Grand Committee
Pensions Bill [HL]
(13 years, 9 months ago)
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The Deputy Chairman of Committees (Lord Geddes)
My Lords, as is usual on these occasions, I must remind the Committee that, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after approximately 10 minutes.
Clause 10 : Certification that alternative to quality requirement is satisfied
Amendment 42
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, I shall also speak to Amendment 43. Concerns about levelling down have been raised throughout the development of the auto-enrolment proposals. In an attempt to predict the likely occurrence of this, a range of interested parties, including the DWP, have carried out surveys. The Johnson report summarises its view on the position on page 63. It says that,
“taken as a whole, the bulk of evidence suggests only limited reductions in pension contributions as a result of the reforms. Surveys by Fidelity, Capita Hartshead and the CBI consistently report that around seven in ten employers are not planning to revise or reduce their current levels of provision, and the National Association of Pension Funds found only three per cent of employers planning to reduce contributions for existing members”.
The thrust of this is to be broadly welcomed, but we accept that differing definitions of qualifying earnings and perhaps more traditional definitions of pensionable pay can add to uncertainty, although I believe that the previous Government made it clear that it was the quantum of contributions rather than the basis of calculation that was important. This issue prompted the search for a process of certification that allows an employer to certify overall that schemes satisfy the relevant quality criteria for defined contribution schemes. That in theory avoids the necessity of demonstrating in respect of each employee by detailed calculation that the minimum contribution on the basis of qualifying earnings as defined in the Bill has been met. That is easier said than done. I recall a number of meetings with stakeholders trying to unlock this conundrum of wanting to encourage employers to stay with existing but quality schemes on the one hand but being reassured that auto-enrolment worked for all, especially those who had been shut out of pension savings in the past.
Clause 10 introduces an alternative requirement to the quality requirement set down in existing legislation that will enable a scheme to be used for auto-enrolment. It is to this that Amendments 42 and 43 relate. The Bill states:
“In prescribing an alternative requirement … the Secretary of State must be satisfied that, in all or most cases, a scheme will be able to satisfy the requirement only if … for a majority of individual relevant jobholders, and … all relevant jobholders taken together”,
the relevant quality requirements in respect of employer and total contributions are met. Our amendment would require the Secretary of State to be satisfied in respect of all cases and for more than a majority of individual relevant jobholders. We have defined this as 95 per cent or all routinely.
My first question to the Minister is why the Secretary of State cannot seek to be satisfied in respect of all cases for which an alternative requirement is prescribed. What are the sort of exceptions considered desirable or acceptable, and why?
My second question relates to new subsection (2A). The alternative requirement needs to ensure that for all jobholders or a cohort—the relevant jobholders—sufficient employer and overall contributions are paid to satisfy the relevant quality requirement. However, it also requires this to be the case for individual relevant jobholders, but only for a majority of them—50 per cent plus one. Clearly, this could lead to significant numbers of individuals missing out. The aggregate requirement could be met by more generous contributions for some jobholders with less than qualifying amounts for others.
The Delegated Powers and Regulatory Reform Committee refers to this as a significant power, as, indeed, it is. We are obviously aware of the proposed certification model on which the DWP is working. The Minister may want to update us on progress. The proposal is based on employee’s pensionable pay from pound one and has three steps: a 9 per cent minimum for each jobholder; an 8 per cent minimum for each jobholder where pensionable pay in aggregate equals at least 85 per cent of total pay; and 7 per cent for each jobholder where 100 per cent of pay is pensionable. It is understood that this may give some 92 per cent coverage, but the Minister might like to explain precisely what this coverage is. What analysis has been undertaken of the 8 per cent who presumably would not, on an individual basis, have a minimum contribution paid on their behalf?
However, our focus is not only on how this particular scheme would work; it is crucially on the powers that it is proposed to enshrine in primary legislation. Should a Secretary of State be so minded—I certainly do not contend that this is the case at present—an alternative requirement could allow nearly half of all jobholders to be short-changed. This is simply not acceptable to us and we urge the Minister most strongly to look at these powers again. I beg to move.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)
My Lords, I thank the noble Lord, Lord McKenzie, for his amendments to Clause 10. These amendments would require the Secretary of State, before making regulations on certification, to be satisfied that in every scheme at least 95 per cent of individuals would receive contributions no less than the statutory minimum. It is my understanding that these amendments may have been introduced to seek assurances that individuals will not potentially lose out under the proposed certification arrangements. The noble Lord made that clear in his remarks. I very much share his concern. That is why we have developed a certification test that balances simplicity with safeguards. The high-level certification requirements in Clause 10 will allow for a straightforward test of scheme quality to be set out in regulations for employers who calculate their pension contributions on basic pay rather than qualifying earnings but offer good-quality money purchase pension schemes. These employers will be able to demonstrate that their schemes meet the minimum quality requirements.
It might help if I briefly describe the certification test in the form that it is envisaged it will take in regulations. Contributions start from pound one and the test itself is based on three graduated tiers. Setting the first tier of the certification test at 9 per cent of basic pay provides a straightforward benchmark for schemes. We expect that a contribution of 9 per cent of basic pay will be a better deal than 8 per cent of qualifying earnings for 95 per cent of individuals who work in the private sector and who are eligible for automatic enrolment. Employers who make slightly lower contributions of 8 per cent or 7 per cent of basic pay will be able to certify that contributions must be based on a set ratio of pensionable pay to total pay. In the latter case, all pay must be pensionable. Employers using certification will be able to increase their contributions gradually. The precise details of how this will work will be set out in secondary legislation.
We worked collaboratively with key stakeholders, including the National Association of Pension Funds, the Association of British Insurers, the Confederation of British Industry, the Society of Pension Consultants, accountants and lawyers in designing the certification model. Employers and trade unions have broadly welcomed the certification arrangements as a pragmatic solution to a difficult problem. I hope that we have managed to unlock the conundrum referred to by the noble Lord, Lord McKenzie.
In designing the certification model, we addressed two risks: first, that there would be a significant detriment to individuals; and, secondly, that any certification test would be too complex. It is important that we get the balance right, as we do not want to encourage employers to level down to the statutory minimum, resulting in lower contributions for many of their workers. To protect individuals, the certification test broadly equates to the statutory minimum quality requirements for money purchase schemes: a contribution equivalent to 8 per cent of qualifying earnings. However, it uses basic pay from pound one rather than qualifying earnings. Basic pay is the key to simplification and to risk, as it varies across employers. Based on the analysis that underpins the certification model, we estimate that, for more than 90 per cent of people employed in the private sector who are eligible for automatic enrolment, basic pay is greater than or equal to qualifying earnings—I hope that that answers the question posed by the noble Lord, Lord McKenzie. That is because the basic pay calculation is made from pound one, rather than on just a band of earnings. In view of this, we believe that many people will get higher contributions under basic pay. We can monitor and mitigate the risk to individuals and take action if necessary. The bigger risk here is levelling down.
The amendment would require the Secretary of State, before introducing certification in regulations, to be satisfied that for every relevant scheme 95 per cent of the individual jobholders receive at least minimum-level contributions. We would not be able to regulate for the certification test that we currently envisage, which has been welcomed by employers and key stakeholders. In effect, we would be back to square one and would have recreated the conundrum. To make regulations, the Secretary of State would have to introduce a test that required the individual checking of each jobholder’s contribution records. That would make the test more complicated. Alternatively, he would have to set a much higher bar. Employers have told us that the former would impose an unacceptable burden and they would seriously consider levelling down to the legal minimum.
We are aware of the risk of individuals losing out, as the noble Lord pointed out. We have made a commitment to fully evaluating the effects and implementation of the reforms. This will include a proportionate check to ensure that the regulations are operating as expected and that there are no unintended consequences for individuals, employers or industry as a result of the reforms. To minimise the number of individuals losing out, we will monitor trends in the various components that make up an individual’s wage packet in our annual surveys. The data will enable us to monitor trends in pay and reward packages to identify any significant shift in earnings patterns. Our data collection enables us to monitor pay patterns by firm size, occupation and industrial sector. If the data suggest that self-certification is being abused, or more individuals than expected are losing out, the Secretary of State will have the power to tighten or repeal the legislation.
The noble Lord asked about clarity and what Clause 10 means by “a majority”. In this case, a majority means 50 per cent plus. However, the analysis on which the certification model was developed suggests that we can surpass this and other conditions. As I said, we estimate that, for 90 per cent of people employed in the private sector, basic pay is greater than or equal to qualifying earnings.
I believe that we have the right balance that allows an administrative easement for employers and provides safeguards for individuals. I hope that this will go some way towards reassuring the noble Lord, Lord McKenzie. I therefore urge him to withdraw his amendment.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for his explanation of what is proposed for the certification model, its monitoring and the follow-up work that will be done. However, our basic concern is not the certification model, which has been worked up and, I accept, will be taken forward, but what is in primary legislation about what a Secretary of State can do. As it is written, a Secretary of State could bring forward alternative regulations that meant that only 50 per cent plus one of individual relevant jobholders would be provided for as they should be. It is the broad nature of the primary power that is our main cause of concern. It is a very wide power. What is to stop a Secretary of State bringing forward alternative models?
Lord Freud
I need to answer that, as it is clearly the noble Lord’s core question. The Bill circumscribes the Secretary of State’s powers by providing that, when prescribing certification requirements in regulations, the Secretary of State must be satisfied that, first, in respect of all or most cases, the total contributions paid by the employer and the jobholder together will not be less than if the scheme had met the relevant quality requirement; and, secondly, this must be the case both for a majority of the jobholders in a scheme and for all the jobholders in a scheme taken together.
Lord McKenzie of Luton
My Lords, I am grateful for that, but it does not help me. My problem is that there might be arrangements whereby some of the relevant jobholders—under the provision, you can choose what cohort of jobholders you want to look at; it is not all employees at any one time—could be well provided for and others not. The second part of the test, which looks in aggregate, would be met; all you have to do to satisfy the first part is for 50 per cent plus one of the individuals to be covered. Unless I am misreading that, and I do not think that I am, that is our bone of contention.
Lord Freud
I can give the noble Lord some reassurance. The regulations are affirmative, so we will have the opportunity to debate them at that point.
Lord McKenzie of Luton
With great respect to the Minister, I have trotted that one out myself a number of times. As we know full well, we cannot amend affirmative regulations, although they give an opportunity for debate.
This is a serious issue and a potential loophole in the legislation. I do not suggest for a moment that the Minister or his current colleagues would seek to exploit it; I accept that they are focused on working up a practical scheme. However, this is too wide a power to be left in primary legislation. I urge the Minister to reflect on that and perhaps discuss it with his colleagues to see whether it could be narrowed. We would be more reassured if the terms of the certification model were placed in primary legislation. We do not think that that is necessarily a perfect fit, but it would be a good deal better than the very wide discretion that the Secretary of State will have at present. I accept that that is not in the Government’s thinking at the moment, given the model that is being developed.
I am reassured about the monitoring of the model to be undertaken. I will need to read the record, but I thought that the Minister was saying that we could still end up with 10 per cent of people in schemes who would not fall within its ambit. If that is right, 10 per cent is a big chunk of the people whom we are trying to get into pensions saving. On that point, unless the Minister has anything further to say, I am happy to read the record, because I know that we will come back to this point on Report.
I seriously urge the Minister to consider my first point, because it is a serious problem with the clause and one that we want to follow through. Having said that, I am grateful for the information that the Minister has provided and beg leave to withdraw the amendment.
Lord Freud
“( ) In section 32 of the 2008 Act (power to modify by resolution) in subsection (1)(b) for the words after “the scheme” substitute “to satisfy—
(i) the requirements contained in section 20(1),(ii) those requirements as modified under section 24(1)(a), or(iii) a requirement prescribed under section 28(2)(b).””
Lord Freud
My Lords, I shall speak also to government Amendment 45. The backdrop to many of the measures set out in Part 2 of the Bill is to provide employers with greater flexibility and to ease their burdens. These amendments continue that practice.
With regard to Clause 10, Amendment 44 introduces an amendment into Section 32 of the Pensions Act 2008. The purpose of the amendment is to make it easier for employers, in collaboration with their scheme trustees or managers, to make certain improvements to their occupational money purchase pension scheme and some hybrids to meet the requirements of a certification test. The modification powers in Section 32, as amended by Clause 12, enable trustees or managers to make certain improvements to their scheme by resolution with the employer’s consent to comply with the automatic enrolment requirements. Amendment 44 extends this facility to employers using certification.
Self-certification will provide employers with a straightforward way of ensuring that their money purchase pension scheme satisfies the relevant quality requirements. Employers intending to use self-certification will need to ensure that their scheme satisfies the relevant requirements both at the outset and on an ongoing basis. We have just debated the self-certification option. The point is that this amendment will make it easier for employers, in liaison with their trustees, to make improvements to their schemes in order to comply with the automatic enrolment requirements.
Government Amendment 45 is a technical amendment to Section 30 of the Pensions Act 2008. Section 30 allows employers who are using defined benefit and hybrid schemes to defer the automatic enrolment date for jobholders when certain conditions are satisfied. Where certain conditions cease to be satisfied during the transitional period, the employer must ensure that the jobholder is enrolled into an alternative scheme.
At present, the Pensions Act 2008 restricts the employer to using either another defined benefit or hybrid scheme, or a money purchase scheme, as the alternative scheme. The amendment provides employers using defined benefit or hybrid schemes with greater flexibility around their choice of an alternative automatic enrolment scheme. It will allow employers to choose to enrol jobholders into a personal pension scheme. This is in line with the original policy intent of giving employers maximum flexibility.
Under the amendment, we intend to amend the automatic enrolment regulations to ensure that an employer who intends to use a personal pension scheme for this purpose provides the jobholder with information about the scheme. This mirrors the existing arrangements for money purchase schemes and therefore provides parity. As has already been mentioned, the amendment will ease burdens on employers and provide them with greater flexibility.
To address the concern about whether employers might abuse these amendments, we will monitor trends along with pay and reward packages. If we identify that employers are manipulating the test, the Secretary of State has the power to strengthen the test or, as a last resort, to repeal the legislation. I beg to move.
Baroness Drake
My Lords, as anticipated by the Minister, I rise to express reservations about government Amendment 44, which continues to give rise to the anxieties expressed by my noble friend Lord McKenzie. While on the face of it the amendment appears to be somewhat benign, aimed at improving the drafting of the Bill, on more detailed reading it raises anxieties, certainly in my mind. As I understand it, this amendment would allow trustees to change pension scheme rules to enable their employers to meet the regulatory test set by the Secretary of State for the alternative requirement for certifying that their scheme meets the qualifying earnings contribution standard—the alternative requirement regulatory test, which my noble friend Lord McKenzie was addressing in Amendments 42 and 43.
My anxieties are twofold and I will try not to be too technical in addressing them. First, the intention behind the regulatory test for the alternative certification to the normal statutory quality requirement was, I believe, to assist good employers who run good schemes but who use a definition of pay for pension purposes other than earnings. However, either their scheme meets the test or it does not. An assessment against that proposition should stand or fall on its own merits. Having made the concession of an alternative qualification test, surely one cannot allow scheme trustees to change their scheme rules in order that the alternative regulatory test is met. That strikes me as changing the original intention of the alternative test and encouraging arbitrage by bad employers, particularly if that regulatory test is weakened, because if a bad employer—and I know that good employers will not do this—can see the benefit of redistributing pay between base pay and other elements of earnings, they may be able to avoid paying contributions on a segment or proportion of members of their workforce. If we have good employers—and the primary intention of this regulatory test is to allow them to show that they are good employers—I do not see why the proposition cannot stand or fall on that basis and why we need to allow subsequent amendments to the scheme rules.
Secondly, the Bill allows for the regulatory test, as my noble friend Lord McKenzie has said, to make an assessment for an employer’s workforce as to whether it meets the contribution requirement at the aggregate level. However, it allows simply for an assessment for a majority of employees at the individual level and, in that way, the regulatory test can still be met. This amendment appears on the face of it to allow trustees to change their scheme rules, with the effect that some individuals are made worse off, under both the scheme rules and the statutory provisions, because no one has disputed that it is possible for some individuals—maybe up to 5 per cent or more, even on the Government’s own arguments—to be excluded from a contribution to which they might have had access if the statutory provisions had been strictly applied. However, we now find the situation where a group of individuals could be made worse off—not only under the statutory provisions but also under their scheme rules—but where an employer can still meet the regulatory test.
I am also concerned that this regulatory test could be made weaker. The consultation on the regulatory test, as outlined by the Minister, has not concluded. We know that it is ongoing, so we do not know what will eventually be brought forward in the regulations. If the regulatory test becomes weaker, the problem could become worse, because there is an even greater incentive to change the scheme rules to take advantage of that regulatory test. Therefore, I have reservations.
Lord Freud
My Lords, I thank the noble Baroness, Lady Drake, for pinpointing her concerns around this. Let me try to address those issues. It is important that we try to disentangle the concerns surrounding the previous amendment from this amendment, which represents a fairly technical and, I will argue, wholly benign approach. Clearly this must be done by trustees who have a duty to pensioners and future pensioners. They can change the rules only to facilitate automatic enrolment or to raise the contribution rate to comply with relevant scheme quality requirements, and those changes can be made only with the consent of the employer. So it is an upwards-only adjustment in practice under this amendment—I am not talking about the issues that we discussed under the previous amendment. The trustees must consider the interests of existing members in that decision.
On whether employers will be able to manipulate the certification requirements by transferring workers from one tier of the test to another, which is behind the noble Baroness’s concern, we want to encourage employers wherever possible to retain their existing schemes, which in many cases will have been structured to suit the profile of their workforce and their business model. That flexibility is important to employers. We are therefore making it easier for them, in liaison with their trustees, to meet the automatic enrolment requirements by means such as the self-certification test for money purchase schemes and hybrids.
If a large employer wanted to take advantage of the greater flexibility of the first tier of the test—the 9 per cent contribution tier—it would have to consult the workers if the scheme on offer was an occupational pension and doing so meant a rise in contribution for workers. Any change resulting in a reduction in the amount of employer contribution in respect of a money purchase occupational scheme would require larger employers to consult their affected workers. Employers using contract-based schemes to discharge their enrolment duties would have to alter the individual contracts.
Let me briefly recap the Government’s case for making the amendments. The amendment relating to Section 32 of the Pensions Act 2008 will make it easier for employers and trustees to make improvements to their schemes so that they meet the requirements of the self-certification test. The amendment to Section 30 of the Pensions Act 2008 will give employers greater flexibility where the transitional arrangements for defined benefit and hybrid schemes cease to apply. In such cases, the amendment will allow employers to use personal pension schemes, as well as money purchase, defined benefit and hybrid schemes, as replacement schemes. These two minor and technical amendments will provide employers with greater flexibility.
Lord Freud
“Arrangements where transitional conditions cease to be satisfied
In section 30(5) of the 2008 Act after “money purchase scheme” insert “or personal pension scheme”.”
“Power of trustees to allow early access to lump sums
After section 32 of the 2008 Act (power of trustees to modify by resolution) insert—“32A Power of trustees to allow early access to lump sums
Providing that the jobholder has at least £10,000 in his or her pension scheme, upon application to the trustees of the qualifying scheme or automatic enrolment scheme a jobholder may withdraw up to 25% of the total sum accrued at the time of the application in the jobholder’s NEST.””
Lord McKenzie of Luton
The amendment is not moved, although I think that my noble friend Lady Hollis wants to bring it back on Report.
Baroness Turner of Camden
Baroness Turner of Camden
My Lords, my amendments are an attempt to deal with the Government’s intention to replace the retail prices index with the consumer prices index as the indexation for pensions in payment. That was raised on Second Reading, and I am sure that everyone is aware that a lot of people have already voiced opposition to that because it is felt that people will suffer very much in their expectation—mostly people who are already receiving pensions.
I understand that people in the public sector have already received notification that they will be receiving the lower amount rather than an increase in line with the retail prices index. A number of them feel very angry about it. My own sister, who is a retired teacher, has phoned up to complain to me about it, and I am not surprised. I have already read quite a lot of material from the TUC, which supports the view that it is not fair. That view has also been expressed extensively by Saga, which has been writing to a number of people on the Committee about the Bill, and I support what it has been doing.
The situation regarding public sector workers is that although there is a lot of talk about public sector pensions being gold-plated and so on, many people working in the public sector do not get paid large amounts of money. Women in the public sector are usually on salaries of between £4,000 and £5,000, and even the loss of a relatively small amount of money means quite a bit to people at that sort of pension level.
With regard to the private sector, the Government have been instructing the pension providers that they have to inform their pensioners that in future the increases will be in relation to the consumer prices index rather than the retail prices index, and their obligation is simply to notify people that that will be their situation. I believe that that has already happened in the private sector. I understand, however, although I am not sure, that if your pension is provided on contract and the contract provides for retail prices index increases, that will not be interfered with by the Government’s new ruling.
One of the reasons why people feel it is so unfair is that we are now in a situation where inflation is running at 4 per cent and everyone expects it to go up—the papers are full of information about how we can expect the cost living to rise substantially—and at the same time many of the people in this category, who were advised to save and have been saving, find that their savings are not worth what they once thought they were, because there has been nothing much by way of interest on their savings. Many of these older people feel that they are losing out twice; they are not getting what they expected with the retail prices index increases, while at the same time the savings that they have been prudentially putting aside are not going to produce the kind of increases or support that they had expected to receive. For those reasons, both Saga and the TUC have been pressing for this to be reviewed. The situation is not fair, and I hope that the Government will be prepared to look sympathetically at their request.
With regard to Amendment 48A, with which my two amendments are grouped, I understand that my noble friends Lord McKenzie and Lady Drake are anxious to soften the blow a bit by providing for the whole thing to be reviewed. I understand that and I respect what they are trying to do. Nevertheless, I want the Government to look again at the whole issue of the retail prices index, as there is a lot of concern about it. I beg to move.
Lord Boswell of Aynho
My Lords, I oppose the amendment. I should perhaps declare that I, too, have members of my family—two daughters, in fact—who are in public sector pension schemes, and of course one hears comments of the sort that have been honourably and properly recorded by the noble Baroness. There are many people in the private sector who for a variety of reasons, not necessarily where their schemes have collapsed into the Pension Protection Fund, are feeling some stress as well. That needs to be said.
I would just say that although I did not respond to the Minister on his remarkable presentation last night with regard to the social security uprating orders, I was actually convinced by it, which I am not wholly sure that I had been until he gave that presentation. It is a change that we have to make, particularly bearing in mind that there are alternative arrangements for retirement pensions which will meet the triple test and will accelerate state retirement pension levels rather faster than the CPI.
I will make one further comment on Amendment 48A and the scheme proposed by the noble Lord, Lord McKenzie of Luton. I understand the motivation, but it is asking for a report on one-hand clapping, as the Zen Buddhists would say. It would be better expressed if it called for a report on the relative impact of the use of the CPI and of the retail prices index. We would then have some measure of comparison. As all noble Lords are aware, historically the CPI has run ahead of the RPI. My noble friend last night made representations about why this was overstating the problem and arguably would overcompensate recipients.
That leads me to make a technical comment of my own, to which my noble friend may want to respond. As one takes the heat off the RPI, it will become less immediately salient, although it will still be used and reportable for a number of purposes. As that happens, given the types of interaction and substitution effects that were rehearsed last night, it may be that it will cease to be of quite the utility that it was. Somewhere at the back of my mind—I must say it while I remember it, and hope that I still can—are my scribbled lecture notes of 45 years ago that I took on the Laspeyres and Paasche indices, and on all the different impacts of these complications. I implore noble Lords not to ask me to explain to the Committee how they work, but I will make the point that as we shift the emphasis to the CPI—that will surely be an irreversible shift, and I have given reasons for supporting the concept—the RPI will move out of focus and could become distorted in the uses for which it is still employed. Perhaps the Minister will give me some assurance that it will retain its integrity even if it is not being used for these uprating purposes.
Lord McKenzie of Luton
My Lords, I will speak to Amendment 48A in this group. I start by acknowledging the criticism made by the noble Lord, Lord Boswell, of the drafting; I very much take his point. I am also intrigued that he can read his notes after 45 years. I struggled today to read the notes that I made yesterday.
Amendment 48A calls for a triennial report to assess the impact of using the consumer prices index as the measure of inflation. It seeks that assessment from, among others, pension scheme members, employers, taxpayers and PPF levy payers. It is an opportunity to reflect on what has become known as the RPI/CPI switch. We stated in the other place, and again in our debate yesterday on benefit uprating, that we cannot support the decision to adopt on a permanent basis the CPI as currently constructed for the determination of benefit uprating and of pension revaluation and indexation. However, if our understanding of the process and legislation is correct, we do not need more amendments to the Bill to secure any change in future—which may help my noble friend Lady Turner. Issues of uprating pensions, including the BSP, S2P, public sector pensions and occupational pensions, are determined annually. These are undertaken by the increase in the general level of prices, which is generally not specified to be RPI or CPI, or indeed any other measure. Therefore, if I am right, a future Secretary of State could take a different view on the most appropriate measure of the increase in the general level of prices, and without the need to change primary legislation. The situation with regard to the PPF is similar. Clause 15 removes references to the retail prices index and substitutes,
“the general level of prices in Great Britain”.
But that does not lock in the CPI for all time. If I am wrong on that, perhaps the Minister will let us know, because we might want to table further amendments on Report. That runs also for the provisions of Clause 14, which my noble friend has addressed.
The change to uprating the various facets of pensions by CPI—subject to statutory caps—will, as we know, have a significant impact, particularly over time. We obviously accept that for the basic state pension, where we support the re-linking to earnings, which will provide the long-term determination of the basic state pension. For private sector occupational schemes, the extent to which the CPI ends up being used for revaluation and indexation depends on the scheme rules, and we support the Government in not pursuing the override. Nevertheless, the updated impact assessment produced by the DWP in February shows that the total cost in terms of reduction in the anticipated value of members’ pension rights—including the stock as well as the flow of pensions—is something like £86 billion, which is a considerable sum. This is not a deficit-reduction saving; it is an almost equal and opposite benefit for sponsoring employers, and there are consequential benefits to the PPF and levy payers.
Lord Freud
My Lords, I thank the noble Baroness, Lady Turner, and the noble Lord, Lord McKenzie, for their amendments, which I will address in detail in a moment. Before I do, I would like to set the context.
The legislation covering statutory increases to private sector occupational pensions requires the Secretary of State to make a judgment about the increase in the general level of prices in Great Britain up to the end of September each year. This judgment forms the basis of an annual order setting minimum statutory indexation and revaluation percentages to be used by occupational pension schemes in the next calendar year. As noted yesterday by the noble Lord, Lord McKenzie, the revaluation order was laid in December last year and the order providing for public sector pension increases will be laid shortly. They are not the subject of the Bill.
Clause 14 could best be described as technical and consequential. It makes changes to important but relatively minor provisions. I know that many noble Lords hold strong views on the Government’s decision to use CPI; it was the topic of extensive debate on Second Reading, and it was discussed at length yesterday. In response to the question of the noble Lord, Lord McKenzie, about how much the hands of a future Secretary of State are tied, I can let him know that he is correct in his presumption that the Secretary of State can take a different view and go back to RPI without a Bill if that is their decision. The CPI is a matter of coalition policy now.
It is not my intention to labour any further the methodology or our reasons for adopting the CPI. I think that that is now a matter of record. I will just pick up the noble Lord on one little point that I cannot resist: he asked whether people really substitute. I tried to explain yesterday how there has been extensive research into whether the practice matches the theory, and the research has all come out to say yes, it does. That is how I respond to that point.
Lord McKenzie of Luton
That was not my own judgment; I am not a statistician. It was the Royal Statistical Society that raised that issue.
Lord Freud
I am most pleased to take this opportunity to inform the Royal Statistical Society of the results of extensive research, which I know it will take into its considerations when it looks at this again.
I think that it would help if I set out exactly what Clause 14 does and why. It does two things. First, it addresses some peripheral references to RPI in occupational pension legislation that need to be removed or amended to ensure that the Government’s decision to use CPI as the best measure of inflation is applied consistently from now on. Secondly, it addresses the so-called “CPI underpin” issue. That arises where a scheme carries on increasing pensions in payment by the RPI. As the statutory minimum is calculated by reference to the CPI, such schemes would be required to track both the CPI and RPI and pay the higher, a bit like the old escalator in the funhouse in Tivoli in Copenhagen. We have made it very clear that statutory increases are minima, and we do not want to discourage schemes from making higher increases. Consequently, the clause before us ensures that schemes that continue to increase by reference to RPI are not subject to this funhouse ratchet effect.
The first reference to RPI is in Section 84 of the Pension Schemes Act 1993. This is a fairly obscure provision that caters for special arrangements in schemes which provide full uncapped revaluation on the whole pension including the guaranteed minimum pension. Clause 14(1) to (3) replaces the explicit reference to RPI in Section 84 with a requirement that these schemes must maintain the value of the pension in line with the rise in the general level of prices. This ensures that Section 84 provides for uprating in the same way as the other pension legislation.
The noble Baroness’s first amendment, reinserting a reference to RPI, effectively does nothing more than revert Section 84(5) to what it already says. It will certainly not restore RPI indexation or revaluation more generally.
The second reference we are addressing in Clause 14 is in Section 40 of the Welfare Reform and Pensions Act 1999. This concerns the indexation of pension credit benefits, which are pension rights deriving from a pension sharing order made as part of a divorce settlement. Clause 14(6) to (8) replaces the existing reference to RPI with a cross-reference to the inflation percentage adopted by the Secretary of State for the purpose of the annual revaluation order. The remaining part of the clause concerns Section 51 of the Pensions Act 1995. Section 51 sets out the requirements for indexation of pensions in payment.
The amendments to Section 51 of the Pensions Act 1995 in Clause 14 will also ensure that where schemes continue to increase pensions by RPI they need not carry out an annual comparison of the RPI increase required under the scheme rules and the statutory increase using CPI and pay the higher of the two. If a scheme increases pensions by reference to RPI, and has done so since the start of January 2011, then it will escape the statutory requirements of Section 51(2). This deals with the CPI underpin issue to which I referred earlier.
The amendments in Clause 14 also make amendments to ensure that Section 51(3) continues to apply as intended now we are using the CPI to measure inflation. Section 51(3) exempts schemes from the statutory indexation requirement where they increase pensions in payment at least by capped RPI measured over an annual period defined in their rules. Inflation for statutory indexation is measured at 30 September, but some schemes want to continue measuring at a different time and that is fine—Section 51(3) currently allows them to do that. The clause has the effect that if schemes increase by CPI, RPI or a combination of the two under their rules, they will continue to be exempt from the statutory indexation requirements. At the moment it is only schemes with RPI rules that would be exempt. All we are doing is making sure that an existing provision, which is very convenient for a number of schemes, is carried forward into a world where some or all pensions in payment will be increased by reference to CPI as well as RPI.
I am afraid that the noble Baroness’s second amendment would undo the part of the clause that allows schemes that increase by reference to CPI to use their own inflation reference period. Again, it will do nothing to restore RPI indexation or revaluation more generally. For that reason, and for the reasons that I set out earlier in respect of Amendment 47, I urge the noble Baroness not to press her amendments.
On Amendment 48A, I stress again that deciding the increase in the general level of prices is an annual duty, and that as the Government have made clear many times over, we believe that the CPI is the most appropriate measure. Publishing a triennial report on the impact of using the CPI will not change that. That is not to say that we are not interested or do not care about the impact—of course we do—but it is important to look at the broader context, not one part of the picture in isolation.
We are also mindful of the impact on private sector pension schemes and their members. That is why we issued a consultation paper in December about the impact of using the CPI on private sector occupational pension schemes. That consultation finished on 2 March and we are currently considering the responses. The noble Lord, Lord McKenzie, has asked when we will be able to share those responses. I can only ask him to show us a little more patience. I think that we have around 150 submissions, and some of them are extremely detailed and complex. We are also conducting social research to investigate the impact of the change from RPI to CPI for statutory revaluation and indexation of private sector pensions. We hope to publish findings from this research before summer.
Baroness Turner of Camden
I thank the Minister for that detailed response. My aim in putting down the amendments was to give voice to a lot of the opposition that has been voiced to me in the letters and complaints that I have received after people have been notified that they are likely to have a different arrangement with regard to indexation from what they have hitherto expected. There is a lot of anger about it, so I put the amendments down. I am not exactly committed to the wording, but I wanted very much to voice that opposition and to say that the people concerned have real worries about what will happen to them and their pensions in future.
I also thank my noble friend Lord McKenzie for what he had to say in support of his amendment. In default of getting anything like my amendment on to the statute book, his amendment seems very worthwhile because it means that the situation has to be reviewed and there is an attempt to ensure that what has happened is placed under survey at intervals. If it seems to be what you might call a soft answer, at least it is an improvement on what people think that they are facing in future.
I will read carefully what the Minister has said. I found it interesting that modifications can be made, surveys are conducted and so on. That is very useful and I will look at it carefully.
Lord McKenzie of Luton
Before my colleague withdraws her amendment, and I certainly do not intend to press mine, it seems a bit hard for the Government to say that their policy is fully evidence-based when they are only just gathering the responses to the survey and will take some while to analyse the consequences. The survey of the consequences of the switch to CPI for occupational schemes is an important one, and one might have hoped that the Government would wait for that analysis and research before they committed to the switch long-term.
Lord Freud
The consultation exercise informs how we do these things in some detail in regulatory terms, but it does not affect the decision and direction of travel.
Baroness Drake
(c) the amount available must be no less than that available on the open market option.”
Baroness Drake
My Lords, this is a probing amendment to understand fully the implications for scheme members in cash balance schemes that are not contracted out or where members have not accrued benefits on a contracted-out basis. This clause removes the requirement to index pensions that come into payment at a future date under cash balance schemes.
I have two concerns. In the first instance, cash balance schemes usually fall into one of two types. The first is cash balance with guaranteed conversion terms, whereby the pension pot at retirement is defined, based on the proportion of salary set aside each year and the guaranteed rate of interest earned, and the pot is converted to pension on guaranteed terms that are set by the scheme at an agreed point before retirement. Once in payment, the amount of pension is guaranteed. The second type is a cash balance scheme with open market annuity, whereby the pot is converted to pension on open market annuity rates and, once in payment, the amount of pension is guaranteed.
My concern is that, under the open market option, an individual has a choice between a level and an indexed pension, whereas the effect of the clause—on first reading of the Bill—could require an individual in a cash balance scheme to accept conversion of their savings pot into a pension on terms that were potentially less favourable than those available on the open market option, given that they could not have access to an indexed pension. Hence my amendment, which seeks, on removal of the indexing requirements, to anchor the conversion rates in cash balance schemes to being no less favourable than those available on the open market.
My second concern arises from the removal of the indexation requirements from cash balance schemes that are not contracted out, as the Bill states. Given the Government’s aspirations to accelerate the integration of the basic state pension and the state second pension into a single state pension, which will result in all schemes being contracted in, what would be the implications for scheme members who had not yet converted their assured sums into pension from their previously contracted-out cash balance schemes but had a reasonable expectation of indexation? I beg to move.
Lord Freud
My Lords, the amendment would require that an annuity without indexation bought by a cash balance scheme member or the pension provided by the scheme must be no less than that available on the open market option. In moving the amendment, the noble Baroness, Lady Drake, raises an important issue.
It is important that individuals can shop around to get the best type of annuity for them at the best available rate. This will affect their level of income for the rest of their lives. This clause, which gives members of cash balance schemes more choice about the shape of the income that they take in retirement, will support this. However, in compelling members to take a pension of no less than that available on the open market option, there arises a practical difficulty.
Annuity pricing is now highly individualised. Most providers offer rates by postcode. Enhanced and impaired life annuities also offer significantly higher rates for those with health conditions or lifestyles that are likely to reduce their life expectancy. This makes it difficult to establish what the right open market rate for comparison should be and very difficult for schemes to establish a workable process to find out what a member is likely to be offered on the open market.
In addition, different types of annuity offer different starting payments. For example, an individual might wish to buy an annuity with a guarantee period. This is likely to give a slightly lower payment, but it gives the member a guarantee that the annuity will continue to be paid if they die before the end of the guarantee period. This is unlikely to represent the best available rate on the market, but is it right to deprive the individual of this choice? For these reasons, I believe that any amendment of this nature would be unenforceable and, as a consequence, unworkable in practice.
I would like to pick up one of the questions that the noble Baroness asked with reference to further reforms to the state pension. It is too soon to speculate about those—certainly, it is too soon for me to speculate about them. We believe that it would be too difficult in practice for schemes to separate out periods of contracted-out service. The same scheme member may have periods of contracted-out and non-contracted-out service. There is also a danger of the possible franking of one benefit against increases to another. All those schemes that have been contracted out on a defined contribution basis no longer have to provide an indexed annuity. Schemes that are contracted out on a defined benefit basis, either where a guaranteed minimum pension is payable or on a reference scheme test basis, have to provide indexation to the relevant level. With that explanation, I urge the noble Baroness to withdraw the amendment.
Baroness Drake
I thank the Minister for that response. I have sympathy with what he says because I would be the last person to want to discourage cash balance schemes, as they allow for a degree of sharing and in today’s world one does not want to discourage that. I can see the compelling argument and I understand the point about the annuity pricing market becoming more individualised, which makes it difficult to establish an open market comparator, especially where a scheme may be wanting to set conversion terms. However, I remain concerned, as it is desirable for individuals to have the choice to access indexing, otherwise they are denied an opportunity to lay off some of their inflation risk. Given that in a DC world they bear so much risk, it would be a little sad if the unintended consequence of this Bill was to deprive to a greater extent than currently exists a group of people who would otherwise have exercised an option to go for indexing and to give themselves some protection against inflation.
I did not expect the Minister to speculate on future state pension arrangements, but I flagged up the issue as sometimes these things are forgotten. Those who have worked with me will know that I consistently flag up the impact of removing contracting out from the system, not least in public service pension schemes. Having said that, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, I wish to speak briefly to Amendment 48C. I stress that it is simply a probing amendment designed to get a better understanding of what the alternative to obtaining a current actuarial valuation will entail.
Currently, determination of the funding position has to be underpinned by a fresh actuarial valuation. This supports the decision of whether the board must accept responsibility for the scheme. Perhaps the Minister can say a little more about the circumstances when the alternative approach is expected to come into play and the type and range of information that might be used in place of the actuarial valuation. The provisions in new subsection (5C) require the board of the PPF to issue a statement setting out how it will make determinations. Can the Minister give us a flavour of what the statement is likely to include? To what extent is it envisaged that reliance would be placed on third-party data? Generally, what level of assurance will be looked for in the use of such data?
I should stress that the purpose of this is not in any way to challenge the proposals but just to get a broader understanding of what is envisaged. It is presumed that these arrangements have been positively sought by the PPF and will help its operational efficiency. I am a fan of the PPF. When we discussed some SIs last week, I took the opportunity to say that the PPF has made a considerable contribution to the current pensions landscape. It is a very professional organisation and it is in that spirit that I move this amendment. I beg to move.
Baroness Garden of Frognal
My Lords, I will first speak to the government Amendments in this group and then respond to the amendment tabled by the noble Lord, Lord McKenzie. Clause 17 and Schedule 4 make a number of amendments to legislation in the Pensions Act 2004 and the Pensions Act 2008 that governs the operation of the Pension Protection Fund. They have been developed with the Pension Protection Fund and reflect the experience gained in the light of live running since April 2005.
Paragraphs 20 to 26 of Schedule 4 replace an existing regulation-making power within paragraph 25A of Schedule 7 to the Pensions Act 2004. Regulations made under the new powers would enable a person to postpone payment of their pension compensation past their normal pension age. Paragraphs 27 to 33 of Schedule 4 make amendments to the Pensions Act 2008 in parallel to those in paragraphs 20 to 26.
Regulations made under the new powers would enable a person who is entitled to pension compensation by virtue of pension compensation sharing to choose to receive compensation from a later date than normal benefit age. To explain further—in response to the noble Lord—for someone who chooses to postpone payment of pension compensation, three things would happen. First, the pension compensation cap would apply as at the time the person first becomes entitled to pension compensation, which would be their normal pension age. Secondly, revaluation would apply up to a member’s normal pension age. Thirdly, the board of the Pension Protection Fund would provide an appropriate increase in pension compensation when it comes into payment, calculated on an actuarial basis to take account of the postponement of the start of payment.
Amendments 49 to 52 amend the legislation in Schedule 4 dealing with the commutation of pension compensation. We intend to use these powers to make regulations to provide a person with the option to commute a portion of their pension compensation for a lump sum at the end of a period of postponement.
This group of amendments enables the Government to make regulations that will provide people with an additional flexibility. Current legislation already allows a person to decide to commute to a lump sum part of their pension compensation. All in all, this provides a person in the Pension Protection Fund with a good deal of flexibility to decide how and when to take their pension compensation.
I turn now to the amendment in the name of the noble Lord, Lord McKenzie, about funding determinations to be made by the board of the Pension Protection Fund and the degree of reliance on independently assured data. For a scheme undergoing assessment for entry to the Pension Protection Fund, an actuarial valuation of a scheme’s assets and protected liabilities under Section 143 of the Pensions Act 2004 will no longer be required in all cases. A scheme’s protected liability is the cost of providing benefits equivalent to pension compensation, any non-pension liabilities of the scheme and the estimated cost of winding up the scheme. Instead, the board of the Pension Protection Fund will have the power to determine whether a Section 143 valuation scheme is required or whether it can use other information that it has in order to decide whether the scheme should transfer into the Pension Protection Fund.
