda. However, I will take the noble Earl’s idea back with me and be in touch with him about it.
Baroness Ritchie of Brompton
My Lords, what work is being done to improve the training of health visitors to enable them to identify the mental health needs of new mothers, which can impact very negatively on the emotional attachment between mother and child?
Earl Howe
My noble friend identifies an extremely important area of the health visitors’ remit—to put their finger on where there are problems and therefore to alert members of the multidisciplinary team to address those problems where necessary. The issues to which she refers are very much a part of health visitors’ training.
Botswana: Bushmen of the Central Kalahari Game Reserve
Lord Pearson of Rannoch
To ask Her Majesty’s Government what representations they will make to the Government of Botswana about their complying with the 1966 constitution, the United Nations Declaration on the Rights of Indigenous Peoples, and recent court judgments in their dealings with Bushmen of the Central Kalahari Game Reserve.
Lord Wallace of Saltaire
My Lords, the UK follows closely the situation of the San communities in the Central Kalahari Game Reserve. We will continue to encourage dialogue between the San communities and the Government of Botswana, and we raise the issue at appropriate levels. We welcome the Government of Botswana’s announcement that they will respect and facilitate the implementation of the recent decision of the court of appeal granting San community members the right to access and sink boreholes within the reserve.
Lord Pearson of Rannoch
My Lords, that is, of course, good news. However, as the Government of Botswana have overridden court judgments in the past, do Her Majesty’s Government accept that we have perhaps a special responsibility in this matter, because we did, after all, give Botswana its constitution in 1966, and it has been consistently abused? Will the Government, as the noble Lord has indicated, pay particular attention to making sure that the Bushmen have free access to their reserve, to their water supply and, indeed, to new boreholes?
Lord Wallace of Saltaire
My Lords, I am not sure that the Government accept that the constitution has been consistently abused, but I welcome the noble Lord’s support for this ethnic minority and its culture, for his vigorous support for the international human rights regime and his insistence that human rights obligations limit state sovereignty. I also congratulate him on his support for the rule of law as a limiting factor on majoritarian democracy, and I am sure that he will hold true to all these principles in his approach to the EU Bill next week. I particularly welcome his reference to the ruling of the Botswana appeal court, which the Botswana Government have clearly accepted. As he will know, the court is, unusually, composed of foreign judges. The judgment is signed by two South African judges and one each from Ghana, Lesotho and Zimbabwe, the last of whom is called McNally. I am glad that the noble Lord recognises that foreign judges can reinforce domestic standards of human rights.
Lord Avebury
My Lords, can my noble friend confirm that the Government of Botswana have already sent a team into the CKGR in pursuance of their undertaking to facilitate the return of the Bushmen? Can he also say whether there is any prospect of employment for the Bushmen in enterprises being set up in the reserve, such as the $3.5 billion diamond mine at which, given suitable training, they might be employed?
Lord Wallace of Saltaire
My Lords, my noble friend will recognise how difficult it is to combine maintaining the traditional hunter-gatherer way of life with economic development. The report of the UN special rapporteur on human rights for minorities talks about,
“economic and other development activities that align with the culture of the targeted communities, including hunting and gathering activities”.
The problem here is that once you start talking about education, medical assistance et cetera, you are moving away from traditional culture.
Lord Harries of Pentregarth
Does the Minister feel able to make an evaluation of the role of the mining interests in this area? Does he think that their role is helpful or frustrating in terms of achieving the desires of the indigenous people there?
Lord Wallace of Saltaire
My Lords, as we all know, these are extremely difficult issues. Botswana has done extremely well economically, and its wealth lies above all in diamonds. That wealth has been put to use for the benefit of economic development in that country; and last year Transparency International ranked Botswana as number 1 in sub-Saharan Africa in terms of the transparency and non-corruption of its Government. I am assured that high commission officials from Britain regularly visit the Central Kalahari Game Reserve and that the current proposals from Gem Diamonds will not destroy the reserve.
Baroness Kinnock of Holyhead
Will the Minister comment on the fact that the real difficulty in enforcing the UN Declaration on the Rights of Indigenous Peoples is that it is not legally binding, and that this creates enormous difficulties? Can he therefore also confirm that the United Kingdom is supporting the recent call by the UN special rapporteur on the rights of indigenous peoples for urgent action to ensure that the rights and principles enshrined in the declaration are implemented?
Lord Wallace of Saltaire
My Lords, I read with great interest the very useful report on Botswana which the UN special rapporteur presented last year. The noble Baroness will know, and I now understand, how immensely difficult it is to maintain traditional cultures in the face of all the pressures of economic development. In a number of other countries there is a clear role for these minorities in protecting the rainforest. In Botswana, some of the issues are a little more difficult.
Lord Pearson of Rannoch
My Lords, are the Government aware that a number of Bushmen have actually been educated according to our western culture and still wish to return to their way of life? Secondly, does the Minister agree that a diamond mine occupies a very small area in the vast expanse of the Central Kalahari Game Reserve and there really should be plenty of room for both?
Lord Wallace of Saltaire
I thank the noble Lord for reinforcing my previous point. As he will be aware, however, there is no surface water in the game reserve; the Bushmen traditionally obtained their water from fruit. Once one talks about providing boreholes around the reserve, one is already beginning to change the traditional way of life. That is one of the tensions we are stuck with as we deal with these problems.
House of Lords: Membership
(13 years, 8 months ago)
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Lord Lamont of Lerwick
To ask Her Majesty’s Government whether under their plans for an elected House of Lords the Prime Minister could be a Member of the House of Lords.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, an important part of the plans for the reform of this House is the continued primacy of the House of Commons. The presence of the Prime Minister in the House of Commons therefore underlines that primacy.
Lord Lamont of Lerwick
Does my noble friend accept that in a number of bicameral systems in the world it is possible for a Prime Minister to be in either House? While it might not be acceptable to public opinion at the moment for a Prime Minister to sit in this House as it is presently constituted, if in, say, 10 years’ time this House is wholly elected, is deemed more legitimate and is demanding more powers, would it not be appropriate and necessary for there to be more senior Ministers in this House? Would it not be wrong for the Government’s legislation to exclude the possibility of a Prime Minister being in this House, as used to be the case right up to the early years of the 20th century?
Lord Strathclyde
My Lords, I am deeply impressed by my noble friend’s ambition—10 years to wait does not seem too long at all. The fact is that the Prime Minister is First Lord of the Treasury. It would a very strange thing, given the reduced powers of this House since 1911, for the Prime Minister to be a Member of this House. Therefore, we have no plan or proposal to make it so.
Lord Kakkar
My Lords, if the programme of parliamentary reform led by the Deputy Prime Minister were to result in the other place continuing to be elected by first past the post, and the future Chamber here being elected through proportional representation as envisaged in the coalition agreement, who would have greater democratic legitimacy—MPs or elected Peers?
Lord Strathclyde
My Lords, it is of course an immensely good question, and it is one that we will return to many times over the next few months when the Deputy Prime Minister has published his White Paper and draft Bill. But I go back to the central point—which is that, under the terms of the 1911 Act, another place has primacy. We believe that that is where it should remain.
Lord Grocott
Can the Leader of the House reaffirm his frequently stated opinion to this House that, in the event of there being an elected second Chamber, which I understand he has not been that keen on in the past, he would be strongly opposed to it being elected on the basis of proportional representation and would stick to first past the post? Secondly, is it correct, as reported in the FT last Thursday, that he expects there to be Senators in this House by 2015? If that is not correct, perhaps he could say so. If it is correct, can he please observe the normal proprieties of making crucial statements about the future of this House or of government policy to this House and not to the Financial Times?
Lord Strathclyde
My Lords, the noble Lord, Lord Grocott, certainly has the power to embarrass me because it is certainly on the record that I am not one who favours proportional representation. However, it was in the coalition agreement that, in the event of there being an elected second Chamber, it would be under the system of proportional representation. So far as concerns the Financial Times, I am not sure that that is what I said. Of course, that will depend on the draft Bill being published soon and on the Joint Committee sitting in time for legislation to be passed so that an election can take place in 2015, and that will depend entirely on the will of Parliament.
Baroness Anelay of St Johns
My Lords, there is time. We have had a question from the Cross Benches. Perhaps we might hear from the Liberal Democrats first and then the Cross Benches.
Lord Maclennan of Rogart
Does my noble friend agree that it would not necessarily interfere with the primacy of the House of Commons if all Ministers were answerable to the second Chamber on matters for which they had ministerial responsibility and, in particular, for the legislation that came from their departments?
Lord Strathclyde
My Lords, that is an interesting proposition and it will no doubt be dealt with in the forthcoming White Paper.
Lord Boston of Faversham
My Lords, does the noble Lord the Leader of the House agree that it would not be possible for the right honourable gentleman the Prime Minister to sit in this House because he is already a Member of another place? Does he therefore accept that the noble Lord, Lord Lamont, should be allowed to amend his Question slightly proposing that a Prime Minister—I emphasise “a”—should be allowed to sit in this House? I say that even though I do not agree with the idea of an elected House of Lords.
Lord Strathclyde
My Lords, all things are possible but that is not part of the Government’s proposals.
Baroness Royall of Blaisdon
My Lords, can the Leader tell the House whether the Government will continue to pursue the coalition agreement until 2015, which is the date when it is reported that he believes the changes will be in place? The agreement states:
“Lords appointments will be made with the objective of creating a second chamber that is reflective of the share of the vote secured by the political parties in the last general election”—
that is, 86 more Conservative Peers and 99 more Liberal Democrat Peers.
Lord Strathclyde
My Lords, over time, we shall certainly wish to produce what is in the coalition agreement.
Baroness Knight of Collingtree
My Lords, is it not the case that this House always gives way in the end to the other place, because its Members are elected and we are not? If we were elected, would we not deny such possibilities occurring? Surely we would be bound to hold to our rights as well.
Lord Strathclyde
My Lords, I accept that possibility, but there are well known processes for dealing with disagreements between both Houses. It is not without precedent. Over the past 40 years, the House of Lords and the House of Commons have come to disagreements that could only be resolved by turning to the Parliament Act.
Health: Sickle-Cell Disease
(13 years, 8 months ago)
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Baroness Benjamin
To ask Her Majesty’s Government what measures are in place to ensure that paramedics and ambulance crews across the country are adequately trained in the diagnosis and treatment of those with sickle-cell disease.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, addressing the training needs of health professionals working with patients with sickle-cell disease is the responsibility of the appropriate regulatory body. They set standards for the preregistration training, approve the education institutions that provide training and determine the curricula. Where a health profession is not regulated, it is the duty of the employer to make sure that the individual has the appropriate level of training to perform the duties required of them.
Baroness Benjamin
I thank my noble friend for that Answer. I am sure he is aware that sickle-cell disease is now the fastest growing genetic blood disorder in England. Some 300 babies are born with the condition every year and yet there are many misunderstandings about diagnosing a sickle-cell crisis. Is my noble friend aware of the recent tragic death of a young girl who died of a sickle-cell crisis? Apparently, during the crisis, she had soiled herself and, allegedly, the emergency crew who came to her home refused to treat her and to take her to hospital because of the messy state in which they found her. Does my noble friend agree with me that this underlines the urgent need for training, not just for paramedics but for all emergency crews, so that that never happens again? Will he assure the House that best practice standards and guidelines with regard to sickle-cell disease are enforced right across the NHS? I declare an interest as a patron of the Sickle Cell Society.
Earl Howe
My Lords, I am aware of the tragic case to which my noble friend refers, which is of course the subject of an investigation at the moment. The facts, as I am aware of them, suggest that the failings that occurred in that case were more to do with poor practice than a lack of training, although we will see what emerges from the inquiry. However, I can tell her that there is national guidance on the symptoms and emergency treatment of people with sickle-cell disease, published by the Joint Royal Colleges Ambulance Liaison Committee. All ambulance crew staff receive training in the assessment and management of patients with sickle-cell conditions in line with those guidelines and further national guidance was issued to staff in 2009. It is regularly updated and it is taken very seriously.
Lord Foulkes of Cumnock
Do both of the Minister’s replies apply also to Scotland?
Lord Colwyn
My Lords, I declare an interest as chairman of the All-Party Parliamentary Group on Emergency Ambulance and Paramedic Services. The College of Paramedics is very aware of the skills levels of ambulance staff. Will the Minister consider the use of badges to identify staff according to their registration status, so that all concerned parties are enabled to make reasonable assumptions about their abilities as regards treatment and overall incident management?
Earl Howe
My Lords, I am aware of the suggestion to which my noble friend refers. The wearing of badges is very much a matter for local determination. Clearly, it is desirable that there should be consistency across the country. I understand that there is a regular meeting of the chief executives of ambulance trusts under the chairmanship of Peter Bradley, the London Ambulance Service chief executive. I suggest to my noble friend that the proposal is put to Mr Bradley as one that the joint chief executives could look at.
Lord Hughes of Woodside
My Lords, does the Minister accept that it is not simply the health service that needs education about sickle cell but also vulnerable communities themselves that need a great deal of education and knowledge to help them?
Earl Howe
The noble Lord is quite right. One of the successes in recent years has been the universal screening programme for sickle cell that has certainly raised awareness among all communities about this devastating condition. The screening programme alerts healthcare professionals to the needs of children with the disease and also enables them to provide the necessary support for families.
Baroness Gardner of Parkes
Do people who have sickle-cell disease carry any form of card or identification as people with various other conditions do? As a dentist, I know that the definitive test is a blood test. Patients told you they had it, but no one expected you to pick it out in some person coming in the door. I wonder whether there might be a case for having some kind of identification.
Lord Touhig
One in 10 children diagnosed with sickle-cell disease will suffer a stroke. Unfortunately, a number will die. Those who do not will go on to have further strokes leading to disabilities and cognitive loss. The Minister talked about a screening programme. Do the Government have in mind any plans to get greater public awareness of sickle-cell disease by a public education programme right across the board among all groups in society?
Earl Howe
There are several initiatives in train that should raise public awareness. We have asked NICE to produce a short clinical guideline. The National Haemoglobinopathy Registry is being launched. It was a key recommendation of the NCEPOD report a couple of years ago. We are funding many more training posts for registrars, nurse consultants and clinical scientists, and we are developing a special competence framework for nurses. As for raising awareness generally among the public, patient groups have an important part to play there in conjunction with specialist clinicians.
National Insurance Contributions Bill
(13 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
15:49 - Division on Amendment 2 - Ayes: 139 / Noes: 200 - Amendment 2 disagreed.
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, we return to the issue of the NHS allocation from the National Insurance Fund. The specifics of the amendment require the percentage of the product of the additional primary percentage rate to be either 50 per cent or such greater percentage as would ensure that the allocation increases in real terms. In essence, the purpose of the amendment is to stop the NHS being short-changed. It is a variation on the theme of the amendments in the other place that required the NAO to report on what sums would be required for this to be achieved. When this was debated in the other place, the Minister offered two arguments against this approach. The first was that the spending on health is set by the spending review and is not affected by the NHS allocation. The second was that the Government would anyway normally expect contributions to the fund to rise broadly in line with earnings. The Minister, Mr Gauke, said:
“In any case, the amount allocated to the health service from national insurance contributions would, other factors being equal, be expected to grow in line with earnings and therefore grow in real terms every year under the terms of the Bill”.—[Official Report, Commons, 13/1/11; col. 475.]
If that is what the Minister’s colleagues believe, perhaps he will say what part that judgment played in the spending review allocation.
However, it would seem that the Minister’s colleague is mistaken. In Committee, the noble Lord, Lord Sassoon, helpfully pointed out Appendix 6 to the GAD report on the 2011 benefits uprating order, which shows the NHS allocation reducing in 2011-12 in comparison to the current year. This outcome is based on assumptions that the number of jobs in the economy would remain the same over the two years and that earnings are expected to increase by 2.1 per cent. This would suggest that, as regards Mr Gauke’s premise, the NHS allocation should rise by some £400 million and not fall. Overall, therefore, it seems that the NHS allocation for 2011-12 has been short-changed by £600 million. Why?
As was pointed out in Committee, in keeping the NHS allocation of the additional national insurance to just 1 per cent, the Government appear to have overlooked the changes to the various thresholds, which were policy changes designed to mitigate, in part, the effect of the national insurance increases. We have debated some of these during our consideration of this Bill. Will the Minister confirm that the effect of the reduction in the UEL from April 2011 and a significant increase in the primary threshold means that, for primary contributions, the band of earnings for 2011-12 on which the 2.05 per cent NHS allocation could be made is cut by something like £2,800 a year, although the 2 per cent rate, just 1 per cent of which is allocated, starts £1,350 earlier? Subject to further adjustments to the thresholds, that will mean a recurring diminution in the amount of the NHS allocation and an equal and opposite benefit to the fund.
Perhaps in dealing with the point, the Minister will say what the coalition Government’s policy objective is in respect of this allocation. Is it to maintain the allocation in real terms or to let it drift? How, if at all, is the projected allocation taken into account in determining the overall resources for the NHS?
We persist in these matters not just as a narrow question of arithmetic but because of our concern for the NHS and what is happening to it. We are concerned that the BMA reports a gap between government rhetoric about protecting front-line staff and the reality on the ground and that the recent comprehensive survey of healthcare cuts found that more than 50,000 doctors, nurses, midwives and other NHS staff are due to lose their jobs. I do not propose to cite at length the improvement brought about to the NHS under the previous Labour Government, but we note the coalition agreement’s pledge:
“We will guarantee that health spending increases in real terms in each year of the Parliament”.
However, in a devastating analysis in Committee in another place, my right honourable friend John Healey MP blew apart the Government’s claims that their plans represented a real-terms increase, particularly because of updated inflation forecasts and the allocation of funding from the NHS budget to cover social care budget shortfalls of local authorities. Of course, there are other pressures from the VAT increase, which the King’s Fund has estimated will cost the NHS some £300 million a year.
We know that the Government have not rebutted this analysis and that they are on course to break the coalition pledge of a real-terms increase in funding. Instead, they are heading for a real-terms cut. Despite the fact that the Prime Minister promised to protect NHS capital investment, that, too, is being cut by 17.4 per cent over four years. In the circumstances, it is surprising to say the least that the NHS allocation from the National Insurance Fund is not being maintained, at least in real terms. This is what the amendment seeks and I beg to move.
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, Amendment 1 returns to the allocation of national insurance contributions receipts between the National Insurance Fund and funding of the NHS, which was covered both at Second Reading and in Committee. This amendment, as the noble Lord, Lord McKenzie of Luton, has explained, is aimed at ensuring that the NHS allocation of the additional rate is subject to an adjustment to ensure that the funding of the NHS from national insurance contributions will grow in real terms year on year. The amendment would require comparisons to be made from one year to the next of the NHS allocation and adjustments to ensure that the allocation grows in real terms each year.
As I explained in Committee, the amount that is to be spent on the NHS, whatever the noble Lord says, was confirmed in the spending review in October last year and is unaffected by whether the funds come from national insurance contributions or elsewhere. The noble Lord says that he wants to ensure, through the amendment, that the health service is not short-changed. I can absolutely assure noble Lords that nothing in this Bill goes anywhere near short-changing the National Health Service. The amendment would ensure that the national insurance allocation to the NHS increases year on year, which is a bookkeeping matter, but nothing more.
It may help noble Lords if I put this matter into a bit of context, because I was beginning to lose some of the train of the noble Lord’s argument and I fear that others may have done so as well. Perhaps it would be helpful to the House to go back and explain the numbers very broadly.
I shall take the last full year for which the numbers are certain. In 2009-10, the total sum raised by national insurance contributions was £94 billion. Of that, just over £20 billion was allocated to the NHS and the balance, around £74 billion, was allocated to the National Insurance Fund. Total NHS expenditure in 2009-10 in England alone was exactly £100 billion, so it is important to understand that, whatever allocation of funds out of NICs proceeds to the National Health Service, it makes up only around 20 per cent of NHS expenditure.
I have also been looking at the numbers over the past few years. If we go back to 2004-05, for example, in that year the contribution made by NICs to NHS expenditure on the basis that I have described was 24.3 per cent, but by 2009-10 that contribution had fallen to 20.3 per cent. So I find it quite hard to accept noble Lords opposite casting all sorts of aspersions at the present Government about how they will safeguard expenditure on the NHS when their own record shows that over the last few years they contributed a significantly falling percentage of NICs to NHS expenditure. Nobody challenged them with the thought that they would renege on their commitment to NHS expenditure, so I do not expect noble Lords seriously to challenge the fact that this Government will stick to their commitment to increase National Health Service expenditure in real terms. The point is that NICs will only ever make a small but significant—20 per cent or thereabouts at the moment—contribution to NHS expenditure. The balance—the greater sum out of NICs—will go where it has to go, which is into the National Insurance Fund.
I do not want to belabour the point but, in big-picture terms, the amendment would make absolutely no difference. It would not affect the money that goes into the National Health Service. The negative effect of the amendment would be to create a degree of uncertainty in establishing the NHS allocation, as we would know the receipts from national insurance for sure only after the end of the tax year, because they are dependent on wage levels, economic conditions and the thresholds as they apply in a particular year. We would then have to compare those with the previous year’s allocation and make an adjustment if necessary to ensure a real-terms increase. That would add administrative complexity and create accounting and funding uncertainty, not least for the Government Actuary, who is required to report on the state of the National Insurance Fund each year. It would have, as I have explained at some length, no impact on the overall spending on the NHS, which is a rightful concern of noble Lords.
Government policy is to maintain the level of national insurance contributions allocated to the NHS and to allocate additional revenues from rate rises to the National Insurance Fund. That is what the Bill will achieve. That helps to ensure that plans for payment of pensions and other contributory benefits are sustainable in the long term. In that way, we can protect pensioners with the new triple lock, which guarantees each and every year a rise in the basic state pension in line with earnings, prices or a 2.5 per cent increase, whichever is the greatest.
I repeat that this amendment will not affect overall spending on the NHS because that figure has been set in the October spending review. Given that the figure has been fixed, the amendment would serve only to create a degree of additional bureaucracy and complexity. I have gone to some length to reassure, I hope, the noble Lord, Lord McKenzie of Luton, that the health service will in no way be short-changed because of the Bill. Therefore, I ask the noble Lord to withdraw the amendment.
Lord McKenzie of Luton
My Lords, I thank the Minister for his response. He said that he did not believe that we could reasonably challenge the assertion that the coalition Government would increase funding for the NHS in real terms, but that is precisely what we are doing. If the noble Lord looks at the Red Book and the projections, the aggregate figure is a 0.4 per cent increase, but when you back out the fact that included in that is £1 billion reallocated for social care, because local authority budgets have been squeezed, you will see the opposite effect—a real-terms cut. That was part of the backdrop to the amendment.
The noble Lord said that the Government’s proposition was to “maintain” the allocation, but that is precisely what they are not doing this year. I raise what Mr Gauke said in the other place. He said on the record that, because earnings were increasing and were projected to increase next year, on the basis of the Government Actuary’s report, he would expect the NHS allocation to increase.
At the end of the day, the Government are clearly under pressure on spending, as any Government would be at the current time. If they are looking for resources outside of the National Insurance Fund to make good any shortfall in meeting their commitments, that will be more difficult if they cannot get a reasonable allocation from the National Insurance Fund—a reasonable allocation being an increase in real terms when earnings are increasing as well. That was exactly the premise of Mr Gauke in another place.
The Minister made much of what this would mean in terms of administration, but I reject that rather bureaucratic proposition of how you could deal with this, because I think that it could be dealt with quite easily on the basis of estimates, with adjustments at the end of the year. There is no great mystery about that. Having said that, our real concern is the fundamental issue of whether proper funding is going to the NHS and whether in real terms the Government are meeting their commitment. We do not believe that they are. This is just one facet of that. However, I think that we have probably got as far as we can on this. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
“( ) This section applies to all regions and countries of the United Kingdom.”
Lord McKenzie of Luton
My Lords, in moving Amendment 2, I shall speak to the other amendments in the group, which seek to remove the excluded regions from the Bill so that the national insurance contributions holiday will apply without geographical restriction. It will bring London, the eastern region and the south-east within the benefits of the provisions.
There are two fundamental reasons why we continue to advance this proposition. The first is fairness and the second is to do with simplicity. To deal with the latter first, it was clear from probing that having excluded regions is a complicating factor in the construction of the legislation and the operation of the scheme, and would discourage a clear understanding and therefore take-up of the scheme. We identified complexities for some types of businesses as to where the new business was principally carried on and, I think, established that some of the 10 employees by whom the national insurance holiday could be enjoyed could anyway be working in the excluded regions. I think that we left unresolved the issue of how, if at all, the holiday would work whereby new business might contribute to the shared services of a group.
I am sure that the Minister accepts that having the excluded regions as part of the scheme creates additional bureaucracy and administrative cost, but the real issue is fairness. Excluding three regions from the holiday scheme means that significant parts of the UK that are every bit as deprived as other parts and have equal if not higher unemployment and a heavy reliance on public sector employment are denied this incentive. If the national insurance contribution holiday is a meaningful incentive, while we do not think that it is perhaps the most effective means of stimulating growth, we can see that it will help and believe that it should be fairly available. Help, of course, is needed especially at the current time, with the unemployment figures looking continually grim. The unemployment rate for the three months to December 2010 was up to 7.9 per cent, and the total number of unemployed people increased by 44,000. For 16 to 24 year-olds, unemployment increased by 66,000 to reach 965,000—the highest figure since comparable records began in 1992.
The Minister has to date been a little coy about providing up-to-date figures for the take-up of the scheme, which has now been running with effect from June last year. Figures given in another place suggest take-up by January this year of some 1,500 businesses, which is obviously disappointingly short of what might have been expected, as the overall projection is that 400,000 businesses will participate over the three years and two months that the scheme will operate. If the Government are not to fall woefully short of their target and to miss an opportunity to deploy to the full the resources allocated to stimulate the growth of jobs, the scheme requires better take-up or an expanded application. We offer by way of a later amendment the requirement for an annual report to take more formal stock of progress. That could lead to changes in the scheme if the report showed that including the currently excluded regions was leading to overspending. Modifications could then be made.
Lord Newby
My Lords, I have made clear in the past my criticism of the Government’s cuts to regional expenditure. Therefore, I welcome the fact that this measure potentially puts back the best part of £1 billion into regional development. It is not the traditional way in which it has been done. Arguably, if it works, it will be more effective because it follows the market absolutely rather than the views of regional development agencies. Therefore, it could be an effective way of getting money back where it is needed.
I found the first of the arguments of the noble Lord, Lord McKenzie, about fairness quite perplexing. To argue that the measure is unfair because it excludes the more affluent parts of the country is to argue that regional policy is unfair because it excluded or did not give much preference to the wealthier parts of the country. It is true that there are wards and constituencies in London that are extremely poor and that have high levels of unemployment—that has been the case for a very long time and throughout the history of regional development—but it has not been seen in the past as a reason for not giving additional support to the north, where the problems are even greater. The difference between the problems of Newham and those of Sunderland, Liverpool and Barrow is that Newham is in a buoyant labour market within a travel-to-work area that is doing very well compared with the rest of the country. Many communities in the north are in labour markets and travel-to-work areas where there is simply no way to get a job very easily. That is the essential difference between the excluded regions in the south and those in the north.
The noble Lord spoke about simplicity. While he might have been right to castigate the Minister for using administrative arguments in dealing with the first amendment, he is doing exactly the same here. He cannot argue that a man or a company cannot be given a benefit in Newcastle just because, two and a half years down the line, they employ someone in London. That argument does not stand up.
New businesses have been set up in the past predominantly in excluded areas. Therefore, if his approach were adopted, one would expect a large number of new businesses to be established in London and the other excluded regions. What assessment have he and the Labour Party made of the cost of such an extension of the area? I know that he—and, indeed, I—are not absolutely convinced that £940 million is the cost of this programme, but no doubt he has a view as to what it is likely to be. I suspect that the cost of extending the provision will be double what is in the estimates already, which means a potential cost of another £940 million. Even if it is £500 million, has the noble Lord contemplated that? How does that extra expenditure fit into the Labour Party’s commitment, under the Fiscal Responsibility Act, to halve the deficit over the next four years?
Lord Sassoon
I am very grateful to my noble friend Lord Newby; he has done my job admirably on these amendments. However, I start by returning to fairness. The reason for the Government introducing the holiday is their belief that it is fair that people and regions that have become overdependent on public sector jobs are given additional help as the economy has to rebalance. I therefore agree completely with my noble friend. It is clear that the noble Lord, Lord McKenzie, means to misconstrue the purpose of the Bill.
We in the Government are doing other things to lift the burden of national insurance contributions on businesses right across the country, notably by raising the threshold by £21 per week above indexation from 6 April 2011 and by reducing corporation tax rates. Those very considerable measures are benefiting businesses right across the country, reversing the damaging effect of the Labour Government’s jobs tax. This particular measure is not about fairness across the country in that sense but about fairness to those regions that, under the previous Government, became overdependent on government employment. This is a way of targeting resources to enable new businesses to grow in those regions.
My noble friend Lord Newby went on to ask the noble Lord, Lord McKenzie, about the additional cost of the scheme. The Government estimate that if the scheme were to go national it would increase the projected costs of the scheme by about 70 per cent, so my noble friend is completely right that this could be a significant additional expenditure. He has made the point that I was not going to make, although he is quite right; it is yet another example of Labour’s unfunded spending promises.
As for other issues on the excluded regions, the reason why Greater London, the eastern and the south-eastern regions are excluded is principally because the proportion of the population in public sector employment in those regions is lower than in any other parts of the UK. Also, in addition to my noble friend’s point, noble Lords might wish to be reminded that during the public evidence session on the Bill, representatives from the Federation of Small Businesses and the British Chambers of Commerce made it clear that the south-east is more resilient than the rest of the UK and that the formation of now businesses would not be harmed significantly if the holiday was not available in these regions. The Government agree with that assessment.
There is then the question of having pockets of deprivation with high claimant count in particular parts of the excluded region. The Government of course acknowledge that areas smaller than regions have particular concentrations of needs. That is reflected in our looking for more efficient mechanisms than this one for addressing those more local needs. For example, my right honourable friend the Chancellor of the Exchequer announced earlier this month that the Budget will introduce new enterprise zones across parts of Britain. Those zones have great potential but need that extra push from the Government and local communities working together. Such enterprise zones would be expected to be far, far smaller than regions. There are other, fairer and more appropriate ways of dealing with the issues which the noble Lord, Lord McKenzie, raises perfectly reasonably. They just do not happen to have anything to do with this holiday, which is about dealing with an unbalanced economy as far as dependence on public sector jobs is concerned.
In conclusion, the holiday is targeted specifically at regions and countries with the highest proportion of public sector dependence. It is there to encourage new businesses to start up and to take on employees in those areas. I will not be drawn into updating now on the take-up—there will be other occasions for that—but one would expect it to increase over time. We will no doubt discuss a little later today the form of reporting that is appropriate. Expanding the holiday to the whole country would undermine the very purpose and rationale of the policy. I ask the noble Lord to withdraw his amendment.
Lord McKenzie of Luton
My Lords, I thank the Minister for his reply and the noble Lord, Lord Newby, for his contribution. We do not misconstrue the purposes of the Bill; we support projects that help to rebalance the economy, and we see that focusing in part on where there is high public sector employment in an area is one way of doing it. It is not the only way, but we have acknowledged that the Bill can make a contribution in that respect.
The noble Lord speaks as though there is almost a huge divide between the excluded regions and those that are included. From the ONS public sector employment statistics bulletin for quarter 1 of 2010, let me run through the list of percentage by region of identifiable public sector employment. The point that I reiterate is that the spread between the regions is relatively narrow, and that London misses out on this basis. The north-east is said to have 25.1 per cent, the north-west 22.3 per cent, Yorkshire and Humber 22.6 per cent, the east Midlands 18.5 per cent, the West Midlands 21 per cent, the east 16.6 per cent, London 21.1 per cent, the south-east 16.8 per cent and the south-west 21.3 per cent. To chop off three of those areas, as though they are a completely distinct part of the economy with in no way the same reliance on public sector employment, seems incredibly flawed as an argument. It is not just a question of looking at little pockets within regions, as the overall regional statistics show a close match across the regions.
The noble Lord, Lord Newby, said that we were talking about £1 billion for regional development—fine; no one is looking to take £1 billion away from the project. However, he again referred to “more affluent” regions. I am sure that parts of all regions are affluent, and parts of all regions are deprived and with high unemployment. One accepts that there are special challenges in some of the northern regions, and one would not want to detract the support available to those. Luton is in the east of England. It still has high levels of deprivation, but the spread across the region shows that parts to the east are distinct, with much lower wage economies, higher employment infrastructure deficits and real challenges. They are every bit as deserving of the benefit of schemes such as this as anyone else.
The noble Lord rightly challenged me on the costs. I refer to figures given by the Minister, but the purpose of the probing earlier—I note that the Minister remains coy on the point—was to question whether the allocation made will in any way be spent. I think that the proposition that underwrites the estimate is that this will support something like 800,000 jobs, and those jobs will have to be created outside the excluded regions by start-up businesses over a period that has about two and a half years to run. That is a tall order. If it can be achieved, great, but there is headway in the allocation to extend the scope of the scheme, and we support that.
I have tried to deal with the points raised. We think that the provision is unfair. All regions should have the opportunity to benefit from this. We shall get to an amendment tabled by one of my noble friends shortly, following which there would be scope, through monitoring, to dampen down the scheme if it proved to be overheating. However, there is no sign of that. It is a pity that the Minister was not even able to give us an update; we are almost at the end of the year. Some £50 million is meant to have been spent, which would mean that at the very least 25,000 businesses would have signed up. I suspect that we are nowhere near that on the basis of the figures of 1,500 that were discussed a couple of months ago in the other place. Having said all that, we have had a brief but, I hope, full encounter on the subject, and I wish to test the opinion of the House.
Lord Davies of Oldham
( ) a non-trading charity
Lord Davies of Oldham
My Lords, we debated this issue in Committee and it was the subject of debate in the other place as well. However, we found the Government’s response to this amendment and the concept behind it somewhat unconvincing. Their view seems to be that this measure, in this Bill, revolves around what they define as the wealth-creating sector. That seems, by definition, to exclude charities from consideration. Why should the Bill be subject to this narrow definition, which seems to suggest that charities do not contribute to wealth in our society? That view is buttressed by the Government’s arguments that reflect the very narrow definition of what they regard as the nation’s wealth. In other words, it is to do with jobs but not public welfare—it is about people being employed but not what they are employed to do. In other words, it has nothing to do with quality of life.
I know that the Minister will regard my presentation of these arguments as indulging in a flight of fancy that is a little different from the day-to-day preoccupations of the Treasury. However, I ask noble Lords to consider the obvious point that in these difficult times we should give hope to our people, as this measure seeks to do. We should give help and support to those thousands of our fellow citizens who will lose their jobs in the public sector as the Government say that they cannot afford to employ them all. They rarely deploy the argument which they use regularly at party conferences and elsewhere, when rhetoric plays its part, that they wish to reduce the size of the state as they consider that that would benefit the nation. In reducing the size of the state they are, by definition, reducing the number of people in public employment not because they cannot be afforded but because, in the Government’s opinion, society is better when the Government play a smaller part. The House will not be surprised to hear that we take a somewhat different view about wealth and the virtues of public employment.
The previous amendment was directed at those parts of the country which the Minister indicated were more dependent on public sector employment which is to be subjected to such a serious assault from the government cutbacks. Why can we not help these areas by creating jobs in bodies such as non-trading charities? Of course, I appreciate that it will be a modest contribution and I subscribe to the view that the noble Lord will no doubt put forward in his reply that the Bill overwhelmingly concentrates on businesses which create wealth. I am not in any way, shape or form against that endeavour. In fact, my party has made clear that it supports the development of small businesses. However, I am against exclusion for no obvious good reason. I do not see why non-trading charities should not be included.
The Minister’s argument in Committee partly revolved round the fact that the matter is said to be outside the main purposes of this legislation and that we should not bring in something that is somewhat extraneous. However, the number of Bills which the Treasury can introduce over the year is fairly limited. The noble Lord will be all too well aware of the fact that apart from the Finance Bill, in which this feature is scarcely likely to be addressed, Treasury Bills, other than those which have a very specific operation, are few and far between as the Treasury competes with other departments for legislative time in both Houses. We therefore propose an amendment of a most modest but beneficial kind that—even if the Minister thinks it is not entirely appropriate to the main purposes of this modest measure—is not far distant from the objective of creating jobs on a very small scale in areas where public employment is being reduced. I maintain that non-trading charities can play a modest part in creating those jobs.
Given the government arguments thus far—and that is why we are continuing this debate beyond Committee—I see no reason why the amendment should not commend itself to the Government, and that is why I commend it to the House. I beg to move.
Lord Sassoon
My Lords, the noble Lords who put their name to the amendment have again raised the issue of making non-trading charities eligible for the employers national insurance contribution holiday. This matter was debated at some length in Committee and I again suspect that what I am going to say will not come as a huge surprise to the noble Lords concerned. Nevertheless, I will do my best to persuade them to withdraw the amendment.
I thought that the noble Lord, Lord Davies of Oldham, was going to go off on some flight of fancy. I do not think that he went off on any flight of fancy, and he kept entirely to areas that the Treasury takes extremely seriously. I was therefore disappointed, because I expected the noble Lord to go down some exotic new avenue—but he did not.
However, in the first half of his remarks, he did not recognise that an important group of charities will get the benefit of this holiday. It is important for me to confirm that new charities in qualifying areas are eligible for the holiday if they are carrying on a business. I appreciate that the noble Lord later on in his remarks started to distinguish between trading and non-trading charities, but this is an important point. For example, were employees to be taken on for a charitable trade, such as providing education or healthcare services, the charity is potentially eligible for this generous relief. Amendment 5 would specifically extend eligibility to new non-trading charities in qualifying areas. As, to be fair, the noble Lord recognises, this would not support the Government’s objective of encouraging new entrepreneurs to set up businesses in areas with a high proportion of public sector employment. The noble Lord suggested that his amendment would be a nice-to-have add-on, if I may crudely paraphrase him. However, he recognised that it does not chime in with the core purpose of the Bill.
Just as we have other ways of supporting regions that are not covered by the holiday, the Government of course have other important ways in which they support the critical work of charities, not least in their contribution to the big society. We provide substantial support to charities and charitable giving with tax reliefs worth more than £3 billion each year. Gift aid and relief from non-domestic rates are each worth around £1 billion a year. I remind noble Lords that, across the UK, charities that are employers will also benefit from the increase in the employers national insurance contribution threshold by £21 a week, plus indexation, that comes into effect on 6 April.
Lord Davies of Oldham
My Lords, I am grateful to the noble Lord for his precise exposition of the Government’s case against the amendment in principle. I do not think that we need the overkill of the technical limitations of the amendment. It is rare for the Opposition to table amendments that do not have certain technical imperfections, but when a Government have the will, they certainly have the way to get past those imperfections. Of course, the Minister is really piling Pelion upon Ossa. He is saying that he is not having this amendment at any price on a fairly straightforward and clear principle; nevertheless, so far as the Opposition are concerned, the argument is made on unconvincing grounds. However, I beg leave to withdraw the amendment.
Lord Davies of Oldham
“Annual report by the Treasury
( ) The Treasury shall, following the day on which this Act is passed, review the operation of the regional holiday scheme under Part 2 of this Act, and provide an annual report to Parliament.
( ) Each annual report shall set out, by region—
(a) the number of businesses availing themselves of the secondary contributions holiday;(b) the number of employees designated as qualifying employees under the scheme;(c) the total expenditure saved by businesses under the scheme; and(d) an assessment of the demand to apply the regional holiday to different areas of the country.”
Lord Davies of Oldham
My Lords, this amendment again relates to an issue that we addressed in Committee. On that occasion, the Minister gave us the benefit of his perspective on this matter and indicated the ways in which the Government would be held properly accountable for their work in this area, as in all aspects of Treasury matters, and indeed wider than that.
The amendment relates to the specific nature of the holiday. We are seeking an annual report in the terms adumbrated by the amendment because this is a most interesting scheme. If not experimental, the scheme certainly has a significant dimension, which is, as we discussed when we debated the earlier amendments on the regional aspects of the scheme, the control factor attached to it. The scheme will operate in the majority of the country, although it will exclude the south-east, London and the eastern region. Therefore, after a year, we shall be able to see how much progress has been made on job creation for those who have lost their position and where there are fewer jobs in the public service and we shall have a control position as regards those regions that are not in the scheme. We may be able to see the benefit of this initiative by the Government.
To my noble friends on the Front Bench, that seems to be a good reason why we should have a precise annual report on this scheme and on how it has worked. Although I quite understand that the Minister’s defence is likely to be that the Treasury is always open and accountable and that it has measures whereby it makes matters explicit to the nation, I would not be the first noble Lord to have to confess, even with the experience of being on the Treasury Bench, that from time to time there has been a degree of obscurity that makes it extremely difficult to analyse just what has transpired in schemes and their effectiveness. This amendment would give the Treasury a golden opportunity, after one year, to make quite clear the success or otherwise of the scheme, which we wish success. I beg to move.
Lord Sassoon
My Lords, Amendment 7 would insert a new clause into the Bill with the aim of requiring the Treasury, following the day on which the Act is passed, to review the operation of the regional employer NICs holiday under Part 2 of the Bill and to provide an annual report to Parliament. The amendment would require the annual report to contain information by region. At the risk of being accused of piling Pelion on Ossa, it is important to get the comparison between what is proposed by this amendment and what I shall go on to say the Government propose to do. It is important to get it straight. I hope that I am not going into any unnecessary detail but I will clarify what is going on in the proposed amendment and what the Government seek to do.
The amendment requires that the annual report should contain, by region,
“(a) the number of businesses availing themselves of the secondary contributions holiday;
(b) the number of employees designated as qualifying employees under the scheme;
(c) the total expenditure saved by businesses under the scheme; and
(d) an assessment of the demand to apply the regional holiday to different areas of the country”.
As I said in Committee when we discussed amendments of a similar nature, I think that this amendment is motivated by a wish to encourage transparency—the noble Lord, Lord Davies, has confirmed that—and to ensure that proper consideration is given to how the holiday operates in practice. I shall attempt to explain to noble Lords why the amendment is unnecessary.
First, as I said in Committee, my honourable friend the Exchequer Secretary explained in the Public Bill Committee in another place that there is no budget as such for the scheme. Anybody contemplating starting up a new business can be confident that there is no budgetary constraint on the scheme. The holiday will continue as proposed regardless of how many successful applications are made. If a large number of additional new businesses are formed as a result of the policy, this would help to increase Exchequer revenues. The expected costs of the scheme were set out in the policy costing document at Budget 2010.
Secondly, on the point on which the noble Lord, Lord Davies, focused his remarks, the Government are committed to increasing the transparency of tax policy-making and of the tax system more generally. To that end, I am happy to repeat the undertaking, which I have mentioned before at different stages of this Bill, made by my honourable friend the Exchequer Secretary in another place to provide to Parliament and the public updates before the end of the calendar year on the operation of the scheme, including information at regional level. As I said in Committee, we envisage a factual report regionally and nationally covering the number of new businesses applying, the number of applications rejected, the number of qualifying employees for whom a holiday has been claimed and the amount claimed.
The only significant difference between the commitment that the Government have made and the amendment that we are debating is that the latter would require,
“an assessment of the demand to apply the regional holiday to different areas of the country”.
I am not completely clear about the meaning of these words and how what is suggested would operate. The noble Lord, Lord Davies, did not address the detail. The substantive point is that the Government do not see the need to report annually on the demand to apply the holiday to different areas of the country. We can assess that now and I do not expect the assessment to change. There is, of course, strong demand from excluded regions to enjoy the benefit of a holiday that they would like to have, but we have debated that already and the House has this afternoon formed a view on excluded regions. The position remains as we have debated it, so I am not sure how that part of the amendment would achieve anything.
The Government’s objective remains to target resources at those regions most in need. The Government do not expect the objective to change. By tabling this amendment again, the noble Lord has given me the opportunity to restate for the avoidance of doubt that we will come forward with a transparent and comprehensive report on an annual basis. With those reassurances, I hope that the noble Lord will withdraw the amendment.
Lord Davies of Oldham
My Lords, I am once again grateful to the Minister for his identification of the way in which the Government are seeking to meet the clear objectives of transparency and effectiveness with regard to the scheme. Of course, I understand that because the scheme has no particular budget there is an aspect of parliamentary control that is clearly not possible in the measurement of the budget. My noble friends support this amendment because we see the value of transparency with regard to the scheme, particularly a scheme that is partial in its impact. Of course I understand that the Government have sustained their position about the limited geographical range of the scheme, but there is bound to be greater demand for transparency in a scheme that does not apply to areas where there are none the less pockets of deprivation, as we sought to identify in the past. Clearly, they would have benefited from the scheme had that been the case.
I accept what the noble Lord has said about the process by which the Government will be transparent on the operation of the scheme. I want to make it clear to him and the Government that we will continue to take a close interest in this scheme. It may be a modest measure, but it is highly significant and, in certain aspects, groundbreaking in the way in which it has been framed. That is why we will hold the Government to account on the extent to which they reflect accurately the operation of the scheme. With that, I beg leave to withdraw the amendment.
Japan and the Middle East
(13 years, 8 months ago)
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The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, this may be a convenient moment to repeat a Statement made by the Prime Minister in another place a few moments ago. The Statement is as follows:
“Mr Speaker, before turning to discussions at last week’s European Council, I am sure the whole House will want to join me in sending our deepest condolences to the Japanese people following the earthquake and tsunami that struck their country over the past few days. We are all deeply shocked and saddened by the devastation that we have seen and by the loss of life, the full scale of which will take many days to comprehend. As yet there are no confirmed British fatalities but we have severe concerns about a number of British nationals. I spoke to our ambassador in Japan who was one of the first to get to the affected region and his team are working around the clock to help British nationals.
Over the weekend, we have had three rapid deployment teams of 20 staff operating in the worst affected areas. They will be augmented by a further team of 17 arriving in Tokyo this afternoon and advancing to the affected area tomorrow. They are working together to help British nationals caught up in the tragedy and to help find out information for the families who are so worried about them. We have set up a helpline for these families. It has taken several thousand calls and we are following up each lead.
We have, of course, offered humanitarian assistance to the Japanese Government and we stand ready to assist in any way that we can. At their request, a 63-strong UK search and rescue team, which includes medical personnel and two dogs, has already been deployed and arrived in Japan yesterday morning.
The whole House will have been concerned at the worrying situation at the nuclear power station at Fukushima. The Japanese Government have said that the emergency cooling system at three reactors at the plant has failed because of the tsunami. There have been explosions due to the release of hydrogen gas at both the Fukushima 1 and Fukushima 3 reactors. This is clearly a fast moving and rapidly changing picture, and the Japanese Government are doing everything that they can to manage the situation they are facing. We are in close touch with the Japanese authorities and have offered our nuclear expertise to help manage this very serious incident.
The Energy Secretary has asked the chief nuclear inspector, Dr. Mike Weightman, for a thorough report on the implications of the situation in Japan. The UK does not have reactors of the design of those in Fukushima and neither does it plan any; nor are we in a seismically sensitive zone. But if there are lessons to learn, we will learn them.
COBRA has met several times over the weekend and again this morning, and we will keep our response to this tragedy and our support for Japan and the wider Pacific region under close and continuous review. The devastation we are witnessing in Japan is of truly colossal proportions. It has been heart-breaking to listen to people who have had all their relatives, friends and livelihoods simply washed away. Those who have survived will not recognise the place where their homes once stood. We do not yet know the full and dreadful toll, nor can anyone truly understand the impact these events will have. Japan and the Japanese people are a resilient and resourceful nation. We have no doubt that they will recover. We will do all we can to aid and assist those affected and our thoughts are with the Japanese people.
Let me turn to the substance of Friday’s special European Council. The reason for having this Council was twofold: first, to make sure that Europe seizes this moment of opportunity to support the Arab people in North Africa and across the Middle East in realising their aspirations for a more open and democratic form of government; and secondly, to address the difficult situation in Libya. The Council addressed both of these issues and I will be frank with the House about where progress has been made and what more needs to be done.
The first is supporting the building blocks of democracy in the Arab world. The aim should be a big, bold and comprehensive offer to those countries in our southern neighbourhood that want to move towards becoming more open societies. There was some real success. The Council declaration talks of a “new partnership” founded on,
“broader market access and political co-operation”,
and with an approach that gears support to those countries where progress is being made in meeting their citizens’ aspirations. This could be so much better than the failed approach of the past. But now Europe needs to follow through on its declaration with a real and credible offer to these countries based on the prospects of deeper economic and trade economic integration with the EU, and the free movement of goods, services and investment.
Turning to Libya, it was right for the EU to meet and discuss how we can work together to deal with this crisis. There has been considerable international co-operation on evacuation. We have now got over 600 British nationals out and have assisted over 30 other nationalities. Around 220 British nationals remain in Libya, the overwhelming majority of whom are long-term residents, and many are, of course, dual nationals or the spouses of Libyan nationals. Many of this group have told us they wish to remain in Libya, but a number of other British nationals are now contacting us for the first time. We will stay in contact with these people and continue to assist those who wish to leave.
We have also been at the forefront of the response to the humanitarian situation in Libya and on its borders, but we remain deeply concerned by the humanitarian situation for people inside Libya caught up in the fierce fighting, and the Development Secretary has repeatedly called for the protection of civilians and for unfettered humanitarian access to those in need.
On further isolating the Gaddafi regime, the Council made good progress. Two weeks ago, we put in place a tough UN Security Council resolution and agreed in record time asset freezes, travel bans and an arms embargo, as well as referral to the International Criminal Court. At this Council, all European leaders were united, categorical and crystal clear that Gaddafi must “relinquish power immediately”. We widened the restrictive measures against individuals close to Gaddafi and strengthened the financial sanctions on the regime, adding the Libyan central bank and the Libyan Investment Authority to the EU asset-freezing list. In doing so, the UK has increased the total of frozen Libyan assets in this country from £2 billion to £12 billion.
We now need to make clear the next measures in terms of putting further pressure on the regime and planning for what other steps may be necessary. Two weeks ago, I told this House that I believed contingency planning should be done, including plans for a no-fly zone. NATO is now carrying out that work. As we have said before, a no-fly zone would need international support based on three clear conditions: demonstrable need, regional support and a clear legal basis.
In recent days, first the Gulf Co-operation Council and now the Arab League have called for a no-fly zone. In terms of the European Council, of course, the EU is not a military alliance and there is always a hesitation in discussing military options, but the Council expressed its,
“deep concern about attacks against civilians, including from the air”,
and agreed that member states will “examine all necessary options” for protecting the civilian population, provided there is a demonstrable need, a clear legal basis and support from the region. There was some progress, especially compared with where Europe was in advance of Friday’s Council, but we need to continue to win the argument for a strong response in the international community, Europe included.
Along with others in the United Nations Security Council, the UK is following up urgently the lead given by the Arab League by drafting a resolution, which sets out the next measures that need to be taken, including the option of a no-fly zone. Included in the resolution in our view should be much tougher measures against mercenaries and the states from which they come, as well as others who are attempting to breach the sanctions and assist Gaddafi.
Every day Gaddafi is brutalising his own people. Time is of the essence. There should be no let-up in the pressure we put on this regime. I am clear where British national interest lies. It is in our interests to see the growth of open societies and the building blocks of democracy in north Africa and the Middle East, and when it comes to Libya we should be clear about what is happening. We have seen the uprising of a people against a brutal dictator and it will send a dreadful signal if their legitimate aspirations are crushed, not least to others striving for democracy across the region.
To those who say it is nothing to do with us, I simply respond: do we want a situation where a failed pariah state festers on Europe’s southern border, potentially threatening our security, pushing people across the Mediterranean and creating a more dangerous and uncertain world for Britain and for all our allies as well as for the people of Libya? My answer is clear: that is not in Britain’s interests. That is why Britain will remain at the forefront of Europe in leading the response to this crisis. I commend this Statement to the House”.
Baroness Royall of Blaisdon
My Lords, I thank the Leader of the House for repeating the Statement by the Prime Minister in the other place. I start by associating myself and these Benches with the remarks in the Statement about the Japanese earthquake and tsunami. The tragedy that has hit Japan and the Japanese people is of an almost unimaginable horror and scale. All of us will have been shocked by the scenes of devastation that we have seen on our screens over the weekend. We fully support our Government in their efforts to help the Government and people of Japan in their hour of need.
This is clearly an anxious time for friends and family of UK nationals and I know that consular staff will be working around the clock to provide all help and assistance. Our thanks must go to the staff of the Foreign and Commonwealth Office who are doing a fine job at this very difficult and demanding time, when they must be focused on Japan, Libya, northern Africa and the wider Middle East. Can the Leader of the House assure us that, while clearly stretched, they have adequate resources?
The Statement mentioned the helpline for families for people who must be desperately worried and we welcome the extraordinary help that that line gives. Does the Leader of the House agree that it would be useful if members of the public whose loved ones are found could inform our officials? I well understand that finding someone who was lost must be overwhelming and making a phone call may be far from mind. However, it would ensure that resources could be targeted on finding those who are still lost. That was a lesson that we on these Benches learnt after 9/11. The circumstances are clearly different, but we are talking about lost people who we hope to God are found. I also associate myself with the remarks in the Statement about the work of British search and rescue teams.
On the understandable concern about the nuclear power issues following the earthquake and tsunami, we should clearly see whether there are lessons to be learnt but avoid a rush to judgment. The scale of what has happened in Japan is such that there is a long way to go on many if not all of these issues. I am pleased that the chief nuclear inspector, Dr Mike Weightman, has been asked for a report on the implications of the situation in Japan. Will the Minister confirm that the report will be published when the Government receive it in due course?
On last Friday's meeting of the European Council, I will focus on three issues: the military options available to the international community regarding Libya, the wider response and the need to re-energise the Middle East peace process. First, we welcome the clear and unequivocal statement in the Council declaration that the Libyan regime should relinquish power immediately. As the Statement repeated by the Leader made clear, the situation in Libya is grave and pressing. We said when the Prime Minister first publicly floated the idea two weeks ago that we welcomed the consideration of a no-fly zone. Can the Leader of the House give us a clearer picture of what the Government believe a no-fly zone would involve and whether it is contingent on the US Government participating, given that some parts of the Administration have expressed reservations?
I note the unanimous decision over the weekend of the Arab League in support of a no-fly zone, which was mentioned in the Statement. In view of the decision, does the Leader think that any no-fly zone would best be supported by the active engagement both in planning and in actions by countries that are members of the Arab League? It would be helpful if the Minister could arrange for the communiqué from the meeting of the Arab League to be placed in the Library of the House.
On timing, I note that the Statement repeats the statement made by the Prime Minister last week that the United Kingdom is now working on a new Security Council resolution. Given the urgency of the situation, what is the Government’s best judgment about when such a resolution will be tabled? Above all, we on these Benches emphasise to him the importance of matching what is said in public with the diplomatic spade-work needed to win international support for a practical and legal plan. Given the position this morning of the former Foreign Secretary, the right honourable Member for Kensington and Chelsea in the other place, on arming the rebels, what is the Government’s position on the legality and wisdom of this?
Secondly, can I ask about the other actions that we can take? I welcome what the Statement said about asset freezes and sanctions. To maximise pressure on the regime, have the Government made any formal communication to the International Criminal Court to impress on Libyan leaders and commanders individual accountability for commissioning and carrying out crimes against humanity? If the Government have not done so, I suggest to the Leader that they do. On the humanitarian crisis, is DfID planning to provide additional support to the other multilateral organisations, such as the World Food Programme and UNHCR? On these Benches, we have evidence that young men are being taken away from their homes and that Benghazi men living in Tripoli are specifically being targeted. I am sure that the Leader will also have such information, but if it would be helpful for us to share that information we will certainly do so.
Thirdly, we welcome the reference to the Middle East peace process. Can we reiterate to the Government the central importance of not losing sight of this issue? Last week, both the Prime Minister and the Leader of my party held separate talks with President Abbas during his visit to London. What discussions took place at the European Council on how the EU can help to get the peace process back on track? In particular, what representations have been made to the United States following its recent veto of the UN resolution on settlements?
I hope and think that we are united in a view that this must be a moment when the European Union and the international community show that they are more than a sum of their parts, whether on Libya specifically, north Africa more widely or the Middle East process more generally. We hope that the Prime Minister of our country and other leaders will do all that they can over the coming days and weeks to make that happen.