Practical experience since the Pension Protection Fund opened for business in April 2005 has shown that in a number of cases there is already sufficient independent information held about a scheme to allow the funding position to be accurately assessed without requiring a fresh actuarial evaluation. For example, a valuation by an actuary under Section 179 of the Pensions Act 2004, undertaken for the purposes of calculating a scheme’s pension protection levy, may be used. These changes will avoid schemes incurring the expense of an actuarial valuation where one is not necessary for a fair decision to be made.
The noble Lord is concerned to protect the interests of members of schemes that will not undergo full actuarial valuation under Section 143. I should make it clear that the Government are not intending to change outcomes for members; rather, these changes are intended to avoid costs where they are not necessary to ensure fair outcomes for members.
New Section 143(5)(c) requires the board of the PPF to set out how it will make determinations when it does not commission a full actuarial valuation. This statement will have to take account of any requirement set out in regulations under Section 143(4). We expect the PPF to set out examples of the sort of information and methodology that it would use in place of a full actuarial valuation in this statement so that it is clear how a meaningful judgment of a scheme’s funding position at the assessment date—that is, the date when the scheme began assessment for PPF—was made.
The Government have no problem with requiring the PPF to make evidence-based decisions. Indeed, the board of the PPF is clear that it will be appropriate not to commission a full valuation only where there is adequate alternative evidence. However, I suggest that the more appropriate place to detail any legislative requirements for that evidence is in regulations under subsection (4) rather than in the Bill. As an example of when an alternative determination would be used, it would be where a scheme was very clearly underfunded on the basis of existing information but not where there may be some doubt about it.
I welcome the noble Lord’s interest in the changes to requirements to undertake actuarial valuations in all cases where a scheme is being assessed for entry to the Pension Protection Fund, but I hope that the explanation that I have given is sufficient for him to withdraw his amendment and that the Committee will be prepared to accept government Amendments 49 to 52.
Lord McKenzie of Luton
My Lords, I thank the Minister for her full response to my amendment. Indeed, I welcome her to her first session at the Dispatch Box on pension issues—the first of many, I am sure. The explanation that she has provided in response to my amendment is totally satisfactory. I think that I understand it fully and it has been a helpful clarification of what is in the Bill. The government amendments are a sign of the growing practical experience and maturity of the organisation. I have no particular points to raise and am happy to support the amendments. I beg leave to withdraw the amendment.
Lord Freud
“In paragraph 24(1) (commutation of periodic compensation) for “becomes payable” substitute “commences”.”
“( ) In sub-paragraph (5)—
(a) in paragraph (a) for the second “the” substitute “each”,(b) omit the “and” at the end of that paragraph, and(c) after paragraph (b) insert—“(c) for the purposes of sub-paragraph (2), the definition of “underlying rate” in the case of periodic compensation under paragraph 5, 8, 11 or 15 applies as if the reference in paragraph (b) of the definition to the amount mentioned in sub-paragraph (3)(aa) of the paragraph in question was a reference to that amount reduced by the commutation percentage, and(d) that amount (as so reduced) is attributable to post-1997 service and pre-1997 service in the same proportions as that amount would have been so attributable had no part of the periodic compensation been commuted.””
“In paragraph 9(1) (commutation of periodic compensation) for “becomes payable” substitute “commences”.”
“( ) In sub-paragraph (7)—
(a) after “references in” insert “paragraph (a) of”, and(b) at the end insert “(and paragraph (aa) of the definition applies accordingly).””
Lord German
“Occupational Pension Schemes (Investment) Regulations 2005
(1) The Secretary of State must publish guidance for occupational pension schemes on the implementation of regulation 2(3) of the Occupational Pension Schemes (Investment) Regulations 2005 (statement of investment principles).
(2) In particular, such guidance must cover the type of information which may be provided under—
(a) regulation 2(3)(b)(vi) (the extent (if at all) to which environmental, social and ethical considerations are taken into account in the selection, retention and realisation of investments), and(b) regulation 2(3)(c), (the fund’s policy (if any) in relation to the exercise of rights including voting rights, attaching to their investments).”
Lord German
My Lords, I shall speak also to Amendments 54 and 54A. The first two of these amendments are identical because they relate to two different sets of regulations. In that respect they could be seen as the same, but they relate to two sets of existing regulations. All three are probing amendments because I want to see the Government’s view on these matters, which are important to pension fund members.
The amendments seek to do two things. First, they suggest guidance to help pension funds ensure that they are meeting the spirit of the law, not just the letter, when it comes to explaining their policy on environmental, social and governance issues, and on the exercise of shareholder rights. It is now 10 years since these rights were written in to law. There is a need to go beyond the generic statements that characterise many statements of investment principles to ensure that funds’ policies give their members meaningful information.
Secondly, the amendments suggest enhanced reporting on how these policies have been implemented in practice. I am grateful for the research by FairPensions and others which suggests that general statements to the effect that ESG issues are taken into account are not always matched by effective implementation. In addition, members can find it very difficult to acquire information about the exercise of shareholder rights attaching to their savings—for instance, information on how their fund voted on a particular shareholder resolution. The stewardship code makes it clear that asset managers should disclose their voting records. It also makes it clear that asset owners have a role to play in ensuring effective stewardship. If the purpose of stewardship is to ensure that the assets of the ultimate owners are safeguarded, there must be accountability to these owners on how stewardship responsibilities are being exercised.
Asset manager disclosure alone will not achieve this. Pension funds also need to play their part. There is no reason why this should amount to a huge increase in red tape. In many cases, the pension fund would need only to provide a link on its website to its asset managers’ disclosures. This would be a very small additional burden on funds, but an enormous improvement in accountability for members, whose money ultimately is at stake. The problem is that often funds state simply that decisions are delegated to fund managers, with no transparency about the managers’ voting intentions. Examples have been given to me of funds that do just that. Funds often direct members to their statement of investment principles, which is unlikely to provide any useful information that has been requested on any matter.
The third problem is that funds often respond as though taking into account an environmental issue, which might be the one being questioned, is in opposition to their fiduciary duty to maximise returns—even though the matter in question is solely business-focused, they are being asked only for disclosures about the financial risks associated with the projects, and the questions are backed by a number of institutional investors. This betrays a continued misunderstanding of responsible investment, and of the ways in which environmental, social and governance issues can be material to financial returns. Members increasingly bear the investment risk associated with their pension savings, and should have corresponding rights to scrutinise the management of that risk. This is particularly important given the growth of DC schemes.
There is an increasing consensus that social and environmental considerations are financially material. That is why a report from the United Nations Environment Programme finance initiative highlighted the reasons why trustees are required by law to take advice from investment consultants when preparing their SIPs. The report suggests that a tick-box mentality on the part of these investment consultants is a key reason for the inadequacy of current disclosures. Many consultants still regard the ESG as a client-driven, ethical preference and do not consider that they have a proactive responsibility to raise these issues with pension fund clients.
The amendments require the Government simply to provide guidance. While I appreciate that they have the power to provide guidance, I question whether they should provide guidance rather than simply have the power to provide it, and what matters might be included in that guidance—for example, a generic statement might say that the fact that a fund takes ESG issues into account will not normally meet the spirit of the law; that the statement should relate to the fund’s particular approach to circumstances and issues at stake; and that it describes elements of a best practice statement on social, environment and ethical issues. There are a range of areas that could be included in such guidance. The elements of a best practice statement on the exercise of shareholder rights, for example, might include whether it is the fund’s policy to vote all shares held; whether the fund delegates voting decisions to asset managers; and, if so, details of any specific instructions given to the asset managers, or the circumstances under which the fund reserves the right to make voting decisions itself. The fund’s policy on dealing with any member inquiries, of course, is particularly important as we move forward in this area.
We do not accept that the inadequate application of existing requirements makes for more prolific and prescriptive regulations. We do believe that there is a sensible approach to a set of guidance which will make the role of the fund, and the fund members, more important. We recognise that that guidance would not strictly require primary legislation, and so these amendments are probing in their character.
Finally, part of the purpose of public disclosure is to ensure better accountability to ultimate owners. The average pension saver cannot be expected to know which asset manager their pension fund uses. If only the asset manager discloses, the net improvement in transparency for the saver at the end of the investment chain is likely to be small. In most cases we think that all that would be required is for pension funds to provide that link to their asset manager’s disclosures, probably on their websites. In other words, members should be signposted to the relevant information. On the basis that this set of information would benefit transparency of process and put some flesh on the bones of the existing legislation, I beg to move.
Lord Boswell of Aynho
I rise very briefly to support my noble friend Lord German, or at least his line of thinking. I have perhaps one qualification or addition to the presentation that he has given, in relation to the role of trustees. I have already declared to the Committee my interest as a pension trustee. I can assure the Committee that my colleagues and I are taking an interest in the matter of ethical and otherwise acceptable investment schemes as part of our dialogue with the fund managers who represent us and the interests of beneficiaries. I think that a little more could have been said about the role of trustees as a necessary link, in most cases, between the former employees and the beneficiaries on the one hand and the investment managers on the other. This is something that we should all be in, and nobody should cop out of it.
My second and perhaps also substantive point is to support my noble friend’s observations about the business utility of all this. I think that the Committee will know that I have a background in a number of issues connected, for example, with disability and other aspects of diversity. In dealing with the private sector I have found over the years that, on the whole, those businesses that take a mature view and consider their long-term interests actually understand the business case for awareness of these considerations. They are not after the big buck. Their reputation and their business attractiveness benefit, with a long-term beneficial result.
When George Cox was chief executive of the Institute of Directors, I remember doing a number of presentations with him on disability issues. He used to come up with the deathless phrase, “We do this kind of thing because we are the kind of company we are”. That seems to me a very good motto. That is the kind of company that as a trustee I would like to invest in, and that as a beneficiary I would like to feel that my trustees and my investment managers were steering me towards. I do not think that this is a matter of political contention; I think that my noble friend has been right to ventilate it.
Baroness Drake
My Lords, I have considerable sympathy with the amendment moved by the noble Lord, Lord German. Notwithstanding the impact of the events of 2008-09 on regulators around the world, which are no doubt focused much more acutely on governance, with the shift from defined benefit to defined contribution pension provision, which the noble Lord referred to, and the imminence of auto-enrolment, the design of the default investment funds and the investment principles surrounding them are going to gain more attention. The issue of how shareholders, particularly institutional shareholders, approach their responsibilities as owners of assets is coming under increasing scrutiny by the Government, regulators, the members of pension schemes and those who discharge fiduciary duties on their behalf.
Corporate governance, principles of stewardship and interactions between institutional shareholders and companies are increasingly considered as a coherent whole in exercising ownership rights. As the noble Lord said, defined contribution schemes in money purchase and in personal pension schemes in future shift the risk on to the individual. Although the Myners principles have improved decision-making, achieving best practice in the investment governance of pension schemes—both trust-based and, particularly, contract-based, which I will come back to—still poses a challenge.
We have seen evidence of that concern in the Pensions Regulator’s recently published consultation on investment governance in DC schemes, which included a table of accountabilities. The table aims to define and clarify the roles and responsibilities of each decision-maker in each part of the investment governance chain, but I read it again last night and, unless I missed this, it does not refer explicitly to social and ethical considerations or to exercising voting rights. Close to my heart, NEST, and its predecessor PADA, published their own document on exercising responsible ownership in a low-charge scheme. Discharging this governance in the context of maintaining low charges is equally important.
As the noble Lord, Lord German, referred to, the Financial Reporting Council published the UK stewardship code in July 2010, which is designed to lay out the responsibilities of institutional investors as shareholders and provide guidance as to how those responsibilities might be met. Pension fund trustees are strongly encouraged to report how they have complied with that code. As a conscientious pension fund trustee, I have attempted to do just that, and my own experience suggests—here I concur with the noble Lord, Lord German—that if the code is to bite, trustees will need a great deal more guidance on how to comply with it if box-ticking is not to continue to be the method of compliance with these standards.
The Occupational Pension Schemes Investment Regulations, which the amendment refers to, say clearly that when setting out their statement of investment principles, trustees should identify,
“the extent (if at all) to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments; and … their policy (if any) in relation to the exercise of the rights (including voting rights) attaching to the investments”.
It is clear that this is an area where guidance and best practice are growing in importance. Because of the political risk that Governments face, with the biggest experience of asymmetrical paternalism that we are about to see, I bet my bottom dollar that this will grow and grow. If you transfer responsibility to the individual, politically Governments have a responsibility to ensure that government frameworks are up to the job.
Clearly, there are issues around how trustees can fulfil these responsibilities. One issue that we must address—I will not dodge it—is how one can be an effective, active asset owner while maintaining low charges, and how one can effectively monitor stewardship policy when one selects passive funds. Although I am absolutely committed to the highest level of governance at every stage of the investment chain, and believe that the ability of trustees to discharge their disclosure requirements in electronic form will help, these things must always be proportionate, because in a DC world it is the individual who bears the charges. I would not want a scenario in which we say that the good news is that we have gold-plated system of governance on disclosure, but the bad news is that it will cost X per cent. Therefore, we need to look at how all the players, including the fund managers, can raise the overall level of governance.
I come back to the providers of contract-based pensions. With the shift away from DB to DC, we are seeing a big shift away from trust-based DC to contract-based provision. Therefore, if we talk only of a model for how the trustees will discharge their governance function in this area, we will miss an ever-growing part of the pension provision market. A big issue, with which I know others are concerned, is who in a contract-based provision world should accept the fiduciary responsibility of designing the default fund or deciding how investment governance should be discharged. This takes us into areas where the Pensions Regulator has no reach. The guidance and regulatory framework must catch up with the shift from trust-based to contract-based provision, because in a contract-based provision world there are no trustees, unless there is a master trust, on whom to place clearly the fiduciary duty. It is clear that the Government will need to look both to the Pensions Regulator and to the FSA or their successors to raise the governance standards in the way that the noble Lord, Lord German, seeks through his amendments.
Lord Freud
My Lords, I thank the noble Lords, Lord German and Lord Stoneham, for tabling these three amendments. They encourage trustees and managers of occupational and stakeholder pension schemes to engage more fully with environmental, social and ethical considerations in the selection and retention of their investments. These are important issues. They resonate with me personally. I remember writing many a happy Lex column in the 1980s on the structural issue. The issue is the separation of the responsibilities of ownership and the attraction of investment returns in the marketplace. Trying to get them back together has proved very difficult. A lot of effort has been thrown at it in the past decade, with the Myners principles and the IGG.
The amendments would have a similar effect on the trustees and managers of occupational and stakeholder pension schemes. Therefore, we should look at the amendments together. There has been a consensus in many previous debates on social and environmental issues that companies perform better when their activities are monitored by shareholders. Therefore, it is important for pension funds and their investment managers to be transparent in publishing their approaches to such issues in their statements of investment principles. That is why this Government, like the previous Government, have been open to suggestions on how to improve this process. In the end, it is a matter for managers and trustees to determine the level at which they engage and what is appropriate for them. It is a statement of the obvious that small schemes, in particular, may not be able to take account of governance issues to the extent that large schemes can.
Lord German
My Lords, I thank my noble friend for those comments. I dread to think of the asymmetric paternalism to which we keep referring. We shall probably have to continue to do so now, because if I can interpret my noble friend’s final remarks as meaning that he and the Government will give active consideration to the sorts of guidance that might help the companies, pension funds and their members to achieve the goals that we have elaborated on, I am very grateful indeed.
As the noble Baroness said, the move from pension trustees to contract-based schemes with trustees will change the fabric of the pension world. I hope that the pension fund for which I am a trustee has sought to get these matters dealt with more swiftly. However, given my own experience, I am not certain that the regulations as framed guarantee that members will get access to all the information on voting rights. I am grateful for my noble friend’s comments, which I will take in the spirit that I described. On that basis, I beg leave to withdraw the amendment.
Lord Mackay of Clashfern
“(4A) The appropriate Minister must not make regulations under this section where the effect of those regulations is either—
(a) to impose an obligation on the person who would be the recipient of the relevant benefits to make a contribution to the cost of those benefits, when there was no such obligation in the person’s original contract of service as a judge; or(b) to increase the level of any such contribution to a higher level than that specified in that person’s original contract of service, except where the increase is in accordance with the terms of that person’s original contract of service and the increase is authorised in line with the consumer price index.(4B) Where the appropriate Minister makes regulations in breach of subsection (4A), those regulations shall be void and of no effect only to the extent that they are in breach of subsection (4A), or consequential on such a breach.”
Lord Mackay of Clashfern
My Lords, this amendment, which bears my name as well as more distinguished names, seeks to follow up the point that I made at Second Reading about the situation of the judiciary in relation to their terms of service. My submission was, and is, that it is a principle of our constitution as it has evolved that the terms of service of a judicial officer shall not be changed to his or her disadvantage during their term of office. In response to that, the Minister who was then replying—not my noble friend Lord McNally but the noble Lord, Lord Freud—said that judges are subject to tax. Of course, but that is not a part of their terms of reference. The arrangements for taxing judicial remuneration and emoluments are absolutely free of any restriction of the kind for which I am arguing.
Secondly, the Minister said that there is already a provision for deduction in respect of dependants’ benefits. However, that is expressly provided for in Section 9 of the 1993 Act, but that makes no provision for any kind of deduction in respect of the judge’s own pension. That is sought to be introduced here for the first time. Undoubtedly, it is a provision adverse to the judge in respect of the terms of service that he undertook.
In this connection, one has to remember that, generally speaking, a judge takes office until he reaches the retiring age, when he must demit office. Apart from that, he is entitled to remain in office on the terms on which he was appointed, subject, of course, to upward changes that may be made during that time. However, in my submission, nothing adverse to his terms of service is appropriate. That does not mean that judges should not be called on to take part in any kind of tax regime that deals with the present situation. Tax is completely free as far as this restriction is concerned. In my submission, this restriction applies to the terms of service of the judiciary and I believe that it is sound. Apart from anything else, I have tried to demonstrate that from the fact that, when I introduced the 1992 Bill, which became the 1993 Act, we made it clear that it did not apply to persons already in appointment unless they elected to join the new scheme of the 1993 Act.
I believe that this restriction is generally recognised. For example, the Latimer House principles embody this situation. Perhaps I may illustrate the point by quoting from the constitutions of some Commonwealth countries. Section 125(2) of the constitution of India states:
“Provided that neither the privileges nor the allowances of a Judge nor his rights in respect of leave of absence or pension shall be varied to his disadvantage after his appointment”.
One can understand the importance of that in the constitution of India, where judges have played a very important part in the development of the rights and privileges of that great country. Article III, Section 1 of the constitution of the United States states:
“Judges … shall … receive for their Services a Compensation which shall not be diminished during their Continuance in Office”.
The constitution of Ireland states:
“The remuneration of a judge shall not be reduced during his continuance in office”.
Incidentally, in 2009 the Irish Government introduced a levy in respect of public service. However, they exempted judges from the levy because of this provision in their constitution. Article 176 of the constitution of South Africa, where judges again played an important part in the development of the country, states:
“The salaries, allowances and benefits of judges may not be reduced”.
Our amendment simply gives effect to that. It does not mean that judges are exempt from anything else, but it does mean that their terms of service cannot be altered to their detriment during their service. I am not arguing that new judges should not be subject to this provision. That is a separate matter, which has to do with recruitment—I am glad that I take no responsibility any more for that. I am arguing only that judges already appointed and presently in service should not have their terms of service as judges altered to their detriment during that service.
Our amendment allows also for an upgrading of the contributions in accordance with a formula. We are not wedded to any particular formula. The provision would be useful in the future and would avoid the need to make a lot of different orders. It would also mean that people would know, when they took office, what the position would be.
This is an important aspect of the constitution. The noble and learned Baroness, Lady Hale, speaking in the House of Lords in a case against the Attorney-General of Trinidad and Tobago, recognised that the security of emoluments is an important guarantee of the independence of the judiciary. I beg to move.
Baroness Murphy
My Lords, I added my name to the amendment. First, I declare my total lack of personal interest in the matter. I am not a judge, I am not married to a judge and I have no judges in my family. However, I do count many judges among my friends. I have often been up before judges—in a professional capacity, I hasten to add. As a result, I have developed an enormous admiration for the judiciary of this country. The quality of their decision-making, their willingness to be unpopular and their independence from the subtle and not-so-subtle pressures of the Executive are qualities that we should treasure.
What is proposed in Clause 24 is a short-term crowd pleaser that will have an impact far beyond what is presumed. It is in direct contravention of internationally agreed guidelines on the protection of the independence of the judiciary, as the noble and learned Lord, Lord Mackay of Clashfern, so eloquently outlined.
Let us face it, these proposals could lead to a judicial pay cut in real terms of up to 10 per cent. I realise that there may well be little sympathy around the House for what I am saying, in the light of the fact that many people in the public and private sectors are taking serious pay cuts and we are debating how pensions will be arranged in the future. It is difficult, but this is a very particular case. The Government’s impact assessment acknowledges that the key risks are that the impacts of this measure are as yet unknown—as are the cumulative effects of existing and future policy decisions about judges’ pay and pensions—that the assumed behavioural response that it would make no difference to recruitment might not apply and that the measure may lead to negative impacts on judicial recruitment, retention and performance.
I wish to deviate slightly from this issue. Research carried out in 2008 by Professor Dame Hazel Genn of University College London found that senior practitioners—solicitors and barristers—are deterred from applying for judicial roles, temporarily or permanently, by practical issues relating to judicial working conditions that include not only geographical and jurisdictional deployment of the senior judiciary but their salary, workload, location, support, patterns of working and general flexibility. We know that it is difficult enough to persuade a top commercial QC earning £2 million a year to accept a judicial appointment, but frankly they are not the judges whom I am worried about. I am far more worried about those lawyers, barristers and especially solicitors, many of whom are women or from ethnic minorities, who cannot see the advantages of entering the judiciary now because of the poor working environment and rewards, but who are attracted to the pension arrangements that would allow them to retire after 20 years. I remind noble Lords that this is not a job that you can enter as an apprentice; you must be a mature and experienced person in the first place.
People say that the arrangements are generous, but they are actually nothing like as generous as for those who remain as solicitors or barristers. There is the difficulty that when practitioners are at their highest earning potential, say in their 40s, they are obliged to seek part-time judicial experience if they want to progress up the ladder. Few are persuaded now. What will this sudden drop in take-home pay do to the application level? It is not the money alone; it is the signal of being undervalued by an Executive looking for PR advantage, but these numbers will make precious little difference to this nation’s debt.
At a time when we are beginning to see the fruits of the work of the Judicial Appointments Commission in appointing more women and people from ethnic minorities, under the admirable chairmanship of the noble Baroness, Lady Prashar, it seems particularly insensitive to throw a spanner in the works with this unnecessary piece of legislation. The experience needed for a High Court post means that only 20 per cent of the pool of eligible senior lawyers are women and only 5 per cent are people from a black or other ethnic minority background. However, boosting numbers of women and other groups is not just a matter of time and a growing pool. One big disincentive is the earnings cut when becoming a member of the judiciary. People marry later, and people in their 50s still have significant financial commitments until late on—commitments to children do not go away.
Let us think back to the last time the Executive attempted to cut judicial salaries. It resulted, among other things, in the following judges’ memorandum and the eventual restoration of salaries. It stated:
“It is we think beyond question that the judges are not in the position occupied by Civil Servants. They are appointed to hold particular offices of dignity and exceptional importance. They occupy a vital place in the Constitution of this country ... It has for over two centuries been considered essential that their security and independence should be accounted inviolate ... In this matter, our country has set an example to the world, and we believe that the respect felt by the people for an English Judge has been partly due to his unique position, a feeling which will survive with difficulty if his salary can be reduced or if he were an ordinary salaried servant of the Crown”.
Clause 24 raises serious concerns in my mind about placing the power to alter judicial pay of sitting judges after appointment in the hands of the Executive. This should be a matter of concern among those who take an interest in judicial independence. There has been little notice of or consultation on that, or any serious look at the real impact.
It is also unclear whether the proposal would impact on the maximum contribution into the judicial additional voluntary contribution scheme, which currently has a 15 per cent ceiling on contributions, with resulting loss of pension in old age as well as lost salary during service. I ask about that because it is especially important for young judges who might not have acquired pensions in earlier parts of their career. If the proposed statutory contributions reduced the amount that one could make voluntarily, it might well significantly reduce the pension available under the voluntary scheme. I hope that the Minister can clarify that for me.
When any judge accepts appointment, the basis for that appointment is that, however successful the individual may have been in his or her previous career, he or she may never return to it. Financial security and pension provision are an essential part of the decision whether to accept appointment. That is particularly the case with the 52 masters who are on the lowest salary band of the judiciary. They earn the same as a basic NHS consultant salary or approximately two-thirds of what a family GP earns. They are not generously paid for the level of responsibility that they carry and many will not serve 20 years to maximise their pension.
I echo what the noble and learned Lord, Lord Mackay of Clashfern, said about the internationally accepted constitutional safeguards for judicial independence since at least the Act of Settlement in 1701, with restrictions on post hoc adverse variation of judicial terms of service. Those were incorporated into Latimer House guidelines in 2003 and repeated in the Bangalore principles and implementation measures published by the UN-sponsored Judicial Integrity Group in 2010. Then there is the draft Universal Declaration on the Independence of Justice by the UN, also known as the Singhvi declaration, and the Universal Charter of the Judge, approved by the International Association of Judges on 17 November 1999. I could go on: there were also the Council of Europe recommendations, the Consultative Council of European Judges’ opinion and the Burgh House principles. There are clearly numerous guidelines about maintaining the independence of the judiciary by not varying their terms and conditions of service after appointment.
The present judiciary had a legitimate expectation when accepting offers of appointment that their pension arrangements would not be adversely changed after appointment. It would be wrong and damaging to our international reputation for this country not to respect that principle.
Finally, I pray in aid the report of the noble Lord, Lord Hutton, which was published earlier this week. He states at page 146, paragraph 6.92:
“The protections might also cover the extent to which there might be limitations on adjustments to existing judicial pensions to meet international conventions for protecting judicial remuneration, while also having regard to factors such as increases in the value of pensions from increasing longevity”.
In summary, Clause 24 will affect a modest number of people seriously and adversely and contravenes our international agreements on judicial pensions. We are not saying that people who are appointed in future could not make further contributions, but they would be appointed knowing that that was the case. I strongly support the amendment in the name of the noble and learned Lord, Lord Mackay of Clashfern.
Baroness Butler-Sloss
My Lords, I have wondered whether to speak on this amendment. First, perhaps, I should apologise to the noble and learned Lord, Lord Mackay of Clashfern, and to the Committee for arriving late. I had not appreciated that Amendment 55 was up on the monitor, but I came in as soon as I could.
I must declare an interest, not only as a former senior judge but also as someone whose father was a High Court judge, so I have spent my entire legal life in the shadow of the judiciary. I strongly support not only the noble and learned Lord, Lord Mackay of Clashfern, but particularly the noble Baroness, Lady Murphy, who made points that are really worth taking into account. It is not so much the senior judiciary—there are probably not more than 110 to 120 of them—as the middle-ranking judiciary who ought to be considered. They labour in the fields, with not particularly generous salaries, as the noble Baroness, Lady Murphy, said. I would add to her Queen’s Bench masters the judges of the various tribunals, who are crucial to the administration of justice in the tribunals; the district judges in the magistrates’ courts; and the district judges across the country trying civil and family work. They are a very important part of the judiciary. Many of them accepted a reduction of income. It is not only the top incomes that senior QCs can make that are reduced, as the people taking these middle-ranking posts also earn reasonable incomes. Almost every person who becomes a judge takes a cut in income.
People generally become judges because they feel that they ought to be paying back to society what they have gained by being barristers and solicitors. It is an important part of the judiciary that they are there to serve the public. They are a special group of people in the country. They are significantly independent and they have to remain independent to be able to challenge the Government in the courts. The Administrative Court is a thorn in the flesh of every Government, of whichever political persuasion. I believe that there is a book called “Looking Over Your Shoulder at the Administrative Court”, which trains new civil servants to cope with the slings and arrows of not so much outrageous fortune as the decisions of the Administrative Court.
I think that the public and perhaps noble Lords ought to remember that our judiciary is not only significantly independent but significantly incorruptible. Since I have left being a judge, I have been on parliamentary visits to various countries. In one of the eastern European countries that had been under the control of communism, I was told by one of the Ministers that the corruption of their judges was the most worrying part about their efforts to improve their country to meet the requirements of the European Community. My husband was a judge in Kenya at one time, under the ODA system, and I was told by my friends who were in the law in Kenya about the judges whom they knew to be corrupt. Eighteen were sacked at one time and my particular friend said that that was not all who should have been sacked. Very recently I was at one of the IPU meetings here in this building. I was talking about human rights and two Kenyan lawyers got up and said, “What do we do about the corruption of our judiciary?”. Forgive me for saying this as a former judge—since I no longer sit, I think that I can say it safely—but we are lucky in our judiciary. What the Government are proposing is in effect to break the contracts of the existing judiciary by substituting something else by statute.
I am well aware that everyone in the pensions system is going to suffer and I well understand people asking why the judiciary should be immune from the suffering of the public. So far as the future is concerned, as the noble and learned Lord, Lord Mackay of Clashfern, said, I express no view. It may well be entirely appropriate that the judiciary of the future should be asked to make the contributions that it has not been asked to make in the past; if I may say so, the Government ought just to think of the points that the noble Baroness, Lady Murphy, has made about that. However, breaking the existing contracts of existing judges who have given up their practices as barristers and solicitors to serve the community under a certain arrangement, where you take on that job without making a contribution, is something that the Government ought to think about long and hard. I very much support the amendment.
Lord Scott of Foscote
My Lords, I express my complete agreement with what has been said to your Lordships by the noble and learned Lord, Lord Mackay of Clashfern, the noble and learned Baroness, Lady Butler-Sloss, and the noble Baroness, Lady Murphy. I want to add a brief word on the nature of the judiciary in this country, which your Lordships will have to take into account in considering this amendment. I declare my own interest: I have been in the law for the whole of my working life, 23 years as a barrister and then 26 as a judge.
The judiciary in this country, and in many Commonwealth countries that have followed our system, is unusual in that it is not a profession that people decide to enter when they are at law school or when they leave law school. A number of continental countries have judiciaries of that sort: you decide that you want to go into the judiciary; you make an application; you become a member of some tribunal, whatever the country may be; if you are good, you work your way up the ladder; and then eventually you become a judge in a senior court. We do not do that.
The bulk of the judiciary in this country—perhaps all of them, barring a few who come from legal academia—come from the ranks of practising lawyers. As practising lawyers, they have a structure in their careers. If they stay in their firms, they can build up provision for their families and of course for themselves when they retire, and they can hope to leave something to their children. They can hope for affluence as the result of a successful professional career. In the old days, there would come a point in that professional career when the individual would get a tap on the shoulder and someone would say, “Now, would you consider becoming a judge?”. Now they have to apply, but I do not believe that that makes a significant difference to the type of people who become judges or to the stage of their career when that happens.
As has been said, an element of belief in public service influences the choice. If lawyers stay in their professions, they will have the expectation and hope—sometimes realised, sometimes not—of reaching comfortable affluence for their old age. When they enter the judiciary, it is and always has been a significant feature of the terms on which they enter that they will look towards a pension for themselves, and for their widow if they leave one, after service of an appropriate number of years on the Bench.
If there is a movement of the sort indicated by Clause 24 of the Bill, which establishes the ability of the Executive to alter to an individual’s disadvantage the terms under which they joined the judiciary—the terms on which they supposed that they would be able to rely for the purpose of building up whatever was necessary for a reasonably affluent old age and retirement—there is a danger that that may affect the type of judiciary that we have. It may affect the willingness of people to accept the degree of adoption of service as opposed to self-aggrandisement that is a feature of almost everybody’s decision to apply for—or previously to accept—a position on the Bench.
The noble and learned Lord, Lord Mackay of Clashfern, made the point strongly that for statute to interfere with the contractual terms of appointment is a very strong thing that must be carefully justified. In addition, I respectfully suggest that it is likely in the long run to change the nature of the judiciary in this country, to the disadvantage of us all. I support the amendment on that ground in particular.
Lord Falconer of Thoroton
My Lords, the amendment is in my name also. It is intended to prevent a fundamental break with the constitutional principle that we have adopted to protect the independence of the judiciary. We are talking about 800 or 900 people in all. The idea that the proposal would have a significant impact on the economy of the country is overstated.
The principle was clearly put by the noble and learned Lord, Lord Mackay of Clashfern, in the Second Reading debate on the Bill. He said:
“The principle that a serving judge shall not have his terms of service adversely affected without his consent during his term of service is a fundamental principle, part of the rule of law and internationally recognised. It has been followed by Governments in this country, so far as I know, as far back as I can tell”.—[Official Report, 15/2/11; col. 634.]
I agree with that; it is a brilliant statement of the position in relation to the terms and conditions of judges.
The amendment would give effect to principles agreed internationally—including by the United Kingdom—on the independence of judges, best expressed recently in the Bangalore principles, to which the United Kingdom is a signatory. The principles state:
“A judge shall not only be free from inappropriate connections with, and influence by, the executive and legislative branches of government, but must also appear to a reasonable observer to be free therefrom”.
It is important to emphasise what the consequence of Clause 24 will be. It will allow the Executive, first, to introduce contributions by a serving judge in respect of his or her pension. That is something that the Executive cannot currently do. Secondly, it allows the Executive in future, without the consent of the relevant judge, to increase the amount of those contributions without reference to any index or to any precedent contractual terms.
I invite noble Lords to consider the Bangalore principles again. Do the proposals give the Executive an inappropriate influence, or the appearance thereof, on what judges do? I say without a shadow of doubt that if, as Lord Chancellor, I had been asked to advise another country on these terms, I would have regarded them as an obvious breach of the principle enunciated by the noble and learned Lord, Lord Mackay of Clashfern, and in the Bangalore principles that the United Kingdom helped to draft, adheres to and promotes throughout the world.
If we are serious about the rule of law, we must preserve the independence of the judiciary. The noble and learned Lord, Lord Mackay of Clashfern, is right to say that if the provision goes forward in this form, it would be the first time—in my experience—we had broken our constitutional principle of not giving the Executive the power, by waving a wand, to say, for example, “We will reduce the judiciary’s terms”. We incorporated in the Senior Courts Act 1981 a provision that prevents the Executive from reducing judges’ pay to reflect in principle the substance of the memorandum that the noble Baroness, Lady Murphy, read out. That is why the noble and learned Lord, Lord Mackay of Clashfern, indicated at Second Reading that the pension changes that he introduced in 1993 could apply only to new judges. There is nothing to prevent the state from extracting significantly reduced terms from new judges, if that is what it wants to do, to show that we are all in this together. However, the one thing that I respectfully ask the Executive not to do is to introduce a power that means that they can hold the sword of Damocles over the judges and reduce their terms and conditions with a click of the fingers if the judges—as a group or individually—do something that they do not like. It would be a significant breach of the constitutional principle to which we have adhered for as long as I can remember and which records show to be the case. Therefore, I respectfully ask the Executive to think very carefully about the damage that they would do to our constitution with this rather mild-looking provision. I support the noble and learned Lord, Lord Mackay of Clashfern, and the noble Baroness, Lady Murphy.
Lord Stoneham of Droxford
My Lords, as a new Member of the House I am somewhat in awe of speaking against a very formidable lawyers’ lobby, although I am married to a solicitor. However, I am delighted to be the only person—it seems—to come to the assistance of my long-standing noble friend Lord McNally. I am reluctant to suggest that the esteemed noble and learned Lord, Lord Mackay, is the shop steward of judges, but I am less reluctant to hold back in respect of the noble and learned Lord, Lord Falconer, who has form in this respect.
Despite the assurances of the noble and learned Lord, Lord Mackay, that judges are not outside the tax system, noble Lords on this side of the Committee will remember the noble and learned Lord, Lord Falconer, defending judges being a special case in not having the tax-free limit imposed on their pension funds. The judges’ pension scheme is very generous. The formula is 20 out of 40 contributions: a judge on £170,000 will get a pension of £85,000 after 20 years’ contributions. This is on top of the provision that they will have made earlier in their careers. Most critically, the value of the contribution paid by the state is 32.6 per cent.
At Second Reading, two arguments were used against changing this very generous benefit. The first argument, put by the noble and learned Lord, Lord Mackay, was that we will undermine the excellence of our judicial system. I am sure that nobody wants that. The second argument, which has been emphasised today, is that we will break the spirit of the legislation that says that any salary payable to judges may be increased but never reduced. I would like to deal with both these arguments.
Nobody in this House would want to undermine the excellence of our judiciary. However, by accepting that the change can be applied to new judges, the amendment would abandon that concern as it would defend only sitting judges. The fact is that everyone in the outside world is having their pension schemes adjusted as defined benefit schemes prove too expensive, too beneficial and simply not sustainable. It is not easy for anyone. I accept the argument that judges cannot go back, but many people who face the prospect of losing their defined benefit scheme if they move jobs cannot go back either. There is a strong argument there.
Barristers 20 years ago were dependent on Equitable Life for their pensions, and the current judges’ scheme must seem more attractive to aspiring judges. The man on the Clapham omnibus will find it perverse if judges are not required to make some adjustment to the cost of their increasingly generous relative pension scheme, provided that everyone else in the public sector is doing so and they are doing it because they want to retain their defined benefit scheme. We know how defined benefit schemes have ended, and not only for new entrants in the private sector; many in existing schemes have lost them in mid-career. This was really the whole point of the Hutton report.
Lord Falconer of Thoroton
I apologise for rising again, but I should have made a declaration of interest; I made it at Second Reading but I should make it here, too. I was Lord Chancellor—I do not know whether anyone noticed—and therefore am covered by the judicial pension arrangements. However, none of this would affect me. Secondly and separately, I have close relatives who in future might be affected by this. I apologise profusely to the Committee for not making that declaration before. I also apologise if I have to leave before the end of the Front-Bench speeches. I hope that I will be able to hear them but I am also supposed to be in the main Chamber for the Fixed-term Parliaments Bill.
Lord McAvoy
My Lords, I rise as a former Unite shop steward to come to the rescue of my trade union colleagues among the legal fraternity. I am impressed by the campaign launched by my fraternal trade union colleagues. The noble and learned Lord, Lord Mackay of Clashfern, would have made a wonderful shop steward in Unite.
I started off by listening to the point, the sums and the principle. I am sure that it was not organised, but the turnout of legal colleagues had perhaps a whiff of vested interests about it—legitimate vested interests, but vested interests nevertheless. The more that I listened and thought about it, though, the more I thought that there is a trade union principle involved in this that has led me to support the amendment. That principle is that when you come to an agreement with your employer, it should not be changed in this manner. I hope that my saying this does not result in any more furniture being damaged but there is a principle here, a wonderful trade union principle, and I am delighted to be able to support my comrades.
Lord McKenzie of Luton
My Lords, I was going to be simply in listening mode on this, awaiting the wisdom of the Minister, with a few questions that may or may not be helpful but with a few comments as well.
I shall start with a point that I raised with my noble and learned friend Lord Falconer just before our proceedings about the precise wording of the amendment. We would not be happy with anything that linked any change to the CPI. We are having a broader debate about that switch and there is an issue, were there to be progress on putting in place a structure like this, about whether that should be linked to some sort of price base or to factors relating to longevity. That is a point of detail.
What we have in the Bill is a framework opportunity. The Minister can tell us about what specifically is currently proposed in respect of that. Can he say anything about the process of making regulations? The Bill just says:
“The appropriate Minister may, by regulations made with the concurrence of the Treasury, make provision”.
Is it envisaged that there would be some parliamentary process attached to that? Yes; he is nodding. I would hope that there would be, but how would that proceed? The point about any changes to the pension arrangements possibly being a slippery slope to undermining the judiciary is one that we need to be mindful of. I accept that, although we do not need to see it as the overriding point. If changes were to be a sort of Trojan horse, though, we would all deplore that.
I was going to raise the issue that the noble Lord, Lord Stoneham, raised—he made the point very effectively—about what counts as a diminution in the terms of service of a member of the judiciary in circumstances where the benefit of the pension, because of longevity, is actually increasing. There is a point there that needs to be answered. I can see that that itself creates difficulties. If you have a judge who has served for 20 years, longevity projections 20 years ago would have been quite different from what they are now; if you have someone who is new in post, that is potentially a different issue. That is a reasonable point. If you are looking at a reduction in someone’s terms of service, if you have a component that is improving in terms of the value of the pension, could you, at least in theory, net them off?
The movers of the amendment seem to have accepted the principle of some change to the pension arrangements because it would relate to new appointments. I wonder whether there are issues about what it would mean for a profession where you basically have two different sets of terms and conditions. Is that a particularly healthy position to end up in?
I wonder whether in all of this there is some sort of process of discussion to try to reach agreement on the way forward which current members of the judiciary would feel comfortable with; or will it always be the position whereby current judges will simply put up the shutters and say, “We don’t have to do this because we have a contract that says you can’t do it”—if that is what the contract says? As has been said, across the public sector people are taking pay cuts and facing large-scale redundancies and increases in contributions to their pensions, and it seems difficult for the judiciary, notwithstanding the constitutional arguments, potentially to be seen as standing aside from that. We should be eternally thankful for our judiciary in this country; they have a quality and integrity, and the public generally support them. However, is there not a risk that if you hold out on this, the trust and standing of judges might be undermined?
I have another point on which I should caution noble and learned Lords, although I hesitate to do so. I accept entirely the argument that judges have given up high-flying careers and high earnings because they want to put something back. That is a motivating force. However, you could say that equally of many others in the public sector. In our schools, how many first-rate, first-class teachers have given up or never pursued high-flying careers in the City because they had a passion, wanted to teach and put something back? I am sure that that is true in respect of the judiciary, but I caution against advancing that as part of the noble and learned Lord’s argument.
Does the Minister accept that the amendment would break the contract arrangements for existing judges, because that is the bone of contention here? Is that not the slippery slope towards undermining the independence of the judiciary? If he does not accept that analysis, it would helpful if he explained, from the Government’s point of view, why he does not. If we are in an environment where it is accepted, because we are all in this together, that there should be provision for new judges to make a contribution, it would be entirely reasonable for those provisions to be constrained in terms of how they might be used so that the floodgates are not opened with a fear that the measures could be used arbitrarily. I am sure that all sorts of legal remedies could be advanced, should the Government seek to do that. However, some sort of constraint would not be unreasonable.
Is there not, in all of this, some process for trying to achieve agreement with existing judges to participate and come into the fold on some basis, rather than have this stand-off and all the negative connotations that that entails? I should be interested to hear the Minister’s responses.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, as always, this has been an interesting debate. It is always difficult to respond to the noble and learned Lord, Lord Mackay, because his wonderful accent means that if he read from the telephone book it would sound like he was reading tablets of stone. Nevertheless, I may have to challenge him before the end of my remarks. The noble Baroness, Lady Murphy, was almost unique in her contribution, until the 7th cavalry arrived in the shape of the noble Lord, Lord Stoneham, but she at least is a friend of judges. She was quick on the attack by calling the government plans a “short-term crowd pleaser”, and saying that the Executive were looking for short-term advantages and imposing a real-terms pay cut of 10 per cent.
Running through many of the contributions has been an “Apocalypse Now” threat that does not stand up against the content of the proposal. I listened to what the noble Baroness said about women and about black and other ethnic minorities in the judiciary. I am the diversity Minister at the MoJ. Having looked at the problem of diversity in the judiciary, I honestly do not think that a modest request for contribution to pensions is the real problem about the disgraceful level of employment of women and other groups in the judiciary. I assure her that I am in close touch with Dame Hazel Genn and the noble Baronesses, Lady Neuberger and Lady Prashar, on those issues.
We went right back to 1701 to find the threat to our judiciary. The noble and learned Baroness, Lady Butler-Sloss, is not only a judge but the daughter of a judge. She made a moving appeal for the middle ranking judiciary—the toilers in the field, as she put it. Nobody challenges the fact that we have a judiciary motivated by public service, independent and incorruptible. I believe, and the past 10 months have deepened my conviction, that we are extremely lucky in our judiciary. Again, the arguments deployed do not bear close examination against the Government’s modest proposals. I also have to disagree with the noble and learned Lord, Lord Scott. I do not think that the proposal will affect those applying for the Bench.
I understand why the noble and learned Lord, Lord Falconer, is not here. We are not arguing that the contributions will have a significant impact on the economy. Of course not; the numbers are not large enough. I will not even try to suggest that we are all in this together, but I take up the point made by the noble Lord, Lord McKenzie: before fighting this to the last ditch, the judiciary should look at their reputation in appearing to fight so hard on a matter of self-interest—even if dressed up in constitutional garb—when others much less well equipped to do so, as the noble Lord, Lord Stoneham, said, are having to face serious sacrifice.
I take up the challenge of the noble and learned Lord, Lord Falconer: is what we are proposing reasonable? I believe that the vast majority of people in this country would find what we are doing reasonable. To suggest that the Government are somehow threatening the independence of the judiciary or the rule of law is not sensible. There is no sword of Damocles or anything like it. I urge the judiciary not to cry wolf too loud on this.
I turn to the noble Lord, Lord McAvoy. My goodness, I am sorry that we are in the Moses Room, because his intervention deserved a much wider audience. I thought that he was going to say that even his old colleagues in the Unite shop stewards’ movement would have blushed at some of the arguments deployed today, but as he rises ever higher in the hierarchy of this House by defending its institutions, it did not surprise me when he intervened on the side of the judges.
I am grateful to the noble Lord, Lord Stoneham, for his intervention. Judges’ pensions are extremely generous: 648 former judicial officeholders receive a pension of between £40,000 and £70,000; 23 former judicial officeholders receive a pension of between £100,000 and £110,000. The average annual pension across the judiciary is just over £41,000. That is not at the lower end of the mass of our society.
That is why the noble Lord, Lord McKenzie, was quite right to warn about reputational risk. I do not believe that this is a slippery slope. I do not believe that it is a reputational risk. On the specific point of how we would handle the powers of the Bill, regulations would be brought forward by statutory instrument subject to negative resolution.
The noble Lord asked me: what is our response to the amendment? I have to tell your Lordships that we believe that it is simply incorrect to assert that the clause could have any impact on judicial independence or raise any concerns about judges’ terms of service. This measure is part of a wider action aimed at ensuring that public service pension provision remains fair and affordable. The Government will not do anything to undermine judicial independence and the rule of law, which is of fundamental constitutional importance. The measures will not affect the pension entitlement of judicial members in any way. Once a member of a judicial pension scheme satisfies the provisions regarding entitlement under the particular scheme, they will still be entitled to their pension benefits, which will not be affected by the contributions they have made. The aim of the measure is that the contributions, when payable, will go towards the cost of the scheme overall—a situation which, as the noble Lord, Lord Stoneham, pointed out, is not enjoyed by many people in many other pension schemes.
The principle that serving judges must pay contributions out of their salary towards the cost of pension provision is already well established. I am pleased to note that the amendment does not object to the principle of taking personal contributions from judges. To take the Judicial Pensions and Retirement Act 1993, which provides the main scheme referred to by the noble and learned Lord, Lord Mackay, members of that scheme pay contributions towards the cost of dependant benefits. That is provided for by Section 9. When the provision was implemented under the Judicial Pensions (Contributions) Regulations 1995, it applied to all those who held qualifying judicial office under the scheme at that time. There were no exceptions for serving judicial officeholders.
The inability of the Government to reduce judges’ pay is seen as an important element of judicial independence by a number of international agreements and recommendations, which have been referred to in the debate by several speakers—the fear being that in some parts of the world, judicial salaries may be reduced if justices do not make the right rulings. I am sure that none of us would seriously suggest that we are in danger of that in this country.
However, that aside, as a matter of ordinary language it would not be usual for a requirement to pay a contribution to a pension scheme to be characterised as a reduction of salary; gross levels of payment to judges will remain unaffected by this measure. Crucially, it would not be correct to assert that the Executive will establish and vary the level of personal judicial pension contributions because the rate at which such contributions will be taken will be set by secondary legislation and so will be subject to the scrutiny and will of Parliament.
Furthermore, this measure does not contravene the letter or the spirit of statutory provisions covering judicial salary protection. Just as it would be incorrect to assert that this measure could impact on judicial independence, so it would be wrong to state that it is inconsistent with the terms of appointment of judicial officeholders. The entitlement to, and benefits derived from, a judicial pension are set out in legislation. Judges’ terms of appointment do not add to, or repeal, the provisions of judicial pensions legislation and do not, therefore, provide any independent source of “right” to the maintenance of the present legislative arrangements in respect of those already appointed to qualifying judicial office.
Any expectation that Parliament may not legislate to alter judicial pension schemes enshrined in legislation cannot be right, particularly when the proposed measures are designed to ensure that such schemes remain affordable and are proposed as part of a consistent range of measures regarding public service pension schemes as a whole. Concerns about judicial independence and judges’ terms of service with regard to this measure are, therefore, unfounded.
It is important to be clear that this measure will apply to judicial officeholders in post in April 2012. However, I should also emphasise a point made by my noble friend Lord Freud during the Second Reading of this Bill; that is, that contributions will only be taken during the period in which an individual judge is accruing pension benefits. For those judges already entitled to a full pension before implementation in April 2012, contributions will not be taken from their salary. Those judges who have part completed their full accrual period before April 2012 will pay contributions only for the outstanding balance of that period. The value of the pension benefits accrued up to the point of introduction of the measure will be unaffected.
At the spending review, the coalition Government took the tough decision to put the economy back on a sustainable footing. To do this they had to consider carefully where spending could be reduced and where costs could be rebalanced to reduce the burden to taxpayers. The noble Baroness, Lady Murphy, called in aid the noble Lord, Lord Hutton, and so do I, for he states clearly that there is a strong case in the short term for increasing the contributions to meet the costs of providing these pensions. This is what we are doing. It is right that judges should begin to contribute towards their own pensions just as other public service pension scheme members will be expected to contribute more.
There are currently around 2,200 salaried judges. Of these, around 200 are estimated to have already accrued a full pension and so would not make personal pension contributions. Therefore, the requirement to pay personal pension contributions will apply to approximately 2,000 salaried judges when it is introduced.
On average, in recent years, around 120 salaried judges have joined the judiciary each year. To restrict the introduction of personal contributions only to new judges appointed from April 2012 would, therefore, either not allow us to make the level of short-term savings on judicial pensions costs which we need to seek in tackling the deficit, or would require an extremely high level of contribution by new judges to help cover the costs of existing judges’ pensions. There is, anyway, as I hope I have made clear, no justification for restricting the measure in this way.
As I said, I will not try to persuade noble Lords that we are all in this together but it would be widely misunderstood if judges seemed to opt themselves out of the realities faced by the rest of the population.
Baroness Murphy
Before the Minister sits down, will he clarify the point about the judicial additional voluntary contributions scheme? I believe that at the moment individuals can exercise their right to add up to 15 per cent. What impact would this new proposal have on the ability of individuals who have a relatively short time to make their contributions before retirement to add to that scheme?
Lord McNally
I apologise if I am wrong on this, and I will write to the noble Baroness, but I believe that the 15 per cent right will be retained and judges will be able to make voluntary contributions, as they do now. I should have asked the noble and learned Lord to withdraw his amendment, even if he intends to return to the fray on Report.
Lord Mackay of Clashfern
My Lords, I need not make a premature decision on that. I will certainly withdraw the amendment, but I will say one or two things about the speeches that we heard. I am grateful to all noble Lords who contributed. It was good to have the support of the noble Lord, Lord McAvoy, who shares something of my accent, though possibly not everything.
My only point at Second Reading concerned the terms of service. The noble Lord, Lord Stoneham, must have been thinking of somebody else when he said that at Second Reading I referred to the quality of the judiciary. I do not think that I did. At Second Reading, I made the point that when I introduced the 1992 Bill that became the 1993 Act, I faced a terrific barrage concerning the effect this would have on the judiciary of the future. Fortunately, Parliament as a whole decided that the gloomy forecast was not correct. I think that I am right in saying that nobody, looking back, would say now that it was correct. The quality of the judiciary has remained very high. However, I did not make the point about the quality of the judiciary: other noble Lords did. I restricted myself to saying that, in accordance with our understanding of the constitution, the terms of service of a serving judge cannot be altered adversely during his term of service.
The noble Lord, Lord Stoneham, referred to contracts being changed with changing circumstances. Of course, most employees are in a situation where their contract has a definite time. The contract will run for that time and, unless there is agreement, it will be very difficult to change it. Judges' terms of service are until retirement because of the security of tenure that the Act of Settlement gave them. There is no question in my mind that we have thought for many years now that the terms of service of judges needed to be set out in statute. In 1993, we set out new terms that applied only to new judges: that is to say, judges appointed after the Act came into effect.
The noble Lord, Lord McNally, said that the 1995 regulations applied to everybody without exception. With the greatest respect, that is not correct. The 1995 regulations applied only to the arrangements under the 1995 Act, which applied only to those appointed after the Act came into effect. The main regulations came into effect on the same day as the Act. Therefore, the regulations were in place when the Act came into effect. Judges who were serving before 31 March of whatever year it was—I think it was 1995—were not subject to the arrangements. They had the opportunity of opting in to the 1993 Act arrangements, but were not obliged to do so, and a number of serving judges still have a retirement age that is different from that laid down in the 1993 Act.
The noble and learned Lord, Lord Falconer, said that he had an interest in this matter which he should declare. I made it absolutely clear—I thought that I had done so originally, but perhaps I did not do so today—that I was the Lord Chancellor for a while, including at the time the 1993 Act came into force, as well as when it was being brought through Parliament. I was also a judge in the Supreme Court in Scotland and a Lord of Appeal in Ordinary. But so far as I know, I have no financial interest in this whatever, and I am certainly not a spokesman for the judiciary—not at all. The judiciary must speak for themselves, though they cannot speak for themselves in this House any longer as serving judges are not allowed to speak here. Therefore, they will have to speak to the Minister for themselves, and I have no doubt that they will have an opportunity to do that. I am not privy to the sort of consultations they may have, although I have heard a little about it. I will have to leave being a spokesman for the judiciary to others; it is certainly nothing to do with me.
I appreciate the difficulty we are in in the present situation. I can see that everyone is required to make sacrifices. Of course, that is something that one can do under the tax regime. I am not confident enough to suggest how this could be done, but I feel certain that the tax regime is pretty flexible in getting money out of people. So there is no question that tax could be used; it does not infringe the terms of service of the individual. When there was a general reduction in the salary of public servants in the Republic of Ireland, the judiciary was expressly excluded for the reason that the constitution had that arrangement in it. I agree that longevity is an important part of the value of a pension but the terms of service here are perfectly clear, as set out in the 1993 Act. My point is that this is a breach of the general understanding of our constitutional arrangement that a judge’s terms of service should not be altered adversely during his period of service. Of course, I shall withdraw the amendment. Whether I return to it may depend on a variety of circumstances which I am not in a position to control at the moment.
Lord Boswell of Aynho
“Gender recognition
Notwithstanding the other provisions of this Act, those persons living within their acquired gender within the terms of the Gender Recognition Act 2004 for a period of two years before the passage of that Act, or who have received a full gender recognition certificate under the terms of that Act within a period of two years after its coming into effect, are deemed always to have lived in their acquired gender for the purposes of calculation of state pension and other provisions of this Act, provided that this is not to their detriment in entitlement to those benefits and other provisions.”
Lord Boswell of Aynho
I am conscious of the hour and will try to be as succinct as I can. The Committee will know that I served previously for 23 years as the Member of Parliament for Daventry, and would not wish me to rehearse too many experiences from that time. However, I would say that this is one of the perhaps two handfuls of cases that I encountered as a constituency Member which struck me as having a particular interest or relevance, which influenced my subsequent actions and interests and in which I became personally involved. It is for that reason that I have brought forward this amendment.
I refer to the situation of a then constituent who was well known to me, who is now a senior and respected member of her local community, having transgendered from being a male and having in that capacity been a senior civil servant—and therefore well able to write a brief for me on this subject, though she is not the sort to do so in this case. I know that the Minister is aware of her identity, as is my successor as the Member of Parliament for Daventry, with whom I have discussed this case and who was enthusiastic that I should take it forward. We happened to discuss it by chance, and I said, “Ah, the Pensions Bill is on; a new clause will be following immediately, because we ought to chase this”.
The background to this situation, which involves the comparatively small number of people in this country who are transgendered, perhaps 5,000 or something of that order, was an adverse judgment of the European Court of Human Rights against the UK for not really handling the problem. It is a matter, both in the application of the judgment and more generally, that continues to attract its attention. Purely by coincidence, I happened to notice as the result of some representations that I had this week by e-mail, that the ECHR is going heavy on Lithuania, which has a rather more punitive attitude than the United Kingdom has ever typically shown on the matter. The issue is not about punitive intervention; rather, it is essentially about the lack of a legal regime and, to some extent, a lack of interest in handling our problem.
The previous Administration rightly sought to respond to the ECHR judgment by introducing a Gender Recognition Bill. Because of my involvement with those issues, I volunteered to lead for my own party in the Standing Committee and the detailed consideration of that Bill. I found the situation fascinating and complex, although there was a wide measure of consensus across the committee. These are complex and sensitive issues for the people involved. People often get the wrong end of the stick if they have had no interest or involvement in this area; they get confused by issues of surgery and so forth. Those matters were rehearsed at some length and in some depth in the committee.
The criterion under which we were operating was living in the acquired gender as the main test, rather than some purely mechanical procedure, and proof that that had been taking place for a substantial period of time and had not been reversed and was not equivocal. Under the 2004 Act, that led the individual involved to have the right to apply for an interim, and then for a final, gender recognition certificate.
I should make the point that this is substantially a matter of law, and it would have been nice if the Ministry of Justice, in the shape of my noble friend Lord McNally, had stayed behind. I am sure that my noble friend Lord Freud will want to have consultations with the Ministry of Justice—indeed, I hope that in formulating his response to this he has done so—because it is primarily an issue of law and legal status.
There were some difficulties, and therefore there is only a limited amount of retrospectivity. If I may give an example from outside this context in relation to registrations of birth, there was an understandable reluctance to tear up the birth registration if someone had altered gender, and special provisions were made for the registrar to record separately any subsequent applications and the grant of gender recognition certificates. We cannot unwrite the past or the previous gender—perhaps some of the people involved would not wish to do so—but we record as we move on.
As I said to the committee, there was a strong emphasis on law and a tacit understanding that, once the certificate had been given, that would alter the legal status, but it did not convey benefits retrospectively back to the cradle in the new acquired gender. It would be fair to say, with no disrespect to either Ministers or officials from the Department for Work and Pensions in their briefing on the Bill, that the provisions for pensions and state benefits were grafted on. It would also be fair to say that Members of the committee like myself did not focus as intensely on them as we did on some of the other issues that we had already debated.
Baroness Drake
My Lords, I am very sympathetic to the amendment, which draws attention to the need to bring a practical resolution for those individuals who have not been able to benefit fully from the Gender Recognition Act 2004. I compliment the noble Lord, Lord Boswell, on raising the matter, because the issues facing transgendered people are considered too infrequently. They will appreciate the fact that their concerns are being recognised in the amendment and in the debate.
As noble Lords said, the welcome introduction of the gender recognition certificate in 2005 meant that individuals for the first time could have their acquired gender formally recognised. However, as with all changes of this type, some individuals are caught in the transition process and risk losing out. As the noble Lord, Lord Boswell, indicated, there are no official data on the size of the transgender population, so it is difficult to quantify the number of individuals who would benefit from a resolution in the manner of the amendment. However, it is clear that the number of individuals is likely to be very small. Therefore, it is unlikely to make a substantial financial difference to government expenditure, although it will do for the individuals concerned.
The Gender Recognition Act 2004, which was introduced in 2005, brought in the official process to recognise gender change. For those who transitioned prior to 2005, there was no official recognition of their change in gender, although the DWP, to the extent that it could use its discretion, was often sympathetic in allowing the change to be recognised in some circumstances. Since the introduction of the gender recognition certificate, an individual with such a certificate is are treated as though that is their natal gender. The amendment seeks to ensure that those who transitioned prior to the implementation of the provisions, and those who did so immediately after the Act came into effect, are not disadvantaged.
The primary beneficiaries of the amendment would be male-to-female transgendered people who reached female state pension age before 2007. At present, they are unable to claim their state pension for that initial period. For example, a male-to-female transgendered person who turned 60 in 2005 but got a gender recognition certificate only in 2007 would not have received the state pension until they gained the certificate in 2007. Therefore, they feel that they lost two years of state pension provision given their acquisition of the female gender. Also, as we know, the women's state pension would have been based on a lower number of working years—39 years for women as against 44 for men. The amount that would have been accrued and credited, as well as the time at which it was paid out, would have been different.
The noble Lord recognises in his amendment that there could be losers. Female-to-male transgendered persons would face the reverse issue to the one that I described for male-to-female transgendered people. The aim of the amendment is to ensure that there are no losers. It seeks to implement the provisions to the detriment of no one. I do not know whether the Minister will pick up on that point. It is a not unreasonable position because those most affected, who will be small in number, would have been near to pension age and would have had less time to adjust to the implications of that.
There will be other issues, such as those relating to divorce. When one partner wishes to transition with a gender recognition certificate, the couple cannot legally remain married. They must divorce and become civil partners. That could create winners and losers. The noble Lord, Lord Boswell, is right to say that what he aspires to achieve in the amendment should not be done in a way that is detrimental to the entitlement of anyone affected. I commend the noble Lord for addressing the sense of unfairness to a small group of individuals, and I join him in urging the Minister to address it.
Lord Freud
My Lords, the amendment seeks to provide a remedy for a group of older transsexual people who have missed out on full state pension rights because the Gender Recognition Act does not allow for retrospective legal recognition of a person’s acquired gender. This is a very complicated area, as my noble friend Lord Boswell pointed out. He spared us some of the detail when he introduced the amendment, but I should take a little time to outline the issue and give him the up-to-date information on the current position.
A transsexual person is someone who desires to live their life permanently in the opposite sex to that which they were assigned at birth; although “assigned” might be the wrong word. This desire often stems from a medical condition called gender dysphoria. The Gender Recognition Act, effective from April 2005, allows transsexual people, through the granting of certificates, to gain recognition of their acquired gender for all legal purposes. It covers only people who have suffered from gender dysphoria.
It is a general principle of our legal system that the laws relating to legal status should have only prospective effect. This ensures legal certainty and clarity. There was no reason to depart from this principle when the Gender Recognition Act was introduced, as my noble friend will be fully aware. Although the Act established future rights, a question remained over the past.
The position on the equal treatment rights of transsexual people for periods before 2005 was tested in the domestic and European courts. In 2006, the European Court of Justice held that it was discriminatory not to have had a means of recognising a person’s acquired gender, for social security purposes, prior to the introduction of the Gender Recognition Act. However, importantly, the court left it up to the UK Government to set the conditions for granting equal treatment for periods prior to the introduction of the Gender Recognition Act in 2005. The European Court clearly considered that it provided adequate cover for periods after that date.
Perhaps I may give my noble friend more up-to-date figures than those he might have. Records held by HMRC suggest that around 750 people in the UK are likely to gain from the European Court ruling, compared with the figure of 50 that he imagined. Under that ruling, where a person is successful in their equal treatment claim, we would need to make increased state payments on the basis that they had foregone all entitlement from the age of 60 or the date of surgery, if that was later. The costs of making such payments would amount to somewhere between £9 million and £38 million over the lifetime of the award. One can recognise the level of uncertainty surrounding that wide spread.
Lord Boswell of Aynho
My Lords, I am grateful to the Minister for his response, the detail that he has been able to bring to the current situation, his explanation of some of the difficulties that go even further than those that I had anticipated or scoped, and his sensitivity in dealing with the matter. I do not think that anyone would have expected a knock-down, one-off answer today, but we have had some encouragement on the commitment to having a specialist team to deal with the issue of equal treatment. I give a personal commitment to provide any assistance that the Minister might want on this, because I am happy to continue my interest in this area in any way that would be useful to a resolution. None of us wants serial legislation to clear up each case. It would be better to get an agreed understanding, and the Minister has perhaps given us the basis for that. I am grateful to him and I beg leave to withdraw the amendment.
Lord Boswell of Aynho
“Objectives of the Pensions Regulator
(1) Section 5 of the Pensions Act 2004 (regulator’s objectives) is amended as follows.
(2) At the end of subsection (1), insert—
“(e) to promote the provision of good pensions and to ensure their health and longevity.””
Lord Boswell of Aynho
My Lords, I will be even briefer on this amendment, having regard to the hour and the common wish to finish.
This amendment arose as the result of an approach that I received from the National Association of Pension Funds. The intention of the new clause would be to put what I might call a forward gear into the work of the Pensions Regulator. As I have explained to the Committee in the past, I have quite a lot of people in my family with a background in education. My wife for one would always say, “Emphasise the positive, don’t go around looking at the negative”. That is a good maxim for this Committee.
At the moment, as the NAPF reasonably reminds us, the Pensions Regulator has three basic statutory objectives, all of which are, at least to some extent, slightly passive, although I do not mean that they are improper: first, to protect the benefits of members of work-based pension schemes, which is hugely important; secondly, to promote the good administration of work-based pension schemes, which is also important, although administration is something that serves rather than being the main driver of the event; and, thirdly, to reduce the risk of situations arising that might lead to claims for compensation from the Pension Protection Fund. At the moment there is an interest in preventing that getting out of hand; we have discussed the levy and the burden on pension funds and, indirectly, on contributors of all kinds. No one is arguing that those objectives are wrong, but the NAPF’s concern, which I warm to, is that the last obligation—trying to avoid benefit run-off—is beginning to dominate the regulator’s activities. The overall work of the regulator is insufficiently focused on the continuation of good-quality workplace pensions. It is in the interests of the NAPF and of everyone across the Committee that that should be sustained.
What is proposed here is a simple provision that would give us a positive forward gear to promote the provision of good pensions and to ensure their health and longevity. Nobody here would dissent from that. Arguably, large parts of the Bill, particularly in relation to the NEST scheme, are focused on it, and it would be helpful to have the Minister's response in due course. He will recognise a probing amendment when he sees one. I am not committed to the exact wording, nor to the vehicle involved: but I hope that somehow we will be able to signal that the focus should be on supporting, sustaining and maintaining the positive, rather than on simply cleaning up the mess where things go wrong.
I will take one final shot. Perhaps the Minister would report on any elements of deregulation or decluttering of the business obligation that he has undertaken within the spirit of BIS’s one-in, one-out approach. That would be helpful. I beg to move.
Lord McKenzie of Luton
My Lords, I will be brief. I understand the thrust of the amendment. However, I have some concerns, mainly over the wording. To place on the regulator an objective to ensure the health and longevity of good pensions is stretching a point. The regulator is focused on workplace pensions. As written, “pensions” could range over a raft of different situations, including contract-based ones as well as DB ones.
From my experience, I challenge the assertion that the regulator is overly focused on protecting the PPF. Perhaps it is easy to forget the circumstances of 2004, when DB schemes were dropping out of the system like flies. The regulator's role then made a real difference. I recall also that over the past 18 months to two years there have been constant challenges to the regulator on the grounds that requirements under recovery plans were too severe. The regulator responded in a very effective way, being clear about what flexibility there was in the system but also recognising that what was important to DB schemes was the employer covenant. Unlike insurance-based contractor arrangements, these entities are capitalised and support the provision of annuities or whatever else through that structure. For DB schemes, it is the undertaking of the employer and sponsor that is the driver. Therefore, the regulator's role in holding them to account is good.
No one would object to anyone’s role in promoting the provision of good pensions. However, in this case I would not impose the obligation to ensure their health and longevity, because these will depend on a whole raft of things, not least the commercial situation of the sponsor and what their future may be. The regulator has played an important role, and I will be interested to hear if the Minister has any proposals to change their current remit and focus.
Lord Freud
My Lords, we have reached the last amendment in Committee on the Pensions Bill with a little nostalgia—and perhaps with relief for some. I will deal with my noble friend Lord Boswell’s amendment on the objectives of the Pensions Regulator, and will start by providing some background. Many noble Lords will be aware that Parliament legislated, through the Pensions Act 2004, to establish an independent, risk-based Pensions Regulator whose job was to regulate work-based pension schemes based in the UK. The Act gave the Pensions Regulator his main statutory objectives. These include protecting the benefits of members of work-based pension schemes and limiting calls on the Pension Protection Fund. Noble Lords may be interested to know that, in its 2007 report on the Pensions Regulator’s progress in establishing a regulatory approach, the National Audit Office found that the objectives provided a sound framework for pensions regulation.
Some of us may also be aware that the NAPF, in its 2010 report Vision for Pensions, recommended that the regulator’s activities should be reoriented. They proposed that this should be done by giving the regulator a new objective, to promote good pension provision and to ensure their health and longevity. My noble friend is well aware of the interests of the NAPF in this area, given the nature of this amendment.
Lord Boswell of Aynho
I am grateful to my noble friend for the way in which he has answered this question. I have been around for a year or two and have seen a ministerial brief or two. I am not entirely surprised, although mildly disappointed, at the nature of his comments. We understand the difficulties, including the substantive one of confusing people or in any way removing the focus on the important background work of securing a properly funded and safe pensions industry. I am glad on his behalf that the Minister has assumed for himself the role of the forward gear, because he is the best possible bully pulpit for all this. The essence of this should be collaboration and discussion between representatives of the industry, employers, staff and the department to facilitate a good outcome.
In conclusion, this has been the first Committee that I have attended in this place. I am grateful to my noble friend for his responses, but in the same breath I apply that gratitude to noble Lords opposite, including the noble Lord, Lord McKenzie of Luton, and others. I have found this procedure enlightening and positive, and on the whole it has done some good. I am grateful specifically for my noble friend’s response, and beg leave to withdraw the amendment.
House of Lords
Northern Ireland: Bill of Rights
(13 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Smith of Clifton
To ask Her Majesty’s Government what consideration they are giving to the motion passed by the British-Irish Parliamentary Assembly on 22 November 2010 which noted the delay in the introduction of a Bill of Rights for Northern Ireland, as promised in the Belfast agreement, and called upon Her Majesty’s Government to fulfil their obligation in that regard.
Lord Shutt of Greetland
My Lords, the Government remain committed to maintaining human rights protection in Northern Ireland and fulfilling our obligations under the Belfast agreement. Indeed, my right honourable friend the Minister of State recently met human rights organisations in Northern Ireland and stressed the difficulty of making progress without political consensus within Northern Ireland and the Northern Ireland Assembly. We will continue to consider how best to address this issue in the coming months.
Lord Smith of Clifton
My Lords, that is not a very satisfactory Answer because it gives a veto to the Stormont parties and it is not their prerogative to exercise that veto. Is what my noble friend said the agreed policy of the coalition? If it is, which Liberal Democrat Ministers participated and concurred in that agreement?
Lord Shutt of Greetland
My Lords, that is an interesting one. I am not the Minister; I am the Whip.
Lord Shutt of Greetland
I make it quite clear; I am the Whip and there are two Ministers in the House of Commons. Noble Lords will remember that we had the general election, following which the number of Members of Parliament in each party was rather different. Under the coalition agreement, the number of Liberal Democrat Members who became Ministers was rather smaller than the number of Conservative Members who became Ministers. My noble friend’s right honourable friend and mine, Nick Clegg, the Deputy Prime Minister, paid a three-day visit to Northern Ireland in October, and I also had a three-day visit. Even though I am not a Minister, I endeavour to influence events and I hope to have a degree of success in that. Alongside my noble friend as the Liberal Democrat Back-Bench co-chair for the policy committee on Northern Ireland, Mr Stephen Lloyd, MP for Eastbourne, has recently been appointed to serve as the House of Commons co-chair.
Baroness Royall of Blaisdon
My Lords, I remind the Minister, with respect, that he speaks on behalf of the Government as a whole. The Government have pledged to bring in a British Bill of Rights. I wonder what that means for Northern Ireland and whether the Government are going to pursue a Northern Ireland Bill of Rights and a separate Bill of Rights for the United Kingdom. I should be grateful for the views of the noble Lord the Minister.
Lord Shutt of Greetland
My Lords, I shall endeavour to speak for the Government. I was just giving the facts as to who is the Minister and who is the Whip. I hold the latter position, and I think noble Lords will find that that situation existed when we had a different Government. The noble Baroness may recall that the Belfast agreement came into being on 10 April 1998. It was agreed that there would be an Assembly with full legislative and executive authority for the six Northern Ireland government departments. Furthermore, it was agreed that the European Convention on Human Rights would be embraced in any Bill of Rights for Northern Ireland that supplemented it. Of course, it is 13 years since the Belfast agreement and things do not stay still. We got a Human Rights Act in December 1998. The devolved Assembly has these powers and from time to time legislative consent motions are required. On 16 February—
Lord Shutt of Greetland
If you want the answer you can have it—the Prime Minister announced that a group of people would be put together for a human rights Act for Britain. Therefore, the Belfast agreement has to embrace those other three factors.
Lord Kilclooney
My Lords, can the Minister confirm that the Belfast agreement brought benefits to the peoples of both states in the island of Ireland? Can he recall that there were obligations on the Dublin Government in that agreement to create a human rights commission, to ratify the Council of Europe’s convention on national minorities, and to legislate for employment equality and for respect of the different traditions in the island? Can he confirm whether any of those four requirements have been honoured yet by the Dublin Government? For those that have not been honoured, will he make representations to the new Government elected in the south of Ireland a few weeks ago?
Lord Shutt of Greetland
My Lords, as I indicated earlier, I will do my best to speak for this Government. It is someone else’s job to speak for the Government of Ireland. However, in another coalition agreement, between Fine Gael and Labour in the south, there is one line that the Belfast agreement and the St Andrews agreement “shall be honoured”. If that is in their coalition agreement, it applies to them as it does here, and I will see to it that I write accordingly.
Lord Glentoran
My Lords, I want to clarify a couple of things. While shadow Minister in opposition, my right honourable friend the Secretary of State, I and others in the team undertook that once the United Kingdom Government set up their own human rights Bill, Northern Ireland would have its share of it. That is where I still stand, and I suspect that my right honourable friend the Secretary of State is in a similar position.
Lord Shutt of Greetland
I am not absolutely clear about the question, but the Government are possessed of the fact of honouring the Belfast agreement. Within that there has to be a human rights element for Northern Ireland. What is not absolutely written in stone is that that has to be very separate.
Lord Bew
My Lords, will the Minister comment on the reality that the Belfast agreement does not impose an obligation on the Government to legislate on the human rights question; rather, it imposes an obligation on them to receive the report of the Northern Ireland Human Rights Commission? Rather more profoundly, that report is supposed to be based on the principle of “parity of esteem” for the “two traditions”. That is explicitly said in the Belfast agreement. The Northern Ireland Assembly has in effect rejected the idea that it is so based. Is it not at this stage for those who believe in human rights legislation to carry on the argument in Northern Ireland with the Northern Ireland Assembly to see whether minds can be changed?
Lord Shutt of Greetland
It certainly is. The Northern Ireland Assembly voted by 46 votes to 42 that it did not want separate human rights legislation. There is an election, and things might well change following that election. If a united front in the Northern Ireland Assembly said that that is what it wanted, obviously the British Government would take due notice.
House of Lords: Life Peerages
(13 years, 9 months ago)
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Lord Grocott
To ask Her Majesty’s Government whether they intend that the life Peers they have appointed should be Peers for life.
The Chancellor of the Duchy of Lancaster (Lord Strathclyde)
My Lords, the Government confirm that they have no plans to remove the peerage from those in receipt of that honour.
Lord Grocott
My Lords, that is a very, very welcome Answer. I am almost at a loss for words. I am so much at a loss that I want to have it rephrased. Is the noble Lord actually saying that everyone currently a life Peer will remain a Peer for life? If he is saying that, I suggest to him that he is getting himself out of an awful lot of difficulty, but if he is not saying that—he is looking very quizzical now, so perhaps I was not getting a straight answer to a straight question. Let me simply put it to him that it would be a bit cynical if the same Government who have created 119 new life Peers since the general election, all of whom are making a terrific contribution to the work of this House, are at the same time, according to his interview with the Financial Times at any rate, planning to remove us and replace us with senators by 2015. I suggest to him that given that, so far, there has been no agreement whatever on the powers and functions of any reformed second Chamber, the simple thing for him to do—I imagine it would be a relief to the Government—would be to pick up the splendid House of Lords Reform Bill in the name of the noble Lord, Lord Steel of Aikwood, and take it forward as government policy.
Lord Strathclyde
My Lords, I thought I had been entirely straight with the noble Lord. A peerage is for life. That honour should remain, but it should not necessarily guarantee a seat in the House of Lords. The noble Lord knows that well because he knows that the Government are committed to House of Lords reform, as all major parties agree that reform is needed and this coalition Government provide the opportunity to determine final proposals that can be put to Parliament after there has been a Joint Committee of both Houses.
Lord Cormack
My Lords, my Letters Patent give me the right to sit here for life. I assume my noble friend’s Letters Patent do the same. Are we to attach more importance to the Letters Patent from the Queen or to the views of the temporary Deputy Prime Minister?
Lord Strathclyde
My Lords, in the passage of the House of Lords Act 1999 we went through this quite a lot. In the end, the view was that statute law could vary the terms of the Writ of Summons. Therefore, if it was the will of Parliament that life Peers should not be guaranteed a place in the House of Lords, I do not think there would be any problem.
Lord Campbell-Savours
My Lords, if membership of the House is to reflect the crude statistic of the national vote at the most recent general election, when can we expect to have 21 UKIP Members of this House and 14 British National Party Members?
Lord Strathclyde
My Lords, we have no plans to introduce members of those parties at the moment. Of course, if there was an elected House, it would be up to the electorate to decide who should sit in this House.
The Earl of Onslow
My Lords, is there not something totally glorious and hypocritical about the noble Lord, Lord Grocott, saying please may his peerage be guaranteed but those promises to elected successors of mine, which could be in the fairly near future, should be taken away?
Lord Strathclyde
My Lords, it is good to see my noble friend speaking in this House, as he has done for many years, and long may that continue. Different people will take a different view of what the noble Lord, Lord Grocott, said but he has been entirely consistent since coming here in wishing to preserve the House more or less as it is. It is an important point of view, although not one with which the Government agree.
Lord Hunt of Kings Heath
My Lords, the noble Lord, Lord Strathclyde, too, has been entirely consistent in being a passionate exponent of an elected House. But yesterday he told the House that he expected that dozens, indeed hundreds, of new coalition Peers would be appointed over the next few years. Can I take that as indicating that he is therefore not very optimistic about the prospect of substantive reform?
Lord Strathclyde
My Lords, neither is the case. While there is an appointed House, it is always open to the Prime Minister to appoint new Members to it on a cross-party basis and the noble Lord will have seen the coalition agreement on that. However, if Parliament passes a Bill for an elected House, elections would take place.
Lord Tyler
My Lords, will my noble friend acknowledge that since 1997, when a Government, of whom the noble Lord, Lord Grocott, was a distinguished Member, were elected with a clear commitment to reform your Lordships’ House to include elected Members and, by implication, to end the life peerage, all of us who have been appointed know that we are term Peers in practical terms? Will he further acknowledge that the big difference since May of last year is that instead of just talking about this for 13 years we have a Government who are committed to action?
Lord Strathclyde
My Lords, my noble friend is quite right. I do not believe that any new Member of this House, before accepting this great honour and, indeed, a job, has not considered what might happen if a reform Bill is finally published.
Shipping: Piracy
(13 years, 9 months ago)
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Lord Naseby
To ask Her Majesty’s Government what action they are taking to mitigate and eventually eradicate the hijacking of United Kingdom shipping by Somali pirates.
The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford)
My Lords, Her Majesty’s Government contribute warships to multinational counterpiracy operations and command the European Union operation. We work with industry to implement best management practice by ships to minimise the risk of a successful hijack, but the long-term solution lies on land with the rule of law and increased stability. The United Kingdom is leading international action in the Contact Group on Piracy off the Coast of Somalia to deliver a comprehensive response to Somali piracy.
Lord Naseby
Is my noble friend aware that the situation gets ever more serious? Two major tankers have been hijacked in recent days, nearly 800 hostages are being held, and now no less than 10 mother ships are extending the amount of ocean in which the hijackers can operate. Since we as Her Majesty’s Government are in the lead role, is it not time that in conjunction with our partners we use some of the UAV planes to pinpoint where these mother ships are and, if necessary, either sink them by an armed UAV or find some other means of sinking them? After all, the Tamil Tigers’ navy was put out of action only by the Sri Lankan navy sinking the mother ships.
Lord Howell of Guildford
My noble friend is absolutely correct. The situation is getting more serious every week. More and more ships are being attacked by the hijackers and the piracy operation is growing, so he is completely right to recognise the seriousness, as do Her Majesty’s Government. We are, as he says, in the lead on the Contact Group on Piracy off the Coast of Somalia. We are seeking to develop more substantial facilities to meet and track the pirates. The question of the UAVs is difficult. We have none, but of course our American allies do. A great many of these are currently deployed elsewhere, but my noble friend can rest assured that we intend to develop a more robust response in relation to these and other kinds of maritime air patrol because it is certainly needed.
Lord Anderson of Swansea
My Lords, the Minister will be aware of reports of a deal between the pirates and al-Shabaab, an affiliate of al-Qaeda in the Arabian Peninsula, whereby the terrorists cream off some of the money that goes to the pirates. Do the Government accept that this is likely to be true? If so, will it not have an affect on us in the possible financing of terrorism through the diaspora in the UK and in possibly making insurance companies in the UK liable for that financing?
Lord Howell of Guildford
I have certainly heard of these reports and there are a great deal of rumours surrounding the whole question of the relationship between pirates, pirate finance and terrorism in the region, but we have no firm evidence of this particular pattern of transaction. It is, however, something that we are investigating and watching very carefully indeed.
Lord Stirrup
My Lords, the Minister said quite rightly that the causes of piracy as opposed to the symptoms must be dealt with on land and cannot be dealt with at sea. Could he therefore tell us what progress is being made in engaging with, and building capacity within, what passes for the authorities in Puntland?
Lord Howell of Guildford
In Puntland, Somaliland and Somalia itself we are making efforts to reinforce the facilities for both the prosecution and the imprisonment of pirates, so progress is being made. Frankly, Puntland is a rather more difficult region than Somaliland, which is very co-operative. In Somalia itself the transitional regional Government are working to build prisons and improve facilities. There is, of course, the wider problem in Kenya with which the noble Lord will be familiar. Some progress is being made, but it is not very easy.
Lord Chidgey
Is my noble friend aware that since January the Indian navy operating some 600 miles or more off its western shore has sunk three pirate mother ships and captured over 100 pirates, who are now being interviewed about their connections with terrorism in Mumbai? The Indian Government are also bringing forward tough legal measures to help them tackle offshore piracy. What is our Government’s assessment of the proactive operational policies of India compared with the effectiveness of the EU operation, Atalanta, in both its maritime and its legal capacity?