Lord Strathclyde
My Lords, I thank the Leader of the Opposition for her warm words. I very much welcome those words of support for the people of Japan, but they come as no surprise to me because one thing that this country is good at—and this Parliament in particular—is showing solidarity when in another part of the world an immense tragedy has befallen people.
I also thank the noble Baroness for her tribute to the FCO. She is right in pointing out that it has a lot on its plate at the moment. The FCO is using its resources effectively and has established crisis centres; it has learnt a lot over many years on how to deal with these emergencies and is able to focus its response not just on Japan but on Libya, preparing for potential crises as they come about. We are living in the most uncertain of uncertain times, and I believe that the FCO continues to do sterling work. In particular, the ambassador in Japan, David Warren, and his team are doing a remarkable job in providing support.
The noble Baroness’s suggestion of targeting resources on helping to reunite people who are lost is extremely wise and sensible. I am sure that officials have thought of that; I had not, and I thought that it was extremely useful. Likewise, I welcome the noble Baroness’s comments about the UK search and rescue teams. They are an important group of people with immense experience, knowledge and ability in finding people under the most difficult circumstances. They have moved quickly; they are on-site and working hard.
The noble Baroness asked me about the publication of the report of Her Majesty's Nuclear Installations Inspectorate. We do not yet know what form the report will take, but when a report is made, clearly, a decision will be taken on whether to publish it. I cannot imagine the circumstances under which it would not be published.
Turning to the situation in the Middle East and Libya in particular, the noble Baroness said that it was a grave and depressing situation; she is completely right in that. We have been very keen to see co-operation across alliances and countries for the no-fly zone concept. We have been much supported in that view by the Arab League. I shall look into why the Arab League's communiqué has not been published; if it is publishable, I shall ensure that she gets a copy and that a copy is placed in the Library of the House.
In the UN, we are working closely with our allies—in particular, France—to draft a resolution that will maximise support among all those whom we need to influence. I cannot give any update as to when the new resolution will be tabled, but I hope that it will be soon. The International Criminal Court is of course an independent body. It is not for the UK Government to make that referral; that has already been done by the United Nations. The United Nations has communicated with the ICC and has asked it to look into that. I am not sure what would be gained by the UK doing that separately, but I will certainly pass that question to officials. The noble Baroness produced some useful intelligence as to what is happening on the ground in Benghazi and Tobruk.
Finally, the noble Baroness rightly asked about progress on the Middle East peace process. As has been said many times at this Dispatch Box—under this Government and the previous one—there is an opportunity to start this work again, to seek to complete it. This weekend, the Council communiqué states at paragraph 17:
“The European Union is conscious of the wider political and economic impact of these events on the wider region and calls for reactivating the Middle East Peace Process”.
That was included specifically at the request of the United Kingdom Government. It is very important that we should start that up. There is an opportunity that should not be missed; if it is missed, it will be a failure on all our parts not to have done everything to ensure that it continues.
Lord Hannay of Chiswick
Perhaps I may press the noble Lord a little on the UN aspect. I know that drafting UN resolutions is quite complicated, but it does not take two weeks, which is what we have been saying is going on in New York. Has the time not now come to put down a resolution on the table? It is only when a resolution is on the table that people are forced to take a position on it. With the Arab League now supporting a no-fly zone, the tactical situation should have changed quite a lot.
Will the Leader confirm that, so far as legitimacy or a legal basis is concerned, this country flew sorties to enforce a no-fly zone in Iraq for 12 years without a specific authorisation from the UN? During that time, no one challenged the legality of that, although it was based on a Chapter 6 resolution that had no mandatory force. There is now a Chapter 7 resolution on Libya, which requires Colonel Gaddafi to stop repressing his people. The legitimacy or legality—whichever you like to call it—of acting even without a UN authorisation is therefore rather clear, as was the case also in Kosovo.
Lord Strathclyde
My Lords, the noble Lord, Lord Hannay, with his former experience, brings to the House a knowledge that is shared by few. I am sure that he is right that the sooner a resolution is tabled the better, but it will not be tabled until we, the French and our other allies feel that we have adequate support. I have no further news to give on that situation. I note what the noble Lord said about the legal basis or legitimacy. He made a useful comparison with Iraq and Kosovo. These issues are being actively discussed at the moment.
Lord Anderson of Swansea
My Lords, does the UN arms embargo apply to both sides? The Arab League and the Gulf Cooperation Council have said very welcome words about a no-fly zone. Does that extend to an offer to supply military assets in support of a no-fly zone? The Statement referred to increased political co-operation with the countries of the Maghreb and the southern flank of the Mediterranean. Earlier efforts—for example, the Barcelona process of 1995 and the Union for the Mediterranean of President Sarkozy—have failed for clear political reasons, including the position of Israel, Morocco and Algeria over the Polisario. What indications are there that this effort will be any more successful than the past failed efforts?
Lord Strathclyde
My Lords, we are obviously operating under very different conditions. It is impossible to say at this stage whether what everybody is seeking will be successfully achieved. It is a fast-moving picture in Libya, as it is in the rest of the Middle East. My understanding is that the Arab League, while supporting the no-fly zone, has not made any offer of physical assets.
Lord Hurd of Westwell
The Statement mentioned the freeze on Libyan assets, whose strengthening I welcome, but are the Government happy about the state of affairs as regards Libyan oil revenues? Can my noble friend give us any assurance that oil revenues will not trickle into the pockets of Colonel Gaddafi?
Lord Strathclyde
My Lords, not only have we taken a very firm line from the beginning of this process on freezing the assets of Colonel Gaddafi and his close associates and family, but that has been extended this weekend in the European Council. As a result of this cumulative effort, £12 billion of assets has now been frozen in the United Kingdom. On top of that, as my noble friend will know, we have removed Gaddafi’s head-of-state exemptions from UK controls and we have prohibited the export of uncirculated Libyan banknotes from the UK. There are of course other countries that will wish to undermine these sanctions, but we, with our allies—and there is a very united view about this—will do everything that we can to make sure that Gaddafi feels the pain of sanctions as quickly as possible.
Lord Morris of Aberavon
My Lords, I welcome the support that Her Majesty’s Government are giving to the drafting of a Security Council resolution on the option of a no-fly zone. May I emphasise that in the search for legality a Security Council resolution is the only real, universally accepted basis, difficult as it may sometimes be to get? Any other basis is where there is an agreed international understanding that there is an overwhelming human disaster, such as with the Kurds, the Marsh Arabs or in Kosovo, where I was involved. Will the noble Lord give an indication that such a situation has not yet arrived, brutal as the regime in Libya is? Will he indicate the Government’s thinking on that? At the same time, will he perhaps encourage the Americans to join the International Criminal Court, which our Government set up?
Lord Strathclyde
My Lords, I will not be drawn on that final question, but the noble and learned Lord again raises some valuable and useful material about the legal basis, in particular the resolution at the United Nations. We want to get the widest possible support for action—in the EU, within NATO and among our wider allies, as well as in the United Nations. It is difficult to forecast at this stage exactly what kind of support that will be, but it is useful that we should try as hard as possible to get that unified view.
Lord Dholakia
My Lords, serious concern has been expressed about the cooling system in the three nuclear reactors in Japan. When the nuclear inspector, Dr Mike Weightman, produces his report, will it be made available to the public and will full account be taken of it before we in the United Kingdom proceed with our nuclear power stations here? Also, the noble Baroness, Lady Royall, rightly asked about the position of the Obama Government on a no-fly zone. What discussions have taken place and where do the Government stand on this issue?
Lord Strathclyde
As the Statement pointed out, the types of nuclear installation affected in Japan are not ones that we have in Britain, nor are any of them planned. However, it was entirely right to invite the nuclear inspector to give us a report to see what lessons can be learnt. I told the noble Baroness that I did not know what form that report would take. I cannot imagine the circumstances under which it would not be published, but I cannot confirm that at this stage. Apart from anything else, if lessons are to be learnt, the more widely those views are propagated the better. Concerning discussions with the United Nations, those are obviously ongoing within NATO and President Obama has given his full support to NATO looking at the planning of such an operation.
Lord Wallace of Saltaire
There are a lot of people trying to intervene. There is room provided that everyone is brief.
Lord Hughes of Woodside
My Lords, while I welcome the statement from the Arab League and do not in any sense diminish its importance, does the Leader of the House think that there is any real prospect of countries which are part of the Arab League and which have the military capacity taking part in the no-fly zone operation? Does he think that seeking such support would be a help or a hindrance to getting a resolution through the Security Council?
Lord Strathclyde
My Lords, there are members of the Arab League that would have the capability to involve themselves in policing a no-fly zone, but I sense that we are a long way from that at this stage. There is still a diplomatic process to be completed of resolutions in the United Nations, but there is certainly no bar to making the co-operation across nations and alliances as wide and as deep as possible.
Lord Elystan-Morgan
My Lords, is not the technical legal situation fairly straightforward and simple? Under Article 39 of the United Nations charter, where there has been a threat to peace or an act of aggression the Security Council is entitled to take that into account; it appears to have made a ruling on that basis. That triggers Article 42 of the charter, which allows—it is permissive, not mandatory—the Security Council to use any measure, including the use of force in the air, on land and at sea. However, prudence and practicality might well suggest that, for a no-fly zone to succeed, it would be necessary for there to be an elimination of the 20 or more surface-to-air missile sites that lace the coastal belt in Libya. Very great caution should be exercised before coming to such a decision.
Lord Strathclyde
My Lords, I agree that there should be caution. I am less with the noble Lord that these legal matters are clear and simple; so far as I can see they are immensely complicated. That is why we want the widest international support from Europe, the Arab League and beyond, and it is why we are working in the United Nations to draft a resolution with France. Things need to be taken step by step—we are not going to overreach ourselves—and we are working with our partners at the United Nations, in NATO and in the US to look at all the options. It is clear that a no-fly zone needs international support, a clear trigger and a legal basis; no country will go for it alone. The question of the surface-to-air missiles that the noble Lord raises, and of Libya’s whole defence resources, will no doubt be taken into account.
Lord Eden of Winton
My Lords, I revert to the horrendous events that have so tragically overtaken Japan. Although it is clearly much too early to form any picture as to what happened at Fukushima’s nuclear power plants, is it not remarkable that those buildings, which were so close to the centre of the earthquake, seem to have withstood so successfully the onslaught to which they must have been subjected?
The second point that I want to make concerns the peace process in the Middle East. Given what has been happening throughout northern Africa and elsewhere, is there not evidence that the youth of those countries are desperate for greater freedom and a more secure economic basis for their existence? Would this not therefore be a wise and helpful time for Israel to show some indication that it understands what is going on inside Gaza and to take some humanitarian steps to assist the people suffering there?
Lord Strathclyde
My Lords, on my noble friend’s first point about the nuclear installations, I agree that lessons need to be learnt—I am sure that they will be—in terms of siting and design of nuclear plants and in terms of what went wrong in the earthquake that led to the problems, which I am sure were unforeseen when the plants were originally built. That will come in not only our internal review, but those of the Japanese Government and any other international organisations. On the second point raised by my noble friend, I agree that there is an opportunity for Israel to, in his words, show that it understands what is happening right across the Middle East and to show a determination to seek a long-term peaceful solution.
Lord Campbell-Savours
My Lords, are we learning lessons from the past in the use of no-fly zones? Have Ministers considered the comments of Mr John Nichol, an air navigator in Bosnia and Iraq, who described delays in securing legal authorisation for interception and delays in securing clarity over rules of engagement, with the result that there was a high incidence of failure by opposition aircraft—indeed, thousands of failures by opposition aircraft—to observe no-fly zones? Before we go down this route, can we get absolute clarity for pilots as to what the rules of engagement are and when they can act? Without it, the policy will fail.
Lord Strathclyde
Yes, my Lords, I agree with what the noble Lord just said, including his correct warning about the dangers of delay. I agree with him about the importance for pilots of clarity about the rules of engagement and that the legal basis should be as wide as possible, to cover all those who are flying within the area. That is, of course, a lesson that we have learnt from the past, which I hope is being put into effect, but the first step is to get international agreement so that we can move forward with unity.
Lord Wallace of Saltaire
I think that the noble Lord, Lord Hylton, was trying to get in earlier.
Lord Hylton
My Lords, I welcome the changes that are now under way in the EU neighbourhood plans and in the conditions attaching to them. Does the Leader of the House agree that it is probably unlikely that there will be sufficient agreement for mounting an effective military intervention, even for the limited task of protecting the people of Cyrenaica who have established their own freedom? If so, will warning be given in good time to the leaders of the uprising that they will, in effect, not be defended or protected? Will sufficient transport be available for those involved in the insurgency who wish to leave the country? Are plans being made for where these people might wish to go?
Lord Strathclyde
My Lords, that is a very wide question and it is difficult to answer. The noble Lord is right that we are seeking, through support for a no-fly zone, to protect the people of Libya who have been involved in the uprising. There are, of course, other options, such as the idea of a humanitarian corridor to allow people who wish to leave to do so. Nothing that I have seen leads me to believe that we are planning to put troops on the ground in any way. We believe that the best way of protecting these individuals is by supporting a no-fly zone.
Lord Gilbert
My Lords, will the Minister inform the House as to the attitude of Libya’s two neighbour states, Tunisia and Egypt, to the intervention of other countries to assist the freedom fighters and protesters inside Libya? In particular, for example, in connection with the no-fly zone, have there been any discussions with the authorities in those two countries as to the availability of airfields, which would not involve our putting infantry on the ground but would be an enormous contribution to the operation of a no-fly zone?
Lord Strathclyde
My Lords, our discussions and negotiations about the possibility of a no-fly zone will include Libya’s neighbours but, given the support from the Arab League at the weekend, I am much more optimistic about having the co-operation of those neighbours in playing a greatly supportive role, including the possibility, at least, of providing airfields.
Lord Ahmad of Wimbledon
My Lords, I thank my noble friend the Leader of the House for the Statement that he has made. We have talked previously about the domino effect gripping the Middle East and I wondered whether he would like to make some statement on the situation that we see emerging in Yemen and on the news stories that are reaching us about the Saudi intervention in Bahrain. Have the Government made any representations in that regard?
Lord Strathclyde
My Lords, just as I left my room to come to the Chamber, I saw reported on the television that the Saudi military had been invited by the Bahraini Government to go into Bahrain in order to restore law and order and to protect government buildings. I have no other information to give and certainly no official response from the British Government. However, my noble friend is right to raise what he called the “domino effect”. Right across the Middle East we have seen enormous changes taking place, and these will continue. The role of the British Government is to be supportive of groups of people who wish to change their lives and to meet their aspirations and we have called on Governments across that region to allow those people to achieve those aspirations.
Postal Services Bill
“( ) the principal objectives intended to be achieved by any disposal,( ) the extent to which the Secretary of State considers that the disposal will achieve those objectives, and( ) the expected time-scale for undertaking the disposal.”
Lord Young of Norwood Green
My Lords, I shall also speak to Amendment 11. These amendments concern the report that the Secretary of State will be required to lay before Parliament after deciding to dispose of Royal Mail, whether through a trade sale or an IPO share sale. We have already put on record the Opposition’s disagreement with the principle of privatising 100 per cent of Royal Mail and that we believe that it should be kept in overall public control. However, in this Committee we are seeking to improve the Bill by casting a critical eye over the detail before us. The Bill might enable Ministers to conduct a sale of Royal Mail, but how they set about that task is important; it can be done well or badly.
We have pointed out some of the dangers that lie before Royal Mail and the country if the Government set about this disposal in the wrong way. So much can go wrong. It could be sold to an owner with short-term horizons who cherry-picks the most valuable parts and breaks up the company, perhaps, heaven forbid, on the road to administration—hence the need for Part 4 of the Bill. The Bill could create a Royal Mail that, against the wishes of Ministers and the current management of the company, decided to break the historic link with the post offices of this country. Either case would be catastrophic for our post office network, and there is nothing in the Bill to prevent them from happening. The company could be sold off cheaply, with a few individuals getting rich at the expense of the country’s taxpayers at a time of public austerity, with taxes going up, public services being curbed, wages being frozen, the retirement age receding and jobs being lost. I hope that Ministers are aware of the public anger that would be unleashed if that happened due to a lack of care and attention by Ministers and civil servants.
We know that in the past many privatisations have resulted in the sale price on the day of sale being dwarfed by the trading price on the first day of trading. The track record of trade sales is not much better. I well recall the Select Committee investigations that ensued when the Royal Ordnance factories in this country were sold, apparently over cocktails between the Minister and a businessman, for the princely sum of £1. The site of the old Enfield rifles establishment and the associated site on either side of the M25 must have been worth a pretty sum on their own. This sort of sale did not instil confidence that the long-term future of the company and its staff would be foremost in the mind of the new owner.
We want to avoid these disasters, as I am sure do the Ministers, and that is why we are bringing forward amendments that might help to make the process safer and more successful. These amendments therefore seek two simple improvements in the report to Parliament: first, to set out clear objectives for the disposal of Royal Mail, not just the process itself but the sort of Royal Mail that we want to emerge at the end of the sale and a clear timetable for action; and, secondly, clear criteria in deciding whether to undertake the disposal. Ministers have made it clear that they would sell to almost anyone. Well, I hope that they will not and that they will show some discretion. They say that they would not sell at any price but give the impression that they would not even obtain an independent valuation, so they will have no benchmark against which to judge whether any offer is too low to accept.
The wording of the amendments might have a familiar ring, but I hope that they will not send the noble Lord, Lord Hunt, racing off to his doctor complaining of another Groundhog Day moment. He need not worry; these are the self-same provisions which the noble Lords, Lord Hunt and Lord Razzall, sought to insert into the 2009 Bill—this is certainly déjà vu—and that were agreed on Third Reading. They were therefore incorporated into that Bill. Imagine our surprise to see them omitted from this Bill, no doubt through some oversight. We simply thought that we would ask why these measures have been omitted and, given their provenance, I am sure that the noble Baroness will have no trouble in accepting the amendment.
The Government have allocated £1.34 billion of funding for the post office network over the next four years of the comprehensive spending review. Fifty per cent is above the social network payments. That is welcome, but what happens in 2015? What happens if a privatised Royal Mail wants to reduce its use of the post office network? After all, we have already witnessed the awarding of one significant contract—the green giro contract—going not to the Post Office but to Citigroup. What happens if there is compulsory competitive tendering for a substantive contract which the Post Office fails to win?
Once again, there are so many unanswered questions. If the Government do not know what the assets of Royal Mail and the Post Office are before moving on to sell Royal Mail or to hand over the Post Office to mutual ownership, they might well sell the people of this country short. That will increase the risk of asset-stripping and of selling at too low a price. That could change the nature of who owns the company and how they run it. Amendment 12A, in the name of my noble friend Lord Whitty, at least seeks to establish a proper record of Royal Mail’s assets in the division between Royal Mail and the Post Office. It also draws attention to the vital inter-business agreement, a subject to which we will return later in the Committee’s deliberations.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, I thank the noble Lord, Lord Young, for his most helpful opening words. Telling me that his intention is to enable those on these Benches to make a better Bill is welcome.
The amendments seek to insert additional reporting requirements into the Bill on the Government’s objectives for a disposal and the principal criteria used for deciding to make a disposal. I believe that the Government have already been very clear about why we wish to dispose of shares and the objectives for such a sale. Like the previous Government, we believe that Royal Mail needs an injection of private capital and disciplines. In addition, we also wish to give the employees the opportunity to own shares in the company. We believe that this, along with the other measures in the Bill, is the best way to ensure that the universal postal service is maintained in the United Kingdom.
When making a disposal, we have already stated clear objectives. These are to secure the future of Royal Mail and to ensure that we achieve value for money for the taxpayer. Clause 2 requires the Secretary of State’s report to state the type of disposal that would be made. Quite broadly, this is likely to be either through a sale by auction or through a flotation. It also requires that the timescale for undertaking a disposal be included in the report.
The Secretary of State would not, especially for the first sale of shares, lay a report before Parliament that had two lines stating, for example, that there will be a trade sale and that it will take place in 2012. We know that Parliament would expect more than this. Indeed, we believe that on the occasion of the first significant sale of shares an Oral Statement is likely to be appropriate. As arrangements have to be made for an employee share scheme before any shares can be sold, the report would also include information on how and when the employee share scheme would be set up.
On the suggestion that criteria for deciding whether to sell Royal Mail should be included in the report, at one level we have already set out those criteria—that Royal Mail is poorly served by the Government as its sole shareholder and needs urgent access to private capital and disciplines to secure the future of the universal services. I have doubts, however, about the inclusion of detailed criteria for a sale in a report before a sale is made. The previous Government’s Postal Services Bill 2009 required information to be provided to Parliament on the criteria for a sale of Royal Mail. However, the report in the 2009 Bill would have been presented to Parliament after an agreement had been entered into to sell shares to a third party. Clause 2 of this Bill requires a report to Parliament before a sale. I hope that noble Lords on all sides of this House will welcome this earlier provision of information to Parliament.
As I have said in response to other amendments that we have debated, it would not make commercial sense for the Government to lay all their cards on the table when entering a commercial negotiation. We will have criteria for a sale, but I see no logic in revealing this before a transaction has taken place. Therefore, I ask the noble Lord to withdraw the amendment.
Lord Young of Norwood Green
I cannot say that we are completely satisfied with the noble Baroness’s response. Nevertheless, we shall reflect on it between now and Report. In those circumstances, I beg leave to withdraw the amendment.
Lord Kennedy of Southwark
“( ) the means by which the name Royal Mail is to be protected and used by the universal postal service provider.”
Lord Kennedy of Southwark
My Lords, I hope that I will get a favourable response from the Minister as my amendment should cause the Government no problems whatever. It has no effect on the thrust of the Bill and its objectives should be welcomed by noble Lords on all sides of the Committee. In the Bill, the Secretary of State is required to lay before Parliament a report on the proposed disposal. Clause 2(3) sets out, on page 2 of the Bill, what the report must state. My amendment would add that the Secretary of State should detail in the report how the name “Royal Mail” is to be protected. Noble Lords might ask why we should do that. The Royal Mail is an institution that can trace its roots back to 1516. Parliament and government should be concerned to protect its name and not to leave that to chance. Royal Mail for me conjures up images of hardworking postmen and postwomen working in all weathers to deliver post to our homes. It is a great brand name.
I raised this issue at Second Reading. I hope that the Minister will not tell me not to worry about this as any new owner would be daft to change the name. However, organisations do daft things all the time. Just because something is right, proper, obvious, reasonable and sensible has never stopped people doing daft things. My amendment would give the Government the power to stop anything daft happening to the name “Royal Mail” and stop it being confined to the dustbin at some point in the future. It would stop another Consignia fiasco happening. No one had any idea what Consignia was. Some people thought that it was a relaunch of a 1980s deodorant called Insignia, not the universal service provider.
The Government have a real opportunity today to stand up for the brand name Royal Mail and protect it for the future. I hope that they will do so.
Baroness Wilcox
My Lords, I fully appreciate the sentiment behind the amendment. The name “Royal Mail” has been synonymous with the delivery of the postal service in the United Kingdom for hundreds of years. In fact, the noble Lord, Lord Kennedy, has told us the date on which it was established, and I can understand why he seeks reassurance that the name will be preserved. However, I have to say that the choice of the name of the company delivering the universal service provider should be a commercial decision for the company and its shareholders. I do not believe, however, that future owners of the company will rush to change its name, because this would not make commercial sense.
I say that because “Royal Mail” is, as the noble Lord said, one of the most recognised brands in the UK, perhaps in the world. There is no doubt that the name is a commercial asset to the company—an asset that potential investors will value; and so will we. It is the Government’s firm belief that any future owners of Royal Mail would recognise the power of the brand, and it would be folly on their part to seek to dismantle such a brand in any way.
Your Lordships will remember the previous attempt to change the name. Once again I repeat the noble Lord’s point; “Consignia” was not a success. It is not a name that you hear mentioned at Royal Mail headquarters these days. As my noble friend Lady Wheatcroft said at Second Reading, the BBC summed up the name change as,
“nine letters that spelled fiasco”.
It would take a brave, or perhaps foolish, owner to seek to change the name again.
Noble Lords will also wish to note that while there might be support for ensuring that Royal Mail continues to be associated with the universal postal service, there are those in the other place who are opposed to a privatised company using the name or the other royal associations currently used by the company. We do not agree and we believe that Royal Mail, as the universal service provider, should continue to be able to use the name and the royal association, provided that suitable safeguards are put in place to ensure that the associations are used respectfully and appropriately at all times. Discussions about these safeguards are ongoing.
I am therefore afraid that, although I greatly sympathise with the noble Lord’s request, I ask him to withdraw the amendment.
Lord Borrie
I would have spoken immediately after my noble friend Lord Kennedy, except that I imagined—wrongly—that there was no answer to his point and that the noble Baroness would give way. It is unsatisfactory that when a sale is to be made, there is no firm or unfirm indication in the Bill that the name will be kept. I suppose that the name “Royal Mail” is protected in one sense, because it is a trademark that no one else can use. Perhaps I was wrong to think that the noble Baroness would adhere to that and say, given the radical change in terms of privatisation, that the name should be protected in more than one sense, not only as a trademark but as a name that cannot readily be altered. We all remember the absurdity of “Consignia”, of which my noble friend Lord Kennedy reminded us. Goodness knows what name someone might think up in the future. People, even heads of business, do silly things in relation to their names. Some of us remember other names that have been changed and had to be changed back again because they turned out to be a complete failure. I ask the Minister to change her mind and at least agree to think further before Report.
Lord Swinfen
Does the noble Lord, Lord Borrie, think it would be appropriate for the name “Royal Mail” to be owned by a foreign company that had bought the postal services—indeed, a foreign company from a republic?
Baroness Wilcox
My Lords, I say to the noble Lord, Lord Borrie, that we intend to put safeguards in place to ensure that the royal associations are used by Royal Mail respectfully and appropriately at all times. We have not yet finalised how these will be structured, but they could, for example, be set out in a legally binding agreement between the company and the Secretary of State. When drawing up such an agreement, we would seek to ensure that the use of the name “Royal Mail” was linked to the provision by the company of the universal postal service, and this would prevent it being used in other circumstances.
I wondered whether someone was going to ask whether there is not the potential for a foreign owner to misuse the royal associations. That was almost the thrust of the question. We appreciate that there might be concerns about the potential for misuse of these associations, and we propose to put safeguards in place to ensure that they are used respectfully at all times. However, this is a commercial transaction and we wish to stop at this point. I am sure that the noble Lord, Lord Borrie, who knows what brand names are all about from his time as director-general at the Office of Fair Trading, will know all the protections that are encompassed around that.
Lord Kennedy of Southwark
I thank the Minister for her response, which I am a little disappointed by but hope she will reflect on. I reserve the right to bring this matter back on Report. I beg leave to withdraw the amendment.
Lord Clarke of Hampstead
“( ) how the Secretary of State will ensure that the provision of universal postal services will be maintained following the disposal;( ) how much of the Royal Mail company’s modernisation budget—( ) has been spent, and( ) remains unspent,at the proposed time of transfer; and( ) what progress has been made towards existing modernisation goals by the proposed time of transfer.”
Lord Clarke of Hampstead
My Lords, I first declare the interest that I declared many times when my party was trying to push through the disposal of Royal Mail. I am a former postman, a former trade union official, a former trustee of the Post Office pension fund, and I have had a few jobs in the Post Office. I am sure that that declaration will suffice as we consider the Bill.
My amendment seeks to add new paragraphs to the part of the Bill that deals with the situation after the Secretary of State has made a decision on the disposal of shares in Royal Mail, and then makes a report to Parliament. My purpose is to require that any report that the Secretary of State may make on the disposal of shares includes the requirements listed in the amendment. It simply asks that in his report the Secretary of State recognises the need for clarity before Parliament is asked to agree to any of his proposals.
The first new paragraph calls for what should be a vital element in any proposal—that there should be a clear understanding of how the Secretary of State proposes to enshrine universal service provision in respect of the new legislation. We have just heard a little about that. The second new paragraph outlines that the necessary information be provided regarding the expenditure of Royal Mail’s modernisation budget and how much of the budget remains unspent at the time of the disposal of shares. Noble Lords who were here a couple of years ago will recall the repeated requests that I and others made for information on what was meant by “modernisation”, what the programme was, and what machines were being talked about. Unfortunately, the Secretary of State at that time did not answer any of those questions. The third new paragraph instructs the Secretary of State to report on how much progress has been made towards the existing goals at the time of the transfer.
Many people would agree that Royal Mail is part of our national infrastructure and cannot be looked at as just another company to be sold off on the Stock Exchange or otherwise. Such a view is shared by me. As the Bill progresses, I shall try very hard not to become too emotional. It hurts me deeply that we are contemplating the destruction of Royal Mail, and it saddens me to the point where I feel that I am witnessing an act of legislative vandalism. When the Minister spoke last week on the first day of the Committee she said:
“I have of course listened to what has been said, and it will of course go on the record. I know that there are Members of your Lordships’ House who would rather that Royal Mail was not sold at all, and I understand people who have been associated with Royal Mail for many years finding all discussions of this sort very difficult, especially having gone through all this a year ago with the previous Government—a Government of their own. Yet that Government, too, could not successfully find a way out”.—[Official Report, 8/3/11; col. 1549.]
I do not know whether the Minister had me in mind when she said that but she can certainly count me in as one of those who are very saddened at what is going on. I would rather Royal Mail was never sold off, and the alternatives should have been examined before rushing into what is happening today.
Before noble Lords opposite remind the House of the role played by the previous Government, perhaps I may say that I and a very few other noble Lords tried to point out the error of their ways at the time. I suppose that a redeeming feature of this Bill is that it is not a direct contradiction of a government manifesto commitment, as was the previous Bill under the Labour Government. It was like a dagger in my heart that the party for which I had worked for so many years proposed to sell off this valuable asset. I am sorry that that Bill ever saw the light of day, especially when my party had promised the British public that they would not make such a sale. I shall say no more on that at this stage.
I believe that this Bill is scant on information regarding the sale of Royal Mail. As the Secretary of State has only to report on his decision, Parliament would merely be noting the sale and would not be able to ensure that it was value for money or that it was in the appropriate format. Later amendments will deal with the need for a proper and thorough valuation of Royal Mail. There is a good argument for ensuring a stronger form of accountability to Parliament by the Secretary of State regarding the terms of the sale. This could be through a variety of methods, including further legislation, the super-affirmative resolution procedure, the affirmative resolution procedure and so on.
The Bill states that the Secretary of State needs only to lay before Parliament a report on the proposed disposal, but unfortunately the requirement to report comes into force only after a decision is made. This seems to close off the opportunity for Parliament to influence how the sale takes place. I hope that, when the Minister replies to this debate, the House will be told exactly what form the report will take. We should consider what the Minister for Postal Services said on the form of that report when he was challenged in the Public Bill Committee in another place. He said that,
“in clause 2, we are putting a requirement on ourselves to report back to Parliament. No doubt, when we debate clause 2, you will want us to do far more than that. I can just imagine the amendments that you will put forward”.
The clause states only that a report will be laid and not how it will be laid. At that time, the Minister was asked whether he intended just to pop it in the Vote Office. He would not be drawn but he did state that,
“there will be a Command Paper”.—[Official Report, Commons, Postal Services Bill Committee, 11/11/10; cols. 126-27.]
A Command Paper, as this House well knows, can cover a multitude of sins. It is a document issued by the British Government and presented to Parliament. It encompasses a wide range of forms, including White Papers, Green Papers, treaties and reports from royal commissions and various government bodies. Therefore, the House is no further forward in understanding the Government’s intention to allow parliamentarians to arrive at an informed decision on the future of Royal Mail.
I am confident that the House will also agree that any decision to sell off part of such an historic and valued organisation as Royal Mail must, at a minimum, be subject to a vote by the people’s representatives on the value of the deal on the table. A Bill would provide the most certain way of ensuring that objective. I stress to the Minister and the House the importance of bringing before Parliament for approval any proposal to sell Royal Mail. As the Bill stands, the only duty of the Secretary of State after deciding to sell is to lay a Command Paper in the Vote Office. Surely we need a little more detail from the Government, as well as a larger commitment from them to report adequately to Parliament on this vital issue. The people of our nation, in poll after poll, overwhelmingly support the Post Office—that is how they see Royal Mail, whether we like the term or not. The public see the Post Office and Royal Mail as the same thing. They deserve better than the cavalier way in which their Government are proceeding.
Would it not be better to accept the need for clarity now rather than face criticism in the future that not enough consultation has taken place and that the proposals have been rushed through Parliament with indecent haste? I said that a few times about the previous Bill that we discussed. The previous Government broke their neck to try to get these things through. I hope we can learn that lesson and not rush this Bill through. I hope that the Government will take the opportunity to ensure that Parliament is properly consulted on the decision to sell a part of the national institution that we all know as Royal Mail.
Lord Skelmersdale
My Lords, as the Committee knows, I look at the Bill from a totally different perspective from that of the noble Lord, Lord Clarke of Hampstead. I look at it from the perspective of a user of Royal Mail and of the universal postal service that is contained within that contract. Wrapped up in the Second Reading speech that we have just heard, the noble Lord, Lord Clarke, makes a very valuable point about the continuation of the universal postal service. I fail to find in the Bill sufficient words to give me confidence that, post the sale, that will continue.
On the other point raised by the noble Lord, Lord Clarke, about the Royal Mail company’s modernisation budget—the second provision in his amendment—the noble Lord caused me to pause and think. When you sell a business, any money that is contained within that business, such as in its bank account, is sold with the business and the price of the business reflects that. Therefore, to whom will the money that remains unspent in the modernisation budget belong? Will it belong to the Post Office or to the Government? Is it a draw-down facility or is it a cash amount? It would be helpful to know. However, if the modernisation goals had been achieved we would not be in this sorry situation, but I am afraid we are.
Lord Hoyle
I pay tribute to my noble friend Lord Clarke of Hampstead. No one else has more knowledge of the Royal Mail and the postal service than him, as he displayed. He may have gone wide of the amendment—he was right to do so—in exposing the history that has led us to this sorry state of affairs. Indeed, he will recall that I was one who supported him and warned of the dangers of going down the road of selling up to 49 per cent—I asked why it would remain there.
Turning to the amendment, I agree that we need to know more about what will happen to the universal postal service. Will it be maintained and in what form will it be maintained? It would be quite easy to destroy the universal service by pricing it out of the market, which is one thing I am afraid could happen as a result of the Bill. Perhaps the Minister could reassure us both on whether the universal service will continue and on whether it will still remain attractive to users of the service, which is equally important. We have had two points of view: one from the person who has been in the service and the other from the person using the service. Perhaps the Minister could provide some clarity. What provision is being made, will the universal service be maintained and will it be prohibitive to use? If it is prohibitive, it will be destroyed.
My noble friend was also right to ask how far the modernisation programme will have gone and how much will have been spent on it. It is a pity that we are where we are because there is agreement between the Royal Mail and all the unions on the need to achieve modernisation; they want it carried forward and the money is available to do it. We need these kinds of assurances. We also need to know what progress has been made towards modernisation and what has developed in the relationship between the present Royal Mail and the unions in achieving that.
It is usual to ask such questions and I know that the Minister has tried to provide us with the answers. I hope she will be forthcoming in this regard. It is not only those who have been involved in the Royal Mail as currently constituted but those who use the service who are asking questions, and they need reassurance. I look forward to the Minister's reply.
Baroness Howe of Idlicote
My Lords, I was present on the previous occasion and listened with considerable sympathy to the noble Lord who spoke, certainly not in support of what the previous Government were doing but from his own immense loyalty and background in the postal service. I remember that well. We all have a duty to reassure ourselves on the point made by the noble Lord, Lord Skelmersdale, that there is nothing that he can see, in the Bill as it now stands, that will guarantee that the service will continue. We are due more clarity on this point and, as many noble Lords have said, we are in a worse situation in many ways than we were before on the financial side. I pay tribute to what the Government have done in their plans to open up the possibility of a better future but some form of reassurance would be welcome.
Baroness Kramer
My Lords, the statements made by the noble Lord, Lord Clarke, expressed the distress that is widely felt and which we all understand. He got to the crux of the matter when he said that a previous Government had liberalised the market in mail without first putting Royal Mail on a secure basis. I agree totally with that analysis. Just as happened with Deutsche Post in effect, Royal Mail should have had private capital brought in in that period to put it on to a secure and thriving basis before the market was liberated. We can see that.
However, I ask the House to be careful that we do not repeat that mistake. Since Royal Mail is bleeding money daily, there is urgency in dealing with the problems facing it to make sure that it survives and that a universal service provider survives. Sometimes in these conversations we might occasionally overlook the reality that if there is no secure financial future for Royal Mail, which requires not just the current very important modernisation programme but steps beyond that requiring considerable additional outside money to establish it as a pre-eminent and effective organisation, the role of universal service provider is indeed in jeopardy. It is making sure there is a successful financial future for this organisation that makes the universal service provider concept viable. Rather than reading this legislation as some sort of attack or as a lack of faith in the universal service provider, I see it as attempting to put into place the structural underpinnings that make the USP a realistic ongoing proposition, because consumers and those who work in the Post Office wish to see that as part of our future.
Lord Brooke of Alverthorpe
I agree with the principal point that my noble friend Lord Clarke of Hampstead made about the universal service. As the House knows, I was one of those who recognised the problem that Royal Mail was facing and who was in favour of substantial capital investment to try to help with modernisation and moving forward, but I was not in favour of 100 per cent privatisation. There is a difference between those who are now expressing concerns in a way that they did not before. The major difference is that we are talking about 100 per cent privatisation as opposed to only a very substantial part of the shares being sold.
My worry is that we could find ourselves in a position where a foreign buyer might already be in the business in a country that no longer has a universal service and that might decide in due course that it will no longer maintain a universal service in this country. That would be very bad indeed for Britain. People are waking up to what is happening in the health service, with the threats and fears that they are starting to see, and I hope that they will start to recognise that while we need change in this area as quickly as we can have it, there have to be fundamental safeguards to meet the wishes of the British people. I hope that they will recognise that there is conceivably a threat at the end of the day to the universal service.
We are governed by European Union legislation in this area to a degree. Originally, the European Union was very much in favour of the retention of the universal service. Bit by bit over the years, the European Union has changed the legislation and has eased its position on it. A number of European countries have now moved from being totally state-owned to 100 per cent privatisation, and in some of them operatives are not required to deliver a universal service. It is quite conceivable that one of those could bid and be successful in purchasing the Royal Mail. I listened to the previous debate and the assurances given by the Minister. She hopes that there will be ways in which we would avoid any such difficulty arising. Ofcom would be involved. Will Ofcom have the right to stop a foreign bidder of the kind that I have just described proceeding with the purchase of 100 per cent, less the employees’ share, of Royal Mail? If so, how would it prevent the universal service disintegrating bit by bit if such a buyer were in possession of the Royal Mail?
Lord Swinfen
Apart from Royal Mail, there are a number of other providers of postal services, none of which produces a universal postal service. They all rely on Royal Mail to deliver the last mile, particularly in remote areas. We need something in the Bill, and I would like the Minister to tell the House how a universal postal service will be ensured by someone taking over Royal Mail. If she cannot, she must bring something forward on Report to ensure that. Otherwise, this Bill is not satisfactory.
Lord Lea of Crondall
My Lords, unless I have read this Bill wrong, Clauses 28 and 29 leave no doubts about the universal postal service. I shall put the question to the Minister the other way round. We are not debating these clauses now, but because the point has been raised it is worth looking at them. Can we take it that they mean what they say?
Viscount Eccles
My Lords, the Postal Services Act 2000 “liberalised” the postal service. There are now, I think, 49 licensed postal operators in addition to Royal Mail, which is also licensed. If that number of people were willing to become postal operators, they must have expected it to be possible to do that successfully. As the noble Lord, Lord Lea, said, the Bill quite clearly states that there has to be a universal service, so whoever buys Royal Mail in whole or in part, wherever they come from, would not be acting in accordance with the law if they did not maintain a universal postal service. That is not really the problem. The difficulty we are in is that we have had an inappropriate regulation system in which the regulator tended to believe that competition was more important than the universal service and acted accordingly.
The problem with the universal service is that it is a monopoly. As noble Lords will have seen from the lobbying that they have had, it has been said that it will become a privatised monopoly. However, it is not a natural monopoly but a completely artificial one. It is not like a railway line or a water pipe. In my part of England, the so-called final mile is absolutely nothing like a final mile but a final 10 miles. It is running about on the roads, which are a public asset and nothing to do with the assets of Royal Mail or the Post Office. There has been confused thinking about whether the so-called final mile is an advantage or a disadvantage. The private operators are trying to tell us in this House that it is an advantage, an asset that enables people to charge monopoly prices. In fact, that is not what has happened. It has been entirely the reverse. The final mile is a disadvantage to Royal Mail. Therefore, in the progress of this Bill, we should concentrate more on regulation and the prospective system of Ofcom than upon anything else.
Lord Razzall
My Lords, I apologise for not being in my place on the previous day or at the beginning of the Second Reading-style speech made by the noble Lord, Lord Clarke, which of course I would have missed at Second Reading because he did not deliver it. Am I not right that this issue should be dealt with under Clauses 42 and 43? I thought that we would talk about the Ofcom relationship to the universal service obligation in relation to those clauses. I am very puzzled that we are having this discussion now. As I have said, the noble Lord, Lord Clarke, made a Second Reading-style speech, and no doubt ranged very widely over the topic.
Lord Young of Norwood Green
My Lords, I support this amendment. At this juncture, I am happy to share the same analysis, if not completely then certainly key parts of it, with my noble friends Lord Clarke and Lord Hoyle. Like the noble Lord, Lord Brooke, I confess that I was not on the side of the angels or the angels as defined by my noble friend Lord Clarke on the previous occasion, but on this occasion I share his analysis.
We and fellow Peers of several party affiliations and of no party affiliation, as we have seen in this interesting debate, have submitted amendments that seek to ensure that the sale of Royal Mail meets four main objectives if it goes ahead. First, it should be done in a timely fashion, which does not present the prospect of an endless cloud of doubt hanging over the future of the company. Secondly, proper measures should be taken to ensure that value for money is gained for the taxpayer and that the company is not sold at too low a price. Thirdly, there should be greater clarity and accountability than the Bill currently provides. Certainly, a number of speakers in this debate have expressed that concern. Fourthly, a privatised Royal Mail should be put on a secure footing and not be subject to the ravages of asset stripping or disintegration, or be doomed to failure because of the circumstances which this Bill creates.
The proposed 100 per cent privatisation is at the heart of our concerns about the future of the universal postal service. At Second Reading, I think that I declared my interests as a former employee of the GPO, albeit at the time when it reigned over telecom as well as postal, and a significant involvement in the union as the company changed from a nationalised company on the telecom side to a privatised company. We are concerned about the future of the universal postal service. I share the points made by the noble Lord, Lord Skelmersdale, on the future of the nation’s post office network.
Private shareholders are more likely to argue that it is unsustainable and too costly, which will undermine the universality of the service. Many rural, distant or sparsely populated areas are costly to reach. I did not agree with every part of the analysis given by the noble Viscount, Lord Eccles, but he rightly reminded us that the final mile is rather a metaphorical term, given that it can be sometimes 10 miles or more. The danger with a totally privatised Royal Mail is that a private company will not necessarily want to invest in a business burdened by a costly universal service. Such a company might lobby the regulator and the Secretary of State to reduce the level of such a service.
My noble friend Lord Clarke was absolutely right to remind us that one potential buyer has already commented in very blunt terms. Noble Lords might recall that the managing director of TNT, Pieter Kunz, said that the universal service obligation was,
“a kind of Jurassic Park and we should get rid of it”.
We are not indulging in a sort of fantasy or paranoia when we draw to the Minister’s attention the view that some potential buyers have of a universal service obligation. The noble Lord, Lord Swinfen, drew to our intention the importance of making this Bill absolutely clear and his concern that it is not clear in its current state.
I was interested in the point made by the noble Viscount, Lord Eccles, about the way in which the regulator functioned in the past in relation to competition being more important than the universal service obligation. He is right. I think that we got that wrong, although it is not fashionable to admit that. While I did not agree with the conclusion made by the noble Baroness, Lady Kramer, that it needed private capital first, I certainly could not help but acknowledge her point about regulation and the way in which it was introduced and functioned.
Lord Razzall
My Lords, before the Minister responds, could I make one point that I think is important? In the context of a number of comments by noble Lords, there is an assumption that the cost of the universal service obligation bears most heavily on remote areas. However, the figures for Royal Mail show that that is actually not true. The real problem does not lie in Orkney and Shetland; it lies in Hampstead and Norwood Green.
Baroness Wilcox
My Lords, we have had a great debate across the Committee, which has been provoked by the noble Lord, Lord Clarke, whose credentials are immaculate in this area. I missed hearing him in the debate on Second Reading because he was not able to be here for it, so we have been able to listen to him today, when he has had the opportunity to put his words on the record. It is a great occasion for us to listen to him. I may not agree with everything that he says, but I believe in the absolute sincerity of what he says, given the background from which he comes.
I share the noble Lord’s desire to ensure that the universal postal service is maintained throughout the United Kingdom and I suggest that that is what binds us all together today. Given that we all want to see the universal service maintained, I suggest that we have no time to waste in getting the finances that we need to ensure that that is possible. It is the overriding purpose of the package of measures set out in the Bill. We need to ensure that the universal service is maintained both for the deliverers of that service and, as we heard, for the customers who need to use it. My noble friend Lord Razzall quite rightly referred to Part 3 of the Bill, which we will discuss in detail in future Committee sessions. It confers on Ofcom a primary duty to protect the universal postal service and gives it the powers to deliver that duty. A disposal of shares in Royal Mail may mean a change in ownership from the public to the private sector, but the obligation on Ofcom to ensure the provision of a universal service will remain.
Lord Skelmersdale
My Lords, perhaps I may briefly interrupt my noble friend. Does that mean that the original purchaser of Royal Mail will be bound by the UPS?
Baroness Wilcox
I think that the answer to that question is yes. In fact I am sure that the answer is yes. The universal postal service is protected by Parliament throughout this regulatory framework, not by the Government’s ownership of Royal Mail. I hope that that gives some comfort to my noble friend Lord Skelmersdale and, if he has the stamina to stay with this Bill through all its stages, I hope that by the end he will feel that he has a lot more comfort than obviously is the case now.
As part of its duties, Ofcom will ensure that the minimum requirements of the universal service as set out in the Bill are upheld. As we know, the minimum requirements are above those set out in the European postal services directive in terms of the requirement to deliver letters six days a week and for a uniform tariff and service to apply. Ofcom is required to report annually to the Secretary of State on its activities, which in future will include how it has performed against its primary duty to ensure the provision of the universal service. The Secretary of State is required to lay that report before each House of Parliament. Therefore, I do not believe that Parliament would be served by an additional report on the future of the universal service at the time of sale.
The noble Lord, Lord Brooke of Alverthorpe, asked what will happen if a privatised Royal Mail no longer wants to provide a universal service. Royal Mail is rightly proud of providing a universal postal service and there is no reason to expect that to change, but in the unlikely event that Royal Mail no longer wishes to provide it, the regulator, Ofcom, will have a primary statutory duty to secure the provision of the universal service and has been provided with the regulatory tools to ensure that the service is maintained. In the first instance, Ofcom would do this by imposing regulatory conditions on Royal Mail that would oblige it to deliver a universal service. Ofcom will also have the power to impose penalties on companies found in breach of the regulatory conditions.
The noble Lord was also concerned that foreign owners could run down Royal Mail. Whoever owns the Royal Mail, as the universal service provider, will still be required to provide that universal postal service. The regulatory regime set out in Part 3 will ensure that. Ofcom, the proposed new regulator, has confirmed that it is satisfied that the powers in Part 3 are sufficient to protect the universal service. We will not let nationalist criteria stand in the way of the right deal for Royal Mail and the taxpayer. Investment is a global business nowadays. For example, around a third of the listed shares in Deutsche Post are owned by UK investors.
The noble Lord, Lord Young, was concerned that a future owner of Royal Mail might lobby Ofcom to reduce the minimum requirements of the universal service. As he will be aware from Clause 33, there can be no such change without an affirmative resolution both in this House and in the other place. This Government have been clear that they have no intention of supporting any such resolution. As we will discuss in later sessions, Clause 33 is a vital new safeguard for Parliament.
Modernisation of Royal Mail is also not directly related to ownership. The company has to modernise whether it is in the public sector or in private ownership. Modernisation does not end with the current transformation plan. If Royal Mail is to succeed and provide our universal service, ongoing modernisation will need to be an integral part of its DNA, so while the current modernisation plan is fully funded, it is clear that Royal Mail will need to go further and faster. Royal Mail therefore requires ongoing capital investment over a long period. Despite the good progress that is being made on the current transformation plans—and here I praise the management and the CWU on that progress—Royal Mail needs upfront cash, which it simply cannot generate for itself at the moment. It needs access to flexible capital, which, given the EU state aid requirements, the Government cannot provide.
Lord Hoyle
Before the Minister sits down, will she answer my point? I said that you could maintain a universal service but price it out of the market by making it unattractive to users because of the price.
Baroness Wilcox
On maintaining the universal service, as I said, Ofcom will be watching like a hawk to make sure that there is a fair balance between Royal Mail and the consumers of the products that Royal Mail produces. Ofcom has had a good reputation in the past and we feel confident that in the future it will do its very best to make sure that all is fair.
Lord Clarke of Hampstead
My Lords, I start by thanking all those who have taken part in what has been a useful exchange of views on a whole range of subjects. Two noble Lords considered that my earlier comments were more suited to a Second Reading debate. I carefully looked at the background to my amendment and tried to draw from my experience to explain how it would affect the clause in the Bill. If I have offended the noble Lords, Lord Razzall and Lord Skelmersdale, I can only apologise.
Lord Razzall
The noble Lord, Lord Clarke of Hampstead, could never offend me.
Lord Clarke of Hampstead
That is a bonus.
I will briefly try to answer some of the points. The noble Lord, Lord Skelmersdale, was the first person to speak in the debate. I recognise that he is a most important person to the people whom I worked with all my working life: he is a user of the Post Office and Royal Mail. Every decent Post Office worker—they are all decent—knows that we rely on customers for our livelihoods. I pay tribute to him because I know from one of my first exchanges some 11 or more years ago that he was in the goods-by-post business. I always respected anybody who did not give work to the cowboys who are trying to undermine the Post Office.
The noble Lord, Lord Skelmersdale, asked how far people have got towards achieving the goals. I think that they have done pretty well. On the first goal, modernisation, there has been a terrific move. The previous Government could never answer questions about walk-sequencing machines, but we have seen those come in. We have seen changes in attendance patterns. There have been reductions in staff. It hurts when a member of staff loses a job. I would never have dreamt that the modernisation programme could have happened in so short a time as the past year or so.
Industrial relations have never been better in all the years that I have known the Post Office. There is a genuine desire to lift the Post Office and the Royal Mail in particular from the reputation that they were getting that they could not do their job. It is much easier now because there is only one delivery and you might get that in the afternoon. The rules have been changed, so there is bound to be some progress.
One thing that came out of the Hooper report, as has been said many times in previous debates, was the need for expertise in management. Everyone in the Committee will recognise the tremendous influence that Moya Greene has brought from running a big post office network in Canada and using that expertise to help us. Some of us were arguing two years ago that expertise could be found not necessarily in the board members of TNT, Deutsche Post or Federal Express. We found somebody worthy of being the chief executive and I pay tribute to her for the way in which she has welded together various different views.
I thank my noble friend Lord Hoyle for his support. He was one of the two or three of us who sat here night after night trying to get the previous Government to understand where they were going wrong. The noble Baroness, Lady Howe, asked for clarity. That is really all that the amendments seek. What is the intent? Let us have some detail.
The noble Baroness, Lady Kramer, whom I have not had the pleasure of meeting personally, made an important point about the need for private capital. It has been required for more than 40 years. That is why in my maiden speech in this House I said that we needed access to funds so that we could have automatic letter facing machines and optical character recognition—things that we were desperately trying to get hold of but were stopped by political interference. The external finance limit was always there to prevent us from getting the money that was needed. She is right. This is urgent and it will not stop when this present programme is over. It must keep on going to be successful. I thank her for illustrating that point.
My noble friend Lord Brooke talked about the European Union, but the less I say about that the better. I have perhaps said too much before about the way in which the Government stampeded into liberalisation without thinking it through. They told the world that we would have a Post Office fit for the 21st century. That was Stephen Byers, but I will not abuse this House by going back. I say to my noble friend Lord Brooke that the sooner we start thinking about the British Post Office and the British Royal Mail, the better for all of us, instead of looking over our shoulders at what other people are doing.
The noble Lord, Lord Swinfen, also talked about clarity and the need to be clear about what we mean when we talk about the universal postal service.
The noble Viscount, Lord Eccles, talked about the inappropriate regulator and the 40-odd private people who are competing for Post Office work. I am surprised that there are not 140 when they have been subsidised by Royal Mail all these years. The noble Lord, Lord Razzall, mentioned the regulator, although I did not introduce it in this sense. The new regulator must start thinking about this issue. The question is not whether this is about Hampstead or Norwood Green. There are parts of Hampstead where you could talk about the final mile, such as North End or Spaniard’s End. You could talk about the places where it takes a lot of time to deliver, such as the 140 flats in South End Close with 1,400 steps to climb. This was not discussed in the Second Reading debate, but as it has been introduced here I have a chance to respond. Thank you very much. As for Tony Young—I mean my noble friend Lord Young—it is wonderful to be on the same side as my own Front Bench. I am pleased to find that he is giving support for these measures.
I am sure that I am leaving out a lot of people, but I address my final remarks to the Minister. I thank her sincerely for her kind words. I know that every endeavour will be made to find accommodation as we go through this Bill. I recognise that she has a bit of a job on her hands, as there are so many competing interests out there, as well as in here. I just wanted to say thank you very much, because it has been a good debate. I shall reflect, as the Minister asked me to do, and I beg leave to withdraw the amendment.
“( ) that the receipts of the sale will be used exclusively for the purpose of investment in the Post Office network of branches and future investment in the delivery of the universal postal service by a Royal Mail company in so far as permitted by applicable competition and state aid regulations.”
Lord Stevenson of Balmacara
My Lords, the purpose of this amendment is to ensure that the proceeds of any sale of Royal Mail are invested in the post office network and the delivery of the universal postal service. In our debate in this House at Second Reading, the Minister explained what would happen to the assets of the pension scheme at transfer. She said:
“The cash transferred to Government will be transferred to the Consolidated Fund, gilts to the Debt Management Office and the remaining assets—stocks, property, et cetera—will be transferred to a newly created government fund. They will then be sold in a measured fashion, with cash proceeds from disposals going to the Consolidated Fund”.
Do you not love that “measured fashion”? It summons up an honourable Dickensian clerk selling fusty bills of exchange for gold coin. Measured fashion—what are they talking about? What century are they in? The Minister promised the Government,
“will be entirely transparent about the effect of these transfers throughout the government accounts”.—[Official Report, 16/2/11; col. 776.]
Despite the words and despite my rather wild fantasy, the proceeds are going back directly or indirectly to the Treasury. There is no doubt about that at all.
There is always a presumption that the Treasury will be the beneficiary of privatisations, but surely this should not happen to the proceeds of the sale of shares in Royal Mail. In 2009, the previous Secretary of State stated to this House that,
“the Government intend to use the money received from the minority share sale to benefit Royal Mail Group, including Post Office Ltd”.—[Official Report, 31/3/09; col. 970.]
In answer to the Business Select Committee, the previous Government also made it clear that the proceeds of any partial sale would be ploughed back into the postal business and used to fund modernisation. The Liberal Democrat manifesto was quite clear in proposing that the proceeds of the sale should be invested in the post office network. Royal Mail itself has stressed the need for investment in the post office network. Moya Greene has estimated the need to have £2 billion of investment over the next few years. As for the post office network, there is a great deal to be done to bring many post offices up to date and ready to survive in a fast-changing world.
We would all agree that the post office network is a suitable candidate for investment within the Royal Mail group. To the extent that they have provided £1.34 billion for the network, the Government seem to agree. However, if it emerges that the Government do not intend to reinvest the proceeds of the sale back into the business, that sheds a different light on the claims that they have made about the £1.34 billion. We know that half of this is fulfilling the programme of social network payments introduced by the last Government to support loss-making but socially valuable post offices such as those in rural areas. Surely we would all agree with this. The rest is set aside for investment in the post office network, including converting 2,000 sub-post offices into post office essentials or post office locals.