Lord Howell of Guildford
Our assessment is positive, both of the Indian naval operations and the naval operations of other countries, including China. This is a co-ordinated effort, and maybe the co-ordination can grow tighter still. We think this should all carry forward in a closely integrated way. As to the legal aspects of the situation, there are the rules of engagement and the operational duties under which a sort of constabulary context is conducted towards pirates. This might need to become more robust in our different countries, but we have to stick by the law of the sea and we have to proceed carefully for fear of involving ourselves in far more complexities in this area, rather than reducing it and maybe being more effective against the pirates.
Lord Davies of Stamford
My Lords, I congratulate the noble Lord, Lord Naseby, on drawing the House’s attention to a very pressing problem that, in my view, has not had enough attention up until now. Is it not absurd that we in this country should be supporting no fewer than three task forces, potentially leaving our sailors and marines at risk of their lives there, and doing nothing at all to interrupt the constant flow of money into the hands of pirates? We have in this country an elaborate structure of criminal assets legislation and anti-money laundering legislation. Will the Minister have a word with his colleagues in the Department of Justice and the Home Office to see whether we cannot use these existing mechanisms to interrupt the flow of money that is making piracy a growing and increasingly profitable industry?
Lord Howell of Guildford
I do not quite accept the noble Lord’s point that we are doing nothing at all. He is quite right that this is a growing concern. We had an excellent debate on it just before Christmas and he is right to raise it again now. These are all areas where progress can be made. There is a contact group and a highly effective operation throughout Whitehall involving all departments in tightening the situation. We have to tackle all these matters and are doing so in many areas very vigorously. To say we are doing nothing at all is going too far, but if the noble Lord feels we should go further, clearly we should because the piracy issue is getting worse and not better.
Lord West of Spithead
My Lords, I, too, congratulate the noble Lord, Lord Naseby, on raising this issue. Does not the Minister think that now is the time to reinvigorate action in this whole area? It is becoming a really dangerous issue. I believe that something will happen in the near future that will make us all pay attention. For example, the loss of two LNG ships coming to the UK would affect energy supplies. There could be a huge catastrophe, and it really is time to reinvigorate our efforts. Should we not look at all the aspects of this problem that have been mentioned and push this very hard?
Lord Howell of Guildford
The noble Lord is right that the time has come, and Her Majesty's Government have recognised precisely the point that he makes. However, this has become a global issue; it could affect Chinese, Indian and Asian interests just as much as European and American interests. This task must be tackled on a global level with great vigour before it gets very much worse.
Police: Expenditure Cuts
Lord Kennedy of Southwark
To ask Her Majesty’s Government what impact the proposed cuts to the police service funding will have on operational effectiveness.
Lord Wallace of Saltaire
My Lords, I welcome back this familiar question in a slightly different form; no doubt we will see it again. The Government believe that police forces can make the necessary savings while protecting front-line services and operational effectiveness. Last year’s HMIC report identified £1.1 billion of savings that could be made while maintaining police availability. We have identified significant further savings, including through better procurement and sensible pay restraint.
Lord Kennedy of Southwark
I thank the Minister for his reply. Before the general election, the leader of his party—now the Deputy Prime Minister, Mr Nick Clegg—promised to recruit an extra 10,000 police officers. The reality, as a result of decisions that the Government have taken, is that we will have 10,000 fewer police officers. Is this not another example of the Deputy Prime Minister saying one thing to get elected and another when elected?
Lord Wallace of Saltaire
My Lords, we all have to pay for what we get. I was not aware until I saw a chart in the Guardian on 23 February that the previous Labour Government went into deficit on the Budget in 2002, ran an annual deficit on it of between £30 billion and £40 billion from 2003 to 2008 at the height of the credit boom, and therefore left us with no spare capacity when the boom collapsed. That is why we all have to take these difficult decisions.
Baroness Doocey
I declare an interest as a member of the Metropolitan Police Authority. Does the Minister share my view that the police could provide better value for money by cutting perks such as chauffeur-driven limousines for senior police officers rather than by cutting front-line services?
Lord Wallace of Saltaire
I had better declare that I travelled several miles in the chief constable of West Yorkshire’s car last week from one police building to another. There are of course areas where the police can cut, and a number of rather imaginative schemes are already under way. I was taken on that day to the Yorkshire regional hub, which the four separate Yorkshire police services now share for a number of operations. That is the sort of thing which we need to take further.
Lord Hunt of Kings Heath
My Lords, how many front-line police officers will lose their jobs in order to pay for the politicisation of the police force through elected police commissioners?
Lord Wallace of Saltaire
My Lords, we will come to the Police Reform and Social Responsibility Bill in good time. We have seen in the past couple of months the normal form of negotiation through the public media. I saw in early February a suggestion that Greater Manchester, for example, would lose nearly a quarter of its strength. We now hear Lancashire Constabulary, I am very happy to say, talking about possibly losing up to 160 policemen in front-line positions. We are beginning to discover that it will be not be as difficult as we feared. Her Majesty’s Inspectorate of Constabulary last week indicated that it expects much fewer police job losses than originally forecast. The Metropolitan Police, accounting for a quarter of all officers in England and Wales, has indicated that it will begin recruiting again shortly.
The Earl of Listowel
My Lords, is the Minister aware of the widespread concern about the impact of cuts to police funding on the child protection role of the police? Can he provide some reassurance on this point?
Lord Wallace of Saltaire
My Lords, one of the principles of this Government is to reduce the different pots under which funding is provided to the police and to allow the police to choose how they spend their money. Some areas of the country require much greater effort on child protection than others. We look to police forces, authorities and, in future, the commissioners who will keep them under check to choose their priorities in the light of local needs.
Lord Hamilton of Epsom
Does my noble friend accept that the Benches opposite may accept that the deficit needs to be reduced as a general argument, but that they will not agree to any measure in particular?
Lord Wallace of Saltaire
My Lords, we all face a structural problem that the media and many of the public want higher quality public services and lower taxes. The call from the Labour Party for cuts in VAT, rather than to talk about how we pay for what we need in maintaining public services, is a good example of that.
Baroness Farrington of Ribbleton
My Lords, would the Minister care to answer the specific question about money being spent on implementing a policy which to my knowledge his party never voted for—single police chief commissioners? I declare my interest as having served for 20 years as a member of a police authority. Responsible chief constables are saying that to achieve savings of the magnitude needed, even if we accepted that they should be made, requires lead-in time. Rather than have these phoney elections, which will have to be backed up by panels to represent the whole community in the police authority, as the Government have accepted, would it not be better to spend the money on that? I have not met a single senior police officer whose priorities would be different from mine.
Lord Wallace of Saltaire
My Lords, I am deeply surprised that the noble Baroness was not aware of the 2006 Liberal Democrat party paper on public service reform, which did indeed raise the question of directly elected police commissioners, so it is not entirely new to our party. I understand that the Labour Party is proposing instead that one should have directly elected chairs of police authorities. I cannot quite get my head around how different that is from what we are proposing.
Warm Home Discount Regulations 2011
(13 years, 9 months ago)
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Lord Strathclyde
That the draft regulations and orders be referred to a Grand Committee.
Energy Bill [HL]
Baroness Anelay of St Johns
My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Energy Bill, have consented to place their prerogative and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Clause 3 : Framework regulations
Amendment 1
Lord Marland
The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland)
My Lords, it is amazing that, although I thought this is a fascinating Bill, the Chamber seems to be emptying quite quickly. I will do my best to encourage everyone.
Before commencing these amendments, I would like to place on record my thanks to all noble Lords for their magnificent contributions. Although those on the opposition Benches will not like it, this has been done in the true spirit of coalition across all parties. I would particularly like to thank those on the opposition Benches for everything they have done in making this Bill fit for purpose. I have been incredibly well assisted by the noble Baroness, Lady Northover, who has worked tirelessly on our account and I thank her very much.
I also thank our officials for their tireless work. The Bill will have passed through this House voteless—at least I hope that it will—and that would not have happened without substantial briefing and explanation to noble Lords during the course of the Bill. I want to thank my officials and everyone for that. As such, these government amendments show that we have listened to noble Lords, particularly on the opposition Benches and my noble friend Lord Deben. I hope that the first group of government amendments are accepted by the House.
Baroness Maddock
My Lords, during the passage of the Bill, I moved several amendments on, and we had long discussions about, the private rented sector. At Report, the Minister said that he agreed in great part with what I was saying and that he hoped to be able to bring forward amendments on the private rented sector going further than they had previously. They have gone a little bit further today. I hope that, as the Bill passes through another place, the Government will be able to take a slightly closer look at the private rented sector.
In the time that we have been discussing the Bill, the most recent English housing survey has been published. It shows that the number of properties in the private rented sector has increased by 1 million in the past 10 years. Such properties now account for 15.6 per cent of England’s housing stock and that number appears to be rising all the time. I remind the Minister, although it will not be his responsibility in the other place of course, that 20 per cent of private rented sector households live in fuel poverty. If we look at the bottom end—at bands F and G, which are the groups that I have spent a lot of time discussing during the passage of the Bill—that rises to 42 per cent. I have said at least twice during the passage of the Bill that, in many cases, we are footing the bill for the rent of these properties through housing benefit.
I thank the Minister for moving a little in my direction and I hope that his colleagues in another place will be able to take a further serious look on these issues.
Lord Best
My Lords, the amendments that I tabled called for a legally binding minimum standard of energy performance by the year 2016, but the Minister has not been able to concede that. I accept that the amendments that he has tabled are a small but helpful step in the right direction, but I want to place on record that I fear that the private rented sector will not do what it should do without a legally binding minimum standard being introduced by the Government for local authorities to implement. Without that, I fear that the Green Deal will not be as effective as it otherwise should be. But it is now for another place to discuss and I am grateful for the modest but important concessions that the Minister has made with these amendments.
Baroness Smith of Basildon
My Lords, I echo the Minister's comments about how the Bill has been conducted. It has been a great example of your Lordships working together to bring forward suggestions. I praise the Government for their efforts to look at the suggestions and amendments and bring forward amendments of their own. I recall at Second Reading the Minister said,
“I will clarify that this is a framework Bill on which there is a lot of work to be done”.—[Official Report, 22/12/10; col. 1151.]
During our deliberations, particularly in Committee and at Report, we have undertaken a lot of that work and brought forward amendments.
I also echo the Minister’s thanks to his officials who have been very co-operative with us. We are grateful for that help and support. I also place on record my thanks to the many organisations that contacted us during the course of the Bill, such as Friends of the Earth, the Association for the Conservation of Energy, the World Wide Fund for Nature and many others. Their work and that of the energy companies have been endless. I have had more e-mails and briefing on this legislation than I have ever had in my entire parliamentary career. It has been very welcome and appreciated and we do not take that support and advice for granted.
Baroness Parminter
On behalf of these Benches and in the absence of the noble Lord, Lord Teverson, who is serving the House in another place today, I add our thanks for the way the Minister and his team have handled this Bill and the co-operation we have had from officials. It has been much appreciated. In particular, on Amendment 1, the way that the Minister has listened to the comments from across this House on the issue of moving from “may” to “must” well reflects the concerns that many of us have had about the need to upgrade consumer protection, if we are to make a reality of the Green Deal and all the aspirations that the Government rightly have for delivering our targets on lowering carbon emissions. It is an extremely welcome step and is an indication that the Minister is listening on this issue, as indeed he has on many others.
I remain disappointed that I was unable—either through lack of eloquence or other means—to persuade the Minister that provision for a consumer ombudsman was needed in this legislation. However, I accept what he has said and what his officials have confirmed, that the legislation is enabling in such a way that, should the Secretary of State feel that is desirable, that option remains open. I believe that an ombudsman for the general public is going to be essential in this important area and that this will be something that will come forward, if not in another place, then certainly in the future.
Amendment 1 is a welcome indication that the Minister is listening and confirms that he has been paying attention to the many useful points of clarification that have come from Members who all support ensuring that this Green Deal works.
Lord Whitty
My Lords, until the noble Baroness made her last point, I was not going to intervene on this amendment, but I would like to associate myself with the words of both my noble friend Baroness Smith and the noble Baroness, Lady Parminter, regarding the way the Committee and Report stages of this Bill have been conducted. I appreciate that the Minister has come some considerable way towards meeting a number of concerns although on this particular one I think the noble Lord, Lord Best, is correct about the need for minimum standards and the noble Baroness, Lady Parminter, is right about the need for consumer protection.
It is important that the Government and the House recognise that, in supporting the provisions of this Bill on the Green Deal, we all recognise that there is still a substantial amount of work to be done in putting the deal together and thereby inspiring confidence in householders and landlords, on the one hand, and in the various different parts of the supply chain, on the other, which will need to act together to deliver the Green Deal.
At several points—I will return to this on a further amendment—during the discussion in Committee and on Report, the Minister said we may need to make a number of amendments in another place. I think the Government will find that there are some anxieties both in industry and on the part of consumers about how exactly the Green Deal is going to be sold and how it is going to be delivered. I suspect therefore the Government need to remain open to the possibility of amending the Bill in another place. I think everybody who was involved in the Committee wish the Green Deal good speed. However, we also know that there are some problems ahead and the Government would be wise to be flexible.
Lord Marland
Again, I value very much the comments made by noble Lords. These comments have been made on several occasions and I am grateful for the compliments that have been made. The noble Baroness, Lady Parminter, was the most complimentary so she is top of my class. Seriously, I am grateful to everyone for their kind words.
The noble Lord, Lord Best, made a very good point about PRS properties and with that in mind we have brought forward the idea of a review in 2013. It is fundamental that we make great inroads into the private rented sector—particularly the F and G categories my noble friend Baroness Maddock mentioned and raising them to the minimum standards of category E —and the Government are extremely committed to that. However, we should allow the sector to lead by example to start with and if it does not take that opportunity then we must help it on its way. The Government are committed to taking people out of fuel poverty. That is part of the reason for the Green Deal building on other initiatives that have taken place; it is fundamental and we owe it to the country to get people out of fuel poverty.
The noble Baroness, Lady Smith of Basildon, asked me whether things that I said on Report stand now. I can confirm that they were on the record and I meant what I said. She can take heart from what I said then and the disappointment that she had with these amendments will be carried through into another place and will be left for them to debate. I am sorry to hear there is a little bit of disappointment, but we have, I hope, persuaded and also given way on a vast number of amendments. It would nice every now and then if everyone carried me rejoicing from these Chambers saying how marvellous it was—I do not think I am going to get that—but in any case I hope I have responded to the questions.
Lord Marland
Lord Marland
My Lords, in break with tradition I am going to read a script I have been given because these amendments are complicated. They make small technical changes to Clauses 17 and 20 ancillary to amendments made on Report that apply to the Secretary of State’s power to make licence modifications.
Amendment 2 clarifies Clause 17(3)(f) and provides that provisions can be made in licences requiring payments to be made by or to licensees as well as enabling such payments to be made.
Amendments 3 and 4 provide that licence modifications made under the powers in Clauses 17 and 20 can be of the type envisaged by Section 7(3)(a) or (c) and (4) of the Electricity Act 1989 and Section 7B(5)(a)(i) or (iii) of the Gas Act 1986. Now you can understand why I read this out. I hope that these amendments will be supported. I beg to move.
Lord Marland
“( ) Conditions included in a licence under section 7 or 7A of the Gas Act 1986 by virtue of the power under subsection (1) may do any of the things authorised by section 7B(5)(a)(i) or (iii) of that Act (which applies to the power of the Gas and Electricity Markets Authority with respect to licence conditions under section 7B(4)(a)).
( ) Conditions included in a licence under section 6(1)(c) or (d) of the Electricity Act 1989 by virtue of the power under subsection (1) may do any of the things authorised by section 7(3)(a) or (c) or (4) of that Act (which applies to the power of the Gas and Electricity Markets Authority with respect to licence conditions under section 7(1)(a)).”
Lord Marland
“( ) Conditions included in a licence under section 6(1)(d) of the Electricity Act 1989 by virtue of the power under subsection (1) may do any of the things authorised by section 7(4) of that Act (which applies to the power of the Gas and Electricity Markets Authority with respect to licence conditions under section 7(1)(a)).”
Lord Marland
Lord Marland
Lord Marland
Lord Marland
Lord Marland
Lord Marland
Lord Whitty
“Smart metering strategy
(1) The Secretary of State shall, following consultation with energy consumers and other interested parties, prepare and publish a strategy to deliver the intended benefits of smart meters to consumers, including in particular low income and vulnerable consumers.
(2) It is the duty of the Secretary of State to report to Parliament on the progress of smart meter roll out every year starting from six months after the coming into force of this Part.
(3) In preparing the strategy the Secretary of State must set out how the smart meter roll out will—
(a) deliver to consumers the benefits identified in the impact assessment of July 2010;(b) ensure adherence to an independent code of practice for installation;(c) contribute to the carbon targets specified in the Climate Change Act 2008;(d) contribute to the elimination of fuel poverty as specified in the Warm Homes and Energy Conservation Act 2000;(e) improve competition in the energy retail market, including in particular in relation to prepayment customers;(f) provide for the interoperability of smart meters;(g) work alongside wider Government programmes such as the Green Deal and water metering roll out.(4) The report should cover progress on the delivery of smart meters, including—
(a) the number of smart meters installed in the United Kingdom, defined as per the Ofgem definition of a completed installation;(b) the costs and savings of the smart meter roll out;(c) the estimated benefits to consumers and taxpayers of the smart meter roll out, with particular reference to low income and vulnerable consumers;(d) estimated effects on the levels of fuel poverty;(e) the estimated energy and carbon reduction from the smart meter roll out;(f) the degree to which interoperability of smart meters has been achieved;(g) customer satisfaction indicators, including levels of complaint;(h) security of smart meters and smart grids in relation to privacy and commercial confidentiality.”
Lord Whitty
This is in a sense left-over business from Report stage. Again, I am not looking to the Minister to accept the amendment as it stands but to recognise that some of the issues that it brings up need to be addressed by the Government during the Bill’s stages in the Commons, one hopes, or possibly in secondary legislation.
The amendment deals with smart meters. We have had substantial discussions on smart meters in Committee; it is a very small part of the Bill but a very big part of the whole strategy for tackling energy efficiency in buildings, fuel poverty and the price of bills for everybody. Smart meters will therefore be key in improving energy efficiency, changing the behaviour of householders, reducing bills and providing the basis for introducing rather smarter grids into our electricity supply system. However, there are issues relating to smart meters. Unlike the Green Deal, which is voluntary for the householder or landlord, the smart meter is mandatory on the supply company and therefore, in effect, mandatory on the consumer, in that at some point the supply company will have to enter the house and replace existing meters and wiring with ones susceptible to smart metering.
I strongly favour this process and think that it will make a big contribution to energy efficiency; I think that at least some consumers will be able to alter their behaviour significantly and that we should therefore all support the strategy. However, there are some clear anxieties among consumers about the whole prospect of smart meters, some confusion about how they are to be delivered and in particular some concern about the lack of standardised and interoperable meters. I realise that on that front the Government are attempting to bring together the companies, and we are making some progress, but those concerns exist. There are also serious concerns, which noble Lords may regard as irrational, about privacy and what use may be made of the records of energy use. We must recognise those problems and recognise the possibility of serious consumer resistance that needs to be built in to how the rollout is delivered. It was an opportunity in this Bill to give a clearer framework to the totality of the smart meters’ rollout. We are three years on from the 2008 Act and, clearly, there have been developments and slight changes in approach. The clause that would immediately precede the new clause that I propose is, in effect, simply to extend the possibility of altering licences to transmission licences. That may or may not be necessary, but it will probably be necessary in some circumstances—and I certainly support that change. Given that smart meters are such a major part of the provisions and we rely so strongly on them to reduce household energy use, we should perhaps have used the Bill for a slightly wider purpose.
Lord O'Neill of Clackmannan
My Lords, I support my noble friend on this amendment, although I have to say that we tend to forget that at the moment a substantial number of meters are replaced every year. The replacement meters have been either replicas or slightly more updated versions of the previous ones. Sometimes they are placed in a different part of the household. If you are lucky, you might even be able to get the utility company to put one in your garden, if you have a garden, so that they do not have to come to your house to read it. What we are talking about initially is scale of operation. We have ambitions for 26 million households—18 million gas meters and some 25 million or 26 million electricity meters to be installed over a 10-year period.
I understand that that work is now going on at quite a rate in some of the utility companies. It would be unfortunate if, in such a large and potentially intrusive operation that will go into every household in the country, a clear form of parliamentary accountability were not involved. Obviously, in order that there be parliamentary accountability we need to know what is happening. I would therefore have thought that an annual report, while it might not be required reading for every Member of the Commons and the Lords, ought to be required reading for members of the appropriate Select Committees which take an interest in these matters. If necessary, that report could be debated annually in both Houses.
Many of us are concerned that we are still rather vague about what is being suggested for this rollout. This amendment goes some way towards identifying a number of concerns and issues. One thing perhaps missing from the amendment is sufficient reference to providing the consumer or householder with adequate information on how the meter operates. If the Minister were to accept the spirit of the amendment, however, he might go away and add to it. If we are to take advantage of the so-called smart element in these meters, it is important that the public understand what is shown on the dials in their kitchens, their gardens or wherever and what those dials can do to help them to use their energy more efficiently and make savings that might mitigate the price rises for electricity and gas that we all anticipate during this introduction.
In principle, this amendment is a good idea. If the Government accept it in spirit, they should be given an opportunity to go away and provide something of their own. A number of bodies outwith this House would want to be able to take the evidence that such a report would provide—for example, the Fuel Poverty Advisory Group which provides help and assistance to Ministers on fuel poverty. It would be emboldened and assisted in its work if it had the kind of technical information from such a report as is being suggested by my noble friend’s amendment, so I give this my full support.
While an amendment of this complexity is easy for Governments to knock down, it might not be the last word on the subject, and it is incumbent on the Government to provide that. That will be a report of sufficient meatiness that it could be chewed over by interested parties and Members of both Houses, and could provide the companies with sufficient information and evidence to be able quickly to change anything that is wrong with the way they are going about their work. One problem that we can envisage here is that the scale of this operation is likely to create something akin to a juggernaut moving across the country and trampling households under its wheels.
Everybody wants to see the introduction of smart meters but it is incumbent on the Government, who have the responsibility of directing that if not actually implementing it, to ensure that public confidence both in the companies and in the whole concept is maintained. I do not think that we have heard many complaints about the work already done. However, it is too soon to reach conclusions, and any horror stories might well jeopardise a project in which everyone sees great virtue. I support my noble friend’s amendment.
Lord Oxburgh
My Lords, I, too, have substantial sympathy with the amendment. Before one starts talking too much about juggernauts, it is worth placing on record that we had to have our domestic electricity meter changed a month ago. From the time the man who was doing the work came through the door to the time he left was about 12 minutes. It is a quick and easy operation, certainly so far as electricity meters are concerned.
However, an important point has been missed. By and large, the electricity companies have a poor understanding of their customers simply because they have no way of disaggregating their demand. With a better understanding of why, how and when loads peak in particular areas, which they do not have at the moment, a significant indirect benefit should be possible for consumers, which would be reflected in reduced electricity charges, because we may well be able to run the electricity system with a lower generating capacity than at present because of our limited understanding.
Lord Jenkin of Roding
My Lords, one matter which is not dealt with in the amendment—I do not know what my noble friend’s reaction to this will be—is the question of the training of the technicians whose job it will be to install the new smart meters. Some noble Lords may recollect that I pursued this issue over the past year or two with the previous Government. I was informed that the sector skills council which dealt with this—the Energy and Utility Sector Skills Council—had applied for the necessary financial support to enable it to lay out a training programme for smart meter installers, only to be told that that could not be done under the then system, which I hope is in the process of being changed. I raised the matter with the previous Government and the noble Lord, Lord Hunt of Kings Heath, who undertook to look seriously at it, and I have pursued it with other Ministers in the present Government.
Attention needs to be given to this matter because, as a number of speakers have said, if people are going to go into consumers’ houses it is important that they are properly trained to do the work. If eventually, as I have heard said, we are going to have combined gas and electricity meters—but perhaps not at the first stage—that will require a considerable new approach to training.
I have supported the smart meter programme from the beginning and have had some representations—not pressure; that would be the wrong word—made to me that it is a con trick in favour of electricity suppliers and distributors. I do not for one moment accept that argument. As speakers on all sides of the House have said, if it is properly handled and people are given all the information that they should have, which is very important, this could be of real value to consumers. The noble Lord, Lord Whitty, was wise to say that he did not really expect the Government at this stage to accept the amendment but, at some stage, something of this kind will be needed and I hope that it will cover the training of technicians as well as the other matters set out in the amendment.
Lord Grantchester
My Lords, it is clear that smart meters will play an important part in identifying energy usage to consumers and highlighting the impact of energy efficiency measures in the home. Consumer confidence in their operation is crucial.
The noble Baroness, Lady Northover, dealt comprehensively on Report with the intentions behind the amendments and gave a full account of the work her department was doing with the industry and in the discussions regarding a code of practice. It is important that the Government show leadership in this area. The House looks forward to receiving the noble Baroness’s department’s conclusions on this process, as there will clearly be a need for further work to develop the benefits and underline the importance of consumer engagement.
It is important that there is a strong programme on the management of the operation of smart meters, and we support my noble friend’s call that the department reports to Parliament on the measurement of the benefits they will bring to enable full accountability to take place.
Lord Marland
My Lords, may I say how delighted I am to see the noble Lord, Lord O’Neill of Clackmannan, in his place? He watched at first hand the horrific events in Japan, where I spoke to him. What an awful time that must have been for him. We are delighted to see him back and, as usual, making some very interesting points.
The amendment of the noble Lord, Lord Whitty, is extremely valuable. He makes, as always, some very good points. Fundamental to this debate has been public confidence: the public must have confidence about the rollout of smart meters. As a department, we are committing a substantial amount of resources to smart meters, as we must get this right. I am not sure that all operators will be as good as the one who came to the home of the noble Lord, Lord Oxburgh; I suspect that, because of his great scientific knowledge, the noble Lord was telling the operator how to install it. Twelve minutes sounds like a very good target for anyone to try to achieve. The training of technicians is fundamental, as the noble Lord, Lord Jenkin, said; there must be great vigilance in this area so that the consumer can have confidence.
The noble Lord, Lord Whitty, made two specific points on the strategy for consumer benefits. We have been carrying out consultation since July on the wide-ranging subject of smart meters. A principal consideration has been a strategy for consumer benefits. We will publish our findings by the end of this month, and I hope that the other place will have the opportunity to debate them.
The Government are sympathetic when it comes to transparency regarding information about and the progress of smart meters. I can assure the noble Lord, Lord Whitty, that we will be developing arrangements for reporting the benefits of smart meters, the progress of the rollout and the delivery resulting from the benefits. That is fundamental not only to the public but to the Government, as we need to know what progress we are making. I hope that I have given the noble Lord confidence that we will take this matter forward in the other place and that he will therefore withdraw the amendment.
Lord Whitty
My Lords, I thank the Minister for that explanation and the other speakers in this debate, particularly my noble friend Lord O’Neill. The noble Lords, Lord Oxburgh and Lord Jenkin, made important points that will need to be borne in mind during the rollout. Technical training in fitting meters and explaining to consumers how to use them will be an important part of the rollout, so customer service training as well as straightforward technical training will be necessary.
With a bit of willpower, these issues can be overcome. When we shifted to requiring A or B boilers a few years ago, the industry threw up its hands in horror and said that it did not have enough people to do that. However, we rapidly got a programme in place which enabled us to do it. It required a little bit of cross-Whitehall arm-twisting; I expect that the Minister is adept at that, and he may need to use that skill.
I am particularly pleased to hear that the assessment of consumer reaction, which I was aware the Government were undertaking, will be available to our colleagues in another place before they reach their final conclusions. The Minister will know that Consumer Focus, which I formerly chaired, has conducted a fair amount of research on this issue. It will be regrettable, if the Public Bodies Bill is passed, that it will not be in a position to do so on future occasions. It certainly threw up a number of incipient difficulties which are not insuperable but they are significant.
As noble Lords have said, we have to provide confidence. One problem is that the industry has a fairly low rating among consumers, and trust in energy supply companies, which will have to ensure that smart meters are installed, is pretty low. They have made some significant improvements in recent years but they have a poor history to overcome. I am afraid that that still informs a lot of customers’ attitudes towards those companies and causes them to make inferences about the reason for introducing these new machines into their houses. There is some suspicion surrounding the use to which the energy companies may put the data, whereas we can see that the data could be used to provide electricity in a smarter, more intelligent and more cost-effective way. From the other end of the telescope, people are wondering why their supplier needs to know whether they have the kettle on at four o’clock in the afternoon. That is an exaggeration; nevertheless, it is a fear that needs to be addressed in the Bill and in the regulations that come under the Bill, as well as in the way that the Government oversee the whole operation. I think that, from what the Minister has said, our colleagues in another place will have sufficient information on which to base their discussion on this matter. In the light of that, I beg leave to withdraw the amendment.
“3A Report on compensation for petroleum spills
(1) The Secretary of State must publish a report every five years about the arrangements in place in the United Kingdom for petroleum companies to compensate for any damage caused, or loss suffered, as a result of petroleum being accidentally released during the operation of licences under this Act.
(2) The report must, in particular, include—
(a) the amount of insurance coverage that industry members have agreed should be available in the circumstances outlined in subsection (1);(b) the Secretary of State’s opinion about whether the amounts are adequate to compensate for any damage caused in the circumstances outlined in subsection (1);(c) the factors that the Secretary of State took into account in reaching the Secretary of State’s opinion under paragraph (b); and (d) the actions that the Secretary of State intends to take, in the event that the Secretary of State considers the amounts to be inadequate.”
Baroness Smith of Basildon
My Lords, in replying to the first group of amendments, the Minister expressed regret that, having made very modest but nevertheless welcome amendments, he was not carried aloft from the Chamber in jubilation. Never liking to disappoint the noble Lord, I offer him another opportunity. My foot may not be fully recovered but I might manage to carry him aloft should he want to accept the amendments that we are putting forward today. I reassure the Minister that the only reason that we on this side have put forward any amendments is to seek to improve the Green Deal and to ensure its success, and I assure him that the same applies to this amendment.
The noble Lord will recall that I raised this matter in Committee and on Report. When, on Report, I raised a similar issue about compensation and payments relating to petroleum spills, he assured me that he knew more about this issue, having been involved in insurance himself, and he patiently explained that he would write to me with further information. He has done so and I thank him. It has helped to clarify the situation, and I appreciate his responding in such detail. However, it is that response that has led to our tabling this amendment.
I was seeking assurance in the Minister’s response about where the liability would fall in the event of an oil spill, and I referred to Deepwater Horizon, which we had previously discussed in your Lordships’ House. He informed me that the Oil Spill Prevention and Response Advisory Group had set up an indemnity insurance group to review the current provisions of the OPOL agreement, as well as the financial and cross-indemnity arrangements behind the current mutual co-operative industry’s mechanism on this issue. I understand that, at the department’s request, the group has reviewed the modelling based on worst-case scenarios, on which the liability limit is based. It has also commissioned modelling of alternative spill scenarios with the aim of providing a more comprehensive picture of potential oil spill costs, and there will be further discussions on this. The Minister told me that the work is ongoing. However, he also assured me that, if that work indicates that a credible worst-case scenario could result in damage exceeding $250 million, the Government will require higher levels of cover. All that my amendment would do is build on what the Minister said a moment ago when he referred to his commitment to transparency and to monitoring the situation. It would be helpful for Parliament and those who are interested to know that the insurance available to deal with these catastrophes is at the appropriate level. That will happen only if there is a review and transparency.
The amendment requires the Secretary of State to publish a report every five years about the arrangements that are in place and specifies some issues that must be included. I hope that the Minister will look at this amendment. If he is unable to accept it today, perhaps it can be discussed with colleagues in the other place. I welcome the opportunity to carry him aloft from the Chamber should he wish to accept the amendment at this point.
Baroness Northover
My Lords, we are very sympathetic to the concern expressed behind the amendment and we have debated both in Committee and on Report the issue of compensation for oil pollution. The main concern in these debates was that arrangements should be in place to ensure that companies could meet any liability arising from oil pollution during their licensed operations.
We explained in these debates that there are indeed appropriate requirements in the licences and that the industry has in response formed a voluntary liability pool, the Offshore Pollution Liability Association—OPOL. OPOL membership requires operators to demonstrate provision to meet clean-up costs and associated damages of up to $250 million on a basis of strict liability in the event of a pollution incident. OPOL also collectively provides a back-up mechanism that in the event of default by any operator, the other members will meet claims for clean-up and associated damages up to the same financial limits. That liability pool is unique to the North Sea, and we believe that it provides a very solid assurance that all pollution liabilities will in practice be met. I particularly stress the significance of the acceptance of strict liability by OPOL members, which means that anyone who has suffered loss as a result of pollution from an oil installation does not have to show that the operator is at fault. He or she merely has to establish that the damage or loss is a result of the pollution. As I have said, it is unique to the North Sea.
Since Report, my noble friend Lord Marland has written to the noble Baroness, Lady Smith, with further details of this arrangement and I thank her for her very positive response to that correspondence. This amendment, however, addresses a slightly different point from the amendments tabled in Committee and on Report. We made the point that the amendments tabled then were unnecessary as appropriate requirements were already in place. The focus of this amendment is rather that the Secretary of State should publish a report on the arrangements in place, the amount of insurance cover provided, and so on. We are wholly sympathetic to the idea that more public information should be available on these matters. As the noble Baroness notes, further work is ongoing under the auspices of OSPRAG, in which government and industry are working together to review the industry’s practices in the light of what has been learnt from the Macondo disaster. One of the OSPRAG working groups is specifically addressing liability and indemnity issues. We are happy to undertake that the Government will make an appropriate statement in the House on the outcome of this work and any changes that may appear necessary or desirable. I hope that that reassures the noble Baroness.
As for future developments, the department is committed to laying an annual statement before the House, and we will, of course, use that to report on any new developments or proposed new measures. In the light of those reassurances, I hope that the noble Baroness will feel able to withdraw her amendment.
Baroness Smith of Basildon
I am grateful to the Minister for her response. It covers a number of the points that I was seeking to address, mainly transparency and the responsibility of government in reporting back to Parliament. On the basis of her response, I am happy to withdraw the amendment.
Lord Jenkin of Roding
“(2A) In the application of section 157(2), for paragraph (b) substitute—
“(b) that the company is likely to be unable to pay its debts and that the directors of the company have consented on that basis to the making of the order; or”.”
Lord Jenkin of Roding
My Lords, I raised this issue in Grand Committee and briefly on Report when my noble friend Lady Northover was kind enough to say:
“I think the best way to take this forward is by consultation. If he would like to discuss the details with officials, we could see what, if anything, needs to be addressed”.—[Official Report, 2/3/11; col. 1163.]
With the help of her officials, I did just that. I had a very interesting telephone conversation and subsequently a paper from a very helpful lady, Dawn Armstrong, in the Department of Energy and Climate Change. Briefly, the issue concerns the power of the Government to put an energy supplier into special administration. It is built on extending the powers in Section 157(2) of the Energy Act 2004 as adapted and applied by Clause 93. Section 157 is headed “Powers of Court” and subsection (2) states:
“The court may make an energy administration order in relation to a company only if it is satisfied— (a) that the company is unable to pay its debts; (b)—
and these are the critical words that I am unhappy with—
“that it is likely to be unable to pay its debts”.
Then there is a third ground on which it might be appropriate to wind the company up in the public interest. The Insolvency Act, on which these words were originally based, included the words,
“likely to become unable to pay its debts”,
but in those circumstances it was only on an application by the directors of the company. Under Clause 93, it is a power of the Secretary of State, or of Ofgem with the consent of the Secretary of State, to apply to put a company into what is called special administration under this Act.
Ms Armstrong sent me an extremely helpful note, much of which I accept. For the benefit of what I hope will eventually be a debate in another place on this subject, I shall read part of it out. She wrote:
“Administration under the Insolvency Act 1986 is a business rescue procedure, with the survival of the company as its primary objective. If entry to administration were only available to a company that could not pay its debts at the date of commencement, the rescue of viable businesses might be jeopardised. For this reason, administration can also be entered when a company is likely to become unable to pay its debts. The clauses in the Energy Bill on special administration follow these principles. The energy supply company administrator’s primary objective is to rescue the company as a going concern. Therefore these provisions apply the same tests for insolvency as the Insolvency Act”.
She used the words “the same tests”. Yes, they are the same tests, but not by the same process. That is basis of the anxiety. I accept that there is a need for a process. There is no question about that. When you have a large energy supply company supplying millions of customers and it seems unlikely to meet its obligations, obviously the authorities must step in and do something about it.
The second point made in the paper, which I had perhaps not entirely appreciated, was that this applies only to supply companies and would not affect the generating part if it were in a separate company in the group. I am not sure that I wholly understand that because it is difficult to imagine a supply company unable to pay its debts if the company is otherwise solvent, but that point might need to be taken.
The third point made in the paper is that it is a court process and not just a peremptory decision made by the Secretary of State or by Ofgem. It is a decision to take the matter to the court and for the court to decide. I will return to that in a moment. My noble friend Lord Marland wrote to me on this matter. He wrote:
“Of course The Secretary of State and Ofgem would no doubt want to discuss any application for an energy supply company administration order with company directors in advance. And directors will be able to contest the application in court. However, enshrining a duty to consult directors in the legislation could lead to delay and it is important that the Secretary of State has the flexibility to act quickly”.
I think that my noble friend might have misunderstood the purport of my amendment. I should thus like to make four points about that, and no doubt my noble friend Lady Northover will be able to reply. First, in my discussion with her official, she made the point that she thought that very few of the energy suppliers were worried about this. Since then I have made inquiries and have been told that the energy suppliers are solidly behind this amendment. I have had letters from two or three of them to confirm that point. It is not true to suggest that this is somehow only a minority concern. The industry’s points of opposition to the special administration threshold—because that is what we are talking about—are vigorously maintained.
Secondly, the official’s note is a perfectly adequate summary of the principles of the special administration regime. It also properly acknowledges that this regime does not disapply the provisions of existing insolvency law. However, it does not seem to acknowledge that the test for putting an energy supply company into special administration is set at a very low threshold: that is, lower than the threshold at which Ofgem can revoke a company’s licence under the licensing provisions. If a licence is revoked, the practical effect is to put the company into special administration. It is certainly, in at least one crucial respect of its business, the inability of the directors to carry it on.
I made further inquiries about the licence. Is it different or does it cover broadly the same process? Ofgem can revoke an energy supplier’s licence on a number of grounds, including if the company has committed an offence while making its original application or if it has failed to comply with a final enforcement order in respect of a breach of a condition or something of that sort.
However, the ground that is relevant to this amendment is that which applies when the company is in financial difficulty. In that event, Ofgem can revoke the company’s licence if the company is unable to pay it debts. There is no permission or discretion to revoke the licence if the company is likely to be unable to pay its debts. Why is it necessary, therefore, to put this provision about,
“likely to be unable to pay its debts”,
into the administration procedure under this Bill when it does not exist under the licensing provision?
More than that, the licensing provision sets out clearly what the court needs to be satisfied with before it withdraws the licence. The company is not to be deemed to be unable to pay its debts unless at least one written demand by a creditor for a sum of more than £100,000 has remained unpaid for at least three weeks. Nor is the company to be deemed to be unable to pay its debts even if such a written demand is outstanding, provided that the company is contesting it in good faith and with due recourse to all appropriate legal process. That seems to be quite different from what we are being asked to legislate in Clause 93. This power of the Secretary of State to go to the court and apply for a special licence is questionable. The contrast between that power in the Bill and the power to revoke a licence seems very stark. In the power to revoke a licence, there is no reference to the company being unlikely to be able to pay its debts, and the definition of what constitutes an inability to pay its debts is detailed and specific. Neither of these applies to the provision in the Bill. That point was not made during the earlier debates.
The third point, which I did make, was that we have had practical experience of the use of the power to put a company into administration if it is deemed to be unlikely to pay its debts. That happened in the case of Railtrack. There was an accountant’s report, which was all that was necessary, to suggest that Railtrack was going to be unable to pay its debts, so off went the Government to the court, and we all know the history after that. This has been widely commented on. It was not, even at the time, entirely bona fide. A political objective was being sought. It is that kind of thing that is causing concern and uncertainty in the industry.
My last point is that my noble friend’s letter, which I referred to a moment ago, raises the idea that I am trying to enshrine a statutory duty to consult directors. He says it would cause delay. In the circumstances that we are considering, a week or two’s delay does not seem very important. However, my amendment does not impose a duty to consult. It says that the court can make a special administration order only if it is satisfied that the company is likely to be unable to pay its debts and that the directors of the company have accepted that to be case and have consented to the order on that basis. To put it bluntly, the directors will have their day in court and that is how it should be. This amendment provides the beginnings of a safeguard against the situation that Railtrack was put in whereby special administration was imposed on the company simply on the say-so of an accountant’s report.
I entirely accept, as I said a few moments ago, that the authorities need to have the power to help a company to carry on its business if it is in difficulties for the protection of both the business and its consumers and, as my noble friend said, to spill over into other companies. A rescue package might have to be mounted, but I contend that this must be done in a way that does not sow uncertainty and raise the risks for investors and their suppliers. My evidence that that is the fear that the industry has at the moment is strong. The amendment seeks to enshrine a safeguard in the Bill to avoid that. I beg to move.
Baroness Northover
My Lords, we are grateful to my noble friend for raising this important issue, which enables us to clarify further and to put the arrangements on the record. We understand that there might be concerns that the tests for insolvency set out in these provisions appear to be rather wide, but they are statutory tests for insolvency as set out in the Insolvency Act 1986. As my noble friend has indicated, it is also a matter of balancing the interests of the companies, consumers and the public interest.