Noble Lords may be aware that such provision is itself becoming an area of controversy. There are certainly concerns among sub-postmasters, who have been drawing to our attention that some of this money is being set aside for temporary compensation payments to smooth the transition of sub-postmasters into either into the new model or out of the business altogether. This is associated with what they fear may mean a substantial fall in guaranteed or actual income, according to what we have heard from sub-postmasters. Be that as it may, if the receipts from the sale of Royal Mail are handed over to the Treasury rather than reinvested in the business, it will be a sad day for our post office network and all those working in them. We ask that the proceeds of any sale should be reinvested in the postal business. Insofar as this requires European state aid approval, it should be cleared in parallel with the pension fund deficit action.
The Minister has reminded us of the stark future facing postal services as letter writing declines and electronic communications grow. Royal Mail may be able to manage these changes under new ownership, presumably through economies of scale and what is called “managed decline” to match reducing turnover in the core business. But the issues facing the Post office in the future are of a different category altogether, and they will get worse if there is no long-term interbusiness agreement with Royal Mail and if the Government do not commit to use the Post Office for face-to-face transactions wherever possible in their business. We of course understand the pressure on Ministers in relation to this issue from the Treasury, but our point is that there is also a case for investment in our post office network. This probing amendment will allow the Minister to place on the record the Government's intentions regarding the proceeds of any sale of Royal Mail.
The post office network has been umbilically linked to Royal Mail for so long, that it is hard to envisage how it will transform itself when it is separated. Mutuality is mentioned in the Bill, but although we welcome that idea, mutuality of its own does not materially affect the question of how many thousand small businesses are to rethink and re-engineer their shops and businesses. How will they up their footfall, redesign their product lines, introduce efficiencies and harness the new technologies? All this will take money—far in excess of the £1.34 billion already provided—so the post offices need the proceeds from the sale of Royal Mail. I beg to move.
Baroness Wilcox
My Lords, Amendment 12 wishes to direct any proceeds received from a sale of shares to investment in the post office network and the universal postal service. I certainly agree that the both the Post Office and the universal service require long-term funding certainty if we are to secure both their futures, but I cannot agree at this stage that the proceeds of a sale should be used for either of these purposes. For a start, it is too early to estimate the potential proceeds from a sale, and too early to estimate where the proceeds should most sensibly be used. But the Government will, of course, look to use the proceeds that they receive to part-compensate the taxpayer for taking on the £8 billion deficit in the Royal Mail pension plan.
The Government absolutely recognise that investment is required in the post office network. That is why, as noble Lords will know, we announced last November a funding package of £1.34 billion for the post office network over the spending review period—a package that will be used to put the network on a sustainable footing, not to fund a programme of closures as the previous Government chose to do. We made this upfront commitment to fund the post office network precisely because we recognise its importance to communities across the UK. Funding for the network should not be dependent on the sale of shares in Royal Mail.
The primary purpose of the package of measures in this Bill is to secure the future of the universal postal service. This package will give Royal Mail access to the flexible capital that it needs to modernise and adapt to a changing postal market on a continuous basis. It will reform the regulatory regime with an increased emphasis on the protection of the universal service and remove the burden of Royal Mail’s historic pension fund deficit.
We will come on to discuss the detail of Part 3 in later sessions, but I draw the attention of noble Lords to Clause 28(3)(a), which requires Ofcom, in performing its duties under this Bill, to have regard to the need for the provision of the universal service to be financially sustainable. This is a vital new requirement on Ofcom, which was not in the 2009 Bill. The Government therefore believe that securing the future of Royal Mail by giving it access to private capital and establishing the right regulatory framework is the best way to support the universal postal service.
During the passage of the 2009 Bill, the previous Government resisted an amendment that would have required the Secretary of State to report on the Government’s intentions for the proceeds from a disposal of shares. In rejecting the amendment, the noble Lord, Lord Mandelson, undertook to inform both Houses how the payment for shares would be distributed. I am happy today to give the same undertaking for this Government. I therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for her response, which is rather depressing in its rejection of our proposal.
My reference to the pension deficit fund dealt with the assets. Tagged on to the end of that discussion was a comment that, in return for obtaining the assets, the Government were also acquiring the liabilities. I am not sure that that is an exact parallel. As I understand it, the assets are real and, even if sold in a measured way, will generate cash for the country which will go to HM Treasury, but the liabilities are ongoing. If I am right, the main pension responsibilities will be met on a pay-as-you-go basis. We are comparing apples with pears. One is a substantial reduction in our deficit position; the other is admittedly a long-term commitment but does not need to be capitalised on the resource accounts. Although I accept that £8 billion is a substantial sum of money, it does not really come into the question of whether the funds from the sale of Royal Mail should go back into the Post Office.
Secondly, the £1.34 billion package—which, as I mentioned, is both a continuation of work started under the previous Government and a commitment on behalf of the present Government to ensure that the Post Office is retained on a sustainable footing—is also a mixture. As I tried to say, the evidence is that it seems to result in a reduction in the number of post offices and certainly a change in the nature of post office services very similar to that which was available before.
My third point is that, without a proper package of business activities, there is no way that the Post Office can survive, however it is organised. It is depressing to read that the latest contract for services which could have gone to the Post Office from government has been given to Citigroup to operate. I suspect that that is only the first of a number of difficulties facing the network in future.
However, this was a probing amendment. The Minister has been kind enough to share her answer with us. I beg leave to withdraw my amendment.
Lord Whitty
“( ) a schedule of assets held by Royal Mail Holdings plc and used for the provision of directly managed Post Office branches which also details—(i) a schedule of those assets which will be transferred to the Royal Mail company;(ii) a schedule of those assets which will be transferred to the Post Office company; and( ) the terms and duration of the Inter-Business Agreement between the Royal Mail company and the Post Office company.”
Lord Whitty
My Lords, this is a fairly straightforward amendment, and I am sure that the Government will have no great difficulty in accepting it.
The noble Baroness will know that I have expressed some scepticism about the changes of ownership proposed by the Government. However, I have supported the proposals by both the previous Government and this one to unravel the status of Post Office Ltd from that of Royal Mail. It is important that we do that on a basis which is transparent and clear and which can therefore be the basis for future financial arrangements and effective and robust services to consumers of Post Office services, on the one hand, and Royal Mail logistics on the other.
Both new paragraphs to subsection (3) relate to the requirement on the Secretary of State to produce a report, as set out in subsection (2). The first, which would be new paragraph (c), requires transparency on the allocation of assets. My concern is that, because of the slightly blurred position between Post Office Ltd, Royal Mail Group and Royal Mail itself, the assets of Post Office Ltd are not as clearly recorded but must be at the point of transfer and unravelling the two parts of the business. I am particularly concerned because Post Office Ltd’s property portfolio consists mainly of Crown post offices, directly administered branches, mostly located in city centres and prime locations. That is the reason for my suspicion.
Before Parliament endorses any report from the Secretary of State, it must know that the full range of assets from Post Office Ltd is to pass across to the new sector—which, initially at least, will remain a publicly owned body. Therefore, that list of assets must be complete and where there is doubt—because some sorting offices are attached to Crown post offices; and there are other complications—the assets of Post Office Ltd must be clearly delineated and not by stealth handed over or promised to any potential investor in the Royal Mail side of the business. My suspicions may be entirely groundless, but there can surely be no argument that the schedule of assets should be clear to Parliament before it makes such a decision.
The second paragraph of my amendment is probably more substantial. If we are to unravel the two businesses, it is important that the relationship between them is understood by Parliament before it gives its decision in principle. That is complicated. The inter-business agreement between Royal Mail and the Post Office is long-standing and there are a lot of inferred obligations on both sides. It is important that the Government commit to the maintenance of an inter-business agreement. The Government have previously indicated that a renegotiated inter-business agreement will take effect prior to separation coming into force. Before that, Parliament must understand what the principles of that agreement will be and whether they will reflect the current relationship between Royal Mail and Post Office Ltd or whether they are to be modified.
Some within the Post Office would argue that Post Office Ltd has hitherto been a rather junior partner in that relationship and we want to ensure that both parties to this division, this partial divorce, are on a robust basis. It is therefore important that Parliament should understand that; that the principles should be set out in the report; and that the duration that the Government are requiring the parties to stick to is clear. There are different conclusions between a short IBA and one which lasts a number of years. Clearly, there needs to be some process for modification as times change, but we also need some certainty about the nature of the relationship.
Those are not unreasonable requirements to include in the report, and I therefore hope that the Government will at least accept the principle of the amendments. I beg to move.
Baroness Kramer
The comments of the noble Lord, Lord Whitty, arouse some questions in my mind, and this seems the appropriate time to raise them with the Committee. In an earlier Committee debate, several Members of the House talked about how important it is that the Minister’s report comes as soon as reasonably possible after he has made his decision—which, of course, is well ahead of the disposal itself. I am concerned that the proposal of the noble Lord, Lord Whitty, today does exactly the opposite. It militates in the direction of forcing the report to be delayed until much later.
An asset register—so that we know which assets will go to the Post Office and which to Royal Mail—is obviously desirable, but we can be reasonably sure that for about 80 per cent or 90 per cent of the assets that will be obvious. There will be others where it is exceedingly complex and where it may take years to unravel who is the legal owner. There will have to be some sort of agreement between the parties on how that process is to be managed. I would expect that to come in the detailed negotiations between the various parties, not immediately after the Minister's decision. There could be a very long delay if we place that requirement on the report.
On the inter-business agreement, again, general terms have already been laid out in the Bill. The purpose of the Bill is to make sure that the inter-business agreement is for as long as is legally possible, but we work with the knowledge that the arrangements will have to be sorted out in detailed negotiations between the parties. That, too, would substantially delay the report to this House. I stress a point at which the noble Lord, Lord Whitty, perhaps hinted: this is not a simple matter of saying that we should keep the inter-business agreement in place for the next decade or so. I have heard many complaints, from various parts of the Post Office, at how restrictive is the current agreement and how it prohibits them entering into various kinds of business which are necessary to make them sustainable.
There are highly complex aspects to all this. While we can expect general principles to be discussed in any report, if we start putting into it great commercial and negotiating detail, we delay it and it becomes something that we see after, rather than before, the fact of the disposal. I believe that it is the preference of this Committee to see the report before the disposal and not after it.
Baroness Drake
My Lords, the Minister in the other place, the honourable Ed Davey, has tried on several occasions to reassure stakeholders by arguing that both Royal Mail and the Post Office want an extended inter-business agreement. In Committee, he said:
“I refer the Committee to what the chief executive of Royal Mail, Moya Greene, and Donald Brydon, the chairman, said. Moya Greene said it was unthinkable that there would not be a long-term relationship between Royal Mail and Post Office Ltd. Donald Brydon said that he wanted to have the longest possible legally permissible agreement”.—[Official Report, Commons, Postal Services Bill Committee; 11/11/10; cols. 121-22.]
Those are wonderful and fine sentiments. The only trouble is that the current board cannot bind a wholly privatised Royal Mail board. Noble friends have said that Moya Greene is a very impressive figure and a great asset to Royal Mail. Having met her, I wholly agree. However, she cannot speak for the board of a new owner whose identity we do not yet know. It is wonderfully reassuring that the existing CEO and the chairman have such positive sentiments, but they are not necessarily translatable into what will effectively be an agreement between the Post Office and any new owner.
If one looks at the Bill and the statements that the Government have made, one sees that, as things currently stand, a privatised Royal Mail has little obligation, nor is it required as part of any terms of sale, in principle or in detail, to be bound to any obligation towards the Post Office beyond the current inter-business agreement.
Many people are anxious to extend the agreement significantly beyond the current five years because there is no firm confirmation that it will be so extended. At the point of sale—because one has no idea how long it will take to negotiate and confirm the details of a purchase—there may be only two to three years left on the existing agreement. The situation could be even more insecure, therefore, because at the point of confirming the sale the Post Office may discover that its fortunes are not well favoured and have only a limited time to deal with that.
As far as I can see—I am sure that the Minister will correct me if I am wrong—the Government have to date refused any amendment that would guarantee a continued relationship between the two businesses. They have suggested that there are legal difficulties in legislating on an inter-business agreement, but they have neither detailed why such legislation would be illegal nor defined what is the longest legally permissible period for any inter-business agreement. More to the point of the noble Baroness, Lady Kramer, who said that we should not get into the detail but take command of principles, nor have the Government said anything about whether a renewed agreement or a sustained relationship with Post Office Counters beyond the five years of the current agreement would be a condition of sale, or whether there would be an expectation that any bidders would make submissions as to the relationship with the Post Office.
In reality, there are very few safeguards for keeping the Post Office contract for the long term. As things stand, it is entirely conceivable that, just a few years down the line, there will be a post office network where you cannot undertake mail transactions. That is simply a proposition of possibility under the terms of the Bill. A privatised Royal Mail will be free to cherry-pick, as my noble friend Lord Clarke said. It could select a supermarket chain to meet its requirement in urban areas, with the Post Office picking up, if it was able to, the slack in rural areas where no one else wanted to compete to deliver the service. That would have serious implications for the viability and integrity of the network.
I refer to the very appropriate comments of the noble Lord, Lord Dobbs, in his maiden speech at Second Reading, who captured the point far better than I could. He said:
“In many rural areas, far from the post office subsidising the shopkeeper, it is the shopkeeper who is now subsidising the post office”.—[Official Report, 16/2/11; col. 732.]
This is not careless speculation on my part, because I think that it is highly possible that a private owner would take such an approach. No access criteria are laid down to which a privatised Royal Mail would need to adhere specifically in relation to post offices. This is important for the small business community, which makes an important economic contribution in sustaining employment in key areas. Fifty-nine per cent of small businesses use post offices at least once a week and 77 per cent use them to send their parcels. Perhaps I may therefore put two questions to the Minister. First, what exactly are the legal constraints on extending the five-year inter-business agreement? I may be able to speculate on the legal restraints on an unlimited extension, but I am not at all sure what they are on extending it. Secondly, why are the Government not confirming that maintaining a business agreement with the Post Office for at least a further five years beyond the existing agreement is a defined provision within the terms-of-sale agreement or invitation to tender that potential bidders would have to address? It strikes me that if everyone is saying that they are so committed to Post Office Counters, one would welcome such a commitment to that being in any documentation prepared, or terms set, for potential bidders.
My noble friend Lord Whitty expressed concern about who owns the assets and how they will be allocated. If the Post Office has to compete in a world where the Royal Mail is privately owned, its ability to do so will be heavily influenced by the assets on its balance sheet at the point of separation of the businesses within the post offices.
I noted that in the Second Reading debate in the other place, the honourable Mr Ed Davey, the Parliamentary Under-Secretary of State in the Department for Business, Innovation and Skills, argued that,
“a privately owned Royal Mail will not act against its own commercial interests. It will not give up valued retail space in the heart of communities the length and breadth of Britain”.—[Official Report, Commons, 27/10/10; cols. 426-27.]
He is no doubt correct that a privatised Royal Mail will not act against its own commercial interests and that it will not give up valuable retail space, but he could be incorrect in supposing that its commercial interests will necessarily lie with the Post Office. When the honourable gentleman says,
“It will not give up valued retail space”,
one has to ask whether he has taken a view as to whose retail space it is to give up. If the Crown Office estate is to be with the Post Office, it is not the Royal Mail’s to give up but Post Office Counters Limited’s to sell. My noble friend Lord Whitty is quite right to be concerned that there should be visibility as to who owns which assets at the point of sale.
Lord Skelmersdale
My Lords, I tend to agree with my noble friend Lady Kramer on this. Although what comes out of the discussion on this amendment will be valuable to our future discussions, as it is it rather puts the cart before the horse. As far as the noble Baroness, Lady Drake, is concerned, I will ask my noble friend one question, if she will deign to answer it. Quite clearly, from what she said in our last exchanges, she has as high an opinion of me as I do of her. The Government have a policy of supporting post offices and it is quite clear that this is what they intend. The inter-business agreement—currently lasting five years, as the noble Baroness, Lady Drake, has just said—is one of the ways in which post offices are supported. Should her worst fears be realised and there is no future inter-business agreement at the end of the five years, does my noble friend think that the policy of supporting the post offices will continue to be self-sustaining?
Lord Stevenson of Balmacara
My Lords, I support the amendment in the name of my noble friend Lord Whitty. A couple of noble Lords have suggested that these discussions, particularly in relation to the assets, are putting carts before horses but I am not sure about that. We are really talking about the transfer schemes that are referred to in Clause 8 and Schedule 1. Those are clearly mammoth undertakings, which will take a lot of time, so while I understand the points being made that they should not be in a position to hold back the main purpose of this Bill, they really do underpin it.
The Post Office is a massive enterprise. The business has revenue of £838 million with a profit of £72 million and employs more than 8,000 staff. There are nearly 12,000 post offices, of which 500 are outreach services and 10,000 are sub-post offices. That network, taken together, is bigger than all the bank and building society branches put together so we know that its scale will require a lot of attention. It would be rather surprising if some work was not already being done in that way. First, it is necessary to identify the assets, then to get into the complicated task of disaggregating the parts of those assets which have to go to Royal Mail and the parts which have to go to Post Office Ltd.
It is, of course, not just a question of assets. I am sure that the Minister will want to refer to this; quite a lot of the Royal Mail’s outstanding loans, including the modernisation loan from the Government, are secured against the assets. What effect will the splitting of the assets have on that and how will that be moderated as we move forward? Then there are the normal activities that one would expect in this sort of process about headquarter costs and shared administrative functions, which will be hard to disentangle—particularly where premises and the supervision of Royal Mail activities take place on Post Office premises.
Baroness Wilcox
My Lords, Amendment 12A seeks to require the Secretary of State to include in his report to Parliament details of the assets held by Royal Mail Holdings plc and asset transfers between Royal Mail and Post Office Ltd. It also requires the Secretary of State to report on the terms and duration of the inter-business agreement between Royal Mail and Post Office Ltd. Currently, Royal Mail Group Ltd and Post Office Ltd each already own the vast majority of the assets they require to carry out their own business. However, it is likely that some residual asset transfers will need to be carried out before any disposal of Royal Mail shares is completed. That is why the Bill contains the transfer scheme powers set out in Clause 8 and Schedule 1. These powers give the Secretary of State ultimate control over which assets sit with what company.
However, there is no set timetable for the transfer of these assets. That may be taken forward before a decision has been made to undertake a disposal of shares in Royal Mail, or it may happen after. If the latter is the case, the Secretary of State would clearly not be in a position to provide details in his report to Parliament as required by Clause 2. Relevant information relating to a transfer of assets will, however, be set out in the transfer scheme or schemes made under Schedule 1. Transfer schemes may impact on third-party contracts and agreements with Royal Mail and Post Office Ltd. I therefore assure the Committee that details of the schemes should and will be made publicly available.
On the ongoing commercial relationship between Royal Mail and the Post Office, there was significant debate in the other place about the inter-business agreement—the IBA—particularly about its duration. The Government’s view is that legislation is not the appropriate place for the commercially sensitive terms of a relationship between two independent businesses to be settled. Contractual negotiations between these businesses will involve a complex interaction of many different factors—such as pricing, volume, service levels and duration—and such negotiations would not be improved by government intervention.
The noble Baroness, Lady Drake, was concerned that the current board of the Royal Mail cannot bind the actions of a future, privately owned Royal Mail. I am afraid that I take a different view on that. Any legal agreement entered into by Royal Mail will remain legally enforceable for its duration whoever owns the company. The Government have been clear that we will ensure that the chairman of Royal Mail fulfils his commitment to Parliament to conclude the longest legally permissible agreement with the Post Office before the two companies are separated.
The noble Baroness, Lady Drake, also asked about the legal barriers to including an inter-business agreement of 10 years in the Bill. Legislation requiring an exclusive arrangement between Royal Mail and Post Office Ltd for, say, 10 years would face significant risk of legal challenge for being incompatible with competition law. Guaranteeing a revenue stream to the Post Office would also face the risk of a successful state aid challenge. It is important to note that a successful state aid or competition law challenge to the Post Office’s commercial relationship with Royal Mail that struck down the contract would present a serious threat to the Post Office network.
My noble friend Lord Skelmersdale asked whether the Post Office would be self-sustaining if the inter-business agreement ended. As I said, the chairman of Royal Mail has been clear that he has no intention of letting it end.
I am well aware that the House, like the other place, is in need of reassurance regarding the ongoing relationship between the two companies and the future of the post office network. I note the comments of my noble friend Lady Kramer, who voiced her concerns in that area. I hope that I will be able to provide further reassurance on those issues when we discuss Clauses 4 to 7, which relate to the future ownership of the Post Office. If the noble Lord is content, I therefore ask that he withdraw his amendment so that I can give the matter further consideration after all the issues have been discussed in full.
Lord Whitty
My Lords, I thank the noble Baroness, particularly for her last few sentences; clearly we may well come back to the matter on Clause 4. However, I did not find the rest of what she said very reassuring.
I am grateful to the noble Baroness for referring to the legal difficulties on the inter-business arrangement. However, there are different legal opinions on it. If it is primarily the Government’s view that an ongoing agreement would run up against both state aid and competition laws, before we complete consideration of the Bill it would be helpful to have an opinion that spells that out in writing. The question asked by the noble Lord, Lord Skelmersdale, is absolutely pertinent to this. If a legally defensible agreement between Royal Mail and Post Office Ltd could not be sustained in law, how can that be compatible with the Government’s very clear—and, frankly, very political and public—commitment to maintaining a post office network of roughly this size? I do not think it is possible to square that circle, which raises deeper alarms than I had when I tabled the amendment. I am certainly not arguing that the inter-business agreement in its present form should last for ever, but both Houses of Parliament will need to be reassured as to which principles of that agreement the Government will see sustained through the ongoing relationship between the two parts of what is currently the Royal Mail Group. I hope that we get greater clarification when we move further into the Bill but, if anything, this short debate has alarmed me more.
I have also been alarmed more on the assets; I am not sure that the Minister alarmed me, but the noble Baroness, Lady Kramer, definitely did. She effectively said, “We can’t set out in the report to Parliament”—the trigger for giving the go-ahead to the Secretary of State—“what assets we are and are not privatising”. In previous privatisations, on occasions there have been huge schedules about that. We do not have such a schedule attached to the Bill, and I do not propose that we do. There may be some obscurities attached to that schedule, in which case some footnotes may be needed.
Baroness Kramer
I fear that the noble Lord, Lord Whitty, may have misunderstood me; I obviously was not clear. If I remember correctly, the report comes after the Minister has taken the decision but before the actual disposal. After the fact of the disposal—that is what the noble Lord is now discussing—a clear schedule would be available. However, we are talking about a report to Parliament, which most of this House welcomes, coming at a far earlier stage than is normal.
Lord Whitty
But, my Lords, the report to Parliament provided for in Clause 2 is a necessary stage for the Secretary of State to go through before the disposal actually takes place. I agree about the decision in principle; I do not seek to delay that or take things out of sequence, but when Parliament discusses the report it needs to know what is and is not being privatised, at least in broad terms. The reasons for not saying so that the noble Baroness adduced—that we could not do so until we saw the final details of the negotiation—really alarmed me; as I said in my opening speech, there are some pretty good assets here. If a negotiation went on whereby the decision of the putative buyer was rather marginal as to whether it went ahead, and someone said to it, “Okay, we’ll throw in a couple of dozen prime-site Crown post offices in our major city centres. Does that make it any better?”, that would cause all parliamentarians a degree of alarm. Therefore, if the register of assets is dependent on the negotiations, we have something to worry about. I would have thought that the Government ought to know pretty clearly which assets go on one side of the line and which are on the other already, although they may have to sort out one or two things. If it is subject to negotiations, and if any premises that have a faint double usage by the two parts of the business could go into the bundle offered to the incoming investor taking over the Royal Mail side in whole or in part, the viability, the effectiveness and the asset base of the Post Office Ltd side of the business come into question again.
I hope that we return to those issues. I come out of the debate somewhat more alarmed than I went into it.
Social Security Benefits Up-rating Order 2011
(13 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Freud
That the draft order laid before the House on 3 February be approved.
Relevant documents: 16th Report from the Joint Committee on Statutory Instruments.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I also speak to the draft Guaranteed Minimum Pensions Increase Order 2011. I am satisfied that the orders are compatible with the European Convention on Human Rights.
The Guaranteed Minimum Pensions Increase Order provides for contracted-out defined benefit schemes to increase their members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 3 per cent. Such increases are in line with the growth in prices or 3 per cent, whichever is the lower.
The uprating order embodies two notable changes this year. This is the first uprating after the restoration of the earnings link for the basic state pension, and the order introduces a clear and consistent approach to price measurement with the move to the consumer prices index, thereby putting the annual uprating of social security benefits on a sustainable footing for the future.
I know that noble Lords will welcome the coalition Government’s immediate fulfilment of the promise to restore the earnings link for the basic state pension. Not only that, but we have also given a triple guarantee which means that the basic state pension will be increased by the highest of earnings, prices or 2.5 per cent. As a result of those actions, it is estimated that the average person retiring on a full basic state pension in 2011 will receive £15,000 more in basic state pension income over their retirement than they would have done under the old prices link. Through these policies for the basic state pension, we will provide a solid financial foundation for people’s retirement income.
The basic state pension goes to more than 11 million pensioners in this country, and is the most efficient and equitable vehicle for distributing resources to pensioners. From this April, the standard rate for the basic state pension will increase by 4.6 per cent. That means an increase of £4.50 a week, taking the weekly rate from £97.65 to £102.15. This is in line with a promise made at the Budget to increase the basic state pension in line with the retail prices index in 2011. In subsequent years the triple guarantee, with the consumer prices index used to measure prices, will apply.
In the other place, there was an accusation that we have had to override the triple guarantee this year because the relevant CPI figure—3.1 per cent—would have resulted in too low an increase. This is not the case. We made a promise to increase the basic state pension in line with the RPI in April 2011 if it showed the highest growth. It did, so that is what we are doing. There is no override here; we are simply fulfilling a promise. We have also ensured that our poorer pensioners see the benefit of the increase in the basic state pension by ensuring that the standard minimum guarantee in pension credit rises by at least the cash increase for the basic state pension this year. Therefore, from April 2011 single people on pension credit will receive an above-earnings increase to their standard minimum guarantee of £4.75, which will take their weekly income to £137.35. For couples, the increase will be £7.30, taking their new total to £209.70 a week.
I will now turn to the second notable change I mentioned; namely, the switch to the consumer prices index as the measurement of prices for benefit and pension uprating. This is not the first occasion on which we have discussed the CPI and it will not be the last. Indeed, we will be returning to it tomorrow in our deliberations in Grand Committee on the Pensions Bill. Nonetheless, I hope noble Lords will permit me to take this opportunity to outline our thinking on the matter again. It has been said before but bears repeating that the purpose of the annual uprating exercise is to ensure that the purchasing power of social security benefits is protected against inflation. It is not to give the highest increase possible.
We believe that the CPI is the most appropriate measure of inflation and one that is fair to the taxpayer. As the Chancellor announced at the Budget, the move will save almost £6 billion a year by 2014-15. We do not claim that it is a perfect measure of inflation, but it is the most appropriate and is the measure used by the Bank of England to measure the general level of price inflation. The key difference between the RPI and the CPI is the so-called formula effect. Put simply, the CPI is calculated in a way that takes account of the choice available to consumers who can trade down to, or, in the jargon, substitute cheaper goods when prices rise. RPI is not and arguably overstates inflation as a result.
A basic principle of economics is the law of demand, which states that, all other factors being equal, a rise in the price of a good will cause consumption to fall and vice versa. A key driver of this is substitution: as prices rise, consumers will substitute away from higher-priced goods, choosing less costly alternatives. Substitution can occur in different forms. There can be substitution among brands or types of products, such as brands or types of ice cream; across different store outlets and across time. This is known as elementary or lower-level substitution. There can also be substitution among items in different product categories—such as between ice cream and cupcakes, or bus rides and train rides—referred to as substitution at higher levels of aggregation.
The geometric mean in the CPI is used only at the elementary aggregation, or lower level. There is no higher-level substitution assumed. A good way to think about substitution is to employ the concept of elasticity. Price elasticity is a measure of how responsive demand is to changes in price. Higher-price elasticity means that small changes in price lead to a large shifts in demand and vice versa. Where a good is described as having unit elasticity, a 1 per cent rise in price will lead to a 1 per cent fall in consumption and vice versa. This is a common way to represent demand behaviour in economic literature, in the form of the Cobb-Douglas utility function. For a given basket of goods, the Cobb-Douglas function assumes a unit elasticity of demand for all goods in the basket.
How does this relate to the geometric mean? Economists have shown that the geometric mean is an exact reflection of the cost of living if the elasticity of substitution is equal to one; that is to say, if a 1 per cent change in price leads to a 1 per cent change in consumption. The arithmetic mean is appropriate if the elasticity of substitution is equal to zero; in other words, if price change has no effect on consumption. Clearly, there are some goods for which price change will have little or no effect on consumption, because there is no recourse to a substitute good which has increased less in price. One example would be petrol. That is why the arithmetic mean is used in the CPI to combine petrol prices. In fact, the arithmetic mean is used in 30 per cent of the CPI’s basket of goods for precisely that reason. Other goods it covers include electricity, newspapers, transport and postal services.
What about the remainder of the index, the 70 per cent where substitution is implied by the use of the geometric mean? Do people really substitute away from goods which have risen sharply in price to those which have not? Is the geometric mean appropriate? Noble Lords will not be surprised to find that there is a body of empirical evidence that people do substitute and that the geometric mean is an appropriate reflection of that. In Australia in 2009 a study by Ivancic, Diewert and Fox found that, in the overwhelming majority of cases, elasticity of substitution was much closer to one than to zero and therefore that the geometric mean was a more appropriate reflection of consumer behaviour. One of their key findings was that consumers are very responsive to price changes at the elementary aggregate level, the level on which the geometric mean operates. However, the study went further, finding that even the geometric mean might not fully capture substitution, with some elasticities exceeding one. There is separate evidence, for example, that brand-level elasticity is often more in the one and a half to two range.
Closer to home, also in 2009, the Scottish Government published an overview of evidence on food prices. Within this, the use of TNS Worldpanel market data showed that consumers do respond to higher food prices by substituting within a general category of food. I hope that this reassures noble Lords that consumers do substitute when prices rise; not necessarily that they substitute all the time, for the geometric mean does not demand that; simply that some people will substitute when an item has risen sharply in price and there is a good substitute.
The CPI deals only with substitution on the elementary aggregate level, the lower level. In the United States a widespread view developed that their consumer prices index was overstating inflation by not taking account of substitution behaviour. The US Advisory Commission to Study the Consumer Prices Index, also known as the Boskin commission, was concerned about substitution bias—concerned that their CPI was overstating inflation by not taking into account consumer substitution. However, the commission’s report made the point that higher-level as well as lower-level substitution was an important part of consumer behaviour.
Suffice to say that the theory and evidence for consumer substitution is compelling, that the geometric mean is an appropriate method of capturing that behaviour and therefore that the CPI’s method of aggregation is superior. That is why the geometric mean is used in the consumer prices index of the United States, Canada, Australia, Denmark, Finland, Ireland, Italy, Luxembourg—I could go on; I will go on—France, Portugal, Spain, Sweden and Austria. You get the picture.
Once we accept that the use of the geometric mean, where appropriate, is superior, then we have accounted for most of the gap between the CPI and the RPI. In fact, it has accounted for an average 0.53 percentage points of the average 0.88 percentage point gap since 1997, or 60 per cent of the gap. Already it seems that the CPI is the more suitable index. People tend to gloss over the fact that most of the gap is contributed by methodology, which experts agree is superior, and concentrate on the basket of goods instead, so it is to that factor that I will now turn.
The CPI excludes mortgage interest payments, which are not relevant to the majority of pensioners and benefit recipients. Only 7 per cent of pensioners have a mortgage, and many working age benefit recipients can get help with their housing costs. As noble Lords will know, it was mortgage interest that caused the RPI to fall in 2009 and, consequently, many pensions to be frozen. Without mortgage interest, the RPI would have grown 1.3 per cent rather than fallen 1.4 per cent in the relevant period. The CPI grew by 1.1 per cent in that same period. This illustrates the significant effect that mortgage interest can have on RPI inflation, and it is not a cost relevant to most benefit and pension recipients. There are other housing costs, of course—rent, for example—but, since the CPI already includes rent, we need not concern ourselves with that.
What about owner-occupiers though? The ONS is working on incorporating owner-occupier housing costs in the CPI. It is not something that can simply be dropped in, and the work is currently at an early stage. We will monitor this work closely and look seriously at the new index when it is close to production.
In correspondence with the UK Statistics Authority, the Royal Statistical Society has made some suggestions with regard to the CPI. Naturally, we welcome the ONS’s continuing statistical development programme. However, let us not lose sight of the fact that the Royal Statistical Society has issues with the RPI, to which I shall return in a moment.
Increases in line with the growth in the CPI maintain benefit and pension value as well as putting the system on a more sustainable footing, allowing the Government to focus help where it is needed most. In short, it is fair to recipients and to the taxpayer. I mentioned the Royal Statistical Society. You will often see reports of its concerns with the CPI in correspondence to the UK Statistics Authority. Have any of those reports mentioned its repeated calls for the RPI’s methodology to be improved, given that it arguably overstates inflation? I suspect not. The Institute for Fiscal Studies’ report on the Budget said that the CPI’s methodology was,
“a sound rationale for the switch”.
For a final word on the CPI, let us look no further than that longstanding Chancellor, Mr Brown, who said:
“It is more reliable ... It is more precise”.—[Official Report, Commons, 10/12/03; col. 1063.]
That is the consumer prices index—not a perfect index, but more reliable, more precise and more appropriate. I commend these orders to the House. I beg to move.
Lord McKenzie of Luton
My Lords, I thank the Minister for introducing these orders and for that journey through geometric means, elasticity of demand and Cobb-Douglas. I am certainly reassured to know that the geometric mean works only at the elementary aggregate level. He has certainly given us plenty to read this evening in time for tomorrow’s further debate on this issue when we get to pensions.
The Guaranteed Minimum Pensions Increase Order presents no problem to us. Although the general level of price increase has been based on the CPI, not the RPI, the limiting factor is the 3 per cent cap, and we can support this order. However, the more substantive benefits uprating order is an altogether different proposition. Of course, we are not supposed to vote against it as it is includes matters that we support, such as the uprating of the basic state pension by the RPI, but we will not vote for it since, as we have heard, it is the start and signals the continuance of the switch to uprating by reference to the CPI. When it comes to debating these things, the Minister is right that there is no perfect index; an index measures what it measures.
The Minister made great play of the triple lock and the re-linking of the basic state pension with earnings. This is something that we support, and why not? After all, we locked it in as a requirement into primary legislation. We should remember that it was a Conservative Government who broke that link at a stroke. It was a consequence of this that when we came to government in 1997, our priority was to target maximum resources on the poorest pensioners. This was helped through measures such as pension credit, which meant that by 2007-08 there were 900,000 fewer pensioners in relative poverty than in 1998-99, as measured by the 60 per cent contemporary median income. On average, pensioner households were £1,500 a year better off in 2009-10 as a result of the tax and benefit changes than if the 1997 policies had simply been rolled forward. The poorest one-third of pensioner households were over £2,000 a year better off.
Baroness Lister of Burtersett
My Lords, I wish to speak particularly on the shift from the RPI to the CPI. The Minister in the other place acknowledged that no single index is perfect, and the noble Lord, Lord Freud, said something similar this evening. Given that, I argue that the criterion that we should use is which index best protects the living standards of some of the poorest members of our society. That is not the CPI. Typically, the CPI rises more slowly than the RPI—15 times in the past 20 years, according to the Minister in the other place—and, of course, that is why it represents a spending cut. We should not underestimate the significance of this shift, which is easy to do when we get caught up in technical jargon about geometric means and so forth. A 2008 Joseph Rowntree Foundation study concluded that uprating policies have big effects over time. This change will have a very damaging effect over time on the living standards of some of the poorest members of our society. As my noble friend Lord McKenzie has said, these are people for whom substitution is rather difficult because they have already substituted a lot in adapting to living on such low incomes.
Lord Beecham
My Lords, it is a pleasure to follow my noble friend Lady Lister, who has for many years been a leading advocate of improving living conditions for many people and who has made a distinguished contribution to national debate.
Like perhaps only a few noble Lords present, but like perhaps many more who are not present, I ought to declare an interest in the Guaranteed Minimum Pensions Increase Order, as I am entitled to claim a state pension although I have not yet done so; it is temporarily deferred. Having said that, I enjoyed the speech, or economics lecture, given by the Minister. I would have enjoyed it more if I had understood it more, but I suspect that, even so, I am slightly ahead of many of those who will be subjected to the effects of these orders. The Minister and the Government have claimed enormous credit for advancing the date by which earnings related payments will be made, but they have done so at a time when average earnings are not increasing. They have made a fairly safe bet because, had they relied on the earnings index, I suspect that there would have been no increase at all. They are therefore making the provision a little earlier, but its effect will be felt at probably about the time it would have been under the previous Government. We should remember that when the RPI fell, the previous Government ensured that a 2.5 per cent increase applied.
Mention has been made of a number of distinguished bodies that have commented on the RPI. We can all choose arguments from what they have said and written that advance our own side in the debate. I hope your Lordships will bear with me if I cite selectively, just as the Minister did. The Royal Statistical Society has said that the CPI fails to reflect the spending patterns of pensioners and the rising costs that they face. The Institute for Fiscal Studies has shown that most pensioner households are not shielded from many of the costs excluded from the CPI. The UK Statistics Authority has said that it does not believe that the CPI should become the primary measure of price inflation until housing costs are included. Other costs are not included, for example changes to council tax.
The Minister will no doubt point out that council tax is frozen and indeed it is—for three years in most cases. That freezing has been affected by top-slicing the grant to local government in the first place, but I leave that aside. There will be a temporary benefit in terms of council tax increases not bearing on the incomes of families, although the elasticity of their demand is extremely limited in any event, as both my noble friends have pointed out. However, while that is the case for the time being for council tax, it should be borne in mind that council tax benefit will be cut by 10 per cent in two years’ time. The Government, in an Answer by the Minister to my Written Question of some time ago, made it clear that they had no intention of promoting the take-up of council tax benefit, despite the fact that £1.8 billion of council tax benefit is unclaimed, largely, although not exclusively, by the very pensioners to whom this measure applies and by other low-income families. In fact, under the new index, the changes and reductions to council tax benefit, the failure to promote take-up, and the apparent reinvention of the 19th century Poor Law—because council tax will eventually be determined not on a national basis but by individual local authorities—it seems that pensioners and others in low-income groups face an onslaught on their living standards.
As both my noble friends have pointed out, the geometric mean will not signify very much to people living on very limited incomes. They feel that they will fall behind many in their communities, and that will certainly be the case nationally. It is particularly disturbing, as my noble friend Lord McKenzie pointed out, that this is not just a temporary measure designed to help tackle the deficit but a permanent change at the expense of many of the poorest in this country that will also affect those on modest fixed incomes in their later years.
I very much regret that the Government have seen fit to bring forward these proposals. As my noble friend said, we shall not oppose them tonight, but their impact will be serious and will certainly reduce the quality of life of far too many people in this country.
Lord German
My Lords, perhaps I may follow that speech by the noble Lord, Lord Beecham, by also declaring an interest. I am in receipt of my basic state pension and I suppose that I should be thanking the Minister for his announcement that I will be earning, on average, £15,000 or more during my lifetime. However, I am particularly grateful that the measure increasing pensions restores the link with earnings. For many of us here who have campaigned on platforms at election time, the issue of re-linking pensions to earnings has been asked for on virtually every occasion when there has been an audience of prospective and actual pensioners who were concerned that the link had been broken and wanted it to be restored. I am therefore deeply grateful that the triple lock will replace the double lock.
I shall come to the issue of RPI and CPI in a moment, but I should first say that the orders demonstrate that we need a less complex system. Noble Lords on the other side have said on several occasions that this is a weighty document containing many changes. That reflects the complexity of the arrangements in our benefits structure and the calculations that flow from it. I welcome the simplification that will occur when the Welfare Reform Bill is enacted.
However, I agree that my noble friend will have to respond to the question of whether these measures will satisfactorily protect the worst-off in our society. That is the test we must put before him. Some measures that are not in the orders will support particularly the long-term employed—the Work Programme, more apprenticeships, and the more rigorous, enlarged and targeted work experience programme that will produce dynamic changes and have an impact upon the take-up of benefits overall.
I turn to the CPI/RPI debate. It is clearly difficult to produce a set of proposals that will be understood by people who are not in this Chamber and who want to hear a simple explanation. Geometric and arithmetic means are not words that roll off the tongue as you sit talking after watching the evening news on television. It is difficult to understand the complexity unless you can understand what lies behind it. What I take from this is what I call the old Tesco/Waitrose test regarding upper and lower shelves, whereby when you make a substitution, you might move shop or shelf when choosing products, in order to make savings in your weekly bill. There is something in that, given that the former Prime Minister, when he was Chancellor, said that CPI is a better measure of substitution. That is a matter which the mathematicians are beginning to grapple with.
However, it is clear that when compared with the UK no country in the western world has such a statistical difference between the two indices. The majority of other countries use the CPI index, but why is there such a difference here between the two indices? We need to understand why, and that was what the Royal Statistical Society was attempting to do. It is not just about whether there is something wrong with using the CPI, but about why there is a gap between the two indices that does not occur elsewhere. That again relates to the way that the formula is constructed. As we know, the formula includes a difference of between 0.5 per cent and 0.8 per cent, and we need to understand that better in future.
Therefore, it is not a question of which is the better index, but of which is the right index. It is not that one is a good index and one is a bad index; we are looking for the right index which measures inflation and how prices are rising. It may well be that we have not got that right in the past and that we are now looking for a change. However, I note that the opposition party in the shape of its leader, and reinforced here tonight by the noble Lord, Lord McKenzie, is prepared to accept CPI as an interim but not a permanent measure. That means that there is a sense that they generally agree with the former Prime Minister that there is a role for this index, although they may disagree about its long-term purpose.
What we do know, as international comparisons tell us, is that CPI is a much more stable measure. I was interested to hear the remarks of the noble Lord, Lord Beecham, concerning the pension. One effect of the methodology used by the previous Government was that the pension rose by 75 pence a week. Of course, it is not reasonable for people to be told that prices have not risen appropriately in that period. We need a stable measure which reflects people’s understanding of how prices have risen during the year.
As we heard from the Minister, housing is reflected in CPI in terms of rent but not mortgages. Work is now being done to improve the involvement of house prices and housing measures within CPI, although we know that only 7 per cent of pensioners have a mortgage. It is important to reflect on the value of the basic state pension, to note that in future the triple lock will work to the benefit of pensioners, and, if I read the newspapers correctly, that the basic state pension will be uplifted even further, which will give people a basic entitlement in tier 1. I hope that that will occur.
Lord McKenzie of Luton
I hope that the noble Lord will forgive me for interrupting. I accept what he says about the triple lock on the basic state pension, but does he acknowledge that applying CPI to S2P on a long-term basis would reduce what would otherwise be payable?
Lord German
The basic pension is bigger than the additional pension. In the long run, the earnings link is worth 2 per cent more than prices, and CPI is 0.8 per cent less than RPI. Therefore, the increase in the basic state pension can be set against the change which will occur with CPI for S2P. It is very important to see the connection between the two. Of course, as the noble Lord, Lord McKenzie, will know, there is much talk in the ether about an improved single-tier pension, and I think that that will be the test. Not only would it benefit people through the measure that I have just described but in the future it might improve matters even more.
Lord McKenzie of Luton
I am sorry to interrupt the noble Lord again, but how would he factor into his assessment occupational pensions which, in terms of future indexation, could be subject to CPI rather than RPI?
Lord German
I was very grateful that the Government did not put the override in place, because of course it should be up to occupational pension schemes to make up their own minds according to their rules. Clearly, if RPI were written into the contract that already existed, that would apply and the schemes would be able to stay with that. Most pension schemes will be able to make that choice, and I hope that there will be a debate among pension fund members about the way in which that might be put into place. It is also very important that pensioners with accrued benefits under RPI should have those benefits maintained and that, if the choice is made to change, CPI should occur only after the CPI regulation hits the deck.
Going slightly beyond this issue, I want look at the packages in the round and I also want to ask the Minister some questions. I am pleased that there was no override, and I wonder whether the Minister can confirm what I have just said regarding accruals for occupational pension schemes. Will the switch to CPI see the pressure on occupational pension funds reduced? I know that some figures have been produced regarding the reduction in pressure on some occupational pension funds. I should be grateful if the Minister could update us on the current thinking on that matter and on the current analysis of who is going to move and in which direction.
My final question relates to the much bigger world of the reforms proposed by the noble Lord, Lord Hutton. What are the Government’s thoughts about the direction of travel of the matters that we are discussing today, and how will that impact on the public sector pension funds? Will the Government be responding to the noble Lord, Lord Hutton, and in what timescale? People will want to understand the Government’s direction of travel, both on the basic pension and on public service pensions, which I imagine are a cause of concern to many people at present.
Lord Kirkwood of Kirkhope
My Lords, I should like to make a few comments at the end of what is always a very important annual occasion. There have been occasions in the past when colleagues in the House have not considered it appropriate to look at social security benefit uprating orders, but these orders are extremely important for the people whom they affect and it is right that we should spend time looking carefully at the provisions. I am not surprised that more colleagues do not participate in these debates, as they are extremely complicated, particularly this year when we are contemplating wholesale changes in the benefit system. It is particularly difficult to foresee the impact that some of these announced changes will bring in future.
It would be helpful to receive some reassurance from my noble friend on the Front Bench on a couple of points. I agree with the comments that have been made about the pension provision. That is one area where substantial progress has been made, for which I am very grateful.
I want to pick up an important point made by the noble Baroness, Lady Lister, who is probably the only person in this Chamber who has been doing uprating orders for longer than I have—she advised me about them when I was elected to the other place in 1983, which was not yesterday. She has a huge amount of experience and knowledge and she will be a great asset to this House in considering these issues in the future. She raised the point about freezing child benefit until 2014. Of course, that is against the background of deficit reduction. I defer to no one on the necessity to attack the important financial circumstances that we all face, but how will that affect the child poverty strategy? In the legislation that we passed in the dying days of the previous Parliament, the Child Poverty Act 2010, we set out the requirement for a child poverty strategy. I anticipate that that will be unleashed on us quite soon. These changes will have a dramatic impact on the staging posts of 2015 and 2020 in the child poverty strategy.
Deficit reduction notwithstanding, I hope that the Government do not make these changes in a way that makes it impossible to get to a more comfortable place on child poverty by 2020. If that were the case, I would be very concerned. I think that redistribution is still necessary. The noble Baroness was absolutely right to say that this benefit was a tax allowance in the days before it was converted. It is extremely important that we keep the pressure up. People like me are uncomfortable about freezing child benefit. If the Government continue to freeze it, I shall be more than uncomfortable; I shall be very upset. A word of comfort about the fact that there is a child poverty strategy in gestation and about to be unleashed on us would send me home a happier bunny this evening.
We shall return to the CPI/RPI debate, and at great length. For me, there is some conflicting evidence. My noble friend dealt with the substitution effect. I think that he is right about substitution and I concede that he is right about geometry and not arithmetic. However, I do not necessarily concede that, therefore, CPI is an appropriate measure. I think that the IFS is on his side when it comes to substitution but, on whether this is an inflation experience that is adequate and appropriate for the client group, it is on a different side of the argument. The press release that I have in front of me, dated August 2010, suggests that it believes that,
“only 23 per cent of benefit claimants are unaffected by increases in mortgage interest payments and council tax”.
Therefore, the rest will be caught by the reduction. We cannot ignore that. I want to think about that more carefully and I shall study, with care, what my noble friend says about it, if not tonight then at another stage. I think that the jury is out. I think that he has won the argument about substitution but I do not think that that necessarily means that it is a safe measure in perpetuity. You only have to ask the Library not just about the short-term effects but also about the long-term effects to see that reductions in domestic household incomes are stark. Over a 20-year and a 30-year period, they are unconscionable. I hope that we in the coalition Government are not lashed to the mast on some of these things. If the CPI in the middle-to-longer term—five to 10 years—starts to pinch in a way that I think it may, I hope that we will be big enough to look again at whether it is an appropriate measure.
Lord Lea of Crondall
Perhaps I may say how interesting I find the noble Lord’s analysis of the difference between the RPI and the CPI. Some 30 years ago, I was a member of the RPI advisory committee when it had a great row with the Treasury about mortgage interest payments. The philosophical argument was that you cannot have the cost of money as a factor in the national income. I respect that that was always the Treasury position. It might be slightly provocative to say this, but perhaps an organisation such as the Office for National Statistics or the new Office for Budget Responsibility could objectively set out the pros and cons for the different purposes. Whether one is dealing with national accounts or the cost of bus fares, one has to disaggregate the RPI. This issue arises all the time. Therefore, it would be useful if the Cabinet Office or somewhere else could produce a paper on the strengths and weaknesses for different purposes of the RPI and the CPI, including European standardised statistics and all the rest of it.
Lord Kirkwood of Kirkhope
I certainly think that that is a good idea and I would support it.
Lord Freud
My Lords, this has been an interesting debate, as one would hope and expect. I thank noble Lords for their valued contributions. I should probably declare an interest in that I am due a winter fuel payment this year, although I did not get it. The DWP says that it paid everyone and I find that I am the only person who did not get their winter fuel payment.
The uprating order and the GMP increase order both legislate for increases to benefits and pensions to be paid from April, thus protecting their value at a difficult time. My overview of what the noble Lord, Lord McKenzie, said is that the party opposite was perfectly happy with the CPI in the short term and would agree with the UK Office for National Statistics on the issue if the CPI was to include housing costs in the slightly longer term. On that basis, I suspect that there is rather less between us than might appear at first instance. We are very interested in the changes that will potentially be made to the CPI if housing costs are incorporated, which is being looked at. However, as the noble Lord, Lord Lea, hinted, it is likely that that would be done not by including the changes in mortgage interest rates but by the actual changes in house values.
A lot of points were raised in the debate and I will do my best to answer as many as I can. An important point about substitution was raised by the noble Lord, Lord McKenzie, the noble Baroness, Lady Lister, and my noble friend Lord German, who pointed out that people will buy everything at the bottom, which is what one expects them to do—that was the sentiment. However, that is not what happens with this index, which it is important to emphasise. If in a given range of the cheapest items—or best value goods, whatever they are called—and one of them goes up but the rest stay the same, people will substitute the one that has increased in price with the ones that remained stable. The relative movement in those goods, rather than their absolute value at any one time, is what counts. It is really important to understand that when looking at how the substitution effect actually works.
We could probably all bore each other by quoting lots of different experts—and I think we have, so I will not bother doing so—but the noble Lord, Lord McKenzie, made the point that we abandoned the policy of the CPI when it came to it. I repeat what I said in my opening remarks: we announced the RPI for the basic state pension for the year at the same time as we announced the move to the CPI, so there has been no reversal or change. That was what the policy was.
On the point raised by the noble Lord, Lord McKenzie, on the triple guarantee, in the current environment the earnings factor does not make much immediate difference, but over time it will make a substantial difference and pensioners will benefit from it. As I said in my opening remarks, the 1.5 per cent increase from the previous year was not reversed. Picking up on some of the noble Lord’s other points, I think that he knows almost better than I do that, when it comes to mortgage interest for people of working age, benefit recipients and working people on low incomes can also get support for mortgage interest payments.
The noble Lord asked what assessment had been made of the changes that we have introduced to non-dependent deductions. The equality impact assessment on those changes has been published on the DWP website. A question was also asked about indexation rights for public service pensions. Those have been index-linked on the same RPI basis up to this point, and in future the indexation will be made on the new basis, which is CPI.
The noble Lord, Lord McKenzie, and the noble Baroness, Lady Lister, also homed in on the effect on poorer households, which is the big question here. We now have 5.8 million adults of working age living in relative poverty. As I have argued, the idea is that using the CPI will ensure that typical changes remain in line with real experience. Where we need to go in this area—a much more important point—is in the structure of the benefits system so that we strike the right balance between the welfare system as a safety net and one that sends out a clear message that work is valuable and that, if you can work, you should work.
We are modelling the big impact that will be made by introducing the universal credit. We estimate that 350,000 fewer children and 600,000 fewer adults will be expected to live in poverty—on the normal definition of 60 per cent of median household income. Some two-thirds of that effect will be because of better take-up. My noble friend Lord Kirkwood asked whether we would chase underpayments as hard as overpayments, but that is exactly how that effect will happen in practice. A lot of the effect will come from take-up by people who simply do not take up what they are entitled to.
Lord Lea of Crondall
Can I just point out that that is by no means the whole argument about the merits of the RPI?
Lord Freud
It is an attempt to find an explanation for why our RPI is so different from the CPI compared with other countries. I was just looking for a clue to answer the rather potent question asked by my noble friend. It was not a complete answer, but I tried to give a more complete answer earlier.
My noble friend Lord Kirkwood asked about the child poverty strategy, which we are aiming to publish shortly. The strategy will set out our plan to transform the lives of children in poverty now and in the future. It will be a step change from previous approaches, which focused solely on income poverty, to a more sustainable and effective approach that addresses the root causes of poverty rather than the symptoms.
On the National Insurance Fund, I am sure that my noble friend Lord Kirkwood, has had this answer back many times and I almost do not want to say it again. The formal answer is that there is no fund in the sense normally meant; there is no pot of money to hand out. But I shall not go into that.
There may be one or two other items that I have not covered, but if there are I shall write and clear up all other points—otherwise I shall be here all night.
I shall try to wrap this up. We are taking an approach that seeks to balance the interests of benefit and pension recipients and the interests of the taxpayer. The CPI is an appropriate measure of inflation and one that helps to put the welfare system on a sustainable footing. The CPI is a legitimate measure for price inflation; it increases in line with real world prices and protects purchasing power. As such, there are good reasons for concluding that it is more appropriate than the RPI for our purposes. Despite the fact the nation’s finances remain under severe pressure, this Government will spend an extra £4.3 billion in 2011-12 to ensure that people are protected against the cost of living increases. Through the restoration of the earnings link and the triple guarantee for the basic state pension, the increase to pension credit and the continued protection of benefit and pension value, we are fulfilling our commitment to ensure that no one is left behind. I commend the orders to the House.
Guaranteed Minimum Pensions Increase Order 2011
(13 years, 8 months ago)
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Lord Freud
That the draft Order laid before the House on 3 February be approved.
Relevant documents: 16th Report from the Joint Committee on Statutory Instruments
Postal Services Bill
(13 years, 8 months ago)
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“( ) The Secretary of State will ensure that any relevant disposal guarantees that the existing rights of recognition of employees are maintained.”
Lord Young of Norwood Green
My Lords, this amendment directs the Secretary of State to ensure that in any relevant disposal there will be a guarantee that the existing rights of the workforce recognition are maintained. There are two themes at work here. The first is that the workforce by its own efforts has unionised the industry to such an extent that recognition of the union was achieved more than a century ago. Long before the existing recognition rights existed in legislation, postal workers had come to an agreement with the employers and behind them the Government on the existence of the workforce’s trade unions. This has shaped employment relations in the industry; both workforce and management have seen the value of organised bargaining and representation. We are looking at a mature attitude to industrial relations. Both parties know of each other’s interests and concerns and are usually able to accommodate them. Despite the media caricatures, the reality is that organised industrial relations have created ways of working that make the industry productive and safe; every day many thousands of hurdles small and large are overcome by the timely recourse to the recognised framework of industrial relations in the industry.
If you looked at the media, you would imagine that everything was in total conflict, whereas the reality is very much different. If one looks at some of the positive aspects, one may remember the severe winter that we have come through recently and how tributes flowed as workers in the Post Office and Royal Mail worked with might and main to ensure that whatever the conditions the mail got through. Then there is the role of union learning representatives in encouraging people to lifelong learning and to embark on training. That is another very positive aspect that is overlooked.
Both management and union representatives know that the job gets done better if the workforce is convinced that it is being done in the right way and in a fair way. As I remarked on Second Reading, if one wants a good example of that, go to Gatwick to see an example of world-class mail and how well it works when the workforce is involved positively. As I said, the media is interested only in the breakdown of those relations, turning a momentary conflict into a sensation that sells papers. The reality is that countless efforts by management and union reps ensure the everyday smooth running of the industry. It is interesting that the Hooper report apportioned blame when conflicts arise fairly between both management and unions. I am sure that the noble Baroness would agree that that is an impartial analysis.