Administration under the Insolvency Act 1986 is a business rescue procedure, with the survival of the company as its primary objective. If entry to administration were available only to a company that could not pay its debts at the date of commencement, the rescue of viable businesses might be jeopardised. For this reason, administration can also be entered when a company is likely to become unable to pay its debts, which was the focus of what my noble friend said.
The clauses on special administration in the Bill follow these principles. When seeking to bring an energy supply company administration to an end, the administrator’s primary objective will be to rescue the company as a going concern. Therefore, these provisions apply the same tests for insolvency as the Insolvency Act. My noble friend argued that the process is different. As he has already picked up, the Secretary of State and Ofgem will no doubt want to discuss with the company’s directors in advance any application for an energy supply company administration order. However, enshrining in the legislation a duty to consult directors could lead to delay. This is significant; the Secretary of State needs flexibility to act quickly if the company’s position poses a threat to the rest of the market. That is extremely important to remember in this case.
The amendment would require the court to apply a stricter test for insolvency when considering applications for energy supply company administration than it does for applications for ordinary administration. It is therefore conceivable that an application by the Secretary of State for an energy supply company administration order could be dismissed, while an application for ordinary administration by a creditor of the company could succeed. This could lead to the very situation that the provisions in the Bill are intended to address.
The fact that a court process is required provides an important safeguard for companies, as the directors of the company have the opportunity to contest the order in court. They will no doubt use the kind of material that my noble friend has just mentioned.
My noble friend mentioned Railtrack. In October 2001, the High Court granted a railway administration order in relation to Railtrack. When granting the administration order, Mr Justice Lightman said:
“This is clearly a case where the making of a railway administration order is not only appropriate, but absolutely essential”.
If my noble friend would like, I can fill him in at another time on the reason for that judgment being made. The company was put into administration to ensure that the railway network continued to operate and was properly maintained and managed, and that it was done in the public interest.
I make it absolutely clear that it is intended that the Secretary of State would apply for an energy supply company administration order only as a last resort and to prevent the risk of financial failure spreading to other companies. It is important to balance duties to the public with the rights of the companies. Energy supply is vital to the public and to the economy. It is therefore very important that this matter is looked at in the context of the public interest. The balance must be right. What we have seen recently in the banking industry, for example, shows how important it is to be very careful in this area.
I hope, therefore, that I have sufficiently reassured my noble friend and that he will now withdraw his amendment.
Lord Jenkin of Roding
I am extremely grateful to my noble friend Lady Northover for the care with which she has replied to this amendment. I have no doubt whatever that the industry will wish to study very carefully what she has just said. I have entirely accepted the case, and I think the industry accepts the case, that there is a need for the authorities to intervene. Our problem is that that might happen when the companies’ assets and liabilities appear to be in balance but someone has thought it unlikely that they will be unable to pay their debts in the future. This seems to me and to others to be an uncertain test. It would behove the Government to try to find some alternative form of words that would allay the undoubted feeling of insecurity and unnecessary risk that the companies are running under the process of the Bill.
However, as I made clear last week to my noble friend Lord Marland, it is not my intention to divide the House on this amendment but to make sure that the arguments are on the record and can be referred to in another place if that appears to Members of another place to be appropriate. Having said that, I beg leave to withdraw the amendment.
Lord Whitty
“Compensation where the Secretary of State requests termination of offshore lease or agreement to lease
(1) The Secretary of State shall make a scheme (in this section, an “early termination compensation scheme”) to have effect where—
(a) a lease granted or agreement to lease has been made by the Crown Estates for the purpose of construction and operation of a generating station powered by wind, wave or tidal energy, or of equipment for transmission of electricity at a site in United Kingdom territorial waters or the REZ;(b) that lease or agreement to lease gives the landlord power to determine the lease or agreement where the Secretary of State so requests on the basis that the whole site, or any part of it, is required in connection with oil or gas works or rights; and(c) the landlord proposes to determine the lease or agreement, as regards the whole site or any part of it, as a result of such a request.(2) An early termination compensation scheme—
(a) must require the owner of, or person seeking to exploit, the oil or gas works or rights in question to pay compensation to the full extent of the loss which is likely to be incurred including the recovery of any wasted expenditure, loss of profits and any consequential loss suffered as a result of such works, by the lessee or holder of the agreement to lease as a result of the determination;(b) may, subject to paragraph (a), make such provision as the Secretary of State considers appropriate for the computation of compensation;(c) must make provision for the procedure applicable to the making and determination of claims, including provision for resolution of matters, in the event of disagreement, by an independent body;(d) must provide for the Secretary of State, when satisfied that compensation as required by the scheme has been agreed or resolved, so to certify in writing; and(e) may contain such other provision as the Secretary of State considers appropriate.(3) The landlord must not determine the lease or agreement to lease until the Secretary of State has certified the determination in accordance with subsection (2)(d).
(4) Subsections (1), (2), (5), (6), (7)(b) and (10) of section 36 apply, with the necessary modifications, to an early termination compensation scheme.”
Lord Whitty
I put down a similar amendment at Report which we were unable to debate. I am grateful to the Minister and his staff for talking to my noble friend Lord Grantchester in my absence. That makes me more confident that the Government understand that there is still a problem.
The amendment relates to the situation where a renewable energy enterprise has invested, at least as far as getting a lease from the Crown Estate, in offshore wind energy—it could be tidal or wave energy—and subsequently there is an oil discovery which would interfere with that site. This could result in a direct conflict, so my original attempt was to ensure that the Secretary of State could prevent such an oil licence being given unless the two sides negotiated an agreement. However, the noble Baroness, Lady Northover, persuasively indicated that the Government have this in hand, that there are negotiations going on and that they are talking to the industries and trade associations. That is indeed true, but the problem is that they have been talking to those two sides for six years and as yet we have no agreement on how to deal with it.
It was clear from what Baroness Northover said that the Government would not be minded to provide for such an override. In my view, an override would restore the balance between the two sides, but nevertheless the Government were not prepared to go down that road. I have therefore reverted to my third choice. My first choice is to have an agreement, my second choice is that the Government should have the means to prevent the oil or gas development happening unless there was an agreement and my third choice is that, if the oil or gas development goes ahead, compensation should be paid. That should be set out in statute.
One of the reasons why I felt it necessary to return to this is that the noble Baroness, having made some reassuring noises, added another comment, which I did not pick up at the time in Committee, when she said that,
“if the oil company is not prepared to offer appropriate compensation, there is no question of the Secretary of State intervening to override what is happening there”.—[Official Report, 8 February 2011; col. GC52.]
I was not entirely sure what that meant, because it seems to me that where there is no agreement and the Secretary of State, having tried to get the two sides to reach an agreement, judges it to be in the public interest that the oil exploration goes ahead, there ought to be some compensation involved. It is important that we register this as an ongoing concern both for the offshore wind-energy companies and, potentially, for tidal and wave installations. Because the clause in the Crown Estate’s lease enables this to happen, some intervention by the state or through the contractual provisions is required to even up the balance between the two sides.
I recognise that this is a complex area and it would be better for all of us if the Government and the two sides could reach agreement, but six years without agreement does not give me huge confidence that we will solve this before the passage of the Bill through both Houses of Parliament. I therefore tabled the amendment to register that with the Government and possibly to persuade colleagues in another place that this is an important issue. If investment in offshore, wind and other renewable technologies could effectively be overridden by a new oil exploration taking place in a site that had already been allocated and for which a lease had been agreed, some compensation is required if we are to encourage investment.
What lies behind this is that making a major investment in offshore wind and other renewable technologies requires significant private capital. For the most part, that will need to be raised from the markets. Although some large companies are investing in alternative technologies, we are mostly looking at finance through the City or the markets in one way or another. As long as potential investors can see not only that an investment could in effect be lost but that there is no legislative provision for compensation, clearly that will deter investment. That is what the offshore wind companies claim and it seems a valid point on which public policy should clearly give an indication.
I hope therefore that the Government will recognise that the third-choice option of providing in statute for some form of compensation is probably the least they can do in the circumstances. I hope that they will accept the amendment. If they cannot do so today, perhaps a similar amendment could be moved in another place and they could accept that. I beg to move.
Lord Oxburgh
My Lords, the amendment certainly addresses an extremely important point. I conclude from the points made by the noble Lord, Lord Whitty, that the issue involves three separate elements: the Government's North Sea renewable strategy; investor confidence; and the behaviour of the Crown Estate. Unless the problem is addressed, we may be dealing with simply a matter of encouraging investment in the North Sea but of making it possible. Now is not a good time to raise money for renewables or anything else, and this could be the last straw when it comes to investment companies looking for where to put their money.
Anyone observing the behaviour of the Crown Estate in recent years cannot be anything other than impressed by the vigour with which it is pursuing the objectives that must have been imposed by its master the Treasury. To describe the Crown Estate as hard-nosed might be an understatement. Indeed, it does not have responsibility for delivering the Government’s renewable North Sea strategy. Without some clear statement, ideally in the form of a statutory instrument of some kind as suggested by the noble Lord, Lord Whitty, or some comparably sure investable assurance, we will not see this going ahead.
Baroness Parminter
I add our support for the noble Lord, Lord Whitty, in raising this important issue about creating a level playing field between the respective players in using the marine environment and the seabed. I also thank him for highlighting again, as he has done so eloquently in the past, the risk that not tackling this issue of the leases that can be rescinded by the Crown Estate will cause huge problems for future investment in renewable energy. While they may have taken six years to potter around on this issue, the Government know—as we in this House all know—that, if they are to meet their targets on renewable energy, this issue has to be resolved very quickly to get the future investment in renewable energy.
My slight concern with this amendment is that it seeks to draw out one particular problem out of the complex number of issues that make up the jigsaw of coexistence between the respective oil and gas companies and those involved in renewable energy. As RenewableUK said,
“efforts to work together to prevent problems are far more likely to succeed if a fair and clear framework for co-operation is established”.
While I support this amendment—because it is right to raise this important issue that leases can be rescinded—I am concerned that it draws out only one particular issue in the jigsaw. If we are to get an equitable solution that all parties can agree to, there is still merit in looking at all those issues together.
Therefore, if the Minister is not minded to accept this amendment, I and other Members of this House would be grateful to know that the ministerial team is working now, with all parties, to agree such a fair and clear framework for co-operation that covers all the issues, not just the—admittedly important—issues around the termination of leases. If that framework can be agreed, which I hope can be achieved during the passage of the Bill as it goes to another place and comes back, that would give Members in this House the confidence that the Government recognise this issue, which has been raised by both sides of the House. The present state of affairs, whereby the leases can be rescinded for offshore wind if oil and gas companies come ahead with proposals, is not satisfactory, will not deliver the Government’s objectives for renewable energy and does not create a level playing field.
Lord Grantchester
My Lords, it is important to promote the coexistence of UK oil and gas interests with offshore renewable energy expansion. We all want to maximise the growth of both sectors in the UK and thereby to enable the UK to benefit from sustainable electricity supply, strong oil and gas revenues and job creation in both sectors. As I understand it, there is an imbalance in the rights under the lease, according to whether the lease is in the hands of the oil and gas industry or the renewable wind industry. Where the oil and gas industry has an existing lease from the Crown Estate, the renewable industry can encroach on that territory only through commercial negotiation. Where the renewable industry has the lease, a clause in that lease gives the Secretary of State powers to terminate offshore wind-farm leases in favour of oil and gas and does not specify whether compensation would be due or how that amount would become due. This causes alarm in the renewable offshore wind industry that it could stifle investment in developing sites.
My noble friend brings forward his amendment to resolve the situation through the operation of a compensation scheme to cover the situation where the Secretary of State may be minded to terminate a lease in favour of the oil and gas industry. This scheme would give renewable developers the assurance that they feel they need to overcome reluctance to invest in developing a lease where it could be thought encroachment may happen from oil and gas operations. We understand there has never been—and, indeed, there is unlikely to be—such an occurrence. However, the renewable industry has the perception that the possibility of an early termination is detrimental to its financing and the exploitation of leases. This amendment seeks to end that uncertainty and uneasiness in the investor market.
I am sure the Minister would want to find a way to end the antagonism between the two key developers in the operation of leases. Can he give further assurances today, or even offer to facilitate a meeting with his department, so that the two protagonists could agree and cement a way forward?
Lord Marland
My Lords, I am very grateful to the noble Lord, Lord Whitty, for pointing out this particular area. We find ourselves perhaps in the crossfire between two interested bodies: RenewableUK and Oil & Gas UK, both of which are fighting for their own corners.
I am afraid I am attracted by the second option—I think it was the second option—to carry on the dialogue. We do not believe that the issue has been going on for six years, but I am very grateful for the historical information, which officials had not imparted to me. I think it is attractive for us to carry on the dialogue and, I might say, knock heads together, because it is important that we get these boundaries clearly defined. As the noble Lord, Lord Oxburgh, and the noble Baroness, Lady Parminter, both said, this is a complex thing that cannot be done quickly and needs negotiation. It needs both parties to come to the table to help us find the correct solution. The Government are immensely committed to it because it is important and therefore I am extremely grateful that this matter has been raised, but noble Lords have our assurance that we are pressing on with the negotiation. We intend to have a resolution, particularly as the renewables industry develops, as soon as possible, but we are in earnest.
I want to clarify something from Hansard that the noble Lord, Lord Whitty, said my noble friend Lady Northover said. Let me read out—another rare event for me—what the statement, in case he hears it incorrectly, should have said: I am happy to repeat the assurances we gave in Committee that where the oil company is not prepared to offer appropriate compensation, the Secretary of State will not intervene, on behalf of oil companies, and therefore the oil and gas development will not be permitted. I hope that clarifies that fundamental point.
With that, I hope the noble Lord will withdraw his amendment.
Lord Whitty
My Lords, I am very grateful to the Minister for clarifying that because that is not the way the original Hansard report read. As I say, I did not pick that up in Committee itself but only subsequently.
I think we all agree that we need diversity of supply and that we need oil and gas and offshore wind as a part of our energy mix. We also have a public policy objective of a certain level of renewables to which offshore wind will be the major contributor. Therefore there is another incentive for Government to get this right. Clearly, a general coexistence and co-operation agreement between the two sides would be highly desirable, and I am certainly happy to support the Government’s attempts to get that. I think he will find that this has been on the agenda for some considerable time. It might be five years and not six, but I think it is six years since I was a Minister and it was on the agenda within the former DTI, which sought comments from my department, which was Defra. So it has gone back that far. It may not have been a continuous negotiation, but the issue needs facing up to.
The renewables industry certainly feels, particularly in the present tight market, as the noble Lord, Lord Oxburgh, indicated, that this is a serious deterrent to getting the kind of funds needed to deliver what are, after all, the Government’s own objectives. He is certainly also right that—let us put it kindly—the nature of the legal advice that the Crown Estate appears to be getting does not help the situation either. It is a complex issue.
I am happy for today to accept the Minister’s assurance that we will continue to try to get an agreement. I suspect that the timescale of this Bill is not sufficient to get this agreement and the Government at some stage of the process may well consider they need a little bit of leverage here and may come back to something like this agreement. However, for today I withdraw the amendment.
Fixed-term Parliaments Bill
(13 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Howarth of Newport
“( ) The polling days for the next parliamentary general election after the passing of this Act will be the weekend of 8 to 10 May 2015.”
Lord Howarth of Newport
I wonder if I may be permitted to make a general point, briefly, as we move into Committee, before I come to the specific matter of Amendment 1. I tabled this and other amendments after I had seen last Thursday that only eight amendments had been tabled to this Bill in Committee. I began to be worried that we might not conduct a proper scrutiny of the Bill in Committee—the very opposite hazard to that which we faced with the previous major constitutional Bill, the Parliamentary Voting System and Constituencies Bill. I have tabled rather a lot of amendments, but I assure the House that neither I nor my colleagues intend to mount a filibuster on this Bill—nor did we on the previous Bill. We tabled some dozens of amendments, but that was very modest indeed compared for example to the opposition parties in the Assemblée nationale de France in 2006, when in opposition to the Government’s measure to reduce the state’s shareholding in Gaz de France they tabled 137,449 amendments. That was a real filibuster. Noble Lords will also be aware that the earliest recorded instance of the practice of the filibuster was on the part of Cato the Younger, who talked out proceedings in the Roman senate because he believed that it was important to resist the ambitions of Julius Caesar, flushed with victory, to flout the conventions of the Roman republic. Of course, for Julius Caesar read Nicholas Clegg—and our task has been to resist the Caesarism of Mr Nicholas Clegg.
In all seriousness, I believe that the point at issue in our proceedings on the Parliamentary Voting System and Constituencies Bill, aside from the particular contents of that legislation, was the continuing ability of this House to perform its role as a revising Chamber. Proceeding in a fashion whereby legislation is scrutinised on all sides of the House, we move things forward on the basis of reasoned debate and the Government listen and accept well made arguments, particularly when supported by majority opinion in this House. But I am encouraged because I need not have feared last Thursday that there would not be enough amendments. Happily, Liberal Democrat and Conservative Lords have tabled considerable numbers of amendments. They have awakened from their long slumber during the Parliamentary Voting System and Constituencies Bill. The noble Lord, Lord Rennard, looks deprecatingly at me, and if he will let me finish my sentence I shall give way to him. It is certainly the case that we heard him sleep-talking and occasionally we heard the noble Lord, Lord Tyler, groan. But in the main, there was a very disappointing lack of participation from noble Lords on the other side of the House on that Bill.
Lord Rennard
My Lords, very briefly, I say that the noble Lord did perhaps invite us to slumber on a number of occasions in the course of that Bill. However, having studied the recent precedence of filibustering in the French Assembly, he must have been unaware of those precedents at the time of the passage of that Act.
Lord Howarth of Newport
The noble Lord, Lord Rennard, makes an excellent point. However, I am optimistic because we are about to resume proper scrutiny in your Lordships’ House.
Lord Tyler
The noble Lord referred to slumbering Members on this side of the House. There is photographic evidence that the only people who actually went to sleep were people listening to his speech on his side of the House.
Lord Howarth of Newport
On the contrary, I myself went to sleep, but not during my own speeches—although I might have done, and indeed the noble Lord might have supposed that I had done. I concede that at certain points.
We are about to resume a proper practice of scrutiny in the best traditions of your Lordships’ House. It is particularly important given that there was no Green Paper heralding this legislation, there has been no pre-legislative scrutiny, yet this Bill is of very great constitutional importance in itself and its provisions interact with other constitutional measures. For example, they interact with the provisions for boundary reviews that we just legislated in the Parliamentary Voting System and Constituencies Act. They interact with provisions that we can anticipate in a draft measure for reform of your Lordships’ House. They interact with the contents that we can anticipate of a draft parliamentary privileges Bill, which we are led to expect. I think that it would have been better if the Government’s proposals in all these respects had been laid out and available for pre-legislative scrutiny rather than that Parliament was required, effectively, to legislate on aspects of the constitution without having the ability to consider the interplay between different reforming measures. However, I am encouraged by what the Deputy Prime Minister said in the Constitution Committee of your Lordships’ House on 13 October last year in responding to the noble Lord, Lord Pannick:
“Of course, what matters now is the degree of scrutiny that”,
the Fixed-term Parliaments Bill,
“is subject to as the legislation passes through both Houses. On that we are very clear. We want to make sure that it is subject to the greatest possible scrutiny, which it rightly deserves”.
In that spirit, I beg to move Amendment 1 in my name.
The Bill, as drafted, prescribes polling at general elections on a Thursday. It ignores the debate about the case for polling at weekends or other ways in which polling can be facilitated for our citizens. It effectively closes down that debate, which has been proceeding somewhat desultorily for a number of years. However, it is a proper debate and I do not think that it should be instantly closed down. We all have a major concern about how to improve participation in elections in this country. I am indebted to the Library of the House of Commons for a chart that it has provided in one of its notes, which shows a tendency for turnout at general elections to have declined significantly between 1950 and 2010. The bar chart indicates that in 1950 turnout in the general election of that year was of the order of 83 per cent. It fell a little bit at subsequent elections, but in February 1974 it was at or very close to 80 per cent, which is remarkable. Of course, the country was in crisis at that time and it was perceived to be an exceptionally important election. Nevertheless, looking back from where we are now, we would regard it as quite remarkable that turnout was 80 per cent in February weather conditions in 1974.
Lord Cormack
Would the noble Lord recollect that in the election of 1974 there were very few postal votes cast? People actually made their way in inclement weather to the polls because they felt strongly about the issues. Have we not made voting too easy with too many postal votes allowed, and does that not relate to the falling off in the percentage poll that we have seen in recent years?
Lord Howarth of Newport
The noble Lord, Lord Cormack, raises an important point. It was the more remarkable that there should have been an 80 per cent turnout in February 1974, given that it was not an easy thing to secure a postal vote in those days. I wonder whether the ready availability of postal votes in more recent elections has contributed to a decline in participation. It is not immediately obvious to me why that should be so but the noble Lord may have something to say about this a little later. Whatever may be the truth there, what we have seen in elections subsequent to that of February 1974 has been a pretty dismal trend of declining participation in general elections, reaching a low point in the 2001 election, where I think it was probably under 60 per cent, and rising slightly since then so that in the 2010 general election the turnout was 65.1 per cent. All of us must worry about the implications of that.
All sorts of explanations are offered for declining participation: dissolving class structures, since people in this country do not so completely identify themselves with the two major political parties; more fluid communities, in a whole variety of senses; rising affluence over the post-war period, so that people perhaps feel a less burning need to secure what they can from politics; the privatisation of economic and social responsibility; the dousing of politics in contempt by the media; the rise of celebrity culture; and the perception on the part of very many people that casting their vote will make no difference. General elections are seen to be determined in a relatively small number of marginal seats. There is the view, which a number of us have perhaps heard on the doorstep: “They’re all as bad as each other”—a poor opinion of politicians and politics. There is perhaps also a view that compared to what may have been the case in the past, British Governments are now rather powerless, whether at home or abroad. I do not know but those are among the explanations that have been offered.
There is one explanation which is germane to this Bill and which the Government ought to take seriously: that voting arrangements are inconvenient. There is the requirement to turn up to vote—you can get a postal vote, as the noble Lord reminded us but the normal practice is still for people to turn up and vote in person—on a Thursday within certain hours. There have been experiments in trying to facilitate participation in elections. There has been an extension of postal voting and there have been trial schemes for advance voting in supervised polling stations, so that people could cast their vote ahead of the formal polling day. Thought has been given to whether people should be able to vote in supermarkets and so forth. Most significantly, it has been proposed that polling should be shifted from the conventional, traditional Thursday to weekends when it can be supposed that it would be much easier for more people to make it to the polling booth.
We had a note from the Electoral Commission, which came in only late this morning. Admittedly, it had not had very long to prepare its briefing but it is always helpful if people who want to advise us can get their briefing in to us a little earlier than that. It comments on Amendment 1:
“While the Commission is not in principle opposed to polling day being moved to the weekend, we have stressed that any such change should only be made if there is clear evidence that it would be of significant benefit to electors. At present, we do not believe that there is sufficient evidence on which to reach a definitive conclusion”.
That must be an entirely sensible point of view. In the absence of sufficient evidence, it would not be sensible to make that change but the question is whether more evidence might be obtainable and whether it should be considered by the Government before they legislate, as proposed in the Bill, to establish definitively and for ever and a day that polling will take place on Thursdays.
The note from the Electoral Commission goes on:
“The Commission has … evaluated a number of local pilot schemes involving advance voting—where electors would be able to vote in a supervised polling station within their local electoral area between one and seven days before the principal polling day—and has concluded that such facilities could help to enhance the accessibility and convenience of the electoral process. We have called on the Government to consider introducing advance voting as part of a comprehensive electoral modernisation strategy”.
Have the Government considered the experience of this pilot scheme and are they thinking, as the Electoral Commission would have them do, about a comprehensive electoral modernisation strategy? Did Ministers consider whether it would be appropriate to allow voters the opportunity to vote at weekends instead of on a Thursday before they wrote Thursdays into the Bill? If they did not do so before they published the Bill, will they now consider it?
Lord Rennard
I support Amendment 2 and the amendments in my name and the names of my noble friends Lord Marks and Lord Tyler.
Many noble Lords will know that I have long been an advocate of voting at weekends. They will also know how frustrated I feel that, among the many models piloted by the previous Labour Government to try to explore different ways of increasing turnout in local elections, only one pilot of weekend voting was ever undertaken—in one place, at one weekend—and that was of limited value. The idea of voting at weekends is not new; it has been floated and discussed in some form, but never properly debated in Parliament in such a way as to enable Parliament to decide the issue.
The Home Affairs Select Committee considered the issue in 1997; a Home Office working party looked at it in 1999; it was the subject of some limited debate when we permitted pilots as a result of the Representation of the People Act in 2000; the then Office of the Deputy Prime Minister further considered the matter in a consultation paper in 2002; the then new Electoral Commission published a report on election timetables in June 2003 and again in 2007; that year, weekend voting was again floated as part of the Government’s Governance of Britain Green Paper; and a separate consultation paper was then published specifically on this issue in 2008. That was supposed to feed into a citizens’ summit, which would recommend whether or not to go ahead with weekend voting later in 2008. That summit never happened. We have never had a proper debate in Parliament to determine the issue.
The principle of weekend voting is simple: more people are at home and free to vote for more of the day at a weekend than they are on a weekday. One possibility is to give people two days over the weekend on which to vote. This would avoid potential problems with religious observance and give people more than twice as much opportunity to participate. Many noble Lords have participated in elections and those who have campaigned will know the frustration of trying to contact voters among the working population of a constituency, in the few hours before the polls close at 10 pm, in order to remind them to vote. They will also have had extensive experience of trudging the streets during the day on polling day and vainly knocking on the doors of people who are out at work. We try to encourage them to vote but know that they cannot.
All those involved in elections know that people who are contacted on polling day and reminded by parties to vote are significantly more likely to vote than those who are not. It stands to reason that if people are contacted during the weekend when they are at home and reminded to vote, they are significantly more likely to participate. All good democrats should agree that increasing participation in elections is a good thing, especially as turnout has declined in many recent elections.
Lord Grocott
I know that the noble Lord favours different electoral systems and is passionate about increased participation in elections. Does he acknowledge that there is no evidence whatever in this country that changing an electoral system increases participation? In fact, we know that the various election systems that he supports lead to far more spoilt ballot papers, which, surely, is a further illustration of weakening participation in elections.
Lord Rennard
My Lords, I anticipated that it would not be long before the noble Lord, Lord Grocott, found an opportunity to digress from the issue of participation in elections at weekends and encouraging people to participate. It is a source of regret to me, if not to many others, that the debate the noble Lord proposed to have about the relative turnout resulting from different electoral systems was not held in this House. Of course, he tends to compare declining turnout in European elections with declining turnout in general elections. The truth is that turnout is declining in many levels of elections, particularly in European elections. People may see the European Parliament as even more remote and they make a protest by spoiling their ballot paper. We have to recognise that. But if the noble Lord wishes to study the evidence on this properly and looks at the preference vote using the 1,2,3 system, he will see that in the Scottish local elections in 2007, notwithstanding the fact that there were other elections for the Scottish Parliament on the same day which used a different proportional system, there were very few spoilt ballot papers.
The principle of weekend voting deserves serious and considered debate. It is most unfortunate that the Bill as it stands enshrines Thursday as the day on which general elections should be held, even though that is an accidental precedent. It is not widely known that there is no statutory basis at present for polling day to be on a Thursday; indeed, many council by-elections are held on a Wednesday or a Tuesday when, for some good reason, they cannot be held on a Thursday.
We should think about voting on a Saturday or a Sunday or a Saturday and a Sunday. Our amendments provide the Government with what some noble Lords will now understand as being a Lord Rooker-type famous lifeboat. They do not actually say that things should change; they merely invite the Government to consider the possibility of a change on the assumption that there could be proper consultation, perhaps piloting and serious debate, and then the decision can be made at a later point. We can look at the arguments and consider them properly but because, as I said earlier, the issue has simply been allowed to drift so often, our amendments set a deadline for determination of the issue. That deadline is, sensibly, 1 October 2013, which coincides with the deadline for the publication of reports by the Boundary Commissions.
I hope very much, therefore, that the Government will keep an open mind on weekend voting. If there is a clear promise that we will consider this issue properly in due course and that Parliament will be allowed to decide whether voting should in some form be taking place at weekends rather than on a Thursday, I will not seek to press my amendments. But if there is no such indication, I would, at the very least, not want to see the Bill pass with people thinking that Thursday 7 May 2015 is already fixed in stone as polling day for the next general election.
Lord Pannick
Before the noble Lord sits down, does he accept that to mandate Saturday as the exclusive day for voting would effectively disfranchise Orthodox Jews? There may also be difficulties about observant members of the Christian community who would not wish to vote on a Sunday. Therefore, does the noble Lord accept that if there is to be weekend voting, it would have to be over the whole of the weekend?
Lord Rennard
The noble Lord, Lord Pannick, makes a very good point, which I made when we discussed the issue in general without being able to decide the precise terms. I have always thought that weekends are probably better for voting than weekdays. I accept that it would be a problem in principle if some people felt that either Saturday or Sunday was an objectionable day when it came to them going out to vote. It would be rather good to say that a Saturday or a Sunday could be polling day—that is, two days. However, the hours could be more limited, as I do not think that polling would need to last from 7 am until 10 pm. I think that this should be the subject of proper debate and scrutiny. It may be that polling hours of 9 am to 6 pm will be very suitable on a Saturday and Sunday. The only objection to this that has been raised in the past is rather absurd and it has come from the electoral administrators. They said that there would be problems with security at the ballot boxes over a Saturday night into a Sunday. However, in the European elections we vote on a Thursday. The ballot boxes are sealed on the Thursday night and counted on the Sunday evening. Therefore, I do not believe that that is a significant problem. Indeed, I believe that many people who work in the electoral administration process would welcome the opportunity to work on a Saturday or a Sunday.
Lady Saltoun of Abernethy
My Lords, I do not know but I would not be at all surprised if it turned out that people much preferred to vote on a weekday, possibly taking a bit of time off work or arriving later for work, than have their football or whatever interfered with on a Saturday or a Sunday.
Lord Rennard
My Lords, few football matches last for nine hours on a Saturday and nine hours on a Sunday. I think that there would be plenty of opportunity to vote over a weekend. Some people may be in the privileged position of being able to take time off work on polling day but I do not think that many employers would take kindly to people saying, “I’d rather go and vote than work for you”. I think that that is why so few people among the working-age population vote and why a disproportionate number of retired people vote in elections compared with those of a working age.
Lord Cormack
My Lords, the noble Lords, Lord Howarth and Lord Rennard, have performed a very real service to the Committee in enabling us to debate this issue. When the noble Lord, Lord Howarth, referred to the Electoral Commission and those dreadful words “modernisation” and “strategy”, I began to have my doubts but, seriously, it is important that we look at this issue. The noble Lord, Lord Pannick, raised an extremely important point when he talked about Orthodox Jews and many Christians.
I also think that there is a great deal to be said for having “a” polling day. I have always felt that having one day for elections and encouraging people to go to the polls is what it is all about. That is why I have viewed with a degree of concern, as well as scepticism, the increase in the incidence of postal votes. I referred to this briefly in my intervention during the noble Lord’s speech. Of course, it is right that people who are incapacitated in any way or whose jobs regularly take them away from home should have postal votes. I was also very much in favour of people who had booked a holiday being allowed to have a postal vote.
I fought every general election from 1964 to 2005— 12 in all, in 10 of which I am glad to say I was successful. I campaigned in many other elections beginning in 1959. Therefore, I think that I have some experience. I remember vividly the election on 28 February 1974, to which the noble Lord, Lord Howarth, referred, when almost 80 per cent of the electorate went to the polls. People were exceptionally concerned about the gravity of the economic crisis. Many of them felt, as I did, that Edward Heath had abdicated in asking “Who governs the country?”. The answer of course is that the Government govern the country and it is the Prime Minister’s job to lead that Government. I felt—and said at the time—that he was wrong to go to the country. Indeed, he discovered that that was not the best decision of his life.
However, people turned out. I think that people will turn out as long as there is a proper incentive for them to do so and as long as it is not made too easy. That may sound paradoxical, but I think that the introduction of postal votes on demand, which in effect is what exists at the moment, does not encourage people or focus their minds or attention on a specific day.
Lord Howarth of Newport
Since we had our earlier exchange on this subject, I have been reminded that participation is actually higher among people with postal votes. It is over 70 per cent at general elections and not much lower at local elections. That suggests that the ease with which people can have a postal vote and thereby cast their vote is not quite as debilitating as the noble Lord fears.
Lord Cormack
I obviously listened carefully to what the noble Lord said, but there have been some disturbing accounts of the way in which postal voting has been conducted, and he knows that as well as I do. The security of the postal vote does not begin to compare with the security of the personally cast ballot. I am glad to see him nodding assent at that.
When it comes to the day, for the reasons that I indicated earlier, I have great sympathy with the noble Lord, Lord Pannick, and I see no need to depart from Thursday. It is good that we should discuss it and maybe consider experiments with more local elections. I would not be averse to that. However, I believe that Thursday is tried and tested for general elections, and I hope that the Government will stick to that, certainly for the foreseeable future as foreseen in the Bill. I very much hope that they will consider the issue of postal votes and how postal voting is conducted and made more secure. It is important for the House to look at this and for another place to have another chance to look at it. Obviously, it would be quite wrong to press any of the amendments to a Division today, but I hope the Minister will be able to tell us that the Government have taken on board the points that have been made and will truly reflect on them.
Lord Bach
I hope that the Committee will forgive me if I speak from the opposition Front Bench at this stage. I am not for a moment trying to shorten the debate. It is a very important subject and the noble Lord, Lord Rennard, among others, has waited for years for a proper debate on this topic. The last thing I want to do is to stop that debate. The Minister knows, and I have told the Committee, that I have some personal difficulties that require me to leave in fairly short order. I hope that the Committee will forgive me if on this occasion I put the view of the opposition Front Bench very briefly and then leave. Of course the opposition Front Bench will be filled very adequately in my absence.
I say briefly that the Committee should be very grateful for the two opening speeches in this debate—the introduction from my noble friend Lord Howarth and the comments of the noble Lord, Lord Rennard, about weekend voting. At the very least it is necessary for the Government to think very carefully about the advantages—and the disadvantages, which the noble Lords, Lord Cormack and Lord Pannick, have hinted at—of changing from Thursday voting to weekend voting. It is an issue that ought to have been debated in Parliament a long time ago; I agree with the noble Lord, Lord Rennard, exactly about that. It was particularly interesting, sitting where we sit, to hear the language used by the noble Lord, Lord Rennard, in the sense that he was looking not just for a debate that would end in a few fine words but for some kind of decision on this issue. If I heard him right, he thought that this was the appropriate Bill for such an issue to be finally resolved under. Am I wrong about that?
Lord Rennard
For clarification, I was not necessarily suggesting that this Bill should determine the issue but that, if we were assured that it would not close this issue and that we would properly and seriously consider the issue in Parliament in due time before 2015, I would not necessarily want to press the amendments at this stage.
Lord Bach
I understand what the noble Lord has said. He mentioned the magic date of 1 October 2013. My advice to him, if I dare give advice to someone so expert in this field, would be just to beware the words that you hear from the Government when they have had time to consider this issue, even though they will be honeyed by the tones that the noble and learned Lord, Lord Wallace of Tankerness, will undoubtedly use both today and when the matter is raised again on Report. The noble Lord will be promised the earth but I am not sure that there will be any delivery within the timescale that he is looking for.
It seems to us an attractive idea in principle that we should consider very carefully whether weekend voting is more appropriate and will lead to greater turnout. I do not think that we should assume that it necessarily will. There are people who would not dream of voting at weekends who will vote on a weekday, but I think that more people will be more tempted to vote if they are given a period, such as some part of Saturday and some part of Sunday, to do so. This is a very important issue not just for turnout but for other issues around British elections. The Opposition wish these amendments well. We hope that the debate continues, and we look forward to playing a full part in it.
Lord Tyler
I am very glad that the noble Lord, Lord Bach, preceded me because it gives me an opportunity to congratulate yet another sinner on repenting when I hear from him the admission that Ministers occasionally give us honeyed words and assure us that action will be taken when, in the 13 years in which he had a very responsible role in government, there was very little action even in discussing this issue, let alone consulting on it.
I shall make two or three quick points in support of the amendments that my noble friend Lord Marks and I have tabled. First, I recall very well indeed the night of 28 February 1974. In an enormous, scattered rural constituency with snow threatened, pouring rain much of the time and a lot of wind on Bodmin moor, we managed a turnout of 83 per cent, but that was in extremely difficult circumstances. This is true of many rural consistencies in which there are big distances to travel from the place of work to get to vote. There are very difficult circumstances in many villages when the only place where you can have a polling station is the village school, so it is closed for the day. That practical point has not yet come up in the debate. It may be true in urban areas too, but I do not have the same experience. There are practical problems about the insistence on Thursday as polling day that we should address.
The other point that I shall address very briefly was raised by the noble Lord, Lord Pannick, and supported by my noble friend Lord Cormack. I am a practising member of the Church of England, by which I mean that I am never going to be perfect but am practising all the time. I recognise that there are people in all the churches who would find it difficult if Sunday were the only day. That is why our amendments specifically refer to the possibility of two days. Of course, it is also true that Saturday is a day for other faiths, as indeed is Friday.
I am chair of the Faith and Civil Society Unit at Goldsmiths College, so I take a particular interest in the way in which we are now a multifaith community. We should recognise that in the way in which we address this issue. That is why I am very strongly of the view, as my noble friend Lord Rennard said, that it would be preferable to have the choice of two days, but they should be shorter days. I also recall that on 28 February 1974 one presiding officer was so exhausted by the end of the day that he did not properly perforate the ballot papers. Since I ended up with a majority of nine after six recounts, I think that the long day is another factor that we should take into account, and a shorter working day but on both days seems to be something that we should look at very carefully.
I have some sympathy with the point made by the noble Lord, Lord Cormack, about the insistence on moving towards more and more absent voting, both proxy voting and postal voting. On balance, it is preferable to try to extend voting in person and to make that as easy as we can, not just for reasons of potential corruption and fraud but because it is part of one’s civil responsibility to come together as a community to vote. I hope that is true.
The noble Lord, Lord Howarth, referred to the briefing by the Electoral Commission, and I should say en passant that I am a member of the informal advisory group of politicians of all parties who give guidance to the commission every so often. Its summary is in effect that at this stage it would be premature to insist on moving towards weekend voting, which is really why my noble friends and I have put it not in a prescriptive way but in an advisory way that we should be moving in that direction. It is disappointing that although there have been pilots for so many other aspects of improving access to the voting process, there has been so little attention to or consultation on this issue. Incidentally, I endorse the point made by the commission about the number of advantages in advance voting. This is not an either/or. They are both quite useful ways in which we could get more people to go to the poll to cast their votes.
There is an interesting opportunity here. I hope that my noble friend the Minister will at least be able to indicate that he will not adopt the attitude of the previous Government, which was personalised, illustrated and characterised by the noble Lord, Lord Bach, in his honeyed words but with mighty little action. Before we get to the definitive moment to which my noble friend referred when we will know the shape of the new constituencies in October 2013, I hope that more work will have been done to consult all interested parties and to conduct pilot schemes to see whether a two-day weekend polling period with shorter hours each day would not suit our fellow citizens much better than plumping again for a Thursday, which is so inconvenient for so many and causes so much disruption.
Lord Grocott
My Lords, I echo what my noble friend Lord Howarth has said about how much better debates on major constitutional reform are when we get contributions from all parts of the House, which has characterised the debate on this amendment. I welcome the fact that we have had the opportunity to discuss this amendment even though I have real anxieties about it. Perhaps it is a sign of a simple mind, but one of the tests I put to constitutions is the extent to which they are straightforward, intelligible and as simple as possible, which is one of the many reasons why I am so strongly in favour of first past the post.
While I do not doubt for a minute the good intentions of people who think that we should have a couple of days to vote, there would be a problem. It would just extend the development, which has undoubtedly occurred in most of our lifetimes—I do not want to be rude in characterising it in this way—towards a kind of rolling election as opposed to an election day when the nation makes a decision. In part, a rolling election is very much as the noble Lord, Lord Cormack, has said. I know that under a Labour Government there was substantial development of postal voting. In effect, we have at least two election days, if not a longer period. There is the crucial day when the postal ballots go out and people react to that. Then there are the days between the postal ballots and the election day when more ballots come in, which makes it a kind of rolling election.
I feel a certain nervousness about extending the election over two days. At least it might mean that a lot of the drama will undoubtedly be removed from election day. Perhaps I am wishing for days that have passed to think that that drama can ever come back. The February 1974 election was certainly profoundly dramatic for me because it was one of the many elections that I managed to lose and there were several recounts into the middle of the night. We were pretty tired over that period, but that is part of the drama of an election night.
What would happen between the two polling days? Perhaps we would all sit in limbo. Again, I am trying to avoid crudely partisan points, but occasionally I cannot manage that. A rolling election period would be made worse by more complicated election systems. I genuinely respect the noble Lord, Lord Rennard, who has participated throughout. If the AV vote is passed, it will inevitably mean that counting will occur on the day after. It is inconceivable that an AV vote could be counted through the night of an election day.
Lord Rennard
One of the attractions of voting on a Saturday and a Sunday, between the hours of, say, 9 am and 6 pm, would be that the counts would begin at 6 pm on Sunday. Before the last general election, there was great controversy in the other place about when counts might take place and great concern that many of them would take place on the Friday rather than the Thursday. The Electoral Commission was greatly concerned about the accuracy of the counting by people who had been involved in the process from setting up the polling stations for 7 am to finishing at 10 pm and then counting the vote sometimes through to 4 am or 6 am on the next morning. It seems much more sensible for voting to take place during normal hours on a Saturday and Sunday and for votes to be counted on a Sunday evening. The noble Lord says that he personally did not like the February 1974 election results. I wonder whether he would prefer the system of 100 years earlier when a general election took place on different days in different constituencies all over the country.
Lord Grocott
That rather proves my point. I like the simplicity of polling day being polling day. We all know the beginning and the end, that the election programme will be on the BBC and that we will get an instant polling verdict on “News at Ten”. Are these bad things? I believe they increase the drama of an election and you need some drama in politics. It cannot be reduced to a dull procedural convenience. I do not doubt for a moment, as I have said, the motives of people who wanted more postal votes. There were many in my party who did and my Government facilitated it. It was done with good intentions but the outcome of what I can only describe as a rolling election has not been a good one. Likewise, I do not think the idea of having more than one polling day would be a good one. The noble Lord, Lord Rennard, says it makes people very tired so that they cannot cope and might make mistakes. However, our elections are amazingly free of challenges once the results have been declared. I have lost some elections and won one after a recount but people accept the results and rarely contest them.
My final concern is that, if elections are to result in more hung Parliaments—I doubt that they would under the first past the post system, as some claim, but they certainly would under a more proportional electoral system—the period between people first starting to think about an election and casting their postal vote will be prolonged and the country could reach a verdict weeks afterwards. So I recognise the motives behind these proposals but it is easy to have good intentions but bad outcomes. We have elections relatively rarely, and we will have them even more rarely if the Government have their way with this Bill. They ought to be dramatic days and I fear that these amendments would make them less dramatic and certainly less decisive.
Lord Newton of Braintree
My Lords, it is more or less fatal for me to come into the House because somebody always presses a button that leads me to get to my feet. In this case, it is all this nostalgia about February 1974, which is the date on which I was first elected. My memory of it is that it took a very long time because Braintree did not count during the night; it only counted the following day. After a nervous, sleepless night, I came in with a relatively small majority at about the same time as the Western Isles.
I have a lot of sympathy with the points made by the noble Lord, Lord Pannick. I would not support these amendments if they were pushed, but consideration of change should not be ruled out. I make three points in support of that. First, on the point made by the noble Lord, Lord Cormack, most of the criticisms of abuse or problems connected with postal votes seem to relate at least as much to people who have had them for years as to new postal voters. Secondly, like many people here, I live in London during the week and at my home in Essex during the weekends, so I now have a permanent postal vote for everything except parliamentary elections, which I cannot vote in anyway, because I never know where I am going to be.
The third point picks up that made by the noble Lord, Lord Howarth, about the greater use of postal votes and non-postal votes—if I may oversimplify what he said. A key strategic problem is the decline during the past 20 or 30 years in the number of people who vote at all. During most of my time in the other place, the turnout was never less than 75 per cent. It was several times more than 80 per cent, and I had villages in my constituency where the vote went over 90 per cent. In the previous two elections, we have been down to percentages which we used to associate with American elections—between 60 and 70 per cent. Therefore, the key problem here is getting the vote up. We should be willing to consider anything which could be shown to contribute to that.
Baroness Golding
My Lords, I was an election agent for some 15 years, so I do not think that there is very much that I have not seen. I have dealt with four elections—parish, county, district and general elections—all on the same day and all over a big area, and have learnt much through practice. Does the amendment refer just to a general election? Will all other elections follow suit? If we have a general election at a weekend, is it being proposed that county and parish elections take place then as well? Or will they be on a different day?
Lord Pannick
My Lords, the noble Lord, Lord Rennard, in answer to my intervention, accepted that if there is to be weekend voting it would need to be over the whole two days of the weekend, albeit during shorter periods on each day. There are difficulties about that, not just the loss of drama to which the noble Lord, Lord Grocott, referred. The difficulties arise from the fact that one day of voting involves all the electorate, with the exception of those who are postal voters, voting on the same factual premise. It is a snapshot of opinion at a particular time. Broadcasters are prevented from broadcasting any material during that day which would be politically partisan. That is entirely acceptable and workable. All that becomes much more difficult if the period of voting extends over two days. What happens if an event of considerable political significance—it may be a foreign policy issue or a terrorist attack—occurs during the first day of polling? The danger is that one can envisage circumstances in which the electorate who vote on the second day would be voting on a set of facts that would be materially different from those on which the electorate voted on the first day.
Lord Newton of Braintree
The noble Lord refers to certain instances, including a terrorist attack. Such an event could occur in the middle of polling day, in which case there would be a completely different mood among those who had voted early and the very large number of people who vote going home from work. I do not think that even a single day of voting avoids that risk.
Lord Pannick
The noble Lord is of course correct, but it is much less likely that the electorate who vote during a single day will be aware of or affected by a major news event during that day than if the event occurs during that day and there is second day of voting. This seems to be at the very least a factor that should be taken into account if consideration is being given to two days of voting.
The Advocate-General for Scotland (Lord Wallace of Tankerness)
My Lords, I thank the noble Lord, Lord Howarth, and my noble friend Lord Rennard for introducing these amendments. I say in respect not just of the amendment of the noble Lord, Lord Howarth, but of a series of amendments as we go through the Bill that it is important that there will proper scrutiny. The amendments that have been tabled already indicate that although the Bill is relatively short it is important, and that most if not all its key components will be addressed. We look forward to those debates.
I think that there is a consensus across the Chamber, as I think there was on a number of occasions—although it was sometimes difficult to believe it—during the passage of the Parliamentary Voting System and Constituencies Bill, that it is important that we try to look at ways in which we can increase turnout and participation in elections. No matter which party we belong to, or even if we belong to none at all, I think that we recognise the importance of trying to increase turnout.
It is probably fair to say—no doubt those opposite will correct me if I am wrong, because they were in government and responsible for introducing them—that the greater availability of postal votes is more a response to decreasing turnouts than a contributory factor as my noble friend Lord Cormack suggested. It is also fair to raise concerns, as has been done, about the security of postal voting, but it should be recorded that measures have been introduced during the past couple of years to ensure that postal votes are properly verified. Some of the debate which has taken place in recent days and weeks about the timing of the counts for the Scottish Parliamentary and Welsh Assembly elections in May has been coloured by the fact that returning officers are now very conscious of the time that will quite properly be taken in verifying postal votes.
My noble friend Lord Rennard indicated that this issue has never been properly debated in Parliament; I hope that he feels that it has had a reasonable airing today. It is clear from the contributions that have been made that there are arguments both for and against moving the polling day from the traditional Thursday to another day and, as the amendments would foreshadow, to weekends. There has been debate, too, on the cases for and against the holding of elections on more than one day. The noble Lord, Lord Pannick, said that if one was to have polling day on a Saturday it would raise religious issues for some faiths. Equally, I can think of places, not least in my native Scotland, where if voting was only on a Sunday there would be difficulties. That led noble Lords to consider the possibility of voting over two days. The noble Lord, Lord Pannick, indicated some of the practical issues to which that would give rise. I do not think for a moment that they are insuperable, but they would certainly have to be addressed if we were to hold elections on more than one day.
A number of issues have been raised. The previous Government instigated a significant test of opinion, by way of a consultation held in 2008, on the very subject of moving elections to weekends. The consultation sought views from a range of groups on whether elections should be moved from the traditional Thursday to one or both days of the weekend and whether this would improve access and opportunity for voting. There were diverging views on this issue. While it is fair to say that there was a balance of opinion in favour among members of public who responded to the consultation, the majority of respondents did not favour a move to weekend voting.
It is not obvious from that survey, which was published in March of last year, that such a move would make it easier for electors to vote. As the noble Lord, Lord Howarth, pointed out, there is nothing in statute that says that polling day should be a Thursday. I am sufficiently old, and enough of a political anorak, to remember a lot of local elections taking place on every day of the week. I think that I am correct in recalling during one of our debates on the Parliamentary Voting System and Constituencies Bill someone on the opposition Benches saying that they were once a candidate, or an agent, in a local election that had taken place on Saturday.
Baroness Armstrong of Hill Top
In the Local Government Bill in 1998, we made provision for significant pilots to take place on this and on different ways of increasing participation. It may be useful to the Minister and others interested in this amendment to look at some of those. The first organisation to do this in depth was Watford Council, which led to the Liberals taking over—so I was not too popular.
Lord Wallace of Tankerness
The noble Baroness is encouraging me to look at these pilots. However, I seem to recall that voting took place on a number of days. In Scotland, local elections were for many years on a Tuesday. For some reason, they all seem to have coalesced round a Thursday. Picking up the point of the noble Lady, Lady Saltoun of Abernethy, I recall that in 1978 the Hamilton parliamentary by-election took place on Wednesday because Scotland’s first match in the 1978 World Cup finals was being played on the Thursday. I am not sure what it did for the noble Lord, Lord Robertson of Port Ellen, but it did not do much for the Scottish football team.
There is a consensus on the need to find ways in which we can increase the turnout, which undoubtedly ensures that those elected to the other place have a stronger democratic mandate.
The noble Lord, Lord Howarth, referred to the briefing of the Electoral Commission, which echoed what the Electoral Commission said in the consultation undertaken by the previous Government. The Electoral Commission stated that it was,
“not opposed to weekend voting in principle, but that no change should be considered without clear evidence that it would be of significant benefit to the voter”.
That view was shared by the Committee on Standards in Public Life, which in its response to that consultation said,
“The Committee is not opposed in principle to moving the day of elections from Thursday to the weekend. But we have seen no evidence that such a move would bring any clear benefits … It is not obvious that [people] would find it easier to vote at the weekend”.
One might say in the Scottish context that this is a not proven verdict, but that does not mean to say that there should not be trials. With regard to advance voting, which the noble Lord, Lord Howarth, mentioned, that was referred to in the consultation paper on The Governance of Britain published by the previous Government. It pointed out in that consultation that, as part of the previous Government’s programme for piloting innovative voting methods, 20 local authorities had piloted advanced voting in polling stations since the year 2000. Evidence from these pilots, however, indicated that the availability of advanced voting had done little to increase turnout.
There are a number of issues and I recognise that this is inevitably an issue to which your Lordships’ House will wish to return. I hope this is not honeyed in any way and I am not standing at the Dispatch Box to say that the Government are about to launch an initiative with regard to weekend voting. However, picking up the point made by my noble friend Lord Newton, I want to make clear that we are not ruling it out. I want to reassure the House that not including something in this Bill will not rule out the possibility of us returning to this issue.
I do not believe—this is an important point—that this is the appropriate legislative vehicle to make the change. In this Bill, we have tried to do only that which is strictly necessary to establish fixed-term Parliaments and, as far as possible, reflect existing practice. It has become common practice to hold the elections on the first Thursday in May. Three of the last four were held on that day, the exception being in 2001 when the need to move it was widely agreed due to the outbreak of foot and mouth.
The noble Baroness, Lady Golding, also indicated that one of the issues that had to be looked at is that, if we are moving the date of parliamentary elections to the other place, should we also look at the local elections and, for that matter, the elections to the devolved Parliaments and Assemblies.
It is not a criticism of the drafting because I think the point of these amendments was to raise an important issue, but there are a number of consequential issues which would flow in terms of any change that was to be made. In the light of that, I want to reassure my noble friend that if this Bill goes through without amendments, that will not be used at a future date as evidence of Parliament agreeing that it will be that day. That was the assurance he was looking for. It will not be thrown back at him like that. I hope that in those circumstances, the noble Lord will agree to withdraw his amendment.
Lord Howarth of Newport
My Lords, this has been a lively debate with contributions from noble Lords all around the House speaking from their extensive experience and their serious concern that we should find the best ways we can to improve participation at general elections. As my noble friend Lady Golding reminded us, it is equally important that we raise participation in other elections, notably local elections, although that is outside the scope of the Bill’s Long Title.
I am most grateful for what the noble Lords, Lord Rennard and Lord Tyler, had to say. The noble Lord, Lord Rennard, speaks with even greater knowledge than the noble Lord, Lord Tyler, though it could be a close-run thing. Both of them made invaluable contributions, the noble Lord, Lord Rennard, rehearsing with us the somewhat dispiriting history of consideration of this issue—the unsatisfactory pilot scheme and the citizen summit that never took place. The noble Lord, Lord Tyler, made the extremely important point that our traditional practice of holding elections on a Thursday means that schools all over the country closed. That is undesirable.
On the other hand, the noble Lord, Lord Pannick, put his finger unerringly on two real difficulties. One is not necessarily an insuperable difficulty because he rightly reminded us that there are different religious traditions in this country and you cannot decently or appropriately legislate for polling to take place on one particular day of the weekend. He then went on to make a point that I take seriously: that it is desirable that as far as possible people should cast their votes on the basis of the same information and that, if some dramatic event were to intervene, that could have the effect of altering the tendency of polling on the second day. We would need to think carefully about that.
That serves to illustrate that there are significant arguments on both sides. I rarely disagree with my noble friend Lord Grocott on anything—he was my Chief Whip, after all—and particularly in the constitutional field but I am not sure there is not a hairline crack between our two personal positions on this particular issue. But he and the noble Lord, Lord Cormack, rightly appeal to our sense of tradition and history. What my noble friend Lord Grocott had to say about the importance of the drama of election day and what the noble Lord, Lord Cormack, had to say about the ceremony of election day were very important observations. We do not want in any way to diminish the occasion of polling, which, as the noble Lord, Lord Cormack, suggested, has perhaps been somewhat diminished by the increasing resort to postal voting. If postal voting has raised turnout overall, however, that is an important merit in it.
The noble and learned Lord, Lord Wallace of Tankerness, responded in as positive a spirit as he could but it remains the case that the Government, while they may have reviewed previous consultation, have not applied themselves to this question with any seriousness at all in advance of including prescriptive provisions in this fixed-term Parliaments legislation that polling will take place on a Thursday. The noble and learned Lord himself reminded us that at the moment there is nothing in the law that requires polling to be held on a Thursday.
If there is a major national crisis, as in Scotland, and the Hamilton by-election has to be moved from a Thursday to a Wednesday because of a football match, there is at least the freedom to do that. But this legislation would remove that freedom. The noble and learned Lord says that the Government are not ruling out a change, but by stating in this Bill their intention to legislate, they make it that much less likely that there will be a change. I had hoped that the Minister would have been able to tell us rather more definitely what the Government intend to do. We may or may not agree with his point, but he said that this may not be the right legislation in which to incorporate provision for polling to take place on a weekend rather than on a Thursday. He suggested it has to be considered on a separate track. I heard no convincing evidence from him that he intends to pursue that track.
While the feeling of the House is that it would be inappropriate to vote on this issue today, Amendment 16 tabled by Members of the Liberal Democrats, which would require the Prime Minister and the Government to have made up their minds about what they want to do by October 2013, has enormous merit. For my part, I beg leave to withdraw the amendment.
The Deputy Chairman of Committees (Baroness Pitkeathley)
As we come to Amendment 3, I remind your Lordships that if it should be agreed to I cannot call Amendments 4 to 8 for reasons of pre-emption.
Amendment 3
Lord Grocott
Lord Grocott
My Lords, I start by apologising to the Committee because my amendment includes the dreaded word “referendum”. I can understand why everyone else's heart sinks just as much as mine does at the very mention of that word. I tabled this amendment alongside my noble friend Lord Howarth, who has amendments along similar lines in this group—and they may well be better than mine—because I want to raise two or three issues. It is important that we correct an error that has been uttered on a number of occasions by no less a person than the Deputy Prime Minister. It is an error to say that this Bill removes the right of the Prime Minister to determine the date of the election. At Second Reading in the House of Commons on 13 September last year, the Deputy Prime Minister said:
“We have a Prime Minister who is the first in history to relinquish the right to set the date of the general election”.—[Official Report, Commons, 13/9/10; col. 622.]
What he should have said is, “This is the first Prime Minister to relinquish the right on behalf of future Prime Ministers to determine the date of the next general election”. Not only has this Prime Minister decided the date of the next general election, he has legislated to enshrine in law his choice of date. I hope from now on no one will use that as a justification for this Bill, which, as the House may know, is not a Bill that finds much favour with me. Can we at least correct that error? As I shall say later on, the Prime Minister is uniquely legislating to enshrine his favoured date in law, so people need to have a say about that, which is what we do in a referendum.
My second reason for tabling this amendment was to seek clarification from the Government on when and why they use referendums as a basis for constitutional change. The Committee is entitled to an answer to that question. The Deputy Prime Minister has said many times that these are hugely important constitutional changes. As far as I know so far, and we may still be counting, four major constitutional changes will be decided in this Parliament. We have already determined two, which are quite separate issues. The first was that there should be a referendum on AV and the second was that there should be fewer Members of Parliament. There is a referendum on one of those but not on the other. The one that we are debating now is to fix the terms of Parliaments, which is an important issue on which the present thinking from the Government is that there should be no referendum. The one coming down the line, which may take a bit of time in this House, is to abolish the House in its present form and replace it with senators.
I would simply like the noble and learned Lord, Lord Wallace, who always treats these questions with great seriousness, to tell us why there is a referendum for one of those four major changes but not the other three. What factors have the Government brought to bear in determining which will be decided by referendums? Although I need some persuading of this, we have been told quite frequently by the Government that this is a coherent whole of constitutional change.
Lord Cormack
The answer is simple: the Government knew that they could not get AV through the House of Commons. Therefore, they have gone to a wider electorate.
Lord Grocott
I hope that the wider electorate reach a sensible conclusion. We shall know soon enough.
The Earl of Onslow
As the leader of the Labour Party has been discouraging the Deputy Prime Minister from taking any part in the AV campaign, it will be interesting to see the outcome.
Lord Grocott
I am interested but also worried because I care deeply about the outcome of the referendum and the damage that I believe can be done to our constitution. But we must not go back over that. It has been concluded and now it is for the people to decide.
I do not favour any of these changes, but if they are to go ahead the public need to be consulted. A referendum should be considered to determine whether there should be a four or five-year fixed term because of what I hope the Committee will agree is a powerful point: that the Bill reduces the power of the electorate. It reduces the number of occasions on which the electorate can be consulted.
If you reduce the power of the electorate, which the Bill undoubtedly does, then surely the electorate have the right to be consulted about that. It was right in 1975 for the then Labour Government to have a referendum on the Common Market, as it was then called, because it reduced the power of this Parliament. By the way, I voted no in that one. It is right that the choice should be given to the public. It is unarguable that the Bill reduces that power.
Lord Maclennan of Rogart
Does the noble Lord believe in the opposite proposition—that to give power to the electorate you should not have a referendum? That might affect some of his earlier arguments about reform of this House.
Lord Grocott
I do not know which of the various constitutional proposals increases the power of the electorate. The noble Lord referred to reform of this House. One of the key reasons why I am opposed to this being an elected House is that it would seriously diminish the significance of a general election to the House of Commons. I hope that my argument is consistent; I will have to read it in Hansard tomorrow.
I hope that I can put this with some conviction but, according to my maths, since the 1945 election there have been 17 general elections in this country. If this Bill had been an Act, we would have had 13 general elections. I simply put this proposition: does that or does that not weaken the power of the electorate? There can be only one answer to that. The answer is yes.
I do not want to go to absurd lengths but we can all assume that, if there were no elections, that would seriously weaken the power of the electorate. I am not sure about the other end of that continuum—perhaps the Chartists with their annual elections. But there is no doubt that the convinced and settled view of the members of the Government who are voting on this Bill is that since the Second World War the British electorate have had too many general elections. Which ones should we not have had that we did have? Was it wrong in 1951 for a Labour Government who were tired to seek another mandate? Was it wrong of Mr Heath? Was it wrong of Harold Wilson, who had a majority of three in 1964, to call another election, or should he have soldiered on for another five years? Should Harold Wilson's Government in 1974 have gone on without a majority?
I would like to know the answer to a fairly simple question: why do the Government think that we have had too many general elections since the Second World War? Which ones were superfluous? There could be an interesting answer to that.
Baroness Farrington of Ribbleton
My Lords, between now and the next stage of this Bill I wonder if my noble friend could ponder whether, as has been proposed, the reason that AV is going to a referendum is because it could not be got through the House of Commons. Does that mean that we must have a referendum on Lords reform if it proves impossible to get it through your Lordships’ House?
Lord Grocott
What a persuasive argument—I am completely convinced by that.
If the Government are going to reduce the power of the voters over their Government, they must give us a very convincing argument as to why that is desirable. Of course, I very much hope that my amendment becomes entirely surplus to requirements, because I very much hope that the Committee will decide later that we should have four-year gaps between Parliaments. I do not agree with fixed terms, but if there is to be one I hope it is four years. For the first time in my life I am operating entirely in accordance with the Liberal Democrats’ manifesto and I hope they will be voting with us on four-year Parliaments. However, if the Government unilaterally reduce the power of the electorate to have general elections and to make their decisions about Governments, I hope that they will only take this power away on the authority of the electorate in a referendum.
Lord Howarth of Newport
My Lords, I am very happy to support the spirit of my noble friend Lord Grocott’s amendment. I have tabled two amendments—Amendments 57 and 58—which also require that a referendum should take place before we move to fixed-term Parliaments in this country.
I do not, in general, favour referendums, but there is a particular case for holding them when major constitutional change is being proposed. I think that is a view that the Constitution Committee reluctantly came to. The basis of that has to be that the constitution belongs to the people—it is not the property of those politicians who happen for the time being to have the privilege of serving in either the House of Commons or the House of Lords. Those who are Members of Parliament in either House, and certainly those who are in Government, should regard themselves as holding the constitution in trust on behalf of the people, by whose authority they have been given and entrusted with the opportunity to serve. They should treat that constitution with the very greatest respect and should move to change it with the very greatest caution. That applies even more particularly to a Government such as this present coalition Government, which does not have a mandate from the electorate for its policies.
It is, as my noble friend Lord Grocott suggested, curious that this Government—which makes great claim to be a liberalising Government who want to improve the quality of our democracy and increase the accountability of Government, and indeed Parliament, to the people—are proposing legislation that would mean that we would in practice have fewer general elections than we have had in the past. The average interval between general elections since the war has been three years and 10 months; if the Government have their way on this Bill, it will be not less than five years. That is one of the reasons why I, like my noble friend Lord Grocott, believe that—although I am no enthusiast for legislating to fix the term of Parliament—if we are to fix the term, then we had better fix it at four years. We do not want to see accountability diminished in a major measure of constitutional reform.
It is also curious that the Government believe that it is appropriate to hold a referendum on changing the electoral system and that it is appropriate to hold referendums when there may be some transfer of power—possibly no very great transfer of power—between London and Brussels, but they do not think that it is appropriate to hold a referendum on whether we should move to fixed-term Parliaments. My noble friend Lady Farrington raised the question of whether there might be a referendum on reform of the House of Lords, which would be a very major constitutional change by any standard. It seems extraordinary that the Government should propose to take that forward without incorporating provision for a referendum in the legislation.
I am not necessarily a devotee of consistency in constitutional matters, because I believe that there are many anomalies in our present constitutional arrangements, which have grown up for compelling historical reasons, that actually provide flexibility and enable the constitution to accommodate different traditions and to adapt itself as time goes by. If we are slavishly schematic in our approach to constitutional change, we shall be even more likely to get it wrong; but I wonder why the Government are quite so inconsistent in their approach to holding referendums on constitutional reform. Surely the Government should conduct themselves on a certain set of principles.
Turning to the particular amendments that I have tabled, I suggest to the House that they incorporate a better design for a referendum than the design of the one we are to have on 5 May on electoral change—there are differences between what I propose and what Parliament has enacted at the behest of the Government. The referendum that I have proposed would be advisory only and would leave scope for Parliament to meditate upon the message that voting in a referendum sends to Parliament. Amendment 57 would also provide that, if less than a threshold of 51 per cent of the electorate support the introduction of fixed-term Parliaments, then the question would be dismissed. That latter point should have applied also in Amendment 58—it was an omission on my part not to have included that in the drafting of that amendment. If we come back to this issue on Report, I can repair that then.
My amendments would provide for two questions. The first would be to ask the people whether they favour the introduction of fixed-term Parliaments, as provided for in the legislation. The second would ask them the other key question: if we are to have fixed-term Parliaments, do they think it right that the term should be fixed for four years or for five years? We all agree, I think, that this is quite the outstandingly important issue that remains to be resolved in this legislation apart from the overall issue of whether there should be fixed-term Parliaments, which has been approved in Second Reading. However, the question of four or five years remains wide open. I put it to the House that that may also be something that should be offered for the decision—or at least for the advice—of a wider electorate.
Lord Marks of Henley-on-Thames
My Lords, I am one of those who is largely in favour of referendums for important constitutional reforms. The noble Lord, Lord Grocott, is quite right to ask in what circumstances referendums are appropriate and to say that the matter should be considered by the House.
The Constitution Committee in 2010 used the word “fundamental” in respect of constitutional reforms for which referendums were appropriate. The question arises as to what is meant by fundamental. I accept entirely that a referendum is appropriate in respect of the proposed change in the voting system to AV on the 5 May, as it was appropriate for the European referendum in 1975, which noble Lords will know was the last UK-wide referendum—I am not suggesting that such referendums should take place only every 36 years, or anything like it. However, it is significant that the same Constitution Committee report produced a list—not an exhaustive one—of the type of issue that might be appropriate, in which it included any decision:
“To abolish the Monarchy;
To leave the European Union;
For any of the nations of the UK to secede from the Union;
To abolish either House of Parliament;
To change the electoral system for the House of Commons;
To adopt a written constitution; and
To change the UK’s system of currency”.
The report made clear that that was not intended to be a definitive list.
Lord Howarth of Newport
Does the noble Lord agree that this Bill marks a very significant step towards the creation of a written constitution in this country?
Lord Marks of Henley-on-Thames
My Lords, I do not accept that. It might indeed be desirable to have a written constitution, but that is a matter for another day.
I accept that the Bill provides for an important constitutional reform, but it is not a fundamental change to our constitution. I say that for a number of reasons. First, in terms of whether or not a referendum is appropriate, the fixed term proposed is within the existing maximum term of a Parliament. Under the 1911 Act, Parliament can last for up to five years; under this Act a Parliament will last for five years unless either of the trigger mechanisms for an early dissolution is activated.
The Earl of Onslow
May I interrupt? Actually, it is a fundamental change. As the Bill is not subject to the 1911 Act, we can veto this Bill because it seeks to extend the life of Parliament. That is a fundamental constitutional change, which in my view should be resisted at all possible costs.
Lord Marks of Henley-on-Thames
My Lords, the noble Earl is entirely right to say that the Bill is capable of extending a Parliament under the two-month extension proposal. That is the reason why the Parliament Act does not apply. That does indeed give this House the right to veto the legislation, but it is a non sequitur to suggest that it follows from that, and that alone, that this is a fundamental reform of the type to warrant a referendum.
Baroness Farrington of Ribbleton
Can the noble Lord, Lord Marks, explain to me, because I listened to the logic he was developing, how changing a system of voting for a Chamber of Parliament, where that Chamber is already elected, is a greater change than introducing a system of voting for a Chamber of Parliament which is not elected at the moment? I raise this as somebody who is in favour of reform—I do not want to be dismissed as somebody who is not—but I find a real fault line in his argument, unless he is about to conclude that he thinks there should be a referendum on Lords reform.
Lord Marks of Henley-on-Thames
My Lords, the noble Baroness’s logic is seductive and attractive, but it misses the point that, as all noble Lords accept, this House accepts the primacy of the House of Commons. Therefore, a change to the voting system for the House of Commons, which alters the entire electoral system for the House that has democratic primacy, should have different weight accorded to it from that of a change to the composition of the upper House.
Baroness Farrington of Ribbleton
My Lords, can I just press the noble Lord further? As I understand it, the noble Lord’s party’s view is that AV is, to a degree, an acceptable alternative to the present system of first past the post. However, I believe quite senior members of his party have said they regard AV as a staging post. If your Lordships’ House were to be elected by a system that was further down the staging-post road, would we not be in a difficulty, using the reasoning of the noble Lord’s own party, given that it is not certain that the democratic legitimacy of the House of Commons —which I accept—would be accepted by a more democratically elected second Chamber?
Lord Marks of Henley-on-Thames
My Lords, the noble Baroness is perhaps addressing a debate that we are yet to have on another occasion. It is well known that in the past we have favoured, and indeed do favour, other electoral systems. It is also well known that the coalition agreement commits us to a proportional system of representation for the election of Members of this House. However, noble Lords will accept, I hope, that that is a matter for another day and what we are now concerned with—if I can just finish my response to the noble Baroness—is considering an amendment which calls for a referendum on the Fixed-term Parliaments Bill and a separate referendum on the question of four years or five. The future electoral system for this House is of interest and of course of some relevance, but it is not central to this point. I give way to the noble Lord.
Lord Cormack
I am extremely grateful to the noble Lord, but when he read out the list of issues which could be subject to a referendum he mentioned the abolition of the monarchy and the abolition of either House. Does he not accept that, if your Lordships’ House is replaced by a different second Chamber, wholly elected, it has to be abolished first? Therefore, surely there is no logic at all in saying there should not be a referendum on that issue.
Lord Marks of Henley-on-Thames
My Lords, I do not accept that. It is not the abolition of a House to change its composition, however attractively the point might be put.
I remind your Lordships’ House that we had a very significant constitutional reform with the Constitutional Reform Act 2005, whereby the highest court in the land, having been constituted by a committee of this House, was replaced when the Supreme Court was established. Nobody then argued that there should be a referendum on that very significant and wide-ranging change in the constitution.
Both the noble Lords, Lord Grocott and Lord Howarth of Newport, addressed the question of four or five years. That is an important point which we are addressing in this Bill and on which there will be a separate debate during this Committee stage, and I would not be at all surprised if either or both of them contributed. However, the point here is not the length of a fixed-term Parliament, which is a matter of judgment and on which many speeches were made at Second Reading, including my own, but whether this is a matter for a referendum.
There are a number of further points. In a lengthy consideration of the Bill by the Constitution Committee —which I might say was not an enthusiastic report endorsing the Bill and the way it had been handled—it was not suggested that this was a matter for a referendum. Had it genuinely been believed at that stage that there were respectable arguments that this was a fundamental issue of a nature that required a referendum, I suggest that it would have been put before the committee and either adopted or rejected.
Baroness Farrington of Ribbleton
My recollection is that the Constitution Committee took the view that there should have been pre-legislative scrutiny, which would have led to many of these points being discussed properly, particularly the role and relationship proposed in this Bill between the Prime Minister and the Speaker in another place.
Lord Marks of Henley-on-Thames
My Lords, the noble Baroness is absolutely right to draw attention to the fact that the Constitution Committee thought that pre-legislative scrutiny would have been a good idea. Nevertheless, the committee heard evidence over a number of days and read a great deal of written evidence from some of the leading academics in the land and nowhere was it suggested that this was a referendum issue in my reading of the evidence of the report. That was the point that I was attempting to make.
The other point of importance that I would invite noble Lords to consider is that the principle of fixed-term Parliaments was subject to manifesto commitments of the Labour Party and my own party and in neither case was there a suggestion that it should be the subject of a referendum rather than legislation. The Conservatives embraced that commitment very shortly after the election, and the Members of Parliament elected as Conservatives to represent their constituents did not seek to interpose a referendum before this legislation should become law.
There is a danger, which I urge the House to bear in mind when it considers these amendments, that we move from a representative democracy, which the vast majority of us value a great deal, to government by plebiscite. If you lose sight of the principle that only fundamental changes require referendums, you move some way down that road.
Lord Grocott
Did the noble Lord not say in the first part of his remarks that he was very much in favour of referendums? I am not sure how that squares with what he has just said.
Lord Marks of Henley-on-Thames
I qualified that by saying, “on important matters of constitutional reform”, and I then went on to explain what the Constitution Committee said when they used the term “fundamental”. I stand by that. What I am saying is that, if you extend the number of referendums that you have well outside the ambit of what is fundamental, you move away from representative democracy and towards government by plebiscite. It is a matter for Parliament properly to decide—both the principle and the question of four years or five.
I make one final point about Amendment 57, which the noble Lord, Lord Howarth of Newport, applauded —in spite of the fact that it is his own—and said that he liked its design. He said that the amendment was advisory only. That is entirely wrong since, as drafted, the amendment is a wrecking amendment, as it seeks to impose a mandatory 50 per cent threshold, which means not 50 per cent of those who vote but 50 per cent of the electorate, without which the Bill cannot become law. That is a very high threshold indeed. It means that a turnout of anything less than 50 per cent cannot give effect to the Bill, even if not a single no vote is cast.
Lord Cormack
It is nowhere near as high a threshold as has been put in this Bill for a dissolution of Parliament.
Lord Marks of Henley-on-Thames
My Lords, 66 per cent of the House of Commons voting on an occasion when we may expect a turnout of well over 99 per cent is not, in my respectful submission, a very high threshold. The thresholds are different in kind, and my noble friend Lord Cormack knows that perfectly well.
In the recent Welsh referendum we had a turnout of 35 per cent, which was seen as somewhere between respectable and high. Not only do thresholds detract from the view that referendums are valuable, because they involve telling the electorate that we propose to ask for its view and then reserve the right to turn around and reject it after the event, but thresholds of this magnitude, which are mandatory in this way, do nothing for the cause of democracy.
Baroness Hayter of Kentish Town
I apologise to your Lordships for intervening at this stage when I was not here for Second Reading, not least because I missed the maiden speech of the noble Lord, Lord Cormack, which I have had the pleasure of reading since then.
The reason why I was not here on St David’s Day when the Second Reading happened was that, thanks to the Commonwealth Parliamentary Association, I was at the New Zealand Parliament, which I had the great pleasure of visiting with the noble Lord, Lord Rennard, although he made it home rather faster than I did. When I was there, I discussed the three-year terms that they have in New Zealand, and how business and elections could best be organised around that period. It is true that many people in New Zealand, politicians and civil servants, consider that four years would be a better period. I have to say that they do not even go to five years; it was not on their agenda at all. The interesting thing from the point of view of this debate is that, despite the fact that many would like to move to a four-year period, they have never dared to test that in a referendum with the electors, because from their sample polls and from listening they know that the move from three to four years would be rejected. That is a lesson for us to learn about extending a Parliament’s life. The Government should perhaps heed that.
There is a broader lesson with this amendment, and that is to note the incredible significance that the legislators in New Zealand attach to their electorate. They would not dare even to ask them to extend their term of office without a referendum. They will not do that until they think they can win it. So we should ask the people their view before we entrench anything new in our law. I would even like to put the option of three years as well as four years and five years in that referendum, but I would certainly favour at least going out to ask people for their opinion to find out what suits them rather than suits the politicians who will be elected in those elections.
Lord Cormack
My Lords, when I was first elected to the other place, I was a very staunch believer in parliamentary democracy, full stop, and did not like the idea of introducing the referendum into our system. But the fact is that we have done so, and on a number of constitutional issues. We had the referendum on what was then the Common Market, or European Union, in which I participated on a platform with friends and colleagues from the Labour Party, urging a yes vote, while I believe that the noble Lord, Lord Grocott, was doing the opposite. Now of course I find myself in virtually total agreement on almost every subject of a constitutional nature with the noble Lord, and that is a very happy relationship. But it is a bit like the atom bomb or the internet; you may have strong views, but you cannot uninvent things—and you cannot uninvent the importation of the referendum into our constitutional system. And you should not treat it capriciously.
The noble Lord, Lord Marks, uttered his honeyed words. I have not been a Member of your Lordships' House for long, but I have heard the noble Lord’s felicitous utterances on a number of occasions and he is very good on honeyed words. But I could not help but think of Pickwick Papers and the case of Bardell, where there is “a weak case and an abused plaintiff's attorney.” It was a bit like that, with the capricious favouring of one referendum rather than another. By what turn of logic anybody could suggest that the creation of an elected senate does not involve the abolition of this House I do not know—unless it is a Liberal desire that the two Houses should sit separately or work alternate days. That is a fundamental constitutional proposal. I believe, along with the noble Lords, Lord Howarth and Lord Grocott, that the issue that we are discussing this evening is at least worthy of consideration for a referendum.
I hope that my noble and learned friend Lord Wallace of Tankerness will be able to explain what the coalition Government’s philosophy is on referenda. I prefer the word referenda to referendums, as I am sure the father of the noble Lord, Lord Howarth, the High Master of St Paul’s, would have done. What is the Government’s philosophy on referenda, and what is the list of subjects that merits that constitutional accolade? It was reasonable to suppose that AV should be the subject of a referendum, although as I indicated in my intervention the only reason that we are having one on that is that it was not considered possible to get it through the House of Commons. Is the Government’s definition of a referendum that if you cannot get something through the Commons you have a go by going to the people? Is that the definition? If so, there is a certain cynical logic in it and I am sure we would like to hear that. However, if the other definition is that we will have a referendum only on an issue of supreme constitutional importance, is not the alteration of our electoral system to have fixed-term Parliaments, to which I am not intrinsically opposed, a very fundamental constitutional change? As the noble Lord, Lord Grocott, indicated, it will mean that the people have less frequent chances of voting. If that is to be the case, should they not be given the opportunity of saying whether that is what they want?
The Earl of Onslow
My Lords, I crave your Lordships’ indulgence and apologise for not being able to speak at Second Reading. There was a slight horlicks done by our Whips’ Office, for which I apologise.
This Government, who I support extraordinarily strongly, have the opportunity to produce some of the greatest social reforms and improvements for the benefit of this country since 1911. If Iain Duncan Smith gets his welfare reforms right, that will be a major contribution to the well-being of this country. If George Osborne gets the economy right, it will be of major benefit. If education reforms and medical reforms are as good as I personally think they are going to be, these will be the successes of a very great Government. But why have they gone completely doolally over constitutional change?
The trouble with this country is that constitutional change is extraordinarily easy. Every other country has complicated locking mechanisms in it. The Bill reduces the power of the House of Commons, reduces the power of the electorate and increases the chances of chaos. In 1870 or 1871, the French Government resigned. Either the President or the Prime Minister refused a dissolution—I cannot remember which. As there was no possibility of a dissolution, they played the game of pass the parcel and wrecked French government from 1870 until 1945. That is bad constitutional form. We would do the minimum amount of harm by adopting something along the lines of what the noble Lord, Lord Grocott, says. In my 30 or so years in this House, I have regarded myself as a disloyal Conservative, and I will go on being a disloyal Conservative. If they are doing something that I believe is as fundamentally wrong as this, I will say so. That does not mean that I will come and join you over there.
Lord Pannick
My Lords, I, too, support the observations of the noble Lord, Lord Cormack, as to the need for careful consideration of constitutional reform. The noble Lord, Lord Marks, accurately pointed out that the Constitution Committee, of which I am a member, did not suggest that a referendum is required in relation to the introduction of fixed-term Parliaments. As the Committee well knows, the Constitution Committee expressed grave concern in paragraph 20 of our report that this Bill owes,
“more to short-term considerations than to a mature assessment of enduring constitutional principles”.
I suggest that the Government’s position in relation to whether a referendum on constitutional reform is appropriate is precisely a matter that appears to be determined by short-term considerations—alternative vote, yes; reform of this House and fixed-term Parliaments, apparently no.
It is very difficult to deny that the Bill that we are currently considering will introduce major constitutional reform. In paragraph 40 of our report, we refer to the evidence that we heard from Professor Vernon Bogdanor in which he pointed out that the Bill, if enacted, will prevent,
“a newly chosen Prime Minister between Parliaments from going to the country”,
it will prevent,
“a Prime Minister who has a new policy for which he may seek a mandate from going to the country”,
and:
“Most importantly of all, because we could be moving into that situation with our hung Parliaments, it means that coalitions can change in the middle of a Parliament without the people being allowed to pronounce on that”.
This is a major constitutional reform. I am no fan of referendums, but I would welcome guidance from the noble and learned Lord, Lord Wallace of Tankerness, on behalf of the Government, as to what their policy is as to when a referendum is appropriate for constitutional reform and when it is not, and I would welcome an assurance that that issue is not determined by short-term political considerations.
Lord Brooke of Sutton Mandeville
My Lords, I realise that I regard the noble Baroness, Lady Hayter of Kentish Town, as an agreeable ally on constitutional matters, but I was sorry that the noble Lord, Lord Howarth of Newport, felt it necessary to precede her in this short debate. Of course I understand the protocol that he was pursuing, but we always know that the noble Lord, Lord Howarth of Newport, will have spoken before the Minister rises—he is indeed a pillar of the constitution. However, I think that chivalry has a role. At Second Reading, I alluded to the French Revolution. In Burke’s memorable sentences:
“It is now sixteen or seventeen years since I saw the queen of France … the age of chivalry is gone. That of sophisters, economists, and calculators, has succeeded; and the glory of Europe is extinguished for ever”.
I understand why the noble Lord, Lord Howarth, spoke but a little variety in our experience might bring the government Benches back into the Chamber on constitutional matters, as he was wishing earlier, just as everyone who speaks in these debates has their own personal and individual subjective view on how we could increase voter turnout.
An aspect of variety in this speech is that, most unusually, I disagree with the noble Lord, Lord Grocott, whose constitutional views I respect just this side of idolatry. However, I have a reservation on this occasion. He prayed in aid the statistical fact that there would have been four fewer elections since the war under this Bill than factual history produced. I have profound admiration for the maturity of the British electorate. On only one occasion among those 17 post-war elections did they possibly make a mistake, as they themselves may have conceded, by giving more votes to one party and more seats to the other, but that does not mean that we may want more opportunities as an electorate to exercise our maturity or indeed our wisdom.