The first theme of the amendment is to ensure that the hard-won legal recognition of union organisation is protected in any share disbursal. Recognition has not just been won as a legal right, it has been established by the efforts of generations of postal workers and managers. Any new owner must begin by recognising that they are buying in to an organised workforce. Being unionised does not mean being unproductive. On the contrary, many studies demonstrate that unionised workforces are productive. If any new owner is in doubt, the Secretary of State will be obliged to dispel that doubt, as the new owner must learn to work with the unionised workforce. Tributes have been paid to the new CEO, Moya Greene, and her ability to work well and productively with the unions.
The second theme on recognition is that bargaining is a natural part of such recognition. It may be argued that under TUPE transfer, the workforce carries across existing terms and conditions, although some comments in the press on TUPE recently give me cause for concern, so that may be true but insufficient. The workforce is an organised one which will address any new employer with the expectation that its bargaining rights remain intact. That is not just about what is currently earned or what is currently an entitlement—to paid holidays, for example—it is also about the right of the workforce to address its future conditions with confidence that it can resolve its problems through negotiations.
Any new employer who bought into Royal Mail on the assumption that it could simply impose its vision, priorities or methods on the workforce would break down what we see now, to which the noble Baroness paid tribute: what we have achieved in the current transformation and modernisation agreement; really constructive partnership working. The workforce has agreements which have been hard-won and painfully negotiated, and it would expect any changes to be negotiated.
That is not necessarily a conflict-ridden process—on the contrary, the only cost for the vast majority of agreements has been the time and patience of management and union reps—but such rights are valued greatly by the workforce. Postal workers know that the industry is constantly changing. They have had to accept losses of about 69,000 jobs over the past decade. It has been painful, but they have seen that as a part of improving productivity and accepting the modernisation programme. That also means that working arrangements and conditions change. That is on the understanding that postal workers will buy into those changes by helping to shape them. Those of us with experience of employment relations know that that is the best way forward.
We expect the Secretary of State to be entirely clear with the new owner of Royal Mail that recognition of the workforce and its union involve a negotiated bargaining framework for employment relations in the workplace. That fact of life will have to be addressed. It is best that we make that clear in the Bill to any potential investor in or buyer of the industry. Carrying the amendment would do exactly that. I beg to move.
Baroness Donaghy
My Lords, I speak as a former chair of ACAS. One of the joys of ACAS is that I probably know more about the employment relations of most industries in this country than anyone else; one of the frustrations is that I follow the ACAS tradition of not speaking about them in detail.
I want to speak in general terms about the importance of recognition. I am sure that noble Lords from all sides of the House recognise that whatever final shape the Postal Services Bill takes, this will be an unsettling time for employees and will increase their anxiety for their future.
Whenever ACAS became involved in labour relations in a particular industry, its key concerns were transparency, consultation and employee buy-in, and we would take both sides through the steps required to achieve success. Continued recognition of the appropriate trade unions would always be a key element in achieving employee buy-in. It would be enormously reassuring during these uncertain times if the Government were to agree to uphold in the Bill existing recognition rights. It would be much more than a gesture of good faith; it would be a statement that the worker’s voice will be heard, and their involvement assured, in negotiating both their own future and that of the industry to which they are committed.
Recognition rights do not mean that an employer has to accede to union demands or to weaken its position commercially. They represent an acceptance that employees are an asset and that their commitment is a commercial asset. I hope that the Government will accept the amendment of the noble Lord, Lord Young of Norwood Green.
Lord Lea of Crondall
My Lords, I am afraid that we now see week after week in some newspapers—I would include under that heading a magazine such as the Economist—thinly disguised attacks on collective bargaining. We cannot debate that topic in its totality this evening, but I refer the Committee to the central point. Across the OECD countries, there is a close statistical fit between the amount of collective bargaining in a society and its equality. It is therefore the grossest hypocrisy—it is not conscious, but perhaps subliminal—for people to say that they do not like the gap between rich and poor when they are attacking collective bargaining. Both at a point in time and over the decades, the weakening of collective bargaining means that the forces in society are no longer balanced. We now have a gross imbalance between the oligopoly of power in the City of London and the attempt to weaken the workforce.
I think that we will see in the demonstration to be organised by the TUC in London on 26 March that the workforce has woken up. It will demand that its rights be respected, which will have great resonance with the people of this country. I therefore fire a warning shot across the bows of people who think that they are now able to administer the coup de grace to people who have collective bargaining. When the postal services are in the private sector, they may be expected to fit the private sector model whereby workers are not covered by collective bargaining and it is much more difficult for them to be so. Therefore, it is fair to take the opportunity to point out, in the spirit of this amendment, that it would be very unwise for people to think, “The public sector has collective bargaining. In the private sector, we don’t have collective bargaining and we can just say goodbye to it”. Anybody who thinks that is deluding themselves.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, Amendment 13 seeks to place a duty on the Secretary of State to ensure that employees’ existing rights of recognition are maintained. I am not sure whether the amendment fits neatly into Clause 2, which is intended to place a duty on the Secretary of State to report to Parliament when a decision has been made to undertake a disposal of shares in the Royal Mail company. However, I am happy to debate the specific issue raised by the noble Lords.
Before I do that, I reiterate that the Government welcome the positive changes in the relationship between Royal Mail’s management and the CWU over the past 12 months. I say this because, notwithstanding the historic references made by the noble Lord, Lord Young, industrial relationships at Royal Mail have undoubtedly been poor in recent times. The national strikes in 2007 and 2009 were damaging for the company and for the postal market but the business transformation agreement, reached in March last year, has seen the implementation of a new approach to union-management relationships. It has enabled progress on the much needed modernisation of the company and I urge both sides to continue to work together in that improved way.
The noble Baroness, Lady Donaghy, was concerned about uncertainty for employees. Let me be clear that the worst thing for employees would be for us to do nothing and to let the Royal Mail decline through inaction and a lack of investment. People want to work for a stable company and to have a secure pension, and I believe that our proposals will help us on both those fronts.
On employee representation, employees at Royal Mail are mainly represented by the Communication Workers Union and by the Communication and Managers’ Association, which is a section of UNITE. This representation is recognised in voluntary agreements between these unions and the management. The Government do not play a role in these agreements. Such voluntary agreements occur across industries where there is a union presence and it is good practice for the employer to take full account of the views of employees when deciding whether a union should be recognised or continue to be recognised. Union membership remains relatively high within most grades at Royal Mail. That fact suggests that most staff support union recognition.
I have no reason to believe that any new owners would seek to change such agreements, provided, of course, that the employees wish to continue to be represented by those unions. Any new owner will fully appreciate the need to work with employees’ representatives to secure the future of the company in the changing postal market. Management most certainly cannot do this alone. However, as I have said, union recognition within Royal Mail—or any other business—is primarily a matter for the employer and the trade unions concerned. I do not therefore believe that it would be appropriate for there to be a specific duty on the Secretary of State to guarantee these arrangements in Royal Mail. I therefore hope that the noble Lords, Lord Young and Lord Lea, will take time to consider my response and that they will withdraw their amendment at this time.
Lord Young of Norwood Green
I thank the Minister for her response, even if it did not go as far as I would have liked. I also thank my noble friend Lady Donaghy for contributing to this debate and for pointing out that at a time of great change—and moving to a privatised environment will be a great change—the role of unions will be absolutely vital. My noble friend Lord Lea warned about not taking trade unions for granted in the current environment.
While the Minister welcomed the new approach between management and unions and laid stress on the question of voluntary agreements, any new owner ought nevertheless to recognise the environment that they will be coming into. If they want the company to succeed, it will mean working with the unions, in our view. We will reflect on what has been said and consider whether we need to bring this back on Report. On that basis, I beg leave to withdraw the amendment.
Lord Lea of Crondall
“(3A) In the event that a sale is made by an initial public offering, a relevant disposal may only take place if the conditions in subsections (3B) and (3C) are met.
(3B) Shares representing no more than 30% of the value of a Royal Mail company may be disposed of before 31 July 2012.
(3C) No other shares shall be disposed of before 31 July 2013.”
Lord Lea of Crondall
My Lords, Amendments 13A and 14 cover two complementary points; I shall deal with the first aspect and my noble friend Lord Young of Norwood Green will deal with the second. The key words in Amendment 13A are “initial public offering”. In the event that a sale is by means of an IPO, the relevant disposal should take place only in circumstances where different tranches are put forward one after the other. I shall relate that to the experience of the big wave of privatisations in the 1980s, which had some clear lessons.
The sale could be to a single entity but, if one reads the report by Mr Richard Hooper of 2010, one sees the presumption of some likelihood that an IPO will be the modus operandi—in other words, there will be a sale of shares to the public. Incidentally, in this case all the arguments that we have heard about concealing the price would evaporate, because for an IPO there is an offer price and share traders would decide whether to buy at that price and how much to buy. However, in the heyday of privatisation in the 1980s, privatised companies were consistently sold at too low a price. That was the experience for British Airways, British Gas and British Telecom, where the undervaluation on the first day of trading amounted to over £2 billion—£2 billion of our money went somewhere else. Indeed, it has been estimated that, for 1986 alone, the average share issue premium on major share issues was 7 per cent, but on privatisation issues the average premium on the first day of trading was 77 per cent. Tony Blair pointed out at the time that—to vary “The Importance of Being Earnest”—if something was negligent at 7 per cent, what is it if that suddenly becomes 77 per cent?
I am not suggesting that the circumstances for selling Royal Mail will be exactly analogous; the forecasts of offer price and outcome are hard to judge. However, the experience remains relevant. That is why I propose that a sale by an IPO should be phased in tranches, with no more than 30 per cent sold before 31 July 2012 and no other shares to be disposed of before 31 July 2013. I have already talked about the critique of revealing a price; I do not know whether the Minister will repeat that contention, but the notion that revealing a price is difficult does not apply to an IPO, where shares are at a set price.
I trust that the Minister will accept that to carry out the sale by tranches will be a more certain way to protect the public interest. If she has arguments against that, I will be interested to look at them and see what the rationale is; we will have to study them and think about it. It is incumbent on her to state the arguments explicitly and not just keep repeating them like Pavlov’s dog, so that we can consider what she has said carefully before we return on Report to what we believe—until convinced to the contrary—is a compelling case.
Lord Young of Norwood Green
I beg to move the amendment standing in my name.
The Deputy Chairman of Committees (Lord Skelmersdale)
You are speaking to it.
Lord Young of Norwood Green
My Lords, the purpose of Amendment 14 is to provide for the disposal of shares to take place in tranches or batches rather than all at once. In keeping with our previous amendment, the batches are at 30 per cent and 19 per cent, to maintain Royal Mail in overall public ownership. Of course, the Government may wish to propose different figures, but the same principle would apply.
One of our difficulties with the Bill is in trying to grasp the detail and discover exactly what information is in it—whether there will be an initial public offering or a trade sale at auction. The Government have not set a clear timetable and they have not explained whether there will be a general sale of shares to the public—an IPO—a restricted sale to certain categories of buyer or a trade sale by auction to a single buyer, such as a private equity firm or a postal competitor, which may raise competition issues. They have not been clear about how valuable public assets will be allocated between Post Office Ltd, the pension funds and Royal Mail, thus finding their way into private hands. They have not indicated how the board might be constituted. They have not ruled out dismantling Royal Mail and selling off the most profitable parts, in particular GLS, its successful European parcels service, and Parcelforce. They have not indicated how they will guard against a buyer with short-term horizons seeking to squeeze costs and cherry pick the assets.
Before any sale takes place, this House will want to be assured about the future of the universal service, the exact regulatory regime and the future of the post office network. The Government have not explained any measures to ensure value for money for the taxpayer and—this is the subject that this amendment focuses on—they have not explained whether they would sell the whole company all at once, with the risks that that involves of selling cheaply, or whether they would be prepared to sell in tranches.
There is a huge amount of evidence that, when privatisations have taken place in the past, the value for which the businesses were sold was too low, as my noble friend Lord Lea has demonstrated. This is most clearly evidenced where a general sale of shares has taken place. When the shares are traded, it is easy to see what price they trade at and how this compares with the original sale price. If there is a big gap and the original sale price is much lower, it indicates that the shares should have been sold at a higher price—the taxpayer has lost out and someone has pocketed a pretty penny as a result. With Associated British Ports, which was 35 times oversubscribed, the share price rose 23 per cent in one day. With Amersham International, sold for £71 million, the share price rose 32 per cent on the first day of trading.
As early as 16 May 1984, the Public Accounts Committee in its 17th report expressed concern at stock in public corporations being sold, in the words of the committee, at an,
“immediate substantial premium creating windfall gains for the investor at public expense”.
It recommended considering selling in tranches, as was normal practice in the sale of large quantities of government bonds. Selling by tranches worked in a number of cases. For example, in the case of National Power, the share price rose 22 per cent a day after the first tranche sale but only 4 per cent after the second tranche was sold. Powergen’s first tranche of shares appreciated by 22 per cent within one day, but the second batch rose only 3 per cent the day after.
Of course, it is difficult to predict what the reaction of investors will be to the disposal of shares. It is undesirable for the shares to be offered, either in an IPO or a trade sale, in one single tranche, which would have the effect of transferring 100 per cent ownership in one go, albeit with 10 per cent or so employee shares, if that is to be the figure. There is a strong case that transfers should therefore be staged. Our amendment proposes this, such that shares representing no more than 30 per cent of the value of the business should be capable of being transferred in the first year following the Act coming into force and no more than a further 19 per cent in the following year.
The Secretary of State has complete discretion over the disposal of all Royal Mail shares. There are a number of issues to consider. The market may be glutted by a complete offering and so reduce the value. Privatisation of Royal Mail separate from the post office network is an innovation, so it will be best to proceed by degrees to ensure that the universal service is not jeopardised. If the value of the shares rises, the taxpayer would be a loser if the initial share sale were a complete sale.
There is a real prospect that Royal Mail may be undervalued or overvalued by the Government. Ministers have yet to put a value on the Royal Mail Group at this time—or, if they have, they are being exceedingly coy about it. Estimates of the value of Royal Mail have varied wildly. Many factors will impact on the value of the business. The prospective regulatory regime, the industrial relations climate, the onerous nature of the obligations placed on Royal Mail—all these factors and others will determine the value of the business and its share price on flotation.
There are, then, strong arguments for the sale to be implemented in tranches. That would allow for a wide variety of approaches to possible amendments. For example, tranches could be subject to various reporting procedures to Parliament to guarantee effective oversight. I stress that in our amendment we have been consistent with our wish that overall ownership of Royal Mail should remain in the public sector. However, the principle of selling by tranches to avoid underpricing would apply to any percentage of sale, including 90 per cent or 100 per cent. I hope that the Minister sees merit in the notion that disposals should be by way of tranches and that she will either accept the amendment or give assurances to the Committee about how the Government intend to proceed.
Lord Razzall
I cannot say how much I respect the views of the noble Lord, Lord Lea of Crondall, and the noble Lord, Lord Young of Norwood Green, but I have to say that from what they have just said they are living in fantasy land. We are faced with a situation where, unless the Royal Mail gets significant investment from a third party, it will be in serious financial difficulties. The idea that there will be an IPO or a sale with tranches is from a fantasy world. If people want to oppose the Bill, they should say so; they should say, “We don’t agree that it should all be sold off”. But, as those of us who deal with the markets every day know, to suggest that in some way we could have 30 per cent here, 30 per cent there and 19 per cent there is a fantasy world.
Lord Razzall
May I finish what I am saying? We are in Committee; the noble Lord does not have to interrupt me. The noble Lords are quite right: in the world under the Labour Government, they successfully sold off all sorts of things in tranches. However, we are not talking about the businesses that they sold off; we are talking about a business that is in serous financial difficulties. The idea that we can go to the market on an IPO and sell only 30 per cent, or sell 30 per cent now and trickle out the rest of the sales, simply will not happen. If noble Lords oppose the Bill and do not want Royal Mail to go into the private sector, they should say so, but they cannot pretend that we can do this in the way that they propose.
Lord Lea of Crondall
My Lords, the noble Lord has sat down. Did I hear him say that a sale through an IPO per se was unlikely? Clearly there is a difference between a sale through an IPO and a sale to an individual but, as my noble friend Lord Young and I have pointed out, it is perfectly straightforward to say that the public interest would have been served in the 1980s if there had been tranches. Presumably, the noble Lord is saying that the financial position of Royal Mail makes tranches impossible. In that case, it is up to him to prove that he would not be making a catastrophic mistake in an IPO about the initial sale price. Is that not correct?
Lord Razzall
It is not for me to respond to this; I am sure that the noble Baroness can do so more eloquently than me. But anybody who thinks, in the Royal Mail’s current circumstances, that there can be an IPO, is living in a total fantasy world. In the world in which we live, and the numbers we have from the Royal Mail—we know what they are—there is no way that suddenly an IPO will be forthcoming. I understand the noble Lord’s point—theoretically there could be an IPO—but we should not clutter the Bill with theoretical amendments. It simply will not happen. There might have been the possibility of an IPO under the noble Lord’s Government if they had got there quickly enough 10 years ago, but it is too late now. The pass has been sold, and this is fantasy.
Lord Lea of Crondall
If the noble Lord will allow me, it was the Hooper report that said that the most likely presumption of going forward was an IPO, and that was very recent.
Viscount Eccles
Hooper said in 2010 that the situation had worsened, although he acknowledged that things were happening at Royal Mail which were a great improvement. The big snag with an IPO is that it does not bring Moya Greene’s £2 billion. The noble Lord, Lord Clarke of Hampstead, would certainly buy some shares, and I might if the price was low enough, but you would not get any part of the £2 billion from either of us.
Baroness Kramer
My Lords, does not the dispute that has just taken place make it clear that this House and the other place are not the appropriate organisations for detailed discussions on how to do a disposal of shares? Obviously there are many different views, but this is not the kind of issue that can be put in the Bill. The financial circumstances of the Royal Mail have to be considered, as have the financial markets and the trade buyers that may be available. There will be a wide range of issues. I agree with those who have criticised past sales.
Lord Young of Norwood Green
I do not normally intervene; indeed, I am impelled to do so only by the contribution of the noble Lord, Lord Razzall. The noble Baroness, Lady Kramer, compounded the situation by saying that this was not the place to discuss this. I reject that. This is absolutely the right place for us to test the water on this issue. We are entitled to put the argument about tranches; we are entitled to see the Minister’s response. On the point of the noble Lord, Lord Razzall, we have made it clear that we oppose the core of the Bill, which is to achieve 100 per cent privatisation, but we have not adopted a negative attitude in an attempt to undermine every stage. We have endeavoured to engage in constructive debate, and we have a legitimate right to do so on this issue.
Baroness Kramer
The noble Lord, Lord Young, and I seem to have discovered a knack of talking past each other. I have no criticism of anyone raising the issues—in fact, I think it is good to have the warning that past sales of assets have not really achieved the maximum price that could have been achieved under more effective disposal mechanisms. The Government tend to be quite poor at procurement of almost anything, including a price for the sale of assets. However, I argue that putting down a set of rules such as 30 per cent, 90 per cent or whatever else does not belong in the Bill. I am not saying that the issue should not be raised or that the matter should not be debated but that one cannot define it in the Bill when it depends so much on market conditions, particular financial circumstances, the specific issues of the time and the deals that can be negotiated. The Bill is the wrong place in which to set down hard and fast and black and white rules on this matter. That does not mean that debate and reporting back on the whole process is not necessary, but I regard those as two different issues. I hope that the noble Lord, Lord Young, is aware of that.
Baroness Wilcox
My Lords, this has been a stimulating evening all round. Amendment 14 is a sister amendment to Amendment 2 which we debated last week. Amendment 13A provides a new twist on the disposal of shares in Royal Mail and seeks to place time constraints on the disposal of shares specifically in the case of an initial public offering—an IPO.
I will first respond to Amendment 14 which seeks to keep Royal Mail in public ownership and reflects the position set out in the previous Government’s Postal Services Bill which was considered by this House in 2009 but never found its way on to the statute book. As I said when we debated Amendment 2, the Government believe that limiting a sale to only a minority of Royal Mail’s shares will reduce our ability to attract the best future owners for the company and secure the best value for the taxpayer. Amendment 14 proposes a staggered approach to a sale of shares but with a limit on the disposal of 49 per cent of the value of the shares in Royal Mail. Given that the Government are also committed to establishing an employee share scheme—we will come later to amendments from noble Lords opposite to increase the size of the scheme—these amendments would in fact limit even further the amount that could go to private investors. However, the difference between this Government’s position and the previous Government’s position is that we do not believe that it is necessary for the Government to retain overall ownership of the Royal Mail.
The noble Lord, Lord Young, was concerned about maximising the value of Royal Mail. That concern is welcome although somewhat surprising given his earlier amendments which sought to limit how much could be sold, which would undoubtedly impact on the value. The Bill as drafted allows for the sale of shares in tranches, as set out in Amendment 14. However, we do not believe that there should be a rigid structure for how shares can be sold. There is nothing to stop the Government, in the first instance, selling a minority stake in Royal Mail or for Government to retain a stake in the company in future. However, we do not believe that there should be any barriers in legislation to prevent a disposal of a majority of the shares. As I have said before, our focus is simply on what is best for the Royal Mail and the taxpayer.
The noble Lord, Lord Lea, was concerned that Richard Hooper had steered the Government towards an IPO and that the Government would undervalue Royal Mail in such a flotation. I wish to make it clear that Richard Hooper did not express a preference for any form of sale. In his 2010 report he said that an IPO had become an option as Royal Mail now had less need for corporate experience from a partner thanks to its strengthened board. The Government are focusing on securing the best outcome for Royal Mail and the taxpayer. I hope I have already assured the noble Lord that we can sell in tranches, as he suggests, if that best meets our twin objectives.
As I said in my remarks on Amendment 14, and earlier amendments, the Government want to maintain maximum flexibility in the method and timing of any disposal of shares. This will give the Government the opportunity to make the right decision at the right time and to ensure that we can get the best result for Royal Mail and the taxpayer. Placing statutory arbitrary deadlines in legislation will not help to achieve the Government’s objectives. If we choose to dispose of shares through an IPO, I believe that it would be impractical to be faced with a deadline of 31 July 2012 and to have to rush the process through by then. We heard last week from the noble Lord, Lord Jones, and the noble Baroness, Lady Kramer, about the damage caused by imposing statutory deadlines on commercial transactions. What if we were not ready to launch a flotation until August 2012? We would then have to wait until July the following year to make the disposal and give Royal Mail the access to the capital that it so badly needs. That would be in the interests of neither the company nor the taxpayer.
As I said on Amendment 14, nothing in the Bill would prevent the Government staging a disposal in the way that the noble Lord, Lord Lea, suggests, but Amendment 13A would reduce the flexibility to make the right decision and I do not believe that that would be in the best interests of Royal Mail or the taxpayer. I hope that the noble Lord is persuaded by my argument and I therefore ask him to withdraw the amendment.
Lord Lea of Crondall
My Lords, it will not surprise the House that I will in due course withdraw the amendment pro tem, but that in no way assumes that our arguments have been overwhelmed by the firepower of the noble Lord, Lord Razzall, or the Minister.
The Liberal Democrats must have been reading too much Machiavelli recently. I am not surprised at that, given the extraordinary arrangements that they have been making with the Conservative Party, and I am sure that they are being kept awake at night wondering who is going to stab them in the front instead of in the back. As to the idea that the amendment is aimed at killing the Bill, we have experience of killing Bills but this would be a peculiar way of going about it. This is about helping the Government and society to avoid a fiasco by feeling our way on how this disposal will be carried out.
Is the noble Baroness prepared to respond on whether it is her view—along the lines of the view of noble Lord, Lord Razzall, for whom he knows I have the greatest respect—that we are living in fantasy land if we think that this sale can be carried out by way of an IPO. The alternative, presumably, is the Sheikh of Kuwait. It may be that Colonel Gaddafi is no longer the likeliest candidate. The alternative is an IPO. We will all avidly read Hansard tomorrow—which means that we will not—but I do not think I said that Hooper advocated an IPO. I said that the most likely presumption to be made after reading Hooper is that an IPO would be a strong candidate as the means of sale. If that is the case, the amendment is the exemplar and states that if the scenario is an IPO, some of the experiences of the IPOs in the 1980s should be borne in mind.
Lord Razzall
I must intervene before the noble Lord withdraws the amendment. I am a student of Machiavelli and I have always regarded the noble Lord, Lord Lea of Crondall, as the model of The Prince.
Lord Lea of Crondall
I take compliments of that type. I do not receive many compliments and I shall take that as a compliment and have it framed. In conclusion, a point of analytical disagreement has come out in the past 20 minutes such that I am pretty sure that my colleagues and I will return to this matter on Report. In the mean time, I beg leave to withdraw the amendment.
Earl Attlee
This might be a convenient moment to remind the House that we are in Committee, we can speak as many times as we like, we are having a great debate and we accept interruptions, but that we tend to avoid them because we are in Committee and do not need to interrupt each other. I hope that that is helpful to noble Lords.
Amendment 15
“( ) In order to ensure that it remains a single company, for the purpose of this Part “Royal Mail company” means the company that provides the universal postal service.”
Lord Stevenson of Balmacara
My Lords, I thought that, following that interruption, we should have a few seconds of silence to gather our thoughts in case we are interrupted.
This amendment restricts the issue or transfer of shares in Royal Mail to the whole company by defining a “Royal Mail company” as the company that provides the universal service. Clause 2 allows for the issue or transfer of shares in a Royal Mail company. The Bill defines a Royal Mail company as one that,
“provides a universal postal service and … is or has at any time been in the same group as … the original holding company, or … another company that … has at any time been a Royal Mail company”.
That, I think, means that, as the Bill stands, the Secretary of State can dispose separately of the various companies that can make up the Royal Mail Group.
The Royal Mail Group provides the universal service. It currently consists of a number of business units, the largest of which is Royal Mail, or Royal Mail Letters. This is the part of the business that deals with the collection, sorting and delivery of letters, packets and parcels, and it accounts for more than 70 per cent of the Royal Mail Group’s revenue.
Royal Mail Letters is a huge operation, delivering some 70 million items every day to more than 28 million addresses. It is at the core of the Royal Mail Group, ensuring the maintenance of the universal postal service. However, it works only because it is an integrated whole. Large volumes allow the business to achieve sufficient economies of scale to make the universal service affordable and to pay for the countrywide labour-intensive network on which the postal service depends.
We believe that Royal Mail must remain an integrated whole if the universal service is to survive and if postal services are to thrive in the United Kingdom. The financing of the universal service has already been put under strain by the operation of upstream competition in the mail market and by the way in which the market for access mail has developed.
Royal Mail has lost over 60 per cent of the pre-sorted bulk mail market. This is mail which competitors collect and sort and give to Royal Mail to deliver. Royal Mail therefore handles far fewer items upstream than it used to and it has had to cut back its upstream operations as a consequence. Royal Mail must maintain a viable upstream business if it is to be able to provide the universal service at an affordable tariff. It is therefore important that an integrated business model is encouraged and supported through legislation and regulation.
We believe that it would be in the public interest if an integrated Royal Mail business model were established by legislation. The amendment would prevent the separation of Royal Mail through the sale of separate business units and through the break-up of Royal Mail Letters and its sale as a series of separate business units.
There will be an appetite among Royal Mail’s private competitors for the break-up and sale of Royal Mail. This might suit their business models. However, it would be short-sighted and would eventually damage the postal industry and the provision of postal services in the UK.
If anyone would like to see Royal Mail stripped down to only a core delivery network, with all other parts of the business separated and broken up, that would not help the provision of a robust universal service. Competitors might wish to collect and sort bulk mail but they do not generally wish to collect and sort individual items from domestic customers. Royal Mail must do this as part of its universal service. The universal service will become more expensive and less sustainable unless Royal Mail can continue as a viable, integrated end-to-end operator.
Along with Royal Mail Letters, the Royal Mail Group further consists of Parcelforce, Global Logistics Systems—GLS—and a number of other smaller businesses. It also consists of Post Office Ltd, whose sale is of course restricted by the Bill, and we welcome that.
Parcelforce and GLS, the third biggest parcels provider in Europe today, are both profitable businesses—GLS particularly so, with £122 million in operating profit in 2010 alone. That is almost the same level of operating profit as was seen in the whole of Royal Mail Letters, a company with four and a half times GLS’s revenue. That means that GLS is a target for Royal Mail’s competitors. Many would like to get their hands on it, but they are less keen to take on the difficult but important operations undertaken by Royal Mail Letters. The sale of GLS and Parcelforce separately from Royal Mail would be revenue-generating but would leave Royal Mail, the universal service provider, in a much weaker position.
Royal Mail needs to operate as an integrated business and it needs to be able to hold on to what valuable assets it has while it goes through its current difficult and costly transition. We do not want to see it asset-stripped. It is therefore important that restrictions are placed on the sale of Royal Mail that mean that it can be sold only as a single company, and that it cannot be asset-stripped or broken down in the interest of short-term gain to appease the company’s competitors or to consolidate a regulatory model that has damaged the business and is in desperate need of change. I beg to move.
Baroness Wilcox
My Lords, I believe that the intended effect of Amendment 15, in the names of the noble Lords, Lord Young, Lord Stevenson and Lord Tunnicliffe, is to seek to ensure that Royal Mail remains a single company providing the universal postal service and that it is the only universal service provider. We will, of course, come on to the protection of the universal postal service when we debate Part 3 of the Bill, but I should make it clear now that we expect Royal Mail to be the universal service provider in the UK for the foreseeable future. I hope that reassures noble Lords.
I now turn to the issue of whether Royal Mail should be a single company. I do not consider that we should be legislating on the future structure of a company that will no longer be in public ownership. A privatised Royal Mail should be free to organise its business and operations in such a way that enables it to provide the universal postal service efficiently and effectively. This could mean establishing subsidiaries to deliver part of the service or it might mean no change at all. We simply do not know, in 2011, what the best operational structure should be for Royal Mail. Through a disposal of shares, we are giving Royal Mail real commercial freedom, and I do not consider that it is appropriate for the operational structure of Royal Mail to be set in primary legislation.
I have two answers in the question and answer part of the brief on subjects that the noble Lord mentioned. On whether Parcelforce or GLS will be part of the package, no decision has been taken on the formal method of sale. Just as for the Royal Mail, we have no plans to retain either Parcelforce or GLS in public ownership in the long term. The noble Lord also asked about the risks of a new owner stripping the assets from Royal Mail. The Government simply would not sell to a bidder if they believed that they would not assist in securing the future of the universal postal service. Furthermore, any shareholder would want to see a successful business and a sustainable universal service, given that the cash generated by a successful Royal Mail will outweigh the asset value in a very small number of years. Investors would also face significant reputational damage if they allowed Royal Mail to become insolvent. We believe that there is ample protection against that, both in the Bill and more generally. With those answers and the answer I gave previously, I ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for that response. We seem to be placing a great deal of stress on hopes and aspirations about what will happen after the sale—other noble Lords picked up on this, I think—and very little on what many people in the country would regard as sensible and appropriate public interest measures, which are being taken on board by the Government or even considered in a serious way.
From what the Minister has said, there is a grave danger of cherry picking. That will still be a possibility. If the successful owner is robust and strong enough, they will be able to do what they wish once they have control of the assets. It is particularly important to register that the Government have not ruled out dismantling the Royal Mail and cherry picking the most popular parts, in particular GLS, which is the most successful European parcels service, as I said earlier. That must be a worry as we go forward.
The assets can be taken away; they do not have to be very large or prestigious to be capable of being sold. On the first day in Committee, the noble Lord, Lord Christopher, considered selling the Oxford sorting office at a profit. Heaven knows why. I have not visited it yet, but perhaps the Minister has. If that is his vision of it, then clearly the assets are valuable and they will go. There is also the possibility of the Royal Mail being split in a geographical way or by function, which would undermine the viability of the universal service provision, which in effect cross-subsidies rural and other diverse locations. We think this is an important issue, but on this occasion we shall not push the matter to a vote. I beg leave to withdraw the amendment.
Lord Low of Dalston
“(6) Prior to any disposal of shares in Royal Mail, the Secretary of State shall consult service user groups including small businesses, pensioners, people with disabilities and people in rural and remote areas.
(7) Following the consultation in subsection (6) and prior to any disposal, the Secretary of State shall lay a report before Parliament which sets out how the universal service provider shall maintain the minimum requirements set out in section 30.”
Lord Low of Dalston
My Lords, Amendment 16 is designed to strengthen the rights of users of postal services. As has been seen in the past, with privatisation and a greater focus on commercial imperatives, it is all too easy for the most vulnerable users of services to be put at the greatest disadvantage. Let us take the energy sector. The most expensive way to buy gas and electricity is with a prepayment meter, yet it is the poorest in society who are forced to buy them in this way as they do not have access to direct debit facilities. There is a real risk that certain groups of service users who rely on Royal Mail more than others will similarly be vulnerable to change. I believe it is important that Parliament sends a strong message that it expects the services provided to vulnerable groups to be maintained.
To take one example close to home—and I declare my own interest here—on the one hand, the Bill legislates to protect specialist services for blind people, but on the other, it requires the proposed postal services regulator, Ofcom, to review that service and all the other services contained within the universal postal service within 18 months of the Bill coming into force. The Minister was very clear at Second Reading that this review is not intended to lead to a reduction in the minimum requirements of the universal postal service. However, in discharging its primary duty to secure provision of the universal postal service, Ofcom must give specific consideration to the financial viability and efficiency of the service. The review will decide whether the current universal service obligations work in the interests of users. I believe they do, but I do not think a regulator with a remit to further competition in postal services necessarily would.
A similar concern applies to the concept of the single tariff: a single price for a stamp. At the moment, Royal Mail is obliged to offer customers the same letter service without discriminating on price, regardless of the distance between the point of posting and the point of delivery. This works in favour of people who live in rural areas, but once the accountants and management consultants are let loose, questions about why users in urban areas should go on subsidising an often loss-making postal service in rural areas are bound to arise. Why not reduce the cost of a stamp in the cities and make those in the countryside pay a price that better reflects the cost of providing the service?
Small businesses are equally vulnerable to changes in the price of letters and packets. The Federation of Small Businesses has expressed concern about the Bill. It is worried—and I can understand its fears—that a more aggressive pricing regime will harm small businesses. The collection and delivery of postal packets forms part of the universal postal service. Such a service is vital for small enterprises. With economists in charge, these businesses could well be charged a price for the service they receive based, at least in part, on their location. Small businesses in rural areas are perhaps the most vulnerable to the more commercial spirit that will inevitably come with privatisation.
Older people, pensioners, who are a growing section of the community, again rely on the postal service more than younger users. With the advent of electronic communications, there has been a seismic shift away from writing and sending letters in the conventional way, but many older people are marginalised when it comes to such technologies. They are more reliant on the traditional postal service as a means of communication. It is important that a privatised Royal Mail does not operate in such a way as to disadvantage older users of postal services.
I am not against this Bill. I simply want to strengthen it so as to protect the postal service for those who live in a rural area, who run a small business that is reliant on Royal Mail, who receive specialist services for blind people or who are elderly. The object of this amendment is to restrict the ability of Royal Mail and the postal services regulator to use their new-found commercial freedom and a more competitive environment slowly to chip away at those services, to raise their costs disproportionately or reduce their frequency.
The Minister will no doubt say that it is absolutely the intention of the Government to protect these services. I do not question her intention for a moment. But once the Bill receives Royal Assent, the Minister hands over responsibility for the maintenance of these services to the regulator. An obligation on the Secretary of State to consult in the way I have suggested with this amendment and to report to Parliament strengthens the hand of the consumer and helps to build into the legislation another safeguard for service users. I beg to move.
Lord Touhig
In supporting the amendment tabled by the noble Lord, Lord Low, I shall speak to my Amendment 16A. The Bill does little to ensure accountability to the devolved Administrations in the United Kingdom. Yet we must recognise the vital services provided by the Royal Mail to the whole of Great Britain and Northern Ireland. It is part of our country’s infrastructure, supporting economic and social interaction across all the nations and regions, and we should retain universality of service across the whole country.
The needs of service users varies depending on where they live, with those in rural and hard-to-reach areas particularly dependent on postal services and vulnerable to changes that may follow from the introduction of the Postal Services Bill. For that reason, I believe that the devolved Administrations must be kept informed about the developments in postal services. Specific analysis should be undertaken and the likely impact of changes to postal services in Scotland, Wales and Northern Ireland should be properly considered. Moreover, specific consideration should be given to those with particular needs, such as pensioners and people with disabilities, a point eloquently argued by the noble Lord, Lord Low of Dalston, a few minutes ago.
The devolved Administrations already take a keen interest in postal affairs and recognise their importance. Economic development has been important to the Welsh Assembly and the Scottish Executive. They support the needs of small business in rural areas and both Administrations have made significant investments in their post office networks over these past years. In my view, it is unlikely that any of the devolved Administrations would want to see the break-up of the universal service. Providing detailed reports to the devolved Administrations would give them the opportunity to comment on particular implications of changes and will be important to improving oversight and accountability.
The future of Post Office Ltd and the continued provision of the universal service are a particular concern. Scotland, Wales and Northern Ireland contain large rural communities that would be disproportionately affected by any further decline in the post office network. The post office network is struggling. More than 150 post offices were closed as long-term temporary closures in 2010 alone and more than 900 post offices are up for sale. Sub-postmasters are struggling to make a living from their post offices. I fear that this Bill will potentially make things more difficult for them if we do not seek to improve it.
Breaking the link between Post Office Ltd and Royal Mail puts one-third of the Post Office’s revenue at risk. If the two cease to be part of the same company, there will be no guarantee that Royal Mail continues to sell its products through the Post Office. The Government’s proposals for the redesign of the post office network will see 4,000 “main” post offices created and the remaining post offices becoming “essentials” and “locals”. Essentials and locals will not provide the full range of post office services and some 2,000 sub-post offices would be transferred into essential or local category by 2014. They will offer only a proportion of the widespread post office services now available. I think that all remaining non-main post offices are likely to follow soon after.
Lord Razzall
My Lords, I do not want to intrude in the debate on this amendment, but unfortunately the noble Lords, Lord Touhig and Lord Low of Dalston, were not in their places when I made this point earlier. If we are to preserve the reputation of this House for knowing the facts and having expertise, we really must not say things that are not true. As I said earlier, the issue for the Royal Mail is not about whether it can deliver to rural Wales or rural Scotland. As I said earlier, it is more expensive for the Royal Mail to deliver to Norwood Green or Hampstead than to maintain the service to the Orkneys and Shetland.
If we are to debate this issue, the concern should not be about whether or not the universal service can be maintained to outer Wales or northern Scotland. It is about whether we can maintain it to Hampstead or Norwood Green. If we are to debate this issue, we should not fall into the trap of thinking that this is about how we preserve the service to the outer islands or parts of the UK. All the other issues that noble Lords have raised are worthy of debate, but if we are to be the serious House that knows the facts, we should take that on board.
Lord Touhig
Did the noble Lord suggest that the noble Lord, Lord Low, and I were somehow misleading the Committee by not telling the truth in this matter? I take exception to that. I am sorry that he has this metropolitan view. I know that his party is not that strong in Wales and will probably be wiped out in the coming elections, but there is no need to dismiss Wales as if it is at the other side of the moon.
Lord Razzall
No, I actually said that the noble Lord, instead of making party-political, snide comments, should actually learn the facts. The facts are that the Royal Mail at the moment is seriously under pressure delivering to Norwood Green and Hampstead, not to outer Wales, which is easy for Royal Mail to deliver to. That is the truth and he cannot deny it just because he wants to make Labour party-political points.
Lord McAvoy
I am tempted, especially by the last speaker. I am sure that every Liberal candidate in Scotland will welcome his intervention, but I can assure noble Lords that every Labour candidate will welcome it even more. The noble Lord mentioned the “outer” areas. Such contempt—such arrogance and such an unctuous dismissal of other people's points of view in this House—is against the very nature and style of this House. That is one of the most arrogant, aggressive statements that I have ever heard in my short time in this place.
I support the contents of the amendment of the noble Lord, Lord Low of Dalston. There is so much practical common sense in it that I do not know why—there is no logic or reason—it should not be accepted.
I am especially grateful to my noble friend Lord Touhig for his amendment because of its reference to the “outer” areas of Britain—the intervention by the noble Lord, Lord Razzall, will go down extremely well and will be well quoted. The point is that we have devolution. Let there be no doubt that I speak as a confirmed unionist—I always have been and always will be—who has no truck with the nationalists in Wales or Scotland, particularly Scotland. However, the democratic will of this United Kingdom Parliament set up the institution of the Scottish Parliament. To have devolution and not involve the devolved Administrations and not have lines of communication to them is a failure of the UK Government.
I would also like to restore a bit of balance—this is also relevant to the amendment—given that I have heard the phrase “the previous Government” about 25 times this evening. As my noble friend Lord Stevenson mentioned, the Labour Party manifesto said that all proceeds from any sale of the Post Office and Royal Mail would go straight back into modernisation and assistance. That is the sort of thing that would have helped Scotland. I understand that that was also a Liberal promise, but then again, like so many promises that the Liberals made, it vanished into a haze when they got the shock of being asked to deliver on their promises. We would have done that, but not one person from the Liberal Benches has mentioned that they had that commitment as well. Their whole principle is to surrender for power—or the illusion of power—because they have to be in government for a wee while.
Scotland, Wales and Northern Ireland—I am delighted to see the noble Lord, Lord Empey, here—are different because, unlike most parts of England, they comprise extensive geographical areas that can be sparsely populated. Some of those areas are not particularly well-off economically. However, there is a missed opportunity in the Bill. Previously in Scotland, there were closures of some post offices, which I fully accept were uneconomic—the closures were opposed by local Liberals, who are opportunists par excellence. There is an opportunity in Scotland, and no doubt in Wales and bits of Northern Ireland, where local authorities have a much more involved role locally than some of the big English councils. There is more localism there, and I believe that there is an opportunity to keep post offices going, in light of local circumstances. In Scotland—I am talking particularly about Scotland here, as I know it best, although I know Northern Ireland well, too—local councils could have co-operated with government and all types of bodies, including co-operatives, to ensure that a local service was still provided and not swept away. I declare an interest as a Labour and Co-op Peer. A big opportunity is being lost here. Scotland has a number of outreach services such as temporary vans or mobile post offices, so the whole difficulty facing the universal service in Scotland is different from that facing metropolitan areas in England.
I do not know about Hampstead and Norwood Green, but I know that that universal service is threatened in Scotland because of this Bill. What we have here is an authoritarian Government backed up by—I am astonished to say—an authoritarian Liberal Party that is only interested in getting legislation through. We in Scotland are going to lose out. I think Northern Ireland will lose out. My noble friend Lord Touhig has indicated that Wales will lose from it—there is a big loss there.
However, there will be a price to pay, because there are elections coming. In England, the local council elections will soon put pay to the Liberal votes. In Scotland, we have renewed vigour in our party, as have other parties, because Liberals have been exposed. In Wales, I think that the same will apply for elections to the Welsh Assembly. One thing about the House of Lords and the House of Commons—the Westminster Parliament—is that they provide an angle on British politics. Great things are being discussed here that, come election time, will have terrific resonance outside.
Lord Razzall
My Lords, I normally try to avoid rising before the Minister’s response. Although the noble Lord does not know my name, I think that he is the noble Lord, Lord McAvoy. One of the conventions in this House is that if you are going to be rude to somebody, as he was, you ought to know their name. I am Lord Razzall.
I am terribly sorry that the noble Lord did not know my name. He called me unctuous. Yes, I probably am quite unctuous, because I am quite polite to various people on his Benches. The only point that I was trying to make, which cannot be denied, is that the Royal Mail cost figures demonstrate easy-to-provide services to northern Scotland and rural Wales. That was the only point that I was making. Why that produced a diatribe against the Liberal Democrats I do not know, but I suppose that that is what he has introduced to this House. I am Lord Razzall, by the way, if he wants to name me.
Lord Touhig
The noble Lord suggested that people were not telling the truth. I do not know where he has been this evening—perhaps he has had a very good dinner. However, it is quite improper without any evidence to suggest that either I or the noble Lord, Lord Low—he followed both of us—were not telling the truth.
Lord Empey
My Lords, I do not wish to get involved in this particular exchange, but I declare an interest as a Member of the Northern Ireland Assembly.
The point that the noble Lord, Lord McAvoy, makes is valid. Like it or not, people who are furthest away from the centre in any country feel—rightly or wrongly—that whenever there is an economic contraction it comes from the outer areas and goes to the centre. That is not exactly a surprise. I hope that in her response the Minister will be able to reassure people in the regions.
I took the opportunity to make my maiden speech on this Bill at an earlier stage because I regard this service as a fundamental piece of national infrastructure. It is just as important to people as railways, air links, or whatever. It is not only a vital service for individuals. We must remember that we spend large amounts of money pushing rural development. That has not only a European but a national dimension; we spend a lot of money and time trying to develop rural businesses. One of the principal mechanisms that they have to distribute their products is the Royal Mail.
I fully understand that people feel the risk, whenever there is a contracting situation, that people at the outer edges will be disadvantaged. I hope that the Minister will be able to reassure us. I have no difficulty with the regional Administrations being consulted; that makes sense. We are trying to have a balance: not to impose a whole lot of conditions on the sale that make it less likely to happen at a good price for the taxpayer but at the same time to ensure that people in less central areas—let us face it, that applies to areas of England as well as to Scotland and Wales—feel that their interests are being taken seriously into account at the core. I hope that the Minister can reassure the House that, when it comes to consultation on the matter, those interests will be taken firmly into account.
Baroness Kramer
My Lords, I say to the noble Lord, Lord McAvoy, that I remember, not that long ago when we were standing not that far apart on the Floor in the other place, when he whipped his rather unwilling troops in to vote for the closure of 4,000 local post offices. I remind him that his views have taken a rather dramatic turn between that House and this one.
I turn to the issue that seems to be in contention here, which is whether deliveries to the outer parts of the British Isles—such as Orkney and Shetland—are subsidising deliveries to areas such as mine in Richmond or vice versa. Intuitively, I had assumed simply that the more rural the area, the more costly the delivery. I understand that that is not justified by the numbers, and I was going to suggest to the Minister that she might wish to speak to the Post Office because I presume that the appropriate numbers that make that clear could easily be placed in the Library for everyone to look at. That might clarify an issue of fact.
I have relatively little sympathy with Amendment 16A because the devolved Assemblies have many mechanisms for regular conversation with government departments here. They can come to their conclusions and make whatever representations they consider important without us having to encumber the Bill with further administration and burden. As others of us have said, it is important that we proceed in as accelerated a way as possible to make sure that both Royal Mail and the post office network are rescued before more financial damage can be done by the passage of time without a change in regime.
I am concerned that Amendment 16, moved by the noble Lord, Lord Low, might have been obscured in this conversation. That is the important amendment in this group. Whether it is justified or not, many people who are more vulnerable are very concerned by the changes that are coming to Royal Mail and the Post Office. There are many protections in the Bill for people who are more vulnerable and for small businesses, but it is not right to expect people to delve into the details of the Bill and spend time trying to work their way through the Explanatory Notes in order to come to an independent conclusion. It is crucial that the Government and the department are in conversation with more vulnerable groups and small businesses to make it clear that their needs are being recognised and heard, and that a response is available within the context of the Bill. Whether that is done via the mechanism of a formal consultation or in some other way, it is crucial to draw attention to people who are vulnerable.
I remember when local post offices were closed. I have mentioned before the ward of Ham, the most deprived ward in my old constituency. All three branch post offices were closed there. Many older people found themselves deprived of their independence because they had to get a friend to drive them to the post office. They could no longer walk there themselves; they were not capable of getting on to the bus to make the journey. It was an appalling experience for all of them and they still live without a post office. The noble Lord, Lord McAvoy, will be aware of what they went through because this all happened on his watch. That group will be anxious; it will not be certain that the Post Office recognises its needs; and it needs the additional reassurance that the amendment of the noble Lord, Lord Low, in many ways underscores. That is the amendment that we should be debating. The devolved Assemblies have mechanisms of their own which I am sure they are using most successfully.
Lord Young of Norwood Green
My Lords, somewhat later than planned, I rise to support both Amendment 16 in the name of the noble Lord, Lord Low, and Amendment 16A in the name of my noble friend Lord Touhig.
We can be proud that the universal service includes the six day a week, price goes anywhere letter service, but there are other important elements to it. Following representations from the noble Lord, Lord Low, in particular, the previous Government agreed to incorporate into the universal service minimum requirements the service to blind and partially-sighted customers and to put it into their 2009 Bill.
I pay tribute to the noble Lord, Lord Low, for the way in which he made the case in 2009 that carried the day. Nine million items a year are sent free of charge through the Articles for the Blind service. This Bill carries through that decision, a move that will be welcomed on all sides of the House.
It can be argued that there is a general duty on Ofcom to take into account the interests of vulnerable groups. Other Members have said this, and it bears repeating. People with a disability are more likely to use mail services as a means of communication and more disabled people visit the post office to post mail than the average. It can be argued that since Ofcom must consider the cost of the universal service as part of its statutory duties, it may weigh against its general duties to have regard to vulnerable groups.
Regarding the question of delivery costs, I do not know whether it is quite as axiomatic as the noble Lord, Lord Razzall, says. I just point out that it is odd that the competitors seem to gather in the urban areas. They do not seem to be flocking to the rural areas as if it was that good a deal. For once this evening, we are not actually talking through each other and I acknowledge what the noble Baroness, Lady Kramer, said. If we had the facts put in the Library, it would sustain us in further debates on this issue because this seems counter-intuitive. However, I may well be wrong so I am willing to go along with the point that the noble Baroness made.
Ofcom is currently consulting on abolishing its advisory committee on older and disabled customers, which should be a cause for concern. Equally, there are concerns in those parts of the UK which would be most vulnerable to any reduction in the universal service obligation or in the post office network. It has been remarked that small and medium businesses are also heavy users of the Post Office and Royal Mail services. Scotland, Wales and Northern Ireland certainly feel more at risk than other parts of the UK. The noble Lord, Lord Empey, put it very well in expressing carefully the value that business and the community put on the services provided by the Post Office and Royal Mail. It is therefore right that there should be an obligation to consult user groups, including small businesses, pensioners, people with disabilities and people in remote and rural areas. I urge support for these amendments.
Baroness Wilcox
My Lords, I suppose that I ought to start by saying that I live in Cornwall, which may put the Committee’s mind at rest. I have some idea about the differences of living in Cornwall and in the centre of London. Indeed, I apologise, for so does the noble Baroness, Lady Dean. There are quite a few of us around the Committee tonight.
Amendments 16 and 16A touch on the issues that we will be debating under Clause 11, about the annual report on the post office network, as well as under Part 3 on the regulatory framework for the postal sector. Amendment 16 would require the Secretary of State to consult various groups before a disposal of shares and to lay a report before Parliament setting out how the minimum requirements for the universal postal service, set out in Clause 30, will be maintained. Amendment 16A requires the Secretary of State to submit reports to the devolved Administrations about the impact of proposals in the Bill on post offices, small and medium-sized businesses, communities in remote areas, pensioners and those with disabilities. I hope to reassure noble Lords that the existing and future duties of Ofcom and existing reporting requirements are sufficient to meet their concerns.
I will first address the points raised in Amendment 16 by the noble Lord, Lord Low. Under Part 3, Ofcom will have responsibility for regulating the postal sector and its primary duty in that regard will be to ensure the provision of the universal postal service. The noble Lord, Lord Low, was concerned that Clause 29 would allow the minimum requirements of the USO, particularly the requirement for Articles for the Blind, to be reviewed by Ofcom and changed within 18 months. Let me reassure him that the requirement for a review within 18 months is for the very particular products and services that Royal Mail is required to deliver. It can have no impact on the statutory protections for the minimum USO requirements in Clause 30, including free services for the blind.
The noble Lord, Lord Low, was also concerned that a private Royal Mail could charge higher prices to customers in rural areas. Again, let me reassure him that Clause 30 also provides that pricing of the universal service must be,
“uniform throughout the United Kingdom”.
As I said when we debated Amendment 10, Ofcom will report annually to the Secretary of State on its activities, including the provision of the universal service, and the Secretary of State is required to lay that report before each House of Parliament.
Lord Young of Norwood Green
I am sure that the Minister is right about the attentiveness of the Bill team in the Box; they all look exceedingly alert to me—bright eyed and bushy tailed. I just want to be sure what we are seeking, as it is not the guarantee that the universal service will be provided. The debate is about the cost of delivery in urban as opposed to rural areas; I trust that I have got that right. Can I see them nodding in the affirmative over there? I hope so.
Baroness Wilcox
I thank the noble Lord for expressing that more clearly than I did. The Government have already produced an impact assessment on the proposals in the Bill. It looked at the impact of the proposals on all parts of the United Kingdom. The universality of the universal postal service means that the impact is the same across the UK. The assessment also looked at the impact on small firms, rural communities and disadvantaged groups.
As I said in my remarks on Amendment 16, it will be the regulator, Ofcom, that will have responsibility for ensuring the provision of the universal postal service. Ofcom will report annually on its activities, including ensuring the provision of the universal service throughout the United Kingdom. In addition, we expect that Royal Mail will report, as now, on its quality of service performance broken down by postcode areas, so that there continues to be transparency about the provision of the universal postal service to all parts of the United Kingdom.
With regard to post offices, Clause 11 requires a Post Office company to send a report annually to the Secretary of State on its network of post offices. The report on the post office network must contain information about the accessibility of post offices to, among others, individuals living in rural areas, small businesses, individuals with disabilities and elderly individuals. In recognition of the importance of post offices to all communities, Clause 11 requires the Secretary of State to give a copy of the report to Ministers in the devolved Administrations, as well, of course, as laying the report before this Parliament. I expect that we will discuss this reporting requirement in great detail when we come to Clause 11.
The noble Lord, Lord Touhig, raised a number of specific points on the post office network and I am sure that we will consider these issues in full when we debate the proposed amendments to Clauses 4 to 7 and to Clause 11. The report in Clause 2 is specific to when a decision has been made to undertake a disposal of shares. I reiterate that, regardless of any change in ownership from the public to the private sector, the obligation on Ofcom to ensure the provision of the universal service will remain. The universal service is protected by Parliament through this regulatory framework, not by the Government’s ownership of Royal Mail.
The information that is already in the public domain and that which will be provided as a result of the Bill will provide long-term transparency on the protection of the universal postal service and the accessibility of post offices throughout the United Kingdom. I therefore, at this late hour, ask the noble Lord to withdraw his amendment.
Lord Low of Dalston
My Lords, I am grateful to the Minister for her full reply and to all noble Lords who have spoken. At times I felt caught in the crossfire to the right and the left of me when I was simply moving a simple amendment designed to secure a fair deal for users of postal services. I am certainly most grateful to the noble Lord, Lord Razzall, for his intervention. I am sorry that I was not in my place earlier when he made his point and he had to repeat it, but I am grateful to him for repeating it because I yield place to nobody in my commitment to evidence-based legislation. The point that the noble Lord brought to our attention for a second time struck me as being counterintuitive, as the noble Lord, Lord Young of Norwood Green, said, but there are many things that are counterintuitive and may yet be true. I will certainly take the opportunity, before we come to Report, to follow the lead that the noble Lord has helpfully given us.
I assure the noble Lord that I was not making any party-political points; I was simply interested in curbing the rough justice that the market can sometimes cause in the interests of the consumer. I am sorry that the noble Lord felt it necessary to make his point with such acerbity. I may unwittingly have said something that was not correct, as the evidence and my further researches may reveal, but I assure the House that while I may have been mistaken there was no intention to mislead the House or to say anything that was untrue. I will follow that up and will be able to set the record straight by the time that we come to Report.
The Delegated Powers and Regulatory Reform Committee has pointed out that the Secretary of State has a power to alter the minimum requirements of the universal postal service. Without following the conclusions of the Ofcom review, this is, as the Committee pointed out, a significant power for the Secretary of State to have. It would not be unreasonable for the Secretary of State to be obliged to consult the groups that we have mentioned in the amendment before having the opportunity to exercise that power.
At this late hour I do not wish to press the amendment, but I will look carefully at the Minister’s reply—I repeat that it was very full and I am sure that it was helpful—to ensure that it contains the safeguards that we are looking for and I reserve the right to return to the matter on Report. For now, I beg leave to withdraw the amendment.