The reductio ad absurdum to which the argument from the noble Lord, Lord Grocott, could be made subject is that we should hold a referendum on whether the electorate wanted more elections or fewer. There is some polling evidence that they would vote for fewer but that would accelerate the number of referendums we felt it necessary to think that we need.
Lord Hunt of Kings Heath
My Lords, that is an interesting contribution to follow. Like the noble Earl, Lord Onslow, I am pleased to make rather a late entry into your Lordships’ deliberations on this Bill. I am glad that it is on such an interesting matter and I am grateful to my noble friends Lord Grocott and Lord Howarth for their amendments.
As a number of noble Lords have suggested, this is part of what was promised to be a comprehensive package of reforms on the constitution by the Government. We have already had the Parliamentary Voting System and Constituencies Act. We now have this Bill and before too long, although it seems to be a somewhat lengthy time in coming, we are promised the draft House of Lords reform Bill. Like other noble Lords, what I find so puzzling is the piecemeal approach and lack of consistency on the part of the Government to how these different measures are brought before Parliament, then in some cases put to the electorate and in others not so.
We are to have a referendum on AV. We are also promised, in the coalition agreement, a referendum on any changes or amendments to the European Communities Act 1972 where there is a proposal under a treaty to transfer areas of power or competencies. Yet there is to be no referendum on the principle of a fixed-term Parliament, on whether it should be for four or five years, or on reform of your Lordships’ House. I agree with other noble Lords that, arguably, this Bill and the one to come are constitutionally much more significant than changing a voting system from first past the post to AV.
As the noble Lord, Lord Pannick, said—it is worth reflecting on this—the view of the Lords Select Committee on the Constitution is that this Bill owes,
“more to short-term considerations than to a mature assessment of enduring constitutional principles”.
I agree with that. My noble friends Lord Grocott and Lord Howarth are surely right that the period of five years must mean that the voters will find themselves less able to hold the Executive to account. That is therefore of significance. The noble Lord, Lord Brooke, may be right in suggesting that the public might welcome being inconvenienced on fewer occasions. But should that not be put to the public in a referendum? Surely it is the same when it comes to Lords reform. Like the noble Lord, Lord Marks, I think that the issue of Lords reform is highly significant to the debate that we are having.
Lord Tyler
The noble Lord and I both served for many months on the working group chaired by his colleague, Mr Jack Straw, when we looked in very considerable detail at the various proposals for reform of your Lordships’ House. At not one single moment through the whole of that White Paper’s preparation did he or his colleagues suggest that it was necessary for those proposals to be put in a referendum for the public to take a view. Why is there suddenly this interest in making that proposal the subject of a referendum?
Lord Hunt of Kings Heath
It is because it is part of a series of measures of constitutional change. The noble Lord, Lord Tyler, will also know that the intention was always to produce that White Paper, which we did, then to ensure that it was in the manifestos of the three parties at the last election, which it was, then to bring forward proposals. For myself, I believe that a referendum ought to be considered in the context of the current Government’s decision to go for a referendum on AV and their other constitutional changes; and because it is abundantly clear, from all that I have read and heard, that they are not prepared to deal with the issue of powers when it comes to Lords reform.
My noble friend Lord Grocott and I do not always see eye to eye on Lords reform, but I certainly agree with him when he challenges the naive assumption that an elected senate will simply carry on in much the same way as your Lordships’ House does, without any impact on the House of Commons. I do not accept that; an elected second Chamber is bound to impact on the Commons and on our constitution in a major way. In many respects, it will be a new House even though there may well be a transition period between where we are and where we get to in the end. The same applies to the Bill. As a result of the Bill there will be less accountable Parliaments, because they will last longer, and a legislature with a more limited ability to evict a Government who have lost the confidence of the Commons. I say to the noble Lord, Lord Marks, that that is pretty fundamental to me. At the very least the Minister, whom we all value for his contributions on constitutional issues, ought to have a shot at showing where the consistency is between those constitutional changes which are to be subject to a referendum and those which are not.
Lord Wallace of Tankerness
My Lords, we have once again had a spirited and interesting debate with a number of important points made. It is also obvious that some of the issues raised went beyond the question of a referendum and into some of the detail of the different constitutional reforms that have either been debated and passed or are about to come down the track.
Perhaps I might start by taking issue with the noble Lord, Lord Grocott, on a couple of the points which he made at the outset. He said that he hoped that never again would he hear that the Prime Minister was surrendering power or determining the date of the election. While it is the case that the Prime Minister and the Government are, in this Bill, putting forward a date for an election as being the first Thursday in May 2015, and while I hope that the Bill will be passed with that in it, that in itself means that the Prime Minister has surrendered a power because it is not possible—
Lord Wallace of Tankerness
He has actually put it to Parliament for it to support. Parliament will have had to vote that through, as is quite clear because we have other amendments coming down to change that date. Unless circumstances arise that would trigger the mechanisms in Clause 2, the Prime Minister of the day will not have the opportunity to seek Dissolution when it might seem opportune other than to have the election on the date set down in the Bill. He will have surrendered that power.
The Earl of Onslow
The Prime Minister has said, perfectly reasonably, that he thinks his Government will go on until 15 May 2015. He has made a perfectly legitimate choice to the House of Commons, but binding his successors is a different matter altogether.
Lord Wallace of Tankerness
My Lords, my noble friend’s point goes to the heart of whether one should have a fixed-term Parliament, bearing in mind that no Parliament can bind its successor. We debated the arguments for fixed-term Parliaments at Second Reading. I believe that they would ensure that Governments were able to plan, as indeed could Parliament, for a fixed period, and that they would not allow a Prime Minister of the day to seek an opportune moment to go to the country earlier than the full length of a Parliament for partisan reasons. This is an advance on what we have at the moment.
The point I am making is that if the Bill becomes law as it currently stands, the Prime Minister’s hands will be tied. If he saw an advantage some time in the spring of 2014, it would not be possible for him to cut and run because, if the Bill was on the statute book, he would not be allowed to do so. The fact that the Bill ensures that Parliament cannot otherwise be dissolved means, as the noble Lord, Lord Hennessy, remarked at Second Reading, that the Prime Minister has given up an important power.
We could debate whether the electorate have been denied as many chances to go to the polls as otherwise. The crude arithmetical approach—I do not mean crude in a pejorative way—adopted by the noble Lord, Lord Grocott, did not take into account that in no case since 1945 would any circumstances have arisen that would have triggered the mechanisms for early Dissolution or an early election under Clause 2; he assumes that that would never have happened. However, if one looks at history, it may well have happened in 1951 when there was a consensus between the parties that an election was needed. It may well have happened in February 1974. I know that my noble friend Lord Cormack thinks that the then Prime Minister, Mr Edward Heath, was wrong—and, indeed, as the electorate pointed out, he probably was—but there may well have been circumstances then in which it was felt that the Government of the day, and, one assumes, the Opposition, would not have stood in the way of an election, and that could have triggered Dissolution. It may well be that, as a result of that election in 1974, when there was no working majority for any party, another election may again have been agreed.
The point I am trying to make is that you cannot simply indicate that every Parliament would have gone the full five years since 1945 because there may well have been circumstances during these years that would have triggered an election. That is the whole point of the provision of trigger mechanisms, which no doubt the Committee will debate in due course. With issues such as no-confidence Motions and their wording, there is plenty of material and meat for debate.
My noble friend Lord Onslow, in his response to my noble friend Lord Marks, asked whether the Bill would extend the lifetime of this Parliament. My noble friend Lord Marks was right to say that it has the potential, if the power is used, to extend the date by two months in certain agreed circumstances, such as the foot and mouth outbreak in 2001. However, it is important to put on record that the general election last year took place on 6 May and that the first meeting of the new Parliament took place on 18 May; therefore this Parliament can continue until 18 May 2015. The latest date on which an election could be held is 11 June 2015, so stipulating the date of 7 May 2015 does not extend the life of this Parliament. The power is there to be used in exceptional circumstances and is subject to the votes of both Houses, and that is why the Parliament Act would not apply.
The amendment invites the Government to hold a referendum on whether the general election should be held in May 2014 or May 2015, although it makes no provision for the result of a referendum to be reflected in the length of a fixed-term Parliament after that general election. I think we get the spirit of what the noble Lord, Lord Grocott, is moving. My reaction is similar to that of my noble friend Lord Brooke; I am not sure what the public will make of being invited to choose the date of the next general election. I suspect that they would consider that as one trip to the polling station that they did not need to make.
The noble Lord, Lord Grocott, asked my noble friend Lord McNally which issues would be submitted to a referendum, and my noble friend replied:
“the Government believe that Parliament should judge which issues are the subject of a national referendum”.—[Official Report, 24/1/11; col. 671.]
Indeed, it will be possible for Parliament to make that judgment on any legislation.
As to the referendum on the alternative vote, let me try to put into context where we are. I do not make any bones about the fact that in the aftermath of the last general election, when quite clearly no party had an overall majority, there were coalition negotiations in which we tried to seek agreement. This has put in place a Government who are doing things of which my noble friend Lord Onslow heartily approves. I have been involved in coalitions in devolved Administrations, and there is inevitably an element of give and take and compromise in the negotiations. It is quite clear that the Conservatives did not support electoral reform in the shape of the alternative vote, and I do not shy away from the fact that some movement was required on that if there was ever going to be a coalition that would address the immediate economic crisis facing the country. There was therefore an agreement that there should be a referendum on the alternative vote, a policy that had been in the Labour Party’s manifesto. The Conservatives did not espouse a policy for fixed-term Parliaments, but they were prepared to accept it as a part of a coalition agreement because the Liberal Democrats were prepared to accept many other things. This has subsequently laid the foundations to get us out of the economic and fiscal mess bequeathed to the Government.
Both the Labour Party and the Liberal Democrats had a commitment to a fixed-term Parliament in their manifestos, although neither of them said what the period would be—certainly the Liberal Democrats did not say so. We had party policy papers from the past, but we did not say four years in our manifesto. Crucially, neither party said that there would be a referendum on that commitment. Contrast that with the Conservative Party, which indicated that it wanted referendums on British membership of the European Union and ceding further powers to Brussels.
Baroness Farrington of Ribbleton
The Minister is very careful in his choice of words. Can he assist me? What should I say in the referendum campaign to people who ask me whether there will be the same AV system for voting for Members of the House of Lords? If it is not to be the same, what should I say to people who ask me why we should not have the same system for the House of Lords? The fundamental flaw in the Government’s policy is not the options that they choose on an individual issue, but that when they all come together they begin to look like a committee trying to design something but not knowing how many legs it has or whether it has two heads.
Lord Wallace of Tankerness
Far be it from me to suggest how the noble Baroness should answer questions about the merits of the AV system. I am not sure which side she is on but I should like to think that we are on the same side. I cannot answer her question because I am not a member of the committee looking at Lords reform and have not seen its proposals. I genuinely do not know the answer to the question.
I do not think that it would be appropriate to go into the merits of Lords reform in the context of this Bill, but I pick up the point made by my noble friend Lord Tyler that in all the discussions with the previous Government on the committee chaired by Mr Jack Straw, it was never anticipated that there would be a referendum. As was confirmed by the noble Lord, Lord Hunt of Kings Heath, the purpose identified was that a White Paper would propose either a wholly or a substantially elected second Chamber, which would go into the manifestos of the three main parties. Indeed, that proposal was put before the electorate in the manifestos of the three main parties. I did not find it a very convincing argument that there should now be a referendum on Lords reform or anything else just because this Government have brought forward other constitutional measures.
Lord Hunt of Kings Heath
My Lords, the noble and learned Lord will know that the Government’s intention is that when the draft Bill is published, it will then go before a Joint Committee of both Houses for pre-legislative scrutiny. If, as a result of that pre-legislative scrutiny, the Select Committee does indeed report that there are significant constitutional issues involved in the proposals, would the Government then consider a referendum?
Lord Wallace of Tankerness
Tempting though the honeyed words of the noble Lord are—that seems to be the phrase of the night—he knows full well that it would be wrong of me to anticipate a hypothetical situation regarding that committee other than to confirm that it is proposed that there will be a Joint Committee to carry out pre-legislative scrutiny. It would be wrong for me to speculate on what that committee will propose, because that is some way down the track, or what the Government’s response would be.
My noble friend Lord Marks indicated that the previous Government brought forward legislation that fundamentally changed the relationship between the judiciary, the Executive and Parliament, and did so without a referendum. That might be thought to be a far more fundamental and far-reaching constitutional reform than the one we are considering. With the exception of the proposed referendum on the alternative vote, the Constitutional Reform and Governance Act, introduced in this House before the wash-up, had a plethora of constitutional measures, none of which, other than the AV referendum, sought to have a referendum attached to it. While I take on board the strictures of the noble Lord, Lord Pannick, on the Constitution Committee’s consideration and view on this Bill, the committee did not, as he confirmed, recommend that there should be a referendum. If one reads the Constitution Committee report from the previous Session, when I was a member, one detects a great reluctance to go down the route of referendums—or referenda, in deference to my noble friend Lord Cormack.
The items on the list read out by my noble friend Lord Marks, including the abolition of the monarchy and the secession of one of the nations from the United Kingdom, are of a different order from what is proposed in the Bill. This country is, after all, governed by a system of representative democracy in the other place. We in Parliament are basically entrusted with the power to make important decisions on behalf of the people of this country and, in the other place, by the people who are elected to make these decisions as representatives of the people. There must be an exceptional reason to ask people a direct question in a referendum, and I do not believe that the case has been made this evening for that exceptional high threshold to have been reached in respect of the Bill. I therefore urge the noble Lord to withdraw the amendment.
Lord Grocott
My Lords, I really am grateful for the contributions that have been made to this debate, not least because, as I said at the beginning, I felt that I needed to apologise to the Committee for mentioning the word “referendum”. It seems that there is still a fair degree of enthusiasm for talking about it now.
I will not use the term “honeyed words”, but the noble and learned Lord, Lord Wallace, always puts together a strong argument. I must say, however, he was on pretty weak ground when he tried to suggest that it was not the Prime Minister who decided that the next general election will be on 7 May 2015. No less an authority than his own dear leader said:
“We have a Prime Minister who is the first in history to relinquish the right to set the date of the general election”.—[Official Report, Commons, 13/9/10; col. 622.]
Who did set the date of 7 May 2015? If it was not the Prime Minister, who was it? That decision was quite clearly made by this Prime Minister, and the only rights he is relinquishing are those of future Prime Ministers. I suggest taking the Denis Healey advice on that one—when in a hole, stop digging. The Prime Minister made his decision, with the Deputy Prime Minister, for the understandable political reason that they are in a fragile political situation following the general election and they had best try to bank five years in the job rather than risk their term being foreshortened. I really cannot put it any more strongly than that.
The noble and learned Lord suggested—and this may or may not be true; this is, by definition, something that cannot be demonstrated conclusively—that there might have been a few more general elections than I said since the Second World War if the provisions of this Bill had been in operation. He suggested that there might have been scenarios in which a general election would have been triggered according to the provisions that deal with that. I find that argument pretty unconvincing. I am trying to imagine a scenario in the House of Commons when two-thirds of the Members—that means the whole of the governing party and a substantial number of opposition party members—were cheerfully voting together to charge to the polls. It is very difficult to imagine.
The only time when an election would have been triggered under the provisions of this Bill was in 1979, when the Government lost a vote of confidence. I will not repeat too much of what was said on Second Reading, but that seems to have been the perfect operation of our constitutional arrangements. It was beyond improvement. Why on earth we need to start defining that kind of thing in legislation is beyond me. It was a magnificent occasion although, from my perspective, it was also a magnificent defeat. It was the constitution working as it should have done, and we only diminish the constitution by these provisions. But we will come to that later.
I am encouraged by a number of the contributions to this debate that were, on balance, more in favour of acknowledging that this is a fundamental change. Having fewer general elections weakens the electorate—surely we can agree on that. The noble Lord, Lord Brooke, as ever, put forward an interesting tangential view. I agree with him that perhaps the electorate would not give the answer to the question, “How many elections do you want?”, that we might assume they would. They might decide, “We can’t be bothered with another blooming election for quite a few years now”. That is quite possible. However, I certainly think that they should have, as my noble friend said, the right to decide whether, instead of having an election every three years and 10 months on average, there should be one every five years. That, surely, is a fundamental constitutional change. I do not want to misrepresent what the noble Lord, Lord Pannick, said, but I think that he as good as said that, as did a number of other speakers.
I realise that there is a weakness in my amendment, which is what my noble friend Lady Hayter said I might say. It was a pity that she did not go to New Zealand earlier because I would have loved to have heard her views of what the people there felt about changing their electoral system from first past the post and whether it had brought undiminished joy and happiness in the way that people who argue for proportional representation suggest.
Baroness Hayter of Kentish Town
It does bring the likelihood of coalition very much to the fore. Some people favour that and some do not, but undoubtedly in New Zealand the great advantage for those who support coalitions is that abandoning first past the post makes a coalition more likely.
Lord Grocott
I wish even more that we had had the benefit of a contribution from my noble friend and that she had been to New Zealand earlier. Perhaps we should take some advice on that front. However, her fundamental point was that, if you are going to increase the gap between general elections, you should certainly not do so without consulting the electorate.
I do not know whether the noble Earl, Lord Onslow, was supporting the proposal for a referendum but I very much agreed with him on what I think he referred to as the “constitutional madness” of the Government or a phrase of that sort. He said that they have got everything else right—which I obviously do not agree with—but they are getting constitutional reform wrong.
Lord Grocott
Doolally was the word. It is a splendid parliamentary term and I would not disagree with it.
There were many contributions to this debate but the only one with which I strongly disagreed was that of the noble Lord, Lord Marks, as he will not be surprised to hear. From his perspective, he did a good job in trying to persuade us that this is not a fundamental constitutional change, but the balance of the arguments we have heard suggested that it is. The only doubts that everyone has are in relation to there being another referendum, and I freely admit that I would not be absolutely thrilled at that prospect either. However, I hope that this short debate has established in the Government’s mind, even if it has not convinced them, that a lot of people believe that this is yet another major constitutional change. It diminishes the power of the British people by reducing the number of elections. It is surprising that the determination to proceed comes principally from the Deputy Prime Minister, who has made much of the need to reconnect Parliament with the people. How this proposal squares with that is something on which I look forward to hearing an explanation. However, in the mean time, with thanks to everyone who has taken part, I beg leave to withdraw the amendment.
Lord Cormack
Lord Cormack
My Lords, I do not wish to detain your Lordships for long on this amendment. I am conscious that there are other very important debates to come, and I am also aware that there is very important dinner break business.
I tabled this amendment for one simple reason: I am extremely unhappy about the coincidence of elections in May 2015. It seems wrong to have a general election for the United Kingdom at the same time as elections for the devolved Parliament and Assemblies. I feel that very strongly. I have a son who lives in Scotland and I have had considerable experience as chairman of the Northern Ireland Affairs Committee in the other House. I know that in Scotland—and I assume that the same applies in Wales and Northern Ireland—specific and real local issues which are very different from those in the United Kingdom rightly dominate the general election. It seems to me that it would devalue the devolved Parliament and Assemblies to have a plethora of elections on or at around the same date.
I was not an enthusiast for devolution in Scotland and Wales but it has happened. As it has happened, I am very anxious that it should continue to work, and work as well as possible, but I do not believe that it would be assisted by having this plethora of elections on the same day or at about the same time. Since I tabled the amendment, I understand that the Scottish Parliament has decided that it wants to prolong its life by a year. That raises some interesting constitutional issues because there is no second Chamber there to say, “Hold on a minute”. For the Scottish Parliament to prolong its own life, in effect because of what we are doing here, does not do a service to parliamentary democracy either in Scotland or in the United Kingdom in general.
Lord Empey
I am very grateful to the noble Lord for giving way. His very thoughtful amendment is obviously designed to assist the devolved Administrations. There are of course other aspects to the amendment. It would mean that those regions would be in a prolonged state of electioneering for additional months, for obvious reasons, and of course the parties would face additional costs because one election would follow the other. The question would also arise as to whether it would be possible to get the people to come back out again so shortly after being at the polls. Therefore, a series of issues arise here. It is a very thoughtful amendment and I know that the noble Lord has many years of experience in these matters. We are obviously dealing here with very sensitive issues and therefore the Administrations should certainly be consulted to get their views on the ideas that the noble Lord is putting forward.
There is also a possibility that local government elections could collide with some of the elections in certain places. Of course, depending on the circumstances, we also have the ever-present European elections, although they will not clash with that date. I thank the noble Lord for bringing forward the proposal. I think that there should be consultation with those most directly affected to test their views on it.
Lord Cormack
I am grateful to the noble Lord for his speech, rather than his intervention. This is very much an issue that your Lordships’ House should consider, and the Government should give us a very considered response.
There is of course an additional by-product of my amendment. Bringing forward the election by virtually a couple of months would prevent the Prime Minister having the opportunity to prolong the life of the Parliament. That might have the incidental benefit or disbenefit of robbing your Lordships’ House of the ability to reject this legislation, because as it is currently drawn it cannot be subject to the Parliament Act, as we have heard again today. However, that is another point.
I urge the Minister to think very carefully about this. We value our devolved Administrations. Having created them, we have to nurture them, and we have to make sure that the powers they exercise are complementary to the powers exercised by the United Kingdom Parliament and that we do not create unnecessary tension between the devolved Administrations, the United Kingdom Parliament and the United Kingdom Government. Again, I think this is an example of not thinking through sufficiently carefully the consequences of the Bill. More damage has been done by the law of unintended consequences than by any other statute. We are in danger of having another law of unintended consequences. I beg to move.
Lord Howarth of Newport
My Lords, Amendments 6 and 7 in this group, which are in my name, are also intended to try to avert this unhappy clash between elections to the devolved institutions in Scotland, Wales and Northern Ireland and the general election. Mr Mark Harper, the Parliamentary Secretary, giving evidence to the Constitution Select Committee, noted that this clash could have happened anyway under existing legislation. However, the Bill makes it inevitable that the clash will occur in 2015 and every 20 years thereafter, all things being equal. It adds injury to insult. The insult has already been in the Government’s insistence that the AV referendum should be held this year on the same day as the elections to the devolved institutions. They ignored the complaints about that from Scotland, Wales and Northern Ireland, and they ignored the pleas from both Houses of Parliament not to bring about that situation. It is contemptuous of the devolved institutions and those nations.
The Government of the United Kingdom should show better respect towards them. They appear to treat elections to the devolved Parliament and Assemblies as being of no real importance. Yet, the Liberal Democrats, before the general election, proposed that there should be regionally elected assemblies in England, and a number of Conservatives have argued seriously that there should be an English Parliament. Do they believe in devolution? Do they believe that there should be a mutually respectful relationship between the Parliament of the United Kingdom and the devolved Parliament and Assemblies or not? I fear that having the elections on the same day in 2015 and periods thereafter will wreck the devolved elections. Candidates in those elections ought to be judged on their own record and promise in the important fields of government that are devolved and the important political service that they give. They should not be caught up in the backwash of the general election.
Professor Padgett, giving evidence to the Constitution Select Committee, observed that in Germany, where elections take place on the same day, federal issues and campaigns have, as he put it,
“totally engulfed the regional campaigns”.
Dr Milner, also giving evidence at the same session, noted that in Sweden, where national, regional and local elections coincide on the same day, there is high turnout—that is a merit—but that people gave very little attention to the issues in the regional and local elections. On the other hand, in Norway, where regional and local elections take place at mid term of the four-year cycle of national elections, the focus is truly on the regional and local elections when they happen. He also made the worthwhile point that more frequent elections are good for democratic engagement and democratic education.
There will, inevitably, be great confusion if all these elections are held on the same day, fought on different boundaries, possibly on different voting systems and with different campaigns for the different elections. On the administrative side, returning officers have complained that it will be very difficult for them to acquit themselves of their responsibility. Mr Harper said to the Select Committee that the question of coincidence of the dates of the elections for the devolved Assemblies and the general election was a bigger question than the clash with the AV referendum. As of early last November, when he gave that evidence, he said that he was considering what the appropriate solutions might be. He said that,
“we then intend to have a proper consultation process”.
Of course the consultation process should have taken place before the Bill was published. He said that he hoped that an agreed way forward would be implemented in the Bill.
I should be grateful if the noble and learned Lord would give us a report on what has transpired in these consultations and what the Government intend. Is it, as the noble Lord, Lord Cormack, suggested, correct that the Government have been tempting Members of the Scottish Parliament to have their term in office extended to five years, or do the Government envisage that the dates of the elections to the Scottish Parliament and the Assemblies might be shifted to a lesser degree? How can it be that a Government who believe in fixed-term Parliaments are mucking about with the fixed terms that have already been legislated for the Scottish Parliament and the other Assemblies? Will we see government amendments on this? If so, will that be at Committee stage or on Report?
The amendment proposed by the noble Lord, Lord Cormack, is preferable in the sense that it would shift the proposed date of the Westminster elections and does not incommode the devolved elections. My own amendments equally involve some shifting of the dates of the Westminster election and my Amendment 6 would bring it forward to October 2014. If we are to have fixed-term Parliaments there is no reason why we should not have elections in October rather than in May. I look forward to hearing the Minister’s response.
Lord Hunt of Kings Heath
I shall make a short intervention. This has raised an important point. There is no doubt, as was said at Second Reading, that this Bill leads to the real possibility of difficulty every 20 years in the close timing of the Scottish Parliament and Welsh Assembly elections on the one hand and the Westminster Parliament elections on the other. All three elections are specified to occur in May under normal circumstances. I understand that the Government are involved in consultations with the devolved institutions on that issue. It would be useful if the noble and learned Lord could report to the Committee on the progress of those negotiations, particularly if there is any potential for amendments to be tabled at later stages.
The noble Lord, Lord Cormack, and my noble friend Lord Howarth have each put forward a different approach. They may have noticed our Amendment 52, which suggests a third approach. It states that a,
“general election shall not be held within 30 days of a general election to the Scottish Parliament, National Assembly for Wales or Northern Ireland Assembly”.
Today’s debate will be helpful in allowing us to discuss this matter more fully later.
I agree with my noble friend Lord Howarth and the noble Lord, Lord Cormack, that there should be stand-alone elections in the devolved Administrations. As my noble friend pointed out, we know the problem of holding different elections on the same day with different voting systems. I should have thought that it would be foolish to repeat the problem that we have seen in the past. I hope that the Minister will be sympathetic and at the very least update us on the discussions with the devolved Administrations.
Lord Wallace of Tankerness
My Lords, I thank my noble friend Lord Cormack and the noble Lord, Lord Howarth, for tabling the amendments and giving me an opportunity to update the Committee further to what I said on the Second Reading. My noble friend Lord Cormack asked the Government to think carefully about this and I confirm that we have done so. As was indicated from the evidence given by my honourable friend Mr Mark Harper to the Constitution Select Committee, this is an issue that we have considered and on which we have been in consultation.
I have much sympathy for the points that have been made and the underlying purpose of the amendments in trying to separate out the dates of the 2015 United Kingdom general election and the general elections to the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly. As has been indicated, it is not solely as a result of the Bill that a conglomeration—if that is the right word—of elections could happen. Indeed, it would happen only once every 20 years but it so happens that the first time would be in 2015. The Bill has given advance warning. Clearly under the present system, towards the end of the five years for which this Parliament was elected, a decision could have been taken to have an election on 7 May 2015 and there would not have been the opportunity to have the same kind of consideration and consultation that we have had.
One reason why the Government would not favour the proposal in the amendment tabled by the noble Lord, Lord Howarth, is that all three devolved assemblies will not always hold their elections on the same day. I think that it has always happened to date that the Welsh Assembly and the Scottish Parliament have held their elections on the same day, but the Northern Ireland Assembly has not always done so. I can check but I understand that this coming May is perhaps the first time that all three have coincided on the one day. I also take the point made by the noble Lord, Lord Empey, that two months may not be a sufficient gap between the elections, if indeed the purpose of separation is to ensure that one is not overshadowed by the other. Apart from the stresses and strains that two months might put on those who would be in permanent campaign mode, it might be difficult even then to disentangle the relevant issues as to which was devolved and which was reserved to the Westminster Parliament.
Lord Hunt of Kings Heath
I am sorry that the noble Lord, Lord Marks, is not in his place because I presume that on that basis he would argue that, since the proposal might be to extend the devolved Administrations from four years to five years, it should be determined by referendum.
Lord Wallace of Tankerness
My Lords, I do not think that a referendum would be appropriate in those circumstances, not least because people go to the polls on 5 May, which is about six weeks away, and we could not hold a referendum in that time. It is important that people know the term of office of those they elect on 5 May. That is why we wish to bring forward that amendment in Committee. We await the outcome from the Welsh Assembly.
Northern Ireland Office Ministers are conducting separate discussions with the parties in Northern Ireland on this issue and have concluded that it would be better to await the outcome of the combined polls scheduled for May 2011 before taking a decision on whether special provision will be needed for Northern Ireland.
For the reasons I have outlined, and in the light of the fact that we have been working not only with the parties but with presiding officers in Scotland, Wales and Northern Ireland, I hope that the concerns that legitimately motivated these amendments have been addressed, and I invite the noble Lord to withdraw his amendment.
Lord Cormack
My Lords, never has a probing amendment produced more in the way of disturbing information from my noble and learned friend. Anyone who knows him likes him. He is an extremely agreeable man who was rightly very popular in the other place and is clearly popular in your Lordships' House, but if ever there was an illustration of the maxim of my late father that you should think before you do anything, it is the response that we have just heard. We are now going to have discussions in Scotland to see what the implications will be.
Lord Wallace of Tankerness
There are no discussions about what the date will be for what will no longer be the 2015 election. We have said that in the longer term there ought to be discussions to avoid a recurrence of the clash. We are not at the moment prepared to put the Scottish Parliament on to a permanent fixed five-year term. It is about the longer term that there will be discussions, but I make it clear that they will not be with regard to the date for the election that would otherwise have been on 7 May 2015. I hope that my noble friend will agree that that is something that should not be rushed into and that it is proper that there is consultation.
Lord Cormack
Yes, of course, but I respectfully say that there should have been consultation before we got into this mess. As I listened, I could not help but remember a quotation from WH Auden, writing just before the last war, who said that every great drama has two acts. In the first, the mistake is made, and in the second people discover that they have made a mistake. I could not help but think that there is a lot of that here. If only there had been consultation with the devolved institutions first. Then there could have been a proper working out of the most sensible date on which to have these various elections. However, the probing amendment has worked to some degree, and in the spirit of conciliatory unity which is so prevalent in the House today—I am delighted by that—I beg leave to withdraw the amendment.
Transfer of Functions (Dormant Accounts) Order 2010
20:26 - Division on Motion. - Ayes: 102 / Noes: 159 - Motion disagreed.
Lord Hunt of Kings Heath
To resolve that this House regrets that the Transfer of Functions (Dormant Accounts) Order 2010 (SI 2010/2967) makes a very limited amount of money available to the big society bank in comparison to the cuts being made to voluntary organisations and youth services.
Relevant document: 19th Report from the Merits Committee.
Lord Hunt of Kings Heath
My Lords, I make it clear that I support the use of dormant bank accounts for socially useful objectives. It was the previous Labour Government who took through the Dormant Bank and Building Society Accounts Act 2008 to make provision for the Big Lottery Fund to distribute dormant account money to meet expenditure that has a social or environmental purpose. The big society bank clearly originates from those proposals. We proposed then that dormant money would be distributed to meet expenditure on or connected with the provision of services to support opportunities, to meet the needs of young people, to support the development of individuals’ ability to manage their finances, or to a social investment wholesaler. Let me say that we welcome the Government’s decision to continue the work of the social investment wholesale bank. However, it is currently unclear how the big society bank will be set up and on what terms it will receive capital from UK banks. I hope the Government will be able to explain how they will guarantee the social mission of the bank and ensure that it does not become just another mainstream lender.
There are serious questions about how the big society bank will function. What form will the capital from the Royal Bank of Scotland, Barclays, HSBC and Lloyds take? Will it be legally incorporated? What working rate of return are the Government expecting to provide to the banks? What interest rate will the big society bank charge? Will it be allowed to issue bonds and raise additional wholesale finance? What kind of social enterprise will the big society bank favour? Will the big society bank have paid employees? What salary levels will be paid? What bonus structures will be used? When the funds are passed to the community groups and voluntary organisations on the ground, will they represent the total sums of money put into the big society bank?
I also ask the noble Lord what he has to say in response to your Lordships’ Merits Select Committee, which reported on this statutory instrument. He will know that it made the comment:
“The infrastructure of the Big Lottery Fund is already up and running, and using it as a conduit offered potential economies of scale”.
The Merits Committee wanted to know, and invited the House to ask, whether the policy proposals that the Government are bringing forward will result in an additional administrative cost. I would be grateful to the noble Lord for his response to that.
Going beyond the specific questions that I am asking the noble Lord, there is a more substantive issue at the heart of my Motion. In the face of tens of billions of pounds in spending cuts, which are more likely to be cut from public service contracts that impact directly on the voluntary sector—it holds many of those contracts—the limited amount of money that the big society bank will receive is very small beer. In fact, it is hard not to conclude that the big society is a misnomer for what this Government are all about. They are embarking on a destructive assault on our welfare state. It is clear that the voluntary and charitable sectors are taking a massive hit as a result.
Over the past few weeks, I have mentioned the situation of Birmingham on a number of occasions in your Lordships’ House. In Birmingham, the CAB is threatened with closure and it is not alone. Many of the city’s voluntary services are similarly threatened as a result of decisions made by the Conservative-Liberal Democrat council. At the same time, we are seeing large reductions being made in legal aid services. All those decisions will have a dramatic impact on the most vulnerable people living in Birmingham. What is happening in Birmingham is happening up and down the country. Libraries, children’s centres, the youth service and the charitable sector—all are being adversely affected.
When the Government’s big society policy concept emerged, the role of the voluntary sector was said to be crucial. Since then there have been various interpretations of what the big society has meant but I believe, from my reading of the various enunciations from Ministers, that the voluntary sector is still at the core of what it is about. I support and embrace the role of the charitable and voluntary sector.
When Labour was in office we took important steps to support the charitable sector and volunteering. But no one can volunteer at a library, the CAB or a children’s centre if it is closed. No wonder many charity heads have warned that the speed and depth of the cuts imposed by local councils make the big society impossible to deliver. The director of Eaves and the POPPY Project, Denise Marshall, said:
“David Cameron, I get what he’s trying to do … but he needs to understand that groups like mine can’t function without that funding. We can’t go from year to year hoping that people will fill our begging bowls. We have to have proper funding … domestic violence victims don’t storm the town hall saying don’t close down the refuge because they can’t”.
She said that the Government,
“needs to understand that and so do the others who are in charge of this funding”.
That was only four weeks ago. She concluded:
“We are going to really mess up more services and we’re going to make women’s lives more difficult”.
The reality is, as the Association of Chief Executives of Voluntary Organisations has estimated, that the voluntary sector will face a reduction in funding of £1.14 billion this year, rising to £3.1 billion per year by 2014. The Society of Local Authority Chief Executives has said that,
“in the short term, there are real fears that spending cuts will impact adversely on the capacity of the charitable/not-for-profit sector. Far from taking on more, and providing capacity to enable a shift away from the state, it may be able to do rather less”.
Baroness Butler-Sloss
My Lords, I have put down a take note Motion so perhaps your Lordships’ House will permit me to go next. I have to declare an interest as a member of the Merits of Statutory Instruments Committee, which is why I have read this order, which I support. I congratulate the Government and I support them rather more perhaps than the noble Lord, Lord Hunt of Kings Heath, has done.
I have absolutely no intention of suggesting that there is anything wrong with this order, nor do I intend to go outside what might be called the parameters of the order, unlike the noble Lord, Lord Hunt of Kings Heath. However, there are some points and questions that need to be asked within the confinements of this order, which provides for a very sensible amendment of the 2008 Act. The questions that I would like to ask are based on the fact that the present position is very vague and it would be helpful to know rather more as to how this new bank is intended to work.
The present position, under Section 16(1) of the 2008 Act, is that the purpose is to be social or environmental. Under Section 18(1), the distribution will focus on providing places to go for young people. That is one of the main objectives. From what I have read of what has been said recently about the proposed big society bank, neither of those matters has figured. It is important to go back to see what the purpose of the Act was to which this order relates. Is one of the destinations of the big society bank to be providing places for young people to go to? How will the bank apply social or environmental purposes? Who will be the recipients? What will be the spending priorities? How will the bank work as the “social investment wholesaler”—what a terrible phrase—in investing and managing financial intermediaries? What are the financial intermediaries intended to be?
The noble Lord, Lord Hunt of Kings Heath, and the Select Committee on Merits also raised the issue of the additional costs. Undoubtedly, the current structure is set up under the Big Lottery Fund. Consequently, any move to the bank is going to cause some additional costs. How are those going to be met? Is it likely that the administration will be so expensive that the £100 million or more from the dormant accounts—I hope those will provide much more than £100 million—will not cover it? One does not want too much of that spent on the additional cost of this big society bank. I am hoping that those costs can be kept to a minimum, but I am somewhat concerned about the movement from the Big Lottery Fund to this new bank.
I would also be interested to know to what extent, if any, there will be any form of parliamentary scrutiny of the bank’s activities. It would be helpful if Parliament had the opportunity to know what was going on and to express a view. I do not wish to comment on what the noble Lord, Lord Hunt, has said about the wider picture, but we ought to know rather more about how the big society bank is going to work within the confines of the 2008 Act. The debate on the Bill in this House undoubtedly raised considerable expectations and it is crucial that the big society bank should fulfil them.
Lord Newby
My Lords, it is a great pleasure to return to the joys of the Dormant Bank and Building Society Accounts Act 2008. I may be the only person in your Lordships’ House who sat through the entire proceedings of that Bill.
That was a fascinating process because the original purpose of the Bill was to do what the Government plan to do, namely to make the funding available from bank accounts to a new social investment bank—the brain-child of the current leader of the Labour Party. When it became clear that some new funding was available, other members of the Cabinet thought it might be a good idea if they had a share. Therefore, a new purpose was added to the Bill to make expenditure available for the provision of services for young people—Ed Balls’ proposal that every community should have a new youth club. This was the second purpose inserted after the first purpose. The third purpose about financial literacy was inserted by the Treasury because it was fed up that it was not getting a look-in. So we ended up with an Act which was a muddle. It had started with a simple purpose and ended up with three purposes.
The relevance of that to the report of the Merits Committee is that it explains why the Big Lottery Fund has a role in the Act as it is currently set out. If you were going to have, as was originally envisaged, part of the funding going to establish a national network of youth clubs, somebody had to be in charge of allocating the money for those youth clubs. And if you were going to make money available for financial literacy, somebody had to decide where the money went. It was agreed that the Big Lottery Fund was a logical home for that. It was never intended that the Big Lottery Fund would have any role to play in terms of the social investment wholesaler because that is not what it does. I suspect that the only role of the Big Lottery Fund now, given that the first two purposes have fallen by the wayside and we have got back to the original intent of the Bill, is to decide who the social investment wholesaler will be. Someone has to do that, so it has to be either a civil servant or the Big Lottery Fund. I doubt very much whether there will be any additional cost involved with that.
Regarding the original purpose of the Bill, I believe it is extremely important that the big society bank is established. Whether you agree with the cuts or not, it is undoubtedly the case that many public services are being better delivered today than they were yesterday because they are being delivered by social enterprises. I have referred in previous debates in your Lordships’ House to Sandwell healthcare services, which provide facilities in the West Midlands for half the price previously provided by the local authority. I know this because the chief executive came before the All-Party Parliamentary Group on Social Enterprise, which I chair. When asked how Sandwell was able to do that for half the price, he said that nobody is paid any less but some simple things have been done such as reducing the average number of days’ sick leave from 32, when the services were administered by the local authority, to two. He has made huge efficiency savings by motivating staff and freeing them from a bureaucratic environment.
The problem with the social enterprise sector is that it is full of organisations such as Sandwell healthcare services doing tremendous things but on a small scale. One of the main reasons they are not doing things on a large scale is that it is very difficult to get access to finance. Very often social enterprises do not have the business record because a lot of them are relatively new, nor do they have assets against which a loan can be secured. Therefore, the mainstream banks do not lend to them. The big society bank, with the combination of funding from this Act and from the high-street banks, will for the first time provide a significant pool of capital for social enterprises.
As I say, whatever you think about the cuts, having more social enterprises will enable public services to be delivered more efficiently and more effectively than is often done at present. Therefore, I strongly welcome the establishment of the bank. This is a minor order that helps clear the way for that and it has my full support.
Baroness Pitkeathley
I want to speak in favour of the Motion proposed by my noble friend Lord Hunt. I declare two interests. Until 31 March 2011, I am the chair of the advisory body to the Office for Civil Society, which has responsibility for the big society bank. I was also a member of the original Commission on Unclaimed Assets, chaired by Sir Ronald Cohen, so in that sense I go even further back than the noble Lord, Lord Newby.
I want to remind your Lordships of what Sir Ronald said at the time of the launch of the Commission on Unclaimed Assets, which was set up originally in 2005 and launched in 2007. He said:
“As for the money that remains unclaimed, we must never forget that this is neither the Government's nor the banks' property - but the people's money … the money should be spent in order to have the biggest impact possible on deprived communities in Britain”.
Further, it was pointed out that,
“the unclaimed asset funds could help to create new and profitable investment opportunities within local communities”.
That was the spirit of the Commission on Unclaimed Assets and its purpose was that it would support the local voluntary and community sector. If that was the purpose then, how much more important is that purpose now when, as we all know, the voluntary and community sector is somewhat in difficulties because of the withdrawal of funding?
Lord Beecham
My Lords, I must apologise for not being in the House when my noble friend Lord Hunt opened this debate, especially as he was kind enough to make reference to me subsequently—although I did hear that.
I want to take up one point, on which my noble friend Lady Pitkeathley touched almost in passing, while welcoming the principle of the order and of the bank and recognising that there is certainly some potential for helping the voluntary and community sector. She mentioned in general the terms under which investments and loans will be made. Can the Minister give us any assurances about that? Sir Ronald Cohen, who is a very enthusiastic supporter of the principle, has suggested that interest will be at commercial rates. If that is the case, is there not a danger that voluntary organisations, which after all will be seeking investment anyway because they are having some financial difficulties, will find it difficult to proceed when they are being expected to pay commercial rates of interest on loans? It would be different if grants were being made, but my understanding is that this is to be a rolling investment fund and that it will be a question not of grants but of loans. It would be helpful if the Minister were able to give an indication on that issue.
Lord Taylor of Holbeach
My Lords, I am sorry if my slowness in rising rather gave the impression that the debate would be longer than I had imagined. I am not reluctant to spring to my feet for I believe that this is a very welcome debate and thank all noble Lords who have participated in it, in particular those two noble Lords whose Motions are before us this evening, because it gives me an opportunity to expand further on the Government’s plans and actions deriving from the order which is the debate’s subject.
The noble Lord, Lord Hunt, has expressed concern over the current challenges facing voluntary, community and social enterprise organisations. I share the view that the VCSE sector plays a crucial role in our society and economy, but as I will make clear in these closing remarks, the big society agenda, with its emphasis on social action, community empowerment and public sector reform, will open up many new opportunities for these organisations to thrive in the future. This Government are taking a number of measures which will directly support the sector through this difficult time in the short term, but which will help to ensure a more secure and stable future in the long run. Those measures include the setting-up of the big society bank.
I join the noble and learned Baroness, Lady Butler-Sloss, in welcoming the coming-into-force of the transfer of functions order. As the noble Lord, Lord Hunt of Kings Heath, will know, and as he said, this derives from legislation enacted under the previous Government which we supported. It marks an important step on the way to meeting the Government's ambitious plans for a big society bank. With this order, the Minister for the Cabinet Office can now direct the Big Lottery Fund on how to use England’s portion of released dormant accounts to achieve social benefits in line with the provisions of the Dormant Bank and Building Society Accounts Act 2008.
As the Prime Minister announced in July 2010, the Government intend to use all the dormant accounts money available for spending in England to capitalise an independent big society bank, or—I apologise to the noble and learned Baroness for the phrase—social investment wholesaler. The role of the big society bank will be to help build a sustainable social investment market, making it easier for voluntary, community and social enterprise organisations to access the finance and advice that they need. Although a nascent social investment market has emerged over the past decade, it remains small and fragile. Many of these organisations tackle our most intractable social problems and deliver vital public services. They empower local communities and work with the most marginalised members of society, yet still struggle to access the finance they need to grow and develop.
The big society bank will work with a range of social investment intermediaries to increase the overall pool and variety of capital available to front-line organisations. In the long term, our vision is of a fully functioning and more sustainable social investment market which will enable voluntary, community and social enterprise organisations to grow and develop, and to become more resilient.
There are many ways in which the bank will work to achieve this. For example, I believe that there are people and organisations, including the public sector, willing to invest in social impact. There are also organisations trying to create that social impact but few mechanisms to bring the two together. Some new ideas include social impact bonds, community bonds and community share schemes. One of the things the big society bank might do is support innovation, particularly proposals that find new ways of matching the needs of front-line organisations with potential providers of capital.
There are also organisations—community groups, social enterprises, charities—which are viable businesses but are unable to access working capital or capital to buy new assets from commercial banks. The big society bank could increase the flow of capital via intermediaries which specialise in affordable loans to these institutions. And for organisations which are looking to expand and grow, the big society bank will look to increase the availability of risk capital, where the investor takes a stake in the future success of the organisation.
In refocusing the priorities of dormant accounts allocation, we are not downgrading the importance of youth and financial inclusion. We would like the bank to include both themes within its investment mandate and believe that far better outcomes can be achieved through the social enterprise and community-led solutions that the bank will support. I am grateful for the support of my noble friend Lord Newby and the noble learned Baroness, Lady Butler-Sloss, in recognising that the Government’s proposals build on the original Act in a positive way.
We recognise that the current economic situation and the need to tackle the deficit create a challenging and sometimes painful environment for many organisations, including those in the voluntary, community, charitable and social enterprise sectors. We also understand that organisations might have difficulties managing the transition to a tighter funding environment and getting to a position where they can take advantages of the future opportunities presented by the big society agenda. This transition is more difficult in an environment than either the Government or the previous Government would have wished.
This is why we have set up a £100 million transition fund to give a lifeline to those VCS organisations that are delivering front-line services and are affected by reductions in public spending. The fund provides grants of between £12,500 and £500,000 to help organisations make the necessary changes in order to thrive in the long term and take advantage of the opportunities presented by the big society and public service reform. Already, following a large number of applications, 18 early transition awards have been made and many hundreds more will be announced in the coming weeks and months.
We will also shortly be announcing a programme of work to give front-line organisations access to support and expert advice beyond funding matters that will enable them better to meet their changing needs. We also want to help the sector access a wider range of funding to increase its strength and resilience for the long term. That is why we are aiming to capitalise a big society bank to increase levels of capital investment in the sector and we are also reviewing ways to incentivise further philanthropy and charitable giving. We are committed to opening up public sector delivery so that voluntary, community and social enterprise organisations can compete for national and local government contracts and access a greater proportion of government spending.
We have established a red-tape taskforce, chaired by my noble friend Lord Hodgson of Astley Abbotts, to remove the barriers that get in the way of sector involvement. It is looking at a range of issues that we know cause difficulties for voluntary organisations, including charity law, licensing, insurance and funding, and will be reporting in May. We have also introduced new powers to help communities save local facilities and services threatened with closure and give the communities the right to bid to take over local state-run services.
We are working hard to set up a big society bank. Not surprisingly, this is a complex process. None the less, by April of this year, we aim to have arrangements in place so that we are able to start making early investments as soon as the first round of dormant accounts money becomes available in the summer. It will take longer for an independent big society bank to be set up and fully operational but we are already in the process of seeking the state-aid approvals necessary to capitalise it with dormant accounts. We have been delighted that Sir Ronald Cohen, previously head of the Social Investment Taskforce, and Nick O'Donohoe, formerly head of global research at JP Morgan and head of its social finance unit, have volunteered to develop a proposal for an independent big society bank. We look forward to working with them and other social investment experts. In addition to the investment from dormant accounts, as the Prime Minister announced on 9 February as a part of a broader package, four of the UK's largest banks have agreed to invest a further £200 million in a fully fledged big society bank. We expect that the final bank will be a lean organisation, and I assure this House that we are conscious of the need to keep any administrative costs to an appropriate level.
In this way, with the combination of dormant accounts money and the support of the banks, we expect that the big society bank will be capitalised with at least £300 million over the next two years, with further injections of capital as more money is released from dormant accounts. This is a significant sum, especially when we consider that in 2010 the entire amount of social investment in the UK was less than £200 million.
In addition, we expect that the bank will attract increasing levels of private sector investment over time, generating hundreds of millions of pounds for charities, social enterprises and voluntary groups, and creating a strong, vibrant and sustainable social investment market in the future.
I will try to answer some of the questions that noble Lords have asked. The noble Lord, Lord Hunt of Kings Heath, asked whether the bank would be able to raise capital, what rates it would set and the salary levels. The big society bank will be able to raise capital although it is unlikely to be able to do so in its first few years. The details of the BSB investment will be decided by its management. They will have to be demonstrably in keeping with its social mission. Salaries will be set in line with the sector, but I know that Sir Ronald Cohen and Mr O'Donohoe are giving their services free to the project to set up the bank.
The noble Lord also asked what form capital from the bank will take. That is being negotiated with the banks and we want to ensure that the terms enable the BSB to deliver its social mission. How will the social mission be guaranteed? The BSB is being set up as an independent, non-public organisation, but we have made it clear that we will direct dormant accounts only to organisations that have a clear, protected social mission in their founding articles, and governance accountability arrangements to protect that mission.
Rather predictably, the noble Lord also asked about the citizens advice bureau in Birmingham, because we have debated that in another context and I suspect that we might debate it further. Perhaps I can put that decision in context. As the noble Lord will know, the Government have a strategy for basing these decisions at a local level. Many councils have made substantial savings through increasing efficiency in back-office functions rather than passing on cuts to the VCSE groups which, as the noble Lord admits, do excellent work. The Government have set out reasonable expectations of councils, challenging them to work with the sector and organisations and not to pass on disproportionate cuts. We expect that from local government throughout the country.
The big society is not a cover for cuts. The challenge that we face in terms of public finance cannot be ignored, but the big society was an approach developed before the recession which is at the heart of the Government's programme of reform. The big society will give individuals and communities a role in shaping the provision of services and give more power to communities rather than central government.
The noble and learned Baroness, Lady Butler-Sloss, asked particularly about parliamentary scrutiny. The aim is for the big society bank to be independent in order to have flexibility to respond to the market, but our key criteria for directing BSB money include robust governance and accountability arrangements, which will include the principle of transparency. Parliament will, in the normal way, be able to scrutinise government spending directions of dormant accounts and in that way scrutinise the whole function of the big society bank as the recipient of those funds.
The noble Lord, Lord Newby, said that in many ways the Government had gone back to the original Bill, and showed how the social enterprise sector can be an effective deliverer of community services and how these proposals will provide much-needed funding.
The noble Baroness, Lady Pitkeathley, asked a number of questions, but I can reassure her that the whole purpose is to use this money—people's money, as she said—to support the voluntary, community and social enterprise sectors. She is right that the big society bank is not the whole solution, but it is part of the development of this sector, which I know she believes in greatly.
The noble Lord, Lord Hunt of Kings Heath, seeks in his Motion to place the Government’s proposals in the context of the spending review and ignores the state of the public finances under the previous Government, which made budgetary reduction a vital part of the coalition’s strategy for rebuilding the economy. He has also chosen to ignore not just the degree to which the Government have sought to protect the VCSE sector but the measures, of which this is part, to provide it with the opportunity and ability to play its part in reshaping the economy for the future.
This has been a useful debate and I hope that I have been able to reassure the House that this instrument is being used to positive effect. I would like to thank the noble and learned Baroness, Lady Butler-Sloss, for tabling her Take Note Motion and her support of the order. In the light of this, and my comments, I hope that the noble Lord, Lord Hunt of Kings Heath, will feel able to withdraw his Motion of Regret.
Lord Beecham
Before the noble Lord sits down, will he comment on the rate of interest that the bank might be deploying and whether it is likely to be a commercial rate?
Lord Taylor of Holbeach
The bank will be operating in the market, and it is unlikely that the bank is going to be able to provide finance at a subsidised rate. None the less, the most important thing to secure is the availability of the funding. That is the direction of travel of the bank at this time.
Lord Hunt of Kings Heath
My Lords, I am very grateful to the noble Lord, Lord Taylor, for his response and for some of the details he gave to noble Lords. However, from what he said, it seems that it will be some months before money starts to flow and the amounts seem likely to be modest. His contribution was, as ever, meant to be as constructive as possible—until at the end when we heard from him about the deficit and the financial position of the public sector. He made no mention of the global financial context in which the last Government had to move to protect the economy. Also, the Government do have a choice—they can slavishly carry on as now, or, as I hope, they can take steps to deal with faltering growth in our economy; establish a plan to create jobs in the private sector to deal with the crisis of youth unemployment; and take steps to support the voluntary and charitable sector.
I appreciated the comments of the noble Lord, Lord Newby, and his tour de horizon on the passage of the 2008 Act. I agree that social enterprises are invaluable and that we want to support the sector. I also agree with his point about access to finance. However, as my noble friend Lady Pitkeathley says, the voluntary and charitable sector is running short of cash now. At the very least, it needs an injection of resources and time to adapt. As my noble friend Lord Beecham suggested in his question about commercial rates, that is highly pertinent. I know that access to capital is an issue, but when very little revenue is available from traditional sources of funding, the cost of capital becomes a major inhibition on the very organisations the noble Lord is relying on.
The noble Lord is ambitious for the future, for the proposals contained in the order and for the role of the voluntary and charitable sector. I applaud that ambition. However, many of the organisations on which he wants to rely are not going to survive. That is why I continually come back to the situation of the CABs in Birmingham. Of all the organisations on which one would have thought the Government would have depended to provide that kind of infrastructure support, I cannot think of a more important organisation than the CAB. Indeed, that is why in the Public Bodies Bill we are seeing the CAB being asked to take on the responsibilities of a number of consumer organisations. How can the Government say they are supporting and relying on the sector when a key part of that structure in this country’s second city is under threat of complete closure?
I respect the noble Lord, Lord Taylor, enormously. We support the use of dormant accounts but the context in which we find ourselves is that the very organisations on which the Government depend so much are being obliterated by the impact of the cuts taking place. I commend the Motion.
Transfer of Functions (Dormant Accounts) Order 2010
Baroness Butler-Sloss
That this House takes note of the Transfer of Functions (Dormant Accounts) Order 2010 (SI 2010/2967).
Relevant document: 19th Report from the Merits Committee.
Motion not moved.
Fixed-term Parliaments Bill
(13 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Howarth of Newport
Lord Howarth of Newport
My Lords, I hope that Amendments 5 and 9A will be of some interest to the House. They would introduce a flexibility to hold a general election at any time in the fifth year of the Parliament. Amendment 5 deals with this particular Parliament and Amendment 9A deals with subsequent Parliaments. They still provide for Parliament to be fixed, but with flexibility between four and five years. They recognise that there are important objections to the term of Parliament being fixed for a full five years. The objections, which have been explored in our debates earlier in the day, are that accountability is diminished, that elections would take place less frequently, that the accountability of Members of Parliament to electors is therefore reduced and that the accountability of the Government to electors is reduced. Furthermore, if you insist on fixing the term of Parliament for a full five years, you are liable to find that you require an exhausted Government to totter on into a fifth year and probably expire at the end of it.
My amendments also recognise the widespread view within our political culture that, assuming that a Parliament is still viable, for the Prime Minister to call an election before five years are up is opportunistic, exploitative and an abuse. On the other hand, it is widely accepted that to call an election after four years have passed is acceptable. We saw that in the Parliaments of 1979-83, 1983-87, 1997-2001 and 2001-05. I do not think that anybody complained when either Mrs Thatcher or Tony Blair called an election after four years on those occasions. It was regarded as entirely within the reasonable understanding of our constitution.
These amendments would allow a continuation of the four-year norm—it has been typical that Parliaments have lasted for around four years in the post-war period— while respecting the principle of the five-year maximum which was legislated for in 1911. When Mr Asquith proposed that legislation in 1911, he envisaged that while there would be a maximum of five years the probability would be that elections would tend to take place some time around the end of the fourth year, or not long thereafter. That was prophetic and has proved indeed to be the case. These two amendments would simply institutionalise what has become convention and practice and, on the whole, has been found to be satisfactory by the people of this country. I beg to move.
Lord Brooke of Sutton Mandeville
My Lords, I shall be extremely brief but I told myself that if anybody else brought Mr Asquith into the debate yet again I would take advantage of his reappearance to make a single point. In the Earl of Oxford and Asquith’s memoirs, he describes the debate within the Liberal Cabinet in the period leading up to the First World War in relation to the Marconi scandal in which the then Attorney-General was somewhat embarrassed by his behaviour. I think that it was on the issue of shares. I am astonished that the Prime Minister put this into his memoirs, but the outcome of the Cabinet discussion was that they were at no real parliamentary risk because it was absolutely clear that the Conservatives would be too stupid to take advantage of it. There was one dissenting voice, which was Winston, who had of course once been a Tory.
The Opposition say, again and again, that the purpose of the Bill is to provide glue in the coalition relationship. In responding to that, remembering what had happened in Asquith’s Cabinet, I asked myself, “Is it really because they want to be helpful to the coalition that they go on repeating this?”. I recall in the process C S Lewis’s happy remark that if you hear about someone going around doing good to others, you can always tell the others by their hunted look. It occurred to me that there was some degree of overlap between the argument that we need a Parliament shorter than a five-year one and the Opposition’s view, set out during the passage of the Parliamentary Voting System and Constituencies Bill, that it would be helpful if the country had the opportunity of expressing its opinion at the earliest possible opportunity, when it so happened that there might have been some degree of parliamentary advantage to the Opposition in that happening. I hope, diffidently, that as the Bill progresses we will not have suggestions made in either direction that we are all engaged in this for short-term parliamentary advantage or that we are all concentrating totally on the good of the nation and the constitution.
Lord Hunt of Kings Heath
My Lords, that was an interesting and helpful intervention. Anyone who has read David Laws’s book on the negotiations between the coalition parties will find that the coalition parties did not meet the test that the noble Lord, Lord Brooke, has set. On page 98 of that highly readable tome, Andrew Stunell pointed out to the negotiating team that,
“trust and confidence was very important to us, and that we wouldn’t want to find the PM calling an election at a time that did not suit us. ‘That works both ways!’ said William Hague. We mentioned that our own policy was for four-year, fixed-term parliaments. George Osborne made the point that five-year parliaments were better, as they allowed governments to get into implementing their plans before having to start worrying about the timing of the electoral cycle. We made no objection to this, and Britain was on its way to five-year, fixed-term parliaments for the first time in its history”.
So much for principle.
Lord Brooke of Sutton Mandeville
I was not making any comment on the course of events. I was simply saying that interventions periodically from the Opposition Benches on this subject might have had a degree of self-interest.
Lord Hunt of Kings Heath
I do not recognise that at all. It is tempting to mention Mr Asquith, if only to encourage the noble Lord to make further enjoyable interventions.
There are two issues here. We are changing our system and we believe that the change from four to five years will be damaging to our constitutional arrangements. Extending the elections by, in practice, around one year will distance people from the politicians. The debate before the dinner break on the issue of the devolved Administrations was very interesting because it highlighted the principle of unintended consequences of the noble Lord, Lord Cormack. It is likely that, as a result of this legislation, the term of office in Scotland and Wales, and possibly Northern Ireland, will be extended to five years. That must be the clear implication of what the noble Lord said. I am glad to see that the noble Lord is in his place. He argued that we should not have a referendum on this Bill because, although under the Bill the term of the Parliament will be fixed at five years, that will not be outwith the limit in the current legislation. However, in relation to the devolved Administrations, moving to five years will go outwith the current primary legislation. I hope that there will be a referendum on that proposal if it comes before Parliament.
My noble friend has raised the very interesting and ingenious proposition that four years should be the norm while respecting the principle of a five-year limit. He deserves a comprehensive response from the Minister.
Lord Pannick
Before the Minister responds, I should like to add my response to these amendments and, indeed, to so many of the thoughtful amendments to Clause 1 that have been tabled. They tinker with a fundamentally misconceived concept of a fixed-term Parliament, as was explained by so many of your Lordships at Second Reading. As we have already debated this afternoon, Clause 1 is driven by the short-term political considerations of the coalition and will reduce the effective power of the electorate to have their say about those who govern them. I am coming to the view that the correct approach is for this House to agree that this Parliament should last for five years—that will deal perfectly adequately with the short-term political needs of this Government—but refuse to accept that we should legislate for any future Parliament. After this Parliament, the normal, traditional procedures, which have worked very well, should continue. I very much hope that on Report we can decide that that should be the case.
Lord Martin of Springburn
My Lords, I have a worry about the idea of a five-year Parliament. My experience of the other place was that when there was a four-year Parliament, although there were arguments between Back-Benchers and their own government leaders—the Executive—and between parties, at least the electorate had an opportunity to sort the matter out. They could decide who would be the next Government. Now we are proposing to have five years.
If my memory serves me correctly, during the time that I was in the House of Commons, there were two occasions when the Parliament went the full five years. The last Parliament went five years, and there are no two ways about it—in that last year, the electorate were not getting value for money, if that is the right way to put it. There was very little going through the House. Some may say that that was the fault of the Government for not finding legislation to put through the House, but it is a problem with the whole House. The electorate are entitled to better.
It is not the first time during my political lifetime that I have heard criticism of the great trade union barons, although there are none any more. The railway industry, which was traditionally the main industry in my area, employed 12,000 people in my constituency. You can imagine the numbers working for the railway industry throughout the country. The same went for the steel-working and engineering unions. Perhaps I should declare an interest: I am a card-carrying member of my engineering trade union. Maybe I am digressing, but this is a valid point: if any trade union leader had said, “By the way, I am going to have an extra year of office and I’m not going back to the membership about it”, there would be criticism on the Floor of this House and in the other place.
On the five-year term, we know that an arrangement has been made by the Conservatives and Liberals. I do not want to criticise that, but where arrangements are made there can be fall-outs. What kind of situation will we have if members of the coalition start falling out with one another? There are better scholars of history than me, but I got an opportunity to read some of our great country’s naval history. It turns out that Captain Bligh and Fletcher Christian were pals when they got on board but, after that long voyage, they fell out with one another. That could happen with the Liberal Democrats and the Conservatives—they, too, could start to fall out with one another.
I have another point to make concerning the practicalities of a five-year Parliament. I noticed that on a Thursday in the House of Commons—noble Lords can check the records; they have no need to take my word for it—there were debates but no votes. The party managers arranged it that way. It was clear that after Prime Minister’s Questions Members of Parliament went back to their constituencies, where they were working hard. Perhaps they were a bit worried about the people in their constituencies who were attacking them. I remember Tam Dalyell, who was an excellent mentor. He would say to me, “Michael, you are elected to Westminster. You are elected by your constituents to be in Westminster and you shouldn’t be seen in the constituency while Parliament is sitting. You should be in Parliament. You are the only person in your constituency who can get to those green Benches, and you should do so”. However, that was not happening, and the five-year Parliament was part of the reason.
I have seen MPs promoted to ministerial posts. They have been bubbly and full of enthusiasm, and they have taken to the Dispatch Box like a duck to water. Then the Prime Minister of the day would have a reshuffle, and the Minister who was so pleased to take a portfolio from the Prime Minister was not too pleased when he lost it. He would call the Prime Minister of the day every name under the sun. When I heard that, I would say, “He wasn’t too bad a man two years ago. You liked him then. I heard you say so, but you don’t like him now”. Therefore, the handing out of gifts went only one way so far as some Ministers were concerned—they felt that they should be given the portfolio but not have it taken away. That brought about what was known as the ex-Ministers club, and with a five-year Parliament it is going to have a lot of members. The reality is that the Prime Minister of the day has to get fresh blood in because, if he does not, there will be a gnashing of teeth in the ranks. Therefore, others have to be pushed out and return to the Back Benches.
I may have spoken for too long, as I know that we have other amendments to consider. Regarding the five-year Parliament, I can only say to my noble friends on the Liberal Democrat Benches that it is happy days for them now. Some of their colleagues have ministerial jobs and they are all as happy as Larry. However, I go back to Fletcher Christian and Captain Bligh: there will be fall-outs, and that five years may end up being a millstone round their necks.
Lord Norton of Louth
My Lords, I share the view of the noble Lord, Lord Pannick, but I am motivated to follow the words of the noble Lord, Lord Martin. There is a great deal in what he has said. When you look at Parliaments that have lasted for five years, they tend to suggest that it is very difficult for a party to generate a coherent programme of public policy that is sustainable over a full five-year period. By the time you come to the fifth Session, the Government tend to have moved from being a Government to being an Administration. They tend to be very reactive; they are deskbound; they are not generating policy; and they are certainly not pursuing the programme that they placed before the electors at the general election. There will be certain dangers if a Parliament is dragged out artificially for a particular fixed term. Electors should be given the opportunity to have a say before then if the Government have clearly run out of steam. Therefore, there is merit in what the noble Lord, Lord Howarth, is proposing, which is to inject an element of flexibility to take care of that very point.
Lord Tyler
We should be absolutely clear what precisely the amendments in the name of the noble Lord, Lord Howarth of Newport, would do. They would put back into the hands of the Prime Minister of the day, the leader of one of the political parties, the opportunity to pick a good moment to alter the general election date for party advantage. That is the precisely the way in which these amendments could fulfil their purpose. For that reason, they should be firmly opposed.
Lord Martin of Springburn
Can I make the point that going beyond four years can be a double-edged sword for a Prime Minister? Margaret Thatcher was very shrewd in how she went after a strict four years, as was Tony Blair. We have seen what happened with five years, so it does not always work in a Prime Minister’s favour.
Lord Cormack
I make one brief point following the comments of the noble Lord, Lord Martin. Surely in a coalition Government the Prime Minister could not do what his partner, the Deputy Prime Minister, did not wish him to do. So why are we here?
Baroness Stowell of Beeston
I want to repeat a point I made on Second Reading, which does not seem to have been raised so far today. I do not bring any preconceived ideological support for fixed-term Parliaments. The Bill is a positive step to address the lack of public confidence in the political system. One of the points I made on Second Reading, which is the most powerful reason to support the Bill, is that it would ensure that the Government and the Opposition had to face the electorate on a predetermined date, whatever the political conditions are at that time. That is the most compelling thing about fixed-term Parliaments. As to the length of the term and whether it should be four or five years, I was struck by the remarks of the noble Lord, Lord Armstrong of Ilminster. He made the point about Governments being distracted by preparing for elections and said that if there were to be a fixed-term Parliament, in his view as a former Cabinet Secretary, it should be five years.
Lord Grocott
We need to address the point made by the noble Lord, Lord Brooke, which as ever was entirely valid, about the extent to which we all tend to cover our party advantage with the cloak of great constitutional principle. That is obviously a criticism that we need to take seriously. The way in which to leaven that a little is to ask ourselves, whichever side of the argument we are on, whether we would take the same position of “principle” if we were on the other side of the House. I readily ask that question of myself, having spent a fair chunk of my parliamentary life in government—not as a Minister but in supporting the Government—and a fair chunk in opposition. If I find, as we all do from time to time, that I am in danger of adopting different positions in government and in opposition—which I must say I have seen to be spectacularly the case with one or two who are now in government—we ought to ask whether it was a great constitutional principle or party advantage. I try to test that myself and I have no doubt that I frequently fail, as I freely admit that I do not readily support a constitutional principle that I know would damage the Labour Party. That is where I am.
However, I ask the Government whether, if there were a Labour majority of one after the next general election, which they want to be in 2015, would they with the same passionate, principled enthusiasm say that it is essential that that Government remained in power for five years? That is the question the Government need to ask themselves. If they can say with certainty and conviction that the answer is yes, then obviously I will accept their argument and their integrity on that basis and will live with it, but I think they will find that a pretty tricky question to answer.
The Advocate-General for Scotland (Lord Wallace of Tankerness)
My Lords, again this amendment has stimulated an interesting debate, some of which goes into the general principles of fixed-terms Parliaments and some of which foreshadows the later debate we will have on the figure of four or five years. The amendment would omit the date of 7 May 2015 and provide instead that the next parliamentary general election should be held within a range of four to five years after the previous general election. In other words, we would be looking at an election held no earlier than 6 May 2014 and no later than 6 May 2015.
As my noble friend Lord Tyler very succinctly put it, that drives a coach and horses through the whole concept of a fixed-term Parliament because it would put back into the hands of the Prime Minister the option of choosing the date of the election which those of us who have supported the concept of fixed-term Parliaments want to move away from. I say to my noble friend Lord Cormack that it would quite easily be resolved because the Prime Minister could do so only if he had the agreement of the Deputy Prime Minister. It would be in the very circumstances where the Deputy Prime Minister and the Prime Minister fell out that the chances would be that the Prime Minister would want that option—the circumstances perhaps more graphically, from a literary perspective, expressed by the noble Lord, Lord Martin of Springburn. As my noble friend Lady Stowell said, the important point about fixed-term Parliaments is that the Government of the day have to face the electorate on a predetermined date regardless of the prevailing political circumstances.
Asquith was quoted. I have read this quote several times, and I am glad that the noble Lord, Lord Howarth, did quote him because it gave us the benefit of the intervention by my noble friend Lord Brooke. We can have a quite legitimate debate about what Mr Asquith was saying on 21 February 1911. He said that reducing the Parliament from seven years, as it previously was, to five years would,
“probably amount in practice to an actual legislative working term of four years”.—[Official Report, Commons, 21/2/1911; col. 1749.]
He did not say that the term would be four years, but that legislative working term would be four years. That reflects the comments referred to by my noble friend Lady Stowell that were made by the noble Lord, Lord Armstrong of Ilminster, at Second Reading. I readily concede that he has misgivings about the idea of fixed-term Parliaments, but he said that if we have them, he prefers five years rather than four years because:
“Even with a term of five years, that shadow extends over the last year of the term and tends to reduce to no more than four years the period during which government policy-making and parliamentary debate can effectively be pursued without too much looking over the shoulder at electoral considerations”.—[Official Report, 1/3/11; col. 971.].
His concern is that if we have a four-year fixed term, it would kick in at the end of three years. Obviously, if we are going to have even more prelegislative scrutiny in the first year, that shrinks the time available to Governments to deliver their programme.
My noble friend Lord Norton, the noble Lord, Lord Martin, and others have indicated that our recent experience of Governments who have gone for a fifth year has not necessarily always been happy. In many ways, that almost makes the point. The only reason those Governments limped on during the fifth year was that it was not propitious or opportunistic for the Prime Minister of the day to call an election after four years because he thought he was going to lose. If you have a five-year fixed term, clearly Governments can plan for those five years. It may well be that they can do more prelegislative scrutiny in the first year. There will inevitably be an election looming at the end of the fifth year, but you are more likely to get proper planning for five years and a Government not having to go for the fifth year because they do not think it opportune to go at the end of four years.
Lord Martin of Springburn
I am at a loss to understand why the Government do not go for four years. Another feature about a fifth year is that everyone will be in the doldrums. Members of Parliament will not stay in the Chamber. They will be campaigning in their constituencies. That will be a problem in the fifth year. I know that some noble Lords are muttering and I do not want to go on for too long because I was accused on the radio of filibustering not so long ago, which was not true. My point is that, if there is legislation in the fourth year, Members of Parliament will stay because of their duty to vote, but if there is nothing doing in that final year, they will be campaigning in their constituencies.
Lord Wallace of Tankerness
My Lords, with all due respect, the noble Lord makes the mistake of trying to impose on a new situation of a five-year fixed-term Parliament the problems that have arisen under the existing system. Clearly, if a Government are elected for five years, and they know that it is a fixed term and that they will not have to make a calculation at the end of three and a half years or four years on whether they should go to the country, they can plan their legislation properly for the five years. Parliament’s committees can plan their programme of work for five years in terms of bringing the Government to account. It is wrong to take the experience of an existing system, which I would argue is one of the problems of the existing system. A Government might not think that they can cut and run after four years and will limp on into the fifth year. Where there is a fixed term for five years, the Government could plan for five years, subject only to overriding circumstances, which is why we have the escape-hatch mechanisms as set out in Clause 2.
I also take the point made by the noble Lord, Lord Pannick, which I would link to my answer to the noble Lord, Lord Grocott. He says that this Parliament should see its five years through and that it was elected for five years. As perhaps was suggested by the noble Lord, Lord Martin, we would not act like some trade union baron—he said that the trade union baron would not do it and that he would be criticised if he did—and try to get more time than we were elected for. This Parliament was elected for five years, as I indicated in an earlier debate. The next election could take place as late, I think, as 11 June 2015, so there is no question of this Parliament trying to take extra time unless there were overriding circumstances, whether it be two months for, say, a foot and mouth outbreak.
We are also proposing that future Parliaments should be for five years. Clearly, no Parliament can bind a successor, which is a position that we recognise. I would say to the noble Lord, Lord Grocott, I believe in fixed-term Parliaments. Who would predict the result of the next election this far out? There is no guarantee that the Government will involve my party or the Conservative Party. It may well be a Government of the Labour Party. I am prepared to say that, yes, I believe in the fixed-term Parliament. If it was a Government of the Labour Party that was to last five years, that would be the right thing to do. Having believed in the concept of fixed-term Parliaments, I am prepared to accept that that could be a consequence. I hope that the noble Lord will take that in the good faith in which it is offered.
I cannot accept that this is a fix for this coalition Government, because we will not necessarily be the Government after 2015. Clearly, we will want to fight our case as best we can. The Conservative Party will undoubtedly want to get as many seats as it can. We as Liberal Democrats will want to get as many seats as we can. Who knows what the outcome will be? At this stage, who knows what electoral system the election might be fought on? It would be impossible to predict. The principle of supporting the fixed-term Parliament means that what is sauce for the goose must also be sauce for the gander and I readily accept that.
I believe that to adopt the amendment as proposed by the noble Lord, Lord Howarth, would completely undermine the whole principle of having a fixed-term Parliament. It would reintroduce the opportunity for the Government of the day in that final year to choose the most opportune moment to go to the country. My noble friend Lord Lawson in his book, The View from No.11: Memoirs of a Tory Radical, said about the then Prime Minister, now the noble Baroness, Lady Thatcher:
“Her view was that a Government should always wait until the final year of the quinquennium, but once there should go as soon as it is confident it will win”.
Clearly, the judgments of the noble Baroness, Lady Thatcher, in 1983 and 1987 were absolutely right as far as the Conservative Party interest was concerned, but it underlines the fact that it was a question of going when it was politically opportune to do so. That is what this amendment takes away from the Prime Minister of the day and that is why I urge the noble Lord to withdraw it.
Lord Norton of Louth
My Lords, the logic of my noble friend’s argument is that a Parliament might go for a full five years and a Government will have a programme for at least a full four years. Does he think the empirical evidence is there to support that?
Lord Wallace of Tankerness
Is my noble friend asking whether it is impossible for a Government to devise a programme for five years? Perhaps I have misunderstood the question.
Lord Norton of Louth
A Government who come in will have a programme for four years with the fifth year spent preparing for the election. I am asking the Minister whether he thinks there is the empirical evidence to support that Governments come in and have a full programme to cover four sessions.
Lord Wallace of Tankerness
If this Bill becomes law and there is a five-year Parliament, the Government of the day can expect to be there for five years and therefore can plan their programme over a five-year period. They need not necessarily frontload the parliamentary programme. It may allow more opportunity for pre-legislative scrutiny, which is regularly being encouraged. That is a difficult issue in the first year of a Parliament when Governments clearly want to move on and do some of the things they were elected on. But if they know that there is a five-year fixed-term Parliament, there is a better opportunity to programme it.
If it was a four-year Parliament, the final-year problem described by the noble Lord, Lord Martin, would kick in in the fourth year, with people going back to their constituencies because they knew an election was looming. Therefore, the effective period of a Government’s programme would be much reduced. If you have a five-year period it will be possible for a Government to plan that programme over five years. We are talking about annual Sessions beginning in May. At the moment the final Session tends to start in late November and has to wind up in late March. I do not think any of us who saw the wash-up last March found it a particularly edifying experience. One would hope that if a Government knew that the final Session was starting in May and going through to a solution the following late March, that would allow for a much better programme in the final year and avoid the consequences of wash-up.
Lord Cormack
If the virtue of five years is to give more time to plan, and I accept the logic of that, why have we not had better planning in the first year of this Parliament?
Lord Wallace of Tankerness
My Lords, we have indicated that we will move towards a May Queen’s Speech. There is a legislative programme and I do not think the number of Bills in this first Session matches the numbers in some of the first Sessions of the previous Administration. This Bill is not yet on the statute book but if it is passed, I believe that we will see a much more orderly planned programme than I have seen since I came into this House, certainly in the final Session.
Lord Howarth of Newport
My Lords, this has been a better debate than it looked like being. We were not exactly playing to a packed House at the beginning but more and more noble Lords have stood up and made short speeches that have been to the point and very interesting. I am particularly grateful to the noble Lord, Lord Norton, for his support. At least, I think I had his support for the amendment. If so, that was quite something because I, like other noble Lords, hold his views on the constitution and constitutional reform in the very greatest respect. He is quite right to press the Government to provide an evidential base in support of the propositions they put to the House in their legislation. I do not think that the noble and learned Lord, Lord Wallace of Tankerness, was able to respond with the evidence that the noble Lord, Lord Norton of Louth, sought.
My observation is a little bit like his: I simply do not see it as being the reality that politicians plan systematically. They talk endlessly about strategies, but I have yet to see a politician who is capable of developing and sustaining a strategy over a year, let alone four years. It is wholly unlikely that the culture and work and behaviour patterns of either House of Parliament would be so dramatically changed as a consequence of knowing that the span of this Parliament was to be fixed for five years. Politicians improvise, and it is greatly to their credit that they do so—they need to. It is part of their responsibility to be responsive to public opinion and the shifts and tides of opinion and events; they are not good politicians if they are not. That is not to disparage or to criticise them. I would have a horror of a Government who were so tunnel-visioned and so rigid that they set themselves a five-year plan at the outset of a Parliament and determined to stick to it. It does not seem to correspond with political human nature, and it is an entirely spurious justification for introducing fixed-term Parliaments.
One has only to look at the ad-hocery that we have seen in this first year of the coalition Government, as the noble Lord, Lord Cormack, suggested. We have seen this Government attempt to get away with establishing a requirement for a 55 per cent vote to have an early general election. It was like a leak except that it was brazenly published in the interesting work of autobiography, memoir, history, political science or whatever it is by Mr David Laws, who candidly acknowledged—my noble friend Lord Hunt quoted from this interesting volume—the unembarrassed, shameless and self-interested calculation on the part of Mr Stunell for Liberal Democrats and Mr Osborne for the Conservatives. The noble Lord, Lord Brooke, supported by my noble friend Lord Grocott, reminded us that we have a responsibility when we address questions of constitutional reform not to dress up our views and even our calculations of party political interest in high-flown constitutional sentiment—I suppose the term is not to be hypocritical. My noble friend is quite right that we are all susceptible to that temptation. It may well be that, from his vantage point there in the corner, the noble Lord, Lord Brooke of Sutton Mandeville, is better able to spot when that aberration, that corruption, is occurring than many of us who are more impulsive participants. He was perfectly right. I suspect that I am simply too naive to make an effective calculation of party political interest. In a rather old-fashioned way, I think that it is our job to try to get all this right.
I dispute the suggestion of the noble Lord, Lord Tyler, and the noble and learned Lord, Lord Wallace of Tankerness, that my amendment would drive a coach and horses through the principle of a fixed-term Parliament, because it proposes a fixed term within a tolerance of one year. It is a fixed term with a sensible flexibility. It is a compromise, but there are many compromises already in the legislation. The Government have introduced what the noble and learned Lord, Lord Wallace of Tankerness, was candid enough to refer to as escape hatches. If the Government can introduce escape hatches, is it not in order or appropriate for us to amend this legislation to provide some pragmatic flexibility to enable the term of the Parliament to run between four and five years? That is a compromise between a fully fixed-term Parliament and the situation that we have at the moment where it is open to the Prime Minister, answerable to no one, to determine the date of the election. I believe that, previously, the date was for the Cabinet to determine. It was Lloyd George as Prime Minister who took it upon himself, on his own single initiative, to exercise the prerogative power, as one could term it, to call upon Her Majesty to dissolve Parliament.
What I am proposing lies somewhere between the two extremes. In reality, when you are legislating on most matters, you need to provide for a sensible degree of flexibility so that in practice people can carry things forward in a realistic way. The noble Baroness, Lady Stowell of Beeston, said that it would undermine one of the great benefits of the Bill as she sees it; the requirement of the Prime Minister and the Government to face the electors on a pre-determined date. The proposal does compromise on that, but it still means that there will be a pre-determined date in the fifth year of the Parliament. I think public opinion would find that quite acceptable.
The noble Lord, Lord Pannick, absolutely rightly said that in this Committee we are all being driven to tinker with a fundamentally misconceived policy. I agree with him; I do not support fixed-term Parliaments. But we are, as the previous Prime Minister Mr Blair used to say, where we are. The Bill has received its Second Reading. It is not for us to seek to overturn the principle of the Bill that there should be fixed-term Parliaments. It is for us to limit the damage that this legislation may cause. The noble Lord, Lord Pannick, suggested that perhaps the least bad way forward would be to legislate for this Parliament alone and to drop the idea of having fixed-term Parliaments after the expiry of this Parliament. I suggest that it would be deplorable to legislate to rescue the coalition from its political difficulties; to provide some sort of lifeline to coalition partners who do not agree with each other and do not trust each other and have asked Parliament to bail them out of that predicament. That would not be a proper way for Parliament to spend its time. On the other hand, I am tempted to agree with the noble Lord, Lord Pannick, that it is less bad to do that than to saddle our country and our constitution with fixed-term Parliaments in perpetuity or until Parliament decides that it was not a good idea after all and therefore we should undo the legislation.
The debate on this amendment is really an amuse bouche before the important debate on Amendment 11 which we will have next week. That will be the debate on whether we should amend the Bill to provide for a fixed-term Parliament of four years in clear-cut fashion and without the compromise and flexibility that I have suggested. That is the amendment in the name of my noble and learned friend Lord Falconer, my noble friend Lord Bach and the noble and learned Lord, Lord Lloyd of Berwick. That will be a major debate.
Lord Tyler
I wonder whether the noble Lord recognises that if he had not spoken at such length we could have progressed on to Amendment 11 this evening.
Lord Howarth of Newport
I assure the noble Lord that that is absolutely not the case.
We have had a useful exploratory debate on the issue of four and five years. The House ought always to listen with special care to the noble Lord, Lord Martin of Springburn. As a former Speaker of the House of Commons, he understands that House in a way that few others do. The noble Lord has given us some reasons why Parliament should favour a four-year fixed term rather than a five-year fixed term and we should meditate on what he said. In the mean time, I beg leave to withdraw this amendment.